Skunk Works' Operating Rules Shrug off excessive administration, do good stuff quicker, increase profits!

08 Oct 2019

I've been working in the electronics industry as an independent design consultant for 27 years, and my experience of working with over 800 different companies is that the percentage of their effort that they put into creating wealth is constantly reducing.

Even before I was even born, it had been noticed that many engineers, left to their own devices, were more interested in designing neat stuff than making profits for their employers or shareholders. The solution was to employ people who understood management and administration, from the CEO on down.

Unfortunately, the new people generally didn’t (and still don’t) understand electronic engineering or engineers, but they did (and still do) understand that the more staff you control, the greater your salary! So, they continually employ more and more of the people they can understand – managers and administrators. Shareholders are naturally concerned to maximise the value of their holdings, so it is quite usual for these managers and administrators to have accountancy backgrounds.

I once met a “Management Accountant” and asked her how it was different from being a regular Chartered Accountant. She replied that a “Management Accountant” actually had a clue about what the companies they worked for actually did. How many of the Accountants employed by your company are qualified Management Accountants? I’d be willing to bet there isn’t single one!

Like I said, it seems to me that there is an increasing ‘suffocation’ of engineers and the engineering that actually creates the wealth that everyone in their company depends upon.

Having suffered from increasingly excessive examples of administrative ‘platinum plating’ in recent years and seeing this as part of a continuing (worsening) trend, I thought it might be useful to revisit the rules for Lockheed Martin’s famous Skunk Works®.

Lockheed Martin’s Skunk Works® are legendary, well-proven to be very effective, and a lot has been written about them – for example: https://www.lockheedmartin.com/en-us/news/features/history/skunk-works.html.

These rules are listed on the next page, copied directly from the URL stated. Although they are based on military contracting, their basic principles are easy to apply in all other areas, including when one part of a company ‘contracts’ with another to produce products to sell under its own name.

I sincerely hope that you are able to take this well-proven engineering management process and use it to create some real benefits for engineering and profits in your company.

Be prepared to put some noses out of joint where this is justified to adhere to Skunk Works® principles!

Skunk Works® Operating Rules

From www.lockheedmartin.com/en-us/who-we-are/business-areas/aeronautics/skunkworks/kelly-14-rules.html

1. The Skunk Works® manager must be delegated practically complete control of his program in all aspects. He should report to a division president or higher.

2. Strong but small project offices must be provided both by the military and industry.

3. The number of people having any connection with the project must be restricted in an almost vicious manner. Use a small number of good people (10% to 25% compared to the so-called normal systems).

4. A very simple drawing and drawing release system with great flexibility for making changes must be provided.

5. There must be a minimum number of reports required, but important work must be recorded thoroughly.

6. There must be a monthly cost review covering not only what has been spent and committed but also projected costs to the conclusion of the program.

7. The contractor must be delegated and must assume more than normal responsibility to get good vendor bids for subcontract on the project. Commercial bid procedures are very often better than military ones.

8. The inspection system as currently used by the Skunk Works, which has been approved by both the Air Force and Navy, meets the intent of existing military requirements and should be used on new projects. Push more basic inspection responsibility back to subcontractors and vendors. Don't duplicate so much inspection.

9. The contractor must be delegated the authority to test his final product in flight. He can and must test it in the initial stages. If he doesn't, he rapidly loses his competency to design other vehicles.

10. The specifications applying to the hardware must be agreed to well in advance of contracting. The Skunk Works practice of having a specification section stating clearly which important military specification items will not knowingly be complied with and reasons therefore is highly recommended.

11. Funding a program must be timely so that the contractor doesn't have to keep running to the bank to support government projects.

12. There must be mutual trust between the military project organization and the contractor, the very close cooperation and liaison on a day-to-day basis. This cuts down misunderstanding and correspondence to an absolute minimum.

13. Access by outsiders to the project and its personnel must be strictly controlled by appropriate security measures.

14. Because only a few people will be used in engineering and most other areas, ways must be provided to reward good performance by pay not based on the number of personnel supervised.

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