Boeing Learns a Lesson in Predictability

Recent stock market confusion affects investors, but recent trends in management affect almost everyone.

Boeing’s $2.6-billion charge against earnings for late delivery penalty payments, overtime and unexpected production-related expenses should serve as a warning to management about the consequences of the new social contract. This same $2.6 billion could have kept 10,000 people working at Boeing over the past five years and built new technologies, new teamwork and loyalty. Instead, the desire for short-term earnings led management to create havoc in people’s lives. By laying off 7,000 workers just two years ago, the company was going to try to squeeze costs out of every part of the production process. Now, when those workers could help meet the new orders and ramp up production from 18 to 43 planes a month, they are not available.

In our infatuation with markets as the solution to every problem, we have forgotten that mutual predictability is the glue that binds us for effective joint action.

There must be a bittersweet taste in the mouths of thousands of highly skilled employees who were unceremoniously dumped in the early 1990s to protect efficiency and shareholder wealth. Now, union leaders and down-sized workers alike are responding to Boeing’s short-term needs with defiant indifference. Boeing’s production union, the International Assn. of Machinists, has refused to allow Boeing to hire temporary workers from competing aerospace companies and suppliers. The Wall Street Journal quotes union president Bill Johnson, as saying, “We had a 69-day strike over this sort of issue in 1995.”

Why sign up to work again for a company that neither cares nor understands that great teams take time to build and that all-important corporate values are not tracked on the balance sheet as defined by generally accepted accounting principles.

The assumption running rampant in today’s management fads is that when something is needed it can be bought or “allied.” The reality is far different. The United Parcel Service strike demonstrated all of our vulnerability to the assumption that no matter what we do, workers will be available to do our bidding. The skill level required for parcel delivery is much less than for building airplanes. Boeing’s problem demonstrates a deeper lesson: To accomplish complicated tasks together, people need to know one another well. Workers are not disposable tools to be bought off the rack when the need arises.

To be truly efficient together, each worker and manager needs to know his colleagues’ strengths and weaknesses. They need to speak a common language, nuanced through shared experience, and to trust one another so that a worker doesn’t believe that if she works hard now, the manager won’t lay her off sooner.

Efficient and effective societies need the constituents to be mutually predictable. I have to know whether you drive on the left or right side of the road. I have to know that when I put money aside, you won’t steal my life’s savings with a gun or with taxation. I need to know that if I invest in skills and knowledge useful only in your firm, you won’t terminate me at the first hiccup.

Boeing’s problem now can be traced very directly to the lesson that it gave its work force in 1991: We won’t protect you; protect yourself. That is precisely what people have done by developing strong unions or joining smaller firms where personal relationships matter. They have committed to industries with steadier demand patterns and they have made life choices that for them have created greater predictability than the boom/bust cycle of aerospace.

Predictability is not about no change. The most predictable event in our world is change. The role of organizations and of management is, however, to help people work together through change. To develop clarity about the future and the skill base required is a first step. The second step is to ensure consistency so that people do not see their world disrupted arbitrarily. The third need is competence in acting to serve constituents predictably.

The lesson from Boeing’s problems is clear: Pay now or pay later. Preserving great teamwork and loyalty often pays huge dividends when the world gets either much worse or much better in an unexpected way. The devastating result of a shortsighted search for predictable earnings often is long-term unpredictability in performance.