Pay & Benefits

Here comes pay for performance! [Commentary]

Since the election and subsequent inauguration, many human capital observers and leaders have carefully examined President Trump's statements and policy proposals, including those impacting the personnel management function of the federal government. While actual policy changes are still in the works, some aspects of the new administration's plans are taking shape.

As indicated in a recent 2017 Human Capital Trends to Watch report, pay for performance has emerged as a heretofore possibility. The signs and trends continue to build, and the concept of pay for performance — in some shape or form — is spreading.

My advice: Start preparing for it now. Here's why:

  • The Trump administration has voiced support for policies which "financially reward employees who do a good job, and fire those who don’t," as Vice President Mike Pence has stated. In stressing the need for more accountability, Pence has criticized a system that depends upon "outdated civil service rules" that prevent leaders from properly disciplining troublesome workers.
  • In January, the Department of Defense announced that it was revising its reduction in force policies to designate performance as the most important factor in deciding who gets laid off and who doesn’t. Prior to the change, managers had to prioritize an employee’s tenure and veteran status over appraisal results. "This is not signaling that any RIF is imminent," a senior DoD official said. "But if it becomes necessary, we want to have the policies in place to keep our highest-performing employees. We want to have policies that allow us to do RIFs in a consistent way."
  • In November, agencies gained approval to raise their limits on spending for employee awards in fiscal 2017. They can now spend up to 1.5 percent of aggregate salaries for all non-Senior Executive Service employees at the end of the year based upon ratings-based performance awards and individual contribution awards. The previous limit was about 1 percent. "The Office of Personnel Management and the Office of Management and Budget recognize that awards programs are valuable tools to help agencies reward employee performance excellence and reinforce a high-performing culture that will help improve organizational effectiveness," OMB Director Shaun Donovan and OPM acting Director Beth Cobert wrote in a Nov. 22 memo.
  • In March of last year, the DoD announced that its New Beginnings initiative will require more frequent reviews between supervisors and employees while better linking performance to rewards such as bonuses and promotions. New Beginnings will also introduce a three-tiered rating system to assess staffers, with supervisors holding a minimum of three formal documented performance discussions with an employee per year. As a result, the DoD intends to more clearly align an individual’s work quality to organizational strategies.

The new administration has stated it wants to eliminate inefficiencies, deliver more value to the American taxpayer and run government like a business. It wouldn't be difficult to argue that most federal workers as well as taxpayers desire a more effective government. For those who would argue a particular agency is operating at a high level now, just as with a private company, there’s always room for improvement.

How to improve via pay-for-performance can certainly be debated — whether good or above-average contributions should be incentivized or whether poor performance should be punished, for example. Whatever methods are utilized, the ability to properly measure good and bad performance is key.

Today’s analytics solutions can help agencies successfully track and quantifiably assess employee contributions. With this, they identify which areas are struggling and which are thriving — and take best practices from the latter to benefit the former. (That’s something that leaders should seek to do anyway, regardless of whether the changes are coming.)

And there are auxiliary benefits:

Accountability.

Pay for performance fosters individual accountability — a significant component of private business.

Engagement and retention.

Pay for performance is difficult or impossible to accomplish without better and more frequent interaction between employees and managers. This interaction should drive enhanced engagement, morale and retention for all employees — especially strong achievers.

Employee development.

Through increased interaction and better identification of required skills and competencies, managers and employees will position themselves to identify necessary development strategies that will augment performance.

While the implementation of performance-based compensation throughout the government isn’t quite a "done deal" at this point, it’s obviously something for which federal human resources leaders should at least prepare. This is an administration that clearly "thinks business" first and foremost, after all, and many businesses have adopted pay for performances as an effective way to achieve mission-critical goals. Why shouldn’t such success readily translate to agencies?

Joe Abusamra is vice president of Acendre's North America sector, focusing on Acendre's federal talent management, workforce planning and people analytics solutions.

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