Are you familiar with Kelly Johnson’s 14 Rules of Management ? Available at Lockheed Martin, these Rules were at the heart of the most successful aeronautical projects ever completed, such as the Lockheed U-2 and SR-71 Blackbird. These rules made the difference between completing a project on time and on budget and not completing it. I say that because so many projects nowadays involve over-spending and delays.

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. Don’t have the books ninety days late and don’t surprise the customer with sudden overruns.

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 with 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. “

Johnson’s Principles, together with Gene Kranz’s quotes [below] from “Failure is not an option: Mission Control From Mercury to Apollo 13 and Beyond ” are still guideposts for leadership.

1. “To recognize that the greatest error is not to have tried and failed, but that in trying, we did not give it our best effort.

2. You can not operate in this room unless you believe that you are Superman, and whatever happens, you’re capable of solving the problem.

3. Leadership is fragile. It is more a matter of mind and heart than resources, and it seemed that we no longer had the heart for those things that demanded discipline, commitment, and risk.

4. I think everyone, once in his life, should be given a ticker-tape parade.

5. Probability said that someday we would run out of luck—as.

6. From this day forward, Flight Control will be known by two words: -Tough- and -Competent. – Tough means we are forever accountable for what we do or what we fail to do. We will never again compromise our responsibilities. Every time we walk into Mission Control we will know what we stand for. Competent means we will never take anything for granted. We will never be found short in our knowledge and in our skills.”

Alpha males need to be celebrated every day, and remind the younger generations of their proud forefathers.

Failure is not an option. - Gene Kranz

4 Replies to “The Fourteen Rules of Kelly Johnson”

  1. Steve says:

    Bud, did you hear that Boeing is buying Embraer ?

    ERJ's EV-to-EBITDA higher than 86% of the 162 Companies in the industry.

    During the past years, Embraer SA's highest 3-Year Average Share Buyback Ratio was 0.80. The lowest was -31.60. And the median was -0.40.

    Reply
  2. Mel says:

    The most important valuation I use for is the Yachtman ratio or forward rate of return. Normalized free cash flow yield plus real growth plus inflation. Embraer forward rate of return for was -3.30%. Boeing Co's forward rate of return for was 11.72%

    Reply
  3. Dinesh says:

    A 5-yers Ebitda/CAGR tells the story, not the Yachtman ratio.

    Reply

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