Full Employment for DOD HR Specialists and Attorneys

November 30, 2003

The author, who is writing under a pseudonym, is a 32-year Department of Defense human resources professional. The opinions in the article are those of the author.

Just in time for Thanksgiving, President Bush got together with Congress and delivered a real turkey to white-collar federal employees. I'm not referring to the total legislation that authorizes DOD to make some radical changes to the civil service personnel system. There is the potential for some long-needed change coming from that package. If DOD takes full advantage of that new authority to curb the inclination of unions to burn millions of dollars of labor on mostly trivial issues, it will certainly be worth a bit of trouble, but I'm not sure it will outweigh the price we're about to pay for our new turkey --- "Pay-for-Performance."

PFP, a major centerpiece of the DOD legislation, will initially impact white-collar employees, who, once the system is implemented for them, will be moved from the General Schedule to five "career groups," each with four "pay bands." Blue-collar employees will be spared, at least at first.

There is little doubt in my mind that this provision will do little more than keep a lot of HR professionals and lawyers occupied, to no good end, for years to come. Congress has been spoiling to get civil service employees under a PFP system for years.

The theory seems to be that we lazy, unmotivated civil service employees will catch fire once such a system is put in place. Who can argue with the concept that people who perform better should be paid more than their lesser performing colleagues? Over the past year, various legislators and administration officials have called for this attractive-sounding version of workplace justice. There's just one big problem; it won't work. It never has and it never will. Anybody who says they've seen it work in a public sector setting just doesn't know the facts.

It's not that I doubt the intelligence and creativity of my DOD HR colleagues and their intention to design a crackerjack PFP system. The problem is that any system designed to tie compensation closely to performance within the federal service can't possibly succeed, even with everybody's best efforts.

That's because the decisions for movement within pay bands, thus increasing pay, will be based on performance appraisals of some type. Virtually all increases in pay will depend on the results of the appraisal process. So this new system is based on the presumption we have the ability to do sufficiently competent performance appraisals and ratings that we can feel comfortable that future pay raises should be based on their results. One who receives a high performance rating will get bigger raises than those with lesser ratings.

It sounds like the merit system at its best! I only wish some guru would emerge to tell us how to make it work. None have emerged in the last several thousand years. In fact, some pretty credible experts counsel against the use of performance appraisals at all, including Edwards Deming, Stephen Covey and Philip Crosby, just to name a few.

So the first big problem is simply that we suck at performance appraisal. I spent a period of my career evaluating an agency's execution of previous performance rating systems. I helped train managers and supervisors on how to execute them, with the sincere expectation that if we trained people well, they'd get it right. I never found an organization that was able to get performance appraisal done in an effective way (whatever that is).

Everybody hates them, and for good reason. The reason we are so bad at it is because performance appraisal, and even more so, performance "rating," are flawed concepts. I could write a book about the reasons performance appraisal and ratings don't work, but somebody beat me to it.

If you want to see how fruitless our efforts to execute an unexecutable system will be over the next several years, read Abolishing Performance Appraisals: Why They Backfire and What to Do Instead by Tom Coens and Mary Jenkins (Berrett-Koehler Publishers, Inc. San Francisco 2002). This book is articulate and deconstructs the concept of performance appraisals. The exhaustive research that underlies that book reveals the numerous flawed assumptions that underlie performance appraisal and rating systems. The sum of their findings is that even the best designed and executed systems fail to deliver the hoped-for improved performance and are typically damaging to performance.

Anybody designing a performance appraisal and rating system should be required to read it. Of course they would probably give up their assignment if they took me up on that suggestion.

I have to ask, has anybody with any significant knowledge of motivation and other aspects of human behavior been consulted before this PFP gem was conceived? I think there is little controversy among those who have read related research that people aren't motivated to higher performance by offering them more (or less) money.

The only arguable exception would be situations involving "piece work" or commission-based salaries, in which cases no appraisal is needed; the results drive the pay, not some appraisal. How many federal civil service employees are paid by the piece or on commission? The reality is that people who are performing well now will probably continue to perform well, unless we manage to demotivate them with a poorly executed performance appraisal and rating system. It's insulting to them to suggest they would perform even better if we held out a big financial carrot to them. So it's doubtful PFP will change their performance.

Do we really believe those we perceive to be underperforming will suddenly improve with the advent of potential higher compensation? I think most modern theorists in motivation would tell you that most people are doing their best under the circumstances in which they find themselves. Nobody comes to work and says, "I'll just give it a half-hearted effort today." Their performance is a function of a myriad of things, including how they're treated, how well they're trained, the tools available to them, the design of their work systems, their interaction with co-workers, etc.

The reality is that a conversation held with an employee a few times each year, at which they receive well-intended "feedback," has no chance in hell of increasing their performance, and a good one of diminishing it. So this new system, at best, may make some managers feel better, knowing they gave more money to the better performers. Of course, that may be at the expense of the feelings and performance of those who will be labeled as the lesser performers, or the good, but not great, performers who now know their supervisors don't think they're as great as they think they are.

Alternatively, we could give everybody something equivalent to a 4 on a 5-level scale, like most managers did before pass/fail systems were put in place. Depending on the design of the system, that will either mean nobody will get much, or our payroll costs will escalate above current levels to keep the peace. I am sincere when I say I expect the advent of the PFP system will probably have the largest negative impact on organizational performance of any single event in a long time.

Oh, and don't forget about the people who won't take their ratings lying down. That's discrimination complaint fodder. We will soon return to hearing, "I didn't get the rating I deserved because I'm over 40, female, male, orange, Albanian, etc." HR professionals in the Navy will remember what a significant part of our discrimination complaint and grievance workload flowed from performance ratings, and that was before an employee's entire raise and "promotions" hinged on the ratings.

Research reveals that most employees sincerely believe they are above average, if not outstanding. So who wants to have to tell their spouse they're getting little or no raise because they got a less-than-outstanding rating? Do you think they will perform better, or file a complaint? I'm betting on the latter.

So fellow HR professionals, here's our future. First a crash, Herculean effort to train our agency's employees and managers about the new system. Then, the complaints will begin to flow as ratings and raises are executed. A few years down the road, the consensus will build that this whole thing was a mistake. GAO will point out how the new system drove up labor costs and how badly agencies carried out their responsibilities for performance appraisals and ratings. When the Democrats take office, as they will inevitably do sometime within the next decade, they will dump the new system, calling it yet another failure of the previous Republican administration. In the meantime, we loyal HR professionals will do our level best to make this unworkable system work.

What should we be doing instead? Well before we abandon the current system, we ought to have a better plan. It's a difficult issue. "Gainsharing" is a concept that has seemed to have some promise, but such variations on "profit sharing" are very dicey in public employment. Organizational results in government agencies are often more affected by the vagaries of political decisions and poorly designed regulations than the efforts of employees.

But it's clear that systems designed to reward individual performance, as opposed to organizational success, are doomed to fail. So we should probably be working in that direction. But the old general schedule pay system is a lot like our form of government; it's not great, but it's a lot better than the alternatives we know about.