GovernmentExecutive.com

As pay-for-performance systems become more predominant in the government, an office charged with protecting merit principles is counseling agencies to tailor systems to their specific needs, rather than replicate ones already in place.

The Merit Systems Protection Board last week released guidelines for agency officials designing performance-based compensation systems. Most federal employees are paid under the General Schedule, which offers raises that are automatic for most employees.

The Homeland Security and Defense departments, though, are in the midst of switching to performance-based systems and the Bush administration is seeking to extend the overhaul to the domestic agencies.

"Agencies must tailor pay-for-performance systems to their mission and environment," the MSPB report said. "Agencies have many options when designing a pay-for-performance system ... However, there is no universally correct choice for any of these options."

The board presented a number of issues agency heads need to address before designing their systems. One is how costs will be kept under control. The MSPB presented three choices: forced distribution of performance ratings, limiting performance-based rewards to a top percentage of employees or placing caps on pay progression.

Officials also need to decide who will rate employees, the report said. Smaller agencies may choose to make pay decisions in a centralized, top-down manner. Other agencies may use a central board made up of senior managers, but the MSPB warned that these managers may not have enough intimate knowledge of agency subunits to make such decisions.

At the other end of the spectrum, agencies can delegate rating decisions to first-line supervisors. The board counseled that this scenario, however, "involves the natural tendency of supervisors to protect their employees' interests rather than objectively assessing accomplishments."

Designers also need to decide who will provide input on ratings among supervisors, managers, the employees themselves, peers and customers. The MSPB recommended using as many sources of feedback as possible.

Other questions the report said agencies should consider include: Should employees be placed into the system in stages or all at once? What exactly should be rewarded with pay increases? Should performance-based increases come in the form of one-time bonuses, permanent raises or a combination of both?

The underlying message of the report is that while the federal government seems to be moving toward a more heavily merit-based pay system, the systems are at risk of being unwieldy.

"To make pay for performance successful, agencies need to make a substantial investment of time, money and effort," the report said. "Agencies will need to make investments that extend far beyond the money needed to fund bonuses and pay increases," such as extensive training for supervisors on how to work under the new system.

COMMENTS

• One of the things that I find most troubling is that people from human resources who are tasked with training the managers about the new program actually believe 100 percent in it. They actually think that this new type of system is good for employees, that it will work, and that cronyism won't be a problem. They believe this despite the fact that all past performance-based systems have failed, with corruption being the number one problem without exception. The problem is the people who created and/or trained managers on all of those previous systems undoubtedly thought the same things ... only to be proven to be miserably wrong. These HR people have seemingly bought into their own line of BS, without even realizing it. It's quite scary. But then again, I guess these people wouldn't have been picked for this task if the powers that be weren't certain they had this type of submissive, unquestioning personality. There is one positive thing about all of this, I guess. There is the fact that all of us who are against this new performance-based pay system (which is almost all of us) will at least have the pleasure of being able to say "we told you so" once the system proves itself as a failure. If one thing is guaranteed in all of this, it is that all of us who oppose this will undeniably be proven right. If Vegas would take bets on whether the new performance-based pay system would fail, I would bet my entire TSP on it. This system will absolutely fail. It's just a question of how long it will take. GovExec.com reader Posted April 10, 2006 4:32 PM
• With all respect, the system is broken. But, it is broken because it was allowed to be mismanaged by people who have become intent on covering up their extremely bad management practices. MSPB is continuing to keep its head in the sand to avoid making waves. The old system was never the problem. It was and will continue to be the lack of management accountability for their actions that undermines the functions of the government. If the MSPB was serious about reform, it would create a neutral means of appeal and provide serious consequences for managers who abuse the rules for hiring, appraisal and promotion. The higher up on the ladder the managerial position is, the greater the consequence they should face because they cause greater damage to the government. Let's see managers do time in federal prison for promoting their buddies over more qualified candidates. Let's see them brought to trial for fudging productivity ratings within their agencies. There are sizable work groups in the government that should have been disbanded years ago. Will someone be held accountable for the waste? Or ... would that be fraud? This mess can't go on indefinitely. It was recently reported in the press that President Bush, his Cabinet and the Congress have reached an all time low in public opinion polls. Is time running out for the business as usual? Robert M. Posted April 10, 2006 8:19 PM
• Face it folks, DoD is run by military managers that have no concern for civilians or the conditions that civilians work under. Our work spaces are far below the recommended size of OPM, our work duties change daily -- even hourly with no defined objective or purpose, we are held at set grades because there is a cap on the number of grades you can have, you cannot expect to increase in grade without moving around the country (that is what the military does so should the civilians), the military managers move jobs every two years (generally more often) and therefore have no incentive to get good people or get rid of bad people, good civilian workers get the work that the bad civilian employees cannot or will not do the problem is never resolved, there is little idea of what one is expected to do until they come into work! Now on top of this we get NSPS so the generals and political appointees can reward their friend and punish the people they have to explain things to. The punishment is designed to get rid of the people they should fire but are too lazy or afraid to fire today! The reward is for those that simply say yes sir boss and carry on like the volunteer military that would never face controversy with their general because it would stop their career progression. Now they want the same system for the civilians. Yes sir boss NSPS is a good system -- not! Taxpayer Posted April 11, 2006 9:06 AM