For critics of the National Security Personnel System (NSPS), the decision by Congress to terminate the system was a victory that reinforces the argument that pay for performance is not viable in the federal government. However, there is solid evidence that NSPS' failure was attributable to poor planning and implementation and to issues unrelated to pay.

Few companies have workforces the size of the Defense Department's, but they cannot match the number, diversity and geographic dispersion of DoD's units. DoD is a unique conglomerate; its many units have different missions, cultures and management styles. No large, highly diversified company would try to force-fit a uniform, rigid salary system in every business unit.

Significantly, pay for performance has had a long and successful history in DoD units, starting with Naval Air Weapons Station China Lake, Calif., 30 years ago. DoD has had a number of successful alternative pay "demos" for more than a decade. And of course, DoD employees often work side by side with contractors paid for their performance. At the start, there was no reason to think the change in policy would fail.

From a broader perspective, surveys repeatedly show government employees at all levels would prefer to be paid for performance. The philosophy has its naysayers, but the number of public employers that have successfully switched to performance pay has increased steadily. President Obama and Office of Personnel Management Director John Berry have both advocated the change. The failure of NSPS is a setback but certainly not evidence that the idea should be discarded.

In a 2004 NSPS planning document, Pentagon officials recognized that "designing and implementing a new personnel system is similar to the acquisition of a complex weapons systems." As someone who has managed similar but smaller projects, I agree but would go beyond that. With a new pay and performance system, every manager and employee will react to the change. Some inevitably will feel like losers. The change affects their relationship with managers and co-workers, and their career prospects.

Designing a new pay and performance system is not brain surgery. There are no grand theories or proven, universal designs. There are widely accepted principles that were developed in the private sector. There is no evidence NSPS planners reached out to specialists in the planning of salary systems or tried to understand how the government context influences planning. It was a mistake to approach this as a do-it-yourself project.

The fatal flaw was the untested notion of pay pools. In every other sector, the policies associated with budgeting and deciding increases conform to the textbooks. It may be surprising, but corporate managers commonly have little, if any, discretion once the performance rating is final. The allowable percentage increase is specified for each rating level.

The pay pools violated one of the primary tenets of salary management — employees need to know what they can expect. According to reports, immediate supervisors had no control and were unable to explain how an increase was determined. The pay pool process was far more time-consuming than industry would ever tolerate.

There were other problems. Managers and employees had no meaningful involvement — therefore, no sense of buy-in or ownership — in the planning. The focus on goal-setting is clearly a best practice, but it takes practice to hone those skills. The training was often led by individuals who demonstrated little, if any, hands-on experience with goal-setting and performance planning. Despite references to high performance, in the most recent data only 5.1 percent of employees received the top rating. Inflated ratings have been a problem, but every organization needs to recognize its true star performers. These issues and others should have been addressed in the planning.

If this was a failed weapons system, DoD would have studied it intensely to understand the problems. Since this failure affects all of government, it warrants similar analysis to avoid repetition of the mistakes. Congress has ordered such a review of the pay-for-performance system used by the intelligence community, but oddly not for NSPS.

For unknown reasons, NSPS planners ignored lessons learned from successful DoD alternative pay systems. One of the most prominent, the National Geospatial Intelligence Agency, relied on a very different strategy, and its pay and performance management systems have helped the agency win several awards for management. If government wants to improve performance, agencies have to send the message that high performance is valued and important to career success. NSPS should not be a barrier to progress.

---

Howard Risher is a consultant with federal agencies on pay and performance and author of the book "Planning Wage and Salary Programs," published by WorldatWork.