- On Monday, the Wall Street Journal reported that Boeing is suspending production of the 737 Max jet in January 2020.
- Sandra Sucher is a professor of management practice at Harvard Business School. She is writing a book on how companies build trust.
- She told Business Insider that Boeing's story was "a template for how not to be trustworthy."
- Here's what else she has to say about how Boeing and its leadership fall short on the four dimensions of trust: competence, motives, methods, and impact.
- Click here for more BI Prime stories.
Boeing CEO Dennis Muilenburg's highly publicized decision not to take a bonus this year shows "just how little he understands about human nature," said Sandra Sucher, who teaches management practice at Harvard Business School and has over 25 years of experience in industry and nonprofit management.
Muilenburg giving up his bonus is "a completely weird gesture," she said.
The executive said he gave up "tens of millions" at November's DealBook conference, a move following the two Boeing 737 Max crashes in October 2018 and March that left the company reeling — and the public demanding answers.
On Monday, the Wall Street Journal reported that Boeing is suspending production of the 737 Max jet in January 2020.
Muilenburg appeared before Congress on October 29, later meeting privately with the families affected by the second crash. He said today that hearing the families' stories affected him so deeply that he started thinking about how he could send an individual message of responsibility, in the form of forgoing the bonus until Max jets are once again in the air.
The move creates a strange equivalence, Sucher said, between the money Muilenburg receives and the lives that were lost on his watch.
"It's a confusion of what's the denominator here," Sucher told Business Insider. "No one's thinking about what he gets paid; they're thinking about the fact that he presided over two crashes that killed 346 people."
A CEO voluntarily giving up his bonus has precedent. Amid the recession in 2009, Honeywell implemented furloughs — a situation in which employees are asked to take unpaid leaves but aren't let go — in place of layoffs. Employees were understandably upset, and Honeywell's top management showed their sympathy by losing out on more than half of their overall compensation for the year — they didn't take their bonuses. David Cote, Honeywell's CEO at the time, wrote that his bonus was significant, about $4 million, but he decided early on that he wasn't going to take it. There's equivalence there because it's compensation measured against compensation.
Boeing's circumstances, however, are rather unique. Muilenburg deciding to give up his bonus can't gauze over the fact that hundreds of people died in problematically designed Boeing aircraft. If he were to stop at just this conciliatory gesture, it would be like saying that part of a CEO's compensation is equivalent to massive loss of human life.
The 4 dimensions of trust
Leaders must first establish competence in order to lay the groundwork for trust, and Boeing failed to do so with the launch of the 737 Max, said Sucher. Even though the company considered building a new plane instead of building on the 737 model that first launched in 1967, competition from Airbus made launching quickly appear more lucrative than taking 10 years to develop a new plane. So Boeing went with the 737 Max.
"Boeing just never did what you need to do in a business, which is to decide when it's time to move beyond legacy platforms," Sucher said.
Creating a new model instead of building on a legacy would've been an expensive but essential undertaking in establishing not only competence but also the second dimension of trust: how the public perceives a company's motives.
"From the start, it appeared that Boeing's main motivation was to beat its only competitor, Airbus," Sucher said. "It was willing to forgo many important steps in order to get a plane out as fast as it could."
A company that's obviously motivated by a market race, and appears lukewarm or indifferent to the lives of customers, undermines public trust. Sucher said Boeing's response after the two crashes irrevocably damaged what was left of public trust.
"They were unwilling to act until they were forced to ground the plane that had proven itself statistically untrustworthy," Sucher said. "They weren't going to do anything about it until they were forced to."
This brings in the third and fourth dimensions of trust: the means, or the way a company goes about what they're doing, and how they deal with the impact of their actions. Pilots' training for the 737 Max training was lacking from the start, rooted in a short course that could be completed on a tablet. In the way Boeing launched the 737 Max, the way it dealt with the fallout — from start to finish, in retrospect — there's a traceable thread of faulty execution, she said.
All of this leads to what exactly can be done in the aftermath, when these four pillars crumble and the leaders at the helm attempt to glue what's left back together.
What leaders should do to regain trust
The first step is understanding exactly how much power leaders have to shape the atmosphere of a company.
"Leaders create the context within which people behave," Sucher said.
In Muilenburg's case, Sucher thinks that it's about more than having the necessary capabilities or experiences. It's about honestly asking if people would ever trust the company again as long as he were still leading it.
The onus was on Muilenburg after the first crash to launch an internal investigation and uncover what went wrong before journalists did. Sucher said he should've done his own analysis of what happened and created an environment where people told the truth about the lead-up to these crashes.
"It's a very compelling set of tensions and pressures, and you have to make priorities," Sucher said. "As soon as you're choosing, that's where your boundaries come out. You're showing people what you think by what you choose."
Sucher further said that it was not that business leaders couldn't make good decisions.
"It's a choice to be in the business of making good choices," she said.
This piece is an update from a November analysis post. It will be updated as further context comes in.
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