June 21, 2010
Progress in North American Aerospace & Defense Industry Threatened by Leadership-Development, Talent, Organizational and Cultural Problems, Accenture Research Finds

New entrepreneurial nature of industry requires more comprehensive approaches to developing human capital, including enhancing capabilities in leadership, talent, culture and organization
NEW YORK; June 21, 2010 – The North American aerospace and defense industry will face serious business challenges due to its existing leadership development, talent sourcing, organizational structure, and corporate culture problems, according to new Accenture (NYSE: ACN) research that included a survey and interviews with a broad range of industry executives.

The research findings point to future industry threats such as an escalating talent management problem. According to the research, high percentages of skilled workers are rapidly approaching retirement age. More than half (51 percent) of respondents indicated that the potential for decreased business performance due to changing workforce demographics is either looming or critical.

In addition, 67 percent of the executive respondents lack confidence in their company’s ability to execute programs to develop future leaders. Consistent with this finding, 63 percent lack confidence in their company’s capability to deal with human capital challenges.

Asked whether they were confident in their company’s ability to transition from a command-and-control mindset to a more entrepreneurial outlook, more than half either disagreed or strongly disagreed that their firms were capable of handling this transition well.

“The problems with leadership development, talent sourcing, organizational structure and corporate culture are acute, systemic and intensifying in the North American aerospace and defense industry,” said Pinaki Dasgupta, managing director of Accenture’s North American Aerospace and Defense business. “Companies that do not take comprehensive steps very soon to solve these problems are likely to be severely challenged to innovate, transition and grow during the next several years. Time is not a luxury for them at this point.”

Several cultural and leadership barriers figured prominently in the research. The executives were especially concerned, for example, that some aerospace and defense companies tend to be too big and impersonal and that command-and-control mentalities inhibit the kind of collaborative management techniques needed to succeed in today’s business environment.

“The prevailing mindset of a typical aerospace and defense company has been highly centralized and control-oriented, and that has served many companies well to this point,” said Dasgupta.  “But leadership styles and the prevailing cultural mindsets, particularly in the commercial sector, would benefit from cultures that are less bureaucratic and more entrepreneurial, less authoritarian and more collaborative, and less focused on top-down communications and more concerned with individual employee needs.”

The research also revealed that the biggest organizational structure challenges these companies face include silos that prevent the flow of information and communication, turf battles and dispersed multi-site operations.

Innovative Ways to Overcome The Hurdles
Despite these hurdles, the Accenture research found many ways leading companies are striving to achieve high performance through distinctive human capital capabilities. Several innovative programs for overcoming talent shortages include involving military veterans with disabilities, collaborating with universities and local businesses. Some companies are expanding their traditional leadership development programs to stress a broader suite of capabilities. Other companies are more explicitly embracing a diversity of backgrounds and talents throughout their culture. Still others are devising governance structures that encourage a more agile organization.

According to Accenture, the key to developing the human capital capabilities needed to meet the aerospace and defense industry’s business challenges in the decades ahead is a more comprehensive approach that goes beyond a traditional focus on employee sourcing only.

“The emphasis on attracting and retaining top talent is a critical part of the equation, but that alone will not be enough,” added Dasgupta. “New kinds of leadership behaviors are equally important, as are cultures that encourage openness and cross-functional teaming. The right kind of organization structure is also critical—one that pushes decision-making further out into the company and that incorporates reward structures to encourage collaboration.”

Methodology
Accenture’s research involved a survey and interviews with 40 executives. Executives represented various market segments including providers of commercial and defense products and services.

For a copy of the full report, please visit: http://www.accenture.com/Global/Services/By_Industry/Aerospace_and_Defense/Services/WorkforceTransformation.htm

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with more than 181,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.

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Charles Hartley
Accenture
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Charles.hartley@accenture.com