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Wednesday, March 20, 2024

You Get What You Reward, Boeing’s Rewarding Safety and Quality Performance

We’ve all heard the phrase “what gets measured gets done” but I also believe “what gets rewarded gets done even quicker.”

Understanding how employee rewards and recognition impacts productivity, performance, and employee engagement has been the subject of many studies and experiments, ergo, the salient connection between human behavior and appreciation needs no introduction. We are wired to crave connection, support, and acceptance from those around us, due to which the need for effective employee recognition has been diligently emphasized by thought leadership.

Behavior reinforced is behavior repeated. Behavior reward is repeated. This simple yet profound concept is at the root of more poor productivity, broken relationships, negative personnel issues and high costs of doing business than any other management principle.

Boeing has been in the news recently for a number of troubling safety and quality issues. Among the safety and quality issues of recent years have been two fatal crashes of the 737 Max jet due to a design flaw in the plane, numerous halts in deliveries due to quality control issues and, most recently, a door plug that blew off of a new 737 Max operated by Alaska Airlines in January of this year, leaving a gaping hole in the side of the plane.

The National Transportation Safety Board has determined that aircraft left a Boeing factory without the four bolts need to keep the door plug in place. It has yet to assess blame for the accident, but CEO Dave Calhoun has accepted responsibility for the incident.

The theme is a corporate culture that was once reflective of an engineering and product quality driven leadership to that of a financial and investment community culture of driving up share price and investor returns regardless of process control, pandemic or building supply network challenges.

In a Bloomberg, The Big Take in Business column titled: Boeing’s Legacy Vanished Into Thin Air. Saving It Will Take Years. (Paid subscription), the following was noted:

“Together, these point to a common problem: the company’s once-vaunted system for building its prized 737s has been badly damaged by worker turnover, supplier distress and the shortcomings lingering from the breakneck production last decade before the Max tragedies and the Covid freeze.”

This Bloomberg editorial further observes:

“At the same time that Boeing was reworking its supplier network, executives put greater focus on propping up the share price with the help of dividends and buybacks. Since 2011, the year the 737 Max was officially announced, Boeing has handed some $68 billion to shareholders in the form of dividends and stock buybacks, according to data compiled by Bloomberg, though it suspended the measures as its financial crisis deepened. Airbus, by comparison, has been much more conservative with its balance sheet, giving it greater resources to respond to the pandemic.”

After being rocked by years of quality and safety issues, Boeing is changing the bonus formula it uses to pay more than 100,000 nonunion employees. Instead of basing most of white-collar employees’ bonuses on financial results, bonuses will now be based mostly on safety and quality metrics.

The company has faced harsh criticism for a series of quality and safety issues in recent years, with many of those critics saying the company has shifted its focus in the last few decades to financial results at the cost of safety and quality in its aircraft. But those safety and quality problems have resulted in five years of operating losses topping $31.5 billion.

“It’s very, very important to drive the outcomes that we’re all committed to, and that’s to deliver a safe and quality product to our customer,” said Chief Operating Officer Stephanie Pope on Thursday in comments to employees announcing the new bonus formulas.

The troubled aircraft maker said 60% of the annual incentive score used to determine bonuses for employees of its commercial airplane unit will now be based on safety and quality metrics. It previously had 75% of that score based on financial results, with the other 25% based on operational metrics that included data beyond safety and quality readings.

Boeing said all employees will be required to complete training courses on product safety and quality management as a pre-condition to receiving any annual incentives.

A core principle of TPS is a system and process that depicts audio and visual systems that indicate a production process has been stopped because of a worker observing and flagging a quality control issue whenever they occur. To quote a Toyota descriptor: “Operators are equipped with the means of stopping production flow whenever they note anything suspicious. Jidoka prevents waste that would result from producing a series of defective items.”

The notion of Genchi Genbutsu (Go and see for yourself) compels production managers to dispatch themselves to where the problem was flagged and to produce timely resolution. It implies not penalizing the worker for calling attention to the problem, or risking a production shortfall, but rather triggering a collective effort toward resolving the problem as quickly as possible. That includes whatever engineering and technical resources that may be required.

The ongoing crisis has Boeing’s most senior management now compelling production workers to flag known production and quality problems. With the systemic changes to reward safety and quality it’s corporate culture can focus on producing each aircraft with the utmost quality and efficiency, and reward production and supply chain workers for their ingenuity and follow through. Such a culture rewards operational workers for significant quality and operational milestone achievements.

From my experience, this will take time and extraordinary efforts. The question remains, what is the willingness of Boeing’s senior leadership? It would be tragic if the commercial aircraft industry faces a singular dominant global provider. Industries require vibrant competitors, especially those with upwards of ten years in order backlogs for new aircraft.

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