Trains, Planes and Automobiles
How corporate cultures die
I’m Mandy, Fly Me
It used to be that only airplane geeks were interested in what plane they were flying to their holidays on. Unless it was an Antonov in the 1960 and 70s, in which case you could literally be playing Russian Roulette as they fell out of the sky with an alarming regularity.
But now, as you idly look at the safety card to while away a minute or two before take-off, you see it’s a Boeing and your heart skips a beat. “Is it a 737 MAX?”, you wonder.
There has been a worrying number of incidents with these planes lately. And that’s since they were all grounded for safety upgrades after two cases of them actually diving into the ground.
Now, let me be clear, flying is still a very safe form of transport. As reported in The Week, “On the whole, air travel is becoming safer and safer. According to a 2020 Massachusetts Institute of Technology (MIT) study, between 2008 and 2017, there was one fatality for every 7.9 million passengers who boarded a flight. Between 1998 and 2007, that figure stood closer to one death per 2.7 million passengers.” 2023 was the safest year ever.
However, Boeing used to have a reputation for safety ‘par excellence’ and now that reputation is significantly tarnished. Perhaps beyond repair - in the short term, at least.
So how has this happened? And why?
Safety used to be an unambiguous priority. Boeing was an engineering company, and safety was an engineering issue on which there was no compromise. Which is what we like to see in the people who build aircraft, isn’t it?
Boeing became the world’s biggest aircraft manufacturer because, in large part, it had a reputation for engineering rigour.
But then they merged with another aircraft manufacturer, McDonnell Douglas, and they began to change from being an engineering-centric (i.e. safety-focused) company to one focused on profit.
The CEO at that time, Harry Stonecipher, states that “When people say I changed the culture of Boeing, that was the intent, so it's run like a business rather than a great engineering firm.”
Instead of decisions being taken by engineers, they began to be taken by accountants. Instead of a focus on excellent product, the focus switched to profit and, inevitably, cost cutting.
They outsourced parts of the manufacturing process, notably spinning out the fuselage manufacture as a separate company. That risked losing oversight of an important component of the aircraft.
Whereas before management worked alongside the manufacturing plant, Boeing consolidated them in a new headquarters in Chicago, isolated from the core business.
Now decisions were not being based on safety considerations alone, they were being challenged on cost grounds. By people thousands of miles away.
Bit by bit, safety was compromised. Once that starts, the culture begins to break down. It’s not immediate and, generally, the consequences are not seen for some time. Bits didn’t start falling off planes straight away, it’s taken 25 years. Although you could say it took 20, as the 737MAX crashes were due to rushed software development that would never have happened in the old culture.
Whistleblowers have told how safety failings were known but covered up. How their warnings that processes were being weakened were ignored. They tell a story of a complete failing of the culture. A recent FAA audit of Boeing found that the company culture has placed more of an emphasis on mass production than safety standards. FAA Chief, Michael Whitaker, said in an NBC interview that the manufacturing protocols were not what one would expect "if safety is the first priority.”
You either have a safety culture or you don’t. It’s either top priority or it’s not. The same is true for a people(-centric) culture. It has to be imbued in everything you do, in every moment, in every decision. Or else it starts to disappear.
As soon as the Harry Stonecipher decided tha Boeing’s priority was to be a run like a business, he started the clock on the destruction of the safety culture and the first crash.
There’s an old Italian proverb that ‘A fish rots from the head’. However, it can take a long to time make the whole fish inedible. About 20-25 years, it seems.
Long Train Running
We’ve been here before, of course.
As part of the privatisation of the UK railway system in the mid-1990s, British Rail was broken up into different business units. It was relatively straight forward to separate the Train Operating Companies out to reflect the pre-nationalisation structure of the rail industry. However, the responsibility for the rail network and infrastructure itself, providing the capacity that the Train Operating Companies would use and pay for, was put into a new company, Railtrack plc.
Railtrack plc was listed on the London Stock Exchange. It was expected to make a profit and raise finance for its operations and investment.
Prior to this, British Rail was proud of its safety culture. Much like Boeing, it was led by engineers, who made the decision about how the system was maintained and developed. Many employees and managers warned that this safety culture would be compromised through the creation of Railtrack but they were told their fears were groundless.
As happened with Boeing, engineers has less input to decision making and accountants had more and more. Parts of the operation were outsourced to third parties to cut costs and create profit. Oversight of safety compliance was lost.
Whistle blowers began to tell of mistakes not just being made but actively being covered up. Railtrack bosses denied there were any problems. Meanwhile, Ralitrack struggled to deliver on its financial results, which led to further cost cutting and ‘rationalisation’. Safety was pushed further down the priority list.
The inevitable happened. The Southall rail crash in 1997 and the Ladbroke Grove rail crash in 1999 led to criticism of Ralitrack’s approach to safety, notably the abandoning the installation of the Automatic Train Protection system on cost grounds, despite this being recommended by a previous crash enquiry. This was clear evidence of the break-down of the safety culture.
The fatal Hatfield rail crash in 2000 brought further condemnation of Railtrack’s safety approach and forced it into large investments in safety measures. This, in turn, led to the company being placed into Administration and eventually being replaced by a new entity, Network Rail, operating as a part of government (essentially a re-nationalisation).
Network Rail no longer has a profit motive and emphasis has been put back on safety, where it should have been all along.
You can’t have a ‘bit’ of a safety culture. You can’t have a ‘bit’ of any culture. You’ve either got it or haven’t.
You either keep people safe; or you don’t, and some will die needlessly.
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Little Lies
So when organisations say they have a ‘people-centric’ culture, you have to look at their actions.
If they get rid of people to boost short-term profits;
If they re-organise without any consultation;
If they have lots of procedures in place to police behaviour;
If they impose cultural norms;
If they recruit to for ‘culture fit’;
If they don’t support flexible working;
If they unilaterally impose changes in terms and conditions;
If they cut the training budget to save costs;
If they tolerate high-performing arseholes;
If there are topics that are ‘out of bounds’;
If they continually ask for more to be done with less;
If they focus on profits;
If they make you fit the process;
If they allow workloads and stress to increase;
then they are not people-centric.
Because if they were, they wouldn’t do those things.
Drive My Car
Good cultures are easily ruined, sadly.
The pattern is that the ownership changes in some way (merger, aquisition, restructuring) and the new management pursue ‘normal business priorities’, namely
Profit maximisation
Cost-cutting
Outsourcing (reducing the boundary of control to save costs)
Share price manipulation (to enrich the C-Suite)
Whilst the espoused values and priorities remain the same, the practised values and priorities change and are quickly picked up on by the employees. It doesn’t have to be said, it happens organically.
In good cultures, there is an almost obsessive focus on the ‘thing’, be that safety, people, style, a customer profile, brand. It trumps every other consideration. As soon as that obsession is challenged, it starts to dilute and the culture begins to rot.
Toyota have an obsession with quality. They demonstrate this by empowering anyone on the production line to stop the line if they see something is wrong. The cost and disruption of this action is not an issue because they know that lapses in quality are more damaging in the long term. Employees are praised for spotting the problem and stopping the line. The priority is unambiguous. It is lived. It’s made Toyota the largest car manufacturer in the world.
But, despite Toyota’s evident success, the norm is to pursue ‘normal business priorities’. That’s why there are so many mediocre organisations in the world, and so many toxic cultures. Even when companies try to apply ‘the Toyota way’, they compromise on the relentless focus on quality and fail to implement it properly. They go through the motions without the obsessive commitment.
That’s why companies that are acquired by bigger rivals often fade away. Their success is frequently based on a unique culture born of the obsession of the founder, but that very source of success is compromised by the ‘normal business priorities’ of the new owner.
This is how cultures die. We see it time and time again.
It’s always tragic. However, sometimes it proves to be deadly, and not just for the organisation.
As always, I’d love to hear your thoughts on this or any other topic I have rambled on about. I’m interested to hear about your experience in Corporate Fantasyland and what your challenges are (especially if they are about making good trouble or getting the hell out!). Maybe I can help you figure out what to do next.
So get in touch, I’d love to hear from you
Book a call on my Calendly page
Email me at colin@colinnewlyn.com
