The Navy Secretary’s speech on managing talent was founded on sound economic principles.
In his speech at the Naval Academy this morning, Navy Secretary Ray Mabus announced that he intends to profoundly reform the way his department manages people—the human capital that drive the physical capital of its ships and aircraft. He admits that progress will proceed at a pace somewhere between “the speed of my pen” and “the speed of Congress,” but the breadth of the initiative indicates earnestness. Are the changes sensible? The idea that one can analyze people as self-developing assets was pioneered by the late Nobel laureate Gary Becker, and his book Human Capital offered eight observations on how it is managed, and on how it manages itself (see page 30 of the 3rd edition, University of Chicago Press, 1993). Those principles have been borne out by decades of economic research, and most usefully, Mabus’s innovations seem very much in line with many of them.
Becker’s last point (#8) was actually a Chicagoan warning about rationality—the typical investor in human capital is more impetuous and thus more likely to err than is the typical investor in tangible capital. That’s probably true, but it has unhelpfully helped reinforce the BuPers view that only a staffing hegemon has the data and the insight to manage a fleet of sailors. If the Navy let ship captains choose their own wardrooms, some would choose better than others. If the Navy let officers solicit those assignments, some would get off those 20-year tracks so painfully shown midshipmen in tedious PowerPoint briefings. To anyone in human resources at a Fortune 500, this degree of overthinking seems positively Soviet. As a former Army Reserve division commander and General Electric executive wrote in Armed Forces Journal a few years ago, “highly talented people… vote with their feet when employers fail to reward performance, fail to give people a voice in their work, and fail to fire bad bosses.” Recognizing that mounting danger, Ray is moving on.
But even if the SecNav isn’t opening the system to the market mechanisms that economist Tim Kaine wants, his new Office of Talent Optimization will at least use statistical tools and a network like LinkedIn’s to bring bureaucracy into the 21st century. The office is awkwardly named, and that reminds me of point #3—firms in underdeveloped countries tend to be more paternalistic towards employees than firms in developed countries. In a recent memo to Defense Secretary Ash Carter, Under Secretary for Personnel Brad Carson described the current mess across the services as a “calcified personnel system largely unchanged since 1947.” The Pentagon’s approach to people today indeed looks creakier than that of a 1970s South Korean chaebol or a South Asian trading house. Those sorts of organizations would build everything from scratch because they had to. Today, maintaining huge internal structures of centralized management makes sense only if external markets are poorly developed. But with a flourishing external environment, the constraints of the hothouse readily show. Even Mao thought that a thousand flowers should be allowed to bloom.
Deng took that a step further: some areas, he agreed as he relaxed the grip of the dead hand, must get rich before others. Becker put it more precisely with #5—the distribution of earnings is positively skewed, especially among skilled workers, and #2—unemployment rates tend to be inversely related to the level of skill. Unless, that is, you’re in the Navy, today. One can try to fight the basic laws of economics, but as Mabus quipped, gravity “isn’t just an idea.” Thus the Navy Secretary will also be requesting legislative authority to provide more tailored bonuses to retain the best, and more control over advancement and separation by ship and squadron commanders. Authority to manage people will be devolved, in some cases all the way to the people themselves.
Related here is Becker’s point #6—abler persons receive more education and more kinds of education than others. Here again Ray is saying they should. Part of his plan is modest—increasing by 30 the number of officers sent annually for graduate work at civilian institutions. Another part is more ambitious—increasing from 40 to 400 the number of officers and enlisted approved for “career intermissions,” in which they take a break from the service to do something new and different and valuable. Some of these will be sponsored on ‘Secretary of the Navy Industry Tours’—fellowships arranged with Fortune 500 companies so that sailors can bring back the best of the best practices they learn. It’s another recognition that the hothouse approach to learning about leadership isn’t working.
There is one more point. In 2008, Becker wrote that “the enormous increase in the labor participation of married women is the most important labor force change during the past 25 years.” The Navy is still catching up. At the Defense Entrepreneurs Forum in DC last week, a lady from the amphibious fleet reminded me that while women have been at Annapolis since 1976, and in the NROTC much longer, only 17 have since commanded ships. Mabus noted how women are 57 percent of college graduates today, so the Navy is at least under-leveraging an important talent pool. What might make the service more attractive? He hopes more attractive—and “iconic”—choker white uniforms. But he’s really betting on longer maternity leaves, and longer hours at daycare on every base worldwide. I imagine that fathers should like those ideas too. I could churlishly ask what took so long, but I think instead simple thanks are in order. So Bravo Zulu, SecNav. Report back to the republic, sir, when you’re done.
James Hasík is a senior fellow at the Brent Scowcroft Center on International Security.