General John J. Pershing became the Chief of Staff of the Army in July 1921 and began a reorganization of the Army Staff. He imposed the same model he had used in the American Expeditionary Forces of a five-part General Staff on the Army, directing that separate divisions be established for personnel, intelligence, operations and training, supply, and war plans. However, with only four Brigadier Generals authorized for the Army Staff by congressional funding, the intelligence officer lost in the competition.

The new Assistant Chief of Staff, G-2, was Dennis Nolan, Pershing's highly successful G2 from the war and his personal friend. Unfortunately, what worked in wartime did not always work in peacetime, and the officers in the G2 ended up taking on primary responsibilities like public relations that had nothing to do with military intelligence. As a result, intelligence work often became a dumping ground for officers incapable of performing any more demanding activities, and astute officers regarded intelligence assignments as detrimental to their careers.