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High Fliers
Creating the talent, leadership, culture and organization capabilities to meet the new business challenges of the aerospace and defense industry
Accentures new research-based study introduces a comprehensive approach to addressing todays critical A&D workforce challenges. Moving beyond traditional analyses of organizational deficiencies focused mainly on the aging workforce, Accentures human capital strategy program looks at the distinctive talent, leadership, culture and organization capabilities needed to achieve high performance in both the defense and commercial A&D sectors.
and competing in the international marketplace. These companies will need to put an increased emphasis on operating efficiency and on new kinds of partnerships and alliances. Deeply rooted in a military-oriented culture, defense companies will need to become more entrepreneurial and collaborativenot necessarily a traditional strength. If one looks closely at these challenges, almost every one of them relies to a large extent on superior human capitalon the A&D workforce, its leadership and its culture. Yet the capabilities and performance of the workforce in the A&D industry are now being severely testedin some cases straining the ability of organizations to respond.
Reshaping companies to meet this challenge is important to the industry itself, of course, but also to the broader economy and to global stability. The A&D industry is one of the largest job creators and value creators in the US economy. It plays a vital role in the safety and security of not just North America but the rest of the world. In other words, meeting the human capital needs of the A&D industry has global consequence. Based on new Accenture research and on surveys and interviews conducted across a range of companies in the aerospace and defense industry, we find that A&D companies are not yet taking the kind of comprehensive, value-driven approach needed to respond to the business, workforce, leadership and culture challenges ahead. Companies are taking some actions, to be sure. For example, industry executives have been expressing concern for years about the loss of critical skills as
experienced workers retire and as the sources of top talent begin to dry up in light of demographic and educational changes. In response to these concerns, many companies are looking for improvements in specific areas that primarily touch upon the employee lifecycle: new sourcing and hiring strategies, innovative approaches to learning and development, and revitalized efforts to retain top talent. Yet these actions by themselves will not be enough to meet the workforcerelated business challenges facing the A&D industry. Based on our research, we contend that companies must be taking action across a range of integrated areas in the broader dimensions of what we call human capital strategy: Talent Leadership Culture Organization
In short, a human capital strategy works to see that the right workforce talent is acquired and developed, guided by the right leaders, and supported by the right culture, organization and operating model. As with business strategy, an effective human capital strategy informs a companys most important decisions about where and how to compete, and supports the enterprise as it balances short-term decisions with longer-term imperatives. With a human capital strategy, A&D companies can meet todays business needs, while also making themselves agile enough to respond to new opportunities, compete more effectively and support a growth agenda.
Talent
Culture
Leadership
Diagnosing the capabilities of current executive teams to ensure that openness, collaboration and encouragement of diverse thinking are a part of the mindsets of a new generation of leadership. Creating leadership development programs that encourage broader sets of skills, augmenting the engineering, technical or military backgrounds of many executives.
Organization
Developing an internal change management capability geared toward continuous change and a more agile company and workforce. Creating governance and rewards structures that encourage collaboration across the enterprise and help to eliminate traditional turf battles. Pushing decision making further out into the organization.
if they are to become more innovative, entrepreneurial and collaborative qualities essential to achieving high performance in the years ahead. In spite of the hard work needed to retool their organizations for a new business era, we also found among many of our interviewees a sense of excitement about the opportunities a comprehensive approach to human capital presents for achieving competitive advantage. The
challenges ahead are substantial: Nothing less than a human capital transformation is required if companies are to compete effectively now in a global marketplace. Yet, for these executives with competition in their DNA, its a challenge many of them are looking forward to battling.
The aerospace and defense industry is in the midst of profound change as it copes with the effects of the economic downturn and also responds to the challenges and opportunities of a global marketplace. For many years now, the challenges to workforces and organizations have been phrased primarily in terms of the threat of losing workers to retirement. But closer inspection of the business challenges ahead reveals that the talent or human capital imperative is much broader than most executives thought. We spoke with John Douglass, former President and CEO of the Aerospace Industries Association and a fifty-year veteran of the aerospace and defense industries, including a tenure as Assistant Secretary of the Navy and Director of Defense Programs for the US National Security Council. Douglass notes that, in addition to an understandable focus on cash flow and the bottom line in todays economic circumstances, A&D companies now must retool themselves to compete in an emerging global marketboth in international arms development and in commercial aerospace systems.
In the United States or in North America more broadly, says Douglass, companies used to develop airplanes and systems that could dominate what was being built by the Soviet Union. Today thats less important. Companies are now realizing they have to build systems that are competitive on an international commercial market. John Holdingretired Executive Vice President of Bombardier Aerospace and Fellow of The Royal Aeronautical Society, among other industry experiences and honorsaffirms this challenge of competing in global markets. Too many A&D companies, says Holding, are getting into trouble as they approach this global market with an old mindset. This new competitive environment places longstanding concerns about workforce competitiveness on a different level of discussion, one concerning the essential viability of companies and the value of their human capital, not merely their ability to replace retiring workers.
Clearly major challenges are ahead for companies when it comes to basic workforce numbers. One executive with whom we spoke expects to lose 45 percent of his workforce over the next 10 to 15 years, and those numbers are representative of projections across the industry. Yet, the issue is not simply one of replacement; it is, rather, one of retooling the entire employee sourcing and development machinery for a new kind of competitive environment. Workers must then be supported by the right kinds of leadership, the right culture, and the right organization structure and processes that properly direct their performance toward new and more frequently changing strategic goals. Our research suggests that all is not well when one looks at the human capital capabilities of A&D companies from this broader perspective.
Business Strategy
Enables
Shapes The Human Capital Strategy defines the leadership, talent, culture and operating model requirements to align to the Business Strategy
Enables
Shapes The HR Strategy articulates the strategic direction and imperatives of the HR organization and builds out the capabilities required to align to the Human Capital Strategy
HR Strategy
This human capital strategy layer goes beyond the limited, though important, activities focused on the employee lifecyclerecruiting, training and rewards to look more comprehensively at four interrelated sets of questions: 1. Talent
What skill areas and capabilities will be needed to compete and grow the business? Where are the gaps between the skills we have and those we need, and how can these gaps be closed through various talent sourcing and development options?
2. Leadership
What types of leadership capabilities do we need to act on to sustain our business strategy? How will leaders be developed or sourced?
3. Culture
What are the key cultural attributes of our company today? How does this prevailing culture affect performance and productivity, as well as the ability to attract and retain top talent? What are the characteristics of the ideal cultureone more aligned with our business needsand how do we create and sustain that culture?
4. Organization
What is the organization designstructure, governance, reporting relationshipsmost conducive to the kind of business we want to be and the strategy needed to get there? What types of operating models can help us optimize strategy the execution and use of resources?
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40%
Globalization
23%
Cost control
14%
Government regulation
14%
Loss/availability of talent
9%
Innovative products
61%
Customer intimacy
19%
Efficient operations
6%
6%
Other
8%
Our conversations with industry executives suggest that many companies are aware of this broader perspective on innovation and are taking steps to address it. For example, we spoke with Bob Rearden, vice president of supply chain integration for A&D company Lockheed Martins Aeronautics business segment. According to Rearden, Lockheed Martin stimulates innovation capabilities across multiple dimensions of its Aeronautics company, including skills sets, processes and organization structures, through a dedicated solution invention organization called Advanced Development Products. This organization, as Rearden explains, is a customer solution invention organization, where much of the innovation around customer problems and solution options occurs. At the same time, the Aeronautics unit also has initiatives in place that look at processes and systems that can support its ability to be more innovative. One process reinvention initiative is focused on the manufacturing and engineering environment. The driving force behind this, says Rearden, is that we recognize that the business systems and processes we have been using are not capable of enabling us to do the type of work that we want to do in the future. We saw the need to change out processes as well as the associated systems and tools if we were going to position ourselves strategically for future success. Bell Helicopters Sid Sreekanth, the companys Enterprise Lead for Engineering Strategy & Globalization, adds an interesting point relative to rewards associated with innovation. Sreekanth notes, As part of our overall rewards and incentives program, we have an innovation contest culminating in an award at an annual event. However, its important for our leadership to bear in mind that most of our people are not actually motivated only by the award itself. What they are looking for is status as a true industry thought leader, and they are motivated in part by the patent
itself. We are not a lab, so the true test is whether an idea makes money. That mindset is reflected, therefore, in what our people value, too. Underlying this point about recognition and rewards associated with innovation is, then, an important point about motivation of a new generation of A&D employees. Retention of top talent, as Sreekanth says, is rooted in providing challenging work earlier than many current executives may have experienced. Top talent is difficult to retain, he says, if they are not given something challenging to work on. The new generation of worker wants to be a playerspeaking at society meetings, presenting papers. This aspect of innovation and rewards is something new for the industry to address. Kevin Smith, vice president of HR for Pratt & Whitney Canada, makes an interesting distinction between innovation and creativity. Traditionally, says Smith, the A&D industry has been about innovation but not necessarily creativity. Creativity is much more about risk taking, and A&D has often been risk averse. If we are to become entrepreneurial, we need to have the risk management processes and structures in place that release the creativity in our people, which then can lead to more profitable innovations. These perspectives on innovation are important, because they recognize that employees are ultimately the engine of innovation for any company. At the same time, an engine alone isnt enough; a company also needs the paths and steering mechanismsin this case, processes, systems, tools, structures and leadershipthat help the entire enterprise reach a profitable destination based on those innovations. A&D companies face considerable challenges across the four dimensions of a human capital strategytalent, leadership, culture and organizationas the following sections detail.
"To become entrepreneurial, we need better risk management processes and structures which then can lead to more profitable innovations.
Talent
Culture
Leadership
Organization
This absence presents a problem at both ends of the age spectrum. To pick up the slack, companies must either keep older workers on the payroll beyond what would normally be their retirement years, or they must advance younger workers into leadership roles faster than they might like.
mandates that can direct people into areas of studies needed to fill critical industrial jobsand you have a situation where North American A&D companies may find it increasingly difficult to compete with differentiated human capital. As the scarcity of talent begins to weaken companies from a leadership, innovation and culture perspectiveas well as in the most obvious areas of having enough qualified people just to keep the lights onone can see the urgency of taking focused, collaborative steps to anticipate and try to correct the upcoming talent deficiency.
When it comes to this task of capability modeling, as it is called, many companies are coming up short. In many HR departmentsnot only in A&D but across multiple industriesthe hiring and development processes are based on history and precedent (the way things have always been done) rather than on up-to-date information about the capabilities needed, and in what numbers, to properly execute business strategy. As part of our survey, we asked A&D executives about this sticking pointabout the absence of rigorous competency modeling within the A&D industry. The results indicated, first, that our hypothesis was correct: only about seven percent of respondents claimed to already have in place an effective competency model. (See Figure 3.)
Figure 3. Survey responses: Why do so few A&D companies have in place a well-defined competency model?
39%
29%
14%
11%
7%
10
Asked to name the reason for not having an adequate competency model in place, the top answer pointed to the difficulty of doing such modeling work and of finding the expertise to do it right. The second most important reason cited was insufficient support from executive teams. This latter point takes us back to another critical dimension of A&D leadership: the need for a strong sponsor for the programs needed to acquire and develop the right workforce skills in numbers sufficient to meet a companys future needs.
performancethe results were fairly evenly split among those who believe action is needed now and those who believe the issue is important but not urgent. (See Figure 4.) While nearly 52 percent of respondents find the talent sourcing and retention challenge to be either looming or critical, the remaining executives believe the workforce demographics issue to be either not urgent or simply an important issue that bears watching. Asked if they have an active human capital program in place to meet their future needs, 46 percent indicated they are current pursuing such a program. However, one in three executives indicated that such a program is not even on their radar. Our interviews found similarly mixed results when it came to the urgency of human capital or workforce-related issues. One interviewee noted insightfully
that the question of urgency really depends on the level of executive that one asks. Among the leadership of the engineering function, the workforce sourcing problem is seen as particularly acute; they feel it every day. On the other hand, if you ask board-level executives, they have a host of challenges on their hands and the workforce issue is not necessarily top of mind.
A sense of urgency?
Are companies and their leaders taking action to address talent challenges and to adopt innovative practices like those just mentioned? The news here is mixed, judgeing from our survey and interviews. Asked in our polling how critical the talent challenge really iswhether changing workforce demographics have the potential to diminish business
Figure 4. Survey responses: How critical is the potential for decreased business performance due to changing workforce demographics (e.g., aging workforce, insufficient STEM skills, different values and assumptions of younger workers)?
Critical
12%
Looming
39%
Important
36%
Not urgent
12%
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Talent
Culture
With a preponderance of leaders coming from a military or engineering/technical background, strength, courage and conviction are without a doubt present throughout executive leadership teams at most A&D companies.
Today, an effective leader also needs to encourage collaboration and the contributions of workers at all levels and across all functions.
Figure 5. Survey responses: My company has the leadership awareness and capabilities to deal with human capital challenges
Strongly disagree
15%
Disagree
48%
Agree
33%
Strongly agree
3%
Figure 6. Survey responses: I am confident in my companys ability to execute programs to develop future leaders
Strongly disagree
10%
Disagree
57%
Agree
30%
Strongly agree
3%
13
Talent
Culture
Leadership
Organization
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top-down strategic change against bottom-up cultural resistance, culture will win almost every time. The culture dimension of a human capital strategy program seeks to identify the particular cultural implications of the business strategy. Whether its understood well or not at all, every organization has a culture: a shared set of assumptions, beliefs, values, understandings and meanings that guide the perceptions, judgments and behaviors of its people. So if a company is to execute strategy, it must understand what its current culture is and whether that is adequately aligned with the culture needed to support the new business strategy. If it is not, then specific programs must be put in place to influence the culture and push it in the right direction. This is difficult, of course, because many factors go into what a culture is and how it behaves (see sidebar). Yet culture can be shaped. One of the challenges A&D companies face is the difficulty of changing and then sustaining a culture in the face of almost constant organizational and marketplace change. One of the aircraft manufacturer representatives we spoke with put the matter well when he spoke of wishing for a corporate culture that can benefit from more stability and less frequent, significant changes in the organization as well as company strategy.
Figure 7. Survey responses: What are the biggest cultural barriers to addressing your human capital challenges?
38%
Command-and-control mentality
31%
21%
Other
10%
15
These concerns are especially important as companies face the Generation Y challenge noted earlier. In the words of one of our interviewees, an executive who runs university recruiting for a major R&D company, Work-life balance is very important to this group. Theyre also attracted by flex time, tuition reimbursements, gym membershipsthat kind of thing. People coming out of college now, says this executive, are more interested in whether theres career advancement opportunity and if the company operates in an ethical and socially responsible environment. If there is one major red flag raised in our research about the cultural norms needed to achieve high performance in the A&D industry, it is about executives confidence (or lack of confidence) in their ability to create a culture that can meet the primary corporate challenge noted in the opening of this report: becoming entrepreneurial enough to meet the needs of customers in a global marketplace. We asked our survey respondents whether they were confident in their companys ability to transition to a more entrepreneurial mindset among leaders and the wider culture. More than 60 percent either disagreed or strongly disagreed with the statement that their companies were capable currently of handling this transition well. (See Figure 8.) Creating this new, entrepreneurial culture is a challenge every company must figure out how to meet.
"People coming out of college now are more interested in whether theres career advancement opportunity and if the company operates in an ethical and socially responsible environment."
Figure 8. Survey responses: My company has a commitment to innovation capable of supporting the transition to a more entrepreneurial mindset
Strongly disagree
14%
Disagree
46%
Agree
18%
Strongly agree
21%
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Talent
Culture
Leadership
Organization
17
The organizational or structural challenges faced by the typical A&D company today are exemplified by the perspective of Sid Sreekanth of Bell Helicopters, who notes that current structures and operating models are generally based on accounting systems and functional boundaries. Too often, says Sreekanth, the way the organization operates is simply a reflection of reporting structures within functions. This worked when the prevailing mindset of a typical A&D company was military in nature, but is less appropriate for a commercial environment because it doesnt enable the kind of flexibility needed to succeed today. In response to this structural barrier, Bell Helicopters is experimenting with what it calls a value stream approach to organization design. How is value actually being created within the organization? If that can be properly tracked, and also accounted for in new ways, then the organization can be structured to encourage this kind of horizontal flow of information and value, rather than the typical vertical structure. The potential organizational barriers to success in the A&D industry were supported by our polling results. Asked to name the most important challenges to success caused by organization structures and operating models, respondents were most likely to reference the siloed structures that prevent the optimal flow of information and communications. (See Figure 9.) A related challenge cited by about 20 percent of respondents was the turf battles among executives and managers whose appraisals and performance reviews are likely to be based on their own functions performance, rather than its contribution to the larger success of the business. Ultimately, these kinds of organizational barriers can impede a companys ability to respond quickly to marketplace needs.
"Too often the way the organization operates just reflects reporting structures. This worked when the prevailing mindset of a typical A&D company was military in nature, but success in a commercial environment requires more flexibility.
Figure 9. Survey responses: What are your biggest challenges in terms of organization structure? Silos that prevent flow of information and communications
43%
Turf battles
21%
18%
Top-heavy organizations
14%
4%
18
Organization
19
Talent
Culture
Leadership
Organization
20
The following are some important steps A&D companies must take to avert the impending talent shortage and to create the ability to compete on distinctive talent capabilities.
it compares skills and competencies of the current and planned workforce to what is necessary to meet that demand. Those working on a companys human capital strategy will incorporate the specific expertise within recruitment, development, performance and rewards.
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Raytheons intention is to hire qualified veterans for technical positions all the way up to higher management. We have people with disabilities in every function, Foley says. People are coming in at every level, from managerial, supervisory and program management to jobs within the IT and engineering functions. They have engineering degrees or IT and communications experience.
This is increasingly a problem for engaging and retaining Generation Y or millennial employeesthose who came of age around the turn of the century. As Sid Sreekanth of Bell Helicopters puts it, Retaining Generation Y employees becomes very difficult given the structure of the typical A&D company. These young people are conscious of their status and titles, and they care about advancement. We sometimes say, only half jokingly, that they expect to be CEOs within a year. These employees look around at other industries and see other companies with shorter promotion cycles. Those are often more attractive opportunities.
throughout the state, demonstrating how education can be redesigned to ensure that all students graduate well prepared for college, work and citizenship. With a wide range of task force studies, research reports, and active engagement with government leaders concerning educational policy issues, the Business Roundtable is an excellent example of the level of engagement and dialogue that must take place between government and business leaders if a steady supply of workers with relevant skills is to be made available to the business community. In the shorter term, other kinds of innovative sourcing strategies must be instituted to meet immediate needs. Previously, we mentioned initiatives such as Lockheed Martins apprenticeship programs and their partnerships with local high schools and junior colleges. Other companies are looking into actions they can take even earlier in the educational system. Raytheon, for example, is a title sponsor of MATHCOUNTS, a national math enrichment, coaching and competition program that promotes middle school mathematics achievement in every US state and territory. According to Raytheon sources, over the last 25 years more than 7 million students have used MATHCOUNTS materials, and more than 41,000 middle-schoolers from all 50 US states and territories compete in local and regional MATHCOUNTS competitions each year.
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Talent
Culture
Leadership
Organization
top 10 or 20 people on the leadership team who often wield the most influence within an organization. By combining what we call a personality and leadership profilewhich measures more than 40 different personality traits and characteristics that are correlated with executive performancewith a traditional 360-degree feedback tool, companies can get a clearer assessment of their leadership teams. This assessment provides an objective understanding of each persons potential strengths and weaknesses that could influence their effectiveness as a leader, along with tangible suggestions for improving performance. In addition to helping individuals improve their leadership and change management skills, this assessment can also help companies balance the mix of competencies needed in a good leadership team. That is, a good team doesnt include people with all the same skills. Visionary evangelicals are needed, but so are good program managers and relationship builders. By understanding each persons particular aptitude in different areas, more diverse and effective teams can be assembled. We see this kind of approach in action at a number of leading companies. One executive we spoke with has an initiative in place looking at what leadership skills are truly needed in the future. According to this companys HR representative, the company has historically hired people for their technical abilities, and leadership advancement was often based on those skills as well. Today, says the executive, We are putting a major effort into understanding more deeply the attributes we need in our leadership, particularly when it comes to our management of talent. We provide training and development on the desired competencies we want, and we also have developed a new process for leadership hiring that uses a structured interview procedure to screen for these new, desired attributes.
Risk averse
One key will be to draw potential leaders from broader pools of talent, and then to develop them in different ways. Technical and military experience will always be relevant; but other management skills are also important todaycapabilities such as: Thinking globally to contend with connected markets around the globe and to take advantage of the technology-driven ability to perform work anywhere in the world. Appreciating cultural diversity to draw on a broad range of employees and to motivate people from a variety of backgrounds. Building partnerships to cooperate with others to round out core competencies. Sharing leadership which will allow executives to more effectively manage knowledge workers and alliance partners. Here are some specific actions companies can take to develop and sustain a new generation of leadership.
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regions. At one major A&D company, for example, executives are actively involved in a rotational development program that combines real get it done leadership assignments with management experience in multiple disciplines and businesses. This approach provides individual leadership development and a broader understanding of the complex business.
Explicitly embrace and encourage diversity among leadership teams and the broader workforce
Diversity is not only about race, culture and gender, but also about the ability to bring together generations of workers. Executives who came of age in more authoritarian eras or times when a degree of career hazing was expected as part of the price of advancement, must now learn to work with young people with different assumptions about work and how it fits into a broader understanding of a meaningful life. The key here is not necessarily to cater to the preferences of one part of the workforce. Instead, the answer is to embrace diversity in the workforce and culture, which means a respect for employees different needs and preferences. Leaders also need the ability to sanction more flexible work schedules and to support the flow of work among a more dispersed population. A sense of diversity in action is behind one A&D companys leadership training program which incorporates a diversityfocused curriculum into its courses. The goal of the curriculum is to encourage managers to value and leverage multiple perspectives, experiences and skills, and then integrate them into practices and processes to more effectively achieve the companys business objectives. The company strongly believes that its the diversity of thought, people, teams and culture that drive innovation, growth and business success.
Diversity is not only about race, culture and gender, but also about the ability to bring together generations of workers.
Rotate promising talent through different parts and functions of the company
Developing leaders who can cross traditional silos and organizational boundaries is also essential. One way this is being done is by rotating top talent through different parts and functions of the company, and even geographical
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Talent
Culture
Leadership
Organization
The lack of confidence expressed by participants in our polling survey about the ability to influence the traditional A&D culture is a cause for concern, of course. As noted, six in ten participants did not feel confident in their companys ability to make the transition from a defense company culture to an entrepreneurial culture.
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Turf control
Accordingly, a different mindset on the part of executives is critical when considering the type of culture most conducive to high performance. The goal is not just strength but also suppleness. One does not necessarily seek a culture that is unyielding but rather one that can listen, sense and respond according to changing conditions. Such a culture is inherently nimble, enabling a company to shift direction more quickly according to environmental changes and evolving customer needs. It is a culture that promotes continuous learning and enables employees to adjust plans and improve a companys efficiency without creating bureaucratic impediments or by overworking and overstressing its people.
Top-down communications Hazing mentality to development: I went through it and so must they Concern for the company
Sink or swim
Here are several concrete steps companies can take to shape the kind of open and entrepreneurial culture needed to succeed in todays business environment.
The CVA brings hard data and analysis in a very action-driven way to something often thought of as a soft subject. It enables senior management to gain an objective and realistic understanding of the organization they lead and, therefore, take focused and effective action on the areas they need to change. Another question relevant to A&D companies is whether a strong culture is the most important goal. Claims about strong cultures are often exaggerated and oversimplified. The culture that is strong enough to serve a company well in one era of competition can impede its progress in a different era. The example of companies in the technology sector should serve as warnings. Several highprofile IT companies have faced stiff challenges when technology disruptions dictated new strategies that their cultures did not easily support.
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With A&D corporate cultures, the goal is not just strength but also suppleness. One does not necessarily seek a culture that is unyielding but rather one that can listen, sense and respond according to changing conditions.
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Talent
Culture
Leadership
Organization
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Stable and unchanging Vertical and hierarchical Top-down use of guidelines, regimen, process and protocol Power is driven by headcount numbers Organized according to internal efficiency
As Bob Rearden explains it, the company has two ways to organize its employee reporting. The first is the program organization. The role of programs, says Rearden, is to do work on behalf of customers. Probably 80 percent of our employees on a day-to-day basis work in a program. The other 20 percent of employees are in what the company calls functional organizations, which focus on the enabling processes and tools used in performing work for customers. One way we get alignment of performance against business objectives, says Rearden, is through the process of deployment. When people are deployed theyre actually assigned to a program, and their appraisals and merit pay actually go to the program leadership and dont stay in the home room organization. What this gives Lockheed Martin, then, is the ability to be more agile in the face of customer needs. This structure makes it easier for our programs that operate on behalf of customers to handle fluctuations in skills or total workforce numbers, or to respond to new customer needs.
Several important questions should be considered by companies as they look at their operating model and organization structure: What should our business model look like in three to five years as the implications of our business strategy play out? What balance do we need on the spectrum of centralization through a distributed network of business entities? Do we have the right organizational design and structure in place to help the workforce perform optimally? Are the right governance and decisionmaking structures in place? Do we have the right leverage and the right organization structure (the pyramid of different roles and responsibilities) to execute cost effectively? Do we have the right analytics and tools in place to monitor workforce performance and make timely changes? Do we have structures that keep workforce performance continuously aligned with a changing business strategy?
Is our HR organization designed to support the workforce in a costeffective manner? Are there any constraints in the HR organization that would impede our ability to get the right capabilities and people into the organization, develop them and retain them? Here are some steps companies can take to encourage the kind of organization and operating model needed to optimize the value of their human capital.
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to users quickly, within quality and risk standards, and then using an iterative or spiral development process to perfect it.
most of them (43 percent) believe that security issues restrict their ability to leverage a global sourcing strategy. Certainly for defense companies, issues of security and security clearances present obstacles to the ready use of non nationals in critical areas of development. In the commercial space, however, we believe that getting the global sourcing operating model right is crucial. We find that innovation is occurring today in how companies piece together the different components of that operating model. To high performers, global sourcing is not just about offshoring to one lowcost location. Its about blending onsite, offshore and nearshore capabilities, supported by industrialized methods and delivery capabilities, strong leadership and communications, and effective change management. Kevin Smith of Pratt & Whitney Canada, for example, notes that his company is moving to source work globally in several critical areas to ensure they can
Expand the organization and operating model to accommodate global sourcing wherever possible
Increasing numbers of companies from multiple industries have moved to more global sourcing of work and workforcesincluding outsourcingto improve operating efficiency and augment their existing capabilities. Is such a strategy possible in the aerospace and defense industry? We asked our survey participants about their companies plans for alternative sourcing options to meet their future business needs. (See Figure 11.) Although 37 percent are currently pursuing either global sourcing or outsourcing, and another 20 percent are considering it,
protect margins. We used the economic downturn, says Smith, to actually put ourselves in a stronger position as the economy comes back. We are increasingly leveraging a global workforce supply base as part of our other initiatives to drive down costs, including lean manufacturing. Pratt & Whitney recently made the decision to transform all its manufacturing facilities into centers of excellence. Also, says Smith, the company is moving to outsource business processes such as finance and HR, and to source certain engineering tasks in locations such as India and Poland.
Figure 11. Survey responses: Will your company pursue global sourcing and outsourcing to meet your future business needs?
43%
Currently pursuing
37%
17%
3%
31
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That mindset, in turn, creates presumptions about what skills are needed to succeed in the future, where talent is sourced, what kinds of leaders are necessary, the cultural attributes encouraged and rewarded, and the organizational structures that dictate how work is performed. These presumptions must be thoroughly understood. A company is, in fact, the sum total of what its people believe, how they work together and how they perform. Influencing and shaping workforce performancein effect, optimizing or maximizing the value of a companys human capitalis a critical challenge facing A&D companies today. This challenge is in part about how to deal with an aging workforce, the scarcity of talent and the difficulties many companies in the A&D sectors have in attracting young people to the industry. But that, as the saying goes, is just the tip of the iceberg.
As we began by noting, A&D companies in North America are now moving into a new competitive eraone requiring the entrepreneurial capabilities required to compete in global markets in a multi-polar world. Economic power is becoming more distributed across multiple areas across the globe, and the talent that companies need to succeed is also increasingly found outside national borders. Can A&D companies continue to innovate at the speed required to compete in this marketplace? The answer to that question, as our research has shown, largely depends on the value of a companys human capital assets. Sourcing and retaining top talent at the right numbers and in the right places is a key part of the equation. Equally important, however, are the leadership qualities, the cultural characteristics and the organization structures that enable workforce talent to attain the performance levels required.
Creating distinctive, differentiated capabilities are essential to achieving high performance in the aerospace and defense industry in the years ahead. The capability that is the hardest to imitate, and therefore more sustainable as a competitive advantage, is the human capital that executes the business strategies required for success in a new era.
Contact us
For more information on how Accenture can help your company drive toward high performance with a comprehensive and integrated human capital strategy, please contact: aerospace-defense@accenture.com
Also contributing
Tammie Pinkston, Ph.D., is an independent consultant focusing on people, process and strategy. She is a former partner at Accenture and serves as adjunct faculty in the MBA program at the University of Georgia. Craig Mindrum, Ph.D., is a strategy, talent management and communications consultant. He is the author of several books including Return on Learning (Agate) and has taught business ethics and leadership at DePaul University and Indiana University.
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Accenture is a global management consulting, technology services and outsourcing company, with more than 181,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.
The Accenture research involved 40 executives in a combination of interviews and surveys. Executives represented various market segments including providers of commercial and defense products and services.
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