Toward Incentives for Military Transformation: A Review of Economic Models of Compensation
RAND NATIONAL DEFENSE RESEARCH INST SANTA MONICA CA
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Recent efforts toward military transformation have extensive implications for the militarys personnel management and compensation systems. In addition to the existing goals of ensuring effective participation of individuals in the military attracting, retaining, and developing qualified personnel, the compensation and personnel systems of a transformed military should emphasize effort and performance incentives by encouraging reasonable risk-taking and innovation, allow for greater speed and flexibility in deployment, and support more decentralized forces. The worry, however, is that current military systems cannot facilitate simultaneously all the needs of a transformed military. This report reviews economic models of compensation in a hierarchical organization and identifies factors within the military compensation system that might constrain or facilitate transformation efforts. In particular, it focuses on how lessons from these economic compensation models can be used to increase flexibility of personnel management and provide incentives for creative thinking and performance and well-calculated risk-taking. Frameworks reviewed in this report are useful in describing the behavior of military personnel and patterns of performance in the military. This report is part of a larger project titled Enhancing the Flexibility of the Military Compensation System. The project seeks to define ways of simplifying and adding flexibility to the military compensation system that bring value to the military organization and support the goals of military transformation. Further effort within the project would use existing military compensation models to determine what changes to the compensation system would support transformation.
- Economics and Cost Analysis
- Personnel Management and Labor Relations
- Military Forces and Organizations