Resources

Our key resources are fundamental to the success of the Group
The Group’s key resources and arrangements include the people it employs, its relationships with customers, subcontractors and other suppliers, research and development, and intellectual property. These resources, together with the application of the mandated policies and processes in the Operational Framework, help the Group to achieve its strategy.

People

The contribution made by the Group’s employees is fundamental to its success. Through global implementation of its people policy the Group obliges each employee to contribute to the creation of an inclusive work environment where individuals are respected, the value of having a diverse workforce is recognised and the recruitment, employment and development of people is based on qualifications, skills and competencies to do the job. This helps the Group attract and retain highly talented people who can deliver the systems and services that its customers need.

The Group’s workforce encompasses the broad spectrum of skills and experience needed to deliver a full range of systems and services for air, land and naval forces as well as advanced electronics, information technology solutions and customer support services. The Group works in partnership with education providers in its home markets to ensure that there continues to be a supply of talented and qualified people to fill its early career programmes for university graduates and apprentices. We invest in education schemes with a particular emphasis on promoting the teaching and study of science, technology, engineering and mathematics subjects.

The Group drives high performance through its Performance Centred Leadership (PCL) process. PCL is a mandated core process under the Operational Framework and addresses the setting of objectives and performance assessment together with the determination of reward, development needs and potential. It drives business success by linking individuals’ goals with the wider goals of the organisation, enabling employees to understand how their own success contributes to the success of the Group. The Group’s 2008 target to increase the roll-out of PCL by a further 500, to a total of 6,700 executives worldwide, was achieved.

The Group is committed to equal opportunities regardless of sex, race, colour, nationality, ethnic origin, religion, age, sexual orientation or disability, subject to considerations of national security and the territories in which it operates. The Group operates a policy that discrimination against any person on the grounds of disability shall not be tolerated.

The Group has put into place a number of ways of consulting with employees, and providing them with information on the performance of the Group and other matters that affect them. These include regular employee surveys, global, regional and departmental newsletters, and a global intranet site. We also engage with our people through employee representative bodies and trade unions. The effectiveness of the communication process is assessed regularly.

Employees are actively encouraged to become shareholders in the Company by way of all-employee share schemes.

This year, the Group’s biennial employee opinion survey was completed by more than 58,000 employees.

In 2007, the Group declared its aspiration and commitment to achieving a level of safety comparable with the best in class. The Board actively monitors days lost to work-related injuries, a key performance indicator relating to corporate responsibility.

Relationships with customers

The Group regards the relationship with its customers as a key discriminator in a competitive industry. Its core businesses are mostly defence related, selling products and services primarily in our home markets and to other national governments, both directly and indirectly through other defence and aerospace companies. In many cases these relationships extend over decades and span the full product and service lifecycle from initial concept definition, through the system development phase, into production and then on to support for the system in service.

This lifecycle approach is used as the basis for Lifecycle Management (LCM), which is a mandated core process under the Operational Framework. LCM provides a structured approach to managing the Group’s commitments and investments throughout product and project lifecycles, promoting the application of best practice management and facilitating continuous improvement. Under LCM, programme margin variation and schedule adherence are regularly reviewed to monitor the Group’s performance in relation to contract profitability and milestone achievement. These are key performance indicators relating to programme execution.

Throughout this lifecycle, the Group engages extensively with its customers and undertakes customer satisfaction surveys as part of its drive for continuous performance improvement. The Group targets year-on-year improvement in customer satisfaction. This is a key performance indicator relating to programme execution.

Increasingly contracts are being awarded for the delivery of a capability, rather than just a product. Reflecting this new approach, traditional customer relationships are evolving into long-term partnerships with governments and their armed forces.

Subcontractors and other suppliers

Managing major subcontracts is a key strategic capability. Expenditure on subcontractors often represents a significant portion of project cost and effective management of this expenditure is a key value driver for our Group. The benefits of capability-based contracting, combined with ongoing budget pressures, are leading many customers to demand a more integrated partnering approach to meeting their requirements. Transforming relationships with suppliers is an essential part of developing systems integration and through-life management capabilities. The Group is committed to improving supply chain relationships and working together with other companies, large and small, in each of the Group’s home markets to deliver better value and innovation for its customers.

The Group’s Centre for Performance Excellence has identified best practices in managing major subcontracts from across BAE Systems and industry. Best practice in managing major subcontracts is embedded in the Group’s processes, guidance and training to help deliver on commitments to customers. This directly aligns with the Group’s strategic objectives of enhancing programme execution capabilities, sharing of best practice between the Group’s global businesses and embedding a high-performance culture.

Research and Development (R&D)

The Group is engaged in significant R&D programmes in support of the platforms, systems, services and capabilities that it provides to its customers. These cover a wide range of work and include performance innovations, improvements to manufacturing techniques and technology to improve the through-life support of products. Long-term research is undertaken through partnerships with the academic sector and in the Group’s Advanced Technology Centre and Systems Engineering Innovation Centre.

Application of this research is managed through business-focused R&D programmes. Customers fund directly much of the near-term product development work undertaken by the Group. Total R&D expenditure for the Group amounted to £1,044m (2007 £1,460m), of which £211m (2007 £176m) was funded by the Group.

Intellectual property

Intellectual property is created every day, taking many forms, both in tangible products and ‘know how’ developed over the years. The Operational Framework mandates a policy to protect the Group’s intellectual property through appropriate use and observance of intellectual property law, so that returns made from the investment in R&D and technological innovation are protected, and valuable commercial and business innovations, all of which contribute to the Group’s competitive advantage, are adequately safeguarded.

The Group filed patent applications covering over 200 new inventions in 2008 in support of its global businesses, and has a total portfolio of patents and patent applications covering more than 1,700 inventions worldwide.

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