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Why Engineers Strike--The Boeing Story.

Why did Boeing's engineers and technicians strike for 40 days in early 2000? And what can other companies with large cadres of knowledge workers learn from the experience?

The morale of Boeing's cadre of engineers was in a real slump by the end of last century. Newly imported management had suddenly begun focusing on financial results rather than engineering excellence, and the engineers had begun to feel that their basic contributions were receiving short shrift. Failing to detect this decline in morale, Boeing management had made no preparations for weathering a strike and was caught by surprise when its knowledge workers walked out.

The resulting situation allowed the engineers' union to score an outstanding victory, which has led to further organizational successes at Boeing. It has also caused the Seattle Professional Engineering Employees Association (SPEEA), now affiliated with the International Federation of Professional and Technical Engineers (IFPTE), to eye other large employers of engineers, scientists, and other knowledge workers. Before the strike, only about half the Puget Sound engineers, technicians, and scientists were dues-paying SPEEA members under Boeing's open shop agreement. SPEEA represented some 22,560 Boeing engineers and technicians, 20,250 of whom were in the Puget Sound bargaining unit, with another 1,300 engineers and scientists in Wichita and about 700 scattered in small units in other states.

How did the strike situation come about? One warning sign came in October 1999, when unhappy SPEEA engineers affiliated with the IFPTE, despite Boeing's low-key campaign to deter the move. Begun in 1927, the IFPTE is an understandably obscure union of some 55,000 engineering professionals, mainly civil engineers and similar types employed by northwestern states and their subordinate bodies. In addition to governmental employees, it now also represents Boeing workers and small groups of engineers and technicians at GE, Lockheed Martin, Lucent Technologies, NASA, Westinghouse, and a few shipyards.

The marriage of the two unions came about after a long courtship that became more attractive as Boeing engineers perceived their status and pay declining compared to the company's blue-collar workers represented by the International Association of Machinists (IAM). The October 1999 merger vote was 3,462-to-883, approved by roughly 40 percent of the 10,000-odd Seattle-area SPEEA dues-paying members eligible to vote (and fewer than 20 percent of the engineers represented by that union).

The affiliation warning came too late for Boeing to appease more than 20,000 angry engineers and technicians. With only two months between the October merger and SPEEA's December contract expiration, Boeing had no time to devise effective programs to bolster the flagging spirits of so many professional employees.

Unaware of the morale of its engineers (if not in denial over it), Boeing began negotiations with SPEEA in the fall of 1999 with no strike preparations. After all, there had been only one engineers' strike in the company's history, a symbolic affair lasting only a single day. Boeing engineers had been formally organized by SPEEA since 1946. For years, the organization considered itself an "association," even though peaceful proforma contract talks were conducted every several years. However, the relationship had slowly grown strained, resulting in the one-day symbolic walkout of 1993.

Bargaining began optimistically on October 4,1999, but soon bogged down. SPEEA struck Boeing on February 9, 2000, and 17,000 engineers walked out. The company's misreading of its engineers' attitudes had serious consequences. When they struck this time, they stayed out.

Past Domination, New Competition... and the Results

Boeing has dominated the commercial air frame market since the start of the jet age. Its 700 series aircraft (707, 727, 737, 747, 757, and lately the 767 and 777 models) have long ruled the world's skies. But within the last decade, Airbus Industrie has successfully challenged Boeing's domination. Airbus is a European consortium led and subsidized by the German and French governments, which started Airbus in the early 1970s to revive their national aerospace industries.

Airbus has been successful. In 1999, it delivered 294 commercial planes (32.2 percent of all commercial deliveries), compared to Boeing's 620. This is in great contrast to 1990, when Boeing delivered 84.7 percent, or 527, of the world's commercial aircraft and Airbus only 15.3 percent, or 95 planes. The Economist ("Airbus" 2001) noted that Airbus's order backlog of 1,659 planes was bigger than Boeing's. And Holmes (2001) reported that Airbus is "projected to deliver more planes than Boeing by the end of the decade."

Obviously, competition in the commercial aircraft industry has changed in the last decade. Once it was superior technical excellence-- range, altitude, speed, and fuel efficiency--that Boeing engineered into a plane. Then Airbus's French and German aerospace engineers began to design aircraft that became the technological equals of Boeing's. After all, Boeing's basic designs date from the 1950s and the old B-47 bomber. The 737s and 747s are 1960s planes, periodically modernized. Airbus began designing and manufacturing planes in the 1970s, so its basic technology has a two-decade advantage, despite Boeing's periodic engineering updates.

Now world airlines are pitting Airbus against Boeing to see which can offer a more attractive financial package. Orders for Airbus's new "super-jumbo" A380, the long-awaited rival to the 747, promise to intensify pressure on Boeing. Helped by Germany and France, Airbus offers better financial terms than Boeing can, a situation about which Boeing has complained to Washington, to no avail. "The most fundamental issue," said Philip M. Condit, Boeing's chairman and CEO in early 1998, "is that we're moving from a period where our products were defined by their performance to a period where costs are more important" (Biddle and Helyar 1998).

Current events have unfortunately proved Mr. Condit's emphasis on costs to be prophetic. As this issue of BH went to press, Alan Mulally, president of Boeing's commercial aircraft division, announced potential layoffs of up to 30,000 of his division's 93,000 employees by the end of 2002 as a result of the September 11 disaster in New York City. This was due to a flood of requests by U.S. airlines to postpone deliveries of new planes, or to cancel or defer orders indefinitely. The airlines, in turn, face a severe cash shortage caused by the short-term nationwide grounding of all flights, the longer-term cut in flight schedules, and the reluctance to chance further risk. "The impact of the terrorist attacks on Boeing's order book has to be both traumatic and long-term," according to Prudential Securities analyst Nicholas Heymann. "If the events of [the week of September 11] are going to restructure the entire airline industry, there is bound to be a comparable impact on the country's major plane maker" (Lundsf ord and Pasztor).

New Management

Finally taking decisive action to counter the financial challenge, Condit imported several key executives rather than follow Boeing's usual practice of internal promotion. First came Harry C. Stonecipher, President and COO, who had been president and COO of McDonnell Douglas from 1994 until 1997, when Boeing acquired it. Stonecipher brought with him Michael Sears, who became Senior Vice President of Military Aircraft and Missile Systems. Then Deborah C. Hopkins was recruited from General Motors to become Executive Vice President and CFO. And finally, James Dagnon, former labor chief at Burlington Northern Santa Fe Corporation, started as Senior Vice President of People.

These recruits saw the new nature of airframe competition and soon inaugurated a much needed emphasis on cost cutting, efficiency, and bottom-line results. With Stonecipher's support, Hopkins soon started the Managing for Value Program to develop a new, company-wide culture for continuously improving financial performance and growth. Performance targets were set based on "economic profit goals," calculated by subtracting a capital charge from Boeing's net after-tax operating profit. Executive bonuses would be based on achieving those goals, an innovation that upset the company's engineering-based culture. New dictates were issued that emphasized boosting income by cutting costs, shedding unproductive assets, and expanding service lines--all to the dismay of many longtime Boeing executives, especially those in its large commercial airline group. R&D funds were cut from $1.92 billion in 1997 to $1.44 billion in 2000.

Effect of Changes on Morale

These sudden changes were all attributed to Deborah Hopkins, the new CFO. Her program did not go unnoticed at tradition-bound Boeing, which had always promoted from within. Upset by new management's financial emphasis, the engineering community perceived a loss of status, feeling that their contributions were no longer valued as greatly as in the past. Before, top Boeing executives had always stressed engineering excellence, not just bottom-line results. Altogether, management's new thrust, the bargaining history with its engineers and blue-collar employees, and the company's lack of insight into the morale of its knowledge workers combined to produce a strike that will have long-lasting ramifications for Boeing, as well as for other employers of large cadres of engineers, scientists, and computer specialists.

THE STRIKE

Boeing's initial contract offer of November 11, 1999 was rejected by SPEEA. The company made a second, improved offer on January 13, which was also rejected. Fed up with a "lack of respect," as SPEEA Executive Director Charles Bofferding put it, Boeing's engineers struck on February 9, ostensibly over the economic issues. Thousands of non-dues paying engineers and technicians represented by SPEEA manned the picket line alongside their 10,000 or so dues-paying brothers in a surprising show of solidarity. Boeing's "improved" third offer, on February 26, was rejected. Observers wondered how many improved "last, best" offers the company could make without doing long-lasting damage to its management credibility.

The widely reported walkout was not settled until Boeing was forced to surrender on March 19, 40 days after it began. A continued customer outcry over its inability to deliver planes, an underground campaign by striking engineers to question the safety of its aircraft, and the union's effective corporate campaign in the canyons of Wall Street all created relentless pressure and extreme embarrassment for the manufacturer.

Corporate Campaign

Union leaders publicized their March 9, 2000, conference call to Lehmann Brothers, who represented Boeing's institutional investors. During the call, SPEEA leaders:

* claimed that paid union membership had grown from 40 percent of the pre-strike work force, to 60 percent after the rejection of Boeing's second offer, to 65 percent as of March 9;

* insisted on a union agency clause in a new contract to replace the open shop of the old one, because "unions make a company stronger;

* said SPEEA wanted to help the company and believed it was fighting for Boeing's engineering future and soul, not against it;

* stated the need for a union/management partnership going forward, and wanted to define the relationship between the engineers/technical employees and the company;

* wanted a "me-too" understanding for the Boeing-Wichita/SPEEA contract, which is negotiated separately;

* averred that the 1997 merger with McDonnell Douglas brought a different attitude to the company, one of both "power-based negotiations" rather than the "principle-based negotiations" of 1995;

* pointed out the damage being done to the company by the strike;

* emphasized that the company was under-investing in the future at a time when market share had dropped from 70 percent to 40 percent, due to competition from Airbus;

* asserted that SPEEA member expectations were set by ads taken out during the past negotiations between Boeing and the IAM, ads that emphasized no benefit take-aways;

* demanded a signing bonus, just as the machinists had won;

* insisted on no cost sharing of medical insurance benefits, like the machinists;

* wanted a company apology for its efforts to take away fully paid medical benefits; and

* deprecated Boeing's overall offer, pointed out the morale problems its "recalcitrant positions" were causing, suggested that deliveries of new planes were hopelessly behind, and insinuated that those engineers still working were not qualified to "certify" planes as safe for delivery.

Then, in an underground campaign, striking engineers began sending messages and e-mails to customers, questioning the safety of Boeing aircraft not inspected by the specially trained cadre of engineers who checked and certified planes before delivery as safe and conforming to all federal standards.

The union's campaign worked. After 40 days, Boeing's stock had dropped 32 percent. Institutional investors, owning just over 50 percent of the stock, pressured the company to settle. Unable to deliver new planes because alternatives (trained supervisors, non-striking engineers) had not been prepared before the walkout, and stung by safety issues obliquely raised by the strikers, Boeing finally caved in.

Boeing's Surrender

Boeing's settlement offered the engineers salary raises averaging 17 percent over three years, most of them guaranteed--a departure from the past practice of offering merit raise fund poois. It also offered the strikers a signing bonus, part of which was tied to future deliveries in a face-saving gesture for the company. But at SPEEA's insistence, the contract was worded so that engineers were virtually guaranteed the money. More over, the company dropped its efforts to make the strikers pay part of their health insurance. And SPEEA was given a much greater voice in the company through a "Partnership Agreement." Finally, Boeing okayed an agency-shop election (all SPEEA-represented employees would have to pay dues, whether they were members or not) to be held under favorable terms--a company neutrality clause.

Disastrous Decade

SPEEA strikes were the first and last of a series of employee relations fiascoes at Boeing in the past decade. SPEEA had struck Boeing only once before, on January 19, 1993, with a symbolic one-day walkout. Though only 55 percent of Boeing's 22,560 professionals in 1993 were dues-paying members of SPEEA under their open shop agreement, fully 80 percent of them took part in the one-day walkout, to the company's surprise.

Engineers and technicians wanted terms similar to those won by the TAM, which in 1989 had negotiated a cost-of-living clause and a 12 percent first year bonus for its blue-collar members. The TAM had struck for 69 days in late 1995, a lengthy walkout caused by Boeing demands that blue-collar workers pay part of their health insurance costs. The walkout was lengthened by a November 16 announcement that Boeing was negotiating to acquire McDonnell Douglas and the November 21 notice that Boeing's then CEO Frank Shrontz and four other top company executives received more than $3,000,000 in bonuses.

IAM leaders claimed that if Boeing had enough funds for those maneuvers, it surely had enough to meet the union's demands for fully paid health insurance, and more. Finally, under customer pressure, Boeing abandoned its health care co-pay proposal and gave strikers a 10 percent first year bonus. SPEEA negotiations, on hold during the TAM strike, were soon settled on lucrative terms because the company feared another upheaval.

Aircraft orders surged between 1995 and 1997, reflecting the strength of the Asian and Central American economies. Bent on defeating Airbus, Boeing accepted all the orders it could, then tried to ramp up production to meet exceptionally strong demand. However, its manufacturing systems were not ready for the volume, Assembly lines were unprepared, trained manpower was scarce, and the manual, paper-intensive design methods for the highly customized aircraft slowed production even more. By mid-1997, deliveries were dragging. In September, Boeing made an embarrassing formal announcement that deliveries would be late. A month later, it took a $1.6 billion charge and shut down 737 and 747 production to straighten things out. By early 1999, the task was accomplished, and Boeing was again humming. Then came the SPEEA strike of 2000.

Aftermath

In the short-term wake of the strike, commercial aircraft deliveries were again delayed, military aircraft design work was temporarily halted, and company earnings in the first half of the year suffered. However, for the foreseeable long term, many observers believe the real damage has only just begun.

Subsequent to the strike, Boeing quietly rescinded the medical insurance co-pays it had unilaterally imposed in January 1999 on about 80,000 nonunion salaried employees, presumably to offset any unionization sentiments in those ranks. The company refused to estimate the cost of that move. It also began to work its engineers 10 hours a day, six days a week, playing catch-up on delayed military design work and late commercial aircraft deliveries in order to reduce penalty payments. Obviously, the extra costs of the overtime and delivery penalties were substantial.

A rejuvenated SPEEA accelerated its plans for a representation election for a 4,200-strong group of technicians in Boeing's Wichita plant, where it already represented some 1,300 engineers. Trumpeting its Seattle victory, the union won the June 29, 2000, vote by a close 1,924 to 1,859 margin. It then overwhelmingly won the agency shop vote in July: 64 percent of the engineers voted for it, as did 77 percent of the technicians. All Puget Sound area Boeing engineers and technicians in SPEEA-represented units would now pay union dues of more than $24 a month, a windfall that enabled SPEEA to raise the number of its contract administrators (union stewards) policing their agreement. "There has been no significant increase in grievances, because now we can address the issues from the start," said Paul Sheron, SPEEA's organizing director, in January 2001.

With these victories fresh in everyone's mind, SPEEA attempted to organize more than 10,000 nonunion Puget Sound technicians in yet another organizing drive, though without success. It also began fishing expeditions to ascertain employee interest at other Boeing divisions, mainly those in St. Louis and California acquired from McDonnell

Douglas and Rockwell International. The Southern California Professional Engineers Association leaders in the old "Mac-Dac" plants who led a successful affiliation vote with the Office and Professional Employees Union on December 4, 2000, were voted out of office later that same month by members more interested in merging with SPEEA.

Sheron confidently maintains that he now has two goals: to organize all Boeing engineers throughout the United States, and to organize engineers, scientists, and similar staffers in other companies having large professional employee cadres.

THE MIND OF BOEING

Paradoxically enough, the seeds of Boeing's employee relations misfortunes in the past decade bad been sowed by the company's long-term successes. First, Boeing has a long history of successful aircraft design and production. Second, until the advent of the newly imported executives, engineers promoted from within basically ran Boeing. Engineering is an exact science, determined by inarguable mathematical formulas. That mindset underlay most top management decisions at Boeing. Because "scientific" decisions were based on factual analysis, all employees should logically follow orders based on the eternal truths as divined by senior Boeing management. As a result, management became overconfident and developed an "if-notinvented-here-forget it" mentality.

Third, the traditions of top-down management were accentuated by years of dealing with the U.S. Air Force and its methods. Because orders are orders in the military, it was easy for Boeing's executives to assume a similar stance. The same top-down approach was applied to internal communications as well.

Internal Communications

The accent in Boeing's internal employee communications was one way: downward. Management told employees what it wanted them to know and do, It failed to listen and respond to their needs, perceptions, and suggestions in a manner consistent with business conditions and competitive realities. Nor did it encourage ideas on how best to do things. This lack of upward communication meant that Boeing had no handle on the attitudes and morale of its professional employees. Lacking this knowledge, the company was blindsided by the strike.

Had Boeing implemented an effective twoway communication program, it could have identified and rectified the concerns of its engineers long before the upheaval. Adequate efforts could have been made to avoid a strike; and if a strike was unavoidable, preparations could have been made to weather one. Warning signs, like the IFPTE affiliation vote, were ignored or came too late for proud Boeing to take remedial actions.

Similar Problem, Successful Resolution

In the mid-1970s, Rockwell International had experienced problems similar to Boeing's in the Los Angeles basin, but it reacted just in time. The National Engineers & Professionals Association (NEPA), a brainchild of the United Auto Workers, tried to organize all the aerospace scientists and engineers at Rockwell's West Coast Divisions: Rocketdyne, Space, B-1, North American Aviation, and Los Angeles Aircraft Division. Executives were shocked at the union interest among their professionals, and did not know how to identify and rectify the problems made so evident by the union drive.

Anticipating that NEPA would petition the National Labor Relations Board for a representation election, Rockwell's top management, then headquartered in Pittsburgh, took decisive action in the decentralized company. Patrick Crotty, corporate director of employee relations, retained a team of skilled consultants led by this author. The widely circulated report "As the Engineer Sees His Problems" (Imberman 1976) had discussed the motivation of such knowledge workers as engineers, how to identify the causes of morale problems, and how to handle them. Many companies with engineering cadres were familiar with these recommendations.

Rockwell started a series of "listening conferences" led by experienced interviewers. The process allowed the consulting team to ascertain the issues causing the engineers to seek unionization in each division. Based on long experience with professionals, we were able to pinpoint the causes of the morale problems among Rockwell's engineers quickly enough for the company to take remedial action. The key issues--many duplicated later at Boeing--were:

* Management remoteness. Senior engineering managers were virtually invisible, and engineers had few if any opportunities to interact and identify with them. * Inconsistent application of human resource policies. Vague, contradictory pay policies and merit raise criteria were frequently mentioned.

* Management credibility. The lack of management follow-through on previously announced plans undermined engineers' belief in new ideas.

* Poor communications. Engineers received little information about future plans in their divisions, and had even less opportunity to provide input for management consideration.

* Inadequate recognition programs. Engineers received little formal recognition for their achievements or on-the-job efforts, resulting in a pervasive belief that senior management was not concerned about engineers, their status, or their well-being.

* Poor working conditions. Physical amenities were not in keeping with the engineers' concept of a professional work environment.

* Pay and benefits. Wage differentials had gradually been eroded vis-a-vis non-degreed technicians and blue-collar employees.

Reasonable efforts were quickly taken by Rockwell management to address these issues, resulting in a strong company election victory that deflated NEPA and set the unionization of aerospace industry professionals back 20 years.

Clearly, Boeing managers overlooked growing employee unrest during the '90s, despite periodic employee opinion polls reporting some dissatisfaction and declining morale. (Such paper-and-pencil surveys, though simple to use, rarely uncover the nuances behind worker unrest.) Blind to the storm signals, Boeing could not use the basic motivational tools that impel knowledge workers toward excellence and cooperation.

WHAT MOTIVATES PROFESSIONALS?

Four areas of motivation are key to high morale and productivity among such highly skilled professionals as aerospace engineers, scientists, and computer experts. Dealing successfully with these employees calls for a subtle touch, knowledge of what motivates them, and a long-term management commitment to recognize the standards that professionals live by. The four areas are:

* engineering respect for upper management;

* salary differentials;

* advancement opportunities; and

* recognition of professional competence.

Engineering Respect for Upper Management

Engineers want to be managed by other engineers. This is the basis for generating an atmosphere of professionalism and respect. Medical directors of hospitals are physicians, and managing partners in law firms are lawyers. Similarly, professional engineers regard themselves more as members of a learned society rather than as mere employees of a corporation. They would rather be praised by an engineering boss than a nonengineering one. Many believe that nonengineering managers have no appreciation for professional standards of individual engineering excellence or performance, and lack insight into the possibilities of products conceived and/or improved by superior engineering. This concept of professionalism is strongest when threatened.

At Boeing, the 1998-99 cuts in R&D budgets and the new cost-cutting emphasis by the executives imported by Boeing were perceived by the engineering community as threats to their professionalism. The sudden change in focus from valuing technological excellence to cutting costs implied a change in the basic values of their employer. Although the engineers understood that the threat of Airbus warranted stricter approaches to business, the company did not do enough to reassure them that engineering excellence was still the bedrock at Boeing.

During the strike, engineers' misgivings were confirmed when SPEEA quoted CFO Deborah Hopkins as saying that all engineers wanted was to "design things that could go faster and higher." Her comment was seen as a slap at Boeing's engineering community and an insult to their professional integrity and intelligence. "We felt underappreciated," said SPEEA's president Craig Buckham. "The role of engineers and technicians--the people who do the critical and important work of the company--is often underappreciated by people at the very top, whose language revolves around money as opposed to action, products, and customers" (Sprovieri 2000).

SPEEA leaders emphasized Hopkins's statement during the strike to buttress union support among Boeing's professionals as being the defender of engineering excellence and values. This helped the union persuade engineers to hold out on the picket lines until the company recognized their true worth.

Salary Differentials

Another motivator of knowledge workers is having salary differentials that recognize technical excellence. At Boeing, engineers compared the wages and benefits won by SPEEA to those won by the IAM for factory workers. During its negotiations with SPEEA, Boeing admitted its engineering salaries had fallen 6 percent below market, and technicians' salaries 4 percent, citing an Organization Resource Counselors survey of 26 American aerospace-related companies. Boeing said it would rectify this not only by setting aside substantial funds for merit raises, but by creating special bonus funds for engineers who were promoted. It also said it would add new sums to attract new talent and reward specially targeted (but undefined) key skill areas.

Despite the credibility gained by admitting its salaries were below market, Boeing's offers were not well received. First, SPEEA argued that existing salaries had fallen not 6 but 13 percent behind the industry, citing statistics from the American Association of Engineering Science; the union wanted more. Second, the IAM had won substantial signing bonuses for its machinists in the 1995 and 1999 contacts. SPEEA negotiators wanted the same--up-front money--rather than just healthy pools of merit raise funds.

Clearly Defined Advancement Opportunities

Closely aligned with money as a motivator for knowledge workers is having unambiguous avenues of professional advancement. Many engineers did not have a clear view of their future because Boeing's offers were so complex and the details perhaps not fully explained. Boeing's proposal emphasized the need for a company-wide salaried job classification system. Because of its acquisitions of Rockwell's aerospace divisions in late 1996 and McDonnell Douglas in 1997--all with different salary structures and benefits than those in Boeing's "heritage" divisions--Boeing felt that a common, company-wide salary structure was needed because engineers from all three companies worked together on many projects. Since most engineers and other knowledge workers are mobile, career-minded, and critical of vague generalizations, a company's compensation structure and policies must be clear and in accord with the professional criteria of their technical community. Boeing tried to provide that with a much-needed company-wide job rec lassification effort and special promotion and skill funds.

But what did all that mean to the individual engineer in Seattle? What was the bottom line for him? Many engineers asked, but were unable to obtain firm answers. No one really knew for sure, and lack of knowledge bred fear, misunderstandings, and yet another reason to be suspicious of Boeing's entire economic package.

Three Phases of Recognition

The fourth area of effort needed to motivate knowledge workers such as engineers is recognition. This can be divided into three phases. The first is the opportunity to demonstrate one's technical performance. This means being given individual responsibility for a small project, even if it is only a minute segment of a larger project. The typical engineer wants to be judged by his own performance on a project--on-time completion, the quality and ingenuity of his work--and be rewarded accordingly with promotions and raises. Unfortunately, Boeing's traditional merit raise program provided very little differential in salary increases because most merit raises were roughly similar. In reality, they were nothing more than disguised general increases. This rather egalitarian history made Boeing's offers to increase funds for merit raises less attractive because engineers saw little reward for individual excellence.

The second phase is peer recognition of excellence, reflecting the belief that engineers are members of a professional, learned society rather than just company employees. Despite lip service, Boeing did little to honor its engineers before the strike. For example, Engineering Week is a traditional fete of demonstrated excellence in companies with large engineering cadres, and is honored in aerospace companies like Lockheed Martin, McDonnell Douglas, and Rockwell--the latter two of which are now part of Boeing. Staffers are nominated for Engineer of the Department or Division. From these comes the Engineer of the Year award, with proper pomp and circumstance. Surprisingly, Engineering Week is still ignored in Boeing's "heritage" divisions, in contrast to its celebration in the acquired McDonnell Douglas and Rockwell aerospace operations.

The third phase of recognition is the perceived ability to contribute to the good of the firm by having one's ideas and suggestions listened to by management--in short, to be heard. To his credit, Frank Shrontz, Boeing's president at the time, attempted to address the issue in the early 1990s by starting a Quality Circle program, an upward communication effort that had been reasonably effective in some companies. Unfortunately, Boeing's program was not well received by many executives and managers, who were more comfortable with their traditional top-down style of management than with "bottom up" communication. As a result, it dragged due to executive indifference and managerial manipulation.

Periodic paper-and-pencil employee opinion polls, another form of upward communications, produced few apparent results. The upshot of these ineffective efforts was further engineering alienation, leaving simmering unhappiness among Boeing's cadre of professionals.

The Symbols of Motivation

In rhetoric before and during the strike, SPEBA emphasized certain symbols of motivation and was able to focus strikers' attention on them because of Boeing's past. These symbols became rallying cries used by Charles Bofferding and other SPEEA leaders, enabling the union to portray itself as the soul of Boeing engineering, a tradition betrayed by new "bean-counter" management that treated engineers without respect.

Symbolic items define perceived status. Boeing's bargaining tactics were exploited by SPEEA leaders, who realized that even among engineers emotion trumps logic. Bofferding believed and communicated to his members that Boeing's offers were symbols making them "second class citizens." One symbol was that Boeing asked the engineers to pay for part of their health care costs, an item the machinists had successfully rejected during their 1996 contract negotiations. A second symbol was the notion of a signing bonus. Boeing's initial offers pointedly had no bonuses because the company reasonably believed funds should be spent raising all engineering salaries, to retain top engineers and attract new ones, rather than paying the money in a one-shot bonus to existing employees. But the IAM had managed to wrestle a 10 percent signing bonus from Boeing in 1995, and had successfully resisted health insurance copayment. SPEEA's Bofferding wanted similar treatment.

SPEEA leadership repeated these "facts" and emphasized that they "proved" Boeing would shortchange its engineers, again claiming the company's offers would brand engineers as second-class citizens. It worked. After the 40-day strike, Boeing caved in and offered the terms previously cited, including a new "Partnership Agreement." The engineers saw that their union had delivered for them, just as the IAM had delivered for Boeing's blue-collar workers.

Negotiating Respect

Although respect cannot be negotiated, part of the engineers' 1996 contract called for the start of the "Ed Wells Initiative." Named for one of Boeing's former, preeminent chief engineers, the initiative, according to the company's Web site, was supposed "to develop an effective, sustainable process to improve the company's technical excellence with opportunities for enhanced education and training, career development, and skill utilization and application for employees." Although Bofferding says the Ed Wells Initiative was a good start, and helped in improving employee utilization, not a great deal was accomplished because of lack of direction and, perhaps, management indifference. Again, this produced additional dismay and distrust.

The new 2000 contract calls for a Partnership Agreement by which a Leadership Council, co-chaired by Phil Condit, Boeing's CEO, and Paul Almeida, IFPTE president, will meet quarterly. Its charter: to deal with wide-ranging issues "of concern to Boeing's Engineering Community." Its methods: "to be based on mutual commitment and to operate on the basis of mutual respect," while serving as a problem-solving mechanism. SPEEA's president Craig Buckham explains:

The real test will be the next three years. It's an opportunity to work together with management to do some innovative things, to change the way the company operates and the way people are treated. ...There's considerable anger within our ranks toward top Boeing management. Now that we have this partnership agreement, that's probably a much bigger hurdle. A partnership requires that we resurrect some level of respect for each other. (Sprovieri 2000)

Fifteen months after the strike ended, Bofferding noted, "My candid assessment [of the Leadership Council] is that there is more support in the lower ranks than the upper ranks. Closer to the floor, people work together more closely."

Boeing's engineers are counting on this new channel to voice their concerns. However, the Leadership Council could provide union leaders with new opportunities to make life difficult for Boeing. Similar efforts by Detroit's Big Three automakers and the United Auto Workers have often backfired. When the UAW was concerned with parts subcontracted from a GM assembly plant to a nonunion supplier, it successfully threatened to withdraw cooperative "jointness" support until GM mended its ways. SPEEA may well join the IAM in its fight with Boeing over the company's shedding of assets.

The future of the Leadership Council may be rocky indeed, since Boeing is outsourcing more of its engineering and manufacturing. Moreover, tensions may rise as Boeing continues conducting aggressive anti-union campaigns to prevent further SPEEA successes.

Boeing's proposals to subcontract major wing work for the projected 747X (before it was cancelled) as well as portions of the new "Sonic Cruiser" have raised the hackles of the Puget Sound unions. The cutbacks announced after the September 11 disaster are intensifying the unions' resistance to outsourcing, and promise to make negotiations with the machinists, whose contract expires September 1, 2002, even more contentious. "Outsourcing is a major concern for us," noted Paul Sheron:

Four years ago, Boeing defined wing design as one of its core competencies. When we hear the company is looking to do this outside, that concerns us in two ways: First, employees built this company, and we have great concern over Boeing's new concept of shareholder value. Second, under this, they are looking to profit at the expense of the entire corporation's workforce.

Following the May 2001 announcement that Boeing would move its headquarters to Chicago from Seattle, Bofferding was quoted as saying that "morale stinks" among his members (Manor and Schmeltzer 2001). When queried by this author, the union director explained, "Since the merger with McDonnell Douglas, there has been a change in Boeing's culture. The focus now is on short-term financials rather than a long-term vision. The strike was about getting back to the balance." The low morale, he said, was because of "the gap between the 'proclaimed vision' and daily actions, like the talk of outsourcing." As to Boeing's move to Chicago, he stated:

Our reaction is a little disappointing. They [senior management] should be able to make the same decisions in Seattle as they might make in Chicago. They are moving away from the company's heritage, and it is a philosophical statement that senior management is distancing themselves from the company and its employees.

Success with Similar Changes at Timken: Two-Way Communication as Key

Change always scares employees, especially when competitive circumstances force management to shake up a proud, long-successful, but ingrown company. The need for change, dictated by the growing competition from Airbus, was voiced by Boeing's new executives in a way that provoked employees rather than rallied them 'round the flag to work together to fight the common threat.

The Timken Company, headquartered in Canton, Ohio, faced a similar situation in the early 1980s. Long a world leader in roller bearings and specialty steels, Timken was conservatively run, tradition-bound, and always promoted senior executives from within. Timken management awoke to changing worldwide competition, and saw that it could no longer charge premium prices for its bearings and specialty steels. Competing products made by other companies in Europe and the U.S. were almost as good, and cheaper. Timken needed better control of all its costs, including labor.

Joseph F. Toot, Jr., then Timken's president, asked this author to develop and implement a company-wide program to offset employee concerns about belt-tightening and to lay the groundwork for concessionary contract talks with United Steelworkers. The resulting program was a twoway communication effort called "Our War On Competition." Based on "Who Strikes and Why?" (Imberman 1983), it described how unionized companies could use internal corporate communications to develop cooperative environments.

Timken's program had two elements. The first was a series of videotapes presented by Timken executives to all employees discussing various aspects of global competition and how cost containment was needed for Timken to survive and prosper. Specially indoctrinated local managers in all of Timken's 56 worldwide offices and 19 manufacturing facilities held meetings with the company's 15,520 employees to discuss what the messages meant to them in their specific locations. The second element was even more important: opening the floor to employee ideas, both critical and laudatory, on how to cut costs and become more competitive. These ideas were recorded, and many eventually made their way to Canton for worldwide implementation. The first-year cost of the continuing program was about $3 million, but recorded savings totaled nearly $80 million.

Timken was also able to negotiate sizable concessions from United Steelworkers, which represented its factory employees. More important, the two-way communication program created a sense of community and identity among all employees, who developed a common purpose and united as a team to fight their common threat in the continuous improvement program.

Had Boeing been more sensitive to employee concerns and attempted a similar effort, its new cost-cutting emphasis would have been far more readily accepted--perhaps even blessed-by all employees as the price for maintaining worldwide industry leadership. Moreover, the fateful engineering strike might never have occurred.

At a news conference following the 1995 strike, Boeing's then-president Shrontz contended that "Boeing's biggest mistake leading to the strike, whose correction would become a high priority, had been a failure to communicate successfully with employees about the costs of doing business in the mid-1990s" (Rodgers 1996). Obviously little came of Shrontz's mid-decade promise-except for the epochal engineering strike of 2000, which transformed the Boeing environment, perhaps forever. On March 17, 2000, Boeing's new president Phil Condit said in a conciliatory post-strike statement:

All of us have a greater understanding of what is meant by the issue of "respect." One day I hope we can all look back on this as a turning point, a time when we more clearly recognized the importance of listening to and seeking to understand one another. (Verhovek 2000)

The shock of the 40-day engineers' strike should put some meaning into his promise of listening and respect. Listening sounds easy, but an effective two-way communication program building mutual respect and support for continuous improvement is difficult to implement without expert help. It is hoped that executives at other companies with large cadres of engineers, scientists, software designers, and similar knowledge workers will apply the vital lessons of the need for such two-way communication--lessons so painfully learned at Boeing.

Woodruff Imberman is the president of Imberman & Deforest, Inc., a management consulting firm headquartered in Evanston, Illinois.

References and Selected Bibliography

Airbus Industrie corporate information accessed from www.airbus.com, various dates; information on Boeing accessed from www.boeing.com, various dates.

"Airbus: Place Your Bets," Economist, June 23, 2001, pp. 60-61.

Frederick Biddle and John Helyar, "Behind Boeing's Woes," Wall Street Journal, April 24, 1998, p. 1.

Charles Bofferding, Executive Director, Seattle Professional Engineering Employees Association, personal conversation with the author, January 17, 2001.

Jeff Cole, "Boeing Plans Sale of St. Louis Parts Plant in Sign of More Divestitures," Wall Street Journal, June 16, 2000, p. B8.

Jeff Cole, "Boeing Weighs Giving Japan 747X Wing Job," Wall Street Journal, January 2, 2001, p. A3.

Stanley Holmes, "Boeing's Sonic Bruiser," Business Week, July 2, 2001, pp. 64-68.

Woodruff Imberman, "As the Engineer Sees His Problems," Conference Board Record, April 1976, pp. 30-46

Woodruff Imberman, "Who Strikes and Why?" Harvard Business Review, November-December 1983, pp. 18-28

Lynn Lundsford and Andy Pasztor, "Boeing May Cut as Many as 30,000 Workers," Wall Street Journal, September 19, 2001, p. 3.

Robert Manor and John Schmeltzer, "Uneasy Rests Boeing King's Crown," Chicago Tribune, May 20, 2001, Sec. 5, p. 1.

Eugene Rodgers, Flying High (New York: Atlantic Monthly Press, 1996).

Paul Sheron, Organizing Director, Seattle Professional Engineering Employees Association, personal conversation with the author, January 17, 2001.

John Sprovieri, "Engineers' Strike Grounds Boeing," Assembly Magazine, June 2000, p. 26.

"Union Vows to Fight Asset Sales," Chicago Tribune, July 14, 2000, Sec. 3, p. 2.

Sam Verhovek, "Tentative Pact Made to End Boeing Strike," New York Times, March 18, 2000, p. C1.
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Title Annotation:analysis
Author:Imberman, Woodruff
Publication:Business Horizons
Article Type:Statistical Data Included
Geographic Code:1USA
Date:Nov 1, 2001
Words:6922
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