Adrian Miller got outstanding performance ratings every year in
the mid-1990s. His bosses knew how hard he was working to get the
West Los Angeles Veterans Affairs Medical Center's research
division out of a $1 million hole caused by financial
mismanagement. In fact, Miller and his co-worker, Marnell Davis,
were the ones who brought the division's financial crisis to the
attention of medical center officials in 1997, shortly after they
were hired to get the division's financial house in order. The
research division's entire finance staff had quit just before
Miller and Davis arrived, leaving a major mess to clean up.
Miller often was in his office before sunrise. As a program
analyst with a background in finance, he had to bring accounting
order to a division that had more people on the payroll than the
budget could bear and outstanding invoices dating back several
years that the division didn't have money to pay. In 1998, Miller
received a $600 performance award for improving the division's
finances. Miller's boss and the research division chief, Dr.
Stephen Pandol, regularly heaped praise on him. The medical
center's budget and finance officers, Bill Lysaght and Rick
Pasquale, also approved of Miller's work.
As of 1998, it appeared that Miller was a prime example of a
performance management process in working order. His bosses
provided him with direction, he did the work they wanted done and
they rated and awarded him accordingly.
Five years later, it appears that Miller and his colleague
Davis are prime examples of the perils of performance management
in the federal government.
Failing Grade
A sense of socialism runs through the government's culture,
says David Walker, head of the General Accounting Office. It's
reflected in the performance ratings that federal managers hand
out each year. Of employees rated on a 1-to-5 scale, 43 percent in
2001 were rated outstanding, and only 17 percent got anything less
than a four on a five-level scale.
Walker, who is Congress' top watchdog over the executive
branch, says there's too much of a rah-rah, all-together-now,
we're-all-dedicated-public-servants, we're-all-above-average
mentality in the government workforce. “We need to adopt true
merit-based concepts,” Walker says. He's urging agencies to set up
performance evaluation systems that make meaningful distinctions
among top, good, mediocre and poor performers.
Walker is not alone. Homeland Security Secretary Tom Ridge and
Office of Personnel Management Director Kay Coles James are trying
to put such principles into practice at the new Homeland Security
Department. In February, the Bush administration asked Congress to
approve a plan to cut $500 million out of an across-the-board pay
raise scheduled for January 2004 and instead allocate that money
to workers based on their performance evaluations. The House
approved Bush's pay-for-performance plan in May as part of the
2004 defense authorization bill. In addition, Defense Secretary
Donald Rumsfeld has asked Congress for the power to create a new
pay system that would make employees' evaluations a more important
part of annual pay changes. And the National Commission on the
Public Service, headed by former Federal Reserve Board Chairman
Paul Volcker, recommended in a January report that the government
find a better way to reward top performers and reform or drop poor
performers.
“Mediocrity and excellence yield the same pay check,” the
commission lamented.
It was not supposed to be this way. For more than a century,
government leaders have attempted to establish a civil service
that is merit-based. In 1978, the Civil Service Reform Act pushed
agencies away from pass-fail evaluation forms, on which managers
generally just checked off the satisfactory box each year, and
toward tiered ratings systems that required supervisors to set job
standards for their employees at the beginning of each year and
evaluate their performance against those standards on a 1-to-5
scale at the end of the year. But many managers never got
comfortable with the act's requirements, and the 1978 reforms
resulted in little clear linkage between employees' pay and their
performance evaluations. In the 1990s, when agencies were given
more leeway over their rating systems, many reverted to the old
pass-fail forms. As of 2001, about 39 percent of federal workers
were evaluated under pass-fail systems again.
Managers at pass-fail agencies actually list the de-linking of
monetary rewards and performance appraisals as a goal, arguing
that the two-level system allows supervisors to have more
constructive conversations with employees about performance,
rather than contentious debates over whether an employee deserves
a 3 or a 4 on a given standard. In practice, employees often find
they get little feedback at all. “Since going to pass-fail, the
most I get is, ‘You're doing a great job, keep it up,' ” says
Patricia Armstrong, a program analyst at the Naval Air Systems
Command in Lexington Park, Md.
Across government, federal workers don't think their managers
are good at performance management. In a government-wide survey of
federal employees conducted in mid-2002, the Office of Personnel
Management found that:
- Only one in four employees thought steps were taken to deal
with poor performers in their work units.
- Only two in five thought strong performers were
appropriately recognized.
- Only three in 10 thought their organizations' awards
programs provided them with incentives to do their best.
- Only one in three thought their organizations' leaders
generated high levels of motivation and commitment.
- Only one in three thought promotions in their units were
based on merit.
From the top to the bottom of the
workforce, from inside government and from outside, there is
little satisfaction with the state of performance management in
federal agencies. Despite decades of effort, accountability in
government remains an elusive goal.
Firing Line
Three years after Adrian Miller and Marnell Davis brought the
financial problems at the Los Angeles VA Medical Center's research
division to their bosses' attention, the two employees received
notice they would be fired.
In 1999, the division's financial woes came to VA headquarters'
attention, and Miller and Davis were reassigned within the West
Los Angeles center, along with Pandol, the research division
chief. Pasquale, the chief financial officer, had already
transferred to the Phoenix VA Medical Center. Several other
officials retired or got new jobs. Pandol received a reprimand in
his file, as did Dean Norman, chief of staff and the No. 2
official at the Los Angeles medical center.
Despite Miller and Davis' efforts, and the glowing performance
appraisals they had received each year, the finance division was
still $1 million in the red. Was the fault in Miller and Davis, or
in the culture in which they worked?
Norman, who was two levels up the chain of command, said Miller
and Davis had falsely assured him that the financial problems were
being fixed. But Pandol and Pasquale, who supervised Miller and
Davis, said all members of the management team at the medical
center were well aware of the situation in the research division.
Pandol, Pasquale, Miller and Davis worked on a plan to get the
research division out of financial trouble in 1997. At first,
Miller and Davis proposed asking VA headquarters for a bailout.
But Pasquale and Pandol didn't want headquarters to get involved,
fearing for their jobs and heeding their bosses' implied wishes,
according to Pasquale's testimony at a February 2001 Merit Systems
Protection Board hearing. “I reported to my supervisors . . . the
extent of the [research division's financial] problem ... and they
wanted me to quietly take care of it because they didn't want to
have bad news happen on their shift,” Pasquale said. So instead,
they laid off researchers whose salaries could not be covered by
the annual budget. The savings from the layoffs would take several
years to make a difference in the budget. In the meantime, Miller
and Davis continued to follow the questionable financial practice
of their predecessors—switching money around among research
accounts to cover the most pressing bills. Their bosses were well
aware of their actions, Pasquale and Pandol testified.
Lysaght, the medical center's chief budget officer, urged his
colleagues in a February 1997 e-mail not to blame Miller and Davis
for the financial crisis. “[We] must avoid killing the messenger.
Dr. Pandol and his team [Miller and Davis] are bring[ing] to light
and grappling with a problem which has existed for many years,”
Lysaght wrote.
But Pasquale said blame trickled down at the VA. “In [the] VA,
the buck stops with the lowest person you can possibly push it
down to,” he said.
After Norman sought to fire Miller and Davis in February 2000,
Philip Thomas, the newly appointed head of the medical center,
reduced the proposed punishment to a 90-day suspension and
demotions from GS-12 to GS-9 for Miller and from GS-13 to GS-11
for Davis a few months afterwards.
“They don't have any previous disciplinary history,” Thomas
said later. “Their performance [records] are outstanding ... But
at the same point in time, do I have confidence for them to have
any financial responsibilities in the future? No.”
Miller and Davis appealed their suspensions and demotions to
the Merit Systems Protection Board, noting they were the only
employees or managers receiving serious disciplinary action for
the research division's financial collapse.
Lacking Credibility
The downfall of the federal government's performance management
system is its lack of credibility. Employees don't believe in it.
Neither do managers.
A key problem is the set of standards that employees are
evaluated against. Job standards were much easier to define in the
industrial age than today, now that most federal employees are
expected to act more independently and use more discretion. Beyond
some basic output measures and standards of conduct, many jobs
rely on subjective standards of effectiveness.
Agencies spent 1 percent of their salary budgets on employee
awards in 2001, with about half of those awards tied to
performance ratings. More than 9,600 employees were terminated for
disciplinary and performance reasons in fiscal 2002. But many
employees believe that the process of rewarding top workers and
punishing or firing poor performers is based less on merit than on
favoritism, political pressure or supervisory incompetence.
Employees often believe that the managers evaluating them have
little real understanding of the work they do. “You have to have
line of sight to the work and validity of the criteria,” says Ward
Mannering, a former federal human resources specialist. “If you
don't have those, you have de facto mistrust.”
Conversely, many federal managers believe that the performance
management system assumes they have bad intentions. Federal
supervisors have come to feel that their bosses won't back them
up. So they avoid using the system as it was intended. “The amount
of effort and paperwork and the stress that I would have inflicted
upon myself was more costly than I was willing to spend in order
to fire a poor performer,” a Defense Department manager says.
Before tying pay decisions more closely to a performance rating
system, agencies must improve the system's integrity. “It's really
all about credibility and trust,” says Kay Frances Dolan, a
Homeland Security official involved in the creation of the
department's new performance management system. “The ultimate test
of a personnel system is, does almost everyone think it's fair?”
Review and Reversal
A case file thousands of pages long sits in the San Francisco
regional office of the Merit Systems Protection Board, detailing
the story of Miller and Davis. Everyone involved in the case
acknowledges that Miller and Davis discovered a longstanding
financial crisis at the Los Angeles VA Medical Center's research
division. It's also clear from an October 2000 VA inspector
general review of the crisis that the division was still $1
million in the hole in 1999.
Miller and Davis each were charged with more than a dozen
performance failures, including “failure to ensure the fiscal
integrity of the research and development service” and “failure to
ensure that falsification of records did not occur.”
Norman, the chief of staff who recommended Miller and Davis be
fired, argued at the February 2001 hearing that they deserved
harsher treatment than their boss, Pandol, who was merely
reprimanded. “Were they more culpable, should they have gotten
more severe punishment than Dr. Pandol? Is that fair? I would say
yes it is, because they were directly responsible for these
day-to-day financial operations,” Norman said.
The inspector general review agreed with Norman that some
blame, at least, should be placed at Miller and Davis' feet. “The
practices used by the former managers contributed to serious
operational deficiencies in [the] research service,” the review
said.
But MSPB, in September 2002, sided with Miller and Davis. “Both
appellants have no prior discipline, records of excellent
performance and there is no indication that their misconduct
produced any benefit to themselves, financial or otherwise,” the
board said.
The board said it would be unfair to harshly punish Miller and
Davis when their bosses went basically unpunished. “Although
[Miller and Davis] used some questionable budgeting practices,
their actions were undertaken with the knowledge of the agency's
senior management,” the board said. The board reversed Miller's
and Davis' demotions and suspensions.
Raises, Not Rewards
There's something of an implicit contract between the federal
government and the people it hires. For starters, federal law
essentially establishes a government job as a property right—once
you have one, it can't be taken away without due process. New
employees are often told by hiring managers that even if they
start at lower-than-market salaries, the longevity-based federal
pay system will take care of them over time. Employees can count
on annual across-the-board increases, which have ranged from 2
percent to 5 percent in recent years, plus 3 percent within-grade
increases that are triggered by milestones in an employee's
tenure. An employee hired in 2000 at a salary of $28,866, for
example, could count on across-the-board and within-grade
increases to boost his salary to $36,010 by this year—an average 8
percent increase per year. Private-sector employees averaged a 3.8
percent annual salary hike over the same period, according to
surveys by WorldatWork, a Scottsdale, Ariz.-based human resources
association.
Comptroller General Walker estimates that 85 percent of annual
salary hikes in the government take the form of across-the-board
and within-grade increases. Those raises go to all but a tiny
handful of poor performers. “Part of this is a big cultural
challenge,” Walker says. “People are accustomed to being treated a
certain way.”
Because of longstanding rating inflation, people also expect to
get high performance ratings. And they're likely to get awards
such as bonuses regularly, since such awards tend to be spread out
among many workers rather than targeted at a few top performers.
The sense of entitlement such practices create, coupled with the
sense of socialism Walker observes, creates an environment where
managers focus on non-extrinsic rewards to push performance.
“The most successful people that I have supervised had
self-motivation, a willingness to take responsibility, a positive
attitude and work ethic, and the skills to do a good job,” the
Defense manager explains. “Other than provide them the goals of
our organization, provide as many of the tools and freedoms needed
to do the job as I could, help train them, and lead by my own work
ethic, I do not feel that I made an employee a ‘good' and
‘successful' employee.”
The fact that extrinsic rewards have not been used effectively
in the federal government, despite repeated attempts to instill
pay-for-performance measures, suggests that reformers' latest
efforts to make performance management systems more meaningful
will face an uphill battle.
Marta Brito Perez will be heading up that battle as OPM's
accountability monitor. She is reviewing agencies' performance
management systems as part of OPM's ongoing assessment of
agencies' human resources policies. To get a green light from OPM,
agencies must show that most of their employees' job standards are
tied to overall organizational goals and that their performance
management systems differentiate between high and low performance.
OPM only expects 15 percent of agencies to get a green light on
performance management by July 2004.
But Perez won't accept excuses about how difficult it is to
deal with poor performers. “Managers are there to lead their
employees and if they fail to do that, shame on them,” she says.
“Our biggest problem across government—federal to local
government—is that our managers are reluctant to use the system.”
Power, Performance and Pay
To the managers who sought to reprimand Adrian Miller and
Marnell Davis, their case shows the futility of the federal
performance management process. The managers tried to hold people
accountable, spent two years in an appeals process and ended up
having their decision reversed.
To Miller and Davis, their case demonstrates the politics of
performance management. They tried to solve a financial crisis
they inherited and ended up having their careers sidetracked for
their efforts. In their view, the performance management system
was used to shift the blame, not to provide accountability.
Miller and Davis' case also shows that performance management
systems do not operate in a vacuum. The culture of an
organization, the relationships of managers and employees, and the
level of trust in the workplace all affect whether or not
performance management systems work in promoting strong
performance.
There's danger in paying attention only to the performance
management system. “A lot of organizations focus on the back end,”
says Patricia McLagan, a Washington-based management consultant.
“They say, ‘Let's just put the squeeze on people. Let's get rid of
poor performers. Let's give bonuses for better behavior.' That may
not be the real solution. The real problem may be a lack of trust,
a lack of clarity about what the vision is; it may be people don't
know what their jobs are.”
As the latest pay for performance drive gets under way, federal
managers will be given more ability to hold employees accountable
through extrinsic rewards and power over their incomes. Managers
will also have to give thought to how they themselves contribute
to, or detract from, their employees' performance.
