Boeing to announce major defense division restructuring

CHICAGO, Wed Nov 7, 2012 – Boeing Co. announced a major restructuring of its defense division on Wednesday that will cut 30 percent of management jobs from 2010 levels, close facilities in California and consolidate several business units to cut costs.

The company told employees about the changes ahead of the planned announcement set for later Wednesday, a copy of which was reviewed by Reuters.

Boeing, the Pentagon’s second-largest supplier, said the changes were the latest step in an affordability drive that has already reduced the company’s costs by $2.2 billion since 2010, according to the document.

When what used to be a company’s strength is now seen as a weakness

William F. Hutter, President and CEO, Sequent

This is Part 2 of two articles addressing the trials and tribulations of a company’s growth and development. Part 1 described how the gun slinger role helps drive growth in the early stage of a company’s evolution. The gun slinger is the person who challenges the status quo, the one who takes risks to blaze new trails. They are often the one who leads the company through challenges or troubled times.

In Part 2 of the story, William F. Hutter, president and CEO of Sequent, describes what happens as a company matures and grows.

“When the original entrepreneurial spirit begins to wane, the gun slinger is no longer welcome,” he says. “Questions emerge that spark a re-evaluation of what led the company to where it is today.”

Smart Business spoke with Hutter about how the trailblazing gun slinger might no longer be welcome in a company leadership role.

How does a company’s growth affect leadership? 

After a company’s early-stage success, the leadership often begins to question ‘what got them here.’ This questioning and re-evaluation process usually leads to a revelation: ‘We need to move from an intuitive approach to one that is more prescriptive.’

This shift toward structure requires different skills. As a result, what had been the company’s strength is now seen as its weakness, and the early-stage leaders start to look like a bunch of rookies. So the re-evaluation questions begin to foster a need for change, which in turn produces two separate and distinct outcomes — one that is intended, and one that is not.

What is the intended outcome of the growing company’s re-evaluation? 

Committees are formed to bring together seemingly disconnected pockets of knowledge from different functions or different departments around the company. The objective is simple — to create the most efficient operation between each of the moving parts of the company. In order to break down barriers and miscommunication, each function identifies how to best do its job as a way to complement other departments or to help the next stage of the process by making sure its job is complete. The process of identifying the skills, talents, and responsibilities of each person and/or department can be a long-term commitment for any organization. This effort helps document and validate the business systems that have materialized out of necessity. The systems and processes that have allowed the company to get to this point in its growth are now challenged and possibly changed in this reconstruction stage. It is at this point that the following questions could emerge:

  • How can we improve?
  • Why does this or that happen?
  • Do we need more forms?
  • Shouldn’t everything be consistent?
  • How does this business delivery system meet compliance standards?
  • Who can we get to help us?

All the while the business has not stopped, new deals are made, clients are serviced, inventory is delivered and bills are paid. But now there is a group of people from around the company trying to analyze the existing systems and processes while getting the day-to-day work done. It begins to look like a group trying to change a flat tire on a moving car.

So, who participates in the reconstruction process? Certainly not everyone can participate. It is usually just a select group that begins to determine how to improve existing systems and processes, documents the suggested improvement (changes), and communicates the same to the various people and departments impacted by these improvements.

Sounds like a perfect scenario, right? People are coming together working on a common goal to improve the organization. But there can be a dark side. Those who are not included in the reconstruction process begin to question and wonder, ‘What are they talking about? How is it going to impact me? Why is he or she in the meeting?’ Then the unintended outcome happens.

How can creativity unintentionally dwindle with this kind of reconstruction? 

The reconstruction process is the intended outcome that companies often see as they transition from the early stages of development. However, there’s an unintended outcome — the death of creativity.

This unintended outcome doesn’t just happen one day, it occurs gradually. Over time, the activity of identifying and defining the systems and processes begins to create structure for the company. Management uses this structure to evaluate employees against a standard of processes and systems. However, in the business environment, especially within the service sector, it is very difficult to establish a standard because the variables are constantly changing. Customers are continually challenging the standards. While this looks great on paper, service providers need to constantly change to meet their customer’s needs, which often results in a continual process of customizing to meet those needs.

With this loss of creativity, how are company gun slingers impacted? 

It is nearly impossible to build a system or process for every situation or circumstance. When a company tries to do this, it affects the accountability of the individuals in that culture. This leads to a culture where decisions are oriented around risk, not service. The result is a culture built on ‘do’s and don’ts’ driving decisions rather than a culture that embraces creativity and thought leadership to guide decision-making.

I’ve seen this many times — it’s the companies where the people with the strongest voice are the people who follow the system, not those who lead. A fear of voicing an opinion, asking a question or taking leadership fuels an undercurrent of negativity and squelched creativity. And, in the end, it’s the gun slinger, those who aren’t afraid to question the system and challenge the status quo, who pay the ultimate price of this new approach. In the end … the system kills the gun slinger.

William F. Hutter is president and CEO of Sequent. For more information, visit Reach Hutter at (888) 456-3627 or [email protected]

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KBW posts fourth-quarter loss on sluggish bank M&A

NEW YORK — KBW Inc reported a fourth-quarter loss due to restructuring charges and a drought of merger and acquisition activity among its core customer base of small to mid-sized commercial banks.

The company posted a net loss of $16.3 million, or 55 cents a share, compared with a year-earlier net profit of $3 million.

Excluding severance and other one-time charges, KBW posted a loss of 28 cents a share. Analysts on average had expected a profit of 2 cents a share, according to Thomson Reuters I/B/E/S.

While restructuring charges for the elimination of about 20 percent of KBW’s workforce were expected, revenue and earnings were “well below” forecast, JMP Securities analyst David Trone wrote in a note to clients. He maintained his “buy” rating on KBW on prospects of banking consolidation down the road, but said the stock was likely to fall on Thursday because of the “big miss.”

Shares of KBW were down 7.1 percent at $16.03 in midmorning trading on the New York Stock Exchange. They had fallen 8.7 percent earlier.

On a conference call, recently appointed CEO Thomas Michaud declined to say when merger activity among bank clients might revive, but said potential buyers are getting more confident while sellers are under pressure to cut costs and expand revenue.

“There is a general belief within the industry that consolidation has to happen as a way of driving better returns in the banking industry,” he said.

Potential buyers, he said, are growing more confident that they can effectively value loan portfolios.