WTH Is Happening To Boeing?
The Great Boeing Company was once the undisputed heavyweight champion of commercial aviation. Today they are struggling with plummeting market share and costly systemic problems. Yes COVID-19 struck them hard but also exposed deeper problems. The short answer is simple: Boeing forgot their engineers.
I started my engineering career at Northrop on the B2. I moved to satellites at Hughes, and Space Shuttle at Rockwell — all of which are now Boeing properties. I then worked at Boeing proper for almost a decade before leaving the aerospace industry completely. This post is a first-hand account of a single engineer and not meant to be construed as investment advice or any specific safety concern.
A Collaborative Profession
In my early days, engineering was a highly collaborative profession. Senior engineers took pride in mentoring junior engineers. Methods, techniques, and thought processes were shared without hesitation. The engineer held the final word on any technical matter under their charge — the data always won over expediency and cost. Production took a long time and complexity of design was limited to what could be measured with the tools that were available.
In the early 1990’s a new idea emerged called Total Quality Management System. TQMS was the beginning of the Six Sigma revolution that modernized many industries. The TQMS mantra was “You can’t improve what you don’t measure!” There was no question that TQMS decreased cost and improved quality across the board . The benefits were indisputable with one exception; what could not be measured was easily forgotten.
The engineer — an intangible asset — is not as easy to measure as, say, dimensional tolerance, customer satisfaction, cost, schedule, rejection rate, etc. The role of the engineers is to eliminate risk from complex systems — how can you measure something that does not exist? This is not the same as insurance — insurance can’t make airplanes fly. I believe this is where engineers were forgotten.
The Y2K Strike
The awakening came in early 2000 when Boeing engineers went on strike over low wages, diminishing benefits, and reduced R&D budget. It was one of the largest white-collar strikes in US history. Boeing was accustomed to strikes — the machinists union had them all the time. Whenever the machinists went on strike, Boeing stock would soar on investor expectations of short-term payroll gains. Executive bonuses flourished.
However, when the engineers went on strike, something completely different happened. Images were broadcast around the world of clean-cut engineers dressed in Grunge rock flannels standing around burn barrels shivering in the Seattle rain. The public relations impact was swift and severe. Boeing lost 25% of its market value. Deliveries stopped, sales stalled, and the public grew nervous about airplane safety. Politicians stepped into the limelight. The FAA threatened to withdraw Boeing’s airframe manufacturer certification. Analysts predictions were grim. The pressure for engineers to cross the picket line was intense. But the engineers held out.
Meanwhile the Seattle Dotcom revolution was in full swing and Boeing engineers were getting snatched up by the emerging Wireless Telecoms, Internet hardware tech, and e-commerce start-ups. The engineering union even held seminars to packed union halls on how to defect to tech. Executives were stunned and their own casualties began to mount.
The War on engineering
After 40 days, the strike was ended. For the first time ever, the tangible value of this humble “intangible asset” came into full and furious focus. This existential threat to the company caught management completely off guard. But instead of trying to figure out how to improve relations, Boeing doubled down and went to war with the engineers.
Several changes affecting engineers took place in the early 2000’s, which would have a lasting impact.
- Relocation of corporate headquarters from Seattle to Chicago ostensibly to insulate executives from media (and engineering).
- Intentional relocation of aircraft production to a non-union state of South Carolina.
- Outsourcing engineering: Company policy had once stated explicitly that all employees with an engineering classification must hold a degree from an ABET accredited university program. That requirements was replaced by the term “substantially equivalent” engineering program. This allowed Boeing to outsource engineering work to low-cost countries in earnest. Many Boeing engineers were required to train their foreign replacements before themselves getting laid off.
- Boeing adopted some sort of 80/20 rule which forced engineers to compete against each other for promotions and pay raises. At every layoff cycle, management would terminate the bottom 20% based on nebulous metrics. Engineers began to look at each other with suspicion as possible threats rather than collaborators. Managers lead with fear.
- Layoffs were frequent and almost seemed to be timed to external events such as minor economic downturn or fluctuations in stock price. Engineers nearing 50 years old seemed to be especially vulnerable to periodic layoffs and many lost pensions, stock options, or reduced medical coverage . Others were rehired on the next upswing under a new contract with reduced benefits.
- Being laid off from Boeing was not good for your job prospects. Transferring to another industry was difficult because aviation job descriptions used entirely different language and key words than most other industries.
- The age gap became extreme. Older engineers withdrew from mentoring younger engineers for fear of defending their job. Fewer mid-career engineers were left. Younger engineers lost interest with mundane tasks and moved to other companies.
- No new aircraft had been developed during the 15 years between the 777 and the 787. Boeing was forgetting how to build an airplane.
- Boeing’s local supplier network was required to pay engineers less than Boeing so that they would not poach from the mothership.
To their credit, Boeing was able to remake itself as a complex systems Integrator creating one of the most extensive international design, manufacturing, and logistics operation that the world has ever known. Then they put together one of the most innovative aircraft ever built. But the journey was excruciating, the cost was enormous, and the vulnerability to external shock persists to this day.
The entire point of this story is that it is very difficult to measure the tangible value of engineers until you remove them from the equation. All the TQMS in the world may end up doing more harm than good if it is not measuring the right things at the right time. We are entering a new era of AI, blockchain, and IoT - each deeply data dependent — if we don’t measure the right things, these technologies may not give us the right results. By far the most critical dataset is to measure the direct economic contribution of engineering . What is the value of the risk that engineers remove from our modern lives? Without this, we will become painfully aware of the economic impact due to the absence of engineering.
These problems are not unique to Boeing. Complex systemic risk is manifesting in many mysterious ways across the globe from pandemics to climate change to political instability and distribution of resources. We believe that they each have a common thread — The Forgotten Engineers.
Case Study: The Innovation Bank
The Innovation Bank was partially developed at Boeing during the difficult period between 2000–2006. Every summer, dozens of wide-eyed college interns arrived on site for a fun summer of airplanes and activities. Nobody had time to deal with Interns so we looked around for ways to spread them around as widely as possible. Boeing also had an interesting program that provided cash incentives for employees who identified cost savings opportunities to aircraft production. So, we hijacked the employee suggestion box and set the interns out on a wild scavenger hunt to find the winners and the losers from these ideas. They literally had to roam the entire 200+ acres of manufacturing property unguided to find answers to the questions that were presented. What we inadvertently discovered was that by creating an internal market, we could incentivized senior engineers to work with junior engineers toward a common financial reward. The results were spectacular. At the end of the summer, we presented our project to senior management and, well, they must have forgotten.
The current evolution of the Innovation Bank uses a combination of game theory, blockchain technology, and actuarial math to measure the economic impact of engineers on an economy.