7
Implementing a New Defense Manufacturing Strategy: An Illustrative Model

Changing the Department of Defense's (DoD's) approach to acquisition of manufactured goods will require substantial effort at all levels of the hierarchy within defense production and acquisition organizations, including the Office of the Secretary of Defense, the military services, the contractor and supplier base, and the Congress. Although the specific mechanisms for effective cooperation among these major constituencies are impossible to define and will evolve over time, the committee offers the following model to illustrate in specific terms how such cooperation in an effective change process might occur. The model includes four major phases of effort. The effort should be managed from the Office of the Secretary of Defense, with the Deputy Secretary serving as Chief Executive Officer (CEO) and the Under Secretary for Acquisition serving as Chief Operating Officer (COO).

CREATE A VISION OF MANUFACTURING

A widely shared view (vision) of how defense procurement should be conducted several years from now must be developed. To be effective, the view must be shared by Congress, the White House, the Department of Defense, and defense contractors. No such common view exists now.

To create such a shared view (vision), a senior group of officials including the Secretary of Defense, the Deputy Secretary of Defense, Chairman of the Joints Chiefs of Staff, the Undersecretary of Defense for Acquisition, the military service secretaries, the Chairmen of the House and Senate Armed Services Committees, the Director of the Office of Management and Budget



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Breaking the Mold: Forging a Common Defense Manufacturing Vision 7 Implementing a New Defense Manufacturing Strategy: An Illustrative Model Changing the Department of Defense's (DoD's) approach to acquisition of manufactured goods will require substantial effort at all levels of the hierarchy within defense production and acquisition organizations, including the Office of the Secretary of Defense, the military services, the contractor and supplier base, and the Congress. Although the specific mechanisms for effective cooperation among these major constituencies are impossible to define and will evolve over time, the committee offers the following model to illustrate in specific terms how such cooperation in an effective change process might occur. The model includes four major phases of effort. The effort should be managed from the Office of the Secretary of Defense, with the Deputy Secretary serving as Chief Executive Officer (CEO) and the Under Secretary for Acquisition serving as Chief Operating Officer (COO). CREATE A VISION OF MANUFACTURING A widely shared view (vision) of how defense procurement should be conducted several years from now must be developed. To be effective, the view must be shared by Congress, the White House, the Department of Defense, and defense contractors. No such common view exists now. To create such a shared view (vision), a senior group of officials including the Secretary of Defense, the Deputy Secretary of Defense, Chairman of the Joints Chiefs of Staff, the Undersecretary of Defense for Acquisition, the military service secretaries, the Chairmen of the House and Senate Armed Services Committees, the Director of the Office of Management and Budget

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Breaking the Mold: Forging a Common Defense Manufacturing Vision (OMB), and a few CEOs from industry—both defense contractors and leaders of firms with successful change processes—must achieve consensus on the following: What improvement in cost, quality, time, and technical performance over the next decade should a new manufacturing strategy achieve? Appropriate goals might be 30 percent lower cost, 30 percent shorter lead time, and an 80 percent reduction of defects without sacrificing technical progress. What philosophy should guide trade offs among cost, quality, time, technical performance, and social goals (such as Equal Employment Opportunity, small business participation, or control of waste, fraud and abuse) so that each of these is not treated separately but is treated simultaneously at each stage of procurement and manufacturing? What philosophy of control is needed so that the Congress and the DoD can determine that procurements are effective and efficient? For instance, in many cases the current accounting system makes "real" control more difficult and less effective than control in non-defense commercial work. What should be the appropriate rate and sequence of change sought in the myriad of procedures, procurement policies, technical specifications, and practices that currently exist? What personnel policies are appropriate for the people required to make the transition from an old system to a new system, where some may become redundant or technically obsolete? What is the appropriate balance of time and energy for the senior management to devote to the demands of the existing system and the need to change to a new system? How can the staffs involved do the work while the principals retain their conviction and understanding of the implications of change? What performance review and promotion policies will permit uniformed officers to participate in the change process without jeopardizing their careers? Their participation is essential if the new system is to operate well later in the decade. What early wins will have the greatest impact in terms of reinforcing conviction and communication? Modest gains can be made quickly, since many units already are trying to improve and have programs under way. Bolstering these units will yield small but significant results. CREATE A WORKING CADRE A working cadre should be formed to address the operational details of achieving the vision. For a task of this magnitude, the working cadre will probably consist of 200 to 300 uniformed officers and civilians.

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Breaking the Mold: Forging a Common Defense Manufacturing Vision The cadre will work for 5 to 10 years helping to lead the change. Tours of duty will range between 2 and 4 years for individuals. A majority of the cadre should be analytically skilled. Skills represented on the working cadre should include: program managers from the military services and contractors; line officers; finance and contract administrators; engineers and manufacturing experts; personnel and civil service experts; Individuals likely to be leaders of their organizations in 5 to 10 years should be selected. Current or former staff members of Congress from both parties who have recognized competence and understanding of both the political process and the weapon systems development and production process should be included. A dozen or more facilitators will be required, all experts at change processes. Substantial training of the cadre is essential. Three months of full-time training in organizational change using facilitators and experts will be necessary. Several days should be spent with the vision team during this period to understand their interest, commitment, and objectives. Training should include practice in organizational analysis, review of all prior reports recommending change in procurement and manufacturing, and explanation of those reports by the authors. In addition to studying management of successful corporate training programs, cadre members should attend management and manufacturing training courses, such as the Motorola Manufacturing Institute and other corporate training programs, to understand the education process and the kinds of expertise that the new culture demands. SELECT A CHANGE STRATEGY Change in military organizations and military-like organizations generally has been top-down, implemented by directives, with mechanisms to ensure compliance. Changes in manufacturing during the past decade, driven by Japanese experience, have been quite different from this model. More recently, senior personnel have been more deeply involved in determining what needs to change and helping lower levels understand and accomplish change. This approach has worked effectively both for small organizations and for complex organizations with powerful subunits and demanding external forces—such as those found in defense manufacturing.

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Breaking the Mold: Forging a Common Defense Manufacturing Vision The choices facing both the vision team and the working cadre include: Should the change be introduced broadly across all of DoD or more narrowly? Should significant change be undertaken first in those organizations that are "change ready" or in those organizations that need it most urgently but that may resist strongly? Should change be undertaken where it is easiest, or most significant, or most disruptive in order to break the old system? Should change be attempted only for new rather than existing weapon systems, on large systems rather than small, or on systems that have a simpler customer/supplier relationship? Should change be undertaken where it can be accomplished by DoD directive alone, or is it more useful to address problems that will require Congress, OMB, contractors, and DoD to arrive at a new method of operation? Can the mechanisms chosen to implement the change process accommodate the existing promotion system or must amendment or exception be taken for those officers in the promotion zones that are assigned to this initiative? Early in the process, the vision team and the working cadre need to answer these questions, defining the approach or strategy for change. COMMUNICATING THE INITIATIVE Communicating the vision and the commitment of senior executives and managers will be difficult. Listeners within DoD and industry will be cynical; they will be unlikely to believe that this is a serious effort or that it will last beyond a few months or a few incumbents. "Real" communication will take place through actual change, but that will not happen quickly, so major communication programs in the beginning can lead to more cynicism rather than build conviction. A strong message of senior-level commitment would include: Direct involvement of the Secretary, Deputy Secretary, and Under Secretary of Defense for Acquisition. They must spend time, participate, and demonstrate commitment to change. A clear statement that change of this magnitude is required to free dollars for adequate procurement of weapon systems. Selection of a team including some of the most promising officers in the armed forces. Congressional support of change.

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Breaking the Mold: Forging a Common Defense Manufacturing Vision One measure of good communication is that half of the most senior 10,000 members of the defense community believe that change will occur. Therefore, building awareness through intensive communication with fewer people is probably preferable to widespread communication with little follow-up or belief. Furthermore, communication must be balanced between what currently captures people's attention (top-down directives) and what is needed to energize change (bottom-up involvement). Early decisions on requests to amend existing practices send a powerful message. An effective approach would be to create pilot projects in which units would be given greater freedom, with the concurrence of financial auditors and contract administrators. The results could then be monitored and communicated broadly to accelerate replication and further progress. LATER IN THE CHANGE PROCESS If this or a similar model of a change strategy is undertaken, the vision team and working cadre will make scores of decisions and choices during the early stages of the process. Once the essential commitment to the change process is achieved, the on-going activity might be: Managers of 10 to 20 existing weapon programs doing as much as possible to operate in a direct, simple manner within existing procurement regulations. Both military and contractor people would be working closely together and auditors would actively encourage the maximum flexibility within the regulations. Improvement ideas would be shared among the 20 programs. A legal task team proposing amendments to non-controversial laws to simplify reporting and remove difficult and irksome requirements. A second legal team would be examining the more fundamental balance among oversight, financial control, equal employment opportunity, waste, fraud, and abuse. Some teams would have recommended shifting to commercial products on fixed priced procurement and identified the simplification that such a shift entails for a substantial percentage of purchases. Other teams would be working on the difficult question of minimal specifications of the existing type and searching for ways to make functional specifications more commonly used. This would be a long-term effort with some very difficult technical and economic issues. In each of the services the process would be diffusing through the organization with new teams forming to examine how they might procure and manufacture weapon systems better than currently. No results from these early teams would be expected at this stage because the roll-out would take three years.

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Breaking the Mold: Forging a Common Defense Manufacturing Vision A team of contractors working with engineering specialists from DoD would have clarified inspection and testing standards, modified those standards which could be converted to commercial standards, and would be examining how complex military standards might be simplified. There would be a belief among the top 10,000 people that the process was going to continue even though some of the senior officials changed. There would be reasonable understanding among half of those about how change would occur during the succeeding several years. However, the normal conflicts between Congress, the White House, and DoD would still exist and would be far from resolved. This partial picture may convey or imply some of the activity that would take place during the early stages of the change process. The Secretary, the Deputy Secretary, and Congressional leaders would have spent more time on this change process during those early stages than they would have predicted. However, the potential gains in quality, cost, and responsiveness would be clear by that time to those individuals and there would be substantial commitment to achieve greater progress.