DRAFT #2 — PAY FOR PERFORMANCE MESSAGE POINTS
DoD TURNS PAY FOR PERFORMANCE
INTO COMPENSATION CANNIBALISM
Will End Cost-of-Living Increases;
Make Annual Raises a Zero-Sum Game;
Harm Morale and Performance
We already have real “Pay for Performance”. Unfortunately, the U.S. Department of Defense (DoD) would give us something very different: Compensation Cannibalism, where an employee’s annual raise could only increase at the expense of his or her fellow employees.
Cost-of-living increases would be gone for 300,000 DoD employees, as would quality increases for superior performance. Instead, all employees within a unit would compete for raises not against an objective performance standard but against each other. This zero-sum game would not improve performance — rather, it would destroy morale, and undermine the cooperation and teamwork needed to win the war on terrorism. And it would make employment at DoD less attractive than other federal employment or the private sector.
True “Pay for Performance” already exists in the current compensation system at DoD and throughout the federal government. Beyond the annual comparability increases approved by Congress, employees who perform well are entitled to a step increase in pay. Employees with exceptional performance may receive an additional raise, a quality step increase. Employees with substandard performance are denied any step or grade increase and may be fired or demoted.
The DoD’s National Security Personnel System (NSPS) would replace this proven approach with a bizarre scheme in which annual raises for 300,000 DoD civilian employees would become a zero-sum game, pitting colleagues against each other.
Here is how it would work: Managers would give employees “performance scores” from 0 to 100 — although a system to ensure that this scoring process is clear, objective, fair, equitable, credible, transparent and uniform has not been developed.
Each performance score would translate into a range of shares for payout – your supervisor would decide how many shares to give you within that range.” Employees with scores of between 98 and 100 would receive between 13 and 16 shares. Scores of 95-97 would equal 11 or 12 shares. Scores of 91-94 would result in nine or 10 shares. This continues down the line; employees with scores of 51-65 would receive one or two shares. Anyone with a score of 50 or lower receives zero shares.
Employees are then grouped into “pay pools” of between 25 and 500 employees. Annual “payouts” (raises) are determined by taking the total amount of money that would otherwise be available for raises within the pay pool, dividing that amount by the number of shares allocated, and then multiplying the “share price” by the number of shares each employee receives from his or her manager.
Consider these hypothetical scenarios:
You are one of 50 employees in a pay pool. For simplicity’s sake, let’s say you and your colleagues each earn the same $40,000/year. Your pay pool’s combined salaries thus total $2 million. The total amount of money available for raises — equal to the amount normally appropriated for cost-of-living increases and quality increases under the current system — comes to 5 percent, or $100,000.
Your manager considers you an outstanding performer and gives you a performance score of 99, which translates into 15 shares. Now, let’s look at what your raise would be under three different scenarios:
The “performance scores” of you and your colleagues translate into an average of eight shares per employee, so 400 shares are issued (50 x 8). Each share would be worth $250 ($100,000 divided by 400 shares). Your raise would come to $3,750 (15 shares times $250) or 9.375 percent. By contrast, an employee with eight shares would receive a raise of $2,000 or 5 percent, and an employee with two shares would receive a raise of $500 or 1.25 percent, falling behind inflation.
Your manager believes most of your co-workers performed at a very high level and so the average number of shares granted per employee is 12. This would increase the total number of shares to 600, dropping the share value to $167, and reducing your raise to $2,500 or 6.25 percent.
Your manager believes your co-workers’ performance was mediocre at best, so the average number of shares granted per employee is four. This would reduce the total number of shares to 200, increasing the share value to $500 and bringing your raise up to $7,500 — an 18.75 percent increase!
Under each of the three scenarios described above, your raise would vary widely, not due to your performance, but rather to the performance of your colleagues. This creates a perverse system of incentives and disincentives. You would benefit when your colleagues perform poorly and suffer when they perform well. You could actually receive a financial reward for sabotaging or undermining your colleagues’ work, and be financially penalized for working collegially and supporting their efforts!
Suggested sound bites and message points
DoD’s plan would substitute Compensation Cannibalism for the real “Pay for Performance” system that already exists, as employees’ raises could only be maximized at the expense of their colleagues.
DoD’s Compensation Cannibalism plan will sabotage the war on terrorism, by undermining the cooperation and teamwork necessary for success. It will pit employees within the same unit against each other for raises, creating an environment of mistrust and animosity.
Rather than creating a win/win scenario in which performance improves across the board, DoD’s Compensation Cannibalism plan will turn pay into a zero-sum game, in which no one gains unless someone else loses.
We already have real “Pay for Performance”-- and it works. All Compensation Cannibalism will do is replace it with a perverse system of incentives and disincentives — one that encourages cutthroat competition between colleagues and discourages cooperation and teamwork.
It may be a dog-eat-dog world out there, but the last place we need a dog-eat-dog workplace is at DoD.
Compensation Cannibalism will destroy morale at DoD and make it harder for DoD to compete with the private sector for the best and brightest employees.
The most successful companies in the world make teamwork and cooperation the cornerstone of their workplace environment. Why is DoD taking the exact opposite approach?
Compensation Cannibalism is the human resources equivalent of Friendly Fire.
Can you imagine what would happen on the battlefield if the environment created by Compensation Cannibalism somehow made its way into the armed services? Instead of soldiers covering each other’s backs, you’d have fraggings and friendly fire.
This is Alice in Wonderland personnel policy — verdict first, trial later. Each employee is to have raises determined by a new 100-point scoring system — but a system that it is clear, objective, fair, equitable, credible, transparent, uniform and not subject to abuses or political influence has not been developed. Under NSPS, it does not ever have to be developed!
DoD’s Compensation Cannibalism plan is premised on the myth that the best employees are held back by mediocre colleagues. But it will create an environment in which the best employees can only move ahead financially if they have mediocre colleagues. That logic verges on Orwellian!
At a minimum, our public servants should be entitled to keep up with increases in the cost of living. Yet DoD would destroy this pillar of the federal personnel system and simple decency.
This is “Survivor”-style personnel policy. Unfortunately, working at DoD is not reality TV, it’s real life. And the real-world consequences of Compensation Cannibalism at the department responsible for protecting Americans from foreign enemies would be very grave indeed.
Now we know what NSPS really stands for: Non-Sensical Pay System.
Rebuttals to DoD’s rhetoric
DoD Rhetoric: You’re making this up, trying to scare people. It is nowhere in any documents about NSPS.
The on-the-ground reality: The devil is in the details. This administration is very clever at trying to disguise its most radical and controversial initiatives and this is a textbook case. So let’s look at the fine print. There is clear and explicit language that the “Best Practices” initiative of demonstration projects utilizing alternative personnel systems “will be the foundation upon which NSPS is built.” A careful review of these demonstration projects makes clear that they have already replaced Pay for Performance with Compensation Cannibalism and that is what the new pay system will be under NSPS.
DoD Rhetoric: The current system does not work. Only a fraction of the poor performing employees who should be denied their step or grade increases actually suffer this consequence. And too many high performing employees do not receive the extra quality step increase that is their due. Only our plan will create true pay for performance.
The on-the-ground reality: First, we do not accept the premise of this statement. If you have real data proving your point, reveal it to the public. Second, even if the current system wasn’t being implemented properly, the solution is obvious: overcome the barriers and make it work, don’t blow it up and replace it with a bizarre system that will make matters worse.
DoD Rhetoric: Under NSPS, for the first time, the best performing DoD employees will be able to get the kind of raises their performance merits. And underperforming employees will get the message in their pocketbook that they need to improve or get out. Both changes will dramatically improve the quality of work at DoD.
The on-the-ground reality: First, there is no system in place to ensure that scoring truly reflects performance rather than a manager’s whim or political bias, and that there is uniformity and objectivity. Second, those employees scoring the highest cannot get the raises they are allegedly due unless a significant number of their colleagues get low scores. The goal should be for everyone to perform at the highest level and to be paid commensurate with their performance. Compensation cannibalism actually prevents DoD from achieving this goal.
DoD Rhetoric: Managers are hamstrung from managing effectively under the current system with its rigid, bureaucratic structure, and millions of hoops through which they must jump. They need the flexibility and discretion to be able to reward their best performers and weed out their worst performers. NSPS will give that to them.
The on-the-ground reality: That’s a myth — under the current Civil Service system managers can indeed manage effectively, reward their best performers and weed out their worst performers. Under Compensation Cannibalism, managers’ jobs will be made tougher because the teamwork and cooperation they need will go out the window.