LINKING STRATEGY TO EXECUTION Program Performance Management: Increasing Focus and Velocity

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Martin Baldwin
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1 l Program Performance Management: Increasing Focus and Velocity ACCELERATING HIGH PERFORMANCE: TACTICS TOOLS TECHNOLOGY JANUARY 29-31, 2012 NEW YORK MIKE GABALY LOCKHEED MARTIN CORPORATION INFORMATION SYSTEMS & GLOBAL SOLUTIONS ASSET MANAGEMENT GROUP 1

TECHNOLOGY JANUARY 29-31, 2012 NEW YORK MIKE GABALY LOCKHEED

2 ORGANIZATION 2010 Sales $45.8B Aeronautics Electronics Systems Information Systems & Global Solutions Space Systems $13.2 $3.8B B $14.4 $3.8B B $10.0 B $8.2 B 2

3 Not everything that counts can be counted...and not everything that can be counted counts. Albert Einstein 3

4 TRIPLE BOTTOM LINE S O C I A L Sustainability F I N A N C I A L Sustainability Business Plans Strategic Planning Financing / Investment New Initiatives Impact Assessments Social Audits Training E N V I R O N M E N T A L Sustainability 4

Financing / Investment New Initiatives Impact Assessments

5 ROAD MAP Formulate Strategy Operationalize Strategy Build Strategic Alignment Measure Strategic Performance INTEGRATION 5

6 ROAD MAP Formulate Strategy Mission & Vision Clearly define the direction we want to take the business Competitive Environment Understand the environment in which we are competing Our Capabilities Identify required capabilities & areas of competitive advantage INTEGRATION 6

Understand the environment in which we are competing Our

7 ROAD MAP Operationalize Strategy Strategy Mapping Corporate Level; Business Area; Product Line; Program Develop Key Performance Indicators (KPIs) Communications Plan What is our strategy? How are we performing? What is my role? INTEGRATION 7

Performance Indicators (KPIs) Communications Plan What is

8 Contract Management Process PURSUIT: CONTRACT FORMATION CONTRACT AWARD PERFORMANCE CLOSEOUT 8

9 ESTIMATING IS THE FRONT-END BOE Basis of Estimate Fact Finding Final BOE Proposal Pricing and Submittal Negotiations Generate Price Breakdown Fee and Final Price Use for MR & Budgeting 9

10 STRATEGIC V. LONG RANGE PLAN Strategic Plan (SP) Market Assessment Competitive Assessment Gap Analysis Acquisition / Divestiture / JV Candidates What-if? Focus Long Range Plan (LRP) Internal Operating Targets Resource Allocation External Guidance Strategic Plan Explores Alternatives, LRP Establishes Measurement Baseline

Analysis Acquisition / Divestiture / JV Candidates What-if?

NOTIONAL PLANNING CYCLE Strategic Health Assessment Market / Budget Assessment Horizontal Integration Competitive Analysis Senior Management Meeting CEO Guidance Business Area

11 NOTIONAL PLANNING CYCLE Strategic Health Assessment Market / Budget Assessment Horizontal Integration Competitive Analysis Senior Management Meeting CEO Guidance Business Area Strategic Plans Strategic Business Reviews Long Range Plans Long Range Plan Reviews Monthly / Quarterly Performance Reviews Strategic Baseline Strategic Planning Conference Strategic Analysis

Strategic Plans Strategic Business Reviews Long Range Plans Long Range Plan Reviews Monthly

12 BUSINESS DEVELOPMENT PURSUIT & CAPTURE PROCESS Opportunity CAPTURE PROCESS Stand-Up Campaign Pursuit Process Market Development Cont d Development Qualification No Yes Exit Criteria Approach Win Plan Develop the Offering Termination of Capture Program Implementation Transition Closure 12

Development Qualification No Yes Exit Criteria Approach Win Plan

13 Performance Measurement Baseline PMB is a model of the entire program Depicts technical, schedule, and cost elements integrated into a single plan PMB = INTEGRATED TECHNICAL, COST AND SCHEDULE Technical Baseline

cost elements integrated into a single plan PMB =

14 PPMP IMPERATIVE Program Performance Management Process (PPMP) How to plan, monitor and control programs Assigns functional responsibilities Establishes common process Deploys compliant process Promotes the use of predictive metrics Provides management with greater insight into program performance Achieves customer expectations and satisfies contract requirements

compliant process Promotes the use of predictive metrics Provides management with greater

15 ROIC: MEASURING VALUE CREATION SEC Sarbanes/Oxley ROIC

16 ROIC VALUE TREE ROIC Income Investment Revenue COGS Working Capital Fixed Assets Goodwill Orders / Pricing % Complete Deliveries Milestones Services Labor Material Overhead Receivables Inventory Facilities Equipment Systems Acquisitions Where the Desk Meets the Financials

Milestones Services Labor Material Overhead Receivables Inventory

ROIC IMPROVEMENT LEVERS Corporate Actions Company Actions Improve Program Performance Revenue Growth Organic and M&A Lower Taxes Acquisitions Earnings Reduce Unallowables Manage Contracts and

17 ROIC IMPROVEMENT LEVERS Corporate Actions Company Actions Improve Program Performance Revenue Growth Organic and M&A Lower Taxes Acquisitions Earnings Reduce Unallowables Manage Contracts and Subcontracts Pay Down Debt Repurchase Shares Invested Capital Optimize Capital Spending and Manage Fixed Assets Reduce Working Capital Increase Performance Based Milestones and Customer Advances Maximum ROIC Is Achieved Through Management of Both Returns AND Investment Base

Shares Invested Capital Optimize Capital Spending and Manage Fixed Assets Reduce Working Capital Increase

18 QUESTIONS 18

The Program Managers Guide to the Integrated Baseline Review Process

The Program Managers Guide to the Integrated Baseline Review Process April 2003 Table of Contents Foreword... 1 Executive Summary... 2 Benefits... 2 Key Elements... 3 Introduction... 4 IBR Process Overview...