[Accompanying Slides]
Thank you, Don [Winstead], for that kind introduction. For those of you
who don't know, Don and Doris Hausser, the Assistant Director for
Performance and Compensation Systems Design, have been working extra hard
as sharing the responsibilities of Acting Director of WCPS in Henry
Romero's absence. You are both wonderful, you have both done a terrific
job, and I want to thank you both for all your assistance!
Its great to be here with you and the Federal compensation community
today at the second annual conference focused on the future of strategic
compensation.
And really, that is why we are here -- to talk about the future.
In fact, we made a point of naming this year's Strategic Compensation
Conference, "Choosing the Best Course for Today AND
Tomorrow" for a couple of very good reasons:
First, it means we recognize that compensation management involves both
very immediate decisions and long-term planning. We have to answer
questions like "what is the correct rate of pay for this employee,
with these competencies, in this locality?"
And we also have to answer questions like "what will the
employment marketplace be offering people in our most important jobs in
five years? And what will that mean for our ability to
complete our missions? "
Second, by using the term "Choosing the Best Course," we
acknowledge that we all must devise workable plans to get to where we must
be. We must all identify destinations and choose, or create, the
right paths to those destinations.
In essence, the Federal government must give agencies the compensation
tools necessary to choose the courses that will help them achieve their
strategic goals, not just for today, but as technology, workforce
demographics and other conditions change in the future.
Agencies must be able to explore, develop and use new compensation
tools to reward employees effectively. And that requires a willingness to
leave behind the old definitions of compensation as a stand-alone concept
and include all things of value to employees.
We must move beyond the old ways of doing things to get to our
strategic destinations.
So, at OPM we have been seeking new ways of structuring and
delivering compensation to meet today's workplace challenges.
I also want to point out that, though this morning's talk is about
compensation, OPM's overall approach to strategic Human Resources
Management alignment takes this same general direction -- where are we
heading and what are our tools? -- so that agencies can be sure they have
talented people in the right jobs with the right skills at the right time
who have been hired in the right way. You will find that is a
consistent theme across all the policies, programs, and services we
provide.
Let me talk a bit about the evolution of the Governments
compensation tools. While we often think that our Federal system has
changed very little, the truth is significant changes have occurred
throughout the last century.
Many of these changes were made to improve the tools Federal
agencies told us they needed to accomplish their missions.
The general trend of these changes was toward a reduction in the
legislative management of compensation decision-making. We sometimes
forget it wasn't all that long ago that Congress, and Congress alone, set
pay rates for Federal positions.
Sometimes Congress would set rates and then not get around to doing it
again for quite a while. How long a while? Well, when Congress set pay in
1818, it didn't do it again until 1853.
Publishing the pay table back then was a snap. No need for 180 pages of
schedules and special rates. Congress gave the Executive branch an
extremely simple map to steer by.
Back then, though, there were no arguments over the classification of a
job. That's because there was only one classification -- Clerk. No matter
what a Federal employee did, she or he was a Clerk.
In the early twentieth century, people began to figure out that work
could be analyzed and pay could be based on factors like relative
difficulty, by providing an equitable way to differentiate pay
among employees.
So over the years, as the American people gave their national
government more tasks to perform and new goals and destinations to steer
toward, agencies came to require more sophisticated compensation tools to
chart their courses.
Agencies got some of those tools, but more work is still required.
Today, we have a regular pay setting process established in law. It is
primarily an administrative process in which the President and his agents
determine adjustments to the overall salary schedules.
But, when our present compensation system was created 50 years ago, the
workplace was very different, and our General Schedule compensation system
reflected the time in which it was born. While the basic structure has
been quite stable, important tools have been introduced over time to make
the system better able to meet modern challenges.
Let me review some of them for you.
First, Special salary rates -- OPM is authorized to
establish higher special rates of pay for an occupation or group of
occupations nationwide or in a local area. We do so based on a
finding that the government's recruitment or retention efforts are, or
would likely become, significantly handicapped without those higher rates.
A later, more sweeping change occurred when locality-based pay
adjustments were introduced for the entire General Schedule. This let us
implement broadly the idea that Federal jobs could be paid differently
based on their location and the effects of local labor market conditions.
Many other compensation flexibilities are available for navigating
more narrow, sometimes even individual courses.
For instance, superior qualifications appointments --
agencies have the authority in some circumstances to set pay above
step 1 of a grade based on superior qualifications of a candidate or a
special need of the agency.
Agencies also have discretionary authority to use quality step
increases to accelerate movement through a pay range for an employee who
has demonstrated exceptional performance.
Using performance and incentive awards, agencies
can grant an employee a lump-sum cash award based on exceptional
accomplishments or contributions to government operations.
Agencies also have the authority to use what have come to be known as
"the 3 Rs."
First are recruitment bonuses, which can be lump-sum
payments of up to 25 percent of basic pay to new employees in
difficult-to-fill positions.
Second are retention allowances, which are biweekly
payments of up to 25 percent of basic pay based upon unusually high or
unique employee qualifications or an agency's special need for the
employee's services. These allowances can be paid both to individuals and
to groups of employees where warranted.
And third are relocation bonuses of up to 25 percent of
basic pay, which can be paid to employees who relocate to difficult-to-fill
positions in a different commuting area.
So, there they are -- the modern 'tools of the trade' that have
improved our ability to use compensation to get results. And of course,
there have been occasional accommodations for individual agencies
faced with particularly difficult compensation problems over the years.
Its important to note that the Federal Government has not been
alone in changing the way we handle compensation.
Compensation in the private sector has changed from individual
"deals" between the employee and the employer at the beginning
of the twentieth century, to internal equity systems similar to the
General Schedule, and then toward the performance-oriented, market-based
pay setting we see today.
But the most important development in private sector compensation
practice is the growing view that a strategic rewards concept is necessary
to attract and retain the employees with the skills necessary to be
competitive. We in the Federal Government must share this view.
What are strategic rewards? They include everything that employees
value in the employment relationship. Take a look at this chart as a
illustration:
Fig. A -- Strategic Rewards Chart
Simply put, strategic rewards are the bundle of all employee reward
elements, including compensation, benefits, development and learning,
and the work environment.
For compensation, that means all the forms of money paid directly to
employees and the methods for determining the pay -- base salary, variable
pay, job evaluation systems, performance management programs, and paid
time off.
For benefits, it means regular and disability retirement, as
well as health, life and I am very pleased and proud to add -- long-term
care insurance.
That last accomplishment has put the Federal benefits package clearly
at the forefront of 21st century practice.
We have also added benefits in recent years like the recent legislation
to permit Federal agencies to pay a part of the child care costs of our
civilian employees.
For development and learning, it means lifelong learning,
training, career development, and workforce and succession planning.
It used to be that organizations viewed development of employees only
as a means to keep up their value to the organization.
Now, many employees see training and development as a form of reward in
itself because it keeps the employee competitive in the employment
marketplace. Being assured of employer support for continued
development and growth has become a powerful attraction for prospective
employees. Such a commitment is a significant feature, for example, in the
new Federal Career Intern Program that OPM is implementing under an
Executive order President Clinton signed in July.
And for the final area on the Strategic Rewards map -- the work
environment -- we mean those factors that help make a work setting a
satisfying and meaningful place to stay.
This includes things like how well the organizations policies
support employees being able to balance their work and family
responsibilities. And whether employees are offered clear leadership and
vision for the work they do.
And whether an employee is in a supportive and empowering environment,
allowing them to make a meaningful contribution to the mission. The
research evidence is clear -- these factors make a real difference in
whether employees want to stay in an organization.
Fig. B -- Strategic Rewards & OPM
Now, let's look at another chart. Here we see how that same general map
of strategic rewards is served by many different organizations and
programs at OPM.
As you can see, strategic rewards is not a matter just for
"compensation people," but for everyone involved in Human
Resources Management.
I understand you have been provided with your own copies of those
last two slides about strategic rewards. Keep them in mind as a good
summary of the kind of tools and mechanisms you can use to steer your
agency's course.
Just as the North Star was a constant means of orientation for
navigating on the open oceans, the North Star for an organization is its
mission its strategic goals.
So, we must never lose sight of the fact that the primary orientation
and driver of any compensation system, public or private, must be
the bottom line goals of the organization. In business this means making
money, but it includes other goals as well.
In the Federal Government, our bottom line lies in the strategic goals
of each agency -- strategic goals that lay out how we will achieve what is
laid down for us in law and public policy.
It would be foolhardy to try to design a sensible compensation strategy
for an organization without first determining what the organization is
intended to achieve.
And, once an organization determines the results it must
achieve, it must determine just what talents and skills its workforce must
have. Then it must determine what combination of strategic rewards will
attract, manage, and retain the workforce it needs.
And, of course, we must never neglect the important principles of
fairness to employees and equal pay for equal work. So we must
consider how we provide fairness and internal equity in a system that is
designed to attract, develop, and apply the skills and competencies we
must have to produce the results we are accountable for today, and well
into the future.
A compensation system should be fair and even-handed in how it rewards
employees. And a compensation system must also be strategic, that is, make
a clear, cost-effective contribution to the achievement of
strategic goals.
The simple fact is that a compensation system that does not help
attract employees with the competencies necessary to achieve strategic
goals will not succeed.
And compensation practices that do not communicate and reinforce the
most important things to be done will not succeed.
The fact is, today's employee must understand an organization's goals
and priorities.
Why? Well, few employees in America today work in an environment
where good attendance and hard work are enough to ensure success for
either a private sector company or a public sector agency. Work today is
complex. It often includes many tasks, many relationships with co-workers
and customers.
You know it and I know it -- in the modern workplace, things can often
be confusing. What is more important, customer satisfaction or keeping
costs down? Where should I place more attention, on building cooperative
relations with other members of my team? Or on making certain my
work products are error-free?
In an ideal world, we want to achieve all these things -- we want low
cost, team oriented, error-free customer satisfaction.
To reach that ideal world from the real world, we must ensure
that employees understand which activities and competencies are most
valued because they are most crucial to reaching our strategic
goals.
How do we do this? Well, employee rewards are an important means of
communicating information about what the organization values. Remember,
the development of modern navigation on the high seas was a collaboration
among mapmakers, instrument makers, ship builders, sailors and explorers.
Information flowed freely among them -- increasing the rate of
innovation and improvement, and increasing their success in crossing
uncharted waters.
You may have read recently about new hopes for finally opening up
that elusive "Northwest Passage" between Europe and Asia that
eluded mariners for centuries. Changes in the Arctic ice pack suggest that
soon ships may be able to sail across the top of Canada and Alaska.
But such a momentous oncoming change has also raised issues and alarms.
Local residents and conservationists are concerned that shipping vessels
could have accidents that would threaten if not devastate the delicate
ecosystems of the Arctic.
Those of us who work with competing stakeholder interests on a daily
basis can see an interesting debate coming.
The point, though, is that new navigational routes are going to be
possible and I expect that fabled Passage will be used before long. We are
in a similar situation as we reshape the routes and passages that Federal
agencies may use to reach their strategic goals.
Strategic compensation will require a collaboration among the
entire Federal community: agencies, unions, management associations, the
Executive Branch, and Congress.
That collaboration is well underway in the work of OPMs Workforce
Compensation and Performance Service and its Strategic Compensation Policy
Center. At sessions in this conference, you will get a chance to hear
about their progress.
Because when it comes to compensation, it is a continuing story.
In compensation and human resources management in general, we don't work
in a static world we work in a changing universe. So, for us, there is
no single course to follow.
The demographics of the work force, the changing nature of technology,
the ebb and flow of the world economy mean that the world we chart changes
constantly.
This is why we must work together to fashion a compensation structure
for the Federal Government that allows agencies to anticipate change and
respond as it occurs. We must develop a compensation structure that
allows agencies to chart their course today AND TOMORROW to
reach their destination -- their strategic goals.
And this will include new and innovative thinking to respond to
employee values. As the Director of OPM, I have been working hard to make
the Federal government a family-focused and competitive employer. One key
part of this goal is improving health care benefits for all Federal
employees, with a particular emphasis on those members of the Federal
family who have been neglected in the past.
Examples of our family friendly health care initiatives include
expanded maternity benefits to guarantee a minimum hospital stay following
childbirth; expanded use of sick leave to care for ill family members; and
full implementation of the President's Patients' Bill Of Rights.
And, as of January 1, 2001, the nine million Americans covered by the
FEHBP will have health insurance that provides parity for mental health
conditions as for any other health condition. It will have the same
co-payments, the same access to specialists, the same coverage for
medication, and the same coverage for out-patient care.
Just recently, I announced a new recruitment and retention tool for
agencies to use to attract and hold on to the best and brightest
candidates for Federal jobs. We have proposed regulations that authorize
Federal agencies to repay student loans as a recruitment or retention
incentive for both candidates and current employees.
In addition, we recently adopted a health insurance premium conversion
plan to allow Federal employees to pay their health insurance premiums
with pre-tax dollars -- a critical step which guarantees employees
immediate savings averaging $434 per year.
Each of these initiatives is another tool in our strategic toolbox. And
each of these tools gives us another way to attract and retain the best
and brightest. Each of these tools keeps us competitive in the war for
talent.
In conclusion, let me say that it is a great personal honor for me to
serve this Administration and work to carry out its goals. During the last
seven years, we have achieved remarkable success, but our journey is not
complete.
If our Federal government is to continue to be the leader of the free
world in the 21st century, then each and every one of us must think about
creating a personnel system that allows us to recruit, reward, and develop
the best minds to do the job.
I want your input. I want your insights. I want your experience. I want
your energy and continued commitment.
You are the leaders of this process. We succeed or fail based on the
work that you do, the message that you carry, the way you use the tools we
have given you.
Thank you.
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