To Thrive in Current Defense Spending Climate, Focus on Outcomes

In a 2013 DefenseNews op-ed, Herren Associates President Jeffrey M. Voth argued that it is possible for organizations to thrive despite cutbacks in defense spending by realigning to focus on delivering outcomes. As the pendulum begins to swing back toward a higher defense spending level, outcomes-based strategy continues to be an essential method through which organizations can make the best use of every dollar, standing out from competition and achieving breakthrough results.

Post-9/11 Pentagon spending peaked in 2009 at more than $691 billion — a combination of the Defense Department’s request for basic funds and the supplemental request it made for wartime spending. 2015’s spending level, $560 billion, was the lowest in nearly 10 years.

“Conventional wisdom suggests that—with the U.S. military presence having wound down in Afghanistan and Iraq over the last five years—U.S. military spending will continue to decline,” wrote Henry To, chief investment officer at CB Capital Partners in January of 2016. “In actuality, this is far from the truth.”

With the passage of the National Defense Authorization Act for Fiscal 2017, the U.S. is set to spend $574 billion on national defense. Given that personnel levels continue to fall, this more robust spending level indicates an increased focus on procurement and research, development, test, and evaluation (RDT&E).

Given these new opportunities, how can our nation’s leadership adopt new ways of thinking as they invest in America’s national defense? The answer: they must realign their decision-making processes using an outcome-based mindset.

Until recently, the performance of defense programs has been judged largely on a series of inputs, activities, outputs, and performance relative to budgetary benchmarks. This approach, however, has come under fire, and the 2017 NDAA will split the position of Under Secretary of Defense for Acquisition, Technology, and Logistics USD (AT&L) into two positions. One executive will focus on innovation, while the other focuses on acquisition. One of the limiting factors behind many past reform initiatives has been the preoccupation with a maze of processes and guidebooks developed to simply follow rules, lacking clarity about what benefits are actually realized from each taxpayer dollar.

Defense programs are under increasing pressure to produce results. “Innovation cannot be an auxiliary office at the Department of Defense. It must be the central mission of its acquisition system,” said Senator John McCain, chairman of the Senate Armed Services Committee (SASC) in a recent statement.

Review of our nation’s defense posture recognizes the importance of outcomes for effective and responsible management, because an outcome approach requires a strategic focus on what matters to the warfighter.

What is an outcome-based mindset?

Outcome orientation represents a fundamentally different way of thinking and managing programs across all aspects of the defense acquisition system and how it relates to its major stakeholders. To be effective, organizations will need to rethink their current operating model at all levels.

Change of this nature is not easy – both a top-down and bottoms-up approach is needed. Strong and direct support from legislators and program executives will be essential to provide legitimacy and support. But unless there is also support throughout the defense acquisition system – from policy formulation to operational execution – an outcome focus runs the risk of becoming another administrative reporting exercise instead of a substantive change in thinking of how a program is managed throughout the acquisition lifecycle.

To be sure, outcomes are longer term in nature and are typically influenced by a variety of factors, many external to an individual program manager. They tend to be more difficult to quantify than activities or outputs. Given that achievement of outcomes may in part depend upon factors beyond the direct control of a program or its manager, a different approach may be required other than simply measuring inputs or outputs.

Outputs are important products and artifacts – the “what.” Output metrics are inwardly focused to assess the effectiveness or efficiency of activities within a given program. Outcomes, on the other hand, create direct value for the warfighter— the “why.” Outcome-based measures provide us with a way of measuring effectiveness and determining success from the warfighter’s perspective.

How to adopt an outcomes orientation

Given this juxtaposition, what will facilitate moving from a traditional input-activities-output model to a results-based approach that focuses on outcomes?

Start at the end. To know that you are working toward the right outcome, you need to start with the end in mind. A simple logic model will help provide a visual diagram that depicts the relationships between resources, activities, outputs, and outcomes. It illustrates the rationale behind each activity, process, or investment. Beginning with outcomes, reverse-engineer the model and identify what outputs are required to affect the desired end-state. Continue backward to identify the activities needed to produce those outputs and finally, the inputs needed required by the activities. Through this exercise, a program will be able to identify what is needed to produce desired outcomes.

Strike a balance. Outputs do play an important role in helping measure and track progress toward achieving an outcome; however, if not balanced, the outcome can get lost amid a myriad of outputs. To avoid this fate, determine what outputs produce value-add to the desired outcome. Start by identifying warfighter needs and specifying value from their standpoint. Construct a value-stream map that tracks the information produced by your processes and activities and into final decision-making. This will enable you to determine the outputs that are not contributing value to the desired outcome and can be eliminated.

Tailor smartly. Shorten the concept-to-deployment lifecycle by developing a less monolithic strategy. It is clear that there is not one best model that should be applied to all programs. Capability requirements, past history, constituent support, and many other factors require an approach to be tailored to the situation within each program.

In a time of ambiguity regarding the defense budget and policy considerations, an outcomes-based approach offers the government an objective, unbiased perspective to rethink, realign, and then resolve to break down barriers – always focused on the end results. Ultimately, combined leadership in the Pentagon and on Capitol Hill will need to challenge the status quo, lead with innovation, and adopt new ways of thinking to thrive during a period of uncertainty and change.