Pay-for-Performance Systems Have No Real Record of Success, Kelley Tells House Body


7/31/07: Various pay-for-performance systems often are touted as an effort to improve effectiveness and morale in the federal workplace, but there is no hard evidence these alternative systems accomplish those ends. In fact, there is evidence they have the opposite impact, NTEU President Colleen Kelley told a House subcommittee today.

At the same time as she delivered that message, Kelley pressed her call for a 3.5 percent pay raise for federal employees in 2008. “Federal employees deserve what every other employee deserves,” Kelley told the House Oversight and Government Reform Subcommittee on the Federal Workforce, “a system that offers fair compensation for a fair day of quality work.” The administration has proposed a three percent pay increase in 2008 for both federal civilian employees and members of the military; however, there is strong bipartisan congressional support for the higher raise for both groups of federal employees.

Kelley added that while NTEU stands ready to contribute to measures leading to a more effective and efficient federal government, “my concern is that the administration has moved forward on pay alternatives without first demonstrating that a problem exists.”

The subcommittee, chaired by Rep. Danny Davis (D-Ill.), is examining issues relating to federal pay, including pay-for-performance—a matter with which NTEU has considerable familiarity.

Kelley was direct in her assessment of such systems. “The alternative pay experiments which NTEU has been involved with have been dismal failures,” she said, including the systems in place or under discussion at the Federal Deposit Insurance Corporation (FDIC), the Transportation Security Administration (TSA), the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS).

At the FDIC, the agency has divorced its pay system from its performance management system. The result is reliance on vague and subjective ‘corporate contribution’ factors under which employees are not clear on what they must do to be evaluated at the highest level. The FDIC program also contains a ‘forced ranking system,’ which prevents employees from knowing how this might translate into a pay raise. The system “does little to actually motivate performance,” Kelley said.

She also called the subcommittee’s attention to serious problems with the IRS pay-banding program for managers, which has hurt morale; as well as to TSA’s merit pay system under which 80 percent of the workforce received no raise last year; and the DHS system which has not yet even been implemented but is widely seen as likely to push already-demoralized employees out of this critical agency at a time when the importance of keeping experienced, skilled workers is greater than ever.

The DHS system, she said, is neither set by statute nor subject to collective bargaining; it will have employees competing against one another even as it discourages teamwork; and it would be both subjective and enormously complex.

The NTEU leader also noted that pay-for-performance systems not only have little if any track record in improving agency recruitment and retention efforts, they very often suffer from the fatal flaw of under funding, as well as lackluster and ineffective agency efforts to align their performance management systems with any pay-for-performance effort. Instead of such systems, she called for an increased effort by the Office of Personnel Management to promote existing flexibilities and authorities to help recruit and retain employees.