CHCOs say pay now or pay later

New study shows high-level support for governmentwide pay changes

Federal Human Capital: The Perfect Storm

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Michele Pilipovich, human resources director at the Pension Benefit Guaranty Corp.,  said at a recent forum that the federal government can no longer afford a patchwork approach to pay,  with some agencies adopting market-based compensation while the rest of the government remains on a General Schedule pay scale.

“For a small agency, we can’t afford to stay on the [the General Schedule] pay scale because I am now competing with other agencies with different pay scales,” Pilipovich said. “Before, I might have been losing people to private industry. Now I’m losing them” to other federal agencies.”

A similar situation exists among the nation’s intelligence agencies, said Ron Sanders, chief human capital officer (CHCO) for the Office of the Director of National Intelligence. He said new recruits and experienced professionals in highly competitive occupations, such as scientists, engineers and information technology workers, “are going to begin voting with their feet” by leaving for agencies that have established more flexible pay systems. 

Without a governmentwide modern pay system, Sanders said, “we’re going to wake up one morning and find that we have haves and have nots, and the haves are getting all the talent and the have nots aren’t.”

A new study found that most federal CHCOs believe it is imperative that a performance-based pay system be a long-term goal of the federal government.

A majority of CHCOs said the GS system is no longer adequate for meeting the government’s hiring and retention needs, according to “Federal Human Capital: the Perfect Storm,” a report released July 19 by the Partnership for Public Service and Grant Thornton. The report was based on extensive interviews with 55 human resources executives from 28 departments and agencies.

“I think the next generation will be intolerant not only of rigidity in General Schedule system but also of the lack of opportunities which that rigidity brings,” said Marta Perez, CHCO at the Homeland Security Department.
More than a third of CHCOs in the study said the GS pay scale should be eliminated immediately, researchers said.

“The consensus clearly was that the General Schedule system is no longer adequate for the 21st-century workforce,” said John Palguta, vice president for policy and research at the Partnership for Public Service, at a forum in Washington to announce the study results. “We need something different.”
Although there is no consensus on what governmentwide pay and performance system should look like, many CHCOs said the process of creating it should be measured and deliberate, Palguta said.

However, others said the government shouldn’t wait too long to introduce changes. “I fear that if we don’t move forward with this at a brisk pace, the folks we’ve brought into the federal [workplace] and who we’ve invested heavily in as our future will leave us,” Sanders said. Pay for performance “is the kind value proposition and social contract they’re looking for,” he said.”
Many people who responded to the survey said agencies must establish credible performance management systems before they change employees’ pay.

“There is a real fear of quotas or the possibility of politics driving [performance-evaluation] decisions,” said one official in the survey. “That’s something only time will change. The more transparency we have and the more employees are involved in the process, the better it will be.”
Perez said pay for performance must be better understood. “Pay for performance is really not rocket science,” she said. “It’s how most of the world gets paid. I think we’re over-thinking pay for performance a little bit in government.”

Recent legal setbacks for DHS and the Defense Department in establishing performance-based pay systems have made some human resources officials reluctant to fully embrace the idea, according to the report.

Also, executives who participated in the survey expressed other reservations. For example, the federal government’s human resources agency, the Office of Personnel Management, received mixed reviews. More than two-thirds of officials said OPM doesn’t fully understand their needs and limitations on resources. However, many respondents said current OPM leaders are receptive to ideas from the federal human resources community.

In response to a survey question about the Office of Management and Budget’s Human Resources Line of Business initiative, many executives said they are taking a wait-and-see attitude. The executives said they like the idea of shared-service centers, but they are concerned about the logistical aspects of moving to a governmentwide service provider, according to the report. “I’d like to see how it works for someone our size,” said a human resources official at a large department.
6 immediate ways to meet federal workforce needsChief human capital officers must take the following immediate steps toward achieving governmentwide changes in how federal employees are paid, according to researchers at the Partnership for Public Service.
  • Keep human capital front and center. Make sure senior leaders stay involved.
  • Improve performance management systems. Use an office or a bureau to test new approaches.
  • Get rid of one-size-fits-all policies. The Office of Personnel Management and Congress shouldn’t impose the same requirements on small agencies that they do on large ones.
  • Concentrate on filling skill gaps. Effective succession planning is crucial, especially as an expected retirement wave begins to crest.
  • Demonstrate the value of human capital initiatives to Congress and the executive branch to gain support for appropriate spending on training and information technology.
  • Clarify the Office of Management and Budget’s Human Resources Line of Business initiative. Agencies need clear guidance and a means to offer feedback about the initiative.
— Richard W. Walker


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