People Person

Mary Lacey is described by her colleagues as a brilliant engineer, a woman who has thrived in a man's world, a "people person" able to build consensus, and a mentor to many promising Navy civilians. To be sure, she has built a stellar reputation during her 31-year government career, eight of those in the Senior Executive Service.

In May, Lacey landed the big one, a job that will define her career, and likely the future of the Defense Department. As the program executive officer for the National Security Personnel System, the 49-year-old is leading the team that in the next few weeks will propose performance-based pay rules for 650,000 Defense civilians, more than a third of the government's General Schedule workforce. Those rules will shake the foundation of the civil service and could lead to its permanent replacement. Then, during the next four years, she has the unenviable task of dismantling the General Schedule while building the new system from scratch.

Lacey understands the magnitude of her job. "We are talking about people's livelihoods," she says. "This is going to be affecting employees' pay, something that used to be untouchable." And it's going to take a long time-until 2008 at least. The new system "will need care and feeding until it's institutionalized. . . . Change is a scary thing," she adds.

To get there, Lacey needs to win over, or at least assuage, the Defense Department's unions, which are adamantly opposed to the change. Many managers are nervous as well. Lacey wants to assure them that no one is going to touch the rules that transformed the American civil service from a machine marred by graft and patronage to the merit-based system that exists today. "I am a civil servant," she says. "Those two words are very important to me." But without new rules, she adds, Defense will fall further behind the private sector in the competition for talent. And Defense managers will feel more compelled to turn over civilian work to contractors and military personnel due to inflexible rules.

She says that's because the restrictive job classifications of the General Schedule that limit employees to a narrow job and salary range are a turnoff for talented young workers, she says. And Defense managers are frustrated by the slow pace of hiring as well as their inability to quickly assign new tasks to civilian employees, or to move them to new locations.

Lacey is in step with Defense Secretary Donald Rumsfeld and Undersecretary of Defense for Personnel and Readiness David Chu, who first made those arguments while successfully lobbying Congress for the new authorities last year. But those positions will be difficult to reconcile with Defense's unions, which argue that the existing General Schedule system works well and that the type of changes management is proposing-pay for performance, strict disciplinary rules and more limited union bargaining-will only hurt teamwork and foster favoritism.

Lacey has the temperament to see the job through to completion, says Karen Higgins, executive director for research and engineering at the Naval Air Warfare Weapons Division at China Lake, Calif. "Her leadership style fosters trust," says Higgins. In the late 1990s, the two executives worked together to launch a Navy Energetics Board to encourage Navy scientists to collaborate on weapons research.

Partly due to union opposition, the personnel system design process was in disarray before Lacey was hired last May. After Congress passed the 2004 National Defense Authorization Act in November 2003, granting Defense authority to waive sections of the civil service code and devise new personnel rules, the department rushed headlong into writing regulations with the idea of launching the system by the end of 2004.

Things quickly unraveled. Left out of the design process, unions cried foul. So did the Office of Personnel Management. Soon, members of Congress were lashing out at the Pentagon, urging officials there to slow the process. In February, Rumsfeld charged Navy Secretary Gordon England with rescuing the design process, and England quickly began a search for a day-to-day manager. "We had a good sense that we had to do a bit more listening to employees and managers and really design this thing," recalls Peter Brown, executive director of the Naval Sea Systems Command, who held Lacey's job on an interim basis before she was hired.

Defense wanted an office that would follow the model it had developed for significant acquisition projects, with the top two posts held by a high-level program manager and a human resources expert. The Navy recommended that Lacey be hired for the program management slot. She long had been a top Navy engineer and, after joining the Senior Executive Service in 1996, she had impressed the brass with successful stints as head of the research department at the Dahlgren, Va., division of the Naval Surface Warfare Center, then as director of its Indian Head, Md., division, and most recently, as technical director of the center, which a $4 billion-per-year operation.

After a number of candidate interviews, Lacey stood out as the best-qualified, according to Charles Abell, principal deputy undersecretary of Defense for Personnel and Readiness, who sat on the committee that selected her. "Her proven expertise in managing complex acquisition programs and personal, hands-on experience implementing a performance management-based personnel system made her the perfect candidate," he says.

Lacey was hired, Brown says, because she had three outstanding credentials: expertise in line and program management, familiarity with Defense's personnel demonstration projects and a working relationship with the agency's unions. "She has face-to-face, toe-to-toe negotiation experience with the unions," says Brown. "She's a scientist who can sit at a table and negotiate with the unions. Go find me three or four of those."

Nearly 60 percent of Defense employees are represented by unions, 41 of them in all. Lacey hasn't yet won them over. Union leaders say Defense has refused to share planning details with them, or to respond to their concerns. They've turned to allies in Congress to put pressure on Lacey and her team.

But Gregory Junemann, president of the International Federation of Professional and Technical Engineers, isn't ruling out an agreement. Lacey, he says, "seems quite willing to explore new concepts and avenues toward mutual understanding." Even as Junemann and his union have hurled harsh critiques at the Defense Department, he continues to describe Lacey as a "hard-working, dedicated professional."

At the Naval Surface Warfare Center, Lacey helped usher in a demonstration project that includes many of the attributes expected to form the core of the personnel system: broad pay bands instead of narrow General Schedule ranks, and pay for performance-impressive, considering that the workforce included everyone from welders to scientists and plenty of union members. "There was no uprising," Brown remembers. In fact, many employees rejoiced as Lacey set up a workforce development program that set clear paths to advancement. "It was a good system," adds Brown. "So how come we can't give that to the rest of the Defense Department?"