What Are “Performance Management” and “Pay for Performance” Systems and How Does the SEC Intend to Use Them?
“Performance management” and “pay for performance” (the latter sometimes referred to as “merit pay” at the SEC) are frequently used interchangeably. Although they are often linked, they are actually different. Performance management systems relate to how agencies develop, monitor, and rate employee performance as part of an overall effort to manage and measure agency performance. Pay for performance systems deliver performance-based raises and/or bonuses based on performance ratings that are developed by the performance management system. SEC senior management’s goal is to develop a new performance management system and use the ratings it generates to drive employee raises.
Do all Federal Agencies Have Performance Management and Pay for Performance Systems?
Federal agencies typically have some form of performance management system. Although salary increases in the federal sector are always contingent on a finding that an employee’s performance is at least acceptable for the job they are performing, not all agencies have what are commonly referred to as pay for performance systems. Some agencies provide “within-grade increases” (“WIGI”) to employees over time based on performing their jobs at acceptable levels. Awards under a WIGI system tend not to vary as much as awards under a typical pay for performance system.
What Is the History of the SEC’s Performance Management and Pay for Performance Systems?
As many SEC employees already know, the SEC has struggled over the past decade to implement a modern performance management system that generates credible performance ratings which are then used as the basis for performance-based pay. In 2003 the SEC implemented performance management and pay-for-performance systems without working with the Union. The agency scrapped these systems after several independent studies and a federal arbitrator found them to be discriminatory and ineffective. The SEC has been developing the current “Evidence Based Performance” (“EBP”) system since 2008. In the early stages of the system’s development, the SEC did include the Union and employee focus groups as part of the process. The focus groups, however, were critical of what the SEC was developing because the performance standards were not clear and were often not aligned with what the focus group participants actually did in their jobs. These employees also complained that the system was too confusing and time consuming given the demands on their time. The SEC ignored this input and continued developing the system over the Union’s objections without regard to the feedback provided by frontline employees. Eventually, the SEC no longer included the Union or frontline employees in the process.
What Is the Union’s View on Performance Management and Pay for Performance?
The Union’s view reflects the views of SEC employees generally – high performers should be recognized and rewarded and poor performers should be identified and held accountable. Of course, there are differing views on how the agency should achieve this – but there are certain key elements necessary for the success of any system. For example, in the Office of Personnel Management April 2007 report “Pay for Performance: Your Performance Management Program is the Foundation,” OPM provides guidance that to be successful an agency must establish clear expectations and measures that make meaningful distinctions across levels of performance and engender high levels of trust and understanding among employees and managers. In this report, OPM also stresses the need for employees to be involved in the design and implementation of a successful program. The Union has consistently emphasized the need for any system to be developed consistent with this guidance. We believe that a system that complies with this straightforward guidance can be successful at the SEC.
What Is the Current Status of the New Systems?
The SEC launched the EBP as a pilot program in the Division of Enforcement and in the Office of Compliance Inspections and Examinations in 2010. It rolled the EBP out in an agency-wide pilot in 2011. As reflected in an independent report entitled “Evaluation of the U.S. Securities and Exchange Commission’s Evidence Based Performance Management System” (the “EBP Study”), the EBP received extremely poor marks from the SEC workforce across the board (from management and non-management employees alike). The results of the pilot programs are very consistent with the reaction the focus groups provided back in 2009 when the SEC first showed employees what they were developing and how it would work.
What Are the Union’s Concerns about the EBP?
The Union’s concerns track those reflected in the EBP Study, which mirrors the feedback Union representatives received from the focus groups before the EBP was launched and also after the 2010 and 2011 pilot runs. At this point it is clear that SEC managers and frontline SEC employees share the same concerns that the Union’s bargaining representatives have been articulating to management since 2009.
The EBP Study Shows Little Support for the System, so What Is Next?
As the Union has reported in the past regarding its discussions with SEC management over performance management and pay for performance, the SEC has largely acted without regard to employee or Union input. The Union’s intention in proposing an independent study of the EBP was to create an opportunity for SEC employees to provide feedback to SEC management about the EBP through a third-party. We hoped that the feedback would serve as a basis for future discussions about performance management and pay for performance with SEC management. At this point in the process, the entire SEC workforces’ feedback on the EBP is overwhelmingly consistent and critical. We continue to reach out to management through OHR and the Labor Management Forum, but in many respects the ball is in the SEC’s court. Suffice to say that we think the best path forward is a collaborative one. NTEU was very successful in utilizing a collaborative process to create a performance management system and pay for performance at the FDIC a few years ago.
Was the NTEU/FDIC Experience with Performance Pay Successful?
Yes. In 2007, the SEC ranked 3rd and the FDIC was ranked 27th on the "Best Places to Work in the Federal Government" rankings. FDIC employee morale was low, and people were very unhappy with performance management and pay. FDIC Chairman Sheila Bair made the decision to collaborate with NTEU on the performance management and pay systems. Within a year, the parties worked out a resolution that resulted in a successful performance management and merit pay system. In 2011, the FDIC was ranked 1st on the "Best Places to Work" rankings and had the highest pay satisfaction score of 83.3 out of 100. In 2011, by contrast, the SEC is ranked 27th on the "Best Places to Work" rankings and received one of the lowest pay satisfaction scores, 57.8.