The CEO who was fired is just a "scapegoat"? The root of Boeing's problems lies in the "collapse of engineering culture"

Boeing's CEO has been fired, and this cannot immediately solve the problems faced by this century-old aviation giant. Instead, what Boeing most urgently needs is to change its financially-oriented corporate culture and rebuild its deep engineering and technical foundation.

Wall Street News mentioned earlier that due to a series of safety crises with its core product 737 Max, triggering a comprehensive regulatory investigation and public panic, Boeing had to make a decision to undergo a major personnel "bloodletting":

CEO Dave Calhoun, Chairman Larry Kellner, and Commercial Airplanes President Stan Deal will all leave the company.

Calhoun will leave the company by the end of this year, during which time the company will tirelessly search for new CEO candidates.

The president of its commercial airplanes division will be succeeded by Chief Operating Officer Stephanie Pope, a similarly significant personnel appointment that has raised questions among analysts:

Pope comes from an accounting background and does not have a technical background himself. He served as the Chief Financial Officer of Boeing Commercial Airplanes from December 2020 to March 2022.

How can a CEO with a financial background lead a technically complex aircraft manufacturing company?

Boeing's board analyst and founder of analysis service agency Free Float LLC, Matt Moscardi, bluntly pointed out:

Boeing is not facing an accounting or cost-saving problem, but a safety and corporate culture problem.

Former Chairman and CEO of Medtronic, and current Executive Fellow at Harvard Business School, Bill George, pointed out in a recent article at Harvard Business School that Boeing's current problems stem from "leadership failure, leading to a departure from the engineering quality that Boeing once prided itself on."

Boeing's board analyst Moscati more bluntly stated:

Boeing's problem is that it has pushed out the talent with the ability to build and design aircraft from the centers of power. To address Airbus's challenge, they must find engineers who can lead this company.

From Engineering Excellence to Financial Focus, Boeing is No Longer the Boeing of the Past

Since its inception, Boeing has established itself as the global leader in aircraft manufacturing with its robust engineering technology, creating one legendary aircraft after another that has made history.

As the "ancestor" of civil aviation, Boeing has long adhered to a culture of safety and quality supremacy. The slogan "If it's not Boeing, I'm not going" is enough to demonstrate Boeing's emphasis on manufacturing and its high confidence in its technology.

However, this corporate culture took a 180-degree turn after Boeing's acquisition of McDonnell Douglas in 1997—financial performance was prioritized over engineering manufacturing. Former General Electric executive Harry Stonecipher, who was once embroiled in a moral scandal, led Boeing after the merger.

"He (Stonecipher) said, 'We will not be just an engineering company, we will operate like a business,'" George said, "This is an insult to many people and has made many engineers feel frustrated."

Over the next twenty years, Boeing no longer focused on research and design, but instead increased its reliance on external suppliers, focused on making quick money by selling old models, and used cash for stock buybacks.

The consequence of this was that Boeing no longer produced popular aircraft models and safety accidents occurred frequently.

The most typical example is the Boeing 737 Max - a model hastily introduced by Boeing to challenge the European aircraft manufacturing giant Airbus.

The Boeing 737 Max was globally grounded after two fatal accidents in 2018 and 2019, and resumed flights in 2020, but in January of this year, a plane door fell off, prompting a comprehensive investigation by the Federal Aviation Administration (FAA) and reigniting public concerns about safety.

It is worth noting that the series of groundings of the Boeing 737 Max also had a huge financial impact on the company.

Chief Financial Officer Brian West stated at a meeting last week that Boeing's cash flow will suffer losses of $4 to $4.5 billion in the current quarter.

In addition, Boeing's stock price has fallen by about 30% since early January, making the company the target of shareholder lawsuits once again.

The new leader must help Boeing rebuild its manufacturing strength

Calhoun's departure timeline does not seem to convey the necessary sense of urgency, but this may be helpful in finding a suitable successor.

"The new leader of Boeing must be able to collaborate with regulatory agencies, motivate employees, and most importantly, rebuild Boeing's renowned manufacturing strength to restore it to a world-class level."

"Announcing a leadership change 9 months in advance may be beneficial from a succession planning perspective, but it does not reflect a sense of urgency," said Jo-Ellen Pozner, Associate Professor of Management and Entrepreneurship at Santa Clara University's Leavey School of Business. "If Boeing truly understands how the market views its current leadership, it will announce an external successor with extensive manufacturing and operational experience."

Whether Boeing should look for Calhoun's successor internally or externally is a complex issue. The best candidate is likely to come from outside, mainly because Boeing's current corporate culture has been maintained for too long.

"Given the widespread belief among observers that Boeing urgently needs a change in mindset, selecting an external candidate may be more easily accepted," Pozner pointed out. Boeing has not disclosed any details of its CEO succession plan and did not immediately respond to media inquiries.

Analysts believe that restoring Boeing's engineering culture will be a long and difficult process, but Boeing has already missed the best opportunity. In addition, Boeing's board of directors also needs to undergo changes, as members lacking engineering or manufacturing experience should not continue to stay in the company "These individuals have influence at the board level," Pozner said, "If the board's discussions focus on shareholder value, this mindset will impact the entire organization."

No one wants to see Boeing fail or fall further behind its competitors. But the company needs further transformation and more significant measures to start achieving real and measurable change.

"This cannot be achieved overnight, it requires more time," George stated, "The board must stick to this position."