Tim Kane Chief Economist Hudson Institute Book published by Palgrave MacMillan December 2012

Pentagon Paradox Why does the American military produce the most innovative and entrepreneurial leaders in the country, then waste that talent in a risk-averse bureaucracy? Why Coercion? What values are at stake? A Professional Military? What is Entrepreneurial Leadership?

Survey of 250 West Point Grads “93 percent believed that half or more of ‘the best officers leave the military early rather than serving a full career.’ Among active-duty respondents, 82 percent believed that half or more of the best are leaving.”

Survey of 250 West Point Grads Percent Active Duty Percent Yes, strongly agree 19% 23% Yes, agree 59% 55% No, disagree 20% 23% No, strongly disagree 2% 0% Does the current exit rate of the military's best young officers harm national security? “How can the Army break up the institutional concrete, its bureaucratic rigidity in its assignments and promotion processes, in order to retain, challenge, and inspire its best, brightest, and most-battled tested young officers to lead the service in the future?” - Robert M Gates, Secretary of Defense

Survey of 250 West Point Grads... does a good job weeding out the weakest leaders. 18%... does a good job retaining the best leaders. 5%... does a good job matching talents with jobs. 18%... does a good job promoting the right officers to general. 38%... promotes & incentivizes entrepreneurial leaders. 8%... should be radically reformed. 55% The current military personnel system...

Entrepreneurs in Uniform George Washington Civilian Robert E. LeeEngineer Alfred Thayer MahanIntellectual Bill MitchellInnovator James GavinYoung Gun Dwight EisenhowerOld Staffer

Total Volunteer Force 1.The military is its own role model for radical reform. We did it in 1973: ended the draft and instituted the radical All Volunteer Force. 2.Key pieces: performance evaluations, thicken labor supply, end year groups, pay, all issues orbit the central piece of job-matching

What’s wrong with leadership management in the Army? (and Navy, and Air Force, and …) Job-matching is a disaster. It is centrally planned, and consequently suffers from Hayekian knowledge problem. Inefficient and morale crushing. Careers based on seniority & box checking, not merit. System is rigid – not adaptive to changing technology. Performance evaluation is inflated beyond parody. Not useful for feedback, job-matching, promotion. Promotions are strictly gated: one narrow path. Up or out framework discourages entrepreneurship, talent development. No lateral entry.

Each commander is responsible for hiring personnel in his unit. Total Volunteer Force (an economist’s framework) Use volunteerism, not coercion. Boards meet to authorize, not award, promotions. Each commander has an HR officer.

Total Volunteer Force Efficiency means getting the MOST out of your people. Real evaluations with relative rating and peer assessments will lead to better talent matching and career development. Flexible pay and time on station will lead to great satisfaction, productivity, and talent matching.

Tim Kane Chief Economist Hudson Institute