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Hunn Review: 30 September 2002

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Chapter 7

Co-operative and joint arrangements for New Zealand Defence

  1. In presenting the information and opinions that have been conveyed to me in the course of this review, I hope I have done justice to the effort that has been expended to ensure all the relevant material was made available. All of those who have participated in the review have done so with the national interest in mind and while there are significant differences of perspective, the goodwill I have received has convinced me that all parties are anxious to put behind them the experiences of the past few years and engage in a discussion which will lead to a more positive and effective defence management system for the future.
  2. Looking across the range of suggestions for improvement that should now be made, there are some areas where consensus is possible and others where differing views are sincerely held and unlikely to be reconciled. Boiled down to its essence, there are broadly two schools of thought. The first is that there is now a clearer understanding of what is required, an acceptance that essential adjustments can be made without major upheaval and that the process for achieving improvement should be gradual and practical: in this view there is no need to revise the current legislation, although some limited amendments may be needed to clarify one or two points. The second school is that while some of the measures introduced with the 1990 Defence Act have been successful and should be retained, that Act was based on a wrong premise and should now be replaced with legislation based on structures and systems that recognise the importance of melding the military and civilian contributions to the defence of New Zealand.
  3. Having weighed up all the material presented to me, I have concluded that our current systems must be thoroughly revised, new organisational structures and processes established and new legislation enacted. While my preference would be for this to be done by means of a single series of measures over a period of twelve months, I would concede there could be good practical reasons for taking somewhat longer and instituting a programme for change in two or more steps. For example, an initial programme could be agreed and implemented within the framework of current legislation then an assessment made in the light of experience whether more fundamental adjustments were desirable, including the passing of a new Defence Act.
  4. In this chapter I am putting forward a number of proposals which I consider necessary to transform the current system. These proposals are presented in a form which is capable of being implemented - at least to a degree which would achieve many of the essential improvements - whether or not the legislation were revised. In my opinion, however, that would not attain the objectives implicit in the Terms of Reference for this review. I would suggest that the concepts of jointness and cooperation which are the focus of the review, are only achievable through the unification of the civilian and military arms of the defence system; through a major shift in the thinking of the military as to what jointness means and how it should work in practice; and through the development of new cultural and organisational norms to reinforce the behavioural and attitudinal changes that must be made by both civilian and military officers.

A High Performing Defence Organisation

  1. High performing organisations are those that are able to adapt successfully to the demands of the future. They have cultures that place high value on collaboration, innovation and continuous learning. Leaderships develop and spread a common vision of organisational purpose and direction. They provide examples of corporate commitment to sustain both a shared vision, and ensure its continued relevance to internal members, as well as external clients and stakeholders. Policies for recruiting, selecting, paying, training, developing and organising the organisation's workforce reflect corporate values.
  2. High performing organisations also have a strong focus on mission and results, with everybody in the organisation being interested in understanding what the organisation's customers want. In addition, all parts of the workforce are aware of, and work to supply, the resources, information, and support that all need, to achieve the organisation's mission.
  3. In high performing organisations, corporate-level decision-making processes are designed to support strategic policy and management for delivering results to external clients. These processes are clearly defined, including key corporate-level decisions. Standards of information support for decision-making stress high levels of factual data, understandings of cause and effect mechanisms, rather than instinct, authority or anecdotal evidence.
  4. The roles of all participants in decision processes are also well defined and the approach to decision-making is highly inclusive. Such approaches have proven more effective in managing the points of intersection between different units of the organisation and co-ordinating all contributions to achieving organisational strategies. Inclusive decision processes also extend outwards to incorporate contributing partners from complementary organisations.
  5. Decision-making authority is aligned with responsibility and accountability for results. At the same time, for decisions that have whole-of-organisation impacts, there is a trend to re-design management and work responsibilities to be more over-lapping, acknowledging the importance of teamwork. For example, high performing organisations have adopted flexible, adaptive structures more suited to the current operating environment. Such structures include cross-functional teams that draw people and resources from vertical structures to deliver corporate-level results. Cross-functional teamwork is managed through planning processes that facilitate whole-of-organisation strategic management. Collaborative information-sharing tools have also been introduced to encourage and assist staff to share knowledge and best practice. Co-operative, participatory work processes de-emphasise rigid internal vertical hierarchies that build and nurture their own barriers, distinctive cultures, particular priorities and control over resources and results.
  6. Where common processes are identified, duplication between vertical structures has been removed (particularly in overhead support functions). Specialised structures are retained to facilitate specialised processes that do not require critical connections to other processes. The management systems of high performing organisations, (such as compensation systems, selection and promotion criteria, career paths, performance appraisals and training and development for example) have also been re-aligned to support team structures and over-lapping accountabilities.
  7. In my view, New Zealand Defence could benefit substantially from the application of these reinvigorating organisational principles. Transformed structures and arrangements for New Zealand Defence need to reflect:
    • cultures that value collaboration, contribution, commitment, innovation and continuous learning
    • leadership at all levels that promotes a shared vision of relevance to Government and the New Zealand people, as well as the internal memberships of the organisations they lead;
    • clearly defined decision-making processes that are inclusive of all key participants and are based on high standards of information
    • decision-making aligned with responsibility and accountability for specific outputs balanced with over-lapping and shared responsibilities for whole-of-organisation results;
    • more flexible and adaptive internal structures that integrate and connect people, tasks, and processes to results.
    • fewer internal vertical hierarchies linked to specialist functions; and
    • career paths, compensation policies, and training and development for personnel aligned to support cross-functional teams and shared responsibilities and accountabilities.

Requirements and Timing for Legislative Change

  1. This and other earlier reviews, have identified persistent and extensive problems with the current defence management system. Moreover, it is clear there is a need for defence structures and arrangements better able to cope with the future, as much as to deliver better results today. In responding to these factors, it is my judgment that, amongst other changes, the two existing defence organisations need to be merged into one, and as part of that merger, the NZDF needs to be developed substantially as a joint organisation at the strategic, as well as at the operational, level.
  2. Unless this happens, it is my assessment that there will continue to be a potential for dysfunction, division and defensive behaviour, and resultant unnecessary transaction costs. In the absence of such change, it is likely that the current defence arrangements will become progressively less capable of delivering the performance expected by future Governments.
  3. This is not to say that complete integration will eliminate the personality conflicts that have characterised the current arrangements. However, the harm such conflicts inflict is likely to be less damaging in a single strategic-level Defence Organisation working to a single set of directions and objectives and a common view of the world, than one where integration is laid over two separate organisations and cultures, and where one of those organisations contains strong internal boundaries and cultures.
  4. The advice received by the review (See Annex F) is that - paradoxically given its original intention - the current Defence Act would allow, or rather would not prevent, transformational change. In fact, a significant range of organisational, structural, procedural, and governance changes could be set in place without triggering a need for legislative revision. Such changes could be reflected and managed down through both current organisations to achieve a considerable degree of jointness and integration.
  5. If such changes were to be instituted without preceding law change, the current Act (and the other relevant Acts) would require that the Secretary remain the "principal civilian adviser" and the Chief of Defence Force the "principal military adviser" to the Minister. Each would need to remain responsible and accountable for their respective departmental outputs. The Chiefs of Staff would need to remain titled as "Chiefs of Staff", the Chiefs of Staff Committee retained.
  6. My legal advice (See Annex F) is that these matters would not prevent the formation of an integrated and joint MoD and NZDF defence policy and strategic management group, and an operations and services group: nor would such a structure be legally prevented from providing recommendations and information to the Secretary and the CDF to assist in their advice functions. But there is one important caveat: "Legally, however, the Secretary and the CDF would each continue to fulfil separate functions in providing advice. They would be doing so through the same medium and there would be some doubt as to what extent of integration would run into legal impediments" (my emphasis added). To overcome this potential inhibition, pending revision of the Act, the structural and other reforms recommended here could (and should) proceed on the basis of Ministerial direction - as was done in 1989 in the structural and responsibility changes that were undertaken ahead of the 1990 Defence Act.
  7. I have noted that the changes made in setting up the position of the Joint Forces Commander NZ and the Joint Forces Headquarters have already moved the current arrangements to the edge of legality under the current Act. I have also noted the opinion of a number of the Government's senior advisors that it is not necessary to revise the Act in order to fulfil the TOR for this review. Yet, there is a risk of back-sliding unless effective changes are endorsed in law. I accept that it is possible to make substantial progress without changing the law, and that it would be unacceptable to delay any action until the Act had been revised. However, I would be concerned if there were no ultimate legislative expression of the new direction that would confirm, embed and mandate that direction.
  8. To assess the merits of both viewpoints, I would propose that consideration be given to a phased approach to change - the immediate implementation of an action plan that can be completed within the parameters of the current Act, followed by an examination of the effectiveness of these reforms; then, when the timing was appropriate, the introduction of a revised Defence Bill into Parliament. In this Chapter I present one approach to integration, jointness and broader governance that has been designed to fit both possible scenarios i.e. whether the law remains unchanged or whether it is changed after a period of implementing and trialling new arrangements.

Transformation Proposals

  1. The proposals for change are grouped into two areas: first, higher national security governance structures and governance and second, management structures and responsibilities within the defence organisational framework.

Higher-Level National Security Structures and Arrangements

  1. As outlined in earlier chapters, among our strategic partners the defence function is increasingly accepted as part of a broader responsibility of sovereign states for all aspects of national security. In turn, as national security becomes "more than simply defence", it involves a wide range of Governmental agencies and departments that need to network with non- Governmental national and international contributors. While New Zealand's higher-level national security arrangements are gradually but consistently moving in the direction of a more co-ordinated approach, in my view they are the starting point rather than the end-point, of a more highly developed national security governance structure. Consideration could now be given to a whole-of-Government approach to national security policy, strategy and action. This approach would ensure that the full weight of national effort was co-ordinated to shape New Zealand's security capability so that we were better prepared, as well as to address security issues when they arise.
  2. Such a whole-of-government approach would encourage the Defence Organisation to take a wider view of national security. In so doing, it would enhance its ability to understand its role and responsibility in the desired context of jointness and co-operation. It would also provide a broader-based higher governance structure to guide internal direction and decision-making.
  3. To this end, I am suggesting the Government might consider setting up a permanent national security governance structure including a National Security Committee of Cabinet. The Committee would be responsible for providing political direction on strategic priorities for influencing New Zealand's national security environment over the medium to long term. It would also be responsible for guiding Cabinet decisions in response to security crises and emergencies, and for providing political direction to relevant departments and agencies to implement the components of any national response strategy. Further, it would create an opportunity for building up a widened base of political expertise and knowledge in national security affairs.
  4. I would see the Prime Minister chairing the Committee with the Ministers of Defence, Foreign Affairs and Finance being permanent members, and other Ministers invited as appropriate. The Secretaries of Prime Minister and Cabinet, of Defence and of Foreign Affairs, and the CDF, would serve as principal advisers to the Committee.
  5. It is also suggested that a National Security Officials Committee, with membership from relevant Government departments and agencies, could be set up to support the Cabinet Committee. This officials committee would be responsible for:
    • co-ordinating and consolidating national security policy and strategy advice;
    • providing the Cabinet with periodic assessments of national security risks as well as response capabilities;
    • co-ordinating the implementation of Cabinet directives in response to specific threats to national security;
    • serving as a centre of expertise for inter-departmental/ agency processes and procedures and as an officials-level focus for networking with strategic partners on international security issues; and
    • providing the overall management and evaluation framework within which the activities of each of the individual organisations concerned (including Defence) were conducted and assessed - this would reinforce the Government's growing emphasis on strategic outcomes.
  6. The logical location for the Secretariat to support this Committee would be in the Department of Prime Minister and Cabinet, with the CE serving as Committee chair. The Secretaries of Defence and Foreign Affairs, the Chief of the Defence Force, and other relevant Department CEs with a national security interest would comprise the membership (some of them on an "as needed" basis). The Secretariat could comprise staff seconded from each of the permanent members of the Committee.

Supports for Ministerial Roles and Relationships

  1. As noted in the previous chapter, Defence is a demanding and complex portfolio. In other countries studied, Ministerial decision-making, control and oversight responsibilities are managed:
    • by supporting lead Ministers with associate or assistant Ministers with specialist portfolio responsibilities;
    • ensuring that Ministers of Defence do not have other demanding duties;
    • attaching specialist staff advisers to the Minister's office; and
    • ensuring effective working relationships with departmental advisers.
  2. The first three of these arrangements are appropriate in countries where the defence function has a much higher profile in the overall priorities of Government and where the expenditure levels require a higher level of political supervision than here. In the New Zealand context, it may not be practical for the Minister of Defence to be responsible for the Defence portfolio alone.
  3. However, there is scope for considering the appointment of an Assistant Minister outside Cabinet at an appropriate stage with responsibility for one of the defence areas - for example, equipment acquisitions - to assist the Minister to cover the ground that has the greatest political sensitivity. There would be value also in considering an expansion of the Ministers' office to include at least two advisers, one military and one civilian, from the Defence Organisation.
  4. When the strategic management and planning processes for the Defence Organisation are defined in logical sequence, as I have attempted to do in Table 1 and Figure 1, it is clear that the Minister is involved at key points to provide direction and guidance to officials, and to receive appropriate advice in order to present the Defence Organisation's work to Cabinet. While the practice over the last decade has been to place a certain distance between the role of the Minister as decision-maker, and the role of departmental officials as managers, there is a need to ensure that this distance does not become isolating, either for the Minister or his or her officials. It is evident that at times in the past, this level of exchange has not been sufficient for either party. There is a need to improve the Minister's access to a more inclusive range of senior advisers, and vice versa.

Defence Governance Structures

  1. New governance structures are needed that will allow the Minister to share his vision, priorities, and strategies with the key Defence Organisation executives who will be responsible for implementing them. Similarly enhanced structures are needed that will allow Defence Organisation executives to contribute their knowledge and experience to support the Minister in his role of presenting defence business to Cabinet.
  2. Furthermore, the existing governance arrangements inside Defence have at best ameliorated some of the unacceptably high transaction costs of the present structures; at worst, they have exacerbated these costs. If they are not working in the current environment - a view which is widely held -they are even less likely to meet the needs of an organisation based on the principles implied by the TOR for this review. I propose a new Defence Organisation governance structure -set out below in Figure 1 - that is externally responsive to the Minister and the proposed national security arrangements, and internally suited to new organisational structures and processes processed for the Defence Organisation.
Figure 1: Proposed Defence Governance Structure

Image: Figure 1 - Proposed Defence Governance Structure.

View text equivalent of above image.

Strategy Committee of the Defence Organisation
  1. For the future, I would suggest a more inclusive governance arrangement. The key engine would be a Strategy Committee, which would be the Defence Organisation's highest decision-making forum. It would integrate both senior military and civilian advisers and decision-makers1 . Its membership would include the Secretary, the CDF, Vice Chief, Deputy Secretary of Defence, heads of Defence Evaluation and Acquisition Services, the Chief Financial Officer, the JFCOMNZ, and the three Service Chiefs. For greater transparency, and to include other relevant perspectives, an appropriately qualified external director might also be considered.
  2. In my view more explicit Ministerial oversight of the Defence Organisation is needed, particularly where departmental decision-making requires political direction. The fact that a third of Defence's strategic management processes involve political direction/decision points indicates the level of desirable involvement of the Minister.
  3. For this reason, I would suggest that the Minister should chair the proposed Strategy Committee. Given the competing demands upon the Minister's time, the Ministerial chairmanship could be exercised on, say, a quarterly basis, with the Secretary and CDF co-chairing other meetings of the Committee in the absence of the Minister.
  4. If the Minister were able to chair the Strategy Committee at least quarterly he or she would be well placed to provide clear political direction to Defence's senior management group, engage them in the Government's vision for the Defence Organisation and receive their input into Cabinet decision-making. This level of participation would not compromise managerial responsibility by the Defence Organisation's principal officers. It would ensure that the Government's interest was more directly applied to the management of the substantial resources allocated to Defence.
Other Joint Integrated Committees
  1. There are three areas of Defence management where particular decision support is needed: Defence policy / strategy guidance, future capability, and major equipment acquisitions. Many of the problems raised in submissions to the review demonstrated deficiencies in appropriate forums and mechanisms for inclusive decision-making and effective process management. These areas of defence management can be better supported and managed through inclusive committee arrangements, as is done successfully elsewhere. It is noted that recently moves have been made in this direction with the establishment of an Acquisition Control Group. I would suggest that this Board be retained, and additional high-level committees be established to report to the Strategy Committee.
  2. In this new setting, I would see a revised role for the Chiefs of Staff Committee. If my suggestions are adopted, the Chiefs of Staff would be involved in the strategic direction and management of the overall Defence Organisation, through their membership of the Strategy Committee. This would allow the Chiefs of Staff Committee to focus more particularly on professional matters relating to armed forces - military personnel policies, military ethos and ethics, leadership and training, operational practices and effectiveness and professional advice to the principal military adviser to the Government.
  3. In support of a more inclusive, information-sharing management approach, there would be considerable value in the Secretary of Defence being invited to join the Chiefs of Staff. Indeed, I note that the current CDF has already taken this initiative.
  4. A total of five top-level Committees are proposed for providing product for the Strategy Committee's agenda in a structure set out in Figure 4 below with the following memberships:
    • Defence Policy Committee (chaired by the Secretary; membership: CDF, Deputy Secretary of Defence, Vice Chief, Director, Policy, Strategy and Plans);
    • Chiefs of Staff Committee (chaired by CDF; membership: Vice Chief, Chief
      of Navy, Chief of Army, Chief of Air Force, Joint Forces Commander NZ and Secretary)
    • Acquisition Management Board (chaired by the Secretary; membership: CDF, Deputy Secretary of Defence, Vice Chief, Head Acquisition Services, Director, Force Structure, Resources and Logistics);
    • Defence Capabilities Committee (co-chaired by the Deputy Secretary of Defence, and the Vice Chief; membership: Director Force Structure, Resources and Logistics, Head Acquisition Services, Director, Policy, Strategy and Plans); and
    • Defence Staff Co-ordinating Committee (co-chaired by the Deputy Secretary of Defence, and the Vice Chief; membership: functional directors of the Defence Strategic Staff).
  5. All five committees would work to the direction of the Strategy Committee, with the Defence Policy Committee having the same standing as the Chiefs of Staff Committee. The other three committees would be high level working groups with specific co-ordinating functions. The intention would be to ensure that the Strategy Committee remained focused on providing strategic direction and decision-making and the subordinate committees focused on results management and production - it would be expected that the three "second level" committees would occupy less of the Strategy Committee's time than the other two. The suggested governance structure is outlined in further detail at Annex I.
  1. For more detailed discussion of changes to senior military and civilian decision- making positions in the proposed defence organisation, see paras. xx pages xx.

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