Schuster aims to bring RAC ‘back to greatness’

 - May 16, 2008, 5:46 AM

News from Raytheon Aircraft Co. (RAC) for the last several years has been mostly bad. For the three years before Jim Schuster’s appointment as chairman and CEO of RAC last May, the Wichita-based airplane manufacturer posted ever-increasing expenses, with operating cash flow consuming nearly $1 billion over that time. So it is no wonder that the first thing Schuster did when he took over was to examine the OEM’s financials.

“We spent much of our time the first few months last year getting the costs out,” he said last month. Very quickly 1,800 full-time employees lost their jobs, in addition to about 500 contract workers. Another 200 or so followed this year. Capital budgets were slashed. “I told the Raytheon board of directors that we would cut as much cost as we can as fast as we can and it still wouldn’t be enough,” he said.

Next he took a hard look at RAC’s senior leadership. Last July, Raytheon Aircraft announced one of the most thorough corporate management shakeups of a business aircraft manufacturer ever (AIN, August 2001, page 1). Eleven top-level changes were made and several other vice presidents and directors found themselves with new responsibilities. More personnel changes came later, as well as company-wide commitment to the Six Sigma process and a focus on improved customer support.

Soon after determining the extent of RAC’s problems, Schuster asked parent company Raytheon for help and got 50 experienced managers. “We also received help from outside the company, people who didn’t just give us advice and leave, but came in and worked with the company for a few months.” Some even stayed on. Bob Horowitz arrived as a consultant from Electronic Systems, also a Raytheon company, and is now COO of RAC. His main focus for the time being is the introduction of the Premier I to customer service.

In January, Schuster laid the cards on the table at a one-day, 12-hr meeting of some 350 company managers, union officials, customers and suppliers and then challenged them to “rebuild, restore and revitalize” the company. Those assembled gathered into breakout groups to identify problems in five critical areas–quality, customer, processes, partnerships and people–and develop action plans to solve them. A 30-min video of the meeting’s highlights (dubbed “Back to the Future”) was then shown at subsequent meetings with virtually every one of RAC’s 11,000 employees and over an intra-company television network. On the video Schuster told employees, “Restoring this company to greatness depends on your willingness to follow through on what was decided at the meeting.” The participants in the initial meeting are to meet again each quarter to assess the results.

Last month, Schuster felt confident enough in the progress of the beleaguered company’s turnaround to invite a contingent of aviation trade press editors to observe first hand the changes taking place at RAC.

Back to Basics

“One of my first goals,” Schuster told the editors, “was to get everyone to agree that we had to do something.” In numerous meetings with employees, he explained the company’s dire economic situation and the unpleasant results of customer and employee surveys. “Customers told us [regarding customer support], ‘We love your products, but we feel like abused children when you leave.’” In a Raytheon-wide survey of employee opinions RAC scored lower than the rest of the corporation. “The employees were screaming that things needed change,” Schuster said. “We were living on the great deeds of Beechcraft’s past.”

Not one to make empty promises, he told employees to expect only two things: “First, we’re going to make mistakes, because we’re going to do a lot of things. So bear with us. Second, on the way out of this meeting, someone is going to say this is all B.S. Do me a favor and try to get that person to get a job elsewhere. We don’t need that kind of employee.” He claimed employees generally accepted the layoffs as part of the ups and downs of the aviation business. He invited them to e-mail him directly with their questions and promised to answer each one personally. Their main concern? “Do you guys know how to run this business?”

Two days after moving into RAC’s plush, green-roofed headquarters building last year, Schuster said he realized he couldn’t stay there. “I had the nicest office I’ve ever had in my career, but I was isolated. Management has to be engaged in the day-to-day operations of a business.” So Schuster moved to the old executive offices in Plant One’s “Mahogany Row,” where hourly employees coming to work in the plant can see him through the open door to his office. He made most of the rest of the executive staff move as well.

The former executive headquarters, recently renamed the Walter H. Beech Delivery and Customer Support Center, still houses human resources and sales, marketing and contracts on the first and second floors, respectively. Its main tenant, however, is customer support (including warranty and technical support), which has taken over the third floor from finance and legal, the fourth floor from the top executives and part of the first floor. Schuster moved customer support from a building, now for sale, in Andover, Kan., which is about 10 mi away. “It just makes sense to have customer support alongside the delivery center, but it’s symbolic as well,” he said.

Also symbolic to many employees, customers and the surrounding community is renewed emphasis on the Beechcraft name and recognition of exceptional employees as Beechcrafters. The day of the editors’ visit, workers were mounting a large neon Beechcraft sign that formerly had hung on the flight-test hangar above the entrance to the tunnel that takes Wichita’s Central Avenue underneath Beech Field.

Embracing Six Sigma

Beyond the symbolism is an ironclad commitment to the Six Sigma process throughout the organization. At its core, Six Sigma is simply a belief that the people who know best how to do any particular job are the ones who do it day in and day out–the men and women on the shop floor. The role of management is to continually engage employees, as well as customers, suppliers and business partners, in the development of work processes to lower costs and improve productivity.

Six Sigma requires integrated work groups in every section identifying problems, hashing out solutions, assigning tasks and measuring the results. At RAC today there are innumerable progress-plotting graphs and charts hanging on the walls of every meeting room and most other vertical surfaces where employees frequently walk past or congregate.

“We started measuring things that weren’t measured before,” said Schuster. “It was really basic ‘how you run a business’ stuff. Our factories and assembly areas had lost discipline. They were cluttered and dirty. There were parts on the floor and tools weren’t put away. Chairs were chained to desks. Bob Horowitz and I started picking up parts and trash as we walked around the factories. The employees soon took notice and began doing it, too.”

“Six Sigma requires a culture change,” said Ed Dolanski, v-p of customer support, who brought his experience as an executive at Wal-Mart to RAC. “Employees understand the problems. They have to make the changes and develop the processes.”

Virtually everything was, and still is, game for change. On the Premier I line, workers figured out how to “stuff” the aft fuselage section nearly completely before it is mated to the forward fuselage. Customer support identified the three major gripes from customers–parts availability, parts cost and aircraft-on-the-ground (AOG) support–and attacked these first.

Motivated to keep their jobs from heading south to Mexico, three union shop stewards in the wire-harness section galvanized their co-workers to change procedures to improve efficiency. Productivity improvements on the order of 25 percent and better were made in a matter of months in some areas. Same-day part deliveries increased from 62 percent to 99 percent. Average time on hold waiting for a customer service representative dropped from 50 sec to 13 sec.

David Shih, who became v-p of manufacturing operations in August, told AIN, “What we’ve done so far is not rocket science, but simply the application of basic management tools. Any experienced production professional would know that to experience the level of gains we’ve seen is simply an indication of how bad things were, not that we are geniuses. We’ve just harvested the low-hanging fruit. Subsequent improvements will be more difficult, but as you can see we’re all working toward common goals now.”

“There’s not a piece of our business that doesn’t have an interesting story,” said Schuster. “But the