1 Human Capital Strategic Planning in the DoD Commentary by the PEO/DHCS 5 March 2007 Program Executive Office (PEO) for the Defense Human Capital Strategy (DHCS)

2 The PEO for the DHCS The Program Executive Office for the Defense Human Capital Strategy was a brainchild of QDR 2006 Task is to develop strategies for improved HR management in DoD Charter sets no boundaries Website at:

3 What’s the problem? What’s Human Capital? What strategy?

4 What is human capital strategic planning? Generally, strategic human capital planning proceeds in three steps:  Get a clear understanding of the workforce needed in the future  Develop a clear set of policies and practices to get the needed workforce  Make a business case for change to establish vertical and horizontal alignment inside the organization DoD faces challenges in all these areas

5 Six elements of a HCS for the All Volunteer Force Missions – the operational environment Sizing the force -- doctrine, technology by mission areas Sourcing workforce functions -- the principles of TFP Investing in people – management of human capital (human resources = people + human capital) Managing inventories – force shape, experience mix, turnover, leadership selection, divesting low performers Providing the tools – selection, compensation, benefits, assignments, career paths, budget incentives, etc. We have issues in all of these areas, both mil and civ

6 Interaction with Friction Pay Table Goldwater-Nichols DOPMA Force Shaping Reserves Goldwater-Nichols Pay Table Force Shaping Retirement Paradigm DOPMA and the Pay Table are integral to this complex “human resource system.”

7 An MPTE system that was never built as a system All elements of the MPTE system relate to each other, and have been made to work over time through patchwork fixes The system is not broken But it creaks, and needs to be modernized to serve the AVF of the future How to make the case for change? Where to begin?

8 Operational Environment: Only Uncertainty is Certain History will repeat itself: we know what we don’t know (probabilities and ranges)  Forward presence Hum asst Peace kpng Peace enf IW SSC LSC Long war Nucl war 0 1 Un- kwn war HLD

9 Future force size not easily predictable Neither trend nor steady state projection seems reasonable Variance in total endstrength likely to continue, and can never be as high under AVF as under the draft era DoD Active Duty Military Endstrength

10 What Do We Know About Our Future Pool Of Personnel? Who joins the military?  Quality: better than civilian average (enl)  Attitudes: action oriented, problem solver, adventurous, wants discipline, and public service  Our task: create a jobs, careers, support, benefits, and compensation to attract and keep these people None of this is going to change  We are and will remain an all-volunteer force  Neither the quality or the attitudes of future volunteers are likely to change much – if they do, we have to adapt

11 20-year vesting rule yields strange force shape Force management and shaping are driven by compensation – not the other way around 42% loss 25% loss

12 A tightly managed system Officers: variation only beyond O6 Enlisted: variation only in lowest two grades

13 Force should be shaped by Service and functional area Current force shape is dictated by convention and legislation We have incomplete knowledge of what an unconstrained force shape ought to be

14 DoD has six separate cost drivers for AD personnel Costs include Basic Pay plus benefits, and the present value of future retirement benefits WILL NOT RETIRE WILL VEST AT 20 YOS VESTED AND SERVING 53% 24% 42% 62% 5% 14%

15 The total Fed Govt cost for mil pers is very unbalanced Pay system is very unfair to non-retirees Senior personnel are very cost effective 53% of force 12% of cost 42%, 86% Enlisted Officers 24%, 4% 62%, 90% 14%, 6% 5%, 2% Force share Cost share Force share

16 What issues do we need to work on? Mil side: 20 year retirement vesting rule, pay table, DOPMA, Goldwater/Nichols Civ side: build on NSPS, improve ed/trng, build career principles, leadership selection, inventory management Significant problems in all areas