Roi brief for knowledge transfer muras

Non-export controlled. Releasable to non-US persons per INC-DSEA-2015-00032

Savings Calculations – One ApproachAndrew Muras, Advanced Learning [email protected]

© BAE Systems, Inc. 2014 1

BAE SYSTEMS, INC.

‘What is my ROI for Knowledge Transfer?’


Goals

• Quantify Business Value: Focus on savings and return on investment

• Use Credible Data: Finance-supplied data, industry standards and accepted financial calculations

• Be Conservative: Use reasonable, but lower figures when developing results

• Employ Scenario-based Rules: Construct impact using results from ongoing efforts

Provide a straightforward and credible approach for quantifying ‘hard-to-quantify’ knowledge, collaboration and learning efforts.


Basic Process

1. Identify value-added

benefits

2. Make reasonable

assumptions

3. Gather supporting

data

4. Perform practical

calculation

5. Assess and iterate

Complete for each independent

value-added benefit


Knowledge Transfer Savings Calculations


Why Knowledge Transfer for BAE Systems?

Upcoming significant retirement issue: Approximately x% of our staff is eligible to retire over the next 10 years

• Intellectual capital is our competitive advantage

• We sell expertise and knowledge, it’s what our customers expect from us

We are defining and implementing an Inc.-wide strategy and process for capturing and transitioning knowledge and expertise from experts to our

current and future employees


Example Industry PracticesRecent Study completed by APQC – Top 6 practices in transferring critical knowledge

1. Create strategy and process to protect critical knowledge 2. Identify critical knowledge 3. Capture and transfer critical knowledge 4. Manage access to critical knowledge5. Manage change related to knowledge capture, transfer, reuse 6. Ensure critical knowledge is applied and used

Corporate wide initiative begun in 2008

Integrated with other knowledge initiatives

Dozens of teams running simultaneously

Promoted as a business discriminator

Knowledge sharing initiated early 1990’s

Moved to advanced knowledge sharing behaviors-2010

Annually they conduct 20,000 individual knowledge transfer activities

George Washington University independent study of Knowledge Transfer/Continuity efforts:91% Documented Success Rate>$140K Cost avoidance/team

Focus is on knowledge flow, conversation, learning and reuse versus documentation and repositories.

Examples of two other firms investing in Knowledge Transfer efforts


How Does Knowledge Transfer add Business Value and Reduce Cost?

1. Preserves intangible capital and provides for business continuityassociated with that position.

2. Saves direct cost if the team is able to continue the work without replacing the departing employee or by replacing with a new hire at a reduced salary

3. Avoids recruiting costs when the departing employee is replaced by internal Other Experts or not replaced.

4. Reduce time to full productivity while awaiting replacement employee.

5. Decreases risk by quickly ramping up new employee and reducing probability of failure.

6. Realizes performance gains for KT team members as they learn more about business processes and lessons learned.

7. Improves processes associated with current team’s business efforts.


Quantifying ScenariosSavings Category No

ReplacementBackfill: Lower

priced Other Expert

Backfill: External Hire

Save direct salary costs $xx$xx

$xx$xx

Avoid recruiting cost (externalhire) $xx $xx

Reduce time to productivityawaiting backfill (3 mos avg)

$xx$xx

Decrease risk: improve ramp-up & decrease failure rate (1/3rd)

$xx$xx

Performance gain : KT team (eliminate rework, 1% improve) $xx $xx $xx

Process improvement: (reduce 5% NVA = 1.25% improvement) $xx $xx $xx

TOTALS $xx$xx

$xx$xx

$xx$xx

Direct Cost Savings $xx$xx0

$xx$xx

Calculations based on higher global grade departing employees

To be conservative: did not consider additional cost savings associated with Facilities, IT, etc. or other recruiting/HR costs such as training, use of outside recruiters and others.

Financial Analysis: Preserving

Intangible Capital per employee

$154,423

Based on BAE Systems Annual Report to Investors


Calculating Savings1. Average Savings from the three Scenarios and Intangible Capital

2. Discount by 20% to be conservative

3. Sanity check with other industry/independent studies: >$140K savings

Average Savings $xxKAverage Savings for higher global grade employee $xxK


Return on Investment

Cost of Average KT event $5.3KCost for GG13-16 departing employee (assume 3 of 5 team members at GG13-16)

$7.6K

1. Calculate cost of conducting a KT event:- xx team members for xx one-hour sessions + xx hours planning- To be conservative, increase total costs by 20%

2. Calculate ROI: (Savings – Cost)/Cost

Average GG+

Savings $xx $xxK

Cost $xx $xxK


Real-Life Examples to date

Captured 30+ years of Reliability insights which resulted in over $200K in cost savings/avoidance

Engineering

Through process improvements and increasing team skills, no replacement was needed, thus eliminating need for backfill. >$175K cost savings

Inc Function

Members of our Strategic Initiatives Group (SIG) are working with business development and proposals to use knowledge transfer concepts and methods to enter new customer and market areas. It provides a powerful message: we have a proven system for capturing, transferring, and applying knowledge.”

Business Winning

KT provides an effective and orderly transition of responsibilities when a person leaves the company.It gave my direct reports additional insight into my total responsibilities and forced us to reflect on those responsibilities that are not always intuitive.KT provides an opportunity for our future leaders to be more prepared to lead this company.

VP, Supply Chain


Summary

• Business Value of Knowledge Transfer processes are quantifiable

• KT processes are relatively simple to implement across multiple home markets, sectors, functions and global grade levels.

• KT processes require minimal investment and provide significant cost savings/avoidance and return on investment

Cost Savings ROIInc Average $xxK xx%GG13-16 Employees $xxK xx%

Roi brief for knowledge transfer muras

Data & Analytics

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