Airbus 380

It is not very often that we can attribute a project failure directly to a culture that management hastried to change but for political reasons finds it impossible to do so. The project failure at Airbus isone such example.

Airbus

When Airbus was founded in 1970 two major objectives prevailed. The first was to create aconsortium of existing companies whose facilities had been scattered at sixteen sites in fourEuropean countries including France, Germany, Britain, and Spain. The second was to transform these existing companies into a modern and integrated organizationcapable of competing more effectively with American companies that included such giants asBoeing, McDonnell Douglas and Lockheed. Today, the only two surviving commercial aircraftcompanies are Airbus and Boeing. Airbus now employs about 57,000 peopleWhile this strategy did bringing sixteen organizations together, these disparate business units hadtrouble functioning as an integrated organization from the very beginning. Even by 2001, it was stillseen as a loosely knit organization. A Financial Times article argued that the retention of productionand engineering assets by the separate partner companies made Airbus nothing more than a "salesand marketing company" (Kevin, Survey "Europe Reinvented: Airbus has come of age." FinancialTimes, February 2, 2001). An article in Aviation Week and Technology contended that while thecompanies collaborated on design they were unwilling to share financial data and sought tomaximize the prices for the goods they provided to other business units in the consortium (Sparaco,Pierre, "Climate Conducive for Airbus Consolidation", Aviation Week and Space Technology, March

19, 2001). Unfortunately, there was little evidence that the goals and objectives of the consortiumhad been met.

Airbus Prepares for the A380

In 2000 Airbus undertook its most ambitious project ever, the A380. It was to be an aircraftdesigned to usher in a new era of superjumbo jets, capable of carrying up to 853 passengers andcrew. Launch date was to be 2002.At this time the company also announced that it had taken additional steps to integrate theconsortium and announced a new administrative structure. This structure would physically locatetop managers from each of the sixteen sites in one location. It was a reorganization that would putan end to the conflict and cross-purposes that often occurred with the more independent, informal,and geographically dispersed organization. Yet, the change would prove to be inadequate.

Wiring Harness Fails to Install

Production problems began to surface in the spring of 2005. The French and German productionfacilities began blaming each other publicly when deliveries were postponed from the fall of 2005 tothe spring of 2006. Then, in the fall of 2006, the pre-assembled wiring harnesses produced in theHamburg plant failed to fit properly into the frame when the plane was in the assembly stage in theToulouse plant. Hamburg had designed the wiring harnesses using an older version of CATIA, software commonlyused in the aircraft industry. The assembly plant in Toulouse, however, used the most up-to-dateversion of the software. Unfortunately, there were issues of compatibility between both versions andone consequence was that design specs could not flow electronically between the two plants. As aresult, when it came time to install hundreds of miles of wiring cables into the fuselage of the aircraftin Toulouse, they failed to fit. Airbus was then left with no choice but to halt production, postponedeliveries of the aircraft for two years, and redesign the wiring system. The cost, expected toexceed $6 billion, would place the program over two years behind schedule. It was not until October15, 2007 that the first aircraft was delivered to Singapore Airlines.

Why Did the Project Fail?

An article in the Wall Street Journal suggested that the failure could not be attributed to a technicalproblem nor could it be attributed to project managers. They suggested that the problem was muchlarger and placed the blame at the very top. They concluded that because managers atheadquarters remained loyal to their former constituents, the company was plagued with a"convoluted management structure" that repeatedly slowed decision making (Gauthier-Villars, D.and Michaels, D., "EADS Considers a Simple Management Structure," WSJ, July 9, 2007, p.A3).Business Week also pointed the finger at top management. It suggested that the problem was notwith the software but with a "Surprisingly balkanized" organization (Matlack, Carol, Business WeekOnline, "Airbus: First Blame the Software," October 5, 2006). Others blamed an unresponsive management process, continual squabbling among its executives,and unresolved internal disputes ("Head to Head in the Clouds," The Economist, January 13, 2007,p.75.).But the problems at Airbus were not confined to the A380. EADS announced a six-month deliverydelay for the A400M, a military transport plane. This delay would cost EADS another $2 billion. Problems continued. In an additional setback, extensive design changes were announced for theA350, a mid size jet. These changes were announced after several major customers found thedesign of the aircraft failed to meet their needs and that unless the aircraft were redesigned, interestin the plane would fall.The delay of the A380 launched significant concern both within EADS, among stockholders, andwithin the international business community. On July 2, 2006, EADS chief Noel Forgeard andAirbus CEO Gustav Humbert announced their resignations. Then on October 9, 2006 ChristianStreiff, Humbert's successor, resigned because management at EADS would not give him thesupport and authority necessary to implement a reorganization plan for Airbus.It is always tempting to blame project failures on technical issues. Was it really the failure to updatethe CATIA software? Unfortunately, in this case , the blame belongs elsewhere. If indeed thesoftware was critical to the integration and design of the aircraft ...which it certainly was ... then whywas it not coordinated from the top. After all, this is what the consortium was expected to do best. Could it be that management, although they succeeded in moving executives to a central location inToulouse, failed to move the culture off dead center? So the blame, as is often the case, needs tofocus on management's contribution to the project failure.But how can this be fixed, so that the consortium becomes more successful in the future? Whathave we learned from this project failure that can be applied to Airbus and to other projectenvironments? The most important lesson is that organizational culture matters and without an effective cultureprojects and their project managers are condemned to produce mediocre results or fail altogether.

Lesson Learned: Organizational Culture is Critical to Success

Organizational culture is a system of shared beliefs, values and assumptions that defines a group ofindividuals working in an organization. But values, beliefs and assumptions are, by themselves,academic and rather vague. Gray and Larson ("Project Management," McGraw-Hill, 2008) attemptto be more concrete and identify 10 primary characteristics that contribute to a positiveorganizational culture, one that is more likely to produce successful projects. Some cultures, ofcourse, do better in each of the areas than others.

1. Member Identity- The degree to which employees identify with the organization as a wholerather than with their specific job or professional expertise.

2. Team Emphasis- The degree to which team activities are organized around groups rather thanindividuals.

3. Management Focus- The degree to which management decisions take into account the effect ofoutcomes on people within the organization.

4. Unit Integration- The degree to which units within the organization are encouraged to operate ina coordinated or interdependent manner.

5. Control - The degree to which rules, policies, and direct supervision are used to oversee andcontrol employee behavior.6. Risk Tolerance - The degree to which employees are encouraged to be aggressive , innovative,and risk seeking.

7. Reward Criteria - The degree to which rewards such as promotion and salary increases areallocated according to employee performance rather than seniority, favoritism, or othernonperformance factors.

8. Conflict Tolerance- The degree to which employees are encouraged to air conflicts andcriticisms openly.

9. Means Versus End Orientation- The degree to which management focuses on outcomes thanon techniques and processes used to achieve those results.

10. Open-Systems Focus- The degree to which the organization monitors and responds tochanges in the external environment.

Using these characteristics as reference points, we can reasonably conclude that Airbus sufferedfrom shortcomings in member identity, unit integration, and conflict tolerance. Consider memberidentity. Team members apparently did not identify with the organizational as a whole and wereunwilling to set aside partisan politics to focus on the task of designing and developing a world-classaircraft. Instead, their own self interests dominated.

Consider also integration between units. At Airbus it was conspicuously absent and the failure ofthe harness to fit into the aircraft frame confirms that these business units failed to operate in acoordinated manner. Finally consider conflict tolerance. It is reasonable to conclude that conflictwithin and among divisions was not encouraged even at headquarters in Toulouse. Instead,mangers went along so that they could get along. But in bureaucratic organizations public conflict isoften minimized. Indeed, in the short run it is much more comfortable for everyone to get along. It is the path of least resistance. Unfortunately project results are measured by results not process. Without an appropriately supportive project culture there is no silver bullet, no methodology, and nokit of tools that can consistently minimize the risk of project failure