John Gage’s Statement to NSPS Review Panel on June 25, 2009

Thursday June 25, 2009

Thank you. On behalf of the 260,000 DoD civilian workers that we represent, I want to thank the Panel for inviting us to this hearing.  Since time is very limited – I will highlight several issues.

First, we are not clear about what exactly is meant by design principles or program objectives mentioned as part of the task group’s charge. But if the principles and objectives were designed to:

• suppress future wages,
• lower future retirement income,
• eliminate due process,
• destroy employees’ collective bargaining rights,
• create years of controversy,
• undercut morale,
• mislead the Congress and the employees with half truths,
• allow total flexibility to undermine merit principles,
• make the pay process incredibly complex and impossible to understand,
• eliminate merit promotions,
• take money from some employees and give it to higher salaried employees in the name of national security and without sunshine or transparency to the employees themselves,

 

then we can unequivocally confirm that those design principles have been incorporated and those program objectives have been fully met! 

In all seriousness, NSPS is a failed system, disliked by employees under it and feared by employees concerned they will come under it. NSPS should be done away with completely, not tinkered with or modified. 

The sooner the better.

Since Congress reestablished in the 2008 NDAA the employees’ rights to due process and collective bargaining, I will focus on the NSPS pay for performance system. I will highlight only a few of the multitude of critical failures as they relate to transparency, fairness, merit principles or effectiveness.

The GS pay system is simple and transparent. By contrast, NSPS is extremely complex, secretive and completely lacking in transparency.

While there is a significant pay gap relative to the private sector that should be closed to keep the federal government competitive; that is a matter of budget not process.

Some career managers and academics who are proponents of NSPS doubt that the budget problem will be overcome, and they despair of having more money to recruit and retain higher valued positions. So they see NSPS as a way to solve that problem because it is easy in this system to shift money away from less valued positions and pay pools to those pools with more highly valued positions. In 2005, the Defense Business Board also was concerned and recommended that firewalls be built into the system to prevent this from happening.

DoD ignored these recommendations because those at the top wanted more money for those at the top. DoD’s own Evaluation Report of NSPS released June 22, 2009 makes the movement of money from less salaried employees to higher salaried employees crystal clear on the chart (figure 2.8) on page 2-15. The evaluators call it a net draw. In other words, “how much do you get back versus how much of your money went into the pool”.  

Those making below 60K had a negative net draw or “lost money”. The 60-80K group had a positive net draw. Those at 80-100K gained more. Those making over 100K received the most money back with the largest positive net draw. This is not reform but cannibalism that hurts the mission. Personnel reform should not be a cloak for fixing a budget problem. It doesn’t work. This is not fair, undermines motivation and is all a big secret to the employees.

Pay bands are similar to grades in one respect, they both have beginning and end salary points.  But unlike under the General Schedule, where the value of the position is clearly identified, in NSPS it is not transparent. Where in the band a job is valued is not always clear, so the equal pay for equal work system requirement is impossible to achieve.  Although it may appear at first blush that salary potential may be greater for some positions in a band, employees soon learn that a often unknown non transparent “control point” has been established which limits the salary below the top of the band.

Pay bands also undermine the merit system because merit promotions are virtually eliminated.  Under the GS, jobs are posted for all to see, and people are hired for those positions following a competition based on merit. This is not only transparent and honest, but a promotion is very public recognition for the individual’s performance.

By contrast, under NSPS, merit promotion is rarely used.  Instead, employees have their duties increased with additional pay by their supervisor through what is simply called a reassignment. No posting or open competition and no transparency.  Even if there is no favoritism and motives are pure, the perception becomes reality acting as a cancer. There is no merit competition and no “public recognition” for the individual and less money then under GS promotion policies.

The rating process is not transparent and does not link to actual performance. Supervisors have been ordered NOT to reveal to their subordinates the ratings and payouts they are recommending to the pay pool panels where the ratings can be rewritten by others who do not directly supervise the employee.  An Army instruction guide for supervisors provides them with a script when an employee asks for his rating.  The supervisor’s proper answer in such a circumstance is,
       
“My recommendation is just that – a recommendation – that I will not share with you.  The higher level reviewer, and the pay pool panel, will be looking at my recommendations in terms of the larger organization.”

This hardly encourages meaningful performance communication between employees and their supervisors. Imagine the conversation between you as the supervisor and your employee. You thought she did a great job and told her so even though you could not reveal your rating of 5.  Three months later, you have to tell the employee that a “pool” of higher level supervisors who do not know her or her work product, has declared that she didn’t do so great—and that her rating is a 3. The employee’s trust in the boss is gone and the supervisor’s ability to lead anyone is gone.

Further, the rational for the decision on how many shares you get and how much of the share is either “salary or bonus” is completely a “secret” and not challengeable. Employees in the same pool with the same job may get the same rating and same share amount but one is virtually all salary while the other is virtually all cash bonus.  Also, the value of a share varies with every pay pool. In some places, a share is worth 1% of salary, in others 1.5% and in yet others 2%.  These vary among and within components and all the way down to individual workplaces and individual employees.  In some workplaces, an employee who got a 3 could get more than someone elsewhere who got a 4 or even a 5.  Some pay pools make distinctions among 3s, 4s, and 5s giving individuals who got the same ratings different numbers of shares.  In other words, there is no consistency whatsoever and the information is not shared for all to see.

DoD contracted out its own internal evaluation of NSPS results for 2008 to SRA International which was released last week. They judged themselves according to five parameters having to do with encouraging high performance, agility, credibility and trustworthiness; and fiscal controls.  They say failure on any one of them requires serious reconsideration of NSPS – and NSPS failed on all of them. Many of its specific findings corroborate much of AFGE’s criticism of NSPS. For example:

• a majority of NSPS participants told SRA that the system has not improved the link between pay and performance
• NSPS has not improved communications between supervisors and employees regarding performance expectations or feedback
• reassignment caps and control points undermined the performance pay system, negatively affecting retention.
• focus groups expressed doubt over whether performance ratings matched actual performance. 
• employees generally see “NSPS as worse than the GS system for hiring, placement, and promotion.”  
• the report says that a majority of employees do not believe that “pay pool panels help ensure fair ratings and payouts.”
• the study also found that employees were worried about the effect on their future retirement of cash bonuses rather than pay increases.

 

The Evaluation Report confirms that employees with the same performance ratings received different numbers of “shares,” but also that the share values varied throughout DoD.  One of the most damning statistics was that the percentage salary increases, and the percentage value of bonuses were more correlated with income level than with performance level.  In addition, when pay pool managers exercised their discretion over how many shares to award, higher salaried employees received the higher level of shares more frequently. In short they are treated more favorably. The rational is secret and not challengeable.

The report states plainly:  “…in general, the higher the pay, the higher the rating, the higher the proportion getting the higher number of shares for ratings of 3 or 4, the higher the percent who received an increased rating due to the contributing factors, the higher the payout percentage.”

AFGE has also examined the data from the 2008 payouts to see whether there is any pattern of discrimination against women, racial minorities, or a particular age group.  Our preliminary findings indicate that there has been discrimination.  And the most pronounced discrimination has come from the step in the process most open to managers’ discretion:  the awarding of shares from the pay pool.  Even if performance ratings were objective – and there is no indication that they are – the decision of how many shares to award to individuals with a given rating is discretionary.  And the data clearly show that at this crucial step, NSPS has facilitated racial discrimination in pay.  

With regard to other factors, in general, being a racial minority had a negative effect on your payout, and being African American had a more negative effect than membership in other racial groups.  This combination of racial and class bias in ratings, the movement of money to higher salaried from lower salaried employees, and in the distribution of shares to workers with the same performance ratings is unconscionable.  To be frank, NSPS is a class action lawsuit just waiting to be filed.

Though the report strains to put a positive spin on its overall findings, it is forced to admit that from employees’ perspectives, it might require a generational turnover, when no current employee remembers the GS system, before NSPS might be perceived as either fair or superior to the former system. 

NSPS is a tainted, fatally flawed system, created in a poisonous atmosphere by ideologues seeking to destroy collective bargaining, federal unions and employee rights and protections.  The pay, performance management, classification, and staffing systems created under NSPS are unwieldy, discriminatory, complicated, costly, opaque, and mistrusted by DoD civilian employees at all levels.  Despite its short existence, unlawful discriminatory practices are already coming to light.  NSPS must be killed.  No amount of rehabilitation can make it acceptable or workable.  We are willing and eager to work together with the Department and the Administration to find ways to improve the personnel systems so that they better meet the needs of federal workers, their agencies, and the American people.  But that must be a future step, after NSPS no longer exists.

That concludes my statement.  I will be happy to answer any questions.

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