Summary

The men and women who serve in uniform for the naval services are at the heart of U.S. maritime superiority. Sound Navy and Marine Corps manpower and personnel policies are crucial to attracting enough of the right people to join and remain in service for as long as needed. Force management policies must also get people into the right jobs and motivate good performance. Since the inception of the all-volunteer force in 1973, the naval services have had remarkable success in working within the framework of existing policies to attract and retain high-quality people, develop their skills, and manage the force.

The Department of the Navy, however, must not take future success for granted. New threats, emerging technologies, and changing concepts of operations are all combining to place new demands on sailors and marines. Unfortunately, today’s manpower and personnel policies will not meet the needs of the Navy and Marine Corps efforts to shape their forces to meet those new demands. At the same time, demographics and other societal forces are acting to reduce the number of military-qualified youths. Moreover, in a constrained fiscal environment, the rising costs of uniformed personnel threaten to drain the Navy and Marine Corps of funding that is needed to modernize aging equipment, capitalize on emerging technologies, and realize the potential for transformation.

As discussed in more detail in Chapter 1, the committee recognizes that the needs of the Navy and the Marine Corps to enable transformation are not congruent. However, the committee also concluded that the best way to address its terms of reference dealing with the Department of the Navy in a single report was to review the challenges to transformation faced by the Department of the Navy and depend on the individual services to move to meet their individual needs. The committee presents analysis and options to meet several potential problems, some



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Summary The men and women who serve in uniform for the naval services are at the heart of U.S. maritime superiority. Sound Navy and Marine Corps manpower and personnel policies are crucial to attracting enough of the right people to join and remain in service for as long as needed. Force management policies must also get people into the right jobs and motivate good performance. Since the inception of the all-volunteer force in 1973, the naval services have had remarkable success in working within the framework of existing policies to attract and retain high- quality people, develop their skills, and manage the force. The Department of the Navy, however, must not take future success for granted. New threats, emerging technologies, and changing concepts of operations are all combining to place new demands on sailors and marines. Unfortunately, today’s manpower and personnel policies will not meet the needs of the Navy and Marine Corps efforts to shape their forces to meet those new demands. At the same time, demographics and other societal forces are acting to reduce the number of military-qualified youths. Moreover, in a constrained fiscal environment, the rising costs of uniformed personnel threaten to drain the Navy and Marine Corps of funding that is needed to modernize aging equipment, capitalize on emerging technologies, and realize the potential for transformation. As discussed in more detail in Chapter 1, the committee recognizes that the needs of the Navy and the Marine Corps to enable transformation are not con- gruent. However, the committee also concluded that the best way to address its terms of reference dealing with the Department of the Navy in a single report was to review the challenges to transformation faced by the Department of the Navy and depend on the individual services to move to meet their individual needs. The committee presents analysis and options to meet several potential problems, some 1

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2 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE facing both services and some only one. The committee’s guiding principle was that manpower and personnel changes will inevitably impact both services and thus demand the attention of both. In 2004 the Department of the Navy published its human capital strategy (HCS)1 outlining the department’s broad goals for human resources. Two years later, in 2006, the Navy’s Strategic Vision: MPT&E [Manpower, Personnel, Train- ing, and Education] Strategic Plan2 was published as the first of three milestone documents leading to implementation of the HCS. Later that year the second milestone document, the Navy MPT&E One Voice Reference Book,3 was issued. As of this writing the third milestone contribution—the Navy MPT&E roadmaps containing implementation action plans, discrete tasks required to achieve the HCS, and metrics, accountability methods, and timelines for completion—has yet to be finished. Thus the guidance for implementation of the HCS effort remains unfinished. Over the course of the past two decades, several studies have recommended fundamental reforms of military manpower and personnel policies across the Department of Defense (DOD). In 2000, the Defense Science Board flatly stated that “the current set of human resource policies and practices will not meet the needs of the 21st century force if left unchanged.”4 In addition, numerous prior studies recommended reforms in the areas of compensation and retirement. In 2005 the Center for Naval Analyses reviewed several past studies to assess the alignment of the Navy’s compensation tools with those broad goals.5 In 2006 the Defense Advisory Committee on Military Compensation (DACMC) called for changes in the basic pay table, consolidation of today’s plethora of bonuses and special pays into a few flexible incentives, and an overhaul of the retirement system.6 1William A. Navas Jr., Assistant Secretary of the Navy, Manpower and Reserve Affairs; LtGen Garry L. Parks, USMC, Deputy Commandant, Manpower and Reserve Affairs; and VADM Gerald L. Hoewing, USN, Chief of Naval Personnel. 2004. Department of the Nay Human Capital Strategy, Department of the Navy, Washington, D.C., June 21. 2 Navy Manpower, Personnel, Training, and Education (VADM J.C. Harvey Jr., USN, Deputy Chief of Naval Operations for Manpower, Personnel, Training, and Education, N1). 2006. Strategic Vision: MPT&E Strategic Plan, Department of the Navy, Washington, D.C., October 31. 3 Navy Manpower, Personnel, Training, and Education (VADM J.C. Harvey Jr., USN, Deputy Chief of Naval Operations for Manpower, Personnel, Training, and Education, N1). 2006. One Voice Refer- ence Book, Department of the Navy, Washington, D.C., November 1. 4 Defense Science Board. 2000. The Defense Science Board Task Force on Human Resources Strat- egy, Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, Washington, D.C., February, p. 14. 5 Michael L. Hansen and Martha E. Koopman. 2005. Military Compensation Reform in the Depart- ment of the Nay, Center for Naval Analyses, Alexandria, Va., December. 6 Defense Advisory Committee on Military Compensation (ADM Donald L. Pilling, USN [retired], chair). 2006. The Military Compensation System: Completing the Transition to an All-Volunteer Force, Arlington, Va., April 28.

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3 SUMMARY The committee reviewed the 2005 Center for Naval Analyses report and the 2006 DACMC report. Using an explicit set of criteria based on the needs of a transformed force, the committee critiqued the recommendations of the previous studies. The following findings and recommendations stem from the committee’s review of previous studies as well as its understanding of the demands associ- ated with transformation, possible future challenges to the supply of personnel, and developments in the labor force. (The recommendations in the report are not prioritized.) REALIzATION OF A FuLL HuMAN CAPITAL STRATEgy Finding 1: Completing, communicating, and implementing a comprehensive human capital strategy will be essential to achieving the Navy and Marine Corps transformation goals. In 2004 the Department of the Navy published an overview document outlin- ing an HCS. The committee is concerned that the strategy remains incomplete, in that the declared third step, the implementing roadmaps, have yet to be issued by the Navy. Nor is the Department of the Navy HCS broadly understood or routinely employed as a guide to decision making outside a relatively narrow circle of manpower and personnel specialists. Moreover, since the signing of the Navy’s HCS in June 2004, the services have undertaken important operational and organizational changes. They have also gained experience related to the Navy’s downsizing, lengthy commitments in Iraq and Afghanistan, and increased reliance on the private sector—all without the coherence and logic that a completed HCS would bring to the decision-making process. Recommendation 1: The Chief of Naval Operations (CNO) and the Comman- dant of the Marine Corps (CMC) should take ownership of their services’ human capital strategy (HCS) and direct its prompt completion. Beyond that, the CNO and the CMC should institute a process to review and update their HCS in light of changes in the strategic environment, future plans, and evolving experience with existing human resource policies. The completion of the services’ HCS should be done with the following criteria in mind: 1. Aligned. The HCS should be linked clearly to the services’ goals and mis- sions, identifying the highest-priority “key success factors” required of personnel for organizational success. 2. Internalized. The HCS must be communicated to and broadly understood at all levels, in ways that clarify to individuals in each subunit how their efforts affect overall success.

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4 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE 3. Routinized. The HCS should routinely inform decisions, trade-offs, and resource allocations and should be embedded in everyday operating procedures (e.g., planning and budgeting, personnel reviews, external reporting). 4. Coherent. The HCS should promote coherence and synergies in human resource administration across specific domains (e.g., recruitment, compensation, training, and development). It should sustain a human resources “brand” that makes clear to current and prospective sailors and marines what is expected of them and what they in turn can expect of the organization. 5. Measurable. The HCS should describe desired outcomes that can be and are assessed with metrics. 6. Adaptable. The HCS should be dynamic, undergoing routine reassessment and adjustment in light of learning and of changing organizational and environ- mental contingencies. 7. Consequential. Supporting the HCS should represent (and must be per- ceied to represent) a significant element in the formal assessment and evaluation of leaders. The committee recommends an assessment of current proposed human resource strategies against this list of criteria and creation of a template simple enough in form and content that it can be used to articulate the key success fac- tors and human resource strategy to diverse audiences at all levels of the naval services. RECRuITMENT OF SAILORS AND MARINES Finding 2: Changes in demographics, fitness, and attitudes toward military ser- vice call for creative approaches to Navy and Marine Corps recruiting. Since the inception of the all-volunteer force, the Navy and Marine Corps have devoted substantial resources to recruiting. Those resources have been instru- mental in bringing sufficient numbers of high-quality youth into the services over the years and making the all-volunteer force a success. In the future, military-qualified youth will make up a shrinking share of the U.S. population. Attitudes toward serving in the military may also reduce the pool of potential recruits. At the same time, the nation’s racial and ethnic mix is shifting in ways that will advantage employers that emphasize and value diversity and make extra efforts to attract minorities. Reserve Officer Training Corps (ROTC) scholarships are a crucial tool in attracting qualified students from diverse backgrounds into the officer corps. Complementing that effort, the Junior ROTC offers opportunities for high school students, including many who are otherwise disadvantaged, to improve their physical fitness, build values, and get a taste of military life.

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5 SUMMARY Recommendation 2: The Assistant Secretary of the Navy for Manpower and Reserve Affairs, the Chief of Naval Personnel, and the Deputy Commandant of the Marine Corps for Manpower and Reserve Affairs should examine options to expand Junior ROTC programs to attract qualified students from diverse back- grounds to naval service. Congress would have to be persuaded to provide additional funds for Junior ROTC programs. In some cases funds have been appropriated but have not been spent by the services. Location of Junior ROTC units can be critical to the suc- cess of the program. School districts with a large minority population need to be emphasized for the new units. Furthermore, there are aviation magnet high schools in the United States that should be made prime targets for units. Under current law only retired active duty members who are drawing retirement can be instructors in Junior ROTC. The way pay is structured, the retired reservist who is not drawing retirement cannot be an instructor. The Secretary of the Navy needs to determine if this requirement can be changed to increase the pool to draw on for instructors. DEPLOyMENT AND PACE OF WORk Finding 3: Recent and planned changes in Navy and Marine Corps missions, unit structure, and materiel will likely have adverse effects on people and readiness. Studies based on surveys and focus groups indicate that whether service members are deployed or at home, their morale and intention to continue in ser- vice appear to suffer when work hours are unexpectedly onerous, and when the realities of military life differ substantially from the individuals’ expectations. The wars in Iraq and Afghanistan, other worldwide deployments and commitments including the global war on terror, and the continual downsizing of the Navy pose the potential for adverse effects on people and readiness. While such effects may ultimately be ameliorated by the introduction of labor-saving technologies, they are exacerbated when workloads increase because the fielding of or training on new equipment lags behind the personnel reductions. Moreover, the challenges of irregular warfare, the continued shifting of shore work to contractors, and the Navy’s plans to move from a pyramidal to an oval workforce structure (discussed in Chapter 2) are likely to lengthen work days for many sailors and marines. If individuals are overloaded beyond their ability to support the mission, both mis- sion readiness and future retention are likely to suffer. Recommendation 3: The Navy and Marine Corps need better evaluation pro- grams to measure and interpret the effects of changes in workload, separation from home, length and repetition of deployments, and similar factors on readiness, morale, and intention to serve. The Assistant Secretary of the Navy for Manpower

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6 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE and Reserve Affairs, the Chief of Naval Personnel, and the Deputy Commandant of the Marine Corps for Manpower and Reserve Affairs should develop new metrics for the early identification of morale and retention signals related to deployment cycles, workload, and manning levels. Additional studies should be undertaken to understand better how deployment cycles, workload, morale, inten- tion to continue, and actual continuation are related. CAREER PATHS Finding 4: Officer career paths in the Navy and Marine Corps are designed to produce well-rounded officers suited for major command and flag rank. However, relatively few officers achieve these goals; most of the career force leave at (or shortly after) 20 years—many at the peak of their operational experience and expertise. Recommendation 4: The Secretary of the Navy (SECNAV), the Chief of Naval Operations (CNO), and the Commandant of the Marine Corps (CMC) should take steps to allow those officers who prefer an operational or specialist career to remain in operational or specialist billets, with limitations on rank, for their entire careers. Toward that end the Navy Department leaders should investigate how to embed performance incentives to accommodate career paths that would not involve moving up the chain of command. In addition, the SECNAV, CNO, and CMC should sponsor and support changes to the basic pay table that would allow individuals to stay in grade longer without financial penalty. Finding 5: Current promotion patterns from enlisted to commissioned officer are wasteful of talent and inconsistent with the Navy’s desire to move toward an “oval workforce.” The Navy recruits more ensigns than it needs in order to ensure that it will have enough midlevel officers. The surplus of ensigns is inconsistent with the Navy’s desire to develop for its future ships a workforce that looks less like a pyramid and more like an oval. At the same time, the Navy provides limited advancement opportunities for E-8s and E-9s, who therefore leave the service in large numbers as soon as or soon after they reach retirement age. Recommendation 5: The Chief of Naval Operations should work with the Sec- retary of the Navy to institute an enlisted-to-commissioned promotion path that pulls senior enlisted people into the midlevel officer ranks, and should use this program to avoid recruiting more ensigns than needed. Finding 6: Today’s restrictions on entry levels for people will hamper Navy and Marine Corps efforts to exploit emerging technologies and address unexpected threats.

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7 SUMMARY To exploit fully the trend from hardware- to software-driven systems, the Navy and Marine Corps will need officers and enlisted personnel who possess information technology skills at a very high level. Such skilled individuals will have to provide the Department of the Navy with educated buyers and allow units to modify their systems at the pace the threat requires, rather than the pace the defense industry normally provides. These skills are increasingly in demand in the private sector as well. When a new requirement suddenly emerges, such as the cultural and linguistic knowledge demanded by the global war on terror, there is no time to develop the expertise from within. Whether or not such expertise will be needed over the long term, the short-term need is often urgent. Individuals with such skills are avail- able in the civilian world. If provided the right incentives, such individuals might volunteer to serve on active duty for a specified period. Such individuals would be more valuable to the Department of the Navy than civilian contractors, and such service might be more attractive for the individuals as well. Recommendation 6: The Chief of Naval Operations and the Commandant of the Marine Corps should direct the development of a plan for lateral-entry programs to permit and encourage routine entry from the civilian world into active duty at all ranks for individuals with needed skills. Finding 7: Today’s policies can make a return to active-duty service challenging or unattractive for sailors and marines who wish to take time out to obtain train- ing and education not offered through the services, gain experience in the civilian world, or start a family. Today some sailors and marines of both genders leave for educational or workplace opportunities that are not available to them on active duty. Women early in their careers exit the services in disproportionate numbers. While they may need only a few years off, those who leave generally do not return to service. The early exit of experienced sailors and marines puts an extra burden on the remainder of the force and on resources for recruiting and training. Recommendation 7: The Chief of Naval Operations and the Commandant of the Marine Corps should direct the development of programs for on/off ramps whereby sailors and marines could without undue prejudice to their careers take time off from their active-duty careers in order to obtain education, take advantage of training opportunities beyond those provided by the Navy and Marine Corps, or start a family.

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 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE COMPENSATION AND RETIREMENT REFORM Finding 8: The current package of immediate compensation is overly complex, lacks flexibility, is not conducive to Navy and Marine Corps force management, and generally costs more than its value to service members. Recommendation 8: The Secretary of the Navy, the Chief of Naval Operations (CNO), and the Commandant of the Marine Corps (CMC) should support the following DOD-wide policy changes: • Improve incentives for performance by reconfiguring the basic pay table to set pay based on grade and time in grade rather than time in service. • Equalize the basic allowance for housing (BAH) rate for all service mem- bers, regardless of family status. • Pay BAH to all service members and charge rent to those in government housing, with the rent equal to the fair market value of their housing. • Consolidate all deployment-related pays, including the family separa- tion allowance. Deployment-related pay should be set to reflect the nature of deployment. • Consolidate the special and incentive pays into a much smaller number of categories, and work actively to help shape the categories to make these pays as flexible and useful as possible. In doing this, give particular attention to assign- ment and career incentive pay and selective reenlistment bonuses to best match the interests of sailors and marines with those of the services. Assuming that the broader pays are instituted, naval leaders, including personnel and budget offices, should make every effort to avoid “cost creep” as individual constituencies lobby for pay increases. The CNO and CMC should direct that rigorous evaluations of the services’ quality-of-life programs be carried out to understand their effects on readiness and ensure their cost-effectiveness. The leaders should also conduct research to assess the costs and benefits of flexible spending accounts for these programs, including health care. Finding 9: The current military retirement system impedes flexible force man- agement and is inequitable and inefficient. In addition, health care benefits for military retirees are not cost-effective. Recommendation 9: The Secretary of the Navy (SECNAV), the Chief of Naval Operations (CNO), and the Commandant of the Marine Corps (CMC) should advocate and support changes to the compensation system that would accomplish the following:

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9 SUMMARY • ncourage longer careers for some personnel and shorter careers for E others. • Offer greater flexibility in management of active and reserve forces. • Result in more personnel who are vested. • enerally provide more compensation up-front and less deferred to G retirement. • Improve integration of active and reserve forces. A three-part system seems the most promising in terms of effectiveness and political feasibility. Such a system would consist of the following: • An entitlement that allows members to accumulate benefits for old age, • A career management tool for the services, and • dditional front-loaded compensation that would also serve as a manage- A ment tool. The SECNAV, CNO, and CMC should also support a proposal that would require retirees under age 65 to stipulate a primary and secondary insurer, and that would give these retirees an incentive to stipulate Tricare as the secondary insurer. To induce more cost-effective use of health benefits, Tricare fees should be indexed to the annual cost-of-living adjustment to the military retirement annuity. Finally, the financing of the under-65 health benefit should be through an accrual fund, as it is for retirees over 65. RESEARCH TOOLS AND EXPERIMENTATION Finding 10: Establishing and sustaining transformation in Navy and Marine Corps manpower and personnel policies will require the use of a variety of research tools. Research tools ranging from surveys and analyses of administrative data to pilot demonstrations and experimentation have always been key tools in formulating policies that support military manpower transformation. Experimentation has been one of the research tools that the Department of Defense and the Navy in particular have used in achieving changes to the shape of military forces, and the Navy’s recent Sea Swap project illustrates that the Navy understands the value and challenges of experimentation. Recommendation 10: The Assistant Secretary of the Navy for Manpower and Reserve Affairs, the Chief of Naval Personnel, and the Deputy Commandant of the Marine Corps for Manpower and Reserve Affairs should continue to develop and use research tools and experimentation to address the many facets of the naval services’ transformation equation. In particular, the committee recommends the following projects:

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10 MANPOWER AND PERSONNEL NEEDS FOR A TRANSFORMED NAVAL FORCE • Evaluate Navy plans for dealing with the special requirements imposed by the crewing needs of the littoral combat ship (LCS) and other ship classes by using “embedded ovals,” that is, subsets of existing combatant crews, assigned to existing ships, to simulate the crews of LCSs in service. • Design and conduct a controlled experiment to test the assumptions of the value of various leave options, including the notion of the on/off ramp. • Undertake a pilot demonstration of a lateral entry and exit program to evaluate the availability of needed talent outside the services, the willingness of people with such talent to serve for a limited duration, and the contribution that such people could bring to real-world naval service situations. • Use the Navy’s Job Advertising and Selection System, Super-JASS, to create an experiment in the allocation of sailors to sea duty by using a variable economic incentive that could replace the blanket amount of sea pay now in use. • Use administrative data and other research tools to identify warfare behaviors and service appropriate to the requirements of irregular warfare, and encourage such behaviors and service by publicizing and rewarding them. CHANgE MANAgEMENT Finding 11: The implementation of changes to manpower and personnel policies is a complex and difficult process. The SECNAV, CNO, and CMC already have the authorities they need to make some changes. Even in those cases, however, change may be complex or involve several stakeholders, including the individuals who serve, their families, military retirees, the other military services, and Congress. If manpower and personnel policies are going to meet the challenges of the future, the Department of the Navy must prepare for and overcome strong opposition. Recommendation 11: To bolster the likelihood that changes to manpower and personnel policies will be adopted, the Secretary of the Navy, working with the Chief of Naval Operations and the Commandant of the Marine Corps, should take control of the change management processes. The Department of the Navy-wide processes should include the following: • Opportunities for early successes, • A program of continuing evaluation, and • The institutionalization of a program of comprehensive education of and communication with service members and other stakeholders about the reasons for the changes to manpower and personnel policies and the desired outcomes of change.