The Business of Government Hour


About the show

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

The interviews

Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

Zack Gaddy interview

Friday, February 4th, 2005 - 20:00
"Our job at DFAS is to understand what transformation means to this department and ensure that we are enabling our customers, our clients, to transform. As a result, we will transform ourselves to help achieve customer objectives and goals."
Radio show date: 
Sat, 02/05/2005
Intro text: 
Financial Management; Managing for Performance and Results; Leadership; ...

Financial Management; Managing for Performance and Results; Leadership;

Complete transcript: 

Friday, December 17, 2004

McLean, Virginia

Mr. Lawrence: Good morning, and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of the IBM Center for the Business of Government. We created the Center in 1998 to encourage discussion and research to new approaches to improving government effectiveness. You can find out more about the Center by visiting us on the Web at


The Business of Government Radio Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Zack Gaddy, director of Defense Finance and Accounting Service.


Good morning, Zack.


Mr. Gaddy: Good morning, Paul.

Mr. Lawrence: And joining us in our conversation also from IBM is Chuck Prow. Good morning, Chuck.


Mr. Prow: Good morning.


Mr. Lawrence: Well, Zack, I'm sure many of our listeners are familiar with DFAS, but perhaps we can begin by giving us an overview, and the mission and the vision of the agency.


Mr. Gaddy: Well, DFAS was formed in 1991 when they rolled out what they called a program budget decision that created DFAS. It originally was owned by the services themselves and defense agencies. So we're a relatively young organization, only having been in existence since 1991.

Our purpose and why we were formed was to consolidate finance and accounting things that the services and military departments and defense agencies performed for themselves; put it into a working capital fund environment, and have a single service provider, almost like a shared service provider. So we've been doing that for a while now.

Our job, really, is to support the men and women who wear the uniform who defend this country. We pay people, we pay vendors, and we provide accounting service to all DoD appropriations. We have about 16,000 people, roughly. We are at 26 locations, where we have what I call main sites or field sites, but then we're also at other locations. We're at a total of 90 locations DoD wide, and we may have a presence of one or we could have a presence of four or five at some of those smaller sites. But we�re a lot more places in our field sites, but the bottom line is, compared to what we started with in 1991, where there were over 330 sites, we're still much smaller than that.

Our job, as I said, is to support the men and women who wear the uniform. We are trying in our organization to be what we call best value. And I know best value is kind of a generic term to a lot of people. I like to think of best value as the intersection of cost and quality. That's where we want to meet customer needs, and at the same time, do it at the most favorable price we can. That's where we do benchmarking and things of that nature to attempt to make sure that what we provide the people not only meets their needs, but it is done at an acceptable price.

Mr. Lawrence: You talked about your team of 16,000 people. With finance and accounting in the title of your organization, I got a sense of what they might be, but perhaps you could give us a sense of the range of skills of those folks.


Mr. Gaddy: Well, of that 16,000 or so, we have about a thousand or so military members. We also have predominantly civilians and foreign nationals over in Germany and Japan. We have a wide range of skills out there. We have computer programmers; we have system analysts; we have accounting technicians, pay clerks, accountants, financial specialties. We range in grade from GS 2 up, obviously, through the senior executive service, and 01 through the general officer ranks, as well as E 1 through E 9. The bottom line is we have a wide range of skills out there. The predominancy of our workforce are what we call in the 500 series. That's the financial management series, whether it's 501, the financial specialists, or 510, accountant, or 525, accounting technician.

Mr. Lawrence: Zack, as director for DFAS, what is your role and responsibility?


Mr. Gaddy: Well, my role, I see it as trying to make sure that through my leadership team, as well as DoD senior leadership, we have a clear vision and strategy for this agency, and I'll talk about that a little bit later. But our goal, or my goal as a director, is to take that strategy and vision as an agency, and go out to the workforce. I've been doing that for the last six months now I've visited 14 of our locations so far trying to ensure that our workforce is plugged into what we're trying to do as an agency and what our customers expect of us, and get that vision and goals and objectives out there in ways they can understand. So my job is to make sure that we deliver on mission and vision and values of this agency.

Mr. Lawrence: What were your prior roles before coming director for DFAS?


Mr. Gaddy: Well, immediately before becoming director of DFAS, I was the client executive for DFAS for all Air Force organizations and some defense agencies, and in that regard, I represented DFAS to those customers. It didn't matter what the service or the product was. I also was directly responsible for delivering accounting services to the Air Force and those defense agencies. Prior to that, I was in Arlington. I was a deputy for business funds and accounting, and so there I primarily worked on accounting policy kind of things as well as system kind of things for all of DoD, not just for the Air Force. Prior to that, I was working in Denver as the director of departmental accounting, so I did all of the financial statements and reporting for the Air Force, as well as some defense agencies. And prior to that, if I go back far enough, I was an auditor, I was a budgeteer, I was a cost analyst, I was active duty military in the Navy, so I've had a lot of jobs along the way. Over a 28 year career, I guess that's to be expected.

Mr. Lawrence: How have these prior roles prepared you for your current role as director for DFAS?


Mr. Gaddy: Let's say the benefit of being around as long as I have is I've seen a lot of things. One of the best things I think that got me ready for the job I'm in today was starting off as an internal auditor for Air Force audit many years ago. I got to come in to organizations and not be a part of an individual organization; but, rather, I looked across the whole spectrum of what a base or a command did. That's where you got to see how the pieces fit together, whether it was logistics, engineering, contracting or in the finance and accounting arena.

From that, I then wanted to go from the audit world into the management world. I wanted to actually do things instead of review things. So I then went in a career broadening assignment in the Air Force, where I was in cost, budget and audit. Then I went to the job in Denver, where I became the director of departmental accounting, and I got more into the management role as opposed to the reviewing role. So these jobs I think all helped me understand how financial management works within this department, and how crucial it is that we do a good job, and also at the same time, how much management depends on us to do that job for them in the most cost effective way.

One of the real benefits, I think, also of being an auditor was I was used to the idea of questioning why we did things; was it efficient, was it effective, did it meet customer needs. And that served me well in the current jobs I've had because as a client executive one of the things you're always after is what do you want, can we deliver it, how should we deliver it, how can we improve what we're doing for you? As a director of DFAS, I just get to do that for all of DoD instead of a subset of the customer base.

Mr. Lawrence: Tell us about the transition from your previous job to this job in terms of being now the director of the world's largest finance and accounting organization, what that was like. Did your management style or approach change?


Mr. Gaddy: Well, in some ways it changed, certainly. I guess the biggest thing that I would say I would point to in the transition was, up until now, I always worried about a segment of the population, whether it was the Air Force and defense agencies or whether it was accounting versus all of the services DFAS provides. When you walk into the role of director of DFAS, you're the person on the hook for everything. The old expression "the buck stops here" I think is really applicable to the position that I'm in. You're at this center point of a lot of typical issues that might come your way, as well as trying to do the day to day business, as well as trying to move the organization forward.

I like to tell people sometimes, DFAS to me is synonymous with the elevator. You don't hear a lot sometimes when the elevator is working well. But when the elevator doesn't work, doesn't stop on the floor you chose, then you'll hear about it. So sometimes I think you can get the negativity coming your way, and you'll tend to view the organization through that prism instead of seeing the whole of what you're doing and how important it is that you're doing many things well. Yes, you do have legitimate issues from people who have legitimate complaints, and you need to deal with those, but at the same time, a majority of things you're doing, you're doing well. The workforce is providing the services they're asked for, and so you can't lose sight of that.

Mr. Lawrence: When you described your team, you talked about not only civilian employees of all ranges, but also military, and even foreign nationals. What are the challenges of managing a team that cuts across all those different types of employees?


Mr. Gaddy: Well, the challenge right now is we used to have a much larger military presence, and it's been ratcheted down over time, and over the next few years we'll even become smaller. So one of the challenges that presents is whenever I visit our sites and I talk to military, they kind of question me: well, what's going on, what's my future in DFAS? The reality is it's not going to be nearly as significant as it used to be.

The military would rotate in and out fairly quickly compared to civilians, so I always saw them as a source of currency: what's going on in the mission areas, what do people care about, what do we as an organization need to pay attention to? So we're going to lose touch to some extent with that kind of capability. On the other hand, the military has a big demand for military presence in other career fields, so it's the right thing to do, so we're certainly supporting that. But it does create somewhat of a challenge for us as an organization to say, come to DFAS, do a great job, we appreciate you, and at the same time there's just going to be less and less of you. That is somewhat of a challenge.

On the foreign national or local national side, certainly we have the same kind of issues. In Germany as well as Japan, where we're located, we do have a sizable number of people, but that number has gotten smaller over time because we just don't have as large a military presence in those countries as we used to. And the DFAS at present has actually come down even faster because we've done some things to get more efficient, do more operations from CONUS as opposed to overseas, and the end result is we just don't have the same size of a workforce over there that we used to have.

Mr. Lawrence: It's interesting. You've really described a large global organization.


What are the DFAS strategic targets and how are they working towards them? We'll ask DFAS director, Zack Gaddy, to take us through this when The Business of Government Hour continues.



Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Zack Gaddy, director of Defense Finance and Accounting Service. And joining in our conversation is Chuck Prow.

Well, Zack, let's start by talking about the strategic direction of DFAS. I understand there are five strategic targets that you're currently working on. What are they and how did they come about?

Mr. Gaddy: Yes, you're right. We recently published our new strategic plan that has those five strategic targets listed. It starts off with probably the most important one, and that is pay service members the right amount on pay day. We believe that pay of people is the most crucial role that we play, and we have to make sure that we're doing a better job there.

Another target, however, we've come up with is helping the Department of Defense achieve an unqualified audit opinion in its financial statements. What I like to tell people sometimes is, while that's a great target, some people will ask me, why do I care about that. My answer to them is, we're trying to improve our underlying processes so that we can deliver the right kind of information to people, and as a by product of that, it's auditable, and so you can help achieve or sustain an unqualified audit opinion. Right now, one of the barriers to that, of course, is DoD financial reporting. As long as we don't have the unqualified audit opinion, then there's always some question in someone's mind about the credibility of the financial reporting we do and what we do with the resources that are provided to DoD.

Another area we're concentrating on is applying electronic commerce to our commercial pay business area. In the past, we've done an admirable job, I believe, of reducing interest penalty payments and lost discounts, which are very important to our customers. But in my opinion, the real benefit or the real money that we can save is looking at those processes that we use to make those payments, and go from what's largely a manual process to an electronic process because the rates are much lower, the cost is much lower, and we should, in turn, save the customer quite a bit of money, and as a by product, not have lost discounts or not incur any interest penalty payments because the processes are automated and are flowing instead of people having to have backlogs of transactions.

Another area that we're concentrating on is something called business intelligence. This department, as you know, has many databases, many sources of information, and there is not single source of truth out there. Often times the financial reports that we do provide are static, meaning they're after the fact; they're autopsies of something that's occurred in the past. What we need to do as an organization is help provide business intelligence to people on a near real time basis.

Business intelligence goes beyond just giving them report information. It's actually going to the step where you take data and information and apply heuristics to it to garner from it whatever you can; so it's like, where did you spend your money? Why do you spend it at the rate you spend it? What are you buying with it? All the kind of things that when you look at it, today you may say, did I obligate the money? In reality it's what did I acquire with it? What value did I earn from the resources provided? That is a big leap, and that's going to be a big challenge for us.

The fifth area that we're concentrating on because the things that I just described can't happen if we don't have the right people to do the job is that we have a human capital strategy or focus that says, do we have the right person, in the right job, at the right time? That's very consistent, as you probably know, with the president's management agenda. At the same, we recognize that succession planning and all those kind of things have to take place for us as an agency because there are a lot of things changing out there for us, whether it's the systems or technology we use or whether it's the roles that we play. All those things tell me that we have a big challenge ahead of us to make sure we have the right workforce to do the mission I just described.

Mr. Lawrence: You've talked earlier in the first segment, I know from doing some research, that customer service is really an important thing at DFAS. What I'm curious about is how do you think about customer service when the customer's needs are always changing, and now even more than maybe in the past?

Mr. Gaddy: That's an interesting question. There was a change not too long ago that I became aware of and how to measure that. I mean, we typically do the customer service surveys every year. We actually have OPM perform an independent survey. We also go out and approach our customers all the time, asking them how we're doing. That's what I'll call the traditional approach to measuring customer service.

What I learned about probably in the last year was an approach where if you're a service provider or a partner with someone, the way that you measure customer service is how well are you helping them achieve their strategic goals and objectives. And that's kind of where we're trying to go with this. Everyone in DoD, and within the government as a matter of fact, is doing something called transformation. Our job, I believe, as a support organization within DoD is to understand what transformation means to this department and ensure that we are enabling our customers, our clients, to transform. As a result of that, we will transform ourselves; we have to. And so whether it's technology, whether it's the customer not wanting something that they used to want, doesn't really matter. It's just that we just have to understand all the moving parts here, and there are many of them. But I think, ultimately I don't know how to measure that yet that one of my goals is to be able to go to a customer and say, did we help you achieve your strategic objectives or your transformation goals? If we did, then I'll know we're successful.

Mr. Prow: Zack, you've already discussed the move from a paper based environment to an electronic environment. How is DFAS facilitating electronic transfer between yourself and your vendors?

Mr. Gaddy: Well, right now, that's probably a big area of focus for us. As I mentioned, we have a strategic target that looks at applying electronic commerce within our commercial pay arena. We have embraced something called the YDAY Workflow within DoD. That's a new approach, where we have the vendors submit their invoices electronically. The receivers of goods and services submit their receiving report, receipt and acceptance electronically. We can mass that up internally to our systems with obligating documents so that we can do a matching of information to do the entitlement and then a payment.

I think electronic commerce, whether we use the Defense Business Exchange, or DBEX, or whether we use technology YDAY Workflow in conjunction with something called our DFAS corporate database, there are ways we can go host to host with transactions. That today people are using faxes and e-mails in other ways to send information back and forth; that we ought to be doing system to system and let the system do things that we have people doing today, so that we can free people up to do more valuable things -- like make sure the process is working and make sure that we are taking advantage of cost favorable discounts and things of that nature, as opposed to literally bringing documents together on a screen. We use EDM, Electronic Document Management, to do that. But that's just to me a stop-gap to where we really need to be, and that's where we use electronic commerce.

Mr. Prow: Zack, DFAS is often cited as the only government agency to achieve a clean audit opinion. How did this occur?

Mr. Gaddy: I like to say it was just a natural by product of great systems and people, and the reality is it took a lot of hard work. Part of it was simply having an audit organization that we could partner with to identify what are the hurdles that we have to overcome to achieve an unqualified audit opinion. People make think they're doing their job and they're doing it well, but when the auditors walk in and find things that you're not doing as well as you should, or your internal controls are not as tight as you thought, then it's pretty easy to find out that you've got some holes in your processes.

It took a lot of training of our workforce. It took a yeoman's effort on the part of a lot of people to pull together all the documentation and support of why we had a valid audit trail for the information that we were reporting. And it took strong collaboration between the auditor, the management officials, as well as the people doing the work day in and day out.

We've already had four years of an unqualified audit opinion. We implemented a new system last year which creates some change in perturbations in the process. So our goal in '05 is to make sure we even streamline the process, and we make it easier and more systematic for this unqualified audit opinion not to take quite as much effort on the part of many players.

Mr. Prow: You've already described human capital as one of your priorities. What is your plan to recruit, train, and retain employees?

Mr. Gaddy: Well, that's a good question because right now I'd say that's probably one of our biggest hurdles as an agency. When I looked at our demographics and saw that about two thirds of our workforce today is eligible to retire through normal what they call optional retirement or early retirement, and by the end of 2011, almost all of us will be eligible to retire, that just tells me we have a big undertaking ahead of us, just looking at the age or the demographics of the workforce. Introduce on top of that new technology coming. You've all probably heard of the Business Management Modernization Program. So new technology is coming our way in terms of systems and capabilities that we have to train people on so that we do work differently than we do it today.

The other event that everyone's probably familiar with is something called base realignment closure or BRAC. We'll know the results of BRAC next year, and the final vote will be taken in November of 2005, so we'll know what BRAC means to us. What I think it will mean is fewer locations than what we're currently at, and so that will cause changes in the workforce. We'll be realigning work from where it is today to, more than likely, fewer locations.

The end of result of all of these things is we just to have a very aggressive human capital strategy so that we have the right people doing the right job at the right time. So training and development is critical for the current workforce, as well as our recruitment strategy to bring in new talent where we need it, and that's where we've embarked upon a national recruiting strategy.

On the training dealing with the current workforce, we are creating what we call a skills database so we'll know where people are, what skills they have, what skills do we require, and what are the gaps, so that we can target our training to those gaps and fill in those gaps. So whether it's on the job training, career broadening assignments, technical training, whatever it is, we can get people the right training so that we know we're spending our training dollars wisely.

Succession planning is also a key aspect of this because if you look downstream at a workforce that in the next four or five years, in essence, could retire I'm not saying they all will, but I think a sizable number probably will what are we going to do to replace the leaders we have today? You can't recruit them today and have them ready to go in four or five years throughout the whole organization. So we have to look at new people coming in, mid career people, as well as senior people. So we have a mid career as well as senior-level succession planning, and that's all part of our human capital strategy.

Mr. Lawrence: That's interesting and quite challenging.

What are the management challenges of simultaneously consolidating systems, yet preserving the functions unique to the different military services? We'll ask DFAS director, Zack Gaddy, to take us through this when The Business of Government Hour returns.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's guest is Zack Gaddy, director of Defense Finance and Accounting Service. And joining us in our conversation is Chuck Prow.

Well, Zack, in the last segment, you talked a lot about the strategic goals and the plans. How are you measuring how you're doing against those?

Mr. Gaddy: Well, the thing I would like to point out, I've heard again I don't know who to attribute this to was, having any strategic plan is a good thing, but what really sets you apart is being able to implement it. A bad plan is better than no plan, but no matter how good your plan is, if you're not measuring how well you're doing, it doesn't really matter.

For us, we've been using a tool called balance score card for the last three and a half years. It's been very valuable to us. It's pointing us in the right direction. We look at customer, we look at financial, we look at internal, learning and growth, and we look at how we can look across the whole enterprise. At the same time, we have something called performance management indicators, so those go beyond what's in the balance score card. We track literally about 400 of those.

Another area that we use is something called service level agreements, and those service level agreements capture the services we provide to a particular customer, the service level objectives, and how well we're doing against them. We actually brief those to our customers every quarter. But on the performance management indicators, as well as a balance score card, we actually use that on a month to month basis to track performance in key areas.

Just recently, we've introduced something called a Customer Advisory Forum, where we bring our customers in every quarter to talk about the things we're doing to make sure that, strategically and tactically, we're on target. Because if we're tracking performance management indicators for things they don't care about anymore, if we've made satisfactory progress and it's time to move on to the next strategic target okay, are we there yet? has something new has come down the pike that's just pushed something off the plate that we ought to pay more attention to, we need to pay attention to that.

A good example would be with the global war on terror, all the call up of the guard and reserves, there's a lot of issues with contingency travel and payments to guard and reserve men that we need to make sure we're paying correctly. And so we have to put more focus on those areas, probably, than we had planned on, and that may force something else off to the side until we make sure those processes work correctly.

Every time I go to a field site or a site for a visit, I pay attention to what's posted on the walls until I see the indicators out there; does management brief me on their performance against those key indicators. At the business line level where we have accounting services, mil civ pay services, and commercial pay services, I meet with those business line executives every month for the sole purpose of reviewing performance against these critical areas.

Mr. Prow: The prior segment you discussed business intelligence. Let's talk more about developing the corporate capabilities to deliver client unique business intelligence by 2005. What are some of the challenges that DFAS faces on moving toward the more integrated, value added solution?

Mr. Gaddy: That's also a great question, because reality is that a lot of people have a different idea of what business intelligence is. To some people, it's just simply a static array of information, whether it's interest penalty payments, lost discounts, obligation rates. To others it's internal business or management information that only they care about and nobody else should, so they don't necessarily like the idea of transparency.

As a department, I think one of our challenges is that we have a lot of intelligence or indicators for data and many databases all throughout the department. Where do you bring that together? One of the biggest challenges is what do you care about, and you can get swamped or inundated with just too much, and not put enough attention on the things that are really critical. So one of our biggest hurdles is just reaching agreement on what it is that we want to measure.

The next step of that process is how do you want to measure it; what's good or bad performance; what does that look like, so that you will know the upper and lower limits, for example, of a certain metric.

Probably the third and most critical event is, what analysis do you want to perform for performance, so that when you see the indicator says you're doing well, how did you achieve that? Or more importantly, if you're not doing what you thought you wanted to do, what's inhibiting you or preventing you from achieving good performance? That's where I think as a department because funds, for example, are executed at, literally, thousands of locations within the department how do you explain something as simple as a budget execution at the top when you have to go out and touch, literally, thousands of people to find out what budget execution is? What does the process look like for that, in terms of people, technology, and process?

I look at that and say it's a big challenge. It's much bigger than people give it credit for, because individually you can come up with something that fits a particular organization. It's when you step back and look at the DoD enterprise, or even a military department enterprise, that it gets tougher and tougher to do. There are so many organizations involved, all with their own ideas of what business intelligence is and how much of that they want to share with others.

Mr. Prow: Although DFAS has consolidated financial and accounting services across the military, the processes and operations are still somewhat unique. What are your plans for further consolidation?

Mr. Gaddy: Well, some of those are going to be accomplished through something called the Business Management Modernization Program. Something like Defense's travel system, for example, it standardizes how travel is done throughout DoD. Today there's an Army, Navy, Air Force and defense agency way of doing travel. In the future, because of DTS, there will be a way to do travel. When you look at military pay, today the Marine Corps has a way to do Marine Corps pay because they have their own system, and the rest of the DoD's on another system. In the future, there will be something called DINHRS, Defense Integrated Human Resources System, that will have one way of doing the military pay. So in one sense, BMMP is bringing more standardization to the table.

At another level that�s where you start looking at finance and accounting systems or business management systems there's still going to be more than one typically out there. So the question is, well, how do you normalize across many systems. Again, within BMMP they have something called standard business rules. So I don't care what system you're on; if you do an accounts receivable transaction, it ought to be done the same way. The same standard of terminology is used, the same data elements used, the same fields are described, and the process is the same. What I like to think someday is that we'll be smart enough that the screens won't even look that different, even though behind the screen is a different application, that shouldn't matter. What you're looking at and what you're processing pretty much looks the same.

So our goal within DFAS is to work with BMMP to help craft those standard business rules, to help deploy those systems to the end users, and be trained on it ourselves and help do the training, and ensure that we have a much more homogenous product than we've had over the last 13 years.

Mr. Lawrence: It would sound, then, that implementation of BMMP will be a key to further standardization, and, thus, reduction of the obstacles you described. Can you give us some examples of how those obstacles may be overcome by a standard solution?

Mr. Gaddy: Well, again, if I use DTS as an example, when you go out today with IATS, which is Integrated Travel System, there's an IATS for the Marine Corps, there's an IATS for the Army, and there's an IATS for other users, so how you do travel won't be the same. The joint travel regulation is, in fact, the same wherever you go. So the reality becomes, how do I take a standard application and embed within it the same rules for everyone? If you look at civilian personnel, there is now today a common civilian personnel management system. So no matter where you are in DoD, civilian personnel servicing looks more and more the same.

When I look at standard systems out there that are integrated and they have standard nomenclature and standard business rules, then one of the issues becomes, you can't have an Army, Navy, Air Force flavor to something like you do today because the systems we typically use today are very old and have been around many years, were custom developed for a specific user base, and they've been embedded with whatever the practices they had from 10, 15, 20 years ago.

The new systems I don't care if it's a system from DLA or a system for the Army they're going to use the same common business rules and common operating environment, so those things will be the same. I don't care what the name of the system is, and whether it's the same application or not shouldn't really make a difference. And then we can start doing what DoD likes to call the netcentric approach, where you can reach out to many sources of information, record that information once, but share it across the enterprise. That's something I think that will enable business intelligence. It will enable sharing of information in ways that we can't do it today, and it will help ensure that we do, in fact, have standard business rules that are being used throughout the department.

Mr. Lawrence: As I understand it, DFAS is a matrix organization with services and industries. I'm curious how that's working out in the sense of what are the challenges, and, then, what are the benefits?

Mr. Gaddy: I'll start with the benefits first. The benefits, I think, when we stood up our business lines, if you take something like commercial pay business line, in the past we had a contract pay organization in Columbus, and then we had what we call vendor pay, which are typically payments that are managed locally at over 25 locations, all running different systems. Not 25 different systems; there are about 10 or 12 different systems. In the past, you looked at it along service lines; how does the Army do business, how does the Navy do business, how does the Air Force do business, et cetera.

When we put somebody in charge of commercial pay, then you start looking across the whole business line of how vendor pay or commercial pay is being performed, and you start to see that, again, you can't make it all exactly the same unless you put everybody in the same process. But you can start looking at where it was dissimilar, even within the Air Force, because in the past you would have had a site person at a particular field site, managing that vendor pay operation and another site two states away running the same application, doing vendor pay just a little bit different because that's what their customer wanted. And now you had someone looking across vendor pay, say, for Army or Air Force. You're also looking at vendor pay for all services, trying to identify the best ideas that now fit across the board, something like YDAY Workflow, or something like electronic document management. So you can start applying more standard solutions outside of the particular application that's being used.

So the benefits are you start to see a more holistic view of things. That's true for finance/accounting, as well as military/civilian pay services. The challenge you have to face is it's just as easy to form a stovepipe horizontally as it is to form one vertically. You can't lose sight of the fact that whatever goes on in our three business lines have an effect upon one another. If you're going to make a travel payment, civilian pay payment, or contract payment, they all flow through disbursing; the information's embedded somewhere in accounting. One of the things we have to guard against is having too much of a business line focus and not enough integration between the business lines to make sure that our processes are flowing the way we want them to.

I'm particularly concerned about that now because of BMMP, when I look how do modern systems do business. When we stood our business lines up back in 2000, we set them up based on the current processes that existed then and have existed since then. One of the things we have to make sure of going forward is, I'm not saying that business lines aren't something we'll retain, but what we define within a particular business line may change based on how technology supports performing those functions.

Mr. Lawrence: That's interesting.

How will information technology change the way DFAS conducts business? We'll ask DFAS director, Zack Gaddy, for his perspective when The Business of Government Hour returns.


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Zack Gaddy. Zack's the director of the Defense Finance and Accounting Service. And joining us in our conversation is Chuck Prow.

Well, Zack, you've been the DFAS director for a little while now. What are some of the lessons you've learned since becoming director, and what advice would you give to someone who is also focusing on customer service?

Mr. Gaddy: Well, the main thing I think I've learned since becoming director of DFAS is, it's a huge operation. There are many moving parts to it. We have many challenges ahead of us. Keeping focused on so many things is hard to do, so I have to have a really good leadership team that I can depend on to get things done, even when I'm not around, and I'm fortunate to have that.

We have something we call an executive council that is comprised of senior executives within the agency. We meet once a quarter to make sure that we have our act together on the things in terms of strategy, and budget, and all those kinds of things. We also have structure called a decision support board that meets even more frequently than that to make sure that the business lines and the other organizations are on top of things, and are bringing issues forward that need to be reviewed. So the greatest lesson I have learned is to make sure you have the right management team in place to support the things you're trying to do.

That's where we created that thing called the Customer Advisory Forum that I mentioned a little while ago. It's very important, too, that we stay in tune with what our customers care about. DFAS doesn't exist if we don't have a mission to perform. When that mission changes, we have to be responsive to what our customers and clients expect of us. When I go around to talk to the workforce, I try to communicate to them all the time that we're not here about having a job; we're here because we have a purpose, a mission, a very important mission. We serve the greatest military department upon the face of the earth, so we have to make sure they get the very best service they can get from us. And I count on the workforce day in and day out to continue looking at our business processes to enact the entrepreneurs. They own that process. Is that process working the way we want it to? Is it, in fact, delivering best value to our customers? Is it meeting their needs at the lowest possible cost? If it isn't, then they ought to be coming forward with their ideas of how to improve things.

So far they've been very good at that. I told them every most efficient organization which I know is the technical term that we use associated with A 76 studies every one of those that I've been involved with personally, and I've been involved with four of them, the ideas that came out of the employee teams that we used to create the most efficient organization didn't come from management; it came from the employees. And so I know they know the processes better than I do, and I can trust them to give me the right kind of ideas and the right ways to improve things. So another lesson learned that I would leave with people is, you have to trust your people. You have to count on them. We think that as a core competency, our workforce is a core competency for DFAS, and I count on them everyday to get our mission done.

Mr. Prow: Zack, aside from the main challenge of serving customers, what other significant challenges will DFAS face in the future?

Mr. Gaddy: Well, as I described a little bit earlier, when you look at our demographics, you look at BRAC and you look at BMMP. We kind of have what I call a convergence of many forces. Many of them are external to us. At the same time, we have what I'll call an umbrella over the whole thing called transformation. The Department of Defense is very serious about transformation and making sure that we have the right military force to do what has to be done. So when you look at all those events, all converging together, I think it's going to be huge challenge to deliver new systems, deliver new capabilities, and meet customer expectations.

Something I haven't mentioned up to this point is something called the National Security Personnel System that is being implemented as we speak. We're going to be in the first spiral of that starting as early as next July, and we'll be fully deployed with that by the end of 2006. NSPS will offer a radical departure from how we manage human capital today. We're very excited about that. We think that's going to present just a tremendous opportunity for us to move DoD forward in terms of how we take care of our people, how we hire people, train and develop them, reward them, retain them. We're very proud in DFAS to be one of the first organizations in spiral 1 to help shape the ultimate destiny of personnel management within DoD. That's going to be a huge undertaking because at the same time we're doing NSPS, we're doing BRAC, we're doing BMMP; we're doing all the things I described earlier, so there are a lot of moving parts here, and so a lot of challenges ahead.

What I like to leave with people is it's a very exciting time to be in this business because if you want to influence DoD financial management, and if you want to have an impact, now is the time to do that because we have all these opportunities. I know they're challenges, but they're also tremendous opportunities to improve what we do and make a difference within this organization as well as within DoD.

Mr. Prow: You've mentioned transformation several times throughout the course of the session. What role do your industrial or your commercial partners play in assisting with that transformation?

Mr. Gaddy: Well, the industrial or commercial partners play a huge role. In one sense, if you have ever heard of something called lean management, we are embracing lean management as a way to try to improve our processes. Lean management says you look not only at the process you own, but you look three steps into the supplier's side and three steps into the receiver's side to make sure that, again, you're looking at the whole process. Often times our process partner on the supplier side might be a military department; often times it's private industry.

We also look at private industry as suppliers of a lot of new ideas and ways to implement this. When we were talking about our workforce earlier I failed to mention that we have a sizable contractor workforce. Our retired and annuity pay function has been totally contracted out, but we also go to contractors to supply system support for program management and development, maintaining systems, as well as helping us to field and deploy new systems and new capabilities. Private industry is certainly a valuable resource with us in terms of evaluating processes, helping to train our workforce, helping to field new capabilities, and make sure that we deliver the best service at the lowest possible cost.

Mr. Lawrence: Zack, in our first segment you described your career, and you described a long career where you devoted your professional life to public service, especially in the financial area. What advice would you give to someone interested in public service, and especially in the finance area?

Mr. Gaddy: That's a great question because when I was in college, many, many years ago now, I was studying to be an accountant, and in those days, the only thing you ever were told, basically, was graduate, get your degree, and go into public accounting; go to a CPA firm. And that's what I thought I would do. As a matter of fact, I had a job lined up to do that. Well, then I found out about this thing called public service, where you could go work as an auditor working for the Department of Defense in my case. I could have gone to the IRS or others as well. And it opened up a whole new horizon to me I didn't even know existed. I don't know if it's changed much in the schools and universities from when I was in.

One of the things that we try to do as an agency when we recruit on campus is try to help people understand the choices they have. Certainly, public accounting is a way they can go, but working for government in the public sector, as opposed to the private sector, is certainly a way that you can do more than you possibly think sometimes. If you want to make a difference, if you want to have public service as a way of life, there are tremendous opportunities for people.

Financial management represents a subset of that. Certainly, firemen, policemen, people wearing uniforms, are all categories of public service, but financial management is a very interesting area because that's a growth field. If you look in private industry, more and more people go into the financial management arena all the time. Well, we have the same kind of opportunities in government. And here you're dealing with billions of dollars, technically, and you get increased responsibility very quickly. And, certainly, a career path for someone in government is, I think, very rewarding. I would honestly say it may not be as lucrative as it is in private industry. On the other hand, I think there are other rewards besides monetary compensation that will offset that.

So public service is something that either you have it or you don't. I grew up around it. I think public service is something that all of us should pay attention to and in some way play a role in, even if it's for a temporary period of time. But the bottom line to me is public service is a great way to support your country.

Mr. Lawrence: Zack, that will have to be our last question. Chuck and I want to thank you for squeezing us in your very busy schedule and joining us this morning.

Mr. Gaddy: Well, thank you very much for the opportunity to come out and brag about DFAS. I'm very grateful that I am the head of this organization. I'm very proud of what we've accomplished over the last 13 years of our existence. I'm very proud of the fact that over the next 5 to 10 years we can do even more. I have a fabulous workforce that has many successes to be proud of, and at the same time, we've got a big challenge ahead of us. And as that song goes, What Have You Done For Me Lately?

So in spite of all we've done in the past, we have a lot more to do, and I have every confidence that we'll do it going forward. If anyone wants to contact and ask us for more, it's You can get to our web site. You can look at all kinds of opportunities for jobs or things that we're working on that you may pay attention to and be interested in.

Mr. Lawrence: Thank you, Zack. This has been The Business of Government Hour, featuring a conversation with Zack Gaddy, director of the Defense Finance and Accounting Service. Be sure and visit us on the Web at There you can learn more about our programs and research into new approaches to improving government effectiveness and get a transcript of today's fascinating conversation. Once again, that's I'm Paul Lawrence. Thank you for listening.

Zack Gaddy interview
"Our job at DFAS is to understand what transformation means to this department and ensure that we are enabling our customers, our clients, to transform. As a result, we will transform ourselves to help achieve customer objectives and goals."

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