One Step Forward, Two Steps Back (Part 2)

(This is the second part of a four-part post on the state of white collar pay-for-performance in the federal government.  Part I was published on Friday, November 13th.)

Following enabling legislation in 2002 to develop new pay-for-performance systems for the Department of Defense (DOD), Department of Homeland Security (DHS), and the government-wide Senior Executive Service (SES), the agencies and the Office of Personnel Management went to work on design and implementation.

DOD and DHS had some differences in their new personnel systems, but they were similar in that they replaced the highly structured General Schedule (GS) grades and steps with broad pay bands.  The SES pay system was changed from 5 fixed rates to two broad pay bands - a higher one if the agency had an independently certified pay-for-performance system, and a lower one if the PFP system was not certified.

Further, new performance management systems were established based on the following bipartisan approved design criteria:

1. Accountability - participants are held accountable for performance
2. Alignment - individual performance plans are clearly linked to those of the agency
3. Measurement of results - at least 60% of a rating is based on measurable results
4. Balance - performance measures include the use of employee and customer/stakeholder feedback
5. Consultation - employees must be involved in development of performance plans
6. Organizational assessment and guidelines - a paper trail is required to document the plan and outcomes
7. Oversight - head of the agency ensures the system operates as designed
8. Training - employees and evaluators are trained on the performance management system
9. Performance differentiation - meaningful differentiations are made reflecting organizational and individual performance
10. Pay distinctions - pay adjustments and awards are differentiated based on performance differentiation

By 2008, OPM reported that most of the federal agencies had their SES performance management systems independently certified.  Those of us in the federal sector that believe in the concept of pay-for-performance for federal workers had the audacity of hope that a new era of federal performance was in sight.  What can go wrong with such well-reasoned, bipartisan design concepts? 

When the Bush administration tried to implement the changes in the DOD and DHS authorized by the 2002 Homeland Security Act for General Schedule non-executive white collar workers it was met with stiff resisitance.  The changes called for a new performance management system, labor relations, adverse action and appeals systems.  The changes also would have featured a market- and performance-based pay approach to replace the decades-old General Schedule system under which most civil servants work.  Federal employee unions in both DOD and DHS objected to perceived unilateral changes in personnel systems, filed grievances, and initiated litigation.

Further, a shift in the political mix in Congress created a greater opposition to President Bush's initiatives to reform performance management in the federal government.  By 2007, the 110th Congress had a majority of Democrats in the House, and an even split of Democrats and Republicans in the Senate.

A month before the 2008 presidential election, the DHS personnel system was killed.  In a compromise with Congress, President Bush signed into law a bill that discontinued funding for the DHS personnel system, formerly called MaxHR.

With pay-for-performance now dead at DHS, there was still hope that the DOD initiative would succeed.  Furthermore, the SES system had a foundation of 4 years under their new PFP system.  Next week we'll see what happened with PFP under the new Obama administration in Part 3 of "One Step Forward, Two Steps Back."

Guest blogger Paul Weatherhead is a Pay Program Manager for the US Postal Service.  His primary pay program is their award winning Pay-For-Performance program, but he also is involved with other pay and benefit policy issues at the USPS.  Paul actively participates in the WorldatWork professional association as an instructor, author, speaker, reviewer, and blogger.  In his spare time he teaches human resource management courses for the University of South Carolina.  He can be reached at cpaulwd@yahoo.com