Secretary of Defense Corporate Fellows Final Report Secretary of Defense Corporate Fellowship Program 2004 - 2005

Secretary of Defense Corporate Fellows

Final Report

Secretary of DefenseCorporate Fellowship Program

2004 - 2005

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Agenda

• Background

• Common Findings/Recommendations

• Individual Experiences (time permitting)

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SDCFP Background

• SECDEF concerns for future Service leaders- Open to organizational and operational change- Recognize opportunities made possible by info tech- Appreciate resulting revolutionary changes underway

Affecting society and business now Affecting culture and operations of DoD in future

• Businesses outside DoD successful in:- Adapting to changing global environment- Exploiting information revolution- Structural reshaping/reorganizing- Developing innovative processes

4


SDCFP Organization

• Two officers from each Service- High flag/general officer potential- O-6 or O-5- Senior Service College credit

• Group Education- Current political/military issues;leading edge technologies - Meetings with senior DoD officials, business executives, Members of

Congress, the press, former sponsors, alumni- Graduate business school executive education

• Eleven months at Sponsoring Company• Permanent Staff

- SDCFP Director, Admin Assistant- Net Assessment for oversight- National Defense University for Admin support

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SDCFP Sponsors

• 1995 - 2004– 3M, ABB, Accenture, Agilent Technologies, American

Management Systems, Amgen, Boeing, Cisco, DirecTV, DuPont, Enron, FedEx, General Dynamics, Hewlett-Packard, Human Genome Sciences, IBM, Lockheed Martin, Loral, McDonnell Douglas, McKinsey & Co., Merck, Microsoft, Mobil, Netscape, Northrop Grumman, Oracle, Pfizer, PricewaterhouseCoopers, Raytheon, Sarnoff, Sears, Southern Company, Sun Microsystems, United Technologies

• 2004-2005– 3M, Caterpillar, Cisco, Hewlett-Packard, Honeywell, Lockheed

Martin, SRA International

• 2005 – 2006– FedEx, Insitu Group, Johnson & Johnson, Raytheon, Southern

Company, Sun, Symbol Technologies, United Technologies

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SDCFP Results

• Program objectives fulfilled- Education

- DoD, Individual officers, Sponsors- More Sponsors than Fellows available- Intra-group experience sharing

• Unique corporate experience- Strong corporate support - Executive/operational level mix- Mergers/restructuring

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SDCFP Products

• Build a cadre of future leaders who:– Understand more than the profession of arms – Understand adaptive and innovative business culture– Recognize organizational and operational opportunities– Understand skills required to implement change– Will motivate innovative changes throughout career

• Report and Briefings directly to SecDef, others– Business insights relevant to DoD culture/operations– Recommended process/organization changes


“And we must transform not only our own forces, but also the department that serves them by encouraging a culture of creativity and intelligent risk taking. We need to promote a more entrepreneurial approach to developing military capabilities, one that encourages people—all people—to be more proactive and not reactive, to behave somewhat less like bureaucrats and more like venture capitalists…”

Secretary of Defense Donald Rumsfeld

Remarks to The National Defense University

31 January 2002

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2004 - 2005 Fellows

• Col John Clark Lockheed Martin CorporationDallas, TX

• Col Scott Vander Hamm 3M CompanySt. Paul,

MN• CAPT Mark Rich Honeywell International, Inc.

Columbia, MD• LTC(P) Dennis Slagter SRA International, Inc.

Fairfax, VA• Col (S) Ed Wilson Cisco Systems, Inc.

San Jose, CA• CDR Mike Murphy Hewlett-Packard Company

Reston, VA• Lt Col Howard Parker Caterpillar, Inc.

Peoria, IL

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Agenda

• Background



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Two Distinct Cultures…

Corporate America• Profit and growth

• Market centric/customer focused

• Cost conscious (profit/loss) culture

• “Street”/competition drive urgency

• Ruthless advocate for efficiency

• Continuously reinventing tech base

DoD• Mission accomplishment

• Service centric

• Spend culture

• Politics/budget/ops drive urgency

• Tenacious advocate for warfighter

• Develop in blocks and spirals

...with Best Practices to Share

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Framework

Over time, the most successful organizations achieve world-class results across key areas in an integrated manner

Technology

ENABLING TECHNOLOGIES

* Framework adapted from What Really Works, Joyce, Nohria & Roberson

EXECUTION• Consistently meet expectations

• Empower workforce

• Focus on continuous improvement

ORGANIZATION & CULTURE• Fast, flat, flexible organizational structures

• Performance & innovation oriented

• Sharply communicated company values

TALENT• Recruit, retain, develop top talent

• World-class training & education

• Reward top performers

STRATEGY• Clear, focused, growth-centric

• Anticipate change (competitive landscape)

• Core vs unrelated business areas

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EXECUTION

STRATEGY

ORGANIZATION & CULTURE

TALENT


* Adapted from What Really Works

Where Great Companies Put their Emphasis

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Strategy

• DoD Relevance– Increasing customer value in the requirements process– Clarifying and focusing the budget cycle – Anticipating changes in the security environment– Increasing returns on R&D investments

• Recommendations- Apply marketing methodologies to requirements development - Manage anticipated changes in the security environment - Review and manage “core” capabilities

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Strategy

• Observations– Why Marketing?

Not selling – deciding what to sell to whom Define the business, segment the market, ID target segment, develop value

proposition and go-to-market plan Requires & enables true understanding of the customer & competition

– Industry tools get at “customer value” Feature/Benefit/Value relationship Voice of the Customer, Employee Satisfaction, Customer Strategic Review,

data analysis tools, application methodology

• DoD should– Apply Marketing methodology to Service Requirements processes

• Understand stakeholder relationships, interdependencies better• Increased Requirements specifications fidelity• Increase Requirements process value • Promote transparency between Services

Apply Marketing Methodologies to Requirements Development

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• Observations– Corporate mindset to be alert for market transitions– Change usually begins on the edges – Stable investment streams important – Industry moving to outcome based research investment process

Interdependent vice individual projects prioritized Business outcome driven ~ effects based decision-making Industries with similar decision criteria benchmarked

• DoD should– Accommodate DoD’s broader focus, different time horizon– Increase Return on (R & D) Investment (ROI)

Stay committed to & stabilize long-term R&D funding Apply Marketing processes to ACTD process Apply Six Sigma tools & methodology to R&D investment decision processes Benchmark industry leaders

Strategy

Manage Anticipated Changes in the Security Environment

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Strategy

Review & Manage “Core” Capabilities• Observations

– Corporations constantly adjust to changing environment Leverage transition periods for competitive advantage

– In-house, outsource, or out-task decisions Core or context (relative to business) gap evaluation Mission critical or non-mission critical evaluation

• DoD should– Review Command/Service/Agency capabilities

Assess processes - core vs context – Apply Build/Partner/Acquire decision to core/context evaluation

Build to close gaps in core mission critical capabilities Acquire (outsource) non-core where capability exists affordably Partner (out-task) where gaps are common or cost-prohibitive

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EXECUTION

STRATEGY


TALENT




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Execution

• DoD Relevance- Flawless execution = mission success- Supporting troops, meeting needs of combatant commanders- Quest for excellence in all areas– Eliminating waste frees dollars for critical priorities

• Recommendations- Improve Information and Supply Chain Management– Adjust Acquisition Reform– Implement process improvement methodology

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• Observations- Ops, Info Management, Supply Chain Management converging

• IT no longer a “support tool”- Information is the business

• Supply Chain Management vital to operational success

• DoD should- Push convergence - Navy N6 (C4I)/N7(Requirements) good example- Strengthen DoD CIO’s role- DoD-wide IT architecture stds that encompass entire operational scope- Continue Supply Chain improvement implementation

• Cross service collaboration of best practices

Execution

Improve Info and Supply Chain Management

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Execution

Adjust Acquisition Reform

• Observations- Corporate America believes Acquisition Reform on track, but…

• Pendulum has swung too far in some areas

• DoD should- Make Quality Assurance part of the contract; not assumed

• Mandate First Article Inspections and physical configuration audits - Both sides determine what is “good enough”

• Larger role for DCMA in Tier II/III risk management and quality control - Better quality from Subs/Suppliers to Primes

- Require subcontractor, supplier management plan from Prime - Continue to foster closer partnerships with industry

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Execution

Implement Process Improvement Methodology

• Observations– Corporations adapt to change in disciplined manner

• Common language, common metrics

• 4-6 year commitment required for organizational DNA change – Top level support imperative– Change driven by change agent teams– Annual budget savings of 2–3 %

• DoD should- Develop / implement a formal process improvement methodology

• Dedicated fully resourced effort

• Eliminate inefficiencies and improve process quality

• Teach in leadership training and at all levels of PME

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EXECUTION

STRATEGY


TALENT




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Talent

• DoD Relevance– DoD OPTEMPO can stress service-level manning– DoD must compete for talent with private industry– DoD’s NSPS applies some of private industry’s best practices– Private Industry focus on execution is the “bottom line”

• Recommendations- Increase leader stability and continuity- Continue focus on leader development- Develop management skills as a core competency

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• Observations- CEOs emphasize importance of senior leader commitment to

change- Leader continuity is key to winning business strategies of:

• Agility and adapting to market place changes• Creating a culture for change and transformation• Constantly communicating organization’s values and vision

• DoD Should- Increase tour lengths for key leaders (military & civilian)- Recognize and reward all players on the team (line & staff) equally- Drive performance improvement for GS ranks

• Institutionalize incentives for top performers• Improve or out

Talent

Increase Leader Stability and Continuity

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• Observations- Emerging focus in Industry- Industry lacks “up or out” pressures- Industry constrained by individual mobility options- Team based and collaborative across boundaries - Often involves mentoring by senior leadership (imprints subordinates)

• DoD should- Partner with Industry for leadership exchanges at junior officer levels- Leverage early successes from NSPS across the Services quickly- Develop short-duration leader training programs- Continue leader development training investment; even during GWOT

Talent

Continue Focus on Leader Development

“We needed to excite the talented middle in our ranks” – 3M Executive

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• Observations- Corporations emphasize both leadership & management - Flawless execution is the key to achieving “bottom line” growth- Metrics, process improvement, instrumentation are best practices- DoD emphasizes leadership over management skills…rightly but

balance may help

• DoD should- Recognize that both skill sets are complementary- Incorporate executive MBA training into existing education programs- Outsource management training- Build a bench of management excellence outside of acquisition field

Talent

Management (not just leadership) a Core Competency

“What’s important? How well your machine works and how well you relate to others” – Lockheed Executive

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EXECUTION

STRATEGY


TALENT




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Organization & Culture

• DoD Relevance– Importance of strong core values– Simplify – ability to eliminate redundant organizations– Keep raising the bar – reward achievement with praise & pay– Harness innovation as catalyst for transformation efforts

• Recommendations - Continue strong emphasis on core values- Institutionalize disciplined change management- Drive cost conscious vs. spend culture

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Continue Strong Emphasis on Core Values

• Observations- Pervasive commitment to doing the right thing for customers

• Ethical standards, honesty, trust, quality

- Dedicated members in our Nation’s defense- Strong commitment to corporate citizenship…globally

• DoD should - Continue strong support to Services for core value efforts

• Invest in DoD’s success, as well as our Nation, by exporting core values• Increase visibility to public sector


“There’s never a right way to do something wrong.” – SRA Int’l Executive

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Institutionalize Disciplined Change Management• Observations

- Successful corporations adapt to change• Disciplined part of enterprise processes• Constantly learning at all levels of the organization• Understand remaining static is not an option due to competition

- Successful change management requires• People, process, technology…in this order• Leadership commitment & ability to communicate vision & strategy• New approaches anchored in the corporation’s culture

• DoD should- Leverage common Process Improvement methodologies- Continue broad-based improvement actions

• Eliminate regulation, policy, organizational, etc., obstacles

- Identify and measure key performance metrics


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Drive Cost Conscious vs. Spend Culture

• Observations- Corporations focus on cost reduction- Process improvement methodology (Lean, Six Sigma)

• Lower costs, increased productivity

- Performance-based compensation• Tied to increased profits• 10-60% of total, depending on pay grade

• DoD should - Incentivize commanders at all levels to control costs

• Allow unit savings to be used locally - mission, QoL, etc.• Unit working capital funds appear a ready-made solution• Goal-based approach most successful

-Strategically aligned, clearly communicated, routinely reported

- Include cost savings In performance appraisals• Focus on Total Cost of Ownership (TCO) when assessing alternatives


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EXECUTION

STRATEGY


TALENT




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Enabling Technologies

• DoD Relevance– Large, diverse enterprises require the right tools– IT tools changing work environment, individual expectations– Interface with industry/allies requires interoperable IT/other tools

• Recommendations- Leverage emerging work-support technologies- Use standard, electronic organizational processes- Optimize facilities for the future environment

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• Observations - Advanced IT accelerating virtual collaboration, matrixed teams- International diversity key to success, yet remains challenging- High technology corporations cultivating a culture of empowerment- Complete network access driving strong work ethic (50-80 hrs/wk)

• DoD should- Use mobile/wireless technologies to increase productivity- Adopt telecommuting guidance, virtual collaboration tool standards- Continue transformation to Internet-based solutions

Leverage Emerging Work-Support Technologies


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Use Standard, Electronic Organizational Processes

• Observations- Several high tech corporations have made transition to “paperless”- Strong productivity gains by developing paperless processes

• Not just duplicating paper forms on-line

- Broad application to operational and support organizations • Travel planning, reservations, vouchers, etc.• Human Resource activities (job openings, performance ratings)• Meeting scheduling, agendas, conduct, follow-up

• DoD should - Implement paperless processes wherever possible- Implement virtual, collaborative processes

• Process first, then technology solution“If it isn’t on the web, people don’t take it seriously…” – Cisco Sr. Director


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• Observations- Fusion of wireless voice, data, & video; collaborative workspaces

•Drives more careful facilities management

- Creative workspaces can increase productivity, generate savings•Small mobile team concepts

• DoD should- Ensure facilities planning includes entire requirements spectrum

• Present and future; especially communications and power

- Implement flexible workspace utilization modes•Small team staff and back office organizations

- Acquisition offices, PME, headquarters staff, etc.

Optimize Facilities for the Future Environment


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• Advanced Video Conferencing Technology• Natural Language Processing • Radio Frequency Identification (RFID)• Internet Protocols

– Voice Over IP (VOIP)– Blackberry wireless VOIP

• Identity Management • Hyperspectral imagery • Storage Area Networking (SAN)• Broadband into the home• Instant Messaging / Chat• Virtual Modeling and Simulation• ePaper• Multi-layer film Laser protection• Electronic Dashboard (for metrics measuring)

Specific Technological Opportunities

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Summary of Recommendations

• Strategy- Apply marketing methodologies to requirements development - Manage anticipated changes in the security environment - Review and manage “core” capabilities

• Execution– Improve Information and Supply Chain Management– Adjust Acquisition Reform– Implement process improvement methodology

• Talent- Increase leader stability and continuity- Continue focus on leader development- Management (not just leadership) is a core competency

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Summary of Recommendations

• Organization & Culture- Continue strong emphasis on core values- Institutionalize disciplined change management- Drive cost conscious vs. spend culture

• Enabling Technologies- Leverage emerging work-support technologies- Use standard, electronic organizational processes- Optimize facilities for the future environment

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Agenda

• Background



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Lockheed Martin Corporation

• World's largest defense contractor– 132K employees (85K scientists and engineers)– $35.5B 2004 sales, $73B backlog, $2.9B cash– Main business segments

Aeronautics, Electronic Systems, Space Systems, Integrated Systems and Solutions, and Information &Technology Services

• Corporate Strategy: Disciplined growth to increase shareholder value– Operational performance and customer satisfaction as top priorities– Consistent financial performance including strong cash flow– Focus on profitable growth in core markets (DOD, Homeland Security, IT)

• Assignment: President, Missiles and Fire Control business area– Strategic plans and PAC-3 program office

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Observations (LM)

• LM employees: Dedicated members in our nation’s defense

• Strategy: Clearly stated & focused on customer value– IR&D, Shared Vision, Lab insertion

• Execution: Flawless operational execution – Executive leadership Council, rigorous metrics, cost consciousness,

– Lean/Six Sigma

• Culture: Performance based, firm commitments, ethical

• Structure: Matrix org -- Fast, flexible, and flat

• People: recruit, retain, reward, and develop leaders– Intern program, development programs, pay linked to performance

• Innovation: 30% IR&D invested in new tech -- passion for invention

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Recommendations (LM)

• Ensure sufficient funds for Contract R&D through labs, DARPA• Review core competencies and reduce duplication and redundancy• Continue to aggressively pursue outsourcing opportunities• Implement a formal process for process improvement• Management skills are as important as leadership skills

– Incorporate executive MBA training in our PME

• Encourage commanders to save resources and manpower– Provide incentives to save $$$ and measure on performance reports– Transform from a spend culture to a cost conscious culture

• Institute a formal mentorship program for scientists and engineers• Focus on stabilizing key leadership positions to drive transformation

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DOD Acquisition

• Program stability is key to delivering a successful program

• Acquisition reform receives high marks but need to add:– Physical Configuration Audits and First Article Inspections

– Improve communication w/ industry while protecting proprietary data

• Knowledge Transfer major issue with ageing workforce

• Supplier base demands a great deal of LM’s attention – COTS, parts obsolescence, quality controls create supplier issues

– Make subcontractor and supplier management plan part of bid

• Benchmark DCMA’s risk assessment for LMMFC programs

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• Innovative Diversified Technology company– Revenues $20.1B (61% international)– 67K employees (51% international)– Operations in 60+ countries; products sold in 200+

• Seven businesses; 40 units– Health Care– Industrial – Display and Graphics– Consumer and Office– Electro and Communications– Safety, Security, and Protection Services– Transportation

• Corporate Strategy

Delivering solid, consistent profit growth, driven by organic top-line growth and continuous improvements in operational efficiency

• Assignment - Six Sigma Operations– Black Belt, Master Black Belt, Design for Six Sigma Champion

3M Company

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• Six Sigma driving results in cost, cash, growth– Common language, established channels, measured performance

• Aggressive business initiatives optimize processes– Six Sigma– e-Productivity– Global Sourcing– Global Business Processes– 3M Acceleration– $1.7B combined Operating Income impact of five initiatives since inception

• Entrepreneurial Leadership– Utilizing Six Sigma and leadership development opportunities– Performance management focus– Stretch assignments– Top management engagement in growth

Observations (3M)

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• Deploy a DoD process improvement discipline similar to Six Sigma– Top level support– Beware superficially applied, under-resourced “quality programs”– Common language, common metrics

• Leverage DoD size in “back room” processes

• Incorporate Radio Frequency Identification (RFID) technology– Where 100% accountability is critical – Medical, Personal Reliability Program (PRP), logistics, intel

• Partner with the services to provide comprehensive DOD solution to protecting cockpits, tanks, and vehicles with multi-layer film to protect eyes from outside lasers

• Consider synergy of establishing joint labs, acquisition offices, joint requirements offices, joint research and development organizations

Recommendations (3M)

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Honeywell International Inc.

• Fortune 100 Company– $25B sales, $31B market capitalization– 108K employees in nearly 100 countries– Business segments

Aerospace Automation and Control Solutions Transportation Systems Specialty Materials

• Corporate Strategy – “Five Initiatives” to drive success– Growth, Productivity, Cash, People, Enablers (DigitalWorks & 6+)– Principal interrelated key processes

Strategic Planning Process (STRAP) for direction Annual Operating Plan (AOP) for budget Management Resource Review (MRR) for people

• Assignment - Honeywell Technology Solutions, Inc (HTSI)– Aerospace Sector, Aerospace Electronic Systems– Business Development & Military Segment

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Observations (Honeywell)

• History and heritage– AlliedSignal & Honeywell merger– New CEO in 2002 brought Five Initiatives

• Globalization– Expanding overseas, going where the customers are

• Functionalization– Engineering, HR, IT, Program Management, Supply Chain

• Marketing Transformation– Deeper understanding of customers & competitors

• HTSI – Focusing on growth– Organizational realignment– Government Services division of a product-centric company

Return on Investment (ROI) vs. Return on Sales (ROS)

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Observations (Honeywell)

• Honeywell (AlliedSignal) leader of Six Sigma– Senior leadership buy-in– Across entire business (organization)– Dedicated resources– Best people in Six Sigma billets– Efforts linked to critical needs– 6+ includes Six Sigma, Lean, Design for Six Sigma

• Functionalization key to flattening the organization

• Key issues for Honeywell / HTSI– Driving profitable growth

Changing environment– Integrating the sectors, segments and businesses

Cross-Honeywell strategy, product pull-through, joint initiatives– Mindset

Conservative approach Prime or sub dilemma

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SRA International

• A Fortune “100 Best Company to Work For” - Winner for last 6 years; 4,100 employees nation-wide- 2004 Revenues: $615M / 2005 Projected: $850M- Growth from 2003 to 2004: 49%- Company founded by a McNamara Whiz Kid (USAF Colonel)

• Corporate Strategy- Provide IT Services & Solutions to Federal Government only- 65% DoD/DHS; 35% Civil Government- Hire employees “for a career”- Innovation in C3I and Data/Text mining

• Assignment- Defense Sector x 3 months (Business Unit / Project Level)- Civil Sector x 5 months (Sector / Senior VP level)

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Observations (SRA)

• Corporate Strategy working thru…- Selective acquisitions based on “values”; not just “of value”- Internal investments in explosive external growth- Development of horizontal expertise to increase agility - Persistent and insistent adherence to SRA Culture & Values

• Corporate Execution focused on…- Genuine desire to add value for the customer…ethically- Reaching for higher purpose goals (national interests)- Caring for their people who provide the “services”

•Evidence?- 80% win rate on new contracts; 90% on re-competes- Less than 12% personnel turn-over rate- Demonstrated willingness to “invest $” to maintain customer

satisfaction- Employee incentives found at all levels of the company

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Recommendations (SRA)

• Transformation- Change is occurring and will continue in DoD- Rapid change requires incentives- Effective change requires focus

• Industry focuses on…- Helping DoD identify its requirements and solutions- Incentives for their people- Being agile and responsive- Investment in internal growth and processes

• What can or should DoD learn from industry?- Investments in people + Incentives for people = Rapid Transformation

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Cisco Systems Inc.

• Global leader in Internet innovation, equipment, services– Revenue $23B; profit $15B (+ $6.8B cash)– Market Capitalization $132B (2:1 WRT top 11 competitors combined)– 35K employees worldwide ($657K profit/employee)– Primary business segments

Core - routers & switches Advanced Technologies - Voice over Internet Protocol (VOIP), optical, wireless, etc Service Provider - tech support, manufacturing, training, etc

• Corporate Vision - “Changing the way we work, live, play and learn”– Unprecedented value & opportunity - Cisco synonymous with productivity– Customer partner status - technology + business success = trust– Network evolution leader - End-to-End Net of Nets Intelligent Network– Expand, grow Advanced Technologies - 4 new business areas $2B, 8 $1B – Drive quality, security, systems, processes into culture

• Assignment: IT/Infrastructure Business Practices– Program management improvements– Strategic planning initiatives

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Observations (Cisco)

• Strategy: Pioneer use of Internet for all business activities– Generate 95+% of sales via www.cisco.com website ($40K/minute) – Showcase internal IT Internet solutions revenue generation

• Execution: Build, acquire, partner – Leader in business acquisition 90+ companies in last 10 yrs– ~1,000 new employees/month over 3 yr period in late ‘90s

• Organization: Empowerment via virtual collaboration, matrixed teams– International diversity key to success; remains challenging– Reward success (top 20%)– Aggressively manage poor performance (bottom 5%)– Actively build consensus (recurring 1:1s); use 360 degree feedback sessions

• Culture: Intense organizational commitment to “Cisco Culture”– Customer success, innovation, stretch goals, integrity, corporate citizenship– Complete network access drives strong work ethic (50-80 hrs/wk typical)

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Recommendations (Cisco)

• Continue transformation to Internet-based business solutions– Leverage corporate investment in robust IT foundation & lessons learned– Virtual collaboration holds potential for rapid change at all levels– Drive towards increased info accessibility/availability

Balance with info security

• Strengthen (potentially elevate) CIO role within DoD organization– Enable stronger partnerships with tech industry leaders – Provide focal point for spending authority, interoperability, standardization– Potential to leverage lower cost, overseas solutions

Balance with procurement regulations, security, Congressional oversight

• Assess benefit of proactively identifying/separating low performers– Build strong incentives for higher performance – Additional tool to manage reductions in force when required

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Hewlett-Packard Company

World’s leading consumer and small/med business IT company– $80B Sales (#11 on Fortune 500)– 152K employees worldwide– Business segments

Imaging & Printing Personal Computing Enterprise Systems HP Services

Corporate strategy - Increase value through growth & innovation “Reliable innovation at a price our customers can afford,

delivered with an experience that sets us apart. We deliver high tech, low cost and best customer experience”

● Assignment - VP Federal Sales

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Observations (HP)

• Much of the “HP Way” remains intact– Left to themselves, employees will do the right thing– Departure of CEO Fiorina had cultural overtones

• Similar to US Services – Size, worldwide reach, team diversity– Challenges

Employee integration Team building Communication and horizontal integration

• Acquisition of Compaq– Resembles integration of US Services in joint environment

CNO has had this discussion with HP CEO

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Observations (HP)

Commitment to doing the right thing for the customer is pervasive

– Historically, no aggressive lobbying or direct attacks

Share of direct business with DoD relatively small– Plan for public sector growth being debated internally

Strong commitment to global citizenship– More than traditional philanthropy (not just writing checks)

New CEO is much more hands-on, operationally oriented– Well-received by analyst community and by employees

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Caterpillar Inc.

• World’s largest heavy equipment producer – Construction equipment– Mining equipment– Natural gas engines– Industrial gas turbines– Diesel engines

• Heart of Illinois - Peoria– $30.25B sales; $2.03B profits – 77K + employees (38K U. S.); 198 dealers worldwide– Main business segments: Machinery, Engines, Financial Products

• Professional corporate culture– Steeped in Midwestern values; grows own leaders– Positive work environment - trust, quality, community involvement – Ethical standards and honesty in dealing with customers

• Assignment– CAT Logistics VP, Human Resources Division

Strategic projects in leadership training, recruitment, employment, retention– Operations Area next

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Observations (CAT)

• Cat employees - dedicated, innovative and professional. – Relationship with company characterized as “Partnership”; Very Patriotic

• Strategy - articulated top down; executed bottom up– Focused on 3Ps

Profitable growth, Performance through Six Sigma and People

• Execution: Operational excellence in all areas – Involved senior leadership

• Professional corporate culture – Positive work environment-trust, quality, community involvement– Ethical standards and honesty in dealing with each other and customers

• Structure - Matrix org w/ 26 business units• People

– Diversity focused; getting “right people on the bus” is corporate critical success factor

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Recommendations (CAT)

• Deploy Six Sigma or similar process improvement methodology for elimination of inefficiencies and process quality improvements

• Conducted “top to bottom” force structure review to ensure we are getting right people with rights skills to meet future challenges

• Conduct comprehensive pay study to close pay gap with civilian sector• Restructure benefit packages• Adapt Shared Services Model; focus on core functions/enablers• Conduct study to assess implementing Behavior Based Safety

Methodology

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Backup

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MEF/CCCAG/CC

Key Roles: Six Sigma Organizations

Six SigmaDirector

Six SigmaDirector

Service Chief

MAJCOMCC

Unified Commanders

Post CC

Functional Leader

BB

MBBBB

BB

CFACC/CFLCC/CFMCC

Wing CC

Base CC

BB

MBBBB

BB

NAF CC

Corps CC

Functional Leader

Six Sigma Operations

GBGB

GBGB

DOD / Joint Director

Champions

Six Sigma Personnel

Green Belts

Black Belts

KEY

Direct Report

Matrix

Execution

Documents

Secretary of Defense Corporate Fellows Final Report Secretary of Defense Corporate Fellowship Program 2004 - 2005