Defense Secretary Chuck Hagel put into action Wednesday plans to reduce his Defense Department staff by 20 percent, an effort he said will save the Pentagon $1 billion over a five-year period.

The changes involve eliminating civilian and contract workers, while reorganizing the oversight responsibilities of some of DoD’s senior officials. The plans also call for a major overhaul of the Pentagon’s policy directorate, including the elimination of one deputy undersecretary and four deputy assistant secretaries.

“This restructuring will better balance workload across policy’s assistant secretary of defense, sustain our emphasis on the Asia-Pacific region, space and cyber capabilities, and better integrate our focus on emerging threats with homeland defense efforts and strengthen our security cooperation efforts, while eliminating some senior executive positions,” Hagel said of the policy reorganization during a press briefing at the Pentagon on Wednesday.

Hagel has also realigned the Office of Net Assessment, a strategic analysis organization, under the policy directorate. The organization, which is led by long-time strategist Andrew Marshall, was said to be on the chopping block during the review but survived.

Over the summer, Hagel asked former Air Force Secretary Michael Donley to look for places to cut Office of the Secretary of Defense (OSD), services, Joint Staff and combatant command headquarters staffs by 20 percent.

In 2012, OSD had nearly 2,700 civilian and military staff positions, according to Pentagon documents. There are about 2,400 military and civilian personnel in OSD today, according to a senior defense official. After the downsizing, there will be fewer than 2,200 people remaining, Hagel said.

Other changes ordered by Hagel include trimming DoD’s intelligence division by identifying “non-core functions and programs that may be transferred to the services or defense agencies,” and moving oversight of information technology resources from the Deputy Chief Management Officer to the Chief Information Officer, a fact sheet on the changes states.

Hagel also called for changes to the Deputy Chief Management Officer’s responsibilities “to better coordinate and integrate DoD’s business affairs by creating a leadership focused on management concerns and creating a single management, business oversight, and administrative organization within OSD and across DoD,” the fact sheet states. He also called for realigning oversight of business systems from the deputy chief management officer to the chief information officer.

“[E]very dollar that we save by reducing the size of her headquarters and back-office operations is a dollar that can be invested in war-fighting capabilities and readiness,” Hagel said. “Beyond these fiscal considerations, our goal is to use this opportunity to streamline OSD, making it more agile and responsive.”

More details of the initiative will be included in the Pentagon’s 2015 budget proposal, which is scheduled for a February release.

“These reductions are only a first step in DoD’s efforts to realign defense spending to meet new fiscal realities and strategic priorities,” Hagel said.

“Difficult, but necessary choices remain ahead for the department, choices on compensation reform, force structure, acquisitions and other major parts of DoD.”