Alumni Interview Series: Jim McNerney, CEO, the Boeing Company

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Jim McNerney (HBS 1975), CEO of the Boeing Company, visited HBS on April 4 in conjunction with the RC Strategy case “Airbus vs. Boeing.” While on campus, he had lunch with students and spoke in Spangler Auditorium about the leadership lessons he has learned during his extensive career. Beginning in 1982, McNerney held a number of senior management positions at General Electric, including CEO of GE Aircraft Engines from 1997 to 2000. He then served as CEO of 3M from 2001 until July 2005 when he assumed his current post as CEO of Boeing.  He is Chairman of Boeing’s Board of Directors and also serves on the boards of Proctor & Gamble and IBM. He is currently Chair of the Business Roundtable and President Obama’s Export Council.

Harbus Editor-in-Chief Alex Kleiner sat down with McNerney during his campus visit to ask him about his time at HBS and what it takes to run the largest exporter in the United States.

AK: You have been the CEO of a number of diverse businesses and seem to embody the “general manager.” How has your HBS education factored into your success?

JM: “HBS taught me that ‘general management’ is a functional area in and of itself that represents strength independent of industry or function. At HBS, virtually every case approaches life like that. Whereas when you attend other business schools or you grow up in a company, you tend to value, and in some cases, overvalue, the functional aspects. The smartest graduates of Harvard Business School realize that they should spend time in functional areas to hone their skills, but they always keep sight of the larger, broader picture of integrating everything together. To be honest with you, the higher up I got, I saw more and more value in my HBS education.”

AK: When you entered HBS in 1973, did you know you wanted the career you have now had?

JM: “I knew very early on that business leadership was something that attracted me, and I figured out pretty quickly that the best place to come for that was here. I love managing people, and I knew that, but it’s not about power. The command and control model is largely dead. You have to know how to use a leadership position to engage people and pull out the best in everybody and then reform, refine, and move on. That process is exciting. I’m someone who likes being around people. I’m not a ‘power’ guy. It’s more ‘achievement.’ Attaining business achievement, through people, is what excites me. And that is what I have pursued throughout my career.”

AK: You are someone who has always worked for big companies, but today we are so focused on start-ups and entrepreneurship. What is the role of the start-up and the big company in our nation’s economy?

JM: “Recently we have gone through a bit of an anti-institutional era, and that’s big companies, big government, big anything. And simultaneously we have also seen a lot of success in Silicon Valley, Route 128 and other places. We think of the entrepreneur as Renaissance Man, and I think it’s cool, I think it’s great. But big companies get a lot done. We may soon be entering an era when global competitiveness will drive us back to understanding that a piece of our global competitiveness is our entrepreneurial capability—it’s a big piece—but another big piece is made up of large, at-scale companies—the GEs, Boeings and Exxons—that create a lot of wealth and a lot of jobs for people.”

AK: Is the traditional way of making a career—working your way up through a big company over many years— a thing of the past?

JM: “Things have changed a lot. The entrepreneurial model can feed the idea that immediate success is the measure of all success. Let me frame this from the perspective of how we hire people. We no longer think that we’re hiring people forever. We understand that we are not going to get fiercely loyal people who will never leave like we did in the 1950’s. That’s not the game anymore, so we need to up our game to keep people. Big companies understand that now and they continue to be amazing places to work and to make a career. So, my advice to people is to focus on your own capabilities, skills, and passions, rather than loyalty to a particular company or particular concept, such as working at a start-up. Ultimately, if you are your own person, you will find success.”

AK: Does it ever frustrate you that, unlike a nimble start-up, it takes time to implement things, particularly in a long cycle business like Boeing?

JM: “There are times it is frustrating because it takes so long to change things. On the other hand, when you get things right, it feels good for a while. And there are other parts of the business—the customer facing things—some of the customization we do, those things have a lot of velocity to them, and it’s a lot of fun. The sales we make to our customers, for example a $20 billion sale to a state-owned airline, is as complicated a deal as you can imagine and those never feel slow.”

AK: How do you manage a company the size of Boeing? Is it difficult not to have your hand in every decision?

JM: “It is difficult, but I focus mostly on the three areas where I can really make a difference. First, that’s the strategy of the company. Second is clarity of vision. In my job, being able to communicate clearly, making people feel aligned with where the company is going and why it’s going there, is a very hard thing to do. In big companies, what typically happens is that people in the middle go home happy, but the people at the top are very upset because they aren’t achieving their business objectives. This means the people at the top haven’t shown those in the middle how their efforts connect to success or failure. The third thing I am focused on is the culture of the company. Of course, I also spend a lot of time speaking with customers, but these are the principal areas where I can make a unique contribution.”

AK: How do you think about culture, particularly at such a large company?

JM: “You have to talk about culture. And you have to be willing to talk about the negatives. You can’t just send out memos on culture. The other piece is your own behavior. Do you walk the talk, or don’t you? If you want people to behave this way in the dark, are you behaving that way in the dark? So it’s leadership by example. Then the other thing that determines your culture is who you hire, fire, and promote. It has to connect. If people resist a culture, then they can’t be leading the company. So you have to be tough minded, because until things link—pay, promotion, hiring, firing—it’s just a discussion.”

AK: What is a key issue currently facing your industry that you will need to address?

JM: “Airline consolidation. And it won’t just be big U.S. carriers consolidating, but big U.S. carriers linking to big European and Middle Eastern carriers. Within 10 or 15 years, we’ll have big globally consolidated airlines. If that happens, that fundamentally shifts the power dynamic between the airlines and the technology providers. For example, they’ll want more customization. So what does that mean for companies like us? You either need to be the lowest cost producer, or you’ve got to be the most innovative producer. You cannot be in the middle when you have strong customers. You will win for one of two reasons. There isn’t a third. When you have lots of little customers, you can win for other reasons.”

AK: What is a mistake you made during your career and what did you learn from it?

JM: “Most of the regrets I have revolve around people decisions, either hanging on to the people that I liked too much that weren’t good enough, or sometimes I didn’t see capability when I should have seen capability. These are the types of things you stay up late at night thinking about. I can think of three or four people decisions on either side of that equation that I wish I made differently. Today, people judgments are 30% of my job. Unfortunately, it’s a skill that you can’t teach. The good news is you get better at it over time.”

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