Government’s Staying Power

That's the message Congress and the White House sent to federal workers with the two most significant workforce policies of the last 20 years. In 1983, Congress and President Reagan made it easier for new federal employees to go work for private companies by creating the Federal Employees Retirement System, a portable retirement package-including a modest pension, Social Security and a 401k-style investment plan-that employees could take with them to other jobs. Then in 1994, lawmakers and President Clinton urged hundreds of thousands of federal workers to retire or quit through a downsizing effort. As a result, there were 427,269 fewer executive branch employees at the end of 2000 than at the beginning of 1993.

But despite the nudging and the downsizing, the federal government has one of the most remarkable retention rates of any employer. Four of every five federal workers have been with the government for 10 years or more. In the private sector, it's just the opposite: only one in three workers have been with their current employer for at least a decade. The average length of service for federal workers is 17 years; the average in the private sector is 3.5 years.

In 2000, the typical private firm had a turnover rate of 19 percent, according to the American Management Association. The federal government had a rate of 6 percent, the Office of Personnel Management estimates.

The rate of employee turnover is one of every organization's key measures of human resources success. While turnover is often a goal of management policies, such as the federal downsizing program, executives generally attempt to reduce it. The benefits of turnover include getting rid of poor performers and introducing new blood. The costs of turnover include a drain of institutional knowledge, lost productivity while positions are vacant, additional recruitment efforts and training for new employees.

The Numbers

Across government, turnover numbers this year are lower than those for the private sector. The Bureau of National Affairs' quarterly report on employee turnover found that the typical employer lost 1.3 percent of its workforce each month in the first quarter of 2001. That doesn't include losses due to layoffs, reductions-in-force or temporary staff departures. According to OPM, the federal government had a turnover rate of about 1 percent in February and March 2001, including seasonal workers and some categories of turnover that the BNA analysis didn't factor in. Some agencies had lower turnover rates. The Equal Employment Opportunity Commission lost only 0.11 percent of its workforce each month and GSA averaged 0.3 percent turnover.

Another way to look at turnover is to see how many employees stay in their jobs after two years. Here too, the government is doing relatively well, and better than it did a decade ago. Of the 109,281 workers hired into the federal service from April 1987 to March 1988, about 24 percent left within two years of being hired. Of the 52,202 new hires from April 1998 to March 1999, about 19 percent left within the first two years.

Despite the portability of the Federal Employees Retirement System, the numbers suggest so far that the government isn't having any trouble holding on to workers hired after 1983. In fact, of the 61,691 employees hired in 1983 under the old Civil Service Retirement System (with its generous pension plan), only 30.3 percent still work for the government, compared with 32 percent of the 51,038 employees hired in 1984 under the portable retirement plan.

Turnover Troubles

OPM officials caution that turnover data are most useful at the agency level or in occupational categories. And at those levels, the government has retention problems. The Securities and Exchange Commission, for example, has lost 30 percent of its attorneys, examiners and accountants in the last two years, Acting SEC Chairman Laura S. Unger told lawmakers this summer. In fact, 50 percent of SEC employees have been with the agency for less than 10 years, a retention rate well below the federal average.

Across government, occupations with high turnover rates include pilots, with a 12 percent annual turnover rate as of March 2001; patent examiners, with 10.6 percent; and radiological technicians, with 11.6 percent. An OPM analysis shows the turnover rate for each of those occupations increased over the past three years.

Last year, OPM found turnover problems in some low-level technology occupations, prompting the agency to approve special salary rate increases of 7 percent to 33 percent for about 33,000 information technology specialists. The quit rate for GS-5 computer specialists from fiscal 1998 to fiscal 2000, for example, averaged 6 percent a year, compared with a 1.8 percent quit rate for GS-13 computer specialists. OPM approved the higher salary rates to help agencies recruit employees at the GS-5 through GS-12 grades. GS-13 workers didn't get the salary boosts in part because turnover was not high at that level.

Overall, the quit rate for full-time permanent federal workers dipped from 2.6 percent to 2.4 percent in the last three years, and the overall separation rate fell from 6.8 percent to 6 percent.

Some observers say workers are becoming less likely to stay with an employer-even the federal government-for a full career, requiring agencies to adapt their recruitment and retention strategies. But this trend may not be so new. Of the 112,000 people who began government careers in 1983 and 1984, only three of every 10 are still working toward their federal pensions today. Agencies will see a bump in their turnover rates as baby boomers retire this decade. The General Accounting Office recently estimated that an average of 1.8 percent of federal employees will retire each year from 1999 to 2006, higher than the average of 1.3 percent per year from 1991 to 1998. The retirement rate will be about 2.1 percent in 2006, GAO estimated. Just as with overall turnover, some agencies are facing substantially higher retirement rates.

But even with the higher retirement rate, the government's overall turnover rate still will be well below private sector average. "The turnover looks like it should be manageable," says John Palguta, director of policy and evaluation at the Merit Systems Protection Board.

Why is turnover so low? Last year, the MSPB surveyed federal workers, asking them why they stay in their jobs. The top reasons were federal benefits programs, job security, current job duties, pay compared to outside government and work schedule. Diane Disney, former civilian personnel policy chief for the Defense Department, says another reason people stay in government is the ability to serve the country. "It's love of the work and a sense of mission," says Disney, now dean of Penn State's Commonwealth College. "I've never met a more dedicated workforce than the one at the Defense Department."

Leave And Let Leave

Turnover can be healthy for an organization, some observers say. "You get in new ideas, new abilities and new skills, and it provides a chance to restructure," says an OPM official. Turnover also can weed out people who aren't right for their jobs. An MSPB analysis found that in 1999, federal managers let go of 6 percent of new hires during their one-year probationary periods. Managing turnover can help an agency let go of people with skills that aren't needed and bring on people with those that are. Employees often decide to leave on their own for the same reason. Indeed, the MSPB survey last year found that the primary reason federal employees are planning to look for another job is that they want to find an employer who could better use their skills and abilities. The trick for managers is making sure that the people looking for new jobs are not the people they need to stay.

Even though overall turnover rates won't rise dramatically with the anticipated retire- ment wave, MSPB's Palguta cautions that agencies must ensure too much expertise doesn't walk out the door. After the 1990s downsizing, "turnover is occurring from a federal workforce that is already spread pretty thin," he says. And Linda Rix, co-chief executive officer for Tacoma, Wash.-based human resources services firm Avue, says that federal executives should expect a ripple effect from the retirement wave. For every re- tirement at top grades, human resources offices could deal with three or four staffing actions as lower-level employees move up to fill the spots of outgoing managers and professionals. That workload onslaught "is going to hit a very limited HR capacity," Rix says, noting that many HR professionals are headed into retirement.The good news about government's track record on turnover may get lost in the turmoil to come.