Performance Management is Not a Contest

The administration is sending the wrong message with its fund for targeted pay incentives.

The management of employee performance is not a contest to select the fastest or the prettiest. For better or worse, our society places a lot of emphasis on competitive situations and on winning. My Philadelphia Eagles just proved they are the best among the 32 NFL teams. Philadelphia went crazy. Soon March Madness will be here and there will be a lot of betting on which college wins. We have beauty contests, spelling bees, dog shows and all those TV shows where someone wins. We love to celebrate winning.

Business is about winning. The rewards can be significant. Companies celebrate their successes. But within a company, individual competition is limited to the salesforce. Today, teamwork and collaboration are emphasized, and they are reinforced with incentives. Small ‘spot’ awards of a few hundred dollars are the only individual awards.  

In contrast, the Trump administration’s budget proposal includes a $1 billion workforce fund that will heighten the competition for financial rewards. That’s roughly $500 per employee (assuming all two million employees are eligible) or if 20 percent earn awards, the average would be $2,500. If awards go to 10 percent, the typical award is still not enough to retain a high performer with an attractive job offer. To have the intended impact the fund should be considerably larger.

The administration’s budget fact sheet states the money is to be used for “targeted pay incentives to reward and retain high performers and those with the most essential skills.” So the awards will be limited. The message to those not granted an award is “You’re not a valued contributor.”

When the number of recipients is limited, it is effectively a contest. There are winners and losers. Just ask anyone who had a colleague selected for an award when they were ignored. The losers have a reason to be dissatisfied—or angry when the decisions are subjective.

Today, far more than 20 percent of federal employees are rated as high performers. It’s broadly understood that the ratings are not credible. Robert Tobias, the distinguished practitioner in residence at American University’s Department of Public Administration and Policy and a former president of the National Treasury Employees Union, summarized the problem: “A pay-for-performance system has to have an evaluation system that is perceived as fair and accurate. But agencies have talked for years and years and years about creating fair and objective evaluation systems, and they don’t have it.”

Surprisingly, at least to me, the 2018 Federal Workforce Priorities Report released this month by the Office of Personnel Management fails to list performance management as a priority. The report states “agencies are establishing plans to maximize employee performance, including a specific set of required actions designed to help address conduct issues and poor performance.” Performance management is also not included as one of the “promising agency practices.” If those plans are being developed, it’s a well kept secret.  

Developing the policy governing the designation of high performers or those with essential skills will not be a straightforward problem. High performance involves different accomplishments in each field. It’s very possible that a notable accomplishment in one agency does not warrant recognition in other agencies.  Important accomplishments typically involve several employees. It would be similarly difficult to develop a consensus on what to designate as essential skills.  

In the context of the administration’s plans to reduce the workforce, freeze salaries and slow down step increases, the prospect of cash awards is unlikely to make federal employment attractive for top performers or those with high demand skills. They can command fully competitive salaries and the promise of a positive work experience. And the awards are certainly not going to help with recruiting top talent.

If the goal is “maximizing employee performance,” as stated in the workforce section of the budget documents, focusing on already highly valuable employees or the small number of poor performers is not the best strategy. That implicitly ignores what might be three quarters or more of the workforce. Further, selecting only a few for special awards—especially if the selections appear to be biased or discriminatory—could backfire and adversely impact performance.

No other employer would even consider a similar strategy. Of course no other employer is constrained by policies and practices that are a century old.   

It would be far more productive to invest in the executives and managers responsible for day to day operations. They are the keys to improved performance. They need the skills to engage and challenge their people. They also need to be accountable and rewarded for achieving or exceeding planned results.

OPM should take the lead in providing thought leadership and the people management policies and systems agencies and their managers need. However, the website information on performance management does not reflect best practice thinking. The tool to help agencies assess their practices, the Human Capital Framework (HCF) Diagnostic Tool, is focused on administration, not the management or improvement of performance. It includes 12 questions asking for yes or no responses. The first four, abridged slightly, are:

  1. The organization’s performance appraisal systems are effectively and efficiently designed, implemented and evaluated.
  2. Managers and supervisors are given time for and are held accountable for their exercise of supervisory responsibilities.
  3. The performance management system motivates employees to focus their work effort.
  4. Executives, managers, and supervisors receive training on appraisal and awards systems.

The questions read as if they were written a decade or more ago. Most striking is the silence on issues like the effectiveness of managers, the importance of performance planning, the use of metrics, the validity of ratings or the consequences linked to ratings.

At some point agencies need to get serious about improving performance. The management practices proven to contribute to better performance are well documented. The research is solid—well managed organizations in every sector are more successful. The only real barrier is the political commitment.

As a suggestion, OPM should take each human capital practices and decide if it reflects the best practice, and if it fails that test, decide how to upgrade it

OPM should be providing best practice advice to agencies. That includes advice on proposals that could trigger adverse consequences. The website should advocate proven best practices. Hopefully, the incoming OPM Director will use his broad knowledge of the field to initiate needed changes.

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