McNerney emerges

Boeing’s had some big shifts in corporate culture in the past decade. It’s in the midst of another one, under the direction of new CEO Jim McNerney, and last week we may have gotten a glimpse of where the new pilot is steering the plane.

McNerney’s arrival in July 2005 coincided with Boeing’s big rebound year. You can’t really credit McNerney for that. The big decisions — particularly the one to launch the game-changing 787, had been made before he came on board.

In fact, Boeing did very well, chugging along on autopilot for the first half of the year, after former CEO Harry Stonecipher was sent packing for being much too hands-on in managing his employee relations.

McNerney’s hiring didn’t bring an immediate shift or series of new policy directives. The new chief said he was taking “deep dives,” trying to familiarize himself with the details of his new company.

Internally, McNerney was active — at least according to John Dern, a spokesman at Boeing’s Chicago headquarters. (And also the host of a big party for expatriate Seahawk fans in the Windy City on Sunday.)

But from the outside, it appeared that McNerney was content to let his business unit presidents — Jim Albaugh at defense and Alan Mulally at commercial — run things, with his support, perhaps, but not his direction.

That changed last week.

On Wednesday, as he announced the company’s year-end profits, McNerney also signaled that changes are on the way.

McNerney told analysts and reporters that he’d instituted a series of new initiatives.

He said he wants “financial results that match the quality of our people and technology.” The new programs are aimed, he said, at “finding ways to make Boeing bigger and better than the sum of its parts.”

The concept, Dern said later, is to take the drive for efficiency Boeing has instituted in its Everett and Renton factories and extend it to all areas of the operation. McNerney has appointed senior executives to sponsor the improvement program — Commercial Airplane Group president Alan Mulally will direct the effort to make his engineering and support programs more efficient; Boeing chief financial officer James Bell will do the same to overhaul Boeing’s back-office operations, its Bellevue-based Shared Service Group.

In addition, McNerney announced he’d made some moves aimed at changing the corporate culture.

Last month, Boeing leaked to the press a transcript of a recent speech by the company’s top lawyer, in which he flayed Boeing leaders for the serious ethical breaches involving top-level executives in recent years.

McNerney followed that up last week by announcing he now expects his top executives to live up to a set of “attributes.” The expectation is that they will, among other things, deliver results, set high expectations and “live Boeing values.”

“We must take specifc steps to strengthen the culture of leadership and accountabilty at Boeing,” McNerney said. “We’re going to insist that our leaders by models for the entire company.”

The timing is right for this kind of move, said analyst Richard Aboulafia with the Teal Group. McNerney is widely seen as one of the more-talented proteges of retired General Electric legend Jack Welsh, and the Welsh School playbook holds that new CEOs “keep quiet for six months and then go in and make some major moves.”

“This is basically the time it happens,” Aboulafia said.

But only time will tell if if these were the right moves, and whether they’re being made with conviction. After all, Harry Stonecipher declared a new campaign for ethical behavior and mandated companywide ethics training — wildly unpopular with rank-and-file workers here in Everett — just before he was booted in disgrace.

There might be a difference. McNerney is tying senior executives’ pay to how well they do adopting and exhibiting the new attributes. Given that new values “are meaningful,” Dern said. “They’ll have significant meaning.”

“Just talking about them won’t make them stick,” McNerney said. “We’re going to teach them to leaders and managers. We’re going to let people no we expect them to live by these attributes.”

The Motley Fool’s Seth Jayson took a look at this topic too. http://www.fool.com/News/mft/2006/mft06020221.htm

Key Quote: “It’s clear that (McNerney) is driving Boeing to become even more profitable, both through restructuring as well as management incentives that put a premium on longer-term value. That should help remake a corporate culture that’s got more than its share of scandal to leave behind.”

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