Organizational change Diagnosis: Cessna Aircraft Company

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Cessna Aircraft Company offers multiple lines of aircraft to meet a wide variety of needs. In particular, the Citation family of aircraft provides paramount cabin luxury, simplicity of flight, and outstanding performance. Today's evolving line of Citations is the world's most proven, popular, and trusted fleet of business jet. It is therefore no coincidence that three of the top selling business jets of all time are Citations. With a worldwide fleet of over five thousand, Citation jets have outsold the combined total of their competition. From the entry level business jet, the Citation Mustang, to the Citation X, there is a Citation perfectly suited to meet all of the customer's needs.

Cessna has recently experienced declining sales, which will likely lead to cultural and organizational issues which must be addressed before Cessna Aircraft Company can be truly a great company, some of which are seen in the diagnostic chart.

Strategy

Structure and Design

Patterns of Behavior

Higher quality, price point, and profit margin than competitors.

1. Research drives product capabilities.

2. Profit and customer relationships are built in production and completion.

3. Service is used to build relationships and attract new customers.

Quality is the primary focus however it sometimes clashes with schedule pressure and data re-use.

Purpose

Create the best in class private aircraft.

Aligned - Quality high-performance aircraft demand a price premium.

Very Well Aligned - All business units are focused on aircraft quality.

Very Misaligned - The production culture can be lean to a fault.

Business Model

Build long term customer relationships to maximize long term profit.

Aligned - Higher price may drive away some customers. Others are less concerned about the price than about the product capabilities.

Very Well Aligned - Focused on attracting and keeping valued customers.

Aligned - Rewarding employees is important in helping to motivate them to maintain customer relationships.

Industry Analysis

1. Ahead of the competition in performance leads to larger sales.

2. Dynamic environment with frequent aircraft updates.

3. Production relies on partnerships for manufacturing.

Aligned - Higher price drives business to competitors. Production rates are dependent on vendors.

Well Aligned - Service is unique to Cessna's business model and helps attract new customers.

Aligned - Quality is better than competition, but competitors are close behind on some new airframe designs.

Cessna Aircraft Company designs, manufactures, and services the best quality private aircraft available. Aircraft in the Cessna fleet are the safest, fastest, and longest range aircraft within each respective market segment. Aircraft quality is second to none and backed by extensive warranty support.

Competition in the business aviation industry includes Bombardier, Dassault Falcon, and several other aircraft manufacturers. New types of very light jets, new large cabin aircraft, and quiet supersonics are slowly reshaping the industry. New materials are dropping weight from aircraft and advanced manufacturing technology is improving quality. Other aircraft manufacturers compete with the mid-sized aircraft and Bombardier and Dassault compete directly with the entire Cessna fleet, but generally the competitor's offerings are lower quality, at a lower price point, and offer less value to the customer. Market share is roughly equal between the three large-cabin competitors.

Decision making is centralized at Cessna Aircraft Headquarters in Wichita, Kansas, where the majority of research and production personnel are located. The business is divided primarily into research, aircraft production and completion, and service units. Service is frequently a break-even business that is used to introduce customers to Cessna service quality and sell new or used aircraft.

As is common in the aircraft industry, portions of the Cessna Aircraft assembly are sourced from suppliers. Currently the only aircraft that is not built at the Wichita Citation Service Center is the Citation Mustang. The engines are supplied by Pratt & Whitney in Hartford, Connecticut and Williams International in Commerce Township, Michigan, and all the electronics in the aircrafts are provided by Garmin since they are located nearby. Close partnerships with suppliers are key to Cessna operations.

Revenue is generated from production of new aircraft, sales of used aircraft, aircraft financing, and service of existing aircraft. Profit is generated from building long-term customer relationships and offering products and services that are not available elsewhere. Profits are maximized through manufacturing efficiency, re-use of engineering data, and research on continued development of unique products. Profit is earned primarily through new aircraft deliveries, and research is heavily funded to ensure Cessna technology is always at the forefront of the business jet market.

Cessna's strategy involves positioning itself as the service and quality leader in its field. The highest performing products command a higher price than the competition, but the customer relationships built over the length of aircraft service extend to multiple purchases of new or used aircraft directly from Cessna. The aviation industry is somewhat cyclical and Cessna needs to be able to excel regardless of the economic conditions.

Effort is made within the organization to ensure employees are aware of the organizational goals; however, groups occasionally over-emphasize internal goals or fail to understand their roles or responsibilities within the company. This leads to conflict between departments. Overall quality and customer satisfaction are pursued and the company does work toward educating all employees on their purpose in the organizational design.

Analysis of the Need for Change

One will not be successful in the aviation industry without being passionate about aircraft. Cessna Aircraft is doing things right and is at the top of the business jet industry. They lead in aircraft quality, technology, and value. Manufacturing is making huge leaps in quality efficiency through continuous improvement. Customer support is the best in the industry. Unfortunately, being good at these things cannot keep Cessna at the top of the industry. Very light jets and active competitors are attacking market share in the mid-sized fleet and while the fleet has a large number of orders, the wait can drive potential customers to competitor's offerings.

To be truly great in this industry Cessna needs to continue offering the best in aircraft and service, but at the same time needs to be flexible enough to handle economic troubles by shifting product focus and building new customer relationships. To best handle economic hardship Cessna must ignore the tendency to focus heavily on quarterly aircraft deliveries and instead focus on building quality aircraft and maximizing profit per customer over the long term. Cessna needs to focus and work on aligning the patterns of behavior within the company to the hedgehog concept.

Hedgehog Concept

If the company tightened its focus on the hedgehog concept, Cessna would "win the race." If they take their time and do the proper research, they can focus on their concept of building the highest quality and performance jets possible for their customers while maintaining long term customer relationships. This is not much of an adjustment, as quality and service are already guiding principles of the company.

Passion

Aviation is clearly the company passion. Cessna is the world standard for business jets. Many of the people in the company work there just to be around aircraft all day. Employees are pilots and aviation enthusiasts, and most of the engineering and production personnel work in the aviation industry for their entire career.

Economic Denominator

Profit per customer is the best measure of success for the company. Cessna is a high margin business that builds strong customer relationships for repeat business. Contracts with businesses and governments frequently span decades with dozens of new aircraft and years of service.

Specific Recommendations

Cessna is a high tech company with a traditional employee structure. There are a significant number of layers in management - 8 for most employees. Work schedules are traditional 8 to 10 hour days, which are an old standard in the aviation industry. Salaried employees are expected to be in their seats on time every day. Dress codes and privilege drive a wedge between management and subordinates. Managers tend to flex the time requirements and have preferred parking. At the same time, operations and engineering exist in an overtime mindset that drives them to think of work in terms of hourly commitment.

Employees should be salaried instead of hourly, because hourly scheduling is more likely to interfere with thorough completion of work activities. The customer relationships would suffer because the employee would care more about getting home and seeing their family instead of making sure the customer is happy. The salaried employees would take the time and help the customer out with their purchase or issues before they leave for the day. Finally, the company would benefit from an egalitarian culture that does not focus on status.

Cross-site inconsistencies are a huge loss for the company. Aircraft are manufactured at one of four sites: Wichita, KS; Independence, KS; Columbus, GA; or Chihuahua, Mexico. All four sites cannot certify the exact same aircraft currently. Progress needs to be made in developing standards that all sites can follow to prevent rework and process bottlenecks. Manufacturing is the easiest to bring on board for cross-site product consistency, but engineering and certification need a significant amount of effort. Some is related to different regional regulations, but that effect could be controlled by restructuring the FAA certification structure, which is slowly progressing forward.

On the other hand, efforts at standardizing FAA rules tend to reduce the overall concern for quality and focus on maintaining the standards. Incentives in engineering, for example, tend to focus on issuing unmodified existing data even when it is not ideal for an application. Protections need to be built into the incentive system that allows employees the freedom to exercise good judgment when the customer could receive a higher quality product instead of one the does not work.

Cessna does need to focus on getting the right people on the bus, and in the right seats. Over ten years ago, half of the shop personnel were certified in airframe and power plant maintenance (A&P), bringing a good understanding of the inner workings of the aircraft. Less than 20% have the same qualification today. Employees should be incentivized by the company to pursue further education in A&P licensing and other aircraft related certifications with methods including tuition reimbursement and pay incentives.

Growth depends on attracting skilled technical employees. Reliance on specialized employees can also hurt the company when an employee leaves or is overburdened. Cross-training existing employees can help smooth out the workload and prevent overworked employees. Processes need to be documented in many areas to prevent the loss of knowledge or skill when employees depart. All of this could result in a much more flexible workforce that is more adept at handling the schedule swings that are unavoidable in high-end aviation. Degreed engineers are used to do drafting work, which many do not have experience in. Cessna should build a layer of employees who have a degree in engineering drafting that are directed by the engineers and let the engineers focus on the more technical aspects like stress analysis, certification, and top level assembly. This would be more fulfilling for the engineering staff as well as reduce the need for additional skilled engineers or repurpose them to other specialties within engineering.

Many of the data construction and analysis tools used within engineering and operations are complex and must be designed by advanced computer programmers. Unfortunately this has led to the tools being designed to fit how the programmers think they are used instead of how they are actually used. Inter-disciplinary cooperation needs to receive more attention in the Cessna organizational structure.

Overall the company is strong; however it could use some adjustments in personnel policies, incentives, and standardization. By addressing these issues the company could remove two of the large hurdles to building and maintaining positive momentum within the organization.

Specific References, Contingencies, and Limitations

This analysis may lack depth due to the diagnosis being performed. The interviews must be taken at face value because there is no way of contradicting the information collected from the three leaders during the interview process. Leadership time limitations forced discussions to be held via email instead of via phone conversation. They were unable to discuss many of the sensitive issues due to concerns about parent company stock performance and information leaks.

Cessna is an organization of over 20,000 employees worldwide which balances Cessna performance with that of their other operating units for financial and risk management reasons. This could cause a redirection of Cessna profits and efforts to assist an ailing business unit. Due to the differences in culture at the different Cessna sites it is also difficult to tell whether the application of some of these recommendations would be beneficial or if all of the problems are universal.

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