Execs rewarded under pay for performance

Agencies are making progress in improving their pay-for-performance systems, such as linking executive performance with the organization’s goals and results, Springer said. For example, the Defense Department has strengthened the link between pay and performance in its National Security Personnel System and has provided management the ability to encourage broader skill development and advancement opportunities within and across pay bands. The system requires employee participation, so communication has increased between managers and their workforce, she said. The Government Accountability Office is preparing a report highlighting selected agencies’ policies and procedures for their SES performance appraisal and pay systems and oversight of the certification process by OPM and the Office of Management and Budget, said Christopher Mihm, managing director of GAO’s strategic issues. He explained some early findings. “Our preliminary results show that there are opportunities for improvement in the communications of aggregate appraisal results to all senior executives,” he said. GAO is evaluating the pay-for-performance systems of the Defense, Energy, State and Treasury departments, the Nuclear Regulatory Commission and the Agency for International Development. Those agencies have policies that require SES performance expectations to be aligned with organizational results, and organization performance is factored into the SES performance appraisal, Mihm said. However, OPM has reported that many agency plans do not sufficiently identify the measures used to determine whether the results are achieved, he said. Although the selected agencies have multiple rating levels in place for assessing SES performance, GAO’s analysis found that the senior executives are rated overwhelmingly in the top two levels for bonuses but not necessarily for pay increases, Mihm said. The agencies built safeguards into their senior executive performance appraisal and pay systems, such as pre-decisional checks of performance appraisal recommendations through higher-level reviews and Performance Review Boards. Communication of aggregate results is important for transparency and credibility of their systems in addition to the executive’s individual rating against the performance plan, and implementation varied, Mihm said. Despite the reported progress, pay-for-performance systems are biased and lead to low employee morale, employee groups and unions told the lawmakers. To be credible and effective, a pay system must either be set in statute, like the General Schedule system, so that everyone understands the rules and consequences, or there must be collective bargaining so employees can have a role in the pay system and have remedies for unfairness, said Colleen Kelley, president of the National Treasury Employees Union. One of the underlying issues is that there is not enough agency funding and limited resources, she said, adding that agencies must implement the alternative pay system with credibility and transparency. “Managers may see awards but none of their employees are recognized,” Kelley said. “NTEU’s experience shows the alternative pay systems in many of the agencies are characterized….by a litany of failed experiments, widespread employee dissatisfaction, inequitable distribution of resources, abuse in ratings systems, and rampant employee confusion leading to low morale,” she said. For example, the Performance Accountability and Standards System at the Transportation Security Administration plays a large role in the high TSA turnover rate, she said. It relies heavily on awarding bonuses instead of increasing base pay. TSA employees have an average salary of $30,000, and training is minimal, she said. Further, TSA employees are constantly tested, but are not told what they did wrong in the event they fal; training is minimal; and a majority of employees don’t know what is expected of them in order to earn a pay raise, Kelley said. Additionally, TSA recently awarded Lockheed-Martin Corp. a $1.2 billion contract to handle human resource issues, including pay systems. In a survey of TSA employees in April, the Homeland Security Department found that only 21 percent believed promotions were based on merit and 23.6 percent believed that their pay raises depend on how well they performed their duties, she said. About 8,000 TSA employees, or 20 percent of its total 40,000 workforce, leave their jobs each year, Kelley said.