Can the Army be Efficient? Pt 2: The system

The last entry summarized a concept for changing the way the Army does its human-resources management. In short, I proposed moving from the central-planning concept currently in use to a market-based approach in order to increase efficiency, mission capability, and retention or job satisfaction of soldiers. This entry will outline a bit more of how the process could work. Some readers will have ideas that could improve the system or other considerations I didn’t think of; please include those in the comments section.

First, a quick refresher on some of the key tenets of the free-market system: A free-market is composed of individual actors motivated by profit competing for scarce resources which are allocated by price (that's my lay-definition). This is in contrast to a central-planning system in which resources are rationed by planners in accordance with a top-driven master-plan. The free-market system is more efficient than the centrally-planned system because individual actors have more local knowledge of their needs than does the central planner. To use Thomas Sowell’s example: A gas station owner on a street corner has more knowledge about what the locals will pay, when traffic is highest, what refreshments are selling, and etc., than does a corporate strategic planner a thousand miles away. If the strategic planner tries to dictate everything that the gas-station owner does in running his store, the result will be a less-efficient–though undeniably more uniform– and less profitable gas station. The Army has a centrally-planned human resources division. The premise of this series of posts is that there is a more efficient alternative, based on free-market theory.

So. The basis of the system is a personnel-marketplace, similar to what exists throughout America today. In this case, however, the system would be Army-internal, and the pool of potential candidates would come from either existing service-members, commissioning sources, recruits, or draftees, and the information clearing-house would be HRC.

Here’s how it would work: Units would have a budget determined by a number of factors. Individual service members would have records– essentially a resume package consisting of the ORB/ERB and past evaluations–at HRC. Units would post job openings, similar to what happens on monster.com or similar job opening sites. Individuals could contact the units or vice versa about job openings; mutually interested parties (units and service-members) would come up with and sign contracts assigning the individual to a job or range of jobs with a given unit for the contract-specified amount of time and pay. The individual would serve the terms of the contract, and at the end of the contract, the individual could re-negotiate or seek another opening in the Army. The Army could specify a minimum time in service for the individual and mission set for the unit as a general framework.

It’s that simple.

There are some additional refinements for the system, or rather, other considerations.

The only units involved in the bidding/hiring process would be divisions or equivalents. This would be done to keep the administrative competition at lower levels to a minimum, and enable them to fight wars. At the same time, it would give enough flexibility to tactical-level organizations that they could properly employ their local knowledge to compete for personnel. Corps is too high; Brigade is too low. Division looks just right. The current system allows units to request personnel based on their MTOE (Modified Table of Organization and Equipment); however, the actual allocation is up to, again, HRC, to come through and slice out personnel based on Army requirements. With a division- level manning program, soldiers would have visibility on the organization they were entering, stability, and be ensured that they were getting into a small enough organization that they wouldn’t be totally lost.

The budgetary and salary issues become a prominent issue in this discussion. Army personnel are paid on a fixed salary, with fixed benefits depending on their dependents and physical location. Retirement consists of a fixed percentage of the average of the 3 highest years of salary, as shown here, which starts at 50% for 20 years of service and moves up gradually with more years in uniform. This is quite the incentive to stay in the service. How would the free-market system deal with the retirement benefits package? This might be a case where the Department of the Army (DA) supplies funds for the benefits package, or alternatively, the package becomes fixed to rank and years in service regardless of the High 3 earning average. No doubt this would cause outcry from career officers, but it would be an excellent way to put to the test any claims of being in the service for the service and not the money. It would also be equitable from the paying units’ point of view– multiple units wouldn’t have to argue over who paid for retirement of the Colonel or Sergeant Major.

As a practical matter, this would have to be implemented in a phased manner, with units coming on-line in the system in a gradual manner, and individuals prior to the end of their first term-of-service being put under the new system. Current “lifers” have already legally committed to a system, and changing the terms of their current contracts would likely be illegal. This would also remove an institutional barrier against change–namely, the “I’m going to protect my piece of the pie” mentality of people in an organization. Newcomers would have eyes-open to what was going on and would be able to leave or to commit to more time in service.
This also raises the important question of having a draft vs. volunteer force. I believe a draft is a good idea for many reasons, but (and I say this without quantitative studies to back me up) I believe that either system would work equally well in the meritocratic Army-market.

Units would still receive a given mission-set requirement from Big Army and would have to meet evaluation and performance standards to earn a budget. The unit could man itself any way it liked, as long as it could fulfill the mission requirements of its various staff and operational functions. Budgeting would be a combination of evaluated performance from scheduled on-post exercises, Training Center rotations, and surprise/short-advance notice evaluations and exercises. Impending combat tours could be factored into budgeting to allow units to come up to strength– to compete with other units for personnel.

Now we have a system where units are free to work to meet their mission needs, balanced against a reasonable measure of performance, mixed with a price-based allocation system that meets service-members’ needs and avoids the surplus/shortage symptoms of a centrally managed economy. Let’s move on to some effects of the system.