MoD needs plan to plug skill gaps and face emerging threats

REPORT SUMMARY

In January 2018, the Armed Forces had the largest shortfall of regulars for many years. It has skill shortages in over 100 critical trades.

This is a longstanding problem and the Ministry of Defence does not expect to close the shortfall of 8,200 regulars until 2022 at the earliest.

So far, the Department states that it has managed to deliver defence operations by prioritising its commitments and placing additional demands on regulars.

But this approach is not sustainable in the long-term, particularly as the nature of warfare is evolving rapidly, and the Department increasingly needs more specialist technical and digital skills to respond to threats to national security.

It currently has skill shortages in critical trades, including a 23% shortfall in pilot trades; a 26% shortfall in intelligence analyst trades; and a 17% shortfall in engineers.

The Department has not developed a coherent plan for closing the existing skill gaps and securing the new skills that it will need. It has relied too much on long-established and conservative approaches, and has been slow to respond to the changing external environment. 

Its initiatives to improve recruitment have been small-scale and piecemeal, and the changes to regulars’ terms and conditions have not yet helped retention.

The Department needs to: develop and implement a strategy to close existing skill gaps and secure the new skills that it needs; make better use of the extensive data it collects to understand the causes of shortfalls in critical trades; and exploit more innovative approaches to recruiting and retaining people with specialist skills.

COMMENT FROM PAC CHAIR MEG HILLIER MP

“The Government’s ‘make do and mend’ approach to staffing its defence commitments cannot continue.

“Muddling through is unsustainable – a point underlined by the fact that twice as many Forces regulars describe morale as ‘low’ than did so at the start of the decade.

“The MoD must ensure the Armed Forces have the skilled personnel they need to tackle established and emerging threats to national security.

“A creative, effective workforce strategy is long overdue but will be vital if the stresses of today are not to become the crises of tomorrow.”

CONCLUSIONS AND RECOMMENDATIONS

The Department does not have a clear view on how it will secure and retain the skills it needs in the future. As part of the Modernising Defence Programme review now under way, the Department is assessing the changing demands of modern warfare and the need to enhance its skills in technical and digital areas, including cyber specialists. The new demands are likely to add to the pressure to increase the strength of trades that currently have shortfalls. For example, in April 2017, the Department already had a 26% shortfall of regulars in its Intelligence Analyst trades. While the Department states that it has so far managed to deliver its defence tasks, the existing skill shortages and new requirements create potential operational risks if the Department needs to ‘scale-up’ the Armed Forces at pace. The Department has not developed a coherent plan to close the shortfalls and respond to new requirements, or undertaken a strategic analysis of its ability to attract and keep the skilled personnel it needs. A challenging external environment, including national skill shortages in areas such as engineering, means that the Department faces strong competition from other government bodies and the private sector to recruit specialist skills.  There could also be an impact on the Armed Forces should Brexit further increase demand for scarce skills in the UK.

Recommendation: Following publication of the Modernising Defence Programme in Summer 2018, the Department should develop and implement a workforce strategy to close existing skill gaps and secure the new skills that it needs. This should include an assessment of its ability to compete in recruitment markets for more specialist skills, particularly in the light of the UK’s exit from the European Union.

The Department has an inadequate understanding of how Commands use their workforce budgets and whether they make informed investment decisions. The Royal Navy, Army and Royal Air Force (the Commands) have flexibility over the use of their workforce budgets – funding for pay, recruitment and training – to deliver agreed defence tasks. The Commands have each had a shortfall of regulars for many years, and so they have been able to re-allocate some of their workforce budgets for other purposes, such as equipment maintenance. The Department’s Head Office estimates that Commands did not use £261 million of their allocated workforce budgets in 2017-18, but does not know how else this funding was used. This lack of visibility limits Head Office’s ability to understand the impact of Command underspends on longer-term skill development, or to consider whether the Commands are making informed investment decisions; for example, around the level of their expenditure on marketing and training, or use of recruitment or retention payments. As the Department has to fund pay increases or financial incentives from within the Defence budget, a better understanding would enable a fuller assessment of the trade-offs.

Recommendation: The Department’s Head Office should look closely at Commands’ use of workforce-related funding, including expenditure on marketing, recruitment and training. It should establish a bi-annual process to review – with Commands – how workforce funding is being used, learn from best practice and ensure Commands are making informed investment decisions to develop the skills they need in the future.

The Department has not done enough to understand fully the causes or impacts of skills gaps in critical trades. In April 2017, the Department had 102 trades with insufficient numbers of skilled personnel available to fulfil defence tasks without placing additional demands on regulars already in post. In these 102 trades, the aggregate number of regulars was 18% below the requirement. This included a 23% shortfall in pilot trades; a 26% shortfall in intelligence analyst trades; and a 17% shortfall in engineers. As a result, the Commands have to cancel leave or training to maintain operations, potentially reducing morale and making regulars less willing to remain in the Armed Forces. The level of ‘voluntary outflow’ in these trades was often higher than the overall rate for the Armed Forces; for example, five trades had a voluntary outflow in excess of 15% in the 12 months to December 2017.  More generally, morale has also worsened, with 67% of regulars describing it as ‘low’ in 2018 compared to 33% in 2010. The Department understands the main reasons why people leave the Armed Forces, but has not yet systematically assessed its data to understand fully whether there are specific issues in those trades with more significant shortfalls. There is no mandatory requirement to complete exit interviews, and the data is too generalised to provide senior management with a timely and detailed view on specific trades. The Department has begun to explore the potential to make greater use of data analytics, but needs to do more.

Recommendations:

The Department should write to the Committee by December 2018 to explain how it is systematically exploiting its data to analyse the causes of shortfalls in pinch-point trades and better understand the strain its demands are placing on regulars.

It should develop a more structured approach to exit interviews, which should be mandatory, including proper analysis of the data collected. It should also maintain a database of regulars with key skills who have left in order to make it easier to reconnect.

The Department’s Head Office lacks the powers it needs to drive a strategic approach to workforce planning and tackle cross-Command shortfalls. Under the Department’s delegated model, the Chief of Defence People (CDP) role does not have the authority to direct Commands or tackle workforce capability issues that require a cross-Command or longer-term response. The Department has not assessed whether its existing workforce policies will enable it to meet the future demand for new skills, or fully evaluated the impact on the retention of regulars of the workforce change programmes, which have been underway since 2010. This has limited its ability to tackle enduring and cross-cutting skill shortages, and develop the skills it will need to meet its future operational demands. As part of the Modernising Defence Programme, the Department is looking to enhance the CDP’s role to provide more authority over workforce policy, greater standardisation across Commands, and improve Head Office’s oversight.

Recommendation: The Department should write to the Committee by December 2018 to explain what it has done to increase the authority and powers of the Chief of Defence People, and develop a more strategic approach to workforce planning between the Department’s Head Office and the Commands.

The Department has not thought radically enough about how to adapt its existing approach to find innovative ways of recruiting people with specialist skills.The Department has relied primarily on its traditional ‘base-fed’ workforce model whereby the Commands recruit regulars at the lowest ranks and provide training to develop their skills and experience over time. Although there will always be a need for the ‘base-fed’ approach, it can take many years to develop the skills that are needed. Commands have significant shortages in critical trades and thousands of vacant posts, and do not expect to close the shortfall of regulars until at least 2022. The Commands have introduced a range of initiatives to help address the shortfalls, and the Department is looking, for example, to develop a new career structure for cyber specialists. But these initiatives have been small-scale or are still under development; for example, the Department has recruited only 50 people through its ‘lateral entry’ (direct recruitment into more senior roles) schemes. The Department’s Head Office has not properly evaluated the success of Commands’ initiatives or explored the potential to roll them out more widely and at pace. The Department accepts the need to explore more innovative ways of attracting recruits and to expand initiatives, such as lateral entry, across more trades. It also recognises the need to change the culture within the Armed Forces to encourage the adoption of more radical solutions.

Recommendation: The Department should urgently assess the potential to expand Commands’ innovative approaches to recruitment and retention, including the use of financial incentives, flexing entry requirements and the re-designation of roles. It should also examine how to overcome procedural barriers to increase the speed at which it can roll-out initiatives when they prove successful. The Department should write to the Committee by December 2018 with an update on its approach.

In a rapidly changing world, the Department has not sufficiently adapted its recruitment processes to engage effectively with different groups in society. The Commands have missed their recruitment targets for the last three years. In aggregate, in 2016-17, they recruited 4,200 regulars fewer than their annual targets. It routinely takes six to nine months to complete the recruitment process, which results in people dropping out and delays in getting new recruits into the Armed Forces. The Secretary of State has recently set a target to reduce the time to three months. The Department is also missing its targets for recruiting women, and people from Black, Asian and Minority Ethnic (BAME) communities. In the 12 months to September 2017, 12.2% of the intake was female, compared to a target of 15%, and 9.2% of recruits were from BAME communities, compared to a 10% target. These targets are also only for new recruits, rather than for actual representation across the Armed Forces. The Department has undertaken many initiatives to generate interest in a career in the Armed Forces. For example, it takes part in the STEM engagement scheme with other government departments and works with schools and cadets. However, it could not identify the level of investment in these recruitment activities, and had not assessed the potential benefits of its approaches to targeting different sections of society or people with the skills it needs.

Recommendation: The Department should ensure that its skills strategy sets out a credible approach to increasing interest in a career in the Armed Forces from among a broader base of society. This should also include a communications plan - based on research - to generate interest from more diverse groups in society and from among those who have previously served in the Armed Forces.