At the end of last month, on the same day that Boeing touted plans to hire 10,000 people this year, senior leadership convened virtual meetings internally to break bad news to nonunion staff in human resources and finance.
Despite the growth elsewhere, those corporate positions will be slashed through substantial job cuts and layoffs.
“We expect about 2,000 reductions this year primarily in Finance and HR through a combination of attrition and layoffs,” Boeing confirmed Monday.
Boeing is outsourcing about a third of those jobs to Tata Consulting Services in Bengaluru, India.
The rest will disappear as Boeing reduces its finance and HR support services, according to Mike Friedman, a senior director of communications at Boeing.
“Over time, some of our corporate functions have grown quite large. And with that growth tends to come bureaucracy or disparate systems that are inefficient,” Friedman said. “So we’re streamlining.”
Even with the 2,000 white-collar job cuts, plus attrition as employees retire throughout the company, Friedman said the push to hire production workers and engineers will ensure that overall Boeing will “significantly grow” this year, particularly in the Puget Sound region.
Boeing declined to say how many Seattle-area positions will be impacted by the cuts.
With ramping up jet deliveries the top priority, he said Boeing Chief Financial Officer Brian West is “working to focus our resources and hiring in the factories, in manufacturing and engineering.”
About 1,500 jobs will be cut in finance, about a quarter of the roughly 5,800 total companywide, and up to 400 more in HR, about 15% of the total there.
Staff in those organizations, many of them longtime employees, are shellshocked by the news that their jobs may be gone later this year.
One senior finance leader, whose job is secure from layoff but who spoke on condition of anonymity out of concern he would be fired for speaking to the press without authorization, said he worries that, with all the layoffs at Big Tech companies, many of these white-collar workers may struggle to find new work.
“The realization is hitting a lot of people that they are not going to have jobs,” he said.
Separately, in a blow to white-collar staff in all roles across the company, Boeing has begun requiring managers preparing employee annual performance reviews for 2022 to classify 10% of their staff as failing to meet all expectations.
“This year, we’re adhering to those guidelines … pretty rigorously,” said Boeing’s Friedman.
A senior manager in Boeing’s IT organization, who also spoke on condition of anonymity to protect his job, said it’s the first time in two decades he’s seen what was previously a soft guideline strictly enforced.
He said nonunion white-collar staff downgraded by the forced ranking will get significantly lower annual bonuses this month and reduced raises.
“We all had to revise our honest scores and make several downgrades,” the IT manager said. “To me, it’s unethical and it’s really got a lot of managers concerned.”
The work at Boeing Finance is much more than just bookkeeping.
For example, the commercial airplanes division must conduct sophisticated financial planning before any production to provide cost estimates, allocate resources, calculate overhead rates and provide metrics to program managers.
And when airplane production is underway, finance staff must gather complex cost and revenue data to determine profitability and accurately close the accounting books every quarter.
Much of the accounting is arcane and some of it peculiar to Boeing, which in the past routinely used tricky financial engineering to make sure it met quarterly cash-flow projections.
Another challenge, the senior finance leader said, is that through numerous acquisitions across the world, Boeing has accumulated diverse accounting systems at separate units over time that “all have to be kludged together into the Boeing accounting system.”
The plan to cut 1,500 finance jobs follows a much smaller initial job cut in that organization announced last fall.
Boeing employees trained Tata Consulting Services employees on that initial set of outsourced work, which TCS is scheduled to take over in the coming week.
TCS, a subsidiary of the multinational conglomerate Tata Group, is a major IT and financial services consulting company with about 600,000 employees worldwide. Its market capitalization stands at $154 billion, compared to Boeing’s current capitalization of $123 billion.
Boeing now has about 3,500 direct employees in India and another 7,000 people in India employed at Boeing’s suppliers, including Tata Group.
The TCS nonengineering work for Boeing will be done at a new facility in Bengaluru, formerly known as Bangalore.
Friedman said Boeing will keep the strategic financial planning capability in-house and that Boeing will maintain “very strong controls” around the quarterly accounting.
In addition to outsourcing work, Boeing hopes to reduce work both by simplifying processes and by cutting out some tasks — such as preparing multiple financial data breakdowns for program managers.
Instead, it plans to set up computer systems that will allow program managers to create “self-service” data reports.
Friedman said no layoffs are planned this year in IT, an organization that shrank dramatically from 1,500 job cuts starting in 2013, then hundreds more in 2016 and once again in 2021 with 600 jobs outsourced to Dell.
In human resources, he said generalist HR staff will continue to work with local employees in the factories and engineering offices while TCS will be given only “process work.”
That seems to mean work such as preparing reports or employee benefit statements that doesn’t entail direct contact with individuals about their situations.
Another challenge for Boeing is that much of the HR and finance work in the defense division can only be done by U.S. personnel.
In the meeting last month when he disclosed the job cuts in finance, Boeing Chief Financial Officer West — the executive leading the downsizing charge in corporate functions — announced that the company will set up two “finance hubs” in St. Louis and in Mesa, Arizona.
Friedman said those U.S. hubs are “where we’ll centralize support to government business.”
Downgraded to the bottom
While performance reviews are an annual ritual for all Boeing employees, as at many companies, the decision to strictly enforce ranking categories is new.
Boeing managers learned only last month that they must assess the top 20% of their staff as having “exceeded expectations,” a middle 70% who “met expectations” and a bottom 10% who “met some expectations.”
Many managers had already completed their employee performance reviews by that time. Having not had to strictly follow the guideline before, they now faced the task of downgrading some workers to fill out the 10% requirement — regardless of performance.
A January email within Boeing’s IT organization reviewed by The Seattle Times shows one manager plaintively asking managers below him to nominate candidates previously assessed in the middle category who might be downgraded to the bottom one, stating that the directive came straight from the top of the IT unit: Boeing’s Chief Information Officer Susan Doniz.
“We all know it’s not right, but we have to do it,” said the senior IT manager. “I’ve had to flat-out lie to staff members who were rated low and were not deserving of it.”
He said employees he praised during the year for performing very well will be starkly demotivated to learn later this month they aren’t judged to have exceeded expectations because they are outside the top 20%.
The manager said that can only foster a “why bother?” attitude.
He added that the process also sets individuals against one another, creating a disincentive to collaborate. “So much for teamwork,” he said.
Forced ranking of employees was famously pioneered by Jack Welch, the take-no-prisoners CEO of General Electric, who influenced a generation of top executives at Boeing. Among them is Boeing CEO Dave Calhoun, who worked for Welch as head of GE Aviation.
At GE, in a system dubbed “rank and yank,” Welch fired the bottom 10% each year. Boeing insists that’s not its intention.
“At Boeing, a low performance rating indicates areas for improvement,” the company said. “We have not and do not plan to use this process to force reductions.”
However, for nonunion employees, performance reviews are a component of the calculation used to determine an individual’s annual bonus and raise.
So aside from what an employee will naturally take as a threat to job security while corporate layoffs are looming, a downgrade to the bottom 10% will deliver a certain financial hit to the employee.
Bonuses for 2022 will be paid this month or early next.
The first wave of layoff notices is to go out in April, with two more waves to follow at 60-day intervals.
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