In principle, it’s hard to argue that a pay system devised half a century ago primarily to reward clerks makes sense in today’s information age, when so many civil-service jobs demand knowledge workers capable of managing complex tasks and responsibilities.

In practice, however, attempts to develop a better pay system—dating back to the 1978 Civil Service Reform Act—have resulted in one failure after another. Efforts to reward employees for their skills and results rather than length of service were invariably undone by inertia, resistance and union objections.

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"The administration’s push for a pay-for-performance system continues to be an uphill battle."

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Not surprisingly, the administration’s current push for a pay-for-performance system—and efforts to reform systems for more than 700,000 Defense Department employees—continues to be an uphill battle amid worries about cronyism and favoritism.

There have been pockets of success: at the Federal Aviation Administration, the IRS, the National Institute of Standards and Technology and the Government Accountability Office. Each demonstrated that progressive leadership could break the chains of the General Schedule system and attract and retain the talent government needs. Indeed, more than 90,000 federal workers are now in some form of performance-based pay system.

Those successes, though, tend to affirm one point: While rewarding employees for performance is the right thing to do, a performance-based system makes a meaningful difference only if and when it’s properly implemented. Easier said than done.

GAO and its chief, David Walker, are widely credited these days with doing the job right. Critics quickly dismiss GAO for having some distinct advantages: Its workforce is small, relatively homogenous and highly educated.

But the lessons of GAO—and the principled approach of comptroller general Walker (profiled in this issue)—offer important leadership examples worth emulating.

For starters, GAO recognized that pay-for-performance must be built on a credible performance appraisal system. It engaged employees from the beginning with open meetings, advisory councils, frequent draft reviews and plenty of training. That it took nearly four years to fully develop its appraisal process is a testament—and a cautionary tale—for what it takes to move successfully to a performance-based pay system.

GAO also ensured that employees who meet expectations would still get a minimum raise, giving them an incentive even if they don’t rank among the top performers. And it wisely kept its existing employee grievance process intact to ward off abuses.

Walker also is right in emphasizing that the success of any pay-for-performance system depends on linking personal performance to clearly articulated goals of the organization. Disturbingly, as Walker tells our readers (on Page 25), while the executive branch sets priorities with the federal budget, it still sorely lacks a strategic plan and well-defined goals to pass down to agencies.

That raises a sobering question: Even if we succeed this time in moving federal employees to a pay-for-performance system, will we get the right results as we move forward in the 21st century?