The transformation of the military retirement benefit that is likely to become law later this year is hardly the end of the changes on the horizon for the armed forces' personnel system, a top Pentagon official said.

"It is a watershed change. It is not enough of a change, though, because we have to do still more,"  acting Defense Department Undersecretary for Personnel and Readiness Brad Carson said about the retirement reform.

In an interview from his Pentagon office, Carson spoke to Military Times about his ambitious plans to reshape DoD's system for paying, promoting and managing its roughly 2.2 million active-duty troops and reservists.

Unlike most top defense officials just a couple of years ago, however, Carson said the far-reaching changes he envisions for military pay and benefits are not primarily a cost-cutting effort in response to defense budget cuts.

In fact, he said, rising per-troop costs may be unavoidable when building the kind of technologically savvy force the military will need in the 21st century.

"I have no quibble with the amount we pay our service members, whom we have asked to make enormous sacrifices over the past 15 years," Carson said. "I think we need to change the debate a little bit."

The issues he's raising at this point are quite basic. For example:

How troops are paid. Carson is suggesting fundamental changes to the pay table mandating that compensation should be roughly equal across all career fields.

How troops are promoted. He wants to look at ways to phase out traditional "up-or-out" rules that emphasize seniority over than individual skills and qualifications.

How troops are assigned. He's looking at ways to better match individual service members with the jobs that suit them best, calling for a shift away from more standardized career tracks and the implicit penalties for troops who deviate from those tracks along the way.

In short, he envisions a military personnel system in which troops in some career fields are paid more than others, in which young and highly talented troops could earn promotions regardless of time spent in their current paygrades, and in which officers and enlisted members could focus more on developing specialized skills rather than "checking the boxes" with bureaucratic assignments.

"We have to move to a world of talent management, not this kind of industrial-age mass production of people who are interchangeable with one another," Carson said. "We have to recognize that every person has unique talents and every job has unique requirements, and our job here is to match them up."

Through a "revolution in talent management," he said, "we can, in a painless way, make service members better and the institution better because we are matching people with the right jobs, because we have better talent management."

Carson's assumption of his post earlier this year has shaken up DoD's personnel and readiness directorate, which for years has exercised limited influence inside the Pentagon and has struggled with poor leadership and high turnover.

Carson, who often sports cowboy boots with his business suits, has a varied background, including stints as a lawyer and businessman in the private sector. His government service is extensive; he served four years in the House as a Democratic congressman from Oklahoma and later deployed for a year in Iraq as a Navy intelligence officer.

He reportedly honed many of his ideas about reforming military personnel policy while serving as the Army's general counsel and subsequently its under secretary just prior to being named to the top DoD personnel post.

Now he's vowing to bring "revolutionary change" to the military personnel system. And he's looking to work fast — his goal is to unveil a detailed slate of proposals some time in August.

"The system right now has become sclerotic," he bluntly declared. "We're trying to clear it up a little bit, to where the blood can flow and we can get more flexibility."

The various reform proposals under review "all get to this notion that we need more flexibility, more permeability, more equity in the system. So you can envision a world where people have individualized career tracks. Perhaps we're more family-friendly. We're trying to deal with the issue of women's retention."

Congressional approval of fast-track changes to the military retirement system is helping to lay a foundation for further reforms. Now nearing its final version on Capitol Hill, the new retirement plan would shrink current payments by about 20 percent.

In place of that, the military would begin offering cash contributions to individual retirement savings accounts, which troops would own outright after a few years of service regardless of whether they serve a full 20-year career. That cash would be accessible for withdrawal without penalty starting at age 59 and a half.

The new retirement benefit also would likely include some sort of "continuation pay," cash bonuses to midcareer troops who agree to an additional service commitment.

The new benefit, if approved as expected, could be the first in a series of major steps that give military manpower planners more tools and flexibility to motivate individual troops, boost specific career fields and change the shape of the future force, Carson said.

"A more flexible compensation system is essential to 21st-century talent management, and a retirement system is a critical part of that. But there is still more we need to do on the compensation front," he said.

"We have to contemplate differential pay for high-demand skills. We have to use bonuses more than we do today to keep people with high-demand skills. We have to think more broadly about these questions. When are pay raises going to be given to service members and at what stage of their career, to maximize retention?"

In the long run, pursuing answers to those questions may lead to a fundamental reassessment of the military pay table that has dictated across-the-board salary levels for generations.

"Out in the private sector, if you are in a high-demand job, you get paid more than your teammate who may be doing an important job but is in less demand on the outside," Carson said.

"It's something we have to look at. … We haven't made any decisions yet, but these are the kind of questions that we want to throw out for discussion, to say, 'Hey, is it OK if someone is making kind of a market-clearing wage that might be more than we typically pay an E-6 or E-7, if that is what it takes to keep that person in the military?' "

Just a few years ago, the Pentagon's top brass frequently warned that rising personnel costs were on course to overwhelm the defense budget and erode the military's ability to invest in new weapons systems and high-tech research. But those concerns have receded.

The shift in the Pentagon's approach to personnel is driven in part by anxiety about one specialized mission: cyber warfare. Many top officials worry that the military is struggling to compete with the private sector to recruit and retain the most skilled cyber warriors.

And while the cyber force ultimately will comprise only a small fraction of the total force, Carson said it highlights the need for an increasingly skilled and well-trained force in many other branches.

"The trend of having more educated service members is going to increase over time," he said. "I think this is what war in the 'Information Age' is all about. We have to compensate our military members in a way that is competitive with the labor market and the opportunities they have outside the all-volunteer force, and in a way commensurate with their service to their country."

Yet recruitment and retention are about more than money. Carson said one of his central goals is to reassess the up-or-out rules that define many of today's military career tracks. For officers, those rules are codified in federal law.

Those rules, with their rigid time-in-grade requirements, force young, highly talented troops to wait in line for promotions, while also forcing some individuals out of uniform if they fail to advance in timely fashion.

Those rules date back to the 1940s, when most military jobs were physically intensive and the force prioritized youth. Today, those rules are becoming outdated, Carson said. The military may consider moving to a system more similar to today's private sector, which promotes talented people when they are qualified, and allows people to remain in their current jobs if they're performing well.

"I do think people have realized that the up-or-out system is not effective in all areas of the military," he said. "There may be certain careers where up-or-out works just fine and should be maintained. But that that system doesn't work everywhere."

For traditional career fields like combat arms, up-or-out rules likely will remain. But in some newer fields — like cyber warfare — they may not, since those skills grow, rather than atrophy, with time.

"What we are trying to figure out is: What are the implications of that? How broad of a reach might a new system have? Will it be limited to a few careers? Or is this something that the whole force would be interested in?" Carson said.

"I think we need to be open minded that there are places to pilot this, places to test it," he said. "Perhaps it has widespread applicability. Of course, we should be open to the possibility that not every branch is fit for this."

That said, "Even the infantry might benefit from some of those changes," Carson added.

About Andrew Tilghman

Andrew Tilghman is the executive editor for Military Times. He is a former Military Times Pentagon reporter and served as a Middle East correspondent for the Stars and Stripes. Before covering the military, he worked as a reporter for the Houston Chronicle in Texas, the Albany Times Union in New York and The Associated Press in Milwaukee.

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