2. Workforce recruiting and retention

Overview

2.1The Government has directed Defence to grow its workforce in response to the changing strategic circumstances. The Committee acknowledged the current geo-political context and how that has informed the requirement for the growth in personnel numbers over the forward estimates.

2.2This chapter analyses Defence’s workforce health and associated pressures, ongoing and future recruiting and retention initiatives, and organisational structural change to improve its personnel system. Concerningly, Defence is currently experiencing significant challenges with its ability to manage its workforce; therefore, immediate action is required to reverse this trend.

2.3The Committee received evidence outlining historical and contemporary departmental workforce statistics. The Committee heard from Defence and several academics on potential causal factors and the importance of mitigation strategies that take into consideration personnel shortages at key rank levels across several specialisations.

2.4The Committee concentrated its discussions and questioning on Defence and academic analysis as to why workforce pressures existed and the relevant initiatives that Defence needs to consider in the short to mid-term. This included human-based factors, incentives, survey data, future recruiting and retention initiatives, and specific workforce requirements.

2.5Finally, the Committee was provided additional context from Defence regarding a change to its organisational structure by creating a Chief of Personnel that will lead the ADF personnel system. The Committee reviewed the change in portfolios between this newly created position, the Vice Chief of the Defence Force (VCDF), and the Deputy Secretary Defence People Group.

Strategic context

2.6Defence must be able to respond to emerging or real time threats when ordered by the Government of the day. The challenge is to ensure the Government has all the available resources and means to understand the complexities of the current and future operating environment and how that informs policy and strategic direction regarding force posture, forging and strengthening existing alliances, as well as enhancements to deterrence strategies against potential adversaries.

2.7Central to the achievement of national strategy is people. It is critical that Defence has a highly trained, capable, and well-resourced workforce ready to execute the Government’s decisions in the pursuit of national interests at home and abroad. This holds relevance in the current global context noting strategic competition is in its most active phase since the end of World War II.

2.8Defence acknowledged that ‘immediate action is required to stabilise the current workforce and set conditions for growth to achieve the required capability outcomes’.[1] This included the requirement to review the outputs from the 2020 Force Structure Plan, the trilateral security partnership between Australia, the United Kingdom and the United States (AUKUS), and the recently released Defence Strategic Review (DSR) outcomes.[2]

2.9The 2020 Force Structure Plan detailed the Government’s intentions for new and adjusted ADF capability investments to implement the new strategic objectives contained within the 2020 Defence Strategic Update. The 2020 Defence Strategic Update and the 2020 Force Structure Plan will seek to ensure that Defence can respond to emerging threats and challenges.[3]

2.10The AUKUS trilateral security partnership enables and supports ‘Australia’s development of the infrastructure, technical capabilities, industry, and human capital necessary to produce, maintain, operate, and steward a sovereign fleet of conventionally armed, nuclear-powered submarines’.[4]

2.11The DSR considered the priority of investment in Defence capabilities and assessed the ADF’s structure, posture, and preparedness to meet the nation’s security challenges over the decade and beyond. The DSR provided a framework to ensure Defence’s capability and force structure ‘is fit for purpose, affordable, and delivers the greatest return on investment’.[5]

2.12The evolving strategic environment demands a proactive and effective recruiting and retention workforce strategy across Defence. This holds the same level of importance as any significant capability investment and should be appropriately nuanced across the five recognised operational domains. The force posture requirements as outlined in the DSR will be realised by possessing a force that is ‘fit for purpose’ and supported by a ‘compelling employee value proposition’.[6]

Workforce health and pressures

2.13Defence is not immune from the recruiting challenges associated with a competitive job market coupled with low unemployment. There have been strong workforce pressures outside of Defence, in areas that are vital for DSR capability realisation requirements, including: engineering, science, programming, mathematics, and statistics occupations.

2.14Defence acknowledged the requirement for immediate action in both competitiveness to recruit, and incentives to retain serving personnel.[7] Defence submitted evidence that demonstrated a departmental-wide underperformance in recruiting and retention targets for financial year (FY) 2021/22.

The ADF Average Funded Strength guidance was 61,468. The ADF achieved an Average Funded Strength of 59,803, which was 1,665 (2.7%) below guidance. For FY22/23, the ADF Average Funded Strength guidance is 62,063, which is 595 higher than FY21/22. Therefore, at the start of FY22/23, the ADF needed to grow by 2260 to return to guidance. As of 01 Jun 2023, the ADF is forecasting to achieve 58,584 Average Funded Strength, which is 3,479 (or 5.6%) below the guidance of 62,063.[8]

2.15Defence’s submission articulated that recent workforce shortages have been compounded by lower than planned recruiting achievement. Defence forecasted it will achieve 72.8 per cent of the FY22/23 ADF enlistment target. This is significantly lower than what is required to offset the separation rates noting ‘the ADF separation rate is 11.3 per cent (equating to around 6600 personnel), and the Australian Public Service (APS) separation rate is 12.8 per cent’.[9]

2.16Defence classified 42 workforce categories and occupations as critical in 2023, an increase of 18 from 2022. Defence explained that of the 42 workforce categories, 25 are ADF categories, and 17 are APS occupations. Defence defines a critical classification as a ‘workforce risk that could limit options available to achieve the Defence mission’.[10] The identification of critical categories and occupations allows focused effort to remediate those areas of the ADF and APS deemed most critical to Defence.[11]

2.17The Australian Strategic Policy Institute (ASPI) noted the potential impact on recruitment in FY21/22 was due to the closure of recruitment centres due to COVID-19 protocols. ASPI commented that Defence consistently underperforms in recruitment targets including specialist areas of science, technology, engineering, and mathematics, as well as specialised professions and trade. ASPI highlighted that for Defence to grow by 30% by 2040, this equates to rising targets year on year.[12]

2.18The ADF has received sustained commitments to domestic responses since COVID-19 and has continued to assist the Government with disaster management for floods and fire in 2022 and 2023. This resulted in concurrency pressures at the same time the department was experiencing long-term workforce shortages at specific rank levels. The natural consequence is that it leads to sustainability pressures while the ADF is attempting to grow its workforce.[13]

2.19Dr Andrew Dowse from RAND Australia noted the trend that all three services have experienced an increase in involuntary separations. These are a result of medical reasons and/or suitability for continued service. While this may be reflective of evolving standards (increasing or decreasing), the reality is this will continue to be an important factor when considering pressures pertaining to retention. Further consideration is warranted as to whether the employment classification architecture can be flexible enough to accommodate specific individuals with desired skills sets.[14]

Recruiting and retention analysis

2.20The ability to recruit and retain the right personnel remains a central tenant of any workforce strategy. In the context of Defence, adjustments to current processes as well as modernising personnel strategies have been acknowledged by the department and notable academics.

2.21Defence will be required to make deliberate decisions regarding the reality of its future workforce. ASPI recommended a departmental structural review that takes into consideration strategic guidance from the 2020 Force Structure Plan, the DSR recommendations, and how that translates to forecasted growth. ASPI suggested this may support Defence refining its prioritisation of personnel asset against directed workforce requirements.[15]

2.22Dr Dowse proposed that while workforce health statistics may focus efforts on recruitment, it must equally attend to the high separation rates. He explained that ‘even if recruitment activities can exceed targets, there are constraints and lead times associated with the training pipeline, and with increased separation representing potential losses in intellectual capital and increased costs’.[16]

2.23Growth of specialist areas requires Defence to adjust now in preparation for the desired future workforce. Dr Dowse referenced the requirement to actively prepare for future workforce priority areas based on the evolving operating environment. This included robotics and autonomous systems, as well as cyber and space. Additionally, Dr Dowse noted the importance of reviewing areas and capabilities that could be undertaken by the wider Defence enterprise as opposed to the ADF.[17]

2.24The Government endorsed DSR recommendation calls for a comprehensive strategic review of the ADF Reserves, including consideration of previous programs such as the Ready Reserve Scheme. ASPI proposed that Defence should expand their approach in their efforts to recruit and retain personnel. This affords an opportunity to enhance additional reservist capacity, notably in the Navy and Air Force. Increasing the number of civilian reservists would not only bolster overall workforce strength, but also support mobilisation requirements for conflict or national crises.[18]

2.25Defence’s recruiting and retention initiatives are underpinned by an enterprise-level Employee Value Proposition Framework. The purpose of this is to help personnel understand the value of their service as well as providing detail on pay and financial benefits, work purpose, workplace experience, ways of working, career and personal development, and wellbeing and family support. In addition, Defence has undertaken a partnership with Adecco recruiting services to enhance recruiting and retention efforts.[19]

2.26RAND Australia commented on the importance of Defence understanding the motivations of younger generations to be successful in meeting future recruiting targets. Dr Dowse’s analysis of extrinsic and intrinsic factors suggested that:

Defence arguably has historically relied on intrinsic factors such as accomplishment and pride in serving the nation; however, this may not be enough if personnel find themselves undertaking duties they did not expect, or if the duties they expected to undertake failed to provide a sense of accomplishment.[20]

2.27Major General Wade Stothart, Head People Capability, referenced Defence’s active interest in the cohort of 17–24-year-olds and three specific offers that are positively resonating despite challenging recruiting circumstances.

• Army Reserve recruiting. Trend analysis is reflecting positive returns which is potentially attributed to the extensive commitment of the ADF in local communities in response to domestic operations.
• ADF Gap-year program. This initiative provides an opportunity for school leavers to be part of an intense and limited commitment that is usually done while career options are being explored by the participant. At the completion of that year, many have either transferred to full-time service or remained in the reserves.
• Defence Force Academy. This offer provides world-class training and education in leadership and academics, as well as the promise of a great employee package inclusive of an undergraduate degree.[21]
  28. Research conducted by Defence indicated there was significant interest in the younger generation to serve; however, the challenge for the ADF was to remain competitive noting universities and firms in the civilian sector are offering placements as early as the end of year 10 and into Year 11.[22] This reinforces the importance of the school cadet program.

Exit survey data

2.29Exit data via survey or equivalent mechanisms provides an opportunity to capture the lived experience of members that have either decided to voluntarily separate or involuntarily separate, due to medical and/or other administrative reasons. The information gained can be used to support analysis of the current organisational climate as well as informing personnel policy.

2.30Defence explained the exit survey is voluntary, however, they encourage members that are separating to provide feedback.

Defence respects members and employee’s rights under the National Statement on the Ethical Conduct of Human Research (2019) to choose whether to participate in organisational research. Mandatory completion can reduce the validity of the data; however, Defence continues to encourage completion and ADF members are invited to provide feedback on their service through the transition process.[23]

2.31Defence provided a summary of captured exit data which provides useful insights into current organisational and personnel pressures. From an ADF perspective, family circumstances continued to be a prevalent reason as to why members separated from Defence. This includes stability for children, schooling, spouse employment, connections to extended family, as well as considerations pertaining to cost of living pressures.[24]

2.32Employees within the APS experience similar issues to that of uniformed personnel; however, there are differences. Evidence suggested that remuneration is increasingly becoming a key consideration in terms of retention, as well as professional development and learning opportunities. APS do not have the same pressures that ADF personnel have in terms of routine posting cycles and the consistent disruption to families.[25]

2.33Data is captured through ‘YourSay’ and via the census. Most of the information gained via this mechanism correlates with the exit survey; however, there are subtle differences. Key results from the census included remuneration, workplace experience, feeling valued, and the family unit as key considerations. Evidence received by the Committee suggested remuneration is a lower priority to family needs/requirements; therefore, ensuring that a career in Defence can be pursued while healthily maintaining a family unit remains a key consideration for many serving personnel.[26]

Recruiting and Retention Tiger Team

2.34The Recruiting and Retention Tiger Team (Team) was established on 12 April 2022. The Secretary and CDF assigned it a mandate to identify ways the department was going to respond to ongoing workforce challenges. This team took into consideration costed initiatives as well as identifying common themes that were potentially impeding recruiting and retention efforts.[27]

2.35The Recruiting and Retention Team identified five contributing factors to Defence recruiting and retention challenges, including:

• Slow and cumbersome APS and ADF recruiting processes
• Stressed workforce driven by workforce shortages and sustained high tempo
• Unfulfilled needs and expectations of a changing demographic
• Poorly communicated employee value propositions
• A complex workforce system that lacks the resources, agility, and flexibility to keep pace with a more dynamic and competitive labour market.[28]
  36. The team identified six high priority initiatives, including: ‘tempo and growth management; enhanced and accelerated ADF recruitment; enhanced and accelerated APS recruitment; accelerated review of ADF pay and allowances; accelerated review of APS remuneration; and significantly uplifted Defence public communications’.[29]
  37. In October 2019, the ADF Employment Offer Modernisation Program commenced to modernise and simplify the ADF employment offer. The ADF employment offer is being reviewed across three work streams: allowances, housing, and member categorisation.[30]

Submarine workforce requirements

2.38Defence articulated the challenges with recruiting and retention within its submariner workforce. This is a vital consideration as the ADF must balance the twin challenges of both maintaining (slightly boosting) its existing Collins class submarine workforce while simultaneously preparing to develop specific skills sets including the acquisition of nuclear-powered submarines (SSN) and rapidly growing this workforce.

2.39The Committee received evidence that outlines how remuneration incentives are being implemented including the Submarine Capability Assurance Payment scheme (currently under review) which serves to attract and promote a sustainable submarine workforce.[32]

2.40Defence informed the Committee that it will have to grow its submariner workforce from the current total of 856 to approximately 2900 qualified personnel by the mid 2050’s. This is necessary to enable the Royal Australian Navy to support the operating requirements of the SSN. Several training opportunities are already being pursued with AUKUS partners to support this workforce growth plan inclusive of overseas training courses, secondments, and participation in joint exercises and sustainment activities.[33]

2.41The efforts to recruit, train, and retain specialist trades and qualifications will directly inform the projected requirements as per the AUKUS optimal pathway capability milestones. The success or otherwise of these efforts will determine whether Australia is able to meet its goal to manage its own sovereign SSN fleet from 2030.[34]

Defence People System restructure

2.42The DSR recommended Defence adopt an integrated personnel management architecture. This would link the ADF and wider department to Whole-of-Government effort, enabling a more efficient pathway to realise future workforce requirements. In response, Defence has reviewed its Defence People System and redistributed roles and responsibilities as follows:

• The newly appointed Chief of Personnel will lead the ADF personnel system, operating in partnership with Deputy Secretary Defence People Group who designs the enterprise people strategy and policy framework
• The Deputy Secretary Defence People Group leads the coordination of enterprise level workforce strategy, aligned to Whole-of-Government direction; by developing and leading the execution of the Defence Strategic Workforce Plan and the associated strategic policy settings to realise an integrated military, civilian and external workforce; leads the coordination and management of Defence APS people capability; leads enterprise mental health and wellbeing and culture reforms; and provides people services for an integrated workforce
• The VCDF sets the design of ADF capability and structure of the ADF organisation; as well as plans the required organisation structure, military workforce allocations (Average Funded Strength), military establishment and workforce priorities to best support the realisation of war fighting domain capabilities and enabling capabilities. Additionally, this portfolio establishes control of demand for military workforce across Defence in all service categories.[35]

Committee comment

2.43The Committee is cognisant of Australia’s fast changing strategic and geo-political climate and notes the importance of having a well-resourced and highly capable ADF that is ready to respond to Government direction, in the pursuit of national interests.

2.44It was apparent to the Committee that Defence recognises the critical need to improve the overall performance in its approach to workforce recruiting and retention. The Committee acknowledges that Defence is attempting to make a concerted effort to nest future personnel initiatives to strategic level guidance and relevant capstone documents.

2.45However, the Committee is concerned by the department’s latest advice regarding its workforce recruiting and retention figures, overall and especially with respect to the areas of critical workforce shortage. This includes Defence’s ability to recruit and train sufficient personnel to work within its current and future submarine programs. The trend in recent years does not demonstrate and inspire confidence that Defence will be able to stabilise current numbers, let alone grow the workforce over the forward estimates.

2.46The 42 workforce categories classified as critical (an addition of 18 since 2022) carries especially significant risks. These specific trades and qualifications, inclusive of a relatively high percentage of science, technology, engineering, and mathematics base fields, have the potential to directly impact Defence’s ability to realise AUKUS capability requirements and specific DSR force posture initiatives.

2.47The Committee identified an opportunity for the Government to further consider the interaction between recruiting and retention efforts in the National Defence Strategy, due for release in 2024. This inaugural document and ongoing workforce initiatives to strengthen Defence capability are interdependent rather than mutually exclusive. There is an interplay that should be acknowledged: what are the workforce requirements, force posture, and recruitment and retention initiatives necessary to support national strategy; and how the National Defence Strategy may in turn be shaped or constrained by workforce or force posture realities.

2.48Given the strategic circumstances Australia faces and the critical importance of rapidly growing the size and resilience of the ADF, the Committee reiterates the critical need for Defence workforce planning and forecasted growth to be supported and enabled in future DSR capability realisation initiatives. Plainly speaking, while it is difficult to address in the current strong labour market, the current slide in the ADF’s numbers, growth, and critical skills shortage areas must not continue.

2.49Evidence heard throughout this inquiry indicates that while concurrency pressures that Defence experienced during the pandemic and natural disaster relief in recent years may be a contributing factor towards job dissatisfaction for a percentage of serving members, it was not a defining reason for separation. The overriding issues is simply the strength of the economy – as conventional wisdom indicates, Defence recruits well in a recession and badly in a boom. However, there are more complex issues that Defence can seek to address.

2.50The Committee supports continued efforts to identify the causal factors for lower than anticipated and required recruitment and retention rates, and the efforts of successive Governments to put in place new measures to reverse the decline in overall ADF numbers. Overwhelmingly, this is not a partisan issue, and the Committee supports Defence’s serious commitment to address these concerns. An improved understanding of both extrinsic and intrinsic factors is welcome, as is Defence’s approach to exhaust all avenues of the total workforce system including the Reserves, and ensuring there is a compelling value proposition in the context of the current competitive job market.

2.51The Committee is concerned though that Defence does not appear to have fully developed and agile mechanisms to adjust its workforce planning in response to evolving capability needs. The Committee understands that Defence traditionally operates on a longitudinal scale to match capability acquisition milestones; however, it should consider integrating a shorter learning loop that is capable of more rapidly responding to changing requirements within its personnel system.

2.52The Committee recommends the Government use the forthcoming National Defence Strategy to set out how ongoing recruiting and retention efforts will interact with the design and implementation of the Defence Strategic Review’s force posture recommendations.

2.53The Committee recommends the Department of Defence report back to the Defence Subcommittee of this Committee on a six-monthly basis, for the next two years from the tabling of this report, with updates in relation to specific recruiting and retention initiatives including:

• Defence’s partnership with Adecco and associated performance metrics
• trend analysis of workforce categories identified as ‘critical’ and any impact to Defence Strategic Review implementation requirements
• data analytics from exit interviews/surveys that references serving personnel’s lived experience and how that is informing future retention strategies.

Footnotes

[1]Department of Defence, Submission 1, p. 3.

[2]Ibid., p. 3.

[3]Defence, ‘2020 Force Structure Plan | About | Defence’, https://www.defence.gov.au/about/strategic-planning/2020-force-structure-plan, viewed 7 September 2023.

[4]U.S. Embassy & Consulates in Australia, ‘AUKUS Joint Leaders' Statement’, au.usembassy.gov/aukus-joint-leaders-statement/, viewed 7 September 2023.

[5]Department of Defence, Submission 1, p. 3.

[6]George, M., Parliamentary Library, ‘Retention in the Australian Defence Force’, 20 June 2023, https://www.aph.gov.au/About_Parliament/Parliamentary_departments/Parliamentary_Library/FlagPost/2023/June/ADF-Retention, viewed 7 September 2023.

[7]Department of Defence, Submission 1, p. 4.

[8]Department of Defence, Submission 1.3, p. 2.

[9]Ibid., p. 4.

[10]Ibid., p. 5.

[11]Ibid., p. 5.

[12]Australian Strategic Policy Institute, Submission 9, p. 1.

[13]Department of Defence, Submission 1, p. 4.

[14]RAND Australia, Submission 3, p. 5.

[15]Australian Strategic Policy Institute, Submission 9, p. 2.

[16]RAND Australia, Submission 3, p. 2.

[17]Ibid., p. 5.

[18]Australian Strategic Policy Institute, Submission 9, p. 2.

[19]Department of Defence, Submission 1, p. 2.

[20]RAND Australia, Submission 3, p. 6.

[21]Stothart W., Department of Defence, Committee Hansard, Canberra, 23 May 2023, p. 9.

[22]Ibid., p. 9.

[23]Department of Defence, Submission 1.3, p. 1.

[24]Stothart W., Department of Defence, Committee Hansard, Canberra, 23 May 2023, p. 5.

[25]Nokels D., Department of Defence, Committee Hansard, Canberra, 23 May 2023, p. 5.

[26]Plath R., Department of Defence, Committee Hansard, Canberra, 23 May 2023, p. 6.

[27]Department of Defence, Submission 1, p. 5.

[28]Ibid., p. 5.

[29]Ibid., p. 8.

[30]Ibid., p. 7.

[31]Ibid., p. 7.

[32]Department of Defence, Submission 1.3, p. 4–5.

[33]Ibid.

[34]Department of Defence, Submission 1.3, p. 4–5.

[35]Department of Defence, Submission 1.2, p. 1.