Taking command Featured

7:00pm EDT February 28, 2007

Gerald Dinkel fights a war on two fronts every day.

He was hired into Cubic Defense Applications in 2000 and moved into the president and CEO position six months later, just as the defense division of Cubic Corp. was finishing an unprofitable year.

While his firm assists combat efforts by providing training systems, integrated services and communications products to U.S. military forces and allied nations, it was losing its own battle with the bottom line.

“The way I would characterize it is that we had multidimensional problems,” says Dinkel. “We had just lost money on a major contract, and once I was here, it became apparent to me that we had poor relationships with our customers. There were lots of historical events that pointed to a lack of focus on our customers, and we had recently lost a number of contracts to the competition.”

Dinkel began his discovery process by spending time with staff, evaluating people and the culture, and looking for the hidden reasons behind the recent lack of growth and loss of contracts. He also gathered information by speaking with the firm’s customers.

Dinkel is an engineer by trade, so after assessing the challenges, he drafted his battle plan in a systematic and organized fashion. Moving Cubic Defense Applications back to financial health would require a cultural shift, a more aggressive posture in developing new technology and better customer relationships.

Developing a passion for customers
One of Dinkel’s early assessments was that the corporate culture didn’t value customers. So in addition to looking at the management structure and leadership team, he immediately launched a parallel mission to change the attitude of employees. “Without customers, we don’t have any business, and we need them more than they need us,” says Dinkel. “Relationships with customers are vital. It may not get you the business if you don’t have the lowest price, but that relationship can break a tie.”

To transfer his vision of improved customer relationships to the staff, Dinkel spent time in one-on-one sessions with managers, expressing his desire for change. He also made examples out of those who didn’t want to follow the new direction. The competition was growing and profitable, and Dinkel began to surmise that his company had stayed with its current technology solutions too long. “In order to be successful, we needed to achieve things that had not been done before,” says Dinkel. “We were going to be creating and delivering services for the first time, and in that process, you can sometimes have difficulty with delivery. If you have a problem and you have the customer working with you, they will help you solve that problem rather than leaving you.”

Evaluating people
To navigate change, Dinkel relied heavily on moving people to new roles and on his ability to be a persuasive and effective leader. Most of the staff he started with is still with the organization but in different positions.

As he evaluated people and made his decisions, an openness to change became his litmus test.

“As a CEO, you have to have confidence in your judgment when it comes to people,” says Dinkel. “I looked at people’s attitudes. Some are open to change, and some are just not flexible and don’t want to be bothered with it.”

Because he didn’t know the staff yet, Dinkel sought internal opinions about who would be the best candidate to become project manager over the troublesome contract that had produced a bottom-line loss and an unhappy customer the prior year. Again and again, the same name kept coming up. “I wanted a project manager who understood the technology and could turn the customer situation around by fulfilling the contract through tremendous attention to detail,” says Dinkel.

With that change, he moved a major item off of his to-do list, and the contract has since been profitable.

“There was some pent-up demand among some of the staff to be more entrepreneurial and creative, so I was able to unleash that,” says Dinkel. “I also brought in people that I had known from prior assignments.”

Dinkel acknowledges that incorporating leaders who have prior relationships with the CEO can be a double-edged sword.

“I know that they are perceived by others to be ‘FOGs,’” friends of Gerry, says Dinkel. “They actually have more pressure on them because if they fail, I fail. In the end, I will be judged on whether the people I brought in actually make the organization better.

“Sometimes, you have to change the people in order to change the culture because cultures don’t change overnight, and as the CEO, that culture will outlive you. Before, it had become an intimidating, closed type of culture. Now, we have a fairly open culture.”

The matrix
Prior to Dinkel’s arrival, Cubic Defense Applications was organized into five operating units, each headed by its own president and CEO. Dinkel says that the groups were working in silos, and many operating functions were redundant.

His vision was for three divisions, organized by function, which allowed for greater sharing of information and focus on the customer. Dinkel eliminated the top positions and took the parts of each unit that were similar, such as engineering, and consolidated them. He says that although there are pluses and minuses to organizing along a matrix structure, in this case, it was the right way to improve performance, creativity and speed to market.

Matrix structures are common in organizations that utilize project management, blending a conventional vertical hierarchy for reporting with a traditional horizontal project management structure that encourages cross-communication and accountability. “I like a matrix structure because it gives you checks and balances and eliminates redundancies, while encouraging peer-to-peer challenges,” says Dinkel. “We had also become very tactical, and my goal was to move us to a more strategic posture. In order to achieve that, we had to break down the silos and the fiefdoms.”

The focus on three functional areas and the elimination of silos drove innovation and increased the volume and pace of new technology developments and releases. That move drove new sales to existing clients and repositioned the company from follower to leader. “Recently, I thought that our business development people were becoming too short-term-oriented,” says Dinkel. “So I moved them into one centralized organization away from the business units. They still have a relationship with the business unit, but they have a separate reporting structure.”

Dinkel says some of his staff laud his ability to anticipate future market demand, likening him to Wayne Gretzky, who described his prowess in hockey by saying, “I skate to where the puck is going to be, not where it has been.”

Dinkel attributes his vision to unleashing internal creativity through management changes, the matrix structure and spending time in front of customers. “The Department of Defense actually publishes forward-looking information which helps to anticipate the new technology needs,” says Dinkel. “I also spend a great deal of time in front of customers. In particular, the international customers value a personal visit from the CEO, and they will share with you where they are headed.”

Annually, he takes his management team off-site to look at long-term strategic planning by reviewing the data in anticipation of emerging customer needs.

The increased rate of new technology releases has positively impacted both the top and bottom lines. In 2006, CDA had revenue of $563 million, an increase of more than $100 million over 2004.

Improving execution
One of Dinkel’s final changes involved moving CDA to become a high-performance organization.

He implemented the principles of Capability Maturity Model Integration (CMMI), a process improvement approach that also plays a role in generating new business. “One of the reasons that it was important for us to become CMMI-certified is because the customers demanded it,” says Dinkel. “There are certain things that you can’t bid unless you have that certification, and as a mid-tier supplier [a defense contractor with revenue up to $1 billion], we needed to demonstrate that we were a high-performance organization.”

Dinkel says that often, CEOs assign process improvement initiatives to staff. In this case, he embedded the responsibility with his line managers, a move that he says placed the accountability for improving productivity and results directly with those most responsible for the outcome.

He named the initiative “competitive superiority” to serve as a constant reminder to the team of the real outcome they hoped to achieve through the process. “I really don’t like the term ‘total quality management’ because I think it became a buzz word overnight, and it really doesn’t describe the outcome that you are trying to achieve,” says Dinkel. “I wanted to put the onus on the functional organizational team to make these improvements. There is a cost associated with always bailing out a project, and I wanted people to see that job security is not achieved by running a continuous series of fire drills. The result has been that projects are running more predictably, there’s been a reduction in cost, and we’ve been more consistent in executing our plans with fewer errors.”

While there has been much improvement at CDA under Dinkel’s leadership, he is still refining the processes and says he needs to stay one step ahead because the business of defense is constantly changing. “I came here because it was a fairly diversified company, and I have no loss of enthusiasm for the opportunity,” says Dinkel. “I’ve had the chance to establish my own management culture and to build a team. I think the success that I’ve had goes back to the people I admire; you build a team and then you say, here’s what we’ve got to do. “In my view, the main ingredients for success were already here; the organization rose to the occasion.”

HOW TO REACH: Cubic Defense Applications, www.cubic.com