SEC's New Performance System Threatens Mission Readiness; Union Offers Path Forward for Implementation


8/23/12: The recent independent survey of the SEC regarding the agency's new, so-called "evidence-based" performance management system ("EBP") clearly demonstrates what SEC employees have been talking about for the last couple of years around the water cooler:  the new system is too complicated, time consuming, vague and subjective. Furthermore, the SEC's staff does not find it to be fair and credible, which is the foundation of any successful performance pay system. By a very large margin, SEC employees believe that this poorly designed system simply does not work. In fact, the data on the distribution of ratings from the first cycle under the EBP provided evidence of a disparate impact on African American employees and employees over 40 -- the same problems that led to the downfall of the SEC's prior pay for performance system.

The SEC needs to head in a new direction, towards a fair, transparent and credible system that identifies and rewards high performers and holds poor performers accountable. Failure to do so will continue to cause lasting and substantial damage to the SEC's performance-oriented culture, the agency's ability to meet its mission, and the long term trust and morale of the men and women who perform that mission.

For that reason, the Union has renewed its long standing proposal for the SEC to adopt a collaborative approach like the one successfully utilized by NTEU and FDIC management in developing the FDIC's new performance management and pay for performance system, with all issues on the table. Regrettably, even in the face of the damning survey results, SEC management has once again rejected that offer, and continues to reject employee input on key aspects of the new system.

Why There Was a Survey

The Union, and the employees that we represent, are highly supportive of both performance management and performance-based pay -- but we also believe that it must be done right. In developing the EBP, the SEC has long ignored feedback from front-line SEC employees, the Union that represents them, and many SEC managers -- all of whom share the same cultural perspective on performance management and pay issues. For several years, this state of affairs has led to a number of fundamental disagreements between the Union and SEC senior management regarding how to move forward with a workable performance management and pay system at the agency.

Last year, the Union proposed an independent study and survey of the EBP in a good faith effort to create a process for the SEC workforce, managers and non-managers alike, to provide feedback about the EBP through an independent third-party. We believed that this would help the discussions around performance management to move forward based on an agreed upon set of facts.

The depth and breadth of the EBP’s problems as reflected in the study and survey obviously demonstrate the need for the SEC to work closely with all stakeholders, including SEC managers, employees and Union representatives, to develop a system that is efficient, fair and includes clear performance standards. The EBP’s problems cannot be fixed simply by mandating more training of supervisors and better communication and more frequent feedback between supervisors and employees. All of these things need to be done, but the fundamental problem with the current EBP system is that it is too complicated, too time consuming and lacks clear performance standards which define the difference between the various rating levels, particularly between levels 3 and 4.

Employee focus groups and Union representatives have been pointing to these flaws in the new system since the early stages of its development, but the SEC’s performance management team failed to incorporate this feedback into the new system. As the survey results make clear, this was a profound lack of judgment that has resulted in significant and unnecessary costs, dislocation and delay. After all of this time working on their own, SEC management clearly needs to roll up its sleeves and work together with the Union to get it right.

Even though the survey results are about as bad as they could be, our hope that constructive input from the managers and frontline staff using the EBP would be used as a starting point for fixing the system appears to have been rebuffed, because senior management continues to claim that it is "on the right track" on performance management. In fact, the SEC has informed the Union that the EBP system will actually be utilized to make pay decisions for managers this year, despite the lack of confidence in the system the managers expressed in the survey and the system's obvious continuing flaws.

Senior management's view ignores the overwhelming survey feedback from both managers and non-managers alike. The survey results have demonstrated that there is a critical need for SEC senior management to re-evaluate its basic assumptions in the design of the EBP in partnership and collaboration with all stakeholders at the agency. Simply put, moving forward, the agency cannot chart a clear path on performance management and pay for performance unless it first acknowledges and accepts the underlying causes of the EBP’s failure.

 The Union Again Offers a Collaborative Path Forward

The Union recently proposed to the SEC a way to move forward and correct these problems – by adopting the same collaborative process that NTEU and the FDIC used to develop a successful performance management and pay for performance system. At the FDIC, its Chairman, Sheila Bair, wanted input from all stakeholders, and she agreed to a process that brought them together with NTEU to work towards developing a system that fit the FDIC. A similar process at the SEC would require that management work with the Union and the employees it represents to ensure that the system, from how many ratings levels it includes to how those levels are defined, is a good fit for the SEC. This requires that the parties work together in good faith and with an open mind.

Using this highly collaborative process at the FDIC, NTEU and senior management were able to craft, in less than one year, a highly successful performance management system and merit pay system. That system is not perfect, and the parties continue to work together to improve it. But it cannot be ignored that, during this same time period, the FDIC rose from the 21st best place to work in the federal government in 2007 (close to the bottom) to 1st place in 2011 – while the SEC has plummeted from 3rd place in 2007 to 27th place in 2011 (read about the comparison between the two agencies' approaches here). Clearly, getting the job done right matters. And strong leadership matters.

Nevertheless, SEC senior management has rejected the Union’s offer to utilize this proven collaborative, open process in which both parties are willing to put everything on the table. Instead, the SEC remains wedded to all of the core features of its unilaterally designed EBP, whether those features are working or not. The agency is opting instead to continue to push forward with its fundamentally flawed EBP system.

We are particularly troubled by the fact that, this year, the SEC has informed the Union that it intends to use the system to make pay decisions for managers (but not non-managers), even though it clearly knows that the system is not ready for prime time. This approach will create two separate pay systems at the agency, one for managers and one for non-managers. This is an extremely divisive approach.

In a nutshell, rather than learning from its mistakes and acting promptly to correct them, SEC senior management is doubling down. This is a failure of leadership.


SEC employees and managers alike want a transparent, fair and credible performance pay system based on clear distinctions between performance levels. They want a system that is straightforward and easy to use, in deference to an already over-extended workforce. This cultural view is based on the staff’s collective experience, which is that the vast number of SEC employees are motivated by the SEC's mission, public service, a positive work-life balance and the collegial relationships they form with their fellow employees at all levels of the agency.

The Union continues to stand ready to work out a solution. But senior management at the agency must be a willing participant to make it happen.