COLUMN | Proposal for 2.0 Management of the Chilean Armed Forces

El Mostrador, Thursday, November 7

Richard Kouyoumdjian
Vice President, AthenaLab

On Friday, October 11, 2019, the CESIM of the Chilean Army organized a seminar dedicated to issues of internal control, transparency, and crime prevention. Not only were the generals leading the institution present, headed by their Commander in Chief, GDE Ricardo Martinez, but also the Comptroller General of the Republic, the Undersecretary for the Armed Forces, the President of the Council for Transparency, and the Executive Director of Chile Transparente, along with distinguished foreign and national guests.

Is it worth writing about a proposal to change the management of the armed forces after what happened in recent weeks, which saw them on the streets for a week fulfilling the constitutional role required by the state of emergency? Perhaps some may find it an inappropriate time, but we must also understand that good ideas, innovation, and change in terms of institutional management cannot be forgotten due to current events. Regardless of the significance of what has occurred, the military institutions remain the same, with an administrative reality that did not change significantly on October 18.

The presentation by the Commander in Chief of the Army (CJE), which focused on the model for crime prevention and improvements regarding transparency, was particularly innovative as it proposed the incorporation of high-level civilian professionals into the Army’s staff as reports to the CJE in positions related to control, auditing, finance, and other specialties where civilian professionals may have more experience and knowledge due to their focus on these issues. This new talent would hold a level equivalent to the generals that make up the high command and would also have matrix reporting lines to their counterparts in the Ministry of National Defense.

Earlier, in April of this same year, General Martinez had proposed transferring the Army’s procurement processes to the relevant ministry, leaving the Army only in an advisory role and in the respective technical definitions, but with decision-making in the team of Minister Espina.

What is novel about the proposal by the general is that it recognizes that institutions like the Army develop capabilities and talents more oriented toward their primary functions, defense and warfare, and that there are functions that can be performed better by importing capabilities that are developed more deeply in other civilian organizations or private sector companies.

What the Army proposed is already being implemented in armed institutions in other countries. The case I know best is that of the Royal Navy of the United Kingdom, which not only has a civilian finance director managing the finances and administration of that institution, but also has a board (Navy Board) responsible for institutional corporate governance and helps manage the Royal Navy, meeting monthly to carry out its work. Its composition includes not only the four principal admirals but also the aforementioned finance director (CFO), external civilian directors, and the operations director (COO) of the Ministry of Defense of that country, who also integrates the corporate governance of the British Army and the Royal Air Force. The Navy Board is chaired by the Admiral who holds the position of First Sea Lord, equivalent to our Commander in Chief of the Navy.

The five external directors aim to provide a challenge to the institution from an external perspective, bringing experience that the Navy does not specialize in generating, contributing their own experience in high-level positions and leading the board committees that address financial, internal control, auditing, and other issues where their experience and expertise may be required.

The question that arises is why not do something similar in Chile and innovate in this area? I am not questioning the role of the commanders in chief, who are the constitutional and natural leaders of their respective institutions, but I am suggesting that the corporate governance of the three defense institutions be reviewed and modified under the following considerations:

1) Corporate governance that serves as an equivalent to a board, led by the commander in chief, who presides over it, and composed of three-star generals or admirals dedicated to institutional roles rather than joint or ministerial ones, a representative from the Ministry of Defense, and three external civilian directors, which in the case of an institution with five general officers of the rank of division generals or equivalents, would result in a board of ten (CJ, five generals or admirals, one representative from the Minister of Defense, and three external civilian directors),

2) The frequency of board meetings should be monthly,

3) There should at least be finance and audit committees, which should be chaired by the external civilian directors and meet with the same frequency as the board,

4) Minutes of board sessions should be generated, and except for those aspects that are classified, the decisions and topics discussed should be publicly accessible,

5) Following the idea of GDE Ricardo Martinez, the functions of internal control & auditing and finance should be managed by high-level civilian professionals rather than generals or admirals, and

6) The external civilian directors and high-level civilian professionals should be selected through a public competition via the senior management system and could serve for around five years, ensuring that not all complete their terms simultaneously, and if deemed appropriate, could be re-elected for a further term. For reasons of transparency and logic, it is recommended that former uniformed personnel who may qualify based on their experience and knowledge should not be integrated into these roles until they have undergone a cooling period of five years after leaving active service.

These changes to the corporate governance of the institutions, combined with other changes being implemented by the Ministry of National Defense in terms of control and auditing, not only leave us with institutions reporting to a civilian executive power but also reinforced in control, auditing, and finance by incorporating civilian professionals in high-level management and corporate governance roles, thus bringing relevant external experience in these areas that complements the institutional expertise inherent to the nature of the institution.

The question some may ask is why change if things are supposedly functioning well. In this regard, the Commander in Chief of the Army has already taken a step in this direction because he believes that things could be improved and that perhaps it is time to modify the way of working and the institutional organization related to administrative and financial matters, but not the operational organization focused on combat or in the instances where the armed forces are activated to carry out the tasks defined in their mission areas. The changing world and the desire of civilians to see their armed institutions more open, transparent, managed under modern standards of control and compliance, and following successful corporate governance models widely used in other areas of public administration and the private sector should also motivate change. For the commanders in chief, the model where everything reports to them may in the future turn into a disservice; conversely, this proposal brings in qualified external resources that will assist them in areas outside their specialty and will give the institutions they lead a sense of modernity and transparency. In cases where there are complex issues of control and integrity, it may even help them find solutions that would not have been discovered with the same old approach.

Evidently, and as a wise acquaintance of mine whom I respect greatly advised, we must be prudent and skillful in this transition from the current management model to a more modern one. There may indeed be a need for legal changes, and we will certainly require significant political will and commitment from individuals to modify the way we work. However, common sense indicates that such changes are inevitable and necessary in today’s world, and I cannot find reasons why the armed forces should have a different organizational and operational structure for their administrative, financial, and control and auditing aspects than those applied in other sectors.

I would be pleased if this column is read and analyzed, and if the ideas mentioned here are not dismissed outright. I would be pleased if aspects of this proposal are implemented, and I would be very pleased if, at the end of the day, we have institutions that, due to being well-managed, controlled, transparent, and efficient, can ensure that in times of war, conflict, or crisis, they will be extremely effective as combat forces defending national sovereignty and interests wherever they may be located, and that any issues or potential issues of integrity and control that may have arisen in peacetime will not diminish their combat capabilities or the trust that the entire nation, to which they owe their allegiance, has or should have in them.

I conclude this column with the dictionary definition of innovation:
To renew, improve, create, discover, invent, perfect, reform, and progress.
Where its antonym is to conserve.