Training, Education and Welfare - DEFENCE MANAGEMENT JOURNAL, Issue 57
Coping with the cuts
The National Audit Office recently published a report into headcount reduction in the MoD. Senior Analyst Sarah Shakespeare explains the findings…
When it comes to headcount reduction, the 'Managing Change in the Defence Workforce' report1 found that the MoD has planned this process well up to now. It also found that the department will need to ensure it retains the skills needed to deliver its strategic objectives, while also delivering the financial savings required.
Reducing staff numbers
To help cut costs, the MoD aims, by 2015, to reduce its workforce by 29,000 civilian and 25,000 military personnel. The department plans to reduce personnel by cutting levels of recruitment and increasing the number of people leaving.
On the civilian side, the department expects that 14,500 staff will leave through its Voluntary Early Release Scheme, 8,000 people will leave through natural wastage, and 2,000 civilian jobs will be transferred to the private sector. A further 4,500 personnel are expected to go from the Trading Funds (organisations such as the Met Office and the Defence Science and Technology Laboratory).
'The department plans on reducing its staffing levels by at least 16,000 personnel through natural wastage. But one of the key risks associated with relying on this is of course that the department cannot control which skills it loses and which it retains, potentially leading to a worsening of current skills shortages.'
The department predicts that 9,000 military personnel will leave through redundancy with approximately 9,000 through natural wastage. It also plans a further reduction of 5,000 army personnel through a combination of the two. The military reduction also includes a reduction in RAF personnel of 2,000, which the department committed to make before the 2010 Strategic Defence and Security Review.
The NAO found that the MoD has followed good practice up to now in planning its headcount reduction, with the policy being set centrally and applied consistently across the department by different budget holders. The detailed planning for military and civilian roles was done separately because of their different terms of employment. The first rounds of military redundancies and the civilian Early Release Scheme have so far progressed without problems.
The department developed good models and tools to help it profile the number of headcount reductions required and the predicted savings. The model to calculate the civilian savings was robust and the tools used to forecast military reductions and savings followed accepted good practice.
Retaining the right skills
The department has good information on its military skills, but poor information on its civilian skills. It has put some steps in place to improve its knowledge in this area by requiring all applicants for the Early Release Scheme to complete a skills profile. This will give the department some information on the skills of those who want to leave, but not on the skills its civilian workforce has in general.
The department has taken action to protect the key skills it needs in its civilian workforce. The applicants for the Early Release Scheme are assessed against several criteria, including skills value to the business area and the department.
The military redundancy programme has been targeted at current or forecast surplus trades and ranks, and the department has stipulated which are eligible for redundancy. Only people who fit the criteria are able to apply for redundancy, allowing key skills in the military to be protected.
The department plans on reducing its staffing levels by at least 16,000 personnel through natural wastage. But one of the key risks associated with relying on this is of course that the department cannot control which skills it loses and which it retains, potentially leading to a worsening of current skills shortages.
The department should therefore continue its monitoring of new and worsening skill gaps in the medium to long term in its civilian and military workforce.
In December 2011 the department developed a blueprint for its new operating model, which it plans to have finalised by April 2013. However, both the military and civilian schemes will be well under way by 2013 and the RAF and Royal Navy redundancy schemes will be largely complete. As a result of deciding which staff will leave before deciding which skills are needed, there is a risk that the department will not have the key skills it needs under the new operating model, with new skills gaps being created and existing ones worsened. The department needs to finalise and implement its new operating model as a matter of priority.
Delivering the required financial savings
The department aims to save £4.1bn from reducing headcount between 2011 and 2015. To achieve this level of savings, it must reduce the headcount required within its planned timetable. There are a number of risks to the MoD reaching its savings target.
The department has undertaken a three month exercise to reduce costs even further. The result was an announcement that it would reduce the army by a further 5,000 personnel by 2015. The department has not yet determined in detail how it will achieve this headcount reduction, posing a further risk to its meeting its savings targets. The MoD expects that these 5,000 posts will be lost through a mixture of redundancies and natural wastage. The risk of the redundancies being delayed has diminished, as the first round of headcount reduction is complete, and the department has started the second.
Another risk is that there will be delays to the different rounds of redundancies or that fewer staff will leave through natural wastage. This could have the consequence of delaying or lowering the savings that can be achieved, given that the department would need to continue to pay out salaries, pension contributions and benefits for longer. The required savings would then need to be found from elsewhere in the department. The NAO's experience of examining previous savings programmes indicates that, on average, they under-achieve on their gross annual savings targets by 20%.
The MoD believes that it has the capacity to deal with any shortfall in its programme. But the NAO has recommended to the department that it develop a fully costed plan to identify, should its planned savings fail to materialise, where it would find the extra money.