Friday, October 5, 2001
MR. LAWRENCE: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of The Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about The Endowment by visiting us on the web at endowment.pwcglobal.com.
The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy.
MR. CIPRIANO: Thank you. It's good to be here, Paul.
MR. LAWRENCE: And joining us for our conversation is another PWC partner, Bill Phillips.
MR. PHILLIPS: Good morning, Paul.
MR. LAWRENCE: Well, Joe, since the terrorist attacks, Americans are more acutely aware of our military forces. However, many of our listeners probably are not familiar with the specific missions and the roles of the U.S. Department of the Navy. Could you describe the Navy's missions and activities for our listeners?
MR. CIPRIANO: I'll be glad to. The Department of the Navy is made up of maritime services, the U.S. Navy and the U.S. Marine Corps. In times of war, the U.S. Coast Guard also becomes part of the force.
The Navy is responsible for all fighting at sea, and the Marine Corps is responsible for fighting from the sea; they project power ashore. We work very closely together, obviously, the Navy and the Marine Corps, to accomplish that mission.
There is a common mission that both services, in fact, all services, share. And that is the mission to train, maintain and equip the war fighters to fight and win, to maintain freedom of the seas and to deter aggression.
MR. LAWRENCE: Can you give us a sense of sort of the size of the Department of the Navy in terms of the number of military personnel, and also, the number of civilians that assist in supporting them.
MR. CIPRIANO: In the Department of the Navy, there is over 900,000 people, so it's a big department. In the Navy, we have about 350,000 or 375,000 active duty and we have another 170,000 or so in the reserves. Civilians total about 180,000 of that number, and the Marine Corps has about 212,000 active and reserve members.
MR. LAWRENCE: What are the challenges of managing, essentially, three groups under the same umbrella?
MR. CIPRIANO: Well, there are challenges, because obviously, there are some differences in culture between the civilians and the military and also between the Marines and the Navy. But we share a lot of common objectives as well.
And we tend to work together, between military and civilian, by alternating management levels. And so you will have, at one level of management, a civilian, and the next level up might be a military, the next level up might be a civilian and so forth. And we tend to, at least in the shore establishment, alternate levels of management so that we have both perspectives at every level -- if the principal is a military, the deputy will be a civilian and vice versa to get both of those perspectives as we go up.
And the military brings an understanding of the mission, understanding of what an objective is and the civilians tend to have more in-depth training on the rules of contracting and law and administrative things necessary for procurement and to exercise the other functions. So they bring functional expertise, and the war fighters bring understanding of the mission and focus to the job.
MR. PHILLIPS: Joe, let's switch gears and talk about your career a little bit. What drew you to the Navy, how long have you been with the Navy and what has been your career path?
MR. CIPRIANO: Well, I first joined up with the Navy right out of college. A recruiter came to Baylor University, where I was getting a degree in physics, and they were looking for folks to help with missile programs in the Navy. And that sounded interesting to me. It was the lowest job offer I got, but I took it because it was in California. I had never been in California and it sounded like it might be fun.
So I went and signed up with the Navy as a civilian at the time, became a missile guy. Stayed in the weapons and combat systems business for about the first ten years of my career with the Navy and enjoyed it immensely. Very challenging, very exciting, great people to work with.
But then I left the Navy; went to private industry. And I spent about three years in private industry, became vice president and head of a cost center in industry. And then, after a time, the Navy asked me to come back during the Reagan defense build-up to help them with that, and I did. I came back to the Navy, took another pay cut to go back, and spent a number of more years working my way up to the point where I became the head civilian of the weapons and combat systems business for ships and submarines in the Navy.
And then I left again to go to the Department of Energy, where they asked me to come over and be the project director for the super-conducting super-collider project. And I spent some time there, and then came back to the Navy; once again, to help with another transformation the Navy's going through, which is transforming itself into a network-centric organization.
And that had enormous implications to everything that the Navy did, on how it designed ships and airplanes and all the pieces on it, to how we were organized and how we budgeted. And so it was another very interesting challenge.
MR. PHILLIPS: I guess you were meant to be in the Navy, right?
MR. CIPRIANO: I guess I was. And I've enjoyed immensely working with the people there.
MR. PHILLIPS: Now, of all those things you've done, Joe, what best prepared you for the position that you have now?
MR. CIPRIANO: Each job, I think, contributed something. I've tended to have more of a military career than a civilian-type career in that I've changed jobs every three or four years, and I've learned and moved around with most of those job changes. So I've learned a lot of stuff.
And my industry experience, I think, taught me how to manage cost and cost centers; how to make a profit, how to understand how much things cost, and control those things better than any job I've had in government could have. The super-collider experience helped me understand how Congress works. And when you're working on a big, big project with lots of money and visibility, the other things that you have to consider in management besides just meeting a costing schedule, there's national, there's regional employment concerns and lots of other considerations that have to be taken into account.
And then a couple of jobs I've had, I've created organizations from scratch. In other words, they gave me a charter and said go build a warfare systems directorate, for instance. And here's a secretary and a charter and good luck. And so figuring out how to do that -- and I've done that a couple of times, also helped, because that's kind of what happened with this job; this job being PEO for information technology, didn't exist. They asked me to go create it and gave me -- I didn't even have a secretary -- they gave me an office and I started from there to put the organization together, to be able to treat or deal with information technology at an enterprise level.
MR. LAWRENCE: Well, speaking of your present job, tell us about it. What are your responsibilities as the program executive officer for information technology?
MR. CIPRIANO: The program executive officer for information technology is the enterprise acquisition manager for IT. So I buy IT for the enterprise. And in the past, we have bought IT at various levels in our organization and each requirement was tailored to support one of our echelon commands or missions.
And we found that in doing that, there was inter-operability problems. There were problems talking to each other because there were no standards that were being imposed across. And we also had security issues with some of the places that made it difficult to exchange information with them -- have to go through firewalls, which again caused problems. And it wasn't particularly efficient.
So as we were moving to a network centric, if you will, kind of organization, where we're trying to speed up our decision making -- that's really what we're trying to do -- is to use information so that a decision maker has in front of him the best information available to make a decision and so he can make it quickly -- that we needed to be able to share all that information that was resident in all these different places around the world and be able to access it and get it in front of the decision maker very quickly and securely.
So the PEO-IT was created to do that, and we have kind of two big organizational chunks: One of which is to put the infrastructure in place, which is NMCI's job, so that we can move information seamlessly across the enterprise and it enables that information flow and access so that everybody has access to the knowledge that's available to support their decisions.
And then the other piece is to work on applications that are enterprise wide applications. Some of the big projects we have are DIMERS (?), which is a joint OSD manpower and pay system. And the Navy is executive agent for that program for OSD, and PEO-IT is the Navy executing organization. So the DIMERS program manager works for me. And we're responsible in that program to develop this system to a set of requirements given to us by OSD to support all personnel pay for the Department of Defense, a big, big enterprise wide system. We have some others that are Navy wide systems that we also manage out of PEO.
And that's our primary focus, is infrastructure to support information movement seamlessly across and securely across the Department, and then managing large applications that are used by many people across the Department.
MR. LAWRENCE: Let me just get some context. What's the relationship between your job and other IT professionals in the Department of the Navy? Do they all report to you? How does that work?
MR. CIPRIANO: We have a couple of different relationships: We have a CIO for the Navy, who is Dan Porter; the Marine Corps has a CIO and the Navy has a CIO as well. So there's a Department CIO, a Marine Corps and a Navy CIO. And we have an Information Executive Council, which I'm a member of, which has those three CIOs on it, and also comptroller folks and things like that, to help with the financing of whatever great schemes we come up with.
So they have operational responsibility, the CIOs for systems, and they have policy responsibility. I essentially am responsible for equipping -- I do the equipping part of the mission; buying the capability that those CIOs say they need. And then after I buy them, they're turned over to them to operate and maintain.
MR. LAWRENCE: That's a great point for a break; we've got to stop. Stay with us through the break. When we come back, we'll ask Joe Cipriano about one of the largest and most innovative contract awards ever made. If you don't know what NMCI is, you will when we continue with The Business of Government Hour.
MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy. And joining us in our conversation is Bill Phillips, another PWC partner.
MR. PHILLIPS: Joe, in our first segment, you described your responsibility to head this thing called the Navy/Marine Corps Internet, NMCI project. Tell us, if you would -- tell our listeners what exactly is NMCI, and what do you hope to accomplish through it?
MR. CIPRIANO: NMCI is a service, a voice, video, and data service that we provide to everyone in the enterprise, military and civilian. And that service is provided to a guaranteed service level. So they can count on it being available a certain percentage of the time, they can count on message traffic moving across it with packet losses less than some number, and with cross-country transit times less than some number. They can count on it being refreshed. And essentially, what we've done is, we've said, we're going to treat IT as a service rather than a commodity.
Prior to NMCI, we bought stuff. We bought software, we bought hardware, we bought networks, we refreshed them as we could afford to. Hard to synchronize those refreshments. And so we could continue to talk to each other when one guy got a bunch of money and could buy the next upgrade and the other guy couldn't. And it was very hard to synchronize that across our very large and diverse organization, where individual commanders were making decisions on the priority of these investments versus other priorities that they had.
And so we looked at this and we said, you know, this is what we want to do. In order to be able to share this information to improve our decision time, as we desired, and also address security issues across the board and inoperability issues, we really needed to think about this differently.
And we decided that operating and maintaining networks wasn't a core competency of the Department of the Navy, that there were people in industry that did this better than us, did it less expensively than us. And we imagined that if, without spending any more money than we were spending today, by just letting somebody do this for us, where it was in their core competency, we could get all of these improvements we were seeking without spending any more money.
So the objective that I was given was, don't spend any more money than we're spending now; I want service for all of these people, including an extra 55,000 that don't have service today that need it. I want this improved security; I want this improved availability; I want built-in tech-refresh; I want help-desk services; I want standard software packages that everybody has and that are automatically upgraded; and I want it all without spending any more money than I'm spending today.
The first step was to agree on what this service, what these service levels had to be, because they had to support, you know, 400,000 people that are on active duty and civilians and military that are ashore at any one time.
So agreeing on what those were took some doing. And everybody insisted that their requirements were unique, that nobody else but -- you know, I have special requirements that nobody else has.
We found that in fact that there is a core set of requirements that everybody shares, and we were able to agree on a service level that if this service level were met by the network, it would support everybody's requirements for information. And so this became the basis for a contract.
And we went out to industry and we said, here is a statement of objectives, this is what I want to do; here is a design-reference mission; here is the environment it has to work in because our environment is different than maybe what some of the commercial IT industry was used to working in. But this is how our surge requirements impact, information technology requirements; we may have four- or five-time increases in traffic during certain times. This is where our people are and here are the service levels that we want you to meet.
And we gave them no other direction than that. We did not specify any hardware and we did not specify any software. And we said you go figure it out, I just want to buy this from you as a service. And we had a lot of discussions with industry so they could ask a lot of questions, and then we put this RFP out.
The second thing we did was, we said we want to get out of this business. And so we turned over to industry our existing infrastructure. We said you can have it and you can use it if you can, and if you can't, fine; just make it go away because we want to be out of that business. We just want a service, like a telephone service or electricity, where it's just there and I don't have to worry about however it is gets there. It's just there every day and I can count on it and I want to be able to count on IT that same way.
So industry responded to this challenge. We asked them to bid against this service level agreement, and also to give us a best-value proposal, because we, quite frankly, didn't know where the knee and the curl was between costs and performance for the elements in the service level.
We didn't know if getting four 9s availability versus five 9s availability was a lot cheaper or just a little bit cheaper. And we didn't know, you know, if specifying certain packet losses -- for instance, cross-country costs a lot of money, or I could get better than that for very little more investment, or I could get just a little bit less and save a whole bunch of money.
So we let industry tell us where the knee and the curl was for their particular technical solution, and we competed at best value. And so we allowed innovation that was out there to be a big part of this effort.
MR. LAWRENCE: It seems very logical to spend no more money and get a consistent level of service, yet I can't help but think that the people who had the different systems at various levels all believed what they were doing made some sense, and therefore, were comfortable where they were. How did you get them to understand, sort of, I guess, sort of global optimization?
MR. CIPRIANO: Right. And that's a very good word is optimization, because everybody had optimized their network for their situation, and that may not be optimized for the next echelon or the echelon several echelons up. So the trick is always to -- how do you optimize requirements for everyone without decreasing anybody's requirements? And it was difficult.
The other thing is that anything that's managed out of Washington couldn't possibly be as good as something I'm managing myself; just previous experience would lead one to conclude that. And so we had to work on that.
We did some things. First of all, we met with all of these people every month. And we facilitated these meetings with very senior Navy leadership, four-star-level participation; the CINCs, the commanders-in-chief from Atlantic fleet and PAC fleet, from the CNOs office and so forth -- so we had very senior Navy leadership saying this is important to us, and re-enforcing that idea.
And then we listened to people's concerns about it. And then we put provisions in the contract and in our governance structure to accommodate those concerns, to the extent we could. For instance, there was a concern that, since a contract was held centrally instead of locally, that the contractor would try to please the central holder of the contract instead of pleasing the end-user.
And so, in NMCI, we dealt with that by having a customer-satisfaction incentive that's built into the contract that is up to $200 a seat, per person incentive, which adds up -- which can come to $150 million a year. It's a lot of money -- that is controlled based on surveys of the end-users; it isn't based on whether I'm happy or not with the service, but is the end-user happy with the service. And so every quarter, they're given an opportunity to fill out an online survey. And based on that survey, the contractor can earn $25, $50 or $100 a person more, if he delights those people with the service.
And that was intended to focus the service provider on making the customer happy and take some of the focus away from worrying about meeting every little contract nuance. We were more concerned about customer satisfaction than we were on meeting all these very specific metrics that had been specified in the contract, because who knows if they're right or not.
So customer satisfaction was given a lot of attention as a way to help settle that. But to change management is always hard, and the hardest part of this as we transition through this is that.
Another factor that was identified, another concern was, there were a lot of people's jobs that were affected by NMCI, since we had about 2,000 civilians and military that were operating and maintaining networks that would no longer have that responsibility once NMCI came to their sites. And of course these people were concerned about what had happened to them as a result. And we asked industry to help us with that, too.
And so each of the industry proposals contained a how we think you should deal with this problem. The proposal we selected has a very nice program for dealing with this. For anyone that we identify as being impacted by NMCI to the contractor, the contractor promises to hire them. They get a 15 percent raise; they get a hiring bonus; they get guaranteed employment for three years. And so they have a pretty nice package to transition to industry if they want to continue doing the kind of work they were doing before.
If they want to move into knowledge management, or if they to move into some of the other areas in IT where we are growing people and moving, then we were offering training opportunities for those people, and said, you know, if you decide you want to take this industry offer, great; if not, we will try to place you in the Navy in other locations to help with some of the remaining responsibilities we have, because these are very talented, very high-value people. And IT people, as you know, are in short supply, so it's not like we wanted to get rid of them or that it's hard for them to find jobs.
MR. LAWRENCE: How long did all this take, describing the vision, selling the vision and executing such a big contract?
MR. CIPRIANO: We started in May of 1999 with an off-site, with all of our echelon two commands, facilitated by one of our 4-stars, where we come up with a vision for NMCI. This is what we want to do; here's the scope of it, and began an acquisition strategy.
In December, we issued an RFP, so between then and December, we got all the requirements together, got agreement on the service level agreements, did industry visits of everybody who had provided this service to over 100,000 people, and learned, therefore, you know, how they had done that, and tried to incorporate that in our process. And so it took less than a year to go through the whole acquisition process.
MR. LAWRENCE: And speaking of time, it's a good point for us to stop. We're talking with Joe Cipriano about the NMCI project. Stick with us through the break. When we come back, we'll ask him more about this large and fascinating project.
This is The Business of Government Hour.
MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy. Joining us in our conversation is another PWC partner, Bill Phillips.
Well, Joe, let me ask you one more question as we're coming out, about the challenges at NMCI. You describe that as a result of this, the Navy will now be buying a service, whereas it once actually did it itself and owned all the infrastructure. That seems like a huge management challenge to come around to that point of thinking and actually execute it. How was that done?
MR. CIPRIANO: It actually was a process that was started a year or two ahead of NMCI, where the Navy looked at and identified what its core business was. And we also looked at where our people were. And we had an objective of putting more of our people assets, because we were seeing challenges in recruiting and retaining kinds of people, that the ones we had, we wanted to make sure were focused on the areas that were our core business areas.
So we identified those core business areas, we identified how we had distributed our knowledge workforce and our talents to support that. And then we started doing business cases on the non-core areas, to understand how much it was costing us to do them ourselves, and then, how much it might cost us to have somebody else do them for us that could do them more efficiently.
And we did that within NMCI; we did a business case. If we were to do this ourselves, this is how much it would cost. We had that done before we got the proposals back from industry. So we said this is how much it's costing us to do it ourselves, and this is the result of that cost. And then we got bids back from industry that said this is how much it would cost us to do that same thing if we had industry do it. And by comparing those two, it's a very compelling business case in this particular example, that it's something you want to let somebody else do for you.
MR. LAWRENCE: Did the numbers alone work or -- wasn't there the argument made -- I think you just made it, that of course, somehow me touching it and controlling it beats any number differential? How do people get over that?
MR. CIPRIANO: There's always that, and you have to keep enough in-house expertise, I think, in these things so that you can be a smart buyer. And so we made some decisions about, you know, we looked at our workforce and made sure we retained enough expertise and enough work for them to do that we could continue to be a smart buyer and continue to reinforce the fact that yes, this is a valid business case; yes, we are getting this service, meeting our requirements, and we're doing it in a cost-effective way.
So it's not something you can stop, I think. It's something you have to look at and continue to look at over time.
MR. PHILLIPS: Joe, you've described a number of specific success measures over the course of your response to our questions here in the last few minutes. But when you sit in a room with the Secretary of the Navy or the CNO or the four-stars or the senior leadership of the Navy, what things are they asking you and wondering about to measure the success of NMCI?
MR. CIPRIANO: Most of the measures from their viewpoint are customer satisfaction. Are the customers or the users happy with the service that they're getting? That's really the key. If you did everything right, they are; and if you haven't, then there's things you need to do. So customer satisfaction is a big one, and something that we try to stay right on top of.
Like I say, we have online surveys that we do, even starting out during the transition to do these surveys and so we can find issues that are involved during that period of time.
But when we're done, and I'm sure this will change -- the questions will change, you know, as now we're getting started and we're identifying budgets and so forth and going through transition phases. I think the question when we're done is going to be, have we in fact sped up our decision making process? Because when all is said and done, if we aren't making faster, better decisions as a result of this investment, then we didn't do it right. That's the real reason for doing it, because I think faster, better decisions is the key to success in business, and it's the key to success in warfare.
So to the extent that you can do that and take advantage of technology to allow you to do that, I think you will be successful on both of those fronts.
So we've tried to identify measures. It's hard to measure the reaction time of an organization directly, but we've identified about 200 metrics that we think in a group allow us to get an indication of the reaction time of the organization as a system; that if these metrics are being met, then we are -- have optimized our reaction time as an organization.
Lots of elements -- NMCI alone doesn't do that; you have to work the applications side. We have other initiatives, such as Taskforce W, which is a web-enabled initiative or web-enabling applications. We have organizational issues where we're changing how we look at requirements to buying capability instead of buying stuff. And that is impacting how we're organized, how we budget, how we prioritize things. And so there are lots of things that come along with this.
But I think if you keep in focus, bottom line, how do you speed up the reaction time of the organization, and is this speeding up the reaction time of the organization? That's really the bottom-line measure.
MR. PHILLIPS: You used the phrase:"A faster, better decision." that's clearly consistent with what Secretary Rumsfeld has said that he expects the Department of Defense to do. Are there applications of NMCI and what you're trying to accomplish there elsewhere in DoD, in the Army, the Air Force, or for that matter, across the federal government?
MR. CIPRIANO: I think there are. The other DoD agencies and other government agencies as well have asked us what we're doing, and we've briefed them. In fact, foreign governments even have. And so NMCI has raised an enormous amount of interest across the government, here and abroad. And we have talked to them about what we did and how we did it. We've freely given them copies of our service level agreements and contracting strategies and whatnot so that they can borrow from those, improve upon them, which is what we did.
We went out and looked at everybody else that had done this and tried to come up with a little better way than anybody else had. And I'm sure others that choose to go this path will find a better way to do it than we did; you know, here's what worked well and here's what didn't.
But I think there is a large part of this that is directly applicable to other government agencies and even commercial agencies, because we tried to follow best practice, you know. And we went out and discovered what that was and followed best practice to the best we could understand it at the time. Tried to make it better in some places. So best practice is best practice, and to the extent that we were successful at identifying it, I think it is directly applicable.
MR. LAWRENCE: Do you give them any other lessons learned from your experience?
MR. CIPRIANO: We had a couple of things that we would recommend people do in preparation for this. One in particular is that most big companies, IBMs and so forth, Microsofts, have 80 or 100 applications that they run their business with that are critical to their business.
In the Department of the Navy, we have like 100,000 of those that were identified as critical; I can't do my business without them. So we had a very, very big, large number of those. And to make all of those run in this new environment didn't make a lot of sense. So we wanted to rationalize those applications. And that rationalization process is being done at the echelon 2 level, and then again at the enterprise level. So we have to come to two levels of rationalization.
First of all, we were somewhat surprised at the number of them. There were more of them than management was aware of that had snuck in over the years. And it has taken us a little longer to get that rationalization process done. So I would start with that process in advance of NMCI would have started a year ahead of time, working that a little harder.
The problem is you can't get anybody to work on it unless you have a forcing function. NMCI is providing the forcing function, so we're working on it. But if you can figure out a way to get people to work on that problem in advance of the forcing function, maybe the threat of the forcing function would be very good.
MR. LAWRENCE: If one thought about the place such an innovative idea and project would have come from, they might not have immediately thought of the Navy; rich in tradition, not prone to change, and that's probably been an attribute of its success. What sparked this innovation, or what in the Navy culture makes innovation possible that people really don't understand?
MR. CIPRIANO: I think there's a lot of innovation, I believe, in the Navy and in the other services as well. Because I believe innovation is fostered by a results-oriented organization or management approach. When you are the commanding officer of a ship at sea, and you have command of all these resources and you are being held accountable for success of a mission, innovation is important, and allowed.
You have a lot of authority to make decisions on how to do things and you are being held accountable for result. And in the culture of the Navy and in the Marine Corps, accountability is very strong. And so innovation, you know, what does it take to be successful, which is where innovation comes from, is right below the surface, if not at the surface.
And the balance of that, with complying with policies and procedures and all those other things that we're required to do in government sometimes means that the innovation doesn't break through the surface. In this particular case, I was very fortunate that the ASN, Assistant Secretary of the Navy for Research Development and Acquisition, at the time this was created said I'm going to give you extra credit for every rule you break. I want this contract done as fast as humanly possible. You have my full authority to waive any procedures or processes, and if it's a statute, come tell me about it and I'll work on that, too.
So I had that kind of support from my boss as we started this thing. And we had a sign that was hung on the front of the contracting team's office that said this team has been bludgeoned into believing they can do anything consistent with common sense; please do not convince them otherwise. And that was signed Lee Buchanan (?). And that was actually hanging out in front of the door, just to remind people that, you know, it's okay in this case, to think out of the box, to look at things that you may have been told or led to believe you couldn't do and to challenge those.
And we found there wasn't a single statute that had to be changed or violated. And in fact, we have an enormous amount of freedom, if we use it, to do things very quickly and efficiently.
MR. LAWRENCE: Great. It's a good stopping point. Rejoin us after the break and we'll talk about the future with Joe Cipriano. We'll find out how the possible retirement wave might affect many of the things he's been talking about with us.
This is The Business of Government Hour.
MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy. And joining us in our conversation is another PWC partner, Bill Phillips.
MR. PHILLIPS: Joe, in the last few months and the last couple of years, there's been a lot written about retirement and the retirement wave that's impacting the federal government. The Navy, I'm sure, is not immune to that. What are your thoughts on that situation? What are the specific challenges that the Navy has? And what kinds of things are you considering to help deal with that?
MR. CIPRIANO: Yes, that is a concern, Bill, for us and for the Department of the Navy, and we're looking at it in functional areas. The IT workforce in the Navy, for instance, was one of them where there was an aging population; we're looking at our average going up. We're looking to getting to a crisis situation not too far away because our demands for that expertise were going up and the number of people we had were going down.
And so one of the ways that we're dealing with that is by turning over to industry responsibility for those things that aren't core, aren't things that we absolutely have to have our people do, so we can free up the folks we have left to do the things that we have to do ourselves in-house that are core to our mission.
And I think that is a mitigating thing that can help. And I think that for those areas that are not core mission, that is the strategy, I think, that's quite effective. Because if you give it to somebody where it is their front-room business, they could probably do it more efficiently, with less people.
For instance, one of the reasons that NMCI has allowed us to get more for the same amount of money is that they used technology to reduce the number of people necessary. About 70 percent of the cost of running an IT network is personnel.
But when you have a large enterprise network where you can consolidate server farms; you can have automatic fail over, so they don't have to be manned; you can have a guy show up once a week to replace modules and what-not; you can reduce that cost greatly. You can reduce the number of people it takes to get that capability.
And I think there's a lot of opportunities like that, when you look across a big enterprise, that aren't available if you're looking at a piece of the enterprise, but become a cost-effective way to reduce manpower requirements; when you look at the enterprise from the top-down perspective, that will become evident.
The other thing we try to do is we try to target key expertise that we need and recruit it at places that we've had success in the past, use people that have come from there to help us with recruiting so they can go tell them what great fun they're having working for us. And we offer in the Navy, and I think all the services, very challenging jobs. And what I found -- and I've left a couple times and come back -- is, it's hard to find a job with as much scope, as much excitement as you can find working in the government.
So people that are interested in that, that are interested in that big, big project challenge, an opportunity to work on multi-billion-dollar programs and do things that nobody's ever done before -- there are a certain kind of people that love to do that kind of stuff, and we were able to attract them.
MR. PHILLIPS: Are you finding, as you have changed the mix of technologies, you're moved technology off to the private sector, are you finding that the people who are remaining in the Navy are becoming more engaged and more excited about what their roles are, and therefore, urging them to stay or join?
MR. CIPRIANO: I think, as a matter of fact, NMCI has improved our retention in this area because the work that's left is exciting work; it's more fun work, it's more challenging work than perhaps the work that they were doing before. And so I believe our retention numbers are up even in the enlisted and on the military side.
MR. LAWRENCE: With the widespread expansion and advancement of technology, what kinds of skills does a young person need who might be contemplating joining the Navy either as a civilian or a service member?
MR. CIPRIANO: Well, I think most of our young people today are a lot more savvy, at least in computers and things than I was, certainly, and some of us were when we went through because it's been built into our education system from elementary school on up these days. And those skills, I think, are important today, will be continuing important because I believe the military, as well as most every place else, is going to be working on speeding up the decision process, which I keep coming back to.
And IT is key to that; the technology that that technology brings enables that speeding up of the decision process. And anyone, therefore, that has those kinds of skills is going to be valuable for a long, long time to come and be able to be used on many different kinds of jobs.
The military, you know, starts with good people and we teach them unique things that we do, but if you have a good strong background, understanding of technology, systems engineering is another discipline that is highly valued. We engineer the largest systems in the world, and we have great jobs for systems engineers. And so we're always looking for them, but those kinds of skills are very important to us.
And if you want to do it for a time, all branches of the military offer great opportunities for a young person to come in, get experience, and get training that looks great on their resume for whatever they want to do for the long-term.
MR. PHILLIPS: What kinds of specific steps are you taking to get people, to attract workers and to retain them? You've described a number of things about the characteristics of the job, but how do you go out and actually get them and find them?
MR. CIPRIANO: They find us. When you're doing something that's new and exciting, people come and they want to work for you. We have people coming into the PEO all the time that want to work there because they've heard about the project. It sounds exciting, it sounds like something that they want to be involved in. It's something they always wanted to do and couldn't wherever it was they were.
And I think if you have a project that is big and new and different and it's getting visibility, you don't have to hunt for them to dome. The jobs that you have to hunt people for are the ones that aren't so exciting.
MR. LAWRENCE: You described taking a pay cut a couple segments ago, several times, I think, in your career as you did this for challenging work, and I'm guessing, from interviews say, a year and a half ago, that all we heard was technology workers were drawn for stock options and very exciting Internet things, I think dot-coms. And I'm curious, what's the relationship between the pay differential, which I think exists in and around government, and this exciting work? Is that really enough?
MR. CIPRIANO: It turns out that having done it both ways, that when you work in industry and you get paid more, I've found that people; the more you get paid, the more you have to work. Or as Pete Pinoffsky (phonetic spelling) who is a Nobel Laureate, once told me; he said, your compensation is equal to the fun plus the one. So if you're having fun, you probably aren't making as much money as somebody that isn't having fun. I know there are some exceptions to that, but generally, the combination of fun and financial compensation should be what you look at in that total package.
And sure enough, there are some great opportunities for fun and very interesting work in the government, even though it may not pay as well as the other opportunities. At different times of your life, that is a great thing to do. When you have kids you're trying to put through school, it's a little bit challenging sometimes.
MR. LAWRENCE: What's your vision for the Navy over the next ten years?
MR. CIPRIANO: I think the Navy is truly on a path to be one of the best-run organizations of any kind. They're really looking at getting information to decision makers faster, restructuring themselves from top to bottom -- from budget to planning; to how we buy things; to how we think about things; to buying capability instead of stuff; to organizing to take advantage of technology to expand the boundaries of system. You know, we optimize systems based on what we're capable of comprehending and dealing with. And the ship used to be the biggest thing that the Navy built, and now we're building battle forces, you know, and joint taskforces. And technology is making those physical and time boundaries between what's in the system and what isn't go away.
And so to the extent we=re able to understand that and manage that, we can extend the system to include assets anywhere on the globe to be part of the problem solution or the mission accomplishment. And the Navy understands that very well. And I believe it is preparing itself and its people to take advantage of that technology and move in that direction as quickly as they can.
MR. LAWRENCE: How about the future in terms of its management capabilities? I mean, you described sort of the past, where a leader or a manager ran a ship or a battleship or a fleet, and now, NMCI is a window into a future that has a great deal of civilians working with the Navy. Will the management skills and capabilities need to change, too?
MR. CIPRIANO: I think they will and I think they are. How do you train people to manage big, big things? Because you can't do it in the old hierarchical well, where you have one guy that's the boss and he runs everything, because it's too big for anybody to understand. So you need to have contracts with employees and members of the organization. Okay, my contract to you is I'm going to provide you this, and your contract with me is you're going to go do this. And you go do that and operate as independently as you possibly can to do that. If you can't establish those contracts, if you can't break up the problem into pieces that you can allocate and contract with individuals to do, then there's a limit to how big the system is that you can manage and you can make-work for you.
And I think the managers that are successful at figuring out how to do that, figuring out how to structure their organizations, how to structure these relationships with the people that support them, will be the ones that are able to handle these very, very big systems and make them work to generate great benefit to the organization.
MR. LAWRENCE: Well, Joe, I hate to bring this interesting conversation to an end, but we are out of time. And Bill and I want to thank you very much for being with us here today.
MR. CIPRIANO: It's been a pleasure to be here. It's a pleasure talking to both you, Paul, and, Bill, and I enjoyed it very much.
MR. LAWRENCE: This has been The Business of Government Hour, featuring a conversation with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy.
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This is Paul Lawrence. See you next week.