Case Study:
Read the "Boeing" case study below.
Create a PowerPoint presentation of 10 to 15 slides (including title and reference slides) that teaches one or more of the diagnostic models(listed below the case study) to a group of students.
Select one or more of the diagnostic models that you believe provides a framework for identifying the key factors in the Boeing case. Using the speaking notes area where appropriate, address these specific points:
1. Describe the advantages of using a diagnostic model.
2. Explain why the chosen model is appropriate for this case.
3. Assess the organization's readiness for change.
4. Recommend three "next steps" for Boeing leadership.
5. Use the speaking notes area, where appropriate, to ensure that you address all aspects of the assignment.
While APA style format is not required for the body of this assignment, solid academic writing is expected and in-text citations and references should be presented using APA documentation guidelines.
The long list of Boeing's woes seems to have reached its pinnacle in late 2003 with the scandal surrounding the Pentagon deal that alleged inappropriate behavior and the loss of documents by Boeing officials. After his seven-year reign at the head of the organization, December 2003 saw the eventual resignation of Phil Condit. Many breathed a sigh of relief at the news. The problems at Boeing were reportedly endless. From a stock price that had decreased by 6.5 percent while the company was under his leadership to increasing competitive pressures, the future for Boeing was in doubt and changes were needed. For many years Boeing graced American corporate news for their prowess as the leading manufacturer of aircraft. However, in 1994 Airbus their main rival-booked more orders. This shocked the management executives and began a series of changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that had reportedly changed little since World War II.
THE BEGINNING OF CHANGE AT BOEING
In 1997 market demand increased dramatically and Boeing attempted to meet this surplus of orders by doubling their production capabilities instantaneously. A manufacturing crisis ensued and Boeing's reputation took a dramatic turn for the worse when they were required to halt production of the 747 aircraft for 20 days. The company had "stubbed its toe," according to the then-president of the Commercial Airplane Group, Ron Woodward, who was dismissed not long after the crisis. The "win at all costs" approach that Boeing supposedly had to its business dealings and a lack of communication within the organization appeared to have been the source of this problem.
After experiencing these manufacturing difficulties, an attempt was made to revitalize Boeing's operations by streamlining aircraft assembly and increasing the efficiency of the company. This was to be done by focusing on production and costs, not on "airy vision statements." Their overall strategy was to update their technology systems, downsize their operations, and reestablish relationships with their suppliers the only feasible way costs could be cut.
Perhaps the first step in recognizing that the cycle of demand for their products caused massive fluctuations in revenue each year and the company needed more stability occurred when Boeing acquired McDonnell Douglas in 1997 to increase its defense contracts. This merger, however, brought with it difficulties in the way of cultural synthesis. McDonnell Douglas had a very strong culture that focused on their dealings with government officials for defense contracts. Combined with Boeing's family-orientated culture, the merger was not with-out integration issues. The merger also had financial implications when investors accused the organization of trickery in regard to the merger with McDonnell Douglas and a payout of $92.5 million was made to shareholders.
WHEN TECHNOLOGY BECAME AN ISSUE
In 2001 Boeing adopted the principles of lean manufacturing and aimed to rejuvenate their reputation by making their production more efficient. The object of the project was to implement an auto-mated system of assembly lines. They also hoped to coordinate and facilitate easier channels of communication between Boeing staff and suppliers. They implemented a Web-based procurement system that allowed suppliers to monitor stock levels and replenish supplies when they dipped below a predetermined minimum.
The process of automating the production line was a struggle for Boeing. Information technology within the organization was decentralized and over 400 systems were being used to meet the needs of various departments. The lack of collaboration in regard to product procurement meant that the same product could be manufactured by Boeing for one aircraft but subcontracted for another. Boeing had recently chosen to implement a technological platform to regulate product life cycles. This was hoped to cut costs and facilitate the more rapid production of the 7E7. It would do this by standardizing the "use of specifications, engineering rules, operational parameters and simulation results across its extended enterprise." It was hoped that this new system would "improve collaboration, innovation, product quality, time-to-market and return-on-investment."
THE CULTURAL IMPLICATIONSOF DIVERSIFICATION
The decision was made to diversify from the traditional commercial airline industry and the many acquisitions that were made created integration issues for the company. The aim again was to add more stability to the business by diversifying into information services and the space industry providing services with elevated margins that would reflect on Boeing's bottom line. Condit later admitted that entry into the space industry was an erroneous move. According to the CEO of Airbus, Noel Forgeard, the process of diversification was "extremely demoralizing for Boeing employees," but Boeing's vice president of marketing, Randy Baseler, claimed that "what affects morale right now is that we are in a down cycle." Regardless of the reasoning behind it, Boeing's employee morale was at a low and this issue needed to be addressed.
According to a BusinessWeek reporter, Boeing was in dire need of "a strong board and a rejuvenated corporate culture based on innovation and competitiveness, not crony capitalism." Boeing's past had left its culture in pieces. After the merger with McDonnell Douglas and many other organizations, the decision was made in 2001 to move the headquarters of their operations from their historical home in Seattle to Chicago. The relocation was said to be the factor that most significantly disturbed the culture of Boeing. The move was instigated to provide a neutral location for the diversified Boeing. Having acquired many different organizations, the past connections to the Seattle site were to be severed. The strategic reason for this move was to help refocus attention on international growth prospects.
Harry Stonecipher, the past head of McDonnell Douglas who had come in as the new chief operating officer of Boeing after the company was acquired, was announced as the new CEO after Condit's resignation. His first important decisionwas regarding the new 7E7 planes, which would be Boeing's first new plane in a decade. On December 16, 2003, Stonecipher announced that Boeing was to go ahead with the production of the 7E7 jets. Stonecipher promised to work closely with unions to see that the low morale is reversed and that the planes are produced at a quicker pace and for less money. Despite Stonecipher's best efforts, critics are calling for an outside leader to come in and take Boeing back to basics.
A researcher of a shareholding firm claimed that Boeing's problems lay in the fact that they had "overpromised and under delivered." The past has shown that Boeing's inability to react to external pressures has increased their demise. The future of the industry will now depend on the ability of either Airbus or Boeing to predict the way the market will go. Boeing has bet its future on the market developing a partiality for smaller aircraft, like their new 7E7. Airbus, on the other hand, projects that the airlines will purchase larger aircrafts in the future.
Questions
1. Select one or more diagnostic models that you believe provide a framework that succinctly identifies the key factors at the center of the Boeing situation. Explain your choice of model.
2. Explain the Boeing situation in terms of your selected model.
Note: In answering these questions, it may be of interest to know that Boeing did turn things around. Fast forward to 2007 and we find that the last few years have been good for Boeing. Its 7E7 is the fastest-selling new aircraft ever and is sold out for years into the future. Boeing addressed many of its issues and its performance has benefited. Airbus, on the other hand, has suffered continuing delays with its giant A380.
1) The Six-Box Organizational Model
Marvin Weisbord proposed one of the earliest diagnostic models, one that he describes as the result of "my efforts to combine bits of data, theories, research, and hunches into a working tool that anyone can use." His model is based on six variables
1. Purposes: What business are we in?
2. Structure: How do we divide up the work?
3. Rewards: Do all tasks have incentives?
4. Helpful mechanisms: Have we adequate coordinating technologies?
5. Relationships: How do we manage conflict among people? With technologies?
6. Leadership: Does someone keep the boxes in balance?
2) The 7-S Framework
The 7-S Framework was developed by the McKinsey & Company consultants Robert Waterman Jr., Tom Peters, and Julien Phillips. 7 It is based on the propositions that
(1) organizational effectiveness comes from the interaction of multiple factors and
(2) successful change requires attention to the interconnectedness of the variables. They characterize the factors into seven categories: structure, strategy, systems, style, staff, skills, and superordinate goals.
Structure refers to the formal organizational design. Strategy refers to "the company's chosen route to competitive success." Systems are the various procedures in areas such as IT whereby an organization operates on a day-to-day basis. Style is a reference to patterns in the actions of managers and others in the organization; that is, how they actually behave (consultative? decisive?) when faced with the need to act. Staff refers to the processes for development of the human resources of the organization. Skills are described as the "crucial attributes" the "dominating capabilities" in areas such as customer service, quality control, and innovation that differentiate it from its competitors.Superordinate goals refer to the organization's "vision".
3) The Star Model
Jay Galbraith argues that an organization is at its most effective when what he labels "the five major components of organization design" are in alignment. In this model, the fivecomponents are strategy, structure, processes and lateral capability, reward systems, and people practices. A preeminent role is given to strategy "the cornerstone" on the grounds that "if the strategy is not clear, there are no criteria on which to base other design decisions." Structure is defined as the formal authority relationships and grouping of activities as represented on an organization chart; processes and lateral capability refer to the processes, either formal or informal, that coordinate activities throughout the organization. Reward systems seek to align individual actions to organizational objectives, while people practices are the combined human resource practices (e.g., selection, development, performance management) of the organization. Misalignment of any of these five factors is considered to produce suboptimal performance.
4) The Congruence Model
David Nadler and Michael Tushman have developed an open systems model of organizations based on the proposition that the effectiveness of an organization is determined by the consistency ("congruence") between the various elements that comprise the organization.
This model sees organizations as comprising four components: task (the specific work activities that have to be carried out), individuals (the knowledge, skills, needs, and expectations of the people in the organization), formal organizational arrangements (structure, processes, and methods), and informal organization (implicit, unstated values, beliefs, and behaviors).
The model is based on the conceptualization of the organization as a transformation process. At the "front end" of the process is the context, comprised of the environment, resources, and history. Environment refers to factors outside the organization such as the economic, social, and technological conditions. Resources are the assets, tangible and intangible, internal to the organization. History refers to the organization's own history,which leaves an imprint on how the organization currently operates. Within this context, strategy is formulated. The organization then becomes the means for the attainment of strategy. The output of the transformation process is primarily the performance of the organization, but this is mediated via the performance of both groups and individuals.
Based on their experience using the congruence model in organizational problem solving, Nadler and Tushman have identified a process for this activity.
5) The Burke-Litwin Model
The main contribution of the 12-factor model developed by Warner Burke and George Litwin is that it differentiates between those elements of the model that are seen as likely to be the source of major ("transformational") change and those that are more likely to be the source of change that is experienced as incremental ("transactional"). The four transformational factors are external environment, mission and strategy, leadership, and organizational culture. These are intentionally located at the top of the diagram that represents the model.
The fundamental premise of the model is that planned change should flow from the top of the diagram (environment) to the bottom (performance). However, as indicated by the arrows, the feedback loops go in both directions, indicating that internal organizational factors can impact the environment and not just be on the receiving end of a one-way environmental determinism.
6) The Four-Frame Model
Lee Bolman and Terry Deal argue that managers benefit from being able to analyze organizations from the perspective of four different "frames" or "lenses," each of which provides a different "angle" on how organizations operate. Without the capacity to usemultiple frames, managers may become locked into their one favored way of seeing the world. Bolman and Deal comment:
Organizations are filled with people who have their own interpretations of what is and what should be happening. Each version contains a glimmer of truth, but each is a product of the prejudices and blind spots of its maker.
The four frames discussed by Bolman and Deal are the structural frame, the human resource frame, the political frame, and the symbolic frame. The structural frame presents organizations as akin to machines that are designed to efficiently turn inputs into outputs. From this perspective, the focus is on getting the correct formal design as one would find on an organization chart and rules and procedures manuals. The mantra for action is, "If there's a problem, restructure."
The human resource frame directs attention to the relationship between the organization and the people that comprise it. It is based on the proposition that a good fit between the needs of the organization and what people want out of work benefits both parties, and the reverse (where fit is lacking, both suffer).
The political frame suggests that we see organizations as sites where participants interact in pursuit of a range of objectives, some in common some that differ; some that complement, some that conflict. One of the most important aspects of the political frame is that it does not present "political" as necessarily equating to "bad" or "underhand." Even where superordinate goals, such as the organization's mission, are shared, the means whereby that mission is to be operationalized may be fiercely contested between various individuals, each of whom may sincerely believe that his or her action is in the best interests of the organization.
The symbolic frame proposes that the essence of an organization may lie not in its formal structure and processes but in its culture the realm of symbols, beliefs, values,rituals, and meanings. In Bolman and Deal's terms, "what is most important is not what happens but what it means."