Improving the Navy's officer bonus program effectiveness

Abstract

Bonuses serve as a valuable tool in attracting and retaining Naval officers. This thesis analyzes the way officer bonuses are currently distributed in the Navy and provides recommended changes based on analysis of scholarly publications. Combining the information gained from current policies and research already conducted in the academic arena, the author proposes a workable bonus structure to meet the recruitment and retention goals while providing the Navy flexibility, quality personnel, and cost effectiveness. Combining auction theory and signaling theory into a new program has great potential to provide flexibility to the Navy, maintain the appropriate quantity and quality of officers, and provide cost savings to the Navy, while providing continued servicemember satisfaction. By offering bonus programs of different rates and time commitments, effectiveness and personnel quality can be increased by allowing officers to signal their intentions to the Navy. Auctions can be used to determine the appropriate monetary values to offer under each contract. By implementing an auction for bonus amounts, the Navy helps to ensure that bonuses will be competitive with the overall job market. This approach provides the Navy with a flexible, effective officer bonus program that is responsive to existing job market conditions.