The Cost of shareholder value

Shifting from an engineering to a shareholder value focused has been challenging for Boeing.

It didn’t work out well.

Not investing in innovation, trading quality for lowest cost manufacturing, cash invested in share repurchases, not new airframes.

So it was good to hear the estimable Tim Clark, CEO of Eremites Airline, and his suggestions.

“You look after the people, they look after you. I think they’ve been offsided by the previous management for too long.”

“Have you got yourself into a mess like this because you prided yourself on treating them badly and not giving them a deal when you were making fat profits and taking bonuses at board level? Really? That’s not the way to run a business. You need to get people with you.

Basically, respect your workers, and make great products.

And again, in the FT, (10/25/24), Scott Kirby, CEO at United:

Scott Kirby, chief executive at one of Boeing’s biggest customers, United Air-lines, told investors this month that he was “encouraged” by Ortberg’s early moves, adding that the company had suffered from “a cultural challenge, where they focused on short-term profitability and the short-term stock price at the expense of what made Boeing great, which is building great products”.

If there is a single central lesson that readers can learn from virtually every issue of Magazine B, is that a focus on making truely great products will take care of problems your competitors are trying to fix with features, gimmicks, marketing, sales promotions, discounts, and partnerships.

But if you focus on shareholder value by squeezing every dollar out of  your workforce, your suppliers, your raw materials and your distribution channel, you’ll wind up with a product that….looks like you optimized costs, not quality.

Some customers buy on cost. But there’s a lot more money, not to mention stability, customer loyalty and market leadership, in making products that cost more money — and are worth every penny.