Boeing’s new CEO takes the ultimate management test

• Boeing’s still new CEO, Kelly Ortberg, faces urgent challengesincluding a workers’ strike.
• Ortberg faces decades of management problems and concerns from customers, employees and investors.
• Ortberg is focusing on communication, trust and future innovation at Boeing to get the company on the right path.

Kelly Ortberg he took the helm at Boeing with no time to waste.

Just two months later, he is struggling with striking workers, multi-billion lossesand corporate culture lost – all while trying to create a plan for the day develop a new plane.

Unlike a happy new CEO who paces the factories and office corridors before making significant changes, Ortberg is under pressure to do everything in his power as quickly as possible to correct course after more than two decades of poor decisions by five previous CEOs.

Ortberg, who started in August, is trying to set expectations.

“I’m still in the process of traveling around and meeting with our people, especially the two and three floors below,” he said on a Wednesday call with investors. “We just have to get everyone in the right positions, play well and focus on the right things. I think we have some work to do in that regard.”

The pressure to perform is significant. On Wednesday, the company reported a third-quarter loss of $6.1 billion. On the same day, the mechanics union again rejected the company’s proposal, which would have included a 35% wage increase over four years. According to one group of analysts, the strike cost the company 50 million dollars a day.

Ortberg, in a letter sent to employees along with the company’s third-quarter results, said Boeing customers want – and need – the company to succeed.

“With the right focus and culture, we can once again become an iconic company and a leader in the aviation industry,” he wrote.

The letter recalled that Ortberg must balance pressure from Boeing employees, investors and customers. For the commercial business of a company that builds planes for airlines, this ultimately means the flying public.

Bill George, former CEO of medical device maker Medtronic and an executive at Harvard Business School, told BI that Ortberg must overcome short-term challenges such as a workers’ strike and strengthening cash flow while making “bold decisions” for the long term .

“He can’t just do one or the other,” George said.

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Restoring a culture of safety

George said that while each of the commercial, defense and space companies faces individual challenges, the broader issue that needs prioritization is restoring safety culture after high-profile accidents.

“It’s the most important thing he has to do, but it’s going to take time,” George said. He estimates that culture and quality issues can take three to five years to fix, or even longer, before they become deeply embedded in the company.

George said Ortberg’s background was as an engineer – not as… a financier who previously headed the company — should help you communicate with many company employees.

“They can tell whether you know what you’re talking about or not,” George said. “If you don’t do this, they won’t trust you.”

He added Ortberg’s decision to this move to the Seattle area, unlike previous chiefsit was smart. The company has deep roots there, especially in commercial activities.

“You have to get the entire top team in Seattle and take it from there,” George said.

Rebuilding trust among employees

Rosalind Franklin, a partner in Executive Search Boyden’s global leadership consulting practice, told BI that to build trust and operate as effectively as possible, Ortberg must formulate an opinion that is “both vulnerable and strong” without being deceptive.

She said it meant being open about the “hurt” caused by the company’s recent decision lay off 10% of the workforce will cause. Ortberg needs to “be honest and acknowledge that this is a really difficult time for the company,” Franklin said.

“When you feel like the CEO is with you and he feels your pain, it makes it more bearable and gives you hope for the future,” Franklin said.

Need show empathy is greater than before the pandemic, she said, because many employees have started to expect more from their leaders.

Franklin said that doesn’t mean shying away from difficult decisions.

“You can’t abandon what you know you have to do. It’s not what you do, but how you do it,” she said.

Leads from the front

Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management, told BI that “we usually advise someone not to do too much, too fast.”

In this case, he said, Ortberg had no choice but to try to resolve issues related to its workforce, the company’s “precarious” financial situation and regulatory concerns.

Sonnenfeld, who is also the founder of the Yale Institute for CEO Leadership, said the task facing Ortberg is similar to those once faced by General Motors CEO Mary Barra and Alan Mulally, a former Ford executive who once headed Boeing’s commercial division.

Like Boeing, Sonnenfeld said, both GM and Ford are complex industrial companies that feature prominently in the public eye. When the CEOs of each automaker had to steer their companies out of the crisis, both made “really bold” public statements and were highly visible, he said.

“They put a lot of emphasis on character leadership and demonstrated accountability, visibility and really good follow-up,” Sonnenfeld said.

In his writing Ortberg encouraged senior leaders reduce the distance between managers and those who are closest to the production process. “We need to be in the factories, in the backrooms and in our engineering labs,” he wrote.

This type of leadership “demonstrates responsibility and approachability,” Sonnenfeld said. “It shows a clean and less formal style, and that’s long gone.”

A clear plan for the future

George, the former Medtronic executive, said one step Ortberg could take to restore confidence and get people excited about the future would be to announce a program for a new single-aisle plane redesigned from the ground up.

“I think he has to do it,” George said.

The new plane could overtake older designs that he says have not kept pace with advances in jet engines and avionics in recent decades.

Ortberg alluded to such a future in his letter. He wrote that the company needs to repair its balance sheet “so that we have a path to the next commercial aircraft.”

Richard Aboulafia, an aviation industry analyst and managing director at AeroDynamic Advisory, told BI that the conversation about what’s coming is essential. He said Ortberg must also make clear that the planned layoffs will not jeopardize safety, cause delays to the company’s defense operations or make future product development impossible.

“It needs to reassure investors and everyone else that the situation is stable, and also reassure the industry that it is ready to invest in the future,” Aboulafia said. “It’s a hard needle to thread.”