Performance pay systems must avoid favoritism, report says

The federal government must ensure that any program to increase pay for high performing employees is fair and transparent and does not allow for favoritism, according to a new report from the National Academy of Public Administration and the National Commission on the Public Service Implementation Initiative.

The report is based on an Oct. 21, 2003 pay-for-performance forum that included top civil servants and public service experts.

The Bush administration is pushing to reduce guaranteed pay raises for the federal civilian workforce and replace them with performance pay adjustments. In the White House's fiscal 2005 budget proposal, the civil service pay raise is intended to cover the cost of inflation-about 1.5 percent. President Bush allotted $300 million for the Human Capital Performance Fund to provide salary boosts for the top-performing federal workers. The same idea was broached last year-and administration officials asked Congress for a $500 million performance fund-but lawmakers appropriated only $1 million.

According to the report, Clay Johnson, deputy director of the Office of Management and Budget, said that a performance pay system must be tied to "specific, tangible things, as opposed to 'I like them' versus 'I don't like them'." Federal managers must not "reward favorites or reward friends," he added.

Marcia Marsh, vice president for Agency Partnerships at the Partnership for Public Service, addressed the issue of federal workers who are rated poorly in a pay-for-performance system. At General Electric Co., Marsh's former employer, employees rated in the bottom 10 percent discussed their performance with supervisors. One-third of those workers improved their performance, one-third decided to leave voluntarily and one-third were "removed from their positions," according to the report.