In December 2006, the Institute for Defense Analyses  also endorsed the need for a CMO position at DOD. DOD Has Made Progress in Establishing a Management Framework upon Which to Develop Overall Business Transformation, but the Framework Focuses on Business Systems Modernization

Although DOD has made progress in establishing a management  framework upon which to develop overall business transformation efforts,  this framework currently focuses on business systems modernization  rather than broader business transformation efforts. The Business Transformation Agency reports to the Under Secretary of  Defense for Acquisition, Technology, and Logistics in his capacity as the  vice chair of the Defense Business Systems Management Committee. Until  the department institutionalizes a management framework that  encompasses all aspects of business transformation, including establishing  overall responsibility for and defining what is included in business  transformation, DOD will be unable to integrate related initiatives into a  sustainable, enterprisewide approach and to resolve weaknesses in  business operations that we have shown are at high risk of waste, fraud,  and abuse. First, DOD does not have a comprehensive, integrated,  and enterprisewide plan or set of linked plans supported by a planning  process that sets a strategic direction for overall business transformation  efforts and monitors progress. DOD Has Not Developed a Comprehensive, Integrated, and Enterprisewide Plan or Set of Plans Supported by a Planning Process for Business Transformation Efforts

DOD continues to be challenged in its business transformation efforts  because it has not developed a comprehensive, integrated, and  enterprisewide action plan or set of linked plans for business  transformation that is supported by a comprehensive planning process. DOD Has Not Established a Full-time Leadership Position at the Right Level Dedicated Solely to Business Transformation Efforts

DOD continues to lack sustained leadership focused solely on business  transformation. A broad-based consensus exists among GAO and others that the status quo  is unacceptable and that DOD needs a CMO to provide leadership over  business transformation efforts, although there are different views  concerning the characteristics of a CMO, such as whether the position  should be codified in statute, established as a separate position from the  Deputy Secretary of Defense, designated as Executive Level II or Level III,  subject to a term appointment, or supported by a deputy CMO. However, this position does not  adequately address the key leadership challenge that we discuss in this  report—that is, the lack of a senior leader, at the right level, with  appropriate authority, to focus full time on overall business  transformation. DOD would rather  leave the assignment of the CMO role to the discretion of the Secretary of  Defense, and DOD plans to formalize the Deputy Secretary’s CMO and  business transformation duties in a DOD directive. As noted in our  report, during the course of our review, we found that DOD has not clearly  defined or institutionalized interrelationships, roles and responsibilities, or  accountability for establishing a management framework for overall  business transformation, and that differences of opinion exist within the  department regarding which of the various senior leadership committees  will function as the primary body responsible for overall business  transformation. Documents that we used for our review  included, but were not limited to, (1) GAO reports related to DOD’s high- risk areas, including business systems modernization, development of the  business enterprise architecture, and organizational transformation;   (2) DOD products, including the 2006 Quadrennial Defense Review and  updates to DOD’s enterprise transition plan; (3) DOD’s annual reports on  business transformation to Congress (and biannual updates); (4) DOD  testimony to Congress on the status of business transformation; and   (5) meeting minutes and briefing documents, such as those from the  Defense Business Systems Management Committee, the Deputy’s Advisory  Working Group, and the Defense Business Board, related to DOD’s  business transformation, governance, and management reforms. To assess the challenges DOD faces in maintaining and ensuring success  in its overall business transformation efforts, we compared DOD’s efforts  to key practices we found to be consistently at the center of successful  organizational mergers and transformations, specifically, establishing a  coherent mission and integrated strategic goals to guide the  transformation and ensuring that top leadership drives the  transformation.
Why GAO Did This Study

In 2005, GAO added the Department of Defense's (DOD) approach to business transformation to its high-risk list because (1) DOD's improvement efforts were fragmented, (2) DOD lacked an integrated and enterprisewide business transformation plan, and (3) DOD had not designated a senior official at the right level with the right authority to be responsible for overall business transformation efforts. This report assesses (1) the progress DOD has made in setting up a management framework for overall business transformation efforts and (2) the challenges DOD faces in maintaining and ensuring the success of those efforts. GAO conducted this work under the Comptroller General's authority to conduct evaluations under his own initiative. In conducting its work, GAO compared DOD's actions to key practices of successful transformations.

What GAO Found

Although DOD has made progress toward establishing a management framework for overall business transformation, the framework currently focuses on business systems modernization and does not fully address broader business transformation efforts. In 2005, DOD set up the Defense Business Systems Management Committee to review and approve the business enterprise architecture--a transformation blueprint--and new business systems modernization investments. It also established the Business Transformation Agency, which currently reports to the Vice Chair of the Defense Business Systems Management Committee, to coordinate and lead business transformation across the department. Despite these steps, DOD has not clearly defined or institutionalized interrelationships, roles and responsibilities, or accountability for establishing a management framework for overall business transformation. For example, differences of opinion exist within DOD about the roles of various senior leadership committees. Until DOD's business transformation management framework is institutionalized and encompasses broad responsibilities for all aspects of business transformation, it will be challenging for DOD to integrate related initiatives into a sustainable, enterprisewide approach to successfully resolve weaknesses in business operations that GAO has shown are at high risk of waste, fraud, and abuse. DOD also must overcome two critical challenges, among several others, if it is to maintain and ensure success. Specifically, DOD does not have (1) a comprehensive, integrated, and enterprisewide plan or set of linked plans, supported by a planning process that sets a strategic direction for overall business transformation efforts, prioritizes initiatives and resources, and monitors progress, and (2) a full-time leadership position at the right level dedicated solely to the planning, integration, and execution of overall business transformation efforts. A broad-based consensus exists among GAO and others, including the Institute for Defense Analyses and the Defense Business Board, that the status quo is unacceptable and that DOD needs a CMO to provide leadership over business transformation efforts. In a May 2007 letter to Congress, however, DOD stated its view that a separate position is not needed as the Deputy Secretary of Defense can fulfill the chief management officer (CMO) role. Although the Deputy Secretary may be at the right level with appropriate authority to transform business operations, the demands placed on this position make it difficult for the Deputy Secretary to focus solely on business transformation--nor does the position have the necessary term of appointment to sustain progress across administrations. Further, DOD plans to leave the assignment of the CMO role to the discretion of the Secretary of Defense. In GAO's view, codifying the CMO position in statute as a separate, full-time position at the right level with an extended term is necessary to provide sustained leadership, further DOD's progress, and address challenges the department continues to face in its business transformation efforts.