Performance pay: We know it works

It’s almost ironic. On Oct. 28, President Barack Obama signed legislation that effectively killed the National Security Personnel System, the Defense Department’s pay-for-performance system. The next day, the new Senate Task Force on Government Performance held its first hearing. Jeff Zients, deputy director for management at the Office of Management Budget, testified about a plan to create a new performance system for federal agencies.

Zients told the task force he has “found that leadership, measurement and a motivated workforce create the foundation for good performance.” He did not refer to pay in his testimony, perhaps because it is a sensitive issue.

In a speech the following Monday, John Berry, director of the Office of Personnel Management, outlined his ideas for replacing the General Schedule system. One of his themes was financial rewards for outstanding performers. He is clearly on the same page as Obama and OMB Director Peter Orszag, who in a letter to a group of congressional leaders said, “The administration strongly endorses the concept of rewarding excellence with additional pay.”

The decision to end NSPS was fully justified. The system had design flaws and lacked the support to make it successful. Terminating the Homeland Security Department’s MaxHR also was the correct decision. OPM now has a clean slate to plan a governmentwide replacement system.

The interest in performance pay is consistent with workforce management practices across the United States. In the private sector, pay for performance is effectively universal. In state and local government, it’s more prevalent today than it was a decade or so ago. It is deeply entrenched in the history and cultural values of our country.

We know how to plan, implement and manage a successful performance pay system. The National Geospatial-Intelligence Agency has had a highly successful pay-for-performance program for a decade. Lawmakers recognized NGA’s pay system as a success by specifically allowing it to continue in the legislation that ended NSPS. Regular employee feedback confirms the acceptance of the program.

Looking back over the experience with pay for performance, the threads that run through the successful programs are clear. Employees need to know:

• What they can expect and what’s expected of them.
• Opportunities for rewards are consistent across the organization.
• There is a review process to identify any problems that arise.

The NGA program was chosen as the model for the intelligence community’s new performance-based pay system, which could be a model for the rest of government. The Office of the Director of National Intelligence authorized an overall program framework with each intelligence agency expected to develop and manage its own pay system based on a set of common principles.

It would be useful at this stage for the government to spell out its workforce goals and priorities. Berry made it clear in his speech that he sees the replacement of the GS system as central to civil service reform.