Defense Business Transformation:

Achieving Success Requires a Chief Management Officer to Provide Focus and Sustained Leadership

GAO-07-1072: Published: Sep 5, 2007. Publicly Released: Sep 5, 2007.

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In 2005, GAO added the Department of Defense's (DOD) approach to business transformation to its high-risk list because (1) DOD's improvement efforts were fragmented, (2) DOD lacked an integrated and enterprisewide business transformation plan, and (3) DOD had not designated a senior official at the right level with the right authority to be responsible for overall business transformation efforts. This report assesses (1) the progress DOD has made in setting up a management framework for overall business transformation efforts and (2) the challenges DOD faces in maintaining and ensuring the success of those efforts. GAO conducted this work under the Comptroller General's authority to conduct evaluations under his own initiative. In conducting its work, GAO compared DOD's actions to key practices of successful transformations.

Although DOD has made progress toward establishing a management framework for overall business transformation, the framework currently focuses on business systems modernization and does not fully address broader business transformation efforts. In 2005, DOD set up the Defense Business Systems Management Committee to review and approve the business enterprise architecture--a transformation blueprint--and new business systems modernization investments. It also established the Business Transformation Agency, which currently reports to the Vice Chair of the Defense Business Systems Management Committee, to coordinate and lead business transformation across the department. Despite these steps, DOD has not clearly defined or institutionalized interrelationships, roles and responsibilities, or accountability for establishing a management framework for overall business transformation. For example, differences of opinion exist within DOD about the roles of various senior leadership committees. Until DOD's business transformation management framework is institutionalized and encompasses broad responsibilities for all aspects of business transformation, it will be challenging for DOD to integrate related initiatives into a sustainable, enterprisewide approach to successfully resolve weaknesses in business operations that GAO has shown are at high risk of waste, fraud, and abuse. DOD also must overcome two critical challenges, among several others, if it is to maintain and ensure success. Specifically, DOD does not have (1) a comprehensive, integrated, and enterprisewide plan or set of linked plans, supported by a planning process that sets a strategic direction for overall business transformation efforts, prioritizes initiatives and resources, and monitors progress, and (2) a full-time leadership position at the right level dedicated solely to the planning, integration, and execution of overall business transformation efforts. A broad-based consensus exists among GAO and others, including the Institute for Defense Analyses and the Defense Business Board, that the status quo is unacceptable and that DOD needs a CMO to provide leadership over business transformation efforts. In a May 2007 letter to Congress, however, DOD stated its view that a separate position is not needed as the Deputy Secretary of Defense can fulfill the chief management officer (CMO) role. Although the Deputy Secretary may be at the right level with appropriate authority to transform business operations, the demands placed on this position make it difficult for the Deputy Secretary to focus solely on business transformation--nor does the position have the necessary term of appointment to sustain progress across administrations. Further, DOD plans to leave the assignment of the CMO role to the discretion of the Secretary of Defense. In GAO's view, codifying the CMO position in statute as a separate, full-time position at the right level with an extended term is necessary to provide sustained leadership, further DOD's progress, and address challenges the department continues to face in its business transformation efforts.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: In the National Defense Authorization Act for Fiscal Year 2008, Congress designated the Deputy Secretary of Defense as the Chief Management Officer (CMO) for DOD and created a full-time deputy chief management officer (DCMO) position. Although the congressional action does not establish a separate, full-time position for the CMO as we suggested, we believe that these congressionally-mandated positions are significant achievements that, if successfully institutionalized within the department, would meet the intent of our original matter for congressional consideration. We will continue to monitor DOD's business transformation efforts as well as whether its CMO and DCMO management structure ultimately provide the focused and sustained leadership need to maintain momentum over those efforts.

    Matter: Given DOD's view that the Deputy Secretary of Defense should be assigned CMO duties, Congress may wish to consider enacting legislation to establish a separate, full-time position at DOD with the significant authority and experience and a sufficient term to provide focused and sustained leadership and momentum over business transformation efforts.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD has not institutionalized in directives the functions of the Defense Business Systems Management Committee.

    Recommendation: To ensure successful and sustained business transformation at DOD, the Secretary of Defense should institutionalize in directives the roles, responsibilities, and relationships among various business-related entities and committees, such as the Defense Business Systems Management Committee, investment review boards, the Business Transformation Agency, and the Deputy's Advisory Working Group, and expand the management framework to capture overall business transformation efforts, rather than limit efforts to modernizing business systems.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD uses a family of plans approach to cascade enterprise business priorities in the Strategic Management Plan which represents DOD?s plan for business operations and includes a performance management framework. We will continue to monitor DOD's use of the family of plans approach.

    Recommendation: To ensure successful and sustained business transformation at DOD, the Secretary of Defense should develop a comprehensive strategic planning process for business transformation that results in a comprehensive, integrated, and enterprisewide plan or set of interconnected functional plans that covers all key business areas and provides a clear strategic direction, prioritizes initiatives, and monitors progress across the department.

    Agency Affected: Congress


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