A JOURNEY TO EXCELLENCE IN TWO ORGANIZATIONS David Spong President, Boeing Aerospace Support Retired 1998

1. 1 A JOURNEY TO EXCELLENCE IN TWO ORGANIZATIONS David Spong President, Boeing Aerospace Support (Retired) 1998/2003 Baldrige Recipient Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

2. 2 WHY AM I HERE? Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

3. 3 1991 � 2000 BoeingAirlift & Tanker Programs 1998 Baldrige Winner OUR QUALITY JOURNEY Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

4. 4 STARTING POINTS

5. 5 THE BOEING COMPANY

6. 6 AIRLIFT AND TANKER PROGRAMS LOCATIONS Obviously, we are very proud of our company, our people, and our products. Just to sketch our financial picture for you -- we have $2.6 billion in revenue and $13.7 billion in backlog. Our return on net assets is 179% -- a pretty good number in our business. We have over 8,000 employees and 1,600 suppliers, mostly in the United States and a few worldwide.Obviously, we are very proud of our company, our people, and our products. Just to sketch our financial picture for you -- we have $2.6 billion in revenue and $13.7 billion in backlog. Our return on net assets is 179% -- a pretty good number in our business. We have over 8,000 employees and 1,600 suppliers, mostly in the United States and a few worldwide.

7. 7 As most of you know, many of the books on change these days, tell us that one of best ways to promote change is to have a crisis. And in fact, I read that if you don�t have a crisis, invent one. We didn�t have to invent one. We had an adversarial relationship with our customer. The attitude between us and that customer was if they wanted us to do something, we said �That�s a great idea, send money.� If we wanted them to do something, it was, �Why should we do that for you?� So it was a very bad time. The airplanes were late, they were over budget, the quality of the delivered product was bad. And yet, there weren�t any bad people. But our performance was so poor that the government threatened to cut us off at 40 airplanes which was our original contract. We�d hoped to get a contract for an additional 80 airplanes, but the government said you�re only getting 40 unless you do something about it -- that�s the banner you see on the lower left. As most of you know, many of the books on change these days, tell us that one of best ways to promote change is to have a crisis. And in fact, I read that if you don�t have a crisis, invent one. We didn�t have to invent one. We had an adversarial relationship with our customer. The attitude between us and that customer was if they wanted us to do something, we said �That�s a great idea, send money.� If we wanted them to do something, it was, �Why should we do that for you?� So it was a very bad time. The airplanes were late, they were over budget, the quality of the delivered product was bad. And yet, there weren�t any bad people. But our performance was so poor that the government threatened to cut us off at 40 airplanes which was our original contract. We�d hoped to get a contract for an additional 80 airplanes, but the government said you�re only getting 40 unless you do something about it -- that�s the banner you see on the lower left.

8. 8 Our employees put up another banner that said �40 and Beyond� -- their way of saying �We�re going to do something about this.� So what did we do? We formed a team with the government. We each invested in improving the program. And we agreed to work together -- what a novel concept. There you see our smiling faces on the right with President Clinton -- a very very exciting step along the journey. Our employees put up another banner that said �40 and Beyond� -- their way of saying �We�re going to do something about this.� So what did we do? We formed a team with the government. We each invested in improving the program. And we agreed to work together -- what a novel concept. There you see our smiling faces on the right with President Clinton -- a very very exciting step along the journey.

9. 9 �THE LAW OF CHANGE� Let�s go on to describe the journey. I think it�s important as you head down this road to remember something I call the law of change -- �If you always do what you have always done you will get what you have always gotten!� Going back to high school geometry, the corollary to that says that, �If you want a different outcome, you must change either the process, the product, or both.� What I�ve found in my 35-odd years in this business is you can�t finesse your way through change. You can�t just talk about things differently or look at things differently. It never works. You really do have to change something. In our case, it was completely flipping things around -- from being driven by cost and schedule, to making quality first. Once we made the change, we never looked back. Let�s go on to describe the journey. I think it�s important as you head down this road to remember something I call the law of change -- �If you always do what you have always done you will get what you have always gotten!� Going back to high school geometry, the corollary to that says that, �If you want a different outcome, you must change either the process, the product, or both.� What I�ve found in my 35-odd years in this business is you can�t finesse your way through change. You can�t just talk about things differently or look at things differently. It never works. You really do have to change something. In our case, it was completely flipping things around -- from being driven by cost and schedule, to making quality first. Once we made the change, we never looked back.

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12. 12 UNDERSTANDING CUSTOMER SATISFACTION

13. 13 Our functionals deal with processes and people. As you�ve heard earlier, process management was one of our early focuses. To get this approach deployed quickly -- and to get the results we needed, we empowered the managers/teams to define their processes, pick metrics, and agree on performance levels with their customers. This decision to empower the teams and the Leadership Team�s active involvement has made our Process Management a model practice for many other companies.Our functionals deal with processes and people. As you�ve heard earlier, process management was one of our early focuses. To get this approach deployed quickly -- and to get the results we needed, we empowered the managers/teams to define their processes, pick metrics, and agree on performance levels with their customers. This decision to empower the teams and the Leadership Team�s active involvement has made our Process Management a model practice for many other companies.

14. 14 This slide shows our schedule performance, so starting on the left hand side, you�ll see some bars headed south. That�s not good. Back then, we were up to 180 days behind schedule. . .and we stayed behind until you see Plane 12, where the big arrow is. Now in a typical manufacturing mentality, if the schedule says the airplane will move down the production line today, you move the airplane. It doesn�t matter if it�s finished or not, just move it. Of course that means some parts don�t get put in when they�re supposed to be, so they have to be put in later. That�s easier said than done. Many parts are tightly packed together in the aircraft structure. So if you install a part out of sequence -- you often have to rip out many of the parts that were installed later down the line. It�s a little like putting an engine in your car, then having to take it out to install a fuel pump, then putting the engine back in, then taking it back out three days later to install a carburetor -- you get the idea. You end up making the airplane 10 to 12 times to get it right. But when we got to Plane 12, my predecessor on the program finally said, �Don�t move the airplane from that station until it�s finished.� Everyone in manufacturing rolled their eyes back and said this man has been smoking some of those cigarettes with no writing on them. He just doesn�t understand the way you build airplanes.� But there was no mistaking the message, �Hold the airplane.� You�ll notice that we didn�t miss a delivery from that point on. That was because we focused on quality, which basically says that if you improve quality, cost and schedule will follow. This slide shows our schedule performance, so starting on the left hand side, you�ll see some bars headed south. That�s not good. Back then, we were up to 180 days behind schedule. . .and we stayed behind until you see Plane 12, where the big arrow is. Now in a typical manufacturing mentality, if the schedule says the airplane will move down the production line today, you move the airplane. It doesn�t matter if it�s finished or not, just move it. Of course that means some parts don�t get put in when they�re supposed to be, so they have to be put in later. That�s easier said than done. Many parts are tightly packed together in the aircraft structure. So if you install a part out of sequence -- you often have to rip out many of the parts that were installed later down the line. It�s a little like putting an engine in your car, then having to take it out to install a fuel pump, then putting the engine back in, then taking it back out three days later to install a carburetor -- you get the idea. You end up making the airplane 10 to 12 times to get it right. But when we got to Plane 12, my predecessor on the program finally said, �Don�t move the airplane from that station until it�s finished.� Everyone in manufacturing rolled their eyes back and said this man has been smoking some of those cigarettes with no writing on them. He just doesn�t understand the way you build airplanes.� But there was no mistaking the message, �Hold the airplane.� You�ll notice that we didn�t miss a delivery from that point on. That was because we focused on quality, which basically says that if you improve quality, cost and schedule will follow.

15. 15 EMPLOYEES BELIEVE IN QUALITY

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17. 17 One of the things we found on our program is that leadership is absolutely required for a successful company -- or as Dr. Deming would say, �Projects are most successful when top management takes ownership.� This is the chart I use to describe the leadership journey -- and believe me, it can be a humbling experience. You start off on the bottom right hand corner. . .at number one and you think you�re good. Now no one else may think you�re very good, but you think you�re good. So you launch down the journey and at some point, you go through this sort of metamorphosis and realize how bad you really are. That�s when it�s very easy to get discouraged and say, �Let�s go back to what we were doing before.� This is where most people drop out. But as a leader, you must stay the course. Believe me -- and I�ve been there -- you will come to a point where your rate of improvement is quite good. And it is recognized by others that you are doing things better. Suddenly, without warning, you turn a corner and end up at number three, where you start thinking a bit better of yourself, and other people think a lot better of you. It�s good to understand this process, because you can get awfully discouraged along the way. Yet, if you work at it, you will get better. One of the things we found on our program is that leadership is absolutely required for a successful company -- or as Dr. Deming would say, �Projects are most successful when top management takes ownership.� This is the chart I use to describe the leadership journey -- and believe me, it can be a humbling experience. You start off on the bottom right hand corner. . .at number one and you think you�re good. Now no one else may think you�re very good, but you think you�re good. So you launch down the journey and at some point, you go through this sort of metamorphosis and realize how bad you really are. That�s when it�s very easy to get discouraged and say, �Let�s go back to what we were doing before.� This is where most people drop out. But as a leader, you must stay the course. Believe me -- and I�ve been there -- you will come to a point where your rate of improvement is quite good. And it is recognized by others that you are doing things better. Suddenly, without warning, you turn a corner and end up at number three, where you start thinking a bit better of yourself, and other people think a lot better of you. It�s good to understand this process, because you can get awfully discouraged along the way. Yet, if you work at it, you will get better.

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20. 20 1991 � 2000 BoeingAirlift & Tanker Programs 1998 Baldrige Winner THE QUALITY JOURNEY Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

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22. 22 STARTING POINTS

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24. 24 DUAL BUSINESS IMPERITIVE

25. 25 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 Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

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27. 27 Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

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29. 29 LEADERSHIP SYSTEM

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35. 35 AEROSPACE SUPPORT IMPROVEMENTS ON BUDGET. . . Managing to tight operating budget with a management reserve!ON BUDGET. . . Managing to tight operating budget with a management reserve!

36. 36 AS EARNINGS PERFORMANCE

37. 37 AS REVENUE PERFORMANCE

38. 38 WE DID IT AGAIN! Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

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41. 41 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 Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works. Success is a continuous challenge that demands a commitment from leadership. Understand and commit to changing. You�ve got to be willing to change. You cannot use finesse to solve problems. Embrace the concept that �all ideas have value.� People come into my office all the time. They�ve got ideas and, to be quite honest, I haven�t a clue whether their ideas will work or not. But if the idea isn�t comparable to rearranging deck chairs on the Titanic, I usually say, �go for it.� 95% of the time they come back with a success story. Again, it�s part of empowering, part of motivating people so they feel they�re worthwhile. Finally, I would challenge all of you, especially if you�re not already doing it, to use an internal Baldrige assessment process -- it works.

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