Privatisation and the Pitfalls of ADF Expansion

Introduction

On 10 September 2001, then-US Secretary of Defense, Donald Rumsfeld, held a town hall meeting for all Pentagon staff. The meeting was to discuss an adversary that posed ‘a serious threat to the security of the United States of America … the Pentagon bureaucracy’[1]. In his speech, Rumsfeld declared that the US Department of Defense should focus on ‘warfighting … but in all other cases, we should seek suppliers who can provide these non-core activities efficiently and effectively’[2].

This war on bureaucracy and subsequent push for the privatisation of certain military functions — such as finance, IT, warehousing, health and accommodation — was inauspiciously declared just hours before the events of 9/11. The following decades of conflict throughout the Middle East subsequently saw rapid expansion of defence industry across Western countries. Subsequently, global militaries have become increasingly reliant on private industry to provide all but ‘core’ warfighting functions, while industry cashes in on one of the largest untapped markets of the 21st century.

Recently, even those previously ‘core’ functions are being challenged by companies such as Lockheed Martin, with F-35s now integrated as part of a ‘program’ — forcing adherence to their requirements, supply chain and oversight at the cost of an individual Air Force’s autonomy. The result of this strategic reliance on private industry is that Western militaries, unlike those of Russia and China, now are almost equal parts a private business as they are a state enterprise. Such reliance causes militaries to lose their ability to act independently in response to war. While governments may be able to declare wars, they are far from able to fight them independent of a complex, and binding, system of contracts and companies.

Former Prime Minister, Scott Morrison, announced a 30% growth target in ADF personnel by 2040[3], which will bring the total force to approximately 80,000. This will be welcome news for many units that suffer permanent undermanning, but how realistic is it? Former Defence Minister Peter Dutton acknowledged that the ADF faces a serious retention problem. Similarly, former Chief of Defence Chris Barrie is sceptical that such a boost can be achieved without a major rethink of current recruitment and retention efforts[4]. With an unprecedented level of spending on military equipment expected to occur over the next two decades, the need to recruit and retain high quality individuals is immense, especially with the ‘drums of war’[5]beating.

This article contends that the issue of workforce retention within the ADF is, ironically, the result of the very expansion it is driving. The growing power and prevalence of the private sector has created an immense number of job alternatives for ADF members who, by nature of their roles and proximity, are well positioned to jump ship with ease into jobs that provide more intrinsic and extrinsic benefits.

As the ADF attempts to achieve an 80,000 personnel target, it must contend with an equally significant expansion of the private sector. This private sector expansion means that not only will the ADF need to compete with industry when recruiting new members, it will experience a continuous fight to retain them. The flexibility and innovation of the private sector, combined with a relative lack of ‘red tape’, allows it to outpace the government in making appealing offers to prospective employees.

Extrinsic Powerhouses

Due to its focus on profit, the military industrial complex is superior at appealing to the extrinsic motivation of employees. This is not anything new. Public bodies such as the military exist to provide services that are in the interest of society, thus they are motivated by providing a public good — not by increasing shareholder profit and revenue. For the ADF, this philosophical difference necessitates a higher level of intrinsic motivation (which is discussed in the next section); at the same time, however, it establishes barriers for the provision of extrinsic incentives. Extrinsic motivation, that is, behaviour driven by external rewards[6], is a fundamental aspect of a capitalist economy. Within a capitalistic model, people engage in economic activity to be rewarded monetarily; at an individual level, more money equates to greater freedom and fulfilment, while on a societal level more money equates to greater respect and the prospect of climbing the social ladder.

When discussing the military industrial complex, it must be recognised that war has become a business. Certainly the private sector has some genuine desire for the promotion of democracy (lest they lose their customer base) and the spread of peace and the protection of innocent lives — but Northrop Grumman would not act on that desire for free; such is the economic reality of capitalism. Since Rumsfeld’s war on bureaucracy, the private sector has been immensely profitable: the top three aerospace and defence Exchange Traded Funds (ETF’s) have returned around 350% since 2006[7]. Furthermore, in Australia the contracted workforce has become our second largest ‘service’ at over 28,000 personnel[8] — easily beating the Navy (14,000), Air Force (14,000) and APS (18,000). While private industry has always been able to offer salaries and stability that the ADF cannot, these advantages are becoming far more relevant for those choosing careers at present than they have been previously.

One reason for this shift is the situation facing young people in the housing market specifically, and the broader economy generally. The extreme divergence of wages from housing prices since 2000[9] now sees nearly two-thirds of people believing that home ownership won’t be an option for young Australians[10]. As a result, those who are deciding upon a career field are extremely cognisant of whether their job will provide them access to the ‘Australian Dream’ of home ownership. In this respect, the ADF is smart to offer benefits such as DHOAS and FPAS, which partially address this problem, yet these benefits are competing against private sector salaries that can cover their financial benefit and guarantee geographic stability and a simple standard for progression.

Salaries and compensation aside, the private sector also offers more efficient and expedited career progression — another form of extrinsic reward. The ADF system for career progression is extremely prescriptive, which can lead it to inefficiently recognise competency. Where military members must jump through a broad range of hoops to get a salary increase (either through promotion or skill grade), profit incentive provides private industry employees a clear goal to aim at in pursuit of reward. There is subsequently a very clear understanding of what types of behaviour will be rewarded, and alternately, which ones will be penalised. Defence has spent copious time on developing detailed career plans for its members, however, the requirements for this miss the clarity of the private sector. As a result, members often view them as ‘box ticking’ activities rather than genuine reward for performance.

This view also reinforces a mindset where it is assumed that seniority will equate to promotions or recognition, regardless of how that individual has necessarily performed over their career. Without doubt the ADF requires seasoned individuals across the organisation, however, a long-held gripe is that militaries promote experience over competency[11]. This dynamic exists partly because militaries need a set number of people to operate, and so it is necessary to have someone in that role rather than no-one. However, a negative feedback loop is established when competent personnel discharge due to stagnation or dissatisfaction with how career progress is managed. This then reinforces the desperation of the service to subsequently fill the billet.

To use a simple ADF example, the average junior officer will likely go through the first 10 years of their career without performance affecting rank or pay. Assuming roughly one year of training, three years as an 0–2 and then time-based promotion to 0–3, it is then a further five to six years as an 0–3 before performance-based promotions to 0–4 are on offer. There are obviously outliers to this example, but writ large the expectation is a decade of ‘getting your time up’ before the organisation is willing to look at your performance and promote you ahead of, or behind, the peers you joined with. Private sector equivalents, due to their relatively straightforward promotional requirements and financial incentives, are attractive for those who want recognition for performance to play a decisive role in their career.

Ironically, when the ADF does accelerate an individual’s career based on performance, it likely takes the member away from the very thing they joined to do. The focus on ‘broadening’, that is, doing various jobs outside of your core specialisation, means that the ADF is keen to shift high performers from the jobs they both enjoy and are competent at. An emphasis on broadening is not inherently counterproductive, in fact it is necessary to produce our high-ranking/high-performing officers and enlisted, however, it is a significant detractor for those who signed up for a specific role. That a technician or infantrymen is ‘required’ to perform office jobs or training roles to gain promotion risks them preferring to leave the organisation for industry, where they can be guaranteed of fulfilling a single role rather than performing a job they dislike. With only a few pathways for specialist employment, such as spec-aircrew, often it is through unofficial channels that ADF personnel are able to stay in their core role — whether it be through purposeful under-reporting or the pervasive ‘purple circles’ that exist.

Finally, the past few years marked by COVID and natural disasters have demonstrated a reliance on the ADF for all manner of national support activities beyond our ‘core’ warfighting functions[12]. Undoubtedly, we have a duty to do so, if for no other reason than the ADF appears to have a greater capability to respond to states of emergency than the various SES bodies. Yet most ADF members likely did not put on the uniform to support nursing homes or guard hotel lobbies. Members respect the requirements of unconditional service, yet to take time away from their homes, families, and friends to support domestic operations — in stark divergence to the notions of ‘core’ warfighting we are told the military should focus on — is a significant ask. The fact that there were no Thales or E&IG personnel manning COVID border checkpoints is therefore another appealing element of employment as a civilian. The ability to work in a single location in a specific role will be broadly appealing to ADF members who are tired of posting cycles and out-of-specialisation jobs, and are seeking to prioritise family and spousal commitments.

The ADF has followed the United States in pursuing privatisation as a means of technological and organisational development. From a capabilities standpoint this move has undoubtedly been a success. Private sector agility far exceeds that of the public sector in developing new platforms and powering innovation, largely due to the profit incentive. It should be unsurprising that the same dynamic exists in private sector human resourcing. The recruitment journey that the ADF is about to embark on will therefore be one marked by struggle and, if it is to succeed, will require (considerable) innovation.

Intrinsic Gaps

Militaries inherently have an advantage when appealing to the intrinsic motivation of employees, however, this is slowly eroding. The ADF as a public body is designed to produce a common good, being the defence of Australia, rather than to generate profit. Subsequently, it is common to refer to oneself as ‘serving’ the country, not working for it. This career path therefore appeals to those who have a deep sense of intrinsic motivation — they work not solely for external rewards but for internal goals such as service, cooperation and challenge[13].

As described above, militaries have purposefully focused on ‘core’ warfighting functions while privatising many supporting functions. This dynamic presumably works well during a war — however, Australia’s recent humanitarian disasters have shown that perhaps the ADF may more regularly be called on for the use of everything but its warfighting functions. For those who are motivated by service in a general sense, being put to task in nursing homes and state borders will likely not diminish their internal motivation. The opposite is true for those who donned the uniform to specifically contribute to the profession of arms. Having been told for the last two decades that uniformed forces are to be the ‘tip of the spear’, with private industry constituting the remainder, it is understandable that there is confusion when we have soldiers’ guarding hotel rooms and delivering Uber Eats for months on end.

The subsequent delta between the expectations of ADF service and the realities causes serving members dissatisfaction in their work for numerous reasons. Most obvious is that people are being trained for a specific job only to undertake a completely different one that they are not trained for. Not only is this discouraging on a personal level, it also contributes to crippling deficiencies at an organisational level. The nature of our training pipelines, exercise schedules, and operational requirements are such that removing substantial numbers of personnel for extended periods of time leads to long-term deficiencies in ADF capability. Over the last two years there have likely been minimal to no ADF units that have had an unimpeded ability to conduct their expected raise, train and sustain functions. Given the ADF is currently undermanned, there simply isn’t the capacity to do both ‘core’ warfighting and domestic humanitarian assistance to a high level — instead we have been forced into a ‘do less with more’ mentality which results in mediocre outcomes for both mission sets.

The nature of unrestricted service means that ADF members will undoubtedly take to these tasks as best they can, however, it does not go unnoticed that private industry doesn’t exhibit this dichotomy. Hence industry can deliver its people certainty in the work they will perform. For many, this certainty is increasingly important as it guarantees that they will be working on tasks, or for causes, which they both believe in and enjoy.

These critiques are not to say that the ADF shouldn’t play a large role in domestic operations. They should. However, these critiques highlight the need for clear direction when it comes to the ADF’s task and purpose. Over 20 years of focus on ‘core’ warfighting means that our training and capabilities are not pointed towards humanitarian outcomes. Additionally, through the partial privatisation of many supporting roles, such as catering and construction, the ADF has deprived itself of the very functions which would be of most use in humanitarian missions. The outcome being that our people are under-resourced and confused about the purpose of service and subsequently have less intrinsic motivation to wear the uniform.

When ADF members are performing the roles they both joined and trained for, it is clear that their motivation levels are high. The ADF offers a level of responsibility and trust that few private organisations offer — especially when it comes to our junior personnel. That we as an organisation regularly trust those in their early 20s with command of platoon-sized elements speaks both to the confidence of the organisation in its people, and the drive of Australians to provide service above and beyond that which would be expected in industry. Unfortunately, these intrinsic motivators are becoming less prevalent in our recruiting process. Instead, recent years have clearly shown that DFR is intent on appealing to extrinsic factors to recruit young people. The Navy’s 1981 ad entitled ‘Pride Of The Fleet’[14] made very clear that it wanted to appeal to a recruit’s sense of service — its chorus stating, ‘you’ll be homesick and frightened but the pride of the fleet will be you’. Such an obvious appeal to the realities of military life is notably absent from recent recruiting efforts. Instead the focus is being placed on extrinsic benefits such as travel, pay and family flexibility. Understandably, this transition has been done to keep pace with the demands of the current generation — and given the 80,000 target that looms, a shift in tactics has been required. The complication that arises from extrinsic recruiting, however, is that you precondition individuals to be sensitive to such factors, which makes them increasingly vulnerable to the major advantages of the private sector. If Australians have chosen the ADF due to salary or flexibility, and not necessarily service, then industry jobs will likely present very serious competition.

Desire for, and pride in, service thus needs to be a priority for the ADF if it seeks to capitalise on its largest advantage of intrinsic motivation. A recent report showing that ADF morale fell from 42% to 38% in 11 of 12 groups quizzed should be a clear signal that intrinsic motivation is dropping[15]. With groups such as Defence Intelligence recording a 17% reduction in morale, there needs to be serious thought as to whether these drops can be attributed simply to two years of pandemic response, or whether it signals a larger issue with the core way the ADF approaches recruitment and retention.

Recommendations

This article proposes three recommendations to address shortfalls in extrinsic and intrinsic motivation in the ADF arising out of private sector expansion. Addressing these shortfalls and implementing these recommendations would significantly assist the ADF in achieving its recruitment and retention targets.

1. ADF remuneration and workforce flexibility needs to be prioritised more.

The private sector will forever have the advantage over the military sector when it comes to flexibility and salaries, but that should not prevent attempts to reduce the gap. The economic situation facing the junior workforce today is markedly different to the conditions faced by senior leaders when they first joined. Two themes have become prevalent among younger generations when it comes to work: the necessity of being paid more and the desire for working less. While these themes may appear somewhat counterintuitive, especially to older generations, trends such as the ‘Great Resignation’[16] are proving that the balance of power lies with employees, not employers. Companies across the globe have introduced measures such as four-day work weeks, flexible salary packaging, bonus options and working from home to attract the most talented workers. As I have written about previously[17], the ADF is making slow moves toward mirroring these options — but it needs to do so with haste. Furthermore, the ability for members to shirk the necessity of ‘broadening’, and thus stay within their specialised role, should be explored in order to ensure our ability to retain highly skilled individuals.

The rapid rise of Australia’s own military industrial complex has invited the fox into the henhouse, so to speak, when it comes to competing for talented employees. Uniformed members are increasingly working alongside those in polo shirts who are similarly qualified yet better paid and afforded flexible work options — a combination that speaks to the growing extrinsic motivators that the workforce is demanding. If the ADF allows this remuneration and flexibility gap to grow, it will either be forced to recruit less talented individuals or it will fail to recruit anyone at all.

2. The role of the ADF in domestic and humanitarian operations needs to be clearly defined.

If the ADF is going to become stalwart in domestic operations, this needs to be clearly stated and rhetoric involving ‘core’ warfighting functions needs to be omitted. The privatisation of all but ‘core’ functions suggests that the ADF is generally not equipped to venture outside of these roles and that its people are not trained to do so. This is not to say that the ADF necessarily shouldn’t perform both warfighting and humanitarian roles, but rather that the ADF’s current mission is to ‘to defend and protect Australia and advance its strategic interest’[18]. People join the organisation with this in mind, so while tenuous links can be made between aged-care assistance and strategic interests, overall these tasks do not coincide with the reasons people sign on the dotted line. The disenfranchisement felt by members when completing these tasks can therefore be directly linked to a delta between expectations and reality, something that results in dissatisfaction and a preference for an industry job where this delta does not exist. The simplest way to minimise the resulting disenfranchisement is to clearly acknowledge the role that ADF members will be expected to play when domestic disasters do occur. Interestingly, in doing so the ADF may increase its appeal to employees who want to contribute to humanitarian causes and not to warfare. Given there is little profit to be made in humanitarian operations, private sector competition is minimal. This could allow the ADF to capitalise on its advantage of intrinsic motivation when it comes to recruitment, but such a move needs to be clearly signalled for all to hear.

3. The ADF needs to seriously consider reacquiring functions that have been privatised over the last 20 years.

If, as political rhetoric would suggest, we are approaching a time of increased strategic conflict, the ADF requires self-sufficiency. The unprecedented privatisation that occurred in the first decade of the 21st century was permissible during the multitude of low-intensity, largely insurgent wars fought throughout the Middle East. An overwhelming military advantage combined with a supercharged, post-9/11 military–industrial complex meant Western forces could afford to outsource all but ‘core’ functions — as was the explicit intention of the US. Our very idea of what constitutes ‘core’ warfighting roles has thus been born from conflicts where there was never direct or existential threat to the West writ large. While these war zones were not permissive, they were certainly accommodating enough to allow contractors to operate as a business and not as an extension of a warfighting force. The next war, according to the commander of the US Army in the Pacific, is going to be ‘very violent [and] very human’[19]. That our military is heavily reliant on industry to provide everything from catering, logistics support, base services and airfield engineering suggests that unless civilian contractors are prepared to engage in the same level of unrestricted service as those in uniform, ADF members will have to take their place. If we are truly preparing for the possibility of conflict, then are we, as a military, content in the knowledge that we likely cannot house, move, feed, or supply our troops without immediately requiring the services of industry whose chief concern is profit, not protection?

Conclusion

The 2020 Defence Strategic Update declared that we exist in a strategic environment wherein ‘confidence in the rules-based global order is being undermined’[20]. This undermining has subsequently been used as justification for the acquisition of a broad range of ADF capabilities, not the least of which is a significant increase in capable military personnel numbers. Unfortunately, running parallel to this is the fact that Western militaries are struggling to recruit members. Worryingly, to quote the Director of the Centre for National Defence, military recruitment ‘is going to become even more difficult’ given that ‘every factor that is predictive of future recruiting success is trending negatively’[21].

This article argues that the cause of the ADF’s recruitment problem can largely be attributed to the expansion of the military industrial complex over the last 20 years. As Australia has followed in the footsteps of the US and stripped its military of all but ‘core’ warfighting roles, it has subsequently created an economy that thrives on qualified, dissatisfied, and disenfranchised ADF members. Firmly entrenched as the ADF’s fifth service, industry will continue to offer better employment alternatives while it maintains a near monopoly on extrinsically motivating current and potential employees. The ADF’s comparative advantage of intrinsic motivation and service will endure through the long term, but such an edge is being eroded through mixed messaging when it comes to domestic-versus-warfighting roles.

To address the recruitment shortfalls that result from the prevalence of the private sector, the ADF needs to address three areas. Firstly, efforts to improve the remuneration and flexibility of ADF employees need to be increased. Current measures will not suffice to both attract and retain the numbers required. While the private sector will always have an advantage in this area, closing the gap to the greatest possible extent minimises the ADF’s most significant weakness. Secondly, there needs to be clear messaging regarding the role of the ADF in domestic humanitarian operations. The discrepancy between what is said (that we are war fighters) and what is being done (non-stop domestic humanitarian deployments) makes private sector employment increasingly attractive for those who want certainty in their purpose. Finally, the ADF needs to seriously consider reabsorbing those support elements which have been progressively privatised throughout the last two decades. If we, as a military, are expected to be prepared for war in the true sense of the word, then a reliance on civilian contractors to provide so many of our basic functions is reckless.

*This article was first published on The Forge*

https://theforge.defence.gov.au/publications/privatisation-and-pitfalls-adf-expansion

Footnotes

1 ‘Donald Rumsfeld September 10, 2001’. 2022. YouTube, https://www.youtube.com/watch?v=MfMjdKElgqY

2 Klein, Naomi. 2010. The Shock Doctrine. Henry Holt and Co, p 263.

3 Joint media release, Prime Minister of Australia and Minister for Defence.’ 2022. Dept of PM & Cabinet and Dept. of Defence. https://www.minister.defence.gov.au/minister/peter-dutton/media-releases/defence-workforce-grow-above-100000.

4 Lisa Visentin and Shane Wright, ‘ADF boost hard to achieve without overhaul of recruitment and retention policies,’ The Sydney Morning Herald, 10 March 2022, https://www.smh.com.au/politics/federal/adf-boost-won-t-be-achieved-without-overhaul-of-recruitment-and-retention-policies-20220310-p5a3bx.html.

5 Greene, Andrew. 2022. ‘Key bureaucrat warns “drums of war are beating” over China expansion’. The New Daily. https://thenewdaily.com.au/news/national/2021/04/27/australia-china-drums-war/.

6 Cherry, Kendra. 2022. ’How Does Extrinsic Motivation Influence Behavior?”. Verywell Mind. https://www.verywellmind.com/what-is-extrinsic-motivation-2795164.

7 ITA Returns of 300% since 01 May 2006. Source: https://www.google.com/finance/quote/ITA:BATS?window=MAX
PPA Returns of 390% since 28 Oct 2005. Source: https://www.google.com/finance/quote/PPA:NYSEARCA?window=MAX
XAR Returns of 350% since September 2011. Source: https://www.google.com/finance/quote/XAR:NYSEARCA?window=MAX

8 Hellyer, Marcus. 2022. ‘External workers behind only army as Defence’s second biggest branch,’ The Strategist. https://www.aspistrategist.org.au/external-workers-behind-only-army-as-defences-second-biggest-branch/

9 Burke, Kate. 2022. ‘House prices: Home values across Australia climbed almost 10 times faster than wages last year”. Sydney Morning Herald, https://www.smh.com.au/property/news/this-graph-shows-why-it-s-so-hard-to-save-a-house-deposit-20220224-p59z6s.html.

10 Chalmers, Stephanie. 2022. ‘Nearly two-thirds of Australians think home ownership won’t be an option for young people as property prices rise.’ ABC News, https://www.abc.net.au/news/2021-06-14/survey-home-ownership-not-an-option-for-most-young-australians/100205244.

11 Forsling, Carl. 2022. ‘Everyone In The Military Will Be Promoted One Time Too Many.’ Task & Purpose. https://taskandpurpose.com/leadership/everyone-in-the-military-will-be-promoted-one-time-too-many-heres-how-to-fix-it/.

12 Knight, Dr Charles. 2022. ‘Managing Expectations of a Bigger Role for the ADF in Responding to Coronavirus.’ Australian Institute of Public Affairs. https://www.internationalaffairs.org.au/australianoutlook/managing-expectations-of-a-bigger-role-for-the-adf-in-responding-to-coronavirus/.

13 Santos-Longhurst, Adrienne. 2022. ‘Intrinsic Motivation Theory: Overview, Factors, and Examples.’ Healthline. https://www.healthline.com/health/intrinsic-motivation#in-practice.

14 ‘Pride Of The Fleet,’ 2022. YouTube, https://www.youtube.com/watch?v=ET8EZBhTpfc.

15 Parnell, Sean. 2022. ‘Defence morale slumps to 38 per cent, with 20 per cent planning to quit,’ Sydney Morning Herald, https://www.smh.com.au/national/defence-morale-slumps-to-38-per-cent-with-20-per-cent-planning-to-quit-20220504-p5aidy.html.

16 Fitzsimmons, Caitlin. 2022. ‘Australia’s version of the “great resignation” revealed as staff swap jobs.’ SMH,https://www.smh.com.au/business/workplace/australia-s-version-of-the-great-resignation-revealed-as-staff-swap-jobs-20211111-p5984f.html.

17 Ryan, Jack. 2022. ‘Can a Results Oriented Work Environment Exist in the ADF?’ Grounded Curiosity. https://groundedcuriosity.com/can-a-results-oriented-work-environment-exist-in-the-adf/#.YkkOgC0RpQI.

18 Department of Defence. 2022. ‘Overview — Department of Defence.’ Department of Defence.

19 Nicholson, Brendan. 2022. ‘US Army Pacific Commander: Next war will be violent, very human, unpredictable and long.’ The Strategist. https://www.aspistrategist.org.au/us-army-pacific-commander-next-war-will-be-violent-very-human-unpredictable-and-long/.

20 Department of Defence. 2022. ‘2020 Defence Strategic Update.’ Department of Defence. p 5.

21 Spoehr, Thomas. 2022. ‘Improving America’s Long-Term Military Recruiting Outlook.’ The Heritage Foundation. https://www.heritage.org/defense/report/improving-americas-long-term-military-recruiting-outlook.