Background and theory behind the compensation, accessions, and personnel management (CAPM) model

The Compensation, Accessions, and Personnel Management (CAPM) model is a software package that enables analysts to study the potential effects of personnel policy changes on future enlisted inventories in the military services. The software is Excel based and uses several modules written in Visual Basic for Applications. The authors provide theoretical background for the reenlistment module of the software. They begin with some general information about econometric models of retention behavior and then describe the Annualized Cost of Leaving (ACOL) and the ACOL 2 models, which are the basis for the adjustment of retention rates in CAPM. Calculation of annualized cost of leaving values, their use in projecting inventories, and examples of CAPM outputs for Air Force enlisted personnel are also discussed. To provide some perspective on the general problem of modeling retention behavior in the military, the authors also discuss the Dynamic Retention Model (DRM), an intuitively satisfying, but computationally difficult model that was developed by Glenn Gotz and John McCall at RAND in the late 1970s. The text is meant to improve understanding of some modeling fundamentals and assist in future improvements of the CAPM model. Companion documents provide a users' guide for CAPM (MR-1668-AF/OSD) and a tutorial and exercises for the model (MR-1669-AF/OSD). The most recent version of CAPM is available on the web at www.rand.org/publications/MR/MR1668.