Not Invented Here - Management Techniques

Not Invented Here by David I ShapiroBen didn’t confide his vision to either John or Mona. He was thinking ahead and calling on his creativity to select the right strategy and rationale for the recommended actions. Based on his estimates, he figured that they would lay off between two thousand and twenty-four hundred on this first round. This layoff had to be completed before month’s end or the Division financial performance graphs to Corporate would show a steeper rate of loss. An increase in the slope of the loss curve would not bode well for the new team, even though they had inherited the problem and had only been on board since the first of the month. He wanted to show the loss bottoming out and, in the next three months, start back up toward the zero line.

The other shocker that Corporate and the Aerospace group would get was the Category Report. This was the Division’s sales forecast that identified, on a cumulative basis, the firm contracted business as Category I, and the normal and semisolid follow-on business of the programs in Cat I as Cat II. Cat III was identifiable new business that the Division had proposals in evaluation on, or in process of preparing and a conservative win percentage of these programs total volume. Cat IV was supposed to be a slightly more optimistic percentage of the volume of winning the identified programs they were chasing.

The previous Division management’s Category Report always showed very optimistic Division totals for these categories, having sales growth to the North-North-East at about a forty-degree angle for the next six years. They did this to support their hiring of Overhead and G&A employees before these sales were captured or booked.

The big bucks that they included in their sales forecast for Cat II was another squadron of the Navy Reconnaissance aircraft and additional Stallion aircraft buys by the Air Force. With the data that John was revealing to Ben, he was going to move these into Cat III and IV, and further cut the probability of wins in Cat III. At best, this would cause the sales curve to slope down ten to fifteen degrees toward the southeast. Ben didn’t have the hard data to prove this yet, but he made a mental note to start getting real world intelligence from the customers on these two programs ASAP.

He figured he would get some flack from Dave and Bill about this, but he could have them caveat the forecast with a footnote that indicated that the change was provisional until customer data was validated or the contracts were in negotiation. Also, if in the process they identified other new programs, like the teaming with Gasich Aircraft on the Reconnaissance version of their new Navy Fighter and the International sales of the Stallion, they could look like heroes by changing the sales line back to the north again with real and defensible new programs.

This new forecast would support the continuing layoffs of Overhead and G&A personnel that would be taking place over the next six to eight months. After that, Ben knew that it would take six to nine months to identify new and real sales targets and move them into Cat III and IV.

The name of the game was to balance the direct labor derived from Cat I to justify enough Overhead and G&A people that used these funds for marketing Cat II, III, and IV programs during the interim period. Luckily, the government pre-negotiated yearly rates was based on an industry standard range of Overhead and G&A between 120 – 150% and 18-22% respectively. With the Cat I programs, and lesser percentages for Categories II, III, and IV, and the already surfaced Overhead and G&A disallowance by the DCAA, he had a very tough selling job to do in order to have resources to chase new programs.

Then there was the Divisions Missile Programs. The Cat Report for this Business Area, while a part of the Divisions overall sales forecast, was identified on separate graphs. The VP for this area was not as optimistic on paper as the others. He underestimated the sales volume of the Cat III and IV new business and didn’t have the sales volume high enough for his Cat II on the Smart Bomb he was developing.

Instead of the Smart Bomb volume being higher in Cat II, he had in its place the Navy Air to Surface Missile that they had had in Development Test for the last two years going into production this year. Ben had heard, and John confirmed, that this weapon, with all the fixes that had to be incorporated, had turned from the ‘Silver Bullet’ to the ‘Gold Bullet’, and was now approaching a ‘Platinum Bullet’ image with the Navy. Even at the Gold stage, it would be canceled because the only targets worth hitting with this expensive a weapon required a much larger warhead for payload that cut down the operational range of the carrier aircraft that carried them. Even if you solved the short-range problem, these targets were so heavily defended with countermeasures that you would have to shoot several Platinum Bullets to get one hit – they were not cost effective!

To make matters worse, because the Navy had this in the Development Test stage for so long, the technology caught up and the state of the art passed its original design. The Navy had originally convinced the DOD to allow the Navy to develop this system at MidWest and that both Air Force and Navy tactical aircraft would use this missile as a common weapon. It was the era of ‘let’s develop one common system for all users’ – the buzz phrase being ‘it’s a Purple Suit’ weapon.

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