In his paper “Keep a Weather Eye on the Horizon,” Commander Guy “Bus” Snodgrass predicted that the Navy could find itself in a “retention storm” caused by challenges of work-life balance, morale, professional pride, and adequate compensation.1 This was later made evident when the results of the Fiscal Year 2018 Aviation Department Head Screen Board were announced, showing that a statistically significant number of tactical air (TacAir) aviators submitted a “don’t pick me” letter and/or declined department head positions. Through informal exit polls conducted by the Navy, compensation was not the number one issue—but it was on the list. Discounting incentive pay and failing to address a restructure could be a missed opportunity, especially when our junior officers compare our service to the recent efforts by our sister service the U.S. Air Force.2
Looking at Navy Personnel Command statistics on retention, it is clear that many officers are leaving the Navy at the O-4 and O-5 paygrades (particularly TacAir). What is not immediately evident is that there is money left on the table. Retention incentive pay (“bonus” money) was budgeted five years ago, and was fenced off in our budgetary process.
What if we could use the lower take rates to our advantage? What if we could harness market forces and flexibility to restructure our decades-old retention contracting to provide more money to those that want to stay? If we could chip away at the complex retention issue by reinforcing the lower portions of Maslov’s hierarchy, perhaps we could gain some resonance while simultaneously appealing to the intrinsic reasons to stay in the Navy.
Within the confines of the Department of Defense budgetary process, any pay and compensation strategy employed to remedy today’s retention deficit will demand effective and efficient ways to maximize every dollar, and must be accomplished within our existing authorities.
Thanks to the intense lobbying efforts of the U.S. Air Force, the Defense Department has authorities to increase annual Aviation Career Pay (ACP) up to $35,000 per year.3 The Navy must seize this opportunity to increase its ACP structure.
The authority to spend money does not come with necessary funds to execute. Acquiring increased funds in a unilateral, traditional method will require budgetary planning through the planning, programming, budgeting, and execution process. The budget is not big enough that the Navy can simply increase the bonus and distribute it among all eligible people. The problem is more complex, and deserves a creative solution.
What if the Navy created a career incentive market place, prioritizing and incentivizing those who commit first? This could make it possible to distribute ACP based on milestone achievement. But this also begs certain questions: if we are not spending budgetary money because of low take rates, how can we make that money work for us while simultaneously taking advantage of increased authorities? And how can we do this today, and not five or ten years from now?
The short answer is that the Navy must create an ACP working capital account and execute contracts to the maximum legal authority. Restructure career retention and incentive pay to achieve maximum effect using marketplace strategies, flexible contracting, milestone-based payment structure, and velocity-based fiscal execution. The creation of an ACP retention working capital account should entail the following concepts:
Increase all incentive pay: Increase ACP to the maximum NDAA limits of $35,000 per year (tiered approach based on communities of retention need).
Create a marketplace: Offer bonus windows during which members who accept ACP contracts are assured maximum pay. Those who do not enter into the contract at first opportunity will have either less payments available or less money annually.
Flexible contracts: Allow individuals to enter into ACP contracts for short term (two years), long term (five years), and career contract (“department head plus command,” also known as the “6+2” structure, to be discussed below). Short-term contracts enable junior officers to have flexibility and not feel over committed. Long term and career options enable mutual investment in the Navy. The Air Force is doing this today.4
Milestone-based pay structure: ACP contracts will offer to retain until the next milestone, but only pay annually until the member is selected for the milestone. If a member under a contract fails to select for department head, he or she may leave or stay in the Navy but will not receive payments until they are working in the milestone job. Conversely, if the member selects for department head then he or she is guaranteed the annual pay, for which they entered into the contract.
Full Career Extension Options: Structure the ACP career contract (6+2) such that if a member enters into the career contract at first opportunity, he or she has the stability to obtain the maximum ACP pay per year under law, and not less than the amount in the year, including the option to increase if NDAA authorities increase during his or her career. The proposed ACP career contract would be fixed for six years as a department head and then include a contract extension option for two years if selected for command at sea. In other words, the member would be guaranteed eight years (6+2) of ACP at legal maximum limits if they screen for milestones and enter into the contract at first opportunity. This would allow the Navy to tell junior officers that as they grow professionally, the Navy will reward their growth and promote them. That is powerful and would resonate, demonstrating personnel valuation that is not available in current ACP structures.
Restructure the command bonus: Overhauling incentive pay would necessitate renaming the bonus to “post-command retention pay,” contractually structured to keep Navy leaders filling critical jobs. The term “aviation command retention bonus” or “the command bonus” is a mischaracterization and evokes a dialog counter to retention. The post-command retention pay must be a two-year contract, minimum. Immediately defuse the notion that staying in the Navy costs money, relative to taking retirement and working for equal pay to O-5. Post-command retention incentive payments must be equal to the largest amount of pay within the command, as it is inconsistent for the Navy to pay less for the retention of post-command commanders than it does for officers with “less time in the company.”
Adding the total money for a hypothetical lieutenant commander who takes a career retention bonus (the 6+2 contract with options), we find that the individual would obtain $280,000 in retention pay plus an additional $96,000 in increased flight pay, totaling $376,000. That is exactly three times the current department head bonus. This innovation allows a dialogue about mutual investment in the Navy and personal valuation. The Navy values its members, and they need to feel valued monetarily. We do not do our job for the money, but when applied properly, retention pay can be a force multiplier.
To achieve affordability, the application of layered effects creates the marketplace, which then can control the total expenditure by implementing “contracting velocity.” The DOD budgetary guidance clearly states that we are all chartered to “Employ appropriate contract types, but increase the use of incentive type contracts.”5
The power of the layered effects of contract windows, milestone-based payment structure, and limiting the number of contracts delivers the maximum effect. Working capital application to ACP is the contracting equivalent to the “shoot, look – shoot” tactic, delivering maximum effect with a conservation mindset. The end result is providing meaningful money into the hands of those individuals who opt in earliest and are the most invested in the Navy.
The bottom line is that our current incentive structure is dated and needs new life. A working capital approach enables the Naval Aviation Enterprise to “do different with the same” to achieve our desired effect – keep the best warriors in the cockpit!
Commander Lisa has flown more than 2,500 hours in 25 aircraft, numerous combat sorties, and made 510 arrested landings. He piloted the first embarked arrested landing of the EA-18G on board the USS Dwight D. Eisenhower (CVN-69). He is the commanding officer of VAQ-135.
1. Guy M. Snodgrass, “Keep a Weather Eye on The Horizon, A Navy Officer Retention Study,” Naval War College Review 67, no. 4 (autumn 2014).
2. Jannelle McRae, “FY 17 NDAA Impact on Airmen,” Secretary of the Air Force Public Affairs, 27 December 2016.
3. “The Planning, Programming, Budgeting, and Execution (PPBE) Process,” Department of Defense Directive (DoDD) 7045.14, 25 January 2013.
4. Oriana Pawlys, “New Bonus: $455k over 13 Years for Air Force Fighter Pilots,” Military.com, 5 June 2017, www.military.com/daily-news/2017/06/05/new-bonus-455k-13-years-air-force-fighter-pilots.html.
5. Secretary of Defense Frank Kendall, “Implementation Directive for Better Buying Power 3.0—Achieving Dominant Capabilities through Technical Excellence and Innovation,” Directors of the Defense Agencies, AT&L Reports, 9 April 2015.
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