Execs rewarded under pay for performance
- By Mary Mosquera
- Jul 23, 2008
A pay system based on performance is starting to have a positive influence on the federal government's ability to meet human capital challenges, Linda Springer, administrator of the Office of Personnel Management, has told a hearing about the progress in senior managers’ alternative pay programs.
She cited data that agencies are granting higher performance awards and pay adjustments to their top performers from a report released July 22 on trends in pay for performance.
The results demonstrate that given time and proper implementation, performance-based pay systems can be effective for the federal workforce, she told the Senate Homeland Security and Governmental Affairs Committee's Oversight of Government Management, the Federal Workforce and the District of Columbia Subcommittee on July 22. OPM evaluates the alternative pay systems used by the Senior Executive Service and the National Security Personnel System.
“It should come as no surprise that these pay-for-performance systems are better able to recruit and retain a high-quality workforce,” she said. “I remain firmly convinced pay for performance is critical for attracting a 21st century workforce,” she said.
In a survey earlier this year of SES members, OPM found 93 percent said they believe their pay should be based on performance and 91 percent said they are held accountable for achieving results. The majority said they were satisfied with the recognition they received and that their appraisal was a fair reflection of their performance, Springer said.
The OPM trends report said although pay distinctions are made among levels of performance, only a third of SES respondents said pay and bonus distinctions are significantly different among executives. However, many of the SES members said they did not receive a summary of their agency’s SES overall performance ratings, performance awards, and pay adjustments, so they didn’t know how they individually compared against the group, the report said.
Agencies are making progress in improving their pay-for-performance systems, such as linking executive performance with the organization’s goals and results, Springer said.
For example, the Defense Department has strengthened the link between pay and performance in its National Security Personnel System and has provided management the ability to encourage broader skill development and advancement opportunities within and across pay bands. The system requires employee participation, so communication has increased between managers and their workforce, she said.
The Government Accountability Office is preparing a report highlighting selected agencies’ policies and procedures for their SES performance appraisal and pay systems and oversight of the certification process by OPM and the Office of Management and Budget, said Christopher Mihm, managing director of GAO’s strategic issues. He explained some early findings.
“Our preliminary results show that there are opportunities for improvement in the communications of aggregate appraisal results to all senior executives,” he said. GAO is evaluating the pay-for-performance systems of the Defense, Energy, State and Treasury departments, the Nuclear Regulatory Commission and the Agency for International Development.
Those agencies have policies that require SES performance expectations to be aligned with organizational results, and organization performance is factored into the SES performance appraisal, Mihm said. However, OPM has reported that many agency plans do not sufficiently identify the measures used to determine whether the results are achieved, he said.
Although the selected agencies have multiple rating levels in place for assessing SES performance, GAO’s analysis found that the senior executives are rated overwhelmingly in the top two levels for bonuses but not necessarily for pay increases, Mihm said.
The agencies built safeguards into their senior executive performance appraisal and pay systems, such as pre-decisional checks of performance appraisal recommendations through higher-level reviews and Performance Review Boards.
Communication of aggregate results is important for transparency and credibility of their systems in addition to the executive’s individual rating against the performance plan, and implementation varied, Mihm said.
Despite the reported progress, pay-for-performance systems are biased and lead to low employee morale, employee groups and unions told the lawmakers.
To be credible and effective, a pay system must either be set in statute, like the General Schedule system, so that everyone understands the rules and consequences, or there must be collective bargaining so employees can have a role in the pay system and have remedies for unfairness, said Colleen Kelley, president of the National Treasury Employees Union.
One of the underlying issues is that there is not enough agency funding and limited resources, she said, adding that agencies must implement the alternative pay system with credibility and transparency.
“Managers may see awards but none of their employees are recognized,” Kelley said.
“NTEU’s experience shows the alternative pay systems in many of the agencies are characterized….by a litany of failed experiments, widespread employee dissatisfaction, inequitable distribution of resources, abuse in ratings systems, and rampant employee confusion leading to low morale,” she said.
For example, the Performance Accountability and Standards System at the Transportation Security Administration plays a large role in the high TSA turnover rate, she said. It relies heavily on awarding bonuses instead of increasing base pay. TSA employees have an average salary of $30,000, and training is minimal, she said.
Further, TSA employees are constantly tested, but are not told what they did wrong in the event they fa
l; training is minimal; and a majority of employees don’t know what is expected of them in order to earn a pay raise, Kelley said. Additionally, TSA recently awarded Lockheed-Martin Corp. a $1.2 billion contract to handle human resource issues, including pay systems.
In a survey of TSA employees in April, the Homeland Security Department found that only 21 percent believed promotions were based on merit and 23.6 percent believed that their pay raises depend on how well they performed their duties, she said. About 8,000 TSA employees, or 20 percent of its total 40,000 workforce, leave their jobs each year, Kelley said.
Mary Mosquera is a reporter for Federal Computer Week.