Can Boeing Fix Itself? | Quality Digest

Although reducing dependence on Boeing and breaking it up may not be feasible, financial instruments like clawbacks could help rein in risky practices. Regulators could also impose requirements, such as mandating professional engineer certification for key tasks, which would force Boeing to think twice before letting employees go.

The confidence trap

Published May 2, 2024, by INSEAD.


First, not only is it a clear conflict of interest, it’s also self-defeating. Investigators found that Boeing employees who were “deputized” to act on behalf of the FAA under the Organization Designation Authorization (ODA) program had come under coercion by Boeing managers.

Drawing on a wide body of research and experience, we consider not only Boeing’s actions but also those of the Federal Aviation Administration (FAA). Our analysis goes beyond Boeing’s merger with McDonnell Douglas and the corporate culture that emerged. We doubt that current remedial actions by Boeing and the FAA will “fix” Boeing, and we suggest measures that could help.

What we can learn—and not learn—from Boeing

Remedying this requires dialing back the cozy relationship between Boeing and the FAA until it’s in the “Goldilocks zone.” This means promoting whistleblowing as well as red-teaming Boeing and FAA staff to conduct effective quality inspections and audits.

Consider Dennis A. Muilenburg—Calhoun’s predecessor, under whose watch two Boeing 737 MAX airliners crashed. Muilenburg, who was fired in 2019 in the wake of the back-to-back disasters that killed 346 people, is an aeronautics engineer. But even he failed to foresee the problems.

Third, Boeing has become too big to fail, which significantly influences how its key decision makers and the FAA act. When FAA administrator Michael Whitaker was recently asked if Boeing was too big to fail, he sidestepped the question, replying instead that it was too big not to build a safe airplane.

The solution lies in establishing governance with appropriately designed incentives, implementing proper administrative controls, allocating decision rights based on expertise and, ideally, selecting employees who place organizational well-being above myopic self-interest.

Disasters can act as brutal audits of organizations, to which even venerable institutions like Boeing are subject. In the wake of two fatal crashes, as well as a midflight door blowout, Boeing has shaken up its C-suite and pledged to prioritize safety over profit. Will these measures solve its problems? We address this question in the context of operations, safety, and organizational economics.

The revolving door between Boeing and the FAA must also be paused. Case in point: Former FAA senior official Ali Bahrami pushed for, and signed off on, recertification of the 737 MAX after the twin crashes. He had previously worked at the American Institute of Aeronautics and Astronautics, a trade association that had also represented Boeing.

This matters because educational training influences the way a person sees the world. As renowned philosopher of science Norwood Hanson noted, all observations are theory-laden. Theories not only guide observation; they also guide attention and focus. While theory can also be acquired by work experience, Pope—like Calhoun before her—does not have experience in aeronautical manufacturing or safety.

Good leadership can improve safety outcomes. But to depend on it is akin to favoring benevolent dictatorships over healthy democracies, which have institutional safeguards to prevent abuse of power and harm due to incompetence.

Good governance structures should also include mechanisms to ensure that the board of directors carries out its fiduciary duties to the organization. At the very least, the roles of the CEO and the accountable executive for safety performance at Boeing should be vested in different people.

But the fact is, because Boeing plays a vital role in the United States economy and national defense, its leaders know it can’t fail. This has likely emboldened them to take risks—such as laying off up to 20% of technical staff, including engineers and mechanics, during the pandemic—with the assurance that they have impunity. Indeed, Muilenburg exited with a $62 million paycheck despite the 737 MAX fiasco.

What Boeing needs at the helm is someone with both the requisite educational training and manufacturing experience. After all, the company has designated its CEO as the “accountable executive” for its safety performance.

That brings us to our second point: Safety should not rest solely on the leadership. It should be underpinned by governance structures that promote good practices on one hand and prohibit shady quality practices and other forms of opportunism on the other.

Unfortunately, the FAA’s oversight process leaves much to be desired. Lulled by Boeing’s comparatively benign safety record before the 737 MAX mishaps, the regulator had allowed Boeing unprecedented latitude in self-certification. This is problematic for several reasons.

Of course, there are no guarantees that the above measures will solve Boeing’s problems. Due to its size and strategic importance, Boeing might well continue to exist despite safety lapses. But for organizations and regulators in high-risk industries, the fall from grace of a once-mighty brand holds salutary lessons.

Meanwhile, during the past two decades since it began the ODA program, the FAA has signed off on eliminating thousands of quality inspections per airplane without due diligence. It has also outsourced its own expertise, essentially becoming little more than an auditor.

The FAA should also consider suspending or revoking Boeing’s ODA status if it doesn’t demonstrate convincing, significant improvements to a third party or independent auditor.

First, appointing Stephanie Pope as the president of its commercial airplanes division will only give Boeing more of the same. Like outgoing CEO Dave Calhoun, Pope is an accounting graduate who spent much of her career in finance.