Focusing Transition 2021 DBB FY 21-01 Observations and recommendations chosen to assist the 2021 Presidential Transition Team at the Department of Defense November 5, 2020 FOCUSING TRANSITION 2021 This publication, DBB FY21-01, is a product of the Defense Business Board. The Defense Business Board is a Federal Advisory Committee established by the Secretary of Defense in accordance with the provisions of the Federal Advisory Committee Act (FACA) of 1972 (5 U.S.C., Appendix, as amended) and 41 C.F.R. § 102-3.50(d), 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 represent the official position of the Department of Defense. NOT FOR RELEASE FOCUSING TRANSITION 2021 CONTENTS INTRODUCTION CHAPTER 1: THE STRATEGIC IMPERATIVE FOR TRANSFORMATION • Global National Security Risks • Domestic Fiscal Pressures • Failure of Past DoD Reforms to Achieve Transformation CHAPTER 2: WHAT DOES THIS MEAN FOR DoD? • Domestic U.S. Challenges • Department Challenges • DoD Management and Overhead Challenges CHAPTER 3: REGAINING MANAGERIAL EXPERTISE • DoD Organization and Cultural Trends • Conclusions CHAPTER 4: ITEMS REQUIRING IMMEDIATE ATTENTION • First Actions • The National Security and National Defense Strategies • Dealing with Crisis • DoD’s Unique Management Challenges • Build The Strongest Defense Team • Selection Criteria And Position Pairings • Develop Meaningful Selection Criteria For The Key Positions • Deputy Secretary of Defense • Under Secretary of Defense Comptroller/Chief Financial Officer • Under Secretary of Defense for Personnel and Readiness • Under Secretaries of Defense for Acquisition and Sustainment and Research and Engineering • Service Secretaries (Army, Navy, and Air Force) • Search For The Best Talent • On-Boarding New Appointees CHAPTER 5: ORGANIZING THE DEPARTMENT FOR SUSTAINED CHANGE • Improve the Speed, Relevance, and Effectiveness of the Defense Business Enterprise • Focus The Secretary’s Time on the Highest Priority Strategic Objectives • Track Performance To Improve Accountability • Align the Services and DAFA to the Secretary’s Agenda • Creating a Business Transformation Culture CHAPTER 6: NECESSITIES FOR A SUCCESSFUL LEGACY • Creating a risk taking culture to foster innovation • Create a Culture of Innovation • Building A Talent Bench CLOSING COMMENT APPENDIX A – SUMMARY OF RECOMMENDATIONS APPENDIX B – LIST OF FIGURES APPENDIX C – RELATED DEFENSE BUSINESS BOARD PRODUCTS APPENDIX D – BIOGRAPHIES - DEFENSE BUSINESS BOARD MEMBERS NOT FOR RELEASE i FOCUSING TRANSITION 2021 The Defense Business Board is pleased to provide Focusing Transition 2021, containing observations and recommendations chosen to assist the 2021 Presidential Transition Team at the Department of Defense. Our undertaking addresses distinct issues impacting the Department: The strategic imperative for transformation Items requiring immediate attention, in particular strategic guidance Obstacles that could hamper long-term transformation Organizing the Department for transformation Necessities for a successful legacy We begin by focusing on the enormous global threats and domestic challenges that the Pentagon leadership team must manage. These drive the need to identify a team with the specific skills and backgrounds, prepared by the Transition Team to execute as soon as the President takes office. We then identify key enterprise-level topics and a series of recommended actions, all of which are designed to improve the performance of the Department: Strengthen the role of the Deputy Secretary as the Chief Operating Officer. Provide direct, focused support to the Deputy Secretary for enterprise-wide transformational change. Significantly alter the institutionalized, risk-averse culture by making speed of execution and cost consciousness valued commodities in an innovation driven, results oriented mindset. Reduce the layers and breadth of the decision making processes and increase accountability by tracking performance. Address the escalating size and cost of the Fourth Estate. Address the unsustainable cost of personnel and benefits. The recommendations offered are intended to assist the Secretary of Defense in establishing/ maintaining a strong leadership team that can better organize and manage the Department to successfully face the myriad of challenges, both current and future. The Defense Business Board Members submit this document for your consideration. Michael J. Bayer Chairman, Defense Business Board NOT FOR RELEASE ii INTRODUCTION The Secretary of Defense must be ready on January 20th to implement an overall strategic vision for the Department that aligns with the President’s national security strategy priority goals. In addition, as history has shown, the Secretary and the Administration must be prepared for the likelihood of a national or global crisis within the first 270 days. Therefore, to reduce the organizational risk associated with a transfer, or continuation, of power, detailed transition planning, well before the 2021 inauguration, is crucial for the next Administration in providing continuity of effort in regard to national security. The 2018 National Defense Strategy focused the Department on Great Power competition with China and Russia as the central dynamic for sizing, shaping, and employing America’s military. However, constrained budgets, unanticipated demands, capability gaps, and other risks threaten the Department’s ability to fulfill the central goals of the current National Defense Strategy (NDS). Adding in increasing domestic fiscal pressures, the economic disruption caused by COVID-19, and failure of past Department reforms to achieve transformation, the situation is approaching critical mass. While the international, domestic, and the Department of Defense’s (DoD) internal issues are wide ranging and pose various levels of threat to America’s national security, only through enterprise-wide, systemic, long lasting transformation might the Department free the resources needed for the recapitalization and modernization necessary to improve readiness to face the oncoming storm that is China. Since the end of the Cold War, throughout the decade of the peace dividend, and over a decade and a half of pursuing Counter Terrorism, the enterprise level of the DoD and its command, headquarters, and administrative support structure has grown in scope and complexity while the size of the warfighting force has shrunk. This underscores why the Department needs strong coherent management and a rationalized structure to prevail in Great Power competition. The DoD once led the U.S. and the world in management innovation. It still can, through the judicious selection of individuals who will focus on improving the speed, relevance, and effectiveness of the entire defense business enterprise The Department is the Nation’s largest enterprise, possessing such an important public trust that it cannot afford, either literally or figuratively, any fiscal irresponsibility. It must work towards creating a business transformation culture through streamlining organizational constructs and breaking cultural trends. Talent is a critical tool/weapon in today’s highly competitive space and DoD must begin the fostering of a risk taking culture as an important aspect in enabling innovation, while building a talent bench to draw upon. It is a truism that the top leaders drive the kind of change necessary to steer the proper course for the rest and thereby achieve strategic vision. This DoD leadership team is especially critical, given the Department’s ongoing worldwide challenges and the urgent need to prepare and invest effectively in a time of Great Power competition. NOT FOR RELEASE I-1 FOCUSING TRANSITION 2021 1. THE STRATEGIC IMPERATIVE FOR TRANSFORMATION The 2018 National Defense Strategy focused the Department on Great Power competition with China and Russia as the central dynamic for sizing, shaping, and employing America’s military. However, constrained budgets, unanticipated demands, capability gaps, and other risks threaten the Department’s ability to fulfill the central goals of the NDS, such as defeating one major-power rival while maintaining deterrence in other regions. The world is amid a technological paradigm shift derived from an information revolution that is transforming virtually every aspect of human endeavor. That revolution has played a considerable role in facilitating the emergence of China as an international peer competitor to America, pursuing its goal of global dominance. Coupled with the reemergence of Russia as a regional power, this new paradigm has created a competitive situation the United States has not faced since the early years of the Cold War. The technology shift, enabling capabilities previously unimaginable, has permanently altered the conduct of operations and war. To address these challenges, every entity in the DoD must perform at the highest levels of efficiency, from warfighting units to support functions, to include the military, government employees, and contractors. Thus, Congress and DoD leadership has placed a high priority on managerial and business process reforms fundamental to successful implement of the National Defense Strategy and protection of the Nation. Managerial and business process reform is not a new challenge for the Department. The DoD has struggled over decades to deliver efficiencies in its complex and widespread