The last few weeks have seen a direct offensive launched against pay for performance efforts underway across federal government agencies. Much of the initial attention was aimed at the Pentagon's National Security Personnel System (NSPS), a pay for performance system launched in 2006 which now covers more than 200,000 of its civilian employees. Now, a group of eight chairmen and subcommittee chairmen have sent a letter to White House budget chief Peter Orszag asking for a government-wide halt in the expansion of merit pay.
From the letter:
The Government Accountability Office found that employees do not trust these systems to compensate them fairly.
(This could very well be the case, especially if the employees surveyed have historically been accustomed to an approach whereby fairness = treating everyone the same.)
... Proponents of pay-for-performance have argued that such systems are necessary to compete with the private sector for talent.
(Is this true? I would find it more likely that these proponents argue their necessity in order to compete with the private sector for results.)
We note that the 1990 Federal Employees Pay Comparability Act provided personnel flexibilities to compete with the market while retaining the fairness and transparency of the merit based civil service system. A well-designed performance management system can recognize and reward high performance without a linkage to compensation.
(Really? Recognize and reward? Huh.)
A recent Wall Street Journal article, "Forget About Merit", sees the move as part of pressing forward with a union agenda. The article notes that the Pentagon's system has been a primary target of federal employee unions since roll-out, with a nine-union coalition going (ultimately unsuccessfully) to court in 2007 on charges that the plan illegally limited collective bargaining.
From the Journal article:
According to figures released by the Pentagon in February, almost all of the employees in the merit system got raises or bonuses in 2009, with the average total reward of 8.35%. That dwarfs the 2.9% to 4.8% hike that most of the federal government's General Schedule employees got for the same time period. Unions prefer a return to a universal General Schedule system, which compensates employees based on time served. This expands the union's power base but also explains why they call them bureaucrats.
Now I will be among the first to concede that merit pay is tough to do well. Anyone who tells you different is selling something you ought not to buy. Even private sector firms with long experience in trying to align pay and performance struggle to do it effectively. But just because something is hard doesn't mean it's not worth doing. Most businesses pursue pay for performance not because it's easy but because of a belief that it's the right thing to do. That it sets the right tone and direction, and creates the right culture. That it is important enough to pursue it not with a likelihood of readily "nailing it", but in the spirit of continuous learning and improvement.
Which is one of the reasons I find the current crusade to stop the progress of Federal merit pay so disappointing; the loss of that critical institutional experience and momentum gained with these programs would be significant, and would require any future initiatives to take a long climb back up the learning curve in order to recapture this progress.
Ann Bares is the Editor of Compensation Café, Author of Compensation Forceand Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School, enjoys reading in her spare time and is currently trying to decide whether to follow her daughter to China this summer. Follow her on Twitter at @annbares.
Very interesting issue.
My father was a retired Air Force Colonel (after 30 years), an attorney and was Staff Judge Advocate for the Air Force. That position meant he had a lot of people that reported to him adn he dealt a lot with the contracts the Air Force had with the private sector. He always said that one of the biggest problems he had was that he couldn't use the same tools private enterprise had to drive performance.
Since there was no "profit motive" (his words) he didn't have a performance measure to use as a lever for getting things done. He couldn't reward people for good work, and conversely, couldn't get rid of them for poor work.
Wonder where $500 hammers and toilet seats come from - look no further.
I think if he had the opportunity to use pay for performance he would.
Posted by: Paul Hebert | 04/22/2009 at 09:22 AM
Amen! Amen! Amen!
It is madness to think that federal entities that have spent so much time and energy in developing pay-for-performance under bipartisan Congressional guidelines should now go backwards to the old GS system in order to go forward!
And its also madness to think that the current Congress who has at best a spotty record for designing federal pay-for-performance should even think themselves qualified to regulate private sector pay-for-performance!
But let’s not paint so broad a brush on this issue to ignore the few federal entities that have had success with pay-for-performance. A handful of federal entities have been selected to the balanced scorecard hall of fame organized by Kaplan and Norton. Pay for the Senior Executive Service has been administered under solid pay-for-performance principles for 4 years. The US Postal Service has had an award winning pay-for-performance program for its 70,000+ white collar employees for 14 years and counting, and has results on a balanced scorecard of performance metrics to show PFP works (see this WorldatWork Journal article by Schuster, Weatherhead and Zingheim: http://www.worldatwork.org/waw/adimLink?id=16925&nonav=yes).
Fortunately, there are a handful of us federal bureaucrats who still feel that pay-for-performance can work in the federal sector; although these days we feel more like Don Quixote tilting at windmills!
Posted by: Paul Weatherhead | 04/22/2009 at 09:27 AM
Read GAO-09-464T, "HUMAN CAPITAL - Improved implementation of Safeguards and an Action Plan to Address Employee Concers Could Increase Employee Acceptance of the National Security Personnel System", Testimony before the House Subc. on Readiness, Armed Services Committee, by Brenda S. Farrell, Dir. Def. Capabl. & Mgmt., April 1, 2009. At only 7 pages long, it's a marvel of brevity for a GAO report.
Fitting, that her tesimony on April Fools Day got absolutely no press. But with phrases like, "However, the purpose of analyzing predecisional rating results is to identify any potential egregious decsions...," I'm not suprised. Doesn't compete well with Beltway-bandit sound bites by union lobbyists about abusive bosses showing blatant bias to their favorite cronys.
Howard Risher is fighting this battle on the front lines. His "The NGA Pay Program: A Success Story" about P4P victory due to stakeholder buy-ins at the renamed Defense Mapping Agency outside St. Louis is scheduled for publication in The Public Manager. He might send you an advance draft.
It is truly tough to crack the centuries-old beaucratic attitude that prefers rewarding credentials over results and favors process over product. Must overcome the WIIFM obstacles, for reform to work.
Posted by: E James (Jim) Brennan | 04/22/2009 at 11:33 AM
Fear is such a strong motivator, and you can count on those who are afraid of losing power to stir the pot. It's hard to imagine the federal government doing a good job at this type of change management, especially with a group of employees who have every evidence that if they ignore something it will eventually go away. I hope that Obama weighs in on this, but the union crowd seem to have an awful lot of power in the new days of the administration, which is hard to understand since the only employees they seem to be really meaningful to anymore are the failing rust belt organizations (and healthcare, which is a real challenge for both employee and management).
Posted by: Margaret O'Hanlon | 04/22/2009 at 11:58 AM
Paul H:
Sounds like your dad was a smart, thoughtful guy - and astute enough to appreciate both sides of the merit pay equation; the ability to appropriately recognize and respond to not only good work but also bad.
Paul W:
I think many of us are struck by the absolute irony of Congress trying to impose their design efforts on private sector pay-for-performance while trying to push back merit pay efforts in Federal government. And certainly the success of the Postal Service in implementing pay-for-performance flies in the face of any efforts to convince us that "these systems" can't and shouldn't work in the public sector.
(Hmmm... I feel a possible future post on the Postal Service program coming on....)
Jim:
Thanks for the info (will check out the GAO report) - and the heads up on Howard Risher's efforts. Another ex-Watson Wyatt colleague - I will try to see if we can get his work additional attention here.
Margaret:
You're correct to remind us of the sheer breadth and level of change management involved in an effort like this. And its hard to disagree that this group of employees probably has plenty of experience and evidence to back-up a belief that ignoring these efforts long enough (until the next administration comes into power, for example) is worth their while.
Thanks - all - for the great comments and discussion here!
Posted by: Ann Bares | 04/22/2009 at 01:45 PM