Modernizing the Federal Government

Modernizing the Federal Government: Paying for Performance

Silvia Montoya
John D. Graham
Copyright Date: 2007
Edition: 1
Published by: RAND Corporation
Pages: 54
  • Cite this Item
  • Book Info
    Modernizing the Federal Government
    Book Description:

    In 2003, the Volcker Commission recommended that explicit pay-for-performance (PFP) systems be adopted more broadly throughout the federal government. In this occasional paper, the authors compare several proposals aimed at enhancing the role of such PFP schemes for federal civil servants, and examine the pros and cons of PFP schemes compared with seniority-based salary systems, as well as the proposals to change the General Schedule system.

    eISBN: 978-0-8330-4441-9
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-ii)
  2. Preface
    (pp. iii-iv)
  3. Table of Contents
    (pp. v-vi)
  4. Figure
    (pp. vii-viii)
  5. Tables
    (pp. ix-x)
  6. Summary
    (pp. xi-xii)
  7. Abbreviations
    (pp. xiii-xiv)
  8. PART ONE Introduction
    (pp. 1-2)

    Improving productivity in government has been emphasized by the U.S. Congress since 1978, when the Civil Service Reform Act (CSRA) introduced a merit-based component to the salary of civil servants. The Government Performance Results Act of 1993 (GPRA) and the Program Assessment Rating Tool (PART) developed by the Office of Management and Budget (OMB) provided managers with tools to improve project management and deepened the pressure to ensure accountability for performance in the federal government. Alternative human resources (HR) systems have been authorized in the Department of Defense (DoD), the Department of Homeland Security (DHS), the Transportation Security Administration (TSA),...

  9. PART TWO Pay for Performance: Social Science Perspective
    (pp. 3-6)

    PFP began in the private sector and was introduced decades ago in the public sector as part of a movement to improve public-sector productivity, thereby producing better results from limited public funds. The underlying assumption is that a clear definition of goals, coupled with rewards for achieving these goals, will help motivate employees and enhance public-sector accountability. Edward Lazear, Professor of Human Resources Management and Economics at Stanford University and currently chairman of the Council of Economic Advisers in the Bush administration, has added to the list of its potential benefits the effect of PFP on employee selection, as incentive...

  10. PART THREE PFP: Different Forms
    (pp. 7-8)

    Conceptually, PFP refers to compensation that is directly tied to specific performance. As theoretically appealing as it is, paying for performance has a variety of forms and definitions (see Table 3.1). And it demands some level of budget control when it comes to implementation. Measures may be applicable at the individual or organizational/unit/team level. In some cases, the combination of individual and collective schemes is a solution to deal with the problems associated with each of them. Such a system rewards outstanding team effort and exceptional individuals within the team.

    In PFP, what matters are the marginal increases in pay...

  11. PART FOUR The Appraisal System: A Source of Concern
    (pp. 9-12)

    PFP is difficult to implement in government agencies because it is extremely challenging to measure output or to track performance. The evaluation method used to decide whether or not to award wage increases can be subjective (based on a supervisor’s opinion) or objective (associated with some observable output).

    It is often argued that a subjective performance assessment can provide a more complete measure of performance by taking into account not only the output itself but also whether the action of the employee or unit that led to that output was appropriate under the circumstances (Prendergast, 1999). Furthermore, nonquantifiable aspects of...

  12. PART FIVE PFP in the Public Sector: Evidence
    (pp. 13-16)

    PFP originated in the private sector, where opposition to automatic salary increases is often considered as a “philosophical issue” (Risher, 2004). It works in the private sector as much through the recruiting mechanism for performance (Lazear, 1996) as it does through incentives for existing employees. However, evidence from private-sector establishments suggests that only 9.4 percent of full-time workers are paid on the basis of piece-rate (pay per unit of work) measures and only 14.2 percent are paid with bonuses (Asch, 2005).

    The translation of PFP from the private sector to the public sector is not straightforward. For example, measurement of...

  13. PART SIX PFP in the U.S. Federal Government
    (pp. 17-24)

    The Pendleton Civil Service Reform Act of 1883 established the Civil Service Commission and is the first U.S. law related to civil service. The act, which applied only to federal jobs, placed most employees on the merit system. The act also made it unlawful to fire or to demote federal employees for political reasons. The law further forbade requiring employees to give political service or contributions. “One result was more expertise and less politics” (U.S. Office of Personnel Management, 2007).

    The Classification Act of 1923 went one step further. The act divided work into five services (professional and scientific, subprofessional,...

  14. PART SEVEN Some Departures from the GS
    (pp. 25-30)

    One of the early experiments on personnel decisions was the 1980 “China Lake” demonstration at the Naval Weapons Center in China Lake, California. The CSRA authorized a wide-ranging pilot program centered on the use of performance pay. The China Lake project was a pioneer among demonstration projects on PFP. It showed both an increase in performance and an overall increase in salary spending. Perceived to be a success, the PFP project gained permanent authorization at China Lake and additional demonstrations were authorized.

    One of the most salient features of the demonstration projects is the option to use the “broadband” pay...

  15. PART EIGHT Proposals to Change the GS
    (pp. 31-32)

    Three bills in the 110th Congress attempt to address the GS system shortcomings: Senate bill 1045 (S. 1045) for federal employees in general and S. 1046 for senior-level and scientific and professional positions (Voinovich, 2007a, 2007b), and S. 967 (Akaka, 2007). These limited initiatives were partly a response to a more expansive White House proposal that that did not attract any sponsors in Congress (Working for America Act, 2005).

    Table 8.1 outlines the similarities and differences between the status quo and the proposals. The White House proposal—the Working for America Act—seeks to identify and reward outstanding performance while...

  16. PART NINE Burgeoning Opposition to PFP
    (pp. 33-34)

    PFP has attracted opposition not only from labor unions but also from key members of Congress. The resistance has been manifested in lawsuits and legislative efforts to deny funding for PFP implementation or rescind the authority to implement PFP. The dispute over PFP is part of a larger dispute about the collective bargaining rights of civil servants.

    In creating the TSA after the September 11, 2001, terrorist attacks, Congress provided the Bush administration with broad leeway to set the terms and conditions of employment for passenger and baggage screeners. Citing national security considerations and the need for different work rules...

  17. References
    (pp. 35-38)
  18. Related Readings
    (pp. 39-40)