Being CEO of a company is a high stress job. This is especially true when you're CEO of a company that transports millions of people miles above the earth each year; when every day could spell disaster.
Boeing CEO Dennis Muilenburg likely knows the feeling. He lost his chairman's title after two crashes of Boeing's 737 Max -- the October 2018 Lion Air crash and the March 2019 Ethiopian Airlines crash -- which claimed 346 lives.
Days after the second crash, the FAA grounded the 737 Max. That has cost Boeing billions -- $5 billion in the second quarter of 2019 alone to compensate airline customers for the grounding of flights. Hundreds of millions more will likely be paid to the families of those killed in the crashes, according to the Wall Street Journal.
Here are three key leadership lessons from the 737 Max debacle to apply to your business today.
Don't Put Fear of Competitors Above the Interests of Customers
Two big companies, Boeing and Airbus, dominate the aircraft industry. In 2010, Boeing feared that Airbus's new, more fuel-efficient version of its mid-sized aircraft, the A320neo, would cost Boeing 737 revenue from American Airlines and others, according to Vox.
The A320neo hosted a wider-diameter, more powerful engine on the same airframe as its previous A320 versions. The 737 Max, Boeing's competitive response to the A320neo, also added a larger engine to the airframe of a traditional 737.
To get the larger engine under the 737 Max's wing, engineers mounted it higher and more forward on the plane. This decision changed the aerodynamics of the plane -- making it hard to fly in a steep angle of attack, according to Vox.
To fix that problem, Boeing engineers developed the Maneuvering Characteristics Augmentation System (MCAS) system which the Lion Air pilots could not disable -- thus sending the aircraft plunging to earth.
In short, fear of losing customers to Airbus caused Boeing to make what turned out to be bad design decisions that harmed its customers.
The lesson for leaders is clear -- don't let fear of losing out to competitors cause you to abandon your commitment to product quality and customer satisfaction in the scramble to catch up.
Don't Rush a Flawed Product to Market to Win Market Share
Had Boeing done that, it would have designed and built a new, more fuel efficient aircraft. But as Vox pointed out, that would have required a long certification process and expensive pilot retraining.
To get the Max to market faster and at a lower price, Boeing got the FAA to certify it as a modification to the 1967-approved original 737, according to the results of an investigative report into the 737 Max's New York Times. This report found that the FAA approved the Max despite its "inadequate awareness of the MCAS function" due to "fragmented discussions delivered to disconnected groups [within the FAA]."
Yet those flaws must have been known to Boeing. According to the Dallas Morning News, 737 Max test pilots commenting in a NASA database noticed a common pattern: when the plane ascended after takeoff: the autopilot caused the plane to suddenly nose down. One of the pilots found it "unconscionable" that Boeing and the FAA allowed pilots to fly the Max without adequate training and documentation of how different the Max was from prior models.
Despite these problems, Boeing received FAA certification in March 2017 -- and won market share. By March 2019, Boeing had received 5,000 orders valued at over $600 billion, according to Bloomberg, as its stock soared 148 percent.
Boeing paid a huge price for the Max crashes and its subsequent grounding: profound damage to its reputation and a 25 percent drop in its stock price.
The lesson? Fight short-term pressure to rush a poor product to market. Create product development teams that include leading customers and respected engineers who care solely about product quality and customer satisfaction. Give those voices real power in making key design and launch decisions.
Don't Destroy Your Credibility By Pushing an Overly Optimistic Narrative
Since March 2019, Boeing has continued to push the idea that the 737 Max would be back in service before the end of 2019 (as it did this June, noted the Wall Street Journal).
The FAA recently chided Boeing for its aggressive forecasts -- asserting that the Max will likely not return to service until February at the earliest -- given global political pressure to be far more cautious about recertification, noted the Wall Street Journal.
Muilenburg's unrealistic deadlines have damaged Boeing's credibility.
The lesson for leaders is simple: tell people what you plan to do and consistently do what you said you would do. Leaders who over-promise and under-deliver destroy trust. Boards should replace such leaders with people who consistently fulfill their commitments.