Business of Government Stories
Thursday, May 21, 2020
While the reinventing government effort in the 1990s sought to empower frontline workers, subsequent reform efforts sought to strengthen the role of human resources and managers.

In early 2001, the Government Accountability Office (GAO) designated “Strategic Human Capital” as one of the federal government’s high risks for potential failure.  This issue is still on its list today, even though there have been concerted efforts by subsequent presidential administrations to address the issues raised by GAO.

GAO’s concerns at the time were that agencies did not:

  • Strategically plan for their current and future human capital needs
  • Create succession plans to ensure leadership continuity among career executives
  • Acquire and develop staff with skills needed to deliver agency missions
  • Create a results-oriented organizational culture

The PMA Scorecard.  The George W. Bush Administration announced in August 2001 that strategic human capital would be a key part of its broader President’s Management Agenda (which was discussed in an earlier blog post in this series by Dan Chenok).

 


What were the five elements of the President's Management Agenda and how did the scorecard work? - John Kamensky explains!

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The Bush Strategic Human Capital element was one of five sets of criteria scored quarterly on a green-yellow-red scorecard used to rate the progress of each of the major agencies. The human capital scorecard used a set of seven criteria to rate an agency as “green,” including:

  • Develop comprehensive strategic workforce plans and link them to annual business plans and individual performance to achieve organizational goals.
  • Put in place performance appraisal plans for senior executives and managers that link to agency mission, goals and outcomes, and effectively differentiate between high and low performers.
  • Put in place succession strategies for career executives.
  • Significantly reduce skill gaps in mission critical occupations and competencies.

Many of its criteria were in direct response to GAO’s concerns and the scorecard served as a guide for the eight years of the Bush Administration.

Beyond the Scorecard.  In addition to the scorecard, the Bush Administration undertook several other human capital initiatives that helped empower agencies’ human capital functions in an effort to address weaknesses identified by GAO and others. Some initiatives reflected the Administration’s ideological leanings, such as eliminating the labor-management partnership councils created under President Clinton and a push for contracting out functions that could be seen as commercial in nature.

Not all of these initiatives bore fruit, but it is worth highlighting them to understand the context for future personnel reform efforts, and lessons for future reformers.  The initiatives that were institutionalized include:

  • Formalized the role of Chief Human Capital Officers and created a cross-agency council via legislation.
  • Legislated the annual federal employee viewpoint survey as a way to understand frontline employee perceptions of their work culture, workplace, and managers.
  • Revised the senior executive service personnel rating system to focus it more on the achievement of agency mission results and differentiations between high and low performers.
  • Created the Human Capital Line of Business (which eventually became a component of the Shared Services initiative underway today) to allow agencies to share common HR services instead of develop their own systems.
  • Created the Human Capital Assessment Accountability Framework (which became the Human Capital Framework in 2016) that allows agencies to self-assess against governmentwide standards.

The first two were legislated; the remaining three were acted upon administratively. In each of these cases, efforts were made to engage stakeholders in supporting the development and implementation of these initiatives.

Several bolder Bush proposals to reform the governmentwide civil service pay and classification system were never acted upon, largely because of the inability to gain consensus among stakeholders. This inability to undertake broad civil service reforms preceded and followed the Bush Administration, largely because of an inherent conundrum reflected at a 2006 GAO-sponsored forum: “a governmentwide framework should balance the need for consistency across the federal government with the desire for flexibility so that individual agencies can tailor human capital systems to best meet their needs.”

Pay for Performance: A Success That Failed?  In addition to its scorecard and governmentwide efforts, the Bush Administration invested substantial energy in targeted efforts to create pay-for-performance systems for civilians in the Departments of Defense and Homeland Security (with the intent to expand them to other agencies).  These were put in place but reversed after he left office.

In August 2004, the Office of Personnel Management and OMB issued regulations establishing rules for a new pay-for-performance system for senior executives.   Pay levels and pay adjustments for thousands of executives are now determined by the evaluations earned under appraisal systems that make meaningful distinction based on relative performance.  The incentive for agencies to participate was that, if agencies certify that they comply with the regulations, they could pay their executives more than the statutory ceiling on pay.

In parallel, nearly 60 percent of the federal civilian workforce was authorized by law to be subjected to similar links between pay and individual performance.  The Homeland Security Act of 2002 creating the new Department of Homeland Security also granted the authority to establish a new personnel system that would have based all individual pay increases on performance.  Similar changes were adopted by the Department of Defense under the National Security Personnel System.   In late 2007, OPM reported that nearly 300,000 employees were covered by a performance pay system. It concluded that the initiative was successful, but that “agencies need to monitor and focus more closely on their implementation efforts.”

This move to performance pay was supported by a 2003 GAO report that described the characteristics of organizations that have successfully linked individual performance to organizational success. It examined high-performing organizations that were early adopters of this approach and saw linking performance and pay as a way of  “. . . fundamentally changing their cultures so that they are more results-oriented, customer-focused, and collaborative in nature. . . high-performing organizations have recognized that an effective performance management system can be a strategic tool to drive internal change and achieve desired results.” In addition, a 2004 IBM Center report by Howard Risher provided a guide for managers on the transition to a performance pay system.

However, GAO also cautioned that agencies that pursue this approach must have “modern, effective, credible, and validated performance management systems” to both protect workers and ensure accountability. This caution was the downfall of the initiative and a lesson for future reformers: initiatives that work in selected environments may not work more broadly because an organization’s underlying culture and operating environment have to be seen as trusted by employees before they will accept a performance appraisal system that makes distinctions with personal consequences, such as pay.

Did these pay-for-performance initiatives fail because of poor planning and execution? Or did they fail because the concept of linking pay to performance is flawed?

A 2009 article in FCW that assessed the initiatives’ failure, stated: “One of the most common complaints from employees is that their job objectives are too broadly defined to be measured in a meaningful way, which gives managers a lot of subjective latitude when it comes to rating performance. . . . The result is that many employees feel as though there is little connection between their performance on the job and the assessments they receive.”

This seems to imply “poor planning and execution” may have been the underlying cause for the failure – it wasn’t the concept of pay-for-performance but the inability of managers and employees to clearly define the work and expectations. This circles back to GAO’s high risk designation and its admonition that agencies need to create results-oriented cultures.

Lessons for Today’s Distance Work with COVID-19. While there are few efforts in the federal government to pursue pay-for-performance, the lessons of its implementation challenges are relevant today. Defining an employee’s work more concretely suddenly becomes important because a majority of the federal workforce is working from home as a result of the coronavirus pandemic. Best practices for effective distance work arrangements typically emphasize: “Clearly communicate which job positions are eligible for telework and which functions within each job position are suitable for off-site work.”

Whether it is distance work or working in a traditional office, if job objectives are vague, how will managers be able to assess the performance of their employees? And how will employees know what is expected of them? The bottom line seems to be less about empowering managers via a pay-for-performance system than it is empowering front line workers to do their jobs, by being clear about what is expected, being given the tools to do their jobs, and help them develop the skills to be successful.

Interestingly, some agencies where productivity can be measured, such as work of Veteran Benefits Administration and Social Security claims examiners, productivity seems to have increased as they moved to telework during the pandemic.

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