what am i doing wrong? (N Atlantic Convoy mission)

[Looney11]

Think of ship defense as a layered system, like onions (Shrek (tm)).

You want to engage threats at the farthest range possible. In case of the FFG, that means SM-2 first. if they miss, or there are more missiles than the system can handle, switch to the 76mm. Punch out clouds of chaff as described above and make damn sure you reload ASAP.
If that fails, and by this time your SM-2 is firing as well as your 76mm, open up your engagements-arcs of your CIWS to have it engage the missiles.

Remember that the Ciws, especially the phalanx system, is the last-ditch effort of the ship to destroy incoming threats and by no means should it be used as a primary means of defense. It wasn't made for that, it was made to give ships a last fighting chance if all else fails, lessons learned from the falkland wars so to speak.

I haven't played the mission myself yet, but will give it a go later on.