Boeing top chiefs failed in Max 8 crisis

Boeing top chiefs failed in Max 8 crisis
The response of Boeing CEO Dennis Muilenburg, to the Ethiopian Airlines crash has been criticised after he initially resisted calls to ground all 737 Max 8 planes. Picture: Mark Wilson

The share price is down only 7% but the US airline’s chiefs have been found wanting in their handling of the safety questions raised by the Ethiopian crash, writes Kyran Fitzgerald.

When the mettle of leaders gets tested in a crisis, many are found wanting.

A week on from the tragic crash of the Boeing 737 Max 8 aircraft near to the Ethiopian capital Addis Ababa, those in charge at the manufacturer have been struggling to come to grips with the crisis.

Boeing chief executive Dennis Muilenburg has come in for some stick over his response. Initially, he resisted requests that all of 737 Max 8 planes — the type involved in the Ethiopia crash along with the crash just months earlier in Indonesia — be grounded across the US.

Mr Muilenburg called President Donald Trump to reassure him about the safety record of the 737 aircraft, the major revenue earner for the company.

There have been concerns about the new 737 Max 8’s software systems and about the level of pilot training required for the effective operation of the planes.

Sniffing out the popular mood, Mr Trump tweeted: “I don’t want Albert Einstein to be my pilot.”

Boeing had been salivating over the earnings potential of the Max 8 planes, which are now in the crosshairs of the safety experts following the two crashes.

Analysts have estimated that they could account for around 40% of Boeing earnings over the next five years.

Since the crash, Boeing shares have fallen 7% but they are still up by 17% from a year ago.

The Boeing share price had doubled in the past two years, becoming America’s largest industrial company in terms of share value. This is no fragile flower.

A prolonged grounding of planes may be painful, but hardly terminal. The CEO has displayed a tin ear in responding to the concerns of his critics and this is hardly good for the Boeing brand.

Writing in the Harvard Business Review last week, economist Sandra Sucher took the CEO to task: “Moments like this are a trial by fire for leaders. All this confusion does no one any good — not investors, employers, passengers.”

The PR industry has also been fairly scathing.

According to a headline in PR Week, Boeing “lost control of comms and faces a crisis of confidence”.

Boeing top chiefs failed in Max 8 crisis

Ms Sucher is more on the money in suggesting that Mr Muilenburg could have “framed” things differently.

His approach was to treat it as a technical matter to be resolved through pilot training.

According to Ms Sucher: “A better frame would be: This is a technical problem that we do not fully understand. In the light of that uncertainty, we recommend grounding the 737 Max 8s and 9s until we are sure we know what caused the crashes.”

Back in 1982, several customers were poisoned after Tylenol capsules were interfered with. Johnson & Johnson, the manufacturer won praise for their response to the situation.

The then chief executive James Burke chose not to highlight the poisoning aspect of the story and treated it instead as a public health problem.

He set in motion what has been described as a gold standard reaction. All 32 million bottles of Tylenol were recalled, against the advice of the regulator, the Food and Drugs Administration. When another poisoning scare emerged four years later, the company replaced the capsules with tamper-proof packaging.

Mr Burke recognised that his company faced a potential meltdown if people lost faith in the safety of Tylenol.

General Motors boss Mary Barra faced a similar situation, in 2014, shortly after she took over as CEO. Around 1.7 million GM vehicles were hit by an ignition switch defect that cost 12 lives. Here was another case of potential reputational Armageddon.

Ms Barra’s approach was to issue a filmed statement in which she issued a mea culpa. She showed a human side and survived, remaining in the job to this day.

But there have been famous missteps by leaders faced with a crisis.

One of the most famous was the response by former British agriculture minister John Selwyn Gummer to evidence of the spread of BSE in cattle. In a publicity stunt, Mr Gummer was filmed on BBC feeding burgers to his young daughter Cordelia, arguably transforming her into a human lab rat for political PR purposes.

Since then, there has been a succession of food and animal scares.

Irish food producers have had to tackle crises such as the dioxin scare of 2009. On the whole, the industry here has done a good job in maintaining and promoting the image of Irish produce.

It was the effective response of then newly appointed Aer Lingus chief executive Willie Walsh — now boss of IAG — to the events of 9/11 as they impacted on the airline’s transatlantic business, which helped propel his career.

But there have been plenty of examples of top executives who have resorted to the telling of ‘porkies’ who come across as complacent, out of touch or simply self-absorbed.

A stand out performer was Gerald Ratner — owner of a one leading British jewellery business — who whipped up a crisis for his business from nowhere.

At an Institute of Directors dinner in 1991, Mr Ratner — the guest speaker —decided to crack a joke or two. He started with a favourite anecdote about a Ratners sherry decanter retailing at £4.95. “People ask me how you can sell it for such a low price. My answer is that it’s because it is complete crap,” he quipped.

For good measure, he added that Ratners earrings were cheap because they had a shorter life than an M&S prawn sandwich.

A furious reaction, led by the tabloids, was unleashed. Sales tanked and the value of the business plummeted.

As Mr Ratner recalled, recently: “That speech caused me to lose my reputation and my fortune.”

More recently, a similar lack of judgement was displayed by BP chief executive Tony Hayward, in the aftermath of the Deep Water Horizon spill in the Gulf of Mexico.

Mr Hayward soon became America’s most hated man. His gaffes were the stuff of legend.

He opined that the spill was “relatively tiny”.

In an unwitting echo of the fictional broadcaster Alan Partridge, he said: “There’s no one who wants this over more than I do. I’d like my life back”.

He got his life back when he was subsequently fired.

They never seem to learn.

Back home, there have been many examples of similar utterances from former Irish bank chiefs over 10 years ago as the banking crisis enveloped the country.

In truth, in many cases, crises simply cannot be managed because the organisations had rotted at the core.

One of the latest examples is “dieselgate” where the German giant VW and key former executives, find themselves accused by the SEC of profiting from deceptive claims about the environmental impact of their vehicles.

But other emergencies come about due to external events for which the firms bear little or no responsibility.

A no deal Brexit could bring such crises in its wake to businesses, here and in such an environment, the ability to firefight will be a core requirement and indeed strength.

Irish executives may need to add this intangible quality — the ability to stay calm in a crisis — to their skills set.

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