President's Perspective - The Merit Pay Process


10/06: President's Perspective – from Chapter 293 President Greg Gilman - The Merit Pay Process

In what has become a late summer ritual at the SEC, the agency recently distributed annual Merit Pay step increases to employees. Unlike in the past, however, this year the Executive Director’s Office sent an e-mail message to all employees notifying them that the overall funds available for Merit Pay increases were limited this year. Some senior managers also have notified their employees that, as a result of the limited funding, although the average Merit Pay increase in prior years was approximately two steps, this year the average increase was closer to one step. NTEU has filed a national grievance challenging this change in the agency’s past practice, as well as an information request regarding the distributions.

A fundamental policy objective of the SEC’s Performance Management Program is “to promote and ensure a high degree of productivity and accomplishment of the Commission’s goals and objectives.” Whether the agency is actually meeting this goal remains an open issue, however, as many frustrated employees have been left with a number of unanswered questions about the Merit Pay process. It is in the best interests of the agency to provide to its employees straightforward answers to those questions.

If Merit Pay increases were limited this year due to budgetary factors, and thus the increases did not in all cases accurately reflect employees’ actual performance, will the agency provide some indication in employees’ personnel records of what their actual performance ratings were? Should performance ratings be based upon the temporal budgetary exigencies of the agency? How can employees determine the extent to which they need to improve their performance in the absence of objective ratings?

Will the agency provide a breakdown of how many steps were distributed to employees and managers (identified only by position and grade)? Without accurate distribution information, it is difficult for employees to place their own individual step increases into a meaningful context. This is particularly true since the increases were lower overall this year. The Merit Pay process appears to have become a “zero sum game,” in which each higher increase awarded to one requires lower increases to be awarded to others. Transparency regarding the distribution would foster the goal of ensuring that employees clearly understand how the agency actually views their performance – which is surely a central objective of any pay-for-performance process.

If, due to limited funding, most employees received lower ratings this year, while a smaller group of employees received somewhat higher ratings, will the agency clearly explain the criteria that were utilized to decide who would receive the higher ratings? Since the Merit Pay process is intended to motivate higher productivity and accomplishment, it seems clear that the SEC should provide this information. In its absence, it is difficult, if not impossible, for employees to determine what, if any, changes they need to make to improve their performance.

A recent survey by the Senior Executives Association revealed that eighty-six percent of senior federal executives believe that a two-year old pay-for-performance system in the Senior Executive Service has made no difference to their job performance. Approximately half of them believe that the system has a negative effect upon morale. There are lessons to be learned from the opinions of these senior federal managers.

NTEU has long asserted that any performance-based pay system must contain key elements to have any chance of success, including adequate and sustained funding, a prohibition against quotas in any form, transparency in every aspect of the program, and an accompanying performance management system that is clear and reasonable in its expectations. To date, the SEC’s Merit Pay system has not lived up to these standards. NTEU will continue to press for improvements to this fundamentally flawed system, and Chapter 293 Works will keep you updated regarding those efforts.