4
DoD Is Different ... Partly

This committee has concluded that instituting cultural change is the single most important action needed to deal effectively with today's challenges to defense manufacturing. It may be among the very few highest priorities at the Department of Defense (DoD). However, the size and scope of change needed at the DoD is very large compared to others that have been undertaken (except perhaps the Defense Reorganization of 1948, the shift to all-volunteer forces, or the Goldwater-Nichols Bill of 1986). It must, in time, encompass the entire defense manufacturing establishment: the DoD, its contractors and suppliers, and other parts of government, such as the Office of Management and Budget and Congress.

Many will argue that this complexity of players and interests makes DoD unique. Unlike private corporations that can control internal procedures and processes, the defense manufacturing enterprise comprises many corporations and many government entities with multiple, sometimes conflicting, interests. Accordingly, it is clear that change cannot be undertaken by defense contractors alone; government and industry must cooperate to an unprecedented degree and the process of change must reach beyond the contractors into industrial suppliers.1 The many subcultures within the DoD, other government entities, and defense contractors will require understanding, involvement, and, eventually, realignment. Although successful corporate change processes are not directly analogous with DoD or with each other, these experiences do provide valuable lessons and help define a strategy to get started.

The process of cultural change in corporations takes years. It cannot be



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Breaking the Mold: Forging a Common Defense Manufacturing Vision 4 DoD Is Different ... Partly This committee has concluded that instituting cultural change is the single most important action needed to deal effectively with today's challenges to defense manufacturing. It may be among the very few highest priorities at the Department of Defense (DoD). However, the size and scope of change needed at the DoD is very large compared to others that have been undertaken (except perhaps the Defense Reorganization of 1948, the shift to all-volunteer forces, or the Goldwater-Nichols Bill of 1986). It must, in time, encompass the entire defense manufacturing establishment: the DoD, its contractors and suppliers, and other parts of government, such as the Office of Management and Budget and Congress. Many will argue that this complexity of players and interests makes DoD unique. Unlike private corporations that can control internal procedures and processes, the defense manufacturing enterprise comprises many corporations and many government entities with multiple, sometimes conflicting, interests. Accordingly, it is clear that change cannot be undertaken by defense contractors alone; government and industry must cooperate to an unprecedented degree and the process of change must reach beyond the contractors into industrial suppliers.1 The many subcultures within the DoD, other government entities, and defense contractors will require understanding, involvement, and, eventually, realignment. Although successful corporate change processes are not directly analogous with DoD or with each other, these experiences do provide valuable lessons and help define a strategy to get started. The process of cultural change in corporations takes years. It cannot be

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Breaking the Mold: Forging a Common Defense Manufacturing Vision instituted by directive—it requires long-term personal involvement by senior managers. Such a cultural change in manufacturing is not a program. It is a persistent change process. Patience is an absolute prerequisite for success. There will be a tendency to claim that the process is not working because results will not be immediate and because there will be resistance. Resistance to cultural change is normal and should be expected. Some participants in defense manufacturing will be at risk as emphasis shifts from a procedure-driven culture to one that encourages local problem solving and efficiency. Many existing activities using the traditional "command and control" style will relabel programs so they appear to meet the new process. While more elegant than open resistance, this will require serious challenge. Such change will not be easy. Even though attitudes are firmly en-trenched, the defense establishment is now in a period of flux. Force reductions and base closings are difficult measures precipitated by the most pro-found changes in budget and strategy since the end of World War II. The defense manufacturing "system" must be similarly addressed now while the opportunity for fundamental change exists. This change process is not simply "downsizing" the defense manufacturing establishment. Problems must be solved differently, decisions made differently, control exercised differently, information shared differently. This report suggests the beginning of such a change. As with large corporations, cultural change is driven from the top, but must be supported throughout the organization. The process requires sustained commitment, patience, and consistency. It requires an understandable vision of how business is to be conducted and of the values needed to produce the best possible manufactured goods for the defense sector in the most efficient way. The change process must become ingrained within the defense manufacturing establishment and externally supported by the rest of government. This initiative is probably best undertaken at the outset of a full four-year term of office of a Secretary and Deputy Secretary of Defense as part of an overall theme of departmental reform, so the process will have opportunity to take root and develop before the shift to new leadership. Further, support for this process of manufacturing and acquisition system reform should be a criterion for selection of succeeding defense leaders to ensure continuation of that momentum. Senior executives at defense contracting and supply firms also must come to believe that their best interests lie in promoting complementary changes within their own operations. It is crucial that the DoD and the defense industry jointly define the urgency of, and the strategy for, change in the defense community. Such a "joint" approach to change management is not new. The perceived barriers to joint DoD/industry management and operational approaches have been overcome in numerous DoD programs, large and small. The normal im-

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Breaking the Mold: Forging a Common Defense Manufacturing Vision pediments of tightly interpreted procurement regulations, non-value-added management or control processes, conflicting goals and objectives, and inconsistent priorities have often been resolved or minimized through joint leadership and teamwork. Team-building activities, training, proper decision authorities, and measurement and reward systems have been developed to create an efficient operational environment. The change process envisioned in this report is intended to institutionalize that kind of problem solving. Success will benefit not only DoD, but also the competitiveness of industry. Industrial experience with similar change processes teaches that particular attention must be paid to certain problem areas. Some of the areas requiring joint solutions are described below. CHANGING PROCUREMENT, ACCOUNTING, AND AUDITING PROCESSES Success of the new vision depends on establishment and maintenance of effective working partnerships between customers and vendors at every level of the defense community, including between DoD and prime contractors. Professional procurement skills must extend well beyond how to live without today's acquisition system to understanding how to work to modify the system to make it more effective. Technical and procurement personnel will need the skill to work cooperatively with contractors rather than to police them. In parallel, defense contractors will have to change the skills of managers who interact with DoD. Experiences at Milliken, Boeing, and Xerox emphasize the importance of training in these new skills. PROBLEM SOLVING, SKILL DEVELOPMENT, AND TEAM BUILDING Empowering people to solve their own problems and to improve performance continually is likely to be an important element of the new DoD vision. Problem solving in this context entails working with teams of those involved, regardless of organizational affiliation. Team problem solving across organizational lines—both within an enterprise among design, manufacturing, engineering, and marketing functions, and between enterprises such as DoD, prime contractors, and suppliers—is difficult, but progress has been made in similar situations by Milliken, Apple Computer, and Federal Express. TRAINING Implementation of a new DoD vision will require people throughout the defense community to acquire new skills—management, technical, personal,

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Breaking the Mold: Forging a Common Defense Manufacturing Vision and manufacturing. In addition, the ability of the defense community to sustain the vision by adapting to changing circumstances will require continuous renewal training. The training effort is not trivial: Bob Galvin has noted that Motorola's investment in training is now greater than its research and development expenditure. Military officers already understand the value of training for military operations. Heavy commitment to training now also must be adopted in the defense manufacturing community. In addition to studying management of successful corporate training programs, the committee suggests that early DoD participants who are unfamiliar with the new vision process should attend management and manufacturing training courses, such as the Motorola Manufacturing Institute, to understand, first hand, the educational process and the kinds of expertise that the new culture demands. Other corporate training programs that approach the size and scope needed by DoD include those at GE, IBM, and Xerox. DECENTRALIZED MANAGEMENT AUTHORITY The size and scope of the defense community make effective centralized management impractical. The new culture must take into account the need to build local management authority to promote improvements consistent with the highly centralized goals of the defense mission. Managers within government, contractor, and supplier organizations must be able to deal with local situations. MANAGEMENT TURNOVER Constant refurbishing and revalidation of the vision and the process will be necessary in order to compensate for turnover of managers. DoD's problem will be more severe than private industry's, given rapid political appointee turnover and rotation of officers. Another factor will be the need to force a change in management personnel when necessary. The magnitude of the changes required by the shift to a new defense manufacturing culture will undoubtedly generate resistance among managers, at least initially. Some will be unwilling to adapt even after prolonged exposure to the process. The DoD must accept the need and establish the means to replace those who do not accept the new ways, just as industry has. PERFORMANCE MEASUREMENT AND REWARD SYSTEMS Measuring the performance of individuals and organizations, and rewarding those responsible for improvement, are critical to the institution of

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Breaking the Mold: Forging a Common Defense Manufacturing Vision a culture based on a new defense vision. DoD managers must learn from industrial experience that motivation without financial reward is possible and potentially more powerful than existing incentives. Xerox, GE, and IBM have devised broad measurement and reward systems that encompass a wide range of incentive possibilities; these can help provide guidance for the DoD. IMPROVEMENT AND RESOURCES The new vision for defense manufacturing calls for the kinds of improvement that result from doing business differently. It does not call for significant additional resources and, in fact, should provide substantial savings. At Xerox, overhead spending was cut by more than $200 million in less than five years, and inventory was reduced by almost $200 million in three years.2 Efficiency savings of this magnitude provide the resources needed to support a process of continual improvement. MEASURE PROGRESS OVER THE LONG RUN As with other learning processes, improvements resulting from promotion of a culture based on the new defense vision will come in fits and starts. Uneven rates of progress characterize all efforts to make sweeping, long-term improvement. NOTES 1.   Data indicate that 60 percent of defense manufactured product costs are in purchased parts; suppliers must participate in the change process to ensure a viable defense industrial base. See, Department of Defense, Report to Congress on the Development of a National Defense Manufacturing Technology Plan, March 1992, p. 12. 2.   Jacobson and Hillkirk, p. 235.