Defence Reform Part 3: looking to the future

Dr Bill Egginton, senior lecturer in Defence Management & Leadership at Cranfield University, presents the final instalment of his papers examining defence reform in the UK

We have seen in previous articles that the principles, processes and practices associated with project, programme and portfolio management (P3M) have shaped many of the changes made as part of Defence Reform and described in ‘How Defence Works’ (December 2015). These changes have been reflected in Front Line Command (FLC) and Top level Budget (TLB) operating models, ways of working and organisational structures. New forum have been established (Portfolio Direction Groups, Portfolio Progress Groups), new functions created (Portfolio and Programme Offices) and new roles and responsibilities established. Tools and techniques have been developed to improve reporting and management information. Service Level Agreements and ‘soft’ contracts have been introduced in order to make more robust the relationships between customers (the Commands) and their suppliers (Defence Equipment and Support, Information Services and Support, Defence Infrastructure Organisation and so on). Investment in education, training and people development has been a further priority at a time of constrained and indeed, diminishing resources. So, a great deal of work has been done, and all at a time when operational tempo has remained high.

The scale of the changes introduced through Defence Reform will inevitably take time to reap tangible benefits. However, despite that, early indications are positive. In its Major Projects Report, published in February 2014, the National Audit Office stated that: “With the exception of the Carriers, where costs have increased by £754 million, the performance of other major projects during 2012-13 has resulted in no overall significant cost increases and minimal delays in comparison to previous years.”

Again, in the accompanying publication, Equipment Plan 2013 to 2023, that: “The Department’s work to address the affordability gap and lay foundations for future stability, on which we reported last year, appears to have had a positive effect on the Department’s ability to maintain an affordable Equipment Plan.”

Lord Levene in his December 2014 update to his 2011 report stated the following: “To me the MOD is now a very different animal... in terms of showing they can be trusted to manage the money… top level budget holders now ‘own’ their own plans and are more active in determining their own priorities.”

And again, in December 2015: “Important changes have been achieved in the management of the services, with the Service Chiefs starting to shape, own and be held responsible for their performance and developing their capabilities as ‘Intelligent Customers’.”

Political interference
So, much has been achieved. It is also interesting to note, that in the same report, Lord Levene recommends that Treasury should ‘formalise with the Department the practice of allowing full end - year flexibility’. That recommendation in fact sets the tone for some of the challenges confronting MOD as it continues to develop and deliver against national strategic security priorities. We have spoken of P3M: project, programme and portfolio management. But there is in fact a 4th ‘P’ to be managed: political. The challenge of ‘political management’ comes in a number of forms.

Firstly there is the issue of political interference. It is of course the case, that in a democratic, party political system some level of political manoeuvring, veering and hauling and policy massaging and re-shaping is inevitable. However, if the ownership of plans is to be complete, and personal accountability is to be genuine, then our political masters must begin to acknowledge the consequences on ownership and accountability of some of their actions. Take for example, the role of the Senior Responsible Owner (SRO) – one that has attracted a great deal of attention, and involved a considerable investment of public funds to train and equip individuals across all government departments. MOD practice ordains that a letter of appointment (a letter, by the way, that is published for all Government Major Projects) should be accompanied by a letter of delegation outlining the level and sources of funding available to the SRO to expedite his or her duties. As present, such letters of delegation are rare. Moreover, even where they exists, the reality is that changes – cuts – to those delegations can and are made without due consideration of the impacts on personal accountability. Under the Osmotherly Rules, where SROs may be invited to attend and be answerable to Parliament, such practice seems to fly in the face of the very principles we are looking to establish and maintain. Ministers must be part of the solution, otherwise they will continue to remain part of the problem.

A further challenge concerns the shape and nature of the success criteria used to evaluate major defence (and for that matter, other major government projects and programmes). The criteria used by the NAO in reporting on project – and programme – performance are the traditional criteria of time, cost and quality. Simply put, has the project (or programme) delivered within the agreed schedule, the approved budget and to the agreed Key User requirements? Yes equals success. No represents failure. We are all too familiar with newspaper headlines proclaiming another failure to deliver, when actually the dimensions of success (and failure) are far more complex. For major public sector programmes involving British industry, British jobs, issues of national interest and international concern, such criteria are at best simplistic, and at worse misguided.

It could be argued, therefore, that the criteria used to ‘baseline’ Defence project and programme performance are themselves flawed. Project and programme management literature highlights the difficulties associated with using traditional outcome metrics such as cost, schedule and performance for any other than the simplest of projects (Shenhar and Dvir, 2007; Fox and Miller, 2006). Nevertheless, the UK government, through the NAO, continues to focus primarily on these three metrics even for the largest, most complex and most political of its defence programmes. In reality, the extent to which these traditional metrics have any real managerial or policy effectiveness is questionable. Clearly, if the assessments of outcomes are flawed then so too might the specific interventions aimed at averting failure. Perhaps a more strategic and holistic set of success criteria are needed if the ‘right’ investments are to be made and performance management and holding-to-account are to be taken seriously.

Adopting and adapting P3M within defence, being able to introduce the necessary governance, build credible business cases, make accurate estimates, develop realistic schedules, manage the associated risks, deal with the issues, engage with and inform stakeholders and ultimately deliver the benefits from investment in change inevitably requires people with the right P3M skills and competencies. There is, therefore, a significant upskilling challenge. This is especially so for our serving military not only because of the fact that their primary role is seen to be in the ‘battle space’ and not the ‘business space’ but also because historically, and still to some extent today, management education and training has not been a top priority and the military ‘posting cycle’ plays havoc when trying to establish continuity in key P3M roles. This situation is, of course, changing for the better. New policies are aimed at reducing ‘churn’ and MOD leaders now acknowledge the importance of management education and training supported by Cranfield University, the ‘academic provider’ at the Defence Academy, but others including Kings College and Civil Service Learning.

So, let us, for a moment, imagine a world in which political interference is more measured, our understanding and reporting of success and failure more meaningful and we have the right people with the right skills and in enough of them.

What other challenges confront MOD?
There remains, of course, the ongoing challenge of reducing budgets: the need to do the same for less, or, as it all too often seems, to do more for less. This is of course, the whole point about being in a position to prioritise. In its January 2017 Equipment Plan 2016 – 2026 publication, the NAO had this to say: "The department should ensure that it has in place suitable mechanisms for prioritising spend and removing or deferring projects from the Plan should affordability be compromised to the extent that Commands are unable to accommodate cost growth within their budgets, and central contingency is insufficient."

In their report, the NAO reaffirmed the responsibilities of Commands to manage their own budgets and stressed the need for the Department to be able to ‘reprioritise commitments in the Plan’. Precisely the intention of a portfolio management approach; exactly what is intended through the introduction of Command Level portfolios. Indeed, it was Lord Drayson who, in his Defence Industrial Strategy of 2005, described ‘killing projects’ as a sign of organisational maturity and not one of failure.

Better still, should demand for resources exceed supply, is having the means to decide not to start a project in the first place. This is precisely the intention behind the following statement taken from the Financial and Military Capability Operating Model (2016): “The Defence Plan is the backbone of the Head Office ‘direct’ function and while TLBs will have an opportunity to shape the plan through the Armed Forces Committee, it is designed as a deliberate explanation of what defence aims to achieve to meet policy. (However) If an acceptable position cannot be reached that matches demand with available resources, either policy will be adjusted to reduce demand, risk will be accepted or extra resources found.”

And this idea of ‘challenging policy’ introduces MOD’s final and possibly toughest challenge: behaviour change. Defence by its very nature is a ‘can do’ organisation. Saying ‘No’ does not come naturally when its history, doctrine and reputation is driven by following orders. However, while the tangible aspects of organisational development – roles, structures, job descriptions and so on – have been central to the implementation of Defence Reform, sustaining that transformation will require a different set of behaviours.

This has been recognised by the NAO in its report Strategic Financial Management in the MOD (July 2015): “Good financial management alone will not achieve all of the change that the department requires. This will also be dependent on changing the behaviours necessary for the system to work.”

However, the department’s operating model as described in ‘How Defence Works’ (December 2015) is rather ‘thin’ in its treatment of behaviours, with just three cursory references to the topic. That said, statements that include ‘placing the best interests of defence at the heart of the business’ and ‘continuing to display the right behaviours’ are encouraging signs.

So now the future really is beginning to look bright: one in which political interference is more measured, our collective understanding of success more meaningful, our approach to starting - and killing - projects more mature and our behaviours fully aligned to, and consistent with, the needs of the business of defence.

Now that is a future worth working towards.

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