Monday, September 29, 2014

Defense & Auto Industries: Peas in the Same Pod?

by Russell A. Vacante, Ph.D.

There is one high level or “big picture” characteristic that has contributed to current global competitive difficulties for both the U.S. auto and defense industries, and it is this - a resistance to promoting and embracing change.
From an institutional perspective, managing and implementing change involves a willingness of senior leaders to recognize and accept the impact of new influences, e.g., globalization and technological advances. Since these influences are, for the most part, “external” to an organization, successful implementation requires that they be accepted and managed “internally.” This is where the “rub,” or primary challenge, is found. The structure, culture, deep-rooted processes and routines of an organization’s leadership can be the biggest hurdle to accepting and adopting new influences.  This is particularly evident in both the U.S. automobile and defense industries, where leadership often resists the need for change when new influences come up against “the way it has always been done.”

Many professionals within the automobile and defense industries are familiar with the challenges associated with career development.  Employees know that in order to be promoted they are expected to regularly attend change management and technical training sessions. The employer’s intention is: employee training will serve to keep the organization competitive, particularly when it comes to technological advancements.  A partial reason for this is training sessions don’t usually require organizations to make huge financial investments and employee’s training opportunities can, and often are, turned off and on at will.  Conversely, employees are at the beck and call of their employers when it pertains to training.  Often the employees return to the workplace with knowledge and information from a training session that will prove beneficial to their organization and possibly to their career, if properly implemented.  However, it should not be a surprise to most that employee recommended changes frequently are not implemented by the employer.  Conversely, employers often blame employees for the inability of their organization to accommodate change.  For the sake of our discussion, let’s call institutional change initiated or suggested by employees “micro” organizational change. With this said, it is acknowledged that instances of micro organizational change, that is, change from the bottom up, rarely occur.

Change at the macro institutional level, i.e., top down, is more likely to occur than change from the bottom up.  When macro changes do occur within an organization, it usually is at a snail’s pace.  For instance, the U.S. automobile industry’s reluctance to retool its factories to accommodate “green” technology continues to keep it at a competitive disadvantage to foreign auto makers, in particular, Japan and Germany. Maintaining the status quo seems to be the modus operandi of U.S. auto makers, an industry whose leadership, incrementally and slowly, implements change only after serious competitive coercion from the marketplace forces. 
The U.S. automobile industry’s precipitous decline in the global marketplace began years ago and parallels Japan’s auto industry's accession in the international automobile market. Leading Japan’s charge to change were two change management advocates, Deming and Taguchi.  The Japanese auto industry's willingness to accommodate macro organizational change, based on their recommendations, led to significant product improvements in quality and reliability.  Thus,   Japanese vehicles became more reliable, easier to maintain and support than U.S. automobiles and as a result captured the buying public’s attention and dollars. Japan’s automobile initiative towards producing “greener” cars is the proverbial frosting on the cake that will help the Japanese auto industry guarantee customer satisfaction well into the future.

It also comes as no surprise to professionals within the government that change does not come easy to the U.S. defense industry.  Cost overruns, schedule delays, and poor performance of many defense systems can be attributed to institutional resistance to change.  The defense establishment, government and private industry alike, often requires its employees to be flexible.   In place of recognizing the necessity of making important institutional changes the defense industry seemingly laboriously develops and implements new policy and procedural reforms in accordance to which way the political winds are blowing in Washington D.C.  We have seen the demise of the Willoughby templates and experienced standardization reform, and have endured numerous other “reforms” to the DoD 5000 document series.  Our collective attention to the addressing of institutional changes has been ignored, in large part, due to our preoccupation with implementing micro level “reforms.”  The Under Secretary of Defense (AT&L), Frank Kendall, memorandum dated August 21, 2014 and the accompanying guidance entitled “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense” apparently is a micro, as opposed to a macro, attempt once again at acquisition reform.

Similar to the U.S. automobile makers who have lost the attention and “voice” of the customer, the U.S. defense industry appears to have lost the message regarding present and future global defense challenges.  The defense community has spent years reforming administrative policies and procedures that have resulted in questionable results.  Little, if any, measurable progress has been made towards controlling cost overruns, reducing schedule delays and improving system requirements definition and associated performance.  With this said, let us hope that the Kendall’s recent reform measures, at a minimum, help control escalating acquisition cost. However, a macro initiative probably would include a new management approach for also controlling schedule and performance. The Japanese automakers implemented macro institutional change that has led to improved quality and reliability of their automobiles - could this be a lesson to the U.S. automobile and defense industries?

            The fundamental story line in this editorial is - the U.S. automobile and defense industry’s resistance to change is proving to be an important factor in contributing to their global competitive decline. Books have been written that cite the causes of institutional resistance to change; issues covered in these books include changing educational priorities, changing work ethics and entrenched leadership and outdated organizational values and interests.  Most literature of this nature leads us down the path of micro level reform as opposed to macro level institutional change and often is written by “experts” who have long-standing and vested interests in prevailing institutional structures.  We cannot expect these experts to recommend an “out with the old and in with the new” approach to any organization.  As a result, their micro advocacy to change reinforces the automobile and defense industry’s “bandage” approach to correcting organizational deficiencies, while missing the opportunity for macro institutional change that can improve their global competitiveness.

To meet the competitive challenges of the 21st century the U.S. automobile and defense industries need to embrace macro rather than micro institutional change.  Institutions that refuse to change get sidelined or die.  The U.S. steel industry is a shadow of its previous self and unless the U.S. auto and defense industry leadership begins focusing on making more macro level changes they will likely suffer a similar demise.