Toward Improved Management of Officer Retention

The U.S. Department of Defense needs the capability to assess alternative policies to enhance the retention of officers. This capability should be founded on empirically based estimates of behavioral response to policy and recognize that, when making decisions, members are forward-looking and take into account future opportunities and uncertainty and the outcomes of past decisions and policies. Further, the capability should enable DoD to simulate or predict the effects of alternative policies on officer retention and the costs of those policies. This report documents efforts to implement such a capability for officers and illustrates its use. The authors statistically estimate the parameters of a dynamic retention model of officer behavior and use the parameter estimates in a simulation model to help evaluate the effect that changes in compensation can have on the retention of officers and to show how policies that change the retention behavior of these officers can also change the aggregate retention of the population of officers at earlier or later years of their careers. The model can also be used to gauge the effect of alternative policies to enhance retention. In addition, the authors have created a spreadsheet version of the model that can provide quick estimates of the effect that bonuses, gate pays, and separation pays can have on retention in all years of service. This report provides the mathematical foundations and the source code for the spreadsheet model. The spreadsheet model is also available on request from the RAND Forces and Resources Policy Center.