Report: Don't give up on pay-for-performance system

Federal agencies may not be sold on the idea of pay for performance, but they need some alternative to the current General Schedule system, according to researchers at Rand.The researchers say the GS pay system seems attractive for its simplicity or for its effectiveness in rating employees. However, the system is prone to a leniency bias in which supervisors and appraisers tend to rate all employees favorably, researchers found.Tenure, rather than merit or performance, is the main driver of wage and promotion under the GS system, according to researchers John Graham, the dean of the Pardee Rand Graduate School, and Silvia Montoya, a doctoral fellow there.Current pay-for-performance initiatives are just the latest alternatives that agencies have tried in the past 20 years. Half a dozen agencies now have independent systems, including the Federal Aviation Administration, the IRS and the Defense Department, according to their report.These systems typically have provided supervisors with more flexibility to reward employees based on assessed performance, they pointed out.Still, the success of alternative approaches depends on how they are designed and implemented, researchers say. In the public sector it is often difficult or impossible to fully measure output or performance using objective data for each employee, they said. That leaves mainly subjective assessment.In many cases, the subjective method is preferred, they said, because it permits supervisors to include factors that are not measurable, such as whether certain actions were appropriate under the circumstances.Critics of the pay-for-performance systems argue that supervisors often don’t monitor their employees effectively, they said. Also, the flexibility in pay for performance creates room “for favoritism and arbitrariness. ”Despite growing opposition to pay for performance in both government employee unions and in the Democrat-controlled Congress, the researchers say they believe the programs now planned or in place should not be prohibited or scaled back until the current experience can be carefully evaluated.“Regardless of what Congress and the current administration decides to do, the next administration should move to establish pay systems that penalize poor performance and reward excellent performance, facilitate dialogue with employees and unions, and extend and evaluate pilot tests of new human resources systems," the report states."A return to the GS structure is a step backward," the report states.