October 1, 2010  

Productivity’s promise

A better way to resource the future

In his May 8 speech at the Eisenhower Library, Defense Secretary Robert Gates struck a powerful historical note in recalling President Eisenhower’s dedication to economy of force:

“Eisenhower told his senior defense team that he wanted the Pentagon cut down to a ‘Spartan basis,’ lamenting that ‘people he had known all his life were asking for more and more.’ He went on to say: ‘I say the patriot today is the fellow who can do the job with less money.’”

Gates closed his speech with clear direction:

“The Defense Department must take a hard look at every aspect of how it is organized, staffed and operated — indeed, every aspect of how it does business. In each instance we must ask: First, is this respectful of the American taxpayer at a time of economic and fiscal duress? And second, is this activity or arrangement the best use of limited dollars, given the pressing needs to take care of our people, win the wars we are in, and invest in the capabilities necessary to deal with the most likely and lethal future threats?”

This was strongly reinforced in his Aug. 9 directive to begin a series of cost reductions in Office of the Secretary of Defense functions, Joint Forces Command and staffing levels across the board.

The financial health of the federal government, the nation and the world come now sharply into focus. Our periodic national dialogue regarding the competing policy goals of budgets and fiscal discipline has assumed a more serious tone with frequent references to dire forecasts of untenable risk, unfunded aspirations and a diminished future. It is accepted by many analysts that we face an escalating “perfect storm” of government reach, financial burden and future debt. Of particular note, the fiscal 2010 federal budget rings in at over $3.5 trillion with almost half of that amount — an unprecedented $1.7 trillion — debt financed. And this is just the tip of the iceberg as the total federal debt surges well beyond $12 trillion — and it is expected to grow another $8.5 trillion in the next 10 years.

See graphic:

Government spending since 1901

For the average citizen, these numbers are staggering and their meaning is often lost on those whose frame of reference is more modest. Perhaps a more relevant way to look at this problem is by showing the amount of federal government spending that we ”seem to need” as a function of our overall population; this provides a number that represents each individual citizen’s ”fair share” of the national budget (or cost per capita). This number (in constant 2009 dollars) has increased dramatically from $172 per person at the turn of the century to more than $11,000 today — an increase of more than 6000 percent (see chart.) A steep escalation begins, on cue, with the expansion of “Great Society” objectives and dramatically spikes, but is not sustained, by the two World Wars. You can also discern a relative flat line during the Clinton presidency. It should also be noted that this discussion is only about the federal budget — parallel issues (poor fiscal budget discipline and increasing per capita debt) in both state and local government are not counted here.

Yet, we advance into this new territory burdened by past assumptions driving the same unimaginative arguments of “budget increases” and “spending cuts.” It is impossible to imagine either doubling the “price” (tax) to citizens or halving the budget of the Defense Department as it is run today. This would lead to debilitating reductions in force strength and a major pullback in U.S. national security posture worldwide. We see in the secretary’s comments perhaps the greatest threat to the strength of our national security. The threat is from within the system; it is this growing national security resource burden in an ever-accelerating world. As Gates notes, “Simply taking a few percent off the top of everything on a one-time basis will not do. These savings must stem from root-and-branch changes that can be sustained and added to over time.”

What happens in well-run private-sector organizations — and is almost completely lacking in the public sector — is a relentless focus on productivity. This often unglamorous, day-in, day-out grinding pursuit of perfection is the engine of possibility and performance. Successful organizations never just price and shrink their way to success. Where is the tough, urgent determination delivering constant gains in resource productivity? What is the normal, routine lifeblood of the private sector is often treated as a sporadic exercise in best practice compliance in the public.

In our DoD experience, this element has proven potential to completely reshape both the efficiency and capability of public-service operations. Three fundamental pillars must be in place to make this work. First, public leaders must learn to see the pervasive and massive waste embedded in their operations. They have to believe in this not as failure, but as a normal condition of human endeavor that grants vital maneuvering room. Second, the organization must reject the incapacitating logic of efficiency-versus-effectiveness trade-offs. Done right, there is no necessary trade-off. Removing waste, defined in the eyes of real consumers, makes you productive, agile and focused. Third, leadership down the entire chain of command must insist on performance and productivity gains — period. Driving 5 percent year-over-year cost performance, normal in many commercial sectors, delivers $50 billion in annual dividends for every $1 trillion increment of national budget. There is no reason the public sector cannot do the same.


Inside DoD, we came to see three principal levels of waste — operational, structural and strategic. The first is about the thousands of working processes executed every day. The second and third deal with how we organize and align with real-world requirements. We can speak to operational waste in specific examples, and raise just a few of the types of questions that go with the latter two.

A sustained push on all three, as a course of normal operations could change our entire national security approach. What would be the value of a defense establishment that reacts faster to an accelerating world, does a better job on what matters and carries a lighter footprint — Eisenhower’s “patriot”?

Foremost, operational waste infuses every dimension of the front-line work done in DoD. Like Neo in the Hollywood future-thriller “Matrix.” once you learn to see it, it is everywhere.

Junior officers at Travis Air Force Base, Calif., develop new protocols for the right balance of live-fly versus simulator in C-17 aircraft training, generating better skill training for a $600,000 lower annual cost — at just one wing. Its extension to other flying operations would only magnify the value (and incidentally lower the carbon footprint). Across the flight line, the maintenance group reduced the leading source of engine downtime in large KC10 tankers — engine thrust-reverser failure — by more than 80 percent with a $350,000 per year savings, in just one wing.

A three-star general asked why our information technology lags so far behind the private sector in its dependence on discrete, proprietary software and databases. DoD has islands of automation that are refreshed and proprietary. These legacy apps can be reduced, consolidated and placed on a service-oriented architecture saving roughly $1 million per application. Considering the current library of roughly 19,000 applications, imagine the savings — do the math. Fixing this vast waste of tech spending and human capital is worth billions.

Medical staff at Aviano Air Base just outside Venice, Italy, model the maternity ward tool and material kits after the “tool carts” of aircraft maintainers to dramatically reduce the walking, searching, checking effort of valuable staff. Vials of critical medications are “fail-safed” through specific shapes to ensure error-free use. (Ironically, on the opposite side of the world, a Hawaii Air National Guard technical sergeant redesigns his F-15 parachute rigging kit on what he sees in a dentist operation — for the same effect). Just down the hall, an Italian national civilian staff member looks at electricity consumption inside the base clinic. She installs motion sensors and upgrades to reduce usage by 30 percent.

Crew chiefs at Kunsan Air Force Base, South Korea, learn how to launch a fully armed F-16 jet with half the manpower. These guys don’t take chances — not this close to spinning jet engines and the North Korean border. They believe you can do better with zero compromise in mission performance and safety.

Aircraft burn fuel to carry weight. More weight, more fuel burn. There is a number they call the “carry cost,” usually a percentage that tells you how much fuel penalty you pay for weight — people, cargo, weapons, more fuel itself, anything. That number for the Air Force fleet really opened some eyes. Put 100 pounds of weight on our fleet of KC-135, KC-10, C-130, C-17 and C-5 heavy-lifters and you just wrote a check for $750,000; 100 pounds equals $750,000 in annual fuel burn through this “carry cost.” Flight crews across Air Mobility Command, National Guard and the Reserve revalidated all equipment carried on board the entire large tanker and cargo aircraft fleet against current mission profiles, new technology and plain common sense. This highlighted an average of almost 2,000 pounds of weight reduction per aircraft — toolkits, heavy rubber mats, tie-down chains (versus synthetic straps) and parachutes. Certain airframes carried up to 30 parachutes that have never been used on Cold War missions and are no longer flown. It’s all dead weight that ultimately drives manpower and fuel burn. One of United Airlines most senior 777/47 pilots, Jim Barnes, volunteered part-time service in the Air Force to support just this issue. In one intervention, he held a blunt session with pilots at the famed 89th Wing — home to Air Force One. Despite the exceptional skill of these aircrews, even that critical fleet did not utilize the sophisticated route-planning technology used in commercial aviation. That interaction also highlighted the latent potential of stronger cross-flow with industry. We are not that different. And this is just the start of it — more advanced flight planning, fuel loads, engine taxi, winglets — and better decisions on surface versus air cargo hauling. Now we are talking hundreds of millions.

One of the airmen at Vandenberg Air Force Base, Calif., asked about the cost of light bulbs in the vending machines. Perhaps these guys have gone too far on the efficiency Kool-Aid? No, they are determined to find opportunity in every operation. “We figured out how much electricity is consumed across the base in all our vending machines — with the light bulbs. It turns out that the vendors have no incentive to put in LEDs or anything more efficient, since we pay for the power. So we just took out the bulbs and then explained it to the guys from the vending company later.” So we’re saving a couple of hundred bucks? “$19,800 annually across the base, sir.” Do the math across 100-plus air bases — or the entire federal government. The same civil engineering crew is also on the forefront of testing LED street lights with potential for massive energy savings across the base, and again, extended across the entire federal government.

Across the country at Pope Air Force Base, N.C., a junior civil engineer developed a remote control system to independently switch massive airfield ramp lights. The original state was an “all or nothing” option for these big light towers. Selective lighting reduced energy consumption by more than $150,000 per year, at one base, and improved night training conditions for the Army’s 18th Airborne unit at next-door Fort Bragg.

The Andrews Air Force Base, Md.-based 79th Medical Wing faced escalating patient visit times with increased compliance requirements. Standardizing task steps, removing 11 process steps and cutting redundant data entry reduced visit time from up to 40 minutes to under the goal of 20. Again, partnership with a civilian leader in health care productivity, Virginia Mason Hospital in Seattle, encouraged this type of innovation.

These airmen were not afraid to ask hard questions and accept the challenge of better, faster, cheaper. Across a wide range of issues and ranks, there is stark evidence of significant potential to reduce wasted man-hours, energy and ultimately cost without negatively affecting mission performance. These examples run the range of large-scale change (e.g. new IT systems), to local, practical action (simple light bulbs). Encouraged, supported and extrapolated across the entire enterprise and run for years, this type of innovation generates enormous gains in performance.

There are also substantial, obvious opportunities that stall in deliberations. Why can’t we replace 1956 vintage, four-engine KC-135 tanker aircraft simply based on operational efficiency — as the airlines do? How can it be that the cost savings alone of going to a modern twin-engine aircraft with a long “maintenance holiday” is not simply a routine, positive return on investment? How is it that financially strained commercial airlines still invest capital in efficiency; imagine United or American flying a 707 model aircraft? Despite tough economic times, they order true next-generation aircraft such as the 787 and A350.

Out of sync

Second, like any public sector agency, DoD must be loaded with structural waste — people working hard and smart, but inside an organizational structure no longer in sync with a rapidly changing world. Working inside DoD often feels like a competitive, overlapping, surprisingly tentative organization struggling with internal conflict avoidance. This is despite repeated, well-intentioned efforts to control this overhead growth. The Pentagon, built at the height of the world’s global war to house the entire military leadership, was until recently the world’s largest building. Apparently not large enough. Today, not fighting anything like that kind of war (then with more than 16 million serving personnel), the department’s current 25,000-plus employees overflow into numerous outbuildings, spurring another round of spending on more government office space now underway. In our experience, this is partly due to the accumulated operational waste burning up valuable employee time. A fair portion of this must also be due to all the outside “help” that pushes in on DoD. Some of this is highly legitimate, some likely routine waste, and some perhaps even the result of the fragmented face the department itself projects. It also portends a results-oriented debate on how DoD should be managed. In this regard, most corporations operate as either a strong, center-led organization with purely operational business units, or as a distributed holding company with autonomous units. DoD has it all and operates as both. Entire budgets, strategy, policy, procurement are done separately, in isolation, and then are redone centrally at the Joint and Office of the Secretary of Defense levels —burning immense amounts of time, manpower and synergy. Furthermore, it is also a large part of the underlying problem. With an overloaded double management structure, how can we ever make good decisions quickly, bring the full weight of DoD to procurement, or present one unified face to external stakeholders? Are we separate services with a light corporate oversight group or are we one common fighting force with central overhead functions? Either we make a clear decision and adjust the bureaucracy or we develop dramatically better processes for managing this level of complexity

STRategic gaps

Third, gaps in national strategy direction and its deployment into the organization create epic opportunities for long-term risk and waste. Any misalignment of current reality with national strategy and its execution opens the door to massive waste. Any space between what is needed (defined by the customers we serve) and what we set out to do, is waste. Investing people and assets in wars we will not have to fight is waste. Gates has been pressing exactly this issue in calling for a more balanced, less conventional force. Also important are efforts to broaden national security responsibility. Over-reliance on the armed forces to assure national security and healthy foreign affairs is incredibly expensive and risky. Why has it been so hard to get State Department staffers to deploy overseas? What took us so long to realize how powerful the Treasury Department or farm subsidy policy can be in shaping at-risk nation behavior? The Air Force has struggled with such tough questions on multiple fronts — the force size requirement of the C-17, the real argument that favors the expensive yet exceptionally capable F-22 versus the more joint burdened F-35 program, and the need for rated pilots behind “unmanned” air vehicles.

These questions can be asked across the department. Gates said, “Consider the massive overmatch the U.S. already enjoys. Consider, too, the growing anti-ship capabilities of adversaries.” Gates is asking, “Do we really need 11 carrier strike groups for another 30 years when no other country has more than one?” Congress asks why it takes so long to deploy the hugely successful Mine Resistant Ambush Protected vehicles in Iraq — despite the known value of such V-shaped hull trucks for more than 20 years in southern Africa? In a May 3 speech to the Navy League, Gates questioned the continued push for more advanced beach-landing craft — “We have to take a hard look at where it would be necessary or sensible to launch another major amphibious landing again — especially as advances in anti-ship systems keep pushing the potential launch point further from shore. On a more basic level, in the 21st century, what kind of amphibious capability do we really need to deal with the most likely scenarios, and then how much?”

Answers to these types of questions have extraordinary implications for resources and performance. Are they being debated in an objective, prioritized context that recognizes the trade-offs of finite resource pools? Are the discussions fully pressurized with the economic reality we began this discussion with? Do these debates also understand the “time value” of the resources in question? Are they urgent and conclusive or do they wander on for ages in a risky, expensive fog? Perhaps the most important question is the most fundamental: How do these gaps in performance — at all levels — originate and pervade an organization so genuinely committed to public service?

Finally, how do we better align and deploy the strategy into the organization so that several million DoD men and women can hope to do the right things well? Top executives at global corporations such as Chevron, Procter and Gamble, Clorox, Virginia Mason Hospital, Amazon and Porsche AG talked candidly to our most senior leaders about their governance and strategic planning practices. The gulf in focus, accountability, capital allocation and management discipline was profound. These issues of front-line operations, organization and even strategic direction are not about function, but about how we work.


Perhaps the ultimate source of justification for organization performance efficiency comes from our military doctrine and history. Carl von Clausewitz’s text “On War” was born of his long, hard European military battle experience. He created the maxim of force economy as a constant focus on best possible allocation, greatest effect, against highest priority and purpose. “Every unnecessary expenditure of time, every unnecessary detour, is a waste of power, and therefore contrary to the principles of strategy.” This foundational military doctrine recognized that efficiency is not weakness, but power and agility. In September 1943, the War Department gave unmistakably clear direction for its leaders to work with their people to eliminate operational waste. It said: “The situation is a very practical one. Most of the men with whom you will work have had years of experience. They have latent ideas that, if properly developed, will increase Production, reduce lost time, prevent waste of material, and increase the use of machinery and equipment. These men command your respect because of their knowledge. Your function is to show them how to fully develop their ideas for practical use.”

Held as an example by Gates of imaginative and controversial leadership, Air Force Col. John Boyd understood this in his now doctrinal “OODA Loop. “ He defined his career on the principles of faster, more accurate decision-making — rooted in the kill-ratios of U.S. F-86 pilots against MiGs in Korea. His Observe-Orient-Decide-Act loop is a direct cousin to W. Edwards Deming’s manufacturing problem-solving methods. The original intent of the military inspector general included clear direction to assess the “economy and efficiency of the force.” The entire Berlin Airlift was a disciplined exercise in industrial engineering by Gen. William Tunner for maximum productivity of limited aircraft, crews, flight corridors and landing slots. Historian Itzo Nitobe noted the devotion of samurai warriors to the tea ceremony or cha-no-yu. It was based in “long observation as to the most appropriate method of achieving a certain result. If there is anything to do, there is certainly a best way to do it, and the best way is both the most economical and the most graceful … the most economical use of force.” Jimmy Doolittle succeeded in his bold Tokyo air raids with precisely the same attention to aircraft weight that a Hawaii Air National Guard team recently applied to its own tanker aircraft to reduce fuel burn.

Economy of force yields strength, agility and capability. DoD, and the public sector overall, is full of exceptional people struggling in mediocre, outdated and wasteful processes. We can do better. We have started to see the waste, but the journey we are on needs continuous senior leadership drive to change the culture to both see the waste and then act upon it.

Would it really matter if we could develop an internal, organic productivity engine within government operations? This question is important because DoD, larger federal government and now national economic performance are completely interdependent. As an exercise in the art of the possible, we could take the fiscal 2010 federal budget plan of slightly more than $3.5 trillion and then build in a year-over-year target of 3 percent real cost efficiency. Extending this out over 40 years to 2050 has a dramatic effect. In 2009 dollars, the annual federal budget would decline by more than $2 trillion — with a cumulative cost avoidance of more than $60 trillion (the gap above the “3 percent line”). Striking a moderate 0.5 percent annual target would deliver more than $13 trillion — roughly equivalent to the current national debt. That is strategic impact that can change the world as we know it. Obviously not all types of federal spending are equally accessible for productivity gains. Procured goods and services, aircraft or solar panels, would require cost targets to cascade down private-sector supply chains. Some of this could be self-reinforcing — most notably reduction in debt service payments.

One important clarification: Generation of “headroom” in DoD or federal budget through productivity gains, must be separated from how to “cash the check.” Saving money, time, energy and other valuable resources gives senior leaders desperately needed options. We can choose how to play these cards along a spectrum of pure efficiency all the way to full-reinvestment in yet greater capability.

What would be a high level list of changes required to instill effective, long-term performance improvement in government? Here may be a start:

1. Develop a relentless, explicit focus on the true customer. Government exists for one single purpose — to serve the citizen. Absolutely anything that does not add value to the lives of its citizens is government waste.

2. Learn to see. Establish an informed conviction that most of what we do is non-value-added, and that this is not bad, but common. It is not our failing, but our opportunity, our room to maneuver. Aggressively reject the incapacitating logic that efficiency must compromise effectiveness.

3. Break the sheltering paradigm that government is different. Actively seek private-sector analogies based on common ground as a large, global enterprise.

4. Insist on clear problem definition and root-cause, factual analysis at all levels, and in every major decision process.

5. Establish a national level synergy team dedicated to rapidly identifying, vetting and deploying standard best practice across the federal government, including strong two-way external linkages.

6. Fundamentally reconfigure government fiscal policy to both stop the wasteful allocation of resources, upgrade the ability to invest operating funds and capital, and eliminate perceived “disincentives” of the use-it-or-lose-it budget process. Include a long-term internal capital investment fund overseen, but not specifically controlled by Congress. Government entities need to be able to approach the Treasury with business cases for investment. If validated, these should be quickly funded and have future budgets marked for repayment.

7. Implement a process for developing integrated national strategy. This needs to be inclusive of real decision makers, not staffers, create space for two-way dialogue, and always, always result in specific actions plans and measurable objectives. Budgeting should follow, not lead, development of national strategy.

8. Create a unified set of national metrics that are transparent and indicative of broad performance of the country. Examples could be as diverse as “life expectancy,” national security risk events/year, number of endangered species, percentage literacy, percentage below poverty line —and of course, per capita federal spending.

9. Set forward performance targets along a constant year-over-year improvement trajectory.

10. Establish a mandatory “strategy and performance review” relative to national objectives. This is a regular review inclusive of congressional, executive branch and department leaders. This is not an advocacy conference. It is an accountable leadership dialogue

This nation, and likely this ever-accelerating, populated, stressed and inspirationally progressive world, cannot survive the resource crisis before it without a dramatic course change. Whether it is dollars, human capital, carbon output or even strategic minerals — we must engage in a whole new tier of public-sector productivity. Arguments centered on price (tax) increases and capability cuts will not only fail, but also likely make the situation worse long term. Learn to see the waste constructively, reject trade-off arguments, relentlessly align public sector operations with true citizen need, and finally, have the confidence to measure and insist on results.

Various attempts by the Defense Department over the years to implement real and substantive efficiency practices have consistently met significant, and almost always insurmountable criticism from unenlightened and unconvinced government bureaucrats who point to the “vast differences in the operating environments between the private and government sectors” as the “obvious reason why nothing from the private sector is truly applicable to government practice.” Unfortunately, these often well-placed and influential individuals simply do not — and seemingly never will — understand that this is purely about “the science of work.” They will never accept the fact that, to fully appreciate the true potential of the “pragmatic third way,” you must see the distinction that this is not about “what you do,” but rather “how you do it.” In short, it is completely agnostic as to function or operating environment — a realization that, once understood, makes all the difference. It is just as applicable in government as it is in business — and it will be just as effective and successful, if only it is given the serious and disciplined attention that is required to make it work.

Once proven in DoD, it can be applied more broadly across the entire federal government as the answer to — and the salvation for — our current fiscal challenges, ultimately leading all Americans to a more prosperous and vibrant future. This is, again, our time to lead. AFJ

GEN. WILLIAM “TOM” HOBBINS retired from the Air Force in February 2008 having commanded U.S. Air Forces in Europe. He is a University of Tennessee adjunct faculty member, where he teaches LEAN engineering at the Center for Executive Education.

RON RITTER is a senior adviser to the Air Force under the Federal Highly Qualified Experts program. From 2006 until 2009, he served as special assistant to the secretary of the Air Force.