Note: This blog post was written a few days before the far more impactful door plug issue which led to the grounding of Boeing’s global 737-MAX fleet.
Last week, Boeing turned a bolt worth a few bucks into bad headlines across America and the world.
It wasn’t a good way to end the year. But it was the smart, ethical move for a company that is responsible for millions of people’s lives.
Doing the right thing is always the right thing
After an airline discovered a faulty bolt in a 737 MAX plane’s rudder control system, Boeing urged the Federal Aviation Authority and airlines that use the MAX to conduct inspections on all MAX planes. Bad press followed as the story made headlines in the New York Times, BBC, NPR, and a gazillion other top-tier business, airline, and public-facing media outlets.
And worst of all, those stories often included references to the 737 MAX crashes in 2019 and 2020 that put worldwide sales on hold and put Boeing under intense government scrutiny around the world.
Replacing or tightening a single bolt is a marginal cost to a company selling planes for tens of millions of dollars and which grosses over $60 billion annually. But the human risk of a bolt error is the lives at stake. And the business risk is an accident that could cost Boeing investor money, government fines, lost airline purchases, and other negative outcomes.
That’s why Boeing’s transparency should be applauded. It’s a great example of a company making an ethical decision that trades minimally bad news today for the worst kind of news later.
Transparently addressing problems is good business
Nothing is worse than hiding issues that later cost money, time, or lives. In one of the most expensive mistakes in corporate history, German automaker Volkswagen had to pay over $30 billion in fines after the US Securities and Exchange Commission found company executives knew about cars being sold that didn’t meet emissions standards. In the most extreme examples, executives like Fyre Festival’s Billy McFarland and FTX’s Sam Bankman-Fried have faced prison time for not disclosing problems with their company’s product or service.
Because the stakes are so high, the airline industry faces heavy regulation and intense scrutiny from many stakeholders. Boeing paid billions to settle with federal agencies after the 2019 and 2020 crashes. But even more mundane issues can result in massive financial losses, such as the federal government’s $140 million fine against Southwest for delayed and canceled flights.
Fines are one side of the financial risk ledger. On the other are investors who can pull money out of operations. Boeing’s stock price fell 18% in the weeks following the grounding of the 737 MAX in 2019, even before airlines canceled orders due to the COVID-19 pandemic. But it’s recovered pretty well, and last week’s 1% dip will easily be overcome by long-term success.
And there’s even a third, large stakeholder group about which Boeing must be concerned: customers, in particular airlines and governments whose reputations and profits suffer when a manufacturer errs. Double-checking bolts will undoubtedly result in some grousing and frustration. However, customers will undoubtedly be grateful for the inconvenience of double-checking bolts if it prevents a crash. And Boeing will keep the revenue coming in because it acted as a trusted manufacturer..
People and companies make errors. Directly addressing them means that stakeholders are less likely to react negatively.
If it doesn’t bleed, it doesn’t lead
Stories about death, danger, and alleged corporate malfeasance make the big headlines. These are the pieces of news that go viral and stick with audiences.
It’s never good to get low-level bad headlines at major outlets, but stakeholders are more likely to brush off these stories as the news cycle changes within a few days. It’s the literal bleeding – or fantastic scandals – that makes stories fester for months and even take on a life of their own.
An effective communications strategy includes knowing when to be quiet and fly under the radar. Boeing’s leadership also correctly recognized the need to make a short-term sacrifice to ensure long-term success. Even if it allowed a bolt the price of a rounding error to create bad headlines.