Shared Services President
The Boeing Company
"Earned Value Management: Institutionalize it, modernize it and globalize it every non-routine day"
13th Annual International EVM conference
Tysons Corner, VA
November 15, 2001
Thank you.... Before I begin discussing Earned Value Management with you this morning...I'd like to thank the many of you in this room...and all of America's veterans...who have helped this country earn...and retain its freedom.
Veteran's Day has always been very important to many of us...but this year...it has taken on a deeper meaning.
To share with you the gratitude I feel...and the gratitude that is felt by all of the people at Boeing...I'd like to share this special TV spot we are airing this week....
It's been quite a year, hasn't it?
I look back and am amazed at all the curves thrown at us.
For the people of Boeing...the year really began to rock and roll in February. All of us in Seattle were sent diving under our desks...while a magnitude 6-point-8 earthquake rattled the region. Buildings groaned...brick walls fell and pipes burst.
Our part of Boeing - which provides enterprise-wide support ranging from the computing...to facilities...to security...to transportation - immediately began working to ensure the safety of Boeing people...to secure assets...and to restore operations for the business units - all with as little interruption as possible.
With hard work over a few days...we did just that. We took the lessons learned...a deep breath...and moved forward.
That took us to mid-March...when it was announced Boeing would change its corporate architecture and increase business-unit autonomy. As a result...the role of Shared Services was broadening to support this new Boeing enterprise. And...our World Headquarters would move from Seattle to somewhere within five months.
So suddenly...there was another focus for the people of Shared Services - who...I must note...also are responsible across the enterprise for relocation... travel and people services... let alone non-production procurement...new construction and telecommunications .
Less than two weeks later...the company announced it was focusing new product-development efforts on a fast...long-range commercial airplane - the sonic cruiser. Again...Shared Services revved up - this time with great excitement - to help this Boeing program change the way the world flies.
By May...when Chicago was announced as the location of the new World Headquarters...we were running at full speed on the project.
That activity settled down to a dull roar...while other unanticipated events occurred - including our Safety...Health and Environmental people having to work soaring energy-cost issues ...and regional water shortage actions.
By Labor Day...we opened the Chicago World Headquarters....fully providing each person there the services needed to do their jobs.
Then came the morning of September 11th.... We were horrified at the senseless death and destruction... and that our airplanes were used in such a manner.... We grieved with the nation and the world....
Our first priority...was the safety of our employees: Â·
- We needed to evacuate some locations....
- We needed to get stranded travelers safely home...
- We needed to provide escalated Security services...
And then...we had to rapidly respond to the business downturn experienced by a segment of our company...the Commercial Airplanes division.
Workforce cutbacks were determined and each Shared Services group started looking at how to reduce the size of their budgets by 20...or 30 percent -- while still providing cost-effective products to customers. That's a tough task...since little of our work in Shared Services truly is variable to the number of aircraft we produce.
Yes...it's being quite a year....
I'd like to show how having a program-management based culture is helping us be efficient through the routine...and...it seems more often than not...non-routine days.
As you know...at Boeing we strive to be a world leader in using program management "best-practice" tools and Earned Value Management methods - not only on our government programs...but on our commercial programs as well.
Our Chief Financial officer...Mike Sears...spoke to this same group in 1998 on many of those accomplishments. Some of you may remember the homework assignment he gave you. He asked that you institutionalize Earned Value ... modernize it ...and globalize it .
I tell you today...at Boeing...we've taken all three to heart.
Robbie Robinson yesterday presented to many of you an overview of our journey to establish a single Earned Value Management system applicable to government and commercial businesses.
In short...we've consolidated nine separately validated Earned Value systems into one...and reached one Advance Agreement applicable to all Boeing government programs. We're using this voluntarily...as well...in some of our non-government programs.
I want to note here that I personally reflect the fundamental attitude change toward Earned Value over the past decade or so. Earned value used to be feared - if not despised - by line management...and considered to be nothing but a non-value-added requirement imposed by bean counters.
In fact...early in my career while working in Contracts...I was encouraged to negotiate earned value requirements OUT of our contractual terms and conditions.
But times have changed...and people's attitudes have changed. The information provided by Earned Value Management systems has become vital to the way we manage our programs. This tool has helped integrate discipline into our program-management techniques - and has become a living and breathing part of everyday program-management life.
Today at Boeing...we believe we have institutionalized the use of Earned Value Management and the other Program Management Best Practices on many of our government and commercial programs.
We even have established a Program Management Workshop at our Boeing Leadership Center in St. Louis. There...we continuously train our best and brightest in the application of Earned Value and the other Program Management Best Practices.
In Shared Services... on our key programs we're implementing with great success Earned Value and the other program management best practices.
You're probably thinking to yourself..."Security isn't a Program.... Non-production procurement isn't a Program.... People Services isn't a Program...." Well...we're managing large-scale initiatives associated with these types of activities as if they are programs. .
We say a Shared services program is any project or initiative for which 50 (m) million dollars...or more...is planned to be expended throughout its life cycle. We also have programs under that threshold - which we've included in earned value management application because we believe their risks and attributes are not routine.
Primarily...these "programs" are key information-systems projects that don't have a government requirement for Earned Value. But we choose to implement earned value management tools anyway.
So why does this "program-management approach" make sense for a Shared Services organization?
First, many of our services are complex and interrelated - requiring good program-management disciplines to deliver them at the right place...at the right time...and at the right cost.
There's more similarity than you might think between a managing a government program and the large-scale computing infrastructure behind our system used to purchase 3 to 4 (b) billion dollars in non-production procurement.
A second reason it makes sense to apply program-management best practices is that it allows us to organize as integrated product teams...versus the traditional functional silos that are sometimes found in service organizations....
And...as a third reason...our service providers are re-inventing themselves to support the Boeing strategy of running healthy core businesses...leveraging core strengths and opening new frontiers.
A big part of this is being able to reduce non-value added transaction costs that are incurred "inside" a business process when data or information is handed off from one person or function to another. Earned value management systems help us identify these cost drivers and reduce - or eliminate them.
An added benefit of viewing our service initiatives as programs is that we are attracting - and retaining - bright, creative people to serve as program managers.
Some extremely qualified people who have demonstrated performance in leading Boeing government programs...have willingly stepped into what they and we consider equally important service program-management positions.
These leaders view program-management best practices...and earned value...as the normal way to run programs. Their expertise is helping us make quantum leaps in areas with which we previously struggled. And...I know many of these people will take what they learn here and move on in their careers to additional defense...space...and commercial program assignments.
A clear benefit in using earned-value-management techniques on these internal programs relates to that of "scope creep." By "scope creep" I mean the practice of allowing additional requirements to be added without the commensurate recognition of resource or schedule impacts.
Typically...on an internally driven program or project...you find that people are more tolerant of scope creep. But this doesn't happen when an earned value management system is in place. Program management best practices...and Earned Value...offer great room for creativity in how you approach the work...but ensure the program stays on plan. They help to drive accountability, discipline and configuration control into program management
I'd like to share now a few specific examples how program management best practices and Earned Value are assisting our Shared Services programs at Boeing.
The Shared Services Procurement/Payables Network - or simply "SPIN" as we call it - is a web-based system we started two years ago.
Today...it's used by 57-hundred people across Boeing...who are authorized to order...acquire and pay for billions of dollars of non-production items. Some of the users are buyers...while others are tool-room clerks and office administrators responsible for re-stocking supplies.
The first challenge in implementing SSPN was to determine how to enable purchasing and payment across the entire Boeing enterprise.
One of our challenges...for example...is that Boeing has multiple accounting systems...resulting from our various mergers and acquisitions.....
As the program progressed...it became clear we under-estimated the difficulty of interfacing the commercial off-the-shelf software to multiple charge number structures and providing a simple user interface. To accommodate this additional complexity...the SSPN team had to add significant additional code to the system and provide easy-to-understand on-line help services.
You know the concept "scope creep," mentioned earlier? It could be said SSPN was a program experiencing "scope leap...."
SSPN quickly became a prime candidate for program-management disciplines: The program team focused on their weekly Earned Value data ... and were able to recover a great deal of the schedule and bring the program in within acceptable performance.
SSPN...incidentally... was honored in June by Computerworld as one of five finalists in the manufacturing category for a 21st Century Achievement Award.... They cited it as one of the most significant applications of the year.
Earned Value and the program-management disciplines had a direct hand in guiding SSPN's success and earning us that honor.
To give you another electronic-commerce example...let's turn to eBuy -which is moving supply-chain management and purchasing to the Internet.
Consider the complexities of getting six million parts to our factories for commercial airplanes. Annually...it takes:
- more than 12 (m) million transactions by 4,000 buyers at 52 sites...
- interfacing with 18 purchasing systems - including SSPN -
- that link to Boeing's 20,000 suppliers.
We're moving our supply-chain management process to the web with the help of Exostar...a global Internet exchange for aerospace and defense suppliers. It was founded last year as a joint venture by Boeing...B-A-E Systems... Lockheed Martin and Raytheon. Rolls Royce also joined the Exostar team this year.
We manage our internal alignment to this venture through the eBuy program. eBuy has the challenge of incorporating rapidly changing software technology into large customized legacy computing systems...while totally restructuring the procurement processes themselves.
The eBuy program highlights another Boeing innovation in the deployment of Program Management Best Practices. In a commercial context...such as this...there are no government-imposed requirements. But we believe compliance to be vital.
eBuy's use of weekly Earned Value information...for example...has allowed the program to evaluate the effectiveness of its planning - which is done in 90-day work packages. The work packages have firm milestone commitments and measurable deliverables. Earned Value helps the program realize better discipline in identifying the deliverables.
Recently...eBuy's Earned Value information was of immense help in reversing an unfavorable trend in program schedule and cost performance: The program identified software development problems at a supplier even before the supplier knew it had a problem.
In fact, the eBuy team volunteered to be one of the first developmental programs to undergo a Program Management Best Practice Assessment. A team of company subject-matter experts reviewed the maturity of eBuy's Best Practices implementation - including Earned Value - and the health of the program disciplines.
At the conclusion... the program was provided findings that showed what they are doing well... areas that need strengthening... and critical processes needing attention.
The eBuy team received some valuable recommendations for ensuring future success...while the assessment team was able to recognize and incorporate the special needs of a developmental program into their Best Practices process.
As a third example...again...in response to the Boeing mergers and acquisitions...we initiated an information-systems program - called "Boeing People Systems" - to develop and maintain one human resources and payroll system for Boeing. We needed this because mergers and acquisitions had left us with multiple payroll systems...people systems...benefits systems...and supporting organizations for each.
The program was funded by one part of Boeing...yet staffed by another. In fact...it wasn't even viewed as a program...but as a process improvement. Early on, we experienced scope creep, missed milestones and cost overruns.
Then, we decided to treat this like a program, and implement an earned value management system. A work breakdown structure was put in place with very tight controls.
Earned value on labor hours now is reviewed weekly...and on dollars...monthly. Everyone on the program can tell you if their area is "red..." "yellow..." or "green" for the week...and how they are affecting the overall program. They know why they are using Earned Value...and know it is a measuring stick...not a penalty stick.
And because they have high visibility throughout the company...the people are teaming well...working hard...and delivering. Their credibility has soared - as has their performance.
Since June 2000...the program has never missed a deliverable.
Also of note...Boeing People Systems is the first program in Shared Services on which we've implemented a new "Commercial-Off-The-Shelf" ...or COTS... Earned Value system. In order to meet program needs...we have taken three COTS applications and integrated them.
This provides an integrated scheduling environment ... that links to an earned value engine...that interfaces with our accounting system...and then links to an application that displays the data on the web for our program teams. Not easy...but sure worth it.
As another element of Boeing People Services...we now are developing what we call our "End-user Services for People." In short...this will allow the people of Boeing to access one system - via the Internet or by telephone - to get answers and achieve resolution on everything from employee records...to benefits...to payroll.
It doesn't matter if the service is provided directly by Boeing or by a vendor - they will have a single secure sign-on to all services. And it's just not for employees...the system also will eventually accommodate former employees...retirees...families and job applicants.
It's a gigantic program...that will again will reap huge benefits by reducing interaction transaction costs...and allow us to rapidly support acquisitions...divestitures and other work-force needs.
As you can imagine...it's a program tailor-made for Earned Value Management ...and will greatly benefit from the discipline it brings.
We recently conducted an Independent Review of the program readiness to proceed based on the Program Management Best Practices ... what many of you know as a Red Team Review. What we have learned is that early implementation of these disciplines is directly correlated to overall program success.
Our team is gearing up for success and refining their requirements...clarifying their integrated plan and schedules...laying out their baselines...and preparing to use Earned Value as a key management tool on the program.
On all of these programs...we're refining our management-information system that provides the program managers...team members....customers and key suppliers Earned Value Management performance data on cost and schedule indices and variances. We know they must adjust rapidly to the challenges our non-routine days continually provide us.
Whereas earned value is an excellent measurement technique...it is only as good as the underlying plan that it is measuring. With SSPN...e-Buy...Boeing People Systems...and End-user Services for People ... we have found that a good plan depends upon:
- clearly defining customer requirements
- developing a well-thought-out integrated plan and detailed schedule
- and ... aggressively managing the flow-down of requirements into a well thought out program work-breakdown structure.
These are especially critical in a service business...and especially in these times of significant change and cost-reduction pressures. A plan that recognizes and embraces the flexibility of the business environment is essential in the success of a services-based program.
2001 has been filled with everything from quakes...that rattled our bones...to terrorist attacks...that shook our souls. Consistency in processes...program management...and cost control...offered us the bedrock footing we needed again and again this year.
We've all heard how Earned Value can be tailored to provide a cost-effective...high-value tool for program management on every type of program - large to small. I challenge you to redefine your view of "program" and realize that enterprise activities and projects can value as greatly - if not more - from the same tool set. You'll see greater credibility for these activities...greater leadership...and direct bottom-line results.
The homework Mike Sears three years ago gave you to institutionalize... modernize... and globalize Earned Value probably is even more applicable today that it was then. Shared Services has been tested again and again this past year on our commitment to those principles.
I believe we've passed...and have ahead of us a strong...interesting... and no doubt... non-routine future!!
Thank you for having me here today...I'll now be glad to answer some of your questions...