Fair Pay, Fair Play

Last week, about 20 minutes into an interview with Government Executive about a bill introduced last year to increase the diversity of the Senior Executive Service, Rep. Danny Davis, D-Ill., changed the subject. The discussion had centered around the role that subjective judgments play in determining who gets SES appointments, and that have kept the executive corps less diverse than both the federal workforce as a whole and the general population.

"All these things are extremely important," Davis said, "because the administration has been pushing pay for performance, and pay for performance has less structure in it than the current system." That lack of structure means there is a greater role for individual decision-making and greater potential for ingrained biases to come into play.

"It's important," Davis said, "as these new pay for performance systems come on line [that we] note if minorities are being hindered by these. . . even more than they were before."

There are multiple ways to measure whether performance-based pay is a success. Unless employees are motivated to work harder for greater payouts, and unless they feel relatively satisfied with their compensation, the new approach won't work.

But pay for performance also will have to be judged on its legitimacy. Do the programs treat employees fairly? Do they exacerbate existing disparities? Establishing the moral legitimacy and inherent fairness of pay for performance isn't just necessary because it's the right thing to do. Perceptions of unfairness lie at the heart of many employees' objections to the systems, whether they're worried about cronyism, ageism, racism or sexism.

There already are some unfortunate examples that suggest Davis' fears may be justified. Ron Stroman, the managing director of the Office of Opportunity and Inclusiveness at the Government Accountability Office, found discrepancies between the performance evaluations of black and white employees, and reported that those discrepancies widened the longer employees stayed at the agency. Such patterns could prevent African-American employees from advancing into the SES.

Last September, a mediator ruled that the Securities and Exchange Commission's pay-for-performance system, adopted in 2003, was illegal because it produced discrimination against African-American employees and workers who were 40 or older.

At GAO, Stroman told Government Executive that he thought a key source of disparities in performance scores was that managers were unwilling to talk to their African-American employees. The National Treasury Employees Union, which filed a grievance against the SEC pay system, claimed the agency's evaluation process was based on overly vague criteria.

When the SEC system was struck down, John Palguta, vice president for policy at the Partnership for Public Service, a nonprofit that works to promote federal service, noted that "done correctly, a good performance system helps insulate a manager against claims of bias or favoritism."

But early pay-for-performance programs like those at SEC and GAO risk associating the concept with bias. Instead of being engines of opportunity, of lifting up employees whose performance might have been overlooked because of preconceptions about race or sex or age, pay-for-performance systems may come to be seen as tools to reinforce the status quo.

That perception is of no small importance: If employees refuse to buy into new systems, there won't be much performance to pay for.