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This is a real privilege for me to be here, and quite an honor to have been invited. I have to tell you there are a number of reasons for me to be intimidated up here. My former boss, Admiral Trost, is in the audience. My predecessor, Admiral Bowman, is in the audience, as is Admiral McKinney. who keeps a good eye on me from the Navy Memorial. I have Carl Schmidt here, who’s straightened me out more than once or twice in several areas of responsibility. Even though I have spent two or three decades in my life as an anti-submariner. I’ve never seen this many submariners in one place. In my career, and some of you have heard me say this before, when I’ve had the great privilege of traveling with Admiral Trost, and Mrs. Pauline Trost, Admiral Trost would introduce himself as a submariner, and I from time to time I would introduce myself as a anti-submariner. Admiral Trost pulled me aside quietly one time and said, “You know, you really ought to introduce yourself as a Marine.” I looked a little perplexed and he said, “because you go around looking for a few good men!” That was pretty good!

Anyway, to get over the intimidation factor, you gave me the courtesy of the longest lead-time I’ve ever had for a speaking engagement. Admiral Cooper, I appreciate it. I’ve had a lot of time to prepare, and my staff to prepare, and so they did. And to borrow a line from Admiral Boorda, they prepared a very nice talk for me, the substance of which was exactly what I would like to address. But I’m not going to do it from the prepared text because, first of all, they are subjects that I am very familiar with, and on the other hand, I don’t want to go over the allotted time here.

I’d like to talk about four things as the post Cold War drawdown comes to an end. And these four things are the things that I am involved with on a daily basis. They are recruiting, enlisted retention, officer retention, and then some issues that mark or are related to what I see as the end of a rather remarkable decade.

If you think for a minute about this decade, 10 years ago the Berlin Wall started to crumble and the Cold War was coming to an
end. At that time the Navy was in the headlines for the Iowa investigation. In fact, we recently had the to-year commemoration of that event. In that decade, it has been pretty turbulent. We had a little bit of an interregnum in terms of the drawdown with Desert Storm, where our efforts were focused somewhere else. But since that time, it’s been quite a cascade from trying to get to the 600 ship Navy, and we never quite got there. The Berlin Wall fell, and all of a sudden we were headed to the Base Force, then the Bottom Up Review Force and then the QDR force. All targeted the end of an era, but we were not quite sure what the next era would be.

From the Navy personnel standpoint, we’ve reached the end of that drawdown. We are now at slightly under 370,000 active duty men and women, which is a significant drawdown from the 600,000 or so that we had when the Berlin Wall started to crumble. We are going to stay at about 370,000 active duty sailors through our program through ’05. We’re talking about that range. It may trickle down a little bit, or it may trickle up a little bit, but this is a steady state opportunity that we have not seen since the beginning of the all volunteer force in 1973 when we were downsizing after the Viet Nam war. We downsized’until we got hollow, the Reagan years of drawing up to the 600 ship Navy never got there, the Berlin Wall fell, and we’ve been drawing down since. Here we are 10 years later.

That’s the drawdown piece of it, but some other things happened. Not only was 1991 the Desert Storm Era, but we also had Tailhook, which got us on the front pages for a different reason . While we were dealing with the repercussions of that, we had the repeal of the combat exclusion law that allowed us to integrate women in much larger numbers into our combats ships and aircraft. These are social kinds of changes that affected a lot of our people policies. At the same time we were in a drawdown that kept getting steeper and steeper, year by year. We had the “don’t ask, don’t tell” thing that we went through. We had hazing policy questions that were raised. All of these things had to be dealt with by the leaders during that 10 year period, all looking for when would this be over. Well, it be over.

From the standpoint of active duty Navy men and women, the drawdown is over … it’s the end of the 10-year drawdown. Now what are we going to come into? We don’t know. Somebody the
other day said we don’t know what this period is. We know it’s post Cold War but we don’t know what it’s pre. We don’t know what it’s in-between. But from the standpoint of military personnel, we know that we are entering the new millennium and at least a few years of a steady state in terms of manpower. That means we’ve got to do some things differently from the way we’ve done them before.

I’ll start with recruiting. As many of you know, we have not made the recruiting goal that we established for ourselves at the beginning of the year, in any year since the drawdown started. For most of those years of the drawdown, that was okay because when we started out, we said this is going to be our goal and we put our resources in place. Then the 600 ship Navy got changed to be the Base Force Navy. The Base Force Navy got changed to the QDR, and the QDR to whatever. We were always able to reduce the number we said we were going to get. As a result of that, we kept reducing our recruiting resources and reducing the number of folks we had to bring into the Navy.

Last year we got caught. We got caught because we had an end strength floor and a number we wanted to meet, but the old downsizing culture of our organization caught up to us. We found that we didn’t have the resources in place at the beginning of the year that we needed to recruit the numbers of folks that we needed. And, oh by the way, for the first time in a long time we couldn’t cut accessions during the year because we’d done too much of that for too long. We missed our recruiting goal by 7000, although we only missed our strength by about 4000. After you do that for a bunch of years, you end up with not very many young people onboard your ships. That’s a problem.

This year, I’m pleased to report that on the enlisted recruiting side we’re going to be able to recruit to numbers that we need. Now how did we do that? We have over 4,800 recruiters in the field today. We started this year with slightly less than 3,300. It was not easy to get that many people in a short period of time out in the recruiting force, but that’s the price of recruiting in this day and age. We doubled our advertising dollars from 35 to 70 million dollars a year. Those dollars are now in our program at about that level through the rest of the program. We are also reopening most of the 200 recruiting stations that we closed in a decade of downsizing. This was one of among many decisions that we made in a downsizing environment when you have a different approach to how you have to sustain a force than you do when you’re at steady state and not looking for opportunities to try to incentivize people to leave. Recruiting today on the enlisted side is expensive, it’s difficult, it’s very challenging, there’s a lot of competition, but we can do it. I don’t lose sleep over it anymore. It’s just a matter of getting the resources right. We offer lots of opportunities for people today, and I think we’ll continue to offer competitive opportunities. It won’t be as cheap as it has in the past, and we will have to keep it resourced like we didn’t have to do in recent years.

On the nuclear side of the house for enlisted, we are doing just fine. We get a tremendous amount of help, I mean this in a very positive and constructive way, from my predecessor, Admiral Bowman, and the entire leadership of the submarine community. I very much appreciate it. I wish the other communities were as far ahead of the problems in terms of recruiting and managing programs. It’s been very gratifying to me because every time we have a problem that comes to my attention, it comes with solutions built in. I’ve been very grateful for that.
On the recruiting side from the submarine standpoint, where we will fall short this year is in officers. The only officer program where we will fall short in recruiting this year will be NUPOC, and those will be the NUPOCs recruited by the recruiting command. We’ve fallen short every year for the last eight years. This year is no exception. We’ll be about two dozen short. Next year we’re more confident that we will be able to make the numbers but we’re working it .all together. Nevertheless, that’s the way it stands today. So, in short, in recruiting, again, expensive, difficult, challenging, doable. Both officer and enlisted.

On the retention side, I do lose sleep. After 10 years of downsizing, most of our men and women in uniform, most of them, have not ever been in a Navy that wasn’t downsizing. It looks sort of like a company going out of business. When you’re in a company going out of business, and you look around on any given day in an economy that has four percent unemployment, you see 16 million employers looking for people to come work for them. Then it’s awfully hard for us to convince our young folks to have trust that we are not going out of business. We are having to examine our policies across the board. On retention, what does it mean when I say I lose sleep over it? I lose sleep over it because I know it’s expensive. I know it’s not just the money, but I know it is also the money. So we are putting some money behind retention. I’ll talk first about enlisted.

Enlisted retention first term is 30 percent, more or less. At a steady state, to sustain our force once we get to the point where we’re shaped properly three or four years from now, we’re going to have to sustain 38 percent, first term retention. So that’s eight percentage points away, or a 25 percent increase, in the retention that we are doing today. You can generalize about eight percentage points to second and third term as well, because we’re also short in second and third term, from what we need to sustain this force. We’re going to have to really work on that.

Some of the policies we put in place got us here. For instance, SRB, which is the Selective Reenlistment Bonus that we offered to our folks. It’s a variable bonus. It can be big bucks, $50,000 or so, for some highly technical skills that we want to reenlist. During the mid to late ’80s, up to 40 percent of all reenlistments were stimulated or associated with an SRB. During the downsizing we were able to turn that valve back and we got down to less than 20 percent of our reenlistments stimulated by SRB. We have a pretty ambitious SRB program in place now, and we will ramp SRB up dramatically over the Navy program to get back up to that 40 percent level. I believe, that that will go a long way when it’s combined with the other retention incentives that are on the Hill, and that are being worked at in the fleet, to keep our enlisted force healthy. We’re going to have to work at it, and do a lot of other things, but the money part of it, I believe will be there.

When we’re talking about what’s on the Hill, I’m not going to get into a lot of detail. There’s a triad on the Hill that looks like both the House and the Senate are going to pass. It’s a pay raise, it’s a pay table reform, and it’s a repeal of the REDUX retirement, or the 40 percent at 20, back to 50 percent. There are some variations in the different proposals on all three pieces of the triad, but we’re fairly confident that all three will be addressed in this session of Congress.

There are a couple of other things that are specifically as important. Bonuses are a lot less money for the Navy, about 40 million dollars a year that we’re looking to plus up. These bonuses are the Selective Reenlistment Bonus plus up, and also the bonuses in our officer programs which are every bit as important as the triad. If we get a 4.4 or 4.8 percent pay raise and pay table reform, and the REDUX repeal, and do not get these bonuses, in my opinion, we will not have done enough to stem the hemorrhage in retention. I believe we have to have the bonuses, and we’ve made that point every time we’ve gone over to the Hill. A bonus for instance for a young Surface Warfare Officer of $50,000 doesn’t sound like much on top of an eight billion dollar triad across the board pay raise, but that $50,000 bucks in the pocket of a Lieutenant is a lot of money. That $50,000 SRB in the pocket of a first class petty officer is a lot of money. So we’ve got to get the money in the right pockets, and that’s why we always say when we’re asked, .,how important is it the triad?” we always say it’s absolutely important, and just as important is that we pass these bonuses that go along with it.

On the officers’ side of retention, I’m not concerned too much across the board, because the data show that our Restricted Line and Staff corps are in pretty good shape. There are a lot of reasons why that might be, maybe related to the culture, maybe their job didn’t change that much, I’m not sure. But the truth is, we’re not having much of a retention problem. Supply Corps a little bit, but the others are fairly healthy. It’s the Unrestricted Line where I lose sleep. We are not where we need to be in submarine officers, in surface officers, in aviation officers, or in special warfare. All of those retention numbers are below what we require. Because of that, we’re going in asking for special bonuses this year on the Hill, ‘including an enhancement in the nuclear officer bonus. We’re confident that will be approved.

We’re going into a ¬∑fundamental revision of the way we pay aviation bonuses, and then we’re proposing two new bonuses, one for surface warfare officers, the first time ever, and one for SEALS, first time ever. These have all been passed by both the personnel committees of the Senate and the House, and they’ll go to conference. We’re confident that we’ll get those out. That will go a long way to addressing the trust factor, because, quite frankly in this day and age, even though they say it’s not the money, we know it’s not just the money, but it’s also the money. How we tell people we value them has a lot to do with how we pay them. We think it’s important that we keep faith with these bonuses. The practical fact of the matter is at this point, the expectations are so high, if we don’t come through, I believe retention will get worse, and not even stay where it is today. Nevertheless, you have to wonder about retention and why it’s the URL that we have the problems with and not the Restricted Line and Staff … it’s something to think about.

I’d like to just mention a few of the other things that either sort of mark the era, or the turning point where we are in the drawdown, or the change or symptoms of the things we want to work on. We’re getting pretty close to the end of the Tailhook era. We will not have any active duty officers that we will be sending forward for confirmation to the Senate, that were .. potentially implicaced by Tailhook”. There were 120 of them, you may know that, and we’re done with the active duty side. No reserves will come up for Senate confirmation until 2005 at the earliest, so we’re pretty much done with this. It’s been a long, long time, but what this means is with that sort of detail out of the way, the certification process going away, it’s now the time, as the Secretary and the CNO have both suggested, that we can open a dialog and speak to the possibility of reconciling the relationship with the Tailhook organization. The pace of that, and how that all takes place is above my paygrade. But it marks the end of an era, a very difficult one for many.

Enlisted advancements are up, a serendipitous outcome of the way we downsize and kept faith with our career force. Our force is slightly misshapen, but the way it’s misshapen means that enlisted advancements will continue to get slightly better over the next several years in the aggregate across enlisted paygrades. We continue to work some of the initiatives that were put in place from our predecessors. Homebasing continues to be a cultural thrust the we push. Sea-shore rotation is something that we continue to work on, trying to get the Navy stabilized from the chaos of the cascade. Our readiness accounts are fully funded. Our PCS account, through 2005, the Navy’s program, is fully funded. Tuition assistance; the TEMDUINS account; our end strength; our Selective Reenlistment Bonus; our Quality of Life accounts; our MWR to DoD staridards; all of these are fully funded across the board through 2005, the end of the FYDP.

I know the Secretary was here yesterday, I know a couple of things he talked about, I don’t know whether he talked about zero defect. There was a zero defect perception out in the fleet. We
have a zero defect mentality. that we have been too tight in terms of zero defects. My diagnosis is that as a result of rebounding from Tailhook, we put in place policies and expectations that we were allowed to execute in a downsizing environment. Our culture is wonderful because it adopts leadership and direction. That was the right thing to do for the time. But like all things, it too should pass. We got to a point where the perception out in the Fleet was that we were too zero defect. Secretary Danzig has made it one of his conscious agenda items to address that mentality, and I can tell you that there is not a zero defect reality out there. There may be some lingering perceptions. But we are moving promotion boards through a lot faster today, and there’s a lot more forgive and forget in the way we’re approaching all of our centrally controlled selection advancement programs.

When I look around at the policies I can find that in the last decade a decision was made to move that policy towards a throwaway environment, or a downsizing environment. I’m talking attrition policies, recruitment policies, early–out policies, admin discharge policies, NJP policies, almost every policy. if you look at it hard you can say, “I bet the background there was that they needed to get smaller and didn’t want to RIF people,” and that’s true. We’re having to go through methodically and think about walking each of those things back.

We have one significant misshape in our force and that’s a divot. We have a big divot in our Unrestricted Line Officer corps. We under accessed in the early 90’s. It was based on good faith expectations of the size of the Navy. It turns out we’re going to be larger than those expectations were able to support. So we under accessed in the early ’90s, about ’93, ’94, ’95. Those were decisions that would have been made 2 to 5 years before that. That applies to aviation, the famous T notch that we have, but also in the other Unrestricted Line communities. So we under-accessed, we are under-retaining, and for one other reason we are going to end up in a couple of years, with a lot less 04s, 05s, and 06s in the Unrestricted Line than we’ll have requirements for. The third reason is a little bit arcane, but I’ll explain it because it’s important. When we downsized from the 600 ship Navy, the battle force came down 40 percent. The infrastructure only came down 19 percent, or about half of that. The way we buy Unrestricted Line Officers, or always have bought them, is that we look at how many we need for Department Head. Then we project the retention to Department Head, and we buy that many billets. Then we figure how many will make it to Department Head, and then when they go ashore, they fill out the infrastructure. Now, our battle force Department Head requirements don’t support that infrastructure that is not proportionately as small as the battle force. We’re going to have a gap to 04, 05, and 06 grades that will get serious in about two years, then it will take about three to four years to work our way through that. These are problematical, if we don’t get our retention up, then that will mean it will be a lot worse than what we are projecting, because we are projecting it at the steady state for retention requirements that we hope we’re going to get by virtue of these bonuses and other kinds of things. That’s a problem for us to deal with.

Beyond that, for the officer’s side, in the longer term we need to think about what it really means to be unrestricted warfare, what it means to be a naval officer, in whatever era it is, after the post Cold War era. There are some cultural things we may want to address. I think in the Navy and the Marine Corps, we had less cultural change to deal with, perhaps than the Air Force and the Army. They are moving more from a garrison type of mentality to expeditionary, but still we have some cultural issues that we need to address.

On the enlisted side, and this is my last comment, the most important thing I think we need to deal with there is our distribution system. Our distribution system, still, after all these years, does not have a placement function in place. We don’t do individualized career planning in the distribution process for our enlisted sailors. We need over time to build a process to treat our enlisted sailors like the individual professionals they are instead of the commodities that we’ve been treating them like when there was a conscription force. We’ve been in the all volunteer force now for 25 years and it’s time to model our programs to treat everybody better.

That brings me now to the end of my prepared remarks, again I thank you very much for being here.

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