Airbus 380


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

Airbus

When Airbus was founded in 1970 two major objectives prevailed. The first was to create a consortium of existing companies whose facilities had been scattered at sixteen sites in four European countries including France, Germany, Britain, and Spain.

The second was to transform these existing companies into a modern and integrated organization capable of competing more effectively with American companies that included such giants as Boeing, McDonnell Douglas and Lockheed. Today, the only two surviving commercial aircraft companies are Airbus and Boeing. Airbus now employs about 57,000 people

While this strategy did bringing sixteen organizations together, these disparate business units had trouble functioning as an integrated organization from the very beginning.  Even by 2001, it was still seen as a loosely knit organization.  A Financial Times article argued that the retention of production and engineering assets by the separate partner companies made Airbus nothing more than a “sales and marketing company”  (Kevin, Survey  “Europe Reinvented: Airbus has come of age.” Financial Times, February 2, 2001).  An article in Aviation Week and Technology contended that while the companies collaborated on design they were unwilling to share financial data and sought to maximize 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 consortium had been met.

Airbus Prepares for the A380

In 2000 Airbus undertook its most ambitious project ever, the A380.  It was to be an aircraft designed to usher in a new era of superjumbo jets, capable of carrying up to 853 passengers and crew.  Launch date was to be 2002.

At this time the company also announced that it had taken additional steps to integrate the consortium and announced a new administrative structure.  This structure would physically locate top managers from each of the sixteen sites in one location.  It was a reorganization that would put an 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 production facilities began blaming each other publicly when deliveries were postponed from the fall of 2005 to the spring of 2006.  Then, in the fall of 2006, the pre-assembled wiring harnesses produced in the Hamburg plant failed to fit properly into the frame when the plane was in the assembly stage in the Toulouse plant.  

Hamburg had designed the wiring harnesses using an older version of CATIA, software commonly used in the aircraft industry. The assembly plant in Toulouse, however, used the most up-to-date version of the software.  Unfortunately, there were issues of compatibility between both versions and one consequence was that design specs could not flow electronically between the two plants.  As a result, when it came time to install hundreds of miles of wiring cables into the fuselage of the aircraft in Toulouse, they failed to fit.  Airbus was then left with no choice but to halt production, postpone deliveries of the aircraft for two years, and redesign the wiring system.  The cost, expected to exceed $6 billion, would place the program over two years behind schedule.  It was not until October 15, 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 technical problem nor could it be attributed to project managers. They suggested that the problem was much larger and placed the blame at the very top. They concluded that because managers at headquarters 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 not with the software but with a “Surprisingly balkanized” organization (Matlack, Carol, Business Week Online, “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 delivery delay 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 the A350, a mid size jet. These changes were announced after several major customers found the design of the aircraft failed to meet their needs and that unless the aircraft were redesigned, interest in the plane would fall.

The delay of the A380 launched significant concern both within EADS, among stockholders, and within the international business community.  On July 2, 2006, EADS chief Noel Forgeard and Airbus CEO Gustav Humbert announced their resignations.  Then on October 9, 2006 Christian Streiff, Humbert’s successor, resigned because management at EADS would not give him the support 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 update the CATIA software?  Unfortunately, in this case , the blame belongs elsewhere.  If indeed the software was critical to the integration and design of the aircraft …which it certainly was … then why was 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 in Toulouse, failed to move the culture off dead center?  So the blame, as is often the case, needs to focus on management’s contribution to the project failure.

But how can this be fixed, so that the consortium becomes more successful in the future? What have we learned from this project failure that can be applied to Airbus and to other project environments?
 
The most important lesson is that organizational culture matters and without an effective culture projects 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 of individuals working in an organization.  But values, beliefs and assumptions are, by themselves, academic and rather vague.  Gray and Larson (“Project Management,” McGraw-Hill, 2008) attempt to be more concrete and identify 10 primary characteristics that contribute to  a positive organizational culture, one that is more likely to produce successful projects.  Some cultures, of course, do better in each of the areas than others.
 
1.    Member Identity- The degree to which employees identify with the organization as a whole rather than with their specific job or professional expertise.
2.    Team Emphasis- The degree to which team activities are organized around groups rather than individuals.
3.    Management Focus- The degree to which management decisions take into account the effect of outcomes on people within the organization.
4.    Unit Integration- The degree to which units within the organization are encouraged to operate in a coordinated or interdependent manner.
5.    Control – The degree to which rules, policies, and direct supervision are used to oversee and control 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 are allocated according to employee performance rather than seniority, favoritism, or other nonperformance factors.
8.    Conflict Tolerance- The degree to which employees are encouraged to air conflicts and criticisms openly.
9.    Means Versus End Orientation- The degree to which management focuses on outcomes than on techniques and processes used to achieve those results.
10.    Open-Systems Focus- The degree to which the organization monitors and responds to changes in the external environment.

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

Consider also integration between units.  At Airbus it was conspicuously absent and the failure of the harness to fit into the aircraft frame confirms that these business units failed to operate in a coordinated manner.  Finally consider conflict tolerance.  It is reasonable to conclude that conflict within 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 is often 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 no kit of tools that can consistently minimize the risk of project failure.