McDonnell Douglas is now part of the Boeing Company, but that does not diminish in any way
Question:
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 suppliers of commercial aircraft, was in serious trouble.
The senior management staff under the leadership of John McDonnell, then board chair, decided to try lean management system. 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 quality performance, 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.
Discussion Questions:
- How value-added activities influenced the cash flow and return on net assets of McDonnell Douglas Corporation?
- Explain how the use of the lean approach could contribute to the improvement noted in McDonnell Douglas Corporation’s key business performance indicators.
Financial Accounting Tools for business decision making
ISBN: 978-0470534779
6th Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso