1. 1 A JOURNEY TO EXCELLENCE IN TWO ORGANIZATIONS David Spong

2. 2 WHY AM I HERE? MAYBE OUR APPROACH WORKS?

3. 3 1991 – 2000 Boeing Airlift & Tanker Programs 1998 Baldrige Winner 2000 to 2004 Boeing Aerospace Support 2003 Baldrige Winner OUR QUALITY JOURNEY

4. 4 STARTING POINTS Airlift & Tanker Programs 1998 Recipient Organizational Type Organizational Complexity Starting Point Crisis Documented Processes Framework Initiatives Locations Reason for Baldrige Approach to Baldrige Aerospace Support 2003 Recipient Overall business model Dispersed – 130+ locations Improvement Service Complex: Bus./Sites/Functions Some Yes Some Stable Not recognized Integrating existing approaches Primarily one Turnaround Manufacturing Primarily one program No None Many Chaos Yes

5. 5 THE BOEING COMPANY Office of the Chairman Chairman Phil Condit President Harry Stonecipher Airlift & Tanker Programs Commercial Airplane People Phantom Works Military Aircraft & Missiles Space and Communications

6. 6 AIRLIFT AND TANKER PROGRAMS LOCATIONS Manufacturing Organization Headquartered in Long Beach, CA 8,106 Employees in 7 States Manufacturing Organization Headquartered in Long Beach, CA 8,106 Employees in 7 States

7. 7 40 and No More … Unless We Perform 1992 Lack of Confidence Quality Problems Late Deliveries Adversarial Relationships Cost Overruns FROM CRISIS TO SUCCESS

8. 8 40 and No More … Unless We Perform 1992 Lack of Confidence Quality Problems Late Deliveries Adversarial Relationships Cost Overruns National Quality Award Winners 1998 FROM CRISIS TO SUCCESS

9. 9 “THE LAW OF CHANGE” If you want a different outcome, you must change either the process, the product, or both. The Corollary If you always do what you have always done you will get what you have always gotten! The Law

10. 10 Planned Journey (’93)(Summer ’95) 1000 Unaligned Projects (’91) Strategic Direction Work Group Individual Tactical Direction Malcolm Baldrige Principles ALIGNING THE FOCUS

11. 11 Airlift & Tanker Airlift & Tanker On-Site Customer Oversight On-Site Customer Oversight External Customer One Team Committed to Program Excellence REINVENTED RELATIONSHIPS WITH CUSTOMERS

12. 12 UNDERSTANDING CUSTOMER SATISFACTION High quality, on time, at cost Meet customer expectations Timely and competent support Anticipate demands Sensitive to customer’s point of view Understand customer expectations Responsive to customer requests Keep our commitments CUSTOMER SATISFACTION Product and service excellence Product and service excellence Relationship excellence Relationship excellence Delivering what the customer wants—flawlessly

13. 13 QualityTimeliness EfficiencyCycle Time AN APPROACH TO... Cover everything we do Manage and improve through a single, disciplined approach Empower Owners 1.0 Enterprise Management 8.0 Support and Services 4.03.02.07.06.05.0 Program Core Process Family Process Based Management Closed Loop 3214567 PROCESS MANAGEMENT

14. 14 90 60 30 0 -90 -120 -150 -180 -30 -60 Days 120 Aircraft P30P5P10P15P20P25P35 199319941992199519961997 P40 1998 P45 “Hold the Aircraft” P50P55 150 180 P60 2000 1999 CULTURAL CHANGE

15. 15 90 80 70 60 50 40 30 20 10 0 Quality vs. costQuality vs. scheduleSchedule vs. cost Percent of employees selecting one priority over another 100 1998 - 88% 1999 - 95% 2000 - 90% 2001 - 93% Percentage of Respondents 73 70 72 27 30 28 33 35 36 68 67 65 68 32 33 35 32 67 65 64 EMPLOYEES BELIEVE IN QUALITY

16. 16 AIRLIFT &TANKER IMPROVEMENTS 200 300 400 450 500 550 600 0 100 200 300 400 500 600 700 1992199319941995199619971998 Baldrige Mid-Range Score TQMS-IE Cal Qual MB 400 Points!

17. 17 How Good You Think You Are How Good Others Think You Are 1 2 3 “Projects are most successful when top management takes ownership” – Deming LEADERSHIP REQUIRED

18. 18 THE JOURNEY TO A ZEOLOT 1991…1996… John McDonnell CEO Harry Stonecipher CEO Launched TQMS-IE “Go For It” MBNQA Baldrige Internal Assessment (TQMS-IE) … Tied to Exec Compensation … At each Business Unit

19. 19 1991…1996… John McDonnell CEO Harry Stonecipher CEO And Beyond 1998… Award Ceremony THE JOURNEY TO A ZEOLOT Launched TQMS-IE “Go For It” MBNQA Baldrige Internal Assessment (TQMS-IE) … Tied to Exec Compensation … At each Business Unit

20. 20 Launched TQMS-IE “Go For It” MBNQA Baldrige Internal Assessment (TQMS-IE) … Tied to Exec Compensation … At each Business Unit 1991… John McDonnell CEO 1996… Harry Stonecipher CEO 1998… Award Ceremony ?... 2004... And Beyond…………… THE JOURNEY TO A ZEOLOT

21. 21 1991 – 2000 Boeing Airlift & Tanker Programs 1998 Baldrige Winner OUR QUALITY JOURNEY 2000 to 2004 Boeing Aerospace Support 2003 Baldrige Winner

22. 22 Commercial Airplanes Boeing Capital Connexion By Boeing Air Traffic Management Phantom Works Shared Systems Group Integrated Defense Systems ORGANIZATIONAL ALIGNMENT Aerospace Support Army SystemsNaval Systems Air Force Systems Integrated Defense Adv Systems Homeland Security and Services Strategic Architecture NASA Systems Missile Defense Systems Space and Intelligence Systems Integrated Defense Systems Aerospace Support The Boeing Company

23. 23 STARTING POINTS Airlift & Tanker Programs 1998 Recipient Organizational Type Organizational Complexity Starting Point Crisis Documented Processes Framework Initiatives Locations Reason for Baldrige Approach to Baldrige Aerospace Support 2003 Recipient Overall business model Dispersed – 130+ locations Improvement Service Complex: Bus./Sites/Functions Some Yes Some Stable Not recognized Integrating existing approaches Primarily one Turnaround Manufacturing Primarily one program No None Many Chaos Yes

24. 24 AEROSPACE SUPPORT PRESENCE Malaysia Japan The Netherlands United Kingdom Germany Saudi Arabia Kuwait 12,303 Employees in 131 Locations

25. 25 DUAL BUSINESS IMPERITIVE Running the Business Growing the Business Aerospace Support is a fairly new organization with a focus on both running and growing the business

26. 26 Established a culture of excellence and continuous improvement 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 INITIAL FOCUS  Customer Satisfaction  Enterprise Planning Process

27. 27 OUR LEADERSHIP SYSTEM Vision & Values Set and Communicate Direction Perform to Plan Reward & Recognize Organizational & Employee Learning Organize, Plan, and Align Be Role Models Be Role Models Empower Teams Empower Teams Continuously Improve Continuously Improve Motivate Employees Motivate Employees Analyze & Compare Analyze & Compare Corporate Citizen Innovation Teamwork Agility Sharing & Supportive Learning Diversity Quality Customer Satisfaction Integrity Stakeholder Requirements & Expectations Customer Work force Suppliers Community Shareholders Safety

28. 28 OUR MISSION, VISION, AND VALUES Mission Provide world-class sustainment solutions to our aerospace customers Vision People working together as the world’s number one provider of innovative sustainment solutions 10 Year Objective We will be a recognized world-class, global business, providing sustainment solutions aligned with our customers’ evolving needs Values Leadership Integrity Quality Customer satisfaction People working together A diverse & involved team Good corporate citizenship Enhancing shareholder value

29. 29 We insist on integrity, first and foremost We tell it like it is We communicate openly and candidly in all our dealings We respect, honor, and trust one another We work toward consensus Disagreement is healthy and encouraged, but once a decision is made, we proactively support it We have one conversation at a time Our silence is consent We focus on issues and ideas rather than titles or personalities We actively listen and question to understand We do not attack the messenger We identify clear objectives and expectations for our meetings We start on time, observe time limits, and end on time We praise in public, we coach in private We have a bias for velocity OPERATING PRINCIPLES Have Fun... Enjoy the journey and each other

30. EMPLOYEE INVOLVEMENT (EI)  Is it a Culture?  Is it a Belief?  Is it a Way of Life? "It is not a new program, project or process. EI is a cultural change in the way we treat each other and work together. It is a journey in which people apply their skills to improve individual, team and organizational performance continuously. This leads to employee satisfaction and improved business results.“ Raj Kanungo  Is it Teams?  Is it Belonging?  Is it a Process?

31. 31 Employee Involvement Vision & Values Operating Principles Diversity “Open Door” Empowerment Recognition Ethics Motivated Employees “Smells Good” Business Results “Taste Great” EMPLOYEE INVOLVEMENT LEADS TO MOTIVATED EMPLOYEES

32. 32 EMPLOYEES ARE MORE MOTIVATED 50% 50 54 58 62 66 19992000 2002 2003 2001 EI ESI Started Baldrige

33. 33 BALDRIGE AS OUR BUSINESS MODEL Strategic Planning Strategic Planning Customer and Market Focus Customer and Market Focus Process M anagement Process M anagement HR Focus HR Focus Leadership Data and Information Management Data and Information Management Business Results Business Results Business Results

34. 34 Baldrige Award! Assigned People To Lead Approaches Tasked Sites To Submit State Award Applications Prepared AS-wide Assessment Document National Baldrige Application Site Visit Internal Assessment & Feedback Macro-level Internal Assessment Created a Business Excellence Organization APPROACH Assigned Executive Champions Deployed Needed Approaches 2002 2003 2001 2000 Received Awards in : Kansas Missouri Arizona Australia California Florida Oklahoma 1 3 2 7 8 6 5 4 12 11 Internal Assessment & Feedback 10 13 9 Improvement Initiatives

35. 35 AEROSPACE SUPPORT IMPROVEMENTS 0 100 200 300 400 500 600 700 200120032002 AS Baldrige-based Assessment Score State/Local/Baldrige -based Score by Major Site Award Recipient Baldrige Mid-Range Score Philadelphia Oklahoma City St L Wichita BAL Mesa BASC So Cal Ft Walton Beach Aerospace Support Baldrige Win 400 Points! Oklahoma City

36. 36 AS EARNINGS PERFORMANCE 2000200120022003 PLANACTUALS Started Baldrige

37. 37 AS REVENUE PERFORMANCE 2000200120022003 PLANACTUALSAVG GROWTH Started Baldrige

38. 38 WHAT DOES BALDRIGE DO FOR YOU?  Ensures continuous improvement Across the Board  “Forces” a collaborative enterprise  Common language  Integration between Businesses, Sites & Functions  Knowledge Sharing  Common processes, where appropriate  Motivates employees  Enables “breakthrough” improvements  Improves business results

39. 39 Leadership Commitment in All Things 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 LEADERSHIP COMMITMENT AND LESSONS LEARNED

40. 40 OUR JOURNEY CONTINUES It starts with leadership Great people keep it going!