Toppie,
I'm being the devil's advocate here, I realise, but this is way too pie in the sky - the practicalities would be insurmountable.
The RAAF isn't a business, it's a public service and always will be, albeit a very special one.
Taxpayers provide the money, so there's no mechanism to boost income via more efficient work practices or greater effort. The bottom line is fixed from above, so decisions by those in the organisation just shuffle limited resources around.
Your model reads as if commanders would become bosses, but the reality will always be that they are middle managers in an unwieldy bureacracy that sometimes has conflicting directives coming from above.
I'm not saying lots of hard work doesn't occur, just that the profit motive isn't there, with its bad aspects (blatant corner-cutting, for example, and lack of job security for personnel) as well as good (generally less wastage of resources, and few unneccessary practices).
FEG Commanders would allocate budgets to OCs and COs to do their job. They'd have clear capability objectives to deliver and these would be independently measured.
Independent measuring organisation required - more cost.
What would be measured? Sorties flown vs planned? Serviceability rates? Cargo/pax moved or practice bombs delivered? Too broad and ultimately meaningless, given the uncontrollable variables that affect figures like this, not to mention massaging that can be done by those standing to lose if the figures don't look good.
What, then?
Budgetary pressures like SRP would mean budget is squeezed, leaving less to do the job. Not enough money means commanders, no matter how good, are hamstrung from the start.
How far would OC / CO budgets be required to stretch? Equipment, maintenance, procurement, essential services, medical, dental etc etc? If not, which parts to be administered by OC / COs? Massive administrative burden on them, more so than now perhaps.
They would choose their own personnel by advertising jobs in the organisation.
Limited pool of candidates within the organisation, so one squadron's rejects would be shunted to another. Laterals could help, but same issue would apply.
They'd use their budgetary flexibility to pay their staff as required to retain them.
Personal likes/dislikes and 'jobs for mates' situations would develop, and this and the pay inequality would breed much discontent.
Necessarily limited budget would still lead to mass departures come airline recruiting time.
Unit structures would be based on their job and not the standard pyramid.
The standard pyramid works, in a squadron!
If they didn't cut the mustard they'd be moved out of the organisation, rather than just posted to be mediocre elsewhere.
Huge training bill for replacements, so not justifiable except in the very worst cases on a cost basis. Open to lengthy appeal process (more cost and complexity) unless CO / OCs given ultimate dismissal power, in which case an atmosphere of mistrust and fear develops, plus the jobs for mates/favourites problem is also rife.
The CO would manage the requirements of the organisation by having a true management team (no just and Admino). They'd have a Risk and Compliance Manager who'd have a safety and risk team working for them. Their role would also include compliance with governance like EEO, ethics etc. The CO would keep the Logo but they'd have an expanded role to manage the budget supported by a professional (non-uniformed) accountant. The admino would be a (properly qualified) HR manager. The XO would truly be an operations manager with lots of flying experience but in a non-flying position to properly manage ops.
Fair enough, COs need a good team to cut through the swamp of alligators and let them focus on what's important. Still, if the system can't pay for this already, it will be stretching the budget even further to provide it.
Accountable managers would put some of their pay at risk. They could be rewarded with bonuses for meeting or exceeding their requirements or fired if they failed.
See above re measurement of 'targets'.
Unit pay structures would be totally flexible.
Where does the extra money come from when external pressures like airline recruiting suck crews out of the system?
NCO pilot and aco aircrew could be used if it met capability requirements.
Why bother? The pay's negotiated anyway, so why would you differentiate?
Well, that concludes my waffle. It's all been reactive and generally negative comment to Toppie's postulates, so I'll put some thought to an alternative scenario for what it's worth.
The reality, though, as I see it, is that a squeezed defence budget exacerbated by super-costly equipment purchases doesn't leave a hell of a lot of scope for sweeping reform, and the RAAF will continue to struggle along and do what it can under the constraints of the resources allocated to it.