Now imagine that you are not a CEO, but a senior leader in the United States armed forces. Faced with a comparable situation—instead of a statewide manager, our hotshot is now an infantry company commander achieving remarkable success in Afghanistan—your options are far more limited. In fact, you are prohibited by both policy and regulation from exercising anything near the flexibility available to your private sector counterpart. This is the case despite the fact that your firm’s wages are uncompetitive compared to what top performers could earn elsewhere, and that you demand sacrifices of your leaders and especially of their families far in excess. Most importantly of all, your hands are tied despite the fact your charge is not just to produce the best profit for your shareholders, but to win a war for your country.
Of course, many remarkable officers remain with the military despite the challenges they face, and this is evidence of their patriotism, sense of duty and capacity for sacrifice. Right now there is no current flood of junior or mid-level officers looking to depart the service, as was the case during the dot-com boom. Yet it is nonetheless a fact that top performers are particularly likely to consider, and often exercise, their option to resign long before their usefulness to the service has expired.
Among the reasons for this fact is a promotion system explicitly designed to emphasize fairness and impartiality at the expense of other conceivable goals—rapid reward for top performers, for example. The current system evolved as a corrective to what was widely perceived as a poisonous “good old boys” environment, which prevailed through much of the last century across all of the services. In those days, connections and networking were not everything, but they were far more important than they are today. To know a general or an admiral, and be in his entourage as his career advanced, could trump other factors in that era, occasionally including the important consideration of job performance.
The current system corrects that, and there is much to be said for fairness. We do a good job in the military of, over time, ensuring that the bottom performers do not prevail over average or above-average performers. But perhaps the most glaring flaw of the present system is that we do a poor job of efficiently differentiating between average and above-average performers.
This can be illustrated by returning to our thought experiment. Our top-percentile company commander (who leads, by virtue of his assignment, a few hundred troops) is making tremendous progress in his corner of Afghanistan, and his methods are being held up as a model for success across the theater of war. Operating in valleys on either side of him are two other company commanders. One is doing a decent but unspectacular job, producing results in some categories but failing in others. The other peer is dramatically underperforming, sacrificing progress made by those who preceded him and losing the confidence of his men and superiors.