Pay flexibility

A January report from the National Commission on the Public Service called for more flexible personnel systems that agencies could tailor to suit their own needs.

"I grew up in the old system where everybody got paid the same thing, [but] a total preoccupation with uniformity no longer fits," former Federal Reserve Board Chairman Paul Volcker told Government Executive just before the report was released on Jan. 7. Volcker led the commission, which spent nearly a year studying the federal government before developing 14 recommendations for reforming the civil service system.

One example of a more flexible personnel system-paybanding-continues to gain support.

Under paybanding, the 15 grades of the General Schedule could be whittled down to four or five salary ranges. This system would give managers more freedom to set salaries than they do under the General Schedule, which limits managers to 10 salary options in each grade.

"Paybanding is simply a tool to get past many of the bureaucratic hurdles that exist in our rigid civil service system," said Diane Disney, dean of Commonwealth College of Penn State University and former civilian personnel policy chief at the Defense Department.

A handful of agencies are using paybanding structures, including the new Transportation Security Administration, while a few others, such as the Commerce Department, are testing the measure out to see if it's a good fit. A 2002 assessment of the paybanding project at Commerce made the system sound promising at that agency.

"Some success has been demonstrated in the ability to link pay and performance, to retain high performers, and to expedite and delegate human resources processes," the report said.

But a wholesale shift to paybanding is not the answer to the government's recruitment and retention woes, according to Disney.

"Paybanding is not a panacea because virtually every time you switch from a rigid classification system into paybanding, the payroll costs go up," she said. "A second issue is that labor generally resists paybanding for fear that management would have too much control and the raises would be arbitrary."

Paybanding projects usually include new performance appraisal systems. Pay-for-performance is part of the Bush administration's management agenda and is one of the issues Rep. Tom Davis, R-Va., said he plans to pursue in his new role as chairman of the House Government Reform Committee. Disney and National Treasury Employees Union President Colleen Kelley say change is needed in the appraisal system before pay-for-performance can be used effectively.

"Federal employees are not afraid of performance-oriented systems, as long as there are credible appraisal systems," Kelley said. The concept may be intellectually and emotionally appealing, but the devil is in the details, Disney said.

"If people give honest evaluations, then you know how to reward performance, but it's not easy to sit across the table from someone and say 'I think you did a very competent job this year and I'm giving you a 3,'" Disney said. "If that were solved, I think the person who figured it out would win the Nobel Prize, the Pulitzer Prize and the Heismann trophy all together."

According to Volcker, all paybanding needs is "sophisticated oversight" by the Office of Personnel Management. "If we want government to do what we're asking them to do … we're going to have to develop some flexibilities," Volcker said. "It's happening anyway."

What do you think about paybanding and pay-for-performance measures? Send "Pay and Benefits Watch" an email at tballard@govexec.com.