New Zealand Chief of Army Writing Competition 22.1 Winner of the Officer Category.
CONDITIONS OF SERVICE THAT ATTRACT, SUSTAIN, AND RETAIN SOLDIERS IN THE NEW ZEALAND ARMY
By Mr C. Wilkie
As New Zealand and the rest of the world endure the widespread effects of the Covid-19 pandemic, a range of new conditions exist that are affecting the way people want to work and live their lives. Throughout early 2020, economic volatility and high unemployment were major factors disrupting the New Zealand labour market, however, with time passing and pandemic restrictions lifting the tide has now turned. In 2021 the largest increases in both economic growth and new job placements in New Zealand’s modern history have occurred.[i], [ii] This has in-turn created a unique dynamic within the national labour market displaying employment confidence that has not been seen in decades. With fierce competition from the civilian sector, recruitment and retention of New Zealand Army soldiers has not been so challenging in years. The Army is competing for the same talent pool as the private sector and therefore must adjust to reflect similar conditions in order to generate interest and retain personnel. This essay will discuss how differing retention bonus strategies and financial incentives could be instrumental in the attraction and retention of New Zealand Army soldiers and officers.
Retention bonus programmes are a common strategy that have been adopted by a large number of military forces in order to retain their personnel. Retention bonuses are usually offered to soldiers and officers’ mid-career, where they have progressed through training to a point where their skills and experience are critical to army operations or essential to the training and improvement of subordinates.[iii] Retention bonuses can be tied to a length of service or rank bracket and usually correspond with a mandatory return-of-service period upon receipt. A report published by the Northern Atlantic Treaty Organisation in 2007 states, “many military personnel choose to return to civilian life later in their careers, attracted by more appealing private sector opportunities”. A retention bonus limits this from occurring by reducing the attractiveness of higher paying civilian jobs and retaining the valuable skills of personnel for a further number of years. A comprehensive study by Hyder Lakhani in 1988 proved a consistent negative relationship between increased bonuses and quit rates in the US Army. It was also determined that bonuses were the most cost effective way to attract recruits and increase retention due to their flexibility over pay-rises and their ability to change periodically and effectively target areas of need.[iv]
The New Zealand Army currently offers multiple funded educational opportunities for service members such as the Voluntary Education Study Assistance, Kia Atamai Te Whawhai Scholarship and the Tu Ako Scholarship. Interestingly, a recent study by RAND Corporation suggests funded education has minimal benefits to recruitment, retention and force management.[v], [vi] In 2008 the US Army introduced two educational initiatives that provided enlisted personnel with either partial or fully funded higher-level education. The funding was widely used by service members with the Army funding more than 9 million courses over a 12 year period. Analysis by RAND Corporation found that whilst the Army benefited in the short term through better educated soldiers, increased education funding also “shortened the service time of members, as higher education improved career prospects in the civilian world.” A further 2-3% of attrition over the same period was attributed to members of the educational schemes in which members “strategically used the benefits to maximize desired educational outcomes” for career goals outside of the military. In 2017, RAND Corporation concluded the two education assistance programs were “expensive, blunt instruments at achieving force management objectives” and recommended to “continue to focus on traditional and effective force management tools like bonuses”.[vii]
A common challenge the New Zealand Army faces is the loss of experienced personnel who are 6 – 8 years into their career. The U.S Army currently offers a Selective Retention Bonus (SRB) that constantly changes to reflect shortages across different military trades. Soldiers and Officers qualify for taxable bonuses of between two thousand and twenty thousand dollars per year, depending on their specialty, skill, experience and how long they opt to remain in service upon payment.[viii] The soldier then receives this bonus at the completion of their agreed service. In 2017 alone, the US Army retained over 9000 critical personnel for a further three to six years through the use of a boost to their Selective Retention Programme. In this same period the US Army retained approximately 25% of its total expected personnel attrition for the year. [ix] The Department of the Army Career Engagement Survey was run in 2021, and of 38,000 troops surveyed, 45.1% stated “how well pay and benefits meet my current needs” was the main reason for remaining in the service compared to three other options.[x] A similar initiative to the SRB could be implemented within the New Zealand Army to retain personnel in critical trades, rank brackets, instructor or deployed positions to fill vacancies and reduce loss of members to the civilian sector. The reason this strategy would be effective is due to its high level of flexibility, being its ability to change frequently and directly reach areas of concern. This would be more practical for the New Zealand Army in comparison to offering pay rises, which would be required to reflect more broadly across the organisation for fairness and would cost significantly more. For example, if the NZ Army experienced a critical shortage of a particular trade such as Electrical Fitters, a selective retention bonus could be imposed to retain members of this trade. The bonus can be employed to target only this trade for a period of time and can range in monetary value depending on the members rank, experience and value to the organisation. The monetary bonus is exchanged for a contracted return of service that would retain Electrical Fitters and counter the risk of attrition in a critically manned trade.
In 2022, the US Army has initiated the largest increase to its Army Incentive Model (AIM) targeted at improving recruitment.[xi] The AIM proposed for enlistment bonuses to be offered for selected trades and specialties in order to attract new candidates to fill shortages. The incentive package is designed to appeal to the most common age of new recruits, that being the millennial generation or those born in the 1990s to early 2000s. Enlistments bonuses are not paid out initially, but are placed in an army managed investment accounts that can be used by the soldier in the future for multiple purposes such as purchasing a house, funding further education, mortgage repayments or student loan repayments. The AIM also provides improved diversity and a sense of empowerment which appeals to the millennial generation.[xii] Enlistment bonuses are guaranteed at the time of enlistment and are determined by a number of factors including trade, experience and initial contract duration. The bonuses are able to be accessed if the soldier extends their contract for a second term of at least three years.[xiii] The bonus can also be accessed sooner if the soldier meets strict criteria, for example purchasing a house, and if they opt to extend their contract by at least three years. A similar initiative would likely be significantly effective for New Zealand Army recruitment and retention. With the national housing market and cost of living on the rise with no sign of decline, monetary incentives attract both new candidates and serving members to continued service within the New Zealand Army. This incentive scheme would appeal to larger number of members and provides more options to the individual soldier in which to use the additional funds to benefit themselves or their families. Acknowledging that New Zealand Army funding is limited, this incentive scheme would allow for funds to reach a wider audience and again could be easily be targeted at specific areas or personnel in need of increased retention.
Closer to home, the Australian Defence Force (ADF) offers a different scheme targeted at retaining senior members with significant training and experience. A report by the Australian National Audit Office in the year 2000 determined “expenditure on retention has the potential to be much more cost effective than expenditure on recruitment and initial training”.[xiv] The ADF’s Military Superannuation and Benefit Scheme (MSBS) retention benefit provides a payment to a member after 15 years of eligible service and encourages the member to continue to serve for 20 years of continuous service. The benefit is an amount equal to a member’s annual salary payable to the member on the benefit computation day. In accepting the benefit the member must sign an undertaking to serve until 20 years of continuous service has been completed. The scheme targets those in the rank brackets of Sergeant and above for enlisted personnel, and Major or above for Officers.[xv] The ADF has assessed this point in time as a critical moment to offer an additional benefit in order to retain their staff. For both officers and enlisted members, the 12 – 15 year mark of continuous service commonly triggers a consideration to depart the service as a large amount of their military training and opportunities have occurred by this point in time. The army then faces the challenge of members opting to take their skills and seek employment in the civilian sector. It would be reasonable to assume that the New Zealand Army encounters similar issues with a large number of members departing the service at or around the 10 year mark. A retention benefit similar to that put into action by the ADF has great potential in retaining senior staff with the critical knowledge and experience to fulfil the army’s senior leadership positions.
To conclude, the New Zealand Army is facing a serious retention issue post the COVID-19 outbreak due to the strengthening labour market and competitiveness between organisations for qualified or high quality employees. Due to the recent signs of high attrition, it is evident that the current conditions of service offered to New Zealand service men and woman are struggling to counter the desire for members to depart the service in search for more appealing work or lifestyles. I have chosen to discuss how financial incentives could resolve this issue due to the large amount of evidence collected by other coalition militaries suggesting it is the most preferred, efficient and cost effective method of retaining personnel. Monetary incentives are flexible, targetable, and appeal to a wider audience. They reflect a perspective that an organisation values it highly trained, highly skilled employees as its priority asset, which is a message the army portrays frequently during recruitment. Acknowledging the New Zealand Army’s relatively limited military budget, smaller scale initiatives replicating those like the SRB and AIM schemes outlined above, propose to yield promising results which could rectify the issue of high attrition rates and attract a larger number of promising future soldiers to the organisation.
Footnotes
[i] (Williams 2021)
[ii] (Jong 2021)
[iii] (Absher 2020)
[iv] (Lakhani 1988)
[v] (NZDF Defence Careers 2022)
[vi] (RAND Corporation 2017)
[vii] (RAND Corporation 2017)
[viii] (United States Army Human Resources Command 2022)
[ix] (Myers 2017)
[x] (Winkie 2021)
[xi] (USAREC Public Affairs 2022)
[xii] (Beerman 2006)
[xiii] (Beerman 2006)
[xiv] (Australian National Audit Office 2000)
[xv] (Australian Government Department of Defence 2022)
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