As 31,000 members of a machinists union cast their vote Wednesday on a contract for Boeing’s commitment to build its 777X airliner in Seattle, the company’s president appeared at the University of Montana to discuss Boeing’s emergence as a world leader in the aviation industry and its challenges moving forward.
Jim McNerney Jr., the company’s chairman, president and CEO, addressed a crowd of about 900 people in the Dennison Theater on the UM campus – a crowd that included Boeing stockholders, employees, Montana business leaders and university students.
In his 30-minute speech, McNerney didn’t mention the pending vote by members of the International Association of Machinists District 751. When asked by a Seattle television station, he skirted questions about the 777X and Boeing’s next move if union members turned down the company’s eight-year contract.
“We hope the team stays together, but we will consider other alternatives if the vote goes negatively,” McNerney said. “I’m not prepared to say we’re moving in one direction or another. The big thing is that this airplane we want to build is a spectacular airplane that our customers want. Where and how we build it will be decided over the next few months.”
With that, McNerney homed in on the topics of his address, the Harold and Priscilla Gilkey Executive Lecture, focusing on “leadership, innovation and competitiveness” in a global market. He touched on the challenges Boeing faces moving forward, and how it established itself as the nation’s largest exporter.
“We’re focused on delivering significant and sustained growth in the years ahead by facing into the realities instead of running from the realities of global competition,” McNerney said. “Rising incomes and education levels around the world have created billions of new customers for goods and services. It’s a world of opportunity for business growth like none before.”
While the opportunities are high, McNerney said, they also come with challenges. Global competitors have become increasingly aggressive as they look to capitalize on emerging markets now valued in the trillion-dollar range.
McNerney said the commercial airliner market carries an estimated value of $4.8 trillion over the next 20 years. The defense, space and security market is valued at $2.9 trillion over the next decade.
Opportunities of that size and value have brought new competitors into the market and have ramped up competition. While Airbus once served as Boeing’s only competitor, McNerney said, the company now faces upstart competition from China, Russian and Canada.
“These dynamics have created a world where virtually all providers of goods and services, including businesses, governments and non-governments, are being asked to deliver more for less,” said McNerney. “The competitive environment Boeing faces going forward is dramatically different than the one in which we grew to the size and marking position we enjoy today.”
Beyond the increasing competition, McNerney said that businesses in today’s global economy also are dealing with a range of other “vexing issues,” including U.S. and European deficits and debt, “which have nearly institutionalized economic uncertainty.”
McNerney also named a softening in the rise of emerging markets, the slowing growth and aging population in mature markets, and the increasing costs of regulatory regimes around the world, including those at home.
Despite the challenges, McNerney said Boeing is built to meet and survive the competition. As a member of the company’s board of directors in 2001, he gained insight into Boeing’s talents and potential for growth.
It also gave him a front-row seat to Boeing’s shortcomings, which he referred to as “ethical and performance lapses” that afflicted parts of the company going back to the prior decade.
The turnaround, he said, has been due to the people at Boeing, not its CEO and other top executives.
“Companies aren’t revived through the exertions, charisma or greatness of one person or one small team,” he said. “The track record of leaders who arrive believing that everything coming before them was terrible and therefore everything must change completely and instantly – that track record is not a good one.”
McNerney described his job as needing to build on Boeing’s prior strengths and correct its weaknesses. Righting the company’s course, he said, was not so much about transformation, but rather a series of slow shifts that corrected the deficiencies.
First among them, he said, came a renewed focus on Boeing’s leadership.
“I regard cultivating and mentoring the best leaders as clearly the most important aspect of my job, one to which I devote an enormous amount of time and attention,” he said. “A few of the best companies go on year after year producing the best leaders, irrespective of the world in which they were created. They know the kind of leadership they want. They define it, they model it, they teach it, they expect it, they measure it and they make it work.”
McNerney said he expects Boeing’s leaders, regardless of field, to perform at high levels and meet clear expectations.
Among the key points, he said company leaders must generate clear and simple strategies and plans for their teams to follow, while setting high expectations for themselves and others.
They must inspire others to meet expectations, and they must overcome unexpected obstacles. Achieving short-term gains, he said, is not worth harming the company or one’s reputation.
“The bottom line is deliver results,” he said. “You can’t run from that. The score counts.”
Early in his tenure as CEO, McNerney said, Boeing built a unified team with members who bought into the same vision. The company changed its compensation and promotion system to incentivize workers. It created a system of accountability.
Careers move forward for “those who get it,” he said, and they don’t move forward to those who do not get it.
“We have metrics for assessing and requirements for differentiating our managers and executives on how well they demonstrate leadership attributes,” he said. “These factors are measured into their career progress.
“When you’ve got the right leaders motivated to perform individually and inspire the performance of others, you can compete in any industry or business environment, and you can adapt quickly when the winds of change begin to blow.”