What Small NATO Nations Can Learn from the Not-for-Profit Sector to Enhance Defense Acquisition

Small NATO nations face particular challenges in terms of defense acquisition. On the one hand, internal factors such as limited administrative capacity, low ordering volumes, small budgets, and an insignificant domestic defense industry impose important constraints. On the other hand, external factors such as stringent (and inflexible) EU and NATO procurement regulations reinforce the internal pressures. Small NATO nations must establish an efficient management system to navigate these challenges effectively.

The article explores how management concepts from the not-for-profit sector can enhance the organizational effectiveness of small NATO nations. Specifically, it evaluates the organizational effectiveness of one of the smallest NATO nations, Luxembourg, utilizing the Bridgespan Group Framework. Firstly, the term “small NATO nations” is (re)defined in the context of manning levels rather than GDP. Secondly, the Bridgespan Group Framework and its five effectiveness vectors—leadership, decision-making and structure, people, work processes and systems, and culture—are examined through different conceptual perspectives (systems thinking, bureaucracy, organizational learning, and organizational culture). These aspects are subsequently examined in the context of the Luxembourg Armed Forces, leading to the recognition of four distinct systemic effectiveness gaps: corrective action with delay, challenges pertaining to tacit knowledge and second/third-order learning stages, the establishment of an embedded learning cycle, and the influence of organizational subculture. The article concludes by underscoring the necessity for future research endeavors aimed at rectifying these identified gaps.

Defining Small NATO Nations

Most authors rely on either GDP (absolute or per capita) or defense expenditures (absolute or as a share of GDP) to distinguish between small, middle, and big military powers.[1] However, this approach can be misleading when assessing a nation’s defense procurement capability. Defense procurement is, in fact, a resource-intensive process that relies primarily on highly specialized actors and intricate procedures and processes (such as legal, financial, political, engineering, and management aspects).[2] As such, defense procurement does not depend only on financial power but rather on the availability of human resources and the overall size of the military apparatus.

Tables 1 and 2 provide a visual representation of the underlying rationale. Subsequent to the category “real change defense expenditure,” the defense budgets of Belgium, Denmark, and Greece appear relatively comparable (each allocating around USD 4.5 billion for defense in 2019). However, when considering “military personnel,” it becomes evident that the Greek military establishment is, in fact, four times larger than that of Belgium and five times that of Denmark. This disparity in human and financial resources underscores why the author favors employing military personnel as an indicator for evaluating a nation’s procurement capability instead of relying solely on financial power. The revised classification, as presented in Table 2, organizes NATO nations into three distinct groups based on their military strength: large, medium, and small powers. Notably, nations transitioning between categories from Table 1 to Table 2, due to the altered classification methodology, are clearly highlighted for emphasis.

Examining the Luxembourg Armed Forces Using the Bridgespan Group Framework

While initially unexpected, the not-for-profit sector can offer valuable insights to enhance the organizational effectiveness of defense acquisition systems in small NATO nations. Three key arguments underscore this significance. First, both development and defense acquisition management are based on Deming’s Plan-Do-Check-Act quality management cycle. [3] Indeed, both require (1) establishing objectives and processes to deliver desired results (plan), (2) identifying problems and carrying out objectives and processes (do), (3) measuring and evaluating data and analyzing results (check), and (4) implementing the best solutions based on analytical findings (act).[4]

Second, both NGOs and small NATO nations grapple with limited human and financial resources. The resemblance is striking. While NGOs struggle with difficulties stemming from elevated poverty levels in the countries where they operate,[5] small NATO nations face problems rooted in their relatively “deprived” overall capabilities compared to middle and large military powers (refer to Tables 1 and 2). Third, a notable distinction arises when contrasting the private sector, where barometers such as profitability and shareholder value facilitate performance assessment, with the not-for-profit and public sectors. In these spheres, gauging performance is notably more intricate.[6] This complexity arises from the fact that the quality of the provided public goods and services hinges not solely on monetary value but rather on a blend of socioeconomic factors.[7]

Given the shared characteristics between the not-for-profit sector and the challenges encountered by small NATO nations in the realm of defense acquisition, the author has chosen the Bridgespan Group Framework as the investigative tool for assessing the organizational effectiveness of Luxembourg, one of the smallest NATO nations. This selection is grounded in three compelling arguments. First, the Bridgespan Group Framework is based on a readapted performance diagnostic survey from the for-profit sector,[8] thereby enabling the incorporation of a cross-sectional array of social and economic factors (as depicted in Figure 1). Second, Luxembourg, with a military apparatus five times smaller than its counterparts in the small powers group (as detailed in Table 2), presents an intriguing and promising subject for research. Thirdly, the author’s role as a development manager within the Procurement Department of the Luxembourg Armed Forces equips him with valuable insights into the organizational structures and processes inherent to the Luxembourg Armed Forces and its defense acquisition system. This first-hand perspective enhances the depth and accuracy of the investigation.

The ensuing subsections delve into the five dimensions of effectiveness, scrutinizing them through diverse analytical perspectives such as systems thinking, bureaucracy, organizational learning, and organizational culture. Each dimension is then examined from the vantage point of the Luxembourg Armed Forces.

Figure 1: The Brigdespan Group Framework and Its Five Effectiveness Dimensions.[9]

Leadership

As per the Bridgespan Group’s perspective, effective not-for-profit organizations are characterized by strong leaders endowed with compelling visions, adeptly translating these visions into a coherent array of tangible objectives and corresponding priorities.[10] In fact, this notion of strong leadership forms a prominent motif within the not-for-profit literature. To illustrate, Milway and Saxton’s Organizational Learning Framework places significant emphasis on the role of visionary leaders with clear objectives and goals, particularly in the context of advancing organizational learning.[11] In a similar vein, Winkler and Fyffe [12] emphasize that “leaders must walk the talk and model the behaviors and practices they want to implement across the organization.”

An important observation arises regarding leadership within the Luxembourg Armed Forces: the Chief of Defense position has undergone five changes within the last twelve years.[13] Most significantly, each incoming Chief of Defense has introduced their distinct leadership vision, consequently prompting a realignment of the strategic priorities of the Luxembourg Armed Forces. The most recent Chief of Defense adheres to this trend. Despite declaring an intention to sustain the legacy of his predecessor’s leadership, recent internal restructuring endeavors cast doubt on the actual realization of this continuity.[14]

The challenge arises from the fact that an excessive number of changes in a short period can generate a downward spiral of transformations and destabilize an organization.[15] Senge’s [16] system archetype, “Corrective Action with Delay,” is well-placed to describe this phenomenon. This archetype depicts a scenario where an initial corrective action is swiftly succeeded by a second corrective measure before the effects of the first one can materialize. As the first corrective action eventually takes effect, the second corrective action becomes ill-placed and, with a delay, negatively impinges on the system. A third corrective action is deemed necessary, starting up a vicious cycle of “ill-adapted corrective action and delayed unintended consequences.”

Establishing and maintaining stable and consistent leadership at the top management can serve as an effective strategy to circumvent Senge’s Corrective Action with a delay trap. As elucidated by the systems thinker Geffrey Vickers: “A trap is a trap only for the creatures which cannot solve the problems it sets. Man traps are dangerous only in relation to the limitations of what men can see and value and do.” [17] Put differently, unless the top management realizes the problem and understands its underlying working mechanism, there is little hope of escaping the initiated vicious circle.

Decision-making and Structure

As per the Bridgespan Group’s definition, decision-making and structure encompass the ability of staff to coordinate and work well together across organizational boundaries while embracing clear roles and responsibilities.[18] Central to Bridgespan’s perspective is the question regarding which decisions are truly critical and is it clear who holds the responsibility and the authority to make these decisions? In turn, Bain and Company closely link decision-making with performance. Across diverse countries, industries, and company scales, Bain and Company’s research demonstrates a robust correlation, at a 95 percent confidence level or higher, between decision effectiveness and financial outcomes.[19]

Similar to many military establishments, the Luxembourg Armed Forces adopt a hierarchical organizational structure, founded upon the principles of bureaucracy delineated by Weber.[20] A formal and strict vertical management order is responsible for formulating the written rules, procedures, and standards. Operating tasks are coordinated via standardized work processes, a distinct division of labor, and close oversight. Mitzberg [21] characterizes this organizational form as a “Machine Bureaucracy,” as its underlying structure is fine-tuned to run as an intricately calibrated and regulated mechanism. In Mintzberg’s terminology, structure encompasses elements such as a clearly delineated authority hierarchy, standardized responsibilities, prescribed qualifications, communication channels, and operational protocols.

Adhering to the Bridgespan Group’s delineation of decision-making, the Luxembourg Armed Forces have a well-coordinated decision-making structure with clear roles and responsibilities. However, amidst the advantages of control and stability furnished by machine bureaucracies, a notable drawback surfaces: these structures are unable to support organizational learning. The reason is that machine bureaucracies are founded on an “explicit knowledge” base. Anchored within their intrinsic hierarchical organizational arrangement, they fall short in accommodating more intricate knowledge forms, such as tacit knowledge.[22]

The distinction between explicit and tacit knowledge is crucial. While the former is overtly articulated and can readily be codified, stored, and studied through formal learning, the latter is manifested implicitly and cannot simply be stored or codified and is typically acquired through hands-on experience within the relevant context.[23] Notably, explicit knowledge tends to be associated with single-loop learning (questioning how existing activities can be done better), while tacit knowledge possesses the potential to catalyze double-loop learning (questioning the appropriateness of current activities) and even triple-loop learning (questioning how to determine the correct course of action).[24] To put it differently, tacit knowledge operates as a catalyst for learning, enabling an organization to transition from a normative dimension (single-loop learning) to a realm encompassing philosophical and political dimensions (double- and triple-loop learning).

People

As per the Bridgespan Group’s perspective, the process of attracting skilled individuals and strategically positioning them within the organization holds equal significance to evaluating, nurturing, and appropriately incentivizing employees in alignment with the organizational priorities.[25] Pertaining to the former aspect, the evaluation criteria for potential employees should ideally be informed by both explicit and tacit knowledge prerequisites. The challenge, however, lies in the fact that assessing tacit knowledge is considerably more intricate due to its concealed nature, while explicit knowledge is comparatively easier to showcase and evaluate through credentials, benchmarks, and similar measures.[26]

Yet, the Silicon Valley experience has demonstrated that overcoming the “explicit-tacit” knowledge dilemma is attainable through sharing industry-specific values within a regionally bounded community. Indeed, following Saxenian,[27] networks of social relationships have provided the “social capital” and “information signals” to ensure the efficient transfer of tacit knowledge within inter-firm career movements in Silicon Valley. In more recent times, the Luxembourg Armed Forces adeptly leveraged the rich fabric of professional networks within the Greater Region to attract industry-specific expertise, especially in the area of information and communication technologies. However, this capability-building strategy must also be seen critically, especially when the Luxembourg capability gain is another NATO nation’s capability loss.

In the context of evaluating, developing, and rewarding employees, a dual challenge comes to the fore. First, as appropriately highlighted by Kramer and Stid,[28] the alignment with the organization’s overarching priorities has to be maintained when setting individual performance objectives and assessing staff performance. Second, performance reviews need to have a follow-up and lead to tangible results, such as plans for skill enhancement and new job assignments.

In 2015, the Luxembourg government implemented a generalized evaluation system encompassing all its administrative entities, which also extends to the armed forces. This system evaluates individual performance within a three-year timeframe, relying on an individual work plan and a subsequent interview with the respective line manager.[29] The formulation of the individual work plan is a collaborative endeavor involving the line manager. This plan is tailored to align with the specific job description and corresponding career pathways. As the assessment system’s evaluation is presently underway, arriving at any definitive conclusions remains premature. Nonetheless, the notion persists that a single follow-up interview at the end of the three-year reference period may not suffice to guide employees along their development trajectory adequately and to induce a genuine “embedded learning” cycle, that is, learning integrated into the daily work routines and activities of the workforce.[30]

Work Processes and Systems

Following the Bridgespan Group, well-defined work processes and tools that effectively enable employees to address the organization’s top priorities are key in an environment where human and financial resources are scarce.[31] The Bridgespan Group recommends investing ample time to elucidate and refine work processes, rendering them explicit and accessible to all employees. This endeavor serves to enhance overall consistency and elevate quality standards. A comparable viewpoint is echoed by Chambers,[32] who perceives administrative capacity as a scarce resource and advocates for constantly checking the consistency between administrative demands, including new demands on personnel, which might divert them from their core tasks.

Functioning as a machine bureaucracy, the Luxembourg Armed Forces exhibit well-defined work processes that are comprehensively documented within a formal catalog of rules and regulations. While this formal compilation of work processes bestows a clear advantage for structuring and measuring standardized and repetitive tasks, it concurrently poses a notable challenge when these processes necessitate frequent readaptation, especially within a swiftly evolving operational environment.[33] The underlying message is that the impacts of 20th-century globalization and 21st-century digitalization reverberate across all sectors of the industry, imposing ever-greater demands for adaptability and flexibility.[34] The defense sector stands as no exception to this prevailing trend.

As exemplified by Mintzberg’s [35] “Operating Adhocracy,” organic organizational structures possess a distinct advantage in addressing these demands. This is attributed to their inherent organizational structure, which is based on coordination and actively supports direct interaction and collaborative adaptation among employees.[36] Furthermore, these structures entail minimal standardization of work processes and knowledge. Instead, the emphasis is placed on practical troubleshooting and individual expertise. To borrow from Sveiby and Lloyd’s perspective,[37] operating adhocracies represent “know-how companies” harnessing the tacit knowledge and the “embodied skills” [38] of their workforce.

The Luxembourg Armed Forces grapple with the challenge to harmonize established, well-known routine processes and practices, which require standardization, with new complex systems and methodologies that necessitate imaginative and innovative thinking. The organization’s top priority must be the modernization of workflows and the initiation of a digital transformation journey. As witnessed by the Luxembourg Defence Guidelines for 2025 and Beyond, the Luxembourg Armed Forces have charted an ambitious development plan and have experienced rapid growth in recent years.[39] However, this accelerated organizational growth brings forth new complexities, including the recruitment and integration of fresh employees, the adaptation of workflows and processes, and the seamless transfer of both traditional and novel forms of knowledge.[40]

Organizational Culture

As posited by the Bridgespan Group, organizational culture encompasses an entity’s inherent values and behaviors, coupled with its potential for change.[41] Extending this definition, Becerra-Fernandez and Sabherwal [42] emphasize that organizational culture functions as a pivotal catalyst for knowledge management and actively molds the processes and practices governing the creation, preservation, and propagation of knowledge. Nevertheless, a significant challenge lies in the fact that organizational culture remains concealed within the prevailing ideology and collective identity of the organization and its people, only becoming evident when questioned.[43] Furthermore, organizations seldom possess a singular, homogeneous, unitary culture; they typically encompass subcultures. These subcultures emerge as distinct subgroups within the organization develop their own unique perspectives, accompanied by a distinct set of values, over time.[44]

An effective initial step towards discerning the organizational culture of the Luxembourg Armed Forces and deciphering its prevailing values and behavioral patterns is to explore its homepage: www.armee.lu. A notable observation is the recent adoption of a values charter by the Luxembourg Armed Forces, with the following core values: Commitment, Uprightness, and Trustworthiness.[45] These moral standards find further expression through the slogan of the main webpage: “Group spirit and cohesion: human values are a priority for us.” The Luxembourg Defence Guidelines for 2025 and beyond highlight that “Luxembourg promotes, in particular, the rule of law and the observance of international law, of human rights and fundamental freedoms and of the principles of good governance […] and the defense of our values on an international level.” [46]

To comprehensively grasp not only the projected external image but also the authentic inner norms and beliefs, the author administered a survey within the Procurement Department of the Luxembourg Armed Forces. The questionnaire design drew inspiration from Cameron and Quinn’s [47] framework, which encompasses four distinct competing values (collaborative, creative, controlling, and competing), and was divided into six categories: dominant characteristics, organizational leadership,  management of employees,  organizational cohesion, strategic priorities, and criteria of success. Each category contained four questions pertaining to Cameron and Quinn’s [48] four competing values. Within each category, the respondents were required to allocate a total of 100 points across the four questions. Notably, 67 percent of the Procurement Department actively engaged in the survey (with eight out of twelve employees participating). In summary, the Procurement Department attributed 45 points to “Collaborate,” 30 points to “Create,” 15 points to “Compete,” and 10 points to “Control” (see Figure 2).

Figure 2: The Dominant Values in the Procurement Department of the Luxembourg Armed Forces.

To extract the most insightful interpretation from the survey findings, delving into Cameron and Quinn’s Competing Values Framework ^[49] becomes imperative. This framework categorizes organizations into four distinct types (Clan, Adhocracy, Hierarchy, Market) and delineates four dominant values (Collaborative, Creative, Controlling, and Competing). These attributes hinge on the organizational strategic orientation, considering factors like focus (Internal vs. External) and order (Flexibility and Discretion vs. Stability and Control) (refer to Figure 3 for visual representation).

Figure 3: The Four Different Organizational Cultures and Their Dominant Values (Source: Cameron and Quinn, 2006, p.46).

Consequently, the analysis reveals that the Procurement Department of the Luxembourg Armed Forces predominantly exhibits a clan culture, with a comparatively lesser inclination towards an adhocracy culture. The presence of hierarchy and market cultures is notably minimal. This may seem counterintuitive initially, given the anticipation of a prevailing hierarchy culture in a machine bureaucracy. Nonetheless, these findings corroborate Brown’s [50] viewpoint that organizations seldom adhere to a single, homogeneous, unitary culture, often harboring distinct subcultures within their organizational framework.

The top management of the Luxembourg Armed Forces holds a crucial responsibility in recognizing the diverse subcultures within the organization. Each subculture is propelled by distinct value drivers and necessitates tailored management approaches. To exemplify, a clan culture accentuates an internal orientation, esteems flexibility and discretion, and revolves around collaboration and sustained growth. In contrast, an adhocracy culture gravitates towards an external stance, similarly valuing flexibility and discretion, yet channeling its energies more towards creation and breakthrough. A hierarchy culture has the most closed profile of all. It inwardly directs its focus and has a strong emphasis on stability and control. The principal mode of organization lies in coordination. Conversely, a market culture adopts a strong external orientation, places a certain value on stability and control, and centers on completion and short-term performance.

Conclusion

To mitigate the internal and external pressures confronted by the Luxembourg Armed Forces in the realm of defense acquisition, enhancing their organizational effectiveness becomes imperative. The comprehensive analysis of the Bridgespan Group Framework, employing diverse conceptual viewpoints such as systems thinking, bureaucracy, organizational learning, and organizational culture, has provided invaluable insights into the effectiveness strategies inherent in the not-for-profit sector. This novel approach has enabled us to scrutinize and evaluate the organizational effectiveness of the Luxembourg Armed Forces from a fresh standpoint.

The analysis has unveiled four crucial areas that need closer consideration: First, the rapid turnover of top management within the Luxembourg Armed Forces could potentially trigger a vicious circle of “Corrective Action with Delay,” [51] adversely affecting organizational effectiveness. Second, existing as a “Machine Bureaucracy,” [52] the Luxembourg Armed Forces inherently encounter a structural limitation concerning tacit knowledge and the potential for double/triple loop learning. This makes it difficult to address the intricate demands of a globalized and digitalized world. Third, a single follow-up interview, conducted exclusively at the conclusion of a three-year reference period, is probably not sufficient to support employees in their individual development path and initiate a genuine “embedded learning” cycle.[53] Fourth, a “competing values” survey [54] has clearly illustrated that the Procurement Department within the Luxembourg Armed Forces possesses its own distinct subculture, encompassing both clan and adhocracy elements. This significantly differs from the general predominant control culture, necessitating specialized management approaches.

Addressing the identified gaps in effectiveness necessitates a dedicated focus on further research. Given the significant contributions that insights from the not-for-profit sector and its organizational effectiveness strategies have made in formulating the initial diagnostic of the management systems within the Luxembourg Armed Forces, delving deeper into the realms of not-for-profit literature appears to be a promising avenue for continued exploration.

Disclaimer

The views expressed are solely those of the author and do not represent official views of the PfP Consortium of Defense Academies and Security Studies Institutes, participating organizations, or the Consortium’s editors.

Acknowledgment

Connections: The Quarterly Journal, Vol. 20, 2021, is supported by the United States government.

About the Author

Alexandre Verlaine is a Development Manager at the Luxembourg Armed Forces and a PhD Candidate at the Hungarian University of Agriculture and Life Sciences (MATE), investigating policies and practices of military acquisition within NATO and the EU with the aim of developing a small nations defense acquisition approach. https://orcid.org/0000-0003-1851-8046

E-mail: alexandre.verlaine@armee.etat.lu