Review of the Defence Accountability Framework · REVIEW OF THE DEFENCE ACCOUNTABILITY...

REVIEW OF THE DEFENCE ACCOUNTABILITY FRAMEWORK

JANUARY 2011

REVIEW OF THE DEFENCE ACCOUNTREVIEW OF THE DEFENCE ACCOUNTABILITY FRAMEWORKABILITY FRAMEWORK

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Dr Ian Watt AO Secretary Department of Defence CANBERRA ACT 2600

Air Chief Marshal Angus Houston AC, AFC Chief of the Defence Force Department of Defence CANBERRA ACT 2600

January 2011

Dear Secretary and Chief of the Defence Force

It is my pleasure to present you with the Review of Accountability and Governance in the Defence Department.

In presenting this report to you I would like to acknowledge and express my gratitude for all the assistance I r eceived in its preparation. I would particularly like to thank Dr Paul Schreier who led the team that worked with me and who took responsibility for the drafting the report and to express my appreciation to the three other team members – Ms Dianne Leak, Mr Jimmy Kiploks and Mr Marc Ablong - for their hard and excellent work. The team and I were greatly assisted by Deputy Secretary Brendan Sargeant whose contribution did much to enhance our work and for which I am very appr eciative.

I would like especially to acknowledge the very open and constructive engagement I found in all of my interactions acr oss Defence and for all of the generous time and assistance provided by many through the organisation.

Yours faithfully

Assoc. Prof. Rufus Black


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Contents Executive Summary 9

Decision making and strategic direction setting 9

Vertical chain of personal accountability 10

Horizontal accountability across the organisation 11

Culture and skills 11

Chapter 1: Introduction 13

1.1 Context 13

1.1.1 Accountability in Defence – the case for change 13

1.1.2 What will ensure impact this time? 15

1.2 What do we mean by accountability? 16

1.2.1 Background 16

1.2.2 Individual characteristics 18

1.2.3 Organisational characteristics 19

1.3 Structure for examining accountability 20

1.3.1 Decision making and strategic direction setting 20

1.3.2 The vertical chain of personal accountability 21

1.3.3 Horizontal accountability across the organisation 23

1.3.4 Culture and skills 24

1.4 Synthesis of lessons of the past 24

1.4.1 The program of measures will take time and stamina to implement 25

1.4.2 Formal mechanisms alone will not be enough 26

1.4.3 Implement in part of the organisation first:

experience shows that this works 27

1.4.4 Personal incentives to drive the required behaviours will be essential 27

Chapter 2: Decision-making and strategic direction setting 28

2.1 Introduction 28

2.1.1 Context 28

2.1.2 Decision-making systems and the exercise of strategic control 29

2.2.1 Context 30

2.2.2 Issues identified with Committees 32

2.2.3 Issues identified with decision making processes 35


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2.3 Committees and strategic direction setting–current state 36

2.3.1 Analysis 36

2.3.2 Case example of an alternative approach 38

2.3.3 Preliminary perspective 39

2.4 The case for a corporate plan 39

2.5 Recommendations on committees and strategic direction setting 45

2.5.1 Principles recommended for adoption 45

2.5.2 Operationalising the principles 47

2.6 Broader decision making–current state and recommendations 51

Chapter 3: Vertical chain of personal accountability 53

3.1 Introduction 53

3.2 Element A: Frame strategic direction 54

3.2.1 Past reviews 54

3.2.2 Current state and recommendations 54

3.3 Element B: Translate policy into measurable outcomes and make individuals accountable for delivery 60


3.3.1.1 Confused accountabilities 60

3.3.1.2 Insufficient use of measurable outcomes 61


3.3.2.1 Assignment of accountability 61

3.3.2.2 Translation of strategic guidance to measurable outcomes 66

3.4 Element C: Support the deliverer to deliver the required outcomes 70


3.4.1.1 Ensuring the right information is available 70

3.4.1.2 Ensuring people are prepared for their roles 70


3.4.2.1 Providing the right people and financial resources to accountable leaders 72

3.4.2.2 Ensuring the right information is available 74

3.4.2.3 Ensuring people are prepared for their roles 74

3.5 Element D: Measure and review outcomes, get to root causes of shortfalls and address them 75



3.5.2.1 Business performance management 75

3.5.2.2 Individual performance management 78

3.6 Element E: Apply rewards for out-performance and

consequences for sustained under-delivery 82



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Chapter 4: Horizontal accountability across the organisation 85

4.1 Introduction 85

4.2 Past reviews 86

4.2.1 Service level agreements 86

4.2.2 Business model 86

4.2.3 Delivery of capability 87

4.3 Current state and recommendations 88

4.3.1 Service level agreements 88

4.3.1.1 Context 88

4.3.1.2 Findings 89

4.3.2 Business model 92

4.3.3 Delivery of capability 92

hapter 5: Culture and skills 99

5.1 Past reviews 99

5.2 Defence culture today 100

5.3 How to ensure that accountability interventions lead

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to the necessary changes in behaviour? 101

5.3.1 Reinforcing with formal mechanisms 103

5.3.2 Developing talent and skills 104

5.3.3 Role modelling 106

5.3.4 Fostering understanding and conviction 107

Chapter 6: Guidance for kick-starting implementation 109

6.1 Introduction 109

6.2 Description of elements of implementation 110

6.2.A Top-down enterprise direction, committee restructuring

and role modelling 110


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6.2.A.1 Corporate plan 110

6.2.A.2 Committee restructuring 110

6.2.A.3 Role modelling 110

6.2.B Specify outcomes and clarify accountabilities across the top level of leadership 111

6.2.C Pilot in selected Groups and Services and roll-out subsequently 111

6.2.D Appoint accountability and performance officer 112

6.2.E Getting momentum in the first year 112

6.2.E.1 Making improvements in end-to-end capability process 113

6.2.E.2 Implementing accountability enabling measures 113

6.2.E.3 Designing and commencing implementation of skills and career model changes 113

6.2.E.4 Communicating what is being done to improve accountability 113

Appendix A: Terms of Reference 114

Appendix B: Defence Inspector-General Case Studies 117

Appendix C: Acknowledgements 119

Acronym Glossary 121

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Executive Summary

Defence has a complex accountability system that has evolved over many years. It has its strengths and weaknesses, however Defence has reached a point in its evolution where there is a strong case to redesign its accountability system. Current arrangements are under stress and their failure damages Defence. This stress is manifested in poor outcomes for Defence. Recent examples include: delivery failures for capability projects; non-compliance with AusTender reporting; poor or inappropriate procurement decision-making; poor outcomes in pay for Special Forces and a lack of cost consciousness in the management of day-to-day activity. Current accountability arrangements also constrain leadership capability and management capacity by reducing the ability of decision makers to exercise strategic control over the construction and implementation of decisions. In addition, the context of a capped budget and reducing contingency provision increases the level of risk that accrues from ineffective management and consequently raises the bar substantially for effective Defence strategic management and decision-making. Defence will need to be more agile, more efficient, and more effective. In practice this means that leaders need to make and implement better decisions faster and with more assurance.

This report is designed to assist Defence ensure it has a high quality accountability system that can evolve to meet the needs of the organisation now and into the future, particularly as it seeks to implement its Strategic Reform Program (SRP) and deliver Force 2030.

To support Defence build a high quality accountability system, this report:

• Examines what is meant by accountability, what kind of organisational and individual characteristics this implies and the components of accountability in the specific Defence context

• Summarises the lessons of the past and analyses the current issues Defence is facing across each component of accountability

• Identifies the opportunities to build higher quality accountability systems

• Describes the approach required from Defence’s senior leaders to capture the opportunities on offer.

Exhibit 1 illustrates the recommendations of this report as a set of themes across each element of accountability.

Decision-making and strategic direction setting

Defence requires an effective and efficient decision-making system which can translate strategic purpose into action effectively and efficiently. The ability to provide enterprise-wide strategic direction and exercise strategic control are critical for Defence. There are too many committees in Defence, which create diffused and confused accountability and their operation is often characterised by poor procedures. Decision-making and accountability systems need to ensure that Defence functions as a single, integrated enterprise, and that accountability systems function as a force for organisational cohesion. Defence


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decision-making lacks the framework of clear priorities and direction which would flow from an enterprise level corporate plan.

Defence can achieve stronger decision-making and strategic direction setting in three ways:

• Redefining committee structures and processes. Defence needs committee structures and processes that reinforce the concept that committees are only advisory to accountable decision makers. This can be achieved by:

- Having fewer, smaller committees with individual ownership focussed on supporting decision makers’ accountability. We specifically outline a streamlined structure and processes for top-level committees

- Putting in place sunset clauses for existing subordinate committees and mandating clear rules for (re-) establishing them, resulting in a radically reduced number of committees

- Establishing more robust procedures uniformly across committees (e.g., ensuring committee agendas are structured around decisions; establishing formal mechanisms for making commitments; having more robust recording and follow-up).

• Instituting an enterprise-wide corporate plan to provide strategic direction, trade-off and agree priorities and set outcomes to be delivered by each Group and Service across Defence. In creating this plan, the Simplified Defence Business Model (SDBM) provides a point of departure around which to articulate Defence’s outcomes. The corporate planning process will also form the foundation for a more robust quarterly review mechanism across Defence

• Establishing mechanisms for increasing contestability of key decisions (e.g., red teams) in a nonadversarial way to improve the quality of decision-making by formalising and institutionalising contestability for key decisions.

Vertical chain of personal accountability

Considerable work on the mechanisms of vertical accountability has been done in the past although many of the core mechanisms (e.g., Charters and Organisational Performance Agreements (OPAs)) have fallen into abeyance. Accountability for delivery needs to be assigned clearly to named individuals and, where there is joint accountability for delivery of an outcome, a clear articulation of who does what to deliver the outcome.

Defence needs to establish a framework in which it can hold its personnel accountable for delivery of outcomes and can achieve a stronger chain of personal accountability in two ways:

• Using the outputs of the enterprise-wide corporate plan to cascade SMART outcome-based measures down each Group/Service and enshrining them in simplified business performance documentation aligned precisely with individual performance agreements and the enterprise-wide corporate plan

• Undertaking rigorous performance management (business and individual). Business performance conversations must take a new shape, focused on addressing the root causes of shortfalls against numeric (SMART) targets and addressing them. Individual performance management will similarly benefit from greater rigour and differentiation with

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more robust application of rewards and sanctions for consistent out- or underperformance of outcome delivery.

Horizontal accountability across the organisation

Much work has been done on the mechanisms to manage horizontal accountability across Defence and recent improvements in Materiel Sustainment Agreements (MSAs) and Customer Supplier Agreements (CSAs) have enhanced their effectiveness. The SDBM provides a good foundation for increased clarity and accountability. Despite much work in recent years, the capability development process continues to suffer from delivery shortfalls related to poor accountability. The reality of much greater scrutiny and the prevailing environment of a capped budget make resolution of these issues essential for the credibility of Defence and the delivery of its outcomes.

Defence can improve horizontal accountability in two ways:

• Continue to tighten Service Level Agreements (SLAs) to reinforce partnership outcomes. Defence can ensure greater responsibility for shared outcomes with an appropriate balance between customer/supplier type arrangements and partnership agreements

• Strengthen accountability for whole-life cost and delivery of capability. Defence can improve its capability outcomes by progressively tightening the boundary conditions around the capability development process, improving top-down incentives for better capability delivery in an environment of capped budgets and extension of the current use of integrated project teams

(and project team leaders) across the end-to-end capability development process.

Culture and skills

To effect significant improvements in accountability, changes to the mechanisms of accountability are necessary but insufficient. To make changes in accountability ‘stick’, Defence needs to address underlying culture and skills issues in four areas:

• Embedding the use of outcomes-based language across the organisation

• Implementing a new model for personal skills development to improve skills

• Continuing reform of risk management practices

- Defence needs to define its risk appetite across all areas of the enterprise

- Defence should develop a ‘near miss’ register to proactively identify and problem solve risks.

• Using review forums and other interactions to role model new behaviours.


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Exhibit 1

Decision making:Committee structure and processes that reinforce •committees as advisory to accountable decision makers:Fewer, smaller committees owned by individuals -focused on supporting decision makers’ accountabilityRules for (re-)establishing committees -Agendas structured around decisions -Formal mechanisms for making committments -Mechanisms for increasing contestability of key •decisions (e.g., red teams) non-adversariallyEnterprise-wide corporate plan•

overall structure of recommenDations

vertical accountability:Use whole-of-enterprise •corporate plan to create:Clear outcomes defined -around each element of Simplified Defence Business Model**Defined accountabilities -for ourcomes both individual or, if shared, who does what to deliver the outcomeTrade-offs across -enterpriseCascade SMART* •outcome-based measures down each Group/ServiceUndertake rigorous •performance management (business and individual) based on simplified documents

Horizontal accountability:Continue to tighten SLAs to •reinforce partnership outcomesUse new Simplified Defence •Business Model** as foundation of planningStrengthen accountability for •whole-of-life cost and delivery of capability through progressively tightening boundary conditions and use of integrated teams

culture and skillsEmbed outcomes-based language•Implement new model for personal skills •developmentContinue risk management reform•Definition of specific risk appetite•Development of ‘near miss’ register to proactively •identify and problem solve risksUse review forums and other interactions to role •model new behaviours

*: Specific, Measurable, Achievable, Relevant, Time-bound**: As already developed by DefenceSource: Team analysis

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Chapter 1: Introduction

1.1 Context

1.1.1 Accountability in Defence–the case for change

Accountability exists to ensure that an organisation is clear about the outcomes it has to achieve, who is to achieve them and what is to be done to get to and fix root causes of shortfalls when they occur. Accountability is the means by which the decisions that are made about organisational direction are translated into action. This means that the structures, process and culture an organisation uses to create accountability – its accountability system - is the backbone of organisational governance and of its leaders’ ability to exercise strategic control over what the organisation delivers and how it delivers it. The quality of the accountability system has a major impact on organisational performance in all its dimensions.

Ensuring that an organisation has a high quality accountability system is a central task of designing and managing any organisation well. There is no template for a perfect system because all good accountability systems are designed to meet the specific nature, purposes and challenges of an organisation at a particular time. The task of organisational design is to ensure that the accountability system continues to evolve to meet the needs of the organisation today. This report aims to assist Defence with that task.

The history of the development of Defence has over many years been about the development of the capacity to function as a single integrated organisation. The challenge has been to achieve this without sacrificing the often unique contribution

to the Defence Outcome that is made by the diverse organisations that make up Defence. The strategic management challenge has been to harmonise the various organisational components of Defence to work in ways that achieve outcomes greater than those that might otherwise be achieved. This is not a simple task, given the separate histories of the many organisations in Defence and the identities that these histories have nurtured.

This report assumes that Defence’s performance in the future will in part be governed by its capacity to function as a single entity, and to translate strategic goals into effective local action in operational and administrative spheres. In strategic terms it is a shift towards the management of performance through the understanding and management of inter-dependencies, as much as through more traditional program and performance management frameworks. That said, this trend towards increasing interdependency of organisational components and hence the need to understand and administer this has been the history of Defence’s organisational development.

Defence has a complex accountability system that has evolved over many years as the organisation has evolved. One trend in administrative reform has focussed on alignment of accountability arrangements with structure and purpose. These arrangements have not been stable because Defence as an organisation has undergone very significant transformation in response to external and internal pressures. This report recognises the work of previous reviews, and builds on them, but focuses more explicitly on the accountability system as a driver of organisational capacity. This capacity might be expressed as decision-making stability as a platform for operational


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and administrative agility. In other words, a well functioning accountability system should increase Defence’s ability to respond more effectively and efficiently to the challenges it faces.

This report will examine strengths and weaknesses of current arrangements as it reviews and develops its recommendations. At this point it is sufficient to note that they reflect an incremental and cumulative response to Government and legislative requirements, to changing organisational need and priority, and to reviews undertaken at various times in Defence’s history. We believe that Defence has reached a point in its history where there is a strong case to redesign its accountability system.

“A change

management and

accountability

environment which is complex and at times lacking in

end control,”

KPMG Audit on the

Implementation of the DFRT

Determinations for Special

Forces Pay (March 2009)

First, the current arrangements are under stress and their failure damages Defence. This stress is manifested in poor outcomes for Defence. Recent examples include: delivery failures for capability projects; non-compliance with AusTender reporting; poor or inappropriate procurement decision-making; poor outcomes in pay for Special Forces and a lack of cost consciousness in the management of day-to-day activity. These indicate that accountability systems are not working optimally, with respect to both the quality of decisions made and

their implementation. This suggests a gap between decision-making processes and the achievement of Defence’s strategic purpose. The damage to Defence is a loss of confidence in Government and with the public. There is also the very real damage caused by financial waste and to organisational morale and commitment.

Second, the current arrangements constrain leadership capability and management capacity by reducing the ability of decision makers to exercise strategic control over the construction and implementation of decisions. This can manifest in loss of visibility of implementation, dispersion of implementation with insufficient monitoring or tracking, separation of decision authority from responsibility for implementation, or decision-making authority residing with more than one entity, any of which may act without reference to broader interests or policies.

“[The] weak

control

environment has

been exacerbated

by the lack of

clarity as to which

Group has overall responsibility for

AusTender”,

Draft Audit Report AusTender

Procurement Review in

response to SMH Allegations

(Audit & Fraud Control Division,

April 2010)

Third, Defence needs an accountability system not just effective today but one which will enable it to implement Force 2030. It needs to be able to implement that vision in a very different environment

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to the one its current accountability system is designed for. Defence now exists in an environment of a capped budget and reduced contingency provision, which will increase the level of risk that accrues from ineffective management. Defence strategic management and decision-making will need to be more agile, more efficient, and more effective. In practice this means that leaders need to make and implement better decisions faster and with more assurance. The ability to risk-manage through the use of large contingency (or money stored in the form of under-performance, over-programming or planned slippage) is being reduced. Agility in strategic decision-making and implementation reduces the need to risk manage through the provision of contingency. It is thus an enabler of organisational capability. Since it strengthens decision-making capability, an effective accountability system is a driver of improved leadership and management performance.

Any new accountability systems that will address today’s issues and support Defence’s effectiveness in the future will need to meet the following strategic requirements:

• The accountability system must support the ability of the Secretary and the Chief of the Defence Force (CDF), both separately and as a diarchy, to deliver consistently the outcomes for which Defence is responsible, including fulfilling the requirements of legislation and other supporting Government direction to which they are subject

• The accountability system must support the creation of an organisational culture that systematically and rigorously looks to understand and address the root causes of underperformance as early as possible (see Section 1.2)

• The accountability system must create internal and external clarity and transparency about who is responsible for making decisions

• The accountability system must ensure the highest quality of robust, transparent decision-making by:

- Getting the right information in front of the right decision makers

- Allowing space for contestability for large, difficult or complex decisions, to ensure high quality decisions

- Allocating appropriate resources to support decision-making.

• The accountability system must allocate appropriate resources to ensure the implementation of decisions

• The accountability system must reach down into the organisation right to front line staff who are ultimately responsible for actual delivery.

While a modern Defence organisation is a necessarily complex business, this does not mean that establishing and maintaining an effective accountability system that meets these principles is beyond reach. Organisations of similar scale and complexity have managed to achieve strong cultures of accountability. This report develops a proposed accountability system and elaborates in some detail the major elements of such a system. It also identifies and discusses issues of culture that animate and shape how processes really work. In advocating that change, it recognises that the levers of change reside in identity and culture as much as structure, system and process. In developing proposals, the report’s strategic reference is the principles discussed above.

1.1.2 What will ensure impact this time?

There have been many internal and external reviews of Defence that have influenced the accountability mechanisms and culture of the organisation. In the context of Defence accountability, the extensive changes


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resulting from the Tange Review in 1973, which amalgamated the five then-existing departments into one, created the diarchy and established the position which is now the CDF, began the journey towards increased cross-Defence use of joint delivery structures and, ultimately, shared services. Since that review there have been at least 10 major reviews which commented on, or had implications for, accountability1. It is worth recognising upfront that between them these various reviews have touched on the overwhelming majority of accountability symptoms that this report will detail. Hence, from early in the team’s work a core question was: what will ensure impact this time?

To ensure impact, it is important to begin by understanding what we mean by accountability because this frames the types of organisation and individual we believe Defence should aim to create. The first section of this chapter deals with this question.

Having understood what we mean by accountability, we describe how we broke down the overall concept of accountability into constituent parts for analysing the issues and making recommendations. This is done in the second section of this chapter.

Finally, throughout Chapters 2 to 5 of this report, in which we examine the current state of Defence accountability2, we have explicitly taken the time to look in detail at past work and to take account of the lessons of history that arise from previous work. The final section of this chapter gives

the reader a synthesised preview of those lessons. We have done this early in the report because the lessons’ implications aid the reader in understanding the proper context for the review’s work.

1.2 What do we mean by accountability?

A system of ‘why first, then who’

1.2.1 Background

Defence is a necessarily complex organisation for two reasons. First, to generate the high quality integrated capability required of a modern military organisation, Defence needs to maintain separate services with the distinctiveness and integrity required to generate the highest quality capability outputs and an integrated structure to prepare for and manage operations. Second, for the efficient delivery of capability where separate services exist there is a need for shared services. This means that Defence will have matrix elements to support service excellence, integrated capability development and delivery and efficiency. In organisations with this level of complexity, simple lines of individual accountability connecting senior leaders with front-line staff are insufficient to ensure delivery3

across the organisation.

In Defence, this complexity is exacerbated by the long timelines that exist between decisions being made and the manifestation of those decisions (e.g., in the selection of a procurement strategy for a major

1 Defence Review of the Higher Defence Organisation in Australia (Utz Review, 1982); The Management of Australia’s Defence and The Australian Defence Force: Its structure and capabilities (Cross Review, 1984 and 1987); Review of Australia’s Defence Capabilities (Dibb, 1986); The Defence Force and the Community (Wrigley, 1990); Force Structure Review (1991); Defence Efficiency Review (DER) (1997); Defence Procurement Review (Kinnaird, 2003); Defence Management Review (DMR) (Proust, 2007); Defence Budget Audit (DBA) (Pappas, 2008); Defence Procurement and Sustainment Review (Mortimer, 2008)

2 With the exception of the operational chain of command, which is explicitly out of scope in this review

3 With the notable exception of the operational chain of command where clear lines of devolved accountability and responsibility are central to the military command chain

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new capability). One notable illustration of this (amongst many others) is the Super Seasprite project which was approved in February 1996, with a Prime Contract in June 1997 and which ran for 12 years with a variety of difficulties prior to cancellation. The Australian National Audit Office (ANAO) Report4 states that “the Project was complex in nature and long running and accordingly the decision to cancel the Project cannot be attributed to any individual factor”. There were a variety of root causes of underperformance across a number of organisational boundaries, each providing important lessons for future projects. Managing this complexity is the reality of managing an organisation of the scale of Defence and ensuring strong accountability in this context is not a simple matter5.

While different organisations use a range of accountability systems to manage this complexity, what is common in the highest-performing organisations is the way in which the accountability system handles delivery issues or failures. These high-accountability organisations respond to setbacks not by first looking for individuals to blame (a system or culture of ‘who’) but by first looking to understand the underlying root causes of the setback, so they can be fixed quickly (a system of ‘why did this setback happen?’). In the commercial arena, the major Japanese manufacturers have been well-known exponents of this philosophy for decades with, e.g., lean manufacturing techniques having at their root a relentless search for ‘things that can be fixed’ to make the outcomes better (in this case ever higher quality and cheaper products). It does

not absolve individuals of accountability for outcomes (indeed, it strengthens this accountability) but it puts the focus on fixing the issues first. The outcome of this style of operation is those root causes of setbacks are quickly put right, first time and endure. Therefore, it produces much better long-term performance and also reduces risk, the latter since root causes are identified early and put right before their effects become catastrophic to, e.g., their finances or reputation.

Furthermore, in public sector organisations, even with more flexible dismissal rules, the practices and protocols that necessarily support public service independence create an environment sufficiently different from the private sector that a mirroring of very strong individualistic approaches to accountability that are found in some organisations in the private sector are not possible. We also note that in many private sector organisations accountability is also a significant issue, especially in those that approach the levels of complexity and with very long-term projects like Defence. Given this context, we believe that a system of ‘why first’ is even more essential.

In the next two sections we detail the fundamental beliefs that emerge across a variety of different organisations (public and private sector) worldwide that have strong accountability of this ‘why first, then who’ kind. The first section details the individual behaviours that ensure accountability and the second the organisation-wide characteristics that underpin and reinforce those behaviours.

4 The Super Seasprite, Audit Report No. 41 2008-09 (ANAO)

5 This complexity does not only apply to major equipment procurement as a reading of, e.g., the Independent Audit of the Implementation of the Defence Force Remuneration Tribunal (DFRT) Determinations for Special Forces Pay (KPMG, 2009) or the complex remediations to lift Defence’s accounts qualifications in the mid-90s (listed in, e.g., the Defence Annual Report 2005-06) amply demonstrate


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1.2.2 Individual characteristics

In terms of individual behaviour, these organisations contain people with a strong sense of personal ownership of the outcomes for which they are responsible within the context of working to deliver overall corporate goals. This ownership of outcomes matters deeply, regardless of:

• Day-to-day or month-to-month successes and failures in various separate outcomes. (Failures are bound to occur even in the highest-performing organisations which, after all, set themselves the highest aspirations and a matching tolerance of the risks of delivery that accompany them: what matters is how people react to setbacks)

• Whether they control all the resources (i.e., people and financial) that bear on the success or failure of the outcome. Modern organisations, especially large ones, are too complex and networked for simple, linear authority structures to work. So, accountable people need to be comfortable with, and expert in, collaborating across formal organisational boundaries to deliver the outcomes for which they are responsible. Many organisations put in place formal incentives to encourage this collaboration (e.g., assessing individuals in annual performance reviews on how well they have been able to support the quantified outcomes of others, and how much in demand they are to do so).

“You can’t own

everything as a

senior manager

but you need to

know how to work

with others who

own other parts to

achieve the desired

outcome”,

Review interviewee

Controlling all the resources that bear on delivery is the exception rather than the rule in modern organisations, which typically make much greater use of matrix structures –e.g., reflecting the use of shared services to maximise efficiency. This means that accountable people must value and take pride in the outcomes they achieve with others.

Given that setbacks are bound to occur from time-to-time, even in the highest performing organisations, how do accountable people in those organisations react? These people own the outcomes for which they are responsible and therefore display the following behaviours:

• When things go wrong, accountable individuals immediately own the whole problem. They set about identifying the root causes underlying failure and develop systemic solutions to prevent recurrence. This strong sense of personal ownership matters regardless of day-today or month-to-month successes and setbacks for different outcomes

• They openly draw in others (including those outside their own formal organisational boundaries) to help them (knowing that they and those drawn in will be recognised for doing so)

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• To move to rectification as quickly as possible, they highlight the issue openly to others quickly so that: (i) they can receive the support they need from them and (ii) so that the rest of the organisation can learn systematically from the experience to reduce the risk of a repeat (knowing that the organisation’s first reaction to this will be to focus on supporting the solution and not scrutinising the individual’s failings)

• Others in the organisation who can provide support move quickly to help the accountable individual with advice and, where needed, resources. To be clear however, the ultimate accountability for resolution remains firmly with the accountable individual.

1.2.3 Organisational characteristics

In terms of the organisational characteristics, high-accountability organisations use formal and informal incentives to create a system that encourages the individual behaviours described above. Specifically, a high-accountability organisation:

• Sets specific, measurable, achievable, relevant and time-bound6 outcomes and ensures individuals are accountable for, and own, them

• Encourages individuals to highlight errors as soon as they see them and rewards them for doing so, promoting a culture of transparency on issues and celebrating their identification. For example, a Japanese motor company rewards frontline assembly staff who pull the Andon Cord (which brings the entire assembly line to a halt) when they spot even a

small production error. Senior production managers worry when the cord has not been pulled for some time because it may indicate a failure to spot ways of improving the production process

• Supports accountable individuals to get their issues fixed and rewards collaboration across organisational boundaries with specific incentives to do so (e.g., by using the annual assessment mechanism as described above)

• Encourages people to manage appropriate risks as a necessary part of delivering high aspirations

• Ensures that accountable people have the personal skills required to deliver, through a combination of formal training but, more importantly, using structured on-the-job apprenticeships to develop the right skills

• Provides the right information (e.g., around costs) to accountable leaders to allow them to make the right decisions and trade-offs around their accountabilities

• Ensures that resources needed to help fix errors are made available rapidly.

We have called this a ‘system of why first, then who?’ That is, the instinctive reaction of a high-accountability organisation to an emerging issue is to ask ‘why did this happen and what can I and we do to fix it?’ We contrast this with organisations whose first instinct is to look for someone to blame for a setback (a ‘system of who?’). The individuals within these organisations: (i) fear blame; (ii) hide issues rather than getting to the bottom of the root causes and (iii) focus on ‘covering their rear’ which prolongs

6 ‘SMART’ outcomes: Specific to the business; Measurable (i.e., the overwhelming majority with numbers and units); Achievable (i.e., realistic and stretching with external benchmarks to inform the ‘stretch’ wherever possible); Relevant (i.e., aligned with the overall outcomes of the business and the outcomes required of the relevant superior) and Time-bound (i.e., specifying delivery over a concrete time-frame)


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the issue, may result in its escalation to catastrophic levels and delays both the ultimate solution and the opportunity for the accountable individual and the wider organisation to learn the lessons of it. Consequently, these organisations waste valuable energy and resources which could be better used fixing systemic issues.

A ‘system of why first, then who?’ does not eliminate personal consequences. What it does mean is that there are only personal consequences if (in descending order of seriousness) there is:

• Deliberate malevolent behaviour or negligence–where removal is often justified

• Repeated failure to do things the right way despite capacity to do so–which indicates a lack of will to perform and requires direct intervention

• Lack of capacity to do the job–which indicates a lack of skill to do the job and requires significant immediate skills development, if that is possible, or redeployment.

We have had these individual and organisational characteristics firmly in mind when examining Defence accountability. The next section describes the structure we have used to examine accountability in this review.

1.3 Structure for examining accountability

In reviewing Defence accountability, the team found it useful to structure the examination of accountability into four separate elements. These elements, the structure of which align with the themes of earlier reports (and are equally useful in structuring the findings of this review7) are:

• Decision-making and strategic direction setting

• The vertical chain of personal accountability

• Horizontal accountability across the organisation between Groups (including associated business models)

• Culture and skills in support of accountability.

We take each in turn.

1.3.1 Decision-making and strategic direction setting

Effective decision-making and strategic direction setting are clearly central to success across the whole Defence enterprise, as expressed in the effective and efficient delivery of its outcomes. In the Defence context we would include the following elements of decision-making and direction setting in this category:

• The effectiveness and efficiency of the various Defence committees, with a focus on role clarity, size, and the ability to follow up and audit decision-making

• The effectiveness of the Defence corporate planning process for articulating strategic direction and allowing for its translation for outcomes down the organisation

• Decision-making processes beyond committees, including contestability within, strategic discipline associated with, and authority of decision-making within Defence

• The degree to which decisions are made at a level commensurate with their strategic importance.

7 See Chapters 2 to 5

21

1.3.2 The vertical chain of personal accountability

The vertical chain of personal accountability [Exhibit 2] describes the separate elements of accountability necessary to ensure the right behaviour by, and outcomes driven by, individuals. It begins with appropriately framed strategic direction. The second step is to translate the strategic direction into a number of measurable outcomes and to make the relevant individual accountable for delivering the outcomes defined. In typical high-accountability organisations, the outcomes defined:

• Are ‘SMART’ outcomes–i.e., Specific to the business; Measurable (i.e., the overwhelming majority with numbers and units); Achievable (i.e., realistic yet stretching with use of external benchmarks and previous delivery experience to inform the ‘stretch’ wherever possible); Relevant (i.e., aligned with the overall outcomes of the business and the outcomes required of the relevant superior) and Time-bound (i.e., specifying delivery over a concrete time-frame)

• Have a proportion of the measures providing a forward-looking perspective on the organisation’s longer-term performance and proportion a perspective on current performance

• Recognise that cooperation with and by others is critical

• Are consistent with wider stakeholder requirements8

• Include those that provide a leading indication of future performance, and potential roadblocks to future performance to ensure the organisation is not trying to ‘navigate by looking in the rear view mirror’.

It is important to recognise that high-accountability organisations also have the language of outcomes embedded in their everyday conversation and values. They think in terms of outcomes and the language of outcomes is seen throughout their conversations and written strategies, policies, procedures and systems.

Having contracted the relevant individual9

the third, essential, step is to give the deliverer the appropriate support. This includes, of course, the right resources (i.e., people and finances) necessary to do the job. Additionally (and critically, given our definition of accountability in the preamble) this support must include:

• Sustained personal support (e.g., coaching and leadership focus) from senior personnel

• The right management information and knowledge systems (e.g., visibility of costs, accumulated organisational wisdom on what has worked/not worked in previous business cycles) needed to make good decisions and to monitor day-to-day performance of, e.g., subordinate parts of the organisation

• Ensuring that the deliverer has access to the right skills to do the job: both personal skills and also the skills of his or her team and those beyond the team that are drawn on to support delivery.

8 E.g., legislation/policy relevant to the industry/sector

9 Complex organisations require professionally skilled senior officers supported by a cadre of similarly skilled support staff. Building such skills requires the identification and management of career management streams in the core organisational disciplines (strategy, finance, human resources and management)

• Provide context • Articulate strategic

direction • Set timeframe for

delivery • Take account of

legislative/regulatory requirements

• Take account of practical delivery constraints when defining policy

• Reward consistently good delivery of outcomes and/or apply consequences for consistently poor delivery of outcomes

• Reward collaboration across organisational boundaries to achieve support and support delivery

vertical accountability cHain

frame policya translate into measurable

outcomes and make individuals accountable for

delivery

b

support deliverer to deliver outcomes

c

measure and review outcomes

D

apply rewards and

consequences

e

execute and manage delivery

• Collect and synthesize data on outcome performance levels

• Identify root causes of shortfalls • Coach deliverer on reconciliation of root

causes • Defence action (and allocate) to fix root

causes • Monitor and follow up actions

• Take strategic direction articulated in policy and break it down into ‘SMART’ outcomes

• Delegate outcomes to individuals for delivery

• Agree performance target for each outcome

• Agree mechanism for accountability - e.g., performance agreement

• Assist with resources • Provide input/advice on

delivery • Provide information and

data needed for decision making

• Deliver their part of the overall value chain (especially for complex processes)

Source: Team analysis


22

With the appropriate support in place, the fourth step is to measure and review the delivery of outcomes on a regular basis. Most importantly (and consistent with the definition of accountability in the preamble) this step must quickly identify root causes of any shortfalls, internal roadblocks or externalities that will adversely affect performance and move the deliverer to rectification of those shortfalls with defined actions and timelines for resolution. It is important that top-level outcomes translate into the initiatives or deliverables for which individuals at lower levels are accountable, and that those initiatives and deliverables are checked at each level of the organisation to ensure that they sum up

to what is required by the relevant leader at the next level up. Ultimately, each individual is accountable for their part of the delivery and the management task is to ensure that each individual has the right clear targets and accountabilities for delivering them to ensure that, in aggregate, overall organisational outcomes are delivered.

In the fifth and final step, rewards are given for consistent out-performance and there are defined consequences for consistent underperformance. Importantly, both rewards and consequences must be known and visible to the individual and the organisation, and be applied consistently across the organisation.

Exhibit 2

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As Exhibit 2 illustrates, this chain should not be thought of as a one-direction, linear process: it is typically iterative over time (e.g., experience gained during actual delivery one year can inform

Exhibit 3

adjustments to policy in subsequent years). Exhibit 3, below, illustrates examples of documentation, procedures and other apparatus used within Defence related to each step in the chain.

examples of Defence Documents anD proceDures relevant to eacH stage of tHe vertical accountability cHain

• Cabinet submissions • Ministerial directives • SODI, including

Defence Instructions, CEI, manuals (e.g., Defence Procurement Policy Manual, Accounting Policy)

• Annual review cycle

Source: Team analysis

frame policy a translate into measurable

outcomes and make individuals accountable for

delivery

b

support deliverer to deliver outcomes

c

measure and review outcomes

D

apply rewards and

consequences

e

execute and manage delivery

• Group produced internal reports • Committees • 1-on-1 meetings • Formal reporting (e.g., Defence audit and risk

committees) • Internal audit reports • ANAO reports

• Charters (for direct reports to SEC/CDF)

• OPAs • Performance

agreements • Business plans

• Budget allocation • FTE/AFS allocation • Submission to arrange

external providers • Internal secondments

(e.g., leveraging internal networks)

• Information systems • Meetings • Committees

1.3.3 Horizontal accountability across the organisation

In addition to the chain of personal accountability any complex organisation has mechanisms for enhancing accountability and collaboration across the organisation between groups of people in different parts of the organisation to produce the right outcomes. Examples of these mechanisms in high-accountability organisations include:

• A defined business model which describes the relationships and structures of the business beyond those articulated in the line structure

• Customer-supplier agreements for delivery of goods and services from one part of the organisation to another (e.g., for the delivery of shared services) and which include ‘SMART’ outcomes. These ought to be structured explicitly,


24

in both the language used and in specific incentives contained within them, to represent the nature of the relationship (e.g., partnership; customer-supplier) and should provide the right information to allow appropriate trade-offs within the organisation–e.g., transparent costs of key outputs

• Peer groups which bring together people of the same functional specialisation to share best practice across organisational boundaries, increase coaching and raise individual skills: all are essential precursors of better accountability.

In the context of Defence the mechanisms used (and examined in earlier reports) include: Materiel Sustainment Agreements (MSAs); Materiel Acquisition Agreements (MAAs); Customer Supplier Agreements (CSAs) and the definition of a Defence Business Model. In Chapter 4, which deals with accountability across the organisation, we also examine the Defence business model and the end-to-end delivery of capability.

1.3.4 Culture and skills

Finally, and consistent with the preamble to this report, good accountability can be held back, or reinforced, by the skills of the workforce and the underlying culture (including the values) of the organisation.

* * *

In Chapters 2 to 5 we examine in turn: (i) decision-making and strategic direction setting; (ii) the vertical chain of personal accountability; (iii) horizontal accountability across the organisation and (iv) culture and skills. Within each chapter we begin by examining in detail past work and its lessons and then understand where Defence accountability is today to make recommendations taking account of current context and past lessons.

The next section of this chapter gives the reader a synthesised preview of the implications of past lessons for this review. The lessons are examined in detail within each of Chapters 2 to 5, aligned with each of the major elements of accountability into which we have structured the review’s work. To aid the reader in understanding the context for this review early, we have brought a synthesis of past lessons’ implications forward into the introductory chapter.

1.4 Synthesis of lessons of the past

We examine the lessons from previous work in detail in Chapters 2 to 5. Synthesising the findings of previous work makes it clear that accountability issues are ones with which Defence has wrestled over a long period, devoting considerable internal and external effort and expertise to understanding them and proposing changes. It is equally clear that many of the most difficult issues across each of the elements of accountability remain unresolved despite considerable effort.

That similar recommendations in the same specific areas appear on multiple occasions implies, at the least, a lack of follow-through to ensure complete implementation but also points to deeper-seated issues that are hampering effective implementation. Taking account of the lessons of the past will be critical if this review is to have impact.

The lessons from the past fall into four broad themes:

• The need to ensure follow-through of a complete program of measures over the longer-term timeframe likely to be required to ensure change. There should be no expectation of a ‘magic bullet’ or ‘quick fix’ to underlying accountability issues. Defence will need stamina to ensure the required changes

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occur and should be thinking in terms of a program over a number of years, not weeks or months. Achieving the kinds of outcomes required in the individual and organisational characteristics described in section 1.2 above will need a complete package of actions to be undertaken together over the duration of the program: picking and choosing from the menu has not worked in the past and will not work now.

• Formal mechanisms alone, important though they are, are not sufficient to drive accountability. They have been the focus of repeated efforts and have fallen short of the requirement. Informal mechanisms will be critical, in particular ensuring that the right skills and culture are in place and that they are role-modelled in the organisation, from top to bottom

• There have been a number of successes across Defence in improving formal mechanisms and a smaller, but not insignificant, number of cases of successful implementation of informal or cultural changes that improved outcomes. Defence can learn from these successes across the organisation. Given that successful case examples have often occurred in the past at the level of Groups or Services, it implies that a program of change may benefit from being implemented in a part of the organisation first and then rolled out more widely

• Personal incentives to drive the required changes will need to be addressed explicitly and put in place. Changes in behaviour will not happen without this.

1.4.1 The program of measures will take time and stamina to implement

Defence has commenced work several times in the past to resolve issues raised through formal review and recommendation. Our interviews revealed a common perception that such work has rarely gained the traction required once the immediacy of the issue that has driven a particular review has disappeared and the dedicated review team has been disbanded. Some of the more consistent rationalisations for the longer-term failure to consolidate and institutionalise such change have included:

• An operational tempo that has overtaken addressing challenges that require substantial organisational effort and time to implement

• An organisation that has changed substantially (often structural change) within the business cycle and so recommendations have been ‘overtaken by events’

• The initial ‘product’ aimed at meeting a recommendation has not met expectations and a decision to proceed no further has been made

• The organisation failed to appropriately resource (human, financial and systems) the change

• The time taken to develop or plan a change was so long (sometimes a multiple of years) that the initial imperative for change was no longer apparent

• No one authoritative individual was given accountability for implementing or managing change and the organisation could not coordinate efforts across multiple functional domains

• The personnel charged with change have posted out and the new incumbents have different priorities and mandates


26

• The organisation did not possess the skills or abilities to make the ‘theory’ of change into a practical reality.

Given this context, it is clear that in constructing recommendations to address accountability in Defence there is no ‘magic bullet’ that, when fired, will provide a simple, instant solution. Embedding the individual and, particularly, the organisational characteristics to drive a culture of ‘why first, then who’ will need to be thought of in terms of a program of changes over several years and not several weeks or months. This timeframe is consistent with driving the underlying behavioural changes necessary to achieve a strong, self-sustaining accountability culture. In addition, the past tells us that the following will be important in designing the program to improve accountability:

• Structural organisational changes, whilst not ruled out where they can help address obvious issues such as clearly overlapping accountabilities, are unlikely to be core to solution, particularly in an organisation that has undergone considerable, almost continuous, structural change. This review has consequently not used the structural ‘lens’ as a core lever in its work but has rather only considered it when it is absolutely necessary to improve accountability

• The program will need to have sustained, committed leadership from the top of the organisation and stamina to follow-through implementation over several years during which the posting cycle would be expected to lead to some turnover of senior leaders

• Given the length of the program there will need to be clear, visible milestones that illustrate what the organisation would ‘look like’ en route to a more accountable culture. Senior leaders can then compare what they actually

see with what is expected at a given milestone and then intervene where needed to improve the pace and depth of implementation

• Upgrading skills will be critical to improving accountability and this is an area that will need urgent and sustained attention both in terms of ensuring that those leading the program have the right skills and in addressing more urgently the underlying skills deficits leading to poor accountability across the organisation

• The program will need to be carefully resourced to ensure delivery.

1.4.2 Formal mechanisms alone will not be enough

In terms of the weight of issues analysed and, hence, recommendations made, the overwhelming focus has been on the identification, and attempted improvement, of the formal mechanistic and process issues. These areas (e.g., performance agreements; service level agreements; Charters; Directives; mandates) have been examined separately in various reports and remedial actions proposed to improve them, typically focusing on greater clarity, definition, detail or specificity. The focus on formal mechanisms is likely not unrelated to the cultural bias for the organisation to rely on process to achieve its outcomes, a point made in many of the internal and external stakeholder interviews conducted by the team.

The more deep-seated skills and culture issues have been examined in much less detail than formal mechanisms. Whilst recommendations, mostly with respect to skills have been made they have yet to be broadly implemented or yield significant results. Furthermore, cultural issues have not been significantly directly addressed across the whole organisation. We believe

27

that addressing culture and skills, and role-modelling new from top to bottom across the organisation will be essential for success.

1.4.3 Implement in part of the organisation first: experience shows that this works

Substantial efforts at skills and culture change to drive better outcomes have been done successfully before, within individual Groups and Services. For instance, a number of interviewees within and, equally importantly, outside Defence Intelligence and Security have pointed to the work done to create a more collaborative, capable culture within Defence Intelligence following the 2004 Inquiry into Australian Intelligence Agencies (the Flood Review).

This is not an isolated case. For example there has been substantial cultural change within the Royal Australian Navy as a consequence of the New Generation Navy and the Defence Materiel Organisation (DMO) has been working on creating a more business-like culture within its organisation. Other Groups and Services have embarked upon similar exercises to improve elements of skills and culture in recent years. What this demonstrates is that committed leadership and sustained effort at the level of Groups and Services can yield results. Given that Groups and Services are the fundamental building blocks of the organisational it is not surprising that efforts targeted at the scale of those building blocks have demonstrated success. This suggests that a broader program of improving accountability may benefit from being implemented or piloted in a part of the organisation first and then rolled out more widely.

1.4.4 Personal incentives to drive the required behaviours will be essential

Achieving the organisational and individual characteristics described in Section 1.2 will not be easy, especially in the context of an organisation like Defence which has: (i) grappled with accountability-related issues over a long period and (ii) has a need to pay even greater attention to underlying skills and culture issues. Given this context, we believe it will be essential to put in place explicit personal incentives to drive the required change. Changes in behaviour will not happen without this.

* * *

The next chapter examines decision-making and strategic direction setting in detail. It begins by examining in detail past work and its lessons, then understands where Defence accountability is today and finally makes recommendations.


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Chapter 2: Decision making and strategic direction setting Good decision-making and the ability to provide enterprise-wide strategic direction and exercise strategic control are critical for Defence. There are too many committees in Defence, which create diffused and confused accountability and their operation is often characterised by confused committee roles, unstructured agendas, poor monitoring and feedback mechanisms for decisions made and weak commitment to decisions and actions down the organisation. Decision-making and accountability systems need to ensure that Defence functions as a single, integrated enterprise, and that decision-making and accountability systems function as a force for organisational cohesion.

To improve the effectiveness of committees a fundamental change in how committees operate is required. We recommend a simpler committee structure at the top of Defence (fewer, smaller committees), a radical reduction in their use lower down (with sunset clauses for current committees and clear rules for reconstitution of committees) and greater clarity of composition, decision-making style, auditability of decisions and follow-up mechanisms. A more formal and auditable model which provides a good template for committee procedures is the Workforce and Financial Management Committee (WFMC), the model of which could be used more broadly alongside more formal commitment procedures for decisions made.

Defence decision-making can only be effective if it operates within a framework of clear priorities and direction which flow from an enterprise level corporate plan. This will provide enterprise-wide

direction, trade-off and agree priorities, and set outcomes to be delivered by each Group and Service across Defence. The corporate planning process will also form the foundation for a more robust quarterly review mechanism across Defence.

Finally, increased contestability for key decisions will be an essential requirement for improving the quality of decision-making (using red teams and similar mechanisms).

2.1 Introduction

2.1.1 Context

Decision-making is an important organisational capability. The ability to translate strategic purpose into action effectively and efficiently is a feature of high performing organisations. The means by which this occurs is through decision-making and implementation processes. How Defence makes decisions, along with the means by which those decisions are followed through, are important drivers of capability and Defence’s ability to achieve its objectives.

This chapter considers Defence’s strategic decision-making system. It considers Defence’s decision-making architecture, its components, its performance, and makes recommendations for improvement, particularly in terms of strengthening accountability. It argues, with reference to past reviews and the experience and views of participants and stakeholders, that the committee system cannot, by itself, function as an effective strategic decision-making system for Defence. It needs augmentation by a robust corporate planning process that

29

integrates and stabilises Defence’s major management processes.

2.1.2 Decision-making systems and the exercise of strategic control

Organisations construct decision-making systems in order to translate ideas into action. How well these systems work is a determinant of organisational capability and performance, and an indicator of the degree of strategic control exercised by leadership. Without a system of control there is no accountability.

In establishing and maintaining decision-making systems it is important to ensure that they are congruent with the nature of the organisation and support its ability to achieve its purpose. Defence is comprised of a number of culturally distinct organisations. This presents a challenge for the development of effective decision-making and accountability systems, but it also suggests what the strategic purpose of such a system needs to be. This purpose can be described as the need to ensure that Defence functions as a single, integrated enterprise, and that decision-making and accountability systems function as a force for organisational cohesion. In this context, it is worth noting that the history of organisational reform in Defence could be described as a search for models that most effectively integrate and harmonise the work of the various and diverse organisations that make up Defence.

In a world increasingly characterised by inter-dependency, the art of Defence leadership and management is ensuring that the constituent parts of Defence contribute as efficiently and effectively as possible to the Defence enterprise’s overall outcomes. Strategic management is primarily concerned with managing the balance between the whole and its constituent parts in an evolving and dynamic environment.

The fundamental test for decision-making systems is the extent to which they support the management of Defence as a single enterprise. This is also the starting point for consideration of the effectiveness of accountability arrangements.

Acknowledgement of the reality of Defence as a single enterprise has many implications for the way decisions are constructed and accountability pursued. For example, where there might be a choice, this acknowledgement preferences inter-dependence over autonomy, or standardisation over customisation, unless the latter provides a compelling reason to do so that specifically improves achievement of Defence’s purpose. Where the line is drawn is often a matter for fine judgement and is likely to change over time. In such an environment, one of the core tasks of strategic management is to surface issues and frame them in a way that identifies the real choices available and the costs and benefits of particular decisions. It is in the ability to identify and handle decisions at this level that we see the exercise of strategic control translate into practical outcomes reflected in structure, priorities and resource allocation that effect the whole organisation.

The remainder of this chapter is structured into five sections:

• An examination of the lessons of past reviews

• An analysis of the current state with respect to committees and strategic direction setting

• The case for a corporate plan

• Recommendations on committees and strategic direction setting

• An analysis of the current state with respect to broader decision-making (i.e., aside from committee-specific decision-making) and recommendations.


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2.2.1 Context

Committees are an important organisational tool and can serve many purposes. Defence uses committees extensively as a means of managing the wide range of interests relevant to issues and decisions. Outside the operational domain, committees have emerged as a major, if not the predominant strategic management and decision-making and support tool. This reflects Defence’s organisational history and the practical reality that the Defence outcome integrates the work of many culturally and organisationally distinct entities. In this respect committees have performed an important cultural function in the organisation.

At issue is the question of whether, in the absence of other supporting processes, committees, or a committee system, are capable of carrying the burden of strategic control and management. Are committees

trying to do too much? Do they need more support? These questions become more urgent in the absence of corporate planning processes or other strategic level management tools capable of supporting the development of enterprise level strategic priorities, the establishment of decision-making rules, and the appropriate allocation of resources and accountabilities. The experience of previous reviews (discussed below) and current practice suggest that in the absence of other strategic level management processes, committees have tended to proliferate, with consequent dilution of accountability. To set this in context upfront with two examples (which are exemplary of the situation across Defence rather than being particularly acute examples in their own right), the number of committees attended by the senior personnel in Army alone10 is 297 [Exhibit 4] whilst Defence Support Group leaders attend 69 [Exhibit 5].

10 The committee system has sufficient complexity that fully 18% of committees in exhibit 4 have chairmen unknown to the Army

number of committees anD relateD structures* attenDeD by army senior personnel

*: Does not include 37 Panels, conferences, seminars and 18 Integrated Project Teams Source: HQ Army

Committees/Councils/Boards

Steering/Planning/Management Groups

Working/user/Stakeholder Groups and Forums

Army HQ sponsored Army sponsored ADF sponsored Total

297145

31

121

5656

3

86

114

19

164

11 4

16

47

12

62

31

Exhibit 4

number of committees anD relateD structures attenDeD by Ds group senior personnel

Source: DSG

Committees/Councils/Boards

Steering/Planning/Management Groups

Working/user/Stakeholder Groups and Forums

Chaired by DSG Chaired by others Jointly chaired by DSG and others

Total

69

27

9

33

18

4

5

37

15

17

3 1

5

16

10

7

32 REVIEW OF THE DEFENCE ACCOUNTREVIEW OF THE DEFENCE ACCOUNTABILITY FRAMEWORKABILITY FRAMEWORK

Exhibit 5

In the next two sections we summarise the work of past reviews in identifying issues and making recommendations with respect to committees and decision-making.

2.2.2 Issues identified with Committees

Previous Reviews, internal and external, have drawn attention to accountability issues related to the Defence committee system. In doing so, they have called into question whether this system, as it has been

functioning, has supported or undermined accountability for decision-making. Some issues relate to the context within which committees operate (their place within the organisational decision-making architecture); others relate to the utility of Committees for the role they are expected to perform (their design and functionality).

Within this framework, six types of issues related to the performance of Committees have been identified. We discuss each in turn:

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• Bureaucratic inefficiency and lack of strategic focus at the top. The DER noted in 1997 that “Defence appears to have too many committees with too many members”. This led to a revision of the top committee structure. A decade later, an external report11 and the DMR highlighted the “often bureaucratic nature of… committee system [which] takes up too much time [and] buries the organisation in paper… does not always assist in focusing Defence on its key strategic issues”. It recommended a new top executive committee (the “Defence Strategic Management Advisory Council”) to replace both the Defence Committee (DC) and the Chiefs of Service Committee (COSC) with a “more streamlined membership and strategic focus” supported by a small set of subcommittees (e.g., audit; personnel; occupation Health and Safety (OHS); risk). The amalgamation of the DC and COSC did not ultimately occur and a recent report noted that “Defence’s senior leaders can spend at least 20% of their time, on average, at DC, COSC and DC sub-committees”12 not including reading briefs, conducting pre-briefs or attending ‘feeder committees’

• Inefficiency driven further down the organisation. The DMR noted the existence of many “lesser existing committees” (in part there to support the operation of senior committees) and recommended that “consideration should be given to abolishing many of [these] committees in favour of a team-based approach to making decisions that need some consensus. Such teams could be formed as an issue arises, empowered to achieve results and disbanded when a solution is reached”. Our interviews revealed that,

as a general rule this has not occurred to the extent envisaged or desirable. There is a cultural tendency that once a sub-committee/team has been formed, it remains in place indefinitely until either the parent committee is abolished (rare) or its focus (and if appropriate its membership) changes with flow-on effects to subordinate committees. We heard from several members of subordinate committees that they suffer from relatively inexperienced chairmanship and lack clarity in understanding their role. These can lead to apathy, with principals regularly sending subordinate staff to represent them. Without intervention, when this occurs, these committees lose effectiveness. A recent example of a team-based approach is the Payroll Taskforce, which was established jointly between Deputy Secretary Defence Support (DEPSEC DS) and Vice Chief of the Defence Force (VCDF) with each providing members, along with other Groups such as the Chief Finance Officer, to address this issue. Other useful, though older, examples, include the “Tiger Teams” established to address remediation of a specific issue (e.g., leave) following Defence’s qualified financial statements. These Teams were disbanded at the point where the crisis had been resolved, and the mechanism for resolving it had been factored into the day-to-day business of relevant areas. Furthermore, the DMR advised that “committee membership should be on the basis of the relevance of the person to the decisions being made at the committee and on no other basis [e.g., rank or representation]”. In practice, analysis reveals that few changes to committee membership have been made since the DMR. Significantly,

11 Improving Defence Management (ASPI, 2007)

12 Defence Senior Committees (Strategic Reform and Governance Executive, 2010)


34

senior committees have grown in size over the last few years, as the issues being discussed have broadened and the senior leadership team itself has expanded. In only one case, that of the WFMC, is the committee membership restricted only to key decision makers and advisers

• Lack of clarity on the role of committees. Defence’s key senior committees, the DC and COSC, are constituted as advisory forums to support the Secretary and CDF in their decision-making. Notwithstanding this, analysis would suggest that “up to 40% of papers have been for noting and another 40% are for discussion of activities already approved by Sec/ CDF and fully consulted”13. In the case of the DC, it is noted that the emphasis of the DC’s work is currently being shifted in a more strategic direction. DC offsite meetings, where members seek to engage in strategic discussions of issues affecting Defence, are being trialled at the present time. Additionally, the DC has advised that it wishes to be engaged earlier in the decision-making process and has requested that strategic one-page papers on issues of emerging import be provided to the Committee. At this early stage, this has only infrequently occurred

• Varying commitment to outcomes. The DER noted that despite Defence committees typically being advisory to the Chairman responsible for the area covered by the committee, “the perception throughout the organisation is quite different–that committees have a life of their own...the commitment of

anyone to act on committee decisions varies accordingly”. Interviews conducted in this review revealed that ‘re-litigation’ or ‘repechage’ of decisions emerging from committee deliberations continues. A consistent theme emerged, particularly from staff levels, that decisions arrived at in committees did not necessarily bind an individual committee member or their organisation to the outcomes of that decision-making process

• Diffusion of individual accountabilities. This was noted in the DMR because the “committee structure within Defence compounds accountability issues by making several people responsible for any one project or decision. This diffusion is cascaded down…and ingrained as part of the culture”, and is reflected in the numbers shown in Exhibits 3 and 4 above

• Insufficient direction in terms of a corporate plan. Insufficiently high-quality corporate planning has been highlighted by internal14 and outside15

observers as an underlying issue that drives poor business outcomes (e.g., forward estimates that under-predict operating costs). Reviews have therefore recommended that Defence improve its internal processes for corporate planning (and for budgeting, as the necessary extension of business planning). This issue was recently addressed in the Defence White Paper, Chapter 13 of which notes that “improved defence planning processes will be crucial to the success of this White Paper”16.

In aggregate, these issues suggest that committees tend to function to confuse accountability, blur strategic focus and

13 Defence Senior Committees (Strategic Reform and Governance Executive, 2010)

14 E.g., DBA (2008); Defending Australia in the Asia Pacific Century – Force 2030 (The 2009 Defence White Paper)

15 E.g., Improving Defence Management (ASPI, 2007)

16 Defending Australia in the Asia Pacific Century – Force 2030 (The 2009 Defence White Paper), p.109

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disperse decision-making capacity. At minimum, one might conclude from the above that the committee system in Defence is insufficient to support the ability of the CDF and Secretary to establish and maintain strategic control of decision-making, or to sustain an accountability system that would underpin such control.

2.2.3 Issues identified with decision-making processes

Broader Defence decision-making processes and their quality have not consistently been examined in previous organisational reviews. Typically, reviews have focused on the structures of organisational decision-making rather than the processes by which decision are made– including the process of identifying required decisions, preparing advice to decision makers, making decisions and recording and monitoring the outcomes of decisions over time. Little work has been undertaken to evaluate the contestability, timeliness, administration and oversight of decisions, and the levels at which they are made.

Consistent criticism from external sources have noted that internal contestability of advice has been diluted and that while central agencies provide some contestability they “cannot hope to mount compelling arguments from afar”.17 Interviews and analysis conducted during this review suggest that this symptom continues to persist within Defence.

The DMR noted the “[extended] time… to come to decisions” within Defence is exacerbated by, but not only the result of, the committee structures. This was observed to be a factor in Ministers’ perceptions that reliability and timeliness of advice was poor “despite many of the better practice processes being in place...[because] the size, complexity and

hierarchical nature of Defence can delay responses”. The review recommended better training to Defence staff on supporting Ministers, reviewing the tasking and clearance process for rapid responses, and more delegation.

The Defence Budget Audit (2008) (DBA) noted, for example with respect to capability development, a risk of insufficient governance through the decision-making process to ensure that the right inputs are gathered at the right time (and are based on the same underlying assumptions of, e.g., cost drivers), and that decisions are made by the right people and recorded. The review recommended that Defence: (i) “formalise an end-to-end capability development process”; (ii) “ensure that capability decisions are traceable and linkage to strategic guidance is clearly articulated”; (iii) “records in detail the decision rationale at applicable committee meetings” and (iv) “increases the accountability of committee members to adhere to the business rules for the committee process”. Furthermore, given lack of clarity as to who is responsible for providing either key inputs or the methodology, the review recommended that Defence: (i) “implement a standard set of business rules for … input from DSG, CIOG and DSTO...[and] any changes to this input should be recorded..” and (ii) “develop and mandate a framework clearly, stating the appropriate costing methodology”.

Little formal review has been undertaken on the levels at which decisions are made within Defence. Of the available sources, most have focused on the delegation of decision-making within the Operational Command Chain (outside of the scope of this review).

Taken as a whole, these previous reviews indicate that Defence has struggled to achieve effective and accountable decision

17 E.g., Improving Defence Management (ASPI, 2007)

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36 REVIEW OF THE DEFENCE ACCOUNTABILITY FRAMEWORK

making processes. The failure to achieve this is manifested in a failure to align accountability systems with management structures and core decision-making and implementation processes. The committee system, as constituted, magnifies the problem because it does not function adequately to harvest, distribute and manage accountability.

2.3 Committees and strategic direction setting–current state

2.3.1 Analysis

We used interviews, the Defence Accountability Framework Survey (DAFS) and numerical analysis to examine the current state across Defence.

Notwithstanding earlier recommendations, there continue to be too many Defence committees. A

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