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Performance Improvement, vol. 49, no. 6, July 2010©2010 International Society for Performance Improvement

Published online in Wiley InterScience (www.interscience.wiley.com) • DOI: 10.1002/pfi.20154

ORGANIZATIONAL REALIGNMENT CASESTUDY: ADDING VALUE BY ANALYZING PERFORMANCE

Aaron U. Bolin, CPT, PhD

The U.S. Navy is a global organization with an annual budget in excess of $140 billion and

employs roughly 330,000 sailors. A multilevel adaptation of the human performance model

was applied to look across organizations for functional areas where efficiencies could be

gained by standardizing business practices and cooperating across organizational boundaries.

The resulting 17-to-1 return on investment is attributed to the process of working through the

model with a team of executive stakeholders.

THE U.S. NAVY IS a global organization with a militaryworkforce of roughly 330,000 and a budget in excess of$140 billion. To manage the recruiting, assignment,budgeting, and career development of this military work-force, the Navy relies on a large network of semiau-tonomous military organizations that function under thecentral leadership of the Bureau of Naval Personnel(BUPERS). Although this network of military organiza-tions shares a common strategic vision and executive-level leadership, each component organization isself-contained in the sense of having a unique mission,budget, workforce, and support infrastructure.

At the beginning of the 2010 budget planning cycle,BUPERS was exploring options for filling a shortfall that was expected to grow to $7 billion over 5 years. Prioryears of personnel and budget cuts had trimmed thecapacity of the component organizations to the point thatfurther cuts could force unacceptable drops in ser-vice quality levels. As an alternative to further cuts within each component organization, BUPERS leadershipdirected component organizations to look across theorganizational boundaries for areas where efficienciescould be gained by standardizing business practices andsharing resources.

As a portion of the planned budget reductions,BUPERS leadership directed four colocated componentorganizations to study the feasibility of realigning tomerge common business operations. These organizationsare responsible for (1) military recruiting; (2) personnelassignments, promotions, retention, and career manage-ment; (3) manpower requirements, standards, and valida-tion; (4) and personnel research and development.BUPERS leadership specified the following business func-tions to study for possible merger: financial management,human resources, administration, logistics/facilities,training, public affairs, inspector general, equal employ-ment office, legislative affairs, safety and security, andprinting and publications. Altogether, the plan called fora review of 327 positions (some of which were vacant)with the initial goal of reducing the total number of posi-tions by 10% while maintaining service quality levels (seeTable 1).

BUSINESS ANALYSISOn the surface, a blanket merger of these 11 functionalareas made perfect sense. All four organizations werecolocated and shared a common parent organization andfunding source. Some of the positions to be studied werevacant at the time, and BUPERS leadership projected thata 10% reduction in these 11 support functions would save$16.5 million per year (or $82.9 million over 5 years).

The views expressed in this article belong solely to the author. Theydo not reflect the official position of the U.S. government, theDepartment of Defense, or the Navy.

10 www.ispi.org • DOI: 10.1002/pfi • JULY 2010

Furthermore, organizational governance policies in theNavy flow downhill; all four organizations shared a com-mon core of BUPERS process, policy, and procedure.

PERFORMANCE ANALYSISPerformer groups in this study occurred at multiple levelsof analysis. Because we planned to consider performanceand results at multiple levels, we selected Kaufman’s MegaThinking model (Kaufman, 2005) as a way to structureour analytical approach. In this model, performance gapscascade down from the highest level of analysis understudy. At the highest level (labeled “outcomes” in the

Kaufman model), BUPERS anticipated a performancegap of $7 billion to accrue over 5 years: the cost of provid-ing adequate manpower to the Navy would exceed theprice that client organizations were willing to pay. Inaddition to other cost-saving measures, BUPERS plannedto reduce its performance gap by eliminating excesscapacity in its component organizations. As a result, thecomponent organizations shared a collective perfor-mance gap of $16.5 million per year at the output level of analysis. To maintain the same output while reducingthe cost, the functional areas in each organization at theproducts level of analysis would need to address theirportion of the performance gap by reducing labor by10%. The individual employees, in turn, would need toaddress their portion of the performance gap at theprocess level of analysis by maintaining service qualitylevels through improved efficiency (see Table 2).

CAUSE ANALYSISBecause of the semiautonomous nature of the four com-ponent organizations, the direction from the parent orga-nization to study common services for possible mergerwas subject to interpretation. As the study lead, I organ-ized a team of stakeholders comprising executives fromeach of the four component organizations to prepare acollective response. Our first meeting revealed two keypieces of information that drove the remainder of thestudy process. First, two organizations intended to resistmerger of common services based on a subjective sensethat a merger would degrade mission focus. Second, noneof the executives on the stakeholder team knew enoughabout operations inside all four organizations to articu-late the potential benefits and barriers of merging com-mon services.

After some negotiation, the stakeholders agreed to thefollowing study format. Using a series of structured work-shops specific to each functional area with representativesfrom each organization, I would gather informationabout the potential barriers and benefits of a merger.During the workshops, I would also capture informationabout efficiencies that could be gained by collaboratingacross organizational boundaries instead of mergingcommon services. After I gathered the information, the

TABLE 1

POSITIONS UNDER STUDY

TOTAL REDUCTIONFUNCTIONAL AREA POSITIONS GOAL

Financial Management 73 7

Human Resources 51 5

Administration 48 5

Logistics/Facilities 40 4

Training 40 4

Public Affairs 20 2

Inspector General 17 2

Equal Employment Office 14 1

Legislative Affairs 11 1

Safety and Security 8 1

Printing and Publications 5 1

Total 327 33

Performer groups in thisstudy occurred at multiplelevels of analysis.

Performance Improvement • Volume 49 • Number 6 • DOI: 10.1002/pfi 11

executive stakeholders would reconvene and use it tomake fact-based decisions regarding possible merger ofeach functional area. Issues regarding ownership andmanagement of any merged resources would be workedout separately; concerns about ownership of mergedresources would not be sufficient to prevent a merger. Ifthe executive stakeholders decided against merger for aparticular area, then other cost-savings methods wouldbe applied in that area automatically (see Table 3).

The goal at this level of the analysis was to provideobjective information that stakeholders could use toevaluate the feasibility of a merger for each functionalarea. In addition to collecting information from work-

shop participants about processes and products, I gath-ered information from the shared manpower data sys-tems, organizational manuals, and interviews to ensurethat I had been thorough and to help me build confi-dence with my executive stakeholder clients. I was alsoforming hypotheses about the root causes of the perfor-mance gaps uncovered at the output, products, andprocess levels of analysis.

Table 4 shows the summary results of 11 workshops;we did not hold a workshop for the administration func-tional area because the executive stakeholders removedthis area from consideration during the initial stages of the study. In the same way, the stakeholders added pur-chasing and contracts to the list of functional areas toconsider for merger. Stakeholders received detailed resultsfor each functional area and had them available during allsubsequent discussions. The initial assessment of the dataseemed to support higher-level direction: Safety andSecurity was the only functional area with significantcompatibility barriers. In the detailed results, the compat-ibility barrier for Safety and Security turned out to be anorganization-level policy specifying procedures for han-dling classified materials. That is, it was within the powerof the stakeholders to adjust the policy to cover all fourorganizations.

The next stage of the study process consisted primar-ily of vigorous debate among the stakeholders. The goalat this stage of the project was to reach a consensus onthe future direction for each functional area. My work-ing hypothesis regarding the root cause of the perfor-mance gap at the output level of analysis was thatstakeholders lacked sufficient information to makeeffective decisions regarding opportunities to reducecosts. When presented with detailed information aboutthe feasibility of merging like functions across organiza-tional boundaries, I expected the executive stakeholderswould make unanimous decisions. That is, we could notaddress the performance gaps at lower levels of analysis(product and process) effectively without commitment

TABLE 2

PERFORMER GROUPS AND PERFORMANCEGAPS

KAUFMAN’S STUDYORGANIZATIONAL PERFORMER PERFORMANCEELEMENT GROUPS GAP

Outcomes BUPERS $7 billion over 5 years

Outputs Component $16.5 million perorganizations year

Products Functional 10% labor areas

Processes Employees To be determined

Inputs NA To be determined

TABLE 3 EXECUTIVE STAKEHOLDER DECISION MATRIX

CROSS-ORGANIZATION FUNCTIONAL COMPATIBILITY

LOW HIGH

Cost and Efficiency OpportunitySmall Organization-specific process improvement Cross-organizational process improvement

Large Focused collaboration and cooperation Merger

12 www.ispi.org • DOI: 10.1002/pfi • JULY 2010

from the stakeholders on the organizational alignmentof those functional areas.

However, the stakeholders did not reach a consensuson the future direction for any of the 11 functional areas.To avoid deadlock, the stakeholders who favored mergeryielded to those who favored other cost-savings methods.As a result, I was prevented from addressing performancegaps at lower levels of analysis.

INTERVENTION SELECTION ANDIMPLEMENTATIONAlthough we did not reach an agreement to merge func-tional areas, we still had hundreds of suggestions from theworkshop participants on ways to improve efficiency andreduce costs. The executive stakeholders culled this list

down to 11 items for immediate action. These 11 itemsbecame the basis for an implementation plan that con-sisted of task assignments, milestones, schedule statuschecks, and due dates. This implementation planincluded items such as reclassifying positions, developingservice agreements among the organizations, changingshared policy, and leveraging shared purchasing power tolower costs. In addition, the executive stakeholders com-missioned a series of follow-up process improvementefforts.

EVALUATION OF RESULTSAltogether, the realignment project was not successfulwhen viewed in the context of the original performancegap. The elimination of 33 positions for a savings of $16.5

TABLE 4 WORKSHOP DATA SUMMARY

FUNCTIONAL AREA(NUMBER IN PARENTHESIS IS INITIAL POSITION COUNT)

FINANCIAL HUMAN INSPECTORMANAGEMENT RESOURCES LOGISTICS GENERAL PUBLIC AFFAIRS

(N = 73) (N = 51) (N = 40) (N = 17) (N = 20)

1. Positions 75 38 32 23 19

2. Vacancies 14 4 6 11 2

3. Supervisors 13 8 5 4 2

4. Current Performance +1.4 +2 +1 +2 +1.4

5. Product Compatibility +2 +2 +2 +1 +1

6. IT System Compatibility +2 +1 +2 +1 +1

7. Governance Compatibility +2 +2 +2 +2 +2

8. Task Compatibility +1 +1 +1 +1 0

Note. The numerical ratings for rows 4 through 8 reflect a summative judgment of the workshop participants. The scale for each item runs from +2, which indicates a

Performance Improvement • Volume 49 • Number 6 • DOI: 10.1002/pfi 13

million did not occur, and all four component organiza-tions continue to maintain distinct functional areas.Furthermore, the hypothesis that executive stakeholderswould reach cost-savings consensus when presented withadequate information was rejected.

Nevertheless, the project was a resounding successwhen measured against other criteria. The one-timeproject cost was approximately $20,000, mostly in theform of salaries for workshop participants, executivestakeholders, and performance consultants. By the timethe implementation plan was fully executed, the projectreported a $367,000 return in value to the organizations,with much of this value reoccurring annually in futurebudget years (for a 17-to-1 return on investment). Otherinfluences contributing to this financial return were notfactored in. Finally, the intangible value of establishing a

vehicle for shared management of resources and the sav-ings that will result from process improvement effortshas not yet been accounted for in the annual valuereturned to the organizations.

CONCLUSIONThe application of the human performance improvement(ASTD, 2000) model at the output level of Kaufman’s(2005) Mega Thinking model was effective in reducingthe performance gap in the U.S. Navy. In this case, theperformance gap was well defined and easily demon-strated using actual budget planning data. The intricaciesof dealing with performer groups at multiple cascadinglevels of analysis prevented the organization from fullyclosing the performance gaps. However, this project

FUNCTIONAL AREA(NUMBER IN PARENTHESIS IS INITIAL POSITION COUNT)

PURCHASING EQUALSAFETY AND AND LEGISLATIVE PRINTING AND EMPLOYMENT

TRAINING SECURITY CONTRACTS AFFAIRS PUBLICATIONS OFFICE(N = 40) (N = 8) (N = 0) (N = 11) (N = 5) (N = 14)

10 9 5 4 3 1

0 0 0 0 0 0

1 1 1 2 0 0

+1.8 +1 +1 +2 +1 +2

+2 +1 +2 +2 +1 +2

+2 +2 +2 +2 +2 +2

+2 (–1) +2 +2 +2 0

+2 0 +1 0 0 +1

highly favorable situation for merger, to –2, which indicates a highly unfavorable situation for merger.

14 www.ispi.org • DOI: 10.1002/pfi • JULY 2010

demonstrated conclusively that performance analysis canreturn value to an organization even without directlyaddressing the performance gaps. By systematically work-ing through a structured analytical process to establish afact-based core of information from which to reason, Iprovided a team of executive stakeholders the tools togenerate a 17-to-1 return on investment with minimalinvestment.

References

American Society for Training and Development. (2000).Human performance improvement model. Alexandria, VA:Author.

Kaufman, R. (2005). Defining and delivering measurablevalue: A Mega thinking and planning primer. PerformanceImprovement Quarterly, 18(3), 6–16.

AARON U. BOLIN, CPT, PhD, is a management analyst with the U.S. Navy Bureau of Personnel. Inaddition to leading numerous performance improvement projects, he remains active in his profes-sional community by regularly consulting on performance issues, presenting at professional confer-ences, and publishing. He received his PhD in industrial/organizational psychology from NorthernIllinois University. He welcomes comments, questions, and collaboration. He may be reached ataaron@aaronbolin.com.