During World War II, U.S. Field Commander Omar Bradley was known as the “GI’s General” for his quiet, unassuming demeanor and affinity for the common soldier. If Bradley was the “GI’s General” perhaps Chuck Hagel should be dubbed the “Soldier’s Secretary.” Like Bradley, he is a Midwesterner with a gentle demeanor that belies battlefield toughness. Like the famously modest Bradley, he has maintained a low profile at DOD, taking time to learn its massive, organizational structure, building trust with both generals and soldiers, and plotting strategy to keep our defenses strong while his budget is tight.
I have known Secretary Hagel since his days as Nebraska’s Senator. He has a history of putting country first, whether in the jungles of Vietnam, the halls of the Senate, or now, the Pentagon’s E ring. A year into his tenure, he recently agreed to talk with me about tensions in Asia, budget cuts, rebalancing our defense priorities, and how running DOD is like a game of football. Our interview follows.
You’ve been in office a year now and already have been thrown some curve balls.
When I first got here, I needed to make some very quick assessments. Kim Jong-un started sending missiles up and threatening to wipe out the West Coast of the United States. Sequestration hit. I hadn’t even been here a week.
Your proposed budget, some say, will bring our troop levels to the lowest since before World War II.
We chose to further reduce troop strength in every military service, active and reserve, to sustain our readiness and technological superiority, and to increase critical capabilities like Special Operations Forces and cyber-resources. The development and proliferation of more advanced military technologies by other nations mean that we are entering an era where American dominance can no longer be taken for granted.
You are also tackling military compensation.
Since 2001, military pay and benefits have risen about 40% more than the private sector. Our proposals were crafted to reform compensation in a fair, responsible, and sustainable way. No one serving our nation in uniform is overpaid for what they do for our country. But if we continue on the current course without making these modest adjustments now, the choices will only grow more difficult and painful down the road.
How worried are you that Hill politics will trump national security needs?
I think Congress understands that we must adapt, innovate, and make difficult decisions to ensure that our military remains ready and capable — maintaining its technological edge over all potential adversaries. As Roosevelt’s Secretary of War Henry Stimson once said, we must “act in the world as it is, and not in the world as we wish it were.”
To what extent will we rebalance our resources toward Asia?
Well, the rebalance is occurring and will continue to if for no other reason than the world through 2,000 years of recorded history has been constantly rebalancing.
Economies are everything because the economy of a nation anchors the security of a nation. Everything else flows from that. That’s why, in one sense, the President has put an emphasis on the Asia-Pacific.
That doesn’t mean we retreat from any part of the world. We’re not retreating from NATO; we’re strengthening NATO. We’re doing what we need to do in the Arabian Gulf, continuing those commitments to our partners, our friends.
So what will change?
I’ve emphasized capacity building with our partners. How do we continue to build the capability of our partners — whether it’s in the Asia-Pacific, NATO, or the Middle East — so that they can handle more of their own challenges?
What concrete steps are you taking?
This April in Hawaii, for example, I’ve invited all the ASEAN ministers of defense for a 2½-day meeting. This isn’t just about military to military. It’s bigger than that. You get to the foundational question:
What’s the purpose of all this?
Every problem in the world today is in some way connected to lack of hope, to despair, and to no opportunities for people. If you can maintain your freedom and your security, then you can grow your economy and create more opportunities and jobs.
So we’re going to involve the Commerce Department. And [we’ll continue to] connect economies, trade, commerce, and opportunities.
In Asia, how worried should business be about the current tensions?
Well, I don’t think you can ever take any possibility off the table. But when you look at all the tensions in the Asia-Pacific — and they’re real — they shouldn’t inhibit anyone from investing there.
We’ve always had challenges. It’s how you manage them. And that includes having personal relationships with leaders and knowing that a nation will always respond in its own self-interest. There’s something reassuring about that.
Can we improve relations with China?
China is sitting there with pretty significant domestic challenges. However, the Chinese have a common interest with us and other nations — they want to continue to grow their economy. We’ll never agree with the Chinese on everything, but if we can find enough common interest, whether it’s with China, Russia, or Iran — everybody’s got to get something out of the deal — then we can manage through this.
Is there a guarantee that’s going to happen? No. Do you have to plan for alternatives? Yes. And therein lies an important part of our policy. Other countries need to know that we have the capability and the will to respond if we need to, and that we will.
How do you even begin to tackle leading an organization the size of a small country?
Yes, this institution is probably as large and complex as any institution in the world. But that said, I don’t think the principles of management, or leadership, are any different in a small organization or a big one.
People need to know that you value them. They need to know that there is a purpose to their effort. Unity is critical. You’ve got to listen throughout the ranks, and make decisions that are fair.
No one person can manage this place, not unlike big corporations. You’ve got to empower your people. You have to trust them and have confidence in them.
Yes, but when you have to react to so many problems, how much time do you have to be forward-looking and strategic?
In a job like this, where your responsibility is the security of your country, you have to factor in a certain margin for the unexpected. You don’t know what’s going to come through your door. It is a dangerous, unpredictable world that we live in.
So you have to strategically think and plan. You need to prepare as best you can for the unexpected, but you’ll never be good enough to plan for everything.
I come at this like a football game. When the President asked me to do this job, he asked me to do it for four quarters, for his second term, for four years, and I committed to that.
The first quarter’s about up. I’m going into the second quarter. I know a lot more. This gives me a higher platform, to strategically think ahead.
And you’ve also got to work with the White House, State Department, and other national security agencies. When you have to make a fast decision, how do you move forward?
Well, as a former United States senator, that’s probably the biggest adjustment I’ve had to make here. As a Senator, you’re accountable really to only yourself and your constituents. But here, it’s different. I work for the President of the United States. I’m accountable to the Congress, to the American people, and the people here. I’ve got an audience of our allies, and those who are not our allies are listening, as well.
You’ve got to talk with people and let them know what you’re thinking. And that means consulting with your interagency partners. Ambassador Rice. Secretary Kerry. John Kerry and I have the advantage of being old friends. We served together in the Senate. The President, the Vice President, the Secretary of State, and I served at the same time on the same committee.
That helps, because relationships do matter. When you make any decision, you have to factor all of that in. But in the end, you’ve got to make a call.
Right. So for instance, when you ordered our jets into China’s Air Defense Identification Zone, your gut told you that the Chinese would not engage. And it worked beautifully. It was a very bold move.
You make decisions based on listening to your field commanders, and people closer to it than you are. Our Pacific Command commander, Admiral Locklear, was part of that. The chairman of the Joint Chiefs of Staff, General Dempsey, is a partner.
So you need good people on the ground, but you need a good gut too.
It is what leadership’s about. Now, the other part of this is the risk that you’re placing your country in — and the people who serve under you — that’s always got to be very paramount in any secretary of defense’s mind.
Robert Gates said in his memoir that he found generals were more reluctant than politicians to go to war, because the generals knew war and the anguish of it.
Bob Gates is right, in my opinion, and I’ve always believed that. I’ve seen that close up here. I saw it in the Senate. Our military is called upon to fight wars based on our civilian leadership’s decisions. But they usually are the last ones that want to take that option.
Final question. You are the first enlisted soldier to ever hold this job. At the end of your fourth quarter — and, of course, a Nebraskan would use a football analogy — how do you want them to remember you? What do you want them to say about Chuck Hagel?
I don’t spend any time on that, because every job I’ve ever had, everything I’ve ever done, that gets sorted out at the end.
What I do want — when I walk out of here — is to have the certainty that I was able to make this place better, the institution stronger, all of our people more capable, and America safer than when I found it. If I can do that, no matter what else has happened in those four years, then I’ll accomplish everything I could possibly accomplish. And I’ll let others sort the rest of it out.
A shorter version of this interview appeared in the March 17, 2014 issue of Fortune.