Question

McDonnell Douglas Corporation Case: McDonnell Douglas is now part of the Boeing Company, but that does not diminish in any way the turnaround that took place at McDonnell Douglas between 1992 and 1997. Times were not good for the company in the early 1990s. With the military buildup a thing of the past, the huge military division watched as sales plummeted. The commercial aircraft division struggled to be competitive with Boeing and Airbus. Waste and inefficiency were rampant. McDonnell Douglas stock sat at $9 a share in 1992—the lowest in anyone’s memory. The company, once the nation’s largest defense contractor, and the world’s number two supplier of commercial aircraft, was in serious trouble. The senior management staff under the leadership of John McDonnell, then board chair, decided to try total quality management. They got off to a very rocky start but learned from their mistakes and by 1992 were making good progress. Starting that year, executives were measured on three items: cash flow, return on net assets, and TQM, with the latter being tied to improvement on a Baldrige self-assessment score. In 1992, the self-assessment score was 200 (on the 0–1,000 scale). Over the next three years, the score increased by 100 points per year. This took the company from being a so-so performer in the traditional ranks to being a high midlevel performer in the TQM realm. McDonnell Douglas found that as its Baldrige self-assessment score improved each year, its key business performance indicators tracked in parallel fashion. By 1995, its stock valuation reached $70 per share, profits were several times greater than in 1992, cash was up, and debt was down—all in a vastly smaller market. TQM literally turned around this giant company to the extent that the Boeing Company considered it imperative to merge in order to save Boeing. (The merger became final on August 1, 1997.)

Instructions Explain how the use of TQM could contribute to the improvement noted in McDonnell Douglas Corporation’s key business performance indicators.

400 MUST BE IN OWN WORDS

Thank You

Answer 1

TQM can contribute to the improvement noted in McDonnell Douglas Corporation’s key business performance indicators by allowing TQM organizations processes that continuously collect, analyze, and act on customer information. By incorporating TQM in Mr. Douglas organization it can integrate customer knowledge with other information and use the planning process to orchestrate action throughout the organization to manage day to day activities and achieve future goals. Plans are reviewed at periodic intervals and adjusted as necessary. The planning process is the glue that holds together all TQM activity. It will also help his organization organizations understand that customers will only be satisfied if they consistently receive products and services that meet their needs, are delivered when expected, and are priced for value. Another benefit would be to use the techniques of process management to develop cost-controlled processes that are stable and capable of meeting customer expectations. Also understand that exceptional performance today may be unacceptable performance in the future so they use the concepts of process improvement to achieve both breakthrough gains and incremental continuous improvement. Process improvement is even applied to the TQM system itself. Mr. Douglas organization will also understand that all work is performed through people. This begins with leadership. In TQM organizations, top management takes personal responsibility for implementing, nurturing, and refining all TQM activities. They make sure people are properly trained, capable, and actively participate in achieving organizational success. Management and employees work together to create an empowered environment where people are valued. In return it is allowing all of the TQM model's elements work together to achieve results. John McDonnell’s motive to making improvements in the company’s Baldrige self- assessment score was that it was a key business performance indicator and that would allow the profits to rise over the years to come.

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