Intell leaders heed pay concerns

Intell community’s guides

The U.S. intelligence community’s performance-based pay system is built on 10 principles drawn from the National Geospatial-Intelligence Agency’s system, Office of Personnel Management’s studies of pay-for-performance demonstration projects, and Government Accountability Office’s audits of alternative-pay systems at the Homeland Security Department, Defense Department and Internal Revenue Service.

1. Ensure senior leadership commitment.

2. Engage employees to build consensus, acceptance and understanding.

3. Budget for sufficient funding — no less than under the General Schedule.

4. Provide sufficient training to managers, employees and human resources staff.

5. Establish implementation milestones and assess readiness.

6. Develop a credible performance management system.

7. Hold managers accountable for managing performance.

8. Establish a clear link between performance rating and pay decisions.

9. Build in safeguards to ensure transparency, fairness and merit.

10. Provide appropriate avenues for reconsideration and redress.

When intelligence community officials began to lay the groundwork for a performance-based pay system two years ago, one of their priorities was to tap the wisdom of the people who would feel the full force of such a fundamental change — their employees.

“You have to involve employees, engage them, talk to them and listen to them,” said Ronald Sanders, the intelligence community’s chief human capital officer. “You have to be as transparent and open as you can.”

The pay-for-performance system, called the National Intelligence Civilian Compensation System, will be phased in at the 16 intelligence community agencies during the next four years.

Most human resources experts agree that attempts to introduce performance pay in the federal government have produced mixed results at best, especially in terms of employee acceptance. Often, the biggest mistake is not obtaining and assessing employee feedback early in the process.

For example, a 2006 Senior Executives Association study found that the Senior Executive Service’s new pay plan had been implemented without adequate communication with SES members. Nearly half of the senior executives in an SEA survey said they had never seen a copy of their agency’s executive performance management plan. The result has been widespread dissatisfaction with system and low morale among those affected.

“You’ve got to start with employee involvement and, to the extent possible, get their buy-in to do this successfully,” said John Palguta, vice president of the Partnership for Public Service. “But the buy-in isn’t just convincing them that this is a good thing to do. It’s employees being involved in helping design [the system]. You don’t want to implement a new system that actually demotivates people.”

Robert Tobias, director of public-sector education at American University, told the House Oversight and Government Reform Committee’s federal workforce subcommittee earlier this year that “active, meaningful involvement of the affected employees…is critical if increased individual and organizational performance is the goal of the performance management plan.”

Intelligence community officials took this strategy to heart and applied it to the development of their new pay system. Beginning in spring 2006, they convened an intensive series of focus groups to identify employees’ concerns about performance pay. The Defense Intelligence Agency alone has held more than 60 town hall meetings with its employees and has another 50 scheduled, said John Allison, the agency’s deputy director of human capital management.

“The more transparent and open an agency’s leadership is, the less concern and distrust employees are going to have about the system,” Sanders said in an interview with Federal Computer Week.

Intelligence Community officials have used the focus groups and town hall meetings to draw up a list of employee concerns and develop a plan to address them.

“One of the most important lessons we learned from the initial round of focus groups is our employees didn’t want to hear platitudes and philosophy. They wanted details,” Sanders said. “They said, ‘Here are the things that concern us.’ They basically told us, ‘Don’t come back until you’ve addressed those details.’ We set that with the senior leadership of our agencies as one of our design principles — that at the end of the day we needed to look at those concerns and speak to every one of them openly with our employees.”

That approach, Sanders said, has gone a long way toward alleviating employees’ fears about the transition to a new pay program. Moreover, officials have drawn from the employees’ perspective to design the system. For instance, they have incorporated pay increases that keep pace with annual General Schedule and locality pay adjustments, a structural element that retains a clear linkage with the pay system employees are accustomed to. “The unfamiliar is fearful so we want to make it more familiar,” Sanders said.

Under the new system, every employee rated successful or higher will receive the same General Schedule national and locality adjustment that their counterparts in other federal agencies get. “That’s the best example of a policy decision…we deliberately made that distinguishes the IC system from many, if not all, other pay-for-performance experiments to date,” Sanders said.

Although building guaranteed GS-equivalent pay raises into the system lends it a familiar feel, it decreases the amount of money available for additional performance pay. But the trade-off was worth it for senior managers, he said.

“They said, ‘We’ve got really good people. We don’t want to make them fearful. If this helps reduce the fear and anxiety, let’s do it even though is does limit to some extent the amount of money available for performance pay. It’s worth that price,’ ” Sanders said.

Another concern for employees was the potential for unfairness in their supervisors’ performance evaluations. “They worry about arbitrary and capricious [performance] decisions so we’ve tried to build in protections that limit if not alleviate that,” Sanders said.

In the Intelligence Community agencies, performance evaluations will stress collaboration and sharing — a holistic approach, said Director of National Intelligence Mike McConnell at a recent briefing on the system. “Our emphasis is on something like a 360-degree appraisal,” he said. “It means [appraisals by senior managers] in your organization — you normally expect them to do appraisals — but it also means input from peers, which often turns out to be the most important part.”

Appraisals might also include feedback from clients — decision- and policy-makers to whom intelligence analysts are providing services, McConnell added.

Officials have developed a stringent, multilevel review process to protect employees from unfair appraisals. Second-level managers will review supervisors’ ratings, and higher-level managers will assess ratings across the entire organization “to ensure that there’s no funny business — no discrimination, no adverse impact, no rater bias of any sort,” Sanders said.

To address another employee concern — that supervisors might make inconsistent performance pay decisions — community officials built a mathematical formula into the system to determine a preliminary performance payout.

“One of our employees’ concerns was, ‘Are supervisors up to this? Do they know how to set pay?’ A way of addressing that is to start with a mathematical calculation so that [the pay decision] is reasonably objective,” Sanders said.

The formula is based on factors including an employee’s individual rating, the rating distribution of other employees in a given pay pool and performance-pay funding in the pool, Sanders said. “The variables are clear, the math is easy and the computer will do it.”

The National Geospatial-Intelligence Agency uses a formula technique in its pay-for-performance system, which was implemented nearly a decade ago and has served as a performance-management design model for the intelligence community’s new system.

In establishing an implementation timeline, officials kept in mind a lesson from other, less-successful federal experiments in performance pay: It takes time to get it right. As a result, the first performance management systems won’t be deployed until later this year, and performance payouts aren’t scheduled to begin until early 2010.

Sanders said taking so long to design the program frustrated some officials who thought it would be put into place more quickly. “It took two years to get the community to come together and to listen to employees,” he said. “This will be phased in over four years so we’ll have plenty of opportunities to learn as we go and make adjustments as appropriate.”

Ultimately, the new system is more than just a set of personnel policies, Sanders said.

“One of the most compelling arguments for proceeding [with performance-based pay] is our demographic,” he said. “It stuns people to learn that almost 50 percent of the intelligence community has five years or less of service. Our newest generation of intelligence professionals wants to be paid on the basis of results. And I fear that if we retrench from that, we’ll lose them. They’ll work somewhere else.”

In the intelligence community, Sanders said, performance pay is a means to a larger end. 

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