1. Personnel and Readiness APEX Orientation Program for DoD SES September 12, 2007

2. 2 AGENDA Trends in Military Recruiting, Retention and Compensation Civilian Personnel Policy The Operational Reserve: Trends in Reserve Force Management Readiness of the Force Progress in Family Support and Quality of Life Trends in Culture and Language Competency Health Affairs: Sustaining the Benefit

3. 3 ASSUMPTIONS We are engaged in a long, irregular war The All Volunteer Force is our paradigm Cost of manpower will rise more rapidly than budget We will complete transition to an Operational Reserve Civilians can play a larger role Operations will be integrated Geographic focus is on Mideast, South/Southeast Asia, East/Northeast Asia

4. Personnel and Readiness Trends in Military Recruiting, Retention and Compensation

5. 5 Compensation Military Pay 9 th QRMC: identified significant gap in military member’s regular military compensation Goal: ensure military pay would be equal to the 70 th percentile of earnings for private sector employees with comparable education and experience FY2000/2001/2002: Congress makes annual pay raises equal to ECI + 1/2% / targeted raises are introduced / President adds $1B to mil pay FY2001-2004: officer pay gap closed and 73% of enlisted gap 2006: 97% of enlisted pay gap closed Combination of increase in basic pay (ECI + ½) & substantial increases in BAH 2007 raise eliminates the gap 2.2% across-the-board pay raise Targeted pay raises for mid-grade and senior enlisted as well as warrant officers. An expansion of military basic pay table from 30 to 40 years of service. 2008 proposed 3.0% sustains success

6. 6 Benefits Growth from Past Congressional Actions $22.8B Billions $ $17.4B $12.7B $21.3B $20.0B $18.9B Growth between FY03 ~ FY10 $13.9 Billion $15.9B $8.9B Based on FY 05 Data

7. 7 Defense Advisory Committee on Military Compensation (DACMC) Recommendations Change non-disability retirement system (i.e. vesting) Revamp Basic Pay table to better reward performance and to support longer career profiles where desirable Change housing allowances/other allowances (remove discrepancies in pay unrelated to performance) Consolidation, simplification and enhancement of Special and Incentive Pays Revise the health benefits for retirees system--more closely align benefit’s value to retiree with its cost to the Department of Defense Periodic evaluation of quality-of-life programs to ensure they are cost-effective and adequate Review of Reserve Component pay/benefits to ensure equality to Active Component members

8. Personnel and Readiness Civilian Personnel Policy

9. 9 Military to Civilian Conversions Objective: Convert military billets in activities that do not require a military person to DoD civilian or private sector performance.

10. 10 What is NSPS? Performance management system that: Values performance and contribution Encourages communication Supports broader skill development Promotes excellence Modern compensation system based on pay for performance and market based pay Streamlined and more responsive hiring process Flexibility in assigning work Preservation of employee benefits, rights and protections Preservation of employee collective bargaining rights Tools to shape a more effective and efficient workforce

11. 11 Major Design Elements HUMAN RESOURCES SYSTEM Classification Jobs in broad “pay bands” based on work nature and competencies (eliminates “grades and steps”) Simple and flexible Compensation Market-sensitive Pay directly linked to performance and mission accomplishment Performance Management Linked to agency mission Job objectives and contributing factors influence rating Meaningful distinctions in employee performance Employee development with ongoing feedback and dialogue Staffing Flexibility to respond to mission change The right person, in right place, at the right time Workforce Shaping Streamlined and mission-responsive Emphasis on performance ADVERSE ACTION AND APPEAL PROVISIONS - Enjoined LABOR RELATIONS SYSTEM - Enjoined

12. 12 Spiral 1: Where We Are Two and a half years of joint design and development “Spiral Development” approach, with Program Executive Office leading effort; oversight by DepSecDef Partnership with Office of Personnel Management Aggressive, comprehensive communications strategy Spiral 1.1 implemented on 30 April 2006 HR provisions only: pay banding, pay for performance, staffing, reduction in force Approximately 11,000 non-bargaining unit employees 12 organizations spread across the Department All employees, supervisors, and managers trained (web based orientation & classroom training, with focus on performance management) Spiral 1.1 Performance Management Workforce trained in HR Elements and Performance Management Performance plans linked to organizational goals and objectives Rating cycle through October 2006 Performance payout in January 2007 Spiral 1.2 implementation October 2006 – February 2007 66,000 employees converted CONUS and OCONUS – two pay schedules (GS and APS) Spiral 1.3 implementation March – April 2007 35,500 employees Spiral 2 implementation October 2007 – March 2008 90,000 employees Multiple Lessons Learned Workshops 113,000 employees now in NSPS HR System

13. Personnel and Readiness The Operational Reserve: Trends in Reserve Force Management

14. 14 DoD End Strengths (FY73 – FY06) FY 1973 – FY 2006 AC: - 38.5% RC: - 10.1% Reductions from Peaks AC: - 38.5% (FY 1973 – FY 2006) RC: - 29.4% (FY 1989 – FY 2006)

15. 15 Total Force RC Contributions All Reserve Components – including USCGR

16. 16 Members Mobilized Once for ONE/OEF/OIF Members Not Mobilized for ONE/OEF/OIF Members Who Served More than Once in ONE/OEF/OIF Not Mobilized – 53.4% Mobilized – 46.6% Reserve Force Mobilization Statistics Current Selected Reserve Members Ever Mobilized for ONE/OEF/OIF Data as of: May 31, 2007 All Reserve Components – including USCGR

17. 17 The New “Operational” Reserve Concept: The new guard and reserve will be organized, trained and equipped to support operational military mission requirements to the same standard as the Active component. Individuals and units will be tasked to prepare for and participate in missions, across the full spectrum of operations, in a cyclic or periodic manner that provides predictability for service members and their families and employers. Key attributes: Rebalanced to ensure an adequate rotational base for needed capabilities and to limit involuntary mobilization to predictable and sustainable rates (e.g., one year in every six) Organized, equipped, and trained to support operational missions in periodic cycles Managed to provide a range of participation opportunities and enhance volunteerism

18. Personnel and Readiness Readiness of the Force

19. 19 SORTS Data are Often Misleading Scores are based on inputs (what units have on hand) as opposed to outputs (what they can actually do)

20. 20 From: Unit status Inputs / resources Deficiencies Service centric Periodic Multiple reports / systems Defense Readiness Reporting System Represents a Real Change… To: Mission assessments Outputs / capabilities Their implications Joint centric Continuous Enterprise views Unclassified Answers Ready for What? Unclassified

21. 21 A New Paradigm: Are Forces Ready for Assigned Missions? Notional Data

22. Personnel and Readiness Progress in Family Support and Quality of Life

23. 23 State Outreach Objectives: Concentrate effort on state relationships and educating state leadership on 10 key issues Alert DoD leadership of state-level debates on key issues to provide an opportunity for their participation Leadership Involvement: DUSD(MC&FP) and PDUSD(P&R) USD(P&R) NGA Governors-only meeting Lt.Gov. Assoc. breakfast Letters to/visits with Governors DEPSECDEF NGA-DoD workshop SECDEF NGA Governors-only meeting Letters to Governors Governor visits to Pentagon

24. 24 Overall Evaluation of States 2004 vs. 2007 Based on Key Issues 1-8 2007 2004 Number in state/territory represents the state ranking by the number of total force & families residing within the state. States/territories meeting at least 75 percent of criteria States/territories meeting between 50-75 percent of criteria States/territories meeting less than 50 percent of criteria

25. Personnel and Readiness Trends in Culture and Language Competency

26. 26 Conclusions The AVF has served us well – but we need stronger national support for military service. We are well on the way to a truly operational reserve. Civilians can – and will -- play a larger role. States are responding to the Department family agenda. Language and culture are accorded greater standing as necessary military skills, but still not at the level likely to be needed. Congress is reluctant to deal strategically with personnel costs. Readiness thinking is shifting to a mission orientation, but old habits persist.