When the Homeland Security Dept. was officially created in February by combining 22 federal agencies and some 180,000 employees, Navy Secretary Gordon England seemed to have just the right résumé for the job of Deputy Secretary. The former engineer received high marks at the Pentagon for managing the Navy's 900,000 seamen, Marines, and civilians, and its $100 billion budget. He successfully oversaw the merger of General Dynamics' (GD ) Fort Worth (Tex.) aircraft plant into Lockheed (LMT ) in the 1990s. And this Texas Christian University MBA once worked as a mergers-and-acquisition consultant. Before becoming Navy Secretary, England had been GD's executive vice-president.
On the Homeland Security job just two months, England is in the midst of creating Washington's third-largest Cabinet department, though he operates out of a small office at a highly secured Naval Intelligence complex in Washington, D.C. BusinessWeek's Paul Magnusson, who covers homeland security from Washington, recently visited England to see how the new department is shaping up. Here are edited excerpts of their conversation:
Q: A lot of effort has gone into securing airports but not much, it seems, into other modes of transportation, particularly inspecting shipping containers at U.S. ports. Do the priorities need adjusting?
A:Well, we were attacked by airliners on 9/11, so we had to fix that problem. And that will level out. But in my judgment, Admiral [James] Loy did a great job in putting the Transportation Security Administration together, and that's what the Congress and the American people were demanding.
Now on container security, you're measuring something different. Washington measures inputs, like how much money you spend. People talk about the number of containers we inspect, and you're left with the impression that if you're successful, you'd be inspecting 100% of the containers. But the reality is, if you're very successful, you don't inspect any of them.
It's like inspecting quality into a car. You are not going to do it. If you are successful in containers, you would know what's in each one, it would be sealed, and you would know where it was delivered. If you're really successful, you'll inspect none of the containers.
Q: You seem to be following Republican model of homeland security: Few mandates or regulations, lots of voluntary measures.
A:Well, I hope we're putting together a department that recognizes the fact that every town, business, and local government is different. Where they're located and their inherent security is different all across America. The people there understand their vulnerabilities better than we do. Our job is to help them do their job better. To be successful, everyone in America has to be successful. Every individual company is important. Remember, 85% of infrastructure in the U.S. is private.
Our view is that we don't protect and defend America from Washington, D.C. This isn't going to be a federal solution, this is a national solution. We are enablers. We are facilitators. Obviously, we have a direct role with our borders and our Customs Service. But we're not going to have federal people involved in every locale in America.
Q: The Chairman of J.C. Penney (JCP ), Allen I. Questrom, recently said this: "Particularly important to retailers: Stop the terrorism alerts. They are the worst invention of mankind. They say, 'Don't go to malls,' which is bogus because no one is going to be protected from terrorists." Fair?
A:Maybe those alerts are why we didn't have an attack. The successes won't get noticed, but the failures do.
But look, you have to have some kind of alert system. If there's an identifiable threat, you have to alert the populace. You'd like to make those alerts very precise, but we don't always have the data to make them precise. By having an alert we prevent the attacks so people can go about their lives. So hopefully it's the other side of the coin: We have an alert, we improve our security and we prevent an attack.
Over time, we'll improve our security posture, and hopefully we'll need fewer alerts. We now are obviously better than we were before 9/11. But if we get some intelligence that there's going to be an attack, we have to let people know that.
Q: Can you point to an instance where there was an alert and because of greater attention, say at an airport or a port, that an attack was thwarted?
A:Well, you never know unless you grab somebody. You take these measures. My own personal judgment is that the security we have put in place has thwarted attacks. I'd like to think that what the nation has been doing since 9/11 has had a result. There's still a threat that's similar to communism, and that lasted for 40 years. When I talk to students now, I tell them that most of their adult life they'll have to live with the threat of terrorism.
Q: We've been hearing a lot from mayors and governors about not having enough money to do their job on homeland security. What would you say to them?
A:More money has gone to specific cities with greater vulnerabilities. But you've got to protect the whole nation. So I think this is an area that will continue to evolve. The first responsibility at the local level is to protect the citizens. Therefore, they do have to allocate some of their own money for that. It's not the federal job to protect every movie theater and every business in the U.S. We can provide special expertise in some circumstances but not across the board.
Q: What needs the most attention in homeland security?
A:We're still working to understand our processes and still putting the department together. We're still hiring people. This is very early. It's less than two months. We have an organizational structure but no operational structure. The process produces methodologies, lines of authority. We do need a strategic approach, and it has to be a long-term approach. You can spend a lot of money and have very little effect. We need to build the analytical basis.
We're doing this as fast as we can, but it's still gong to take months. I'd like to feel that by the end of this year, we'll have a fully functioning operating structure with priorities and metrics.
Q: There has been a lot of lobbying in Congress to avoid regulation. The chemical industry, shippers resisting the 24-hour notification rule on containers, banks resisting money-laundering regulations...
A:My view is people are cooperative with the department's efforts. But this is our system of government. You're always going to have the discussion, give and take, and push back. At the end of the day, we end up with a system that meets all the objectives.
More companies have to recognize that they have a fiduciary responsibility to protect their assets. I believe Corporate America is very responsible. Over time, this security becomes embedded in the system. In some cases, you may need regulatory requirements, and in those cases, we'll do that. On the other hand, you hope you don't have to utilize that very much.
You know, environmental awareness became embedded in society in the same way. The same thing is going to happen with security. There'll be security classes and policies and forums on this, just as there was with environmentalism...the same way people found ways to produce things with less damaging chemicals and processes. That will happen over time with the security environment.
Q: You were once a consultant on mergers. What do you think is the most important aspect of this merger, creating this new department?
A:Most important is that this cannot be a large bureaucracy. What happened in Afghanistan and Iraq is very instructive. The success in Iraq has been the U.S. ability to move quickly, assessing the situation before the Iraqis could respond. In this case, the threat to America doesn't have a large bureaucracy, and they don't have a large infrastructure. So if we end up with a very burdensome bureaucracy, then no matter how much money we spend, we lose.
It's very important we be flexible and agile and rapid and adaptable so that we can move quickly to address any emerging threat.
In all mergers, the CEO has to drive the organization. He has to establish the principles. There's still a lot of pressure to build staff, and that's what we're going to have to resist.
Q: Except, you still have an incredibly complex budget to manage. Washington being Washington, you still have earmarking of funds. You still have subcommittee chairmen wanting this or that device made in their district and not someplace else.
A:Well, it is America. That's the way the system works. And so we're going to have to find ways to accommodate it.
Yes, the real issue is the tyranny of the budget. The fiscal '03 budget just went into effect in the last two months. The '04 budget hearings are on the Hill, and we're just preparing the '05 budget. Think about that. You have to deal with the present and two years in the future at the same time. We don't have a history to rely on, either.
Q: This must be your most difficult challenge.
A:You have to understand what your priorities are, and we're still working to understand that. As an organization, we have to understand what our top five priorities are this year and next year. Like any other business, we have to figure out goals and objectives, and them implement them.
A lot of people have said it will be three or four years before we get this in place. It's not going to take that long, but it won't be in two or three months, either. But by the end of this first year we should have a fully functioning organization with all our processes and procedures and methodologies in place.
Q: What's the biggest public misunderstanding?
A:Maybe the threat situation. At some point threat levels will change, and it won't be this huge public event. It will be business of as usual. Take the CEO of Penney's. There's a case where people need to understand that the warning system, while not perfect, is necessary for America. We do need some sort of system.
Even during the Cold War, the nation progressed in every measure. Our society expanded its standard of living and health -- it all went up. And the same thing will happen during our fight against terrorism. It will become part of our economic system. It will take great leadership, determination, commitment, a never-ending effort. But you can win. And if you stay committed, you will win.It will take teamwork with our allies because this is an international effort. But we can prevail as we did against fascism and communism. It took a World War and a Cold War to prevail.
Q: But in a way, isn't this a tougher job, on defense?
A:Well, that's right. You can't do it with defense alone. You cannot allow people, irresponsible leaders to have weapons of mass destruction to abuse their own people and eventually the world because the consequences are so profound. This -ism is far worse than the prior -isms. This is a far greater threat. For the first time, a few people with weapons of mass destruction can create more havoc than military organizations in the past.
Q: What do you worry most about?
A:Bioweapons. They've been around for a long time, but as the body of knowledge expands, there's going to be room for a lot of mischief. Our expanded knowledge is of great benefit, but there will also be a lot more opportunity for mischief.
It's enough to keep you up at night, thinking about the various ways they could attack us. Over time, it's hard to keep up resolve. I worry that we can get too relaxed.
On the other hand, over time, these security concerns will be embedded in the economy and the culture. For example, the concept of protecting against terrorist attack is being incorporated into the principles of corporate governance -- the idea that management has a responsibility to protect against attack and to plan for business continuity. This is a systemic change -- and it's critical.
Q: What's most important?
A:At the end of the day, intelligence. Understanding the threat.