HR SYMPOSIUM
September 20, 2013
Presented by: Edmond E. Hughes
Vice President HR & A
Ingalls Shipbuilding
Workshop Agenda
• Who We Are
• Strategy
– Definition of Strategy
– HR and the Talent Management Cycle
– How HR Influences Strategy
– Risks of Poor Execution
• Enterprise Value
– Definition of Value Creation
– Understanding Business Strategy
– HR’s Contributions to Business Strategy
– Differences between Benefiting the Organization and Value Creation
• 4 Levels of HR
– Definition of the levels
– Traditional HR vs Strategic HR
– Interactive discussion around the 4 levels and how they show up in our organizations
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INGALLS SHIPBUILDING PRIVATE / PROPRIETARY LEVEL I
Huntington Ingalls Industries -- Who We Are
• Over a century designing, building, overhauling and repairing
ships for the U.S. Navy, the U.S. Coast Guard and
international navies
• One of the nation’s leading providers of major surface
combatants (destroyers, cruisers, high endurance cutters,
and amphibious assault ships)
• Builder of more than 40 percent of the U.S. Navy’s current
surface combatant fleet
• The Nation's sole industrial designer, builder and refueler of
nuclear-powered aircraft carriers
• One of only two companies capable of designing and building
nuclear-powered submarines
• After-market services –maintenance, repair, and overhaul –
support a wide array of naval and commercial vessels
• A wide variety of products and services to the commercial
energy industry and other governmental customers, including
the U.S. Department of Energy.
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Ingalls Shipbuilding
• 15,100 employees at three sites across the Gulf
Coast plus subsidiaries in San Diego, CA and
Virginia Beach, VA
• Building four classes of ships simultaneously—
eight ships now in production
• DDG 114 will be the 30th Arleigh Burke-class
destroyer built by Ingalls Shipbuilding
• Builder of record for LPD and LHA classes of
amphibious assault ships
• Builder of largest multi-mission National Security
Cutter for the U.S. Coast Guard
• Only “Composite Center of Excellence” facility in
U.S. shipbuilding – building major components for
LPD and DDG 1000 Classes
(under construction)
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USCG National Security Cutter
DDG 51 Surface Combatants
LPD 17 San Antonio Class Amphib
LHA 6 America Amphib Assault Ship
Strategy Planning
What is “Strategy”?
Strategy Planning
What is “Strategy”?
1. A method or plan chosen to bring about a desired future, such as
achievement of a goal or solution to a problem.
2. The art and science of planning and marshalling resources for their
most efficient and effective use.
3. The term is derived from the Greek word for generalship or leading an
army.
"Leverage HII Ingalls expertise and experience of existing hull forms to
cost effectively meet new missions."
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Object Lesson – Kodak / Fujifilm
• Until the 1990s, Kodak was regularly rated one of
the world’s five most valuable brands
– Founded in 1880, it was the Google of its day, known
for pioneering technology
– By 1976, it accounted for 90% of film and 85% of
camera sales in America
– It built one of the first digital cameras in 1975
– In January 2012, Kodak filed for bankruptcy; it failed
to invest wisely in the face of a new digital reality
• Kodak’s rival, Fujifilm, had a similar history in Japan and faced the
same market dynamics, yet today it thrives
– Sought new outlets for its products in related markets, investing $4
billion in new technologies since 2000
– Acquired new business ($9 billion) and rationalized others ($3 billion)
– “It was a painful experience. But to see the situation as it was, nobody
could survive. So we had to reconstruct the business model.”
Shigetaka Komori, Fujifilm
Value creators are “intentional” – they set clear priorities and execute
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Examples of Strategy
• Increasing Production/Productivity
– Increase recruiting efforts – need to find people with the right skill sets
– Automating processes – need to purchase technology and train individuals
• Grow the Business
– Increase performance on current business (cutting costs, less waste, first time
quality, better skill sets, etc.)
– Find an adjacent market that utilizes your core competencies
– Find a new market
• Increase Quality Output
– Train for quality
– Increase surveillance of how the work is done (looking for failure points, refine skill
sets to increase quality work of employees, institute best practices)
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Examples of Strategy
• When might you need to build a performance culture – need to reward
contribution?
– When you need a strategy that motivates people to perform well
• When might you need to build an entitlement culture – need to reward
longevity?
– When you need a strategy that reduces turnover
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What tools do you have in HR to deal with talent?
The 6B’s: Dave Ulrich on acquiring needed skills and competencies
• Buy: Hire contract and contingent employees
• Build: Internal development (grow your own)
• Borrow: Consulting, outsourcing, open sourcing
• Balance: Strategic scenarios calling for different composition of workforce and ways to
close the gap
– Best case
– Most likely cases
– Worst case
• Bind: keep specific talent in the enterprise
• Bounce: Redeploy or re-skill employees with “old” skill sets (may mean booting them off
the bus)
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Talent Management Aligned with Strategy
Talent Management Practices
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HR Influences thru . . .
• Workforce Management – workforce planning, employment strategies,
succession planning, organizational branding
• Total Rewards – planning, implementing, and managing all aspects of
employee compensation including recognition, and increasing
engagement
• Risk Management – identifying risks to both employees and the
organization and includes labor, compliance, turn-over, health & safety
• Development – employee skill building to improve individual and
organizational performance as well as change management
• Employee Relations Management – building positive relationships
between employers, managers and employees
• Strategic Management – integrates all the above
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Talent Management by the Numbers
70% of organizations have a weak
pipeline. Cost per day when
operating without a key player $7000
Plan
Value of top performers –
2 to 3 times the
performance of average
employees
Cost of losing a talented
employee - $250 - $500K
Acquire
Execute
Retain
Number of employees the
average manager’s actions
directly affect - 12
Talent Life
Cycle
Engage
Develop
Lead
Deploy
Percentage of a company’s
employees who are well suited for
their roles – 20%
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Cost of poor hire - $300 to $500K
impact
Rate of efficiency at which most
businesses operate because of
poor engagement levels – 30%
Average time required for a new
manager to become productive – 6
months
Strategy Planning
What is “Enterprise Value”?
Objectives
Enterprise Value (EV)
Understand
EV
Performance
Metric
External &
Internal
Definition
Role in Near
& Long Term
Strategy
Use EV
Determining
Value
Creation
Decision
Making &
Prioritization
Corporate vs.
Division Role
HR&A’s
Role
Creating a
Benefit vs. EV
Where HR&A
Impacts EV
Aligning with
the Business
Strategy
What have you done for me lately?
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The Value Equation – A Decision to Invest
CREATE VALUE
INVESTORS
Investment
=
R
I
S
K
Investments
Made
Assets
Employed
+
INVESTORS’ REQUIRED RATE OF RETURN :
COST OF CAPITAL
DESTROY VALUE
XX.X% RATE
OF RETURN
Cash
Generated
Cash
Generated
-
R
I
S
K
CASH
FLOWS
Enterprise value is based on our choice of investments and their return
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How Can You Affect Enterprise Value?
• Understand today’s cost drivers
– Regulatory “must do’s” – Common cost driver in HR, BM, IT
– Discretionary activities – Probably more than you think
• Identify where tough decisions – to do more or do less – could make a difference
– Every activity is an investment of some kind. How am I prioritizing those investments?
– Do we really understand our core requirements, or are we just reacting/executing?
– Can I stop doing some things, allowing me to redeploy resources where I create more value?
• Quantify the long-term benefit in financial terms
– Direct impacts
 Headcount reductions (HII employees or leased)
 Lower material costs (consultants, training, etc.)
– Value stream impacts
 Improved throughput (with measurable impacts downstream)
 Improved quality (with measurable impacts downstream)
 Reduced footprint (with measurable impacts on capacity, throughput, etc.)
– In the case of new business, profitable growth that wasn’t in our plan increases EV
• Make investments with the biggest impact on EV
Each day you make choices that impact Enterprise Value
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The Value Equation – A Decision to Invest
Reporting Results
+
CREATE VALUE
=
Business
INVESTORS
A
INVESTORS’ REQUIRED RATE OF RETURN :
COST OF CAPITAL
R
I
S
K
F
DESTROY VALUE
-
R
I
S
K
B
Headcount /
Hours
/
Investment
Money
Investments
Made
Cash
Generated
C
HR&A
Assets
Initiative
Employed
Cash
Generated
XX.X% RATE
OF RETURN
Impact of
Initiative
D
Cash OR
Behavioral
Metric
CASH
FLOWS
Our decisions will create or destroy value. How should we invest?
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E
How do these affect Enterprise Value?
Increase
1.
Increase head count
2.
Facility closure
3.
Compliance Audit
4.
Affirmative Action
5.
Succession planning
6.
Attendance bonuses
7.
Gym for employees
It depends…
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Decrease
HR Leadership Opportunities
• HR is uniquely positioned to facilitate and enable each of these
drivers due to its ubiquitous presence throughout the organization.
• Many opportunities to help “connect the dots.”
• Special understanding of business facts, culture, methods,
preferences, etc.
• Seat at table and share of voice.
• HR Business Partners predisposed to receiving staff assistance.
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Benefit or Enterprise Value?
Benefit
1.
Workers’ Comp
2.
Monthly reports
3.
Voluntary RIF
4.
Meetings
5.
Succession Planning
6.
Tuition Assistance
7.
Selecting the right people
8.
Health Insurance
Does it increase….
•Customer satisfaction
•Employee productivity, motivation or
satisfaction
•Risk management & compliance
•Innovation
•Capabilities
•Information for decision-making?
Enterprise Value
How is enterprise value affected?
•Revenue Growth
•Profit Growth
Creating a “benefit” may or may not lead to increased EV
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4 Levels of Human Resources
LEVEL 4:
1. HR informs Management of a problem
2. HR creates the solution
3. HR flawlessly executes the solution
LEVEL 3:
1. Management informs HR of a problem
2. HR creates the solution
3. HR flawlessly executes the solution
LEVEL 2:
1. Management informs HR of a problem
2. Management creates the solution
3. HR flawlessly executes the solution
LEVEL 1:
1. Management informs HR of a problem
2. Management creates the solution
3. HR fails in the execution
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Four Levels of HR
HR Role
Level
4
Level
3
Level
2
Level
1
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Service Delivery
 Trusted Advisor –
focuses on business
improvement & value
creation
 Little to no interface
required by HRBPs
 Addresses business
challenges when
making functional &
technical decisions
 Self-service
 Functional &
Technical Expert
 Limited &
decentralized selfservice
 Harmonized services
& standards exceeding
business requirements
 Performance
standards in place
Technology &
Infrastructure
 Common Systems
 Full Integration
 Only the required
systems & processes in
place
 No performance
standards in place
 Have specialized
knowledge & skills in
business critical areas
 Have the required
skills to fully address all
business issues
 Full integration of
key systems
 Identifying skill sets
required for the future
 HR metrics align
with business
objectives & show
impact
 HR metrics focus on
service improvement
 Planning for &
developing the
required skill sets
 Limited integration
& centralization
 Strong technical &
functional knowledge
 Developing business
& analytical skill sets
 Few performance
standards in place
 Administration &
Service Delivery
People
Performance
Measurement /
Reporting
Decentralized
Systems
No Integration
 Little to no business
& analytical
competencies
 Developing
functional & technical
skills
 HR metrics focus on
service delivery &
efficiency
 Difficulty reporting
on business issues
 Metrics focus on HR
operations
What Does Level 4 HR Look Like?
Run HR
like a
Business
Continuous
Improvement
Customer
demands
HR at the
Table
Out in
front of
problems
Level
4 HR
Know
your
customer
HR
Expertise
Credible,
Ethical
at all
times
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Business
Acumen
What Level of HR?
1. Your IT department complains about the length of time it is taking to
fill their open positions. They suggest that you advertise on a few
specific IT tech web sites. You really don’t think that that would help
– after all, you are already posting your positions on several national
job boards and anyway, what does IT know about recruiting? You
advise them to be patient and give it some more time
2. Your IT department complains about the length of time it is taking to
fill their open positions. They suggest that you advertise on a few
specific IT tech web sites. You do and fill all the openings within two
weeks. What level of HR does this represent?
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What Level of HR?
3. Your manufacturing division expresses a concern about the high
level of turnover in their area. Reviewing the metrics, HR sees that
the attrition rate started rising about 12 months ago, and has now
reached an all-time high. HR devises a new exit interview process,
and using information gathered, helps the division make changes
that result in a 65% drop in the attrition rate within 6 months. The VP
of Manufacturing makes a point to thank HR publically for the
successful turnaround, stating at an All Hands meeting that “HR
knocked it out of the park”.
4. HR tracks attrition monthly and notices an uptick in turnover across
the board, and particularly in your manufacturing department, in the
last 2 months. HR devises a new exit interview process, and using
information gathered, helps the company make changes that result
in a 20% drop in attrition. Several months into the new program, the
numbers continue to hold steady or decline.
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Questions?
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INGALLS SHIPBUILDING PRIVATE / PROPRIETARY LEVEL I