A lack of diversity at the Defence Ministry is leading to a "club-like culture", a review says.

A performance report issued by the State Services Commission criticised the ministry for its "limited ethnic diversity".

Of about 70 staff, 57 per cent are over the age of 50 and are "predominantly" male.

The review says it "is always only one resignation or retirement away from a very serious skills shortfall and inability to deliver required outputs".

It also points to a long lag in recruitment because of the need for security clearance and identifies "excessive modesty, deep conservatism and possibly a short-sighted approach to resource management" as weaknesses.

The department is "thinly resourced" and the review concludes it should not be returning funds to the Government each year.

This will eventually adversely affect morale and energy levels of staff and the quality of its work.

However, the report's authors, Debbie Francis and Ian Fitzgerald, were struck by the "happy and collegial ambience" at the ministry.

They said it had in recent years "boxed well above its weight in view of its tiny resource base".

The ministry has an operating budget of about $14 million but manages expenditure of between $140m to $440m. The Defence Force manages recruitment, training, deployments and gives military advice to the Government.

Defence Minister Jonathan Coleman said the review was a "useful and helpful tool" and he would consider the conclusions.

The Government is appointing a replacement for outgoing secretary of defence John McKinnon.

- © Fairfax NZ News