FOCUSING A TRANSITION

A REPORT BY THE DEFENSE BUSINESS BOARD

JANUARY 2009

H E DEFENSE

ANUA R Y 2 0 0 9
This report, DBB Report FY09-4, is a product of 

the Defense Business Board

The Defense Business Board is a federal advisory 

committee established by the Secretary of Defense 

to provide independent advice and recommendations 

on best business practices to improve the overall 

management of the Department of Defense. The

content and recommendations contained in this report 

do not necessarily represent the official position of the 

Department of Defense.
FOCUSING A TRANSITION

A REPORT BY THE DEFENSE BUSINESS BOARD

JANUARY 2009

TABLE OF CONTENTS

i

Table of ContentsINTRODUCTION .............................................................................................1EXECUTIVE SUMMARY. .................................................................................. 3CHAPTER 1. ITEMS REQUIRING IMMEDIATE ATTENTION ......................... 9

Focusing the Eff ort ...................................................................................... 9DoD’s Unique Management Challenges ................................................. 13Building the Strongest Team .................................................................... 17

CHAPTER 2. NEAR-TERM OBSTACLES THAT COULDHAMPER LONG-TERM SUCCESS .................................................................25

Lowering the Overhead Cost ................................................................... 25Slowing the Ballooning Cost of Defense Healthcare ............................ 29Addressing Root Causes of Acquisition Cost Growth .......................... 33

CHAPTER 3. ORGANIZING THE DEPARTMENT FOR REAL CHANGE .......39

Identifying an Optimal Management Model to Drive Change ........... 39Focusing the Secretary’s Time on the Most Strategic Objectives ......... 44Using Selection Criteria and Position Pairings ...................................... 48Restoring the “Crucibles of Ideas” by Leveraging Critical Friction Points .............................................................................. 54DoD Leadership to Align the Services to the Secretary’s Agenda ....... 57Leading in a Fiscally Constrained Environment ................................... 60Redefi ning the Defense Comptroller as Chief Financial Offi cer .......... 65

CHAPTER 4. NECESSITIES FOR A SUCCESSFUL LEGACY .........................69

A Vision for the Future of DoD ............................................................... 69Tracking Performance to Improve Accountability ................................ 73

APPENDIX A. SUMMARY OF RECOMMENDATIONS ................................ 77 APPENDIX B. LIST OF FIGURES AND TABLES ...........................................87APPENDIX C. DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES ......89
FOCUSING A TRANSITION

4
EXECUTIVE SUMMARY

1

IntroductionThe Defense Business Board provides the Secretary of Defense and the Chairman of the Joint Chiefs of Staff with independent advice and recommendations on best business practices to improve the overall management of the Department of Defense. The Board is comprised of highly-respected, proven leaders and subject matt er experts from the private sector 

and is appointed by the Secretary of Defense. A list of the board members and brief biographical summaries are in Appendix C.Anticipating the 2009 presidential change of administration, the members of the Defense Business Board identifi ed fift een enterprise-level, transition-related topics and developed recommendations on each. The recommendations are intended to assist the Secretary of Defense in building a 

strong leadership team that will organize and manage the Department of Defense to successfully face the challenges of the future.The members of the Defense Business Board were assisted by its consultants, Pierre Chao, Alan Schwartz, Steven Price, and Dan Peterson, and received additional support from Kenneth Krieg (former Under Secretary of Defense, Acquisition Technology and Logistics), and Leigh Warner (Defense Science Board Consultant).Each of the fift een enterprise-level topics and related draft recommendations were deliberated and approved during the public session of the 

Defense Business Board’s October 2008 quarterly meeting. Copies of the Board-approved slides and minutes of the public session from that meeting are available at htt p://www.defenselink.mil/dbb/. Additionally, copies of the Board-approved slides are contained in a CD located at the end of this report.

THE DEFENSE 

BUSINESS BOARD 

IDENTIFIED FIFTEEN 

ENTERPRISE-LEVEL, 

TRANSITIONRELATED TOPICS 

AND DEVELOPED 

RECOMMENDATIONS 

ON EACH
FOCUSING A TRANSITION

2
EXECUTIVE SUMMARY

3

Executive SummaryThe next administration will face extraordinary pressure from an evolving global economic crisis, continuing military operations in Iraq and Afghanistan, and a broad range of new and enduring domestic issues. These, and other challenges yet unseen, will likely require the Department of Defense to re-balance the resources for institutional capabilities against the resources required for the forces engaged in current and future operations. In this context, and to prepare it for those challenges, the Defense Business Board believes that it is important for the Department to implement the recommendations contained in this report.Based on global best business practices, the Board identifi ed recommendations in four broad areas that will help ensure the Defense Department is bett er positioned and resourced for success: (1) items requiring 

immediate att ention, (2) near-term obstacles that could hamper long-term 

success, (3) organizational issues for the Department to address for real change to occur, and (4) necessities to achieve a successful legacy.Early in the transition, the Department must focus on reducing the risks associated with the transfer of power. History has shown that it is highly likely that a national or global crisis will occur within the fi rst 270 days of a new administration. The senior leadership team must be able to immediately respond to and eff ectively manage any crisis.

The Secretary must personally focus the transition eff ort in order to build, 

and then on-board, a strong and aligned senior leadership team. It is crucial that the Secretary maintains that alignment beyond the opening months of the new administration in order for his team to realize real gains over the unique management challenges of the Department.

THE SECRETARY 

MUST PERSONALLY 

FOCUS THE 

TRANSITION 

EFFORT IN ORDER 

TO BUILD, AND 

THEN ON-BOARD, 

A STRONG AND 

ALIGNED SENIOR 

LEADERSHIP TEAM 
FOCUSING A TRANSITION

4

Strong leadership is especially necessary to address three signifi cant nearterm fi nancial obstacles facing the Department: (1) excessive overhead costs, (2) the ballooning cost of Defense healthcare, and (3) the root causes of acquisition cost growth.While the private sector is never complacent about overhead and constantly “goes to war” on it, the Department has run a 42 percent “overhead” rate since Fiscal Year 2002. This overhead rate has occurred as the Department’s Total Budget Authority has increased 189 percent between 1980 and 2009 (not including supplemental authorizations). The Board believes that no enterprise should be complacent with this level of overhead.Additionally, a dramatic increase in health benefi ts expenditures has 

resulted in further restrictions on the Department’s discretionary spending. Defense healthcare is projected to grow to around $66 billion by Fiscal Year 2015. The root cause of this increase is not the growth in the cost of basic medical services; it is rather more the result of Congressionally mandated expansions of benefi ts. The Board believes this trend is unsustainable, and it is imperative for the Secretary to work with the Congress and the Military Services to stem this growth.The total acquisition budget for the major defense acquisition programs has more than doubled in the past seven years from $783 billion to $1,702 billion – yet the return on such an investment is diffi cult to quantify. 

Increasing program costs also include cost overruns which divert needed resources from other programs and operations. Given the Department’s many failed eff orts to reform acquisition, it is now up to the Secretary to 

drive a targeted reversal of this trend.The scarcest commodity for the senior leadership of the Department is time. The Secretary’s available time for strategic thought and planning has been diminished by the press of day-to-day events. To be more eff ective 

THE PRIVATE SECTOR IS NEVER COMPLACENT ABOUT OVERHEAD AND CONSTANTLY “GOES TO WAR” ON IT
EXECUTIVE SUMMARY

5

and strategically focused, the Secretary must utilize his management systems to return more of the day-to-day issues to his direct reports. Doing so will more fully engage his civilian and military teams, and give the Secretary more time to focus on future strategic issues.To eff ectively tackle the tough strategic challenges the current environment demands superior leadership skills at all levels of the incoming political team. The Secretary must invest the time to att ract, retain, and motivate 

quality people for both career and political positions. It will require him to proactively reach out to fi nd those with signifi cant public and private sector senior leadership experience – if necessary, with the help of top executive search fi rms with successful experience recruiting for high-level executive positions.The Secretary should more forcefully exploit the many points of intellectual friction within his Department. Through them he can create a fl ow 

of competitive ideas as an alternative to the natural fl ow of a consensusdriven bureaucracy. The intellectual energies of multiple “Solarium-like” 

engagements will bett er serve the Secretary and his senior leaders by arming them with access to the best possible ideas in order to make the best possible decisions.The strong and diverse cultures of three Military Services and multiple Defense agencies create a management environment that requires constant att ention. Excessive management layers around the Secretary can potentially isolate him from some of his most senior advisors – the Service Secretaries. Occasionally, these key direct reports have “gone native” within their own organizations - subordinating the overall goals of the Department to the advantage of their own enterprise. Only the Secretary can create and sustain the true team relationship with these most senior subordinates to ensure all remain synchronized in support of the overall mission.

THE

SECRETARY 

MUST...RETURN 

MORE OF THE 

DAY-TO-DAY 

ISSUES TO 

HIS DIRECT 

REPORTS
FOCUSING A TRANSITION

6

One of the most signifi cant leadership challenges will be organizing the Department to operate in a fi scally-constrained environment. Bold action 

is necessary to redefi ne the Department’s approach to fi nancial management in order to confront the increasing cost of personnel, fringe benefi ts, 

and overhead. It is essential that the Secretary promulgate a management model that anticipates, responds to, drives, and sustains his changes. The Secretary’s senior team must have proven fi scal “turnaround” experience 

to guide the Department in the right direction.The expected future fi nancial challenges, coupled with the growing importance of international partnerships, will require the Comptroller to take a 

strong leadership role in expenditures and resource allocations. In selecting a Comptroller/Chief Financial Offi cer, the Secretary should look for a 

leader with strong global fi nancial management expertise and experience. 

To emphasize this new chief fi nancial offi cer responsibility, the position 

should be renamed: “Under Secretary of Defense (Chief Financial Offi cer 

and Comptroller).Eff ective leaders articulate a strategic vision for the organization and then 

communicate and reinforce it continuously. A crisp vision statement for the vast institutional aspects of Department of Defense would help align disparate interests of the senior leadership team and drive and reinforce strategy, policy, sourcing, accountability, and performance. In the Department, all authority, responsibility, and accountability begin with the Secretary. Therefore, to further enhance Departmental eff ectiveness, the Secretary and Deputy Secretary must require a performance 

management system that cascades critical objectives down the organization, translates them into measurable metrics, and provides for periodic updates for evaluation and feedback.

THE SECRETARY SHOULD LOOK FOR A COMPTROLLER/CFO WITH STRONG GLOBAL FINANCIAL MANAGEMENT EXPERTISE AND EXPERIENCE
EXECUTIVE SUMMARY

7

The Defense Business Board hopes this report will stimulate action and solution, not conversation and missed opportunity. The Board believes these recommendations will help ensure the Department is bett er managed to deliver excellence in defense of the Nation.
8

FOCUSING A TRANSITION
9

ITEMS REQUIRING IMMEDIATE AT TENTION

Items Requiring Immediate Att ention

FOCUSING THE TRANSITION EFFORT 

___________

The Administration must be ready to govern immediately upon taking offi ce and respond to any national crisis. Departmental transitions traditionally begin too late in the campaign and hand-off is oft en diffi cult. 

There is litt le time to develop a “plan” due to the short duration between the Secretary’s selection and his fi rst day. Therefore, it is imperative that 

the incoming team be prepared to respond to a likely fi rst 270-day crisis.

Item 1 Imm

IT IS IMPERATIVE 

THAT THE 

INCOMING TEAM 

BE PREPARED TO 

RESPOND TO A 

LIKELY FIRST 270-

DAY CRISIS

U.S. Administration

First 270 Days

Figure 1-1. National Security Issues Faced by New Administrations

EisenhowerKennedyJohnsonNixonCarterBush IClintonBush II

Iranian revolutionBay of PigsGulf of Tonkin IncidentEscalation into Cambodia and LaosKorea troop reductions/Singlaub reliefPanama invasionWorld Trade Center bombingDowning of EP 3 and September 11
1 0

FOCUSING A TRANSITION

PREPARE FOR CRISIS CHALLENGES 

Over the past 20 years, Department transitions have been fraught with ineffi cient processes, requiring many months to get the new team established. However, the incoming team does not have the luxury of time. In 

light of the current national security situation and global economic crisis, the next transition must begin early – long before January 20th - to avoid major leadership gaps (see Figure 1-2) and unnecessary vulnerabilities to the Department. Department of Defense transitions have a history of ill-preparedness resulting in a lack of time for proper strategic planning, deep leadership vacuums, and a leadership team that is disjointed and misaligned with the President’s goals and objectives.

IN LIGHT OF THE CURRENT NATIONAL SECURITY SITUATION AND GLOBAL ECONOMIC CRISIS, THE NEXT TRANSITION MUST BEGIN EARLY...TO AVOID MAJOR LEADERSHIP GAPS

50

Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09

3020

0

Figure 1-2. DoD Civilian Leadership Vacuum

Vacant Positions

1040
1 1

ITEMS REQUIRING IMMEDIATE AT TENTION

It is hard to ignore the probability of a critical national security issue arising early on in a new administration. But that is only the fi rst part of the 

problem.Upon inauguration, the Secretary’s agenda is quickly fi lled dealing with fi nancial compliance, preparing for hearings, and responding to the media – there is no question these initial responsibilities leave litt le time to set a 

strategic agenda. In the fi rst days of offi ce, the Secretary is also left with only a few hold-over team members who barely comprise the staff necessary to keep the Department running on course. Also, as the team ramps 

up, many past Secretaries have found themselves initially surrounded by a deluge of people focused on developing policy vice managing the Department. Although policy personnel are necessary in the current global environment, the Secretary must also assemble a team of leaders with executive competency and the necessary skills and expertise to execute programs and missions on day one of the new administration. 

ESTABLISH EXPECTATIONS

The necessity of early planning – very early planning – cannot be emphasized enough. Emphasis must be placed on maintaining alignment between the Department and the President’s objectives—alignment is oft en mistakenly assumed. Intense scrutiny will surround the new team with the electorate expecting concrete outputs from the new government. The intentions, and even the eff orts, of the new team are not enough to 

satisfy expectations – this can only be done by solid execution of predetermined goals and objectives. The incoming team must apply forwardthinking strategies to drive a results-oriented transition – using specifi c 

metrics (dates, dollars, etc.) to shape the entire team’s performance goals. To succeed, the senior leadership team must convert a mandate to actual governance change.

THE SECRETARY 

MUST ALSO 

ASSEMBLE A 

TEAM OF LEADERS 

WITH EXECUTIVE 

COMPETENCY...

AND EXPERTISE 

TO EXECUTE 

PROGRAMS AND 

MISSIONS

ON DAY ONE
1 2

FOCUSING A TRANSITION

The selection process for senior offi cials should be informed by the President’s goals, objectives, and resource constraints. The President should get agreement on those expectations from each Cabinet candidate (individually quantifi able and delivery date specifi c). Those specifi cs should 

be monitored by quarterly performance reviews conducted by the Vice President and annually by the President. Performance failures should not be sanctioned.In summary, by starting the planning process early, the White House team, together with the Secretary of Defense, can make the transition process smoother, avoid leadership gaps, enable top personnel performance, and be prepared for any situation the future may hold.

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Set aside time in the transition to identify the planning, gravitas, 

and interagency process necessary to respond to a likely fi rst 270-

day crisis.

2. Establish cabinet-level performance expectations up front and 

review the transition team’s plans for governance.
1 3

ITEMS REQUIRING IMMEDIATE AT TENTION

DOD’S UNIQUEMANAGEMENT CHALLENGES 

__________________

The Secretary must reconfi gure the management structure of the Department by defi ning objectives and expectations, modernizing management 

systems, aligning leaders and organizations according to management and budget responsibility, and utilizing feedback mechanisms and metrics to gauge progress. 

ASSIGN A TEAM OF EXPERTS

Bett er alignment of functional and budget responsibility with strategic planning will enhance the eff ectiveness of the Department of Defense in executing its mission to provide military forces to deter war and to protect the security of our country. The decision-making process will become more eff ective by aligning each tier of the leadership hierarchy to the appropriate management responsibilities. Driving down decision-making, while reducing excessive layers of management, will allow greater opportunity for the Secretary to conduct deep future strategic thinking. The Department lacks eff ective modern management systems that can 

predict, analyze costs, and make eff ective trades. Today, there is litt le connection between strategic intent and force structure or investment decisions. It is diffi cult for the Department to synchronize these elements and 

make eff ective trades, due to the lack of knowledge regarding costs and value.The Department of Defense, the Nation’s largest enterprise with such important public trust, cannot aff ord such shortcomings. The Department 

behaves more like an economy than a corporation – it would be the 17th largest nation globally if expenditures were gross national product. With over 1.3 million men and women on active duty, and more than 700 civilian personnel, the Department is the nation’s largest employer. Another 

DRIVING DOWN 

DECISIONMAKING...WILL 

ALLOW GREATER 

OPPORTUNITY FOR 

THE SECRETARY 

TO CONDUCT DEEP 

FUTURE STRATEGIC 

THINKING
1 4

FOCUSING A TRANSITION

1.1 million serve in the National Guard and Reserve forces. About 2 million military retirees and their family members receive benefi ts, which 

they have earned. In fi scal year 2007, the Department consumed more 

than 56 percent of the discretionary budget for the entire United States Government and many of its decisions drive the Nation’s industrial base, technological competitiveness, and social structure.

BUILD A SENIOR LEADERSHIP TEAM 

The Department engages in a broad range of initiatives that include fi ghting the Nation’s wars, humanitarian aid, peacekeeping, disaster relief, and homeland security. Within the Offi ce of the Secretary of Defense there are 

staff s that plan, advise, and carry-out the Nation’s security policies in the critical areas of policy, fi nance, force readiness, purchasing, and personnel 

(active, reserve, and retirees). These staff s also formulate policy to support 

national security objectives, oversee budgetary and fi scal matt ers, conduct 

program analysis and evaluation, oversee personnel policy matt ers, and 

buy goods and services. The Department trains and equips the Armed Forces through our three Military Services: the Army, the Navy, and the Air Force. The Marine Corps, mainly an amphibious force, is part of the Navy. The primary job of the Military Services is to train and equip their personnel to fi ght wars, help with peacekeeping, and provide humanitarian and disaster assistance tasks as directed by the President through the 

Combatant Commanders. Such a broad mission requires a strong, highlyskilled, and competent senior leadership team.

ESTABLISH CLEAR AND MEASURABLE OBJECTIVES

The Department’s systems continue to have diffi culty providing relevant management data to make trade-off decisions. The $100 billion-a-year 

hardware and services acquisition system continues to be criticized for costly acquisitions that are late-to-need. Despite signifi cant increases in 

THE DEPARTMENT’S DECISIONS DRIVE THE NATION’S INDUSTRIAL BASE, TECHNOLOGICAL COMPETITIVENESS, AND SOCIAL STRUCTURE
1 5

ITEMS REQUIRING IMMEDIATE AT TENTION

funding to address the serious shortfalls, the Department continues to be challenged in its eff orts to provide timely support to on-going operations 

and personnel in Iraq and Afghanistan.

EXPLOIT DEEP STRATEGIC INITIATIVES 

Further, the Department’s diffi culty in consistently synchronizing strategic intent with force structure and investment decisions has resulted in 

excessively high overhead for decades. Some studies have shown that the overhead rate is as high as 42 percent. An important strategy document, the Quadrennial Defense Review, rarely impacts more than several percent of the Department’s budget. These are decade-long issues that have battered both the Clinton and the Bush administrations. This is mostly the result of the absence of an eff ective, competent management system.

Modernizing the Department beyond Robert McNamara will require the Secretary to commit the personal time and energy necessary to drive this change. To do this, the Secretary must move forward to select a Deputy to be the Chief Management Offi cer and realign the necessary staff under 

that person to improve the systems and instill discipline in the Department.

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Assign a team of experts to review, validate and/or alter Department of Defense management systems/processes in order to get 

underway on January 20th, 2009.
1 6

FOCUSING A TRANSITION

2. Build a senior leadership team with the skills and experience that 

complement the Secretary’s strengths and compensate for any gaps.

3. Establish clear and measurable management objectives and 

organizational and individual expectations, and demand ongoing alignment essential to achieve goals.

4. Develop leading indicator metrics to measure progress and 

improve accountability.

5. Synchronize the capability to identify and exploit deep strategic 

initiatives that are as important as pressing near-term actions.
1 7

ITEMS REQUIRING IMMEDIATE AT TENTION

BUILDING THE STRONGEST TEAM 

______________

Department of Defense transitions over the past 20 years have been slow and lagged with many months required to get the new team in place. Once the candidates have been identifi ed, the on-boarding of the new leadership team has been both haphazard and inconsistent, resulting in a stutt ering start and limited eff ectiveness in the opening months of a new administration. Given the current national security situation (Iraq, Afghanistan, 

Russian assertiveness, the global economic crisis, etc.) the next transition must be far smoother and faster. There is litt le room for error in a wartime transition. To be successful, the next transition must be carefully planned, aggressively implemented, and receive Congressional cooperation. 

LIMIT THE NUMBER OF EMPTY CHAIRS ON DAY ONE

Whether through mergers, acquisitions, or market dislocations, global businesses face the task of leadership transition on a frequent basis. Because of this, they off er a unique perspective and potential lessonslearned for application within the Department. The corporate on-boarding process is carefully planned and executed. It begins by bringing a clear focus on understanding the issues and challenges faced by the organization, and by spending time to build relationships with the senior leadership team. A diff erent type of transition is the leveraged buy-out, which is more akin to a political transition. One or several key leaders may be replaced early on. The new management team (including hold-overs) is identifi ed, 

briefed, and ready to go on day one. A 100-day plan is oft en used to drive change, post buy-out.

THERE IS LITTLE 

ROOM FOR ERROR 

IN A WARTIME 

TRANSITION
1 8

FOCUSING A TRANSITION

By comparison, transitions within the Defense Department have become longer and more diffi cult with each successive change in administration. It has become harder and more time-consuming to att ract well-qualifi ed candidates due to the onerous nature of the selection/confi rmation process, the highly political environment, and fi nancial considerations. White 

House vett ing is also a major factor in the extended confi rmation process 

(fi nancial and personal history forms, Federal Bureau of Investigations checks, and political clearance). In addition, the Congressional review is oft en slow and involves duplicative paperwork.

START THE PROCESS EARLY

The outgoing team departs on January 20th creating a serious leadership vacuum in most cases. During past transitions, litt le att ention was given 

to identifying strong transition leaders to act during the interim. At most, a handful of new appointees will be in place three to six months aft er 

January 21 (only the Secretary of Defense and the Deputy Secretary of Defense were in place by May 1, 2001). The risk, of course, is not having a “seasoned” leadership team in place ready to handle a crisis. (Historically, each new administration is almost always “tested” early on as previously indicated in “Focusing the Transition Eff ort”).

On-boarding within the Department has typically been given litt le priority and has had uneven success. During the 2001 transition, a more simplifi ed (both in time and substance), but structured approach was used and achieved good results in bringing the new senior executives into the organization. It was a diffi cult task to accomplish in three to fi ve weeks, 

but was especially useful for the nominee who was new to the role of a senior political appointee.

THE RISK...IS NOT HAVING A “SEASONED” LEADERSHIP TEAM IN PLACE READY TO HANDLE A CRISIS
1 9

ITEMS REQUIRING IMMEDIATE AT TENTION

FOCUS ON THE KEY POSITIONS

A rapid and eff ective transition will be a major driver in the success of the new Secretary’s policies and programs. Keys to a far more eff ective transition include starting the personnel selection process early, focusing on 

the initial key hires, and maintaining continuity throughout the process to avoid lapses in leadership. The timely and effi cient process of integrating new employees into their agency work environments will ensure that 

they are fully productive and engaged as quickly as possible.

Political Transition Corporate Transition

Leadership vacuum is created due to many top leaders leaving simultaneously

Executive team stays in place during top leadership transition. New team is built slowly – over 3 to 12 months

Transitions without suffi cient succession planning Early, in-depth succession planningInsert several new leaders, one at a time, over many months Insert one new leader into a large existing teamUsually an outside candidate Often an in-house candidateFocus on one candidate at a time Two to three candidates identifi ed for each positionInsuffi cient vetting of external hires External hires carefully vettedNew leaders expected to “get on the ground running” without formal executive training and support

New leaders receive special attention/off ered 

the services of executive coaches and industrial psychologists

New leaders often not off ered substantial support New leader given clear show of support from top management 

Limited goals fi rst year Aggressive goals for the fi rst 6 to 12 monthsSecond tier leadership in for the duration (goal is 4 years)

Second tier rotates regularly to prevent going “native”

Gaining “control” is key Changing direction is key

Table 1-1. Brief Comparison of Political and Corporate Transitions
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FOCUSING A TRANSITION

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

BUILDING A STRONG TEAM TO SUPPORT THE SECRETARYOF DEFENSE

1. Develop a slate of “hold-over” candidates for key positions to 

limit the number of empty chairs on day one.a. Apolitical presidential appointees.b. Strong, experienced civil servants.c. Senior military offi cers may be appropriate in some cases.

d. Goal – no dropped balls or leadership vacuums.

2. Start the personnel process early. 

a. Develop an organization plan that spells out the primary 

responsibilities of the key positions to guide the selection of the right person for each job.

b. Identify multiple candidates for key jobs before the election. 

Ensure you have a strong alternative in case problems arise.

c. Start the clearance process for 30 to 40 people from each party 

right aft er the conventions (both transition team members and 

possible appointees).

d. Start the formal vett ing process day aft er election – not necessary to know exactly which jobs they will fi ll.

3. Reach out for candidates; don’t just sett le for those eager for 

appointments. 

4. Focus initially on the key positions (see Table 1-2).

a. Select preferred candidates.b. Ensure Federal Bureau of Investigations gives the candidates 

priority.
2 1

ITEMS REQUIRING IMMEDIATE AT TENTION

c. Target gett ing names to Capitol Hill within 30 days (60 days is 

the norm).

d. Drive to get them in place by January 31 (February 15 at the 

latest).

5. Work closely with the Federal Bureau of Investigations personnel 

and key congressional committ ees to get their full cooperation.

6. Careful selection of military assistants is very important. Don’t 

just accept those that are nominated. The right ones can be invaluable.

ONBOARDING NEW APPOINTEES1

1. Carefully structure the on-boarding process and start as early as 

possible.a. Provide a strategy to guide key changes in policy/programs.b. Focus particular att ention to early challenges/immediate 

issues.

c. Identify potential “land-mines.”

2. Utilize focused, short briefi ng papers (no thick books).

a. One-pagers on key issues requiring early att ention/decisions.

b. Provide background, options, timelines (no recommendations).c. More in-depth education will take place during the confi rmation process.

3. Outline key responsibilities of the positions.

a. Brief summary of functions and key roles/relationships.b. Short bios of senior career offi cials.

4. Carefully select briefers for prospective appointees.

a. Independent, creative thinkers – military and civilian.

1. Reference DBB Report FY04-3, “Civilian leadership Task Group” for greater detail.
2 2

FOCUSING A TRANSITION

b. Don’t be defensive, locked in on prior administration policies/

programs.

c. Expect suspicion/skepticism from the new appointee.

Table 1-2. DoD Civilian Presidential Appointment/Senate Confi rmation

Positions

Level ISecretary of DefenseLevel IIDeputy Secretary of Defense Under Secretary of Defense (Acquisition, Technology, and Logistics)Secretary of the ArmySecretary of the Navy Secretary of the Air ForceLevel IIIUnder Secretary of Defense (Policy)Under Secretary of Defense (Comptroller) Under Secretary of Defense (Personnel & Readiness)Under Secretary of Defense (Intelligence) Deputy Chief Management Offi cerDeputy Under Secretary of Defense (Acquisition and Technology) Under Secretary of the ArmyUnder Secretary of the NavyUnder Secretary of the Air Force
2 3

ITEMS REQUIRING IMMEDIATE AT TENTION

Level IVDeputy Under Secretary of Defense (Logistics & Materiel Readiness)Deputy Under Secretary of Defense (Policy)Deputy Under Secretary of Defense (Personnel & Readiness)Director, Defense Research & EngineeringAssistant Secretary of Defense (Networks and Information Integration)Assistant Secretary of Defense (Health Aff airs)Assistant Secretary of Defense (International Security Aff airs)Assistant Secretary of Defense (Global Security Aff airs) Assistant Secretary of Defense (Asian & Pacifi c Security Aff airs)Assistant Secretary of Defense (Public Aff airs) Assistant Secretary of Defense (Reserve Aff airs)Assistant Secretary of Defense (Homeland Defense)Assistant Secretary of Defense (Special Operations/Low Intensity Confl ict) Assistant Secretary of Defense (Legislative Aff airs)Director, Operational Test & EvaluationGeneral CounselInspector General

Source: DoD Executive Schedule Positions (Civilian Presidential Appointment/Senate Confi rmation (PAS) Positions), as of 28 January 2008.

Table 1-2. DoD Civilian Presidential Appointment/Senate Confi rmation

Positions (continued)
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FOCUSING A TRANSITION
2 5

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

Near-Term Obstacles that Could Hamper Long-Term Success

LOWERING THE OVERHEAD COST 

_______________

Industry is constantly seeking to maximize resources and gain greater effi ciencies to reduce overhead. While the Department of Defense does not track overhead precisely, it tracks the relationship between the combat force structure executing the Department’s mission (tooth) and the Nea 2 Ham

Table 2-1. Characteristics by Presidential AdministrationA logical question: How much defense do we get for $670 Billion per year?

Category

End of 

Carter

End of 

Reagan

End of 

Bush

End of 

Clinton

GW 

Bush Change

1980–2007

1980 1988 1992 2000 2007 (Est)

Total Budget Authority ($B - Constant $) $412 $491 $412 $354 $441 7%Total Budget Authority ($B - Current $) $178 $284 $282 $291 $441 148%Supplementals ($B) $0 $0 $4 $0 $190 Active Duty Personnel (K) 2,101 2,209 1,886 1,449 1,406 -33%Reserve and Guard Personnel (K) 851 1,158 1,135 865 843 -1%Civilian Personnel (K) 1,019 1,090 1,006 698 702 -31%Active in Commission Ships 521 573 471 341 236 -55%Army Divisions (active) 19 20 20 10 10 -47%

AF Fighter/Attack (Total Active Inventory) 2,789 3,027 2,000 1,666 1,619 -42%

Sources: National Defense Budget Estimates for FY 2006, April 2007http://www.history.navy.mil/branches/org9-4c.htm; AFA Almanac
2 6

FOCUSING A TRANSITION

infrastructure used to manage and support those forces and other DoD missions (tail) (see Table 2-1). Spending on infrastructure has remained relatively constant at approximately 42 percent of the Department’s total spending between FY 2002 and FY 2006 and is projected to remain at the same level. In the private sector these expenses generally would be considered overhead (“tail” to the Department) that management would work aggressively to continuously reduce to achieve greater effi ciency. 

SECRETARIAL LEADERSHIP

Reducing the Department’s overhead rate is as much a cultural problem as a management issue. Thus, only the Secretary of Defense can lead 

Table 2-2. DoD infrastructure $(billions) remains steady at ~42 percent(Total obligated authority) Source: PA&E

Infrastructure FY2002 FY2003 FY2004 FY2005 FY2006Force Installations 29 35 33 35 28Communications & Information 7 10 9 9 9Science & Technology Program 11 12 13 14 14Acquisition 9 10 12 12 12Central Logistics 22 29 26 25 25Defense Health Program 28 25 27 27 28Central Personnel Administration 8 13 13 12 13Central Personnel Benefi ts Programs 9 10 10 10 10Central Training 33 36 33 33 34Departmental Management 18 22 21 29 27Other Infrastructure 4 4 12 25 5Total Infrastructure (% of DoD) 180 (44%) 206 (42%) 209 (42%) 230 (43%) 205 (42%)

REDUCING THE DEPARTMENT’S OVERHEAD RATE IS AS MUCH A CULTURAL PROBLEM AS A MANAGEMENT ISSUE
2 7

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

the Department to address this critical obstacle. It is important that the Department work to shrink its overhead costs and to free-up resources to support critical Defense priorities.

SET A GOAL TO REDUCE OVERHEAD

The Department is likely entering a prolonged period of fi scal constraint in a tough economy of increasing defi cits and competitive spending pressures. The Secretary of Defense will need all available resources invested 

as eff ectively and effi ciently as possible to maintain operational readiness. It is time for the Department of Defense to embrace the private sector best practice of “going to war” on its overhead.Specifi cally, industry maximizes its resources and gains greater effi ciencies by undertaking the following strategies:

 Continuously “going to war” on waste – targeting cuts on low 

value-add areas. – Apply “Value-chain” and “Activity Analyses” tools to reduce 

ineffi ciencies/overlaps.

– Leverage technologies to achieve bett er than one–to-one ratios 

in workforce redesign.

 Designing organizations to facilitate and encourage prudent risk 

taking.– Decentralize to encourage innovation; centralize to eliminate 

duplication.

 Continuously charting “core competencies and incompetencies.”

– Create incentive for, measure, and reward desired outcomes.– Constantly monitor performance.– Identify leaders early and develop succession and promotion 

plans accordingly.

IT IS TIME FOR 

THE DEPARTMENT 

OF DEFENSE TO 

EMBRACE THE 

PRIVATE SECTOR 

BEST PRACTICE OF 

“GOING TO WAR” 

ON ITS OVERHEAD
2 8

FOCUSING A TRANSITION

– Career map to core competencies – builds on people’s 

strengths.

 Measuring and analyzing human capital performance and workforce engagement to drive a culture of excellence.

– Apply benchmarks and projects three to four years ahead 

(lead, don’t lag).

– Compare results to competition and/or most effi cient organization.

RecommendationsThe Board off ers the Secretary of Defense the following recommendations: 

1. Conduct a review of all indirect and direct costs to determine if 

42 percent is an appropriate level of overhead, and to identify opportunities to constantly reduce overhead.– Set a goal to reduce overhead.

2. Mandate the use of management tools and processes that are 

based on an enterprise vision to drive down overhead spending.– Metrics should focus on outcomes (not outputs) to provide 

strong measures of implementation and achievement of goals.

SET A GOAL TO REDUCE OVERHEAD
2 9

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

SLOWING THE BALLOONING COSTOF DEFENSE HEALTHCARE 

_____________________

The ballooning cost of Department of Defense health benefi ts represents a critical obstacle to the Department’s long-term success. The Department’s healthcare costs are “eating up” Defense resources that otherwise could be used to increase the quality and quantities of systems that warfi ghters need now and in the future. Over the Future Years Defense Program defense healthcare spending is forecasted to grow to around $66 billion by fi scal year (FY) 2015. Gaining support from Congress and the Military Services to slow the growth of Defense healthcare costs is as much a cultural problem as a management issue, and thus, only the Secretary of Defense can lead the Department to address this healthcare budget crisis.

SECRETARIAL LEADERSHIP

In FY 2007 the U.S. Government spent $93 billion related to Department of Defense healthcare, which included $17 million to pay down the Department’s $488 billion unfunded liability (FY 2007) for “TRICARE-for-Life” healthcare benefi ts. Department spending on healthcare is growing at a rapid pace - $25.1 billion from FY 2000 to FY 2008, representing a 144 percent increase.At this pace, healthcare spending is growing faster than the Defense Department’s discretionary spending. One of the primary drivers of this growth is the growing number of Congressional mandates for increased healthcare benefi ts. It is likely that Congress will continue to increase the Department’s healthcare benefi ts making it diffi cult for the Department to fi nd 

tough funding trade-off decisions.

THE 

DEPARTMENT’S 

HEALTHCARE 

COSTS ARE 

“EATING UP” 

DEFENSE 

RESOURCES
3 0

FOCUSING A TRANSITION

ENGAGE THE CHAIRMAN, JOINT CHIEFS OF STAFF, AND SERVICE CHIEFS

With Defense healthcare programs in fi nancial competition with other 

critical Defense acquisition and operational programs, it is critical that the Secretary work to gain agreement from the Department’s uniformed leadership to aggressively pursue savings in Defense healthcare spending. Only the Secretary can lead the Department and its uniformed leadership (Service Chiefs and Chairman Joint Chiefs of Staff ) to a solution.

25,000

FY00 FY01

FY2000 Unified Medical ProgramNew Users <65

Source: OUSD/Health Affairs Note: FY08 GWOT medical spending totaled $1.137B

Price InflationExplicit Benefit Changes to <65

Volume/Intensity/Cost Share Creep, etc.

Increase 

over FY2000

$25.1B

144%

FY2000

Baseline

$17.4B

$9.8B — 39%$0.8B — 3%$2.7B — 11%$4.0B — 16%$7.8B — 31%

100%

Explicit Benefit Changes to 65+, i.e., TFL

FY02 FY03 FY04

Fiscal Year 2000–Fiscal Year 2008

(Excluding that in GWOT)

FY05 FY06 FY07 FY08

15,00010,000

0

Figure 2-1. Growth in the Unified Medical Budget

($Million)

5,000

20,00045,00035,00030,00040,000

0

o

$$$$$ 0

00

0

00000

$$$

000

0

0

$ 0$

0
3 1

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

The Secretary of Defense will need all resources invested as eff ectively as 

possible to maintain operational readiness. The Department cannot continue to let its overall spending on Defense healthcare grow at the same pace it has over the past seven years (see Figure 2-1) – 144 percent from FY 2000 to FY 2008 ($17.4 billion to $42.5 billion - does not include Global War on Terror and supplemental spending authorizations).The Department must address the primary drivers behind this rapid growth: retiree spending (which has grown 39 percent from FY 2000 to FY 2008 and accounted for 64.8 percent of healthcare expenditures in FY 2008); pharmacy spending (which is growing faster than overall Defense healthcare spending); and Congressional mandates (which accounted for $11 billion of Defense healthcare spending in FY 2008).As Congress continues to push for expansion of Defense healthcare coverage, the Department’s unfunded liability for “TRICARE-for-Life” continues to increase. In FY 2007 this unfunded liability totaled $488 billion, representing a true existential threat to the Department. The FY 2007 passthrough to the Department of Treasury to pay down this debt ($17 billion) was less than the annual FY 2007 growth of the debt ($22 billion). 

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Lead the Eff ort – Only the Secretary can lead the Department to 

address this fi nancial constraint.

THE SECRETARY 

OF DEFENSE 

WILL NEED ALL 

RESOURCES 

INVESTED AS 

EFFECTIVELY 

AS POSSIBLE 

TO MAINTAIN 

OPERATIONAL 

READINESS
3 2

FOCUSING A TRANSITION

2. Build a Team – The Secretary must convene his senior military 

and civilian leadership to reduce Defense healthcare spending.– This is an issue that can only be solved with the active support 

and engagement of the Chairman, Joint Chiefs of Staff , and 

Service Chiefs.

3. Identify High Pay-Off Items – The Secretary’s team must focus 

on areas of highest potential savings.– Place emphasis on the areas of retiree spending and pharmacy 

costs.

4. Work with Congress – Any changes to the trajectory of expenses 

will require the support of the Congress, as many of the fastest rising programs are mandated.– Utilize a bi-partisan commission (similar to the National Bipartisan Commission on Healthcare) to address the Department’s rapidly increasing healthcare expenditures.

UTILIZE ABI-PARTISAN COMMISSION TO ADDRESS HEALTHCARE EXPENDITURES
3 3

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

ADDRESSING ROOT CAUSES OF ACQUISITION COST GROWTH _______________________________

The rapidly increasing cost of defense acquisition programs represents a critical near-term obstacle to the Department’s long-term success. Acquisition program cost overruns consume money that otherwise could be used to increase the quality and quantities of systems and training that combat forces need now and in the future. Reversing acquisition program cost growth is another cultural problem that will require the focus and leadership of the Secretary of Defense. 

SECRETARIAL LEADERSHIP

In the past seven years, the total acquisition budget for all Major Defense Acquisition Programs has more than doubled – from $783 billion to $1,702 billion (see Figure 2-2). Rapid growth has been fueled by increases in program costs ($401 billion) and changes to program baselines ($328 billion). These rising program costs lead to increases in unit costs – Augustine’s Curve – limiting the Department’s ability to recapitalize the force. Historical analysis and current trends indicate that the Department is entering a prolonged period of fi scal constraint in a tough economy of increasing 

defi cits and competitive spending pressures. The Secretary of Defense will need all available resources invested as eff ectively as possible in order to 

maintain operational readiness.Also during the past seven years, fi ve Major Defense Acquisition Programs accounted for over 50 percent of the program cost growth over the 

baseline: Future Combat System (Army); Joint Strike Fighter (Navy / Air Force); USS Virginia class submarine (SSN 774) (Navy); Chemical Demilitarization (Army); and Evolved Expendable Launch Vehicle (EELV - Air Force). Estimating, engineering, and schedule changes were responsible 

ACQUISITION 

PROGRAM COST 

OVERRUNS 

CONSUME MONEY 

THAT...COMBAT 

FORCES NEED 

NOW AND IN

THE FUTURE
3 4

FOCUSING A TRANSITION

for over 80 percent of the cost growth above the baseline cost during this period (2000 to 2007) (See Figure 2-3).

1,000

78 79

Source: OUSD(C) Study, DoD Selected Acquisition Reports, 1978–2007 (2nd Quarter) Numbers may not add due to rounding* Figures reflect Compound Annual Growth Rates (CAGRs)** Includes all changes between a program’s initial ‘baseline changes’ and its current ‘baseline estimate’ (as of 2Q 2007 SAR); BMDS engineering cost changes were reclassified as ‘baseline changes’ due to unique program budgeting process

ProgramCostChangesBaselineChanges**ProgramBaseline

80 81 82

(2007 Constant Dollars in Billions)

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

600400

0

Figure 2-2. Major Defense Acquisition Program Portfolio: 1978–2007

2007 Year $ (B)

200800

1,8001,4001,2001,600

Eng., Est., Schedule Cost ChangesQuant. and Support Cost ChangesBaseline ChangesProgram Baseline

00 Baseline Changes

Program Baseline

0

00

0

0000

Recent Buildup

Reagan Buildup

1979–1986:

245% Spending Growth

2000–2007:

170% Spending Growth

Overall 30 year

MDAP Growth Rate*: 4%

Annual Growth Rates*

’79–’86

3%

21%

–

13%

Total 14%

’00–’07

13%

–

7%

5%

8%

Recent buildup is characterized by fewer new programs, increases in existing baseline budgets, and 

increases in engineering and estimating costs

ESTIMATING, ENGINEERING, AND SCHEDULE CHANGES WERE RESPONSIBLE FOR OVER 80 PERCENT OF THE COST GROWTH
3 5

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

IDENTIFY AND TRACK COST DRIVERS

In addition to program cost growth, which the Department tracks according to the above categories (and is recorded in Selected Acquisition Reports), the Department makes ongoing decisions to change program cost estimates, called “re-baselining.” Unfortunately, the Department does not 

Figure 2-3. 2000–2007 Major Defense Acquisition Program PortfolioCost Growth by Program (Dollars in Billions)

Source: DoD Selected Acquisition Reports, 1978–2007 (2nd Quarter) Numbers may not add due to rounding* Includes all changes between a program’s initial ‘baseline changes’ and its current ‘baseline estimate’ (as of 2Q 2007 SAR);  BMDS engineering cost changes were reclassified as ‘baseline changes’ due to unique program budgeting process

** Combines 3 Chemical Demilitarization programs into 1 to match earlier SARs

Cost growth is only five programs accounted for $206B or 51% of the total

$328B$190B$401B

$401B

Baseline

Changes*

New

Programs

Program Cost

Growth Future

Combat

Systems

$69.7

91 Additional MDAPs ($195B)

Includingt $"	#
t &'7	#
t %%(	#
t $3&31	#
t 4#*34 	#


Joint Strike

Fighter

(F-35)

$66.8

SSN 774 Attack Submarine$27.3

Chemical Demilitarization**$23.4Evolved ExpendableLaunch Vehicle (EELV)$18.5
3 6

FOCUSING A TRANSITION

track the cost drivers behind such decisions using similar categories when a decision to re-baseline a Major Defense Acquisition Program is made. Hence, the true nature of associated cost growth is lost once re-baselining decisions occur. In the period between 2000 and 2007, managerial insight was lost for $328 billion worth of “re-baselining” decisions.

DEVELOP JOINT MANAGEMENT TOOLS

The rising cost of acquisition programs is not just an acquisition problem. Rather, it is the requirements, budget, and acquisition processes that are the drivers that fuel this unsustainable trend. Fundamental to this problem is an atrophy of the acquisition workforce (skills, numbers, and capabilities) that the Department must address.RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Work with the Under Secretary of Defense for Acquisition, 

Technology, and Logistics and the Service Secretaries to drive a targeted reversal of this trend which addresses the previously listed key drivers of program baseline changes and program cost growth.a. Maintain metrics for each re-baselining decision to track/monitor drivers of growth.b. Focus on fundamental drivers not on “fi xing” symptoms, 

including the human capital issues.

c. Set and then propagate the cultural change necessary to 

reverse behavior.

d. Establish non-negotiable objectives and supporting metrics 

and hold the leadership accountable for achieving them.

REQUIREMENTS, BUDGET, AND ACQUISITION PROCESSES...ARE THE DRIVERS THAT FUEL THIS UNSUSTAINABLE TREND
3 7

NEAR-TERM OBSTACLES THAT COULD HAMPER LONG-TERM SUCCESS

2. Hold industry executives accountable to the same objectives and 

supporting metrics as the Department of Defense. a. Initiate dialogue with industry independent of the requirements process to minimize future program baseline and estimate changes. 

3. Develop joint management tools to fi x and manage the authority, 

responsibility, incentives, and accountability across the relevant parts of the Department of Defense and industry.
3 8

FOCUSING A TRANSITION
3 9

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

Organizing the Departmentfor Real Change

IDENTIFYING AN OPTIMAL MANAGEMENT MODEL TO DRIVE CHANGE 

_____________________

External factors and management challenges will be major infl uences on the way the Secretary manages the Department of Defense. In the past, events (e.g. Sputnik11) or new threats (e.g. terrorism) have resulted in signifi cant organizational change and management focus. The Secretary of 

Defense will likely face challenges, ranging from tighter budgets, to cyber threats, and asymmetrical warfare, which demand a responsive, agile, and synchronized management approach that capitalizes on the skills of a myriad of people and organizations. The optimal management model will anticipate and respond to key national security and management challenges, expand the Department’s organizational capacity, and fi t the Secretary’s personal and management style.

ADOPT A MANAGEMENT MODEL

Past Secretaries have had very diff erent management models and 

approaches, in part driven by their personalities and management styles. The roles of the Secretary, Deputy Secretary, and the Offi ce of the Secretary of Defense have evolved as well. In the 1940s, the Secretary’s role was 

1. Sputnik – The Soviet Union’s successful launch of Sputnik 1 was the world’s fi rst artifi cial 

satellite to orbit the earth. It marked the start of the space age and the United States and Soviet Union space race.

Org 3 for 
4 0

FOCUSING A TRANSITION

limited; however, by the 1960s that role was far stronger. In addition, the staff , especially acquisition and policy functions, has expanded its role and infl uence. Models have diff ered based on the world situation, past events, and primary threats. In the 1940s and 1950s the focus was on improving coordination and integration of the Services and operating forces. Later, events drove change: Sputnik (Department of Defense Research & Engineering), Missile Gap2 (Civil Defense Offi ce), and asymmetric warfare/

terrorism (Under Secretary of Defense for Intelligence). Then, in the 1980s, Goldwater/Nichols increased the role of the Combatant Commands and strengthened the role of the Chairman of the Joint Chiefs of Staff to provide independent and coherent military advice.

Factors driving the Secretary’s management approach will need to incorporate the fi scal and budget outlooks, threats and military challenges, and 

the role of the Department of Homeland Security. The Secretary will also have to take into consideration the nature of the interagency and National Security Council processes, and how they impact staffi ng and structure. 

The Board off ers an assessment of the issues and challenges that the Secretary is likely to face (see Table 3-1).

SUPPORT AND STRENGTHEN CRITICAL MANAGEMENT PROCESSES AND HUMAN RESOURCES 

Several weaknesses in management systems and structure have repeatedly surfaced and need early and sustained att ention. Poor management and 

information systems (fi nance, personnel, and logistics), a weak requirements process, and lack of adequate cost estimating remain problematic. Lack of clear authority and accountability, poor response time, and speed of eff ort are issues across the organization. Most of the Department’s systems and processes are reactive and seldom anticipate. This is further 

2. Missile Gap – Perceived discrepancy between the number and power of weapons in the ballistic missile arsenals of the Soviet Union and the United States

THE OPTIMAL MANAGEMENT MODEL WILL ANTICIPATE AND RESPOND TO KEY NATIONAL SECURITY AND MANAGEMENT CHALLENGES
4 1

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

complicated by the declining capability of the career workforce due to poor recruiting, increasing numbers of retirements, and personnel reductions.

Table 3-1. DBB Assessment of Issues and Challenges

National Security Challenges 

Importance Likelihood Organizational 

Capacity

Increased WMD Threats High High MedSharp Increase in Terrorism Med High MedMissile Defense High High MedExpanded Chinese Mil Capacity High Med LowIncreased Regional Threats High High HighAggressive Russia Med Med LowExpanded Homeland Security Role Med Med LowBroader Post Confl ict Role Med Low MedManagement Issues 

Importance Likelihood Organizational 

Capacity

Deep Budget Cuts CRT High MedDeep Force Cuts High High LowWeapon Costs/Schedules CRT High LowPeople Cost Increases High High MedCapability Requirements High High MedZero Base Force Structure/Roles Med Med MedNetwork Centric/ Cyber Threats CRT CRT LowBasic Management Systems Med High LowEffi cient Responsive Mgmt Med Med LowIntense Interagency Process Low Med Med

Critical=CRT High Medium=Med Low
4 2

FOCUSING A TRANSITION

In summary, greater focus is needed on the critical management issues and national security challenges the Department faces in shaping the organization and ensuring there is clear authority and accountability for delivering results. More emphasis is needed to strengthen key management processes and systems (many are weak and ineff ective) to provide early and accurate tracking of the organization’s performance. Finally, greater energy must be applied to addressing the Department’s diminished human resources, especially in the areas of technology, contracting, and fi nancial management. Failure to improve the capacity of the Department’s people will seriously undermine the Secretary’s ability to successfully execute key programs.RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Adopt a management model that: 

a. Focuses on the management issues and national security challenges facing the Department.b. Clearly refl ects the Department’s top objectives.c. Provides clear authority and accountability to key subordinates.d. Fits the personal management style of the Secretary.

2. Analyze critical management processes and strengthen as necessary: 

a. Determine which management systems support the Secretary’s management model.b. Provide meaningful metrics, and reporting systems to measure and track them.

GREATER FOCUS IS NEEDED ON...ENSURING THERE IS CLEAR AUTHORITY AND ACCOUNTABILITY FOR DELIVERING RESULTS
4 3

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

c. Focus on areas of known weaknesses such as fi nance, personnel, and logistics.

3. Give priority to strengthening the Department’s Human 

Resources. Specifi cally:a. Att ract, retain, and motivate quality people for both the career 

and political positions. 

b. Strengthen career personnel numbers and talent in such functions as acquisition, systems engineering, and research and 

development. 
4 4

FOCUSING A TRANSITION

FOCUSING THE SECRETARY’S TIMEON THE MOST STRATEGIC OBJECTIVES 

__________

Corporate chief executive offi cers spend the majority of their time strategically planning for the future success of their companies. The Secretary of Defense stands to gain valuable insight by analyzing corporate leadership priorities. Past Secretaries have had diffi culty maintaining focus 

on the right objectives. There has been good focus on processes, but not necessarily on the best priorities or on following a management agenda that articulates priorities and holds lower organizations and management accountable. Although there are existing systems and processes that provide senior offi cials with an unusual degree of knowledge, oversight, and control of the Department’s activities, oft en they are not utilized or do not 

provide the necessary data to make informed decisions. The challenge for the Secretary of Defense is to oversee and provide timely decisions for the many simultaneous processes, each ultimately reporting to him. To do this, the Secretary must focus his eff ort on a few key objectives, engage 

stakeholders, and be willing to make trade-off s and reject decisions. 

FOCUS ON A FEW KEY OBJECTIVES

The Secretary will need a management agenda which is focused on addressing a few key strategic priorities as time and resources to “do everything” will not be available. Early alignment with key internal and external stakeholders on key priorities requires a clear understanding of trade space.Current fi nancial challenges will require faster and more targeted decision making. The Secretary must rely on a high-performing, well-run management team synchronized to his objectives in order for him to be proactive instead of reactive on strategically important objectives. 
4 5

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

BETTER ALIGN KEY OBJECTIVES AND PROVIDE A FORCE MULTIPLIER

Considering how past Secretaries of Defense have allocated their time, there are options that the Secretariat-level leadership should consider to bett er focus their eff orts on the most strategically important objectives. But, the leadership must be committ ed to creating and sustaining a focused management agenda. Past Secretaries have commented that there is insuffi cient time to be proactive or focus on long-term strategic issues. The majority of their days are 

consumed by interagency or internal meetings reacting to events that have already occurred, as compared to a chief executive offi cer who spends the 

majority of his/her time being proactive on future strategic issues. Those Secretaries that were successful focused on a few major objectives and were able to get stakeholders’ buy-in.Past Secretaries of Defense found that one of their most diffi cult tasks was to marshal the ideas and interests of the various components of the defense community to build a consensus on policy. Those that were successful found that they could use incentives to get what they wanted and force trade-off s, without infringing on autonomy of execution.

ALIGN MANAGEMENT ATTENTION AND MAJOR BUDGET ITEMS

At least one former Secretary of Defense viewed his task as exercising civilian control for the Commander in Chief by reserving the right to get into anything and issuing orders. Many others viewed their role through the prism of their experience, whether in industry or government, which would ultimately infl uence how they would advance their management 

agenda. However, what is consistent is agreement that cohesive alignment of budgets with priorities, and an ability to stay focused on a few 

PAST SECRETARIES 

HAVE COMMENTED 

THAT THERE IS 

INSUFFICIENT TIME 

TO BE PROACTIVE 

OR FOCUS ON 

LONG-TERM 

STRATEGIC ISSUES
4 6

FOCUSING A TRANSITION

critical objectives while building stakeholder consensus are the keys to eff ectiveness. The Secretary must have a clear management agenda and a well-defi ned 

strategy to implement that agenda. Additionally, the Secretary must leverage the Department’s core capabilities and functions towards realizing the agenda. He must also build a high-performing, well-run management team synchronized to his objectives, so he can be proactive on strategically important objectives. 

Recommendations The Board off ers the Secretary of Defense the following recommendations:

1. Focus on a few key objectives and harmonize those priorities with 

stakeholders. Provide management att ention early and consistently.a. Identify trade space within the major budget categories ( i.e., 

personnel/operations, maintenance/research and development/procurement) and use that to obtain and leverage mutual cooperation with key internal and external stakeholders

b. Clearly communicate expectations to the senior civilian 

appointees, link objectives to outcomes and allocate time to monitor performance.

2. Engage the military and civilian leaders, including the Chairman 

of the Joint Chiefs of Staff and Combatant Commanders on strategic and operational matt ers to bett er align key objectives and provide a force multiplier to the Secretary. a. Leverage the expertise and forums available to these entities 

to advance key management objectives. 

THE SECRETARY MUST HAVE A CLEAR MANAGEMENT AGENDA AND A WELL-DEFINED STRATEGY TO IMPLEMENT THAT AGENDA
4 7

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

3. Support strategic priorities by aligning management att ention 

and major budget items.a. Issue strategic planning guidance that supports key management objectives and drive implementation decisions down to 

Tier II and lower management levels.

b. Identify core management systems and processes and use 

them to provide important budget and management data.
4 8

FOCUSING A TRANSITION

USING SELECTION CRITERIA AND POSITION PAIRINGS 

___________________________

The complexity of today’s global environment demands superior leadership with the skills to eff ectively tackle the Department’s toughest strategic challenges. Reviews of past Department senior leadership pairings 

(i.e., Secretary/Chairman Joint Chiefs of Staff , Secretary/Deputy, Deputy/

Vice Chairman, Secretary/Service Secretaries, and Service Secretaries/Service Chiefs) have shown that there are unique skills and expertise that make such pairs successful. Oft en, when selecting candidates for fi lling 

key Department of Defense Presidential Appointment/Senate Confi rmation positions, the value of creating leadership pairs that complement each 

other in terms of experience is not taken into consideration. Also, more eff ort needs to be placed on identifying potential sources to recruit civilian talent that meets the Department’s leadership needs (see Figure 3-1).

LEVERAGE INDIVIDUAL EXPERIENCE AND QUALIFICATIONS TO PROMOTE COMPLEMENTARY PAIRINGS

The roles and responsibilities of senior leaders will be impacted by the reality of functional pairings that drive the Department’s daily operations; therefore special att ention must be given to the necessary and desired 

competencies for each pairing. The fi rst step to building a successful management team is to establish a framework to determine the skill profi le 

and critical experiences necessary to form the basis for judgments of prospective Defense candidates. This is especially true at the most senior level pairings: Secretary/Chairman Joint Chiefs of Staff , Secretary/Deputy, 

Deputy/Vice Chairman, Secretary/Service Secretaries, and Service Secretaries/Service Chiefs.

OFTEN...THE VALUE OF CREATING LEADERSHIP PAIRS THAT COMPLEMENT EACH OTHER IN TERMS OF EXPERIENCE IS NOT TAKEN INTO CONSIDERATION
4 9

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

ALIGN AUTHORITY, RESPONSIBILITY, AND ACCOUNTABILITY

Individual experience and qualifi cations should be leveraged to promote complementary pairings that enhance eff ectiveness and ensure the team 

stays focused on the most strategically important objectives. Selecting the “right people” with the “right skills” at the “right time” can achieve and sustain the focus.Leadership “pairings” are akin to that of a conductor with an orchestra—their personal and professional skills complement one another and enable the relationship to excel. At any given time, their “roles” may embrace: decision maker, coach, nurturer, encourager, visionary, moral leader, empathizer, disciplinarian, etc. Senior leaders of the Department of Defense team will likely be drawn from diverse backgrounds; embody wide-ranging personal styles, skills, temperaments, and experiences; and 

Figure 3-1. Where to Look and How to Find “A-Level” Talent

• Enlist the services of the top executive search fi rms with successful experience in  recruiting for high-level government positions.• Other Sources of Candidates and Advice • CEOs, COOs, CFOs, Senior Operating Executives and Board members of Fortune 500  companies, leading fi nancial institutions, and auditing fi rms

 • Cabinet-level appointees in previous administrations • Current and previous members of the DoD Federal Advisory Committees (Defense  Business Board, Defense Science Board, and Defense Policy Board), Chief Naval  Operations Executive Panel, Service Secretaries Boards and Defense Department  Advisory Committee on Women in the Services • Alumni of the White House Fellows Program, Congressional Fellows Program, etc. • Minority alumni associations from leading business schools, law schools and schools  of government; minority professional organizations, e.g. Executive Leadership  Council ( senior-most African Americans in corporate America) and Latinoleaders.com  (national magazine of successful Latino Americans) 

Potential Sources to Recruit Civilian Talent
5 0

FOCUSING A TRANSITION

will bring diff ering managerial styles (coercive, authoritative, affi liative, 

democratic, pacesett ing and coaching, etc.). Emphasis must be placed on 

gett ing the right folks. As it has been stated, “managers do things right; 

leaders do the right thing.”Additionally, each member of the Department’s senior leadership team must be committ ed to leading and managing with a sense of urgency. This 

is essential in today’s tenuous domestic and global environment. They must establish creditability by: (1) quickly learning the organizational landscape; (2) building relationships up, down, and across the defense community; and (3) working eff ectively with Congress, the media, and 

other constituencies.

Table 3-2. Suggested Traits, Experience, and Duties of Key Leadership Personnel

Personal Traits Experience Duties

Deputy Secretary of Defense

• Ability to work eff ectively 

with and complementary to the Secretary of Defense

• Ability to work eff ectively 

with the top leadership of the Joint Chiefs of Staff , especially the Deputy/Vice Chair “pairing” 

• Personal integrity• Seasoned leader• Tough-skinned; able to 

make tough trade-off s and strategic choices 

• Comfortable with uncertainty and ambiguity• Strong communicator who 

can deliver the “bad news” as well as the good

• Operate with a sense of 

urgency (wartime setting)

• Leading a senior executive team as a former Chief 

Executive Offi cer, Chief Operating Offi cer, or senior operating division President of a complex, global organization

• Crisis management (acquisitions, divestitures, restructuring of large, complex, 

global organizations)

• Direct or indirect knowledge 

of the Defense complex as a former war-fi ghter or policy-maker 

• Worked with Congress, other 

governmental organizations, and the business community 

• Understands the military 

procurement, weapons and technology development, and budgeting processes

• Communicating eff ectively 

with a wide range of competing constituencies

• “Chief Operating Offi cer” of 

the Department of Defense

• Acts on behalf of the 

Secretary in his absence

• Oversees functional staff s 

within the Department (e.g. budgets, policy, tasking, position papers, outcomes, decision-making process, inter-governmental collaboration, and cooperation)

• Recommends strategic 

choices to the Secretary based on rigorous analysis and vetting 

• Keeps things moving...

makes things happen 
5 1

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

Personal Traits Experience Duties

Service Secretaries (Army, Navy, Air Force)

• Operate eff ectively with the 

Secretary, Deputy Secretary, and Service Chief counterpart (“Pairing”)

• Personal integrity• Tough-minded; make tough 

trade-off s and strategic choices

• Strong leader• Strong communicator• Thrives in complexity and 

ambiguity

• Led a complex, global 

business as Chief Executive Offi cer, Chief Operating Offi cer, or President of a large operating division

• Understands the military 

government interface (former war-fi ghter or policymaker)

• Understands the unique 

needs of the Service, and the collaboration required within the Defense Team and with external constituencies (former war-fi ghter or policy-maker)

• Worked eff ectively with 

Congress and other governmental organizations and agencies

• Understands the development, procurement, and 

force deployment issues relating to the Service

• Eff ectively represents 

Service’s views within the Department, to Congress, and to other governmental agencies as required

• Establishes and maintains an 

eff ective operating relationship with Service Chief

• Recommends policy on 

behalf of the Service to the Secretary, Deputy, JCS, Congress and other governmental agencies

• Implements directives 

emanating from the executive, legislative, and judicial branches of the government, and evaluates performance 

• Oversees the day-to-day 

activities of the Service staff(e.g. budgeting, acquisitions. technology development, force development and deployment, human capital issues, etc.)...Makes things happen 

Comptroller / Chief Financial Offi cer 

• Ability to work eff ectively 

with the Secretary, Deputy Secretary, Service Secretaries and the Financial Offi cers in the offi ces of the Service Secretaries, yet maintain independence 

• Personal integrity• Strong, proven fi nancial 

acumen

• Independent thinker• Tough-minded; thickskinned; persistent; 

thorough

• CFO of a large, complex, 

global organization 

• Managing Director or 

Principal of a major accounting fi rm 

• Prior government work: 

GAO, Congressional Budget Offi ce; senior fi nance roles in other government agencies

• Budgeting for a large, complex, global organization

• Chief fi nancial strategist 

• Chief fi nancial spokesperson • Develops and implements 

fi nancial policies 

• Ensures the integrity of 

the fi nancial management, fi nancial reporting, and performance measurement systems within the Department of Defense

• Oversees preparation and 

on-going reporting on the Defense budget

• Liaises with other governmental agencies and 

the Congress on fi nancial 

matters aff ecting the Department of Defense

• Strong (dotted-line) 

oversight of the fi nancial activities of the fi nancial 

executives in the offi ce of the Service Secretaries

Table 3-2. Suggested Traits, Experience, and Duties of Key Leadership Personnel (continued)
5 2

FOCUSING A TRANSITION

Personal Traits Experience Duties

Acquisition, Technology and Logistics

• Knows and trusts either the 

SecDef or DepSec and vice versa; don’t have to be pals, but have to trust each other.

• Value ability to make hard 

strategic choices (especially saying no) over technical competence

• Builds teams, especially 

with VCJCS and Resources Leaders

• Fluently bi-lingual (business 

and defense)

• Thrives in complexity and 

ambiguity

• Thick skinned and persistent• Communicates

• Run complex organization(s)• Understands economics/

motivations of the private sector

• Understands Capital 

intensive and technological endeavors

• Good to have served in DoD 

at some point.

• Worked with Hill

• Acquisition Executive—

milestone decisions; all policy; performance oversight

• Supply Chain and RDT&E—

policy and performance oversight

• National Armaments 

Director—International duties, tech transfer

• Oversees workforce policy 

and performance; training and education

• Industrial Base leadership• Chairs Nuclear Weapons 

Council

• Oversees DLA, MDA, DTRA, 

DAU, DCMA

• Point on reform issues• Visible leader for inside, 

connection to industry, Capitol Hill, press

Table 3-2. Suggested Traits, Experience, and Duties of Key Leadership Personnel (continued)
5 3

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Leverage individual experience and qualifi cations to promote 

complementary pairings that enhance collective individual eff ectiveness and ensure the team stay focused on the most strategically important objectives.

2. Align authority, responsibility, and accountability of these pairings.3. Identify and agree on the most senior level pairings: Chairman 

Joint Chiefs of Staff , Secretary/Deputy, Deputy/Vice Chairman, 

Secretary/Service Secretaries, and Service Secretaries/Service Chiefs.

4. Identify the most pressing issues and challenges that will impact 

organizational climate and use them to guide the selection of core competencies necessary to meet those challenges.

5. Exploit the pairing of the most senior positions to ensure the 

skills and experience needed are fi lled by one of those parings. 

Key considerations should be given to making sure there is a balance in the pair of those skills and experience.

6. Require the Deputy Secretary of Defense and Service Under 

Secretaries within the Department to have prior government management experience.

EXPLOIT THE 

PAIRING OF THE 

MOST SENIOR 

POSITIONS TO 

ENSURE THE 

SKILLS AND 

EXPERIENCE 

NEEDED ARE 

FILLED BY ONE OF 

THOSE PARINGS
5 4

FOCUSING A TRANSITION

RESTORING THE “CRUCIBLE OF IDEAS” BY LEVERAGING CRITICAL FRICTION POINTS 

_______

A culture of consensus pervades the Department of Defense, which can hinder innovation and stifl e creativity rather than facilitating a “crucible 

of ideas.” The Secretary of Defense will be required to make tough strategic decisions, particularly with the likelihood of fl at or even declining 

defense budgets in the near term. Fostering a culture of creative tension would advance the Department towards increased innovative risk-taking and the creation of out-of-the-box ideas.

“President Eisenhower understood the value of being challenged by his advisers on even his most basic assumptions ... he understood the benefi ts of disagreement and sought to institutionalize such a debate in an inclusive and integrative fashion.” 

Project Solarium report

SEEK ALTERNATIVE VIEWS

Today’s senior leaders rarely use these inherent “friction points” (see Figure 3-2) or at best use them inconsistently. Within the Pentagon, it is extremely diffi cult for the Secretary of Defense to make a diff erent, albeit 

bett er decision, without alternative facts, analysis, and understanding. 

Using the inherent checks and balances within the Department creates some basic ineffi ciency; however, it also off ers leadership a broader view 

to enable bett er decisions. While confl ict is endemic, and perhaps inevitable to any organization, it need not always be negative. Those working together must understand how to use confl ict to facilitate becoming a more reasoned team that increases its capacity to take eff ective action through a diff usion of knowledge and skills. 

TODAY’S SENIOR LEADERS RARELY USE INHERENT “FRICTION POINTS” OR AT BEST USE THEM INCONSISTENTLY
5 5

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

QUESTION SOLUTIONS WHERE “EVERYONE GETS THEIR SHARE”

The normal tendency across the Department, Military Services, and Joint Staff is to “work things out” (i.e., consensus building), typically through horse-trading and ultimately watering down solutions so that everyone “gets their fair share” before presenting solutions to senior leadership. Oft en the “loser” fi nds alternative ways to get what they want, (e.g. turning directly to congressional stakeholders or working outside the organizational structure). 

Figure 3-2. Representative Friction Points

1. Weapon System Portfolio Management: Within and between Services (e.g. Navy Air vs 

Navy Surface vs Navy Subsurface)a. Each side views their orientation as the most critical for the futureb. Each side seeks to minimize capabilities of the others

2. Mission Planning: Combatant Commanders vs Services

a. Combatant Commanders defi ne mission by articulating the capabilities and 

resources required

b. Services may have diff erent view of their mission role or capabilities being 

requested

3. Financial Controls: Department of Defense Comptroller vs Title 10 Entities

a. Department of Defense Comptroller – Wanting to transform the business operations of the Department. Building common business practices Department-wide, 

gain control of systems and associated costs

b. Title 10 Entities (Services) – Wanting to maintain control of programs and budget 

seen as built to their “unique” requirements

4. Other Friction Points include:

a. Capability development: Army vs Navy vs Air Forceb. Major Weapon Program Decisions: DoD vs Servicesc. Spending Plans: Personnel/Health Care obligations vs Weapons Systems obligations
5 6

FOCUSING A TRANSITION

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Seek alternative views on key decisions. When presented with 

“black & white” answers, assume that things probably aren’t that clear. a. Diversity in the broadest sense opens the aperture around 

ideas.

b. Alternative views help drive innovative thinking. 

2. Question solutions where “everyone gets their share.”

a. The future does not off er this option. There will be “haves” 

and “have-nots.”

b. Must represent the entire Department, not just part of the 

Department.

3. Use an inclusive senior leader forum (with ongoing support of 

the Secretary of Defense) to set strategic direction, and develop a culture that rewards appropriate risk-taking.a. Create an environment that utilizes friction points.b. Establish a forum for challenging ideas, as well as driving 

implementation once the decisions are made.

c. Use the forum to test alternative ideas.d. Set the performance expectations for the Department.e. Challenge approaches and hold people accountable for decision implementation.
5 7

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

DOD LEADERSHIP TO ALIGN THE SERVICESTO THE SECRETARY’S AGENDA 

_________________

The start of a new administration off ers an opportunity for the Secretary 

of Defense to institute a streamlined management approach to ensure cohesiveness, eff ectiveness, and accountability of senior service leadership. Creating and sustaining a true team relationship with senior subordinate leaders (both civilian and military) will ensure they stay focused 

and aligned with Secretary’s mission, priorities (or objectives), and remain accountable. These critical steps will help prevent subordinate leaders from “going native” within their own organizations.Building and keeping a senior leadership team united and focused is a constant challenge for the Secretary of Defense. Within the opening days of a new administration, the Secretary could fi nd himself embroiled in 

crisis-management, driven by an unimaginable number of meetings – all focused on the urgency of the immediate. These urgent matt ers leave litt le 

or no time for strategic thought or forward vision, and could potentially cause the Secretary to be disconnected from the newly formed senior leadership team. Additionally, poor utilization of eff ective management tools 

to manage the Presidentially Appointed – Senate Confi rmed Personnel may result in these subordinate senior leaders becoming out-of-coordination with the Secretary’s goals and objectives, i.e. “going native.”Hard decisions, particularly when there is overall budgetary pressure, tend to diminish alignment, and increase friction between the Service Secretaries and the Secretary of Defense. The true senior leadership teaming that exists at the onset of a new administration too oft en erodes, enabling subordinate leaders to become overly focused on their military Service’s perspectives at the expense of alignment with the Secretary’s agenda.Unlike the corporate world, the Secretary of Defense does not customarily get to pick his entire leadership team. There are forty-nine PresiURGENT MATTERS...COULD POTENTIALLY CAUSE THE SECRETARY TO BE DISCONNECTED FROM THE SENIOR LEADERHIP TEAM
5 8

FOCUSING A TRANSITION

dentially Appointed-Senate Confi rmed positions on the Department of 

Defense Executive Schedule. Most of those are direct appointments from the White House with various levels of involvement by the Secretary of Defense. Whereas in the corporate world, the new chief executive offi cer 

oft en has the latitude to assemble his leadership team to meet his own goals and objectives. 

INVEST THE TIME WITH SERVICE SECRETARIES TO MAINTAIN FOCUS ON PRIORITIES AND GOALS

Regardless of how they are formed, involving and actively cultivating alignment of the Secretary’s management team leads to greater organizational eff ectiveness. To be most eff ective, the Secretary’s “direct reports” 

must be aligned with the Secretary’s agenda and have fully established mutual trust, yet be appropriately decisive within their roles. The Service Secretaries must remember that they support the President and the Secretary of Defense fi rst, and then their Services second – managing their Services accordingly.

DELEGATE DOWNWARD

One internal structural risk is that “Title 10” authorities, (to organize, train, and equip) can frustrate the Secretary’s eff orts to build a unifi ed 

team. Military Service objectives can potentially run in opposition to the Secretary’s policies and goals. Congressional pressure can widen these “seams” even further.Chief Executive Offi cers of best-performing corporations measure performance, provide feedback (even when negative), and rapidly and decisively 

remove poor performers that hurt the team. Not doing so can break team confi dence, introduce compromise, and create a fractured and splintered team that loses focus on the mission priorities – and risks “going native.”
5 9

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

To be most eff ective it is best to remember the old verities: be decisive; state and reinforce priorities early; delegate authority, responsibility and accountability early; establish, communicate, and enforce standards of expected behavior; and make early accountability decisions.RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Maintain active open lines of communication and invest the time 

with Service Secretaries and other senior leaders to focus on priorities and goals.a. Aggressively utilize existing governance structures.b. Consider creating a higher-level executive committ ee where 

the members represent the Department and not their Services – and allow Service Secretaries to rely on each other.

c. Conduct one-on-one performance sessions with key senior 

subordinate leaders, utilize cascading scorecards, and publicize outcomes.

2. Delegate downward - Title 10 provides signifi cant latitude to prevent the staff s from sending lesser actions upward.

MAINTAIN

ACTIVE OPEN 

LINES OF 

COMMUNICATION 

...WITH SERVICE 

SECRETARIES...

TO FOCUS ON 

PRIORITIES AND 

GOALS
6 0

FOCUSING A TRANSITION

LEADING IN A FISCALLY CONSTRAINED ENVIRONMENT 

_________________

All indications suggest the Department is poised to enter a prolonged period of fi scal constraint with increasing defi cits and competitive spending pressures. Actions related to the Wall Street crisis will exacerbate 

the pressure. Business as usual is no longer an option. The current and future fi scal environments facing the Department demand bold action. The Department’s current long-term program is not sustainable without signifi cantly more funds than projected. The growing gaps and mismatches between future budget levels and acquisition programs/plans must be 

resolved; Department of Defense personnel costs, health care costs, and fringe benefi ts must be addressed. 

IDENTIFY THE TRADE-SPACE

The current global economic situation appears to be unlike any the nation has faced before. However, historical analysis indicates that it is not without precedent. Since 1947, there have been four periods of signifi cant increase in budget authority. To date, each period has been followed by a period of signifi cant 

decrease (see Figure 3-3). Current Departmental processes are structured for programmatic growth with the even distribution of increases and decreases across its time span. Opportunities exist for redirecting funds, but culture, decision authority, and management’s leadership challenges remain signifi cant. The challenges are further exacerbated by the increasing costs of what could be called “Department of Defense Entitlements” 

– personnel, fringe benefi ts, and overhead. Defense is presented with an 

opportunity to re-think the recapitalization strategy under the auspices of preparing and equipping for future threats versus a simple replacement of combat-worn resources. 

THE GROWING GAPS AND MISMATCHES BETWEEN FUTURE BUDGET LEVELS AND ACQUISITION PROGRAMS/PLANS MUST BE RESOLVED
6 1

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

There are fi ve primary cost drivers that need to be considered when planning for budget reallocation (see Figure 3-4). These cost drivers are:

1. Manpower & Entitlements: Fully loaded people costs are over half 

of the baseline budget. The current military manpower cost is over $120,000/person/year and growing. Fully loaded health care costs are approaching $60 billion/year for current health care and future retirees. These costs are increasing as a percentage of available funding, and will increase at a faster rate in a constrained budget.

2. Operations and Maintenance costs: Growing at 2.5 percent real cost 

over time; opportunities exist to improve the $100 billion/year supply chain; capital decisions over coming years will have long-term eff ect on Operations and Maintenance costs.

3. Excessive Overhead: (running at least 42 percent) severely limits the 

Department’s ability to maneuver. Over the past decade Department 

600700

1948

*Future year defense plan projections, based on OMB and CBO data

1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012*

400300100

Figure 3-3. U.S. DoD Budget (Including Supplementals) Constant FY09 ($Billions)

($Billions)

200500

000000

Korea

Vietnam

Reagan

Build-up
6 2

FOCUSING A TRANSITION

of Defense overhead has remained at approximately 42 percent. In the global economy similar functions such as installations, management functions, personnel support, and central training have dramatically reduced their burden on global enterprises; overhead is taxing combat capability.

4. Force Structure Levels/End-Strength: Historical structure priorities 

need to be adjusted to strategic intent for the next generation for which there is no consensus. Current consensus is on raising force levels, reserve/active balance, U.S. alliances, and partnerships.

5. Research & Development/Procurement: Cannot reset current force, 

modernize, and transform in all portfolios at the same time; choices must be made across capabilities and within systems to deliver capabilities at known prices within specifi c periods of time.

250300350

1948

*Future year defense plan projections, based on OMB and CBO data

1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012*

150100

0

Figure 3-4. DoD Budget by Title, Constant 2008 ($Billions)

($Billions)

50

200

Military Personnel Operations and Maintenance RDT&E Procurement

00

9 8 9 2 9 6 960 96 968 9 2 9 6 980 98 988 992 996 2000 200 2008 20 2*

0

0

0000

0
6 3

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Identify the trade-space early.

a. Items previously viewed as “non-discretionary,” e.g., pay, 

entitlements, and infrastructure costs, can no longer be sacrosanct. The uniformed military must tackle this also.

b. Cuts should apply in an “all or nothing” tactic in conjunction 

with strategy and priorities. 

‒ “Taking cuts at the margin” won’t work this time; nor 

will “pushing things off to the later years.”

‒ Across-the-board reductions can have high unintended 

consequences; it risks cutt ing the “wrong stuff ” and 

leads to even more att rition of already critically scarce 

capabilities, resources, and skill-sets. 

‒ Invest savings into unfunded priorities, off er back to 

Congress as goodwill, or combination of both.

‒ Focus on increased war fi ghting capability with lower 

cost.

2. Move beyond just being fi scally prudent to creating incentives for 

the Defense community to become more outcome focused.

a. Assign responsibility to the Chief Management Offi cer, with 

the support of the Business Transformation Offi ce for implementing necessary cost reductions in the fi rst year.

b. Ensure the Chief Management Offi cer is an experienced 

executive with prior government management experience.

c. Eliminate programs and activities not vital to the mission.d. Utilize a bi-partisan commission (similar to the National Bipartisan Commission on Healthcare) to address the Department’s rapidly increasing healthcare expenditures.
6 4

FOCUSING A TRANSITION

3. Recruit a management team with the right leadership experience 

and “turnaround” skills.a. Select leaders, civilian and military who understand and have 

specifi c experience (and a reputation / track record) in rightsizing, redesigning, and realigning an organization for forward sustainable success.

b. Develop the bench of future leaders and prepare succession 

plans early for sustained continuity.

4. Set new expectations by sett ing benchmarks, and establish a new 

culture by sett ing performance standards right up front that all 

must achieve.
6 5

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

REDEFINING THE DEFENSE COMPTROLLER AS CHIEF FINANCIAL OFFICER 

__________________

As the Department of Defense budget has grown, so too have the seemingly endless succession of supplementals. While the size, composition, and complexity of future budgets remains uncertain, the number of critically important allies and coalition partners joining us in the global war on terror continues to rise. 

GLOBALIZE THE COMPTROLLER/CHIEF FINANCIAL OFFICER RESPONSIBILITIES

The Department of Defense is at the center of fi nancing both increased 

international programs (Section 1206 of the National Defense Authorization Act: Train and Equip Foreign Military Forces), which involve complex fi nancial negotiations, and increased overseas base expansion agreements. The Department is also at the center of fundraising from, and with, coalition partners to support our ongoing and expanding eff orts in Afghanistan. Because of the signifi cant importance of these fi nancial transactions, 

the Offi ce of the Secretary of Defense Comptroller should have a mandated and leading role in all fi scal matt ers aff ecting the Department. Therefore, the position should be renamed: “Under Secretary of Defense (Chief 

Financial Offi cer and Comptroller).” 

SELECT THE COMPTROLLER FROM THE FINANCIAL INDUSTRY

In the business world, the chief fi nancial offi cer is far more important than the comptroller. The chief fi nancial offi cer is oft en the third most important person in a fi rm aft er the chief executive offi cer and the chief operatTHE SECRETARY OF DEFENSE SHOULD RE- EMPHASIZE AND PROMOTE THE ROLE AND RESPONSIBILITY OF THE CHIEF FINANCIAL OFFICER IN THE DEPARTMENT
6 6

FOCUSING A TRANSITION

ing offi cer. The chief fi nancial offi cer manages cash and manages changes 

of dollar allocations to diff erent accounts depending on “burn rates.” 

Traditionally, in the Department, the role of the comptroller was more important than that of the chief fi nancial offi cer role, with the sole objective of gett ing a budget through Congress. The comptroller laid out a budget, but that was in eff ect only a target. As it stands today, any changes 

in spending patt erns that the Department may need to make (i.e., reprogramming) requires prior approval, and is capped at $4 billion—less than 

three-quarters of one-percent of the entire budget. In the corporate world, the authority and responsibilities of the chief fi nancial offi cer vary. Many have discretion to reallocate a small percentage 

(about 10 percent) of funds, and at some fi rms, the chief fi nancial offi cer carries additional responsibilities such as dealing with Human Resources issues as well. 

Corporate Chief Financial Offi cer Offi ce of the Secretary of Defense

Comptroller

Third most important in fi rm (after chief executive offi cer and chief operating offi cer)

Comptroller is more important than the chief fi nancial offi cer

Manages cash and changes of dollar allocations Lays out budget – objective of getting it through 

Congress

Has discretion to move 10 percent of funds around

Changes in spending patterns (i.e. reprogramming) requires prior approval

Considers projections in reviews Projections not adequately considered

In the past, the Department worried less about transparency and accuracy of fi nancial statements. Congress and the Government Accountability 

Offi ce have pressed for greater transparency both for good governance 

Table 3-3. Comparing Fiscal Leadership Responsibilities

THE SECRETARYOF DEFENSE SHOULD DRAW A COMPTROLLER FROM THE FINANCIAL INDUSTRY
6 7

ORGANIZING THE DEPARTMENT FOR REAL CHANGE

and fi nancial management reasons. By way of oversight, normally there has been only one execution review a year (in the spring).Because of the importance of Congressional approvals, past comptrollers have been people with Hill experience, usually with experience on the Appropriations Committ ee. As a result, comptrollers oft en have litt le 

understanding of, or interest in, fi nancial management. This includes the production of meaningful fi nancial statements and clean audits, as well as 

the management and rationalization of fi nancial systems.

RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Rename the position: “Under Secretary of Defense (Chief Financial Offi cer/Comptroller) – USD(CFO/C).2. The USD(CFO/C) should be drawn from the Financial Industry.

a. The key skill-set required is global fi nancial management 

experience. 

b. Financial management is critical for the effi cient and credible 

management of expenditures.

c. Some background on the Hill would be useful, but not critical.d. A strong Principal Deputy, well-versed in Congressional 

matt ers can be the essential complement for any lack of Hill experience.

3. The USD(CFO/C) should conduct two (February and June) annual execution reviews vice one – include projections in reviews.4. Globalize the USD(CFO/C) responsibilities to include all Department of Defense-related international fi nancial negotiations.

a. Restore the International Branch to the Offi ce of the 

USD(CFO/C).
6 8

FOCUSING A TRANSITION
6 9

NECESSITIES FOR A SUCCESSFUL LEGACY

Necessities for aSuccessful Legacy

A VISION FOR THE FUTURE OF DOD 

_____________

Eff ective leaders drive successful organizations by articulating an aspirational vision that motivates constituent parts to work together for the 

larger good, and then communicating and reinforcing it continuously. Structural, cultural, and behavioral changes are needed to strategically align with, and operationally support, the Nation’s military forces in a full range of activities. A crisp vision statement for the Department of Defense would align disparate interests of the senior leadership team and help drive and reinforce strategy, policy, sourcing, accountability, and performance during the Secretary’s tenure. Internally, a vision statement will help instill management discipline, align functions, and bett er integrate business operations with strategic priorities. Military capability to plan and conduct military operations increases while overhead decreases. Future forces should be more lethal and bett er 

equipped to deal with an uncertain future. Innovation, agility, adaptability, collaboration, and partnership should guide the formulation of strategic processes and organizational structures that support the strategic direction articulated in a vision statement. Also, horizontal integration should be vastly improved if all the stakeholders are working toward a common end state. Externally, a vision statement helps constituents understand organizational culture and build support for the organization. Additionally, it 

Nec 4 Suc

A CRISP VISION 

STATEMENT FOR 

THE DEPARTMENT 

WOULD ALIGN 

DISPARATE 

INTERESTS OF 

THE SENIOR 

LEADERSHIP TEAM 

AND HELP DRIVE

...PERFORMANCE
7 0

FOCUSING A TRANSITION

can help to provide some direction for the industrial base and academia investments to help sustain America’s scientifi c and technological advantages over any potential competitor and contributes to the Nation’s ability to dissuade potential military competition.

VISION ELEMENTS

To drive change the Department will have to:

 Create a vision for making the Department of Defense more eff ective in: protecting and projecting American interests in defense 

of freedom and democracy; maintaining peace and security for the American people; and deterring, fi ghting, and winning wars 

when necessary.

 Tie performance objectives to the vision Align the Service Secretaries’ visions with the Department’s  Take immediate actions to implement the vision: 

Recommendation

The Board recommends the Secretary of Defense create a vision statement for the future of the Department and establish measurable goals and metric to accomplish that goal.
7 1

NECESSITIES FOR A SUCCESSFUL LEGACY

Each leader articulates his vision in his own way. The following is a sample vision statement for the future state of the Department of Defense. 

SAMPLE VISION FOR DOD

Our mission is to protect and defend the constitution of the United States with a full range of combat, peace keeping, humanitarian, and support forces needed to protect the security of our Nation and its people.Our vision is to increase our eff ectiveness in protecting and projecting American interests in defense of freedom and democracy, in maintaining peace and security for the American people, and in deterring, fi ghting, and winning wars when necessary.

TO MEET THE CHALLENGE OF THIS VISION, THE DEPARTMENT OF DEFENSE WILL:

 Adapt best global business practices from the private sector to the 

defense enterprise;

 Adopt a management structure of centralized business operations 

in support of decentralized military operations;

 Adopt and implement the Strategic Management Plan for 

improving the overall effi ciency and eff ectiveness of the Department’s business operations;

 Establish leadership selection criteria and joint service to ensure 

seasoned judgment in senior positions;

 Instill management discipline that continuously seeks to benchmark performance against other world-class enterprises, measure 

outcomes, increase accountability, and reward superior performance;
7 2

FOCUSING A TRANSITION

 Att ract, develop, and retain the brightest and best men and 

women who seek to excel in service to their country;

 Encourage innovation, prudent risk-taking, individual and team 

achievement, and commitment to continuous improvement at all levels of the defense enterprise; and

 Cooperate with and support our partners in the other branches of 

government in serving the interests of the American people.
7 3

NECESSITIES FOR A SUCCESSFUL LEGACY

TRACKING PERFORMANCE TOIMPROVE ACCOUNTABILITY 

____________________

The Secretary of Defense and Deputy Secretary of Defense are urged to adopt a form of “Management by Objectives” as an integral part of managing the Defense Department. There are special factors that need to be taken into account in implementing a performance management system at the Department of Defense: priorities change in response to external events (the war comes fi rst); vulnerabilities are created by disclosure of shortcomings; it is hard to keep a close hold on benchmarks and performance ratings; “holding people accountable” has negative connotations of scapegoatism; and there is a high degree of turnover of senior people, which is disruptive to the continuity of priorities and projects. Assuming the Secretary of Defense and Deputy Secretary of Defense agree the Deputy will be “Mr. Inside”, the Deputy Secretary of Defense should run the program through the Chief Management Offi cer. However, to work eff ectively, performance management through goal sett ing and measurement needs to have the active support and reinforcement of both the Secretary of Defense and Deputy Secretary of Defense. It is not a “program” that can be delegated to lower levels and forgott en. It is, rather, a way of managing that best works as part of the leadership style of the Secretary of Defense and Deputy Secretary of Defense. Successful implementation also requires communication with and buyin by the whole senior leadership. The Secretary of Defense and Deputy Secretary of Defense likely will have a council of their chief subordinates, which will meet periodically to discuss issues and obtain input and buyin for major decisions. This council should be used to launch and reinforce the performance management process.11. Cross reference to DBB Transition Task, “Leveraging Critical Friction Points,” recommendation 3.

...PERFORMANCE 

MANAGEMENT 

THROUGH GOAL 

SETTING AND 

MEASUREMENT 

NEEDS THE ACTIVE 

SUPPORT AND 

REINFORCEMENT 

OF BOTH THE 

SECRETARY OF 

DEFENSE AND 

DEPUTY SECRETARY 

OF DEFENSE
7 4

FOCUSING A TRANSITION

The performance management system should be applied in two ways: (1) to each of the Defense Department’s 25 presidential appointees subject to Senate confi rmation other than the Secretary of Defense and Deputy 

Secretary of Defense2, and (2) to each of the major Department of Defense 

offi ces, military branches, combatant commands, defense components, and defense agencies.For the individuals in a Presidential Appointee - Senate Confi rmed position, senior management should create a listing of critical objectives and goals for these positions. These performance objectives and goals should refl ect (1) the overall goals that the Secretary of Defense and Deputy Secretary of Defense have for the Department, (2) the individual’s role in helping to achieve those goals, (3) why the position exists, and (4) what the individual aspires to achieve during his/her tenure with the Department over and above Title 10 responsibilities. The process should start at the top and cascade down, fi rst to the Secretary of Defense’s direct reports and then to the next echelon.We suggest the goals be set for each individual in a Presidential Appointee–Senate Confi rmed position within 90 days of confi rmation, and reviewed 

in quarterly meetings between with his/her boss.The second application is to all organizational entities that report to leaders in the Presidential Appointee–Senate Confi rmed positions. There may 

be diff erences between the objectives and goals the Secretary of Defense 

and Deputy Secretary of Defense set for organizational units and those set for a Presidential Appointee–Senate Confi rmed position that warrant 

a separate process. Or the processes could be combined, with each Presidential Appointee–Senate Confi rmed position having both individual and 

unit goals to be achieved. The Joint Chiefs of Staff should be involved in goal sett ing and measurement tracking for major combatant commands. 

2. Souce DoD Executive Schedule Positions (Civilian Presidential Appointment/Senate Confi rmation Positions), as of 28 January 2008.

THE PROCESS SHOULD START AT THE TOP AND CASCADE DOWN, FIRST TO THE SECRETARY OF DEFENSE’S DIRECT REPORTS AND THEN TO THE NEXT ECHELON
7 5

NECESSITIES FOR A SUCCESSFUL LEGACY

The Service Secretaries goals and objectives should be aligned with the Secretary of Defense and support those of the combatant commands. Performance management is a closed-loop process. Aft er goals are set and 

agreed to, there needs to be measures of performance, periodic assessment, and feedback. Individuals and units being measured should provide periodic self-assessment of progress and achievement or lack thereof. The standard green, yellow, red scoring system can be useful in monitoring performance.A performance management process is nothing more than a way of communicating performance goals and expectations in a disciplined manner that invites buy-in and accountability. Eff ectiveness requires the personal support and commitment of the Secretary of Defense and Deputy Secretary of Defense and consistency of application throughout tenure. Ideally, the goals are limited to the “critical few” and are measurable, including timetables for progress and achievement. Judgment plays a role because everything important cannot be measured fi nitely. 

To that end, a performance management system is an integral part of managing the Defense Department to harness the energies of senior appointees to the objectives that are set and to the changes to the institution that are desired.Therefore, it is important to establish jointly set performance goals and conduct management reviews of all 25 Presidential Appointee–Senate Confi rmed (Executive Levels II, III, and IV) positions as individuals, all Offi ce of the Under Secretary of Defense offi ces, Joint Chiefs of Staff , combatant commands, military branches, and defense agencies and components to measure progress, develop indicators of success, and ensure the Department is aligned horizontally and vertically.It is also important to leverage existing organizational capabilities rather than adding staff and enlisting the support of the Deputy Secretary 

IT IS IMPORTANT

TO ESTABLISH 

JOINTLY SET 

PERFORMANCE 

GOALS AND 

CONDUCT 

MANAGEMENT 

REVIEWS
7 6

FOCUSING A TRANSITION

of Defense and chief management offi cer in the process. The task group recommends that the Director of the Program Analysis and Evaluation assume collateral duties as Special Assistant to Secretary of Defense for Strategic Planning regardless of where the Director of the Program Analysis and Evaluation reports and use a senior leadership forum (currently Deputy’s Advisory Working Group) to communicate and gain commitment.RecommendationsThe Board off ers the Secretary of Defense the following recommendations:

1. Adopt a performance management system as an integral part of 

managing the Defense Department.

2. Establish performance goals.3. Leverage existing organizational capabilities.
SUMMARY OF RECOMMENDATIONS

7 7

Items Requiring Immediate AttentionFocusing theEff ort

1. Set aside time in the transition to identify the planning, gravitas and 

interagency process necessary to respond to a likely fi rst 270 day crisis.

2. Establish cabinet level performance expectations upfront and review 

transition team’s plans for governance.

DoD’s Unique Management Challenges

1. The new Administration should assign a team of experts upon the announcement of the new nominee for Secretary of Defense to review, 

validate and/or alter DoD management systems/processes in order to get underway on January 20th, 2009.

2. Build a senior leadership team with the skills and experience that 

complements the Secretary’s strengths and compensate for any gaps.

3. Senior leadership must lay out clear and measurable management 

objectives, establish organizational and individual expectations and demand ongoing alignment essential to achieve goals.

4. Develop leading indicator metrics to measure progress and improve 

accountability.

5. Synchronize the capability to identify and exploit deep strategic initiatives that are as important as pressing near term action.

Appendix A. Summaryof Recommendations* As approved during the October 23, 2008 public session.
FOCUSING A TRANSITION

7 8

Items Requiring Immediate Attention (continued)Building the Strongest Team

1. Develop a slate of “hold-over” candidates for key positions to limit the 

number of empty chairs on day one

a. Apolitical presidential appointeesb. Strong, experienced civil servantsc. Senior military offi cers may be appropriate in some casesd. Goal—no dropped balls or leadership vacuums

2. Start the personnel process early

a. Develop an organization plan that spells out the primary responsibilities of 

the key positions to guide the selection of the right person for each job

b. Identify multiple candidates for key jobs before the election. Ensure you 

have a strong alternative in case problems arise

c. Start the clearance process for 30 to 40 people from each party right after 

the conventions (both transition team members and possible appointees)

d. Start the formal vetting process day after election – not necessary to know 

exactly which jobs they will fi ll

3. Reach out for candidates, don’t just settle for those eager for 

appointments

4. Focus initially on the key positions

a. Select preferred candidatesb. Ensure FBI gives them priorityc. Target getting names to Hill in 30 days (60 days is the norm)d. Drive to get them in place by January 31 (February 15 at latest)

5. Work closely with the FBI and key Hill Committees to get their full 

cooperation

6. Careful selection of military assistants is very important. Don’t just 

accept those that are nominated. The right ones can be invaluable.

Building the Strongest Team: On-boarding New Appointees

1. Carefully structure the on-boarding process and start as early as 

possible.

a. Provide a strategy to guide key changes in policy/programsb. Focus particular attention to early challenges/immediate issuesc. Identify potential “land-mines”

2. Utilize focused, short briefi ng papers (no thick books).

a. 1-pagers on key issues requiring early attention/decisionsb. Provide background, options, timelines (no recommendations)c. More in-depth education will take place during the confi rmation process

3. Outline key responsibilities of the positions.

a. Brief Summary of functions and key roles/relationshipsb. Short Bios of senior career offi cials

4. Carefully select briefers for prospective appointees.

a. Independent, creative thinkers—military and civilianb. Don’t be defensive, locked in on prior Administration policies/programsc. Expect suspicion/skepticism from the new appointee
SUMMARY OF RECOMMENDATIONS

7 9

Near-Term Obstacles that could Hamper Long-Term SuccessLowering the Cost of Overhead 

1. Secretary should conduct a review of all indirect and direct costs to 

determine if 42% is an appropriate amount of overhead and to identify opportunities to constantly reduce overhead

• Set a goal to reduce “overhead”

2. The Secretary should mandate the use of management tools are based 

on an enterprise vision to drive down overhead spending

• Metrics should focus on outcomes (not outputs) to provide strong measures 

of implementation and achievement of goals

Slowing the Ballooning Cost of Defense Healthcare 

1. Lead the Eff ort—Only the Secretary can lead the Department to 

address this perilous threat

2. Build a Team—The Secretary must convene his senior military and 

civilian leadership to reduce Defense healthcare spending

• This is an issue that can only be solved with the active support and 

engagement of the Chairman, Joint Chiefs of Staff and Service Chiefs

3. Identify High Pay-Off Items—The Secretary’s team must focus on areas 

of highest potential savings

• Especially in the areas of retiree spending and pharmacy

4. Work with Congress—Any changes to the trajectory of expenses 

will require the support of the Congress, as many of the fastest rising programs are mandated

• Utilize a bi-partisan commission (similar to the National Bi-Partisan 

Commission on Healthcare) to address DoD’s rapidly increasing healthcare expenditures

Addressing Root Causes of Acquisition Cost Growth

1. The Secretary must work with AT&L and the Service Secretaries to drive 

a targeted reversal of this trend which addresses the previously listed key drivers of program baseline changes and program cost growth

a. Maintain metrics for each re-baselining decision to track/monitor drivers of 

growth

b. Focus on fundamental drivers not on “fi xing” symptoms, including the 

human capital issue

c. Set and then propagate the cultural change necessary to reverse the 

behavior

d. Establish non-negotiable objectives and supporting metrics; hold the 

leadership accountable for achieving them 

2. Hold industry executives accountable to the same objectives and supporting metrics as DoD 

• Initiate dialogue with industry independent of the requirements process to 

minimize future program baseline and estimate changes

3. Develop joint management tools to fi x and manage the authority, 

responsibility, incentives and accountability across the relevant parts of DoD and industry

Reference DBB Report FY08-3 “Strategic Relationship ModelBetween DoD and Industrial Base” for greater detail
FOCUSING A TRANSITION

8 0

Organizing the Department for Real ChangeIdentify an Optimal Management Model to Drive Change

1. Adopt a management model that: 

a. Focuses on the management issues and national security challenges facing 

DoD

b. Clearly refl ects the Department’s top objectivesc. Provides clear authority and accountability to key subordinatesd. Fits the personal management style of the new Secretary

2. Analyze critical management processes and strengthen as necessary

a. Determine which management systems support the Secretary’s management modelb. Provide meaningful metrics, and reporting systems to measure and track 

them

c. Focus on areas of known weaknesses such as fi nance, personnel, and 

logistics

3. Secretary/Deputy must give priority to strengthening the Department’s 

Human Resources. No organization or set of management processes will be eff ective without capable, motivated and empowered people:

a. Must attract, retain and motivate quality people for both the career and 

political positions

b. Strengthen career personnel numbers and talent in such functions as 

acquisition, systems engineering, and R&D

Focusing the Secretary’s Time on the Most Strategic Objectives 

1. Focus on a few key objectives and harmonize those priorities with 

stakeholders. Provide management attention early and consistently.

a. Identify trade space within the major budget categories ( i.e., personnel/

operations and maintenance/research and development/and procurement) and use that to obtain and leverage mutual cooperation with key internal and external stakeholders

b. Clearly communicate expectations to the senior civilian appointees, link 

objectives to outcomes and allocate time to monitor performance.

2. Engage the military and civilian leaders, including CJCS and COCOM 

Commanders on strategic operational matters to better align key objectives and provide a force multiplier to the Secretary. 

• Leverage the expertise and forums available to these entities to advance key 

management objectives. 

3. Support strategic priorities by aligning management attention and 

major budget items.

a. Issue strategic planning guidance that supports key management objectives and drive implementation decisions down to Tier II and lower.b. Identify core management systems and processes and use them to provide 

important budget and management data.
SUMMARY OF RECOMMENDATIONS

8 1

Organizing the Department for Real Change (continued)Using Selection Criteria and Position Pairings

1. The Secretary must leverage individual experience and qualifi cations to 

promote complementary pairings that enhance collective individual effectiveness and ensure the team stays focused on the most strategically important objectives.

2. Align authority, responsibility and accountability of these pairings3. Recommend the Secretary:

a. Identify and agree on the most senior level pairings: Chairman JCS, 

Secretary/Deputy, Deputy/Vice Chairman, Secretary/Service Secretaries, and Service Secretaries/Service Chiefs

b. Identify the most pressing issues and challenges that will impact organizational climate and use them to guide the selection of core competencies 

necessary to meet those challenges

c. Exploit the pairing of the most senior positions to ensure the skills and 

experience needed are fi lled by one of those parings. Key considerations should be given to making sure that there is a balance in the pair of those skills and experience

4. Require all Deputies within the Department to have prior government 

management experience
FOCUSING A TRANSITION

8 2

Organizing the Department for Real Change (continued)Restoring the “Crucible of Ideas” by Leveraging Critical Friction Points

1. Seek alternative views on key decisions. When presented with “black & 

white” answers, assume that things probably aren’t that clear. 

a. Diversity in the broadest sense opens the aperture around ideasb. Alternative views help drive innovative thinking

2. Question solutions where “everyone gets their share.”

a. The future doesn’t off er this option. There will be “haves” and “have-nots”b. Must represent all the Department, not just part of the Department

3. Use an inclusive Secretary’s senior leader forum (with ongoing support 

of the Secretary of Defense) to set strategic direction, and develop a culture that rewards appropriate risk-taking.

a. Create the environment for the use of friction pointsb. Must be a forum for challenging ideas as well as driving implementation 

once the decisions are made

c. Use it to test alternative ideasd. Set the performance expectations for the Departmente. Challenge approaches and hold people accountable for decision 

implementation

DoD Leadership to Align the Services to the Secretary’s Agenda

1. Maintain open lines of communication and invest the time with Service 

Secretaries and other senior leaders to focus on priorities and goals.

a. Aggressively utilize existing governance structuresb. Consider creating a higher-level executive committee where the members represent the Department and not their Services – and allow Service 

Secretaries to rely on each other

c. Conduct one-on-one performance sessions with key senior subordinate 

leaders – utilize cascading scorecards – publicize outcomes

2. Delegate downward, Title 10 provides signifi cant latitude to prevent the 

staff s sending lesser actions upward. 

3. Apply the old verities:

a. Be decisiveb. State and reinforce priorities earlyc. Delegate authority, responsibility and accountability earlyd. Establish, communicate, and enforce standards of expected behaviore. Make early accountability decisions
SUMMARY OF RECOMMENDATIONS

8 3

Organizing the Department for Real Change (continued)Leading in a FiscallyConstrained Environment

1. Identify the trade-space early

a. Items previously viewed as “non-discretionary,” e.g., pay, entitlements, and 

infrastructure costs, can no longer be sacrosanct. The uniformed military must tackle this also.

b. Cuts should apply in an “all or nothing” tactic in conjunction with strategy 

and priorities. • “Taking cuts at the margin” won’t work this time; nor will “pushing things 

off to the later years.”

• Across-the-board reductions can have high unintended consequences; 

it risks cutting the “wrong stuff ” and leads to even more attrition of already critically scarce capabilities, resources, and skill-sets. 

• Invest savings into unfunded priorities, off er back to Congress as goodwill, or combination of both.• Focus on increased war fi ghting capability with lower cost.

2. Must move beyond just being fi scally prudent to creating a structure 

and responsibility for the Defense community to reduce costs and become more outcome focused

a. Assign responsibility to the Chief Management Offi cer (CMO), with the support of the Business Transformation Offi ce for implementing necessary cost 

reductions in the fi rst year.

b. Ensure the CMO is an experienced executive with prior government management experience.c. Eliminate programs and activities not vital to the mission.d. Utilize a bi-partisan commission (similar to the National Bi-partisan 

Commission on Healthcare) to address the Department’s rapidly increasing healthcare expenditures.

3. Recruit a management team with the right leadership experience and 

“turnaround” skills.

a. Select leaders, civilian and military who understand and have specifi c 

experience (and a reputation / track record) in right-sizing, redesigning, and realigning an organization for forward sustainable success.

b. Develop the bench of future leaders and prepare succession plans early for 

sustained continuity.

4. Set new expectations by setting benchmarks, and establish a new 

culture by setting performance standards right up front that all must achieve.
FOCUSING A TRANSITION

8 4

Organizing the Department for Real Change (continued)Redefi ning the Defense Comptroller as Chief Financial Offi cer

1. Rename the position: “Under Secretary of Defense (Chief Financial 

Offi cer and Comptroller)—USD(CFO&C)” 

2. The USD(CFO&C) should be drawn from the Financial world. 

a. The key skill-set required is global fi nancial management experienceb. Financial management is critical for the effi cient and credible management 

of expenditures

c. Some background on the Hill would be useful, but not criticald. A strong Principal Deputy, well-versed in Congressional matters can be the 

essential compliment for any lack of Hill experience

3. The USD(CFO&C) should conduct two (February and June) annual 

execution reviews vice one—include projections in reviews

4. Globalize the USD(CFO&C) responsibilities to include all DoD-related 

international fi nancial negotiations

• Restore the International Branch to the Offi ce of the Comptroller
SUMMARY OF RECOMMENDATIONS

8 5

Necessities for a Successful LegacyA Vision for the Future of DoD

1. Adopt a vision of making DOD more eff ective in:

a. Protecting and projecting American interests in defense of freedom and 

democracy

b. Maintaining peace and security for the American people, andc. Deterring, fi ghting and winning wars when necessary

2. Tie performance objectives to the vision3. Align the Service Secretaries’ visions with the Department’s vision4. Advocate the following actions to implement the vision: 

a. Adapt best global business practices from the private sector to the defense 

enterprise

b. Adopt a management structure of centralized business operations in support of decentralized military operationsc. Adopt and implement the Strategic Management Plan for improving 

the overall effi ciency and eff ectiveness of the Department’s business operations 

d. Establish leadership selection criteria and joint service to ensure seasoned 

judgment in senior positions 

e. Instill management discipline that continuously seeks to benchmark 

performance against targets from other world-class enterprises, measure outcomes, increase accountability, and reward superior performance

f. Attract, develop and retain the brightest and best men and women who 

seek to excel in service to their country

g. Encourage innovation, prudent risk-taking, individual and team achievement, and commitment to continuous improvement at all levelsh. Cooperate with, and support our partners in the other branches of government in serving the interests of the American people

Sample Vision Our vision is to increase our eff ectiveness in protecting and 

projecting American interests in defense of freedom and democracy, in maintaining peace and security for the American people, and in deterring, fi ghting and winning wars when necessary.
FOCUSING A TRANSITION

8 6

Necessities for a Successful Legacy (continued)Tracking Performance to Improve Accountability

1. In the fi rst three months of tenure, adopt a performance management 

system as an integral part of managing the Defense Department to harness the energies of his senior appointees to the objectives he sets and the changes he wishes to institute.

2. Establish performance goals and conduct management reviews

a. Provide strategic management guidance to all 25 PAS (Exec. Levels II,III 

and IV) as individuals, and to all OUSD offi ces, JCS, Combatant Commands, Military Branches and Defense Agencies and Components.

b. Jointly set performance goals, develop indicators that measure progress, 

and conduct periodic management reviews.

c. Ensure that goals and objectives are aligned horizontally and vertically

3. Leverage existing organizational capabilities rather than adding staff

a. Enlist support of DepSecDef and CMO (if activated) in processb. Have Director, Program Analysis and Evaluation (PA&E) assume collateral 

duties as Special Assistant to Secretary of Defense for Strategic Planning— regardless of where PA&E reports

c. Use a senior leadership forum (currently Deputy’s Advisory Working Group) 

to communicate and gain commitment
LIST OF FIGURES AND TABLES

8 7

Appendix B. List of Figures and Tables 

FIGURES

CHAPTER 1. ITEMS REQUIRING IMMEDIATE ATTENTION

Figure 1-1. National Security Issues Faced 

by New Administrations ..........................................................9

Figure 1-2. DoD Civilian Leadership Vacuum ........................................10

CHAPTER 2. NEAR-TERM OBSTACLES THATCOULD HAMPER LONG-TERM SUCCESS

Figure 2-1. Growth in the Uni

fi ed Medical Budget ................................30

Figure 2-2. Major Defense Acquisition Program

Portfolio: 1978-2007 ................................................................34

Figure 2-3. 2000-2007 Major Defense Acquisition Program

Portfolio Cost Growth by Program (Dollars in Billions) ....35

CHAPTER 3. ORGANIZING THE DEPARTMENT FOR REAL CHANGE

Figure 3-1. Where to Look and How to Find “A” Talent .......................49Figure 3-2. Representative Friction Points...............................................55Figure 3-3. U.S. DoD Budget (Including Supplementals)

Constant $FY09 (Billions) .......................................................61

Figure 3-4. DoD Budget by Title, Constant Dollars 2008 .......................62
FOCUSING A TRANSITION

8 8

TABLES

CHAPTER 1. ITEMS REQUIRING IMMEDIATE ATTENTION

Table 1-1. Brief Comparison of Political and

Corporate Transitions .............................................................19

Table 1-2. DoD Civilian Presidential Appointment/

Senate Confi rmation Positions ..............................................22

CHAPTER 2. NEAR-TERM OBSTACLES THATCOULD HAMPER LONG-TERM SUCCESS

Table 2-1. Characteristics by Presidential Administration ..................25Table 2-2. DoD Infrastructure $ (Billions)

Remains Steady at ~42 Percent ..............................................26

CHAPTER 3. ORGANIZING THE DEPARTMENT FOR REAL CHANGE

Table 3-1. DBB Assessment of Issues and Challenges ..........................41Table 3-2. Suggested Traits, Experience, and Duties of 

Key Leadership Personnel .....................................................50

Table 3-3. Comparing Fiscal Leadership Responsibilities ...................60
DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES

8 9

Appendix C. Defense Business Board Member Biographies

MICHAEL J. BAYER, CHAIRMAN

Michael J. Bayer is the President and CEO of Dumbarton Strategies, Washington, D.C., a provider of strategic planning and merger and acquisition counsel. Mr. Bayer also serves as the Chairman of the Defense Business Board, and is a member of the Sandia National Laboratory’s National Security Advisory Panel, the Defense Science Board and the Chief of Naval Operations Executive Panel. His previous U.S. Government service included appointments as Vice Chairman of the Defense Business Board, a Member of the Board of Visitors of the United States Military Academy, Chairman of the Army Science Board, a Member of the U.S. Naval War College Board of Visitors, Chairman of the Secretary of Air Force’s Advisory Group and, Member of the U.S. European Command Senior Advisory Group. Earlier in his career he was Counsel to a senior Member of the U.S House of Representatives, Deputy Assistant Secretary at the U.S. Department of Energy, Malcolm Baldrige’s Associate Deputy Secretary of Commerce, Counselor to the United States Synthetic Fuels Corporation, Counselor to the Commission on Aviation Security and Terrorism and, the Federal Inspector for the Alaska Natural Gas Transportation System. He has been a Trustee of Washington’s Source Theater and its Chairman of the Board, a Member of the Board of the Potomac Community Theater, and a Member of the Board of Directors of The American Heart Association (Nation’s Capitol A

ffi liate). 
FOCUSING A TRANSITION

9 0

FREDERIC W. COOK, VICE CHAIRMAN 

Frederic W. Cook is Founding Director of Frederic W. Cook & Co., a management-compensation consulting fi rm, which was formed in 1973 and 

which currently has offi ces in New York, Chicago, Los Angeles, and San 

Francisco. The fi rm has served over 1,500 clients since its inception. Mr. 

Cook att ended Dartmouth College on an NROTC scholarship, and graduated in 1962. He served for four years as an infantry offi cer in the U.S. 

Marine Corps and then spent six years with Tower Perrin consulting fi rm before founding his fi rm. Mr. Cook has been elected an honorary lifetime 

member of the American Compensation Association and recipient of its Keystone award. In addition, he is a fellow of the National Academy of Human Resources and speaks frequently on management compensation and related human resources and corporate governance issues. 

DENIS A. BOVIN 

Denis A. Bovin is Co-Chairman and Co-CEO of Stone Key Partners LLC, a strategic and fi nancial advisory investment bank. Prior to forming 

Stone Key Partners, Mr. Bovin was Vice Chairman – Investment Banking, Senior Managing Director and Chairman of the Global Technology, Media and Telecom Group at Bear Stearns & Co. He was a member of the team that directed Bear Stearns’ Investment Banking activities and had direct responsibility for a wide variety of the Firm’s key domestic and international investment banking clients.In 1998 Defense Daily named Mr. Bovin as one of the world’s 40 most infl uential people in global defense, aerospace, and national security.He has more than 30 years of experience with the strategic and fi nancial concerns of domestic and international companies and government 

agencies and has initiated or been involved with fi nancings and business combinations aggregating in excess of $250 billion. Mr. Bovin had previ-
DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES

9 1

ously spent more than two decades at Salomon Brothers Inc. and headed that 

fi rm’s Investment Banking Corporate Coverage and Capital Markets 

Divisions. He also led the 

fi rm’s Communications and Technology Group 

which covered computer, defense, telecommunications, electronics, and media companies. In 1985, Mr. Bovin was selected by Institutional Investor magazine as one of the country’s twelve most outstanding investment 

bankers under age 40.Mr. Bovin received his B.S. degree from the Massachuse

tt s Institute of 

Technology and an M.B.A. degree from the Harvard Business School. In addition to serving on the M.I.T. Executive Commi

tt ee, he is an elected 

Life Member of the M.I.T. Corporation; a member of the Council on Foreign Relations; and was previously Chairman of the Overlook Hospital Foundation in Summit, New Jersey. He is Vice Chairman of Business Executives for National Security, Inc. (“BENS”), and a Vice Chairman of the Intrepid Foundation. Mr. Bovin is listed in Who’s Who in Finance and Industry.In 2006, Mr. Bovin was sworn in as a member of the President’s Intelligence Advisory Board. He is also a consultant to the Defense Science Board (“DSB”), which advises the Secretary of Defense and the Chairman of the Joint Chiefs of Sta

ff and was a member of the DSB from 1998 until 

2004. Mr. Bovin has been awarded the Department of Defense Medal for Distinguished Public Service, the highest honor that can be conferred on a civilian, for his “dedication and commitment to the men and women of the U.S. Armed Forces” and for his “vital and lasting contributions to the Department of Defense.” 

HOWARD E. COX, JR.

Howard E. Cox is a Partner of Greylock, a national venture capital 

fi rm 

with o

ffi ces in the Boston and Bay Area with which he has been associated 

for 37 years. Greylock, with commi

tt ed capital of over $2 billion under 
FOCUSING A TRANSITION

9 2

management, is an active investor in soft ware, data communications, consumer internet, and healthcare. Over 150 Greylock companies have gone 

on to become publicly held, while more than 200 have successfully merged with other leading companies. Mr. Cox has been a director of more than 30 companies including three listed on the New York Stock Exchange. He is also a trustee of various Fidelity Mutual Funds. Mr. Cox’s non-profi t activities include Executive Committ ee In-Q-Tel; 

director Business Executives for National Security; member Council on Foreign Relations; Investment Committ ees of Partners Healthcare, DanaFarber Cancer Institute, Museum of Fine Arts; Board of Fellows Harvard Medical School; Harvard Business School Visiting Committ ee; Dean’s 

Council Kennedy School, and past Chairman National Venture Capital Association.Mr. Cox received his AB from the Woodrow Wilson School at Princeton in 1964 and his JD from Columbia Law where he was an International Fellow. He earned his MBA from Harvard Business School and was a 2003 recipient of the Alumni Achievement Award which is the highest honor the School can give to an alumnus. Prior to joining Greylock, he served in the Offi ce of the Secretary of Defense. Upon graduation from Princeton Mr. Cox was commissioned a 2nd Lieutenant Artillery where he was a Distinguished Military Graduate of the Army R.O.T.C. program. Various members of his family have been active in the US military including General Richard Delafi eld for whom Delafi eld Pond at West Point is named and General Morgan Lewis, one of Washington’s Generals.

HENRY N. DREIFUS

Henry N. Dreifus is Founder & CEO of Dreifus Associates Limited, Inc. With over 25 years experience in Secure Identifi cation & Smart Card technologies, he was a Founding Director and Executive Committ ee member 

of the Smart Card Industry Association, and has held a number of board 
DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES

9 3

positions in the 

fi nancial and technology industries including serving on 

the boards of Viewzi, Inc., a visual search engine company, TelaDoc Medical Services, Inc., a national medical cross-coverage service provider, and Micromem Technologies a nano-technology sensor and magnetic memory (MRAM) developer. Mr. Dreifus has been called upon to present expert testimony to Congress, is a published author, an accomplished speaker, and a patent holder in smart card technology. A graduate of the University of Pennsylvania, Mr. Dreifus received a Master’s degree in Business Administration from Washington University, St. Louis.

CARLY S. FIORINA

Carly S. Fiorina has successfully blazed new trails, taken risks and de

fi ed 

the odds. As the former chairman and chief executive o

ffi cer of global 

technology solutions provider Hewle

tt -Packard, she brought all of her 

skills to bear to write a new chapter in the life of an historic company.A

ft er joining HP in July 1999, Ms. Fiorina led the reinvention of the company many associate with the birth of Silicon Valley, returning HP to its 

roots of innovation and inventiveness. Ms. Fiorina successfully led HP’s controversial merger with Compaq Computer Corp., now recognized as the most successful high-tech merger in history.Ms. Fiorina took an unconventional route to becoming CEO of a leading technology company, earning a bachelor’s degree in Medieval History and Philosophy from Stanford University. Ms. Fiorina holds a Master’s degree in Business Administration from the Robert H. Smith School of Business at the University of Maryland at College Park, Md., and a Master of Science degree from MIT’s Sloan School.Prior to joining HP, Ms. Fiorina spent nearly 20 years at AT&T and Lucent Technologies, where she held a number of senior leadership positions 
FOCUSING A TRANSITION

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and directed Lucent’s initial public off ering and subsequent spin-off from AT&T. Ms. Fiorina was named an Honorary Fellow of the London Business School in July 2001. She has been honored with the 2002 Appeal of Conscience Award and the 2003 Concern Worldwide “Seeds of Hope” Award in recognition of her worldwide eff orts to make global citizenship a priority for business. The Private Sector Council honored her with its 2004 Leadership Award for her contributions to improving the business of government. The White House appointed her to the U.S. Space Commission to advise it on the nation’s space science agenda and contribute a broad range of high-tech expertise. Ms. Fiorina also sat on the New York Stock Exchange’s executive board. She has previously served on the boards of Cisco Systems, Kellogg Company and Merck & Company. She currently serves on the boards of CyberTrust (specializing in cybersecurity), Revolution Healthcare Group, MIT Corporation Board of Trustees, Taiwan Semiconductor Manufacturing (TSCM) and is the Chairman of the External Advisory Board at the Central Intelligence Agency (CIA). Ms. Fiorina is currently the Chairman of The Fiorina Foundation. 

JAMES K. HAVEMAN, JR. 

James K. Haveman, Jr. has a long history of human services management and volunteer work. Mr. Haveman is currently the President of the Haveman Group, a consulting and public aff airs company. He has served as the Senior Advisor to the Ministry of Health in Iraq. Mr. Haveman served as the Director of the Department of Community Health in Michigan as a member of the Cabinet of Governor John Engler. Mr. Haveman also served as the Executive Director of Bethany Christian Services, the largest child welfare/adoption Agency in the United States, the Executive Director of the Kent County Community Mental Health Board, and the Executive Director of Project Rehab, a substance abuse 
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9 5

program in Grand Rapids. Mr. Haveman serves on a variety of Boards including Ferris State University, International Aid, and the Defense Business Board of the Department of Defense. He was the recipient of the Department of Defense Medal for Distinguished Public Service. Mr. Haveman graduated from Calvin College and has a Masters Degree from Michigan State University. 

DENNIS F. HIGHTOWER

Dennis F. Hightower is the former CEO of Europe Online Networks, S.A., a broadband interactive entertainment provider. He was Professor of Management at the Harvard Business School from July 1997 to June 2000 and a Senior Lecturer from July 1996 to July 1997. He was previously employed by The Walt Disney Company, serving as President of Walt Disney Television & Telecommunications, President of Disney Consumer Products Division (Europe, Middle East and Africa) and related service in executive positions in Europe. Earlier in his career, Mr. Hightower was managing director and Los Angeles o

ffi ce manager with Russell Reynolds Associates, Inc.; vice president 

of corporate planning and a corporate o

ffi cer of Ma

tt el, Inc.; vice president 

and general manager with General Electric Co. in Mexico; senior associate and engagement manager at McKinsey & Co., Inc; and a manager at Xerox Corporation. Prior to entering the private sector, Mr. Hightower served in the U.S. Army for eight years, where he rose to the rank of major and was awarded decorations for meritorious achievement and valor. Mr. Hightower holds an M.B.A. degree from the Harvard Business School and a B.S. degree from Howard University. He received the Alumni Achievement Award in Business from Howard University in 1986, the 
FOCUSING A TRANSITION

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Alumni Achievement Award from Harvard Business School in 1992, and the U.S. Department of Commerce Pioneer Award in 1996. He serves on the Boards of Directors of Domino’s Pizza Inc., and Accenture, Ltd. Formerly, Mr. Hightower served on the Boards of PanAmSat Corporation, Northwest Airlines, Inc., The TJX Companies, The Gillett e 

Company, and Domino’s Inc. He is also a member of the board of trustees of Casey Family Programs.

MEL M. IMMERGUT

Mel M. Immergut is Chairman of Milbank, Tweed, Hadley & McCloy LLP. He has been a partner in the Firm’s Corporate Department since 1980 and Chairman of the Firm since 1995.Mr. Immergut has extensive experience in a wide variety of corporate governance, board advisory, and transactional work, including M&A transactions, fi nancing transactions, and leveraged leasing. He is responsible for, among other clients, the Firm’s representation of JP Morgan Partners, Anheuser-Busch, Astoria Financial, Cushman and Wakefi eld, Mastercard, 

NASCAR, Sovereign Bancorp, Tyson Foods, and William E. Simon and Sons.Mr. Immergut received his B.A. from the University of Pennsylvania and his J.D. and M.B.A. from Columbia University. He serves as a Trustee and Past-President of the American College of Investment Counsel, a Trustee of The Eye-Bank for Sight Restoration, Inc. and past President of The Billfi sh Foundation. He is a member of the Council on Foreign Relations.Mr. Immergut is a member of the New York State Bar Association and the Association of the Bar of the City of New York. He serves as Vice Chair of the Legal Aid Society and on the Columbia Law School Board of Visitors. He additionally is a member of the Lower Manhatt an Development Cor-
DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES

9 7

poration Advisory Council, a Member of the Partnership for New York City and a Member of the United States Southern Command Advisory Board. Mr. Immergut is a Fellow of the New York Bar Foundation and a recipient of The Jewish Theological Seminary Simon H. Ri

fk ind Award.

MADELYN P. JENNINGS 

Madelyn Pulver Jennings is a principal in the Cabot Advisory Group, a management consulting 

fi rm. She is retired Sr. Vice President of the Ganne

tt Co. Earlier, she was a Vice President of Standard Brands and also held 

a number of executive positions at General Electric. She is President of the McGregor Links Foundation, Chair of the Executive Commi

tt ee of The 

Freedom Forum, and serves on the boards of the NEWSEUM, The Women’s Center, The Columbia Lighthouse for the Blind, and Yaddo, a writers’ colony. A graduate of Texas Woman’s University, she has served on the boards of the Monterey Institute of International Studies, Hanes Corporation, Harte-Hanks Communications, U.S. Commi

tt ee for UNICEF, Sage 

Colleges, and the American Press Institute. 

JAMES V. KIMSEY 

James V. Kimsey a

tt ended the United States Military Academy at West 

Point, and studied at Georgetown University on an honors scholarship. He served three combat tours as an airborne ranger, two in Vietnam, earning various awards for service and valor. In July 2005, Mr. Kimsey was inducted into the Ranger Hall of Fame, which recognizes our nation’s most extraordinary Rangers. Mr. Kimsey is best known for creating the largest company ever started in the Washington, DC area – America Online, Inc. He currently serves as Chairman Emeritus. Mr. Kimsey le

ft AOL to focus his energies on philan-
FOCUSING A TRANSITION

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thropy, and in 1996, he launched the Kimsey Foundation which provides grants that benefi t the Washington, DC community in areas from arts to education. Over the years, Mr. Kimsey has received numerous entrepreneurship awards. He received Presidential appointments to the Kennedy Center Board of Trustees and the West Point Board of Visitors. In 2001, Secretary of State Colin Powell named Mr. Kimsey as Chairman of the International Commission on Missing Persons (ICMP), an organization dedicated to identifying hundreds of thousands of missing from confl icts and natural disasters around the world, through DNA research. Mr. Kimsey also 

serves as Chairman Emeritus of Refugees International, an independent advocacy group which works to protect refugees and end the cause of displacement. He also serves as a member of the board of the International Crisis Group (ICG), an independent, non-profi t, multinational organization committ ed to preventing and resolving deadly confl ict. 

Mr. Kimsey is a member of the board of several companies including the JER Investors Trust, and Thayer Capital. He is on the board of directors of the American Film Institute, Vietnam Veterans Memorial Fund, Business Executives for National Security, and the Department of Defense Business Board. He serves on the Executive Committ ees of the Washington National Opera, and on the National Symphony Orchestra. 

BRUCE E. MOSLER

Bruce E. Mosler is President and Chief Executive Offi cer of Cushman & Wakefi eld. Prior to being named CEO on January 1, 2005, he was President of Cushman & Wakefi eld U.S. Operations, successfully establishing 

the fi rm as a leader in the industrial, multifamily, and retail brokerage 

practices.
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9 9

Mr. Mosler has led the 

fi rm’s rapid organic and acquisitive expansion, 

including the acquisition of the leading real estate services 

fi rms in Canada and Russia; oversaw the expansion of the 

fi rm’s Global Capital Markets group; and secured IFIL Investments, S.p.A. as the 

fi rm’s new majority shareholder.

Mr. Mosler has twice received the prestigious Real Estate Board of New York “Deal of the Year” award, winning in 1998 for the Reuters Building and in 1999 for bringing the European retailer Hennes & Mauritz (H&M) to its United States 

fl agship location on Fi

ft h Avenue. He has been chosen 

in a poll of his peers as the Commercial Property News “Brokerage Executive of the Year,” and named CPN’s national “Property Services Executive of the Year.”In 2003, REBNY presented Mr. Mosler with its annual Kenneth R. Gerrety Humanitarian Award for his service to the community. Mr. Mosler serves on the Capital Campaign Commi

tt ee of the American Cancer Society Hope Lodge and the Executive Commi

tt ee of the Real Estate Board of 

New York.He is Vice Chairman of The Intrepid Sea, Air and Space Museum, and is a member of the boards of the New-York Historical Society, the Partnership for the City of New York, and Duke University’s Fuqua School of Business, among other civic and charitable organizations.

PHILIP A. ODEEN

Philip A. Odeen is the non-executive Chairman of Convergys, a leading outsourcing company and AES, an international energy company. He is former chairman of Avaya Inc., as well as Reynolds & Reynolds, and served as interim CEO of Reynolds & Reynolds from 2004-2005. From the fall of 2005 until mid 2006, Mr. Odeen served as CEO of QinetiQ North American Operations, supporting the expansion of QinetiQ Inc. – a lead-
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100

ing U.K. defense technology company. He continues to serve on their U.S. Board. Earlier, Mr. Odeen was chairman and CEO of TRW, a major industrial corporation providing advanced-technology products and services primarily in the automotive, defense, and aerospace sectors, which was acquired by Northrop Grumman in 2002. Prior to becoming Chairman, he was a member of TRW’s Management Committ ee and responsible for TRW’s $3 billion Systems and Information Technology business, providing solutions 

using information technology, and systems engineering and analysis. He also served as executive Vice President of Washington, DC operations, where he was responsible for government relations, business development, and selected international activities of TRW’s Aerospace and Information Systems sector.Mr. Odeen was President and Chief Executive offi cer of BDM, which TRW acquired in 1997, and directed its growth and evolution as a multi-national information technology (IT) fi rm. Under his leadership, BDM grew 

from under $300 million in revenue to over $1 billion in fi ve years.Before joining BDM as President in 1992, Mr. Odeen was Vice Chairman Management Consulting Services, at Coopers & Lybrand, where he directed a practice of 2,500 consultants in 30 cities across the United States. Earlier, he served as Managing Partner of the fi rm’s public sector practice for 

13 years. From 1973 to 1978, he was Vice President of the Wilson Sporting Goods Company.Mr. Odeen has served in senior positions with the Offi ce of the Secretary of Defense and the National Security Council staff . He was Principal 

Deputy Assistant Secretary of Defense (Systems Analysis) and later led the Defense and Arms Control staff for then-National Security Advisor 

Henry Kissinger.
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101

WILLIAM R. PHILLIPS 

William R. Phillips is a Vice President with IBM Global Consulting Services. He has been the Global Defense Industry Leader, responsible for IBM’s business services to defense, security and intelligence organizations globally since 2004. His primary business focus is on growing the IBM defense business outside the US by leveraging best defense industry business practices between countries around the world and implementing the concepts of net-centric operations. Prior to his current assignment he led the IBM US DoD Industry team.Mr. Phillips has provided consulting services to various DoD agencies and organizations since 1978, focusing on 

fi nancial management operations improvements, CFO Act compliancy, 

fi nancial systems implementation, and general business operations. His clients have included the US 

Army, US Navy, US Air Force, DFAS, DoD, DLA, and the Army/Air Force Exchange Service. He also provided support to Secretary Rumsfeld’s Financial Transformation Task Force in 2001. Mr. Philips led PricewaterhouseCoopers Consulting Defense Practice prior to its acquisition by IBM in 2002. Mr. Phillips earned a Master’s degree in Business Administration from the College of William and Mary and received his undergraduate degree from Dickinson College. Mr. Phillips is the co-author of two books: Public Dollars, Common Sense: New Roles for Financial Managers (Coopers & Lybrand, 1996) and Public Dollars Transformation (IBM, 2002). He is a Certi

fi ed Government Financial Manager, and a member of the American Society of Military Comptrollers and the Association of Government 

Accountants. 
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102

ARNOLD L. PUNARO 

Arnold L. Punaro is Executive Vice President, Government Aff airs, Communications, and Support Operations, and General Manager of Washington Operations for Science Applications International Corporation (SAIC). He is the senior corporate offi cial responsible for SAIC’s government 

aff airs, communications and Washington operations. He also supervises 

SAIC’s corporate Small and Disadvantaged Business offi ce. He joined 

SAIC in March, 1997. From 1973 to 1997, Mr. Arnold worked for Senator Sam Nunn in National Security matt ers. He served as his director of National Security aff airs and 

then as Staff Director of the Senate Armed Services Committ ee (8 years) 

and Staff Director for the Minority (5 years). In his work with Senator Nunn and the Senate Armed Services Committ ee, he was involved in the formulation of all major defense legislation and the oversight and review of all 

major defense activities for over two decades. This included the Defense Offi cer Personnel Management Act and its Reserve counterpart, the Goldwater-Nichols Defense Reorganization Act, the Acquisition Streamlining Act, personnel transition provisions, special operations reforms, and all pay and benefi t matt ers. His Committ ee activities also covered Department of Energy nuclear weapons and cleanup matt ers, intelligence issues, 

arms control treaties, and civilian and military nominations. Mr. Punaro is a graduate of Mount de Sales Academy in Macon, Georgia and holds a Bachelor of Science degree from Spring Hill College in Mobile, Alabama; a Masters of Arts degree from the University of Georgia and a Masters of Arts degree from Georgetown University, the latt er in national 

security studies. He was on the Adjunct Faculty of the Walsh School of Foreign Service at Georgetown University for ten years where he taught an annual graduate level course entitled “National Security Decisionmaking.” 
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103

Mr. Punaro is a retired U.S. Marine Corps Major General. He served as the Director of the Marine Corps Reserve from May 2001 to October 2003, as Deputy Commanding General, Marine Corps Combat Development Command (Mobilization) from August 2000 to May 2001. From 1997 to 2000 he served as the Commanding General of the 4th Marine Division headquartered in New Orleans, Louisiana. He served on active duty as an Infantry Platoon Commander in Vietnam where he was awarded the Bronze Star for valor and Purple Heart. As a reserve o

ffi cer, he has served 

in numerous organizations. In December 1990, he served in Operation Desert Shield in Saudi Arabia. In December 1993, he completed a tour of extended active duty as Commander of Joint Task Force Provide Promise (Forward) in the former Yugoslavia. He was mobilized for a third time in May 2003 in support of Operation Enduring Freedom and Operation Iraqi Freedom. Mr. Punaro served as both the HQMC Director of Reserve A

ff airs and as the Special Assistant to the Commander, U.S. European 

Command. He served in this capacity until his retirement on October 1, 2003. Mr. Punaro has received numerous recognitions. In August 1993, he received the Marine Corps League’s “Iron Mike” Award for “exceptionally outstanding service” and “unwavering commitment” for over 20 years to “insuring a strong national defense.” He has received the Air Force Association’s “Exceptional Service Award,” the National Guard “Minuteman Award” and in 2002 was the co-recipient of SAIC’s “Founders Award.” He has over 20 military awards and decorations to include the Distinguished Service Medal. 

MARK H. RONALD

Mark H. Ronald retired from BAE Systems in December 2006 where he held the positions of Chief Operating O

ffi cer and member of the Board of 

Directors for BAE Systems plc, a $25 billion global aerospace and defense 
FOCUSING A TRANSITION

104

company; and President and Chief Executive Offi cer of BAE Systems Inc., 

the Company’s wholly-owned U.S. subsidiary. He was responsible for 45,000 employees in the United States, United Kingdom, Sweden, Israel and South Africa and sales in excess of $10 billion. Mr. Ronald remains Chairman of BAE Systems Inc and also serves on the Boards of Cobham plc, ATK (Alliant Techsystems Inc.), and DynCorp International. He holds the Honorary Commander of the Most Excellent Order of the British Empire (CBE), awarded in recognition of the valuable services he has rendered to furthering closer transatlantic cooperation in the U.S.-U.K. defense industries. In 2005, he was honored by the Marine Corps Scholarship Foundation with the Semper Fidelis Award for his eff orts in support of the men and women of the U.S. Armed Forces and 

their families. Prior to joining BAE Systems, Mr. Ronald was President of AEL Industries in Lansdale, PA. He previously spent ten years with Litt on Industries, 

Amecon Division, College Park, Md, rising to the position of Vice President, Program Management.Mr. Ronald is a graduate of Bucknell University, where he received a Bachelor of Arts and a Bachelor of Science in Electrical Engineering. He received his Master of Science in Electrical Engineering from Polytechnic Institute of New York and currently serves on its Board of Trustees. He has received the Distinguished Engineering Alumni Award from both institutions.Mr. Ronald is an active member of the community participating in numerous educational, civic and charitable organizations.
DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES

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ATUL VASHISTHA 

Atul Vashistha is the CEO of NeoGroup, and Chairman and former CEO of neoIT, a leading management consultancy focused on o

ff shore and 

global sourcing of services. He is a leading authority on globalization and outsourcing and was recently recognized by Consulting Magazine as one of the “Top 6 IT Power Brokers” as well as “Top 25 Consultants”. Mr. Vashistha has also been recognized by HRO Today magazine as a HRO Superstar (2003, 2006 and 2007) and by FAO Today as a FAO Superstar (2006). Wall Street analysts, Global 2000 executives and top business journalists from CNN, Wall Street Journal, New York Times, Fortune, Forbes and Business Week seek out his thought leadership. He is also the coauthor of The O

ff shore Nation (McGraw-Hill, 2006) a book that presents a 

look into the globalization of services and the role it plays in the economy and its future.Mr. Vashistha began his career in the healthcare segment of the outsourcing industry, joining a 48-year old healthcare services company, Rural/Metro. There, he played a very pivotal role in helping grow this $50 million company into a $500 million company in less than six years. Mr. Vashistha went on to lead international businesses at Cardinal Health and helped establish the infrastructure needed to successfully run global operations. During his tenure with Cardinal Health as Senior Vice President of International, he led, assisted and managed the international operations of the Fortune 25 Company, expanding pro

fi table operations 

to Australia, New Zealand, Spain, UK, Singapore, Brazil, Mexico, Japan and other global locations. The thirst to fundamentally change a business model led Mr. Vashistha to found neoIT in June 1999. Mr. Vashistha is an acknowledged and frequently published authority in the unique requirements of the global services and o

ff shore market. His unique education, business experience and 
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106

understanding of the global sourcing practices provide a unique advantage for his clients. Mr. Vashistha is a strong proponent of globalization and disruptive technologies. He serves on the Board of Advisors at the Center for Services Leadership at Arizona State University. He is also an active Board member of the Soft ware division of the Information Technology Association of 

America (ITAA). Mr. Vashistha has been recognized as a leading businessperson “40 Under 40” in the East Bay, California and Southern Arizona. He is also a member of the Young President Organization (YPO) Northern California chapter and serves on the Board of Directors of non-profi t 

Rural Sourcing Inc., Arkansas. 

JOSEPH R. WRIGHT

Joseph R. Wright has recently joined Scientifi c Games as Vice Chairman. 

He has been a member of the board since 2004. He was previously Chairman of Intelsat, the world’s leading provider of satellite/fi ber services 

with a global fl eet servicing over 200 countries and before that was CEO of 

PanAmSat, a publicly-listed satellite based services business, which was acquired by Intelsat in 2006. Before PanAmSat, he was Chairman of GRC International Inc., a public company providing advanced IT, internet, and soft ware technologies to government and commercial customers, which 

was sold to AT&T, and was Co-Chairman of Baker & Taylor Holdings, Inc., an international book/video/soft ware distribution and e-commerce 

company, owned by The Carlyle Group.From 1989-1994, Mr. Wright was EVP, Vice Chairman, and Director of W. R. Grace & Company, Chairman of Grace Energy Company, and President of Grace Environmental Company. In the 1980’s he served in the U.S. Government under President Reagan as Deputy Director then Director of the Federal Offi ce of Management and Budget in the Executive Offi ce of the President and a member of the Cabinet, and earlier as Deputy Secretary 
DEFENSE BUSINESS BOARD MEMBER BIOGRAPHIES

107

of Commerce. He was later appointed to the President’s Export Council by President H.W. Bush as Chairman of the Export Control Sub-Committee and was appointed by the current President Bush to the President’s Commission on the U.S. Postal Service Reform and the National Security Telecommunications Advisory Commi

tt ee (NSTAC). Prior to the 1980’s, 

Mr. Wright was President of Citicorp Retail Services and Retail Consumer Services, credit card subsidiaries of Citibank, was a partner of Booz, Allen and Hamilton and held several senior economic and management posts in the Federal Department’s of Commerce and Agriculture.Mr. Wright received an MIA from Yale University and a BS from Colorado School of Mines. In addition to the boards mentioned above, Mr. Wright also serves on the Board of Directors/Advisors of Scienti

fi c Games and 

Terremark Worldwide and is a member of The Department of Defense’s Business Board, The Department of Defense’s Science Board Task Force on interoperability, OMB’s Performance Measurement Advisory Council, the FCC’s Network Reliability and Interoperability Council, the FCC’s Media Security and Reliability Council, the Council on Foreign Relations, the Commi

tt ee for the Responsible Federal Budget and the New York Economic Club. 

DOV S. ZAKHEIM 

Dov S. Zakheim is Vice President of Booz Allen Hamilton, where he is a leader in the 

fi rm’s global defense practice. From 2001 to April 2004 he 

served as the Under Secretary of Defense (Comptroller) and Chief Financial O

ffi cer for the Department of Defense, developing and managing 

the world’s largest budgets, overseeing all aspects of the Department’s accounting and auditing systems, and negotiating 

fi ve major defense 

agreements with US allies and partners.From 2002-2004 Dr. Zakheim was DoD’s coordinator of civilian programs in Afghanistan. He also was DoD’s international “fund raiser” for Iraqi 
FOCUSING A TRANSITION

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reconstruction. In this capacity he was an organizer of both the June 2003 UN conference for potential donors and the October 2003 Madrid Donors’ Conference. From 1987 to 2001 Dr. Zakheim was corporate vice president of System Planning Corporation, a technology, research and analysis fi rm based in Arlington, Va. He also served as Chief Executive Offi cer of SPC 

International Corp., a subsidiary specializing in political, military and economic consulting. From 1985 until March 1987, Dr. Zakheim was Deputy Under Secretary of Defense for Planning and Resources in the Offi ce 

of the Under Secretary of Defense (Policy). In that capacity, he played an active role in the Department’s system acquisition and strategic planning processes. Dr.Zakheim held a variety of other DOD posts from 1981 to 1985. Earlier, he was employed by the National Security and International Aff airs Division 

of the Congressional Budget Offi ce. 

A 1970 graduate of Columbia University with a bachelor’s in government, Dr. Zakheim also studied at the London School of Economics. He earned his doctorate in economics and politics at St.Antony’s College, University of Oxford, where he was a National Science Foundation Graduate Fellow, a Columbia College Kellett Fellow, and a St. Antony’s College Research 

Fellow. Dr. Zakheim has been an adjunct professor at the National War College, Yeshiva University, Columbia University and Trinity College, Hartford, Conn., where he was a Presidential Scholar. He is the recipient of numerous awards for his government, professional and civic work, including the Defense Department’s highest civilian award in 1986, 1987 and 2004.
For more information, please contact

the Defense Business Board staff

1155 Defense Pentagon

Room 3C288

Washington, D.C., 20301-1155

703-697-2168

www.defenselink.mil/dbb

Phyllis L. Ferguson, Executive Director

Kelly S. Van Niman, Deputy Director

COL Kevin A. Doxey, USA, Military Assistant

Col Dale R. Marks, USAF, Military Assistant

Debbie K. Duffy, Staff Assistant
1 1 5 5 D E F E N S E P E N TA G O N 

WASHINGTON, DC 20301-1155

DEFENSE BUSINESS BOARD

Business Excellence in Defense of the Nation

www.defenselink.mil/dbb