Once Again, The Cart Before the Horse

Pay for performance in the federal government is likely to have problems

By David Hornestay

David Hornestay is a writer and consultant with more than 30 years experience as a management official in several federal agencies

It looks very much as if “pay for performance” is an idea whose time has come for the federal workforce. After an extended process of consultation and design, the Department of Homeland Security (DHS) is publishing regulations which will establish a pay band system in which raises will be based on performance ratings. The Defense Department is moving even more swiftly toward a similar system.

And if as on cue, the Office of Management and Budget’s deputy director has announced that, in the interest of equity, the President will propose comparable reform for the balance of the Executive branch.

But a few cautions are in order before agencies rush off into the brave new era. To begin with, nothing other than the dismantling of the creaky, 55-year-old Classification Act-based General Schedule is certain in the wake of these actions. What rises in its place may or may not result in systematically rewarding superior performance with meaningful pay differentials.

For historical guidance, merit pay for supervisors and managers on the basis of demonstrated performance was mandated by the Civil Service Reform Act of 1978. It was widely acknowledged to have failed within a few years and was abandoned in the early 1990’s. The post-mortems generally pointed to inadequate funding to recognize significant performance distinctions and the inability or unwillingness of performance appraisers to document differences in performance.

Adequate funding of pay for performance remains questionable. An Administration committed to expensive entitlement reforms, a robust world role, and halving the federal deficit in five years is unlikely to pump up agency budgets with generous allocations for performance pay. An unnamed “senior Homeland Security official” was quoted in a January 31 Federal Times article as doubting that pay for performance was the “perfect fix” for the GS system. “The problem is there’s limited money. There are agencies…that are very short of money now, so the likelihood that they would really be able to participate is probably very limited,” the official said.

A more probable scenario is the usual federal zero sum game, pitting one group against another, as witness the recently announced Department of Defense guideline granting political executives a half-percentage point higher bonus than mere career executives.

As to the capability for fair and effective performance appraisals, every authority concedes that much training and understanding is needed before that becomes a reality. Robert Behn, who lectures at Harvard, cautioned in the January issue of his “Public Management Report” that, “Almost all performance systems come loaded with rules and paperwork requirements, and rule-driven approaches are unlikely to be very effective.”

A recent report by the IBM Center for the Business of Government pegs success of pay for performance largely on “the comfort of managers with new and unprecedented roles,” insisting that preparing managers must include their involvement in the planning and implementation of systems. And the Merit Systems Protection Board’s publication, “Issues of Merit,” listed seven “critical success factors” for pay for performance, including funding, training, and effective measurement.

These caveats, though daunting, do not spell doom for any pay for performance initiative. They do make it clear that inaugurating a new system the standard government way, with acronyms, slogans, handbooks, concentrated training sessions, and skimpy pay pools will not cut it. Intensive analysis of missions, work, and culture; painstaking consultation with, and education of, employees and supervisors; and reasonable budget allocations are all required in advance of transforming the quintessential “bread and butter” system for employees. That’s asking a lot. Which agency would you trust to get it all done up front?

It’s not clear how much advance work will have been done by DHS and DOD, but at least they wisely plan to phase in their new systems. That will allow them to detect and correct inevitable flaws in design and implementation. It will also help the “other half of the government” to avoid the same mistakes.

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