5
Transforming the Naval Force: Obstacles and Strategies for Implementation

Our naval forces must continually change to develop capabilities to address current and emerging missions and contingencies. In recent years the Department of the Navy has become a high-velocity enterprise—the situations to which it must respond change very rapidly and will continue to do so for the foreseeable future. This change requires the Department of the Navy to establish human resource policies that are sufficiently agile to promote—rather than impede—the naval services’ required responsiveness.

The committee has concluded that many current policies, which were adopted during an era when agility requirements were not nearly as great as they are today, are inadequate. The committee also concluded that the needed changes include some solutions that are under the direct control of the Department of the Navy, some solutions that cross organizational lines (are joint), and some solutions that require regulatory and budget support from Congress. In many instances solutions that might be under direct Department of the Navy control cannot be addressed in isolation because of linkages to other concerns that are not under the Department of the Navy’s control. This chapter explores several types of impediments to change in the area of naval manpower and personnel and suggests ways of overcoming them.

There are many potential obstacles to organizational change and reform. Surmounting those barriers can be particularly challenging within an organization such as the naval services, in which culture, traditions, hierarchy, and bureaucratic procedures play important roles. Although organizational change has received immense attention from scholars and practitioners alike—in the mid-1990s Van



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5 Transforming the Naval Force: Obstacles and Strategies for Implementation Our naval forces must continually change to develop capabilities to address current and emerging missions and contingencies. In recent years the Department of the Navy has become a high-velocity enterprise—the situations to which it must respond change very rapidly and will continue to do so for the foreseeable future. This change requires the Department of the Navy to establish human resource policies that are sufficiently agile to promote—rather than impede—the naval services’ required responsiveness. The committee has concluded that many current policies, which were adopted during an era when agility requirements were not nearly as great as they are today, are inadequate. The committee also concluded that the needed changes include some solutions that are under the direct control of the Department of the Navy, some solutions that cross organizational lines (are joint), and some solutions that require regulatory and budget support from Congress. In many instances solutions that might be under direct Department of the Navy control cannot be addressed in isolation because of linkages to other concerns that are not under the Depart- ment of the Navy’s control. This chapter explores several types of impediments to change in the area of naval manpower and personnel and suggests ways of overcoming them. There are many potential obstacles to organizational change and reform. Surmounting those barriers can be particularly challenging within an organization such as the naval services, in which culture, traditions, hierarchy, and bureaucratic procedures play important roles. Although organizational change has received immense attention from scholars and practitioners alike—in the mid-1990s Van 110

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111 TRANSFORMING THE NAVAL FORCE de Ven and Poole1 reported a count of a million articles on the topic—outcomes depend on so many attributes of the particular organization, context, and reforms being undertaken that no set method or process can guarantee successful imple- mentation of the desired change. Any decision maker reading this report scarcely needs input from this com- mittee to appreciate the challenges associated with changing large-scale organi- zations, particularly in the domain of manpower and personnel concerns within the military. In fact, instances of fundamental change in the policies surrounding U.S. military personnel since 1947 are rare. Two major exceptions are the end of the draft in 1973 and the broad changes in officer training, career paths, and requirements for promotion to flag or general officer ranks that were mandated by the Goldwater-Nichols Act of 1986.2 In both cases fundamental change was adopted in a matter of a few years, and in both cases the changes have endured the test of time. Four factors stand out as reasons for the rapid and enduring adoption of both the all-volunteer force (AVF) and the Goldwater-Nichols changes. The first is a sense of crisis. The AVF was adopted as the war in Vietnam ended, public sup- port for the military was at a low point, and the U.S. Army was in disarray. The Goldwater-Nichols Act ensued in the wake of the humiliating failure of the joint effort in Operation Desert One of 1980, in which U.S. forces attempted to rescue hostages from Iran. The second factor that stands out is the importance of sustained, top-down leadership. In the shift to the AVF, President Richard Nixon and Secretary of Defense Melvin Laird embraced the change and laid the groundwork for it. Sec- retary Laird worked closely with Congress, established an internal committee to push the change forward, and held the services accountable for implementing the many changes required. The Goldwater-Nichols Act is an example of outside leadership: congressional proponents, including Senators Barry Goldwater and Sam Nunn and Representatives Les Aspin and Bill Nichols, engaged vigorously in the change effort over several years. A third critical factor in both cases was the establishment of an external com- mission or oversight group. The Gates Commission on an All-Volunteer Armed 1 Sergio Fernandez and Hal G. Rainey. 2006. “Managing Successful Organizational Change in the Public Sector,” Public Administratie Reiew, March/April, p. 168 (Andrew H. Van de Ven and M. Scott Poole. 1995. “Explaining Development and Change in Organizations,” Academy of Management Reiew, Vol. 20, No. 3, pp. 510-540). 2 For a discussion of the change process leading to adoption of the all-volunteer force, see Bernard D. Rostker and Curtis L. Gilroy, 2007, “The U.S. Experience,” Serice to Country: Personnel Policy and the Transformation of Western Militaries, Curtis L. Gilroy and Cindy Williams (eds.), MIT Press, Cambridge, Mass., pp. 233-262. For the Goldwater-Nichols case as a rare instance of successful personnel reform, see Arnold L. Punaro, 2004, “Leadership and Perseverance,” Filling the Ranks: Transforming the U.S. Military Personnel System, Cindy Williams (ed.), MIT Press, Cambridge, Mass., pp. 282-283.

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112 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE Force, established by President Nixon on March 27, 1969, was instrumental in building support for and shaping the decisions related to the AVF. A major external study led by Center for Strategic and International Studies, a Washington think tank, was crucial in the Goldwater-Nichols case. Both the AVF and the Goldwater-Nichols changes owe much of their success and durability to the research and evaluation that surrounded their adoption. In the AVF case detailed, multidisciplinary research pulled together by the Gates Commision was crucial in building support for change and also for establishing key details of implementation. Research and evaluation continue to be instru- mental. Support for and specifics of the Goldwater-Nichols Act relied heavily on studies commissioned and conducted by the House and Senate Armed Services Committees. These four factors and others described in this chapter will be important in building and sustaining support for fundamental changes in manpower and per- sonnel policies in the naval services in the future. The committee’s conversations with military leaders and review of written materials indicate that Department of the Navy leadership has a keen appreciation of the challenges involved in trans- formational change, the merits of various reforms and strategies for implementing them, and how both vary across contexts. By “strategies,” the committee means preparing the Navy for change using the best current theories and practices of organizational change, searching the path ahead for obstacles, and preparing plans to overcome or circumvent those obstacles. In formulating its recommendations and considering strategies for imple- menting them, the committee was mindful that it possesses limited information about numerous organizational, political, and cultural factors that matter greatly in decisions about what manpower and personnel reforms should be undertaken and how. Accordingly, it focused much of its attention on trying to provide templates or frameworks to assist informed decision makers in pursuing transformation and weighing the trade-offs involved, rather than presuming that it has the right answers to the questions of what should be done, when, and how. The committee believes that the success of any organizational change depends on attention up front to two interrelated concerns: (1) the nature and magnitude of the organizational obstacles that must be surmounted and (2) the sequencing of change and what is demanded at each stage of the change. The next section discusses each of these in general, as a prelude to consider- ing how they bear on implementing the specific recommendations adopted by the committee. The chapter goes on to identify several categories of obstacles to change. It then matches several broad categories of manpower and personnel reform to those categories of obstacles. The result is an illustrative mapping of the transformation landscape for naval manpower and personnel policy. The chapter ends with findings and recommendations aimed at improving the effectiveness of the Department of the Navy in managing and implementing such changes.

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113 TRANSFORMING THE NAVAL FORCE STAgES OF ORgANIzATIONAL CHANgE In identifying potential sources of resistance and means of overcoming them, it is useful to distinguish five stages in the organizational change process: 1. Preparing the organization for change, 2. Conceptualizing and planning the change, 3. Implementation, 4. Evaluation, and 5. Institutionalizing the change. The value of planning for each of these stages, in a coordinated fashion, would appear self-evident, yet both the scholarly literature on organizational change and the experience of practitioners highlight how seldom this is done effectively. Each of these stages in general is briefly discussed below. Later in this chapter the committee offers specific suggestions for managing each of the stages in the context of specific recommended reforms. Preparing the Organization for Change The importance of this stage cannot be overstated. As noted above, diverse stakeholders often have competing interests with regard to specific manpower and personnel policies. Moreover, tradition plays a central and invaluable role in military institutions, so attachment to past practices is to be expected. Articulating a compelling case for change entails highlighting what is deficient about the status quo (and how it will be rectified) or what would be superior about the different future that is being sought through the change initiative. The following paragraphs describe a direct approach to preparing the orga- nization for change. Although aware of the effectiveness of the indirect approach in some instances,3 the committee concluded that the current situation called for a more timely and direct change. The committee was persuaded, based on the briefings it received, that the Navy needs to move quickly and decisively and does not have the time for the indirect approach. Creating a compelling case for change will require that the Chief of Naval Operations (CNO) and the Commandant of the Marine Corps (CMC) be person- ally involved in describing and rationalizing important personnel changes. If they are not directly and visibly involved the change process will be devalued by many service people and constituencies. In creating a compelling up-front case for change, influential “champions” must be identified and provided with appropriate resources and support. Potential winners and losers with organizational influence 3 See Stephen Peter Rosen, 2004, “Implementing Changes in U.S. Military Personnel Policy,” Fill- ing the Ranks: Transforming the U.S. Military Personnel System, Cindy Williams (ed.), MIT Press, Cambridge, Mass., pp. 297-299.

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114 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE should be identified. The overall goal must be to discover and implement those changes that are best for the organization. Nevertheless, losers will oppose the changes. Communication and influence strategies should be developed for influ- ential groups who are likely to perceive themselves as losers from the change efforts. For example, current members of the force serve with the expectation that current pension and health care arrangements will continue. These programs are expensive, and the Department of the Navy is under significant pressure to reduce cost. Because efforts to reduce labor costs will likely diminish benefits for some members already in service, they will face opposition from service members and retirees. Therefore, there will likely need to be some adjustments, such as grand- fathering or lump-sum payouts to gain the support of those who will lose. Winners, on the other hand, can be co-opted to establish constituencies with a vested interest in seeing change efforts prevail, even in the face of potential resis- tance and drift. For example, single members stand to benefit from the elimination of the “with dependents” pay differential. Communication and influence strategies should be developed for influential groups who are likely to perceive themselves as either winners or losers from the change efforts. External threats, crises, or transformations can weaken resistance to change and sometimes provide a compelling rationale for transformation. The commit- tee believes that a substantial downsizing of U.S. forces in Iraq may provide a valuable opportunity to reframe future military needs and priorities and launch an agenda for change in manpower and personnel policies within the Navy and Marine Corps. Healthy competition—among or within service branches—can also be a powerful catalyst for innovation. An effective way to prepare an organization for transformation is by causing individuals to perceive change initiatives as providing engaging opportunities to earn esteem (and possibly other rewards) for themselves and the unit to which they are attached. Legendary General Electric Chief Executive Officer Jack Welch introduced into the management lexicon the phrase “relentless and boring” to describe what is required of those leading organizational and cultural change. Few of us aspire to be relentless and boring—and few of us believe this is what our superiors will reward. Consequently it is easy for leaders to lose interest in sustaining the persistent, focused communications that are essential to paving the way for orga- nizational change. Conceptualizing and Planning the Change Given the complex, complementary, and challenging nature of changes in manpower and personnel policy, responsibility for conceiving and planning policy changes should be coordinated centrally to the greatest extent possible, even if this approach requires working around existing organizational distinctions within the service branches. Participation builds commitment, so involving major constitu-

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115 TRANSFORMING THE NAVAL FORCE encies whose buy-in will be essential for change initiatives to succeed is highly desirable, even if this slows somewhat the pace at which change occurs. Numerous factors exacerbate the challenge of implementing organizational change in the Department of the Navy. Some of the more obvious ones are political and budgetary processes, frequent changes in military leadership, neces- sary commitments to legacy assets, and rapid environmental and technological shifts, all of which can hamper sustained efforts at programmatic change. These obstacles are understood all too well by the various parties whose cooperation or resistance will determine the success of the change initiatives. In conceptualizing and planning change in this context, leaders must articulate a compelling and credible plan for overcoming the major impediments to change. Implementation A number of the recommendations offered in this report point to the need to articulate an overarching human capital strategy (HCS) for the Department of the Navy. As presented, all of the ideas contained in the HCS seem reasonable and well intentioned, but it is highly unlikely that all can be accomplished simultane- ously or within anticipated resource constraints. It is necessary, therefore, that the naval services work to put primary focus where primary focus is needed, not simply to document an open-ended wish list of actions that could be taken under ideal circumstances. A completed strategy makes possible coordinated programmatic change ini- tiatives that will prove more effective over the long haul than a plethora of “one- off” interventions addressing specific individual concerns. The committee urges naval leaders to give serious consideration to launching strategically designed demonstration projects that can assess the interdependent effects of the changes in technology, work design, staffing levels, and human resource management practices subsumed under the rubric of “transformation.” Surveys and analyses, pilot demonstrations, and experiments of the sort described in Chapter 4 can be useful tools for anticipating how the effects of specific proposed changes are likely to vary across organizational contexts. Case studies of large-scale change efforts suggest several practices that may enhance success. Sequencing implementation to ensure early and vivid initial victories and capturing of “low hanging fruit” generally builds support for subse- quent phases. Buy-in among line managers is usually enhanced by allowing local customization of broad programmatic objectives to meet the needs of managers across diverse organizational circumstances. The process of conceiving and implementing change sends powerful signals about what an organization truly values and how it seeks to function going for- ward. If flexibility, responsibility, and teamwork are values being elevated, then a change process that is itself highly centralized, is inflexible, and reinforces individual (rather than group) accountability undermines the objectives it seeks.

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116 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE Care should be taken to structure implementation processes in ways that strongly reinforce the cultural messages that manpower and personnel policies are intended to convey. Evaluation Rigorous evaluation will be an essential input into reform and transformation efforts—not only rigorous ongoing and retrospective assessments of initiatives that have already been implemented but also prospective assessments of various policy alternatives. Whatever the course of future transformation, the committee believes that increased flexibility along numerous dimensions will be required of naval personnel (and of the Department of the Navy as an organization). The need for enhanced flexibility is likely to be manifested in more varied assignments and mastery of more varied skills at any point in time; more variety among individu- als in the sequencing of assignments and development of careers over time; more variety in sources of labor; possibly more varied means by which individuals establish and maintain relationships with the military; and more variety in roles, routines, practices, and policies across organizational subunits. Surveys and analyses of administrative data, pilot demonstrations, experimentation, and other forms of evaluation research can play an invaluable role in formulating means of achieving greater flexibility along these dimensions, as well as in assessing the relative merits of particular initiatives that have been undertaken. The commit- tee has outlined several worthwhile areas and methods of inquiry in Chapter 4. Evaluation research might also profitably focus on the development of metrics by which decision makers can gauge the effectiveness of manpower and personnel policies on an ongoing basis. Institutionalizing the Change In a context where capital assets are as costly and long-lived as in the mili- tary, there is an inherent danger that, as introduced in Chapter 1, human capital becomes the cushion by which those who allocate budgetary resources adjust to the constraints they face. If transformation and the global war on terror (GWOT) truly entail fundamental changes in concepts of operations, technology, and orga- nizations, then significant long-term investments in human capital and organiza- tional development will be required. Unfortunately if the case for transformation must be made on an annual basis, little fundamental change is likely to occur. Careful attention must be devoted up front to marshalling formal mechanisms (e.g., metrics, incentives, systems, processes) and informal means (e.g., culture, routines and rituals, and communication practices) to institutionalize new ways of managing the Department of the Navy’s human resources. Put differently, a comprehensive HCS to support transformation must be built to last.

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117 TRANSFORMING THE NAVAL FORCE OBSTACLES TO CHANgE Any attempt to categorize impediments to organizational change is likely to be somewhat artificial. Nonetheless, during its deliberations the committee found that categorizing various types of obstacles was helpful in determining the order for undertaking specific initiatives as well as the kinds of catalysts and implemen- tation tactics that might facilitate particular changes. The following paragraphs summarize four categories of obstacles to organizational transformation. Later in this chapter the committee employs this taxonomy to suggest a framework for prioritizing reform initiatives and developing implementation strategies. Informational Obstacles The first category of constraints involves the availability of information needed to make and evaluate decisions, as well as the organizational capability for acquiring and analyzing that information. The need for clear and credible com- munication about strategic change is imperative. Organizational change becomes more challenging when an organization has greater need for (and less internal capacity to produce) information in four arenas: 1. Generating consensus for change. A logical first step in removing some barriers to change and reform is to clarify to all stakeholders why a specific change is necessary. The rationale for the change must be clearly stated and understood by all. It is not enough to say that we need to implement this change because things just are not working. Evidence of how and why things are not working must be provided, as well as evidence that some new approach is capable of provid- ing superior outcomes. When neither the status quo nor the future is viewed as problematic, or when alternative approaches are not viewed as meritorious, the challenge of organizational change increases dramatically. 2. Analysis of relatie merits of alternaties. Most problems have numer- ous solutions. Possible solutions must be vetted and analyzed, with both benefits and liabilities thoroughly and credibly examined. The proposed alternative must be clearly stated, understandable, and able to withstand rigorous scrutiny. For example, consider a proposal for preventive programs aimed at reducing stress during lengthy deployments. It might be relatively straightforward to assess the outcomes and costs of such a program relative to results associated with treating stress after the fact. 3. Analysis of trade-offs or opportunity costs. When outcomes are longer- term, more uncertain, more multifaceted, more difficult to assess, and more costly, it is easier for detractors to derail change initiatives by arguing that resources would be better deployed elsewhere. Consider a proposal to adopt 360-degree

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11 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE feedback as part of a new approach to career development.4 It is difficult not only to quantify the benefits and costs of such an initiative, but also to assert definitively that the resources required to implement and sustain this reform will yield a higher return on investment than other strategies would yield. Specific proposals may entail costs that are very difficult to quantify, such as second- or third-order effects of making a change (or not doing so) on personnel morale, retention, equipment use, maintenance cycles, and the like. The costs of delaying, only partially imple- menting, or not implementing a particular change may be significant but difficult to quantify in a timely and persuasive manner. 4. Assessment of change impact. For the same reasons discussed above, the impact of some proposed interventions cannot be assessed as credibly, objectively, promptly, or inexpensively as others. Mobilizing and sustaining change will be significantly more challenging in such circumstances. Note that problems in assessing the effect of changes can arise from many sources. Consider an initiative that is likely to span various leadership regimes. If leadership support is integral to success (e.g., implementing 360-degree feedback would require significant leadership support), it will be difficult to determine whether a perceived failure is attributable to the intervention itself or to the change in leadership regime. Knowing this up front, decision makers may be reticent to undertake such ini- tiatives, relative to ones that generate faster and more straightforward outcome measures. Organizational (Department of the Navy) Obstacles Various attributes of the naval service are likely to exacerbate the challenges associated with organizational change. The committee focuses on three of these: 1. Culture. Naval forces are steeped in tradition, and culture plays a vital part in the ethos of the Navy and Marine Corps. U.S. naval forces have been successful in armed conflict throughout our nation’s history, and the organizations and their members remain strongly attached to their heritage. Culture is a positive influ- ence in defining our naval forces but can be a hindrance to the introduction and acceptance of changes. 2. Winners ersus losers. Most organizational changes have distributional consequences—sometimes dramatic ones. When the group of those who perceive themselves to be losers from a proposed initiative are more numerous, vocal, wide- spread, and influential, the costs of implementing change increase precipitously. 4A 360-degree feedback or multi-rater feedback is a technique for evaluating an individual’s per- formance that is based on input from the target individual, the boss, and subordinates. Information may be collected via surveys or face-to-face interviews. Results are typically used for improving individual performance, increasing individual accountability, enhancing team performance, furthering organizational change, and providing evidence for human resource actions.

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119 TRANSFORMING THE NAVAL FORCE 3. Collateral impacts. The naval forces are complex organizations, and spe- cific changes frequently cause unanticipated results in nontargeted areas. Prior to implementation, changes must be examined for both near- and long-term, second- and third-order effects on the force as a whole. Even so, surprises should be expected. Timing Obstacles Features of the timing or implementation of particular reforms can materially affect the obstacles to change. 1. Future commitments. Changes that entail future commitments can have unanticipated effects and therefore must be thoroughly examined from all aspects prior to implementation. The costs of such changes can be hard to estimate accu- rately beforehand. In an organizational context characterized by high turnover among those who lead and those who allocate resources (including DOD and White House civilians as well as Congress), making credible future commitments is nontrivial. This is particularly so if those who are affected in the short term will not experience the anticipated future benefits. 2. Grandfathering. In the same vein, when a proposal may reduce benefits or limit opportunity for vested or current service members, the change will be opposed by those affected and their support groups on the grounds that an explicit or implicit contract is being abrogated. Changes of this nature generally require an adjustment (e.g., grandfathering, lump-sum payment) to gain the support of those who would otherwise lose out. 3. Ability to change incrementally. Changes that can be implemented incre- mentally (e.g., along specific time lines, events, budget years, performance stan- dards) are often easier to implement and sustain than changes that cause sudden or large actions. Systems must be in place to capture support data for sustained incremental change. Compare, for instance, efforts to change the retirement sys- tem with changes to recruitment practices. It is much harder to envision a phased implementation of a fundamental retirement overhaul than a phased change in recruitment policies. 4. Ability to adapt. Organizations, their members, and particular reforms will vary in the ease with which feedback can be incorporated into the change process. Some interventions are by their very nature nearly impossible to undo. Change will be easier to implement and sustain in settings where feedback loops with quantifiable data exist and are attended to. External Obstacles A host of factors outside the immediate control and purview of the Depart- ment of the Navy obviously can impede or facilitate change. The committee focuses on four sets of influences:

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120 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE 1. Joint serice. Manpower and personnel policy changes implemented within the naval service will affect other services and may be met with resistance from them. Such changes require considerably more attention to obstacles that may arise elsewhere within the military establishment, within Congress, and in the arena of public opinion. 2. Legal and regulatory. Some changes are beyond the Department of the Navy’s implementation authority. Fundamental changes to the retirement system as recommended in Chapter 3 will require changes to the Defense Officer Per- sonnel Management Act (DOPMA) and Reserve Officer Personnel Management Act (ROPMA) provisions of Title 10. Depending on how the reform handles the additional front-loading of compensation, a retirement overhaul may also require changing the pay table, which is set in law. Any change that would increase the fraction of senior officers will require changes to DOPMA and possibly ROPMA. Changing the pay table to a time-in-grade structure will also require congressional approval. 3. Fiscal. In some cases, budgetary realities and competition for funding are large obstacles to change. In other cases, they may be the stimulus to change. DOD plans call for budgets to grow less rapidly over the coming 6 years than they did between 1998 and 2007. The costs of equipment and manpower are on the rise, however, raising deep concerns about the future affordability of today’s force. Unless they will save money proposed changes will be subject to rigorous scrutiny during budget formulation. Thus the fiscal impact of proposed changes, including the cost of not changing, must be examined. 4. Public perception. Proposed changes will vary in the extent to which their merits will be closely scrutinized by currently serving sailors and marines and by other constituencies, including retirees, contractors, Congress, lobbies, the media, and the public at large. Such scrutiny can be an important factor in determining the magnitude and pace of change in manpower and personnel practices within the armed services. MAPPINg THE TRANSFORMATION LANDSCAPE: MATCHINg THE OBSTACLES TO REFORM PROPOSALS Based on discussions with Navy and Marine Corps leaders and reviewing Department of the Navy materials regarding existing manpower and personnel policies and objectives, the committee identified a roster of domains and topics that are likely to be involved in the evolution of a transformed naval force: 1. Completing and articulating a comprehensive human resources strategy 2. Domains of manpower and personnel practice reform 2.1. Cash compensation 2.2. Training and development 2.3. Career paths

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124 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE 2. Those that it believes will require more concerted effort and coordination (e.g., realignments, task forces, new roles) and internal championing (gray); and 3. Those that it believes are unlikely to be surmounted without pressures from external champions to impel and sustain long-term change and foster account- ability (black). There is no accepted and precise methodology for making such judgments. The committee’s assessments—subjective, to be sure—reflected four sources of information: (1) presentations to the committee from department officials regard- ing previous efforts to change manpower and personnel policies, (2) experience with Department of the Navy manpower and personnel policies among members serving on the committee, (3) previous studies bearing on particular Department of the Navy manpower or personnel policies within and efforts to change them, and (4) research findings regarding organizational change processes in the literature. For instance, organizational scholars have identified particular organizational features and environmental contexts in which inertial forces are most intense,5 and the committee incorporated such findings into its appraisals of the implementa- tion challenges likely to be associated with various domains of human resource transformation. Table 5.1 summarizes the committee’s assessments, with light gray, gray, and black shading being used to depict challenges that it classified as falling into categories 1, 2, and 3, respectively. A graphical representation of the information in Table 5.1 offers some insights into the transformational landscape confronting the naval services. Figure 5.1 plots the various human resource domains and topics in Table 5.1. 6 The dotted lines in the figure show the median values for the external and internal constraint dimensions, breaking the figure into four quadrants. The figure highlights several distinct clusters of human resource domains based on the likely obstacles to be encountered in transformation. In the lower left quadrant of Figure 5.1 is a set of topic areas that, in the committee’s view, are amenable to reform efforts that can feasibly be managed within the Department of the Navy without significant changes in standard prac- tices, routines, and procedures. This cluster includes articulation of a completed and comprehensive human resource strategy, recruitment, programs addressing stress and morale, and training and development initiatives. In the top right quad- 5 See Michael T. Hannan and John H. Freeman, 1984, “Structural Inertia and Organizational Change,” American Sociological Reiew, Vol. 49, pp. 149-164; and William P. Barnett and Glenn R. Carroll, 1995, “Modeling Internal Organizational Change,” Annual Reiew of Sociology, John Hagan (ed.), Vol. 21, pp. 217-236, Annual Reviews, Inc., Palo Alto, Calif. 6 In quantifying the constraints in Figure 5.1, the committee assigned values of 1, 2, and 4 to the light gray, gray, and black cells of Table 5.1, respectively. Accordingly, in Figure 5.1, the total score for internal constraints can range from 7 (least intense) to 28 (most intense); for external constraints, the range of possible values is 4 to 16.

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125 TRANSFORMING THE NAVAL FORCE 18 16 Health Compensation Care Retirement 14 External Barriers (Assigned Value) Career Paths Career Paths 12 Sourcing Technology Impacts 10 Family Life 8 Training and Human Capital Performance 6 Development Strategy Assessment Strategy Recruitment Job Design Performance Recruitment 4 Evaluation Stress and Morale Morale 2 0 0 2 4 6 8 10 12 14 16 18 20 22 24 Internal Barriers (Assigned Value) FIGURE 5.1 The transformational landscape depicting human resource domains based on the likely obstacles to be encountered. rant of Figure 5.1 are topic areas that confront more intense potential obstacles 5-1 both internally and externally: retirement, health care, privatization and sourc- ing, career paths, and (to a lesser degree) cash compensation. In the committee’s judgment surmounting resistance and entrenchment in these areas will require help from external champions to impel and sustain long-term change and foster accountability. The topics falling in the lower right quadrant and (to a lesser extent) in the upper left quadrant involve sizable implementation challenges due to the likeli- hood of major obstacles either internally or externally. The committee’s estimation is that reform and transformation in these areas—job design, performance evalu- ation and assessment, and programs addressing the quality of military family life and the effects of automation and technology on military personnel—will likely require more concerted effort and coordination (e.g., realignments, task forces, new roles) and internal championing. Table 5.1 reflects the committee’s collective judgments, and below in this chapter the committee describes broadly the types of internal and external cham- pioning efforts envisioned to support transformation in arenas confronting intense obstacles internally and externally. But one hastens to reiterate that these inves- tigations are meant to be illustratie and exploratory. Future assessments should incorporate systematic methods for dealing with differences among individuals’

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126 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE judgments concerning the organizational challenges associated with specific manpower and personnel reforms. The committee finds that even such simple heuristics can be useful in working through the organizational implications and implementation challenges associated with broad human resource strategies. The potential value in this exercise does not come from accepting the committee’s judgments about the nature and magnitude of implementation challenges for particular areas of reform. Rather, the value will be realized if policy makers are able to formulate their own judgments and use a tool like this to organize how they think, plan, and act with regard to transformation. Potential Obstacles to Implementing the Committee’s Recommendations In Chapters 2 and 3 the committee offers recommendations to naval leaders in several of the generic topic areas discussed in the previous section. This section looks at a few of the committee’s recommendations through the lens of Figure 5.1 and discusses specific hurdles that they may encounter. Of the recommendations offered by this committee, those related to cash compensation and the retirement system probably involve the most serious exter- nal impediments. For example, changing the pay table to one based on time in grade rather than time in service would require congressional approval. Moreover, such a change would affect the other services. Thus as described in the previous section, such pay table reform would meet both substantial external resistance and some internal resistance. As discussed in Chapter 3, a fundamental overhaul of the retirement system like the three-part reform recommended by the committee would raise both inter- nal and external obstacles. In 2006 Congress paved the way for the longer careers that such an overhaul would encourage in some career fields, by changing the pay table to reflect up to 40 years of service. Remaining obstacles include opposi- tion from retiree associations; changes that would be needed in legal authorities, including the retirement, DOPMA and ROPMA, and “up-or-out” provisions of Title 10; concerns over internal equity between those under the existing system versus the new system; and establishment of the base of information that will be needed to set the particulars of the new system. For example, policy makers will need to determine which occupations should be selected for the encouragement of longer or shorter careers. The specific amounts of gate pays or other retention pays will also need to be determined. Overcoming such obstacles will require a comprehensive implementation strategy. Fundamental changes to the health care system for military families and retir- ees could raise similar obstacles. On the other hand, the less ambitious reforms recommended by this committee—requiring retirees under age 65 to stipulate a primary and secondary insurer and providing them with an incentive to choose Tricare as the secondary insurer when they have other options, or indexing Tricare to the annual cost-of-living adjustment for the military retirement annu-

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127 TRANSFORMING THE NAVAL FORCE ity—should entail far less internal resistance. Of course, providing incentives for retirees to use their civilian-employer-provided plans would shift costs from the government to those civilian employers. To the extent that powerful employers are involved and lobby vigorously against the shift, Congress may be reluctant to allow the change. In contrast, many of the recommendations of this committee involve actions that are largely under the Department of the Navy’s control. For example: • Expansion of Naal Junior Resere Officer Training Corps (NJROTC). Expanding this program would have a relatively small effect on funding and manpower requirements. Expansion of NJROTC could face external resistance from schools, communities, or parents, however. • Deelopment of better ealuation programs to measure and interpret changes in workload, separation from home, length of repetition of deployments, and similar factors. This recommendation can be implemented by the Department of the Navy without involving external players. Because the other services face similar issues, however, it would make good sense for the Department of the Navy to work together with the other military departments and with the Under Secretary of Defense for Personnel and Readiness on programs to evaluate shared issues. • Allowing officers to remain in operational or specialist billets, with limita- tions on rank, for their entire careers. Naval leaders on their own can sponsor the study to investigate how to embed performance incentives, as recommended by the committee. As discussed earlier, however, changes to the basic pay table will require support from the other services and changes in law. Independent of pay table considerations, making a reformed system work well would probably require changing the “up-or-out” provisions and possibly the DOPMA and ROPMA rules on the distribution of officer ranks that are elements of Title 10. Changing career progression in this way might also raise substantial internal opposition, because the new operational or specialist careers would not be directed toward traditional executive positions. • Enlisted-to-commissioned promotion path. Implementing this recommen- dation will probably require a major cultural change within the Navy and Marine Corps. Shifting individuals directly from the senior enlisted ranks into field-grade officer status can raise social and cultural issues about the differences between officers and enlisted personnel that are difficult for the services to look squarely in the eye. • Lateral entry. The services already use lateral entry for some positions, for example in the medical professions. More widespread use of lateral entry may raise cultural resistance within the Department of the Navy. Lateral entry into leadership roles would run up against important traditions and expectations related to command and hierarchy. On the other hand, lateral entry for individuals with new skill sets (information technology specialists) at midlevel (E 4-5 or O 2-4) might face the least opposition.

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12 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE • Career on/off-ramps and sabbaticals. Implementing a system that would allow for easier on/off-ramps involves obstacles that must be addressed directly by Department of the Navy policy. Ensuring fairness and holding at no harm the careers of individuals who choose this path will be essential. The promotion system and design of career progression may be the most difficult of these. The extent of the external obstacles will be determined in large part by the design of the system with regard to length of breaks, status of member during the breaks, and benefits and compensation policy during the breaks. The most difficult of these obstacles may be refining the compensation and retirement systems to make allowances for these policies. Sabbaticals will raise issues within the Department of the Navy and also from external agents. External obstacles related to retirement credit, continuation of health care benefits, and cash compensation while on sabbatical may require changes in legislative authorities. Department of the Navy obstacles related to the effect of a sabbatical on a service member’s career path and performance evalu- ation require assessment. Sabbaticals for foreign area officer or high-technology training opportunities might face the least opposition. FINDINgS AND RECOMMENDATIONS Comprehensive Human Resource Strategy In 2004 the Department of the Navy published its human capital strategy (HCS)7 outlining the department’s broad goals for human resources. Two years later, in 2006, the Navy Strategic Vision: MPT&E [Manpower, Personnel, Train- ing, and Education] Strategic Plan8 was published as the first of three milestones leading to implementation of the HCS. Later that year the second milestone, the Navy MPT&E One Voice Reference Book,9 was put forth. As of this writing the third milestone—the Navy MPT&E roadmaps—containing implementation action plans, discrete tasks required to achieve the strategic vision, and metrics, accountability methods, and timelines for completion are yet to be finished. Thus the implementation of the HCS effort remains unfinished. 7William A. Navas Jr., Assistant Secretary of the Navy, Manpower and Reserve Affairs; LtGen Garry L. Parks, USMC, Deputy Commandant, Manpower and Reserve Affairs; and VADM Gerald L. Hoewing, USN, Chief of Naval Personnel. 2004. Department of the Nay Human Capital Strategy, Department of the Navy, Washington, D.C., June 21. 8 Navy Manpower, Personnel, Training, and Education (VADM J.C. Harvey Jr., USN, Deputy Chief of Naval Operations for Manpower, Personnel, Training, and Education, N1). 2006. Strategic Vision: MPT&E Strategic Plan, Department of the Navy, Washington, D.C., October 31. 9 Navy Manpower, Personnel, Training, and Education (VADM J.C. Harvey Jr., USN, Deputy Chief of Naval Operations for Manpower, Personnel, Training, and Education, N1). 2006. One Voice Refer- ence Book, Department of the Navy, Washington, D.C., November 1.

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129 TRANSFORMING THE NAVAL FORCE Finding: Completing, communicating, and implementing a comprehensive human capital strategy will be essential to achieving the Navy and Marine Corps transformation goals. In 2004 the Department of the Navy published an overview document outlin- ing an HCS. The committee is concerned that the strategy remains incomplete, in that the declared third step, the implementing roadmaps, have yet to be issued by the Navy. Nor is the Department of the Navy HCS broadly understood or routinely employed as a guide to decision making outside a relatively narrow circle of manpower and personnel specialists. Moreover, since the signing of the Navy’s HCS in June 2004, the services have undertaken important operational and organizational changes. They have also gained experience related to the Navy’s downsizing, lengthy commitments in Iraq and Afghanistan, and increased reliance on the private sector—all without the coherence and logic that a completed HCS would bring to the decision-making process. Completing and communicating an HCS is an essential prerequisite for achieving success in more specific initiatives relating to transformation of the Department of the Navy. For reasons articulated in Chapter 1, investments in any of the domains or topic areas in Table 5.1 will reap greater returns—and be easier to justify internally and externally—when undertaken under the aegis of a com- prehensive and coordinated strategy for transformation, rather than on a piecemeal basis. As documented in Figure 5.1, articulating such a strategy involves relatively few internal and external obstacles and modest commitments of resources. In short, the committee believes that this initiative involves relatively little invest- ment, few roadblocks, and the potential for extraordinarily high return. To illustrate the desiderata of a comprehensive human resource strategy, consider the case of Southwest Airlines.10 The company pursues a niche strategy, offering short-haul, point-to-point, low-cost flights between underutilized airports. It seeks to compete based on cost, reliability, convenience, and superior customer service. Given the high fixed costs of an airline (as is the case for the Department of the Navy), efficient utilization of capital is a critical determinant of profitability. By minimizing delays and turnaround times, Southwest can offer more flights per day on a given route, providing a higher return on invested capital and greater convenience to its target customers. If Southwest employees are able to inject fun, humor, and enthusiasm into the travel experience, customers are likely to be less disturbed by some practices the airline uses to enhance operational efficiency (e.g., no reserved seats, no meals). Thus, successful execution of the airline’s strat- egy requires a workforce that exhibits high productivity (high output at relatively low cost), a strong service orientation, flexibility (e.g., in tasks, shifts), teamwork, enthusiasm, and stability. The company views its human resource practices as dif- 10 JodyHoffer Gittel. 2002. The Southwest Airlines Way: Using the Power of Relationships to Achiee High Performance, McGraw-Hill, New York.

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130 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE ferent channels by which it markets or brands itself to internal customers, insisting that congruent and consistent messages are sent through these various channels. Indeed, it hires people with marketing backgrounds into the human resources function. (Historically, the head of human resources at Southwest and the head of customer relations have reported to the same senior executive, on the grounds that they are both engaged in branding and serving customers—employees and passengers, respectively.) The result of this clear strategy and explicit branding is a set of human resource practices that powerfully complement one another and explicitly support the key success factors. Recruitment, selection, compensation, training, perfor- mance management, and other human resource practices reinforce the importance of teamwork, flexibility, service, and productivity. Rank-and-file employees can articulate the business strategy, the key success factors, and how the company’s culture and human resource practices support the firm’s mission.11 Recommendation: The Chief of Naval Operations (CNO) and the Commandant of the Marine Corps (CMC) should take ownership of their services’ human capi- tal strategy (HCS) and direct its prompt completion. Beyond that, the CNO and the CMC should institute a process to review and update their HCS in light of changes in the strategic environment, future plans, and evolving experience with existing human resource policies. The completion of the services’ HCS should be done with the following criteria in mind: 1. Aligned. The HCS should be linked clearly to the services’ goals and mis- sions, identifying the highest-priority “key success factors” required of personnel for organizational success. 2. Internalized. The HCS must be communicated to and broadly understood at all levels, in ways that clarify to individuals in each subunit how their efforts affect overall success. 3. Routinized. The HCS should routinely inform decisions, trade-offs, and resource allocations and should be embedded in everyday operating procedures (e.g., planning and budgeting, personnel reviews, external reporting). 4. Coherent. The HCS should promote coherence and synergies in human resource administration across specific domains (e.g., recruitment, compensation, training, and development). It should sustain a human resources “brand” that makes clear to current and prospective sailors and marines what is expected of them and what they in turn can expect of the organization. 5. Measurable. The HCS should describe desired outcomes that can be and are assessed with metrics. 6. Adaptable. The HCS should be dynamic, undergoing routine reassessment 11 Libby Sartain and Mark Schumann. 2006. Brand from the Inside: Eight Essentials to Emotionally Connect Your Employees to Your Business, Jossey-Bass, San Francisco.

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131 TRANSFORMING THE NAVAL FORCE and adjustment in light of learning and of changing organizational and environ- mental contingencies. 7. Consequential. Supporting the HCS should represent (and must be per- ceied to represent) a significant element in the formal assessment and evaluation of leaders. The committee recommends an assessment of current proposed human resource strategies against this list of criteria and creation of a template simple enough in form and content that it can be used to articulate the key success fac- tors and human resource strategy to diverse audiences at all levels of the naval services. Propelling Transformation in Human Resource Practices Finding: The implementation of changes to manpower and personnel policies is a complex and difficult process. The SECNAV, CNO, and CMC already have the authorities they need to make some changes. Even in those cases, however, change may be complex or involve several stakeholders, including the individuals who serve, their families, military retirees, the other military services, and Congress. If manpower and personnel policies are going to meet the challenges of the future, the Department of the Navy must prepare for and overcome strong opposition. Recommendation: To bolster the likelihood that changes to manpower and personnel policies will be adopted, the Secretary of the Navy, working with the Chief of Naval Operations and the Commandant of the Marine Corps, should take control of the change management processes. The Department of the Navy-wide processes should include the following: • Opportunities for early successes, • A program of continuing evaluation, and • The institutionalization of a program of comprehensive education of and communication with service members and other stakeholders about the reasons for the changes to manpower and personnel policies and the desired outcomes of change. It is noted that some areas of human resource transformation confront inter- nal and external constraints of sufficient magnitude to require creating unique entities—inside and outside the Department of the Navy—that can champion and coordinate change efforts. How such entities are constituted and tasked will of course depend on the particular transformation strategy and agenda adopted, but several generic suggestions are offered.

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132 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE Internal Task Force-like Function Some changes recommended in this report can be accomplished within the existing authorities and responsibilities of the Department of the Navy, but will entail extraordinary complexity or cut across the claimancies of one or more stakeholders within the department. These changes may require the establish- ment of a task force or task force-like organization internal to the department to develop and implement change(s). In these cases such an organization should be stood up under the auspices of the CNO’s or CMC’s office and given the neces- sary resources, authorities, and responsibilities to design the desired outcomes and resolve conflicts between the stakeholders to successfully complete a change. Examples of such ad hoc organizations that have worked well for the Navy are the Executive Review of Naval Training and Task Force Excel—both constituted to design and execute the revolution in Navy training. External Oersight Group Particular domains—retirement, health care, sourcing, career paths, and compensation—face internal and external obstacles of sufficient magnitude and complexity that significant organizational change is unlikely to be achieved with- out external pressures to impel and sustain long-term progress and foster account- ability. There are numerous examples within the military and the corporate sector of change initiatives that have been supported by such an external forcing factor. The Defense Advisory Committee on Women in the Service (DACOWITS), for instance, adopted this approach. The Base Realignment and Closure (BRAC) process took yet another step and placed the initiating step in the hands of an external group. Within corporate America, companies like Deloitte and Touche and Ben & Jerry’s have adopted similar approaches in pursuing objectives relating to work- place equity, corporate social responsibility, and environmental sustainability. Such an oversight group is crucial not only for pursuing transformation in areas facing internal and external obstacles but also for ensuring that reforms in other manpower and personnel domains are implemented in a coherent and coordinated manner that supports the Department of the Navy HCS. The specific structure, function, and composition of such an external over- sight body would of course depend on the specific transformational objectives of naval leadership and its assessment of what changes are feasible within a given environment. Nonetheless, the committee offers the following general guidelines concerning the formation and functioning of such an oversight entity: 1. The group should be relatively small, containing members who collec- tively bring to their work the following competencies: 1.1 Distinguished military experience, stellar credibility, and extensive

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133 TRANSFORMING THE NAVAL FORCE personal connections within the naval services and to other services and branches of the federal government; 1.2 Distinguished corporate leadership experience, particularly in the areas of human resource management and organizational change; 1.3 Expertise in the legal, regulatory, and fiscal constraints governing manpower and personnel policies within the Navy, Marine Corps, and other ser- vice branches; 1.4 Access to the most recent findings from the scholarly literature and management practice for the topic areas under the group’s purview; 1.5 Knowledge of manpower and personnel policies—as well as initia- tives being undertaken—in other service branches; 1.6 Access to accurate and timely information regarding the character- istics, needs, and preferences of: 1.6.1 Former, current, and prospective service members (active, reserve, and civilian) and their family members; 1.6.2 Organizations representing specific interest groups and constituencies; 1.6.3 Contractor organizations; 1.7 No personal or professional stake in the outcome other than public service; and 1.8 Expertise in communications, public relations, and influence strategies. 2. Stability of group membership is needed, given the long planning and implementation cycles involved in transforming manpower and personnel policies. 3. Also needed is unfettered access to information, personnel, and the media aside from limitations required by national security considerations. 4. The group should be responsible for producing on a regular basis candid, specific, and public assessments of progress toward achieving the transformational objectives articulated by naval leadership. 5. The group should be responsible for providing regular briefings to the Secretary of Defense, the Secretary of the Navy, the Chief of Naval Operations, the Commandant of the Marine Corps, and representatives from the Senate and House Armed Services Committees, assessing progress to date and remaining challenges and opportunities relating to the transformed naval force. CONCLuDINg STATEMENTS The committee began its task by noting the current superiority of the U.S. naval forces and the fact that at the heart of that greatness are the men and women who serve in uniform. With this fact in mind and guidance from the CNO, the committee projected likely future circumstances, including future combat scenar- ios; likely scientific and technological developments; and the characteristics of the recruitment age U.S. population. The committee’s analysis was guided throughout

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134 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE by the manpower and personnel issues outlined in the terms of reference for the study. As requested by the CNO and to the best of its ability, the committee has developed several recommendations presented throughout the report in the context of pertinent analysis and discussion. In addition, the major recommendations are presented in the Summary at the outset of the report. The committee shares the sense of urgency expressed by the CNO that the Navy develop leaders for the 21st century and by the CMC that the Marine Corps continue to develop the individual marine as the heart and soul of the organization. The committee sincerely hopes that its efforts will be of help to them as they lead their services into the future, and it looks forward to observing as the Department of the Navy implements the changes in manpower and personnel policy necessary to maintain its superiority.