Human Capital: Symposium on Designing and Managing Market-Based  
and More Performance-Oriented Pay Systems (27-JUL-05,		 
GAO-05-832SP).							 
                                                                 
Critical to the success of the federal government's		 
transformation are its people--human capital. Yet the government 
has not transformed, in many cases, how it classifies,		 
compensates, develops, and motivates its employees to achieve	 
maximum results within available resources and existing 	 
authorities. One of the questions being addressed as the federal 
government transforms is how to update its compensation system to
be more market based and performance oriented. To further the	 
discussion of federal pay reform, GAO, the U.S. Office of	 
Personnel Management, the U.S. Merit Systems Protection Board,	 
the National Academy of Public Administration, and the		 
Partnership for Public Service convened a symposium on March 9,  
2005, to discuss organizations' experiences with market-based and
more performance-oriented pay systems. Representatives from	 
public, private, and nonprofit organizations made presentations  
on the successes and challenges they experienced in designing and
managing their market-based and more performance-oriented pay	 
systems. A cross section of human capital stakeholders was	 
invited to further explore these successes and challenges and	 
engage in open discussion. While participants were asked to	 
review the overall substance and context of the draft summary,	 
GAO did not seek consensus on the key themes and supporting	 
examples.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-832SP					        
    ACCNO:   A31317						        
  TITLE:     Human Capital: Symposium on Designing and Managing       
Market-Based and More Performance-Oriented Pay Systems		 
     DATE:   07/27/2005 
  SUBJECT:   Compensation					 
	     Human capital					 
	     Human capital management				 
	     Human capital planning				 
	     Human capital policies				 
	     Pay						 
	     Pay for performance				 
	     Pay rates						 
	     Personnel management				 
	     Performance-based pay				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-05-832SP

     

     * July 2005
     * human capital
          * Symposium on Designing and Managing Market-Based and More
            Performance- Oriented Pay Systems
     * Contents
     * Key Themes from the Symposium
          * Focus on a Set of Values and Objectives to Guide the Pay System
          * Examine the Value of Employees' Total Compensation to Remain
            Competitive in the Market
          * Build in Safeguards to Enhance the Transparency and Ensure the
            Fairness of Pay Decisions
          * Devolve Decision Making on Pay to Appropriate Levels
          * Provide Training on Leadership, Management, and Interpersonal
            Skills to Facilitate Effective Communication
          * Build Consensus to Gain Ownership and Acceptance for Pay Reforms
          * Monitor and Refine the Implementation of the Pay System
     * Symposium Agenda
     * Symposium Participants
     * Organizations' Pay Systems: Background Information and Presentations
          * Federal Deposit Insurance Corporation
          * Commonwealth of Virginia
          * IBM Corporation
          * Office of the Comptroller of the Currency
          * American Red Cross
     * Presentation by the Director of the Human Resources Management
       Consortium of the National Academy of Public Administration
     * Presentation by the Director of the Office of Policy and Evaluation of
       the U.S. Merit Systems Protection Board

                 United States Government Accountability Office

GAO

                                   July 2005

HUMAN CAPITAL

 Symposium on Designing and Managing Market-Based and More Performance-Oriented
                                  Pay Systems

                                       a

                           Highlights of GAO-05-832SP

Critical to the success of the federal government's transformation are its
people- human capital. Yet the government has not transformed, in many
cases, how it classifies, compensates, develops, and motivates its
employees to achieve maximum results within available resources and
existing authorities. One of the questions being addressed as the federal
government transforms is how to update its compensation system to be more
market based and performance oriented.

To further the discussion of federal pay reform, GAO, the U.S. Office of
Personnel Management, the U.S. Merit Systems Protection Board, the
National Academy of Public Administration, and the Partnership for Public
Service convened a symposium on March 9, 2005, to discuss organizations'
experiences with market-based and more performance-oriented pay systems.
Representatives from public, private, and nonprofit organizations made
presentations on the successes and challenges they experienced in
designing and managing their market-based and more performance-oriented
pay systems. A cross section of human capital stakeholders was invited to
further explore these successes and challenges and engage in open
discussion. While participants were asked to review the overall substance
and context of the draft summary, GAO did not seek consensus on the key
themes and supporting examples.

www.gao.gov/cgi-bin/ getrpt?GAO-05-832SP.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at (202)
512-6806 or [email protected].

July 2005

HUMAN CAPITAL

Symposium on Designing and Managing Market-Based and More
Performance-Oriented Pay Systems

While implementing market-based and more performance-oriented pay systems
is both doable and desirable, organizations' experiences show that the
shift to market-based and more performance-oriented pay must be part of a
broader strategy of change management and performance improvement
initiatives. GAO identified the following key themes that highlight the
leadership and management strategies these organizations collectively
considered in designing and managing market-based and more
performance-oriented pay systems.

1. Focus on a set of values and objectives to guide the pay system.

Values represent an organization's beliefs and boundaries and objectives
articulate the strategy to implement the system.

eguards are the precondition to linking
       pay systems with employee knowledge, skills, and contributions to
       results.
 on leadership, management, and interpersonal skills
       to facilitate effective communication. Such skills as setting
       expectations, linking individual performance to organizational
       results, and giving and receiving feedback need renewed emphasis to
       make such systems succeed.
 and refining in order to implement and sustain the reforms.

Contents

Letter

Appendixes

:Key Themes from the Symposium 7
Focus on a Set of Values and Objectives to Guide the Pay System 7
Examine the Value of Employees' Total Compensation to Remain Competitive
in the Market 9
Build in Safeguards to Enhance the Transparency and Ensure the Fairness of
Pay Decisions 13
Devolve Decision Making on Pay to Appropriate Levels 15
Provide Training on Leadership, Management, and Interpersonal Skills to
Facilitate Effective Communication 16
Build Consensus to Gain Ownership and Acceptance for Pay Reforms 19
Monitor and Refine the Implementation of the Pay System 20
:Symposium Agenda 24
:Symposium Participants 26
: Organizations' Pay Systems: Background Information and Presentations 34
Federal Deposit Insurance Corporation 34
Commonwealth of Virginia 46
IBM Corporation 61
Office of the Comptroller of the Currency 70
American Red Cross 79
: Presentation by the Director of the Human Resources Management
Consortium of the National Academy of Public Administration 83
:Presentation by the Director of the Office of Policy and Evaluation of
the U.S. Merit Systems Protection Board 91

Contents

                                 Abbreviations

CHCO        chief human capital officer                                    
FDIC        Federal Deposit Insurance Corporation                          
FIRREA      Financial Institutions Reform, Recovery, and Enforcement Act   
               of 1989                                                        
MSPB        U.S. Merit Systems Protection Board                            
NAPA        National Academy of Public Administration                      
OCC         Office of the Comptroller of the Currency                      
OPM         Office of Personnel Management                                 
SES         Senior Executive Service                                       
SRS         standardized rating score                                      

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

Comptroller General Aof the United States

United States Government Accountability Office Washington, D.C. 20548

July 27, 2005

The federal government must adapt to a range of major trends and
challenges in the nation and the world, and to respond, it must have the
institutional capacity to plan more strategically, identify and react more
expeditiously, and focus on achieving results. Critical to the success of
this transformation are the federal government's people-its human capital.
Yet the government has not transformed, in many cases, how it classifies,
compensates, develops, and motivates its employees to achieve maximum
results within available resources and existing authorities. One of the
questions being addressed as the federal government transforms is how to
update its compensation system to be more market based and performance
oriented.1 In this type of system, organizations consider the skills,
knowledge, and performance of employees as well as the labor market when
making pay decisions.2 Recognizing that the federal government's pay
system does not align well with modern compensation principles, Congress
has provided various agencies exemptions from current statute in
performance management and pay administration, as outlined in various
chapters of title 5 of the United States Code.3 Most recently, the
Departments of Homeland Security and Defense received the authority to
establish "flexible and contemporary" human capital and pay systems.

To further the discussion of federal pay reform, the U.S. Government
Accountability Office, the U.S. Office of Personnel Management, the U.S.
Merit Systems Protection Board (MSPB), the National Academy of Public
Administration (NAPA), and the Partnership for Public Service convened a
symposium on March 9, 2005, to discuss organizations' experiences with
market-based and more performance-oriented pay systems. Representatives
from public, private, and nonprofit organizations made presentations on
the successes and challenges they experienced in designing and managing
their market-based and more performance

1GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO- 05-325SP (Washington, D.C.: February 2005).

2GAO, Human Capital: Implementing Pay for Performance at Selected
Personnel Demonstration Projects, GAO-04-83 (Washington, D.C.: Jan. 23,
2004).

3GAO, Human Capital: Selected Agencies' Statutory Authorities Could Offer
Options in Developing a Framework for Governmentwide Reform, GAO-05-398R
(Washington, D.C.: Apr. 21, 2005).

oriented pay systems.4 These organizations are the Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency,
Commonwealth of Virginia, IBM Corporation, and American Red Cross. We
invited these organizations because they have been implementing this type
of pay system and consider it to be important to achieving their missions
and goals. To learn from their experiences, further explore these
successes and challenges, and engage in an open discussion of ideas, a
cross section of senior leaders attended the symposium, including
congressional staff who have oversight responsibility for federal
management issues, chief human capital officers or other officials from
the executive branch who are responsible for managing human capital in
their respective agencies, employee representatives who are currently
engaged in pay reform efforts, and academics and other human capital
stakeholders who have experience with and knowledge of human capital
issues.

Overall, the symposium highlighted a variety of approaches that
organizations have used in designing and managing market-based and more
performance-oriented pay systems. While we believe that implementing this
type of pay system is both doable and desirable, these organizations'
experiences show that the shift to market-based and more
performance-oriented pay must be part of a broader strategy of change
management and performance improvement initiatives. Market-based and more
performance-oriented pay is only one part-albeit a critical one-of a
larger effort to improve the performance of an organization.

Further, market-based and more performance-oriented pay cannot be simply
overlaid on most organizations' existing performance management systems.
Rather, as a precondition to effective pay reform, individual expectations
must be clearly aligned with organizational results, communication on
individual contributions to annual goals must be ongoing and two way,
meaningful distinctions in employee performance must be made, and cultural
changes must be undertaken. Most fundamentally, to implement these types
of pay systems successfully, the organizations found that they must change
the culture from compensation that is based on position and longevity to
one that is performance oriented, affordable, and sustainable.
Specifically, these organizations recognize that pay increases are no
longer an entitlement but should be based on employees' contributions to
the organization's mission and goals.

4For more information on these organizations' missions and key milestones
for implementing their pay systems, see app. IV.

Page 2 GAO-05-832SP Pay Symposium

To begin to make this cultural change, there was widespread recognition
that organizations need to build up the basic management capacity of their
organizations. In particular, there needs to be growth and development at
every level of the organization: top leaders with the vision, commitment,
capabilities, and persistence to lead and facilitate the change; managers
with the skills and abilities to fairly and honestly assess employee
performance; and individual employees who are engaged and empowered to
seek opportunities to enhance their careers. In addition, human capital
professionals will need to acquire a new set of skills for implementing
market-based and more performance-oriented pay systems. Transitioning to
these pay systems is a huge undertaking for organizations and will require
constant monitoring and refining in order to implement and, very
importantly, sustain them successfully. How it is done, when it is done,
and the basis on which it is done can make all the difference in their
success.

The organizations described the tools and techniques they used for
designing and implementing their pay systems in order to best meet their
needs. Based on these organizations' experiences and following
discussions, we identified several key themes that highlight the
leadership and management strategies these organizations collectively
considered in designing and managing market-based and more
performance-oriented pay systems. These key themes are as follows.

acilitate effective communication.
. However, any such effort should
require that the agency implement key reforms only after it meets certain
procedural management assessment and independent certification
requirements relating to its institutional infrastructure.5 This
institutional infrastructure includes, at a minimum, a human capital
planning process that integrates the agency's human capital policies,
strategies, and programs; the capabilities to develop and implement a new
human capital system effectively; and a modern, effective, credible, and
validated performance management system that provides a clear linkage
between institutional, unit, and individual performance-oriented outcomes,
and adequate safeguards to ensure the fair, effective, and
nondiscriminatory implementation of the system, including internal
reconsideration and third-party appeal processes.

Appendix I of this document provides a more detailed summary of the key
themes from the symposium discussion along with examples from the
presentations to illustrate these themes. Appendix II presents the
symposium agenda. Appendix III lists the hosts, moderators, presenters,
and human capital stakeholders who participated in the symposium. Appendix
IV includes the presentations and background information on the
organizations' pay systems. Appendixes V and VI include the presentations
given by directors at NAPA and MSPB on issues related to market-based and
more performance-oriented pay systems.

The purpose of the symposium was not to reach a consensus on how
market-based and more performance-oriented pay systems should be designed
and managed, but rather to engage in an open discussion of the leadership
and management strategies the presenting organizations have considered
with their systems. We asked the participants to review the overall
substance and context of the draft summary of the symposium discussion and
incorporated their comments, as appropriate. Therefore, no assumptions
should be made that every participant agreed with the key themes and
supporting examples.

I would like to thank the hosts, moderators, presenters, and participants
in the symposium for taking the time to share their experiences and

5For more information, see GAO and the National Commission on the Public
Service Implementation Initiative, Highlights of a Forum: Human Capital:
Principles, Criteria, and Processes for Governmentwide Federal Human
Capital Reform, GAO-05-69SP (Washington, D.C.: Dec. 1, 2004).

Page 4 GAO-05-832SP Pay Symposium

knowledge on this important matter. I look forward to working with the
participants on other important issues of mutual interest and concern in
the future.

David M. Walker Comptroller General of the United States

                    (This page is intentionally left blank.)

Appendix I

                         Key Themes from the Symposium

  Focus on a Set of Values and Objectives to Guide the Pay System

To further the discussion of pay reform, the U.S. Government
Accountability Office (GAO), the U.S. Office of Personnel Management
(OPM), the U.S. Merit Systems Protection Board (MSPB), the National
Academy of Public Administration (NAPA), and the Partnership for Public
Service convened a symposium on March 9, 2005, to discuss organizations'
experiences with market-based and more performance-oriented pay systems.
Representatives from public, private, and nonprofit organizations made
presentations on the successes and challenges they experienced in
designing and managing their market-based and more performance-oriented
pay systems, followed by an open discussion among key human capital
stakeholders to learn from their experiences. The organizations described
the tools and techniques they used for designing and implementing their
pay systems in order to best meet their needs. Based on these
organizations' experiences and following discussions, we identified
several key themes that highlight the leadership and management strategies
these organizations collectively considered in designing and managing
market-based and more performance-oriented pay systems.

In their discussions, the presenters highlighted the need to focus on a
set of values and objectives when designing and managing their
market-based and more performance-oriented pay systems. Values are
inherent and enduring principles that represent the organization's beliefs
and boundaries. In addition, objectives articulate the strategy an
organization plans to take to implement a market-based and more
performance-oriented pay system to help it recognize and reward employees
and maintain a competitive position in the market.

The Comptroller General of the United States highlighted GAO's experiences
in implementing its competency-based performance management system. GAO's
core values-accountability, integrity, and reliability-were a focus in
identifying and validating the competencies in GAO's new system. Most
recently, GAO received additional authority to adjust the rates of basic
pay on a separate basis from the annual adjustments authorized for
employees of the executive branch. With additional authority from
Congress, GAO is implementing a market-based and more performance-oriented
compensation system that places greater emphasis on a person's skills,
knowledge, and job performance and not the passage of time while, at a
minimum, protecting the purchasing power of employees who are performing
acceptably and are paid within applicable competitive compensation ranges.
Employee compensation will now consider current salary and allocate
individual performance-based

Appendix I Key Themes from the Symposium

compensation amounts between a merit increase (e.g., salary increase) and
a performance bonus (e.g., cash).

Similarly, OPM's Acting Director stated that as the federal government
moves forward with modernizing the civil service system, the shift to
market-based and more performance-oriented pay should be grounded in the
core values of the civil service system: merit system principles and
prohibited personnel practices. Examples of these merit principles include
promoting employees based on merit and protecting employees against
arbitrary action or personal favoritism. An example of a prohibited
personnel practice is violating veterans' preference requirements.
Protecting merit principles and prohibiting certain personnel practices
must remain intact as the federal pay system is modernized, according to
OPM's Acting Director.

While core values define the organization's beliefs and boundaries,
objectives articulate the strategy the organization plans to take to
implement a market-based and more performance-oriented pay system to help
it recognize and reward employees and maintain a competitive position in
the market. To this end, among IBM's pay objectives is to "differentiate
strongly" among employees by giving larger pay increases or bonuses to
those employees who are most deserving. IBM's Director of Global Services
Compensation noted that IBM believes that by rewarding its highest
performing employees with the largest pay increases, these employees will
stay with and lead the organization, and as a result, other employees will
stay as well. For example, the highest performing employees who were in
the top of their pay bands and were considered to be paid over the market
average still received pay increases because IBM wanted to "protect them"
from its competitors. He attributed this approach to helping IBM weather
both the late 1990s talent wars and the current market for information
technology positions. To help differentiate among employees in making pay
decisions, IBM provides general guidance on the "differentiation ratio"
whereby the largest pay increases are to be far greater than the smallest
increases. Further, IBM employees understand that pay increases are not an
entitlement but are based on each individual's contributions to IBM's
goals. Specifically, in 2003, the Director said a significant percentage
of the population did not receive increases because they were already paid
competitively for their level of contributions and performance. This
approach allows more of the budget for merit pay increases to go to the
highest contributing employees.

                    Appendix I Key Themes from the Symposium

  Examine the Value of Employees' Total Compensation to Remain Competitive in
  the Market

A main objective of the Office of the Comptroller of the Currency's (OCC)
pay system is to maintain comparability regarding compensation and
benefits with the other federal financial regulatory agencies that are
subject to the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA).1 OCC defines its market as other FIRREA agencies,
the Federal Reserve Banks, and other agencies such as the U.S. Securities
and Exchange Commission that are exempt from certain provisions of title

5. To maintain comparability with this market, OCC participates in an
annual survey administered by the HayGroup, which gathers data on these
organizations' total compensation packages in order to benchmark against
various positions and job families, such as bank policy and bank
supervision. The OCC presenters said that the 2004 survey results showed
that OCC's base pay was on average 8 percent above the market average,
which was within its competitive range of plus or minus 10 percent of the
average pay rates of the FIRREA market. These data helped OCC set its pay
increase budget for 2005.

The American Red Cross's Director of Corporate Compensation noted that the
Red Cross recognizes that salary is its main lever to fulfill its mission
and values, and thus one of its pay objectives is to pay salaries that are
externally competitive and internally equitable. To meet this objective,
the Director said the Red Cross sets its employees' pay slightly higher
than the market in order to remain competitive. The Director noted that
since the Red Cross is a not-for-profit humanitarian organization, this
pay objective is critical as the Red Cross does not have variable pay,
stock options, or other incentives to attract, motivate, and retain its
employees, as organizations in the private sector can offer.

The presenters underscored that a competitive compensation system that
provides employees a mix of base pay plus other incentives can help
organizations attract, motivate, and retain a quality workforce. In
addition to base pay, total compensation includes features such as
geographic differentials; monetary incentives, such as awards and bonuses;
benefits, such as health care and tuition reimbursement; and deferred
compensation, such as retirement pay. The presenters noted it is important
for organizations to be flexible in the mix of what constitutes total

1FIRREA gives specific federal financial regulatory agencies the authority
to establish their own compensation and benefits programs without regard
to the provisions of title 5 of the United States Code.

Page 9 GAO-05-832SP Pay Symposium Appendix I Key Themes from the Symposium

compensation so they can remain competitive with the market. On the other
hand, a presenter also identified challenges that the federal government
may face, such as statutory pay caps and other limitations, as it shifts
to market-based and more performance-oriented pay that may hinder its
ability to offer competitive compensation.

In discussing what incentives attract individuals to public service, the
Director of the Office of Policy and Evaluation at MSPB reported that
people come to work for and stay with the federal government for a variety
of reasons besides base pay. Among these reasons is the desire to make a
contribution and the personal pride or satisfaction in their work as well
as the variety of benefits provided to employees, as reported in MSPB's
"Merit Principles Survey 2000" that obtained federal employees' views on
how well the workforce is being managed. Pay alone usually does not
influence whether employees remain with an organization in the private
sector as well. IBM's Director of Global Services Compensation believes
IBM has been successful in competing in the market and retaining its
employees because of the "total rewards" package it offers its employees
along with pay. For example, the package includes work-life benefits such
as tuition reimbursement for employee development, along with retirement
and health care benefits.

To make it more competitive in local markets, OCC offers a pay
differential based on local labor costs. OCC recently shifted to a cost of
labor system called "geo pay" from a "complex" methodology largely based
on cost of living. According to OCC presenters, the newer OCC salaries
better reflect the local market labor rates. Specifically, as part of its
geo pay system, OCC groups its cities where it has offices into seven pay
zones by using the Economic Research Institute's cost of labor data to
identify the differentials in labor costs between its employees and the
labor market. For example, employees in zone 1 (e.g., Atlanta) receive no
differential, employees in zone 3 (e.g., Washington, D.C.) receive an 8
percent differential, and employees in zone 7 (e.g., San Francisco)
receive a 28 percent differential. OCC presenters said that with the new
geo pay system, 49 of its 80 cities have no geographic differentials. Of
the employees who receive a differential, most receive from about 3 to 13
percent. OCC presenters noted that about two-thirds of the employees
receive a smaller differential under the geo pay system than the previous
differentials OCC used. During the transition to the geo pay system, the
presenters said OCC has promised to "maintain the total compensation" of
these employees who now receive a smaller differential by rolling most of
these differences into the employees' base pay.

Appendix I Key Themes from the Symposium

In addition, to help its employees settle into more expensive cities, OCC
offers relocation incentives in the form of lump sum payments that are not
built into employees' base pay. One OCC presenter noted that these
incentives helped OCC recruit employees for critical jobs in New York City
in 2004. For example, the enhanced mortgage and rent subsidies are 3-year
allowances designed to help employees get into the housing or rental
markets when moving to selected higher cost cities from cities in a lower
geo pay zone. In addition, OCC offers an annual lump sum for 3 years to
employees when they move to selected high-cost cities from cities in a
lower geo pay zone to compensate for the higher living costs in the new
city.

However, a presenter identified challenges that the federal government as
a whole may face in offering competitive compensation to its senior
leaders who are subject to a statutory pay cap. The Director of the Human
Resources Management Consortium at NAPA discussed how the statutory pay
cap could restrict rewards, demoralize employees, and nullify market-based
pay for senior leaders. Participants also commented on how the statutory
pay cap may have a negative effect on the retention of the senior leaders
if they could receive higher pay in the private sector. The Director noted
that about 70 percent of the members in the Senior Executive Service (SES)
had their pay capped in 2004, which reflected the agencies' limited
ability to offer performance-based rewards and market-based pay. She also
observed that the recently enacted SES performance-based pay system
provides an interim solution to this pay compression by allowing agencies
to increase the pay cap for their senior executives.2

However, the Director and other participants noted that pay compression
may return despite the higher pay cap for SES members. The new
performance-based pay system replaces the six SES pay levels with a
single, open-range pay band for all SES members. A participant noted that
having one pay band is being perceived as loss of rank among some of the
SES. To help make distinctions in rank among their SES members, this
participant said some agencies are grouping their executives into smaller
pay bands according to their responsibilities. As a result, the
participant

2By law, a SES member's total compensation may not exceed the total annual
compensation payable to the Vice President for agencies that have their
performance management systems certified by OPM with the Office of
Management and Budget's concurrence. For more information on senior
executive pay and performance management, see GAO, Human Capital: Senior
Executive Performance Management Can Be Significantly Strengthened to
Achieve Results, GAO-04-614 (Washington, D.C.: May 26, 2004).

Page 11 GAO-05-832SP Pay Symposium Appendix I Key Themes from the
Symposium

observed that these SES members may in effect have their pay capped more
quickly based on the placement in these smaller pay bands. Another
participant commented that SES pay compression might return if agencies do
not demonstrate the necessary rigor and discipline in applying their new
SES performance management systems to ensure performance ratings and pay
adjustments are consistent with the performance of the organizations and
make meaningful distinctions in performance. The Director agreed that the
long-term effect of SES pay compression remains to be seen.

To help address the issue of market-based and more performance-oriented
pay for the government's senior leaders, the National Commission on the
Public Service suggested, in its 2003 report, that the challenge is to
convince Congress that the pay cap undermines rewarding performance and to
help build the rationale for tying government pay to relevant markets
across all three branches of government.3 For example, the Commission
reported that in the judicial branch, the salaries for U.S. federal court
judges are considerably less than those of deans and senior professors of
top law schools.

However, a participant observed that he felt the federal government's main
pay system-the General Schedule-is already market based and performance
oriented. Specifically, in setting the pay levels for federal employees,
the participant stated that the Department of Labor conducts extensive
market-based surveys for comparing the knowledge, skills, and
responsibilities of federal positions with the private sector market. He
also commented that the pay system is performance oriented in that
agencies can reward employees' exceptional performance with quality step
increases, bonuses, and nonmonetary incentives. He added that another
performance-based aspect of the General Schedule system is within grade
increases, which require agencies to certify that an employee is
performing at an acceptable level.

Federal agencies now have more flexibility in terms of the total
compensation they can offer employees in addition to base pay. A
participant pointed out that through the recently enacted Federal
Workforce Flexibility Act, agencies have the authority to use recruitment,
relocation, and retention incentives or bonuses in more strategic ways to
help them improve their competitiveness in recruiting and maintaining a

3The National Commission on the Public Service, Urgent Business for
America: Revitalizing the Federal Government for the 21st Century (January
2003).

Page 12 GAO-05-832SP Pay Symposium

                    Appendix I Key Themes from the Symposium

  Build in Safeguards to Enhance the Transparency and Ensure the Fairness of Pay
  Decisions

high-quality workforce. However, the participants discussed the impact of
using bonuses or other monetary incentives on employees' retirement
calculations. They observed that bonuses are not included in calculating
retirement benefits and suggested that potential legislative changes could
have cash bonuses calculated toward retirement and thrift savings
benefits. Specifically, it was suggested that bonuses should be factored
into an employee's "high-3" average basic pay when retirement benefits are
calculated. A participant also observed that federal employees' decisions
to remain in government or seek nonfederal employment could depend on the
specific retirement system that covers them.

Agencies need to have modern, effective, credible, and as appropriate
validated performance management systems in place with adequate
safeguards, including reasonable transparency and appropriate
accountability mechanisms, to ensure fairness and prevent politicization
and abuse. Performance management systems with adequate safeguards are the
precondition to linking pay, incentive, and reward systems with employee
knowledge, skills, and contributions to organizational results. The
presenters gave examples of safeguards in their organizations'
market-based and more performance-oriented pay systems that were designed
to help promote reasonable transparency as well as achieve consistency and
equity across employee groups and teams.

The presenters discussed how their organizations provided both general and
individualized information on pay decisions to help promote reasonable
transparency in their market-based and more performance-oriented pay
systems. For example, the Director of Corporate Compensation at the Red
Cross stressed that employees need to know the details of how the pay
system is designed and implemented in order to understand how pay
decisions are made. The Red Cross provides its employees general
information on what the salary ranges are for each pay band, how their pay
compares to the market, and how their performance ties to the pay
decisions. According to OCC presenters, to help foster transparency on its
geo pay system and help employees understand how the system works, OCC
posted on its intranet site formulas for calculating the geo pay rate for
each zone and the resulting rates, as well as the other information
sources OCC uses to establish the rates.

In addition to general information, IBM believes showing each employee how
he or she fits into the organization's pay system is critical to the
understanding of how the pay system works. IBM provides each employee

Appendix I Key Themes from the Symposium

with an annual total cash summary statement showing, among other things,
where he or she falls in the pay range and relative to the market along
with the performance rating, and pay increase, if applicable. IBM's
Director of Global Services Compensation noted that there should be no
mystery about how employees' pay compares to others in their pay range in
any given market and whether they deserve a pay increase based on their
contributions that year.

To help achieve consistency and equity in pay decisions across employee
groups and teams, organizations built in several accountability
mechanisms, such as conducting predecisional internal checks to help
ensure there is no discrimination in pay decisions. For example, IBM
conducts a base pay equity analysis to review the pay of women or minority
employees if their proposed pay is one standard deviation away from the
mean of the majority of employees. The Director said IBM looks for an
explanation for these pay differences, such as poor performance, a recent
promotion into the pay band, or an extended leave of absence.

In addition, the IBM Director stated that while there is a total
commitment from all levels of management to ensure consistency in the
compensation process, IBM built in second-level reviews of pay decisions
before employees receive any pay increases. Specifically, the first-line
managers propose pay increases for the employees they supervise. These
managers then discuss their decisions with other first-line managers and
managers at the next level-the up-line managers-to ensure the assessments
and justifications are consistent across groups. Up-line managers can also
shift pay allocations across groups if necessary in order to ensure
employees who perform similarly are compensated the same regardless of
their first-line managers. As a final check, the senior managers sign off
on the pay decisions for each employee.

The Comptroller General discussed GAO's recent use of standardized rating
scores (SRS) for employees to ensure consistency in ratings and in
applying performance standards within and across GAO's teams. Implemented
for the first time for the fiscal year 2004 performance appraisal cycle,
the SRS indicates the employee's position relative to the average rating
of that employee's team. Employees in different teams with the same SRS
have the same relative performance, thus achieving better comparability in
ratings across teams. Employees' SRS and the midpoint for their pay range
are key factors in calculating their performance-based compensation for
that year. The Comptroller General noted that he plans to continue working
with the employees to identify the best way to

                    Appendix I Key Themes from the Symposium

  Devolve Decision Making on Pay to Appropriate Levels

communicate the SRS information as part of GAO's ongoing commitment to
employee feedback on the new system and transparency about pay decisions.

The organizations also discussed grievance processes to address employees'
complaints about pay or performance management decisions. Both IBM and
Virginia have internal grievance processes in place for their employees if
they want a review of their pay decision. For example, Virginia's Director
of Human Resource Management stated that Virginia's process provides for
grievances to be elevated up to the central office-the Department of Human
Resource Management-if necessary. In addition, IBM's Director of Global
Services Compensation noted that IBM has an open-door policy, and
employees may appeal pay and performance management decisions through its
internal grievance process up to the corporate office if they feel that
these decisions were not fair.

In implementing market-based and more performance-oriented pay systems,
organizations will need to determine what parts of their pay systems
should be maintained centrally and what can be devolved to "lower" levels
of the organization. For example, IBM devolves its pay decisions to
first-line managers, and Virginia devolves these decisions to its
agencies. Regardless of the context, the presenters noted that as decision
making is devolved, organizations will need to build in overall core
processes to help ensure reasonable consistency in how their systems are
implemented.

IBM designed its compensation program to be as simple and flexible as
possible in order to keep the control at the first-line manager level. The
Director of Global Services Compensation noted that IBM uses the phrase
"lower the center of gravity" to mean that line managers need to have
central roles in pay and related compensation decisions since they are the
best sources of knowledge about their employees. Nevertheless, IBM
maintains certain overall core processes. For example, the corporate
office determines the funding for employee pay increases that is necessary
to maintain competitiveness with the market and the managers within the
business units are held accountable for planning how to allocate the money
to the employees. To help distribute the money among the employees, IBM
provides managers with an automated salary planning tool that identifies a
variety of factors considered in determining pay increases for each
employee. These factors include the employee's job family, performance
rating, current pay, and the "market reference point" or midpoint in the
pay

                    Appendix I Key Themes from the Symposium

  Provide Training on Leadership, Management, and Interpersonal Skills to
  Facilitate Effective Communication

range for the employee's pay band. Using the tool, the manager is
responsible for allocating money for pay increases among the employees
before the pay decisions are approved by higher levels of management and
employees receive the increases.

With its statewide compensation reform initiatives, Virginia shifted
responsibility for administering pay from its central office, the
Department of Human Resource Management, to the agencies and their
managers. The Director of Human Resource Management noted that by
increasing their accountability, it reduces the agencies' and managers'
excuses, such as "HR won't let me" for not making needed revisions in
their pay systems. The Director said there is a statewide salary plan that
provides broad guidelines for all the agencies regarding the
commonwealth's overall compensation philosophy, funding for pay increases,
and the pay ranges for the employees' positions that reflect market
conditions, but each agency is held accountable for developing its own
salary administration plan. As part of this plan, the agency is to select
from among designated "pay practices" that it considers useful to best
meet its specific needs. These practices- such as promotions or in-band
pay adjustments to recognize employees for taking on additional duties-are
designed to provide agencies with approaches to reward and recognize high
performance among employees while providing a higher degree of
accountability in reaching pay decisions. The Department of Human Resource
Management approves each agency's salary administration plan before it is
implemented.

There was widespread agreement that clear, consistent, and frequent
communication was critical to the successful implementation of
market-based and more performance-oriented pay systems. A presenter
discussed how the organization trained individuals to ensure they would be
able to clearly and simply communicate information so that employees at
all levels understood how these compensation reforms would be implemented.
Using employee groups to develop the training without using technical
compensation terms was especially valued. There was also acknowledgment
among the presenters that there needs to be a renewed emphasis on
leadership, management, and interpersonal skills, such as setting
expectations, linking individual performance to organizational results,
and effectively giving and receiving feedback, to make market-based and
more performance-oriented pay succeed. Lastly, defining a new role for
employees by holding them accountable for their own careers and for
identifying the necessary training to develop their skills was also
mentioned as beneficial to the individual as well as the organization.

Appendix I Key Themes from the Symposium

Virginia's Department of Human Resource Management developed a central
"train the trainer" approach to provide comprehensive communication on the
compensation reforms that agencies then customized and delivered to their
employees. Trainers were nominated by the agencies' human resources
directors based on their interpersonal skills, experiences, and knowledge
of compensation, among other things. Further, the Director understood that
employees need information on the compensation reforms in as simple and
clear a format as possible with little room for misinterpretation. She
observed that sometimes the misinterpretation of information is caused by
the use of technical compensation terms or "HR" terminology to explain the
initiative. As a result, Virginia has used its Employee Advisory Committee
to help develop training and supporting materials on the compensation
reform initiatives and communicate the information to the other employees.
According to the Director, using the committee to clearly communicate the
information was very effective because the straightforward discussion
allowed employees to better understand how the reforms would affect them
directly.

The presenters acknowledged that there needs to be a renewed emphasis on
leadership, management, and interpersonal skills to make market-based and
more performance-oriented pay succeed. For example, the Chief Human
Capital Officer (CHCO) from the Federal Deposit Insurance Corporation
(FDIC) discussed how managers need "the will" along with the tools to make
distinctions in employees' performance based on their contributions to
FDIC's goals and then give the appropriate pay increases. In his
experience, the CHCO said that some managers have trouble making the
distinctions because they have to face the people they are evaluating the
next day, and they would prefer to give all employees the same pay
increase rather than to have to make these distinctions. Providing
training on how to make these distinctions helps the managers implement
the pay system successfully.

Similarly, IBM's Director of Global Services Compensation recognized the
value in training managers on how to give ongoing feedback to employees on
their performance and its affect on pay decisions. Such training is
especially important to managers since IBM holds them accountable for
assessing employee performance and making pay decisions. To help managers
in giving feedback, IBM developed scenarios where managers could play
roles to help them have these meaningful discussions about the employees'
contributions to IBM's goals throughout the year. IBM also is

Appendix I Key Themes from the Symposium

committed to training employees on how the system works to help prepare
them to receive performance feedback from their managers.

Similarly, the Director of MSPB's Office of Policy and Evaluation
emphasized that supervisors will need to develop leadership and management
skills that will help engage employees in order for the organization to be
successful in its implementation of its pay for performance efforts and
help improve its overall performance. These skills include

     o clearly articulating organizational goals and how the employee fits
       into the goals of the organization,
     o setting realistic performance expectations,
     o adapting to changing circumstances,
     o finding solutions to problems, and
     o demonstrating honesty and integrity.

Virginia is defining a new role for employees by holding them accountable
for their own careers and for identifying the training they need to
enhance their skills. For example, the Department of Human Resource
Management developed career guides to inform employees on what they may
personally need to do to develop, advance, or change their careers. Posted
on the Virginia Jobs Web site, the guides provide important occupational
information for employees interested in developing their careers and
improving opportunities for advancement in any work environment. The
Director noted that an added benefit is that these career guides help
employees understand that they have knowledge, skills, and abilities that
cut across different occupations and that are transferable across the
commonwealth's government. For example, the career guide for accountants
states that these positions are primarily assigned to the financial
services career group, but accountants also have opportunities in other
groups, such as program administration, procurement services, and policy
analysis and planning.

                    Appendix I Key Themes from the Symposium

  Build Consensus to Gain Ownership and Acceptance for Pay Reforms

To help improve internal and external acceptance for pay reforms, the
presenters discussed how they involved stakeholders when designing or
implementing their market-based and more performance-oriented pay systems
to build a reasonable degree of consensus on the reforms. Involving
employees and other stakeholders helps to improve overall confidence and
belief in the fairness of the system, enhance their understanding of how
the system works, and increase their understanding and ownership of
organizational goals and objectives. The Comptroller General observed that
inclusion of employees and their representatives needs to be meaningful,
not just pro forma. Similarly, the President of NAPA remarked that it is
important for the organization to integrate any pay reforms within a
larger strategy to help the organization achieve its mission and program
operations. Because employees are critical to an organization's success,
the President of NAPA also noted that it is important for them to
understand and accept the pay reforms. Without a sustained, disciplined,
and focused commitment from top leaders, managers, and employees, a
participant noted that it may be possible to do more harm than good when
implementing these types of pay systems.

Virginia involved stakeholders in designing and implementing its
compensation reforms. For example, Virginia established the 12-member
Commission on Reform of the Classified Compensation Plan that included
representatives from Virginia's legislative and executive branches, such
as state senators and delegates and cabinet heads, as well as human
resource representatives from private sector organizations. To serve as
internal consultants to the Commission throughout the process, Virginia
established a Technical Advisory Committee comprising central agency
representatives, chief human resource officers from agencies, and
legislative fiscal analysts from the Senate Finance Committee and House
Appropriations Committee. In addition, Virginia formed an Employee
Advisory Committee comprising 20 nonsupervisory employees from diverse
occupations, demographic groups, and geographic locations. The Director
noted that the charge for the employees was to help the commonwealth as a
whole improve its compensation program, not just for their select interest
groups. Further, to implement the new statewide compensation program,
Virginia's Department of Human Resource Management collaborated with 150
human resource staff members and 60 different agencies to form 10
implementation teams representing various priority areas, such as funding,
compensation management, performance management, training, and
communications. The Director noted that these implementation teams helped
to ensure the details of the

                    Appendix I Key Themes from the Symposium

  Monitor and Refine the Implementation of the Pay System

various compensation reforms were consistently communicated to all the
employees across the commonwealth.

Similarly, the FDIC CHCO found that it was better to have the union
involved in the implementation of its pay reforms. The CHCO said when
negotiating compensation for its bargaining unit employees with
representatives of the National Treasury Employees Union, he views them as
true partners instead of following an "us versus them" approach. FDIC is
to negotiate a new pay for performance system with its union this summer
and he noted that they both want to work together to reach an agreement in
terms of compensation levels that will satisfy both parties.

High-performing organizations understand they need to continuously review
and revise their performance management systems to achieve results and
accelerate change.4 The presenters acknowledged that when implementing
their market-based and more performance-oriented pay systems, they
identified problems and corrected them along the way. The presenters
identified ways they monitor their systems, including listening to
employees' and stakeholders' views-informally and formally-on the pay
systems and using metrics to track the effectiveness of the pay systems
over time. While the need for refining the system is inevitable,
especially when new initiatives are introduced, they also observed that
there is value in stabilizing the pay system for a period of time to let
employees get accustomed to the new initiative and see how it works.

The presenters discussed the importance of listening to employees' and
stakeholders' views-informally and formally-to monitor the implementation
of the pay system. To ensure the pay for performance system has integrity
among the employees and stakeholders, FDIC has found that listening to
stakeholders, such as the union, is essential in evaluating the
effectiveness of the pay system. The FDIC CHCO noted that the organization
needs to listen to the "level of noise" among the employees and the union
to find out whether an initiative is working well. In addition to
informally tracking employee views, IBM sends out a pulse survey with only
a few questions on the compensation program to a sample of its 300,000
employees every quarter. IBM's Director of Global Services Compensation
noted that he feels IBM is doing well in implementing the

4GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, GAO-03-488 (Washington,
D.C.: Mar. 14, 2003).

Page 20 GAO-05-832SP Pay Symposium Appendix I Key Themes from the
Symposium

compensation program if over 70 percent of the employees' responses to
these questions are "neutral" or "favorable."

The organizations also identified metrics to track the effectiveness of
their pay systems. For example, IBM tracks its attrition rates to
determine why employees are leaving and compares them to its competitors'
attrition rates. Specifically, during the late 1990s, the Director stated
that IBM had attrition rates that were considerably lower than its
competitors. In addition, IBM and Virginia consider the use of the
employee appeal process as an indicator of the employees' acceptance of
pay and performance management decisions. For example, IBM tracks the
total number of grievances that are initiated by the employees. The
Director indicated that typically employees' appeals are resolved at a
second-level review. Virginia's Director of Human Resource Management
tracks the number of employee grievances that are forwarded to the next
level for resolution because she considers grievances that are resolved
between the manager and the employee to be "successes" since both sides
reached an acceptable outcome. She said her office works with managers to
educate them on what these metrics mean and how they affect their agencies
and employees.

According to the presenters, organizations should be open to refining
their systems to address unintended consequences that may arise when
implementing their pay systems. For example, in order to spread the pay
increases among as many employees as possible, FDIC found that managers
tended not to award merit pay increases to top-performing employees when
they were to be promoted in the career ladder. As a result, the CHCO said
these high-performing employees were not getting the merit pay increases
they deserved. The CHCO said FDIC recognized that this unintended
consequence needed to be corrected in future iterations of the pay system
and managers needed help in learning how to make the necessary
distinctions in employees' contributions.

Virginia made the appropriate refinements to its pay system based on
employee feedback. For example, when consolidating Virginia's
classification structure, the Director of Human Resource Management
developed a crosswalk between the old and new classification structures to
show employees how, for example, approximately 1,650 individual job
classifications would be consolidated into 256 broader job roles. The
Director noted that while most employees accepted the new structure, her
office nevertheless made some revisions as a result of employee feedback
so that employees could more easily see where they fit into these new job

Appendix I Key Themes from the Symposium

roles. According to the Director, it is especially important that
employees perceive that specific actions have been taken in response to
their feedback. Anticipating that there may be unidentified issues as the
classification structure is implemented, the Director said her office
plans to continue soliciting feedback at least annually to see if further
refinements need to be made to the structure.

While the need for refining a system is inevitable especially when new
initiatives are introduced, the presenters noted there is value in
stabilizing the pay system for a period of time to let employees get
accustomed to the new initiative and see how it works. For example, the
OCC presenters said OCC plans to reassess its geo pay rates every 3 years
rather than annually in order to provide continuity in implementing the
system. This continuity benefits employees because they know how much
their geographic differential will be for a period of time and benefits
OCC because it makes managing the pay system more stable. The FDIC CHCO
said that FDIC has not had its pay systems in place without any revisions
long enough to determine if employees have accepted the new systems.
Nevertheless, the CHCO said it is his opinion that there is much more
acceptance surrounding pay for performance than when FDIC first began
implementing the systems in 1997.

In closing, the President and CEO of the Partnership for Public Service
asked participants to identify what they regarded to be the next steps for
pay reform in the federal government. There was general consensus among
the participants that a shift from administering the federal government's
current pay system-the General Schedule-to managing a market-based and
more performance-oriented pay system will be a fundamental change for
agencies' human capital offices. Specifically, participants noted that
human capital professionals will need to acquire a new set of skills for
implementing these types of pay systems. In the changing human capital
environment of increased flexibilities, human capital professionals will
need to transition to a larger strategic role rather than one of
compliance. This transition will require training to play an active role
in helping to determine the overall strategic direction of an
organization.

Overall, there was general agreement that basic management capacity needs
to be built at all levels of the organization, starting with senior
leaders who are to direct the change management initiatives that need to
accompany pay reform. Market-based and more performance-oriented pay

Appendix I Key Themes from the Symposium

are best understood as only one part-albeit a critical one-of larger
efforts to improve the performance of an organization. As such,
market-based and more performance-oriented pay cannot be simply overlaid
on most organizations' existing performance management systems. Rather, as
a precondition to effective pay reform, individual expectations must be
clearly aligned with organizational results, communication on individual
contributions to annual goals must be ongoing and two way, meaningful
distinctions in employee performance must be made, and cultural changes
must be undertaken.

Appendix II

Symposium Agenda

U.S. Government U.S. Office of Personnel U.S. Merit Systems Accountability
Office Management Protection Board

National Academy of Public Partnership for Administration Public Service

    Human Capital: Symposium on Designing and Managing Market-Based and More
                        Performance-Oriented Pay Systems

                                 March 9, 2005

                                     Agenda

8:30 a.m. Arrival and coffee

8:45 a.m. Opening Remarks by x Dan G. Blair, Acting Director, OPM x C.
Morgan Kinghorn, President, NAPA x David M. Walker, Comptroller General
of the United States, GAO

9:00 a.m. Overview of GAO's Classification and Compensation Efforts by
David M. Walker, Comptroller General of the United States, GAO

9:30 a.m. How is your organization managing the transition to a
market-based and more performance-oriented pay system, in particular, the
cultural dimensions of this change?

x Presentation by Miguel A. Torrado, Chief Human Capital Officer, Federal
Deposit Insurance Corporation x Questions from the audience

10:15 a.m. Break

10:30 a.m. How do you manage the pay system across the organization?

x Presentation by Sara Redding Wilson, Director, Department of Human
Resource Management, the Commonwealth of Virginia x Presentation by
Arthur Amler, Director, Global Services Compensation, IBM Corporation x
Questions from the audience

12:00 p.m. Working Lunch

            "The Elephant in the Room - How to Approach the Pay Cap"

x Presentation and open discussion led by Hannah Sistare, Director, Human
Resources Management Consortium, NAPA

                                       1

Appendix II Symposium Agenda

1:00 p.m.      How does your organization manage pay given ongoing changes
                                                                  (e.g., cost
                of labor and budget pressures) while remaining competitive in
                                                                  the market?
               x Presentation by Ben Katcoff, Director, Compensation and
                  Benefits, and     
              Rhonda Jones, Lead Expert, Compensation and Benefits, Office of
                                                                          the
             Comptroller of the Currency
               x Presentation by Philip A. Melita, Director, Corporate
                  Compensation,     
             Human Resources, American Red Cross
                                 x Questions from the audience               
2:30 p.m.                  Break 
2:45 p.m. "Facilitating Employee Engagement Through Pay for Performance"
               x Presentation and open discussion led by Steve Nelson,
                  Director, Office of
             Policy and Evaluation, MSPB
3:00 p.m. Next Steps by Max Stier, President and CEO, Partnership for
             Public Service
                   Closing Remarks by J. Christopher Mihm, Managing Director,
                                                            Strategic Issues,
             GAO  
3:30 p.m. Adjourn

                                       2

Appendix III

                             Symposium Participants

  Hosts

David M. Walker

Comptroller General of the United States

U.S. Government Accountability Office

Dan G. Blair

Acting Director*

U.S. Office of Personnel Management

Neil A.G. McPhie

Chairman

U.S.
           Merit Systems Protection Board

C.
           Morgan Kinghorn

President National Academy of Public Administration

Max Stier

President and CEO Partnership for Public Service

                                   Moderators

Eileen Larence

Director, Strategic Issues

U.S. Government Accountability Office

Marcia Marsh

Vice President for Agency Partnerships Partnership for Public Service

John Palguta

Vice President for Policy and Research Partnership for Public Service

Arthur Amler

  Presenters

Director, Global Services Compensation IBM Corporation

Page 26 GAO-05-832SP Pay Symposium

                      Appendix III Symposium Participants

Rhonda Jones

Lead Expert, Compensation and Benefits Office of the Comptroller of the
Currency

U.S. Department of the Treasury

Ben Katcoff

Director, Compensation and Benefits Office of the Comptroller of the
Currency

U.S. Department of the Treasury

Philip A. Melita

Director, Corporate Compensation, Human Resources American Red Cross

Steve Nelson

Director, Office of Policy and Evaluation

U.S. Merit Systems Protection Board

Hannah Sistare

Director, Human Resources Management Consortium National Academy of Public
Administration

Miguel A. Torrado

Chief Human Capital Officer Federal Deposit Insurance Corporation

Sara Redding Wilson

Director, Department of Human Resource Management Commonwealth of Virginia

David Amaral

  Human Capital

Deputy Associate Director for Small Agencies Human Capital Management U.S.
Office of Personnel Management

Carol A. Bonosaro

President Senior Executives Association

Appendix III Symposium Participants

Bradley Bunn

Deputy Program Executive Officer, National Security Personnel System

U.S. Department of Defense

Lois B. Cheney

Senior Advisor, Human Resources* Federal Deposit Insurance Corporation

Claudia A. Cross

Chief Human Capital Officer/Director, Office of Human Resources Management

U.S. Department of Energy

Amy Denning

Compensation Program Manager IBM Global Services

Brian DeWyngaert

Chief of Staff The American Federation of Government Employees, AFL-CIO

Joan Dodaro

Human Resources Consultant and Former Assistant Comptroller General for
Operations

U.S. Government Accountability Office

Michael D. Dovilla

Executive Director, Chief Human Capital Officers Council

U.S. Office of Personnel Management

Debra Ellerbe

Human Resources Specialist

U.S. Equal Employment Opportunity Commission

Cynthia Ferentinos

Senior Research Analyst, Office of Policy and Evaluation

U.S. Merit Systems Protection Board

Frank D. Ferris

National Executive Vice President National Treasury Employees Union

Appendix III Symposium Participants

Bethany Hardy

Press Secretary Partnership for Public Service

Sallyanne Harper

Chief Administrative Officer/Chief Financial Officer

U.S. Government Accountability Office

Doris Hausser

Senior Policy Advisor to the Director and Chief Human Capital Officer

U.S. Office of Personnel Management

Jennifer Hemingway

Professional Staff Member Homeland Security and Governmental Affairs
Committee

U.S. Senate

Allan Heuerman

Project Director, Academy Studies National Academy of Public
Administration

Jesse Hoskins

Chief Human Capital Officer

U.S. Government Accountability Office

Helen Hsing

Managing Director, Strategic Planning & External Liaison

U.S. Government Accountability Office

Deborah Jefferson

Director of Human Resources

U.S. Department of Commerce

Patrick Jennings

Senior Counsel Subcommittee on the Federal Workforce and Agency
Organization Government Reform Committee

U.S. House of Representatives

Appendix III Symposium Participants

Craig Jerabek

Chief, Wage and Salary Division Civilian Personnel Management Service

U.S. Department of Defense

Ernestine Jones

Human Resources Specialist

U.S. Equal Employment Opportunity Commission

Richard Keevey

Director, Performance Consortium National Academy of Public Administration

Susan Kladiva

Special Assistant to the Comptroller General

U.S. Government Accountability Office

Rosslyn Kleeman

Distinguished Executive in Residence The George Washington University

Nanci Langley

Democratic Deputy Staff Director Subcommittee on Oversight of Government
Management, the Federal Workforce, and the District of Columbia Homeland
Security and Governmental Affairs Committee

U.S. Senate

Marc Porter Magee

Director of Research Partnership for Public Service

Katie Malague

Program Manager, Agency Partnerships Partnership for Public Service

Jenny Mallios

Chief of Executive Resources

U.S. Department of State

Appendix III Symposium Participants

Sally Mavlian

Human Resources Specialist/Compensation*

U.S. Department of State

Jennifer D. Melvin

HR Specialist (Compensation/Classification), Human Resources Strategy &
Solutions Office of the Deputy Assistant Secretary for Human Resources &
Chief Human Capital Officer

U.S.
           Department of the Treasury

J.
           Christopher Mihm

Managing Director, Strategic Issues

U.S. Government Accountability Office

Keith Nelson

Associate Deputy Secretary for Management

U.S. Department of Labor

Terrance Norflis

Legislative Assistant, Office of Congresswoman Eleanor Holmes Norton

U.S. House of Representatives

Lawrence B. Novey

Counsel Homeland Security and Governmental Affairs Committee

U.S. Senate

Aaron Pendleton

Deputy Human Resources Director National Labor Relations Board

Marta Brito Perez

Associate Director, Human Capital Leadership & Merit System Accountability

U.S. Office of Personnel Management

Patricia Prosperi

Director, Office of Human Resources Management

U.S. Department of Transportation

Appendix III Symposium Participants

Theresa Prych

Professional Staff Member Subcommittee on Oversight of Government
Management, the Federal Workforce, and the District of Columbia Homeland
Security and Governmental Affairs Committee

U.S. Senate

Ron Sanders

Associate Director, Division of Strategic Human Resources Policy*

U.S. Office of Personnel Management

Jayne L. Seidman

Associate Executive Director, Office of Human Resources and Administrative
Services

U.S. Securities and Exchange Commission

Tania A. Shand

Professional Staff Member Government Reform Committee

U.S. House of Representatives

Myra Shiplett

Project Director, Academy Studies National Academy of Public
Administration

Janet Silva

Director, Human Resources Management Office Federal Trade Commission

Aaron Smith

Government Affairs Assistant Federal Managers Association

Ed Stephenson

Senior Project Advisor, Academy Studies National Academy of Public
Administration

Sharon Stewart

Director of Human Resources, National Security Personnel System

U.S. Department of Defense

Appendix III Symposium Participants

Michael B. Styles

National President Federal Managers Association

Vincent T. Taylor

Chief Human Capital Officer and Assistant Secretary for Administration

U.S. Department of Transportation

Robert M. Tobias

Professor American University

Didier Trinh

Executive Director Federal Managers Association

James Tsugawa

Senior Research Analyst, Office of Policy and Evaluation

U.S. Merit Systems Protection Board

Dennis Turner

Chief, Classification and Pay Branch, Field Advisory Services Civilian
Personnel Management Service

U.S. Department of Defense

Kathleen Wheeler

Deputy Chief Human Capital Officer

U.S. Department of the Interior

Donald J. Winstead

Deputy Associate Director for Pay and Performance Policy

U.S. Office of Personnel Management

Erica Woods

Program Manager Partnership for Public Service

*Title as of the date of the symposium, March 9, 2005.

Appendix IV

Organizations' Pay Systems: Background Information and Presentations

                     Federal Deposit Insurance Corporation

Mission of the The Federal Deposit Insurance Corporation (FDIC) is an

organization independent agency that is to maintain the stability and
public confidence in the nation's financial system by insuring deposits,
examining and supervising financial institutions, and managing bank
receiverships.

Number of Approximately 5,000 employees. employees

Union participation  The National Treasury Employees Union for its       
                        bargaining unit employees.                          
Key milestone dates  o  1933: Congress established FDIC and gave it the    
                        authority to set the compensation of its employees  
                        without regard to federa                            l
                        compensation laws.  o  1989: Congress enacted the   
                        Financial Institutions Reform, Recovery, and        
                        Enforcement Act of 1989, which gave financial       
                        regulatory agencies pay authorities similar to FDIC 
                        and required these agencies to maintain             
                        compensation comparability so they would not        
                        compete with each other for                         
                        employees.  o  1995: FDIC eliminated a pay system   
                        with increases in steps                             
                        based on years of service.  o  1997: FDIC           
                        instituted pay for performance.  o  2003: FDIC      
                        began to implement three different pay systems for  
                        executive level employees, as well as bargaining    
                        unit and nonbargaining employees.                   
Source for           http://www.fdic.gov                                 
additional                                                               
information                                                              

                                 Source: FDIC.

Appendix IV Organizations' Pay Systems: Background Information and
Presentations - Federal Deposit Insurance Corporation Appendix IV
Organizations' Pay Systems: Background Information and Presentations -
Federal Deposit Insurance Corporation Appendix IV Organizations' Pay
Systems: Background Information and Presentations - Federal Deposit
Insurance Corporation Appendix IV Organizations' Pay Systems: Background
Information and Presentations - Federal Deposit Insurance Corporation
Appendix IV Organizations' Pay Systems: Background Information and
Presentations - Federal Deposit Insurance Corporation Appendix IV
Organizations' Pay Systems: Background Information and Presentations -
Federal Deposit Insurance Corporation Appendix IV Organizations' Pay
Systems: Background Information and Presentations - Federal Deposit
Insurance Corporation Appendix IV Organizations' Pay Systems: Background
Information and Presentations - Federal Deposit Insurance Corporation
Appendix IV Organizations' Pay Systems: Background Information and
Presentations - Federal Deposit Insurance Corporation Appendix IV
Organizations' Pay Systems: Background Information and Presentations -
Federal Deposit Insurance Corporation Appendix IV Organizations' Pay
Systems: Background Information and Presentations - Federal Deposit
Insurance Corporation

                                 Source: FDIC.

Appendix IV Organizations' Pay Systems: Background Information and Presentations
                           - Commonwealth of Virginia

                            Commonwealth of Virginia

Mission of the The commonwealth's Department of Human Resource

organization Management is to address the diverse human resources needs of
its customers through guidance, consultation, and training throughout the
commonwealth.

Number of employees Approximately 54,000 employees in various agencies
across the commonwealth.

Union participation The commonwealth does not negotiate compensation with
the unions.

                              Key milestone dates

     o 1998: The Commission on Reform of the Classified Compensation Plan was
       formed to recommend modifications to the commonwealth's classified
       compensation plan.
     o 2000: The Governor and Virginia General Assembly approved the
       Commission's recommendation to develop a new compensation system for
       employees.
     o 2000: The new compensation system took effect with new pay practices
       and goals of greater opportunities for career growth within state
       government, greater management flexibility and accountability, and new
       ways to recognize and reward exceptional employee performance and
       acquired skills.

Sources for additional http://www.dhrm.va.gov information
http://www.dhrm.virginia.gov/compreform/comp.htm

                       Source: Commonwealth of Virginia.

Appendix IV Organizations' Pay Systems: Background Information and
Presentations - Commonwealth of Virginia Appendix IV Organizations' Pay
Systems: Background Information and Presentations - Commonwealth of
Virginia Appendix IV Organizations' Pay Systems: Background Information
and Presentations - Commonwealth of Virginia Appendix IV Organizations'
Pay Systems: Background Information and Presentations - Commonwealth of
Virginia Appendix IV Organizations' Pay Systems: Background Information
and Presentations - Commonwealth of Virginia Appendix IV Organizations'
Pay Systems: Background Information and Presentations - Commonwealth of
Virginia Appendix IV Organizations' Pay Systems: Background Information
and Presentations - Commonwealth of Virginia Appendix IV Organizations'
Pay Systems: Background Information and Presentations - Commonwealth of
Virginia Appendix IV Organizations' Pay Systems: Background Information
and Presentations - Commonwealth of Virginia Appendix IV Organizations'
Pay Systems: Background Information and Presentations - Commonwealth of
Virginia Appendix IV Organizations' Pay Systems: Background Information
and Presentations - Commonwealth of Virginia Appendix IV Organizations'
Pay Systems: Background Information and Presentations - Commonwealth of
Virginia Appendix IV Organizations' Pay Systems: Background Information
and Presentations - Commonwealth of Virginia Appendix IV Organizations'
Pay Systems: Background Information and Presentations - Commonwealth of
Virginia

Appendix IV Organizations' Pay Systems: Background Information and Presentations
                               - IBM Corporation

Mission of the organization

IBM strives to lead in the invention, development, and manufacture of the
industry's most advanced information technologies, including computer
systems, software, storage systems, and microelectronics. IBM translates
these advanced technologies into value for its customers through its
professional solutions, services, and consulting businesses worldwide.

                                IBM Corporation

Number of Approximately 300,000 employees in more than 160 countries.
employees

Union participation In the United States, unions do not represent IBM
employees, but in other countries, some IBM employees belong to unions
and/or work councils. Often, these arrangements are either encouraged or
mandated by law.

                              Key milestone dates

     o 1991: IBM introduced the employee bonus program where payments are
       based upon straight calculation with no manager discretion.
          * 1996: IBM made multiple changes:
               o Implemented broad bands.
               o Started an annual common review date for salary increase
                 decisions (instead of anniversary reviews).
               o Introduced a compensation planning tool in the United States
                 and Canada.
     o 2005: IBM changed the employee bonus program to give managers more
       discretion for bonus payments.

Source for additional http://www.ibm.com information

                            Source: IBM Corporation.

Appendix IV Organizations' Pay Systems: Background Information and
Presentations - IBM Corporation Appendix IV Organizations' Pay Systems:
Background Information and Presentations - IBM Corporation Appendix IV
Organizations' Pay Systems: Background Information and Presentations - IBM
Corporation Appendix IV Organizations' Pay Systems: Background Information
and Presentations - IBM Corporation Appendix IV Organizations' Pay
Systems: Background Information and Presentations - IBM Corporation
Appendix IV Organizations' Pay Systems: Background Information and
Presentations - IBM Corporation Appendix IV Organizations' Pay Systems:
Background Information and Presentations - IBM Corporation Appendix IV
Organizations' Pay Systems: Background Information and Presentations - IBM
Corporation

                       Page 63 GAO-05-832SP Pay Symposium

Total Rewards Package Pay for Performance Pay Competitively Differentiate  
Strongley                                                                  

Appendix IV Organizations' Pay Systems: Background Information and Presentations
                  - Office of the Comptroller of the Currency

                   Office of the Comptroller of the Currency

Mission of the organization

The Office of the Comptroller of the Currency (OCC) is a bureau of the
U.S. Department of the Treasury. OCC is to charter national banks; oversee
a nationwide system of banking institutions; and assure that national
banks are safe and sound, competitive and profitable, and capable of
serving in the best possible manner the banking needs of their customers.

Number of employees Approximately 2,800 employees located in offices
throughout the country.

           Union participation The National Treasury Employees Union.

                              Key milestone dates

1989: Congress enacted the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA), which gave financial regulatory
agencies, including OCC, similar pay authorities and required these
agencies to maintain compensation comparability. 1999: OCC conducted a
comprehensive survey on the pay systems of the FIRREA agencies, other
title 5-exempt organizations, and the Federal Reserve Banks, which served
as the basis for a major review of its pay programs. 2001: OCC implemented
a new, broad-banded pay plan designed to encourage employees to achieve
and to develop skills that support the mission of OCC. 2002: OCC
implemented a new performance management system. 2004: OCC introduced
changes to its "geo pay" system using cost of labor data to help ensure
that pay is locally competitive and comparable to the FIRREA community.

Source for additional http://www.occ.treas.gov information

                                  Source: OCC.

Appendix IV Organizations' Pay Systems: Background Information and
Presentations - Office of the Comptroller of the Currency Appendix IV
Organizations' Pay Systems: Background Information and Presentations -
Office of the Comptroller of the Currency Appendix IV Organizations' Pay
Systems: Background Information and Presentations - Office of the
Comptroller of the Currency Appendix IV Organizations' Pay Systems:
Background Information and Presentations - Office of the Comptroller of
the Currency Appendix IV Organizations' Pay Systems: Background
Information and Presentations - Office of the Comptroller of the Currency
Appendix IV Organizations' Pay Systems: Background Information and
Presentations - Office of the Comptroller of the Currency Appendix IV
Organizations' Pay Systems: Background Information and Presentations -
Office of the Comptroller of the Currency Appendix IV Organizations' Pay
Systems: Background Information and Presentations - Office of the
Comptroller of the Currency

                       Page 73 GAO-05-832SP Pay Symposium

                                         2003                   2004          
                                     FIRREAS Only           FIRREAS Only      
                                OCC Weighted Average*  OCC Weighted Average*  
Job Familes                  Base Salary Base + Geo Base Salary Base + Geo 
          Overall OCC to Market                        
                        Average                        

Appendix IV Organizations' Pay Systems: Background Information and Presentations
                              - American Red Cross

                               American Red Cross

Mission of the organization

As a humanitarian organization led by volunteers and guided by its
congressional charter and the Fundamental Principles of the International
Red Cross Movement, the American Red Cross is to provide relief to victims
of disasters and help people prevent, prepare for, and respond to
emergencies.

                              Number of employees

Approximately 35,300 employees overall:

     o About 3,300 employees in the National Headquarters (primarily in
       Washington, D.C.) who are part of the broad-banded, pay for
       performance system.
     o About 18,000 employees in Biomedical Services across the country who
       are under a pay for performance system with graded salary structures.
     o About 14,000 employees in 864 chapters across the country who are
       under a pay for performance system with graded salary structures.

             Union participation None at the National Headquarters.

                              Key milestone dates

2002: The American Red Cross instituted broad salary bands for the
National Headquarters. 2003: The American Red Cross began using formal job
family and survey job descriptors in lieu of job descriptions and
instituted a fully automated, market-based job evaluation system. 2005:
The American Red Cross began using a fully automated salary planning or
compensation management system.

Source for additional http://www.redcross.org information

                          Source: American Red Cross.

Appendix IV Organizations' Pay Systems: Background Information and
Presentations - American Red Cross Appendix IV Organizations' Pay Systems:
Background Information and Presentations - American Red Cross Appendix IV
Organizations' Pay Systems: Background Information and Presentations -
American Red Cross

Appendix V

Presentation by the Director of the Human Resources Management Consortium of the
                   National Academy of Public Administration

Appendix V Presentation by the Director of the Human Resources Management
Consortium of the National Academy of Public Administration Appendix V
Presentation by the Director of the Human Resources Management Consortium
of the National Academy of Public Administration Appendix V Presentation
by the Director of the Human Resources Management Consortium of the
National Academy of Public Administration Appendix V Presentation by the
Director of the Human Resources Management Consortium of the National
Academy of Public Administration Appendix V Presentation by the Director
of the Human Resources Management Consortium of the National Academy of
Public Administration Appendix V Presentation by the Director of the Human
Resources Management Consortium of the National Academy of Public
Administration Appendix V Presentation by the Director of the Human
Resources Management Consortium of the National Academy of Public
Administration

Appendix VI

Presentation by the Director of the Office of Policy and Evaluation of the U.S.
Merit Systems Protection Board

Appendix VI Presentation by the Director of the Office of Policy and
Evaluation of the U.S. Merit Systems Protection Board Appendix VI
Presentation by the Director of the Office of Policy and Evaluation of the
U.S. Merit Systems Protection Board Appendix VI Presentation by the
Director of the Office of Policy and Evaluation of the U.S. Merit Systems
Protection Board Appendix VI Presentation by the Director of the Office of
Policy and Evaluation of the U.S. Merit Systems Protection Board Appendix
VI Presentation by the Director of the Office of Policy and Evaluation of
the U.S. Merit Systems Protection Board Appendix VI Presentation by the
Director of the Office of Policy and Evaluation of the U.S. Merit Systems
Protection Board Appendix VI Presentation by the Director of the Office of
Policy and Evaluation of the U.S. Merit Systems Protection Board Appendix
VI Presentation by the Director of the Office of Policy and Evaluation of
the U.S. Merit Systems Protection Board

                                 Source: MSPB.

  GAO's Mission

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( www.gao.gov ). Each weekday, GAO posts GAO
Reports and newly released reports, testimony, and correspondence on its
Web site. To

have GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

                             Order by Mail or Phone

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

Contact:

To Report Fraud, Web site: www.gao.gov/fraudnet/fraudnet.htm

  E-mail: [email protected]

Federal Programs Automated answering system: (800) 424-5454 or (202)
512-7470

Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Relations
Washington, D.C. 20548

Paul Anderson, Managing Director, [email protected] (202) 512-4800

  Public Affairs

U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***