Pay Reform Pitfalls

As the Obama administration attempts to reform the federal pay system, officials are picking their way through a minefield of alternative pay systems, hoping to learn lessons from existing projects while making sure no employee is treated unfairly.

Though the administration has suspended the conversion of new employees to the National Security Personnel System, Office of Management and Budget Director Peter R. Orszag has said other pay-for-performance systems will be allowed to expand. Orszag's memo clears the way for the Agriculture Department to move ahead with its plan to launch a pay-for-performance system at the Food Safety and Inspection Service. On a larger scale, it means the Office of the Director of National Intelligence can continue to roll out its pay-for-performance system.

In April, when Democratic lawmakers asked the administration to halt the expansion of pay-for-performance systems governmentwide, Ron Sanders, chief human capital officer for the intelligence community, said he would mount a strong defense of its system to OMB and to the Hill. Sanders said employee survey data demonstrated the pay system's efficacy, and he noted the system was modeled in part on the National Geospatial-Intelligence Agency's well-established personnel system.

Sanders told Government Executive on Wednesday that the intelligence agencies have long had the authority to establish their own personnel systems, since 90 percent of their employees are in the excepted service. But he also said he was glad for the opportunity to expand the system, in part because it offers the intelligence community a chance to demonstrate what it learned from examining pay-for-performance systems governmentwide.

"The one overarching lesson that we've learned here is designing a system in a collaborative way, involving all the stakeholders, is what works," Sanders said.

Office of Personnel Management Director John Berry echoed Sanders' sentiments about the particular needs of the intelligence community at a conference in Washington on Tuesday.

"We recognize the intelligence community is unique, they face unique challenges, and they get treated in a unique way," he said.

But in the past Berry has said he would like to find an approach to federal pay that could effectively cover a large majority of the workforce. He said the balkanization of federal pay systems, and a situation in which 800,000 civilian employees are covered under something other than the General Schedule, pointed to the weakness of the current approach.

"Does this mean we're at the cliff's edge? No, I don't think this is going to fail tomorrow," he said. "But will this pay system take us another 50 years."

While Orszag and Berry have decided to allow some of those individualized pay systems to move forward, at least for now, Orszag did say they are considering ways to study those divergent systems.

But the administration is treating the National Security Personnel System differently. It is the only personnel system officials have suspended, though President Obama did express his objection on Wednesday to an amendment to the Defense authorization bill that would require NSPS end permanently within 12 months of passage. Two sets of public hearings later this week could provide a sense of what recommendations the review board assigned to study the system will make to the administration, but Berry already has said that whatever the reforms he proposes will look like, they are "not [going to be] NSPS."

Those public hearings and Berry's remarks come as the NSPS program office released its first significant internal evaluation of the personnel system, with decidedly mixed results. The study showed employees covered by NSPS were more likely than their counterparts to say discussions with their supervisors about performance were useful and they were satisfied with the recognition they received for doing good work. They were much more likely to say they were rewarded for creativity and innovation and poor performers in their offices were dealt with, according to the report.

The results also suggested NSPS employees were less likely than their counterparts under the General Schedule to understand what they need to do to earn appraisal ratings, and the number of NSPS employees who believe the system has made it harder to recruit new workers and to discipline poor performers has risen sharply.

Such mixed responses were typical in projects that force employees through major culture changes, according to the report. But it noted significant challenges in the first several years of setting goals, providing appraisals, establishing ratings and distributing pay pools.

"Even with massive training and communication efforts, the workforce has unanswered questions," the report said. "Together, they made it work, though generally not as smoothly as anyone would have wished."

Whether the Obama administration will give the Defense Department a chance to improve on that performance remains an open question. But after setting an aggressive deadline for achieving pay reform, Berry and Orszag are looking for all the information they can get.