Initiative: Internal Services Productivity

Objective: To reduce indirect costs that are centrally managed or embedded in the businesses, while improving functional productivity

James Bell, Boeing chief financial officer, and Rick Gross from Commercial Airplanes are leading the Internal Services Productivity initiative. This effort will improve the efficiency of the common functions and organizations that support Boeing's operations. They recently discussed the initiative's goals and potential benefits.

Q: Please explain the Internal Services Productivity initiative.

Bell: We're going to find ways to improve the benefit-cost equation for the common functions and services we rely on every day. These are billions of dollars in costs incurred annually, and we impose many of the requirements on ourselves. They're necessary costs, such as payroll administration and security, for example. These are indirect costs our business units must factor into their pricing. The more we reduce them, the more flexibility we provide the businesses, and the more we help improve our competitiveness.

We need to apply the tools that make the most sense to help us simplify, standardize and improve the efficiency of the support functions. So, for example, we'll take Lean principles and practices such as reducing variability, creating standard work, eliminating waste, and measuring and improving process performance and apply them to our office and support functions. The goal is to continuously improve the quality and flow time associated with providing these services.

Q: How will you manage this initiative?

Bell: [Boeing Chairman, President and CEO] Jim McNerney is holding me responsible for results, so I went out and found the best person I could to manage this on a daily basis. That's Rick Gross, from BCA. He has a tremendous background in operations and finance, and a proven record of performance in both our commercial and military businesses.
We'll have a Lean team and we're going to hit the ground running. We have to. Boeing's growth requires us to start succeeding now, and improving our productivity is a key way to enable us to invest in growth opportunities.

Q: What are your goals?

Bell: Our goal is to improve or maintain the quality of these functions while reducing their costs. Notice that I didn't say maintaining cost. The status quo isn't acceptable. Our challenge is to continually find ways to reduce these costs. Jim McNerney will measure our success by how we help increase Boeing's competitiveness—and therefore its bottom line.

Q: How long will it take to reach the goal?

Bell: Rather than considering how long, I would ask how often. I expect we will be reaching that goal very often. The next question typically would be, "By how much do you want to cut costs?" My answer is, "As much as we can." We have ideas of what we should be able to accomplish, but tying this to public targets now would be counterproductive. If you're not careful, cost-reduction efforts progress to whatever number is out there, then fade away. We must do better than that. Cost reduction must be a perpetual effort and will be realized through our collective efforts to continuously improve our processes.

Q: Which parts of Boeing will be involved?

Gross: All parts of Boeing—corporate, business units and the functions that support the businesses. Together we'll work to improve and simplify our support requirements, processes and systems to increase productivity. Our support teams play an important role in helping our businesses be competitive. A significant portion of the cost of our products and services is associated with support and services provided to the businesses. So it's critical that we reduce those costs and enable our businesses to be more competitive.

I want to point out that this initiative didn't come about because we dropped the ball. It came about because we always need to find ways we can do better. For example, our Shared Services group, led by Mary Armstrong, has made great progress in standardizing, simplifying and reducing the cost of services. I know there are a lot of good productivity initiatives in our other support functions as well.

Q: How can employees support this initiative?

Gross: By continuously challenging the way we work, the processes we use, and implementing improvements to those processes that enable us to improve quality and reduce the flow time to provide support. I would encourage employees to become knowledgeable of Lean principles and practices, process management, and process improvement techniques that can be applied to improving support.