Managing Director & Partner
Many militaries worldwide cannot maintain the readiness of their armed forces and thus cannot meet their national defense commitments; troop levels and skills are increasingly falling short of requirements. Critical technical skills in digital technology and data analytics, which are needed to develop, operate, and sustain advanced capabilities, are in particularly short supply, in part because the private sector is vying for these same skills. But a bigger underlying challenge is that many militaries don’t have the HR capabilities to effectively compete in the talent marketplace.
Defense ministries have a wide variety of policy reform options available to address these skill shortfalls and improve readiness. We surveyed and benchmarked military and commercial HR practices across the globe to identify the most promising reforms—most already in use in the private sector—that militaries can apply. Specifically, we believe that flexible career paths, an agile organization, and customized training have the potential to deliver a significant ROI. In addition to implementing reforms, a ministry needs foundational capabilities including strategic workforce planning, workforce analytics, and project management to optimize outcomes.
This is a significant undertaking, but it’s essential to ensure that forces have the skills they need in order to meet future mission requirements.
People are the decisive advantage for any military, yet most armed forces are experiencing a large and growing talent gap, which has become acute in the past few years and is almost certain to get worse. Demographic shifts are one contributing factor. Aging populations in many developed countries have led to a net outflow from the military and a smaller pool of younger people from which to recruit. And younger people have far different standards and expectations for their career than people in previous generations. For example, they have different expectations regarding a work-life balance, and in many cases, they want to start companies rather than work for one.
A bigger factor is that military operations have become increasingly complex, as forces operate in new domains such as space and cyber. Technology continues to advance at an accelerating rate, with all functions increasingly dependent on advanced data analytics, digital engineering, artificial intelligence, and related fields. These new technologies also require that militaries work in new ways, with more agile training cycles, more specialized activities, more collaboration with a wider range of stakeholders, and, most important, a greater reliance on data and information technologies.
But perhaps the biggest challenge is that militaries must contend for talent with private employers that are—not coincidentally—vying for an insufficient pool of workers with the same critical skills. The labor market has become far more competitive, with basic laws of supply and demand leading to higher salaries and more attractive offers from private-sector employers for people with high-demand skills, including pilots, engineers, and data scientists. In fact, because companies recognize that any shortage of this kind of talent is a limiting factor on their growth, many are taking ambitious measures to transform their employee value proposition and approach to talent management.
In contrast, many militaries still have immature HR functions in areas such as strategic workforce planning, workforce analytics, and tailoring the employee value proposition to the needs of the market. They don’t have a clear sense of what skills they will need in the future, or when, and they’re unable to measure the effectiveness of any individual initiative. In the war for talent, they are outgunned and—perhaps predictably—they’re losing.
In the aggregate, all of these factors are significantly eroding militaries’ ability to recruit, and the resulting skills gaps are putting military readiness at risk. Consider:
We have seen these issues firsthand in militaries around the world. Personnel policies are decades old and no longer fit for purpose. In these organizations, leaders are unable to identify future needed capabilities. They cannot hit recruiting targets, particularly when it comes to diversifying their ranks with more women and minorities. Support for the families of current members is often insufficient, particularly for child care, housing, and health care. They do not focus enough on talent management and development. And worst of all, they lack detailed personnel data and analytics, leaving them with no clear understanding of why service members are joining or leaving.
As a consequence, personnel shortfalls are contributing to a failure by many militaries to meet their readiness targets. Readiness is not just a function of available platforms (such as ships and planes), and it is not a problem that organizations can solve by simply improving equipment or material readiness rates. In fact, buying more platforms, systems, and hardware often exacerbates the problem, in that shortages in instructors, maintainers, and other key roles mean that new equipment can’t be put into service.
In addition to operational readiness, there are financial consequences to the talent shortfall in the form of higher spending on temporary fixes (such as external recruiting firms and trainers). Perhaps most pervasive is a drop in morale among the current members of the military, who must work that much harder to meet mission requirements. Bad morale leads to increased attrition—and further compounds the staffing problem.
These challenges create a strategic imperative for defense ministries to transform their personnel policies and systems to recruit and retain the right talent to sustain readiness. Fortunately, they can choose from a wide variety of potential policy options. Drawing on our extensive experience with industries and our discussions with major defense ministries, we believe the following three offer a significant ROI and should be priorities for most armed forces.
One final note on these reforms: a 2018 BCG survey asked more than 300,000 employees across industries and countries to rank their priorities regarding job satisfaction. The reforms that we propose cover three of the top five priorities that employees cited: work-life balance (ranked second among respondents), learning and training opportunities (fourth), and career development (fifth). The remaining two—relationships with colleagues and with one’s superior—are more situationally specific and harder to address via broad policy reforms.
Regardless of which policy reforms a military chooses to implement, the success of any individual reform rests on several foundational capabilities that allow defense leaders to better understand the unique needs of their service, to design solutions, and to gauge the effectiveness of those solutions.
Strategic Workforce Planning. The changing supply and demand of talent require organizations to understand their future workforce challenges and the broader labor market at an extremely granular level. Currently, most militaries simply cannot. In practice, this capability requires identifying skills and capabilities that will be more needed in the future, mapping those to the current workforce, and developing plans to close the gap across a variety of potential scenarios through data-driven, value-based recruiting. Importantly, this process is not a one-time event but a recurring process that happens annually or biannually and is enabled by advanced data analytics.
Advanced Data Analytics. The second key capability is using data and analytics to better understand the organization’s current personnel situation and assess the impact of potential policy reforms. Many militaries have vast amounts of data, but they don’t have the right data or the ability to harness it for insights into why people enter or leave military service or how their career development can be improved. To address this problem, ministries should establish a transparent data lake and create an analytics function explicitly tasked with running workforce analytics. Advanced data analytics will help military leaders to understand the current labor environment and demographic changes and to identify emerging personnel gaps and skills gaps. Analytics tools can also predict the impact of specific initiatives, gauge those against real-world results, and improve their accuracy over time.
Project Management. Last, ministries must carefully analyze the suite of potential policy reforms, prioritize them based on their strategic impact, and phase them in through deliberate implementation. Large-scale change will come only through a structured process that generates early successes to build organizational momentum and generate buy-in from force leaders. To that end, each measure should have a set of KPIs and key milestones during the implementation process so that leaders can accurately gauge progress over time.
Financial costs should be part of the analysis, as they’re critical in generating a business case and ROI for specific initiatives. For example, a ministry could consider a performance bonus—5% of base salary to the top 20% of performers in the service. It’s possible to model the effects of this initiative in advance—in terms of more successful recruiting, reduced attrition, improved readiness, and other factors—and translate those aspects to a bottom-line cost for the initiative. In this way, the overall program can potentially pay for itself based on early successes.
Once a ministry chooses a set of reforms, it must turn to implementation. Personnel systems are among the most resistant to change, and large-scale initiatives have a notoriously bad track record—50% to 70% do not hit their objectives. Successful reform requires a deliberate change management plan supported by dedicated employees, significant governance, and a change in mindset among senior leaders to overcome obstacles and ensure that change takes root.
In our experience, several measures can tip the odds in a ministry’s favor:
Like any organization, militaries are only as good as the people within them, and currently many militaries simply lack the talent they need for a shifting technology and security landscape. The staffing shortages at many armed forces have become so acute that they threaten operational readiness. No external factors are likely to change that situation; instead, it is up to government and military leaders to ensure that they have the right talent in place to execute their missions. Private-sector organizations are already investing to transform their personnel policies. With so much more at stake, the armed forces need to do the same.