This is an interesting piece on how Boeing lost its way, deliberately deciding to transition from a company that was engineering driven to one that wasn’t, starting with moving its corporate headquarters from Seattle to Chicago:
On the tarmac, [CEO Phil] Condit stepped out of the jet, made a brief speech, then boarded a helicopter for an aerial tour of Boeing’s new corporate home: the Morton Salt building, a skyscraper sitting just out of the Loop in downtown Chicago. Boeing’s top management plus staff—roughly 500 people in all—would work here. They could see the boats plying the Chicago River and the trains rumbling over it. Condit, an opera lover, would have an easy walk to the Lyric Opera building. But the nearest Boeing commercial-airplane assembly facility would be 1,700 miles away.
The isolation was deliberate. “When the headquarters is located in proximity to a principal business—as ours was in Seattle—the corporate center is inevitably drawn into day-to-day business operations,” Condit explained at the time. And that statement, more than anything, captures a cardinal truth about the aerospace giant. The present 737 Max disaster can be traced back two decades—to the moment Boeing’s leadership decided to divorce itself from the firm’s own culture.
For about 80 years, Boeing basically functioned as an association of engineers. Its executives held patents, designed wings, spoke the language of engineering and safety as a mother tongue. Finance wasn’t a primary language. Even Boeing’s bean counters didn’t act the part. As late as the mid-’90s, the company’s chief financial officer had minimal contact with Wall Street and answered colleagues’ requests for basic financial data with a curt “Tell them not to worry.”
By the time I visited the company—for Fortune, in 2000—that had begun to change. In Condit’s office, overlooking Boeing Field, were 54 white roses to celebrate the day’s closing stock price. The shift had started three years earlier, with Boeing’s “reverse takeover” of McDonnell Douglas—so-called because it was McDonnell executives who perversely ended up in charge of the combined entity, and it was McDonnell’s culture that became ascendant. “McDonnell Douglas bought Boeing with Boeing’s money,” went the joke around Seattle. Condit was still in charge, yes, and told me to ignore the talk that somebody had “captured” him and was holding him “hostage” in his own office. But [President Harry] Stonecipher was cutting a Dick Cheney–like figure, blasting the company’s engineers as “arrogant” and spouting Harry Trumanisms (“I don’t give ’em hell; I just tell the truth and they think it’s hell”) when they shot back that he was the problem.
McDonnell’s stock price had risen fourfold under Stonecipher as he went on a cost-cutting tear, but many analysts feared that this came at the cost of the company’s future competitiveness. “There was a little surprise that a guy running a failing company ended up with so much power,” the former Boeing executive vice president Dick Albrecht told me at the time. Post-merger, Stonecipher brought his chain saw to Seattle. “A passion for affordability” became one of the company’s new, unloved slogans, as did “Less family, more team.” It was enough to drive the white-collar engineering union, which had historically functioned as a professional debating society, into acting more like organized labor. “We weren’t fighting against Boeing,” one union leader told me of the 40-day strike that shut down production in 2000. “We were fighting to save Boeing.”
Snip.
If Andrew Carnegie’s advice—“Put all your eggs in one basket, and then watch that basket”—had guided Boeing before, these decisions accomplished roughly the opposite. The company would put its eggs in three baskets: military in St. Louis. Space in Long Beach. Passenger jets in Seattle. And it would watch that basket from Chicago. Never mind that the majority of its revenues and real estate were and are in basket three. Or that Boeing’s managers would now have the added challenge of flying all this blind—or by instrument, as it were—relying on remote readouts of the situation in Chicago instead of eyeballing it directly (as good pilots are incidentally trained to do). The goal was to change Boeing’s culture.
And in that, Condit and Stonecipher clearly succeeded. In the next four years, Boeing’s detail-oriented, conservative culture became embroiled in a series of scandals. Its rocket division was found to be in possession of 25,000 pages of stolen Lockheed Martin documents. Its CFO (ex-McDonnell) was caught violating government procurement laws and went to jail. With ethics now front and center, Condit was forced out and replaced with Stonecipher, who promptly affirmed: “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm.” A General Electric alum, he built a virtual replica of GE’s famed Crotonville leadership center for Boeing managers to cycle through. And when Stonecipher had his own career-ending scandal (an affair with an employee), it was another GE alum—James McNerney—who came in from the outside to replace him.
As the aerospace analyst Richard Aboulafia recently told me, “You had this weird combination of a distant building with a few hundred people in it and a non-engineer with no technical skills whatsoever at the helm.”
My late father used to complain bitterly when a formerly good restaurant became a mediocre one through cost-cutting. “When the bean-counters get control, it’s all over.” As especially striking observation, since my father was an accountant…
(Hat tip: Instapundit.)