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The Quiet Crisis – Gov’s Woefully Inadequate Pay System

“Money, money, money” – that’s often the refrain you hear from federal civil servants, who feel they don’t get paid enough. Not nearly enough. Chris Dorobek calls the pay system, “woefully inadequate for the challenges of the 21st century.”

A new report from the Partnership for Public Service and Booz Allen Hamilton agrees. The report even goes as far as to say that pay issues are one of the single biggest impediments to creating the best government possible that we face today.

The report, “Building the Enterprise; the New Civil Service Framework,” calls for overhauling the entire civil service system, including pay, performance management, hiring, job classification, accountability, and workforce justice.

Ron Sanders, Vice President and Fellow with Booz Allen Hamilton, is one of the report’s authors. Sanders also previously served as the intelligence community’s Associate Director of National Intelligence and the first Chief Human Capital Officer.

Sanders told Chris Dorobek on the DorobekINSIDER program that the nature of government work and the skills needed for it has changed – but the civil service system has not kept up.

“If you think about how much the world has changed in 10 years, much less 50 or 60, the last time some parts of the federal civil service system were last revisited was 1949,” said Sanders. “I wasn’t born then. We didn’t even have color TV. Cars cost $1,500.

“If you go into a government building today, you can see old black and white pictures of rooms; literally huge rooms full of clerks at desks typing away. That work doesn’t exist anymore for the vast majority of federal government agencies. It’s all on computer. It’s all about technology, and the world has gotten so much more complex. Yet, we’re still labeling with definitions of work literally, established by statue in 1949, that bear no resemblance to what federal employees find themselves doing on the frontlines today.”

Can you keep politics out of civil service reform?

“The core principles that ground the American federal civil service system, I believe are sacrosanct. I think they are the envy of the world, and I’ve been all over the world talking about civil service issues,” said Sanders. “In this report, we are not suggesting that those core principles merit veteran’s preference, nondiscrimination, political neutrality, collective bargaining, due process; we are not suggesting that those should be changed at all. They are enduring. But, the way they’re operationalized needs to be. You can take merit for example. Merit, when the federal workforce consisted of tens of thousands of clerks, is one thing. Merit when the federal government is competing against technology companies like Google and Microsoft for the best cybersecurity talent, and you do that competition on the web where you get 60,000 applications, that’s a different sort of merit. Merit is still the goal, but they have to operationalize it differently.”

Recommendation Number One: Build a market-sensitive labor system by occupation

Hire graded, white collar knowledge workers. That’s where the system is most out of touch with the rest of the world. We do pretty good with blue collar. We do pretty good with clerical and technical employees. But this is where we are at risk of hemorrhaging talent,” said Sanders.

Recommendation Number Two: Change the pay structure

Look, I don’t think we’re naïve or Pollyannaish here. We actually believe that by going to a system that is more occupationally sensitive, the pay debate would get easier. Because when you say the federal workforce should get a 1% raise, you are talking about everything from GS2’s to senior executives, and a hundred different occupations, all of which in the private labor market get paid different things,” said Sanders. “I see hypercompetitive workers, and salaries are increasing, but government salaries are lagging behind.”

  • Key Insight: “There are job categories where frankly the government may be the labor market leader,” said Sanders. “There are almost two million federal employees, tens of thousands of jobs, across the entire country. If you try to classify them into one number, one size fits all, you can see why the pay debates occur. Yet, we think it’s much more sensible to sa,y let’s look at IT workers, see what they’re being paid in the private market, compare that to what we’re paying in the federal. If we don’t match up, let’s make a rational decision as to where we want to compete against private sector salaries. Do the same thing for accounts, HR specialists, acquisition people; those benchmark occupations that are most commonly found in the private industry, or state and local government, we don’t want to exclude them, and do it occupation by occupation. Then this becomes a much more data driven debate, as opposed to all of the emotion.”

“Just think about trying to describe the entire federal workforce, if the way it’s going to be paid next year with a single number,” said Sanders. “There are lots of think tanks that say federal employees get paid too much, and the irony is, they’re right and wrong, depending on the occupation.”

Recommendation Number Three: Stop beating up the public servant

“It’s a quiet crisis. That’s the term that two colleagues termed this situation, the quiet crisis,” said Sanders. “It’s not something that’s dramatic that’s going to make the headlines. We lose a trickle of talent, but that trickle adds up. And, at some point, you risk mission failure.”

Recommendation Number Four: Re-think pay for performance

I know that the unions have compared our pay incentive program to systems that haven’t worked in the past. But look, you don’t implement incentives without learning lots of lessons. You are faced with a choice; do you learn those lessons and act upon them, or do you retrench and retreat. We think we ought to learn and act upon them.

In the report, we say:

  • Any employee who is fully successful, who is meeting performance expectations, should be paid at market rate.
  • Set the salary ranges by occupation; find out where that market point is, and that salary range, it could be the midpoint or the median.
  • Anybody who meets performance expectations rises to that level as quickly as they would rise under the general schedule. All that requires is a performance rating.
  • There’s no supervisory discretion in it.

“To me that was one of the failures of National Security Personnel System – we entrusted those tools to managers who were not yet prepared to use them. They had too much discretion,” said Sanders. “So we would make those pay raises formulaic. You should be at market if you meet expectations. Now, obviously if you don’t, you’re not going to be paid at market rate, you should not. I don’t know who could argue with that,” continued Sanders. “You’ve got to deforest and detach the performance rating from pay decisions. Rate employees the way they should be rated, pay raises by formula; if you get this rating, you get this amount.”

Recommendation Number Five: Get the public on board

“We think one of the biggest issues about paying civil servants is that the number that’s bandied about every year has no credibility with the American public. Again, it is hard to acquire that credibility that’s a single number. So if the American public says here’s how the federal government’s going to pay IT workers, and it’s based on a sophisticated salary survey of what IT workers make generally, and they say alright, but the principle is, if you’re meeting expectations in the government, you’re going to be paid at that market rate. But if you want to be paid above, you should exceed your performance expectations, and here’s he formula,” said Sanders. We think that just leaches so much of the emotion out of the debate, it’s more data driven, both at the aggregate level and at the individual level, supervisor and employee level, that we can get there. We can’t keep going down the path we’re going where you’re talking about 0%, 1%, etc., for the foreseeable future.”

Recommendation Number Six: Rework the Senior Executive Service

“As a practical matter, almost every agency that I know of has gone to a three-tiered approach to managing SES work and SES pay.”

  • Frontline SESers
  • SESers who supervise other SESers
  • Then finally direct reports to agency heads.

“You’ve got to have those 3 levels to make some pay distinctions and responsibility distinctions,” said Sanders. So most agencies have gone to 3. Set that aside. The most important part of the report here focuses on that 4th tier, because there are 1500 jobs, exec—senior executive jobs in government that have C suite and/or enterprise wide, that is government wide, inner agency or inner governmental responsibilities that are beyond just an individual agency.

  • Key Insight: “We would develop the 4th tier executives differently, much the way the military develops general officers, to make sure that they can think jointly. The civilian equivalent of joint is enterprise. Think of the government as an enterprise. If you grow up in a single agency, it’s hard to acquire an enterprise perspective, much less lead in that capacity. So, we would develop individuals who aspire to that 4th tier differently. Make them require an interagency assignment. For example, either coming up as a SESer, or once they’re in the, the Senior Executive Service. But we would limit the executives, career executives who would be eligible for that 4th tier. Again, C suite, CFO, CCO, CIO, the, you can identify the jobs, you know, it’s one of those where you’ll know it when you see it. Those jobs that have enterprise-wide responsibilities, make sure that the executives that occupy them are prepared for that, and pay them accordingly. We pay them up to Executive Level One, where today the cap is Executive Level Two.

The really big challenges that government faces, that our nation faces, are no longer the purview in a single agency, or even level of government,” said Sanders. “You can take examples right out of the newspaper, like the Affordable Care Act. That is a classic case of interagency coordination and collaboration. And we need career executives who can lead those kinds of cost cutting efforts. Look at the President’s and its new set of cross-agency priority goals. Those are the kinds of critical enterprise-wide efforts that require a special kind a leadership. It’s not the kind of leadership you acquire, with all due respect, because look, I was one for 21 years, with all due respect to my colleagues in the SES, if you grow up in a single agency, and even in a single function, it is hard to then step across the line and lead something like one a those cross-agency priority goals. So develop them differently, develop a cadre of executives, a subset of the larger SES to be able to do that, because that’s what we’re facing. That’s where the really big challenges are. We need career executives who can do that, and they ought to be compensated as a consequence.”

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Darrell Hamilton

I like the overall approach that is mentioned here, but I wonder if the supposed fix is actually possible to do in a government environment. I’m in one of the non-traditional pay structures. Our merit system is far superior to the “standard” one, but I would not say that it is perfect. It still has ways for people to game the system. Some tools available in the corporate world to fix that are not available in the government. For example, I can work hard for 5 years or so and qualify for the higher pay scales and then suddenly no longer produce at that level. The government has limited tools for going the other direction on pay. In the corporate world, we could fire or threaten to fire the under performer. We could also demote them or move them to a less desirable position. The government can only fire under circumstances that I would never even get to in the corporate world. Demotion is theoretically possible, but is so hard to get to, that managers chose to ignore the issue or will even resort to promoting the problem person out of their hair.

Scott Kearby

Two comments …

1. This article focuses on pay, but we all know that there are other compensating factors that are part of the big picture … job security, health benefits, retirement benefits, paid leave/time off, travel or lack of travel, work environment & conditions, employee perceptions about whether good deeds/good work is rewarded, etc. If the private sector gives more in pay, maybe they give less of the other things. A narrow focus can be mis-leading.

2. Recommendation 4: Pay employees who meet performance expectations at market rate. Take Supervisory discretion out of it. These two statements are in conflict … who sets/determines the performance expectations and who evaluates whether these are met? I think the supervisor is part of that process and therefore there is some supervisory discretion. And anytime you attempt to quantify things that are not directly measureable but impact performance (loyalty, reliability, dependability, creativity, innovation, extra effort, overcoming challenges, etc.) then the process can be influenced by the evaluator. How do you minimize favoritism or bais in the evaluation? Maybe some type of 360 review that includes peers … or maybe a two tier review by the immediate supervisor and the next level supervisor.

Carol Kruse

I like the basic concept Mr. Sanders espouses, but I, too, have the questions/comments Scott and Darrell have.

My reaction to the money aspect was the same as Scott’s — there are many HR studies that show there are substantially more-important motivators and rewards for workers than money (providing their pay is enough to meet their basic needs…Maslow’s hierarchy does factor in).

My next reaction is that #4 does NOT remove a supervisor from the pay raise decision. A poor or untrained supervisor, or one who plays favorites or has biases for or against their employees which are based on non-work-related issues, will rig the performance appraisal so the rating will trigger the result they want for that employee from the automatic pay raise system. In my experience in both the private sector and government, poor and biased supervisors have a sixth sense for finding work-arounds and loopholes in any system.

The idea of pegging the government pay schedule to the private sector seems appealing, at first blush…but upon taking a “closer think,” I’d guess the bulk of government employees are likely making as much or more than their private-sector counterparts. Our SES leaders and “rising stars” are probably getting paid less.

I understand the argument that we need to modify our pay system to retain the best of the best. However, I am undecided about whether that’s enough justification to modify the pay structures and systems.

Carol Kruse

I meant to also say that I am totally supportive of “4th tier”-type executives — RIGHT ON. Facilitating collaboration across agencies — or attempting to — can be extremely frustrating!! A level of leaders assigned to work in cross-agency environments would be a great resource!!

David B. Grinberg

Another awesome post, Emily! FYI:

Pay Freeze Thaws But Challenges Remain in Fight for Fairness (Jan. 2014)

  • “Unfortunately, a 1% pay hike is not nearly enough to show a minimal level of respect and gratitude to the federal family, not to mention correcting the persistent problem of fundamental fairness for federal salaries.”

  • “Let’s hope that the current pay thaw is merely the start of the beginning, rather than the beginning of the end, to retroactively melt the 3-year cumulative pay freeze via future pay hikes.”

  • “Fighting for fair pay to the federal family is the least that can be done to help feds dig out from the financially harmful 3-year pay freeze and furloughs.”
  • “Is basic pay fairness too much to ask for federal civil servants who dedicate their careers and lives to America? Let’s hope not.”