Breaking the Impasse on Federal Pay

Government needs a mediator.  The stakeholders virtually all agree the General Schedule (GS) system needs to be replaced but each needs to see something different for the planning to move forward.  The July 15 congressional hearings made two key points clear:  No one defended the GS system, but no one is ready to take the lead to develop a replacement system.  With budget cuts through 2021, government could be stuck with a deteriorating work environment.

Another point is increasingly clear — in the current political climate the GS salary ranges will not be increased by more than a nominal percentage each year.  That means federal salaries will fall further and further behind private sector levels.  Inevitably this will lead to increased turnover and make recruiting qualified candidates in high demand occupations more difficult.  It’s already started.

The framework for a new pay system was introduced over 30 years ago.  The idea was tested and proved successful in the demonstration project at the Naval research lab, China Lake.  It’s based on a limited number of salary bands.  It’s simple, facilitates job classification, and solidly supports career management.

There appears to be broad agreement except for two hot button issues:  (1) the alignment with market pay rates and (2) the basis for managing salaries within the bands.  Another issue that is acknowledged but has not been discussed is the flexibility agencies should have to manage salaries to meet human capital needs.

The market pay issue is interesting because the stakeholders have all stated they agree federal salaries should be aligned with non-federal market pay levels.  The disagreement was triggered by the use of different methods to assess federal pay levels and that produced widely varying results.  The Bureau of Labor Statistics (BLS) data show federal jobs are underpaid while analyses by the think tanks and by the Congressional Budget Office (CBO) show federal jobs in the aggregate are overpaid.  The striking fact is that none of these analyses shows how well specific jobs are paid.

Even the President understands that some jobs are overpaid while others are underpaid.  No one knows with certainty, however; it depends on how the market is defined.

Significantly, the analyses are very different from the methods used for this purpose by other employers.  At least one think tank is on record acknowledging their analysis is not useful for salary planning.  It’s safe to say the same data sources cannot be used to break this impasse.

OPM’s reliance on BLS survey data is currently required by law.  The problem is that BLS has thus far been unwilling to modify its survey methodology to make their data more relevant to salary planning.  Their data no doubt are valid for their purpose – to track changes over time in the Employment Cost Index (ECI) – but salary planning requires ‘micro’ salary level data specific to commonly defined jobs, not “macro’ percent change data.  The current BLS survey cannot generate useful data.

The planning for a replacement system should start with an independent market analysis.  OPM, the unions and the think tanks along with a select group of recognized experts in the use of salary surveys should play a role in planning and have opportunities to review preliminary results.  That will serve to identify those jobs that are underpaid as well as those that are overpaid.  There are several thousand surveys conducted annually across the U.S.  Annual market analyses are routine in other sectors.

If, as expected, survey data confirm some jobs are paid above market, it will trigger difficult discussions to decide how to manage those salaries.  But that should not preclude raising salaries to market levels.

The second issue is the ‘living and breathing’ step increases along with the automatic promotions to the top of career ladders.  Neither practice can be defended.  Neither practice contributes to a positive work environment.

But successfully changing those practices rides on agencies improving the management of employee performance.  Government will not be able to transition successfully to pay for performance until agencies invest in developing more effective performance systems.  The termination of the National Security Personnel System (NSPS) along with a couple of other failed systems and now the VA system highlights the problems.

The problem is that performance ratings are badly inflated.  The VA scandal highlighted the problem.  “ . . . not a single senior VA manager, out of 470 individuals, received a less than fully successful performance review for the last fiscal year.”  The residents of Lake Wobegone are all above average.

Getting back to reality, there is little, if any, likelihood that a replacement pay system will ever be approved if it is not based on a pay for performance philosophy.  The switch to pay for performance is likely to be part of a mediated new system.

The latest attempt to develop better performance management systems — the Goals-Engagement-Accountability-Results, or GEAR, system – got off to a good start.  That is until the then AFGE President, John Gage, dismissed the system as lacking substance and being “human resource make-work.”  He went on to say, “ . . .I just don’t see the ‘there’ there.”  That was two years ago.  GAO tried to promote the GEAR approach but it appears to have lost momentum.

Gage’s comment about HR ‘make-work’ is on point.  Performance management has to be ‘owned’ by line managers.  HR is not involved in the day-to-day management of performance.  Managers need to be supported in developing their people management skills.  Agency leaders need to make it a priority.

Whenever a column discusses pay for performance, comments are always posted rejecting the idea.  A frequent point is it’s impossible to “measure” the performance of many government employees.  They are right of course but nevertheless the star performers always stand out.  That’s also true for the few unacceptable performers.  There are proven approaches to overcome or mitigate the concerns.

The GS system is a roadblock to improved performance and to improved work experience for thousands of employees.

© 2016 Howard Risher. All rights reserved. This article may not be reproduced without express written consent from Howard Risher.

About the Author

Howard Risher is a private consultant who focuses on pay and performance. His career extends over 40 years and includes years managing consulting practices for two national firms. He recently became the editor of the journal Compensation and Benefits Review. He has written four books, including Aligning Pay and Results. He has an MBA and Ph.D from the Wharton School of the University of Pennsylvania.

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