Part 2: The timing, pace, and progress of the civilianisation project

New Zealand Defence Force: The civilianisation project.

2.1
In this Part, we look at:

Summary of our findings

2.2
Before it knew how many military staff it required from 2015, NZDF told the Minister of Defence that it would civilianise 1400 positions. Later, NZDF also identified that it had too many military staff in some ranks and trades. From June 2011, through the civilianisation project, NZDF began discharging surplus military staff and converted some military positions to civilian positions. Despite internal concerns about timing, NZDF decided that the advantages of immediately starting the civilianisation project outweighed the disadvantages.

2.3
Since December 2011, NZDF has relied on attrition and contracts finishing to re-designate military positions as civilian positions. In the first stage of the civilianisation project, NZDF discharged 303 staff and is to discharge two more. Eighty-seven of the discharged staff have been appointed to civilian positions.

2.4
Discharging military staff and the manner in which they were discharged have caused problems for NZDF. Some staff consider that NZDF breached its moral contract with them. NZDF's leaders did not foresee this.

Timing and pace of the civilianisation project

Choosing to proceed quickly

2.5
NZDF weighed up the advantages and disadvantages of different approaches to project timing. It considered delaying the civilianisation project so that:

  • analysis could be completed of how best to use military and civilian staff; and
  • all or most of the changes could happen at the same time, which would mean the civilianisation project could be completed in one stage, rather than three.

2.6
The advantages of immediate action were that NZDF would be able to:

  • save money quickly;
  • meet external expectations for progress on the civilianisation project; and
  • signal clearly to staff that major change was happening.

2.7
We saw evidence of concern expressed by senior NZDF staff in 2011 about the decision to progress quickly.

2.8
The three Services were clearly concerned about how quickly the number of military staff would be reduced. The Army said that:

Army remains concerned that their reductions are going to significantly impact on their ability to sustain operations if they reduce too much of the military out of the back end before growing the front end. 65% of officers who fill single or small group operational missions come from the back end.3

2.9
The Navy said that the size of its military workforce was in line with what the Force Structure Project (see paragraphs 2.13-14) said it should be, and that being forced to reduce the number of military staff increased the risk of not having enough staff to put ships to sea.4

2.10
The Air Force wanted a more detailed review of the technical trades before any decisions were made about which positions could be civilianised.

2.11
In another example of concern about the pace of the civilianisation project, an NZDF planning document stated that:

In some instances we may not have sufficient time which means we may have to cut corners to realise the benefits to the allocated timeframe. Some things we may not be able to do to manage change and we may have to do the bare minimum rather than the full niceties of change.

2.12
Despite the concerns about quick implementation, NZDF decided that the advantages of immediately starting the civilianisation project outweighed the disadvantages.

Incomplete information about numbers of military staff needed from 2015

2.13
In September 2010, when NZDF told Cabinet through the Minister of Defence that it would civilianise 1400 military positions, it had already started – but not completed – the Force Structure Project. This project was to work out the number of military staff required to deliver NZDF outputs for the years 2015-2035.

2.14
The Force Structure Project was carried out in stages. An important stage of the project was to work out the number of Personnel Required in Uniform (PRU). The PRU number was decided at some time between December 2010 and March 2011. There were differing interpretations within NZDF of what the PRU number meant. Some NZDF documents describe it as the maximum number of personnel required in uniform to sustain future operations. Another describes it as a minimum number. Others describe it as an interim result, with more analysis needed.

2.15
The PRU number showed that, from 2015, NZDF would require 10,054 military staff to do its job properly. This meant that NZDF needed more military staff overall than it had before the civilianisation project started. Converting 1400 military positions to civilian positions would have left NZDF with 1618 fewer military staff than it required to properly fulfil its role from 2015.

2.16
The Force Structure Project continued after the first stage of the civilianisation project was completed.

How the civilianisation project was carried out

2.17
The main actions in the first stage of the civilianisation project (between December 2010 and December 2011) were:

  • identifying which military positions would:
    • be re-designated as civilian positions;
    • be disestablished; or
    • remain military; and
  • in ranks and trades that were identified as having surplus military staff, reviewing staff files to identify those individuals who were no longer required;
  • notifying affected staff;
  • applying a right-of-reply (appeal) process that allowed military staff to present their case as to why they should not be discharged; and
  • discharging staff.

2.18
The civilianisation project was a significant challenge for NZDF. Most of the policy and processes needed to implement the civilianisation project had to be developed from scratch. Job descriptions for more than 320 civilian positions had to be prepared. More than 3000 applications for the civilian positions had to be processed. Personnel records for more than 2400 military staff had to be reviewed and decisions made as to which staff were no longer required in uniform. The NZDF Human Resources team prepared a scoring system to decide which staff should be discharged. The system was heavily weighted towards assessing how a person had performed and their future potential.

2.19
All this work had to be carried out on top of existing workloads. Also, the human resources function, which had a pivotal role in the civilianisation project, was being downsized. The NZDF Human Resources team had to be supplemented by contracted personnel to help with this work.

Identifying military positions that could be converted to civilian positions

2.20
Senior military staff in the Army, Navy, and Air Force were responsible for identifying which positions:

  • could be changed to civilian positions;5
  • should remain as military positions; and
  • could be disestablished.

2.21
This identification was expected to be carried out between 17 December 2010 and 26 January 2011.

2.22
A moderation review by the head offices of the Army, Navy, and Air Force was planned. NZDF allowed one week for each Service to moderate its results.

2.23
After this review, 262 military positions were chosen to be converted to civilian positions.

Identifying those staff who were no longer required for military service

2.24
NZDF considered that it might want to keep in military service some of those people whose positions were chosen for civilianisation.

2.25
The Force Structure Project had showed that some ranks and trades had surplus military staff. NZDF focused on these surplus military staff when considering which people were no longer required for military service.

2.26
To ensure that NZDF kept better-performing staff, special boards reviewed the files of 2483 military staff. Their role was to identify military staff (from the ranks and trades with surplus military staff) who were to be discharged, transferred between Services, or assigned to other duties in different trades.

2.27
The special boards used rules written by NZDF and the three Services. The boards looked at performance history documents to work out which military staff to retain.

2.28
The review criteria were:

  • performance, including future potential;
  • ability to be deployed, including medical and fitness history and readiness for operational service;6 and
  • commitment to service, including how willing staff members were to be posted, how willing they were to take part in enhancing their professional military skills, and how willing they were to maintain requirements to be deployed.

2.29
The review boards scored staff using the criteria, awarding most marks for performance and potential. This was to ensure that NZDF kept the staff who it considered to be most valuable. In brief, NZDF sought to ensure that discharged staff were those who had not performed as well and had less potential than their peers.

Notifying affected staff

2.30
In late June 2011, 315 military staff received letters saying that they had been identified for discharge.

2.31
The template for the letters was developed by a working group that included representatives from the three Services and staff from NZDF Headquarters. The template letter was sent to senior staff who were required to use it to inform those to be discharged. The letters told recipients how they were rated against the criteria used to assess whether a military staff member should be discharged. The most controversial part of the letters was that describing the rating of the person's commitment to service as low, moderate, or high (see paragraph 2.28). Some military staff with many years of service found it hurtful to be told that they lacked commitment.

2.32
An NZDF internal document quotes Navy staff as saying that:

[We] tried to reword the letters when we got them as we were shocked at their obviously controversial and unfeeling tone. We were told in no uncertain terms that we were not to alter the ‘template' and only add the individual specific information. How is it that the authors could miss the fact that these letters were incredibly poorly written?

2.33
We have discussed the drafting of these letters with staff at NZDF Headquarters. Their view reflects that expressed in the extract from the document quoted in paragraph 2.32, that the Service Chiefs were able to include individual specific information. The instructions with the template letter that was sent to the Services stated that only information relating to criteria in which an individual did not get the maximum rating was to be used. Any other information was not to be included.

2.34
Letters sent by the three Services showed distinct variations in the level of detail that was included. For example, a letter from one Service to a person who was to be discharged, said that his level of performance and future potential was considered to be less than those of his peers and this is why he had been identified as a person to be discharged. There was no mention of commitment to service. Letters from the other Services contained much more specific information about why a person was considered unsuitable to be retained in military service and how the person had shown a lack of commitment to service.

2.35
An NZDF document listing the lessons learned from the appeal process stated that the "letters, in some cases, were telling good people they were bad".7

2.36
The distress of those receiving these letters was evident in many of the appeals in response to the letters. The appeals did not provide any further information to contest the discharge. Instead, the appeals expressed anger and frustration at the way staff had been treated.

2.37
In the first stage, letters were sent to 315 staff. However, before the appeal process began, two people were removed from the list of staff to be discharged. Of 64 appeals, eight were upheld.

Overall outcome

2.38
A total of 303 staff were discharged. Two more are yet to be discharged. Affected staff had two options:

  • apply for a civilian job in NZDF, and, if successful, be discharged with up to two years' pay protection; or
  • be discharged and receive a redundancy payment.

2.39
In the end, 87 military staff were appointed to civilian positions, while 218 were, or are going to be, discharged with a redundancy payment.

2.40
NZDF counted 477 fewer military staff on the basis that 305 were (or are to be) discharged and a further 172 left between 1 March and 31 December 2011 because their contracts were not renewed or they had resigned. All were counted in the civilianisation project's total because they were military staff from the ranks and trades that had surplus military staff. Other people who left for these reasons from other parts of NZDF were not counted towards this total. We did not agree with NZDF's calculation of the overall outcome (see paragraphs 3.8-3.13, and Figure 1).

2.41
The process created 262 civilian jobs. NZDF has informed us that, as of 30 November 2012, five civilian positions have since been disestablished after a further review. Of the remaining 257 civilian positions that were created, 178 have been filled with permanent staff. Five positions have been filled using fixed-term contracts since the positions are being further reviewed. Eight positions have been temporarily filled with military staff. Sixty-six positions are currently vacant.

Moral contract and increased attrition

2.42
Military staff are not employed. They are "in service". They cannot negotiate a contract and the Chief of Defence Force prescribes conditions of service with only a few limitations.8 Military staff must swear an oath of allegiance and obey all lawful orders. They cannot strike and are subject to military justice. In return for this unqualified commitment to serve, NZDF acknowledges a "moral contract", which can be described as an expectation that senior leaders will look after the interests of the rank and file.

2.43
There was a serious problem caused by the way in which the civilianisation project was carried out. Staff saw NZDF leaders as having breached the moral contract because they felt that their loyalty and commitment to NZDF was not reciprocated. We consider this to be one of the causes of the increase in attrition throughout NZDF's Regular Force.

2.44
Despite planning papers that show NZDF leaders knew of some risks to staff morale and performance, senior NZDF staff told us that they had not fully appreciated the effect that the civilianisation project would have on NZDF culture. An NZDF internal briefing paper said that:

The uncertainty of tenure resulting from the many change programmes, and civilianisation in particular, has therefore seriously challenged the traditional culture of an NZDF that develops and supports its people. The negative impact of perceptions of leadership, lower morale and higher propensity of an individual's intent to leave has been greater than expected.

2.45
In January 2011, NZDF recognised that the civilianisation project could increase attrition and that this would affect how it did its work. NZDF used a quarterly survey of staff as its main mechanism to monitor morale and attrition.9 Because of the speed of the civilianisation project, by the time the results of the quarterly survey were available, there was little time for NZDF to take effective action to moderate the effect of civilianisation. We saw no evidence that action was taken until after the first stage of the civilianisation project was complete.

2.46
Now, NZDF has a focus on rebuilding morale and restoring trust among military staff. NZDF has said publicly that it is considering ways to achieve this, including increasing pay (which has occurred), paying more visible attention to staff welfare, and making greater efforts to ensure that senior NZDF staff engage directly with military staff.

3: New Zealand Defence Force internal document.

4: New Zealand Defence Force internal document.

5: The New Zealand Defence Force describes this as Civilianisation of Military Positions (CoMP).

6: Before staff can be considered as ready for deployment on operations, several measures are used to assess whether they can be deployed.

7: The New Zealand Defence Force has a system to review projects or operations and identify mistakes or shortcomings. This is called the "after action report" or "lessons learned".

8: For example, the Chief of Defence Force must take into account civilian pay rates, the need to be fair, and the need to recruit and retain competent people.

9: The survey is called the OAtS (ongoing attitudes) survey. The survey measures factors such as morale, commitment, and military belonging. The survey has been running for nine years.

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