building strong process management capabilities - … on building strong process management...

Building Strong Process Management Capabilities

©2012 APQC. ALL RIGHTS RESERVED.

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Case Study: Northrop Grumman Aerospace Systems

ORGANIZATION OVERVIEW Virginia-based Northrop Grumman Corp. (Northrop Grumman) enables national defense through the systems, products, and solutions it delivers to its clients. In 2011 Northrop Grumman reported $28 billion in sales, had a $47 billion backlog of orders, and conducted operations in all 50 U.S. states, as well as in 25 countries around the world. As an organization, Northrop Grumman is an amalgam of historical American defense contractors including Northrop, Westinghouse, Grumman, TRW, Ryan, and Litton. These legacy organizations provide the basis for Northrop Grumman’s current operations in four distinct operating sectors: aerospace systems, electronic systems, information systems, and technical services.

Each operating sector functions independently of the others but is led by and centrally reports to Northrop Grumman corporate. The operating sectors share some centralized resources including process models, policies, and procedures, although the corporate mandated items are a relatively small portion of the whole. From a customer perspective, the units also work together to develop bespoke “exquisite” systems to meet the demanding needs of their customers. These systems are massive and include technology from a variety of domains. For example, consider a system that involves a soldier on the ground with a handheld unit that communicates with a satellite to receive video from unmanned aircraft providing reconnaissance for that soldier. These types of products may involve technology from all four operating sectors working in unison.

Northrop Grumman’s continued growth and maturity have been recognized by Aviation Week & Space Technology (AW&ST) in its annual survey of defense contractors. Northrop Grumman continues to steadily move up the AW&ST’s annual ranking score based on improvements to return on invested capital, earnings momentum, asset management, and financial health. Northrop Grumman’s improvement in the AW&ST rankings are enabled by continued maturity of process management capabilities in its operating units.



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Northrop Grumman Aerospace Systems (NGAS) is an operating unit of Northrop Grumman. NGAS is headquartered in Redondo Beach, Calif., and it focuses on unmanned systems, military aircraft systems, space systems, and advanced programs and technology critical to the nation’s security. In 2011 NGAS reported sales of $11 billion supported by nearly 22,000 employees. This case study’s site visit location, the Palmdale Manufacturing Center, has 2,973 employees who primarily support services in engineering, production, and program depot maintenance (PDM). All Palmdale operations are conducted in a government-owned, contractor-operated (GOCO) facility. NGAS’s contribution to Northrop Grumman’s success comes mainly from its focus on building strong process management capabilities. These capabilities result in improved performance, reduced inefficiencies, and a level of agility typically not seen in such a large organization.

CAPABILITIES TO ESTABLISH PROCESS MANAGEMENT If it were its own entity, the NGAS sector of Northrop Grumman would place about 220 on the Fortune 500 list. NGAS not only manages its own processes—something many large organizations struggle with—but it must also integrate with corporate Northrop Grumman policies, processes, and procedures, as well as work closely with its peer operating sectors, customers, suppliers, and business partners.

NGAS, as it exists today, began in 2008 with a reorganization of Northrop Grumman’s aircraft and space sectors. Although created in 2008, the roots of process management in each of these sectors date back at least to 1975—the early days of the quality improvement era (Figure 1). Process management capabilities evolved through the years based on investments in process improvement, process models, and tools and technologies. These investments occurred independently at various Northrop Grumman operating sectors.



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Historical Development of Process Management Capabilities along

Organizational Boundaries

Figure 1

Although worthwhile in separate sectors, the expense of managing separate process management systems had to be reconciled and, in some cases, revamped in 2008 with the creation of NGAS. NGAS had to develop capabilities to reconcile more than 30 years of process management capabilities from within; it also had to develop capabilities to successfully acquire and integrate external organizations required to achieve strategic objectives.

NGAS now competes with new market entrants that are typically much smaller and more agile competitors that can reorganize quickly to meet changing customer requirements. These entrants are enabled by their abilities to customize traditional Department of Defense products on a global scale while exploiting commercially available components or by specializing in product solutions created in an innovative and nimble fashion. This change in paradigm challenges decades of norms in the marketplace for defense procurements. NGAS customers are reacting favorably to these new market entrants, so NGAS is forced to compete with these new small-scale manufacturers.



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The maturity of the ecosystem in which NGAS operates is a significant driver for its current state of process management capability. This ecosystem—consisting of competitors, customers, suppliers, and employees—has matured to the point that business management processes can offer a strategic competitive advantage.

To meet customer challenges in this environment, NGAS created an affordability function. Aligned with its traditional process management organization and titled Affordability, Competitive Excellence, and Knowledge Management (ACEKM), this function enables NGAS’ success through integration and collaboration of its internal resources. The function is divided into four functional focus groups (Figure 2) with cross-functional representation in each business sector. These groups provide expertise and capabilities through the business area representatives to individual business areas in NGAS. This matrix structure enables NGAS to benefit from a wide variety of process management capabilities with minimal duplication of efforts.

Affordability Function Relationship Map

Figure 2



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The ACEKM function represents the central part of NGAS responsible for process management. Most of the process management capabilities of NGAS are associated with the “Process Management” section, although the “Competitive Excellence” section addresses the Lean and Six Sigma aspect of process improvement activities.

The ACEKM function traces its history back to the traditional functional silos that exist in most organizations (Figure 3). At its inception, process managers from what would become NGAS struggled in isolation from their lack of integration with the business process architecture. As time progressed, Northrop Grumman leadership launched initiatives that included activity-based costing (2003), value stream identification and management (2005), and, ultimately, the development of the corporate and NGAS frameworks (2010).

NGAS Process Management Evolution

Figure 3

NGAS’s future plans include the development of an intelligent management system based on a business process management system called Nimbus Control (Figure 4). This management system will automate much of the governance, process modeling,



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performance management, and process definition efforts that are currently manually maintained.

Intelligent Management System Capabilities

Figure 4

Process Improvement Process improvement is an important capability for NGAS, according to Dennis Pikop, manager, business architecture for NGAS. It is one of its most mature capabilities, with roots tracing back to the mid-1970s. More than 3,500 NGAS employees hold Six Sigma certification, identify defects, and reduce variation in all NGAS processes. Also 3,200 facilitators were equipped with Lean skills to reduce process cycle time, simplify complex tasks, and eliminate waste. NGAS has found that these two skill sets are complimentary. To keep all of these individuals working in a consistent manner, NGAS codified its process improvement methodology in the NGAS process architecture (Figure 5).



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Process Improvement in NGAS Process Architecture

Figure 5

With so many resources trained in process improvement activities, NGAS has seen its share of sub-optimized improvement activities. The sub-optimized improvements indicate a lack of strategic alignment of process improvement and organizational strategy. At one point, NGAS counted 74 processes among its highest priority processes. These “key” processes were selected based on both causal analysis and perception and in many cases were only considered key because they were widely known to be ineffective or inefficient. The determination of a key process was not solely based on the strategic importance to the organization. For this reason, NGAS designed a process to identify key processes and related improvements (Figure 6).



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NGAS “Key Process” Identification Process

Figure 6

Identifying key processes has been improved by forcing the selection of key processes through a specific set of checks and balances, including executive leadership team approval. One vital checkpoint on the way to becoming a key process is the determination of the location of the process on the process architecture. Farther along the process, the process owner must review the measures associated with the process and ultimately prepare a business case to close the performance gap. This minimizes the chance for processes to be arbitrarily “improved” without proper consideration.

This tight union of process models, governance, and strategic alignment ensures that process improvement activities at NGAS are sufficiently focused to generate real business value. However, key processes typically are identified at Level 3 of the process architecture; processes occurring below this level (tasks, activities, desk procedures, etc.) typically cannot be considered key processes and are therefore exempt from the scrutiny and effort required to maintain a key process. After NGAS identifies key processes, it applies the concepts in its process improvement pyramid (Figure 7) to fix gaps and improve.



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NGAS Process Improvement Pyramid

Figure 7

With almost 7,000 employees trained in Lean and Six Sigma, process owners are key participants in process improvement, per Tim Leach, director of affordability and KM. NGAS defines a process owner as the individual responsible to define, document, manage, and improve a process. Generally, a process owner is not a process performer.

Typical process improvement activities begin with the identification of concerns or process changes by either the process owner or process performer. NGAS defines concerns as possible corrections, improvements, or other solutions. These concerns are identified brought to the process owner, who is responsible for improving the process using the pyramid framework. The process owner determines the requirements and metrics, identifies performance gaps, and then fixes them. The NGAS ACEKM function consolidates all process improvement project results and reports them to the executive steering committee, known as the governance board,



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that is ultimately responsible for investments in process management capabilities and is always looking for improvement observations.

Process Model The process framework in use at NGAS is perhaps one of its most mature process management capabilities, says Pikop. The framework was first adopted in 2000 to support process improvement activities happening within individual Northrop Grumman sites and functions. Since 2001, the framework has grown in breadth, depth, and deployment at NGAS which adopted the relevant portions of the corporate framework in 2010.

NGAS clearly articulates its enterprise process models in relationship to the ecosystem in which it operates (Figure 8). By paying attention to its holistic environment—including the labor market, suppliers, R&D, shareholders, customers, and even its corporate parent—NGAS is able to better understand the impact of changes or improvements to its process model on those that are most impacted.

NGAS Enterprise Process Model Ecosystem

Figure 8



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The purpose of the NGAS process framework is to organize and share business process knowledge across NGAS. The model (Figure 9) consists of three main groups of process elements.

1. Core processes

2. Enabling processes

3. Enterprise system processes

NGAS Process Model

Figure 9

All operational aspects of NGAS’s business trace back to the NGAS process architecture, including process descriptions, documents, metrics, and goals. Even job roles and operational functions are addressed by the decomposition of the processes



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in the process architecture. The processes are decomposed into more than 500 distinct process elements across 89 process groups. Process elements in the architecture break into four levels, with an additional two levels of process documentation at levels 5 and 6 intended for work instructions.

Maintaining this collection of process elements requires governance in many forms. NGAS supports the process architecture with a purpose-built rule set consisting of a glossary, a series of conventions or norms for process element decomposition and definition, and the identification of requisite supporting documentation (Figure 10).

NGAS Process Architecture Level Definition and Document Types

Level and definition Expansion Process Document Type

Level 1: Category Highest level of core and enabling processes required to execute the enterprise

Incorporates the single statement of the enterprise intent for this top-level process framework element.

Policy

Level 2: Process Group A group of related processes that achieve results considered important for the group

Integrates related sector Level 3 processes across each Level 2 summary element. Process group contains a high-level description and requirements are identified with explicit “shall” statements.

Process requirements document

Level 3: Process Related activities that transform inputs into customer-desired outputs

Contains boundaries, customers, suppliers, inputs, and outputs. Identifies responsibilities for the step-wise sequence of actions that transform an input into a desired output. Includes traceability from requirements to steps that satisfy the requirements.

Process procedure

Level 4: Activity Encompasses all child levels; further breakdown of processes and activities as deemed necessary by the process owner to manage process performance

Provides specific directions, roles, and responsibilities for each process element.

Work instruction or desktop instruction

Figure 10



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Codifying NGAS operations into the process architecture allows NGAS leadership to understand quickly what activities the organization is capable of performing. Organizing these activities into rational structures to meet customer and environmental demands is the job of the operating models.

The operating models are essentially constructs of process elements from the process architecture strung together in a cohesive format to allow anyone consuming this information to understand easily how specific work is accomplished. NGAS operating models are structured around go-to-market strategies. For example, the “rapid prototyping” operating model is built from a select group of process architecture process elements and their related documentation. This assembly of existing contents—almost like a storyboard or choreography—enables NGAS to react quickly to specific customer requirements. NGAS focuses on reuse across operating models where possible and tailors processes to each operating model where that process requires change to meet varying customer demands.

NGAS views operating models as the next step its process architecture (Figure 11). This journey began with the establishment of consistent process architecture and continued with the development of process documentation, management systems, and audit traceability.



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NGAS Process Agility Journey

Figure 11

Strategic Alignment and Governance Keeping an organization as large and distributed as NGAS consistently aligned is a significant challenge, according to Leach. In addition to the business rules and documentation supporting the maintenance of the process architecture, NGAS identified three key teams to enable its strategic alignment and governance activities: 1) the affordability steering committee, 2) the process management control board, and 3) individual process management teams. All three teams serve to align the strategy set at the corporate and sector levels with the actual work that is done from the board room to the shop floor.



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NGAS has experienced the same challenges facing other industries in this difficult economy. Thus affordability is a concern. In addition, customer needs are changing and competition is emerging from nontraditional sources. These new sources challenge NGAS not only in terms of its capability to meet customer needs but also the manner in which those needs are met (i.e., the speed and cost at which the customer needs can be satisfied). The affordability function is the means by which the entire NGAS organization intends to rise to this challenge.

The NGAS affordability steering committee focuses on all things related to the strategic goal of affordability. It exists at the highest level of the NGAS organization, ultimately led by a team that reports to the sector president and corporate vice president. The steering committee consists of six members from core various parts of NGAS. The steering committee goals are:

identify sector-level (NGAS) goals for affordability function performance;

promote, execute, and oversee cross-functional processes;

establish and enforce sector (NGAS) policies for performance; and

address overlapping or contradictory tactics and initiatives.

In addition, the steering committee may identify areas for strategic investment in NGAS and develop customer-facing messaging about the work done in the affordability function. Ultimately, the steering committee serves as a guide to help NGAS achieve its affordability goals. Process excellence is one of the levers the committee has chosen to affect its affordability goals.

Another important governing body is the process management control board that is comprised of individuals who report directly to the executive leadership team (Figure 12). This board is responsible for maximizing efficiencies and creating a process-based, quality-focused enterprise.



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NGAS Process Management Control Board Composition

Figure 12

The process management control board consists of representatives from each of the main process categories of the process architecture, as well as NGAS business area representatives. These individuals are responsible for:

developing and maintaining the NGAS process management strategy,

sustaining the process management culture at NGAS,

reviewing process tailoring requests and providing feedback to the executive

leadership team,

maintaining the NGAS process architecture,

overseeing the deployment and use of the process architecture throughout

NGAS,

reviewing process management initiatives, and

coordinating with other corporate organizations on process management

activities.



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The affordability function steering committee and process management control board generally operate at a relatively high level within NGAS—typically managers and higher and generally at a higher level than specific physical sites. NGAS uses another set of structures at the site level to ensure strategic alignment and governance: the site steering committee, the process management team committee, and the process management team (Figure 3). These three entities round out the core teams that enable strategic alignment and governance activities.

Process Management Team Organization Chart

Figure 13

Process management teams at NGAS are groups that act on the strategic vision and work through local process improvement initiatives. NGAS charters process management teams to accomplish a specific task or complete a specific process and depends on team members to achieve their goals. These teams are ultimately responsible for implementing the projects that result in top-line growth and bottom-line performance. Process management teams are deployed throughout NGAS to achieve strategic goals. In larger organizations where these teams may require additional governance or oversight, a process management team committee is created.



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Both process management teams and their governing committees take direction from a site steering committee. This committee governs all process management activity and consists of local executive leadership, line management, and non-management employees. In sites without a strong local presence, the sector-level process management control board takes responsibility for the local-level process improvement and implementation of strategic initiatives.

Change Management NGAS uses a nine-item model (Figure 14) to understand change management needs and plan for effective rollouts of changes. This model is based on By What Method: Leading Large-Scale Quality and Productivity Improvement Efforts, a book on change management by D. Scott Sink, William T. Morris, and Cindy S. Johnson (Institute of Industrial Engineers, 1994).

NGAS Change Management Model

Figure 14



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Using this model and the methodology identified in By What Method, NGAS is able to quantify the impact of changes and plans to make changes. According to Pikop, NGAS realized that traditional change management activities have excelled in one, or maybe two, of the nine items. To be successful in fully implementing the change, a plan must address all nine. If any are omitted, the change incorporation effectiveness potential degrades percentage-wise for each item omitted. A plan that addresses all nine items is considered to be 100 percent effective, whereas a plan that only addresses six of the nine items is only considered to be 66 percent effective.

Cultural awareness is a significant aspect of change management at NGAS. NGAS leadership identified a number of key roles required to effectively implement change. These roles include:

visionary executive leaders (i.e., zealots);

advocates;

managers; and

project team members.

Over the course of a variety of implementations, NGAS has identified the leverage exerted by individuals in the key roles. All of these roles are critical for cultural adoption. Change initiatives typically begin with visionary executive leaders who attend conferences, read books, and generally get great ideas about process improvement. Advocates broadcast ideas espoused by the leaders. The advocates, who typically facilitate process management teams, are responsible for implementing what the leaders identify. For the change to be truly effective, however, it must become incorporated into the organizational DNA. For this, NGAS depends on its managers and their employees to understand and embrace the change. Changes are only effective once these changes become a part of the NGAS operations. Acknowledging the individuals in these roles helps the NGAS process management teams to ensure the successful contribution of the cultural aspect of the NGAS change management model.

Another critical component of the model is motivation. NGAS prepares professionally designed materials and posters—in some cases, hundreds of square feet in area—to motivate individuals (Figure 15). These posters and signs are conspicuously placed and provide a constant visual reinforcement of process improvement results and goals.



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Motivational Posters at NGAS

Figure 15

Tools and Technology NGAS’s vision for process management excellence is enabled by a robust tool platform using Nimbus Control software. Before using Nimbus Control, NGAS managed its process management capability through process definition documents, spreadsheets, and checklists deployed on file shares and intranets. As time progressed, it became clear to NGAS leadership that the vision couldn’t be accomplished without automation.

The affordability and competitive excellence team determined that the current state of automation would be insufficient to handle the proposed process management vision and found a tool to facilitate and enable its work. After reviewing the various tools in the marketplace, NGAS selected Nimbus Control.



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Nimbus Control integrates the main aspects of NGAS’ process model, operating models, governance, and change management through its process mapping, statement sets, forms, manuals, and storyboards. These tools provide NGAS with the capabilities necessary to achieve its vision.

Process models in Nimbus Control are hierarchical and support full drill-down capability (Figure 16). Each element in a process map identifies the inputs, outputs, performer, and any attached documentation. Nimbus Control models processes as objects and supports the development of robust relationships between the processes and items such as audit checklists; change authorizations and reviews; cost models, targets, and estimating models; and feedback and improvement suggestions about the process itself.

Nimbus Control Process Modeling Notation

Figure 16

These models also form the basis of a storyboard—a tool that process owners can use to highlight and elaborate on specific process elements. Storyboards are typically employed for training and reference purposes. A process owner can use a storyboard to identify key components of the process flow and record annotations.

The system also consolidates process management tools and reference documentation in a single user interface. Consider the Lean/Sigma toolbox, a section of Nimbus Control specifically created to support process improvement activities using the NGAS improvement methodology. This tool consolidates data table templates,



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reports, activity-based costing models, and other information necessary to complete Lean/Six Sigma projects.

Nimbus Control also supports governance and change management activities through its feedback, review, acknowledgement, and authorization processes (Figure 17). Each user in Nimbus Control can participate in work flows based on the modeled processes. Process owners make changes to processes, storyboards, or other items modeled in the system. The process owner can submit the changes for review and approval using standard e-mail tools, while Nimbus Control serves as the system of record for the approval. Previously, process owners sought approval by sending documents as attachments, inadvertently creating another layer of management around the approval process. Process owners can also see at a glance which employees have yet to review and acknowledge each committed change in a process. With the tool, process owners know that the material reviewed is always the correct version. According to Pikop, Nimbus Control has become the “one version of the truth” for NGAS when it comes to process management.



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Nimbus Control Governance and Change Management Components

Figure 17

CONCLUSION NGAS has a lengthy history in terms of its process management capabilities. With roots in quality circles in the 1970s, NGAS leaders have seen process management trends come and go. The current balance of process management builds on that rich history and ultimately puts NGAS in a position to move beyond reacting to changes in the market place, said Leach. With its current focus on operating models, automating its change management and governance, and focusing on strategic alignment through



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its affordability function, NGAS leaders have taken concrete steps to leverage strong process management capabilities into tangible results for the business.

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