Fulmer and Gelfand | What happened to Boeing?

Boeing’s mounting crises are beginning to resemble an aviation thriller cooked up in Hollywood. In addition to a piece of fuselage falling off mid-air during a recent commercial passenger flight, there was the nail-biting discovery of mis-drilled holes in undelivered planes, and revelations that an inspector had found an “excessive amount of defects” in a supplier’s operations.

If those problems weren’t bad enough, in late February the US Federal Aviation Administration, FAA, delivered a scathing review of Boeing’s corporate culture and called on the company to implement more than 50 safety-related changes. Boeing was given 90 days to devise a plan to overcome its deep-seated quality-control issues.

Boeing has acknowledged responsibility, committed to slow down its breakneck manufacturing pace, and promised to do better. Its CEO, Dave Calhoun, has met with US senators; Boeing factories have held day-long ‘stand down’ events to halt production and focus on quality control; and the company’s latest earnings call was all about safety, quality, and trust.

But to deal with all its issues, Boeing needs to change its organisational culture.

Or more specifically, it needs to tighten up a culture that has become too loose. As our research shows, every organisation, or units within it, can be classified as tight or loose. In organisations characterised by tight cultures, the people, practices, and leadership typically follow a pattern that creates order through coordination, efficiency, and self-discipline.

Practices are standardised, formal, and carefully transmitted, and employees focus on following the rules and preventing mistakes.

Such organisations often exhibit a hierarchical, pyramid-like shape, with decision-making centralised to give the top leadership command and control. This creates a tightly regulated environment where organisational excellence is achieved through disciplined action.

In contrast, loose cultures place an emphasis on openness, by embracing latitude, showing tolerance, and fostering creativity. Practices in these settings tend to be less standardised, allowing for more flexibility, informality and experimentation. Employees are encouraged to take risks and think outside the box. Organisations with loose cultures typically have flatter and more decentralised structures, with leaders adopting a collaborative approach and challenging the status quo.

These cultural codes aren’t random. They evolve to fit the demands of their ecosystems. Industries with a high degree of public accountability or where errors and failures are potentially catastrophic tend to veer towards tightness. Strict rules and accountability throughout the system help people to coordinate in the face of threats. Industries where there are fewer and less severe threats can afford to be looser.

Typically, organisations become naturally aligned with the requisite levels of tightness or looseness demanded by their environments. But in some cases, they can become misaligned, resulting in what we call a cultural mismatch. They might become excessively stringent, thus stifling innovation – as happened years ago at United Airlines. Or they may become too lax, leading to inefficiencies or unmitigated risks – as occurred at Tesla.

Boeing needs a cultural pivot. While its operating environment shares many similarities with other high-risk industries, it has deviated from this cultural programming and become too loose. One reason is its growing prioritisation of profit over engineering.

In a strategic manoeuvre to secure tax credits, Boeing shifted its headquarters from Seattle to Chicago, creating a geographical gap of more than 2,000 miles between senior management and numerous engineers and employees. Then, in 2022, it announced another move, to Arlington, Virginia. This physical separation hampers effective communication and limits the ability to monitor and enforce rules, making it more difficult to achieve a cohesive alignment throughout the company.

The lack of accountability has also spilled over to suppliers. To boost profitability, Boeing outsourced much of its production to a wide array of subcontractors. Again, this shift towards a more expansive, decentralised network promotes looseness and makes it harder to monitor and enforce rules.

The turbulence within Boeing also has contributed to its cultural loosening. Frequent changes of leadership – there have been five CEOs over the past two decades – have made it difficult to maintain tight control. The constant turnover of leadership means that most of the attention from the top focuses on quick, short-term fixes rather than on longer-term strategic objectives – as seen in the case of a software update after the Lion Air crash in 2018.

Likewise, the robust socialisation that typically characterises tight organisations has deteriorated. The FAA report finds that procedures and training “are complex and in a constant state of change, creating employee confusion, especially among different work sites and employee groups”. Maintaining cultural tightness and adhering to core values might not immediately or directly produce profits, but it is necessary and non-negotiable for sound operations.

The good news is that organisations can pivot and recalibrate their culture when they have become misaligned. We would advise Boeing to introduce more accountability into its overly loose culture by adopting our SECURE model. The acronym stands for: setting clear expectations, establishing structure, centralising decision-making, upholding oversight through increased monitoring, and making sure rules are enforced.

Boeing must work to propagate the core value of safety not only throughout the company, but also throughout all external partners. A tight culture must be maintained by closely aligning everyone from the top leadership to the shop floor.

The company should also make clear that workers who raise concerns about the violation of safety norms will be rewarded. One of the most concerning parts of the FAA report was its finding that workers who raise safety concerns face retaliation. Such sanctioning speaks to the loosening of the company’s safety culture, which increasingly values silence and expedited production over safety.

As Boeing grapples with these challenges, it must recalibrate its cultural compass. Accountability, stability, and commitment to safety as a core value are essential to rebuilding trust, enhancing safety measures, and upholding organisational excellence within the aviation industry. Boeing’s current course will inevitably lead to organisational and competitive decline.

Ashley Fulmer, a US Fulbright Scholar, is Assistant Professor in Management at Robinson College of Business at Georgia State University; Michele Gelfand is Professor of Cross-Cultural Management and Psychology at the Stanford Graduate School of Business.© Project Syndicate 2024www.project-syndicate.org