To Each According to His Needs

If the Republicans' stunning victories in last November's elections indicate anything, it is that Americans want less government and they want the government that remains to be more cost-effective. With entitlements such as Social Security and Medicare being declared untouchable and with such a relatively small percentage of the federal budget being tied up in non-defense discretionary spending, the people in the green eyeshades will turn toward the military, looking for ways to wring money out of the defense budget.

Anyone who has served in the armed forces knows that there are plenty of things that are done too expensively. One area that has not been examined carefully is the set of systems (both structures and techniques) by which ser­vice people are managed. The military compensation system especially has been ripe for scrutiny and mod­ification for many years. The current system is a relic dating back to 1922, devised for a time when:

• There were few military occupational specialties.
• Technology was primi­tive or nonexistent.
• Virtually all service members were single.
• All service members lived either on board ship or in barracks ashore.
• Most service members were unsophisticated—compared with their present-day counterparts—and had simple ex­pectations for the future.

Today’s military is completely different. To make do with this 70-year-old compensation system, Congress (at the behest of the armed forces) has modified it incre­mentally so many times that it has become a stultifyingly complex, cobbled-together maze of procedures and policies. Often, those procedures and policies work against the purposes of an effective compensation system, and they are out of synch with the free-market ethic of most public-sector organizations.¹

Try to name another organization in the United States that pays its workers—at least in part—according to their needs and relies on a compensation system that:

• Includes a complex combination of dozens of com­pensation factors from four different categories (some tax­able and some not) and provides some of these factors in cash and some in kind. Many military personnel believe they are underpaid because of the system by which they are compensated. The present system is so complex that few really know how their compensation compares with that of civilians doing similar work in the private sector.² In fact, a recent study by the defense think tank RAND contends that “when the Defense Employment Cost Index is used to compare changes in pay levels since 1982, the overall pay gap [between the military and the private sector] shrinks to a negligible 0.1% through 1992."³ Nev­ertheless, if people perceive an inequity, the system is less effective than it could be and will not help attract and re­tain the people needed by the armed forces.
• Gives workers more money whenever they get married, have children, or otherwise acquire dependents. What sin­gle service member hasn’t felt indignant about bringing home less money and being entitled to fewer perquisites than a married person of the same rank and length of service—even if their duties, qualifications, and perfor­mance are the same? By increasing allowances for mar­ried members, military policymakers send the message that married people are more important than single per­sonnel—and single personnel may become more tempted to enter into fraudulent marriages of convenience, to reap higher incomes and qualify for off-base housing.
• Gives all workers a raise every two years, regardless of performance. This practice implies that the value of peo­ple in uniform increases ipso facto as a function of age that seniority is more important than competence.
• Pays all workers at the same seniority level and pay grade the same basic pay, whether they are typists or nu­clear power plant operators. Under this scheme, military policymakers tacitly proclaim that a shore-based admin­istrative clerk has the same value to the service as a sea­going nuclear power plant technician. A 1980 Brookings Institution study, Paying the Modern Military, noted the inevitable result of this policy:

By not recognizing the differences in the value of oc­cupational qualifications—differences that civilian pay systems have always emphasized—military pay be­comes especially attractive to personnel possessing the less valuable skills, while it fails to satisfy those pos­sessing the more valuable skills; as a result, the armed forces end up paying some of their workers more than they need to and others less than they ought to.

• Makes it illegal to give a worker a raise without a pro­motion to the next higher level of authority. Under the current system, if a service has difficulty retaining people >n a certain specialty, it has only two possible options: pay them bonuses or promote them faster than those in other specialties.

In most cases, because authorization must come from Congress, the need for a bonus has passed by the time it is approved. This option does not provide the flexibility needed to cope with short-term staffing problems. To be efficient, bonuses must be awarded at the discretion of frontline supervisors.

Promoting people faster provides greater flexibility—especially in managing the volatile enlisted specialties—but it can have some unsettling consequences. For exam­ple, if the Navy has too few second-class electronics technicians, on the next round of promotions it can allow more third-class electronics technicians than usual to make second class. But for this to happen, certain promotion standards might have to be waived—or at least lowered. For enlistees, the four most important of these are job qual­ifications, performance, time in grade, and time in service. Because lowering qualification or performance standards would defeat the purpose of faster promotions (increasing retention of competent people), time-in-grade and time-in service factors are the ones usually waived.

These waivers may not affect overall competence lev­els, but they have the pernicious effect of creating a technically proficient but leadership-poor force. Time" in grade and time in service both equate to age and experi­ence. Certain vital factors, such as institutional memory and overall leadership, are bound to suffer when the av­erage age and experience levels of journeymen barely equal those of the apprentices they supervise. In addition, rank structure suffers from inflation: in time, ranks become de­valued and the military winds up with a top-heavy force.

What Can Be Done

There are at least four things that can be done to make the military compensation system more effective and efficient:

• Combine all elements of the current compensation system (both cash and in-kind) into one cash salary.
• Eliminate the three separate commissioned officer, war­rant officer, and enlisted pay tables and create one new salary table for all uniformed personnel.
• Make pay grade and merit-based steps—rather than rank/pay grade and time in service—the parameters of the new salary table, and make the changes in salary from one step to another or from one rank to another consistent throughout the table.
• Make pay relate more directly to skills, competence, and responsibilities by severing the link between pay grade and rank.

The first recommendation has come out of almost every military compensation study done over the past 40 years. It would not only solve the problem of complexity but also eliminate the unfairness inherent in the current system. Canada (in 1966), Britain (in 1970), and Australia (in 1973) already have taken this step.

The second recommendation would make the system more flexible, and therefore more efficient, by allowing the services to compensate people better in critical skill areas. No longer would technicians (all of whom are en­listed personnel) be limited to the pay linked to the highest enlisted pay grade for their particular number of years in the service.

Under the third recommendation, increases in pay based on time in service would be eliminated. This would put a greater emphasis on competence and skill development. In addition, pay raises—whether from a promotion or step increase—would be consistent. This would eliminate prob­lems service members experience when they move from enlisted status to warrant officer or commissioned officer, or from warrant officer to commissioned officer. Under the current system, for example, Navy or Coast Guard master chiefs take a pay cut if they decide to become warrant officers, even though it is ostensibly an upward move.⁴

The fourth recommendation—severing the link between rank and pay grade—holds the greatest potential for mon­etary savings. In the government and private sectors, the highest pay grade available to an employee routinely varies with the individual’s particular skill or specialty. The top pay grade available to typists, for example, may be many grades lower than the top grade available to civil engi­neers. In contrast, the pay grades for every military oc­cupational specialty run from the same starting pay grade to the same top-end grade. This situation seems to stem from the idea that all military people—at least when com­pared to others of the same rank and seniority—contribute equally to the national defense.

If the link between rank and pay grade were cut, com­manding officers would be able to promote people to higher ranks (recognizing seniority, superior leadership abilities, and mastery of purely military skills), while keep­ing them in pay grades that match their skill levels in their particular occupational specialties. And, concomitantly, commanding officers could give raises in pay grade (rec­ognizing improving and increasingly valuable technical skills) without promoting people to higher rank. Those people in more critical occupational specialties could be paid according to the relative market values of their spe­cialties. And military professionalism—rather than mere earnings—would once again be emphasized, as rank came to indicate military achievement and pay came to indicate technical achievement. The advantages of this concept will be apparent immediately to anyone who has supervised individuals who are wizards in their specialties but who couldn’t lead others out of a paper bag.

Under this new system, the services would have more flexibility with regard to how much they pay their peo­ple. Not all pay grades would need to be represented in all specialties, and each service could set its own ap­propriate pay ranges. For example, on a 30-grade military salary table, salary grades for Navy yeomen (basically sec­retaries) might range from Uniformed Schedule grade 2 (US-2) through US-5, while those for Coast Guard yeomen (whose work combines tasks performed by Navy yeomen, personnelmen, and disbursing clerks) might range from US-4 to US-8.

Given that many—if not most—military specialties now require expertise that is attained only after years of train­ing, higher retention rates are needed to make the services’ training investment worthwhile. The various officer corps could end the skill drain inherent in up-or-out promotion policies and still maintain their pyramidal rank structures because salaries could be kept as high as necessary, re­gardless of rank distribution. In the enlisted ranks, this proposed break would prevent a skill drain by more real­istically tailoring opportunities for higher pay grades to the need to retain certain specialties.

Naturally, there will be costs associated with convert­ing from the current system, but these must be weighed against the long-term savings—lower administrative, train­ing, and recruiting costs—and other intangible factors—improved overall leadership and greater professionalism.

The current compensation system used by the armed forces is an anachronistic, inefficient, ineffective, unfair, and unnecessarily complex vestige of a bygone age. Man­agement styles and techniques have changed over the past 70 years, so must the compensation system. Diddling around the margins will not help. Only a complete over­haul will resolve the inequities and anomalies and turn the current system into the cost-effective management tool a compensation system should be.

1 Most broadly, a compensation system should provide incentives for the organi­zation’s members to behave in the future in ways valued by that organization, to reward them for previous behavior that was considered valuable (or to punish them for behavior deemed counterproductive), and to entice them to remain in the or­ganization. This is a necessarily abbreviated discussion of military compensation issues, but I hope it will serve to bring an important issue to the forefront.

2 The once annual “Personal Statement of Military Compensation” did a poor job of ensuring that service members could make direct comparisons or otherwise understand the total value of their compensation packages. This document in it­self was the perfect argument for proponents of change. If one’s compensation package is so complex that it requires a detailed, three-page explanation to make it comprehensible, it is not an effective tool for doing those things that compen­sation is meant to do.

3 Tom Philpott, “Military Pay Problems: More Myth than Reality?” Points of In­terest, U.S. Naval Institute Proceedings, December 1994, p. 90.

4 This new table could have as many pay grades and steps as desired. In form, it would be similar to the civil service’s General Schedule (GS) scheme.

Mr. Webb, a former Coast Guard officer, congressional staffer, and Na­tional Security Agency intelligence analyst, is a freelance writer and has contributed feature articles, professional notes, and letters to Proceed­ings since 1979. He is the author of an upcoming book on reforming the armed services’ personnel management systems.