Speaker A And why do we do it? Why do we have to do it? Well, one fundamental reason. We've looked at this over a number of years, about seven or eight years in earnest. And it boils down to one, I think, simple truth that there really is no tension between productivity and overhead. Something that all of you in the business world take for granted. But we treat in the government, certainly in the army we treat overhead as an entitlement. I'm still looking for the Y, two K office in the Pentagon. I know it's there somewhere. It's got 20 people, it's got a truck, it's got a sign, it's got a mess hall and we'll be ready for the next millennium. But that's not necessarily a decent use of the taxpayers money. So we create this tension we are somewhat facetious about pain and suffering but the people in the Installation Management Command believe it's true because we have to create it. We have to artificially create it. And requisite organization theory is a great way to create pain and suffering in a Bloated organization. It's a great way to tune a finely honed organization. But when you have an organization such as the business structure of the army it can be a very blunt instrument to get you to the point where you can use other tools. And that's what I want to talk about. Now. Some of the lessons learned from this were we have to look at our processes, we have to look at authorities, we have to look at the flow of information and we have to look at the way we develop people. And I'll sort of tell the army business transformation story the other aspects of it as a result of Ro engagements. Even though we did it simultaneously because we don't have much time. Lean six Sigma. Lean Six Sigma was the forcing function for business transformation. We rolled Ro out more judiciously, more surgically. Lean Six Sigma, as Ken said, this is the biggest deployment of Lean Six Sigma in the history of the world. In fact, I would say it's the single biggest deployment of any coherent aspect of Management Science since Adam Smith invented Management Science. I think we've got everybody all at once. Lieutenant, generals, corporals, getting trained, getting their belts. We've got about 4000 people trained right now. We've got 30 classes going on all over the world with 30 people in them in terms of green belts, black belts, project selection workshops, executive leader training. And we're just starting next week our first Master Black Belt course because we're leasing Master Black belts now because they take a lot more time to train. No magic, no fairy dust. With Lean Six Sigma, I used it in the aerospace industry. It's been in government for a few years. But it's a forcing function. It's a way to prove that you can take a proven business principle off the shelf and apply it to your business challenges. You don't have to invent it. It doesn't have to be army eyes. It doesn't have to come in a book with a camouflage cover. You can go to Borders and buy anybody's book on it. It's essentially the same. That's number one. Number two, it's a lingua franca. It's everybody's way of solving complex problems. And now we've rolled it out into the entire Department of Defense, because when you bump up against the enterprise, you need to be able to speak the same language. So it's not magic, but it works. And it applies to our business principles. And basically, I'm sure all of you are familiar with it. Lean is the part where you take waste out. Six Sigma is the part where you reduce variability in the processes that remain. One of the things that we found was you have to have this infrastructure in place if you're really going to capture the results of an Ro engagement in organizations. As dysfunctional as many in the business structure of the army are, you can't do the Ro and then find things that you need to improve, and then wait until you deploy Continuous Process Improvement and school everybody up and then attack some of those processes. You need the lean six sigma or the continuous Process Improvement infrastructure in place in order to handle those processes. So this slide is just depicts what's involved in that. It is somewhat resource intense at the beginning, and then it pays for itself. We've allowed people to reinvest the savings. We're somewhere between 750,000,000 and a billion dollars worth of savings now over a couple of years, with an expenditure out of pocket of about $20 million in terms of contract to do program and instruction, train people, and lease the master black belts. So it pays for itself very quickly. But you do need some structure. That's one of the benefits of a Lean Six Sigma deployment. It comes with a notion of infrastructure so you have a place to put things. One of the interesting aspects of Ro and Lean Six Sigma is you see the big second bar with MCom. That's the Installation Management Command, the first big command we did apply the theory to and how that spawns Lean Six Sigma projects. There are more Lean Six Sigma projects coming out of MCom than any other command, and I think that says something. Once you get the organization pared down, you do some of this work that Steve described. The people that remain look at their processes. They look at the way they want to do work, and they find there's waste in the process and there's variability in the process that's unnecessary. So you can apply Lean Six Sigma tools to do that. If you do it, and we're doing it right now in plenty of organizations that haven't been honed, you run the risk of improving processes that don't need to exist. You run the risk of making bad processes more efficient. Again, one of the luxuries I wish I could afford, but I can't. But I think we're moving this arrow closer to efficiency and effectiveness now. And Ro is a very powerful tool, and I think this chart proves it. This is just an example in text of a lot of those processes. And you heard Steve talk about a lot of those acronyms up there, dealt with public Works and safety and logistics. And this is just from our data structure, a cursory list of some of the thousands of projects that are being done in the installation world to get at those issues that we uncovered in the Ro engagement. Another thing that it spawned. You asked, why was this organization so dysfunctional? Why did we have several thousand spaces of people, several thousand people actually doing work that was really non value added? So this is one of the major reasons, and I put this under the heading of situational awareness, which I'll define in a moment. But this goes into authorities. Why are people in dysfunctional organizations? They don't know what they're doing. And Steve made some reference to that. We found in these general Orders, which are a way for the army to promulgate management philosophy and actual task description. We had 84 different verbs and modifiers describing what people were supposed to do supervisory, responsibility, oversight, sign off authority, all these things that in the war fighting army are very clear and the subject of professional development and doctrine and revision and innovation to make sure that clarity is at a premium in the business structure. We were very vague. And if people don't know exactly what they're doing over a period of years, especially a period of decades, structure evolves, structure solidifies around those vague authorities. So we went back and we clarified the management philosophy of the army in General Order, and that's done, signed, and then the General Order Three, which is the way we tell the subordinate organizations and staffs what to do. We're getting the verbs down to about five verbs, and we're in a collaborative way steve is helping us with this in a collaborative way, going to those organizations, the HR organization, the purchasing organization, the healthcare organizations, and working with them to describe how we're going to tell them what to do in General Order Three. So we're very explicit about it. So you don't have that impetus to grow structure around vague authority. And this, you'll see, and I think this is in general order, the management philosophy of the army signed by the Secretary of the army that's Ro at work. I mean, that's in the document. That's an official publication of the army that basically describes who does what level of work and what we expect of them. And then actually some notions of staff sizes which aren't hard and fast. But when we look at the superstructure of the army, at the very top, we find all sorts of sizes of organizations that are really running things. At the same time, we have commands who are charged with running things. In fact, sometimes we have two or three different offices that would say they're doing exactly the same thing. So this attempts to codify some of the things we learned in the first engagement.
Speaker B A couple of things on this one that you might find interesting. Number one, I talked about adding eight. We're so big, we decided we had to add a level eight for the secretary and the chief of staff, the army. The second thing that was interesting as we roll this out is we found out that the staff people were operating under the mistaken assumption that they produced direct output that affected the workers. The front line said, nuh, your job is to assist your boss in doing his or her work. Your job is not to be mucking about with the operators. So the workflow goes up on the staff side to the four star who formulates or approves the policy. Let's take recruiting, for example. Show me what it is that you do in the recruiting policy area that helps the poor recruiter actually recruit people. What are your metrics? What are you doing that adds value? Why should I keep you employed? Because the direct output is done down here at the front line. So you show me what it is that you're doing, your work. How does that support it? You're either getting money for them, you're creating policies that make their job easier, you're getting governance in place, whatever. And what happened was people in the headquarters thought that their output was going down. So we're changing that concept and it's tough. You got to reeducate them and we're saying you want to do direct output? We'll reassign you to the field and you can produce direct output. Why do people like to do direct output? Because it's fun. The last fun level in the army is level three of battalion, where you give an order and it actually gets carried out. Above that, they wait you out. It's anonymity and it's corporate work. And so what we've done is we've laid this out by grade, by level, and we said, okay, now show me what it is. At level six, you're doing strategy development. You're not doing policy. You're formulating the policy you're sending up for approval, and you now develop a strategy to execute. You're not in the operational mission. That's not your job. And that allows us then to tailor the number of people. And so in a way, what we're doing is we're really sorting out the work at the higher levels, easier to do it at the lower levels, level one through four, and we're getting people to understand levels. So we put the grades and everything there and pretty soon levels will become part of their lexicon, and it's going to take a while to do that. So that's been a process. Okay.
Speaker A This is the book definition of situational awareness if you it's the tactical definition of situational awareness, and I use it to try to apply it to the business world. And basically it says you need to know two things on the battlefield. You need to know where the bad guys are, and you need to know where the friendly guys are. It's a lot harder on the battlefield having been there to figure out where the friendly guys are and what they're doing. And that's the business challenge. You can buy all the competitive intelligence you want, but the hard thing is figuring out what the marketing guy in the next cubicle is doing when you walk out of your customer's office and he's sitting there with the same brochure that you just gave the guy. I mean, that's what I call business situational awareness. Knowing what you're doing. We've got a big challenge in the army, and the lack of business situational awareness in the army is also a cause for dysfunctional structure. If you don't know what you're doing and you don't have any information in a government setting, you tend to build structure, and you don't have any blunt instruments until we came along to really combat that. And this is a famously busy Pentagon chart with virtually no white space on it. The only thing I'd call to your attention is this 1700 It systems. This is a data flow to work 1700 It systems in the department of the army itself that we know about. That we know about, not on somebody's hard drive, not on somebody's desktop that give us information. There are 215 different financial systems in the department of the army. So if I ask how much something costs, I get three or four people who go away for about three weeks, who come back and give me an 85% solution and tell me to integrate it. And that's how I get my answer. When I was at Northrop Grumman, a big aerospace company, I went to my desktop, and I could find out how much a proposal cost, how much a product cost, who did what last week, to whom, who was with what client. We can't do that in the government. And our use of ERPs and SOAS is, to be charitable, very 20th century. We are just not there on the battlefield. We're there we're not there in the Defense department. And this is another symptom of that pathology. And we're taking some steps through education and the creation of some positions within the CIO's office to go around and really lop data structures off and get to some authoritative flow of information. Professional development, this atmospheric I think this is very important. This is sort of the fourth true north pillar out of Toyota human development. If you have better people, educated, better collaborating in terms of information, you get better results, especially when you're trying to introduce something new. The dial on the left is from a big review of education and training we did of army leaders. This was the officer side, and it says we skew way over on warfighting. Well, like I said, that's core business. The army is never not going to do that. That's what we have to do. But there are also some significant things that senior army leaders do, especially uniformed leaders in terms of statesmanship, and then uniformed and civilian leaders in terms of enterprise management. And we have to get better at that. One of the things we did this acronym on the other side, klismo, the Civilian Senior Leader Management Office. We really had a bifurcated workforce. We had uniformed people who we spent a lot of time and a lot of money developing throughout their careers, and we had career civilians who we really spent next to nothing developing, didn't move them in their senior levels, and they stayed in these stovepipes. Well, who owns the business structure of the army? The civilians do. And who runs it? The uniform do. So essentially, you had a bunch of people who didn't know what they were doing, managing people who only knew what was in their stovepipe, not necessarily a recipe for a high performing organization. And so we're taking some steps now. We centrally manage all the senior civilians. We've revamped the professional development structure, and in short, are trying to increase the business acumen of both of those aspects of the army. And this is the future right now. The interesting thing about the Installation Management Command engagement is Steve and I directed a couple of pilots back office operations of the Secretary of the army and the Chief of Staff of the army. Then we went out into the army writ large with the Installation Management Command. They, of course, didn't want to do it. We had to get them signed orders from the secretary and the Chief both to tell them to do it. And then they sort of became enamored with the process and are now in the process of executing it. The rest of these organizations here, which represent about 185,000 people and between 50 and $75 billion worth of budget authority, they all came to us after they saw the results of the Installation Management Command. These commanders, the Training Doctrine Command, the Army Material Command, et cetera, came to us and said, we want you to do that to us because we see the value in that. In fact, we have this notion, as the Training and Doctrine Command commander said, that my headquarters is not optimized to deliver the product that I'm charged giving to the army. So I think we're well on the way. We're now in the demand support role. And in fact, what I did for these guys is I told them to sign the letter asking me to do it, as opposed to the Secretary of the army and the Chief of Staff. The army doing? So I think this is all heartening. This is all sort of building on our success with things like Lean Six Sigma and really getting the synergistic effect of the suite of tools when you go into an organization like the army.
Speaker B Okay, in one final slide, we put it all together. Strategy drives your structure. Change your strategy, change your structure. Your systems have to be updated to reflect your new strategy. Your processes have to be leaned in terms of continuous process improvement. And so you apply some principles and I always tell them, look, you don't like the principles and we may or may not use the term Ro and I don't care. We call it well managed. You don't like my principles, give me a better set. You got any data? If you don't like it, tough, then you're going to use ours. But you apply the principles, you generate a new structure. You lean the structure, you get the processes efficient, and you put your compensation systems, your pay systems, your task, training, development, all your systems in place. And if you do all that, you might actually become world class. That's a big process, a big job to do that. Any one of those takes a lot of work. And so that's kind of the endeavor we're trying to do. And the backbone is requisite principles, but the other backbone is Lean Six. And together they really match and work very carefully together. And if we had the time, we would do them all sequentially. We don't. So we're mounting offensive on multiple fronts, as Mike said.
