Reports and Publications

• Hunn Review:
  Annexes
  • Contents
  • Annex A
  • Annex B
  • Annex C
  • Annex D
  • Annex E
  • Annex F
  • Annex G
  • Annex H
  • Annex I
  • Annex J
  • Annex K
  • Annex L
  • Annex M

Within this section

• Technology
• Management and Finance
• Summary

Hunn Review: Annexes (30 September 2002)

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Annex E (continued)

The Future Strategic Environment Implications for Higher Defence Structures

Technology

40. The future defence environment is characterised by accelerating technological development, innovation and redundancy. It is not practical here to discuss in detail the dramatic changes that are occurring across the spectrum of technology that have implications for national security and defence. As an economy, the key areas of technology change of relevance to the Defence Organisation have been examined, and rather than itemise these changes, this section highlights the implications of technology change.
41. Cycles of technology change are becoming increasingly short. As the time between each technology advance decreases, so too does the time until a current technology and its products is made obsolete by the next generation arriving. More frequently, older technologies are not interchangeable with new products. These features of technology change represent an in-built growth dynamic that will over time reduce the freedom of choice for many countries and individuals in staying in touch with where technologies are going.
42. In some technology areas of interest to military forces, manufacturing costs are decreasing or not increasing with each generation of technological advance. This is in part because commercial drivers have taken a dominant control and economies of scale can be achieved in meeting a civilian, globalised market, that could be not be achieved if only military customers were being supported. In other areas of interest to military forces, technology-generated cost growth is occurring at the same rate or faster than technological improvement. Many of these areas of technology relate to specialist military equipment (armoured vehicles, naval combatant ships, and military aircraft) where economies of scale are much more limited.

45. As a consequence, while in the commercial world, technology-enhanced products (for example, computers) are gaining generational leaps in capacity for similar or reduced costs, in the area of specialist military equipment, such cost efficiencies are less and less likely.
46. Technology developments in the first decades of the 21st century are likely to make some types of military equipment prematurely redundant. In this context, one area of particular note is the advances being made in robotics - an example is the likely replacement of the light observation helicopter by unmanned aerial vehicles. New weapons and equipment with substantially different effects are likely to move from research type projects into fully developed and fielded systems. For example, low-lethality, disabling weapons and robotics tailored for urban violence control, reconnaissance and surveillance. New battlespaces will open up (including cyber-space and bio-space) and will be exploited by weapons unique to those spaces (such as viruses in computers, and tainting of information. Weapons of mass destruction, particularly chemical and biological are likely to become more available, and less controllable.

48. Technology-enabled equipments will progressively substitute for at-risk personnel in military forces that can afford to do so, for example robotics. The obverse applies. Those countries who chose not to afford, or cannot afford such technology-enabled equipments will be forced to expose their Service personnel to greater levels of risk, and to maintain military forces of a larger personnel size to carry out missions.
49. Technology change is trending in two directions and this trending is changing the balance between offensive and defensive strategies and capabilities. On the one hand, as commercial drives take the lead, new products, substances, and technologies, which can be modified for violent purposes, are more readily accessible through commercial markets. The range of commercially available technologies is likely to continue to provide greater scope for innovative improvised weaponry. Moreover, for those who wish to create disproportionate violent effects, - and this includes non-state groups and even individuals as much as national governments - Cold War - generated arms control regimes are likely to prove increasingly irrelevant.
50. On the other hand, national governments seeking to protect and defend against security threats must balance equipping and preparing their military forces for traditional style war-fighting (which is becoming increasingly expensive), and to meet unconventional threats that can equally soak up significant resources and require particular capabilities, for example, chemical and biological defence capabilities, cyberspace patrollers. For most countries maintaining conventional war capabilities, the pressure to minimise casualties and damage is driving equipment priorities for long-range precision, real-time, accurate surveillance and reconnaissance, rapid strategic and tactical protected mobility capabilities. In both responding to conventional and unconventional violence, responses are dependent upon increasingly sophisticated and integrated technologies that because they are specialised and limited to military use are proportionately more expensive to acquire.

50. Emerging new technologies, which until recently have been the stuff of science fiction are increasingly likely to generate real world applications within the lifetime of extant military specialist equipments. These include areas such as genetics, biotechnology and nano-technology. These technologies will introduce whole new manufacturing processes, new energy sources and energy storage devices, new weapons, for example.
51. The minimum entry level into many types of future multi-national military operation will progressively more dependent upon technology. Military forces that are not technologically interoperable, particularly in terms of specialist military equipment, command and control systems, and information management systems, will be assessed as a risk and burden on more technologically-enabled multi-national forces.
52. While technology change cycles are shortening, professional competence for maintaining and using high technology equipments is a long-lead time component of military capability. Self-diagnostics and improvements in reliability and maintainability are reducing some areas of required professional knowledge. At the same time, the ubiquity of technology is expanding the requirement for military personnel and civilian advisers that are technologically-focused, and able to maximise management and operational advantages from evolving technologies.
53. While security crises can be expected to emerge with relatively short notice, developing technologically-competent, and equipped military forces cannot be achieved in similar time scales. Continuous, committed levels of investment in personnel and equipment will be needed to ensure that technology-enabled capabilities are available when required.
54. As cycles of technology evolution shorten, it will be increasingly important to manage equipment life cycles. For smaller countries with limited resources, managing the risk of premature redundancy will require strategies that include close attention to technology change indicators, experimentation with low-cost, high pay-off niche technologies, investment premiums in selecting equipment platforms with stretch potential to allow upgrading or reconfiguration with each new generation of technology.
55. Over the last decades of the 20th century, information technologies were used to reduce the layers of management in most businesses. This application of technology has taken on a mantra status, with unfortunate side-effects that were not fully thought through. In many firms, and government departments, information technology applications leapt ahead of the organisation's ability to record and automate the tacit knowledge of the layers of management that were removed. Consequently, information technologies are now more focused on information resources management, and effective management structures, rather than simplistically eradicating layers. Such technologies include electronic document management, the internet, and electronic communications.

Implications for New Zealand Defence

56. Because of these trends, a Defence Organisation is required that has sophisticated management processes for identifying and specifying required military capabilities against trends, and building effective business cases to modernise the NZDF in ways that maximise the technology effect for dollar expended over time. A capacity to develop innovative equipment strategies for managing technology turbulence and technology-generated costs is also needed.
57. The increasing rate of technology dissemination is likely to be one cause of acceleration in the rate at which new threats emerge - for example, bomb-making and chemical weapons instructions available on the internet. The future Defence Organisation needs to be structured in ways that minimise impediments to the timely development and acquisition of robust counter-measures as new security threats emerge, or pro-active measures to reduce vulnerabilities.
58. A defence organisation is needed that is capable of creating effective interfaces and partnerships with other Government departments and the private sector to access relevant scientific-technological innovations. It needs to have an environment that supports a culture of innovation, questioning, and searching for alternative solutions. A future Defence Organisation also needs to have the personnel capacity and culture to compose and manage the information requirements of a modem public sector department (e-Government, public relations, and inter-agency co-operation). Structures that impede communications, and use information technologies and management systems to control rather than exploit information, will be increasingly wasteful.
59. The future Defence Organisation will need to manage and sustain a portfolio of capability assets that will increasingly be defined and influenced by technologies and rates of technological change outlined above. The organisation will require professional staffs and leaderships that are technologically knowledgeable, confident and innovative.

Management and Finance

60. Despite a converging trend between management practices within the private and public sector, Defence management will continue in the future to be subject to constraints and controls not found in the private sector. These constraints will continue to influence the degree to which Defence management can operate along commercial lines. For example, every mistake made by Defence is liable for public scrutiny, whereas failure in the private sector is an accepted risk. Failure in Defence can translate into casualties and destruction. Business failures while certainly traumatic do not often have the same consequences.
61. The high capital and operating costs associated with the defence function also call for a standard of transparent decision-making and high standard of decision support that will continue to be considered by some external commentators as excessive. At the same time, the convergence trend in management practices suggests that in many areas of the Defence function, the same management practices can be applied to achieve the same degree of efficiency and effectiveness achieved in the private sector.
62. Trends in public sector management of relevance are:
    • a trend towards devolving Central Government responsibilities to regional and local government entities, state-owned enterprises or management boards. Because of the constitutional control provisions over the monopoly ownership of the instruments of military force by the State, it is assumed that Central Government will continue to retain sole responsibility for national security, including the Defence function;
    • defragmentation with the structural integration of small agencies into larger departments is likely to continue, with synergies achieved, duplication eradicated and a critical mass of qualified, skilled staff established;
    • increasing emphasis is likely to be placed on multi-agency outcomes, and whole-of-government approaches to issues that require collaboration and multi-discipline action with a concomitant reduction in the emphasis on vertical, singular, fragmented accountabilities that are less able to place the public interest in a broader context;
    • Short-term delivery of outputs is being replaced by longer term perspectives, with an increasing focus on Government's ownership interests, and with policy development needing to focus on achieving longer-term Government Outcomes; and
    • Significant benefits are likely to be accrued through the harnessing of information technology under the E-government initiative, with the challenge being to transform current processes and practices to exploit and manage its potential.
63. Best management practices highlight:
    • initiatives to create more adaptive corporate culture - these include articulating and implementing powerful, relevant values through leadership example; setting competencies for individual performance and assessing performance against such competencies; increasing levels of investment in personnel development, up-skilling and re-training; recognition of the value of institutional knowledge in compensation packages;
    • organisations are becoming externally orientated rather than inwardly focused, searching for and expressing a strategic focus that continuously
      positions them for the future, whilst maintaining continuity of service i delivery;
    • cross-functional teams are replacing functional silos, either on a permanent basis such as in business units, or through the adoption of project management concepts, with duplication removed through integration, redundancy, or the adoption of a shared service concept, with emphasis accorded to implementing process management;
    • corporate governance, compliance and standards functions are being integrated into integrated corporate management units, with an increasing focus on risk management to identify and reduce transaction costs and meet service delivery expectations;
    • higher level governance structures of organisations remain centred on committees, having clarity of purpose, with a sense of personal accountability and responsibility, and a mandate to make decisions, rather than manage by consensus;
    • Engagement of employees in management actions is increasingly common, as a conduit for innovation, with more networked organisational structures replacing the traditional hierarchical chain of command that are viewed as contributing to inertia; and
    • personnel potential is recognised, with Human Resources increasingly becoming a specialised discipline, having greater interaction throughout the organisation.
64. Financial considerations likely to impact on the future Defence Organisation include:
    • continued financial constraints, with efficiencies needing to be continually sought in non-core areas and areas that are duplicated across the NZDF, and a need for alternative delivery strategies such as better work practices through to out-sourcing;
    • the percentage of GDP spent on Defence (1.1% currently) is likely to remain substantially unchanged, which is likely to be insufficient to meet even extant capital investment needs, requiring capital injections on an on-going basis;
    • the adoption of 'limited' multi-year operating appropriations to support a longer term focus on Defence matters, with opportunities to enhance management flexibility being to a high degree offset by lumpiness of capital expenditures and funding for military inflation that does not meet actual levels (6-8% per year);
    • resource / finance functions within the Defence Organisation will move away from governance and compliance to focus on business/decision support; with the Treasury demanding increasing robustness in supporting financial data;
    • 'future' strategic issues will increasingly need to be managed under a 'risk management' strategy, which balances the need to preserve and enhance long term military capabilities and address short term priorities, with a framework in place that considers trade-offs between requirements and available resources;
    • Defence strategic-level output and cost attribution structures may need to be re-appraised and realigned to address changes created by the establishment of HQ JFNZ and any move to an joint HQ NZDF, or integrated Defence Organisation; and
    • the discretionary element of Defence's operating budget will remain small (currently about 5-10%), requiring best practice in contract management (currently, there is approximately $60million annually involved in commercial contracts), commercial disciplines to be applied and the impact of future out-sourcing to be weighed against any further potential reduction in financial flexibility.

Implications for New Zealand Defence

65. The management and financial trends outlined above suggest the need for a streamlined Defence structure that promotes the open, rapid flow of data and information to accelerate change. A future Defence organisation is needed that empowers co-operation, information sharing and adoption of best practices, with institutional boundaries between the single Services and between HQ NZDF and the MoD being removed.
66. A future defence organisation needs to lighten its strategic-level structure by delegating executive authority to lower staffing levels responsible for service delivery. A future defence organisation is needed that does not contain functional impediments to process management, and working within management processes tailored to meet the decision support standards required for expenditure of public monies. An organisational structure is needed that can apply commercial discipline to support financial decisions. Internal structures are required that support a shift to an outcome and customer focus, rather than reinforcing the focus on input management.
67. Future Defence organisation and structural arrangements need to contain the following features and characteristics:
    • the capacity to re-evaluate and redefine its core values, with the intent of establishing a Defence joint, integrated culture that is agile, responsive and wholly professional;
    • organisationally integrated to reduce the negative effects of vertical silos, to achieve synergies, to eliminate single Service bias, and to build, sustain and effectively utilise a critical mass of qualified staff to meet the standards for advice and service delivery;
    • co-ordinate and contribute effectively to any network of governmental departments and agencies for national security, with any impediments to working effectively in partnership eliminated;
    • use strategic planning processes as the primary mechanism for aligning capability development, structure, personnel and institutional requirements, with have the capacity to develop a robust future- orientated focus, that provides and updates a shared common strategic perspective;
    • embrace and implement best practice performance across a range of disciplines and functions, supported by a comprehensive performance management system;
    • facilitate and sustain a continuous improvement management focus across all defence functions and activities;
    • develop personnel policies that reflect the best management practices; with a new compact needing to be struck between military and civilian staff, particularly in support areas; and
    • ensure that compliance and governance requirements that meet government and the public sector standards, supported by a risk management strategy, are robust, independent and transparent.

Summary

68. The analysis of trends and their implications for the future structural arrangements of the Defence Organisation highlight:
    • a need to introduce a national security structure at Governmental and senior official level that facilitates a whole of Government (and international) approach to defining New Zealand's security policy, governance and potential responses to events;
    • a need to advance the joint approach to an inclusive inter-agency national security network concept, with a governance structure established that provides direction, policy and strategies to facilitate collaboration and planning between international, government, national and local organisation and agencies, providing the conditions for all instruments of national power to be brought to bear to address security vulnerabilities, including issues of conflict management;
    • a need to redefine and embed core values throughout Defence, to change its existing culture;
    • a need to remove self-imposed wasteful boundaries and adopt a joint, integrated structure strategic-level organisational structure;
    • a strategic perspective be adopted, underpinned by enterprise-wide architecture and supported by a comprehensive, standardised performance management and risk management systems;
    • the requirement for adopting best practice process management approaches, supported by removing layers of unnecessary bureaucracy due to functional silos, streamlining work practices and devolving executive authority for differentiated processes to levels where decisions should be made;
    • the requirement to adopt an open communication strategy for both all internal and external audiences, and to apply resources to develop the effective content to be communicated.
    • a comprehensive personnel strategy, that is innovative and responsive to the current and emerging changes in the work place, be developed and implemented; and
    • corporate governance and compliance be maintained, commensurate with the standards expected of the public sector.

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