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Government Leader home > March 2005 issue
March 2005; Vol. 1 No. 1
The New Pay Scale
By Caron Golden
Pay for performance can be a tough sell, but agencies doing it say the benefits outweigh the pain.
With more than 50,000 employees at the Federal
Aviation Administration, assistant administrator for
human resources management Ventris Gibson has some
experience with salary and pay grade issues.
So when the Bush administration in late January announced
a performance-based pay system for employees
at the Homeland Security Department, she had a good
idea of what it would involve. FAA had been doing the
same thing for several years.
In 1996, Congress and the Clinton administration gave FAA authority to create
an independent system that broke from Title 5, which regulates pay grades
for employees under the General Schedule.
The agency built a compensation framework with a pay-banding structure
that has four different systems: a core system with 23,000 employees, an air
traffic control system with about 19,000 employees, an executive compensation
plan for several hundred employees and a bargaining unit, still in negotiations,
for 9,000 employees. FAA rolled out the pilot in 1998, and it has since
become permanent.
“This system allows us the flexibility to address issues unique to FAA,” Gibson said. “Being more competitive in pay has
given us more leverage to retain and attract
professionals with critical skills.”
FAA and some other agencies—including
DHS, the Defense Department and the
National Institute of Standards and
Technology—are taking the first steps in leading
the government away from the GS system.
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| | Being more competitive in pay has given us more leverage to retain and attract professionals with critical skills.—FAA’s Ventris Gibson | |
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DHS plans to phase in its new system over
three years, affecting about 100,000 workers.
Defense has a three-year plan that will change
the rules for about 750,000 employees. The
two new systems will go a long way toward establishing
a governmentwide model.
The merits of pay for performance, which
links pay raises to individual, group or organizational
performance, have long been debated,
and even now many experts continue to argue
the relative benefits of these systems.
Proponents say pay for performance makes
agencies more responsive, efficient and competitive
with the private sector. Opponents,
which include workers’ unions, claim it
threatens the rights of workers, leaving them
vulnerable to the whims of administrators.
But the change to a performance model is
now certain. The issue is how to do it right.
Fear and resistance
Among the first things you’ll have to address
is the fear employees have of any systemic
change. If Title 5 had drawbacks, at least it
was familiar. Just the phrase “pay for performance”
can sound intimidating, even threatening,
to employees accustomed to salary bands.
And managers can make it worse if they
don’t understand how to deliver a program
that addresses organizational needs, motivates
employees and is transparent enough for
workers to trust.
A good first step is to learn the lessons—both
the successes and the mistakes—of agencies
that have done it. Consider, for example, the
Government Accountability Office.
J. Christopher Mihm, director for strategic
issues at GAO, said one of the most important
factors in the success of a pay-for-performance
system is trust, up and down the ranks.
In its conversion, GAO included everyone
from the outset. The pay team held a series of
focus groups with employees to identify critical
core competencies they felt were directly
related to success. “We worked with an advisory
council and employee groups,” Mihm
recalled. “We conducted a Web-based survey
that all GAO employees had access to. Did we
get it right? Well, over 90 percent who
responded validated those competencies. So
one of the issues we’re not having to deal with
is whether we’re paying for the right thing. We
spent a ton of time trying to get it right.”
The second thing GAO did was to develop a
set of safeguards to make sure that employees
were treated fairly.
Mihm said his agency does two separate, independent
reviews of draft versions of new
performance ratings. “This allows for constructive
comments and feedback before
things get contentious and litigious,” he said.
Employee input and feedback also proved essential
at NIST, where 2,800 employees participate
in a pay-for-performance system that
was implemented as a demonstration project
back in 1988. Many elements of the system have evolved through the years, said Ellen Dowd, NIST’s human resources director.
Initially, for instance, NIST’s pay tables began
with minimum and maximum percentages
for raises. In 1991, that was changed because
management wanted the option of giving
no increase, rather than a minimum.
Another change, prompted by employee input,
was reducing the levels of eligibility from a
five-level system to a single, pass-fail one.
As at GAO, employee involvement at NIST
in the development of the system was important.
“There was an employee committee representative
at every meeting,” Dowd said. “I’d
definitely recommend that. You have to get
employee input.”
Union bliss or blues?
Unlike at many agencies, unions represent a
small part of the employee population at NIST,
so it was a matter of keeping them informed,
even if they weren’t actually at the table. At the
FAA, unions have a far greater presence—
Gibson said the agency included unions as well
as other groups in the design phase.
But no matter how well you plan, be prepared
for contentiousness. Some union leaders
recognize that pay for performance is inevitable
and that being at the table can help
create a system that works for their members,
but others simply are against it.
Jacqueline Smith, public policy director of
the American Federation of Government Employees,
is no fan of pay for performance,
arguing that it’s inherently unfair, given that
not all worker output can be judged objectively,
and that one person’s gain is another’s loss.
“If everyone does well, everyone can’t do
better,” she said. “That’s a fundamental thing.
If you’re shifting distribution from across the
board without an increase in funding, you’re
robbing Peter to pay Paul, and the negative
consequences of that are pretty obvious.”
Dowd acknowledged that pay for performance
can be difficult to manage, but said that
if used correctly it is fair because the best employees
are rewarded.
“Yes, you are robbing Peter to pay Paul,” she
said. “It’s a performance system. Otherwise
everyone gets the same. Is that the way to
keep your best employees? Most people
know who your good performers are, and if
they get more money, people know why.
Giving both good and poor performers the
[same] money is what causes problems. To
treat everyone the same is inappropriate.”
In fact, some experts don’t believe unions
should have much of a role in developing performance
systems.
“Managerial prerogatives should be a consideration,”
said Howard Risher, a management
consultant who has worked with the
National Academy of Public Administration
and the Office of Personnel Management.
“Given the nature of government, I would not allow unions to negotiate how much money is available for salary increases because they’d
spread it like peanut butter. It’s the opposite of
the pay-for-performance philosophy.”
Nevertheless, it’s best to treat unions with
respect, acknowledging their perspective, said
Doris Hausser, senior policy adviser and chief
human capital officer at the Office of Personnel
Management.
“Part of this is recognizing that employee
acceptance is part of whether this is going to
succeed,” Hausser said.
Employee acceptance is based on trusting
the integrity of the system, officials agreed.
Including the unions is one strategy, but
Mihm suggested two approaches that are vital
to convincing employees about a plan’s value.
The first is to make sure you have a good
performance management system. The second,
he said, is more cultural. “It’s convincing
the good employees that they have more in
common with great employees than with
lower-performing employees.”
Caron Golden writes from San Diego on business and technology issues.
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| PAYDAY | Every pay-for-performance system is different, reflecting the varying goals and culture of an organization. But some things are universal when it comes to creating a successful system. Here are some tips:
ALIGN INDIVIDUAL performance
expectations with organizational
goals
PROVIDE and routinely use performance
information to track
organizational priorities
MAKE MEANINGFUL DISTINCTIONS
in performance through
constructive feedback, providing
management with objective,
fact-based information for
rewarding top performers and
necessary information and documentation
to deal with poor
performers
INVOLVE EMPLOYEES and
stakeholders to gain ownership
of performance management
systems
MAINTAIN CONTINUITY during transitions
MAKE THE CHANGE process
transparent and open—communications
is central to gaining
acceptance to change
DON’T STINT on training.
Managers and supervisors, as
well as line employees, will
require extensive education
and training
PROVIDE FEEDBACK regularly
to employees to guide and
encourage their growth and
career progression
CREATE a trusted grievance
system for employees that adequately
addresses their concerns
and complaints
PAY ATTENTION to what needs
fine-tuning as your revamped system
matures so it remains relevant
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