1

A JOURNEY TO EXCELLENCE IN TWO ORGANIZATIONS

David Spong

2

WHY AM I HERE?

MAYBE OUR APPROACH WORKS?

3

1991 – 2000

BoeingAirlift & Tanker Programs

1998 Baldrige Winner

2000 to 2004

BoeingAerospace

Support

2003 Baldrige Winner

OUR QUALITY JOURNEY

4

STARTING POINTS

Airlift & Tanker Programs

1998 Recipient

Organizational Type

Organizational Complexity

Starting Point

Crisis

Documented Processes

Framework

Initiatives

Locations

Reason for Baldrige

Approach to Baldrige

Aerospace Support

2003 Recipient

Overall business model

Dispersed – 130+ locations

Improvement

Service

Complex:Bus./Sites/Functions

Some

Yes

Some

Stable

Not recognized

Integrating existing approaches

Primarily one

Turnaround

Manufacturing

Primarily one program

No

None

Many

Chaos

Yes

5

THE BOEING COMPANY

Office of the Chairman

ChairmanPhil ConditPresident

Harry Stonecipher

Airlift & TankerPrograms

CommercialAirplane People

PhantomWorks

MilitaryAircraft

& Missiles

Space and Communications

6

AIRLIFT AND TANKER PROGRAMS LOCATIONS

Manufacturing Organization Headquartered in Long Beach, CA8,106 Employees in 7 States

Manufacturing Organization Headquartered in Long Beach, CA8,106 Employees in 7 States

7

40 and No More …Unless We Perform

1992

Lack ofConfidence

QualityProblems

Late DeliveriesAdversarialRelationships

Cost Overruns

FROM CRISIS TO SUCCESS

8

40 and No More …Unless We Perform

1992

Lack ofConfidence

QualityProblems

Late DeliveriesAdversarialRelationships

Cost Overruns

National QualityAward Winners

1998

FROM CRISIS TO SUCCESS

9

“THE LAW OF CHANGE”

If you want a different outcome, you must change either the process, the product, or both.

The Corollary

If you always do what you have always done you will get what you have always gotten!

The Law

10

PlannedJourney

(’93) (Summer ’95)

1000 UnalignedProjects

(’91)

Strategic Direction

Work Group

Individual

Tactical Direction

Malcolm BaldrigePrinciples

ALIGNING THE FOCUS

11

Airlift& Tanker

Airlift& Tanker

On-SiteCustomerOversight

On-SiteCustomerOversight

External CustomerExternal Customer

One Team Committed to Program Excellence

REINVENTED RELATIONSHIPS WITH CUSTOMERS

12

UNDERSTANDING CUSTOMER SATISFACTION

• High quality, on time, at cost

• Meet customer expectations

• Timely and competent support

• Anticipate demands

• Sensitive to customer’s point of view

• Understand customer expectations

• Responsive to customer requests

• Keep our commitments

CUSTOMER SATISFACTIONCUSTOMER SATISFACTION

Product andservice excellence

Product andservice excellence

Relationshipexcellence

Relationshipexcellence

Delivering what the customer wants—flawlessly

13

Quality Timeliness

Efficiency Cycle Time

AN APPROACH TO. . .

• Cover everything we do

• Manage and improve through a single, disciplined approach

• Empower Owners

1.0 Enterprise Management

8.0 Support and Services

4.03.02.0 7.06.05.0

Program Core Process Family

Process Based Management

Closed Loop

321 4 5 6 7

PROCESS MANAGEMENT

14

90

60

30

0

-90

-120

-150

-180

-30

-60

Da

ys

120

AircraftP30P5 P10 P15 P20 P25 P35

1993 19941992 1995 1996 1997

P40

1998

P45

“Hold the Aircraft”

P50 P55

150

180

P60

20001999

CULTURAL CHANGE

15

90

80

70

60

50

40

30

20

10

0Quality vs. cost Quality vs. schedule Schedule vs. cost

Pe

rce

nt

of

em

plo

ye

es

se

lec

tin

g o

ne

pri

ori

ty o

ve

r a

no

the

r

100 1998 - 88%1999 - 95%2000 - 90%2001 - 93%

Percentageof Respondents

7370 70 72

2730 30 28

33 35 35 36

68 67 6568

32 3335

32

67 65 65 64

EMPLOYEES BELIEVE IN QUALITY

16

AIRLIFT &TANKER IMPROVEMENTS

200

300

400

450

500550

600

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998

Ba

ldri

ge

Mid

-Ra

ng

e S

core

TQMS-IE Cal Qual MB

400 Points!

17

How Good You Think You Are

How GoodOthers

Think YouAre

12

3

“Projects are most successful when top management takes ownership”

– Deming

LEADERSHIP REQUIRED

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THE JOURNEY TO A ZEOLOT

1991… 1996…

John McDonnellCEO

Harry StonecipherCEO

LaunchedTQMS-IE

“Go For It”MBNQA

Baldrige Internal Assessment (TQMS-IE) … Tied to Exec Compensation

… At each Business Unit

19

1991… 1996…

John McDonnellCEO

Harry StonecipherCEO

And Beyond

1998…

Award Ceremony

THE JOURNEY TO A ZEOLOT

LaunchedTQMS-IE

“Go For It”MBNQA

Baldrige Internal Assessment (TQMS-IE) … Tied to Exec Compensation

… At each Business Unit

21

1991 – 2000

BoeingAirlift & Tanker Programs

1998 Baldrige Winner

OUR QUALITY JOURNEY

2000 to 2004

BoeingAerospace

Support

2003 Baldrige Winner

22

Commercial Airplanes Boeing Capital

Connexion By Boeing

Air Traffic Management

Phantom Works

Shared Systems

Group

Integrated Defense Systems

ORGANIZATIONAL ALIGNMENT

Aerospace Support

Army Systems Naval SystemsAir Force Systems

Integrated Defense Adv

Systems

Homeland Security and

Services

Strategic Architecture

NASA Systems

Missile Defense Systems

Space and Intelligence

Systems

Integrated Defense Systems

Aerospace Support

The Boeing Company

23

STARTING POINTS

Airlift & Tanker Programs

1998 Recipient

Organizational Type

Organizational Complexity

Starting Point

Crisis

Documented Processes

Framework

Initiatives

Locations

Reason for Baldrige

Approach to Baldrige

Aerospace Support

2003 Recipient

Overall business model

Dispersed – 130+ locations

Improvement

Service

Complex:Bus./Sites/Functions

Some

Yes

Some

Stable

Not recognized

Integrating existing approaches

Primarily one

Turnaround

Manufacturing

Primarily one program

No

None

Many

Chaos

Yes

24

AEROSPACE SUPPORT PRESENCE

Malaysia

JapanThe

NetherlandsUnitedKingdom

Germany

Saudi

Arabia

Kuwait

12,303 Employees in 131 Locations

12,303 Employees in 131 Locations

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DUAL BUSINESS IMPERITIVE

Running the BusinessG

rowin

g the

Busines

s

Aerospace Support is a fairly new organization with a focus on both running and

growing the business

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Established a culture of excellence and continuous improvement

• Created a Leadership System and Operating Principles

• Identified and Deployed Overall Initiatives Employee Involvement

Process Based Management

Management by Information

• Assigned Executive Champions

• Adopted Baldrige Criteria as the Business Model

• Assessed the organization by sites and overall

INITIAL FOCUS

Customer Satisfaction

Enterprise Planning Process

27

OUR LEADERSHIP SYSTEM

Vision & Values

Set andCommunicate

Direction

Perform to Plan

Reward & Recognize

Organizational& Employee

Learning

Organize, Plan,and Align

Be RoleModelsBe RoleModels

EmpowerTeams

EmpowerTeams

ContinuouslyImprove

ContinuouslyImprove

MotivateEmployeesMotivate

Employees

Analyze& Compare

Analyze& Compare

CorporateCitizen

Innovation

Teamwork

Agility

Sharing &

Supportive

Learning

Diversity

Quality

CustomerSatisfaction

Integrity

StakeholderRequirements

& Expectations

• Customer• Work force• Suppliers• Community• Shareholders

Safety

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OUR MISSION, VISION, AND VALUES

MissionMissionProvide world-class sustainment

solutions to our aerospace customers

VisionVisionPeople working together as the world’s number one provider of

innovative sustainment solutions

10 Year Objective10 Year ObjectiveWe will be a recognized world-class,

global business, providing sustainment solutions aligned with

our customers’ evolving needs

ValuesValuesLeadership

Integrity

Quality

Customer satisfaction

People working together

A diverse & involved team

Good corporate citizenship

Enhancing shareholdervalue

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• We insist on integrity, first and foremost • We tell it like it is• We communicate openly and candidly in all our dealings• We respect, honor, and trust one another• We work toward consensus• Disagreement is healthy and encouraged, but once a decision is made,

we proactively support it• We have one conversation at a time• Our silence is consent• We focus on issues and ideas rather than titles or personalities• We actively listen and question to understand• We do not attack the messenger• We identify clear objectives and expectations for our meetings • We start on time, observe time limits, and end on time• We praise in public, we coach in private• We have a bias for velocity

OPERATING PRINCIPLES

Have Fun. . . Enjoy the journey and each otherHave Fun. . . Enjoy the journey and each otherHave Fun. . . Enjoy the journey and each otherHave Fun. . . Enjoy the journey and each other

EMPLOYEE INVOLVEMENT (EI)

Is it a Culture?

Is it a Belief?

Is it a Way of Life?

"It is not a new program, project or process. EI is a cultural change in the way we treat each other and work together. It is a journey in which people apply their skills to improve individual, team and organizational performance continuously. This leads to employee satisfaction and improved business results.“

Raj Kanungo

Is it Teams?

Is it Belonging?

Is it a Process?

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Employee

InvolvementVision &Values

Operating

Principles Diversity“Open Door”

Empowerment

RecognitionEthics

Motivated Employees

“Smells Good”Business Results“Taste Great”

EMPLOYEE INVOLVEMENT LEADS TO MOTIVATED EMPLOYEES

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EMPLOYEES ARE MORE MOTIVATED

50%

50

54

58

62

66

1999 2000 2002 20032001

EI

ESIStarted Baldrige

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BALDRIGE AS OUR BUSINESS MODEL

StrategicPlanningStrategicPlanning

Customer andMarket FocusCustomer andMarket Focus

ProcessManagementProcessManagement

HRFocus

HRFocus

LeadershipLeadership

Data and InformationManagement

Data and InformationManagement

Business ResultsBusiness Results

Business Results

34

BaldrigeAward!

Assigned PeopleTo Lead

Approaches

Tasked SitesTo Submit

State AwardApplications

PreparedAS-wide

AssessmentDocument

NationalBaldrige

Application

Site Visit

InternalAssessment& Feedback

Macro-level Internal

Assessment

Created a Business

Excellence Organization

APPROACH

AssignedExecutive

Champions

DeployedNeeded

Approaches

2002 200320012000

Received Awards in : Kansas Missouri Arizona Australia California Florida

Oklahoma

1

3

2 7

8

6

5

412

11Internal

Assessment& Feedback

10

13

9

Improvement Initiatives

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AEROSPACE SUPPORT IMPROVEMENTS

0100

200

300

400

500

600

700

2001 20032002

AS Baldrige-based Assessment ScoreState/Local/Baldrige-based Score by Major SiteAward Recipient

Ba

ldri

ge

Mid

-Ra

ng

e S

core

Ph

ila

de

lph

ia

Ok

lah

om

a C

ity

St

L

Wic

hit

a

BA

L

Me

sa

BA

SC

So

Ca

l

Ft

Wa

lto

n B

ea

ch

Ae

ros

pa

ce

Su

pp

ort

Ba

ldri

ge

Win

400 Points!

Ok

lah

om

a C

ity

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AS EARNINGS PERFORMANCE

2000 2001 2002 2003

PLAN ACTUALS

Started Baldrige

37

AS REVENUE PERFORMANCE

2000 2001 2002 2003PLAN ACTUALS AVG GROWTH

Started Baldrige

38

WHAT DOES BALDRIGE DO FOR YOU?

Ensures continuous improvement Across the Board

“Forces” a collaborative enterpriseCommon languageIntegration between Businesses, Sites & FunctionsKnowledge SharingCommon processes, where appropriateMotivates employees

Enables “breakthrough” improvements

Improves business results

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Leadership Commitment in All Things

• Develop vision & values and a system for leading

• Accept & actively support change

• Align vision, strategies, goals, and measures

• Institutionalize priorities of Quality, Schedule and Cost

• Reinvent relationships with all stakeholder groups:

• Understand customers & commit to customer satisfaction

• Empower teams to optimize results

• Manage through systematic processes

• Assess the organization using the MB Criteria

LEADERSHIP COMMITMENT AND LESSONS LEARNED

40

OUR JOURNEY CONTINUES

It starts with leadership Great people keep it going!