Case 1-9
Case 1:
FAILURE BY DESIGN: BOEING AND THE 737 MAX
TEACHING NOTE
This case illustrates the following themes and concepts discussed in the chapters listed:
Theme/Concept Chapter
Conflict of Interest 5
Organizational Ethics 6
Business Government Relations; Government Regulation 7
Product Safety 14
Case Synopsis
On Monday, October 29, 2018, Lion Air Flight 610 crashed into the Java Sea in Indonesia
shortly after takeoff, killing all 189 people on board. The aircraft was a nearly new Boeing 737
MAX, delivered to Lion Air, a low-cost regional carrier and one of Boeing’s major customers,
just four months earlier. The MAX was Boeing’s newest aircraft and the centerpiece of the
company’s strategy for the short to mid-range commercial market. CEO Dennis Muilenburg
faced an urgent an urgent task: to determine what had gone wrong and why with Boeing’s
newest and so-far successful new model. The case presents the history of Boeing and its external
competitive environment; the evolution of its strategy, governance, and ethics practices; and its
relationship with U.S. regulators during the design and certification of the 737 MAX. What
organizational and environmental factors had contributed to Boeing’s development of an
apparently unsafe aircraft? What could Boeing, government regulators, and its airline customers
1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,and other stakeholders do to prevent unsafe aircraft from being manufactured and sold in the
future?
TEACHING TIP: WHERE TO USE THE CASE IN THE COURSE
This case is integrative, in that it draws on many themes in the text. Instructors may use it at the
end of the course as a final, integrative assignment, or with the study of Chapters 5 and 6 (Ethical
Reasoning and Organizational Ethics) or Chapter 7 (Business Government Relations).
TEACHING TIP: VIDEO
Instructors may wish to introduce the class discussion with a short video of the Lion Air flight.
The first 4 minutes of this 9-minute segment depicts the fatal flight of Lion Air 610, in which a
journalist rides in a simulator with an experienced 737 pilot who recreates the flight from the
perspective of the cockpit. (The remainder of the clip depicts the Ethiopian Airlines crash and is
not relevant to the case.) Viewers may find the video clip disturbing, even terrifying.
www.youtube.com/watch?v=OxPsxmU_ocI
TEACHING TIP: STARTING A CASE DISCUSSION
One was to start a class discussion of this case is to ask students to huddle in groups of 2 to 4.
Give them 5 minutes to write one or two sentences beginning with: ―One reason that Boeing
produced an unsafe aircraft was…‖ They should then have a representative write their
sentence(s) on the board or share on a common electronic platform. The instructor may then
categorize the answers and use them as a jumping off point for taking up various issues raised by
the discussion questions.
Sample answers: One reason that Boeing produced an unsafe aircraft was…
The culture of Boeing had shifted from a focus on engineering excellence to a focus on
shareholder returns. The company’s capabilities for aircraft design had deteriorated.
The FAA delegated most of the work of certifying the 737 MAX to Boeing itself, so the
regulators were unable to exercise effective oversight.
Boeing was under tremendous pressure because of competition from Airbus, so they decided to
update the 737 rather than design an all-new plane. This created an unsolvable engineering
problem, because the bigger more fuel-efficient engines they wanted to use did not fit under the
wings of 737.
2
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,Boeing’s top executives and directors emphasized shareholder returns over engineering
excellence. Cost and efficiency were more important to them than the quality of the aircraft.
Boeing had spent so much money on stock buybacks and shareholder dividends that they did not
have enough left over to invest properly in R&D and aircraft engineering.
Boeing had a code of ethics but did not seem to enforce it. It ignored worrisome survey results
and did not listen to series warnings from senior managers.
Manufacturing of the MAX was rushed, possibly leading to defects in aircraft delivered to
customers.
The FAA basically allowed Boeing to certify the safety of its own plane.
Boeing’s strategy was to acquire other manufacturers (e.g., McDonnell Douglas) and keep
updating their old models, rather than to design new aircraft. Over the years, they lost much of
their engineering know-how.
Instructor Tip: ―C‖ students may answer this question by describing characteristics of the unsafe
plane or its design flaws. For example, ―One reason Boeing produced an unsafe aircraft was
relying on just one sensor.‖ ―A‖ students will understand the distinction between the problem
itself (an unsafe design) and the cause of the problem (e.g., organizational culture, regulatory
failures, external competition). The instructor may need to point out that the question asks for
the reason Boeing produced an unsafe plane, not the reason the plane was unsafe. (Question 1,
below, addresses the reason(s) the plane was unsafe.)
Discussion Questions and Answers
1. What were the immediate technical causes of the crash of Lion Air Flight 610?
Based on information in the case, students will conclude: A faulty angle of attack sensor fed
erroneous data into the plane’s computers, triggering the maneuvering characteristics
augmentation system, or MCAS. The plane’s computer relied on only one sensor at a time (a
single point of failure), and the aircraft did not have an active cockpit alert for disagreement
between the two sensors. Once MCAS was activated, it repeatedly forced the nose of the plane
down, destabilizing the aircraft. The Lion Air pilots had not been trained on a simulator, were
unaware of MCAS and its capabilities, and their flight manual did not include relevant
information. Eventually, the pilots lost control of the aircraft and it crashed nose down into the
sea, killing all on board.
2. Describe the culture of the Boeing organization. How did the company’s culture affect
the development and production of the 737 MAX?
3
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, The textbook defines corporate culture as ―a blend of ideas, customs, traditional practices,
company rules, and shared meanings that help define normal behavior for everyone who works
at a company‖ (Chapter 6). The textbook points out that weak ethical cultures can foster
unethical behavior. To help students unpack this question, the instructor may wish to elaborate
by pointing out that corporate or organizational culture is often understood as having three
layers: basic assumptions, values and norms, and artifacts (Schein, 2004; Chatman, 2014).
Basic assumptions are deeply held values about the organization’s purpose and reason for
existence. Norms are unwritten expectations for appropriate behavior that reflect these values.
Artifacts are visible organizational practices that communicate values, such as rituals, stories,
and language.
One way to organize this discussion is to prompt students to fill in a board grid, showing how
these three layers of Boeing’s culture changed following the company’s acquisition of
McDonnell Douglas (1997).
Boeing’s Organizational Culture Before and After the Acquisition of McDonnell Douglas
Level Past Present
Basic Assumptions Boeing is a trendsetter in aircraft Boeing is an aircraft
technology. The purpose of the manufacturer. The company’s
company is to design better planes that purpose is to create the best value
fly higher, faster, farther. for its customers and the highest
possible returns for its investors.
Shareholder value is prioritized.
Values and Norms Core values are quality, innovation, Core values are efficiency,
and safety. Engineering excellence is profitability, and low cost.
valued. Investment in research and Shareholder value is prioritized.
development is prioritized.
Artifacts Stories about William Boeing’s Common slogans were ―We’re in
attention to quality, innovation, and business‖ and ―We’re managing
safety were part of the company for value.‖
folklore. The company was described
as an ―association of engineers.‖
Summary: Over time, Boeing culture had shifted from a focus on quality, innovation, and
safety to a focus on efficiency, profitability, and shareholder value. This affected the
development of the 737 MAX, as it led to decisions to re-tool an old model (the 737) rather
develop than a new, clean-sheet model, to keep costs down and speed up delivery to key
customers. (The decisions made by Boeing during the development of the MAX are further
explored in the response to Question 4, below.)
3. Describe the ethics policies and practices of Boeing. What ethical safeguards were in
place to promote safety? Evaluate the effectiveness of these safeguards during the
development and production of the 737 MAX.
4
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Case 1:
FAILURE BY DESIGN: BOEING AND THE 737 MAX
TEACHING NOTE
This case illustrates the following themes and concepts discussed in the chapters listed:
Theme/Concept Chapter
Conflict of Interest 5
Organizational Ethics 6
Business Government Relations; Government Regulation 7
Product Safety 14
Case Synopsis
On Monday, October 29, 2018, Lion Air Flight 610 crashed into the Java Sea in Indonesia
shortly after takeoff, killing all 189 people on board. The aircraft was a nearly new Boeing 737
MAX, delivered to Lion Air, a low-cost regional carrier and one of Boeing’s major customers,
just four months earlier. The MAX was Boeing’s newest aircraft and the centerpiece of the
company’s strategy for the short to mid-range commercial market. CEO Dennis Muilenburg
faced an urgent an urgent task: to determine what had gone wrong and why with Boeing’s
newest and so-far successful new model. The case presents the history of Boeing and its external
competitive environment; the evolution of its strategy, governance, and ethics practices; and its
relationship with U.S. regulators during the design and certification of the 737 MAX. What
organizational and environmental factors had contributed to Boeing’s development of an
apparently unsafe aircraft? What could Boeing, government regulators, and its airline customers
1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,and other stakeholders do to prevent unsafe aircraft from being manufactured and sold in the
future?
TEACHING TIP: WHERE TO USE THE CASE IN THE COURSE
This case is integrative, in that it draws on many themes in the text. Instructors may use it at the
end of the course as a final, integrative assignment, or with the study of Chapters 5 and 6 (Ethical
Reasoning and Organizational Ethics) or Chapter 7 (Business Government Relations).
TEACHING TIP: VIDEO
Instructors may wish to introduce the class discussion with a short video of the Lion Air flight.
The first 4 minutes of this 9-minute segment depicts the fatal flight of Lion Air 610, in which a
journalist rides in a simulator with an experienced 737 pilot who recreates the flight from the
perspective of the cockpit. (The remainder of the clip depicts the Ethiopian Airlines crash and is
not relevant to the case.) Viewers may find the video clip disturbing, even terrifying.
www.youtube.com/watch?v=OxPsxmU_ocI
TEACHING TIP: STARTING A CASE DISCUSSION
One was to start a class discussion of this case is to ask students to huddle in groups of 2 to 4.
Give them 5 minutes to write one or two sentences beginning with: ―One reason that Boeing
produced an unsafe aircraft was…‖ They should then have a representative write their
sentence(s) on the board or share on a common electronic platform. The instructor may then
categorize the answers and use them as a jumping off point for taking up various issues raised by
the discussion questions.
Sample answers: One reason that Boeing produced an unsafe aircraft was…
The culture of Boeing had shifted from a focus on engineering excellence to a focus on
shareholder returns. The company’s capabilities for aircraft design had deteriorated.
The FAA delegated most of the work of certifying the 737 MAX to Boeing itself, so the
regulators were unable to exercise effective oversight.
Boeing was under tremendous pressure because of competition from Airbus, so they decided to
update the 737 rather than design an all-new plane. This created an unsolvable engineering
problem, because the bigger more fuel-efficient engines they wanted to use did not fit under the
wings of 737.
2
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,Boeing’s top executives and directors emphasized shareholder returns over engineering
excellence. Cost and efficiency were more important to them than the quality of the aircraft.
Boeing had spent so much money on stock buybacks and shareholder dividends that they did not
have enough left over to invest properly in R&D and aircraft engineering.
Boeing had a code of ethics but did not seem to enforce it. It ignored worrisome survey results
and did not listen to series warnings from senior managers.
Manufacturing of the MAX was rushed, possibly leading to defects in aircraft delivered to
customers.
The FAA basically allowed Boeing to certify the safety of its own plane.
Boeing’s strategy was to acquire other manufacturers (e.g., McDonnell Douglas) and keep
updating their old models, rather than to design new aircraft. Over the years, they lost much of
their engineering know-how.
Instructor Tip: ―C‖ students may answer this question by describing characteristics of the unsafe
plane or its design flaws. For example, ―One reason Boeing produced an unsafe aircraft was
relying on just one sensor.‖ ―A‖ students will understand the distinction between the problem
itself (an unsafe design) and the cause of the problem (e.g., organizational culture, regulatory
failures, external competition). The instructor may need to point out that the question asks for
the reason Boeing produced an unsafe plane, not the reason the plane was unsafe. (Question 1,
below, addresses the reason(s) the plane was unsafe.)
Discussion Questions and Answers
1. What were the immediate technical causes of the crash of Lion Air Flight 610?
Based on information in the case, students will conclude: A faulty angle of attack sensor fed
erroneous data into the plane’s computers, triggering the maneuvering characteristics
augmentation system, or MCAS. The plane’s computer relied on only one sensor at a time (a
single point of failure), and the aircraft did not have an active cockpit alert for disagreement
between the two sensors. Once MCAS was activated, it repeatedly forced the nose of the plane
down, destabilizing the aircraft. The Lion Air pilots had not been trained on a simulator, were
unaware of MCAS and its capabilities, and their flight manual did not include relevant
information. Eventually, the pilots lost control of the aircraft and it crashed nose down into the
sea, killing all on board.
2. Describe the culture of the Boeing organization. How did the company’s culture affect
the development and production of the 737 MAX?
3
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, The textbook defines corporate culture as ―a blend of ideas, customs, traditional practices,
company rules, and shared meanings that help define normal behavior for everyone who works
at a company‖ (Chapter 6). The textbook points out that weak ethical cultures can foster
unethical behavior. To help students unpack this question, the instructor may wish to elaborate
by pointing out that corporate or organizational culture is often understood as having three
layers: basic assumptions, values and norms, and artifacts (Schein, 2004; Chatman, 2014).
Basic assumptions are deeply held values about the organization’s purpose and reason for
existence. Norms are unwritten expectations for appropriate behavior that reflect these values.
Artifacts are visible organizational practices that communicate values, such as rituals, stories,
and language.
One way to organize this discussion is to prompt students to fill in a board grid, showing how
these three layers of Boeing’s culture changed following the company’s acquisition of
McDonnell Douglas (1997).
Boeing’s Organizational Culture Before and After the Acquisition of McDonnell Douglas
Level Past Present
Basic Assumptions Boeing is a trendsetter in aircraft Boeing is an aircraft
technology. The purpose of the manufacturer. The company’s
company is to design better planes that purpose is to create the best value
fly higher, faster, farther. for its customers and the highest
possible returns for its investors.
Shareholder value is prioritized.
Values and Norms Core values are quality, innovation, Core values are efficiency,
and safety. Engineering excellence is profitability, and low cost.
valued. Investment in research and Shareholder value is prioritized.
development is prioritized.
Artifacts Stories about William Boeing’s Common slogans were ―We’re in
attention to quality, innovation, and business‖ and ―We’re managing
safety were part of the company for value.‖
folklore. The company was described
as an ―association of engineers.‖
Summary: Over time, Boeing culture had shifted from a focus on quality, innovation, and
safety to a focus on efficiency, profitability, and shareholder value. This affected the
development of the 737 MAX, as it led to decisions to re-tool an old model (the 737) rather
develop than a new, clean-sheet model, to keep costs down and speed up delivery to key
customers. (The decisions made by Boeing during the development of the MAX are further
explored in the response to Question 4, below.)
3. Describe the ethics policies and practices of Boeing. What ethical safeguards were in
place to promote safety? Evaluate the effectiveness of these safeguards during the
development and production of the 737 MAX.
4
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
