Rethinking Pay, Appraisal

Managers would be able to tie their employees' compensation to how competent they are--or aren't--under a demonstration project planned for up to 50,000 Defense Department acquisition professionals.

Under the Acquisition Workforce Demonstration Project, set to launch in July 1998, acquisition outfits throughout DoD would do away with the General Schedule for civilian employees and redesign the way they evaluate employees' effectiveness. The new evaluation system could lead to substantial raises for strong performers and pay freezes for poor performers.

The demonstration project, which would be the largest ever undertaken in the federal government, was authorized by Congress last year. A proposal for the project will be published in the Federal Register later this year. A draft of the proposal is now out for internal service and agency comment.

Several agencies, including the Defense Logistics Agency and the Defense Information Systems Agency, as well as all the military services, are expected to participate in the demonstration project.

The project would revamp the civilian classification system by combining the 15 grades of the General Schedule into a few broad pay bands. Advocates of broad banding, which has been pilot-tested in smaller projects at the Defense Department and other agencies, see it as a way to simplify job classification and give managers more flexibility to reward good employees than is allowed under the General Schedule.

With a broad band system, managers would be able to adjust employees' pay according to their effectiveness using a "contribution-based compensation and appraisal system" proposed under the demonstration project.

According to the draft proposal, the contribution-based system differs from the civil service system in that "instead of basing the appraisal on how well a specified job is done, the appraisal is based on the job done well."

Managers would evaluate employees by looking at how their efforts have furthered their organization's mission. By helping employees figure out how what they do affects the mission, managers can encourage employees to "think outside the box" of their job descriptions, the demonstration project's designers say.

"People are working harder and smarter" in the acquisition workforce, says Greg Giddens, the demonstration project's director. "We're doing business differently, but we're still managing our people the same way we've been doing it for a long, long time."

The way employees are currently classified, evaluated and compensated makes it difficult for a manager to reward hard workers, Giddens said. Under the demonstration, "that manager will really have the opportunity to reward people."

Managers would also be able to punish poor performers.

Under the demonstration, pay levels within broad bands would be tied to the value of employees' work to the organization. Managers would meet with their employees at the beginning of each year to discuss how the employees' work is expected to further the organization's objectives. Managers would be required to follow up on the initial discussion throughout the year, encouraging employees to think of more efficient ways to accomplish the mission instead of just doing the activities listed in performance plans.

Then at the end of the year, managers and specially-designed panels would rate employees' contributions to the organization. If they found that an employee's contribution level was worth more to the organization than the employee was being paid, he or she would get a salary increase. If they found that an employee's contributions were worth less than the employee was being paid, his or her pay would not be raised.

"Managers have to take employee development very seriously," Giddens said. That means not only rewarding good employees, but also being able to do the unpopular thing--not giving poor performers raises. And under the plan, supervisors must work to motivate poor performers and get them back on track. Managers will also have to learn how to think of what they and their employees do in terms of the broad goals and mission of the organization, rather than in terms of the tasks and activities they perform.

"It will be a struggle to get everyone in that mindset," Giddens said. "We've put together an aggressive training system."

In addition to broad banding and the contribution-based appraisal system, acquisition managers would be given other flexibilities:

• They could get an exception from having to use the Priority Placement Program, which gives laid-off workers preference for job openings.
• Reduction-in-force rules would be adapted to the broad band system.
• Managers could offer employees paid sabbaticals to further their expertise in specialized areas.

American Federation of Government Employees Compensation Specialist Peter Tchirkow said the union is reviewing the proposal. He said AFGE "has concerns with it," because it could affect up to 10,000 of the union's members. Tchirkow added that the proposal is "just starting to percolate."