Ignoring human capital has the same impact as deferring maintenance on bridges and roads.
For several years, the recession provided an excuse to ignore the country’s deteriorating infrastructure. Buildings have aged, the cracks grown wider and the potholes bigger -- and the costs for maintenance have increased. Delaying the inevitable expenditure makes the problems worse.
That same argument can be made for the infrastructure of government – the people who make government work. The pressure to reduce spending has the same impact as deferring investments to maintain bridges and roads. Talent leaves, morale declines, performance deteriorates, and the public’s frustration grows.
Leaders in successful organizations would never allow that to happen. Talent management has become a C-suite priority. They manage the workforce as an asset, not a cost, and adopt strategies to gain everyone’s commitment to maintaining their success. Multiple research studies confirm very clearly that effective workforce management practices generate significantly better performance.
Government’s performance problems could be reduced with more effective work management practices. The way that pay has been managed is at the heart of those problems. The “cost” of performance problems, especially those that make the headlines, should be considered whenever pay is debated.
Excuse the rant, but the contentious debate over federal pay hurts government. A series of GovExec columns starting months ago have discussed a proposed 5.3 percent increase in salaries. That’s not nearly enough to make government salaries competitive. A recent column listed the different findings from comparative analyses of federal and private sector total compensation. One stood out -- a 2015 study from Cato claimed federal compensation is 78 percent above private sector levels. That study triggered the rant.
The author stated, “The federal workforce imposes a substantial burden on America's taxpayers.” That’s based on the federal payroll, $260 billion in 2015 according to the article, which is less than 1 percent of government spending. Actually something like $75 billion is the cost of benefits, so the total of wages and salaries was $185 billion. I did a quick calculation: the 5.3 percent would add $10 billion to the base pay total -- less than 0.25 percent of federal spending. That hardly qualifies as a substantial burden.
Payroll of course is referred to as a discretionary expense. However, every evaluation of pay should consider its implications for staffing and performance. Freezing or reducing pay levels has a cost.
A significant percentage of the payroll is tied to the workforce in Defense, Homeland, Veterans Affairs and the Intelligence Community. Both presidential candidates have proposals that would add to the workforce in those agencies. I doubt if even the most vocal critics want to see those staffs reduced. Added to that is the National Institutes of Health and the Centers for Disease Control and Prevention. Maybe it’s foreign service salaries that are too high, or those for specialists in cybersecurity, or law enforcement. I doubt if the judiciary thinks they are overpaid. Or those overseeing the country’s financial sector.
In the Cato study I found the statement that “Average federal compensation was 39 percent higher than average private compensation in 1990.” That was the proverbial straw.
As the project leader for the studies that preceded the Federal Employees Pay Comparability Act that year, I know that claim is a classic example of misleading statistics. We were not asked to develop an overall measure of the gap but I can probably find a dusty copy of the report showing city by city pay gaps for a list of common jobs. The database was at that point the largest ever assembled, combining the surveys of two nationally prominent consulting firms with the Bureau of Labor Statistics surveys. The gaps were real and we learned made it virtually impossible to fill job vacancies in some locations.
Yes, as the author argues, there are federal operations where employees perform “mundane” jobs and yes, there are employees paid more than the U.S. average. But comparing overall averages is as meaningless as pointing out that the average person weighs less than a Washington Redskins lineman.
And yes, as Cato and other think tanks have argued, federal benefits are better and cost more than those available to many workers. However, a far more pragmatic comparison would be with the benefits, including stock ownership opportunities, provided by federal contractors. That’s the relevant labor market, not the many small “establishments” that are in the sample of employers surveyed by BLS. Companies like Accenture, IBM and Boeing all pay their employees well and provide better than average benefits.
When employees are managed as assets, compensation is managed to attract needed talent. Companies that want to hire world class experts put together a compensation package to attract the best. I’ve had clients pay for key jobs at the 90th percentile to attract top talent. Planning to pay employees, for example, at the 75th percentile is not uncommon.
Government is obviously never going to consider a similar policy but federal salaries are below market levels in virtually every labor market. It’s been years since job specific market data have been compiled but anyone can go to a website like Salary.com to check the facts. The critics add the cost of benefits to support their arguments but benefits are rarely a priority in career or job choice. An exception is the repayment of student loans.
When agencies are unable to hire -- and retain (thinking about the turnover of Millennials) -- well qualified employees, it’s a problem. “Public service motivation” is more important than starting salary for many but year after year of pay freezes has to make many question their career choice.
The problem, however, is not limited to the way salaries have been managed. Job choice is an investment for employees as well. The best want more than just a job. Agencies need to reconsider the way work is organized and managed. Learning opportunities, support for training, job challenge, feedback and recognition, advancement opportunities, flexible hours, autonomy are all important and can make up for low salaries. The direct costs would be nominal.
Government’s people infrastructure is crumbling. Assets are aging and retiring. Talent is not fully utilized. There is no logic in allowing this to continue. It has to start with the commitment of leaders.