[Senate Hearing 110-814]
[From the U.S. Government Publishing Office]
S. Hrg. 110-814
IMPROVING PERFORMANCE: A REVIEW OF PAY-FOR-PERFORMANCE SYSTEMS IN THE
FEDERAL GOVERNMENT
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HEARING
before the
OVERSIGHT OF GOVERNMENT MANAGEMENT,
THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JULY 22, 2008
__________
Available via http://www.gpoaccess.gov/congress/index.html
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
44-579 WASHINGTON : 2009
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware TED STEVENS, Alaska
MARK L. PRYOR, Arkansas TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana JOHN WARNER, Virginia
Richard J. Kessler, Staff Director
Thomas J.R. Richards, Professional Staff Member
Jennifer A. Hemingway, Minority Staff Director
Jessica K. Nagasako, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Akaka................................................ 1
Senator Voinovich............................................ 14
WITNESSES
Tuesday, July 22, 2008
Hon. Linda M. Springer, Director, U.S. Office of Personnel
Management..................................................... 3
Richard A. Spires, Deputy Commissioner for Operational Support,
Internal Revenue Service....................................... 5
Gale Rossides, Deputy Administrator, Transportation Security
Administration, U.S. Department of Homeland Security........... 6
Ronald P. Sanders, Associate Director of National Intelligence
for Human Capital, Office of the Director of National
Intelligence................................................... 8
Bradley Bunn, Program Executive Officer, National Security
Personnel System, U.S. Department of Defense................... 10
J. Christopher Mihm, Managing Director of Strategic Issues, U.S.
Government Accountability Office............................... 12
Carol A. Bonosaro, President, Senior Executives Association...... 29
John Gage, President, American Federation of Government Employees 31
Colleen M. Kelley, National President, National Treasury
Employees Union................................................ 33
Jonathan D. Breul, Executive Director, IBM Center for the
Business of Government, and Partner, IBM's Global Business
Services....................................................... 35
Charles H. Fay, Professor, School of Management and Labor
Relations, Rutgers University.................................. 36
Alphabetical List of Witnesses
Bonosaro, Carol A.:
Testimony.................................................... 29
Prepared statement........................................... 119
Breul, Jonathan D.:
Testimony.................................................... 35
Prepared statement........................................... 161
Bunn, Bradley:
Testimony.................................................... 10
Prepared statement........................................... 82
Fay, Charles H.:
Testimony.................................................... 36
Prepared statement........................................... 165
Gage, John:
Testimony.................................................... 31
Prepared statement........................................... 134
Kelley, Colleen M.:
Testimony.................................................... 33
Prepared statement........................................... 149
Mihm, J. Christopher:
Testimony.................................................... 12
Prepared statement........................................... 94
Rossides, Gale:
Testimony.................................................... 6
Prepared statement........................................... 62
Sanders, Ronald P.:
Testimony.................................................... 8
Prepared statement........................................... 68
Spires, Richard A.:
Testimony.................................................... 5
Prepared statement........................................... 54
Springer, Hon. Linda:
Testimony.................................................... 3
Prepared statement........................................... 49
APPENDIX
Chart submitted by Ms. Kelley.................................... 177
Background....................................................... 178
Federal Managers Association (FMA), prepared statement........... 191
Letter to Senator Akaka from Carol A. Bonosaro, dated July 28,
2008........................................................... 198
Questions and Responses for the Record from:
Ms. Springer................................................. 199
Mr. Spires................................................... 207
Ms. Rossides................................................. 209
Mr. Sanders.................................................. 221
Mr. Bunn..................................................... 235
Mr. Mihm..................................................... 245
Ms. Bonosaro................................................. 248
Mr. Gage..................................................... 250
Ms. Kelley................................................... 253
Mr. Breul.................................................... 258
Mr. Fay...................................................... 260
IMPROVING PERFORMANCE: A REVIEW OF PAY-FOR-PERFORMANCE SYSTEMS IN THE
FEDERAL GOVERNMENT
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TUESDAY, JULY 22, 2008
U.S. Senate,
Subcommittee on Oversight of Government
Management, the Federal Workforce,
and the District of Columbia,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:06 p.m., in
room 342, Dirksen Senate Office Building, Hon. Daniel K. Akaka,
Chairman of the Subcommittee, presiding.
Present: Senators Akaka and Voinovich.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. This hearing will come to order.
I want to thank all the witnesses for being here. It is
good to shake your hands and to see you again, and especially I
am glad to see Director Linda Springer. As many of you know,
Director Springer announced that she will step down next month.
I want to take this opportunity to thank her for her many years
of public service and wish her the best of luck in the future.
Ms. Springer, it was a pleasure to work with you and you have
done a great job in the time that you have been here. God bless
your way.
Today, the Subcommittee will examine pay-for-performance
systems across the Federal Government. We have a full hearing
today, so I will try to keep my opening remarks brief.
Pay-for-performance systems have increased in the Federal
Government out of a desire to improve the link between an
employee's pay and his or her performance. Ideally, the better
someone performs, the greater their pay.
Since the Department of Navy demonstration project at China
Lake began in 1980, the Federal Government has tinkered with
pay and performance systems outside of the General Schedule
(GS). The authority to implement pay-for-performance systems
have been given to Federal agencies for employees in the Senior
Executive Service and to the Internal Revenue Service, the
Federal Aviation Administration, the Department of Defense,
Transportation Security Administration, the Department of
Homeland Security, components in the intelligence community,
the Government Accountability Office, and many other agencies.
When Congress granted Federal agencies statutory authority
to develop pay-for-performance systems, employee and management
groups expressed many concerns with the ability of Federal
agencies to design systems that are transparent, fairly
evaluate employees' performance, provide a fair appeals
process, include employees and their representatives in the
design and implementation of these systems, provide sufficient
training to managers and employees to implement systems, and
budget sufficient funds to properly reward employees for their
performance. I share many of these concerns, which
unfortunately have become reality.
Federal pay-for-performance systems have often been
modified from those in corporate America to address budgetary
constraints. I continue to hear from employees that their
performance rating and pay awards depend not only on their
performance, but rather on that of other employees who are in
competition with too limited resources to reward performance.
If the Federal Government is serious about new and more
rigorous pay-for-performance systems, it must invest in those
systems with enough money to provide a real performance
incentive. Part of this investment requires taking the extra
time and effort to ensure that employees are involved in the
development of these systems and have a clear understanding of
how they operate.
According to the last SES human capital survey, nearly 30
percent of respondents do not understand how increases in their
salary and bonuses are determined. The 2007 DHS employee survey
found that 55 percent of TSA employees do not believe their pay
is based on their performance, and 48 percent do not believe
their pay awards depend on how well they perform their jobs. If
employees do not understand their pay system, or think it is
unfair, it will not work.
Moreover, employee buy-in is essential to the government's
effectiveness and efficiency. If employees are not involved and
their concerns are not addressed, morale will drop and hinder
agency mission.
A recent report from the DHS Inspector General on TSA's
responsiveness to address employee concerns acknowledges that
low employee morale at TSA continues to be an issue and can
contribute to high attrition rates. The estimates for TSA's
attrition rate range from 17 to 20 percent. This is too
high.\1\
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\1\ The chart from TSA appears in the Appendix on page 177.
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The GS system is not perfect. However, there are clear
rules on how employees will be paid and under what
circumstances pay increases are awarded. I am worried that we
are spending hundreds of millions of dollars to transition away
from the GS into new pay-for-performance systems at the cost of
employee morale and agency mission.
I look forward to hearing from our witnesses on the
implementation of pay-for-performance systems in the Federal
Government.
My friend, colleague, and Ranking Member, Senator
Voinovich, will be here shortly. So let's proceed to the first
panel.
On our first panel this afternoon is Linda Springer,
Director, U.S. Office of Personnel Management; Richard Spires,
Deputy Commissioner for Operational Support, Internal Revenue
Service; Gale Rossides, Deputy Administrator, Transportation
Security Administration; Dr. Ronald Sanders, Associate Director
of National Intelligence for Human Capital, Office of the
Director of National Intelligence; Brad Bunn, Program Executive
Officer, National Security Personnel System, U.S. Department of
Defense; and Christopher Mihm, Managing Director of Strategic
Issues, Government Accountability Office.
As you know, our Subcommittee requires that all witnesses
testify under oath. Therefore, I ask all of you to please stand
and raise your right hand.
Do you solemnly swear that the testimony you are about to
give this Subcommittee is the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Springer. I do.
Mr. Spires. I do.
Ms. Rossides. I do.
Mr. Sanders. I do.
Mr. Bunn. I do.
Mr. Mihm. I do.
Senator Akaka. Thank you very much. Let it be noted for the
record that the witnesses have answered in the affirmative.
Before we begin, I want to remind all of you that although
your oral statement is limited to 5 minutes, your full written
statement will be included in the record.
Director Springer, will you please begin with your
statement.
TESTIMONY OF HON. LINDA M. SPRINGER,\1\ DIRECTOR, U.S. OFFICE
OF PERSONNEL MANAGEMENT
Ms. Springer. Thank you, Mr. Chairman. I want to take a
moment to thank you for the wonderful working relationship that
you have led, along with Senator Voinovich, with the Office of
Personnel Management (OPM), and with me personally during these
years. It couldn't have been a more professional and more
effective relationship. I thank you for your support and your
interest in the workforce and for the work we have done
together. So thank you very much, sir.
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\1\ The prepared statement of Ms. Springer appears in the Appendix
on page 49.
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I want to talk today specifically about our progress with
alternative pay systems in the Federal Government. OPM has been
very active in monitoring these programs and in supporting
implementation. In 2007, we issued three major reports on
progress and today I would like to characterize just how we
have been evolving in the Federal Government in this area.
There are three main periods of time that I want to comment
on: The 25-plus years of alternative pilots and programs prior
to 2004, the three major legislative initiatives that occurred
after 2004, and then the current activities. So, that will sort
of be the framework for my comments.
For those older alternative systems that began, as you
said, in 1980 with the China Lake project, OPM maintains an
archive of data that we use to evaluate these programs and how
they are doing. In 2005, we issued a report summarizing these
25 years from 1980 on and reached several conclusions as a
result of our work. Among those were that performance, rather
than tenure, drove pay in those systems. Success of the systems
depended on effective implementation. And that over time, with
the proper implementation, employees did support alternative
pay systems. It was noted that progress in some organizations
was slower than others, as you would expect with new programs,
but that overall, there were clearly positive trends.
Now, beginning in 2004, several legislative initiatives
covered large groups of employees. The Senior Executive Service
(SES) has been covered by a program that was required to make
distinctions based on performance and certified by OPM with
Office of Management and Budget (OMB) concurrence. In 2004, 76
percent of the SES members were covered by certified programs.
Over the past 3 years, that has grown to 99 percent. Virtually
all of these programs now meeting certification.
OPM recently conducted a survey of SES members, and among
other things, we asked about the system, and we found that 93
percent of the SES believe that their pay should be based on
performance, and 91 percent believe that they should be held
accountable for achieving results. I think that is a testimony
to the high performance standards of the Senior Executives.
We work closely with Chief Human Capital Officers to
promote and to communicate the best practices of the SES. There
is more to do and we are continuing to work collaboratively
with the Chief Human Capital Officers to help this program work
even better.
The National Security Personnel System (NSPS) has been a
focal point for OPM. We work closely with the Department of
Defense (DOD) on regulations, including the more recent ones
that are required by the 2008 Defense Authorization Act. Our
review of NSPS, as we have said in our published report,
indicates that both employees and supervisors are developing a
better understanding of expected performance and how their jobs
link to the organization and to performance ratings and pay.
The Department of Homeland Security (DHS), the third major
system as a result of legislation, has not progressed to that
same point, although the TSA has initiated its own Performance
Accountability and Standards System and the information on that
has been provided separately in the testimony provided to the
Subcommittee.
Currently, OPM has been working with agencies that of their
own initiative believe they are ready under a demonstration
program authority to test on a very measured basis performance-
based systems for components of their agencies. These are not
large projects. They are very self-contained and measured. They
range from around 100 people up to maybe 2,500. There are
currently five demonstration projects underway and they really
are a logical step after that component of an agency has
established the right performance infrastructure and they
believe they are ready to move to test and learn from how a
performance-based pay system could work.
As I mentioned in the beginning of my remarks, OPM has
issued a report on the status of all performance-based pay
systems from all of these periods. Our report concluded that
pay-for-performance systems continue to be successful and
provide a strong link between pay and performance rather than
under systems where longevity is an important factor. It only
comes after effort and hard work, but we believe that these
systems are better able to recruit and retain a high-quality
workforce. I am personally convinced that pay-for-performance
systems can be effective for the Federal workforce when they
are done properly.
Mr. Chairman, I thank you again for the opportunity to be
here today and look forward to answering your questions.
Senator Akaka. Thank you very much, Ms. Springer. Mr.
Spires.
TESTIMONY OF RICHARD A. SPIRES,\1\ DEPUTY COMMISSIONER FOR
OPERATIONAL SUPPORT, INTERNAL REVENUE SERVICE
Mr. Spires. Thank you, Chairman Akaka. I am pleased to be
here today to discuss the IRS's efforts to implement pay-for-
performance and respond to any questions from the Subcommittee.
It is an important issue as the Federal Government continues to
look at ways to recruit and retain talented managers.
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\1\ The prepared statement of Mr. Spires appears in the Appendix on
page 54.
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While I have worked at the IRS in various capacities since
2004, I have spent more than 20 years in private industry where
pay-for-performance is commonplace, and from the perspective of
the companies with which I was associated, has had great
success. I recognize that there is not a perfect correlation
between government and private enterprise and what works in one
may not in the other. And in my 4-plus-year tenure at the IRS,
I have seen some of the reasons why. However, the development
of a strong pool of talented employees is such a critical issue
for any enterprise that it is important that innovative
programs be attempted.
In many respects, the IRS has been at the forefront of the
pay-for-performance program in the Federal Government. We have
been dealing with it for over 7 years as we have implemented
such a system for our more than 7,000 managers. Though there
have been some bumps along the way, the creation of pay bands
and compensating employees for the quality of their work rather
than their tenure with the agency has helped the IRS respond to
the challenges presented in turning the agency into a modern
and more efficient organization.
My written statement lays out much of the background of how
we got into pay-for-performance and describes in some detail
how we implemented the program and discusses some of the
obstacles we faced. I want to focus my remarks this afternoon
on two things. First, I want to outline the areas in which pay-
for-performance has benefited our agency. Second, I want to
offer some of the lessons we have learned so that other
agencies that follow us can benefit from our experiences and
have an easier transition.
Perhaps the greatest benefit of pay-for-performance for the
IRS has been the opportunities afforded us in implementing the
dramatic overhaul of the agency mandated by the IRS
Restructuring and Reform Act of 1998. Specifically, the
implementation of a new performance management system allowed
us to link manager performance to the functional goals of the
organization. Managers and their supervisors jointly develop
specific performance commitments as part of annual performance
plans that are designed to further the goals of the functional
unit and the IRS. The pay flexibilities have enabled IRS to
strengthen the linkage between manager performance and the
overall IRS goals.
In addition, the overall job satisfaction among our
managers, based on annual employee survey results, has been on
an upward path since 2005.
Despite these benefits, the road has not always been smooth
and without controversy. Let me offer several lessons we have
learned, and frankly are still learning, that may benefit other
agencies in the Federal Government.
First, agencies should move deliberately and cautiously to
implement the program that is right for their organization,
recognizing that any change in the way employees are paid will
raise concerns on their part.
Second, communication is critical. Employees must
understand how the program will work and how they will be
affected. There must also be forums to have their questions
answered.
Third, an effective performance evaluation system must be
in place. Employees must understand the basis for their
evaluation, and there should be a review system in place to
make sure evaluations are being made on a consistent basis.
Fourth, supervisors and employees must be trained properly
on how to use the system and make sound evaluations.
Fifth, ongoing program evaluation is essential to ensure
that the pay-for-performance system is operating as intended,
and agencies must be willing to modify and revise to meet the
changing needs of their organization.
And finally, evaluations must be made free of any
discrimination based on race, gender, age, or national origin.
I am proud to say that an overall evaluation of the IRS
program by a third-party contractor found that since fiscal
year 2004, there have been no disparate impact on any group of
managers. The contractor analyzed the trends of the ratings
data grouped by race, gender, age, and national origin. In each
group, ratings trended in a similar path to the average ratings
across all groups.
Thank you again, Mr. Chairman, for the opportunity to be
here and I will be happy to respond to any questions.
Senator Akaka. Thank you very much, Mr. Spires. Ms.
Rossides.
TESTIMONY OF GALE ROSSIDES,\1\ DEPUTY ADMINISTRATOR,
TRANSPORTATION SECURITY AGENCY, U.S. DEPARTMENT OF HOMELAND
SECURITY
Ms. Rossides. Good afternoon, Chairman Akaka and Ranking
Member Voinovich. I am pleased to be here today to discuss
TSA's progress on our pay-for-performance system known as PASS.
I am honored to represent the thousands of TSA employees, our
Transportation Security Officers, who serve to ensure the
safety and security of two million passengers a day. These
women and men are dedicated security professionals with one of
the most difficult jobs in government. These officers are the
most tested in the Federal workforce.
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\1\ The prepared statement of Ms. Rossides appears in the Appendix
on page 62.
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Twenty-two thousand of our officers have been with TSA from
the beginning. They have participated in the largest stand-up
of a Federal agency in 50 years. They have stayed with us as we
have responded to the evolving threat by continuously enhancing
the security processes while also helping us build the
infrastructure and the human capital system to properly pay,
train, reward, and recognize their performance. They stayed for
the mission.
There are two reasons TSA relies on pay-for-performance.
Security is the first and foremost. Second, it is to instill a
culture of high performance and accountability in our
workforce.
Performance on the job has a special meaning to us. Let me
be very direct. Our job is to stop a terrorist attack. Our
officers work in an environment in which 99.9 percent of the
people they see every day are not a threat, but the threats
against our aviation system remain. TSOs want to get passengers
through the security check point with a high degree of
confidence that they have stopped anyone seeking to do harm.
Your safety is their priority.
How does PASS improve security? When you get paid more to
do a better job, you do a better job. PASS is targeted to
reward excellent performance. That is an incentive to perform
at the highest levels to which you are capable. PASS rewards
the individual performance necessary to achieve TSA's
organizational goals and that increases security.
TSA's pay-for-performance system is driven by validated
data. Its performance metrics are standardized, measurable,
observable, and almost completely objective. PASS has been
adjusted based on the feedback from our officers about what the
real job is. Our officers have told us that they want a pay-
for-performance system because they know what is at stake. They
want to know that their fellow officers are equally competent.
But building a pay-for-performance system takes time. It
takes employee engagement. It takes leadership. It takes
flexibilities in the human capital system. It takes continuous
improvement. And it takes constant communication. But for us,
it is essential.
In my 30 years of Federal service, 23 of them with the
General Schedule, I have never been more sure of anything. The
pay-for-performance system is the best way in this post-
September 11, 2001 environment for TSA to manage and ensure the
quality of persons on the front line. The effectiveness of PASS
is proven by the statistics. More than half of our TSO
workforce has been on the job for 4 years or more. TSA
supervisors have a significant stake in the PASS program, as
well. Successful implementation of the program is a component
of their own PASS ratings.
At TSA, pay-for-performance ensures the technical
proficiency of the people on the front line. Our goal is for
our officers to be switched on and always at the ready. Pay-
for-performance drives their higher level of performance
because their earning power is directly tied to their learning
power.
The senior leadership of TSA is passionately dedicated to
its people and to the principles of pay-for-performance. We are
committed to using the flexible human capital system provided
under ATSA to make TSA a model performance-based organization.
We are building a culture in which our workforce is actively
engaged. It is through listening and working collaboratively
with all of our officers to find solutions that will continue
to meet our challenges.
While significant advancements are being made in our
technology and our security processes, each day's success
begins and ends with our officers. They are TSA's greatest
investment. They are everyday heroes. In this War on Terror,
the individual motivation of our officers to excel is critical
to our success. We rely on the best to do the best at the
security job, and pay-for-performance is vital to sustaining
this top-performing workforce.
I look forward to answering your questions. Thank you.
Senator Akaka. Thank you very much, Ms. Rossides. Dr.
Sanders.
TESTIMONY OF RONALD P. SANDERS,\1\ ASSOCIATE DIRECTOR OF
NATIONAL INTELLIGENCE FOR HUMAN CAPITAL, OFFICE OF THE DIRECTOR
OF NATIONAL INTELLIGENCE
Mr. Sanders. Good afternoon, Mr. Chairman and Senator
Voinovich. Thank you for the invitation to testify at today's
hearing. It is my pleasure to provide a status report to this
Subcommittee on one of the Intelligence Community's most
important strategic human capital initiatives, the National
Intelligence Civilian Compensation Program.
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\1\ The prepared statement of Mr. Sanders appears in the Appendix
on page 68.
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Our program is modeled after the National Geospatial
Intelligence Agency's innovative performance-based pay system,
which has been operating successfully for a decade. The product
of over 2 years of extensive interagency collaboration, the
NICCP's five enabling IC directives have now been issued by the
Director of National Intelligence. However, because of our
complex statutory context, they will be implemented via
departmental and agency personnel regulations. For example, DOD
will do so with authorities established under Title 10 of the
Code, CIA under Title 50, and so forth.
Why are we doing this? Today's complex national security
challenges underscore the need for an IC workforce that is
second to none. Outmoded civilian personnel policies and
practices, especially those dealing with pay and performance
management, are an impediment to excellence. The NICCP will
replace them with a 21st Century pay and performance management
program that is far more performance-based and market
sensitive. In so doing, it will also transcend departmental and
agency boundaries to better integrate and unify the
Intelligence Community, while rewarding and reinforcing
behaviors that are transformational in their own right, such
things as analytic integrity, collaboration and information
sharing, and critical thinking.
Further, the program will, to the extent permitted by law,
assure a level playing field among our 17 agencies, most of
which are in six cabinet departments. Most of the major IC
agencies are not covered by Title 5. When you add them to those
that are, you have six separate statutory personnel systems in
the IC, each with different authorities and flexibilities.
Employee input has played a significant part in our design
process. According to our surveys, less than a third of our
employees believe their pay depends on how well they perform.
Conversely, less than a third of our workforce believes that
management takes steps to deal with poor performers. These
results suggest that a majority of the IC's employees want a
stronger link between performance and pay, but they also have
concerns.
We heard as much in a series of focus groups we held in
each of our major agencies. In all, several hundred employees
and supervisors were involved. We have tried to address those
concerns in our final design.
With the final IC directives all signed, departments and
agencies have begun communicating these changes to employees
through dozens of town hall meetings and focus groups, websites
and satellite broadcasts, even blogs. These efforts have
reached thousands of employees and will continue throughout our
implementation.
Our directives establish rigorous safeguards and oversight
mechanisms to ensure that our system is credible, transparent,
and above all, merit-based. For example, the directives require
that all employees receive written performance expectations up
front, with final ratings subject to at least two levels of
management review, one of which is at the agency level
specifically intended to protect against unlawful
discrimination.
The directives also prohibit ratings quotas and forced
distributions, and to ensure transparency in the performance
pay process, they establish a standard mathematical formula and
two additional levels of management review to ensure
consistency and fairness in pay decisions.
We have also begun delivering a comprehensive training
curriculum for managers, HR specialists, and employees that not
only covers the technical aspects of the system, but the soft
skills that are just as critical. Those involved in the
performance pay process get even more instruction, including
training to identify and correct any implicit or unintentional
bias against protected classes of employees in the performance
evaluation and performance pay process.
Finally, the directives establish an IC human capital board
to oversee the entire effort. Chaired by the Principal Deputy
Director of National Intelligence, the board is comprised of
the deputy directors of each of our intelligence agencies--the
senior career officials--as well as the IC's Chief of EEO and
Diversity.
The system is fully funded in the National and Military
Intelligence Programs of record and will be phased in over the
next 5 years. It will be implemented agency by agency, with DIA
this fall, with most remaining defense agencies and part of the
FBI implementing through the end of 2009. The CIA and the
Office of the Director of National Intelligence will follow
about a year after that. In each case, performance pay
decisions will typically follow 12 to 15 months thereafter, so
we are approaching this with all deliberation. However, phases
will ultimately be event-driven based on the readiness of each
IC agency to proceed, not a calendar date.
To implement this program throughout the IC, we need some
additional authorities and assistance from the Congress. As it
stands today, our smaller elements, those covered by Title 5,
do not have the statutory authority to implement the system. To
remedy this, the Administration's 2008 intelligence
authorization proposed that the DNI be authorized to extend
flexibilities that Congress has given one IC agency to those
that may not have it to keep the playing field level. As it did
last year, the Senate Select Committee on Intelligence has
included this provision in its Intelligence Authorization Act,
S. 2996, and we ask for your support.
In conclusion, the NICCP is an essential ingredient of the
IC's transformation. The first pay-for-performance system that
is truly interdepartmental and interagency in nature, it was
conceived through intensive collaboration and the final result
will help the IC develop a stronger sense of unity and common
purpose. That translates into mission success, the ultimate aim
of the Intelligence Reform and Terrorism Prevention Act.
Thank you very much. I look forward to your questions.
Senator Akaka. Thank you very much, Dr. Sanders, for your
statement. Mr. Bunn.
TESTIMONY OF BRADLEY BUNN,\1\ PROGRAM EXECUTIVE OFFICER,
NATIONAL SECURITY PERSONNEL SYSTEM, U.S. DEPARTMENT OF DEFENSE
Mr. Bunn. Mr. Chairman and Senator Voinovich, thank you for
the opportunity to speak with you today about the National
Security Personnel System at the Department of Defense.
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\1\ The prepared statement of Mr. Bunn appears in the Appendix on
page 82.
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Successful NSPS implementation remains a critical
transformation priority for the Department, and while we are
still relatively early in our implementation, it is clear that
NSPS is taking root. As of today, we have over 180,000
employees operating in the system. I would like to give you an
update today on our progress.
We are just over 2 years into the implementation, and like
any major transformation, we have had our share of successes
and challenges. We believe, however, that NSPS is working. The
active engagement and participation of our senior leaders, most
notably Deputy Secretary of Defense, Gordon England, speaks
volumes to the importance of our civilian workforce and the
role NSPS plays in the transformation of our Department.
The design of NSPS has been deliberate, well managed, and
transparent, based on guiding principles that include putting
mission first, respecting our employees, valuing talent,
performance, and commitment to public service, and ensuring
flexibility and accountability.
It will take some time before the Department fully realizes
all the benefits NSPS was designed to produce, but we are
already seeing a powerful return on investment. An
unprecedented training effort focused on performance
management, greater and more frequent communication between
employees and supervisors. They are talking about performance,
results, and mission alignment. And better tools to compete for
talent and reward exceptional performance. Overall, we are
seeing positive movement in individual and organizational
behaviors toward a performance culture. These returns are cause
for optimism.
In April 2006, we began implementing the human resources
provisions of NSPS. Over that 2-year period, we have converted
approximately 182,000 employees and will convert another 15,000
to 20,000 beginning this fall. These transitions were preceded
by comprehensive and extensive training to senior leaders,
managers, supervisors, and employees with a particular focus on
performance management. From the beginning of the program, we
have worked to ensure that our organizations have sufficient
time and resources to accomplish the training, prepare their
employees, and implement when they are ready.
Several factors have contributed to our success to date,
including the extensive consultations the Department and the
Office of Personnel Management carried out with our
stakeholders in the design process, the value and investment
placed in monitoring implementation and making adjustments
along the way, and perhaps the most important factor, the
emphasis and resources we have dedicated to NSPS training, one
of the most extensive civilian human capital training
initiatives ever undertaken by the Department. As of June 2008,
our employees have completed over a half-million NSPS-related
courses.
Late last year, we completed our second full performance
cycle under NSPS, resulting in performance-based salary
increases and bonuses for over 100,000 employees in January.
This was the culmination of a rigorous and robust performance
evaluation and pay pool process that assigns ratings based on
objective criteria and allocates rewards based on those
ratings. The pay pool process, which has a proven track record
in our personnel demonstration projects, is designed to ensure
that appraisals and pay decisions are accomplished in a
consistent, fair, and deliberate manner.
To ensure fairness in the system, we designed safeguards
into the process. In addition to the thorough reviews of
performance evaluations through the pay pool process, employees
have the right to challenge their rating in a formal
reconsideration process. Also, we have been very clear in our
regulations, policies, and training that forced distribution of
ratings is prohibited.
One of the key ingredients to effective program management
is program evaluation. The Department has an ongoing evaluation
effort to ensure the system is delivering the results we
expect. Although we have not formally reported findings from
our internal assessments, I can share some of what we are
hearing and seeing.
NSPS is clearly a significant change for our workforce. It
requires more time and energy than previous systems and many of
our employees are not yet completely comfortable with the
system. Performance plans and assessments need improvement, as
many are struggling with translating organizational goals into
individual measurable job objectives. Employees have also
expressed concern over the pay pool process, how it works and
whether it produces fair results, and many are having trouble
accepting a more rigorous evaluation system.
Despite those concerns, it is clear that NSPS employees
have a better understanding of how their jobs relate to the
mission and goals of the organization. They see a stronger link
between pay and performance. And there is increased dialogue
between employees and supervisors about performance.
So far, the results we are seeing are similar to the
experience of our personnel demonstration projects and other
alternative personnel systems. We have said from the beginning
that we expect it to take 3 to 5 years for employees to fully
understand and embrace the system. However, we continuously
monitor and assess NSPS and look for ways to address employee
concerns by making adjustments to the system and improving our
communications tools and training.
Is NSPS working? We believe it is. It will take time,
however, to assess how well NSPS is working through thoughtful
and thorough analysis and assessment. We also know that
transformation takes time and can't be achieved overnight. In
the meantime, we continue to gather information, listen to our
workforce, and do what is necessary to ensure the system is
credible, effective, and fair.
Thank you, Senator Voinovich and Mr. Chairman, for your
ongoing support for our DOD civilian workforce and for
providing this opportunity to share our experiences about NSPS.
I look forward to your questions.
Senator Akaka. Thank you very much, Mr. Bunn, for your
statement. Mr. Mihm.
TESTIMONY OF J. CHRISTOPHER MIHM,\1\ MANAGING DIRECTOR OF
STRATEGIC ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Mihm. Chairman Akaka and Senator Voinovich, it is a
great honor to appear before you again today and I appreciate
the opportunity. My specific role today is to discuss the
preliminary results of our review of selected agencies' SES
policies and procedures for performance pay.
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\1\ The prepared statement of Mr. Mihm appears in the Appendix on
page 94.
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As you know, successfully implementing the SES performance
management pay authorities the Congress has provided is
important for any number of reasons. First, leading
organizations have recognized that effective performance
management systems create a line of sight to help ensure that
individual and organizational performance are aligned and
thereby are effectively contributing to the meaningful results
and outcomes that citizens value.
Further, effective agency-wide pay-for-performance
initiatives must begin, in our view, at the SES level and then
cascade down throughout the organization. In short, the SES
must lead by example on performance management and pay reforms.
The data that Director Springer quoted from the survey clearly
indicates that the SES appreciates that it needs to have the
leadership role in this.
Finally and especially important this year, effective
performance management systems that link programs and daily
operations to significant results can provide continuity during
the upcoming Presidential transition by maintaining a
consistent focus on results. Clearly, the new team will have a
different set of goals and a different set of performance
measures, but what the Administration with the current efforts
of Congress and the agencies now are delivering is a ready-made
vehicle the next Administration can use in order to implement
its policy priorities.
My prepared statement focuses on agencies' policies and
procedures for SES performance management and pay in a number
of important areas, and our forthcoming report will discuss OPM
and OMB's oversight role and make recommendations to selected
agencies, OPM, and OMB in that regard.
My bottom line today is that the agencies are making
positive steps in addressing three important aspects of their
performance pay systems. First, all of the agencies that we
reviewed have policies in place that require Senior Executive
performance expectations to be aligned with organizational
results and for organizational performance to be factored into
SES appraisal systems. However, on the other hand, OPM has
found that while many agencies are doing a good job of this
alignment, some performance plans fall short of identifying the
specific measures used to determine whether or not the results
are achieved. In other words, there is alignment at the front
end. We need better data at the back end to see whether or not
the success is actually taking place.
Second, all of the selected agencies had multiple rating
levels in place for assessing SES performance, and as one would
expect, in general, those SESes with the highest ratings
received the largest bonuses. Several of the agencies, such as
the Nuclear Regulatory Commission, Department of State,
Department of Energy, have designed their appraisal systems to
help allow for differentiations when assessing and rewarding
executive pay by establishing tier structures or prescribed
performance payout ranges based on the resulting performance
rating. Tier structures identify up front that certain SES
positions have greater complexity, greater responsibility for
managing risk, greater responsibility for achieving outcomes,
and therefore should have greater opportunities for higher
bonus and pay awards.
Third, all of the selected agencies have built safeguards
into their SES performance management systems, such as pre-
decisional checks--you have heard a number of those today, of
performance appraisal recommendations through higher-level
reviews, as well as publishing information on aggregate results
to help enhance the credibility, fairness, and transparency of
their systems.
However, on the other hand, this is one area where much
more work needs to be done. Sixty-five percent of the
respondents to the OPM survey that Director Springer was
mentioning--these are of SES--said that they were not given
summary information of their agency's performance ratings,
bonuses, and pay adjustments. This information is important in
order to let someone know where they stand in the organization
so that they can identify and take meaningful action in order
to improve performance. It is both a transparency and fairness
aspect as well as important to improving individual and
organizational performance.
In summary, through the combined efforts of Congress,
members of the SES, OPM, OMB, and the agencies, much progress
on SES performance management has been made over the last
several years. The key now, in our view, is to maintain and
build on that progress and for the next Administration to use
the SES performance management system to achieve additional
results.
Mr. Chairman and Senator Voinovich, this concludes my
statement and I would obviously be happy to answer any
questions you may have.
Senator Akaka. Thank you very much, Mr. Mihm, for your
statement.
Now I would like to ask Senator Voinovich for his
statement.
OPENING STATEMENT OF SENATOR VOINOVICH
Senator Voinovich. Thank you very much, Mr. Chairman. I
apologize for being late. We had the new President and the
Prime Minister of Kosovo here and I have been working on those
issues for a long time and I thought it was important that I at
least congratulate them and have a chance to visit with them,
so I hope you understand.
I would like to begin by thanking my good friend and
partner on human capital issues, Senator Akaka, for holding
this hearing. This is one of so many hearings that we have had
over the last number of years on human capital. We want to make
sure that the Federal Government has the right people at the
right place at the right time to get the job done, and it is an
issue that I have been involved with during my entire time on
this Subcommittee because of my strong belief in the need for
the government to invest first and foremost in its workforce.
The Federal Government has begun an important cultural
transformation in how it manages its most important asset, its
people. As we hear the testimony today, I would remind our
other colleagues that such transformation does take time.
Understanding and accepting the systems being implemented at
several agencies require a change in thinking and an emphasis
on continuous improvement, and we have again heard that from
the witnesses here.
In commenting on management, Harold Geneen, former Chairman
of International Telephone and Telegraph said, ``It is an
immutable law in business that words are words, explanations
are explanations, promises are promises, but only performance
is reality.''
Our next generation workforce no longer seeks to work for
an organization with the idea that they will stay there their
entire professional career. People are looking to work hard and
be recognized and rewarded, and that is why I have introduced
the Federal Workforce Performance Appraisal and Management
Improvement Act, which would require that Federal employees
receive a written performance appraisal annually. Current law
only requires periodic appraisals for job performance.
The legislation would also require that an individual's
performance appraisal be aligned with the agency's strategic
goals and be developed with the employee. The performance
appraisal system would make meaningful distinctions among
employee performance and require agencies to use this
information in making personnel decisions.
I know there are a couple provisions of the bill that cause
some concern because of the fact that it would prevent an
employee from receiving an annual pay adjustment if that
employee has not earned a ``successful'' performance appraisal.
Mr. Chairman, I would argue that we owe the American taxpayer
something to better ensure that they are getting value for
their hard-earned dollar.
I would remind those who have concerns that before an
agency would even reach the point where an underperforming
employee would not receive a pay increase, the agency would be
required work with the Office of Personnel Management to
develop and refine its performance appraisal system. In other
words, if they don't have a good appraisal system in place, and
again, and we have heard this from witnesses, pay for
performance doesn't work. Employees would have then 1 year
under the performance appraisal system to understand how it
would be used to make pay decisions.
These decisions would not be arbitrary or capricious.
Managers would be required to receive appropriate training to
judge the performance of their subordinates, make expectations
clear to employees, and give constructive feedback. People want
to know whether they are doing good or whether they are doing
bad. The last thing they would like is to be ignored. This
would support the Chairman's bill to improve the training
provided to the Federal workforce.
The only way the Federal Government will succeed in
accomplishing its many missions is to have motivated employees
working towards the strategic goals of their respective
agencies. Challenges facing our Nation, from gas prices and the
growing budget deficit to our crumbling infrastructure, are too
significant to rely on an antiquated pay system which rewards
tenure, and I think that is more important today than ever
before.
Everywhere I go today, whether it is in government or the
private sector, we have a human capital crisis. Everybody is
going to be out there trying to find the best and the brightest
people to come to work for them, and I think that pay-for-
performance, if properly implemented and explained and so on,
is a real asset to our ability to attract the kind of people
that we want to work for the Federal Government. It is going to
be a challenge that we are going to have to continue to work
on, but one I think that is very worthwhile.
Thank you, Mr. Chairman.
Senator Akaka. Thank you very much, Senator Voinovich. And
now we will have the questions.
Director Springer, according to OPM's 2007 report on pay-
for-performance, the 2007 DHS employee survey, the recent SES
employee survey, and other reports, there are mixed results on
the success of pay-for-performance systems. Employees are not
necessarily satisfied with their pay. They do not completely
understand the pay system and many do not see meaningful
distinctions in their performance evaluations. Earlier this
year, the FDIC suspended its pay-for-performance system based
in part on declining employee support.
Your message at this hearing is that pay-for-performance
systems are a success in Federal agencies based on numerous
evaluations that you have had. Our reading is not along those
lines. If employee surveys point to problems within these pay
systems, what other evaluations are you basing the success of
the pay-for-performance systems on?
Ms. Springer. Mr. Chairman, it is important to draw the
distinction between the execution of specific programs and the
notion of performance-based pay. What we find in the surveys,
like the SES survey, is that most of our respondents do believe
that performance should be a factor in determining pay.
In the areas where the implementation has not been at the
level that we would expect, that doesn't negate the premise
that people do believe that their performance should be
recognized. It is more a matter of execution and how that has
proceeded. It also, in some cases, is a function of training
and just the basic infrastructure being in place. I believe
both you and Senator Voinovich, as well as the panelists, have
acknowledged that is foundational and critical to the success.
What I would say is that in the systems where the
underlying infrastructure is in place, that you find a better
result and better acceptance, and that is why we are
encouraging this more measured demonstration approach that only
proceeds when the agency has the infrastructure in place. But
it doesn't negate the fundamental belief that most people
believe that their performance rightfully should be a factor in
determining pay.
Senator Akaka. Mr. Spires, Ms. Rossides, Mr. Sanders, and
Mr. Bunn, how are your agencies using the employee surveys and
feedback to address the issues with pay-for-performance
systems? Mr. Spires.
Mr. Spires. Yes, Mr. Chairman. We conduct an employee
survey every year and some of those questions go to the heart
of how we evaluate and reward our employees. On the not-so-
positive side of this, our employees and our managers who are
under pay-for-performance system tell us that we are still not
yet measuring performance as well as we should. To distinguish
those that are outstanding versus those that are just
satisfactory or even below. Likewise, we are also told by our
employees and managers that we are not yet dealing with poor
performers as well as we need to.
But again, we think that a pay-for-performance system that
we have implemented and have rolled out to our managers
actually addresses some of these concerns. In fact, we are
seeing increases in our employee satisfaction scores overall
and we are seeing increases in these particular questions that
have to do with how we both evaluate and we reward our
managers.
Senator Akaka. Ms. Rossides.
Ms. Rossides. Yes, Mr. Chairman. We take a look at both
TSA's survey results and the DHS survey results and look at all
of the questions and the issues directly impacting the
workforce. But the survey results give us the opportunity to
focus on things like the importance of communicating directly
with the employees on our pay-for-performance system and we
have put a number of things in place this year to make that
system transparent to the workforce.
Every TSO today can actually access their performance
record online. We have direct communications with the TSOs on a
quarterly basis. So the survey results really targets the
leadership's attention on what our employees are asking for,
what kind of information, and clarity around those survey
results.
We are also corporately, all of the operating components
are taking the DHS survey results and looking at what issues
are common to all of the DHS workforce in terms of our law
enforcement and security occupations. So those surveys are very
valuable to us to help us guide the areas we need to focus on
to improve the system.
Senator Akaka. Dr. Sanders.
Mr. Sanders. Mr. Chairman, we start with our surveys. We do
an annual survey across all of the agencies in the Intelligence
Community. And as I mentioned, those survey results suggest
that our employees want this kind of system.
Let me tell you a statistic that may surprise you. About 50
percent of Intelligence Community employees have 5 years or
less of service. And to be quite blunt, they are not going to
have the patience to stay with us for a system that is based on
tenure and time in grade. That is what they tell us in the
focus groups.
We have reached thousands of employees in focus groups, 800
in the Office of the Director of National Intelligence alone,
which is not much bigger than that, and that demographic and
their views suggest that we need to develop and deploy this
kind of system if we really want to win that war for talent
that Senator Voinovich talked about.
Senator Akaka. Mr. Bunn.
Mr. Bunn. Mr. Chairman, we have been using surveys for many
years to assess the satisfaction of our civilian workforce.
About 3 years ago, we started targeting the NSPS population
both pre-implementation and post-implementation so that we
could zero in on what the folks under NSPS are thinking about
performance management, about pay and other workforce issues.
We have been able to begin trending how our NSPS employees,
what their attitudes are in comparison to the rest of the
workforce. It is a cornerstone of our program evaluation
effort.
That is how we are getting the valid employee feedback on
what is going on with NSPS, in addition to visits to
installations, focus groups with employees, and other normal
outreach mechanisms. But we spend a lot of time focusing our
questions specifically for our NSPS workforce and they have
been extremely helpful so far as we have done our internal
assessments, and we will continue to do that throughout the
program. Thank you.
Senator Akaka. Mr. Bunn, as you know, one of the main
concerns raised by Federal employee unions over the recently
proposed NSPS regulations is the definition of the term ``rate
of pay.'' The employee unions argue that the definition used by
DOD and OPM would limit bargaining over procedures and work
arrangements for determining overtime work, including rotation,
seniority, and other methods for selecting employees fairly. Is
it your intention to deny unions the ability to bargain over
these type of issues?
Mr. Bunn. That is not our intention. We have heard the
concerns through our formal public comment period with our
recent revised regulations that were published back in May and
through the national consultation process with the unions,
their concerns over how we have defined the term ``rate of
pay.''
Rate of pay is a term that is in the Defense Authorization
Act from 2008 and it is specifically referenced as something
that is not negotiable under NSPS. However, the term is not
defined in the law and it is used in many different ways in
current law, rule, and regulation. So what we attempted to do
in our proposed regulation is define it in the context of NSPS.
We fully recognize that Chapter 71 of Title 5 applies with
respect to collective bargaining in NSPS, but that term is one
of the limitations in terms of collective bargaining, so we
have attempted to deal with that in the regulation.
We are taking those concerns to heart. We are looking at
that language that we have used. But we have no intention of
denying the unions what they may bargain under the law under
Chapter 71.
Senator Akaka. OK. Can you elaborate on what exactly DOD is
attempting to limit bargaining over?
Mr. Bunn. I think what the issue is, Mr. Chairman, is how
we use the term, what we call applicability and conditions with
respect to rate of pay. We understand that Congress's intent
was to provide for collective bargaining for our bargaining
unit employees who would be brought under NSPS with a
limitation on bargaining over pay, which most Federal employees
don't have a right to bargain over now. But there was a
provision in the law that allowed for bargaining over
procedures and arrangements with respect to that, which is a
term of art in the labor relations arena.
What we have attempted to do is build and construct where
we have some uniformity in how that bargaining would be done
and define what is really meant by rate of pay, so, for
example, decisions around modifying our pay band structure or
adjusting the pay bands on an annual basis or the funding that
goes into performance-based pay pools. There are certain things
that we think are appropriate for bargaining under Chapter 71
rules and under the now Chapter 99 rules, but there are things
that would remain off the table. So what we have attempted to
do is define those things.
So for purposes of things like overtime, determining
applicability on who would receive overtime, things that are
currently in collective bargaining agreements, it is not our
intent to go in and overturn those kinds of things that are
currently bargained over in DOD.
Senator Akaka. Well, thank you.
Mr. Bunn. Thank you, sir.
Senator Akaka. Senator Voinovich.
Senator Voinovich. Thank you, Mr. Chairman. Before I ask my
questions, I would like to thank Ms. Springer and Mr. Spires
for your service in the Federal Government. I understand that
both of you are going to be leaving. Ms. Springer and I got to
know each other quite well over the years. She served over at
the Office of Management and Budget and they convinced her to
come back into government and I think you have done a really
outstanding job over there. I appreciate your service and wish
you good luck in our next endeavor.
Mr. Spires, I am not that familiar with your record, but
thank you very much. I was impressed with what you had to say
about what you are doing at the IRS.
Director Springer, OPM has an important operational
responsibility to work with Federal departments and agencies to
ensure reforms of performance management systems provide
employees a fair and transparent system with meaningful
opportunities to enhance communication, improve individual
performance, and I would like to know how OPM has met this
responsibility. Perhaps you could also make reference to a
meeting in July that you had with the Chief Human Capital
Officers where they discussed lessons learned from your recent
survey of the Senior Executive Service. I would like to know
what you have tried to do to make sure that these systems that
we are putting in are robust and also maybe some of the things
that you have learned from that meeting you had on July 14,
2008.
Ms. Springer. Thank you, Senator. Let me also say that it
has been a pleasure to work with you. As I said to Senator
Akaka, there is really no better champion in the Senate than
both of you for the Federal workforce, so thank you.
With respect to our oversight and our work with the
agencies, one of the key things that we use is our Performance
Appraisal Accountability Tool (PAAT) and there is a version of
that specifically for the SES. The Chief Human Capital Officers
(CHCO) Council, has worked with us in developing that, and that
is one of the principal tools we use with each agency. We have
OPM aligned with our different agencies so that there are
dedicated people that work closely with the CHCOs and the
performance managers at each agency.
So, not only do we work with them to assess their
infrastructure and each of the things that the panelists have
mentioned here today in their practice of performance
development and monitoring, goal setting, all of the things, we
assess them and give them a score based on that tool.
The community represented by the CHCO Council, half career,
deputies that are career officials, have helped us develop that
tool and they use it, as well, for their own diagnostic through
the year.
We have had, as you have said, several sessions with the
Council and the Subcommittee on Performance to have those
agencies that score well on that tool share their best
practices. In our hearing a year ago, you encouraged us to
actually be more proactive in that area and use that council,
and we have been doing that. Those performance-based pay
practices are being adopted. They are being documented. They
are being shared and our agencies tell us that that is helpful.
We are also having a CHCO Council Training Academy. That is
the formal educational arm of the Council, again, dedicated in
August to the SES survey and the agencies' practices that we
learned there that got high marks. So the July meeting, the
upcoming August meeting, all of these as well as the
collaborative effort in developing our assessment tools help
OPM to do that work.
Senator Voinovich. We have talked in the past about the SES
and how it in certain areas has been very well received, in
others, it has not. Can you give me an example of where you
have had an agency where from the survey their folks weren't
real happy and how your intervention has made any difference in
terms of the next survey?
Ms. Springer. If I may get back to you on that, I can give
you some specific examples. However, I will tell you that in
addition to getting agencies to reach a level of performance,
there also is the effort of keeping the ones who have achieved
it performing at that high level, as well. We are not focused
just on the ones that need remediation, but also on maintaining
the ones that have been doing a good job. But we will get you
that information, Senator.
Senator Voinovich. Well, I think that if we are going to
make any progress in this area, even this proposed legislation
I am thinking about, it has got to start with the Senior
Executive Service. And if you have people in there who are not
happy with the system or don't feel that it has been
implemented the way it is supposed to, the chances of making
any progress with the rest of the agency, I think is remote. So
I think that work is really very important, and I would really
like to get your best guesstimate about which agencies are your
super performers, and then your candid opinion about where we
need to do some improvement.
Ms. Springer. We will get that.
Senator Voinovich. Dr. Sanders, you have described a very
comprehensive program that you have put together. I have two
questions for you. One is, I just didn't realize all these
agencies, Senator Akaka----
Mr. Sanders. That is what keeps me awake at night.
Senator Voinovich. It is unbelievable. What guarantee do we
have that when the next Administration comes in, that all this
work that you have done is going to prove fruitful?
Mr. Sanders. I don't know if there is a guarantee. As I
believe you have heard Director McConnell testify, the
personnel authorities of the Director of National Intelligence
are somewhat ambiguous and the directives I have talked about,
and maybe there is some good news here, the directives that I
have talked about are literally agreements, treaties amongst
the various departments and agencies in the IC. So where that
legal authority is vague, the fact is you have cabinet
Secretaries and agency heads who have said that ambiguity
notwithstanding, we are going to agree as a matter of policy to
move forward as a community, cutting across all of those
departmental and agency lines. So while those regulations may
not be ``imposed,'' by the DNI, the fact that they were
collaboratively derived may, frankly, make them more resilient
in this transition. At least that is what I hope.
Senator Voinovich. Have you identified folks within the
agencies where you are going to have a change in leadership
that are committed to moving forward with this?
Mr. Sanders. As I indicated, this effort has been largely
led by the agency deputy directors, which are the senior career
officials across the board, and that was done deliberately to
ensure that we do have that continuity. They will be there
through the transition and be prepared to brief the new agency
heads.
In that regard, many of our agency heads are uniformed
military, so they do transition independently of Presidential
elections. We have already been able to sustain some of that
continuity with the change in leadership in individual
agencies.
Senator Voinovich. And you sense an understanding about how
important this is for their ability to retain the folks they
have and to attract other ones and they get that?
Mr. Sanders. Yes, sir, I believe they do. We literally need
a workforce that knows something about everything. We are at
the cutting edge of this competition, this war for talent with
the private sector, with other Federal agencies, and I think
they understand that in order to keep that keen edge, in order
for us to be competitive in that regard, we need the kinds of
flexibilities that this system will give us. They also need
that level playing field so that no one IC agency enjoys a
competitive advantage over the others.
And since I have the floor, let me put one other thing on
your radar screen for this Subcommittee. One of the things that
I worry about is executive pay compression.
Senator Voinovich. I was just going to ask you about it.
Mr. Sanders. This Subcommittee had a hand in fixing that
problem 4 years ago. The passage of time has eroded those great
benefits. And one of the things that I worry about is that your
very best-performing executives, who will by definition be the
first to reach that cap, are suddenly now against the ceiling.
There are literally no financial rewards, at least those that
go to base pay and annuity. This is something that I would ask
this Subcommittee, the full Committee, this Administration and
the next to take on before it becomes a crisis.
Senator Voinovich. We certainly will take that under
advisement. When you are hiring new people, does the fact that
you are implementing this performance system have any impact at
all on their decisionmaking? In other words, we assume that it
does, and I have mentioned that. But of anybody at the table,
have you found that the fact that you do have this system in
place has made your agency more attractive in terms of hiring
folks?
Mr. Sanders. Anecdotally, we get lots of stories from our
recruiters, and as you may know, we get 100,000 to 150,000
resumes a year, the Nation's very best and brightest, and we
have had to equip our recruiters with an information sheet on
our pay-for-performance effort because that is a constant
question amongst the best and brightest.
What are the rules of engagement when it comes to
compensation? Will I be paid based on results or will I be paid
based on tenure? And, of course, these are in most cases pretty
young, pretty aggressive, very talented people, scary smart,
and they, of course, want to be paid on the basis of results.
Senator Voinovich. Well, I know this, not anecdotally, but
probably during the last maybe 6 or 7 years I have had at least
a half-dozen people tell me they left the Federal service
because they just felt that everyone was treated the same way
and there wasn't any recognition for people who were performing
at a higher level and cited that they were going someplace else
where maybe their hard work and talent would be more
appreciated than working for the Federal Government. Go ahead.
Senator Akaka. Thank you very much, Senator Voinovich.
Ms. Rossides, according to a TSA briefing for Subcommittee
staff, TSA uses quotas in its pay-for-performance system. I
understand that unlike other Federal agencies, TSA is not
prohibited from using quotas. However, I am concerned that the
use of quotas undermines the pay-for-performance system. No
matter how well an employee performs, he or she may not get a
significant pay increase. Given that the use of quotas is
prohibited in other agencies, why is TSA using them?
Ms. Rossides. Mr. Chairman, we do not use quotas at all in
our pay-for-performance system. In fact, we have what we have
described to our employees as a rate and rank system. We have a
sum of money that is part of our appropriation and the
employees are scored at the end of the performance cycle under
our pay-for-performance system based upon their performance
during the year and they receive basically a rating on a scale
of 100 points. And then depending upon the distribution of the
performance of those employees, we give out our bonuses and pay
awards based on that. But we do not have quotas under our
system.
Senator Akaka. At our hearing on the SES in 2006, Director
Springer, you were crystal clear on the fact that quotas are
prohibited for the SES pay-for-performance system. However,
despite OPM and other agencies issuing regulations barring the
use of quotas or a forced distribution of performance ratings,
I continue to hear from employees, not just in the SES, that
agencies are, in fact, using quotas. What guidance is OPM
providing agencies on making meaningful distinctions in
performance?
Ms. Springer. In our annual guidance, which came out not
long after that hearing, we added a dedicated section to
agencies to reiterate to them that quotas were prohibited. That
we would be including in our audit work reviews to make sure,
to see if we spotted any instances of it. We also in cases
where it came to our attention that an employee of an agency
felt that they were subject to a quota, we wrote letters back
to that agency to deal with it.
We have through the CHCO Council and very specific written
communications of guidance to agencies reiterated very strongly
that this is prohibited. It will be a constant effort for us of
vigilance to make sure that, (A) we respond to what is reported
to us, and (B) to generally, as a matter of course, be on the
lookout.
Senator Akaka. Thank you. Dr. Sanders, you state that IC
employees will be evaluated on behaviors such as personal
leadership, integrity, collaboration, and critical thinking.
However, there is a dark side to promoting uniformity in the
intelligence community in that it may promote a uniformity of
analysis. I fear that convention and safe thinking will be
rewarded and risk taking will be discouraged as more and more
managers are trained to do performance evaluations with a
common perspective. Analysis may miss what is important in
order to conform with group thinking.
Differences of interpretation are important, and many have
argued, as an example, that if the President has listened to
the State Department's view of Iraq's weapons of mass
destruction analysis, his decision to go to war would have been
different.
What have you built into your performance evaluation
process to ensure that not all analysts think alike and are not
pressured into conforming their independent analysis to
political pressure?
Mr. Sanders. In fact, Senator, the very definitions of the
words you described and the behaviors that we are trying to
elicit amongst IC employees guard against that. For example,
the definition of the performance element, Personal Leadership
and Integrity includes the courage to speak truth to power. So
employees have a set of behavioral definitions that deal with
that specifically. Managers and executives, in their
performance plans, under the behavioral part of them, are
specifically charged with promoting and encouraging that
courage to speak truth to power.
The same thing with collaboration. We have taken great care
to define collaboration. It is not consensus. It is not group
think. It is sharing information, but it is also conforming to
analytic craft trade standards, which require alternative
analysis. We want the sharp edges of a debate on any given
intelligence topic to be exposed in the IC. So these
definitions are deliberately intended and deliberately defined
to do that, to guard against the very dysfunctions that you
have described.
Senator Akaka. Thank you. Ms. Springer, under the IRS pay-
for-performance system, it is possible for a GS employee to get
a higher rate of pay than their manager. According to a report
from the Treasury Inspector General for Tax Administration on
the IRS pay-for-performance system, this is a disincentive for
GS employees to become managers. Similarly, under the SES pay-
for-performance system, GS-14s and 15s are guaranteed pay
raises that SES employees are not. Dr. Sanders points out the
same problem in his testimony, that high-performing GS-15s are
less likely to move into the SES if pay continues to erode.
Do you see a disincentive for GS-14s and 15s to enter into
the SES because pay is not guaranteed under the SES pay-for-
performance system? And if so, what do you plan to do about
that?
Ms. Springer. I think that there are several proposals that
have been offered to deal with the disincentive from a pay
standpoint of moving from the upper General Schedule levels
into the SES. One of those that has been proposed, for example,
is an automatic pay increase when you move up to the SES. That
is something that we would be interested in exploring and
working with the Subcommittee on. And, the SEA, I might add.
The whole challenge, and I don't think this is so much a
performance-based pay issue as it is generally a pay issue, and
the problem that you have moving from the one system to the
other is a real issue and it is becoming increasingly so. I
think that, clearly, we need to do something. If we don't, and
if in the next Administration this isn't taken on, I think we
will see more and more people disinclined to move into the SES.
And, that is certainly not a desirable outcome.
But one that I would suggest off the bat that OPM and
others working with your Subcommittee should do is to look at
that proposal of an automatic increase.
Senator Akaka. Thank you very much, Director Springer.
Mr. Mihm, as the various employee surveys show, there are
still many concerns that employees have with the pay-for-
performance systems. In 6 months, the new Administration will
take office. What are the top three employee concerns that you
think should be addressed before the transition occurs?
Mr. Mihm. Well, before the transition occurs, I think it
will be very difficult because I think the top employee
concerns, at least that we have seen in looking across the
various agency surveys, and frankly GAO's, as well--we are not
perfect by any means in this, our own employee concerns show
these types of things--are long-term issues that need to be
addressed.
The first, I would say, Mr. Chairman, is the clarity,
honesty, and integrity of the entire performance management
system. It is something there has been a lot of discussion
about here this afternoon, something that you have certainly
pointed out, of making sure that we have a good, validated,
robust performance management system in place that has the
confidence of managers and employees that we are accurately
measuring and fairly measuring what we purport to measure. So
that would be the first issue.
Second is, to make sure that we have adequate training in
place, both for supervisors and managers. One of the things
that you mentioned in your opening statement, sir, was about
the costs associated with doing pay-for-performance the right
way. In fact, kind of the flip side to that is that if you want
to try and kill it, the way to kill it is try and do it on the
cheap because the experience from the demonstration projects,
and our experience in GAO is it takes an investment. It is an
investment that is worth it, but it takes an investment if you
are going to do pay-for-performance. It takes an investment
initially in technology and making sure you get a robust
performance management system, but it takes an investment in
training, and that is an ongoing investment that you have to
make.
And it is not just on how to do a performance appraisal. It
is training on how to manage, how to lead, how to supervise,
and there are huge gaps across the Federal complex in those
types of basic leadership and supervisory skills.
And then the third key area I would say is making sure that
we have the alignment in place, and this is making sure that
the organizational goals cascade all the way down into
individual performance expectations because that is going to be
a key part of the transition. Because of the work of the
Congress, the work of the agencies here and other agencies,
they really have put in place a system that the next
Administration, the next Congress can use as they are
implementing their program priorities to make sure that they
cascade down throughout the organization. It is by no means
perfect, as you have been hearing. But it has taken a lot of
work to get to where we are now. That is a tool that the next
Administration, the next Congress can use in order to deliver
effective results for the American people.
So I would say those are three key things we should focus
on.
Senator Akaka. Thank you very much, Mr. Mihm. Senator
Voinovich.
Senator Voinovich. One of the things that I would be
interested in knowing more about is training. With NSPS, for
example, did the Department use a train-the-trainer model, or
am I mistaken? Did you bring in other people to do it? I
thought you trained the trainer and then you worked it out
within the organization. Did that interfere with the job of
those individuals that were taken off whatever they were doing
to become involved in the training, and second of all, in terms
of your budgets as to the allocation of resources for training?
I go back to my early days here when I did a survey when I
first came to the Congress and I sent a letter out to 12
agencies and I asked them, how much money do you spend on
training, and I think all of them said that they didn't know
except one, and they said, we know but we won't tell you.
[Laughter.]
Senator Voinovich. So I would like you to comment on both
of those things, or anybody who wants to chip in on this
question. We will start with you, Mr. Bunn.
Mr. Bunn. Senator, thank you. We used kind of a hybrid
approach with respect to how we trained our workforce on NSPS.
We certainly did the core development of the training, the
materials, and delivery through a train-the-trainer approach,
and that was for a couple of reasons. One, we wanted to ensure
that we maintained control over the content and that the
training materials themselves were of high quality and that we
had the best control possible over those. We also wanted to
ensure that we had a cadre of performance management experts
that we could tap into as we moved through the process and
institutionalized NSPS and pay-for-performance throughout the
Department.
So we made a conscious choice to, in some cases, take
people off of what they were doing and get them those
competencies and skills in performance management, and it
wasn't just their platform training skills but it was actually
their performance management skills that we are now able to tap
into.
We did use some external training vehicles, contractors. We
brought in some retirees from various sources to help with
training, but that was mostly to offset the load. But we
certainly used our own internal resources to do that.
Senator Voinovich. What guarantee did you have that the
last spiral received as much training as the first spiral,
because Senator Akaka and I had a chance to visit with that
first group of individuals and then in Ohio, I had a chance to
visit with some of those folks. But one of the questions I had
was that you started out with this great program and people
understood it. What did you put in place to guarantee that that
training was consistent with what you had in the beginning?
Mr. Bunn. Well, we certainly applied the resources to it
and maintained the momentum as demonstrated by the resources we
put to the whole program. We have spent millions of dollars
implementing NSPS. It is no secret. We have reported on that
before. And the majority of the resources we have spent have
been on training.
What is interesting, Senator, there was a lot of attention
paid to the first adopters, what we call our spiral 1.1s, those
first organizations that came in, and we certainly saw the
return on that investment. There was leadership engagement from
all corners of the Department, including the organizations
themselves.
I would probably point to the engagement of Deputy
Secretary England and his engagement and leadership in
maintaining cognizance over NSPS for the past 3 to 4 years as
probably the biggest factor in ensuring that we had the
resources as we went through implementation.
And what we are seeing so far in our employee surveys is
that the folks who came in in the second and third tranches of
NSPS, actually, the training was a little bit better than the
very first set, mostly--and it makes sense--we learned lessons.
We adjusted our training materials. We adjusted the content
based on feedback we got from those first organizations and
actually delivered a better product. We are also working on
ensuring that we have institutionalized that training really
from here on out so that we maintain and sustain the training
as part of our normal human capital training for any
organization that comes under NSPS.
Senator Voinovich. But the thing that really helped out was
that Mr. England made it a very high priority and stayed on top
of it.
Mr. Bunn. Absolutely, and to this day, he has maintained
his awareness and he is very much in charge of NSPS.
Mr. Spires. I might just add real quickly that once our
system had been set up, one of the things that we did was
brought in an independent contractor with specialty in this
area. This enabled focus groups and other types of evaluations
to go on directly from the employees so that we could get
candid feedback as to what was working well. But more
importantly, what was not working well, and have adjusted based
on feedback.
Senator Voinovich. That was your snapshot to look at how
things were going?
Mr. Spires. Yes, sir.
Senator Voinovich. Ms. Rossides, I travel around the
country and I have a special relationship with your people
because I have a pacemaker, so I get a chance to talk to a lot
of them.
Ms. Rossides. Yes. [Laughter.]
Senator Voinovich. And I do my own survey as I go along.
And I must say that in the last couple of years, things have
gotten better. The issue seems to be two things, that some of
the employees are not aware of the flexibilities that are
available to them, particularly if they have a gripe that they
want to have taken care of, and the others are complaining,
some of them, that the system of evaluation is too objective
and that there isn't enough subjectivity in the evaluation. So
I don't know whether you would comment on both those things.
And last but not least, I know that there is going to be an
effort made to eliminate the flexibilities that we gave your
agency when it came into being because we had to stand up, some
50,000 people overnight. What would be your opinion in the
event that these flexibilities were yanked and we went away
from this very aggressive experiment? Fifty-five-thousand
people in performance evaluations, it is a big deal.
Ms. Rossides. Yes, sir, it is, and if I could start with
that because I think the flexibilities that ATSA provided to
TSA are enormously critical to our success in building this
agency and continuously improving its performance. And
specifically, those flexibilities have allowed us to provide to
our front-line officers differences in pay for hard-to-fill
airports, for example. It has allowed us to pay our part-time
TSOs the full-time equivalency under health benefits. Those
flexibilities have allowed us to build this pay-for-performance
system and to continue to improve it.
Our PASS system is only in its third year, and as a lot of
my colleagues here have said, it takes several years to get it
right. And our commitment is to make sure that we continuously
improve upon this and hear from our officers, just like you do.
The system is predominately objective. Roughly 70 percent
of the assessment of the officers is an objective assessment.
It is based on their performance on critical aspects of the
job, including their ability to recognize explosive devices on
the X-ray. It is based specifically on their training that they
complete. And honestly, we think in the long term, this
percentage of objectivity will help to build the credibility of
the system for the officers and for the managers.
Last, I would say that this entire process requires the
commitment of the top leadership, and your question to Dr.
Sanders about the importance of continuing this kind of a
system, we know we have several years of continuous improvement
in this system. The leadership of TSA is predominately career
people. Our succession plan for both the transition and the
long-term maturity of TSA is to ensure that we have career
people in the jobs, both in our human capital arena, but across
the whole organization. And this is something that you can't
start and stop in a year. This is something that takes years to
perfect because when you are rolling out something like this to
55,000 people, it is an enormous transition. But we believe
very strongly it is critical to our mission success.
The kinds of feedback that you are getting, the kinds of
experience that you see as a passenger who requires special
attention, shall we say, because of your pacemaker, is exactly
the kind of concrete skill that we are building in our
officers, and that is exactly what we are trying to measure
through this pay-for-performance system.
Senator Voinovich. Thank you.
Ms. Rossides. Thank you.
Senator Akaka. Thank you, Senator Voinovich.
I have a question to Mr. Bunn and Mr. Spires. DOD is
required to make meaningful distinctions in performance and not
institute a quota system or engage in forced distribution. It
has come to my attention that some DOD managers have been told
that most employees should receive a performance rating of
three. This looks a lot like forced distribution.
At the IRS, the Federal Mangers Association issued comments
on regulations to revise the IRS broadbanding system and called
for the elimination of performance rating caps or quotas.
Can both of you tell me what measures you are taking to
ensure that you are making meaningful distinctions in
performance and not arbitrarily lowering scores? Mr. Bunn.
Mr. Bunn. Mr. Chairman, I will start. We have heard that
kind of feedback. I think the results, as demonstrated through
this past performance cycle, say otherwise. We have a five-
level system, as you mentioned. We had over 100,000 people
rated. Roughly 57 percent of those folks were rated at level
three, 36 percent were rated at level four, which is ``exceeds
expectations,'' and about 5 percent were considered role model,
and then less than 2 percent were unacceptable or what we call
``fair'' performers. So that distribution, I think, shows that
we are making meaningful distinctions.
We did set the bar high when we developed our performance
evaluation system to ensure that it was rigorous and not that
the expected outcome would be a three, a valued performer, but
that it would take a lot to get above the valued performer
level three. And I think, as I said before, when you look at
the overall results, I think we have made meaningful
distinctions, and those performance ratings also drove
performance-based salary increases and bonuses. So the
meaningful distinctions extended not only to the ratings, but
also into the rewards and salary increase aspect of it.
So I would argue that we have taken great pains to ensure
that we don't have forced distribution. Certainly all of our
training materials, all of our regulations and policies
prohibit forced distribution. It could be that there is some
miscommunication out there about what the expectation should
be, and we have through our evaluation process gathered
feedback on that--and will take the steps necessary to make
sure that what we are training and what we are communicating
are appropriate. Thank you.
Senator Akaka. Mr. Spires.
Mr. Spires. Mr. Chairman, first, I would like to say that
there are many differences in my having come into the
government from my 20 years in the private sector. But this
challenge of how do you distinguish performance, but then also
have the issue of limited amount of cash at play is a classic
problem that not only faces those of us in the Federal
Government, but in the private sector, as well. The issue of
grade inflation comes into play here significantly, as well.
Specifically at the IRS, we have some guidelines because we
don't want to have grade inflation in the sense that you get a
lot of people at the ``outstanding'' level unless they deserve
to be at that level. We have a system that has some checks and
balances. We issue guidance, and I call it guidance--it is not
a quota system--but is guidance around what we would expect the
distribution to look like.
However, we have Performance Review Boards at both the
organizational level and at the enterprise level across all of
the IRS. Managers can come in and they can make a case for why
individuals, for instance, in their organization should be
rated at generally a higher level than the overall average and
make that case.
So it is that balance point. We are trying to strike for
balance. We don't have a system where essentially you can rate
everybody ``outstanding'' and that will hold. Again, from a
grade inflation perspective, is that really the case? It is
tough. I mean, this is a tough problem because you are asking
managers to rate their employees and to be open and honest. But
also to give them the right rating. It is that balance point
that we are striking by providing some guidance. Also having a
process through these Performance Review Boards to ensure that
we are doing the right things if people truly are operating at
an outstanding level.
Senator Akaka. Thank you very much.
Now, I have one final question not related to pay-for-
performance and this is to Mr. Bunn. As you know, last year's
NDAA contained a provision I authored to help reemployed
annuitants at DOD who were forced to retire due to a reduction
in force. I have employees in Hawaii who continue to ask me
when DOD will issue regulations on that provision. Can you tell
me the status of those regulations?
Mr. Bunn. I can certainly take that question back. That is
not within my portfolio, but I am aware of that issue. I know
that the policy that you are talking about is in the final
stages of review within the Department and it should be out
soon, but I will certainly get back to you with a more specific
estimate for when the policy will be out.
Senator Akaka. I would appreciate that.
Mr. Bunn. Yes, sir.
Senator Akaka. Again, I want to say thank you to this panel
for your responses. It will certainly help us in what we are
trying to do. So thank you very much.
[Pause.]
I want to welcome our second panel, Carol Bonosaro,
President, Senior Executives Association; John Gage, President
of American Federation of Government Employees; Colleen Kelley,
National President, National Treasury Employees Union; Jonathan
Breul, Executive Director, IBM Center for the Business of
Government; and Dr. Charles Fay, Professor, School of
Management and Labor Relations, Rutgers University.
As you know, our Subcommittee requires that all witnesses
testify under oath, so I ask all of you to please rise and
raise your right hand.
Do you solemnly swear that the testimony you are about to
give the Subcommittee is the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Bonosaro. I do.
Mr. Gage. I do.
Ms. Kelley. I do.
Mr. Breul. I do.
Mr. Fay. I do.
Senator Akaka. Thank you very much. Let the record show
that the witnesses answered in the affirmative, and let me
remind you that although your oral statement is limited to 5
minutes, your full statement will be included in the record.
It is good to see you again, Ms. Bonosaro. Please proceed
with your statement.
TESTIMONY OF CAROL BONOSARO,\1\ PRESIDENT, SENIOR EXECUTIVES
ASSOCIATION
Ms. Bonosaro. Mr. Chairman, the Senior Executives
Association appreciates the opportunity to share our
experiences and views related to the current SES pay-for-
performance system.
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\1\ The prepared statement of Ms. Bonosaro appears in the Appendix
on page 119.
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Since the creation of the SES in 1978, with its performance
awards and Presidential Rank Awards, its members have been
subject to a rigorous pay-for-performance system. That system
was changed, as you know, in 2003 and has been in effect now
for three cycles. A system that was meant to be transparent,
flexible, and to reward performance has instead become a
disincentive for many of the best employees who might otherwise
desire to join the SES.
Senior Executives take on more duties, work longer hours,
and have fewer rights than GS-15 managers, yet they receive no
locality pay, no compensatory time, and no guaranteed annual
pay raises, unlike General Schedule employees. With a large
number of Senior Executives eligible to retire, it is critical
that issues with the current pay system be corrected so that we
will retain a highly qualified pool of applicants to fill their
positions.
A comprehensive survey of the SES that SEA undertook in
2006, continued feedback from our members, and a survey
recently completed by OPM shows several areas of concern with
the system, including pay overlap between GS-15s and the SES,
perceived quotas, and lack of transparency in both the rating
and pay adjustment processes.
One of the most disturbing findings of the SEA's survey was
the opinion of 47 percent of the respondents that GS-14s and
15s are losing interest in applying to the SES. The OPM survey
reported that only half of Senior Executives believe that the
current system is helpful in recruiting qualified applicants to
the SES. Anecdotal evidence we continue to receive indicates
that the narrowing gap between SES pay and GS pay, coupled with
the inconsistency of the SES system, result in a less
attractive Senior Executive Service.
Another issue highlighted by the SEA's survey was the
perception that agency quotas, not actual performance, drive
decisions about performance levels and salary adjustments.
Downward pressure on rating levels exists within many agencies
and we continue to receive reports from executives whose
ratings were reduced without explanation.
The certification process itself is a cumbersome one that
some smaller agencies do not even attempt. It must be done
every 1 or 2 years, and often the decision to certify does not
come until well into the performance cycle.
We are also concerned with the consistency by which the SES
pay system is being implemented. The OPM survey found that
communication of the results of the system to executives--
ratings, pay adjustments, performance awards--varied greatly
from agency to agency. However, the greatest inconsistency has
arisen from the total discretion that agencies have with regard
to pay, and it is not unusual to find a disconnect between
ratings and pay adjustments.
As one Senior Executive told us, he received no pay
increase for several years despite receiving ``fully
successful'' ratings for his performance at the Department of
Energy. Largely because of this, he voluntarily resigned his
position in the SES to move back to the ``EJ'' excepted
service, where he then received the same 4.49 percent pay
increase given to GS employees this year in the Washington
region.
Our written testimony provides several other examples of
this inconsistent and, on its face, arbitrary treatment.
In the 3 years of experience under the new system, one of
the most striking results is the low salary adjustments. In
2007, the most recent year for which data is available, or at
least was available prior to today, those SES rated ``fully
successful'' the year before received an annual average salary
increase of only 2 percent, substantially below the increase,
2.64 percent, received by GS employees in the Washington, DC
area.
Given these issues with the pay system, it is no wonder
that some who might otherwise aspire to the SES now perceive
that the risks far outweigh the rewards.
SEA's recommendations for legislative fixes to the pay
system include ensuring at least a minimum annual increase for
those rated ``fully successful'' or better and including
performance awards and retention allowances in the high-three
retirement calculation. I think this would no doubt go a long
way towards dealing with the pay compression Director Sanders
referred to and even that Dr. Springer admitted in her
testimony, or in her response to your question, that pay
compression is a problem.
We also recommend a longer certification period, guaranteed
funding of at least minimum SES salary adjustments, a minimum
increase in pay for new Senior Executives, rules for pay tiers
if an agency has them, feedback to Senior Executives, and
greater transparency in the Administration of these systems.
It is SEA's hope that with the adoption of our
recommendations, the SES pay system will be one that adequately
and fairly compensates those who perform the most challenging
and important jobs in the career civil service and which will
continue to attract quality candidates in the future. Thank
you.
Senator Akaka. Thank you very much, Ms. Bonosaro. Mr. Gage.
TESTIMONY OF JOHN GAGE,\1\ PRESIDENT, AMERICAN FEDERATION OF
GOVERNMENT EMPLOYEES
Mr. Gage. Thank you, Mr. Chairman, for the opportunity to
testify today. I will focus my remarks on the National Security
Personnel System and TSA's past system. And thank you, too, Mr.
Chairman, for your leadership in the 2008 National Defense
Authorization Act, which in addition to excluding blue collar
workers from NSPS, the law fully restored collective bargaining
rights.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Gage appears in the Appendix on
page 134.
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But AFGE remains profoundly concerned about the NSPS pay
system. There are many issues, including new illegal
restrictions on bargaining rights, the disconnection between
pay and performance, despite what employees have been told, the
requirement that performance ratings be pushed into a forced
distribution or bell curve, the suppression of wages by
permitting bonuses to be paid instead of base salary increases,
and the virtual elimination of merit promotion.
On May 22, DOD proposed revised NSPS regulations which
cynically and purposely attempt to evade Congress's mandate for
collective bargaining. DOD intends to implement these
regulations in October, preventing the next Administration from
reviewing the pay system and making adjustments before it goes
into effect. This double-cross is unfortunate, but predictable.
We strongly urge the Congress to block the implementation of
the May 22 proposed regulations.
Section 9902(e)(9) of the 2008 NDAA clearly says any rate
of pay established or adjusted in accordance with the
requirements of this section shall be non-negotiable but shall
be subject to procedures and appropriate arrangements of
Paragraphs 2 and 3 of Section 7106(b), the labor statute. And
yet in its proposed regulations, DOD has broadened its
definition of rate of pay to include the phrase, ``and the
conditions defining applicability of each rate.'' The proposed
regulation goes on to list conditions defining applicability of
each rate for a dozen pages, clearly intending to eliminate any
bargaining of the very procedures and arrangements Congress
mandated that DOD negotiate.
It is an act of cynicism and defiance on DOD's part to
think it can define itself out of its statutory obligation. We
urge the Senate to clarify in the Fiscal Year 2009 Defense
Authorization Act that rate of pay does not include conditions
defining applicability of each rate.
The 2008 NDAA also ensures that an NSPS employee will be
guaranteed 60 percent of the GS nationwide pay adjustment and
100 percent of the GS locality adjustment every year, provided
that the employee is rated above ``unacceptable.'' As you know,
DOD was prepared to give only 50 percent of the pay adjustment
to employees in 2008 and none of its annual adjustment in 2009.
The new law ensures that the full amount of the nationwide pay
adjustment go for base pay increases.
But to ensure the viability of the DOD pay system, DOD must
be required to adjust its pay bands by the full amount of the
nationwide pay adjustment, just as grades in the GS system are
adjusted annually. In DOD's proposed regulations, the Secretary
can adjust different pay bands by different amounts and the
minimum and maximum rates of each pay band by different
amounts.
Mr. Chairman, we have heard from so many managers and
employees about the implementation of this new pay system. They
complain that it is unpredictable, unfair, and opaque.
Supervisors have been ordered to withhold information from
their employees about their ratings. The pay pools are required
to force performance ratings into a bell curve, and the
decision about how and by how much to compensate an employee
for performance is completely arbitrary.
When supervisors substitute bonuses for salary increases,
workers lose not only in base salary, but also in their defined
benefit pensions and in contributions to the Thrift Savings
Plan. The result, Mr. Chairman, is the suppression of wages and
benefits for civilian DOD employees.
Under NSPS, promotions are rare. Employees might be given
additional duties by their supervisor with a subjective pay
raise or bonus in what NSPS calls reassignments, but there will
be no clear pathway to that advancement, nor is there a
requirement that the reassignment be open to competitive or
even that other employees know about the opportunity. The Merit
Promotion System will be all but dead. Bias and favoritism are
inevitable.
On Transportation Security Officers, Mr. Chairman, TSOs
continue to be drastically underpaid, around $30,000 annually.
TSOs are subject to the pay system known as PASS. While it is
virtually impossible to obtain data or even basic information
about how the system is supposed to work, to make matters
worse, TSA continually changes the playing field. Employees
believe that PASS is based on favoritism, not performance. Last
December, TSA disclosed that TSOs would receive a smaller pay
raise in 2008 than in 2007, even if they received the same or
better performance rating as the previous year.
On March 25 of this year, TSA Administrator Hawley sent a
memo to all TSOs making changes to PASS, agreeing that it had
become too complicated and that TSOs are being trained and
tested on different standards and these standards do not
reflect how TSOs do their job. Yet in May, TSA implemented the
infamous image test, and in a stroke of astounding
contradiction continued to hold flawed previous test results
against TSOs.
To make matters worse, TSOs still have limited access to
image test training. The new training software is not available
at all airports and in some cases does not work. Trainers are
given wrong information about identifying threat objects during
the test, which led directly to TSO test failure.
TSOs with excellent work histories and commendations have
been told they may lose their jobs. But instead of correcting
the test and properly training TSOs, the agency has come up
with another policy that continues to hold previous test
failures against TSOs but allows management to retain and
retrain whoever they want, making the new and improved image
testing even more unfair than it was.
TSA consistently ranks at the bottom of all surveys of
employee morale in the Federal Government. This workforce is
too important to be treated so callously. These workers need a
rational pay system before the attrition rate climbs higher.
AFGE urges the Subcommittee to end the PASS system and place
TSOs under the General Schedule that applies to other Federal
workers, including their colleagues throughout DHS.
That concludes my statement, Mr. Chairman.
Senator Akaka. Thank you very much, Mr. Gage. Ms. Kelley.
TESTIMONY OF COLLEEN M. KELLEY,\1\ NATIONAL PRESIDENT, NATIONAL
TREASURY EMPLOYEES UNION
Ms. Kelley. Thank you very much, Chairman Akaka, Ranking
Member Voinovich, for the invitation to discuss pay-for-
performance systems in the Federal Government.
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\1\ The prepared statement of Ms. Kelley appears in the Appendix on
page 149.
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The President's fiscal year 2009 budget submission
reaffirmed his commitment to replace the current GS pay system
with a more subjective pay banding system. OPM's December 2007
report touts the Administration's alternative so-called pay-
for-performance systems now in many Federal agencies as
successful experiments.
NTEU does not agree with the notion that the GS system
needs to be replaced, and I believe the evidence is now clear
that current pay-for-performance systems have not been
successful. To the contrary, alternative pay systems have
produced a litany of failed experiments, widespread employee
dissatisfaction, inequitable distribution of resources, abuse
in ratings systems, and rampant employee confusion leading to
low morale. I don't know of one pay-for-performance system that
currently gets good reviews from employees who are working
under it.
The goals of recruiting and retaining high-quality
employees and better accomplishing the agency mission are
simply not being met by these pay systems. NTEU believes that
for a pay system to be credible and effective, it must either
be set in statute, like the GS system, so everyone understands
the rules and consequences, or there must be collective
bargaining so employees can have a role in the pay system and
can have remedies for unfairness.
The Transportation Security Administration has neither
collective bargaining nor a statutory pay system. It is a prime
example of the failure of a current pay-for-performance system.
Under the TSA PASS system, employees are constantly tested, but
if they fail, they are not told what they did wrong. The
training is minimal. A majority of Transportation Security
Officers do not even know what is expected of them to get a pay
raise. Only 21 percent of TSA employees believe that promotions
are based on merit. Fewer than one in four believe that their
pay raise is determined by their performance.
The PASS system has resulted in the highest attrition rate
in the Federal Government, and now TSA has awarded a $1.2
billion contract to Lockheed Martin to perform its human
resource activities, including pay. NTEU believes this taxpayer
money could be better spent by putting TSOs under the existing
GS pay system and increasing staffing and reducing airport
congestion, rather than increasing contractor profits. TSOs
must also be afforded collective bargaining rights like their
coworkers throughout the Federal Government.
At the IRS, where we heard earlier that managers are under
a pay banding system, the Federal Managers Association has
spoken out against the system's forced pay quotas and they said
that pay was not necessarily dependent upon performance
ratings. In addition, the Treasury Inspector General for Tax
Administration found a number of deficiencies in the IRS
managers' pay-for-performance system. A July 2007 TIGTA report
states, ``The IRS risks reducing its ability to provide quality
service to taxpayers because the IRS pay-for-performance system
potentially hinders the IRS's ability to recruit, retain, and
motivate highly skilled leaders.'' If these alternative pay
systems are jeopardizing the achievement of an agency's core
mission, in this case to provide quality service to taxpayers,
how can we justify continuing or even expanding their use?
Even at agencies where pay is negotiated through collective
bargaining, NTEU has seen problems. In September 2007, NTEU won
an important legal battle when an arbitrator ruled that the
Security and Exchange Commission system was found to
discriminate against African-American employees and employees
that were 40 years of age and older. The SEC has since agreed
to freeze its flawed merit pay system and is working with NTEU.
Similar problems existed at the FDIC, where we collectively
bargain over pay. Only 12 percent of employees surveyed found
that the pay system rewarded performance there at the FDIC. To
Chairman Bair's credit, that program was also suspended and
NTEU is also working with that agency on a revision.
The GS system, though much maligned, has rules, standards,
and evaluations which must be written. Employees receive
within-grade raises and career ladder promotions based on
performance criteria. Locality adjustments make it market
sensitive. Flexibilities, like awards, quality step increases,
telework, student loan repayment, and others, are authorized
and should be used more extensively to attract and keep
talented employees in government.
In conclusion, NTEU supports a moratorium on new pay-for-
performance systems and a review of those that are in place to
see whether they are successful in accomplishing their goals.
Those that are failing should be canceled. NTEU also strongly
believes that collective bargaining over pay must be provided
to employees under alternative pay systems to provide employees
with a check on abuse.
Thank you again for the opportunity to testify and I would
welcome any questions you have.
Senator Akaka. Thank you very much, Ms. Kelley. Mr. Breul.
TESTIMONY OF JONATHAN D. BREUL,\1\ EXECUTIVE DIRECTOR, IBM
CENTER FOR THE BUSINESS OF GOVERNMENT, AND PARTNER, IBM'S
GLOBAL BUSINESS SERVICES
Mr. Breul. Thank you, Chairman Akaka and Senator Voinovich,
for the opportunity to discuss performance pay systems in the
Federal Government.
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\1\ The prepared statement of Mr. Breul appears in the Appendix on
page 161.
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The question of how to compensate civil servants remains
what I would call a thorny issue. Public sector positions no
longer necessarily offer a job for life, and Federal
departments and agencies are increasingly in competition with
the private sector to recruit and retain top performers. One
solution widely used in some parts of the private sector is to
replace or complement the traditional civil service system of
automatic salary increases based on length of service with
financial reward for good performance, or performance-based
pay.
In order to gain a better understanding of the challenges
and issues related to performance-related pay, the IBM Center
has sponsored and published three recent research reports by
public management experts. The first report, ``Designing and
Implementing Performance-Oriented Pay Band Systems,'' is by Jim
Thompson at the University of Chicago. According to Professor
Thompson, pay banding is not a new concept to the public
sector. The essential concept is that for purposes of salary
determination, positions are placed within broad bands instead
of narrow grades. And according to Mr. Thompson, the
preponderance of data shows that these systems have achieved
high levels of employee acceptance. However, the degrees of
success seem to vary depending on how well those systems have
been designed and implemented.
Mr. Thompson's report goes on to describe nine different
performance-oriented pay band systems that have been in
operation in the government, in some cases for more than two
decades. He makes the case that successful designs are those
that, one, achieve a balance between efficiency, equity, and
employee acceptance; two, acknowledge the soft as well as the
hard design features; and three, fit the organizational
context.
A second IBM report is ``Managing for Better Performance:
Enhancing Federal Performance Management Practices,'' by Howard
Risher and Charles Fay, who is sitting to my left. The authors
of this report recognize that performance management is
recognized worldwide as a critical factor in helping
individuals and organizations achieve their goals. When done
correctly, performance management becomes a powerful and
effective tool to drive individual and organizational
performance. When done poorly, it can create an atmosphere of
distrust between managers and employees, ultimately limiting
performance and the organization's ability to achieve its full
potential.
Fay and Risher argue that the responsibility for effective
management of employee performance rests squarely on the
shoulders of executives and front-line managers. They emphasize
the management of employee needs are a core responsibility of
every manager. In this view, it is critical that managers
understand and effectively practice the fundamentals of
performance management, including planning, monitoring,
developing, appraising, and rewarding employee performance.
The third report is ``Pay for Performance: A Guide for
Federal Managers,'' by Howard Risher. Risher insists that
research over the years confirms that organizations benefit
when they recognize and reward employee and group performance.
He explains that for the new system to succeed, managers need
to be comfortable with their new role in overseeing such
systems. This makes it essential for them to play a role in
planning and implementing the new systems.
Risher argues that pay-for-performance, including the
reward system, must be an integral part of an organization's
overall strategy to create a performance culture. Further, he
contends that Federal agencies will have to overcome barriers
of cynicism and distrust among Federal employees, and there
will be what he calls bumps and detours along the way, so
agencies must expect to adjust their plans with experience.
He concludes that, in the end, the new policy can be
expected to contribute to improved agency performance.
Importantly, however, Risher warns that the transition will not
be easy. ``This may prove to be the most difficult change any
organization has ever attempted,'' but in the end, he believes
it will better serve the needs of the Federal Government than
the current General Schedule salary system.
In conclusion, the question of how to compensate public
employees remains a thorny one. Performance pay is an appealing
idea, but research indicates that implementation, as well as
improving government performance, remains complex and
deceptively difficult, both technically and politically.
Thank you, Chairman Akaka and Senator Voinovich, for
holding this important hearing and for remaining engaged on the
important issue of improving management and performance of
government.
Senator Akaka. Thank you very much, Mr. Breul. Dr. Fay.
TESTIMONY OF CHARLES H. FAY,\1\ PROFESSOR, SCHOOL OF MANAGEMENT
AND LABOR RELATIONS, RUTGERS UNIVERSITY
Mr. Fay. Chairman Akaka and Senator Voinovich, thank you
for giving me the opportunity to testify on compensation and
pay-for-performance again. Given my background, it should be
obvious I have a bias favoring strong performance management
systems and pay-for-performance in general. When well designed
and well implemented, these systems can and do increase
employee understanding of what is required of them and increase
both their performance and organizational outcomes. Flawed
programs can and do decrease productivity and employee job
satisfaction.
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\1\ The prepared statement of Mr. Fay appears in the Appendix on
page 165.
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I think it is appropriate for the government to institute
pay-for-performance systems. It is clear that agencies have
done their homework in studying the large literature on private
sector performance management and pay-for-performance systems.
That said, I see many of the same problems in the various
systems implemented by government agencies that plague similar
systems in the private sector.
First of all, these programs seem too ambitious. They are
trying to do too much, too fast, for too many.
Second, the culture that makes ``meets standards''
performance a failure, and it is in most of these systems,
needs to be changed. When ``meets standards'' is a failure, you
are going to end up with an excellence entitlement mentality
and no system will be able to differentiate high performers
from standard performers.
Third, managers need to be held accountable in terms of pay
and their own performance for performance management and pay-
for-performance. Many managers think they are far too busy to
do pay-for-performance, to do performance management, and if
managers don't have time to manage, it is questionable what
they should be doing.
The programs and particularly the DOD programs confuse
market adjustments and performance bonuses. Employees expect to
be kept whole against market, and it is clear from union and
employee complaints that they know the difference between
market adjustments and performance bonuses. Hence, all the
arguments about comparison with GS, which is getting the FEPCA
adjustments, as compared to what is happening in the pay-for-
performance systems. The market adjustment issue is
particularly important to government workers because they
generally make less than equivalent private sector workers,
especially from about GS-8 or GS-9 upwards.
For a variety of reasons, government employees are much
more heavily unionized than private sector employees. You can't
simply import private sector programs into government and
expect them to work well. Unions in general are opposed to
performance management and pay-for-performance systems because
employees and employee representatives lose partial control of
terms and conditions, and you have heard that again today. I
hear both that employee representatives have been active in the
design and Administration of these systems and that they have
been precluded from participating in that. In a unionized
organization, they should be very heavily involved in designing
and implementing the systems.
Having bonus pools, as the Department of Defense system
does, where ratings and bonuses are calibrated, is one of the
better designed approaches in these systems. However,
calculating the bonus pool solely as a function of the salaries
of the members of the pool is inappropriate. It rests on the
assumption that the aggregate performance of employees making
up each pool is equal across pools and that the employees of
each pool are equally strategic to the agency or the
department. Neither of these assumptions is likely to be
accurate.
Calibration committees should not be negotiating ratings or
awards. When bonuses appear to employees to be a function of
the negotiating skill of their manager, or when there is a
drive for some specific distribution of ratings, the whole
system loses any value in motivating those employees.
At the same time, there should be an effort to standardize
reward share numbers across pools. A ``meets standards''
employee should receive the same number of shares regardless of
the pool to which he or she is assigned. Similarly, the range
of share measures that each performance level can be assigned
is problematic. When a ``meets standards'' can be assigned any
one of four or five different sets of performance shares, it is
clear that there is lots of room for bias and arbitrariness in
the system.
Performance management systems and pay-for-performance
systems for employees who work as parts of groups or teams need
to have team citizenship taken into account as part of their
performance. Otherwise, they will be motivated to maximum
individual performance even at the expense of suboptimizing
group performance. Performance ought to be rated and rewarded
at the level at which it occurs, and particularly in the kind
of service jobs at the government, it rarely occurs at the
individual level.
It is not clear what evaluation systems have been built
into the various pay-for-performance systems. The previous
panel discussed some of that, but I will make one point about
that in a minute.
The 2007 Annual Employee Survey results of the Department
of Treasury, for example, notes that only 27 percent of
employees believe pay raises are determined on how well
employees perform their job. Only 32 percent of employees state
they typically receive formal or informal feedback from their
supervisor. Those are signs of a broken system or one that
never worked in the first place.
Furthermore, I think that just looking at employee
reactions to systems is really the wrong measure and I was
surprised that none of the people on the previous panel spoke
to the real issue that private sector organizations always look
for as a measure of goodness of the pay-for-performance system,
and that is the performance of the organization gets better. If
you are tying individual criteria and performance criteria, to
organizations' success, then the measure of success of the
system is whether the organization increases its success.
Thank you. I will be happy to answer any questions.
Senator Akaka. Thank you very much, Dr. Fay.
My first question is to all of the witnesses. As we
discussed on the first panel, I continue to hear from employees
about the use of quotas or forced distribution of ratings. Can
each of you discuss your thoughts on the use of quotas and how
you would recommend agencies avoid actual or perceived quotas.
Ms. Bonosaro.
Ms. Bonosaro. Well, it has been an interesting phenomenon
to watch. I think certainly in the first year or two, our
strong suspicion is that many agencies felt that the way to
achieve certification with the Office of Personnel Management
and OMB of their systems was to show a substantially lower
number of outstanding ratings, to push the ratings down. I
think there was just no doubt that--let us simply say there was
an informal message that was operating within the agencies.
My guess is that is less true now. However, we still have
examples of executives who find that their ratings have been
reduced without explanation. Whether that arises because that
political superior is unwilling to actually address substantial
issues with the executive's performance or whether there is a
hang-over, if you will, about the need to suppress higher
ratings, it is very difficult to tell because very few of the
people involved, the individual executives, want anyone to move
forward and make a case out of them. They value their jobs and
they recognize that doing that is not going to be to their
ultimate advantage.
I think, too, that there has been finally one unfortunate
example that we faced where Navy had literally a PowerPoint
presentation with a graph, a normal distribution curve, which
they were using with regard to the SES system, and when we
brought it to OPM's attention, their ultimate conclusion was
that it was not a quota, it was a notional system, and I
frankly don't quite understand what that meant, but rather that
it was some generalized idea of perhaps how ratings should
look.
With regard to a remedy, the OPM regulations prohibit the
use of quotas. I think that one remedy is certainly for OPM to
be willing to quickly jump on every instance we can bring to
their attention where we can convince an executive to permit us
to do that, and another is to put that prohibition in statute,
to make clear that we take it seriously. We don't have any
particular recommendation for what the penalty should be if the
statute is violated, but I think it would send a message that
we are serious about this.
And then finally, I think the message that Director
Springer talked about has to be reinforced every year and
pushed down through the agencies, that there is a clear
interest in evaluating and rating every executive fairly and
not with regard to some presupposed outcome.
Senator Akaka. Thank you. Mr. Gage.
Mr. Gage. Senator, just look at the time line, what DOD
does in rating an employee. In October, the supervisor gives
the employee a performance plan. The following September, the
supervisor has to rate the employee on that performance plan,
but he is forbidden to talk to the employee about that rating
or to give him that rating. Then in October, he has to sit down
and do a new performance plan, even though he doesn't know what
is going to happen with his original rating, nor does the
employee.
The rating in November, or what the supervisor submitted,
that rating goes to the pay pool. They do whatever they want,
which is a forced distribution and apply these ratings to a
curve. Then in January, the supervisor is finally told what the
rating is for the employee and how much money the employee will
get or not get.
If this is transparent--employees are not fools, Senator.
They understand that the supervisor's rating, which should be
the employee's performance matched to that performance plan,
has nothing to do with the real rating he is going to get or
the money he is going to receive.
So I suggest that the Subcommittee just look at DOD's own
time line and see if it is believable, that there is not a bell
curve or a forced distribution going on. Employees already know
there is.
Senator Akaka. Ms. Kelley.
Ms. Kelley. Whether agencies acknowledge there is a quota
system or not, there is, and it happens for two reasons. One,
because they have this notional idea of how the workforce is
performing and should be distributed, which really just makes a
farce of the system. If you announce that only 25 percent of
employees or some fill-in-the-blank percentage can be
``outstanding'' or excel or a role model or whatever the new
term of the year is, the fact is, what you are saying to the
other 75 percent of the employees is no matter how well you do,
even if you are doing exactly the same thing as those top 20 or
25 percent, there are too many of you to be rated that way. So
it makes the whole system a farce, and from there, the
conversation has nowhere to go but down and it has zero
credibility for employees.
But one of the other reasons that I believe it happens is
because of limited resources in the Federal Government. When
the agencies are given their budgets, they then decide how they
are going to divide that up, and it is a system that requires
that if one employee is going to get more, that another
employee will get less based on however the agency decides to
distribute their funds.
So there is a very real issue within the Federal Government
when it comes to appropriations, but then if the agencies are
not making wise decisions, it leads to very serious problems
like we saw in the FDIC and in the SEC. In both of those cases,
the agency announced--they announced as part of their program a
forced distribution system, that only 25 percent of the
employees in the FDIC, they said, could be rated at the highest
level, and it had nothing to do with their annual evaluation or
whatever their rating was. It was their rating plus some
invisible criteria that managers would come up with. They
actually gave it a name. They called it a Corporate
Contribution Factor. You will find a definition of it nowhere
in English, anyway, that employees can hang their hat on. And
the system, as a result, had zero credibility, again, with
employees.
Now, as I said, the good news is the FDIC and the SEC are
now sitting down with NTEU to fix that system. But whether they
admit it or not, there is a forced distribution system and a
quota system. They can come up with all the names with it that
they want and they can say that it is a suggestion, that it is
not written in stone, but it is implemented as if it is written
in stone, in our experience.
Senator Akaka. Mr. Breul.
Mr. Breul. Mr. Chairman, I don't think there is any real
room for a quota. What I would do is reframe the question a
little differently and ask how many employees receive an honest
performance appraisal that tells them where they really stand.
It was my experience in government for many years that too
often, very few receive a real honest appraisal of where they
stand, and I think this is equally unacceptable.
Managers can't call themselves managers unless they
regularly tell their people what they are doing well and how
they need to improve. So the whole notion of an honest,
transparent appraisal system, I think is an essential element
here.
Senator Akaka. Thank you. Dr. Fay.
Mr. Fay. Yes, Senator Akaka. You know, faculty deal with
the same problem all the time in grading. Everybody wants to
make an A. It doesn't happen that way. What does happen is if
you develop a measure of learning or performance that
accurately describes or accurately taps what people are
supposed to have done, then if you rate against standards, you
will get whatever distribution you get. I think it would be
great if every employee in the government got an
``outstanding'' and deserved it. I think it is pretty bad if
they all get it and they don't deserve it, but I think it is
equally bad if 57 percent of them get a ``meets standards''
just for some financial purpose.
As a couple of people have said, employees are not stupid.
They figure this stuff out and nothing loses credibility for a
system faster than having any kind of artificial constraint on
where people come out.
Private sector organizations face the same problem and what
they do is a senior manager will go into a junior manager and
say, ``I noticed you gave everybody in your unit an
`outstanding.' If they are all outstanding, how come your
department is a failure?'' That is, performance rating has to
roll up the organization just as the goals of the organization
roll down, and if a department is performing in an outstanding
fashion against whatever criteria the organization has set for
that unit, then maybe everybody in the department does deserve
an ``outstanding.'' If the department is failing, maybe
everybody deserves a ``non-acceptable.''
Senator Akaka. Thank you very much, Dr. Fay. Senator
Voinovich.
Senator Voinovich. I am certainly glad that I am here today
to hear this testimony. I am going to get the transcript of
what Mr. Gage and Ms. Kelley had to say today and I am going to
get it over to the Departments and get to the bottom of this,
because if what you are saying is true, it is shocking. It is
not what we intended to do. So I just want you to know that we
are definitely going to follow up on what we have heard today,
or I have heard today.
How much do you think of some of what is going on is the
result of agencies not having the budget that they ought to
have and they are trying to figure out how they can cut back,
and as a result of that, the systems get shortchanged?
Mr. Gage. I think that is at the bottom of this whole
system. I have talked with some of our base commanders, who are
very good people and have run very fair bases, and they said,
``with this new pay-for-performance, my money is very tight. Of
course, I am going to tap into that and I am not going to use
it for employees. I am almost forced to do it.''
So I think this is just an elaborate scheme, Senator, to
reduce overall Federal pay. And if you go through the mechanics
of it like we have had to do just to try to understand it, it
is just fraught with bias and prejudice and it is a system that
it is going to be very hard to get out--it is just not going to
be named abuse.
So I had better ideas of this. I think Colleen did, too. We
really tried to work with some of these agencies. DOD refused
to work with any of the unions. But I am really concerned that
this is the end of the good part of the civil service as we
know it.
Ms. Kelley. I think definitely the resources is the
starting point of the problem, but they are given X resources
and then the question is how you spend it, and whether you are
going to build a system that has any credibility to employees
or not. That is not what has been done. In fact, as I listened
to Dr. Fay, I will give you another example of what we see
happen often that is, managers receive bonuses and awards and
not one employee in their group is recognized with an award or
any kind of recognition. So how could that manager be so
successful if every one of their employees were just OK and did
nothing to be recognized?
I mean, there are a lot of flaws in the system that, for
me, are about implementation. So even if you start with the
fact there is not enough money, which there is not, and the
agencies need to be funded to be able to recognize the top
performers, that money should be provided. But whatever the
pool of money is, then the credibility with which it is
distributed is about implementation.
So it is really a two-part question for me. It is, yes, the
resources are needed, but then the agencies should be
accountable for the implementation of how they spend that money
and how they recognize and reward employees. And today, I have
yet to see a system that I could point to that I would say NTEU
would support, and I would like to see that. I have looked at
every one of these systems that OPM and that the Administration
point to as successes and employees will tell you every one of
them is an abysmal failure.
Senator Voinovich. Ms. Bonosaro, would you like to comment,
and then I have another question for you.
Ms. Bonosaro. I think that certainly has been somewhat of a
problem in regard to the SES system, and obviously all of the
pay adjustments in the Senior Executive Service are now totally
discretionary with the agencies so that even budget issues
aside, an agency could determine not to grant any pay
adjustments. But certainly we have seen some examples over the
years where budget has entered into it. I think right now,
there has been a decision at the NLRB, for example, to give no
performance awards because of budgetary problems.
I think, too, that sometimes what we have thought is that
perhaps the reason that performance awards have been more
forthcoming than more substantial pay adjustments in the SES is
because you don't then build that into salary. It is a one-time
payment. So that is one of the reasons why one of the
legislative provisions we are recommending is to guarantee that
some budget be devoted to the system.
Senator Voinovich. We have had 2 or 3 years of pay for
performance in SES and we still have some agencies that are
doing great and others are not doing so great. Would you like
to comment about, first of all, where the agencies aren't doing
a good job, at least from the surveys that come back, if OPM
has really done an adequate job of getting in there and working
with them to find out what is wrong and why it is not working
in terms of what they are doing versus another agency where the
folks understand the system and seem to be satisfied with it.
Ms. Bonosaro. Well, I think just taking one of the areas
where the differences between agencies, where it is most
obvious was with regard to transparency and communicating
results and information about the system, and there were
tremendous differences between the agencies, which was really
difficult to understand because it is not rocket science to
share these results with executives.
I think there, OPM Director Springer really did make a very
strong effort as part of the certification process to make
clear to agencies that communication was critical. So it really
is difficult to understand what is going on there.
I honestly don't have a good enough sense of exactly what
they are doing beyond the work in the CHCO Council with regard
to some of the agencies.
One of the problems, I think, that makes it difficult to
fully understand some of the disconnects is that all of the
data we see, for example, with regard to pay adjustments, are
averages. So when we see, for example, that Senior Executives
rated ``fully successful'' receive an average 2 percent pay
increase, we don't know how many receive no pay increase or how
many receive a 1 percent pay increase or a 5 percent pay
increase. So some of the data really masks some of the
differences.
But there are very clear differences and I think one of the
really striking things were some of the poor results at OMB,
which is charged with acting with regard to agency
certifications in the system. So it is, frankly, a bit
baffling.
Senator Voinovich. I am very frustrated because we still
have some poor performers out there, and apparently even with
OPM involved. Is it your impression that is not being done,
that there is not enough concern at OMB to try to make sure
that the system is successful, or do you think they are just
hiding behind the budget, too?
Ms. Bonosaro. I honestly don't know. I wish we had a good
answer for you. I think a lot of this--we have to go back to
the beginning and the fact that this legislation was adopted
with no hearings. There is no legislative history. So in
essence, OPM developed regulations that took almost a year to
do. Agencies didn't get geared up quickly enough, and then they
were scrambling. I think the learning curve has been pretty
steep and there wasn't enough, at least early enough on, not
sharing between the agencies that knew what they were doing or
trying to do it well and enough clear guidance from OPM. But
then you had two agencies both involved in looking at these
systems. So I think, frankly, it didn't get off to a very good
launch and now you are trying to clean it up, frankly.
Senator Voinovich. Is the CHCO Council doing any good? I
mean, it has been in place for 5 years and we have elevated
human capital to a higher level, supposedly, in the Federal
Government where people are paying more attention to the people
that work in the agencies. Is it--or you don't see any
difference?
Ms. Bonosaro. Those of us at this table are invited to the
CHCO Council meetings once a year, so it is a little difficult
to comment on what they are doing the rest of the time.
One of the things, though, that we do believe is that if we
still had the office in OPM that oversaw--that was kind of a
focal point for the Executive Corps, that we would have a much
clearer understanding of what they were doing and there would
be some clearer direction. Now, OPM, Linda Springer may well
disagree with that, but there are several parts of OPM that
have been involved in this process and I think one clear focal
point, having this under their wing, certainly would have been
helpful. And also a good deal more sharing among the agencies
that were doing well. It is just my impression that did not get
started early enough and well enough.
Senator Voinovich. Well, I will just finish up with this,
that I think the communication is extremely important and there
ought to be a vehicle there at OMB for that to go on. I know
way back when we got started, I think President Clinton had
where you had a chance to meet with the Administration. Wasn't
there something set up in the President's office where the
unions had a chance to come in and talk to some folks and have
a chance to have your voice heard at a high level?
Mr. Gage. Yes.
Senator Voinovich. One of the things that Senator Akaka and
I might do is just to maybe look at some of these things, and
whoever the next President is, make some recommendations on how
we think we can improve the situation to get this flow of
information. I can't believe, you say you can't even get over
and talk to the people at the Defense Department. That is just
incredible. Thanks.
Senator Akaka. Thank you, Senator Voinovich.
Mr. Gage, you heard Mr. Bunn's response to my question over
DOD's intention with the definition of rate of pay. What are
your thoughts on his answer?
Mr. Gage. Well, they have taken ``rate of pay,'' which is
pretty simple, three words, and wrote about 12 pages of
regulations that it would go into every aspect of pay, even
procedures put in for fairness to employees over time,
differentials in pay, night differentials. It would be all
subject to management discretion, non-negotiable, can't talk
about it.
Don't take my word, Senator. It is right there in the
regulations. We have had a number of experts around and met
with all our people and I feel it is really--it is shameful,
what they did, especially after Congress very directly told
them that this stuff was negotiable and restored our bargaining
rights, and for them to come about regulations and then try to
submit it at the end of this Congress, and you know this 60-day
rule, if you all don't do anything, it is in effect, and it is
just--well, I think it is dirty pool. It is certainly not the
way to have a discussion or a collaboration on something as
important as this.
Senator Akaka. Dr. Fay, you testified for pay-for-
performance to work in the Federal Government, there has to be
a legitimate appeals system in place for employees who feel
they have been treated arbitrarily or in a biased fashion. What
in your opinion comprises an adequate appeals system? Do you
believe the systems in place at Federal agencies, particularly
ones we have discussed today, have adequate appeals systems?
Mr. Fay. I can't speak to all of those agencies, but let me
give you an example from IBM, which is a non-unionized company,
generally speaking. They have a system where if an employee
feels that he or she has been mistreated, arbitrarily treated
by the organization, that they go first to the HR unit. If the
HR unit cannot resolve it to the employee's satisfaction, it
then goes into a system where someone from a different part of
the organization comes in and hears it, hears the problem and
makes a decision.
When it first started, there were a significant number of
those where managers got fired, got pay reduced, had a variety
of bad things happen to them. As time has gone on, managers
understand that you can't treat people arbitrarily or unfairly
and so a far smaller percentage do, in fact, turn out in favor
of the employee.
But they still run--and another thing they do that I think
is pretty remarkable, very few private companies do this, they
put the person who made the complaint into a pool with other
people who have made complaints. They select another pool who
are equivalent in terms of their performance, in terms of their
education, a variety of things. So they have parallel pools.
And then they track the pools and make sure that people who
filed a complaint don't end up out in limbo or laid off or
anything at any greater rate than members of the other pool.
That is, they go beyond just hearing and correcting when
they see things are bad. They do two things I think are
important. One is that managers who do behave in an arbitrary,
capricious fashion feel it. They learn not to do that very
quickly if they stay. And then second, they follow up to make
sure that the employee does not suffer from having made a
complaint, whether it is a supported complaint or not a
supported complaint. You know the problems that whistleblowers
in government agencies have and this was IBM's attempt, and a
very successful one, to prevent people who filed this
particular kind of complaint from being retaliated against.
Senator Akaka. Well, let me ask my final question to Mr.
Gage and Colleen Kelley. I am very concerned about the low
morale reported at TSA and the disturbing picture painted by
the responses to the 2007 DHS employee survey. Based on
feedback that you all received from employees, what are the
biggest concerns employees have with the TSA Performance and
Accountability Standards System (PASS)? Mr. Gage.
Mr. Gage. I interview TSA employees probably once a month
and, for instance, they are supposed to do this one test with a
contractor and it basically is they have to pat down, I believe
it is a Lockheed contractor person and they don't get any
feedback from the person they are patting down. But if they do
something wrong in that pat down, they see that they are rated
badly for that very important standard and they don't know why.
Their supervisor doesn't know why. He wasn't there. He didn't
do it.
So there are so many of these things, while they say they
are objective standards, they are not objective as far as the
employee is concerned. He doesn't even know what he did wrong.
And I hear that again and again and again. The same thing with
the image test, which is completely unfair. Yet they say, well,
you flunked the test, but why did I flunk it? How did I flunk
it? What did I do wrong? I think I am a good TSO Officer.
So I think that is one of the big things, but the other
thing is the inflexibility of their leave policies and working
conditions. Those are really the two big complaints that I get.
Ms. Kelley. And I would add that the third one is the issue
of pay and pay raises. There is no TSO who knows what it is
they have to do to get a better pay raise next year, and they
would tell you that pay raises are distributed based on
favoritism and cronyism, not based on skills; not based on
performance of the job. And they would say that in the same way
it is true for promotions, whether it is to a lead TSO position
or to a manager position.
Senator Akaka. Senator Voinovich.
Senator Voinovich. As I say, I do my own personal survey
and the last couple of years, I am getting better responses
from people, but I will say that some of them think that their
evaluation is too subjective. I am aware of the fact that
somebody else is doing it, and what you are basically saying is
that once it is done, employees don't get any feedback about
where it was that they failed and they are left in the dark
about their performance.
Mr. Gage. And by a contractor.
Senator Voinovich. Yes. I wasn't aware of the details of
the contract.
Ms. Kelley. Well, the $1.2 billion contract I mentioned is
a new Lockheed Martin contract, and that is for them to develop
and deliver a human resources system and delivery of their pay
system. So that is an additional $1.2 billion, with a B,
contract, in addition to the one that Mr. Breul mentioned where
they actually come in and conduct the testing of the TSOs.
Senator Voinovich. How long ago was that contract signed?
Ms. Kelley. I believe within the last 6 to 8 weeks. It is
very recent.
Senator Voinovich. I will check into it.
Mr. Gage, you testified that DOD refused to work with the
unions. Do you have any examples of when you have been over
there and tried to get some input with them, and who do you
contact there?
Mr. Gage. Well, I have known Mary Lacey for a long time. I
used to--when she was down at Indian Head. It was pretty clear
during the last session of Congress where we were at
loggerheads certainly on the collective bargaining aspects of
NSPS, and we tried some negotiation--one meeting. But it was
very obvious that there just wasn't discussion. There just
wasn't an attitude of, well, what are your concerns and how can
we work to answer some of your concerns.
It was basically very--and through the whole collaboration
process, it was an our way or the highway type of approach and
there was no collaboration. There was no discussion. And I
thought that was kind of odd because Ms. Lacey and I had done a
lot of business in the past. But on this--this was a much
different thing. I think DOD as an organization had their mind
made up and they were going to do it their way and there was no
looking back and no turning around.
Senator Voinovich. I think one of the things that I
understood was is that in terms of the implementation of the
system, the people that are going into the system now are
really not the unionized employees.
Mr. Gage. Oh, yes. Well, they haven't been. But under these
new regulations--see, we have wage grade exempted. They are out
of NSPS totally. Why, you might ask? That is a good question.
But the GS, the GS people now are the ones that are--the GS
bargaining unit, non-management types, they are the ones that
will be going into NSPS in these coming spirals under these new
regulations that they put in. So we are completely concerned
about that and----
Senator Voinovich. My understanding is that they still have
to go down some more spirals before they touch those people in
the Defense Department that are members of your union----
Mr. Gage. They are talking about this fall, or the fall
next year.
Senator Voinovich. Next year.
Mr. Gage. Yes.
Senator Voinovich. And that part of the reason why that
they may not have had the level of discussion you would like is
because they haven't gotten to your people yet. That is what I
have heard. When we have had Mary Lacey in, she seems to be
very committed to the system.
Thank you.
Senator Akaka. Well, I want to thank this panel. The
performance of Federal agencies, as we know, depends on the
ability of its workforce to trust the system that governs
employee pay and performance. From improving transparency and
communication to ending quotas or the perception thereof, there
remain many problems with pay-for-performance systems at
Federal agencies. We must address these issues in order to
maintain the integrity and the trust of our civil service and
ensure that the Federal Government is an employer of choice.
Again, I want to thank all of the witnesses for being here
today. I look forward to continuing to work with you and with
Senator Voinovich to address these issues.
The hearing record will remain open for 1 week for
additional statements and questions from Members.
This hearing is adjourned.
[Whereupon, at 4:56 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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