Termination of full-time employees is expensive. It results in increased severance payments, the threat of lawsuits and large restructuring costs. Application to Government For more than 40 years, when the Soviet Union was the paramount defense concern, DoD had a relatively constant requirement to defend the country against a well-studied and relatively predictable threat. Within this environment, DoD rationally increased its operating leverage, adding permanent staff and building a great deal of its own production and maintenance capability. Today, however, the operating environment at DoD has become more volatile.
Few threats are certain.
Unlike the bipolar world that existed previously, the new defense environment is highly fractious and rapidly changing. The lessons of operating leverage suggest that DoD should reduce fixed costs to respond to this more volatile environment. From this perspective, even some painful cuts are justified. These reductions are already taking place. The DoD comptroller predicts a 30 percent reduction in permanent staff between 1985 and 1997.