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The Navy needs youthful, vigorous officers to man its shi} and aircraft, hut if we establish a system which produces only officers, the experience level would be too low for efficien performance of many complex scientific, technical, and adminh tasks needed to support today's Navy.
T
JL he practice of releasing or forcibly retiring officers who fail selection for promotion at specified career points has been widely argued for years. But the controversy and visibility of the issue have intensified in the light of various initiatives proposed in recent years to counter the high costs of military personnel and retirement programs.
The “up-or-out” policy as it applies to military officers today is derived from the Officer Personnel Act of 1947 (OPA).1 As spelled out in the OPA and subsequently codified in Title 10, U. S. Code, the policy specifies that officers who twice fail to be selected for promotion to the permanent grade of 0-3 or 0-4 must be discharged. Those who twice fail to be selected for promotion to 0-5 or 0-6 may not remain on active duty beyond a specified number of years. In all services, the active duty status of reserve officers is determined by regulation rather than by statute. As a result, reserve officers will not be considered in this article.
A key feature of the up-or-out system is the effect of failure to be promoted to the permanent grade of 0-5 or 0-6. While achievement of the permanent grade of 0-4 guarantees tenure to retirement eligibility, failure to reach the 0-5 or 0-6 level results in restriction on the total number of years an officer may remain on active duty. An 0-4 must retire after 20 years and an 0-5, after 26. While this effect may not be so traumatic as forced discharge, it can have considerable personal and economic impact on an officer as he assumes a “lame duck” status within the organization.
The rationale for the system is that it provides the nation with a youthful fighting force, one which rejuvenates itself annually as new officers are commissioned and passed-over officers retire or are forced out. On the surface, the reasoning seems sound. Unchallenged, the system even seems successful. Why, then, has it been so frequently challenged in the past few years? Why have lawsuits been filed against the government by groups of “passed-over” officers? Why has disagreement over the policy twice prevented congressional passage of the proposed Defense Officer Personnel Management Act (DOPMA)? Perhaps the current policy has not been reasonable or successful. Perhaps it has failed to serve its intended purpose. Or perhaps its intended purpose is no longer valid or was invalid from the start.
Certain common arguments are frequently heard either for or against the up-or-out system. Foremost of the points in question is the cost-effectiveness
'For footnotes, please turn to page 40.
claim. Hastings Keith, former congressman and former member of the Defense Manpower Commission, said in 1977 testimony that elimination of the up-or-out system would save billions of dollars through lower costs for recruiting, transportation, training and not having to pay pensions as early as is now the case.2 The point Mr. Keith and others like him have seemingly failed to consider is that the ultimate number of retirement accounts will increase by eliminating the up-or-out system, and the average annuity of these accounts will increase as a result of longer active service.
An Air Force study concluded in 1977 found no difference in total cost (for base pay, retirement, procurement, and training) between the up-or-out system and one which would give officers increased tenure. And a cost analysis conducted at the Naval Postgraduate School in 1975, after considering costs of recruiting, acquisition, training, separation, and retirement, concludes that “. . . there is no great economic difference whether a twice failed select Navy lieutenant is separated or continued on active duty until completion of 20 years service.”3
Another point without merit is the comparison with private industry. One study justifies drawing a parallel “. . . because industry, operating on a profit motive, must be as efficient as possible in all management areas.”4 Efficiency in terms of profit, however, is the very reason that comparisons with industry are invalid. An extra employee in a private business can be justified as an investment. If the return, in terms of productivity or revenue or efficiency, |S greater than the cost of the employee, then his retention is justified. Military officer strengths, on the other hand; are directed administrative ceilings with no concern for the “return” on a particular officer s cost. Another significant difference in comparing in' dustry to the military is that the military officer career has a structured promotion process in order to keep up with grade distribution requirements. Each selection milestone is a public “pass-or-fail” point for the officer, whereas a civilian manager, when consid' ered for promotion, is at a non-public, “go-no g° point. If not selected, he or she is not identified or labeled as a “fail-select” manager.
An argument used both for and against the up' or-out system is the “youth and vigor” requirement- Former Congressman Keith expressed the opinion lfl 1977 testimony that only a small proportion of mil1' tary personnel really need to have the “youth and vigor” that the services “now treat as though it were universally necessary.”’ And Senator Sam Nunn has pointed out another consideration in his remarks ro the Senate:
. . we need youthful, vigorous soldiers, sailors, airmen and Marines to perform many combat jobs, but if a system is established which produces only young officers, the experience level of the officer corps would be too low for efficient performance of many complex scientific, technical and administrative tasks needed to support today’s armed forces.”6
Indeed, with increased automation, greater sophistication of equipment, and the tremendous growth in the number and importance of “white collar” management and support jobs, the physical demands placed on military officers are far less than they once were. Nevertheless, there still exists a very real need for physical vigor and stamina in many, albeit fewer than before, officer billets. Furthermore, the same youth and vigor argument which is the basis for the up-or-out policy is also the basis for the 20-30 year retirement policy. The same reasoning which justifies managers retiring in their 40s and 50s works against having 0-3s in their 30s and 40s. Although it seems clear that youth and vigor should not be the overrid- mg influences in officer retention, to simply write them off as unnecessary qualities in officers would be a mistake.
The “Peter Principle” is another argument frequently offered against the up-or-out system. It holds that good performance in a particular position ,s rewarded by promotion to a position of greater responsibility, with the process repeating itself until rhe manager can no longer meet the greater responsibilities, at which point good performance stops and che manager remains occupying a position at his level of incompetence.” It seems that proponents of the Peter Principle argument are trapped into acknowledging that those officers forced out of the active service are in fact low-caliber officers and that retaining them on active duty would only add to the Peter Principle effect, rather than alleviate it. This vote of “no confidence,” probably not consciously intended, is betrayed by such questions as, “Would it n°t be wiser to adopt a more pragmatic promotion policy whereby an officer could remain in grade . . . a°d not be induced by the system to aspire upward heyond his capability?”7
Quite the opposite of the Peter Principle, one of the tuost valid arguments made against the up-or-out pol- lcy is that it forces out some very fine talent. This °hservation is based on two differing assumptions. Qne is that the passed-over officer is in fact an inferior Performer in relation to his peers, although still effec- tlVe in relation to his job and to objective performance standards. The other is that the selection process itself ls an inadequate screening device, or at best a slave to grade limitations. Thus, the passed-over officer may be as well qualified as (or better qualified than) the officer selected for promotion.
The Defense Manpower Commission (DMC), in its 1976 report to the president and Congress, concludes that the up-or-out policy is “. . . one of the most controversial subjects in the personnel management arena . . . has created morale problems . . . has caused personnel turbulence and general hardship,” and is "failure oriented.” DMC further finds it “. . . inconceivable that a Service member who has been screened many times during his Service life by other promotion boards, by Service school and other selection boards, and by other evaluations is suddenly of no further value to his Service simply because the Service does not have enough promotions to go around.”8 A fact sheet given to members of the Senate Armed Services Committee during their consideration of the first DOPMA bill in 1976 said of the proposed new system: “Not everybody is going to be promoted to the highest grades, in part, because not all are required. . . . Therefore, it is inevitable that capable officers are going to be passed over from time to time.”9
There is a very widely held view that forced-out officers are, in any case, quite competent and qualified individuals who perform well and make valuable contributions to their services. This generally unchallenged view considers officers in relation to their jobs and to performance standards, regardless of where they are rated in comparison with other officers. Congressman Les Aspin has said:
“There just ought to be a place for a person who would like to spend a career at a particular rank, is happy doing it, and is good at his job—someone who manages to be productive and useful. There just ought to be some way that we can make use of that kind of person.”10
A General Accounting Office (GAO) report states: “The up or out system is not concerned with an individual’s ability to perform effectively, but with the member’s relative standing among his peers. DOD’s force structure policies do not permit members who are passed over for promotion but are still capable of performing effectively to complete full careers. The retention of personnel should be guided by service requirements and the ability of each individual to perform his or her duties effectively.”11
This view of the system is at the root of DOPMA’s difficulties in getting through the Senate. Senator Nunn of the Manpower and Personnel Subcommittee of the Senate Armed Services Committee, has been the key blocker of the bill. One of his principal objections is the continuation of the up-or-out system. He considers it expensive to force officers up through the ranks and a waste of experience to get rid of others. Nunn believes these individuals could continue active service at a reduced salary even after they are no longer eligible for promotion.12
The effect on the organization of forcing out competent performers is recognized as undesirable. Directly related to this issue is the consideration of the effect on the individual. Not only is the fairness or unfairness of the system to be evaluated, but also the effect on the morale and well-being of the officers whose careers rise and fall. There is no doubt that economic security is one of the key attractions of a military career. Given the structured and relatively short career pattern, it is not unreasonable to believe that this attraction plays a much more important role in a military career decision than it would in a civilian situation.
In considering not only the forced-out officers, but also those who must look forward to early retirement as a result of failing selection for promotion, it is clear that the individual does not have much basis for either satisfaction or optimism concerning his personal and economic prospects. As testimony before the House Armed Services Subcommittee on Military Compensation pointed out during 1976 hearings on DOPMA:
“. . . it should be noted that the 20-year mandatory retirement comes at a time, in many military families, when the children are ready for expensive higher education. With the military officer’s earnings reduced by half at that crucial time, a definite financial hardship occurs.”13 Of every 100 officers commissioned, only 41 will reach the grade of 0-5, and only 18 will reach the grade of 0-6.
In a 1975 survey conducted among 160 Navy lieutenants who had just been passed over a second time and forced off active duty, all 160 indicated that they would have stayed in the Navy for a full career had they not been forced out. One hundred fifty-six, or 97.5%, claimed never to have received any unsatisfactory or unfavorable fitness reports. So the forced- out officer sees himself as both career motivated and as a satisfactory performer. Of those polled, 24 voluntarily offered additional comments “. . . relevant to inability by the Chief of Naval Personnel to provide some information regarding reason for failure of selection and to provide some form of guidance or reassignment of duties to enhance promotion opportunities.”14
The bottom line here is the implication that the system, rather than the individual officers, is to blame for forcing out good talent. The criticism extends to the promotion selection system itself. Many individuals feel that the existing promotion system, with its inescapable up-or-out milestones and its ranking of officers in relation to each other, produces a distorted sense of values and encourages ticket- punching rather than performance standards as the chief means of assuring selection for promotion.
To assess the impact of this situation on the officer corps, it must first be assumed that the officers are aware of the compromise of the system and have generally adapted themselves to it. Once this is assumed, it becomes clear that an adversary relationship exists between the officers and their own career system. To say that the officers mistrust the system would be too harsh, but to say they treat it with caution, never being too sure of what to expect, is likely to be accurate.
After reviewing the traditional arguments for and against the current system, it seems reasonable to conclude that the system does have many problems, its originally intended purposes are no longer served, and it does need reform to prevent an adverse impact on both the military officer corps and the individual services.
These conclusions have been acknowledged in many quarters, and some intitiatives have been proposed or begun with a view toward improving the system. Possible courses of action include such imaginative proposals as a “two-track” system, in which officers would be promoted and retained according to two separate sets of guidelines; manipulation of promotion zones and selection opportunities to allow 100% selection to 0-4; and the granting of active duty reserve status to passed over 0-3s. All would attack the heart of the up-or-out system. Unfortunately, they all disregard the basic reason for the system in the first place; that is, the strength and grade limitations established by the law. No matter how many clever solutions are devised, the system cannot be changed unless the laws are changed.
Granted, then, that the first step toward reform must be a change in the law, a consideration of DOPMA and its effect on up or out is in order-
Officer Pay Grades and Ranks
Navy and Coast Guard Marine Corps, Army, and Air Fort1
0-6 | Captain | Colonel |
0-5 | Commander | Lieutenant Colonel |
0-4 | Lieutenant Commander | Major |
0-3 | Lieutenant | Captain |
0-2 | Lieutenant (junior grade) | First Lieutenant |
0-1 | Ensign | Second Lieutenant |
DOPMA is designed to replace both the Officer Personnel Act of 1947 (OPA) and the Officer Grade Limitation Act of 1954 (OGLA). It is supposed to update and standardize officer management practices among the four military services, eliminating inconsistencies and inequities contained in the old system, and adding enough flexibility to adapt to changing force levels. DOPMA is viewed cautiously by many as a first step toward combining the armed forces into a single defense force. On the specific issue of up or out, DOPMA as originally proposed would not only continue the policy, it would even broaden it to subject 0-4s to discharge and 0-5s and 0-6s to earlier retirements. Those who were passed over could remain on active duty only if selected by specifically convened continuation boards.
It is DOPMA’s inclusion of up-or-out provisions which has raised many of the objections to the bill in rhe Senate. The most recent version of the bill is the first to survive the Senate Manpower and Personnel Subcommittee, chaired by Senator Nunn. Approval came, however, at the cost of significant change to DoD’s endorsed version. Among other substantial changes, the subcommittee reportedly added provisions to allow selected continuation of passed-over 0-3s until they reach retirement eligibility.15 There Lave been reports that the subcommittee’s proposal may be so different from the DOPMA plan first put forth by the Defense Department that DoD might not support the subcommittee’s version. Indeed, there is some opinion that DOPMA’s difficulties over the past few years are proof of the contention that the Peculiar needs of each service preclude the adoption °f a common system.
It appears that the system as now proposed in DOPMA would not do much to eliminate or substantially revise the up-or-out policy. To improve the system would require not only procedural changes, hut also reevaluation of the foundation of the system. The Defense Manpower Commission feels that “. . .a method of managing entry into the career force is preferable to exit management.” The screening process, in this view, “. . . should be separate from the promotion process and should not operate on a quota or percentage basis. It should review a person on the basis of effective performance, not on his relative standing with his contemporaries.”1(1 The scheme recommended by the Defense Manpower Commission calls for a selection system at the ten- year mark to pick those officers who would be allowed 30-year careers, provided they continued to serve well and honorably. Those not selected would be given severance pay and would be able to begin new careers at an age when opportunities are still open to them.
Assuming that such suggestions could be agreed upon and incorporated into the legislative process, there is still one key area which demands consideration in discussing career management policies— retirement. As long as promotion policies are governed by personnel ceilings and programmed vacancies, and as long as retention policies are affected by long-term costs, the retirement system will play a significant role in any proposal. The current system has come under attack for not providing any benefits to those who leave with less than 20 years of service. The logical remedy is to provide for “vesting” of benefits before 20 years. This would facilitate release of unneeded personnel and also would encourage more people with 10-20 years of service to leave voluntarily, thus reducing the numbers who must be separated involuntarily. This proposal is particularly appropriate in considering officers passed over for 0-5 or 0-6. To allow them some alternative to "sticking it out” until retirement would certainly have a favorable impact on promotion flow and opportunities.
Deficiencies in the retirement system have not gone unnoticed. In fact, several controversial revision proposals have arisen in recent years. The new DoD proposal submitted to Congress in July of this year stems from the recommendations of a presidential commission formed after the Carter administration had abandoned the bogged-down 1974 Retirement Modernization Act. The current proposal does contain provisions for “vesting” for all those who serve at least 10 years. Those who voluntarily choose to separate with at least 10 but less than 20 years of service would qualify for a deferred annuity at age 60. Those serving 20 or more years would receive immediate annuities at retirement and increased annuities at age 60. With these features, the proposal purports to encourage both longer and shorter careers, thus opening up career opportunities in the low and middle ranks, while achieving greater stability in the senior officer and enlisted communities. The long-range dollar savings of the proposed system result from markedly lower annuities than at present, and from a cash withdrawal gimmick whereby active duty members with over ten years of service could withdraw substantial cash payments against their eventual pensions, thereby reducing retirement payments significantly.
While retirement modernization is essential to any officer career management reform, it is a subject which inspires controversy and emotional resistance. Like earlier proposals, this latest plan can expect to be opposed by several factions, including the military service chiefs, who feel it would have an adverse impact on retention of middle managers.17
After reviewing the system now in effect, the various arguments for and against that system, and the actions proposed or taken thus far to change that system, it appears that the passed-over officer is in the same situation he has been in since 1947, with little prospect for change in the immediate future. To be sure, the arguments seem to support the conclusion that the up-or-out system is detrimental to both the individual officer and to his service. The system encourages distorted values and can undermine morale and motivation, often leading to personal trauma and hardship. Most of the officials and individuals who have voiced public opinion on the subject seem to support, or at least acknowledge, this conclusion. However, nobody is doing much about it. The various proposals which are offered from time to time are typical of the piecemeal approach to this issue. Legislative initiatives such as DOPMA or the Retirement Modernization Act seem to address only segments of the overall problem, and then only in an oversimplified manner. This incomplete treatment may be symptomatic of a certain shallowness throughout these legislative proposals and may give a clue as to why they repeatedly fail to be approved in Congress.
If an effective revision of the up-or-out process is to be undertaken, it will have to be based on a coordinated approach to all aspects of the problem. Changes in the laws governing officer strengths and grade limitations must be complemented by changes in promotion, evaluation, and retention policies. At the same time, changes must be made in retirement and separation laws, including establishment of benefits for those either voluntarily or involuntarily separated before retirement. This type of coordinated approach does not now exist. Furthermore, it is unlikely that a concerted approach toward the problem will be forthcoming from either Congress or a presidential commission. For this reason, it must be the Department of Defense which takes the initiative. The policymakers in each individual service must join together to highlight all the aspects of the problem, and to develop a comprehensive program to attack it and correct it. For the good of the service, any move toward such coordinated action should be welcomed, encouraged, and supported by all.
Lieutenant Commander Schmitt was graduated from Siena College, Loudonville, New York, in HT 1967 with a B.A. in English. Since receiving his ' Sgt commission through Officer Candidate School in Newport, he has been assigned to the USS Voge (DE-1047); Navy Regional Finance Center and Navy Finance Office, Philadelphia; Naval Supply Depot, Subic Bay; the USS Mississinewa (AO-144); and Staff, Commander Naval Surface Force, U. S. Atlantic Fleet. He is a graduate of Navy Supply Corps School, Naval Transportation Management School, and the Armed Forces Staff College. He is now assigned as supply officer in the fitting-out crew of the Arkansas (CGN-41).
‘See Rear Admiral David L. Martineau, USN (Ret.), "1947—A Very Good Year," Proceedings, September 1977, pp. 25-31.
“"Former DMC Member Says 'Up-or-Out' Promotions Must Go," Nary Times, 4 April 1977, p. 10.
'Jose Terlaje Nededog, A Study of Twice Failed Select for Promotion of Lieutenants in the United States Navy and its Cognitive Effect on Cost Savings (Alexandria, Virginia: Defense Documentation Center, 1976), pp- 72-73.
4Mitchel J. Irlenborn, "Up or Out," An Outdated Management Practice (Maxwell, AFB, Alabama: Air Command and Staff College, Air University, 1977), p. 25.
’"Former DMC Member Says . .
’Quoted in Phil Stevens, "Sen. Nunn Wants DOPMA Revised," Navy Times, 23 August 1976, p. 4.
‘Captain Ronald W. Carter, USA, "The Peter Principle and Army Promotions ," Army, March 1976, p. 52.
’Defense Manpower Commission, Defense Manpower: The Keystone of National Security. Report to the President and the Congress (Washington, D.C.- U. S. Government Printing Office, 1976), p. 261.
“Quoted in Andy Plattner, "Brief DOPMA Hearings Are Expected in House,” Navy Times, 2 May 1977, p. 10.
‘“Quoted in Plattner interview, "Aspin See Many Changes Ahead for Military People," Navy Times, 15 August 1977, p. 4.
"Comptroller General of the United States, Report to the Congress. The Twenty Year Military Retirement System Needs Reform (Washington: D.C.; General Accounting Office, 1978), p. 16.
12 The DOPMA Farce,” Navy Times, 11 September 1978, p. 17.
13U. S. Congress, House Committee on Armed Services, Subcommittee on Military Compensation, Defense Officer Personnel Management Act Hearings (Washington, D.C.: U. S. Government Printing Office, 1976)* p. 12.
"Nededog, p. 88.
"Plattner, "Panel OKs DOPMA—With Changes," Navy Times, 6 August 1979, p. 3.
16Defense Manpower: The Keystone of Security, p. 261.
‘"'JCS Likely to Oppose Military Retirement Plan,” Navy Times, 20 August 1979, p. 27.