- Boeing’s still-young CEO Kelly Ortberg faces pressing challenges, including a labor strike.
- Ortberg must address decades of management issues and concerns from customers, workers and investors.
- Ortberg is focusing on future communication, trust and innovation at Boeing to get the company on the right track.
Kelly Ortberg took over at Boeing with no time to spare.
Just two months later he’s dealing with striking workers, multibillion-dollar losses and a vanished corporate culture — all while trying to come up with a plan to one day develop a new jet.
Unlike the lucky new CEO who gets to walk factory floors and office corridors before pulling big levers of change, Ortberg faces pressure to do as much as he can to course-correct after more than two decades of mistakes by five previous CEOs.
Ortberg, who started in August, is trying to set expectations.
“I’m still in the process of traveling around, meeting our people, especially two and three levels down,” he said during an investor call on Wednesday. We just have to get everybody in the right position, playing the right game, focused on the right thing, and I think we’ve got some work to do there.”
The pressure to perform is significant. On Wednesday, the company reported a loss of $6.1 billion for the third quarter. On the same day, the machinists’ union again rejected a company proposal that would have brought a 35% pay rise over four years. According to a group of analysts, the strike has cost the company $50 million a day.
Ortberg, in a letter released to employees along with the company’s third-quarter results, said Boeing’s customers want — and need — the company to succeed.
“With the right focus and culture, we can be an iconic and leading aerospace company once again,” he wrote.
The letter offered a reminder that Ortberg must balance pressures from Boeing’s workers, investors and customers. In the case of the company’s commercial business, which builds aircraft for airlines, that ultimately means the flying public.
Bill George, former CEO of medical device maker Medtronic and an executive fellow at Harvard Business School, told BI that Ortberg needs to address short-term challenges like the labor strike and strengthen cash flow, while also making “decisions to brave” for a long time. deadline.
“He can’t just do one or the other,” George said.
Restoring a safety culture
George said that while the company’s commercial, defense and space businesses each face challenges individually, the broader issue that needs to be prioritized is restoring a safety culture after high-profile failures.
“That’s the most important thing he has to do, but it’s going to take time,” George said. He estimates that fixing culture and quality concerns can take three to five years and even longer to embed them deep within the company.
George said Ortberg’s background as an engineer — rather than a finance type who previously ran the company — should help on the communication front with many of the company’s workers.
“They know if you know what you’re talking about or not,” George said. “If you don’t, they don’t have any confidence.”
He added that Ortberg’s decision to move to the Seattle area, unlike previous bosses, was a wise one. The company has deep roots there, especially in its trading business.
“You have to have the whole core team in Seattle and get it out of there,” George said.
Rebuilding trust with employees
Rosalind Franklin, a partner in the global leadership consulting practice at executive search firm Boyden, told BI that to build trust and be most effective, Ortberg needs to deliver a note that is “both tangible and yet strong” without being deceptive.
She said that means being open to the “damage” the company’s recent decision to cut 10% of its workforce will cause. Ortberg needs to “communicate honestly and acknowledge the fact that this is a really difficult time for the company,” Franklin said.
“When you feel that the CEO is with you, and the CEO is feeling your pain, it makes it more tolerable and gives hope for the future,” Franklin said.
The need to convey empathy is greater than before the pandemic, she said, because many workers have come to expect more from their leaders.
Franklin said that doesn’t mean shying away from tough decisions.
“You can’t give up on what you know you should do. It’s not what you do, it’s how you do it,” she said.
Leading from the front
Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management, told BI that “typically, the advice we would give someone is not to do too much too soon.”
In this case, he said, Ortberg has little choice but to try to fix the labor problems, the company’s “precarious” financial situation and the concerns of regulators.
Sonnenfeld, who is also the founder of Yale’s Chief Executive Leadership Institute, said the task before Ortberg is similar to those once faced by General Motors CEO Mary Barra and Alan Mulally, the former Ford boss of who once headed Boeing’s commercial division.
Like Boeing, Sonnenfeld said, both GM and Ford are complicated industrial businesses that stay prominently in the public eye. When the respective CEOs of the automakers had to steer their companies out of crises, both made “really bold” public statements and were very visible, he said.
“They really supported the character of the leadership and demonstrated that with accountability and visibility with really good follow-through,” Sonnenfeld said.
In his letter, Ortberg encouraged senior leaders to close the gap between those in management and those closer to the production process. “We need to be on the factory floors, in the back shops and in our engineering labs,” he wrote.
That kind of leadership “shows an accountability, shows an accessibility,” Sonnenfeld said. “It shows a transparent and less formal style, and that’s been a long time coming.”
A clear plan for the future
George, the former Medtronic chief, said one step Ortberg could take to start restoring confidence and getting people excited about the future would be to announce a program for a new, redesigned single-aisle plane. from the beginning.
“I think he should,” said George.
A new plane could overtake older models that he said have not kept pace with advances in jet engines and avionics in recent decades.
Ortberg hinted at such a future in his letter. He wrote that the company needs to fix its balance sheet “so that we have a path for the next commercial jet.”
Richard Aboulafia, an aviation industry analyst who is managing director at AeroDynamic Advisory, told BI that it is essential to talk about what is coming. He said Ortberg also needs to make clear that the planned job cuts will not compromise safety, add to delays in the company’s defense business or alter future product development.
“He needs to reassure investors and everyone else that the situation is stable and also reassure the industry that they are prepared to invest in the future,” Aboulafia said. “It’s hard to thread that needle.”