DHS scales back pay for performance ambitions

The Homeland Security Department is putting a fresh face on its controversial personnel overhaul, expanding the focus of the reforms but also moving more cautiously than originally planned before transferring employees to a system that links pay to job performance.

DHS Deputy Secretary Michael Jackson said in an interview Wednesday that the department will not be as ambitious on the project this time around, specifically on pay-for-performance. Jackson acknowledged that the pay-for-performance initiative was a source of great anxiety to employees.

The personnel system, known as MaxHR, also will undergo a name change.

The new "Human Capital Operational Plan" has five goals that "move beyond MaxHR," opening up a broader focus on human resources, said DHS spokesman Larry Orluskie. The goals promote hiring and retaining a talented and diverse workforce, creating a DHS-wide culture of performance, creating high-quality learning and development programs, implementing a DHS-wide integrated leadership system and becoming a model of human capital service excellence.

The HCOP will involve a 2008 pilot project that will focus solely on the department's employees who work in intelligence and will be coordinated with a pay initiative developed by the director of national intelligence.

If the pilot proves successful, starting in 2009, the department could move all DHS employees off the 15-grade General Schedule pay system and into a pay-banding system that enables salaries to be closely related to occupation and geographic location.

Orluskie spoke about the pay system with caution, however, saying pay is not necessarily the main focus of the personnel reforms. HCOP "is much broader than just pay," he said. "It has plans in it about performance management, how to retain a good workforce and how to develop a good manager."

The Federal Human Capital Survey released last month by the Office of Personnel Management affirmed that agency employees care about workplace issues other than just pay. In fact, DHS employees ranked the department at or near the bottom among agencies surveyed in key categories, specifically in the areas of management and job satisfaction.

Changing the pay system would likely prove a difficult task. The program has been strongly contested by labor unions that claim it will encourage cronyism and result in salary cuts in the long term. National Treasury Employees Union President Colleen Kelley has called the system "fundamentally flawed," saying it threatens national security and causes dangerously low morale among front-line employees.

Kelley said on Monday that the agency's decision to scrap the name of the proposed system and replace it is "recognition that everyone associates MaxHR with failure."

The "failure" came in June when an appeals court found that DHS' proposed system would illegally curtail collective bargaining rights for employees by giving management the ability to cancel negotiated agreements after the fact. The ruling unanimously upheld and even broadened a lower court decision to strike down large parts of MaxHR.

But Orluskie said that though HCOP is simply an expanded version of MaxHR, the agency still plans to correct all of the problems addressed in the lawsuit. "The lawsuit doesn't go away," he said. "We owe it back to the judge, and we'll have a much more detailed plan of what we'll do with labor relations."

MaxHR faced another challenge in October, when lawmakers cut millions of dollars in requested funding for the system for fiscal 2007, settling on $25 million in the department's appropriations bill. That funding was reduced by an additional $5 million earlier this month, bringing total funding for the year to $20 million, far less than the $71.5 million requested in the president's budget and the $29.7 million Congress gave the system last year.

But Orluskie said the new plan is not driven by funding constraints, but rather the need for a broader human capital strategy. "The department is a good steward of the tax dollar and always works with Congress to obtain the funding necessary to meet its goal within the limits of today's financial limitations," he said.

NTEU praised the agency's decision to substantially revise the timetable, but questioned whether the new program was really an alternative to MaxHR or if DHS was simply changing the name.

"I certainly hope this change is far more than cosmetic," Kelley said, "because much more is needed, and most particularly a willingness by DHS to work with employees and their unions."

The project has drawn wide support from the Bush administration, which hopes to use the model to eventually replace the decades-old General Schedule pay scale under which most civil servants work. But since the new project will not be completed before the presidential election in 2008, continuation of the effort will be up to the new White House leadership.

Karen Rutzick contributed to this report.