Are You Ready for Pay for Performance?

By on March 27, 2006 in Current Events with 0 Comments

by Gary Koca

Gary Koca is Vice-president for Operations Support with GRA. He has 35 years of human resources management experience and has authored several publications and numerous articles on human resources management topics. Gary Koca may be contacted at

The federal government is in the process of implementing pay-for-performance systems in many Federal agencies, including the Department of Defense and Department of Homeland Security. Several Federal agencies already have these systems in place, either through OPM-approved demonstration projects or special legislation. And these systems could be implemented throughout the entire Federal government in the not-too-distant future.

A key question is, “Are federal agencies ready for pay-for-performance systems?”

In theory, they certainly make a great deal of sense, and it is tough to argue against them. Try having a discussion with your neighbor or friend who does not work for the federal government on how unfair pay for performance would be for federal employees, and I guarantee that you will lose that argument.

And that kind of argument certainly won’t play in Peoria with taxpayers. Pay for performance in theory is hard to argue against. After all, Federal employees should be paid for their contributions and performance, not for their longevity through automatic within-grade increases.

Having said that, here are three quick issues Federal agencies and managers will face in implementing pay for performance in their organizations:

Pay for performance only works if performance management and performance appraisal are successful, and performance management is difficult in Federal agencies.

In general, agencies produce service, not widgets, and service is difficult to describe, quantify, and measure. It’s easy to implement performance management for outside sales people – you have statistics on the amount of their sales. Or for employees on the production line – you can tell how many widgets someone is producing, and what is the error rate. In organizations that produce service, however, it is much tougher to determine how well someone is performing.

For example, how do you measure the quality of advice that a human resources management specialist provides to her customers? So you end up with performance standards using adjectives like “usually,” “consistently,” and “generally.” And with terms such as that, it is difficult to distinguish between how well employees in the same work unit are performing, which you must do to make pay for performance work.
Managers need much better training than they have been given in the past.

For the first time in their lives, managers will be making real pay decisions about their employees – not just approving within grades, or even giving performance awards. They had better do it well, and they had better make real distinctions in performance between their employees in order to make the system work. That is not going to be an easy or comfortable process, and agencies are going to need to provide their managers with lots and lots of training and guidance on how to do it well – much more than during the implementation of the Civil Service Reform Act in 1981.

It is also not going to be easy for managers to deal with the results of the pay decisions they must make. Employees are going to be upset when they don’t get the same raise as their co-workers. As an example, some DoD agencies are already implementing conflict resolution training for their managers to deal with the inevitable conflicts that will occur between managers and employees during pay for performance decisions.
Do Federal managers really want to make pay decisions?

Throughout my federal career, I encountered large numbers of managers who wanted to be team leaders rather than managers. They continued to prefer to perform non-supervisory work and occasionally “dabbled” in supervision. (Who wouldn’t? After all, managing others is a tough job!) However, pay for performance systems will require full-time managers who look forward to make tough human resources management decisions. The processes for selecting and retaining Federal managers will need to be improved.

These three examples illustrate that while it is tough to argue against pay for performance in theory, it becomes much more difficult to actually implement these systems. Federal agencies will face their share of growing pains in implementing pay for performance.

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