Current Navy infrastructure business initiatives (i.e., regionalization, Smart Base, competitive sourcing, and so on) are good starts, but they have produced only a small fraction of the funds needed to meet the Navy's modernization goals. The current efforts, achieved largely by allocated budget reductions, have taken about $0.75 billion per year out of the infrastructure, but a reduction in the range of $3.5 billion to $5.0 billion per year is needed to return the modernization budgets to the level deemed appropriate by the Navy.
The budget reductions achieved to date appear to be arbitrary and isolated, the result of tactical actions. The committee could not identify an overall corporate Navy strategy to integrate, prioritize, and allocate resources so as to achieve essential fleet support at significantly less cost for the support elements of the total navy system. Also, the compelling case for major change in the way the Navy conducts its infrastructure business is not being made by the senior leadership. Change is being led by isolated support and staff elements who lack the directive and authority to impact the total Navy system. No proven methodology for conducting the evaluation of the current system and for implementing and managing the corporate Navy change could be identified by the committee.
Thus, much more dramatic change, including a major cultural change that only the Chief of Naval Operations can lead, will be needed if the Navy is to succeed in deriving sufficient modernization funds out of its infrastructure. Failure to act quickly and comprehensively to bring infrastructure costs down will likely result in an inability to acquire some of the modern ships, submarines,
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Page 82 4 The Need for Top Leadership to Drive Change Across the Entire Navy System The Compelling Case for Major Change Across the Navy Current Navy infrastructure business initiatives (i.e., regionalization, Smart Base, competitive sourcing, and so on) are good starts, but they have produced only a small fraction of the funds needed to meet the Navy's modernization goals. The current efforts, achieved largely by allocated budget reductions, have taken about $0.75 billion per year out of the infrastructure, but a reduction in the range of $3.5 billion to $5.0 billion per year is needed to return the modernization budgets to the level deemed appropriate by the Navy. The budget reductions achieved to date appear to be arbitrary and isolated, the result of tactical actions. The committee could not identify an overall corporate Navy strategy to integrate, prioritize, and allocate resources so as to achieve essential fleet support at significantly less cost for the support elements of the total navy system. Also, the compelling case for major change in the way the Navy conducts its infrastructure business is not being made by the senior leadership. Change is being led by isolated support and staff elements who lack the directive and authority to impact the total Navy system. No proven methodology for conducting the evaluation of the current system and for implementing and managing the corporate Navy change could be identified by the committee. Thus, much more dramatic change, including a major cultural change that only the Chief of Naval Operations can lead, will be needed if the Navy is to succeed in deriving sufficient modernization funds out of its infrastructure. Failure to act quickly and comprehensively to bring infrastructure costs down will likely result in an inability to acquire some of the modern ships, submarines,
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Page 83 aircraft, and information systems that will keep the U.S. Navy both at its current size and preeminent in quality in the future. The magnitude of the change required is very large and will be difficult to achieve. The difficulty is compounded by the fact that the Navy is a tradition-driven organization that has changed only slowly over the years. The entire Navy organization will have to reengineer itself to become more businesslike and cost-efficient. This will require senior leadership to engage all elements of the Office of the Chief of Naval Operations (OPNAV) and second-echelon commands in the change process. Since the fleet forces levy the requirements on the shore-based and support organizations, all of these groups must engage in a consensus-building change process that will establish the desired balance between forces, modernization, and infrastructure. The comprehensive change process must begin immediately. Significant change, unfortunately, is not a natural process for most people. Most people become very comfortable with the present state that they have helped create. Their contributions have established their sense of self-image and worth to the organization and of their organization to the world. Even when situations and conditions arise that demand rapid, responsive change, such as the budget crises within the Navy, many people are reluctant to take action because they (1) refuse to recognize the seriousness of the threat, (2) are not sure what to do, (3) do not want to give up what they currently possess, or (4) fear the unknown future state. Change must be managed by senior leaders who have a compelling reason to move to a new state, have a clear vision of that future state, and have a plan to deal with the obstacles and impediments that stand in the way of that future. Fortunately, there are numerous examples of organizations that have successfully managed major change in response to threats to their existence. There are key elements for success that have been derived from these cases. The processes or methodologies used by successful leaders to bring about permanent, lasting change within their organizations have also been identified. Unfortunately, numerous examples of failure to change quickly and decisively also exist. U.S. automakers in the 1980s failed to recognize the serious threat from Japanese automakers and lost significant worldwide market share that has not been recovered. U.S. commercial shipbuilders failed to deal with the serious cost threats from Japanese, Korean, and other shipbuilders and have essentially become minor players in the world market. IBM failed to recognize and deal with the threat that minicomputers brought to the mainframe computer business and required many years to rebound. Digital Equipment Corporation failed to recognize quickly enough the impact that personal computers would have on the minicomputer business. As a result, Digital Equipment Corporation has been consumed by Compaq, a personal computer manufacturer. The consequences of failure to act quickly can be significant. In this chapter, the committee highlights the vital role of leadership in mak-
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Page 84 ing change happen. A set of key guides or elements to any successful change is given in Appendix D. An example of a proven methodology for taking large organizations through major change is also provided. The senior leadership of the Navy should use one of these proven step-by-step processes to rapidly move the organization to the desired future state. The Leader's Crucial Role in Changing the Organization The leader of any major organization plays a pivotal role in creating the successful future state. For the U.S. Navy this leader must be the Chief of Naval Operations (CNO) with the support of the Secretary of the Navy (SECNAV). This role cannot be delegated downward if the entire organization is to change. Only the CNO has the authority to bring the fleet elements and the support naval units to the change process and to demand that results happen. Only the SECNAV has the authority to bring all of the stakeholders in the Department of the Navy to the change process and to demand that results happen. Change will occur below this level if led by the leader of a subordinate organization, but it will be confined largely to that organization and fragmented for the Navy as a whole. In studies of organizations that have made significant and lasting change, the leader of the organization has been observed to display some specific characteristics described in the sections below. Be the Champion for Change The leader must be the champion for change within the organization. This role cannot be relegated to direct reports or to staff personnel. The reasons and urgency for change must be communicated clearly and often. The reasons must be compelling to the people in the organization, and the negative impacts of not making the required changes must be put forth. The leader must demand that direct reports follow his or her example in driving the change down through the organization. All personnel within the organization must clearly recognize the importance and high priority that the leader places on the need to change. The leader may designate other champions within the organization to reinforce, facilitate, and implement change, but there is no substitute for the top leader being perceived as the driving force behind the change process. Create the Vision of the Future State The leader must develop the vision of the future state of the organization. For the operational Navy, this must be the CNO in conjunction with senior leaders. This must be a clear and consistent vision that is communicated to all within the organization. It must be a future state (e.g., 5 years) that is more
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Page 85 desirable than the present and one that members of the organization deem desirable. The CNO must convince others that the future state is achievable through hard work and smart decisions. For example, this future state could be a smaller but more capable and ready Navy in which global connectivity provides information superiority and is coupled with smart weapons to provide dominance in naval warfare. In essence, when a clear vision of the future state 5 years down the road is communicated, it becomes the “stake in the ground” from which planning backwards to the present state can be accomplished. Although many in the Navy have a vision of the future, only the CNO has the authority and resources to make the change to a future state happen for the entire Navy organization. With a clearly stated and communicated vision from the top, other visions within the organization can be aligned and made consistent with the overall vision of the Navy. Efforts to create and align visions and change at lower levels in the absence of this unifying, overarching vision and action will at best be fragmented and frustrating for the individuals involved. Set Strategic Goals The CNO with senior leaders, and with the concurrence of the SECNAV, must set the strategic goals of the operational Navy. The goals must be of the highest importance to the future direction of the Navy. For example, a strategic goal might be that the Navy will be capable of engaging in and winning two wars simultaneously anywhere on the globe. Strategic goals must be clear and measurable. They should be “stretch” goals, that is, ones that can be accomplished only through sustained hard work. They might be expressed in terms of numbers of ships, submarines, and aircraft in existence in 5 years in order to conduct two wars simultaneously. They might be expressed in terms of the budget available for specific modernization through reductions in other areas. For example, a strategic goal might be that over the next 2 years the Navy will reduce total infrastructure costs by 20 percent through process changes and competition, with those savings being allocated to the funding of DD-21, IT-21 initiatives, and the joint strike fighter (JSF). These strategic goals will set in place the tactical plans and actions that will lead to accomplishment of the desired results. When the strategic goals are accomplished, the organizational vision will be realized. When goals are vague, such as “achieve cost reductions without sacrificing performance,” success cannot be measured and the results will not equate to the vision. Involve All the Stakeholders The leader is the only person who has the authority to involve all the stake-holders in the change process. In any organization involving multiple, depen-
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Page 86 dent functions, the leader must bring together and engage all of the participants. For the operational Navy, the CNO must be the person to engage all of the stakeholders in the change process. This involves the fleet commanders, the infrastructure commanders, the systems commanders, and the CNO staff. At the next level of the Navy, fleet operations involving the surface, submarine, and aircraft elements, and the shore-based elements, including the systems commands, form a closed system. The warfighting elements place requirements on technology, weapons, logistics, shore housing, job rotation, and so on provided by the support elements. These requirements must always be prioritized and traded to realize the strategic goals. With reduced budgets, these trade-offs are even more critical. The fleet commanders must engage the heads of all of these elements in the change process. It is natural that not all participants will want to engage in change equally. It is the role of the fleet commander in this case to demand participation from all parties critical to achieving the future state of the organization. Establish the Framework and Process for Involving All the Stakeholders The leader at any level must establish the framework that will be used to manage the change process. Meetings should be scheduled at regular intervals. Attendance by all of the stakeholders must be mandatory. The leader must be in attendance and guide the discussions. Unless a high priority is placed on these meetings and the leader is in attendance, the chances of achieving difficult change in which compromises and concessions are necessary are slim. Employing a proven end-to-end process for managing change will greatly facilitate these meetings. Fortunately, there are many proven processes available. The elements of one such successful process are described in Guide 7 in Appendix D. Allow Mistakes As the members of the organization undertake change, mistakes will be made. In an organization such as the U.S. Navy in which following procedures has been sacred, departures from the norm and mistakes have been viewed as unacceptable. As a result, members of the organization are reluctant to take risks. In order to encourage innovation and change, the leader must make it clear that mistakes are an opportunity to learn and to start again along the path to permanent change. Demand Results on a Timetable The leader must demand results on a timetable commensurate with achieving the goals and vision. Change is difficult, and it is unnatural for humans to
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Page 87 give up authority, control, budgets, and so on for the greater good of the organization. Unless the leader demands that specific goals be achieved on a timetable and provides the tools to make the changes, procrastination and only minor accomplishments will be realized. Visible rewards for those who meet and exceed goals will reinforce the change. Communicate The leader must constantly communicate the vision and strategic goals to all members of the organization and present a compelling case for why everyone in the organization needs to buy in and become part of the change process. Forums, broadcasts, newspapers, and luncheons are all mechanisms for spreading the word and developing understanding, cooperation, and participation. Changing a culture is difficult and takes a long time to accomplish. The leader must be the great communicator in convincing people to join in the path to a brighter future. Finding The committee recognizes that many cost reduction initiatives are underway, but the compelling case for major change in the way the Navy conducts its business is not being made by the senior leadership. Change is being led by isolated support and staff elements who lack the directive and authority to impact the total Navy system. Major Recommendation To achieve its recapitalization funding goal, the Navy should develop and implement a corporate-wide strategy to improve the business operations of the entire Navy infrastructure. The senior leadership of the Navy, led by the Secretary of the Navy and the Chief of Naval Operations, should establish a clear vision and a corporate-wide strategy for conducting the future operations of the entire naval system within the budget constraints projected. The strategy must be clear on what is to be achieved, in concrete terms, how it is to be achieved, with what means it is to be achieved, and when it is to be achieved. The strategy, of necessity, must address all portions of the Navy infrastructure, not just a few isolated portions thereof. A compelling case for major change in the way business is conducted must be made by the CNO and communicated to all elements of the Navy. Responsibilities and authorities to implement change must be made clear and issued by the CNO. Recommendation The CNO should make participation in the change process mandatory for
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Page 88 all elements of the Navy. Target reductions, implementation calendars, and progress monitoring should be established. Results should be demanded and organizations and individuals made accountable. Innovative ways of conducting business should be encouraged, supported as appropriate, and rewarded based on measurable results.