Total Volunteer Force: Lessons from the US Military on Leadership Culture and Talent Management

(1990–95)

Introduction

The life or death of any organization hinges on the quality of its people, a truth undiminished and perhaps amplified in our era of accelerating technological change. Some organizations such as the armed forces seem immune from catastrophic failure because they are shielded from profits and the risk of bankruptcy, but the stakes are even greater there. The need for human excellence, for trust in teammates, for optimum leadership as well as talent, is universal. And yet how to thrive in the human dimension remains shrouded in mystery.

Two of the most recent defense secretaries have identified the Pentagon’s underperforming personnel bureaucracy as the top challenge hindering military commanders and the men and women in uniform. In his farewell speeches and memoir, Robert M. Gates, who was appointed secretary of defense by President George W. Bush in 2006 and reappointed by President Barack Obama, asked how the Army can break up the institutional concrete, its bureaucratic rigidity in its assignments and promotion processes, in order to retain, challenge, and inspire its best, brightest, and most battle-tested young officers to lead the service in the future?¹ Ash Carter highlighted recruiting and retaining talent as his top priority during his first speech as secretary of defense, even naming the effort the force of the future.²

The military’s dysfunctional personnel system is well known to service members, but it became a national flashpoint during the wars in Iraq and Afghanistan.³ A number of recent studies have revealed the depth of frustration among active-duty Army officers at all levels. Fewer than one in five officers think the Army does a good job matching talents with jobs and weeding out the weakest leaders, whereas just one in twenty think it does a good job retaining the best leaders. As alarming as such studies have been, they reveal symptoms of the problem—a point of widespread agreement—but not underlying causes and solutions.

This book endeavors to, first, identify the underlying causes of personnel dysfunction in the US armed forces and, second, propose a set of reforms.

The proposed blueprint aims to move Pentagon personnel policies further along the spectrum of volunteerism, away from the coercive structures that have outlived their purpose after the All-Volunteer Force (AVF) was implemented in 1973. The Total Volunteer Force (TVF) envisioned here would emphasize greater individual agency during all stages of a US military career, not just the first day of enlistment. More importantly, by decentralizing personnel processes, the TVF will restore command authority to colonels and captains that has been missing since the misguided centralization of the 1960s and that has neutered operational flexibility for the past half century.

TVF reforms are fundamentally aimed at getting the right people in the right jobs, which is a job-matching optimization process that decentralized markets do exceptionally well. Service chiefs would have new authority to change promotion timetables (or not), allow greater specialization, allow lateral reentry of veterans to active duty, and increase the hiring authority granted to unit commanders. Improving performance evaluations is another TVF recommendation, which can enhance individual morale and development, but is essential information for improved job-matching. Thirdly, TVF recommendations aim to improve military compensation, which is rife with costly disincentives. These are not recommendations rooted in for-profit best practices; rather, they stem from first principles and an empirical assessment (in chapter 1).

When the AVF was proposed in the 1960s, it was called mercenary by almost the entire defense establishment. President Nixon established a fifteen-member commission to study the issue after the 1968 election, chaired by former secretary of defense Thomas Gates Jr. (no relation to Robert Gates). What became known as the Gates Commission was intentionally balanced at Nixon’s insistence, with five members opposed to conscription (including economists Alan Greenspan and Milton Friedman), five neutral, and five in favor. Gates even told Nixon he was opposed to the whole idea of a volunteer force,⁴ which is why the president wanted him. Many months later, the group formally reported that it unanimously believes that the nation’s interest will be better served by an all-volunteer force.…⁵ Now, forty years later, almost no one in uniform wants to serve with draftees. Experience has shown the men and women in uniform to be more professional than ever.

The AVF was a radical transformation that has been fully vindicated by the test of time. Despite deep suspicion among many military leaders and despite a rough first decade of implementation, nobody seriously believes today that a return to conscription would enhance the quality of military personnel. Nor does anyone argue that a draft—even with lower base pay—would save money because it’s understood that retention would collapse, forcing higher recruiting and training expenses.

The AVF enhanced the quality of the force and its morale and efficiency. Once base pay was raised in the early 1980s to provide competitive salaries, the volume of young citizens willing to volunteer exceeded the number of positions. This led to a steady quality revolution in the ranks to such an extent that now literacy and educational levels of enlistees far surpass average civilian levels, and experienced troops are routinely headhunted by private-sector firms. Despite the dramatic change in how personnel were managed, the AVF transformation should not be considered an end state.

The TVF will extend the core values of volunteerism and professionalism and, like the AVF, will save money. Gains in efficiency should not increase costs, not even in the short term. That is why this book focuses its recommendations on reformed (and restored) processes and authorities rather than on expensive new programs. Reducing coercive personnel processes will reduce compensation needed to push people around.

This is possible because the AVF did not end the use of coercion in the ranks—it only ended it at the accessions gate. Since 1973, coercion has remained the dominant management technique for military HR. Personnel are given orders and their careers are managed centrally, rather than personally. Compensation has been shaped to reinforce coercive control. Most plainly, the twenty-year cliff pension enhances retention with the crudest financial tool. To give a twenty-year veteran a retirement package while a nineteen-year veteran gets nothing would be illegal if the employer were in the private sector, a disparity that strikes most everyone as deeply unfair.

For all the critiques of the personnel system, there has not been much in the way of an alternative. To be sure, reams of Government Accountability Office reports, Rand studies, and think tank papers have highlighted flaws and proposed modifications. In many of the internal government reports, however, the solution to an overwhelmed bureaucracy is bluntly to add more funding to the bureaucracy. As an example, the Army recently moved its Washington, DC–based Personnel Command (PERSCOM) to a sparkling new headquarters at Fort Knox, Kentucky: the newly christened 4,000-strong Human Resources Command (HRC).

The Total Volunteer Force aims to restore command authority over personnel to the US armed forces, much of which was surrendered to centralized bureaucracies during Secretary of Defense Robert McNamara’s tenure and codified in subsequent legislation and regulation. Unit commanders today have very little authority to select, dismiss, replace, promote, or rearrange the personnel under their command. Likewise, individuals in uniform have very little authority over their own career assignments. In short, they are not volunteers after day one.

Skeptics of decentralization will rightly warn of nepotism and bias. What should be understood up front is that the theme of these recommendations is flexibility. The armed services operate under extreme mandates, notably the strict promotion timetables that force each service to manage year-group cohorts in lockstep while forcing officers and enlistees into extremely narrow career paths dotted with vital checkpoints and constant geographic and job rotations. The armed forces deserve flexibility to move away from extreme centralization, but the goal is to offer them options and balance. Rather than deal with a binary choice between anarchy and control, an optimal personnel structure should avoid extremes of central or local authority. What the TVF represents is a rebalancing of command authority with central guidance.

The reformer’s central dilemma is how to improve the military without sacrificing invaluable traditions. That dilemma can be easily resolved if the reforms are not mandates at all, but simply structured as the removal of stifling mandates in current law and a restoration of service chief and commander authority over personnel policy.

CHAPTER ONE

Analyzing the Problem

How can the Army break up the institutional concrete, its bureaucratic rigidity in its assignments and promotion processes, in order to retain, challenge, and inspire its best, brightest, and most battle-tested young officers to lead the service in the future?

—SECRETARY OF DEFENSE ROBERT M. GATES’S SPEECH AT THE UNITED STATES MILITARY ACADEMY, WEST POINT, NEW YORK, FEBRUARY 25, 2011

What is wrong with the Pentagon’s personnel system? Perverse incentives in compensation and retirement have distorted the shape of the force—matching highly talented people with the wrong jobs, incessantly rotating employees up and sideways, and fostering a culture where employees feel obligated to express insincere preferences to stay on the career track to get to twenty. Neutered command authority over personnel decisions makes it difficult to match the right people with the right jobs, hurts readiness, and prevents toxic and predatory individuals from being weeded out of the ranks. Inflated performance evaluations are corrosive to fairness and integrity in the Army, Navy, and, especially, the Air Force.

During his farewell address to the cadets at West Point, Secretary of Defense Robert M. Gates identified the personnel system as his main worry for the future of the Army. Likewise, Secretary of Defense Ash Carter emphasized fixing personnel policies as vital to building the force of the future in his first speech in March 2015. Carter said, We also have to look at ways to promote people, but not on just when they joined, but even more based on their performance and their talent. And we need to be on the cutting edge of evaluating performance.… We also need to use twenty-first-century technologies—like LinkedIn kinds of thing—to help develop twenty-first-century leaders and give our people even more flexibility and choice in deciding their next job—in the military.⁶

Red Alert

One statistic above all else serves as a red alert that the military personnel system is dysfunctional: the unemployment rate of young veterans. It averaged nearly a third higher than nonveterans (10.7 percent compared to 8.0 percent) before the 2009 recession. After 2009, more than one in five veterans age eighteen to twenty-four could not find a job between 2009 and 2012, twice the jobless rate of nonveterans. The persistence of this employment gap has reinforced some misperceptions about the quality of troops, even among top policymakers.

The unemployment rate of veterans may seem irrelevant to the readiness of the active-duty force, but it is a profoundly relevant symptom of the real problem: the institutional inefficiency of central planning. In blunt terms, some of the nation’s most talented young men and women are on active duty but never empowered to take—and in fact are discouraged from taking—an active role in applying their unique skills to the military’s needs. Job-matching is centrally planned in all of the armed forces. Young veterans enter the private sector almost totally unprepared to search for a job because that activity—the engine that drives America’s free market economy—is anathema to the modern Pentagon bureaucracy. It wasn’t always this way.

Ben Bernanke, the former chairman of the Federal Reserve, remarked at a public event in August 2015, If you go into the military at age eighteen—versus an identical person who stays in the private sector and takes a private sector job—ten years later, if you leave the military, your skills and wages are probably not going to be quite as high on average as the private sector person. Bernanke chided the Pentagon for advertising that service in uniform adds beneficial skills: The evidence appears to be that there really is not an advantage, and further that the military is really not adding much to the private sector through training or experience. He mentioned academic research by MIT economists Joshua Angrist and Stacey Chen, but unfortunately, Bernanke misinterpreted their work. Angrist and Chen compare veterans to nonveterans from the late 1960s when soldiers were drafted. In fact, the authors conclude that lifetime earnings consequences of conscription … have almost surely been negative. The authors were expressly not analyzing the impact of military service, let alone service in the modern era, but focused exclusively on the negative impact of conscription nearly six decades ago.

So, Bernanke was wrong, but his belief was rooted in the civ-mil employment gap that still persists today.

In August 2015, the US Bureau of Labor Statistics (BLS) issued a major report titled Employment Situation of Veterans.⁷ That month, the national civilian unemployment rate was 5.1 percent. For all 21.2 million veterans, the average rate of unemployment was lower, but for the 3.2 million recent veterans who served during the post-9/11 era, unemployment was higher than the civilian norm. Individuals in this cohort are described as Gulf War II era veterans (including all who served after 9/11 as their most recent period of service).

Those who served in Iraq or Afghanistan had lower unemployment rates than other veteran peers, 4.1 and 4.0 percent, respectively. Surprisingly, veterans who had served tours of duty in both Iraq and Afghanistan had the lowest unemployment rate of all, 2.9 percent.⁸ This suggests that combat experience involves skills that do transition well to civilian jobs. It seems that discipline, courage, teamwork, and other soft skills are highly valued and valuable in civilian occupations.

Another sign of the positive impact of military service comes from a recent study by the Department of Veterans Affairs, which found that post-9/11 veterans attain 11 percent higher median earnings than non-veterans with similar demographic characteristics, an advantage that was even higher for female veterans.⁹

General comparisons of veterans to civilians can easily be skewed by the heavy gender and age differences among those two populations. A closer look at demographically similar cohorts offers an insight into where the problem lies. Note in table 1.1 that younger male veterans have unemployment rates one and a half points higher than male nonveterans, but older veterans have unemployment rates equal or significantly lower.

Why does the employment gap persist for young veterans? The best answer came from a 2014 Rand study by David S. Loughran titled, simply, Why Is Veteran Unemployment So High? He considered five different explanations. After extensive demographic analysis, Loughran discovered that the skills mismatch hypothesis—the one Bernanke echoed—has little support in the available data. Another theory blames service-related injuries, but it is also not supported in the data. Service-related disabilities do keep one in seven veterans out of the labor force, but labor force participation rates are routinely higher, not lower, than for civilians. Nor is employer discrimination to blame. The fourth unsubstantiated hypothesis is that ex-soldiers are less innately competent than other Americans. The opposite is true. Soldiers have much higher literacy and IQ scores than civilians, on average.

Loughran concludes the culprit is weak job search capabilities. Young veterans, by definition, leave a stable job and enter what is to them a strange new world. The key evidence is that the unemployment difference between veterans and nonveterans evaporates over time. It decreases by almost half a percentage point each month after an individual leaves active duty.

In short, US military veterans have superior job skills but no job search skills.

Exacerbating the problem are legislative remedies made with the best of intentions. During out-processing, soldiers are strongly encouraged to sign up for unemployment compensation during their first day as a civilian. Yet academic studies show that unemployment insurance (paying people half their recent salary for many weeks if they remain unemployed) raises the national unemployment rate, while also causing skills to atrophy. A smarter program would make jobless benefits more generous, but not allow people to access those benefits until out of work for a month or two. During the 2009 recession, Congress extended the normal twenty-four weeks of jobless benefits to an unprecedented ninety-nine weeks. Young veteran unemployment skyrocketed.

None of this lets the Pentagon off the hook. It is unrealistic to teach a ten-year enlistee how civilian labor markets work with three days of transition classwork. Ultimately, the Pentagon’s centralized control over personnel assignments bears the most responsibility. A system of central job-matching leaves soldiers and sailors unprepared for a labor market that requires self-motivation, initiative, and personal responsibility.

Identifying the Real Problem(s)

Symptoms of problems are informative, but should not be mistaken for problems themselves, which is why conversations about retention problems or surveys of morale are of limited practical use. Even broad agreement that personnel policies are dysfunctional is followed by disagreement about what, exactly, is