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2007 Speeches
W. James McNerney, Jr.

Jim McNerney

Chairman, President and Chief Executive Officer

The Boeing Company

"Learning to Lead"

University of Washington Business School's Business Leadership Banquet

Grand Ballroom, Sheraton Seattle

November 01, 2007

Good evening! It's a pleasure to be here and an honor to be part of this terrific event that celebrates leadership--and, tonight, recognizes the contributions of three respected business leaders [William Ayer, Leslie Koo, and Ray Williams].

Tonight is all about leadership. Boeing has benefited--and continues to benefit--from the leaders that the University of Washington and its business school has helped to develop. Many of those leaders are here tonight--including the president and CEO of Boeing Commercial Airplanes, Scott Carson.

Scott received his MBA from UW (for which he is eternally grateful); but it's obviously no secret to many in this room--particularly those who have met Scott--that his undergraduate degree is from Washington State. Let's just say he has more pictures of cats (Cougars) than dogs (Huskies) in his office. So I have to ask you to please let Scott leave in one piece tonight. He is a great leader who is adept at melding different viewpoints--a skill he undoubtedly developed the minute he chose UW for his graduate work!

Now, the mutually beneficial relationship between Boeing and UW started long before Scott--and his dad before him--came on the scene at Boeing. It really started in 1918 when Bill Boeing built the first wind tunnel on the West coast at the University of Washington.

And today, many people say that they can see "purple and gold" fingerprints (as the UW alumni magazine coined the phrase) on the 787 Dreamliner. As most of you know, the 787 is the first commercial airplane in the world built largely from polymer composites. And researchers from the University of Washington have been active participants in the development of these composites.

From wind tunnels to composites, Boeing and the University of Washington have both been leading the way with an eye toward the future. And both recognize the importance of developing strong leaders.

With your permission, I will try to impart some of my thoughts on leadership with you this evening, including some of the things that I think I have learned about leadership over the course of my career. I will also talk about the importance that we place on leadership development within The Boeing Company.

My first mentor on the subject of leadership was my own father, Walter McNerney. As the founder and head of the hospital administration program at the University of Michigan School of Business Administration, my father studied how the poor and elderly were unable to obtain proper health care. But then he went a step further: He decided to do something about solving the problems. He became the first president of the Blue Cross, and later Blue Cross & Blue Shield, associations, and he went on to play a leading role in the shaping of the national Medicare and Medicaid programs.

Dad was a skilled negotiator and diplomat. But he was also a person of real vision and extraordinary determination.

My father talked about leadership in MBA-level classes on hospital management long before the corporate world and the business schools became fascinated with the subject. On the first day of class, he would tell his students (as he had told his young sons): "You have got to decide early on whether you want to lead or follow, and that simple decision will go a long way to deciding what the rest of your career will be like."

It's a whole lot tougher to be a leader than a follower, my father would tell his students, because the leader aims to do the impossible--or what others regard as the impossible. But then he would go on to say: "Don't overestimate the opposition. If you have the will and courage to lead, you will gain a lot of support along the way."

Now, let me turn to another mentor who contrasted in many ways--Jack Welch at GE. Though no one would accuse Jack of being a diplomat, there were some striking similarities between him and my dad. One was having the foresight to see the need for change when almost no one else did. And another was having the will and courage to lead.

As a newly minted CEO in the early 1980s, Jack was way ahead of his time in recognizing the new realities of global competition and rapid technological change. He began with the idea that GE should be "number one" or "number two" in every one of its businesses--an easy-to-articulate strategy of "Fix, Sell, or Close." Talk about simple, clear communications! But not everyone was ready to hear about it.

Now, the point that I want to stress here is that Jack didn't just chart the course; he stayed the course, when that made him an unpopular and even a hated figure. Later, as GE moved from defense to offense--or from downsizing to rapid internal and external growth--Jack's message also changed. He turned from products to people. He began to talk about "liberation" and "empowerment" and getting people to step up to the challenge of change. In turning GE's Crotonville facility into a training center for leaders, he became the first well-known CEO to make leadership development a major dominating corporate priority.

One of the stories that passed into GE company lore was the hourly worker who told Welch, "For 25 years, you paid for my hands when you could also have had my brains--for free." That left a lasting impression on Jack.

That one quote sums up the one of the principal objectives of leadership in a neat, concise way. How do you move closer to helping everyone achieve 100 percent of their potential? How do you capture the energy and creativity that is too often bottled up inside people? In fact, it's the leader's job to help others realize their full capabilities.

Within big organizations, the development of leaders does not occur by happenstance. For better or worse, most companies get the leaders they deserve. It is no accident that a few of the best companies go on--year after year--producing the best leaders. They know the kind of leadership they want. They define it, model it, teach it, expect it, measure it, and reward it.

That is our approach at Boeing. Regardless of geographic location; regardless of what culture people come from; and regardless of whether a person is the head of a team of aeronautical engineers, a production line supervisor, or the chief accountant of one of our offices, we ask--and expect--Boeing leaders to do certain things well. These are fundamental things--grounded in human nature. Anyone who aspires to a leadership position inside Boeing should be able to:

The challenge for a leader is to embody not one or two of those leadership attributes, but all of them--all of the time. For instance, to "set high expectations" through bullying, duplicitous or retaliatory behavior...without knowing how to "inspire others" to fall fatally short of being a leader. Similarly, to "deliver results"...while compromising your company or organization through close-to-the-line or unethical to poison the well from which everyone in the organization drinks. It is the exact opposite of real leadership in any kind of a positive--or even a practical--sense.

Part of living the Boeing values and doing the right thing is being absolutely honest and candid with others in evaluating their work and providing feedback on a regular basis--all constructively done. For many people, this is sometimes the most difficult--and the most painful--part of the job of being a leader. No one wants to be unkind; and there is, therefore, the temptation to give basically solid performers (as we used to say in Minnesota) an "above-average" grade. When this happens, you wind up with the situation that a pollster discovered in asking motorists to evaluate their own driving skills. Over 90 percent of all drivers, he found, are well "above-average!"

Accepting such a "human" result--while not uncommon--is wrong in two obvious ways. First, you get what amounts to grade inflation. If you rate the majority of employees as "above average," you under-value the work of those who ought to be recognized for truly superior performance. And second, you aren't really doing under-achievers or even solid performers any favors by turning D's into C's or C's into B's. Just the opposite: You are depriving them of potentially valuable feedback. In lulling employees into a false sense of security, you are setting them up for the eventual realization--which may not happen well into or even late in their careers--that they have been in the wrong place, frustrated and unhappy. And by then it may be too late for them to do anything to rectify the situation. I've seen it happen to a number of people throughout my career.

I've also seen average performers blossom after hearing candid feedback. One employee, who had always had "you're-doing-great" performance reviews, asked me if he should resign after our first review. I said "No, it's time to start, not finish! You should work on improving your leadership skills." And he did! Nobody had ever really helped him understand where he fell short--so he had no way of knowing how he could truly excel--which, by the way, he went on to do.

An open culture cannot work without reality-based communication--honest and respectful conversation. That is why the candid, constructive, one-on-one discussion between a manager and his or her direct reports is an essential element in developing people and achieving strong performance within an open culture. Done well, it is that interaction, more than anything else, that engages people's hearts and minds, that excites them and moves them forward.

As we're thinking of it here, leadership might seem to consist of a series of paradoxes. To be a leader, you have to be

Well, that's a little daunting, isn't it? Just how do you do it all? You don't want to go to work every morning, desperately thinking to yourself "What do I need to do today to be seen to be both tough and inspirational?" In my view, that is the wrong mindset. You will wind up being both tough and inspirational if you give yourself a chance to grow into leadership... thinking of it less as a form of play-acting during dramatic, life-and-death moments, and more as an organic, continuing part of what must be done to help an organization or team proceed toward a shared goal. As we all intuitively know, it is when you are working for the larger good of others that the courage to lead decisively can be found within yourself. Nonetheless, pushing someone hard, even in their own eventual self-interest, is not easy.

So let's go back to the first of the leadership attributes that I mentioned. Charting the course, as I see it, begins on an elemental level: with focusing a team on a combination of growth and productivity--goals that win in the marketplace.

Growth is, most often, customer-inspired. A business grows as a result of satisfying customers with superior products and services. Technology is not enough. Earlier I mentioned the 787 Dreamliner. As you have heard, with people like Mike Bair and his team, we have had phenomenal early success with the 787. We have already won more than 700 orders. The program is essentially sold out for deliveries through 2013.

By using the composites that I talked about earlier, along with other advances in engines and aerodynamics, the efficient new 787 will use 20 percent less fuel and be 30 percent less expensive to maintain. To put that into perspective for you, a three or four percent improvement is considered a breakthrough in our industry. The 787 enables airlines to offer more nonstop service . . . and greater comfort and convenience to passengers significantly reduced operating costs to the customer ...and with far less impact on the environment. It is a beautiful example of achieving growth through customer-inspired innovation.

But even the most revolutionary products can be--and usually are--copied or imitated. We know, for instance, that Airbus is hard at work on development of a competing product to our 787. We feel good that the 787--even with our recent schedule change--is about five years ahead of the planned A350. The key for us is to continue to be aggressive in ensuring that our product line is responsive to the marketplace. As you also may know, we are conducting replacement studies in the single-aisle market. We are also considering technology improvements in our world-class 777 twinjet ...and way down the road thinking about its replacement.

Because even the best and most revolutionary products are subject to challenge, for a company's growth to be sustainable, it must be combined with an unrelenting emphasis on productivity--on taking everything you do and finding a way to reduce waste, cut cycle time and do everything better you can free up resources for the next cycle of growth.

Within Boeing, we have a set of enterprisewide initiatives, which leverage our scale as the world's largest aerospace company ...and which help our people continuously improve quality and productivity, learn from one another, replicate best practices, and improve some more.

That brings me to back leadership development, which I regard as the single most important part of my job. We have metrics for assessing every one of our managers and executives on how well they perform against the six leadership attributes that I mentioned earlier. It is well understood within Boeing that a leader's job consists--in large part--in helping others to discover their own capacity for improvement.

In closing, let me pose a simple challenge to each of you: Pick any activity that you think you do well which requires the cooperation and support of others. Now think of improving your collective performance in this area by 15 percent. I have this notion that if each of us could improve just 15 percent a year, the cumulative result would be truly astounding.

I wish you well in your future endeavors, and I appreciate being able to talk to you tonight. As my own father--and mentor--would have said: Aim high. And don't overestimate the opposition. If you have the will and courage to lead, you will gain valuable support along the way.