ARDEC Journey to Excellence COL Russell Hrdy Deputy Director 973-724-7000 Russell.hrdy@us.army.mil

ARDEC FIRST FEDERAL & DOD RECIPIENT OF THE MALCOLM BALDRIGE US Army Armament Research, Development and Engineering Center Provide 90% of Army’s Suite of Armaments No Single Counterpart in the World Provide Battlefield Supremacy for Our Warfighters FIRST FEDERAL & DOD RECIPIENT OF THE MALCOLM BALDRIGE NATIONAL QUALITY AWARD Short explanation of mission, purpose, vision Many of you in the audience have probably been members of the military or have a family member is or has been in the military Winning & recognition is nice, but bottom line of using Baldrige is the real winners are the men and women of the Armed Forces who use the products we research, develop and engineer Because the products are developed faster At the highest possible quality At the lowest cost to the taxpayer Old expression ‘never time to do things right the first time, but always time to do them over’ Our message is simple – if we can do it, so can you Vision – “Innovative Armaments for Today and Tomorrow”

First Use of Six Sigma, CMMI 2007 Malcolm Baldrige Quality Award Recipient ARDEC’s Performance Excellence Journey Knowledge Base Creation Large R&D Organization of the Year 86,95,99,00,04,06 CSA ACOE Award 96,99,00, 02 First Use of Six Sigma, CMMI & ISO Reduced Cost Increased Quality Faster Cycle Times Increased Innovation Satisfied Customers Army Performance Excellence Award Jan. 2006 Presidential Award for Quality Improvement 1999 System Owners Handbooks NJ Quality Achievement Award 1998, 2004 US Army’s Greatest Invention Awards 2002-07 R&D Center of Excellence Award 89,90,91,96,97 Legend: NJ Quality Partnership Award 1996 ARDEC “Triple Crown” Events Presidential Award for Quality 1996 Awards Start of Formal Benchmarking GPRA Driven Strategic & Business Planning CINC Community of Excellence Awards 96&00 Vice President’s NPR “Hammer” Award Evolving Excellence Process Action Teams and Quality Management Boards Established R&D Organization of the Year 1986&1995 Quality Improvement Prototype Award 1995 Baldrige Category Champions Performance Excellence for us is a journey, not a destination and we continue to be in a state of ‘being’ This busy chart shows some major events on our journey – from the start of teaming with Quality Circles in 1985, our formation of a TQM Executive Council in 1989, being an early recipient of the Vice Presidential “Hammer Award” in 1993 for making a significant contribution to reinventing gov’t through our innovation and excellence, our first use of Baldrige category champions in 1995 to being the first and only winner of the Army Performance Excellence Award in 2004….it has been a long and continuous journey, then all to way to becoming a recipient of the MBNQA. Our Enterprise Excellence initiative has enabled us to apply the right resources at the right time to get our job done right the first time President’s Council for Management Improvement Award 1991 Middle Management Work Groups Power Down X Integrated Product Teams X PEG V Formal Evaluation Of Baldrige Feedback On Opportunities for Improvement & Corrective Actions PEG IV Quality Circles QIP Nomination Middle Managers Trained X PEG III System Approach Adopted, Natural Work Groups X PM Teams TQM Executive Council Formed Vision Established PEG II PEG = Productivity Enhancement Group 1984 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2004 2007

Enterprise Excellence Integrates Best Practices Continuous Improvement FY05 Adoption of Enterprise Excellence FY03 Adoption of Balanced Scorecard Continuous Improvement FY03 Corp Commitment CMMI, ISO, SE Started in Areas with Biggest Business Benefit FY01 Corporate Commitment to Six Sigma Certifications FY01 First CMMI Certifications FY01 First ISO This chart illustrates how Enterprise Excellence has integrated our best practices. The Baldrige-criteria has been the foundation of our continuous improvement and is a major component of our Quality Management System (QMS) within Enterprise Excellence Implemented in 2005, the key components of EE are shown here Our Quality Management System ensures we do things consistently Baldrige is the management framework of our QMS Within this QMS we use Capability Maturity Model Integrated and ISO for controlled, repeatable, tailorable processes A balanced scorecard aligns our strategy to actions to results Our scorecards cascade through multiple levels of our organization and provides a clear line-of-sight to our employees on what is important Voice of the Customer ensures we do the right thing the first time We use Systems Engineering for a common understanding of our customers requirements Additionally, our work is accomplished through Integrated Product Teams that have a customer as a member for almost daily opportunities to listen to the voice of the customer A robust quarterly customer survey also provides a valuable opportunity to listen to our customers Lastly, the wide pervasive use of Lean Six Sigma ensures we do things right We drive both efficiency and effectiveness through out our organization Please consider coming to our Process Management concurrent session to hear more about our LSS I’d like to see a show of hands in this room – who has received a Black Belt, Green Belt or has taken (or is currently taking) Green Belt, Black Belt or Executive Black Belt training? <wait for examiners to look around and see the show of hands> FY00 Six Sigma, CMMI, ISO Starts FY95 Baldrige Management Framework

Level 2 ARDEC Competency Directors / Office Chiefs Cascade of Strategies Vision / Mission Strategy Definition Level 1 ARDEC Centers Level 0 ARDEC Corporate Level 2 ARDEC Competency Directors / Office Chiefs Lean Six Sigma Projects Linked to Strategy At ARDEC, we lead by example and are dedicated to continuous improvement Remember I mentioned how a balanced scorecard aligns our strategy to actions to results Our scorecards cascade through multiple levels of our organization and provides a clear line-of-sight to our employees on what is important – this is a visual depiction of what I was speaking about Strategy Execution Individual Employees Workforce has a Clear Line-of-Sight of What is Important

ARDEC Human Capital Management (HCM) Human Capital “Pillars” Strategy: Workforce Strategic Alignment Leadership: Succession Planning for Leaders Diversity: Demographic & Talent Diversity Culture: Embody a Learning Organization Talent: Recruit, Train, Develop & Educate Performance: Enterprise-wide Management Strategic HCM Mentoring and Rotational Assignments Personnel Evaluation Recruitment Practices Succession Planning and Metrics Multi-Path Career Progression Leadership Development

Applied Talent Management Objectives of the HCMO The integration of LSS Projects The ARDEC HCC Charter The Impact of the 10 year hiring freeze Exit Interviews Measurements of the HCMO Plan Strengthening Talent Pipelines Proactive Recruiting, Talent Acquisition Marketing ARDEC Evaluate Acquire ARDEC’s Human Capital Goals 1.Align and integrate workforce 2. Decentralized execution 3. Data driven workforce analysis 4. Organizational learning 5. Human Capital Strategic Plan Retain Internal Flow of Talent Engage Improved Mentoring Programs Knowledge Sharing and Management Lead Develop This slide aims to demonstrate the actual magnitude of the problem. Plan- Cost per Day – $7000 a day for operating without a key player (Sullivan) Acquire- Cost of Poor Hire – $300K impact (Sullivan) Engage- 84% of highly engaged employees believe they can impact quality and reduce costs vs. only 31% of disengaged employees. Develop- 6.2 months for a manager to become productive in a new job (Watkins). Deploy- Only about 20% of employees are assigned to do what they do best at work (Buckingham) Lead- Top 10% of leadership accounts for almost 2x profit over the middle 80% (Zenger & Folkman – The Extraordinary Leader). On average, a manager’s actions impact 12.4 people in a company (Watkins) Retain- Loss of talented engineer or leader ranges from 250k -500k Cisco loses $250K for each talented engineer it loses. Bristol Meyers Squibb loses $500K for each senior leader lost. Evaluate- Value of Top Performers – Two to three times the performance of average employees (Ulrich and Smallwood) The VP of engineering for Google states excellent performers outperform their peers by a figure of 300 times It costs at least 1.5 times an employees fully burdened salary to replace an excellent employee. Talent Leadership for 1st Line Supervisors Common attributes for Mangers/Leaders Employee Development Deploy Cross Functional Assignments 7

Learning & Development Professional Development Key Workforce Expectation Individual Development Plans Armaments University On-Site Master’s Classes On-Site Teaming Fosters On-the-Job Training Experiential Learning Corporate Investment in Learning Our Workforce Learning and Development System balances the needs and desires of employees with the core competencies, strategic challenges and accomplishment of both short-term and long-term Action Plans. Employees have an opportunity for two-way dialogue with their supervisors about learning and development during the IDP process. Supervisors counsel their employees on the training they need to meet objectives and organizational requirements, and the employees can express their own desires. In 2005 ARDEC won the Undersecretary of Defense Acquisition, Logistics and Technology Workforce Development Award. Our core competencies drive much of our learning and development efforts. Competent armament engineers and scientists are not readily available from academia or private industry, so ARDEC must “grow” the skilled people who can research, develop and engineer innovative armament products. American Society for Training & Development International 2007 Best Award – 6th of 102

Knowledge Sharing Approximately 50% of E&S Newly Hired Organizational and Employee Knowledge Critical Oracle Collaboration Suite (OCS) Repositories Project Information Lessons Learned Process Asset Library Armaments Knowledgebase Our Knowledge Management Office (KMO) is responsible for providing the infrastructure to capture and oversee information flowing from work teams and processes. Recently the extensive Armaments Knowledgebase repository was migrated from old technology with limited access to our OCS (Figure 7.5-7). This extensive repository contains massive amounts of historical and current organizational technical knowledge including lessons learned, technical reports, test reports, failure investigations and other information for solving current problems. Some project areas have shortened the learning curve for new engineers to become familiar and comfortable with their programs from two years to six months to a year through the use of this repository. Knowledge is transferred to and from customers through formal documentation of requirements, disciplined systems engineering, customer surveys, and home-on-home meetings that are formally held between ARDEC leadership and customer leadership. The capture of knowledge from suppliers, partners and collaborators occurs primarily through technical data packages and reports, Cooperative Research and Development Agreements (CRADAs), academic alliances, participation in customer/supplier/ partner reviews, and involvement in national and international conferences and symposia. : Employee knowledge is collected and transferred through: 1) Development of technical data packages 2) Generation of patent disclosures 3) Level 1, 2. and 3 program reviews and after-action reviews on completed projects 4) Formal and informal mentoring 5) Succession planning 6) On-the-job training 7) Classroom training by in-house technical experts 8) Teaming 9) Documented lessons learned and best practices 10) Process documentation in Process Asset Library 11) Armaments history in Armaments Knowledgebase

Bottom Line Results Productivity, Effectiveness, Efficiency 40% Less Workforce Execute 40% More Work Many have asked us if our leadership commitment to performance excellence is worthwhile I want to wrap up with two things which clearly answer that question Our bottom line results are that when we normalized our revenue to 2007 dollars, since 1991 we now execute 40% more work with 40% less employees Diversity in Markets, Integrated Business Development Carryover Supports Business Sustainability Productivity, Effectiveness, Efficiency

ARDEC Strength: Customer & Market Focus Multi-point Voice of the Customer (VoC) Customers part of Strategic Planning & IPT Members Our Customer Support Triangle is deployed throughout the organization and provides a mechanism for us to hear the VOC in a continuous, systematic way. Members of the workforce involved in this Support Triangle validate customer requirements and expectations over the entire life cycle of a project. In addition, customers are a part of our Integrated Product Teams (IPTs) and participate in our SPP to provide information on requirements, new opportunities, and industry issues.

ARDEC Strengths: Work Environment & Systems Workforce Environment Horizontal IPTs Capability & Competency Knowledge Sharing Innovation & Continuous Improvement Work Systems Design Competency-Centric Organizational Structure Competency Management System Innovation is a key business advantage. We have innovation EVERYWHERE! Organizational structure People Products And Processes Through an extensive Six Sigma study, in 2004 we moved to a Competency-Based structure which fostered proactive, synergistic collaboration Although innovation was an integral part of our business, we heightened the importance when we included it in our vision statement of “Innovative Armaments Solutions for Today and Tomorrow” in 2005

ARDEC Strength: Customer -Focused Outcomes High level of patriotism in workforce Clear line-of-sight from our work to the customer, strengthens strategic link The difference in our work makes a difference to the safety of our Warfighters

ARDEC Opportunities for Improvement Understand Product & Service Outcomes Primary HQ Focus on Top 40 Programs Performance & Schedule Not Measured for Majority of Programs Lack of Measures May Hamper Performance Assessment and Allocation of Improvement Resources Obtain Comparative & Competitive Data Other RD&E Suppliers Document & Control Several Key Work Processes Implementing Business Strategies Ensuring Full Implementation of Lean Six Sigma Outcomes It is often easy to understand our strengths, but external “eyes” give insights we might not have discovered or discovered much later The most beneficial product of the Baldrige process is the feedback report. Though ARDEC was a 2007 recipient of the MBNQA, there is always room for improvement. The Baldrige feedback report that ARDEC received in response to its award winning application and site visit in 2007 identified 54 opportunities for ARDEC to improve the quality of its business model. Some of those Opportunities for Improvement (or OFIs) are listed on this chart. ARDECs approach for using this valuable feedback to drive continuous improvement is to tie these OFIs to our strategic plan. Not surprisingly, the majority of these OFIs have a strong correlation to the strategic Objectives and Initiatives that ARDEC has independently identified during our Strategic Planning process. Tying these OFIs to the strategic plan ensure that they become an integral part of ARDECs long term goals. It ensure continued visibility by senior leaders, and underscores the importance of these continuous Improvement efforts to all levels of the organization. Once OFIs are addressed we capture the approach, deployment, learning, integration and results in our next Baldrige application Systematic use of the Baldrige framework helps ARDEC to continually improve the quality of the products that we provide to the US Warfighter.

Estimated Baldrige Scores 500 Point ARDEC “Glass Ceiling” Summary ARDEC is a Role Model Journey Never Ends Requires Commitment & Effort Benefits Well Worth the Effort Estimated Baldrige Scores In conclusion, ARDEC’s vision is Innovative Armaments Solutions for Today and Tomorrow The real recipients of ARDEC’s journey to excellence are the men and women of our Armed Forces who each day benefit from our world-class products which bring them home safely and help keep America safe for the generations that follow Thank you for your time and interest 2007 Recipient 500 Point ARDEC “Glass Ceiling” The Real “Winners” In ARDEC’s Journey