Feds roiled by workforce changes

Experts warn against changing pay rules before feds improve management skills

Mary Lacey had a successful career managing complex technical design projects for the military. Now she is in charge of redesigning the Defense Department’s civilian personnel system, a job that makes rocket science look easy, she says jokingly.

The redesigned personnel system gives DOD civilian managers more flexibility to hire the kinds of employees they need and pay them salaries that will keep them from leaving, Lacey told an audience of federal human resource managers at the 2006 Office of Personnel Management Workforce Conference in Baltimore earlier this month. Hiring managers probably won’t get bigger personnel budgets, she added, but they will have a bigger say in how they spend their budgets.

Under the government’s civilian personnel system, known as the General Schedule, the distribution of pay leaves little room for managers’ discretion, said Lacey, who serves as the program executive officer for the National Security Personnel System.

Some managers might prefer to have a highly paid workforce with fewer employees, she said, and under the new personnel system that DOD is establishing, managers have that choice.

“It becomes a conscious decision that managers have to make, as opposed to where we are today where 85 percent of payroll costs are on cruise control,” she said.

Sessions on federal government pay and systems for evaluating employee performance drew large audiences at the Baltimore conference. Federal HR experts talked about governmentwide personnel system reforms, but they said most agencies would need to develop effective ways to evaluate employees’ job performance before the entire federal government could switch to a pay system based on performance evaluations.

Robert Shea, counselor to the deputy director for management at the Office of Management and Budget, said the General Schedule pay system used to compensate information technology professionals and other federal white-collar employees is outmoded. No modern business gives automatic annual pay increases, he said. “We ought to work collaboratively to fix what is now broken, which is a system that provides across-the-board pay raises to everyone regardless of their performance.”

In 2005, Bush administration officials drafted such a proposal and named it the Working for America Act.

But lawmakers and their staffs, who would have to rewrite current law to change how federal employees are paid, are being cautious. “Getting money from Congress for something like this is probably easier than the cultural change that has to take place in the federal workforce for employees to buy into the whole system,” said Andrew Richardson, staff director of the Senate Homeland Security and Governmental Affairs Committee’s Oversight of Government Management, Restructuring and the District of Columbia Subcommittee. Federal employees are accustomed to the General Schedule, and most of them don’t want managers to have a greater say in their pay increases, he said.

The Bush administration has made workforce issues a priority. But many agencies are still struggling to create performance management systems that OPM will certify as meeting its standards. It is not easy, said Jeff Reisinger, associate executive director of human resources at the Securities and Exchange Commission.

A modern performance management system performs at least three functions, Reisinger said. It functions as an employee disciplinary system, as a rating system for determining employee pay increases and bonuses, and as a system for developing employee skills and other work capabilities. “The complexities associated with getting all that into a [single] system are challenging,” Reisinger said.

Most HR experts agree that how federal agencies create and introduce new performance management systems will largely determine whether employees and managers accept them. They often cite the Labor Department’s success in creating a new performance management system for its 17,000 employees. The key ingredients of that system are fairness, simplicity and rewards, said Patrick Pizzella, the department’s assistant secretary of administration and management.

Pizzella, a political appointee, said he involved career staff and program managers in developing Labor’s new performance management system. “It needed to be apparent to everyone that there was fairness in the system,” he said.

“The system had to be clear and simple,” Pizzella said. “Complicated systems in large organizations eventually fail. Complex, large organizations cannot be efficiently managed by Rube Goldberg devices. Lastly, employees have to feel there are real rewards for participating in a new system and playing by a new set of rules.”

To encourage acceptance of the new performance management system, Labor Secretary Elaine Chao increased the amount of money in the pay pool for Senior Executive Service employees several times, Pizzella said. Chao also increased the pay pool for General Schedule employees for the first time since 1984. “We’re putting what little money we have into the system so that managers and agency heads can reward their employees,” Pizzella said.

After establishing that system, Labor began getting green scores for workforce management on every quarterly score card from OMB, which rates federal agencies on achieving the objectives of the President’s Management Agenda. “We kept using that as a carrot with our employees: ‘This is your chance to participate in a presidential initiative,’ ” Pizzella said.

Many agencies, however, are still struggling with the challenges of writing meaningful performance objectives and training managers to use those objectives in offering employees constructive feedback. “Try talking to someone in their 30s, 40s or 50s about how to improve their critical thinking,” said J. Christopher Mihm, managing director of strategic issues at the Government Accountability Office. “It requires sensitivity and insight and intelligence, or you’re going to get some very [negative] feedback: ‘Well, thank you. I’ve managed to survive this long without being told that.’”

Mihm added that most federal managers need training and practice before they can give that kind of feedback to employees. “That is a real skill, and it’s not one that comes naturally or easily. It takes an awful lot of time and an awful lot of practice,”

he said.

HR experts say that workforce demographics add urgency to the personnel changes at DOD and the Homeland Security Department. During a period of national security concerns, DOD and DHS gained congressional authority to replace traditional federal pay systems and labor-management rules with new personnel systems that give managers greater control over employees and employee pay. Now, with a shrinking pool of potential new hires, all federal agencies face a highly competitive hiring environment in the next decade, Shea said. “We want a system that attracts and retains and rewards the best people,” he added.

No one knows whether lawmakers will pass legislation to replace the current General Schedule and Federal Wage System governmentwide. But federal HR experts who gathered in Baltimore to consider that possibility cautioned against moving too quickly on changes affecting employee and manager pay.

“You have to be very sensitive to the time that it takes to communicate the reason for any kind of change,” Reisinger said. “I don’t think you can overcommunicate why you are doing it, or what you are doing.”

New federal personnel systems look alikeThe Defense Department’s National Security Personnel System and the Homeland Security Department’s MaxHR are alike in five of their basic components. And they are similar in another way: A federal district court has separately blocked DOD and DHS from implementing their new labor-management provisions. DHS has appealed its injunction, and DOD is weighing its options.

Here are the five components common to both systems:

  • New performance management criteria for evaluating employees and managers.

  • Broad pay bands in lieu of traditional pay grades and steps within grades.

  • Variable rather than automatic pay increases.

  • Expanded rights for managers.

  • Curtailed appeals procedures for employees to protest disciplinary actions.

    — Florence Olsen

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