After interviewing veterans who work at some of the most dynamic and innovative companies in the country, I’m convinced that the military has failed to learn the most fundamental lessons of the knowledge economy. And that to hold on to its best officers, to retain future leaders like John Nagl, it will need to undergo some truly radical reforms—not just in its policies and culture, but in the way it thinks about its officers.

All They Can Be?

It would be easy to dismiss Nagl’s story, except you hear it almost every time you talk to a vet. In a recent survey I conducted of 250 West Point graduates (sent to the classes of 1989, 1991, 1995, 2000, 2001, and 2004), an astonishing 93 percent believed that half or more of “the best officers leave the military early rather than serving a full career.” By design, I left the definitions of best and early up to the respondents. I conducted the survey from late August to mid-September, reaching graduates through their class scribes (who manage e-mail lists for periodic newsletters). This ensured that the sample included veterans as well as active-duty officers. Among active- duty respondents, 82 percent believed that half or more of the best are leaving. Only 30 percent of the full panel agreed that the military personnel system “does a good job promoting the right officers to General,” and a mere 7 percent agreed that it “does a good job retaining the best leaders.”

Is this so terrible? One can argue that every system has flaws and that the military should be judged on its ultimate mission: maintaining national security and winning wars. But that’s exactly the point: 65 percent of the graduates agreed that the exit rate of the best officers leads to a less competent general-officer corps. Seventy-eight percent agreed that it harms national security.

The shame of this loss of talent is that the U.S. military does such a good job attracting and training great leaders. The men and women who volunteer as military officers learn to remain calm and think quickly under intense pressure. They are comfortable making command decisions, working in teams, and motivating people. Such skills translate powerfully to the private sector, particularly business: male military officers are almost three times as likely as other American men to become CEOs, according to a 2006 Korn/Ferry International study. Examples abound of senior executives who attribute their leadership skills to their time in uniform: Ross Perot, Bill Coleman, Fred Smith, and Bob McDonald, the new CEO of Procter & Gamble, to name a few. The business guru Warren Bennis reflected in his recent memoirs, “I never heard anything at MIT or Harvard that topped the best lectures I heard at [Fort] Benning.”

Why is the military so bad at retaining these people? It’s convenient to believe that top officers simply have more- lucrative opportunities in the private sector, and that their departures are inevitable. But the reason overwhelmingly cited by veterans and active-duty officers alike is that the military personnel system—every aspect of it—is nearly blind to merit. Performance evaluations emphasize a zero-defect mentality, meaning that risk-avoidance trickles down the chain of command. Promotions can be anticipated almost to the day— regardless of an officer’s competence—so that there is essentially no difference in rank among officers the same age, even after 15 years of service. Job assignments are managed by a faceless, centralized bureaucracy that keeps everyone guessing where they might be shipped next.