Performance Plan for Feds Proposed–It’s DOA

Pay for performance plan proposed for federal employees. It isn’t likely to survive when it comes up against the Washington establishment that resists controversial change.

For the 2004 budget, the President will ask for a two percent pay raise for Federal civilian employees instead of the higher percentage increase that had been expected. The trade-off for the lower percentage: he will ask Congress for a pool of $500 million of additional funds. This $500 million will be a "human capital performance fund" to be prorated among government agencies to boost the base pay for the most productive employees–some of whom would get pay raised of up to 10%.

The plan sounds good for creating an efficient government. It probably is good. The most productive employees should be paid more than others. But it’s DOA (dead on arrival).

We suspect the administration knows that. Federal employee unions issued press releases attacking the proposal before it hit the streets. Congressman Steny Hoyer quickly and loyally followed calling the plan "totally unacceptable."

The director of the Office of Personnel Management, Kay Coles James, says that "Most Americans recognize that the current pay system for the federal work force is broken." She is probably right. But it won’t make any difference.

The average annual federal salary in Washington is now more than $70,000. Interest groups in Washington don’t want serious change in the civil service. And it isn’t just the federal employee unions. While they are primarily interested in increasing their political power, and they may take the lead in the race to issue press releases arguing their case, there is a permanent government structure in Washington that reacts strongly and effectively to change, especially where it impacts their financial interests.

Congressional staffs, for both Democrats and Republicans, will not be wildly enthusiastic about such a proposed change and they obviously impact the legislative and appropriations process. Public employee associations, usually staffed with former employees from some area of government and who took their benefits with them when they left, are also likely to oppose the change (after careful study and consideration). And, while business groups like the idea of pay for performance (more than 90% of private companies have some form of pay for performance system) they aren’t likely to get too worked up over the issue.

It is possible the proposal will be enacted anyway despite the shrill protests we will hear if it gets closer to reality. And, while the entrenched interests in government may not be able to stop the president and Congress from putting such a system in place, the current system assures it will never be fully implemented anyway.

There is already enough precedent to predict the future of this proposal should it ever get implemented. When President Jimmy Carter got behind the Civil Service Reform Act of 1978, it passed. He even had the support of AFGE because, while the union found the idea of pay for performance distasteful, it wanted to get rid of a federal labor system based only on an executive order. Getting the labor system entrenched into law met the federal unions prime objective: increasing their likelihood of survival and increasing political power.

But when the pay for performance system went into effect, reality intervened. Are performance standards negotiable? Cases by the truckload went to the Federal Labor Relations Authority (FLRA) and then the courts for resolution.

Could an employee be removed for poor performance? Cases by the truckload went to the Merit Systems Protection Board (MSPB) for resolution–months or years later.

Could an employee file a grievance contesting a performance rating? Cases by the truckload went to arbitration, and again back to the FLRA for resolution–a year or more after the fact.

Did the new system discriminate in some way against an employee? Now comes the Equal Employment Opportunity Commission (EEOC) to resolve this part of the issue–again, with a decision coming years after the fact.

Why would any supervisor want to enter the morass of never-ending appeals? They don’t want to. There is no incentive to enter this thicket and lots of incentive to avoid it.

The administration’s idea of pay for performance is a good one. It is also possible the structure this proposal would set up would work. But it doesn’t make any difference.

If the President, OMB and OPM are serious about implementing change, this isn’t the way to do it. Instead, they must address the underlying problem–the multiplicity of appeals procedures and hostility of employee unions to any pay for performance proposal.

The federal employee unions are unlikely to go along with any meaningful pay for performance system. Knowing that any system will be attacked from within as soon as it is implemented, there needs to be one appeal system that is quick and final. That will take a legislative change.

On the other hand, perhaps the administration is being cautiously cagey. In the new Department of Homeland Security, they won’t have the problem with the federal employee unions (unless the courts intervene). And they will also have the opportunity to implement a unique human resources system. Perhaps the real goal of the administration is to start there, and then work on a legislative change for the rest of government.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47