Noncompliance can ruin corporate reputations, shatter financial performance, and destroy careers, families, and lives. With so much to lose, doesn't compliance deserve our undivided attention?
Corporate compliance—or, more accurately, the risk of noncompliance—has become a major concern over the past decade, especially for global manufacturers with operations in many different countries and jurisdictions. When a practice commonly accepted in one country could be a serious criminal or civil offense in another, companies had better know about it.
Many firms understand that compliance can lead to competitive advantage and are making their suppliers commit to compliance standards that go far beyond those required by law.
To understand how companies reduce the risks of noncompliance, A.T. Kearney surveyed execu¬tives at leading manufacturers, conducting in-depth interviews with compliance executives at nearly 40 top companies worldwide. While most studies approach compliance from a legal perspective, we focus our attention on compliance management.
Five major findings emerged from our examination of compliance management in these areas:
- Most companies expect to expand their compliance systems.
- Lower management has a much less favorable perception of compliance systems than top management, indicating a strong need for administrative efforts to generate acceptance at all levels.
- Most companies do not have an independent compliance department that reports directly to the executive board.
- External resources are especially useful for setting up a compliance system.
- The most effective compliance systems integrate compliance and process management.
Three Ways the U.S. Department of Defense Can Achieve Its Sustainment Objectives in Challenging Times
A three-pronged approach focuses on what matters—structure and acquisitions.
For more than a decade, the DoD has embraced performance-based logistics (PBL) as its preferred means for reducing sustainment costs. While effective in some cases, PBLs are generally thinly implemented, mostly contract-focused, and executed at the commodity level.
Our recently commissioned A.T. Kearney study reveals that PBLs alone will not be sufficient for the DoD to meet both its sustainment needs and performance requirements during the coming period of significant budget reductions. The study also examines the forces of change inside and outside the DoD, highlighting how they will play out within the context of U.S. national security and the ways in which they will shape the DoD's future sustainment strategy and activities.
Our findings suggest that the DoD can meet its sustainment objectives—despite a declining budget—by looking more broadly at the defense industrial structure and the acquisition process. Indeed, it is possible to substantially improve sustainment performance while also meeting the long-term goals of national security and taxpayer stewardship.
This can be accomplished by aggressively pursuing and implementing three strategies: adopt a menu of principle-driven sustainment models, develop a portfolio mindset, and make better acquisition decisions. This paper outlines each one in more detail.Close
By improving acquisition cycle times, the U.S. Department of Defense can cut costs, increase flexibility, and reduce delays.
A disjointed approval process, the use of unproven technologies, ever-changing requirements, and a massive, complex regulatory burden mean wasted time and wasted money for the U.S. Department of Defense (DoD). Such an outcome is unacceptable for leaders of commercial projects—and should be for the military as well. The consequences are serious: delays in delivering necessary capabilities to warfighters, excessive costs, an inflexible supply chain, increased supply base uncertainty, stymied program workers, and increased government personnel costs for low-value-added activities.
The DoD and Congress must work together to limit the costly oversight and reduce product development time. To do this, they must look to the commercial sector’s product development best practices to streamline acquisition cycle time.
Unlike in the commercial sector—where product development decisions are made with all important parties “at the table” for the purpose of reaching a singular, common objective of maximizing shareholder value—in the military, a raft of decision-making authorities split the various tasks regarding setting requirements and managing program risks, from Program Executive Offices and Services Acquisition Executives to the DoD and Capitol Hill. Acquisition cycle times for the DoD aircarft programs are more than 30 months longer, on aveage, then similar commercial projects. A comparison of DoD and commercial satellite programs yields similar results—almost four years difference, more than double the time.
The DoD faces four main obstacles in its acquisition process that the commercial sector seldom sees.
- The use of immature and high-risk technology
- Changing requirements
- Regulatory burden
- Multiple, disjointed decision support systems
The DoD can improve results by applying commercial best practices.
Establish the technology maturity threshold. To achieve shorter production cycle times, the DoD must apply spiral development more broadly, separating technology development from weapon system development and aggressively pursuing new technologies outside the realm of the broader program. Doing so will enable the DoD to move ahead more quickly with development using mature technologies or incorporating incremental technology advancement throughout the weapon system development.
Freeze requirements at a decision point. Performance requirements need to be frozen much sooner in development if the DoD is to curb cost growth and schedule delays and prevent changes to major performance requirements after development.
Establish milestones and rewards. To improve acquisition decision making, the DoD must recognize that time is directly associated with increasing costs. The current decision-support disconnects are contributing to weapon system cost overruns and schedule delays. It must re-examine with a “lean” mindset the approval authorities and timing along the Major Defense Acquisition Programs (MDAP) process.
These changes would make an immediate impact—lower costs and faster time to completion—and a growing advantage for our warfighters as they succeed on the battlefield.Close
A combination of factors in India’s airline industry could result in a new generation of smaller, faster, more fuel-efficient passenger aircraft.
India’s airline industry has enjoyed tremendous growth in recent years, with its revenue passenger kilometers boasting a compound annual growth rate of more than 20 percent from 2004 to 2011. More importantly, India is poised for significant growth in air traffic. If India’s airlines are to make the most of this growing demand, they will need to expand their fleets. And while fleet growth is likely to occur across all aircraft categories, we believe aircraft designed for regional service (60–120 seats) will grow fastest.
Five key factors will drive the demand for regional aircraft in India over the next 15 years:
- There will be Increased demand for travel between regional hubs and tier 2 and 3 towns.
- There is limited aircraft handling capability at smaller airports.
- Demand for “long-thin” routes will increase.
- New short-haul aircraft will emerge.
- Favorable regulations continue to reign in India.
The combination of these factors leaves little doubt that the concept of regional routes flown by a new generation of short-haul regional aircraft is poised to take off in India.Close
- The Hill, 9 April 2012
The defense industry must pursue an affordability path with a vengeance.
Budget pressures are triggering changes in the defense value chain. Commercial-sector success offers a way forward.
The defense value chain is on the precipice of significant change triggered by severe budget pressures. The Department of Defense is at a crossroads. Successes in the commercial sector offer the industry a way forward, but they also beg a key question: Can defense value chains respond similarly?
Budget cuts are increasing pressure in every direction along the U.S. Department of Defense (DoD) value chain—from customers (PEOs, SPOs, war fighters), prime contractors, and sub-tier suppliers, to funding providers such as those on Capitol Hill and Wall Street. The pressure is forcing the government and its suppliers to dramatically challenge the status quo.
A.T. Kearney interviewed 18 defense-sector senior officers and executives from various areas along the defense value chain. They presented a wide range of perspectives on improving affordability—suggesting that defense acquisition (buy side) and development, production, and sustainment (sell side) are ill equipped to meet today's new realities.Close
- The Hill, 11 November 2011
Five principles for cutting the defense budget without harming national security.
- AOL Government, 3 October 2011
Each side of government's supply-and-demand equation is under pressure.
Europe, Middle East, and Africa