It is increasingly evident that the organizational goals of private industry and the Navy Department are alike in that both are production organizations concerned with the management of men, materials, and money to maximize return on their investments. This is especially true of the military departments since the Department of Defense reorganization of 1958. In private industry, return on the investment is evaluated by measuring profits in terms of total investment, while in the military, return on the investment is evaluated by measuring strategic and tactical advantage in terms of available weapon systems. Experience has clearly demonstrated that profit can be increased by the efficient management of the producers resources and that certain organizational patterns will provide the maximum efficiency.
Let us, then, take a quick look at the historic development of the Navy Department since 1947—to maximize clarity and limit our scope, there will be no reference to the Marine Corps Headquarters—and examine the current organization from a point of view of its applicability to the basic precepts of modern management. Perhaps we can predict the type of organizational structure which reasonably may be expected to evolve in the next decade.
In 1947, the Congress created the National Military Establishment headed by a Secretary of Defense and consisting of three executive departments: the Army, Navy and Air Force, each under its individual service Secretary. The law also legalized the Joint Chiefs of Staff and made the Secretary of Defense a member of the cabinet in place of the service Secretaries. Two years later, in 1949, with the establishment of the Department of Defense (DOD) as a full fledged executive department, the military services lost their status as executive departments within DOD. During this reorientation of the armed forces, the internal organization of the Navy Department remained essentially the same. The Secretary of the Navy remained the chief executive and the CNO, while also a member of the Joint Chiefs of Staff, continued as the Secretary’s chief military advisor and quasi-co-ordinator of the Bureaus. With the Department of Defense Reorganization Act of 1958, however, a major change in the authority of the Secretary of the Navy and the role of the Navy Department did take place. The act of 1958 took the command of the unified and specified forces away from the military departments and placed them under the executive direction of the Secretary of Defense. The role of the Secretary of the Navy and the department changed from that of providing strategic direction to the naval combatant forces of the nation to that of providing an organized, trained, equipped, and ready naval force to the unified and specified commanders operating under the Secretary of Defense’s direction. The Secretary of Defense and Joint Chiefs now provide the grand strategy, the unified and specified commanders decide and apply the grand tactics and the military departments produce the trained and equipped forces.
The 1959 and 1963 Reorganizations. The DOD reorganization act of 1958 instigated a move within the Navy Department to re-evaluate its organizational structure to determine if changes were necessary or desirable in the light of the new orientation within the DOD. In August 1958, the then Under Secretary of the Navy William B. Franke and a select committee began a comprehensive study of the department and subsequently issued a report in January 1959. The Franke report reviewed the history of the Navy, made special disparaging remarks about the General Staff concept of organization and concluded that the then current bilinear structure (CNO and Bureaus) was good and sound for operating the department. The report strongly endorsed the Bureau system, but recommended that the Bureau of Aeronautics and the Bureau of Ordnance be consolidated into a single Bureau of Naval Weapons in order to effect an improvement in weapon system management and development. The consolidation was accomplished in 1959. One further organizational change was made in the department prior to the reorganization of 1966 and it was the most substantial change since the establishment of the office of CNO in 1915. In 1962, a committee, headed by John H. Dillon, Administrative Assistant to the Secretary, examined the department in great depth and issued a voluminous report containing over 100 recommendations for the improvement of the department’s management processes and structure. The most noteworthy recommendation from an organizational standpoint was that advocating the establishment of a single producer executor in the Navy.
A Single Producer Executive is required in the Navy, an executive who will serve the Secretary, the Chief of Naval Operations and the Commandant of the Marine Corps as the voice of the resources interest and be responsible for the effective management of the Navy’s resources capabilities. The Secretary will be free from the burden of resolving many of the differences between the material bureaus and can devote his time to more constructive efforts. The Chief of Naval Operations will acquire a strong right hand, a single responsible and responsive expert. . . .
The report further recommended that this new Producer Executive should control, coordinate and command the Chiefs of the Bureaus of Naval Weapons, Ships, Supplies and Accounts, Yards and Docks, and absorb the Special Projects Office. In 1963, the material Bureaus and the Special Projects Office were placed under the command of a separate functional executive of the department, the Chief of Naval Material (CNM) who reported directly to the Secretary. The 1963 reorganization was designed primarily to strengthen the Secretary’s management of the four material bureaus by placing them under the command of a full-time specialist in material matters whose Office of Naval Material (ONM) would act as their central co-ordinating office. Thus, for the first time since the establishment of the Bureaus, it was officially recognized in the department that some type of a professional operating executive was required not only to co-ordinate the Bureaus, but to command them as well. However, command was not given to CNO—the old ghost of the Prussian General Staff still haunted the leaders of the department.
The Criss-Crossed Organization. During the period 1963-1966, the Secretary had under his immediate direction five senior military executives of the department: the CNO, the Commandant of the Marine Corps, the Chief of Naval Material, the Chief of Medicine and Surgery, and the Chief of Naval Personnel. This was a better arrangement than formerly when the Secretary was required to direct eight people (CNO, the Commandant, and six Bureau Chiefs). While the 1963 reorganization reduced the Secretary’s required span of supervision, it also diluted the tenuous control the CNO previously had over the production and procuring divisions of the department. This reorganization also had other disquieting effects that led to more imbalances in the department’s organizational structure. The status of the six Bureaus changed radically in the hierarchy. All the material Bureaus dropped from a second to a third echelon status. The service Bureaus (BuMed and BuPers) became the senior Bureaus, still in direct contact with the Secretary of the Navy and responsive to the CNO. The chiefs of these two bureaus held the rank of vice admiral while the Chiefs of the Bureaus of Naval Weapons, Ships, Yards and Docks, and Supply and Accounts remained rear admirals. This point of difference in echelon and rank was duly noted in the department’s organizational charts. Another effect of the reorganization was the new stature and position of the Chief of Naval Material in the hierarchy. While directed to be responsive to the requirements of the CNO, he was directly under and thus had authorized direct liaison with the Secretary, and he was senior in position to the Chiefs of all the Bureaus including BuPers and BuMed. This placed the Chief of Naval Material almost, but not quite, on the same horizontal organizational line as the CNO vis-a-vis the Secretary. These relative positions in the hierarchy were also duly noted on the department’s organization charts. It can be said that the problems in position and status were envisioned by the reorganizers of 1963 and would have been eventually resolved to the satisfaction of all. What triggered the reorganization of 1966, however, were the stresses and strains encountered in the department by the formation of the Bureau of Naval Weapons in 1958. The marriage of air and ordnance did not result in the perfectly controlled and co-ordinated development, production and procurement of superior weapon systems envisioned by the Franke report. The new Bureau found itself responsible for the development, production, and procurement of highly advanced and complex aircraft, missiles, and a vast array of conventional weapons for land, sea, and air warfare. With a few noticeable exceptions, the Navy’s missile program became the problem child of the service. The most resounding success of U. S. Navy ship and missile development during the postwar period was the Polaris submarine weapon system developed outside of Bureau cognizance under a special project manager. This event was not overlooked by the weapon planners and organizers in the department. Assigning weapon development, procurement, and even production to autonomous project managers outside the Bureau structure became a way of life in the late 1950s and early 1960s. The motto of development and production management in the service became, “Assign it to a Project Manager.” The Fast Deployment Logistic Ship program joined the ever increasing list of special projects, and the in-house capability of BuShips became suspect along with that of BuWeps. In 1964-1965, it became apparent that there was something radically wrong with the organizational structure of the Navy Department. The organizational lines of authority, responsibility, and communication criss-crossed all over the department, and weapon development in the material Bureaus became the subject of much concern and criticism.
The 1966 Three-Level Structure. The reorganization of May 1966 addressed itself to adjusting two inherent imbalances in the departments organizational structure, the over-centralization of the Bureaus resulting from the 1959 reorganization and the diminishing role of the CNO in the department resulting from the reorganization of 1963. The 1966 reorganization not only healed these self-inflicted organizational wounds, but set the department back on the road towards a fully diversified structure. In 1966, the Bureau of Naval Weapons and the Bureau of Ships were abolished and their tasks decentralized by dividing their production efforts among four newly designated Systems Commands: Ship, Air, Ordnance, and Electronics. These four new commands along with the newly titled Supply Systems Command and Facilities Engineering Command (formerly BuSandA and BuDocks), make up the Naval Material Command, under the Chief of Naval Material. The position of the CNO in the department was considerably strengthened by placing the Chief of Naval Material, the Chief of Naval Personnel, and the Chief of Medicine and Surgery under his direct command. This was the most revolutionary adjustment to the department’s organizational structure since the establishment of the Bureaus in 1842. The Secretary now has a single chief operating officer under his command who has the authority and the organizational tools at his disposal to control properly the production effort of the department. Thus the organizational balance of the Navy Department changed from a semi-functional structure to a three-level diversified structure with a chief executive on top, an effective chief operating officer in the middle over diversified production divisions below. The Navy Department’s organization had arrived at the same point in its developments as that of private industry in the 1920s. The Secretary remains at the organizational pinnacle of the service where he has been positioned by statute, usage and success in providing the Navy with the most effective executive leadership in a democratic society. The Secretary’s immediate professional operating chief (CNO) and operating staff (OPNAV) have evolved to an organizational component which has the command authority to insure co-ordinated control of the service’s production resources. The production divisions have been strengthened and potentially made more effective by closely identifying their efforts with the development, procurement and production of their specialized end-products. The anarchical decentralization and splintering of the Navy Department’s executive management was certainly corrected by the reorganization of 1966. The question now remains whether this reorganization has been too late, too radical, and whether it will be properly applied.
To Centralize or Decentralize. Human experience has time and again demonstrated that when a long standing imbalance in a social order, institution or an organization is at long last corrected, the short term urgency to make the long sought correction normally results in a wave of over-correction to the detriment of the whole society, institution or organization. Revolution supplants evolution and the entire tapestry of the society, institution, and organization, patiently woven over a long period of time, is subject to irreparable damage. This is the situation that the executives of the Navy Department find themselves confronted with today. The current organization provides the CNO and OPNAV with an unprecedented opportunity to gather the loose ends of the department’s organizational structure into a strong central office to give cohesive direction and form to the production effort of the department. The organization also provides the Secretary with the managerial machinery necessary to plan knowledgeably and establish the department’s long range goals, systematically allocate its resources and appraise its performance. The new reorganization of the Systems Commands presents a solution to the duplication, interfaces and mutual competition among the production divisions. It can be anticipated, now that the opportunity presents itself, that the CNO will move rapidly ahead to develop a strong functional central office and that the organizational personality of OPNAV will change from that of a consumer watchdog committee to that of a unifying controlling executive agency. Working through the CNM, the CNO will certainly subject the System Commanders to very specialized direction, control, and appraisal. There will be a tendency to slice functional co-ordinating offices away from the lower echelon of the Secretary’s office and similarly slice certain planning and fiscal elements away from the top echelon of the individual Systems Commands to fill out the body of the central office. A rapid and progressive process of centralization will certainly occur to bring the department’s splintered production effort to heel. The process has begun and will be accelerated in the next few years. The danger exists that the department will be over-centralized to the detriment of its production effort. It has been observed in private industry that the initial and natural response to a newly granted authority to centralize is to over-centralize and reduce the over-all effectiveness of the enterprise. It has been one of the themes of the Navy’s organization story that even when the Bureaus were loosely controlled, marginally inefficient and wasteful, they managed to provide the United States with the greatest naval force in the world. It has been seen time and again in private and public enterprises that an over-centralized organization inherently kills incentiveness and can be more damaging to the goals of the organization in the long run that the inefficiencies, duplications and interfaces of a loosely controlled enterprise. The reconciliation of too much centralization and too little centralization is a managerial technique very difficult to obtain. In his superb business autobiography, My Tears With General Motors, Alfred P. Sloan succinctly voices modern management’s solution to this problem.
It is not easy to say why one management is successful and another is not. The causes of success or failure are deep and complex, and chance plays a part. Experience has convinced me, however, that for those who are responsible for a business, two important factors are motivation and opportunity. The former is supplied in good part by incentive compensation, the latter by decentralization. But the matter does not end there. It has been a thesis of this book that good management rests on the reconciliation of centralization and decentralization, or decentralization with co-ordinated control. Each of the conflicting elements brought together in this concept has its unique results in the operation of a business. From decentralization we get initiative, responsibility, development of personnel, decisions, close to the facts, flexibility—in short all the qualities necessary for an organization to adapt to new conditions. From co-ordination we get efficiencies and economies.
In view of the current knowledge in the art of management, it would appear logical that the future organizational development of the department will be towards designing a structure that will foster opportunity and incentiveness under a proper degree of co-ordination and control. In consonance with this development, it can be anticipated that the department will continue to adjust its organizational structure seeking a more effective balance in the management of its resources and production.
The Fulcrum and the Forecast. What can be expected in continuing organizational development of the Navy Department in 1967- 1977? Attempting to predict the specific image of a developing organism or organization is at best an academic exercise subject to the application of very few constants and an infinite number of variables. Nevertheless, the challenge is there and in view of the similarity in the historical development of the Navy Department and large private industry, certain patterns in the future organizational development of the department should be discernible. The principal constant in the department’s development has been the Secretary’s inalienable executive power within the Navy Department to manage its affairs and allocate its resources within the bounds of existing statutes, subject to the direction of his civilian superiors. While this executive power was diluted in 1958 in its application to the naval operating forces, the Secretary’s position in the headquarters has remained constant. If the axioms of modern management are logically applied throughout the Department of Defense, the Secretaries of the military departments should retain their positions as chief executives of their respective departments for the foreseeable future. The principal variable in the department was the authority of the CNO. In the so-called bilinear organization, his authority to direct the production divisions was subject to mutual agreements among the CNO and Bureau chiefs. This led to many subjective and objective interpretations leading to a fragmentation of executive direction and co-ordination. This was changed by the 1966 re-organizations. The strength of the department was the laissez-faire opportunities and resultant creativeness of the Bureaus, conditions which kept the U. S. Navy in the forefront of weapon development for over 100 years. However, the strength of the department had the Achilles heel of an unco-ordinated production effort resulting in inefficiencies, wastes, and duplication which came under specialized attack after the DOD reorganization of 1958. Due to the application of new management measuring tools throughout the Department of Defense, the Navy has found that it can no longer continue to operate under the laissez-faire management of the pre-Korean days. The Navy has also rapidly become aware that if it does not effectively manage itself, others, inside and outside the DOD, are more than willing to try. Further, in a defense environment that requires the development and production of naval aircraft pricing out at six million dollars a copy, the service must be structured to review meticulously its requirements and manage its resources in such a manner to preclude the naval forces of the United States from being priced out of the defense picture, as is happening to the naval forces of the United Kingdom. Thus, it can be predicted, with a reasonable amount of certainty, that the professional management of the department will, of necessity, be rapidly centralized in OPNAV to maximize efficient and effective planning, implementation, and operation of the department’s productive effort. Requirements will be closely reviewed, inventories strictly governed, funds closely allocated and accounted for. Business, operating, and fiscal procedures will be effectively standardized, promulgated, and monitored. In short, the central office, under the pressure of the times, will be required to recover control of the production effort of the department in a very short span of time. As part of the centralization of the functional control of the departments resources in OPNAV, the requirement to operate the Naval Material Command (NMC) as a separate entity within the department will certainly come under close examination. The most difficult adjustment and the one that will be most resisted will be the gradual assimilation of the Headquarters, NMC into OPNAV. This process will certainly be viewed as leading to the complete centralization of the department and it can be expected that the arguments against the General Staff concept again will certainly be heard throughout the department. The NMC will retain its status of a separate command until the several Systems Commanders recognize that they can operate under a more expeditious and autonomous basis closer to the center of power directly under the functional control of OPNAV than they can in a fourth-echelon status under the vertical two-headed direction of OPNAV and the NMC headquarters. The current trend in the department to keep reducing the status of the production division by making them subject to a multiple layer of executive echelons will almost certainly be detrimental to their incentiveness and creativeness. It follows that the temptation to make all the important development and production decisions on the highest level will be difficult to resist in view of the urgent search for less expensive and more effective weapon systems, and the weakening voices of the production managers. The executives of the largest private industrial enterprise in the United States succumbed to this temptation in the 1920s. General Motors experience with the development and production of the air-cooled automobile engine to replace the water-cooled engine is a perfect case-in-point. An air-cooled engine developed by G. F. Kettering in the research shop of the company was received with a great deal of enthusiasm by the company’s top executives and put in production against the opposition and the best advice of the division managers. The defects in the engine almost put the Chevrolet Division out of competition for two years and the management philosophy of the top executives radically changed. A. P. Sloan’s comments on the situation aptly describes the company’s conclusions:
If I have an opinion today it is that Mr. Kettering may have been right in principle and ahead of his time, and that the divisions were right from a development and production standpoint. In other words, in this kind of situation it is possible for the doctors to disagree and still be all right. From a business and management standpoint, however, we were acting at variance with our doctrines. We were, for example, more committed to a particular engineering design than to the broad aims of the enterprise. And we were in the situation of supporting a research position against the judgement of the division men who would in the end have to produce and sell the new car.
This case history is pointedly mentioned here in the forecast of the department’s development as it is this type of an event which could very easily occur in the department and result in the reinstatement of the System Commands in a position of prominence and effectiveness within the department. It can be expected therefore that the next major reorganization within the department will be the re-establishment of semi-autonomous status of the Systems Commands directly under OPNAV, either under the pressure of events or by the application of logic and foresight. The NMC headquarters can be expected to assume a prominent position as a functional OP within OPNAV and join the other OPs in co-ordinating all the System Commands and Bureaus across the board. As OPNAV develops a sure hand in applying the techniques of functional management to the Bureaus and System Commands and these components learn to live within the parameters of this control, it is more than likely that the System Commands will be again realigned into production divisions that more aptly identify their separate end-products on a more specialized basis. For example, in the systematic balancing of the department, it can be anticipated that, depending on how wide a span of control OPNAV develops, the System Commands will diversify further into production divisions that better describe the specialized weapon systems of the service, i.e., surface systems, aerospace systems and subsurface systems. This development would result in the submarines at long last finding their special identity in their own development and production division and further result in the assimilation of Special Projects Managers of fully developed weapons into the Systems Commands. It is also safe to predict the newly established Electronic Systems Command eventually will be fragmented into specialized elements and absorbed into the individual Systems Commands designed to produce whole weapon systems. Another interesting development could occur due to the CNO’s newly granted authority to command and direct all the lower functional and productive military components of the department. Since the CNO now has the authority to command all the military echelons of the Navy Department, it is now no longer necessary for his executive staff members in OPNAV to have the ranking horsepower to impose “mutual agreement” within the department. Conversely, since the Systems Commands are on a relatively low echelon relative to their multi-billion dollar enterprises, it seems appropriate that the authority of OPNAV and the responsibilities of the System Commanders will seek a more natural balance by a shift in the department’s military rank assignment. It can be expected, therefore, that the top military staff billets in OPNAV, under the Vice Chief, will eventually be downgraded from the rank of vice admiral to rear admiral while the rank of the System Commanders will be upgraded to vice admiral. Thus the high rank of the department will more effectively share the burden of management with the CNO and the Secretary.
If there is one prediction that can be made with a full degree of certainty, it is that the organizational structure of the department will continue to adjust to meet the changing challenges to the peace, security, and democratic ideals of the United States. It can be further predicted with a reasonable amount of confidence that the Navy Department will meet these challenges by balancing its production effort on the fulcrum of the three level diversified organizational structure as the managerial measuring tools of efficiency and effectiveness are fully developed and sharpened. On the Secretary’s level, we have seen the development of an organizational agency designed to provide the service with a fully defined co-ordinated policy governing the establishment of goals and the allocation of resources. On the CNOs level, we can expect the development of a functional central office specifically designed to provide the department with the necessary co-ordination and control of its decentralized production effort. And on the Bureau and Systems Command level, we should hope to see the opportunity necessary to spark the efficient development and production of a highly trained, superbly equipped naval force to meet the contingencies of the next century in, on, and over the oceans of the world.