U.S. Office of Personnel Management www.opm.gov - Recruiting, Retaining and Honoring a World-Class Workforce to Serve the American People

Statement of the Honorable
Linda M. Springer
Director
Office of Personnel Management

before the

Subcommittee on the Federal Workforce
and Agency Organization
Committee on Government Reform
U.S. House of Representatives

on

The Working for America Act

October 5, 2005

Good morning, Mr. Chairman and Members of the Subcommittee. I want to thank you for the opportunity to appear before you today to discuss the Administration's legislative proposal for improving personnel systems in the Federal Government.

Simply stated, the Working for America Act will require agencies to better manage, develop, and reward employees to better serve the American people.

The current personnel system was designed in the late 1940s to maintain Governmentwide consistency for similar jobs based on the principle of the same pay for the same job, with on-the-job longevity serving as a surrogate for performance. However, today's workforce is far less uniform than it was 50 years ago, with federal employees performing a wider range of roles at different proficiency levels. Today, agencies must be able to manage, develop and reward employees as the professionals they are.

American citizens expect the Federal Government to achieve results and better utilize their taxpayer dollars. The goals of individual employees must be tied in a meaningful way to agency missions. Further, individuals deserve to know how their performance contributes to that mission.

The Working for America Act will establish a Governmentwide personnel system that creates an environment where employees have the greatest opportunity to reach their full potential. Under the proposal, individual employees would be provided clear performance goals, managers who can help them be successful, and performance- and market-based pay.

A system that values performance and potential must also ensure accountability. The public expects it, as do Federal employees. The 2004 Federal Human Capital Survey reveals that only 27 percent of Federal employees believe steps are taken to deal with poor performers and only 29 percent believe differences in performance are recognized in a meaningful way.

An employee's career (and pay) potential should recognize achievement and not be determined by the passage of time or obsolete job classifications. For example, General Schedule pay grades were defined by a law that has remained largely unchanged since the middle of the last century and serve as a legacy of the industrial age. It takes employees up to 18 years to reach the top of a General Schedule pay grade, regardless of how well they perform. Our proposed legislation recognizes that enhancements to the personnel system must be made within the context of the core values, principles, and protections of the American civil service. Reform can be accomplished while fully preserving core principles and protections. In fact, the Working for America Act promotes merit system principles by putting them into practice more broadly.

Personnel systems that make it more likely that employees reach their full potential will soon cover more than half of the Federal workforce. The rest should be afforded similar opportunities. The Working for America Act ensures that remaining agencies are not left at a competitive disadvantage.

The proposal establishes a responsible process for implementing these changes. Each agency will design its individual plan for using the flexibilities once the general authorities are approved. In particular, no agency will be able to use the pay features in the bill until OPM certifies the agency's readiness. We have worked closely with the Chief Human Capital Officers Council in identifying these needed authorities. They support these flexibilities and acknowledge they will be fully accountable for ensuring their successful implementation.

Let me summarize the central elements of the Working for America Act:

Preserving Core Ideals

The civil service system must preserve core civil service principles.

The Homeland Security Act preserved these ideals in law for employees in the Department of Homeland Security (DHS), and they are similarly prescribed for the National Security Personnel System (NSPS) in the Department of Defense (DOD). In each of those legislative initiatives, Congress recognized the key role OPM must play to provide overall coordination and oversight of decentralized human resources management systems that fulfill the merit system principles and preserve the fundamental values woven into the fabric of the civil service. The Working for America Act reflects the same commitment to those values and ideals. The legislation articulates OPM's modern leadership and stewardship responsibilities by revising chapter 11 of title 5, United States Code, to reflect OPM's role in coordinating decentralized agency human capital management strategies while ensuring they continue to comport with core system requirements and parameters.

Establishing a Results-Driven, Market-Based Pay System

A pay system is needed that does a better job of reflecting differences in occupations, locations, and unique agency requirements. The General Schedule is ineffective in this regard, with its rigid, "one size fits all" approach masking often dramatic disparities in the market value of different Federal jobs.

Under the Working for America Act's provisions, OPM would establish a core compensation system for the Federal Government, defining broad groups of like occupations (such as law enforcement or science and engineering), as well as pay bands within each group that represent clearly distinct levels of work. In this core system, market-based pay would constitute a significant portion of base pay adjustments, with the balance allocated on the basis of individual performance.

Today, even poorly performing employees receive General Schedule across-the-board and locality pay increases. Further, while today's system provides virtually automatic percentage pay increases based on time in grade, the Working for America Act would make all such increases within a particular band strictly performance-based. Only those employees who are at least fully successful would receive such adjustments.

In addition, our proposal would:

• Bar pass/fail appraisal systems for all but entry/developmental jobs, but as is the case today, provide agencies with a great deal of flexibility to design their own performance appraisal systems;

• Require OPM to certify that an agency's performance adjustment plan, including the operation of its performance appraisal system, meets the high standards Congress has already set for pay-for-performance projects before an agency would be permitted to implement the performance-based pay elements of the core compensation system; and

• Permanently "sunset" the General Schedule and the Federal Wage System by 2010, and in anticipation of that event, require agencies to have a plan in place by 2008 for the development and deployment of an OPM-certified performance adjustment plan, or to adopt a standard OPM system.

Building on Success

It is important to recognize that alternative Federal pay systems that include performance-based pay are not new at all.

They have existed in the Federal Government for 25 years and today cover over 90,000 Federal employees. Taken together, these systems - implemented through demonstration projects and under independent authorities - represent a steady progression away from the current Governmentwide classification and pay systems toward alternative approaches where market rates and performance are central drivers of pay. These performance-based alternative systems already apply to the same kinds of work and workers that the current General Schedule covers. The alternative pay systems vary in some of their technical details, but share many common objectives and practices. Positive results and trends across these systems are clear. The lessons learned from their implementation and experience was carefully considered in drafting the provisions of the Working for America Act.

Providing for Labor-Management Relations, Adverse Actions, and Appeals

The Working for America Act crafts a careful balance, ensuring that Federal unions retain core collective bargaining rights, but precluding them from exercising those rights in a way that would deter, divert, or delay managers from meeting their mission.

The legislation modifies the Federal labor relations statute to clarify essential management prerogatives while preserving the important role and rights of unions in the Federal labor relations system. Further, these labor-management modifications are much narrower in scope than the flexibilities granted to Department of Homeland Security. Bargaining (and agreement) in most instances would continue to be required before an agency could act, but only when a proposed management action's effect on employees is foreseeable, substantial and significant in terms of impact and duration.

Federal employees are accountable to the American people, not only to do their jobs but also to comport themselves according to high standards of conduct and performance. If employees fail to meet performance expectations, the Working for America Act would provide for a simplified and streamlined process that preserves the fundamental due process rights Federal employees deserve - including the right to take their case to the Merit Systems Protection Board (MSPB) or an arbitrator. It would also require a tough burden of proof for an agency to sustain an adverse action (including those taken for poor performance); however, when that burden is met, the proposal would require the penalty chosen by the agency be granted deference.

Preparing for Implementation

An agency will not be able to use the pay flexibilities in the bill until OPM has certified that agency's readiness.

To help agencies in that regard, OPM is leveraging its leadership of the Human Capital Initiative of the President's Management Agenda. In 2006, agencies will be required to develop and expand robust performance management systems. For a defined segment within the agency, evidence must be provided: that employees have clear, written performance expectations; that they receive feedback; that their performance is being appraised; and that awards programs are being used to reward results. In other words, agencies must demonstrate that the site is ready to link pay to a performance appraisal system, with the expectation that such improvements will expand and continue throughout the agency.

OPM will have a critical role in ensuring the success of the Working for America Act. We recognize that agencies will look to us for guidance and assurance from implementation and certification and beyond. You and, very importantly, the men and women of the Federal workforce can be sure of our commitment to being fully prepared to carry out those responsibilities.

This concludes my testimony, Mr. Chairman. I would be happy to answer any questions.