Geoff,you've got to scratch your head about that press release. The quotes sound as ridiculous as the move itself. I vaguely remember at the time noting the odd reference to UAL. It has some parallels with the phrase he "doth protest too much." Looks like Condit skipped his media training session that week.

I fully agree, Geoff.  That is a very correct assessment.

The opportunity to function in short-cut measures and win is partly due to the facts that you bring up.  We have well developed systems to measure the processes and anything that shows better numbers there gets supported.

The transition to quality and value is a longer-term result of:  new competition, results-driven numbers, and/or leadership.  We need to tie more numbers around the contribution of quality and total systems to the better bottom lines - to create an incentive for change.  The "rescue" from unseen danger does not do it.

But the opportunities exist in the examples that you bring out, to make a case for the weakness in short-cuts and then build a positive contrast around the leading companies that build a stronger system.  Awareness, through articles like yours, are the first steps.  Thanks for making us think - that's the first step!

DHagar

@DHagar: The fundemental problem dealing with outsourcing is always going to be this:

You can prepare a business case that measures,
almost to the penny, what you can save on salaries and benefits.

There's no way to get that level of precision about the impact on
quality, reputation and customer loyalty 

I've been in these meetings and it isn't any fun. Even the good ones (the folks who are sincerely concerned about the company-- not just in it for a quick buck) look at you like you're Chicken Little or the Boy Who Cried Wolf. You don't have any numbers, because it's impossible to quanitify. All you can do is say "Look at this company, and this one and this one and this one..."

Usually they say "We understand your concerns and we've studied what happened. We have done this and this and this to make sure they don't happen here. Why don't you think that's enough?"

There's no comeback that works. The best I've ever been able to come up with is "If you do this and we turn out to be right, you'll never be able to fix this. Even if you elinimate the problems-- even if you make the company better than it was-- customers will still remember."

Michael Dell can blame the economy and mobile and Microsoft and lots of other things for his current situation. A lot of it is true. But his situation would materially improve if the first name people thought of when they heard the words "Good computer" was Dell and not Apple, Lenovo or Sony.

@slfisher:  I don't know how the union situation affected the issue. Here is what I do know.

1. I spent three years at the local AFL-CIO, also working with SEIU / Change to Win. Cleveland is one of the places where the people in charge knew what they were doing, so I got a pretty good understanding.. 

2. It's dangerous to talk about a "union" as a big bloc. In any situation, the company is negotiating with one or mroe locals. Those are often (not always) autonomous fiefdoms.

3. It's possible to have a bad local in a well-run union, or an excellent local in an awful union. Some nationals try to weed out the bad apples, others don't. 

4. A local can fall into one of three mindsets:

1. "We're union. We say we're better than everyone else, so we need to deliver. We need to be well-trained, we need to work hard, we need to enforce quality. If the company benefits, we will too."
2. "We're union, we're here to protect workers from management's ongoing attempts to screw us. We need to watch them carefully and make sure they don't job us or the customers. We give them a good day's work, but nothing more."
3. "We're union, so #^$&@%$$ those management @(*$($&@. Try to @&^$#% and we'll @($&% the @#&$^#%. We don't give those @^&$&*$ #^$%#% one thing!!!"

5. Where the local is depends on how hard management fought unionizing, how many contract problems they've had and how bright and honest the local president is. Things can change markedly over time.

6, What I've heard is that Boeing used to work very closely with its unions, feeling they could ride herd on the workers in a way that management can't (Same way in sports-- the star of the team can challenge his teammates not pulling their weight on a peer level).

Over the last decade or two, the union has been moving steadily toward the second mindset. They've lost confidence in management's ability to make good engineering decisions, and are very concerned about the cost-cutting resulting in worse planes.

The attitude seems to be "If you insist on making junk and giving yourselves huge bonuses, we want our share too. And don't you dare blame us for all the bad decisions you're made over our objections."

That's the chain of events that sends labor-management relations firmly into the toilet. Management decides to do something really stupid, the union says "Don't do that-- it won't work", management says "What do you dumb slobs know?" and does it anyway.

Then, after the company begins bleeding money, management comes back to labor and says "We need you to take paycuts." The union's response is "You first-- and you mostly, because you got us into this mess. And from now on, you have to listen to us."

And when management says "How dare you!"... thats how you end up buying "Cloud Cakes" from Little Debbie's, instead of Twinkies.

@B. Krafte: Spot-on. I have a list of activities that a company can take that aren't always mistakes, but normally indicate that the company has lost sight of its priorities. Changing the corporate name and changing the logo are on there.

So is relocating coprporate HQ. Especially to a site that isn't close to any major facility, or wasn't done in response to an acquisition. And particularly if the company chooses a downtown, expensive location (as was done here).

The press release makes for entertaining reading:

Upon arriving in Chicago, Boeing Chairman Phil Condit said, "We are here, not because we wanted to leave Seattle, but because we wanted to build a bigger, more capable Boeing Co. We believe that having our world headquarters separate from any one of our major businesses will help us to achieve our goals of growing this company."...

The move to Chicago will separate its headquarters from its commercial jet unit, located in the Seattle region - where the company was founded in 1916, and now employs nearly 78,400 people. Boeing did not consider relocating to St. Louis or southern California, where the company has its Military and its Space & Communications units,

My personal favorite is this line, where Boeing carefully explains that the one reason that might make sense wasn't a factor:

"Chicago is home to a major Boeing customer, UAL Corp.'s United Airlines, though that was not a factor in the company's selection decision."

Or this: 

The headquarters staff, which is expected to number fewer than 500 people, will focus on developing global growth opportunities and creating shareholder value. The Chicago, Dallas-Fort Worth and Denver metropolitan areas were candidates as the potential locations for the new world headquarters.

That's always what you want to hear: "We're sticking 500 people a couple thousand miles from the 78,000 folks who are the business, and we will let them make decisions that affect their lives."

That's a good way to end up owning a bakery and a greeting card company, in an effort to create "shareholder value."

My opinion on this dates back to Robert Townsend's Up The Organization. When Avis needed a bigger HQ, they decided they needed two things:

• A site close to active domestic and international airports, so people could ge in and out.
• A good market for ccounting and clerical staff.

They moved to Long Island (between LaGuardia and JFK), while Hertz stuck itself in a tony area of Manhattan.

@taimur_tz: Very well said. The other lesson you can learn is that frequent iteration and upgrades are better than "Build a huge system from scratch once a decade."

I don't build airlines, but both they and Big Pharma seem to say "let's sink a huge capital investment into one product and ride it as long as we possibly can."

Maybe that's the only way you can do it... but I doubt it. The life of a consultant is being told "Our industry isn't like [last industry I told them I worked in]. They have it easy and it's very hard for us and the way we do it is the only way you can do it."

I've found that it almost always isn't true-- certainly not to the degree they claim.

Maybe Boeing wouldn't be any better off if (say) they had decided to take an existing design in 2001 (around the time they were planning the 787) and replace one component with soimething they wanted to put in the 787.

If you try to wrap the 767 in a completely composite skin, you'll learn something. Try to make a 777 without the hydraulics, but with electronics, that's another lesson.  You end up with two benefits:

• Practical experience you can use on the new design 
• An old model with new features-- presumably improved.

And it's much easier to spot problems and fix them when you know the product inside and out.

They will definitely gain if they do, B. Krafte.   They have a lot of building to do, however, to not just try and patch but to develop a strong fully integrated supply chain.

DHagar

@DHagar - My hope is that Boeing will learn. 

I fully support your assessment, Usman, and Douglas.  They went after the gold without the proper system.  As Geoff so effectively points out, they had far too many unknowns and new elements that proved disfunctional to the overall system. 

I think the points raised in the failures in the mirage of Outsourcing are key.  I believe many companies seek the bottom line savings without building a system of accountability.  If you take the rungs out of the ladder, it will not work.

Finally, the attempts to copy Toyota are weak images.  Toyota successfully builds an integrated system.  It isn't always flawless, but it is manageable and stays ahead of the competition.

Fascinating case.  Hopefully other companies will learn.

DHagar

When critical systems are protecting lives, stringent control must be retained throughout the supply chain process. While Boeing lifted its three tiered methodology from a former quality learder (Toyota) the glaring difference between the two entities is the time span between model revision/debuts.  An automobile manufacturer can make supply chain, design and/or assembly adjustments within the course of a model year, while major airline models have decades between major revisions/releases.