VULTURES ARE CIRCLING YOUR SALARY SYSTEM
With a new Presidential term about to begin, the scavengers are circling Washington, D.C. hoping to feast grandly at the expense of the federal treasury and federal employees. In a synchronized attack worthy of Seal Team 6, allegedly neutral non-profits, profit-driven beltway consultants, and many soon-to-retire federal executives are slamming the GS salary system. Their goal is not only to have it declared a public nuisance, but more importantly replaced with a product and process that will earn them millions. Little or no concern will be shown for the harm their plan will cause government or how much it will cost employees.
Here is how these scavengers will attack. Out of the blue, so-called public interest non-profits will schedule conferences to discuss the allegedly decaying GS salary system. Blatantly self-interested, profit-obsessed, beltway consultants will magnanimously volunteer to make presentations which do little more than condemn the GS system as the root cause of every governmental flaw. In all likelihood, attractively printed formal reports will be distributed loaded with generalized data about salary systems that the consultants created for private sector clients—and which the consultants alone declare to be great successes. Terms such as the following will be loosely tossed around: modernize, think corporately, top-to-bottom performance linkage, flexibility, better adapt, etc. Sprinkled among the speakers and saturating the audience will be high-level federal executives, typically CHCOs, who invariably confirm with the expertise of an “insider” the burden the GS system has become and their certainty that the consultants product-du-jour is precisely what is needed to get government off its knees. There will be no formal mention of the fact that many of these agency executives are retiring in the next few months and hoping for a career in consulting.
Despite the appearance of high science and deep concern for the public interest that these three actors will create, not once will anyone be called on to defend the current GS salary system, debate the advocates of a replacement systems, or even toss out far more modest adjustments that could be made to the existing system at virtually no cost and with a high probability of return.
If federal employees want to spare themselves the chaos of salary bands, the pain of base pay freezes, and the personal losses from unfunded pay-for-performance schemes, they had best force their way into these discussions to insist on a more open-minded and rigorous analysis of the GS system as well as its alternatives. In the end, the quality of every salary system is measured by how well it meets ten criteria. We have listed them below along with an explanation of how the GS system currently meets each. The time has come to publicly demand that these three self-interested parties identify what their elaborate and very expensive scheme can do that the GS system cannot.
Underlined below are the ten functions every salary system should be capable of performing, followed in italic print by explanations of how the GS system meets them today.
1. Reward the super-performers among the workforce. The GS system permits agencies to not only give the very best of the best performers (or super-performers) competitive promotions to more responsible jobs, but also substantial rewards even if they stay in their current job. Those can include as performance-based cash awards up to $10,000 a year, performance-based immediate permanent 3% salary increases, and even little-known permanent salary upgrades using the “person-in-the-job” grade classification exception to pay one employee at a higher grade than her co-workers in the same job. There is also a bundle of indirect and non-economic benefits that can be given them.
2. Vary rewards to the many, many employee whose performance range between Outstanding (but not super) and Acceptable. As just noted above, managers already can grant performance bonuses anywhere from a dollar to $10,000 a year, give some immediate 3% permanent salary increases. They can also distribute about a half-dozen highly valued indirect rewards such as tuition reimbursement, telework rights, alternative work schedules, developmental details, etc. Moreover, these can be distributed with little effort by supervisors if linked directly to the employee’s annual performance appraisal numerical score.
3. Withhold some or all rewards from the marginal performers until they improve. The GS system permits agencies to withhold otherwise scheduled in-grade increases, promotions, bonuses, and many non-economic benefits. Best of all, the system gives managers the unilateral power to set the performance standards defining every level of performance from Unacceptable through to Outstanding.
4. Penalize those performing unacceptably. The GS system permits agencies to demote or fire the employee with merely substantial evidence that he or she failed to meet just one of the several performance standards the agency unilaterally sets, suspend the employee without pay, and withhold a bundle of economic and non-economic benefits such as the right to telework, work alternative schedules, leave, in-grade salary increases, etc.
5. Entice the best applicants into the organization, especially over the competition. The GS system permits agencies to offer the top candidates “superior qualification” starting salaries at any step above step 1, the usual starting salary step. That can result in as much as a 30% increase over the typical starting salary. Agencies may also offer recruiting incentive payments of up to 25% above the starting salary during the first year of employment as well as non-competitive promotions to higher graded positions.
6. Minimize the chances to losing good performers to in-house competitors. The GS system minimizes in-house predatory competition within an agency as well as between federal agencies by keeping everyone on the same salary grading system. Although not perfectly, it imposes a degree of equity that blocks agencies getting into bidding wars between one another for an employee who already works in government.
7. Minimize the chances of losing good performers to outside competitors. The GS system permits an agency to compete by promoting the employee to more responsible positions, offering retention incentives of up to 25% above their current annual salary when they have an actual competing offer in hand, offering immediate annual bonuses of up to $10,000 or a permanent performance-based 3% salary increase.
8. Keep salaries linked to the outside labor market by occupation and geography. The GS system links agencies to the outside labor market in three ways. First, a government-wide annual study conducted by the highly-reputable Bureau of Labor Statistics measures the size of the pay gap between federal and other similarly situated employees. Second, OPM has the power to authorize special salary rates by occupation and geography that can amount to thousands more in annual salary for targeted groups of employees who are difficult to recruit or retain. Third, OPM and agencies can upgrade positions via the classification system over which they have total unilateral and almost unreviewable power.
9. Minimize administrative costs and burdens on managers and employees. The GS System saves agencies millions each year by offering one system applicable to over a million positions. Without it, dozens of federal agencies would be forced to create and administer their own systems. Burden is also reduced on the individual front-line manager by giving him or her a set of largely objective rules to guide salary decision-making. While it is fashionable to support giving managers vast discretion to do what is right, all too often, lacking the data needed to know what is right, they do something wrong and costs their agencies millions in legal judgments, morale, bad press, and turnover.
10.Stay responsive to budget or available funding. The GS system permits agencies to vary the amount of their performance award funds from year to year without any need to justify their funding decisions. When agencies cannot afford to keep paying current employees their basic pay, the system permits agencies to furlough one or all employees without pay, downgrade duties and pay, and terminate employees. Federal agencies can do everything private corporations can to react to funding limitations.
While all the above apply equally to federal or private compensation systems, there is an 11th criterion of success for any public sector job, namely, does the system protect against destruction of a politically-neutral of the civil service. For example, will it permit political leaders to suppress wages in a politically undesirable agency and drive out its talent without any Congressional approval or other check and balance? Will it permit political appointees to steer pay raises disparately to supporters of one political party, religion, or demographic group? Will it allow managers to deny an employee any pay increase without a factual and fair merit-based foundation for that decision? No. The GS system is designed to resist politicalization by imposing government-wide rules, demanding open decision-making, and putting limits on an individual managers’ discretion. Americans long ago made clear their very strong preference for civil servants who make decisions based on the merits of the taxpayer’s claim or need—not his or her affiliations, political or otherwise.
Is the GS salary system perfect? Absolutely not. The lack of funding hurts every part of it from the ability to reward top performers, through the need to push out poor performers, and on to the BLS survey. But funding shortages also will damage any system consultants conjure up. The GS system could also benefit from some agency-specific, customized tweaking, but neither OPM nor OMB shows any signs of releasing the strangle hold they have on agency discretion to experiment through the decades-old statutory Research and Demonstration project authority. Finally, it could benefit from more measurable performance standards to boost the linkage between performance and pay, but not only is that very difficult to do with the work of government, but it also will be a problem in any salary system.