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

LINKING STRATEGY TO EXECUTION

Program Performance Management: Increasing Focus and Velocity

CORPORATE PERFORMANCE MANAGEMENT CONFERENCE

ACCELERATING HIGH PERFORMANCE: TACTICS…TOOLS…TECHNOLOGY

JANUARY 29-31, 2012 – NEW YORK

MIKE GABALY

LOCKHEED MARTIN CORPORATION

INFORMATION SYSTEMS & GLOBAL SOLUTIONS

ASSET MANAGEMENT GROUP

l

CPM

ORGANIZATION

2010 Sales $45.8B

Information

Systems &

Global Solutions

Electronics

Systems

Space

Systems

Aeronautics

CPM

Not everything that counts can be counted

...and not everything that can be counted counts.

CPM

E N V I R O N M E N T A L

Sustainability

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

CPM

Formulate Strategy

“Operationalize” Strategy

Build Strategic Alignment

Measure Strategic Performance

ROAD MAP

CPM

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

ROAD MAP

CPM

“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?

ROAD MAP

CPM

Contract Management Process

CLOSEOUT

PERFORMANCE

CONTRACT

AWARD

PURSUIT:

CONTRACT

FORMATION

CPM

ESTIMATING IS THE FRONT-END

Fact Finding

Fee and

Final Price

Negotiations

Proposal Pricing

and Submittal

BOE

Basis of

Estimate

Final BOE

Generate Price

Breakdown

CPM

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

CPM

Long Range Plan

Reviews

Monthly / Quarterly

Performance Reviews

Strategic Planning

Conference

Senior

Management

Meeting

Business Area Strategic

_Plans

Long Range

Plans

Strategic

Baseline

CEO Guidance

NOTIONAL PLANNING CYCLE

Strategic

Business Reviews

Strategic

Analysis

Strategic

Health Assessment

Market / Budget

Assessment

Horizontal

Integration

Competitive

CPM

BUSINESS DEVELOPMENT PURSUIT

& CAPTURE PROCESS

CAPTURE PROCESS

Program

Implementation

Qualification

Yes

Exit

Criteria

No

Market

Development

Pursuit

Process

Opportunity

Cont’d

Development

Approach

Develop

the

Offering

Win

Plan

Stand-Up

Campaign

Closure

Termi

na

tio

n of C

ap

tur

e

CPM

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

CPM

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

CPM

ROIC

Sarbanes/Oxley

SEC

CPM

ROIC VALUE TREE

Orders /

Pricing

% Complete

Deliveries

Milestones

Services

Labor

Material

Overhead

Receivables

Inventory

Facilities

Equipment

Systems

Income

Investment

Where

the

Desk

Mee

ts

the

F

in

an

cia

ls

Revenue

COGS

Fixed

Assets

Goodwill

Working

Capital

Acquisitions

ROIC

CPM

ROIC IMPROVEMENT LEVERS

Maximum ROIC Is Achieved Through Management

of Both Returns AND Investment Base

Company Actions

Reduce Unallowables

Manage Contracts

and Subcontracts

Optimize Capital Spending

and Manage Fixed Assets

Increase Performance

Based Milestones and

Customer Advances

Lower Taxes

Acquisitions

Invested Capital

Repurchase

Shares

Reduce Working Capital

Earnings

Pay Down Debt

Improve Program

Performance

Revenue Growth –

Organic and M&A

CPM