(September 17, 2007)

In order to further improve the lines of communication and to respond to the concerns between the National VA Council and you our members, I have established a National VA Council Briefing. This NVAC Briefing will bring you the latest news and developments within DVA and provide you with the current status of issues this Council is currently addressing. I believe that this NVAC Briefing will greatly enhance the way in which we communicate and the way in which we share new information, keeping you better informed.

Alma L. Lee

National VA Council, President

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In This Briefing:  Arbitrator rules against SEC pay for performance system

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Arbitrator rules against SEC pay for performance system
By Alyssa Rosenberg arosenberg@govexec.com September 7, 2007

A mediator ruled on Thursday that the pay-for-performance system adopted by the Securities and Exchange Commission in 2003 is illegal because it resulted in discrimination against African-Americans and employees who are 40 and older.

"This decision should serve as yet another warning against rushing to implement pay-for-performance systems in the federal workplace," National Treasury Employees Union President Colleen Kelley said. "The SEC system failed because it lacks fairness, credibility and transparency, which are critical elements in any merit-based pay system."

"We are reviewing the decision and considering appropriate action," SEC spokesman John Heine said. He declined to comment on what those actions might be. Both SEC and NTEU have 60 days to propose remedies to the arbitrator from the National Arbitration Center.

NTEU has filed separate grievances against the agency on behalf of the 2,200 SEC employees the union represents for every year the system has been in place. It remains to be seen whether those grievances will be addressed separately.

SEC implemented the pay-for-performance system after the Federal Service Impasses Panel found in a November 2002 ruling that the agency's proposal "reflects a pay structure that was well-researched, based on best practices from other agencies, meets the agency's needs, and is comparable to those of other financial regulatory agencies." That ruling was in response to an impasse in negotiations over 2002 pay increases for SEC employees.

The system split SEC employees into 15 pay levels with up to 31 steps in each level. Outstanding employees could receive raises of up to three steps within a level each year, or about 4.5 percent of their salaries.

But, NTEU argued, the agency based the raises on vague performance requirements that were not specific to the jobs the union's members performed.

"The agency success factors were clearly not 'tailored' for each office and division in the agency," NTEU's brief for the case stated. "The failure to use tailored factors was deeply prejudicial to employees, who had little way to know what their supervisors or the compensation committee were looking for in making merit award decisions."

In particular, NTEU said the subjective nature of the performance metrics adversely affected African-American employees, especially those at higher pay grades. A statistical analysis performed for the union showed that only 16 percent of African-American SEC employees received raises of three steps, while 30 percent of white employees received those maximum raises. Ten percent of African-American employees received no merit-based pay increase, compared to only 6 percent of white employees.

That analysis also revealed that while half of SEC employees were 40 or older, 67 percent of the employees who received no merit-based pay increase fell into that age range, and those older employees received only 45 percent of the three step increases.

"The lesson to be learned is the foundation of a viable pay-for-performance system is built upon the foundation of a solid performance management system," said John Palguta, vice president for policy at the nonprofit Partnership for Public Service. "If that foundation is not solid, attempts at pay for performance can and probably will go awry."

But both Palguta and Kelley said the ruling should not discredit pay-for-performance systems, but rather, provide an incentive to get them to work properly.

"There is no question that a system intended to reward high-performing employees should be crafted in conjunction with employees and their representatives," Kelley said, adding NTEU already is working with SEC on its performance management and pay systems.

"The value of a performance-sensitive approach to pay is that it forces managers to take the performance management system seriously since they will have to be able to explain their decisions," Palguta said. "Done correctly, a good performance system helps insulate a manager against claims of bias or favoritism."

Kelley said the ruling was further proof that reliance on the Federal Service Impasses Panel can produce bad policy for agencies reluctant to negotiate with their unions.

"The best agreements are those reached and agreed to at the bargaining table by both parties," she said. "The second-best option is bringing in a neutral mediator, when necessary, to aid that process. Too often in this environment, agencies are going to the FSIP to get their proposals imposed. This is an example where such a strategy has backfired on the agency."

COMMENTS

    • 32648
      Does anyone think that the reason that A-Americans and employees over the age of 40 generally receive lower pay increases is because they are more likely to not be given the chance to work on highly visible projects? Moreover, having great communication skills, advanced degrees, and cultural influences that demand that you do your best is still not enough when the manager that you are working for does not have the same credentials but will always remind you that he/she is in charge of the current situation.
      Jay Posted September 10, 2007 12:21 PM

      32639
      I completely agree with Greg D's comment regarding the fact that the GS system favors seniority, and much to heavily in my opinion. It is disheartening to know that my colleagues that don't contribute a fraction of what I do will always be paid more than me. I received the highest performance rating this year and got a $5K bonus, but that doesn't even begin to close the gap considering my colleagues all make 10-20K more than I do. Where is the fairness here? These people all make six figure salaries and put forth VERY little effort, never want to take initiative, and couldn't think outside the box to save their lives. Yet they have been rewarded simply because they showed up for work every day!
      Underpaid Worker Posted September 10, 2007 11:49 AM

      32636
      While I agree that some changes were needed so the Govt can retain good employees and more easily get rid of poor ones, I am alarmed as I learn more about the NSPS system, and feel sorry for my fellow employees, who I will leave behind since I am eligible for retirement. I think the DOD will find that the voluntary exodus of very competent employees who are eligible for retirement will snowball with implementation of NSPS. The DOD is calling this "performance-based pay" but it really will be budget-based pay to the extreme, with the opportunity only to reward the very select few, while providing no incentive for the majority of workers. My dream for my fellow workers is that this system will either be stopped or revised drastically so it is more fair to all. Thank God I am going to escape before it affects me.
      Deb Posted September 10, 2007 11:44 AM

      32634
      I always find it amazing that employees have vaste access to their fellow employees' work data.
      For example, Tom states: "Why isn't it possible that A-Americans and older employees don't work as hard as others at the SEC? At my Agency, that's how it is." So at your Agency you review the work of everyone, or are you just making the statement based on perceptions?
      Per Son Posted September 10, 2007 11:04 AM

      32628
      Pay for Performance (PFP) probably got as much research put into it as the No Child Left Behind Act did, before being forced into "implementation." Preliminary signs already indicate PFP might work (as much as the NCLBA has)... but has a long way to go if it's going to be implemented correctly, fairly and in a way that the employees will trust.
      wsmr Posted September 10, 2007 10:48 AM

      32621
      Pay for Performance is all smoke and mirrors show that takes away the amount of money the rank and file earns. The average Within Grade Increase is around 3% of your pay. Then your bonus is on top of that and that reflects how well you worked the previous year. Average "share" under NSPS for my old organization 1.2 percent. if I would of been lucky enough to get 2 shares i would of received 2.2% and that’s including the bonus. And because of pay banding it would take 5 years to achieve a 13 which I am eligible for in two months in the GS system. Its not pay for performance its less pay for more work! I left and went to an agency that is GS pay scale. They were sorry to see me go but I come to work to make as much money as i can not donate as much of my time to the Bush and Company Fiasco. Good employees will leave immediately as they are always in demand. DoD will be left with the poor performers in the end because they cant move and the less employees you have the smaller the pay pools and the less employees will get. NAVSEA paid out .98 percent per share last year. Wake up and get out of PfP before we have nothing but poor performers.
      Greg D Posted September 10, 2007 10:17 AM

      32619
      To add to Tom G, management goals are often in conflict with the principles to effectively employ any PFP system. A portion of management evaluations is a focus on keeping personnel costs down. This automatically eliminates any incentive raise that managers could present as rewards for superior performance because it is one of the only components of PFP and personnel costs that they have total control over. Managers simply want to pass the responsibility for raises upward where organization-wide implementations do not affect their own evaluations and, by extension their own raises/promotions. The tools within PFP are often very good, but poor implementation control and contrary management goals sabotage the whole thing. The net result is often the same as a GS plan where seniority is the sole determinant for pay, but with substantially larger splits based on tenure (sometimes orders of magnitude). Newer employees often have less of an incentive to perform above the bare minimums because they are already being paid relatively poorly compared to others who have been around longer yet hold exactly the same job and same level of responsibility, and no amount of productivity or innovation will be recognized through PFP in any meaningful way to close that gap.
      Philip Posted September 10, 2007 10:16 AM

      32614
      What do you expect when the SEC's own HR office is so mismanaged? Three years ago, all of the professionals in their Employee/Labor Relations office, who were over 40, were either forced out or found other jobs in a four month period. The next year, one of the remaining professionals was given a performance award by the Chairman of the SEC, but the Head of Human Resources decided that her performance was not worthy of any Performance Increase. If the folks who are supposed to enforce SEC's PFP program play fast and loose with the rules, what can you expect from the agency as a whole?
      George Posted September 10, 2007 9:58 AM

      32591
      The attempts at pay-for-performance systems have only eliminated the GS progression by time-in-grade through the steps. Otherwise I have seen only the relaxing of supervisors' responsibilities to document employee performance. In my observations high-performing employees could be rewarded even in the GS system with a quality step increase and other performance awards. Pay-band has proved to be boon to the employees by accelerating their pay to the top of the pay-bands. The failure of all the so-called pay-for-performance systems rests squarely on the shoulders of management for 2 reasons. The first is the near impossibility of developing a fair and equitable pay system (non-discriminatory) that discriminates according to performance. The second is the lack of discipline in implementing an objective performance rating system. Too much time and effort is placed on developing new pay-for-performance systems and too little on proper implementation.
      Tom G Posted September 10, 2007 8:27 AM

      32582
      I work for the DOD. They put in pay-for- performance 3 to four years, ago. And I have not progressed any place. I have a degree, Black and looking for retirement with really nothing. discrimination is a under-statement. My supervisor do not like. And the lowest percentage raise has been given by her. Please do away with pay-for- performance It's not fair and help kill the American Dream for most of us. I appreciate your hard work.
      Alice Brewer Posted September 10, 2007 8:04 AM

      32579
      I stated early in the request for opinions, that this system does NOT eliminate the biases which already exists in our employment system. I also knew early on that the people receiving the higher awards dollar would continue to do so. I agree that in the evaluation process there is nothing concrete to justify or contradict monies/raises given. This appears to be an even more massive way to exploit, bring about anger and to promote those who "know someone" in lieu of those that do their job. When the government rushes to do things of this nature regardless of what it's loyal employees think, it backfires and very well should. I do agree also that the system in place allows the same discord, but there are some checks and balances and avenues one is privy to if they are not in agreement. This system is prejudiced by the implementers. I would like to no the ratios of the races who voted that this is the system to beat all systems?
      ROSEMARY MCMILLAN-CRAWFORD Posted September 10, 2007 7:52 AM

      32547
      All of these pay for performance systems such as NSPS are designed to pander to abusive management power and cut salaries for the working rank and file. As one of Bush's political appointees stated, implementing NSPS puts Civil Service at the "Tipping Point". No doubt employees resisting pay for performance are just a few "dead enders". I suspect that the Bush administration will do to Civil Service just what his boneheaded policies have done for Iraq. In order to save it, it had to be destroyed.
      John Post Posted September 9, 2007 1:16 PM

      32543
      Why isn't it possible that A-Americans and older employees don't work as hard as others at the SEC? At my Agency, that's how it is. Looking at a situation quantitatively does not guarantee the full picture. A qualitative analysis might reveal lower motivation, education, and communication skills for these groups that are alleging discrimination. I'm so sick of re-engineering every process for those slackers who refuse to step it up.
      Tom Posted September 9, 2007 10:30 AM

      32509
      Yes, I'm sure they had in mind "How can we get over on black and old people?" Apparently, once again, there are only two races working for the federal government. Of course it must be racial because there is no way cultural influences affect job performance, right? Perhaps next time this "mediator" will use the scientific method to arrive at his conclusions.
      Greg B Posted September 8, 2007 10:29 AM