Change Management
August 2, 2013

Defence renewal: Seeking a better way of doing business

“Finding efficiencies” might be an overused cliché, but allied defence forces from Australia to the United States have undertaken significant efforts in recent years to better understand business performance and manage costs. As part of newly developed white papers, both Australia and France have looked at business reform; the U.S., of course, has been dealing with the implications of sequestration; and the United Kingdom has spent the past several years addressing issues around defence renewal.

Canada, too, has made reform a high priority. When he became Chief of the Defence Staff last fall, General Tom Lawson embraced a renewal process already underway and said the program would be his centre of gravity for the next three years.

In February, Rear-Admiral Andrew Smith was appointed military lead for the Defence Renewal Team (DRT). Together with Kevin Lindsey, Chief Financial Officer of National Defence, and a small group of 20 military and civilian personnel, he is analyzing business functions across the department and the Canadian Forces. Smith, who is retiring this summer, spoke with CGE’s sister publication Vanguard about the team’s mandate and the challenges of changing culture.

General Lawson has said the DRT has three tasks: reduce administrative overhead; energize business renewal; and establish performance metrics to measure progress. Could you expand on that?

The mandate is consistent with what is true for management in public or private practice and that is a responsibility to continually wage war on overhead. I draw a clear delineation between the Strategic Review and the Deficit Reduction Action Plan initiatives and Renewal. SR and DRAP were externally generated expenditure management deficit reduction exercises for which targets were established and for which Defence had its role to play as any other government department. Renewal was initiated internally, by Defence, for Defence. It’s not a budget-cutting exercise, there are no targets, it’s not about workforce adjustment. It’s about a reallocation: it’s about looking at value streams that cut across the department for inefficiencies and better ways of doing business, harvesting those savings without denigrating or eroding operational capability, and then reinvesting elsewhere in the department. It is for ourselves.

For the moment, the DRT has a three-year mandate and we’ll see where it goes after that. I have been involved in several change initiatives over the course of my career and what distinguishes this initiative from any other is a focus on changing culture as well. It’s not only about the performance metrics-based piece. That’s obviously key. But it’s about having that culture of continuous improvement, of getting that into people’s mind, of going from tribalism to stewardship, from risk aversion to risk acceptance, from change resistance to championing change. It’s a culture shift and you don’t change culture in six months; we might not even fully change it in three years. But hopefully in three years you would provide some irreversible momentum toward changing the culture.

Central to the whole piece, though, this is clearly meant to be a metrics, key performance indicator-based exercise so that we can benchmark ourselves against industry best practices or other militaries.

How does this relate to the work of General Leslie? Are you building on the foundation he laid?

As we looked at overhead inefficiencies and the value streams across the department, we drew on some of the initiatives that had already been put in place. We looked at the transformation report of General Leslie and we are also being helped by the consulting firm of McKinsey. They have done a lot of work in this area with other militaries, including the U.K. and Israel, and the results of their enabled work in the U.K. was lauded by the National Audit Office, their Auditor General equivalent. We took McKinsey’s work, initiatives that were already progress in some fashion, and General Leslie’s report, and distilled that down to 23 initiatives that we will now move out on. Some of those initiatives had their birth in the Leslie report.

Can you provide some examples of those 23?

When I say cross-cutting value streams, it’s really some of those enabling functions that contribute to operational capability and operational readiness: materiel management, infrastructure, IM/IT, the personnel and training system, pieces that often transcend the traditional stovepipes that you might envision that any large organization has.

How far are you into this process?

At the moment we are in an analytical phase and we’ve been doing that since February. That will lead to a charter and an implementation plan being generated between now and the end of June. And that charter and implementation plan will drive renewal going forward. At the moment the DRT is in a data capture, analysis, and charter generation mode and we will look to take these 23 initiatives and do that proverbial handshake with the various level one leadership in the department who will then lead implementation. We will become a facilitating, maybe a reporting function, but it will be level-one led going forward. In fairness, a DRT of 20 people is not going to have the horsepower to lead the type of transformative effort required to change an $18 billion enterprise. But we have a real ability to harness the data, analyze it, compile it, shape it and ask some challenging questions, and then enable the initiatives going forward.

Given the greater emphasis on joint operations, are you seeking to consolidate functions in a way that is more “joint”?

I’d replace “joint” with “more efficient.” If that means more joint, great. But it’s really meant to be an efficiency exercise. Are there opportunities for greater synergy and less duplication and more efficient ways of doing business without removing responsiveness or agility or support to operations? Part of it is looking at those areas where we spend the most money like IM/IT and infrastructure.

The term “contractor” has a lot of negative connotations around it these days, yet they are important to what you do. Are you looking at how much the CF needs to own and how much can be contracted out?

I cut my teeth in the Material Group where contracted support was central to doing the business – it’s a fact of life. And there’s a lot of expertise out there. We’re not focused on contractors, but we may have a serious look at how we contract. Are there better ways to do strategic sourcing, as separate and distinct from a focus on contractors?

There are no targets. We are going to look and scratch and sniff through the metrics to understand what we can do to improve, but we are not going to say, “we are going to reduce this by five percent or we’re going to take the number of contractors down from X to Y.” It’s not a target-driven exercise. As soon as you talk about targets, it really impedes the ability to change culture; it’s “give me my target and go away.” And that’s not a long-term game. This is meant to put Defence on a solid business footing for the long-term.

Are you looking then for technology to drive some of these efficiencies?

In trying to change the culture, part of this is about embracing innovation and looking at how technology can enable us, and it is acknowledged that there may be some investment required. What might the future look like and what could we put in place to enable that? Are there business system enhancements that we might be able to do to have MASIS (Materiel Acquisition and Support Information System) and DRMIS (Defence Resource Management Information System) better share information as an innovative way forward. The Military Personnel Management Capability Transformation project is a technology-enabled solution to better manage military personnel and their pay systems.

General Lawson has noted that the procurement process is ripe for renewal. Is this part of your scope or are you waiting for the work that is being done around the Jenkins report?

I would split the contracting piece into two areas, that which we might control autonomously internally and that for which we may want to get together with other stakeholders. At the moment we are focused on what levers we have internally. What are best practices out there, what are some of the lessons learned from McKinsey and others related to contracting that we could get our arms around? Let’s be able to prove that our house is in order before we look beyond our own walls.

That brings me to the issue of metrics. In my opinion, we don’t necessarily have a culture of performance measurement and so part of this is to generate the metrics to be able to prove to ourselves and others that we are efficient. At the Pentagon, I saw a wonderful quote on the wall that sums up this metrics piece: “In God we trust, all others must bring data.” It forces people to come to the table and welcome the challenge function. And that ultimately speaks to the need to drive a culture of openness and transparency that would bleed across the various stovepipes.

Is it a challenge to get all the stovepipes to measure the same things?

We have 23 initiatives and each initiative will have a set of metrics. These metrics are separate from the corporate level program activity architecture metrics that are being put in place from a departmental performance perspective. These are the metrics aligned to infrastructure or training or IM/IT. We are looking at best practices based on what McKinsey has seen, lessons learned elsewhere, and we have operational research folks working with us on what is measurable and what some of the key performance indicators might look like. And we have a small team within the DRT focused on metrics.

Do the business processes you are considering ultimately affect the structure of the Canadian Forces, along the lines that created the Joint Operations Command (CJOC)?

CJOC was certainly the first step in trimming a headquarters piece. And it speaks to the continual war that management should wage on overhead. I’d say that’s an open question. Everything I’ve read and heard would say that structure should be the last thing to change. You change the culture, you change the processes and, falling out of that, you may have a requirement to restructure. Restructuring is the easy piece. You could redraw the boxes tomorrow but that might be akin to rearranging the deck chairs on the Titanic. Let’s have a look at the culture and the processes and the inefficiencies associated with those, and get those right, and then let’s have an objective look at whether we are structurally well positioned to do the business.

It’s been 35 years since you last undertook this type of exercise. Do you have to deal with some very entrenched positions?

We are an institution that is fiercely proud of its heritage. And the environments are the custodians of history and heritage, as is Chief of Military Personnel. So you could see how some of those places might get entrenched. But I wouldn’t want to take that away. You would want to make sure that the good parts of that tradition are celebrated. At the same time, that doesn’t mean we shouldn’t look at how the business of defence is conducted. It’s openness and transparency and going from the requirement of some having to own everything to perhaps influencing everything – you don’t necessarily have to own something in order to get the result. So breaking down those natural barriers and saying, we’re going to have an institutional view and it’s going to be one based on stewardship, not tribalism.

The downfall of many change management initiatives is often poor communication. How are you addressing that?

The communication piece is all about changing the culture. Kevin Lindsey, the Chief Financial Officer, and I have done 10 or 11 town hall sessions on the renewal message. It’s not meant to be just a headquarters exercise; it’s meant to be pan-defence, military and civilian. We could do all we want in Ottawa but until you engage the folks in the regions you are not really going to do much. The town halls were a first step. We’ve recently stood up a website where people can read about defence renewal and provide feedback. There is an acknowledged requirement to go back and engage the regions once we get into the implementation stage to follow up on any commitments we’ve made. And there will be a communication strategy associated with the launch of the charter, probably in late June or July. Communication is key, both to the success of this and also to changing the culture.

This is being driven both top-down and bottom-up. Are people in these town halls pinpointing processes that can be improved?

In almost every town hall we have had a young junior member – a corporal, a master corporal, in one instance a private – ask us a really pertinent question, which is music to my ears because it shows this is getting down to the lowest levels of the organization. In Winnipeg, a master corporal stood up in front of 300 people and said, sir, if we’re trying to be so efficient, why are we still running Windows XP?” I thought, bingo! It may be a small piece, but it illustrates that people get it. Give people the opportunity to contribute and you shouldn’t be surprised that people who know our business are willing to pipe up and say, I think there is a better way of doing this.” We have no shortage of ideas coming up from the bottom.

You also need executive level buy-in. But when the CDS announces that this is his centre of gravity for the next three years, does that increase the pressure?

The DRT was stood up by Deputy Minister Robert Fonberg and General Natynczyk; General Lawson and Richard Fadden (the current DM) have both embraced this. I don’t think there is any extraordinary pressure; it’s nice to have it at the top of their priority list. Without top level buy-in it doesn’t go anywhere and they have been sleeves rolled up and hands on to drive it forward. I welcome the focus.

Do you anticipate other aspects of change management that might be a challenge for such a large and dispersed organization?

I would not underestimate the challenge associated with metrics development. We could stand up and tell everybody that we are great at doing our business and many Canadians would agree with us. Can we actually objectively and quantitatively prove that? I’m not so sure. Developing the metrics and getting our arms around that is a big piece.

We pride ourselves on being a learning organization. We’re meant to be change oriented, we’re meant to be folding lessons learned back in. Lesson don’t only apply to the tactical arena, they also apply to the strategic arena and the business of defence. We’re not here to turn military folks into business leaders. But this is about making sure we are doing business as well as we can and that’s a bit of cultural shift.

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