How to Avoid a Scandal Like the One That Has Embarrassed the Pentagon

Article originally published in the American City Business Journals on October 31, 2016

A story first reported in the Los Angeles Times on Oct. 22 that has since appeared nearly every day in the news media leads one to question the common sense and good critical judgment of Pentagon leadership.

As many as 6,500 national guardsmen who received enlistment bonuses of up to $25,000 a decade ago during the Iraq and Afghanistan wars were told that the payment of these bonuses was a mistake and to return the money plus interest. A 2010 audit revealed that not all the national guardsmen met the criteria for receiving the bonus.

Why didn’t the Pentagon think that clawing back the bonuses due to a mistake that they had made years ago would be unjust? Why didn’t the Pentagon leadership grant repayment waivers at that time rather than just follow policy?

These soldiers kept their part of the bargain, risking their lives fighting in Iraq and Afghanistan. Now they face a financial nightmare through no fault of their own.

Some guardsmen are paying back a portion of the bonus each month, while others are re-mortgaging their homes. A few are refusing to pay back the bonuses and have asked members of Congress to intercede.

This is not a case in which the error had been quickly discovered after the bonuses were paid and the guardsmen were then asked to repay the funds before they were spent. Many years have passed! Homes were purchased, businesses were started, college tuition paid, and many important family decisions were made based on those bonuses.

The Pentagon made the mistake, not the soldiers. Didn’t someone at the Pentagon — regardless of organizational level — stop and think of the hardship that would be encountered by the soldiers and the unfairness of asking for repayment many years later, and propose that waivers be granted?

This scandal is now front-page news, casting the Pentagon in an unfavorable light. It didn’t need to be this way. The cloud of financial uncertainty that hung over these soldiers should have been removed soon after the 2010 audit.

On Oct. 26, Secretary of Defense Ash Carter stated, “There is no more important responsibility for the Department of Defense than keeping faith with our people. That means treating them fairly and equitably, honoring their service and sacrifice, and keeping our word.” Carter further stated, “… [I have suspended the clawbacks] until I am satisfied that our [review] process is working effectively.”

This is the type of statement that should have been made soon after the 2010 audit by then Secretary of Defense Leon Panetta or by Chuck Hagel, who was Defense Secretary from 2013 to 2015.

Secretary Carter, as “CEO” of the Pentagon, needs to address the following issue: What is it about the culture within his organization that prevented staffers from recognizing an injustice and reporting it up through the organization, so that the individual who has the authority to grant a waiver is made aware of the situation, even if that ultimate authority might lie with Congress?

Within business and nonprofit organizations, how often do employees feel current policies and practices are not in the best interests of the organization or its customers?

How often will an employee raise the issue to his boss? How often will she in turn pass that concern on to her boss, and on up to the individual, possibly the CEO, with the authority to change the policy?

All leaders need to think about their organizational culture and whether it encourages employees at any level to identify policies and practices to their management that are not in the best interests of the company’s employees, customers or other stakeholders.

Employees need to feel that their concerns will be heard and considered. This is how any organization can lessen the chance that a small issue will eventually become a much larger one.

Had this occurred at the Pentagon, what is now a very public scandal surrounding the clawback of bonuses could have been avoided.

Stan Silverman is the former president and CEO of PQ Corp. He also is founder and CEO of Silverman Leadership and is vice chairman of the board of trustees of Drexel University. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

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