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2001 Speeches
Harry Stonecipher (Neg#: stoneciphersmall.jpg)

Harry C. Stonecipher

President

Chief Operating Officer

The Boeing Company

"The High Strike - and How to Avoid Unnecessary Disputes"

U.S. Air Force Alternative Dispute Resolution Conference

The Marriott Riverwalk San Antonio, Texas

San Antonio, Texas

April 17, 2001

Let's begin by examining a long-simmering dispute that got out of control . . . and caused a lot of unnecessary damage. My example is not drawn from the annals of defense contracting. It comes instead from our national pastime - major league baseball. I am talking about the great controversy over the enforcement, or non-enforcement, of the so-called "high strike."

As a direct result of "the incredibly shrinking strike zone," as some have called it, batters have been teeing off. They are hitting more home runs than ever. Most fans like home runs. But there have been some unfortunate side effects that no one likes.

Last year, 26.7 percent of all at-bats resulted in either a walk or a strikeout. In other words, no ball put in play. With that, the average length of a baseball game has grown to more than three hours, up from two and half hours a couple of decades ago. In other words, there has been a horrific increase in cycle times.

Even more amazingly, the Umpires Union tried to shut down major league baseball last summer rather than submit to a directive from commissioner Bud Selig reminding them of the parameters of the strike zone. During the heat of pennant race last fall, the commissioner fired 22 umpires for walking off their jobs and brought in replacement umpires from the minors.

How in the world did things come to such a sorry impasse?

To tell you the truth, it reminds me in some ways of the bad old days in defense contracting, when the newspapers were filled with stories charging quote Waste, Fraud & Abuse close quote and when relations between the defense industry and our government customer were at an all-time low.

Let me point out a few morals from the umpires' strike. I believe they are broadly applicable inside or outside baseball.

One is the importance of having rules that are clearly stated and closely observed. Following the 1968 season, when 21 percent of all games were shutouts, the commissioner of baseball decided to lower the pitching mound from 15 inches to ten in order to redress what was then seen as an imbalance between hitting and pitching. Nothing wrong with an agreed change in the rules when everyone is clear about what you are doing. The pitching mound might be lower, but it would be the same for everyone and it would be strictly measurable.

What was not right, however, was a new tendency on the part of umpires - blinked at or tolerated by others in authority - to simply ignore the definition of the strike zone given in the rulebook.

This leads me to a second moral. Where there is no respect for the rules, there is no respect for authority . . . and everyone suffers as a result. Higher authority looked the other way for years as umpires shrank the strike zone. When a new commissioner tried to put things right, he discovered that the union's leadership regarded the strike zone as something that was literally negotiable - something to be dealt with as part of the collective bargaining process.

A third moral should also be clear at this point. Something is very wrong when the parties to a contract - in this case, the umpires and the representative of the club owners - get themselves into a situation in which one side has to lose in order for the other to win.

Sometimes it takes a crisis to bring people to their senses. I can remember such a crisis very well. When I took over as CEO of McDonnell Douglas in 1994, I parachuted into the C-17 crisis. Coming hard on the heels of the A-12, the C-17 - which resulted in over a billion dollars in write-offs for McDonnell Douglas - was open wound that had the potential to deprive the company of a significant part of its future. At the same time, termination of the program - threatened by Congress - would have been an absolute disaster for the Air Force and the Armed Forces as a whole.

To save the program, McDonnell Douglas and the Air Force agreed to drastic changes - beginning with the installation of new management, both inside the company and inside the Air Force System Procurement Office.

At the top level, we agreed to share common objectives, and to start acting as partners in a long-term relationship rather than as adversaries in a continuing dispute. We would not allow problems to fester. To take one example: If mid-level managers from the company and the Air Force were incapable of concluding annual contracting negotiations on a specific date, the two top executives - the McDonnell Douglas program leader and the Air Force's SPO director - would settle the outstanding difference themselves, without the help of their staffs.

That sent a message that we were dead serious about trusting each other, and this was carried down the line. The SPO gave up its practice of sending a person to monitor our work every time we were required to redrill a hole or rebuck a rivet. For our part, we got on with the task of truly empowering the C-17 workforce and our suppliers to do their jobs with a minimum of interference and with genuine encouragement for teamwork and individual initiative at all levels.

In bringing points in dispute to an end, the Air Force paid us some of the money that we felt we were owed and we reinvested some of our own money in the program. As a final and critical point, we all campaigned together - the services, the company and our suppliers - for the needed support in Congress to keep the program going.

The rest, as they say, is history. The C-17 went on to win both the Collier Trophy and the Malcolm Baldrige National Quality Award for excellence in manufacturing. The once-troubled C-17 became a shining example of how to take cost out of an existing program - and improve quality and performance at the same time. Needless to say, the airplane has also done everything the Air Force and the other services hoped it would do in providing rapid mobility for our warfighters and peace-keepers.

A couple of years ago, the Air Force and Boeing - which of course includes the former McDonnell Douglas - came to an agreement under which we provide cradle-to-grave maintenance for the Air Force's C-17 fleet. Now that's partnership. In fact, Darleen (Darleen Druyun, Deputy Assistant Secretary - Acquisition & Management) has just come from visiting our Aerospace Support facilities at Kelly where we take care of the C-17, the KC-135 and other aircraft for our military customers.

I regard the turnaround in the C-17 program as a pivotal event . . . not just for Boeing / McDonnell Douglas . . . but for defense contracting as a whole. It opened many eyes to the opportunity for greater cooperation and partnership not just in the resolution of disputes, but in the whole approach to program management and leadership.

While the C-17 predated the Alternative Dispute Resolution mechanism in defense contracting, the changes that I have I described were clearly ADR-like in spirit, and they help set the stage for the emergence of ADR under the leadership of General Anderson, Darleen Druyun and others.

ADR facilitates open information exchange and provides a variety of techniques and mechanisms for defusing or resolving conflicts. Clearly, we all benefit when we resolve our differences in the fastest and least costly manner. No one (except a lawyer) builds a business on lawsuits. And litigation is not how you build an army or an air force, either.

I am very proud of the excellent work that our contracting officers at Boeing and their counterparts in the Air Force have done in making use of the Alternative Dispute process. Working together, they have disposed of some long-running disputes . . . in such programs as AC-130U Gunship and B-1B . . . and they have done so to the satisfaction of both sides.

Life is full of uncertainty. From any starting point in a business venture, there are going to be unforeseen circumstances and possible misunderstandings. Contracting is one way - a time-proven way - of dealing with uncertainty. But it is inherently imperfect.

Quite simply, there is no such thing as a perfect contract - any more than there is any such thing as a marriage that comes with a full guarantee of success from the initial exchange of vows. But there are great marriages. And there are great partnerships. It is worth examining what makes them possible.

Carefully crafted prenuptial agreements are not the secret to great marriages. Nor do we find that artfully worded and detailed addenda to commercial contracts are the secret to great business partnerships. In fact, the deepest and most satisfying partnerships work in ways that transcend anything that can be found in the fine print.

We are talking here about mutual commitment, mutual respect, a common sense of purpose, loyalty, dependability and trust. We are talking here about the kind of inter-dependence that exists when one side freely and voluntarily measures its own success . . . and its own happiness . . . from the success and happiness of the other side.

Let's go back to baseball for one moment. Last season, the umpires and baseball's management somehow forgot that they were supposed to be on the same side - working together to enhance the public's enjoyment of the game.

I hope those of us in this room never make the same kind of mistake. We serve a common cause and a common customer - the men and women who risk their lives in our nation's defense and in the defense of freedom around the globe. We are working together in their behalf. Let us never forget that in our dealings with one another!