“We Have the Flexibility and Firepower to Succeed in Volatile Times.”

A defense contractor looks to extend its diversification efforts even as it anticipates the re-arming of America. An interview with Bruce L. Tanner, EVP and CFO, Lockheed Martin Corp.

One limiting factor, though, might be the nature of your workforce. It’s highly specialized, so I imagine doing a sizable layoff whenever you need to cut payroll isn’t as easy a lever for you to pull as it might be for a CFO in another kind of business.

Half of our 136,000-person staff is composed of scientists and engineers. They represent an awful lot of intellectual property, and that is the seed corn that sustains the business going forward. There isn’t much that we can’t do with the technical workforce that we have, so we’re constantly watching to make sure we have enough applications to utilize it. But one of our biggest challenges is that we are a fairly senior organization; over the next 10 years a large portion of our employee population will become eligible to retire. That’s something that’s affecting both the technical and nontechnical sides of the house, including finance.

To what degree do you try to get granular with that? Do you project how many people may be retiring in a given year?

We probably get more granular each and every year, but it’s hard to predict exactly when someone is going to retire. It’s not just age-dependent, obviously. Like every other industry, we saw a slowdown in the number of people who retired when the market dropped significantly in 2008, and 2009 was a lower year for retirements than we expected. But that’s not something we can count on going forward. I do talent planning on at least a quarterly basis, and we now devote [more] resources to knowledge transfer through internally produced monthly Webcasts and other programs that help retain the kind of tacit knowledge that is difficult to convey through conventional training.

Beyond those internal efforts, how else do you prime the talent pipeline?

We devote a large share of our philanthropic budget to fund schools, events, and even educational movies that encourage more students to pursue an education in a technical discipline. As a country, we are not generating enough graduates with technical degrees to replace those who will soon retire.

You alluded earlier to some projects that have either been scaled back or cut altogether. Lockheed lives and dies by large contracts. How do you keep staff motivated when the news is less than good?

One of the things that we keep saying is that the portfolio development that we’ve done over the last decade remains very relevant and very affordable. That’s important in an environment where there’s likely not going to be a whole lot of brand new programs. I think incumbency matters, and we are the incumbent on many products that we feel very good about. What I keep telling people is, let’s just perform. The country needs to recapitalize its military assets. I think one of the bigger misconceptions is that all the spending we’ve done since 9/11 has given us a very capable and fairly new set of equipment for the military’s use. In fact, just the opposite is true. We’re actually burning up the useful life of the assets as we use them in theater, to the point where we do need to recapitalize those assets.

Your two immediate predecessors became the CEO and the president of a business unit. Do you see yourself in a nonfinance role some day?

I don’t know. I think I’ve got a great job right now that I very much love doing. I’ll be on the [CFO] job three years in late August or early September, and it sure doesn’t seem that long ago, so I think that’s positive. If the leadership team or the board of directors asked me to do something different I’d probably listen, but I’m having a lot of fun doing this job right now.

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