Show Me the Money

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By on May 14, 2019 in Human Resources with 0 Comments
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What “human capital” really means

It was sometime during the mid-1980s and a legendary Administrative Officer was retiring after 40+ years of service to the (now closed) Charleston Naval Shipyard. I was working in the personnel office as a Labor Relations Specialist.

So many people wanted to honor Mary that it was decided to move the retirement ceremony to an auditorium on the same floor as our Shipyard Commander’s office. Although he didn’t really know her, the Captain felt obliged to attend and participate.

As he began his remarks, he intoned a timeworn platitude that set many eyes rolling. “Our people are our most valuable resource.” For some reason, on that day those banal words caught my attention. People are the business of a personnel office. 

I later called our budget and finance office (Comptroller in Navy lingo) to validate if people really are the most valuable among resources. I’ve forgotten the actual numbers, but they were convincing. Even in a setting where material, equipment, and overhead were tremendously expensive, salaries and benefits dwarf any other categories in a shipyard’s budget.

Follow the money

In our workplace (as in yours) dollars mattered. When a Naval vessel arrived at our shipyard, the work began.

The tasks were as mundane as removing barnacles or rust to challenges as sophisticated as installing new weapons systems or refueling nuclear reactors. The costs to the Navy ranged from big to astronomical. 

Long before a vessel was towed to our facility, people were estimating what each part of an overhaul or repair would cost. There were Planners and Estimators, Engineers, Accountants, Technicians, etc. working as a team on these estimates and budgets. Most of the expense was labor – blue and white collar, inspectors and radiation monitors, professionals and apprentices, supervisors and workers. Some were overhead (like my office) and others “direct labor”.

Estimating costs is part of doing business for shipyards and elsewhere. It involves time, thought, and experience. Without an understanding of the numbers, planning is impossible. Planning and estimating operations are as dazzling to me as they are essential to your agency. 

We invest a lot in people

Shipyards continually hire fresh faces willing to learn marine trades. On-site apprentice schools provide them with classroom and on-the-job and training over the course of 4 years.

In more than 90% of cases, the result of apprenticeship are competent journeymen – Electricians, Machinists, Shipfitters, etc. Similar investments are made in Engineers, Technicians, Contract Specialists, etc. who are hired at entry-level grades and brought to full performance competence and compensation.

I began working at the GS-5 level and left about 14 years later as a GS-12. The costs of developing a fully competent employee are significant and can be quantified.

What the accountants didn’t count

My job in Charleston involved, among other things, dealing with situations where that considerable investment seemed to be failing. Some of these employees exhibited behavior (disciplinary) issues. Others were promoted too fast or proved bad selections, revealing competence (performance) issues.

Our tools in HR were memoranda (like warnings and reprimands), suspensions without pay, performance improvement plans (PIPs), and (often with a workforce of thousands) removal. The time involved in completing such actions was neither tracked nor estimated.

Jumping many years ahead, this past August, a lengthy report came from the General Accounting Office (GAO) titled Federal Employee Misconduct: Actions Needed to Ensure Agencies Have Tools to Effectively Address Misconduct. The GAO went on at length regarding the problems agencies have when dealing with Uncle Sam’s worst employees. The conclusions were rather tepid and can be found under the “Recommendations” tab.

What this report (and previous similar ones) lacked was meaningful data.

While the GAO reviewed existing personnel records and called for more/better recordkeeping, they made no effort to quantify what disciplinary and performance-based actions actually cost. Estimating the price tag for a removal action doesn’t seem to interest the government’s principal bean counting agency.

Process is money

Like many Labor/Employee Relations Specialists, I guided supervisors and managers through agonizing PIPs. Week after week, data was collected, evaluated, discussed and reviewed. We knew the time devoted to this “opportunity to demonstrate acceptable performance” (5CFR432) seemed inordinate.

What is the average cost of a PIP? It seems we should know.

If a shipyard can estimate the cost of refueling a nuclear reactor onboard a submarine in a drydock, the effort needed to estimate expenses associated with personnel actions should be comparatively simple.

During my tenure, no employees who were given a PIP passed this lengthy examination of their competence. We were careful to weed out those who were just lazy or indifferent and used disciplinary actions in those cases. Those who failed PIPs were commonly fired. I have yet to see how much firing an employee costs the government. 

But wait, there’s more

Take the simpler example of a Reprimand. Whether it’s called an Official Reprimand, Letter of Reprimand or Written Reprimand it is a common HR-processed disciplinary action.

It normally involves an investigative (Weingarten) interview, intra-management communications, time in discussions with administrative personnel and HR, composing and delivering the actual memo, etc. In a unionized environment, costs commonly include representational time – allowing for hours a union representative is away from work. 

After all that; however, it may not be over.

If the employee files a grievance concerning a Reprimand, that grievance can proceed through a series of “steps” that, for the government, reflect organizational costs.

While the Reprimand itself is a verdict from leadership, the grievance process represents hearings, union time, and additional verdicts from higher level officials. These are commonly formatted and authored by HR specialists for management review, signature and delivery.

Of course, the same employee may forego the grievance process and file an EEO complaint. Anyone with a gender, national origin, religion, etc. can do so. An investigation, mediation, and/or hearing may ensue.

So what’s the average cost of a Reprimand – $5,000, $10K or more?

Who doesn’t want to know?

Since the GAO has shown interest in my area of work, I’m wondering why its staff isn’t estimating costs associated with disciplinary and performance-based actions. I trust the CHCO (Chief Human Capital Officers) Council referenced in the GAO recommendations would also be interested in learning how much their own processes cost and how these price tags affect their budgets.

We recently read an Executive Order (EO) from the president which attempts to address the time and money associated with this side of employee relations. It seeks to cut the time and expenses involved in such cases.

While the EO may be adding more to the process by mandating reports, it doesn’t address actual savings because the current costs are unknown.

Motives and outfall

HR is a very large area of our government where expenditures are not well examined. Our discipline program is antiquated and our processes are lengthy. While there are many variables involved in taking disciplinary and adverse performance actions, the same can be said of many government actions where average expenses are known. 

I imagine the Patent and Trademark Office knows how much time/money it takes to examine an application, from simple to complex. Similarly, the Department of Veterans Affairs likely knows the average cost of coronary bypass operations. It’s essential data. If the government has similar data regarding Reprimands, Suspensions, PIPs and/or removals, I would appreciate knowing where to find it. 

Finally, as a mediator of Federal disputes, I applaud the GAO for exploring alternative dispute resolution (ADR) as part of their report. I’ve explored this issue in the past, and will again. The amount of time/money mediation efforts might save agencies, however, is unknown. I’m wondering why. 

© 2019 Robbie Kunreuther. All rights reserved. This article may not be reproduced without express written consent from Robbie Kunreuther.

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About the Author

Robbie Kunreuther is the Director of Government Personnel Services (GPS). GPS provides 1 to 3-day seminars to Federal agencies in four subject areas: Dealing with performance and conduct issues; Developing sensible performance appraisal criteria; Fostering cooperative labor-management relations; and Applying mediation skills in the workplace. Over the years, Robbie has trained thousands of Federal supervisors, managers, HR specialists, and union officials. For more information about him and GPS, go to trainingfeds.com.

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