Thomas Modly, deputy undersecretary of Defense for financial management, surprised his audience at a recent conference when he claimed that intolerance is a desirable attribute for achieving business transformation.
“We can’t tolerate the way things are now,” he explained during his presentation at the Defense Finance 2006 conference in Arlington, Va., held by Worldwide Business Research Inc. of New York.
Modly was referring to DOD enterprise processes that are failing to keep up with Defense transformation and private-sector trends. While the military’s warfighting capabilities have become increasingly nimble and adaptive, the Pentagon’s business processes have remained sluggish and outdated.
While the private sector has greatly reduced its product development and systems acquisitions cycles, DOD is “going completely in the other direction,” Modly said.
DOD formed the Business Transformation Agency, which Modly co-directs, last year to set standards to consolidate and streamline processes and to provide systems interoperability. While individual agencies are managing the transformation, Modly’s office determines the overall path.
“We swept up processes being developed in different domains, defined them and described what they wanted to accomplish at an enterprise level,” Modly said. “Once we established standards, no one at a systems level can invest in any system over $1 million that does not meet those rules.”
The Investment Review Boards are the BTA governance mechanism which review for compliance with the standards. Modly expects this year’s reviews to uncover some noncompliant investments.
Governance and culture problems have hampered some of those efforts thus far. The Navy experienced a few “false starts,” according to Mark Easton, director of financial operations in the Office of the Assistant Secretary of the Navy for Financial Management, in its efforts to capture more of its transactions on a central enterprise resource planning system from SAP of America Inc. of Newtown Square, Pa.
The Navy halted transformational efforts being managed by agency comptrollers, and Navy CIO Dave Wennergren became the single point of contact for process transformation.
“The CIO has a broad perspective of the business and of systems,” Easton said. “If we allow a functional manager to take the lead, the process will be weighted heavily in that area.”
For Easton, the tremendous size and complexity of the Defense Department means that “governance is easy to say and difficult to execute.”
“We don’t want to consider ourselves a business,” he added. “We are a national defense instrument.”
Maj. Gen. Butch Pair, chief of staff at Transportation Command and a BTA official, suggested that “governance is too old of a term.”
“The only governance success I can point to is that the [Defense Integrated Military Human Resources System] people at the Defense Business Systems Management Committee show up and made decisions,” he added.
DIMHRS, which will be implemented by the Army in 2008, will eliminate more than 30 current Army finance systems, Pair said.
Modly, however, insisted that “governance matters.”
“If we’re going to try to impose these things at an enterprise level, we need a stick to ensure that those agencies comply with the standards,” he said.
And Pair acknowledged that greater accountability is required as well.
“There is a semblance of a culture of blame,” he said, “that we shouldn’t have to live with.”
For Modly, that must be replaced by “a culture of success and a culture that can adapt to change.”
“People in the federal government have to understand the ultimate lesson from the private sector,” he said, “that change is the work they have to do.”
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