New Modeling Tool Will Help Military Improve Retention and Manage Its Compensation System

A new report from the RAND Corporation outlines advancements to a key modeling tool that will allow the U.S. military to better manage the size of the armed forces and its compensation system.

The Dynamic Retention Model is a state-of-the art modeling tool originally developed at RAND that has been used by the U.S. military to support military compensation decisions to sustain the all-volunteer force in the United States. While valuable, the tool had been limited because it could only forecast the retention and cost effects of policy changes once fully phased in across the entire workforce.

However, changes often are phased in, with existing service members “grandfathered” under the policies they signed up for, and new policies applied only to service members who join after a certain date.

“The typical military career can last as long as 30 years — that's a long time for the effects of a policy change to cover everyone,” said Beth Asch, one of the authors of the study and a senior economist with RAND, a nonprofit research organization. The other authors of the study are Michael G. Mattock and James Hosek.

“The new model will allow the U.S. military to understand the workforce effects of permanent compensation and other workforce policies during a transition period, as well the effects of temporary policies such as pay freezes and furloughs,” Hosek said.

The new RAND research represents a major technical innovation that sets RAND apart in its ability to conduct analysis of potential changes to compensation and retirement, and to manage a force drawdown, such as the one currently underway, according to researchers.

For example, the report investigates the effects of an important strategy that could provide additional flexibility to the military: offer service members the option of either being “grandfathered” under the existing policies, or switch to the new compensation package. Those who preferred the existing system could choose to remain under it, but those who preferred the new system could select the new one. Accurately capturing the effects of options like these on the makeup of the force requires understanding and modeling service members' decision-making, one of the technical challenges overcome in the new model.

The report, “A New Tool for Assessing Workforce Management Policies Over Time: Extending the Dynamic Retention Model,” can be found at www.rand.org.

Research for the report was funded by the RAND-funded Gene Gritton Award for Innovation in Defense and National Security. The award honors Gene Gritton, former vice president of the RAND National Security Research Division. The purpose of the award is to stimulate new thinking about how to solve difficult problems and help RAND sponsors and clients get ahead of new challenges, focusing on research that has the potential to make substantial advances in an important defense or national security policy area. This report is the first to receive the Gritton award.

The project was conducted within the Forces and Resources Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Command, the Navy, the Marine Corps, the defense agencies and the defense intelligence community.