01 Mar 2011
James McNerney Jr.
Chairman, President, & CEO, The Boeing Companyby Julia HannaTopics:
Sailing instructor, ranch hand, and paperboy are a few of the early jobs held by Rhode Island native Jim McNerney (MBA ’75). Later, his résumé would include stints at blue-chip companies like Procter & Gamble, McKinsey & Co., and General Electric, where he led various divisions of the multinational giant (including GE Aircraft Engines) before leaving in 2000 for the top spot at 3M. In 2005, McNerney assumed his current role at Chicago-based Boeing. With just over $68 billion in annual revenues and more than 157,000 employees, Boeing is the world’s largest aerospace company, manufacturing and supporting commercial airplanes, military aircraft, and defense, space, and security systems.
What does it mean to be globally competitive in today’s economy?
From a business fundamentals perspective, you win through innovation, low cost, or better customer service; in my opinion, innovation is the most sustainable competitive advantage. As for company culture, you need to relate to governments and have the capacity to recruit people from all over the world who will feel comfortable in your organization. You have to make them feel that they can contribute. That’s the biggest challenge, I think. American companies either remain too U.S.-centric or overdo it. It’s a balancing act that has to start somewhere, and there are qualities a company can’t let go, such as its purpose and values. I’ve seen examples where, in a hunger to be both local and global, people forget about ethics and integrity.
Manufacturing is around 12 percent of U.S. economic output. Is that enough for the country’s economic health?
There’s little doubt that manufacturing as a percentage of our GDP is down. Part of that represents tremendous growth in financial, IT, and health services. It’s hard to know whether it’s a good news story for those sectors or a bad news story for manufacturing. When people outside the United States view us, they look at organizations like Boeing, DuPont, GE, Johnson & Johnson, and Procter & Gamble as gold standard companies. We tend to lament that manufacturing is going down, but outside our country they all wish they had companies like those. With that said, China, India, and other countries in Asia and the Middle East will no doubt continue to have very competitive manufacturing capability. Europe and America will have to continue to invest in manufacturing innovation to keep up. I’m confident that Boeing can do that, for what it’s worth.
You serve as chairman of the President’s Export Council. Do you have any perspectives to share from your work in that particular post?
American business is trying to find the most constructive way to engage with the Obama administration. I happen to think that trade and exports are places where we ought to be able to come together. It’s about being more globally competitive and creating jobs in the United States, which is a dialogue the President wants to have.
You traveled recently throughout Asia with President Obama and other American CEOs and government officials. What impressions did you come away with from that experience?
I lived in Asia for a time when I worked at GE, and I continue to be impressed by the growth there, particularly in India and China. I think it’s good for the people who govern our country to see more of that so they can begin to realize that being successful over there is what creates jobs back here. It’s not a matter of us or them “winning.” Fewer people will be employed in the United States if we don’t investigate what’s happening in Asia and the Middle East. That’s where the markets are now.
One issue that’s dogged you recently is a three-year delay in the 787 Dreamliner, a passenger jet made from a lightweight carbon composite. What happened?
This company is all about doing things that haven’t been done before. The 787 is a good example of that. It’s a huge leap in technology, and we got a little ahead of ourselves. But when it’s done it is still going to be the big leap that we’d hoped for, and it will still keep us far ahead of our competition. It’s the best-selling airplane of all time during the preproduction phase. And we learned a lot of things that we won’t do next time.
Do some of those lessons involve overseeing the outsourcing process more closely?
There’s a theme over the past twenty years of American companies creating more horizontal business models that require depending on others for fundamental things. A lot of businesses overdid it, as we did on the 787. So one of the lessons is to retain more capability in-house. But we’re still going to engage in global cooperation to get these planes done. Another lesson was IT systems. We lost visibility of the supply chain because our systems weren’t good enough to keep track of manufacturing activity. It’s essential to maintain 24/7 visibility of activity inside and outside the company. We didn’t do that.
You have just one very obvious public competitor in Europe’s Airbus. Is that healthy?
The investment levels are so high in this business that it’s natural that there would be only two players in the space. I think China will eventually be the third. It will take some time, but China has all the ingredients available. The situation works now because Airbus and Boeing push each other on innovation and pricing, which ultimately benefits consumers and businesses. We yell and scream at each other, of course, but that’s the nature of competition sometimes.
When you became head of Boeing, one of your first decisions was to pay a $615 million penalty to the Justice Department for illegal actions Boeing took to win contract work from the government. How would you distill your philosophy on the subject of leadership?
First of all, we do treat leadership as a discipline here. It’s a subject that we define, teach, model, expect, measure, and reward. It’s not something we try to find in people, or wish we had. We believe we can help create it, foster it, teach it, learn it. We take it as seriously as measuring business results. Leadership assessment is part of people’s pay and promotions. If it’s not integrated into the real world of people making their way in the company, it’s just a theoretical discussion.
So how do you measure it?
Many different ways, but essentially we have a list of six attributes that are independent of culture and a particular job. There are a number of characteristics that we look for, but one that stands out in our culture is the capacity to adjust and adapt — the ability to figure out a different way to deliver results while always acting with utmost integrity.
This is your sixth year of leading Boeing. What are your hopes for the future?
Going back to the leadership discussion, I believe that if you grow the people in the company, the company will take care of itself. What really turns people on is not so much pay, not so much that they’re working on the 777, although that’s all important. It’s going home at night and realizing, “It’s a cool place, I’m better than I used to be, and I’ve got a shot at growing and getting a bigger job.” That’s exciting. Personal growth is what I’m after.
What did you take away from your time at HBS?
The overall impression is probably similar to what other alumni experienced. There’s a balance between the academic and the practical, case and theory, a curriculum that’s both broad and narrow in its focus. There was a competitive spirit in the classroom that simulates the way business is…the WAC Written Analysis of Cases was not a kumbaya exercise, it was about getting it done by Friday at midnight. You do come away feeling prepared for a business environment, which is often more about optimization than coming up with the right answer.
I think since my time the focus has been more on teamwork, which makes sense. Effective leaders are people who work with others and through others to make others better. I visited an engineering school the other day and was most impressed with the students who had completed a field project, who had built something as a team. It was more of a leadership exercise. Any way you can foster that kind of teamwork is important, particularly in business.
The history of aviation is such a romantic part of our culture. Do you have a favorite figure from the past century?
Listen, the people who built and flew airplanes at the very beginning are all heroes — Bill Boeing, Charles Lindbergh. Then there are those who went into space in the 1960s. Those two crowds mingled technological achievement and pure courage. It’s hard not to respect each and every one of them.
Did you know what you wanted to be when you were growing up?
I wanted to be the center on the Detroit Red Wings hockey team. And if that wasn’t available, I was fine with pitching for the New York Yankees. That’s where I started, and then reality closed in. Leadership roles of one sort or another were always fun for me, whether it was on the Little League baseball team or guiding a field trip. I enjoy people, and I enjoy groups of people getting things done. That’s a common theme in my life.
— Julia Hanna
Class of MBA 1975, Section B