Robison points out that back in the 1990s, executive performance had been tied to more balanced measurements. These included earnings from operations as well as customer and employee satisfaction metrics. But by 2007, executives were encouraged to focus primarily on one metric: “optimizing net assets.” The company specified how this could be done: “through more efficient process, cost containment and minimized inventory.”
Boeing of course continued to give lip service to the importance of its workforce and its customers, but when it came down to how top leaders made their money?
There, the priority was clear and singular: shareholders mattered most.
You don’t need an MBA to connect the dots between this orientation and the high-profile failures that have tarnished Boeing’s reputation as a brand and employer. Many have pointed to Boeing’s 1997 merger with McDonnell Douglas as when this shift took hold, with the latter company’s cost-saving culture taking root across the new organization.
This disastrous path could have been averted, I believe, had Boeing leadership internalized a better mental model of a business. Fundamentally, a CEO and leadership team must balance the interests of three core groups within the business:
Customers
Employees
Shareholders
To have a sustainable business, you must consistently provide value to each of these groups. Each would prefer to have more resources and attention than the others, but the job of the CEO is to not let any one of them take precedence. Only when equilibrium is achieved can a business thrive.
Unfortunately, it’s common to see organizations place one group above the others, sometimes explicitly. Boeing’s shareholder-first mindset is common, but you also see companies that boast of being “customer-first” or “employee-first.” When these mantras drive decisions, the whole operation becomes unbalanced, lopsided, ineffective. It starts to look like a general practitioner who only optimizes the liver, or a parent of three who gives all the attention to one child.
Not understanding the inherent tensions between these three groups is a common, critical mistake CEOs make. We’re seeing it play out on an epic scale at Boeing, but many smaller and less remarked-upon business failures stem from the same root cause.
