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Reinventing Human Resource Management -- Part 1

Accompanying Report of the National Performance Review

Office of the Vice President

Washington, DC

September 1993


Executive Summary 1

Enable Managers to Create and
Maintain a Quality, Diverse Workforce

HRM01: Create a Flexible and Responsive Hiring System 9

HRM02: Reform the General Schedule Classification and Basic Pay System 19

Enable Managers to Empower, Develop,
Train, Reward, and Discipline Employees ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

HRM03: Authorize Agencies to Develop Programs for Improvement of Individual and Organizational Performance 31

HRM04: Authorize Agencies to Develop Incentive Award and Bonus Systems to Improve Individual and Organizational performance 35

HRM05: Strengthen Systems to Support Management in Dealing with Poor Performers 39

HRM06: Clearly Define the Objective of Training as the Improvement of Individual and Organizational Performance; Make Training More Market-Driven 43

Enable Employees to Manage Work
and Family Responsibilities
HRM07: Enhance programs to Provide
Family-Friendly Workplaces 49

Hold Managers Accountable for Adherence to Principles of Merit and Equal Opportunity ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

HRM08: Improve Processes and Procedures Established to Provide Workplace Due Process for Employees 57

HRM09: Improve Accountability for Equal Employment Opportunity Goals and Accomplishments 61

HRM10: Improve Interagency Collaboration and Cross-Training of Human Resource Professionals 67

Create a System That is Self-Renewing
and Continually Improving
HRM11: Strengthen the Senior Executive Service So That It Becomes a Key Element in the Governmentwide Culture Change Effort 73

HRM12: Eliminate Excessive Red Tape and Automate Functions and Information 77

HRM13: Form Labor-Management Partnerships for Success 79

HRM14: Provide Incentives to Encourage Voluntary Separations 87


  1. Summary of Actions by Implementation Category 91
  2. Methodology 95
  3. Accompanying Reports of the National Performance Review 97

Implementation Categories
Each action is followed by a number in parentheses that indicates the necessary avenue for effective implementation. Appendix A organizes all actions according to these categories.

(1) Agency heads can do themselves

(2) President, Executive Office of the President, or Office of Management and Budget can do

(3) Requires legislative action

(4) Good idea, but will require additional work, or may be better suited for future action

ADR Alternative Dispute Resolution

AFGE American Federation of Government Employees

CFR Code of Federal Regulations

CPDF Central Personnel Data File

CSRA Civil Service Reform Act

DOD Department of Defense

EEO Equal Employment Opportunity

EEOC Equal Employment Opportunity Commission

FEPCA Federal Employees Pay Comparability Act

FLRA Federal Labor Relations Authority

FMCS Federal Mediation and Conciliation Service

FPM Federal Personnel Manual

GAO General Accounting Office

GETA Government Employees Training Act

GM General Manager

GS General Schedule

GSA General Services Administration

HRM Human Resource Management

MSPB Merit Systems Protection Board

NAPA National Academy of Public Administration

NFFE National Federation of Federal Employees

NPR National Performance Review

NTE not to exceed

NTEU National Treasury Employees Union

OMB Office of Management and Budget

OPM Office of Personnel Management

OSC Office of Special Counsel

OTS Office of Thrift Supervision

PMRS Performance Management and Recognition System

QSI Quality Step Increase

SES Senior Executive Service

ULP Unfair Labor Practice

USC United States Code

USDA Department of Agriculture

USPS U.S. Postal Service

Executive Summary

In 1991, the Navy's Human Resources Office in Crystal City, Virginia, processed enough forms to create a mountain of paper 3,100 feet in height--or roughly six times as high as the Washington Monument. Meanwhile, the Agriculture Department recently determined that the total weight of the federal personnel laws, regulations, directives, case law, and departmental guidance required to make human resource management (HRM) decisions was 1,088 pounds.

But problems with Washington's personnel system, which affect 2.1 million non-Postal Service employees in the executive branch, go well beyond paperwork. Indeed, the overly prescriptive system has a very real impact on how government works--or doesn't. As John Sturdivant, national president of the American Federation of Government Employees, told the National Performance Review (NPR):

The Federal government's current personnel management "system" must be candidly termed "management by regulation." In this regard, the Office of Personnel Management micro-manages individual agencies from Washington through the detail-intensive Federal Personnel Manual. . . [A]gencies follow suit by issuing additional volumes of personnel regulations that generally parrot, with even further limitations, their parent agencies' dictates.(1)

The federal human resource administrative system contains major impediments to efficient and effective management of the workforce. It's a patchwork of rules and requirements that confound rather than serve customer needs. It's process-driven; results are a by-product, not a measure of accountability. At the day-to-day operating level, it's not user-friendly--to managers, to employees and their representatives, or to personnel specialists.

Recognition of the problems is not new. In 1983, a National Academy of Public Administration (NAPA) panel observed, "The present personnel management system is far too process oriented. It is much too rigid and needs major change. . . . Process drives out substance."(2) Also, the panel noted, "Management processes, centrally designed and dictated, often become overly proceduralized. . . . Personnel technicians rather than line managers end up making personnel decisions, thus putting further distance between the line managers and their personnel responsibilities."(3)

These problems have compounded over time. Over the years, "anecdotal mistakes prompted additional rules," the Office of Personnel Management (OPM) wrote in 1988. The same document also noted that:

When the new rules led to new inequities, even more rules were added. Over time . . . a maze of regulations and requirements was created, hamstringing managers, doing little to convince employees that their employer treats them fairly, and often impeding federal managers and employees from achieving their missions and from giving the public a high quality of service.(4)

Structure of the Existing System

The civil service revolves around merit system principles requiring that positions be filled through fair and open competition, with the best qualified candidate chosen without regard to political affiliation or other non-merit factors, and protecting career workers from arbitrary dismissal.

OPM's director, who serves as the President's personnel officer, promulgates human resource policy directives that support, interpret, or otherwise implement Title 5, United States Code; the Code of Federal Regulations; miscellaneous executive orders; case law from various adjudicative bodies, such as the Federal Labor Relations Authority (FLRA); Civil Rights Acts; and Equal Employment Opportunity Commission (EEOC) management directives.

Along with OPM, organizations with authority to regulate, direct, or enforce human resource policy include the Merit Systems Protection Board (MSPB), FLRA, EEOC, the Office of Special Counsel, the Justice and Labor Departments, and the General Accounting Office. About 40,000 people help administer the federal government's civilian human resource administrative system.

"Most of the personnel laws we use today were written for a troubled civil service of 1883," OPM Director James B. King explained in May 1993. "We must cut the cord to regulations that were right for their time a century ago, but which hog-tie managers today. In their place, we need systems and mentalities that, while still based in merit and fairness, will let managers manage today and into the future."(5)

Though varying in size from a few dozen to several hundred thousand employees, all executive branch agencies have internal structures for administration of human resources. In each, directors of personnel and directors of equal employment opportunity (EEO) advise and support the agency head--developing policies and guidance, executing authorities delegated to the agency, preparing required reports, acting for the agency with external organizations such as OPM and EEOC, and generally administering programs related to human resources. The personnel directors are linked to OPM through membership on the Interagency Advisory Group.

Supporting the personnel directors, headquarters personnel staffs perform functions at the agency level akin to those that OPM performs for the entire federal service. In large departments, personnel staffs are also located at subordinate levels such as regions and bureaus. Operating personnel offices and EEO staffs exist at the field or service delivery levels, providing day-to-day advice to managers and employees and processing personnel actions.

Problems with the Existing System

Today, the system's functional operating components present a burdensome array of barriers and obstacles to effective HRM. Hiring is complex and rule-bound; managers can't explain to applicants how to get federal jobs. The classification and pay systems are inflexible. The performance management system is not adequately linked to the organization's mission and goals. The labor relations program is adversarial. The federal workplace is not family-friendly, with its overly restrictive leave practices and limited implementation of available programs. Diversity programs are fragmented, and affirmative employment planning and reporting processes are duplicative and resource-intensive. Agencies see little value in the efforts of central guidance agencies to monitor and control their activities.

At the operating personnel office level, processes for delivering human resource services have remained largely unchanged for years, and customers accept them as the norm. In a 1993 special study of federal personnel offices, MSPB concluded, "Unfortunately, for a variety of reasons, some of the functions assigned to personnel offices are too often simply not done well or are of little relevance to line managers in their focus on mission accomplishment."(6) Human resource administration is forms driven, labor intensive, and time consuming. Managers and personnelists alike labor under rules and procedures requiring the meticulous handling of paper. With incomprehensible procedural and regulatory requirements, managers shy away from learning or accepting responsibility for HRM.

To what can we attribute this proliferation of external controls and procedural constraints? In a forthcoming book, public administration professor Patricia Ingraham observes:

In the pulling and hauling between the President and Congress . . . the permanent bureaucracy remains a target for control by both. The pattern of control is similar in both cases: discretion for members of the career service is to be limited whenever possible; control is to be exerted through additional levels of political appointees or other staff responsible to the President and/or Congress; and accountability will be defined as responsiveness to those controls.(7)

The Need for Change

To understand the need for change, and the nature of changes required, we must first understand the extent to which accountability has been defined in terms of procedural controls. The 1983 NAPA panel found that ". . . accountability is divided and varies by functional areas within personnel management in such a manner that everyone and no one is fully accountable."(8)

In his 1993 study of the role of the federal inspectors general, Paul Light concluded:

Despite experiments with performance incentives, such as merit pay, and occasional investments in civil service reform, the definition of accountability in government has remained relatively constant over the past fifty years: limit bureaucratic discretion through compliance with tightly drawn rules and regulations. . . . [A]ccountability is seen as the product of limits on bureaucratic discretion--limits that flow from clear rules (commands), and the formal procedures, monitoring and enforcement that make them stick (controls).(9)

Principles to Guide Change: A Vision for the Future

To reinvent HRM, we must redefine accountability in terms of results- -and we must do so within the context of decentralization, deregulation, simplicity, flexibility, and substantially increased delegations of authority.

The recommendations in this report will create a system in which the President, Congress and, through them, citizens will hold agency managers accountable for mission accomplishment while adhering to principles of merit, equity, and equal opportunity. NPR sees the following assumptions as the basis for forming human resource management policies in the federal government. In the future:

Given these assumptions, NPR's vision in the human resource management arena is one in which managers can adjust work and people to meet mission demands in a cost-effective manner; create and maintain a quality, diverse workforce; lead, develop, train, set high expectations for, reward, and discipline employees; foster a quality work environment that lets employees manage work and personal responsibilities; and promote cooperative relationships with employees and unions. The ideal system is free of political influence and embodies merit system principles. "[A]gency executives and managers take primary responsibility, and [are] held strictly accountable, for observance of merit principles and the prevention of prohibited personnel actions; for enforcing high standards of employee performance and conduct, and for taking necessary actions when such standards are not met."(10)

Administrative systems for the management of human resources that underpin this vision will be simple to use, easy to understand, selfrenewing, continuously improving, and cost-effective. NPR's recommendations will help achieve the vision by:

These recommendations require dramatic changes in the roles and responsibilities of line managers and their HRM advisors, and in labor-management relationships. Managers and supervisors will have more latitude to exercise judgment in their actions affecting employees. This latitude carries a large element of risk and concomitant accountability for results. Managers must have access to quality, responsive advice, and assistance from HRM professionals who truly understand the organization's HRM needs.

Personnel offices must shift from reactive processors of paperwork to responsive consultants and advisors. This shift requires personnelists to view the manager as a customer with needs to anticipate and meet with responsive service, including electronic support systems. This change in roles and relationships must include a similar orientation toward the workforce. Cooperative relationships with organized labor must be established and maintained, with unions viewed as partners.


  1. Letter from John N. Sturdivant, National President of the American Federation of Government Employees, to NPR staff member Roy Tucker, May 1, 1993.
  2. National Academy of Public Administration (NAPA), Deregulation of Government Management Project: Personnel Management (Washington, D.C., October 1983), p. i.
  3. Ibid., p. 1. (Interim panel report.)
  4. U.S. Office of Personnel Management, Simplifying the Federal Manager's Job (Washington, D.C., 1988), Foreword. (Pamphlet.)
  5. "OPM Takes Wrecking Ball to Personnel Structure," U.S. Office of Personnel Management News (May 28, 1993).
  6. U.S. Merit Systems Protection Board, Federal Personnel Offices: Time for Change? (Washington, D.C., August 1993), p. ix.
  7. Patricia Ingraham, The Foundation of Merit (Washington, D.C.: Johns Hopkins Press), p. 26. (Forthcoming.)
  8. NAPA, p. 11.
  9. Light, Paul, Monitoring Government: Inspectors General and the Search for Accountability (Washington, D.C.: The Brookings Institution, 1993), p. 12.
  10. NAPA, p. 4.

Enable Managers to Create and Maintain a Quality, Diverse Workforce

HRM01: Create a Flexible and Responsive Hiring System


The system through which applicants are considered for competitive appointment to positions in the federal government is a merit system- -candidates are selected based on their relative ability to perform the job without regard to nonmerit factors, including political affiliation. There are nine merit system principles, covering (1) recruitment to achieve a work force from all segments of society, and selection and advancement following fair and open competition; (2) employment without regard to nonmerit factors; (3) equal pay for work of equal value; (4) standards of conduct; (5) efficient and effective use of the federal work force; (6) retention and separation based on performance; (7) effective education and training; (8) protections against arbitrary action and prohibition against interfering with an election; and (9) protection against reprisal for disclosing violations or mismanagement.(1)

The law also defines prohibited personnel practices, including discrimination on the basis of nonmerit factors such as nepotism, political affiliation, and marital status.(2) It stipulates that "the head of each agency shall be responsible for the prevention of prohibited personnel practices, for the compliance with and enforcement of applicable civil service laws, rules and regulations, and other aspects of personnel management."(3)

The first merit principle deals with recruitment and hiring. The merit system requires that (1) individuals be qualified; (2) appropriate sources be identified; (3) all segments of society be represented in the work force; (4) selection and advancement be determined solely on the basis of relative ability, knowledge, and skills; and (5) fair and open competition be afforded to ensure that all receive equal opportunity.(4)

The Merit Hiring System.
The competitive examining system for external candidates that has developed around these requirements is controlled by the Office of Personnel Management (OPM). Although OPM may delegate examining authority to agencies, by law OPM must conduct examinations for positions that are common to agencies. With OPM approval, agencies may directly hire candidates in a limited number of occupations where recruitment shortages have been identified--that is, where there is potentially a job for every qualified applicant.

Throughout the year, OPM issues general notices or open announcements soliciting applications for particular occupations for which it retains examining authority. Managers wishing to fill vacancies from external sources must ask the personnel office to submit to OPM a request for a certificate of eligibles. Using an internal, unpublished rating scale, OPM rates and ranks candidates, whose names are then forwarded to the manager in ranked order. The actual list of candidates forwarded to the manager may not represent the best candidates, as higher-ranking individuals may have already been referred out to another agency. The rules surrounding selections are exactly the same for both OPM-generated certificates of eligibles and certificates issued by agencies with delegated examining authority.

Although the certificate may contain many names, the manager is bound by law to select one of the top three available candidates, and may not pass over a veteran to select a nonveteran unless a request to pass over the veteran for reasons of qualifications or suitability is approved. Although authority to approve requests to pass over veterans is delegated to agencies, OPM must rule on requests to pass over veterans who are 30 percent or more compensably disabled. Managers may choose to interview all, some, or none of the candidates, but in no case may they subject candidates to further examination. Certificates may be returned unused when managers determine that candidates are unsatisfactory, which can result in significant time delays in filling positions, as alternative methods must then be considered. The General Accounting Office found in 1992 that managers returned 57 percent of certificates and chose to use alternate means.(5)

Merit Promotion.
OPM rules that govern competition among internal candidates, commonly termed merit promotion, are found in Federal Personnel Manual Chapter 335. Agencies typically construct internal rating and ranking procedures in order to identify the best qualified. Candidates are evaluated by personnelists, a subject matter expert, or a panel of subject matter experts, then either named to the selecting official as best qualified or eliminated from further consideration for that vacancy based on a cutoff score established by the evaluator(s). In most agencies, the selecting official does not participate in the rating, ranking, and referral process. Managers are free to select any candidate from among those referred by the panel.

In 1989, in connection with a study to explore OPM's simplification initiatives, the Merit Systems Protection Board (MSPB) concluded that:

[T]he OPM initiatives which agencies thought were the most effective were those which the agencies felt would assist in the hiring of high-quality employees and those that expedited the hiring process. Clearly, the provision of prompt recruitment and placement services to operating officials is a priority in agencies' personnel programs.(6)

Can today's civil service hiring system meet the needs of federal managers for the 21st century? Most would maintain that the system cannot even meet current needs, and that reinvention is already long overdue, for the reasons summarized below.

Need for Change

The need for change is well documented. When describing the federal hiring system in 1988, OPM Director Constance Horner noted, "The current system is slow; it is legally trammelled and intellectually confused; it is impossible to explain to potential candidates. It is almost certainly not fulfilling the spirit of our mandate to hire the most meritorious candidates."(7) In that same year, the Hudson Institute's Civil Service 2000 predicted that

. . . hiring and retention [will become] much more competitive in the years ahead. Because these tight labor markets are likely to develop in different ways in different states and to shift quickly in response to economic and population changes, it is essential to decentralize responsibility and to provide more flexibility in hiring and personnel management than is characteristic of the current system.(8)

Dwindling resources, shifting markets, and emerging technologies compound the need to ensure that every single employee becomes a vital partner in mission attainment and program delivery. Thus, identifying the impediments to carrying out an effective hiring program and exploring the extent to which these impediments can be alleviated become an absolute business necessity to ensure an organization's survival.

The problems with the hiring system fall into the following major categories:

Lack of Accountability.
The single greatest failing of the hiring system is lack of managerial involvement in the front-end recruitment and evaluation of candidates for employment--in other words, lack of accountability. Managers who do attempt to participate in the external recruitment process in most cases must send potential applicants to OPM or to delegated examining units to be examined, in striking contrast with the ability of private industry recruiters to make immediate offers of employment to qualified candidates and to establish closer ties to professional and community recruitment sources. Managers must wait to receive candidates who have been rated and ranked by OPM or delegated examining units, and are required by law to choose from among the top three available candidates. When considering internal candidates, they make selections from among candidates who have been determined by others to be the best qualified. Managers are then able to blame the system for undesirable outcomes, such as perceived inequity or underrepresentation, if they have followed all of the rules.

Failure to Meet Customer Needs.
In 1989, the National Commission on the Public Service observed that, "Even when the public sector finds outstanding candidates, the complexity of the hiring process often drives all but the most dedicated away."(9) In 1990, MSPB observed that, "Potential applicants are frequently discouraged by the confusion they experience when trying to get a job with the federal government."(10) The system is time consuming and unresponsive; despite improvements in the automated delivery of examining services, the best candidates frequently go elsewhere before federal managers are able to make firm offers of employment. The fact that managers are forced to send some potential applicants to OPM to be examined is of particular concern at remote field locations where access to OPM services is necessarily limited. The issue is not merely convenience; more importantly, the public's perception of the federal government as a responsive employer suffers tremendously when agency managers are forced to send applicants to OPM for examination, with no guarantee they will ever be within reach for positions at that agency on a centralized register. In 1989, the National Commission on the Public Service found that:

Government faces an enormous challenge in recruiting America's top college graduates. On the one hand, outstanding graduates doubt that the public sector can fulfill their dreams of meaningful, challenging careers. On the other hand, they find that the complexity of entry makes public sector jobs among the toughest to get.(11)

Restricted Competition.
Qualified candidates are automatically eliminated from managers' consideration based on narrow point score distinctions reflecting only some of the attributes of individual candidates. The system undermines recruitment initiatives as managers recruit candidates who may not be within reach on certificates of eligibles, and are therefore unavailable for selection. Overly restrictive qualification standards and time-in-grade requirements can eliminate candidates who are in fact able to perform the duties of the position. When centralized OPM registers are filled and examinations are closed, candidates are prevented from applying for position vacancies. Temporary employees as a rule may not apply to be considered for vacancies being filled under internal (merit promotion) procedures. Thus, the open competition required by the merit system principles becomes subject to arbitrary limitations. Obtaining excellence is more a matter of luck and persistence than design.

The system is so complex and rule-bound that managers are unable to explain to applicants how to get a federal job. Staffing law, regulations, and Federal Personnel Manual guidance comprise hundreds of pages, to which departments and agencies add their own interpretive guidance and implementing directives. The system is overly constrained by statute and regulation; over 300 appointing authorities provide little useful management information and require interpretation by personnel specialists.

This complexity has evolved over time as particular statutes, regulations, and related guidance were developed and implemented to address specific situations or perceptions of mismanagement. For example, the law requires that temporary assignments to other positions (details) be made in 120-day increments(12) as a means to control the internal movement of employees. However, the centralized and highly controlled systems designed to ensure the equitable delivery of examining services in fact serve to prevent managers and applicants from either understanding or making full use of available options. In 1993, the National Research Council concluded, "The federal civil service system, with its strong emphasis on internal equity, has long hampered the government's abilities to compete for scarce talent in the labor market and to reward exceptional individual performance."(13)

The Ideal System.
An ideal hiring system would enable managers to hire, develop, and retain a quality, diverse, productive, and ethical workforce in constantly changing labor markets; empower managers to balance the competing demands of multiple stakeholders; and hold managers accountable for adherence to principles of merit and equal opportunity through a performance-based assessment of staffing outcomes. The ideal system would be decentralized to create a link between an agency's recruitment efforts and those candidates who are actually hired.

A decentralized system would permit agencies to establish their own priorities for agency-based recruitment initiatives. Tailored approaches designed to tap into local labor markets could provide managers with expanded opportunities to increase the diversity of the candidate pool. Flexible and responsive agency-based systems would permit managers to adapt to fluctuations in the labor market. Federal recruiters would be empowered to compete with private sector recruiters. A significantly enhanced, automated employment information system could immediately link candidates with nationwide, or communitywide, job opportunities by occupational specialization. Freed from constraining layers of mind-numbing regulations, personnel specialists would be able to become partners with management in the development of staffing initiatives to support overall strategic planning objectives.

Experience has shown that such a system can be successful. In July 1990, a formal demonstration project to test an alternative staffing system was implemented within the Department of Agriculture (USDA) at approximately 140 experimental and 80 comparison locations nationwide within the Forest Service and the Agricultural Research Service. The project's key initiatives include a streamlined, agency-based recruitment and hiring system that completely replaces the OPM register process; recruitment incentives; and an extended probationary period for research scientists. In connection with its ongoing responsibility to conduct a formal evaluation of project impact and implementation, the Pennsylvania State University reported that "the demonstration initiatives are widely seen as providing a flexible and responsive set of recruitment and selection procedures that are preferable to pre-existing procedures (e.g., central registers). The reported benefits from the demonstration project include increased access to the local labor market, greater control over the hiring process, and increased likelihood of quality candidates in the candidate pool, among others."(14) The evaluators proceed to describe "a possible unanticipated benefit associated with increased recruitment of labor from local labor markets . . . the sense that public perceptions of the agency as an employer and community member have [improved]."(15)

The emphasis on merit that characterizes the actions that follow is designed to ensure that the professional career service remains free from political influence and that human resource management is based on and embodies the merit system principles.


  1. Authorize agencies to establish their own recruitment and examining programs. Abolish central registers and standard application forms.(16) (3)

By fall 1994, the director of OPM should forward draft legislation to Congress delegating to federal departments and independent agencies full and complete authority to develop and implement merit systems for employee selection and advancement based on the merit system principles. Legislation should be enacted to allow departments and agencies to conduct examinations for positions that are common to agencies in the federal government, and to redefine the roles of OPM and agencies with respect to the examining process. Within 30 days of enactment by Congress, OPM should develop the broad policies and general principles through which the new legislation would be implemented. Federal departments and independent agencies should establish merit systems for recruiting and evaluating candidates for selection and advancement. These systems should be based on the policies and principles established by OPM in accordance with applicable statutes and reflect the input of the federal human resource management community.

Individual federal departments and agencies should be permitted to conduct examinations for positions that have requirements common to agencies in the federal government. OPM should be able to compete with departments and agencies to provide examining services. Department secretaries and agency heads should be responsible for holding managers accountable for the judicious use of these authorities. OPM would be responsible for (1) notifying department secretaries and agency heads if violations are identified, and (2) ensuring that corrective actions are taken, as appropriate. In cases where violations are identified that involve secretaries and agency heads, OPM should be authorized to conduct an investigation and recommend an appropriate course of action to the President.

Completely decentralizing the hiring process will result in the establishment of agency-based, market-driven hiring systems, which will, in turn, improve managers' ability to hire, develop, and retain a quality workforce, reflective of our nation's diversity. Streamlined, agency-based systems will permit more timely offers of employment and be more readily understandable to applicants. Access to increased numbers of candidates will facilitate the attainment of workforce diversity goals and objectives.

How will accountability be defined in the context of decentralization and substantially increased delegation of authority? Some may believe that increased flexibility will lead to increased incidence of merit system abuse. However, decentralization of responsibility for recruitment and examining is expected to increase managers' participation in and control over the staffing process, thereby reducing their ability to blame the system for unsatisfactory outcomes. Managers will become even more accountable for adherence to merit principles and for preventing prohibited personnel practices as increased flexibility leads to correspondingly increased performance expectations. An April 1993 National Academy of Public Administration report described this shift in the definition of accountability:

The means for accountability focuses on the exercise of leadership and judgment within broad guidelines, rather than on detailed rules and procedures and prior controls . . . [deriving from] clear principles of fairness, equity and individual rights. . . . Accountability measures should be mission oriented and results driven. . . . [T]he new framework emphasizes measuring accountability by: measuring accomplishment of mission, goals and objectives; assessing results, e.g., product and service quality and customer satisfaction; assessing public trust (customer satisfaction) and institutional health (e.g., employee morale, attrition rates); and evaluating compliance with civil service laws, regulations and policy.(17)

Managers' responsibility for ensuring adherence to merit principles and preventing prohibited personnel practices will increase as they become more closely involved in all phases of recruitment and hiring. Extensive training must be provided to ensure that managers understand how the merit principles are applied in the context of making personnel decisions. The success of managers' efforts will be evaluated using performance-based outcome measures, for example, employee morale and workforce diversity. Experience has shown that greater flexibility permits managers to become more involved in and, therefore, more accountable for program results. The Pennsylvania State University reported that, using the decentralized approach being tested under the USDA demonstration project, "both managers and personnelists reported greater participation in the recruitment process, and viewed manager-personnelist interactions as more important in determining the success of the hiring process."(18)

2. Allow federal departments and agencies to determine that recruitment shortages exist and directly hire candidates without ranking.(19) (3)

By fall 1994, the director of OPM should forward draft legislation to Congress to allow OPM, and departments and agencies, to establish categories in which candidates can be directly hired to coincide with the establishment of decentralized, agency-based hiring systems.

Federal departments and agencies will have the authority to directly hire candidates without ranking when recruitment shortages exist after considering the following factors, as applicable:

OPM should establish additional categories where candidates may be directly hired, for example, persons with targeted disabilities, candidates with outstanding academic qualifications, or other categories as appropriate.

3. Reduce the number of competitive service appointment types to three.(20) (3)

By fall 1994, the director of OPM should forward draft legislation to Congress to streamline and redefine appointments in the competitive service and redefine the length of the initial probationary period. By fall 1994, OPM should revise its regulations to redefine the length of the probationary period for initial appointment to a supervisory or managerial position.

Appointments to positions in the competitive service should fall into one of the following categories:

Temporary NTE appointments are used to meet short-term staffing needs. Temporary indefinite appointments are not permanent but will be made without time limitation to permit agencies to more easily adjust staffing levels to meet fluctuations in workload that may extend beyond the two-year time limit on temporary NTE appointments. Employees serving under temporary NTE or temporary indefinite appointments are not subject to governmentwide rules on reduction in force.(21) Agencies will involve employee representatives in determining the length of temporary indefinite appointments through collective bargaining. Agency flexibility to design merit-based hiring systems will substantially reduce the need for the majority of excepted service appointments currently established under Schedules A and B.(22) Excepted appointments will continue to be used for positions of a confidential or policy-determining character (Schedule C), or positions for which eligibility depends upon factors other than education and experience, for example, family income (such as student aid), local residence, or acceptability to foreign officials.

To provide an adequate period of time in which to make retention decisions, the duration of the initial probationary period upon permanent appointment without time limitation to a position in the competitive service and the probationary period upon initial appointment to a supervisory or managerial position will be extended from one to a maximum of three years. Agencies would be permitted to determine an appropriate length of time for specific occupations or positions, which will be announced to candidates in advance. Agencies will involve employee representatives in determining the length of the initial probationary period upon permanent appointment without time limitation through collective bargaining.

4. Permit nonpermanent employees to compete for permanent positions under agency procedures for internal placement.(23) (3)

By fall 1994, the director of OPM will forward draft legislation to Congress to allow nonpermanent employees who were initially hired using competitive procedures to be considered along with internal candidates for permanent positions being filled under merit promotion. Following two years of performance that meets established expectations within a five-year period, temporary NTE and temporary indefinite employees will be permitted to apply to be considered for selection and appointment to permanent positions under internal placement procedures. Within 30 days of enactment, OPM should issue appropriate guidelines for implementation.

5. Abolish the time-in-grade requirement. Create a general qualifications framework that permits agencies to augment or modify qualification standards for both internal and external placement actions. (1)

By spring 1994, the director of OPM should revise the regulations to abolish the time-in-grade requirement.(24) In addition, OPM should revise its guidance concerning governmentwide qualification standards.(25) OPM should continue to implement a framework of generic qualification standards that permits agencies to identify and develop experience requirements for specific series. Agencies would be permitted to modify standards for both external and internal placement actions, including promotions, when the agencies determine that candidates can successfully perform the work of the position although they may not fully meet the qualification requirements in the generic standards. Agencies may augment standards with selective placement factors (for example, foreign language proficiency) but may not require additional amounts of education or experience beyond those required by the standards. Decisions to either augment or modify standards should be made before vacancy announcements are issued and will be publicized in the announcement.

6. Eliminate all statutory rules on detailing employees to temporary assignments.(26) (3)

By fall 1994, the director of OPM should forward draft legislation to Congress to repeal the statutory time limitation on details of employees. Within 30 days of enactment of the legislation, OPM should issue appropriate guidelines for implementation. The 120-day limitation on details will be removed, and agencies will have the authority to determine the appropriate duration of a temporary assignment.

7. Create a governmentwide employment information system to inform the public of job opportunities. Coordinate the development and operation of common automated systems to facilitate agency staffing policies and operations. (1)

By September 1994, the director of OPM should develop and implement an expanded job information service featuring a user-friendly, stateof -the-art electronic information network to which customers can easily gain access. By September 1994, OPM and agencies should collaborate in developing a core automated personnel operations support network to reduce the cost and inefficiency of separate agency systems.

A substantially refined and expanded automated employment information system should be installed to which applicants can gain telephone or electronic access. Services provided at Federal Job Information Centers should be expanded, and agency access to the Central Personnel Data File (CPDF) increased. CPDF should be extensively reconfigured to provide management information for the purpose of monitoring workforce statistics, including those which relate to managerial accountability, such as employee turnover and selection data by race, gender, and disability categories.

Cross References to Other NPR Accompanying Reports

Department of Justice,
DOJ12: Streamline Background Investigations for Federal Employees.

Department of the Treasury/Resolution Trust Corporation, TRE13: Streamline Background Investigations for Federal Employees.

Improving Financial Management, FM06: "Franchise" Internal Services.


  1. Title 5, United States Code, Government Organization and Employees (April 1993), sec. 2301.
  2. Title 5, United States Code, sec. 2302.
  3. Title 5, United States Code, sec. 2302(c).
  4. Title 5, United States Code, sec. 2301(b)(1).
  5. U.S. General Accounting Office, Does Veterans' Preference Need Updating?, GAO/GGD-92-52 (Washington, D.C.: U.S. General Accounting Office, March 1992), p. 27.
  6. U.S. Merit Systems Protection Board, Delegation and Decentralization: Personnel Management Simplification Efforts in the Federal Government (Washington, D.C., October 1989), p. 18.
  7. Horner, Constance, quoted in Leadership for America (Washington, D.C.: National Commission on the Public Service, 1989), p. 29.
  8. Hudson Institute, Civil Service 2000 (Washington, D.C., June 1988), p. 27.
  9. Leadership for America, p. 28.
  10. U.S. Merit Systems Protection Board, Attracting and Selecting Quality Applicants for Federal Employment (Washington, D.C., April 1990), p. 1.
  11. Leadership for America, p. 26.
  12. Title 5, United States Code, sec. 3341.
  13. National Research Council, Improving the Recruitment, Retention, and Utilization of Federal Scientists and Engineers (Washington, D.C.: National Academy Press, 1993), p. 37.
  14. The Pennsylvania State University, U.S. Department of Agriculture Personnel Management Demonstration Project Second Annual Evaluation Report (The Pennsylvania State University, April 1993), p. vii.
  15. Ibid., p. 12.
  16. Title 5, United States Code, sec. 1104; 1302; 3304; 3305; 3324; and 3325.
  17. National Academy of Public Administration, Leading People in Change: Empowerment, Commitment, Accountability (Washington, D.C., April 1993), p. 18.
  18. The Pennsylvania State University, p. 22.
  19. Title 5, United States Code, sec. 1302; 3304; and 3361.
  20. Executive Order 10577; Title 5, Code of Federal Regulations, Administrative Personnel (January 1, 1993), Part 315.
  21. Title 5, United States Code, Chapter 35, and Title 5, Code of Federal Regulations, Part 351.
  22. Title 5, Code of Federal Regulations, Part 213.
  23. Title 5, United States Code, sec. 3304.
  24. Title 5, Code of Federal Regulations, Part 300, Subpart F.
  25. See U.S. Office of Personnel Management, Handbook X-118, Qualification Standards for Positions under the General Schedule (Washington, D.C., December 1991).
  26. Title 5, United States Code, sec. 3341.

HRM02: Reform the General Schedule

Classification and Basic Pay System


Approximately 1.6 million federal civilian employees--about 75 percent of the nonpostal civilian workforce--are covered by the General Schedule (GS) classification and basic pay system. (The remaining 25 percent are covered under a variety of special pay systems, the largest of which is the Federal Wage System, which covers over 300,000 blue-collar employees in trades and crafts occupations.) The GS system was established in 1949 and was intended to provide a standard framework for establishing the pay hierarchy for federal employees in white-collar occupations.

The central core of the GS classification system is codified in law. The law establishes 15 grades and describes the level of work at each grade. As stated in the law, the purpose of the classification system is to ensure that equal pay be provided for substantially equal work (by ensuring equal grade for equal work) and that work be classified based on its difficulty, responsibility, and qualification requirements. The law provides the Office of Personnel Management (OPM) with a central role in establishing classification standards and reviewing agency classification actions (through periodic audits and hearings of employee appeals). OPM has final authority in classification matters.

OPM has established over 450 separate job categories called series. For example, there are 34 different series in the field of biological sciences alone, including such series as Plant Pathology, Plant Physiology, Plant Protection and Quarantine, Soil Science, and Irrigation System Operation. For many of these 450 series, OPM has published classification standards that agencies must apply in assigning grades to jobs. The series-specific classification standards describe the nature of work and set forth criteria or rules for determining the appropriate grade level. Series standards tend to be fairly detailed and can require considerable time and classification expertise to apply. Many of the standards have not been revised for many years and are viewed as out-of-date.(1)

The GS basic pay structure is directly based upon the grades in the classification system. There are 15 overlapping pay ranges that correspond with the 15 grades. Until passage of the Federal Employees Pay Comparability Act of 1990 (FEPCA), the GS basic pay structure consisted of a single nationwide pay schedule (although higher special salary rates could be paid in response to significant recruitment and retention problems).(2) However, FEPCA now provides for locality-based comparability payments based on average pay disparities between federal and non-federal workers.(3) The same locality pay percentage will apply to all employees in a given local pay area, thus maintaining on a local basis the pay relationships among all jobs in the GS hierarchy of grades, consistent with the equal pay principle.

By law, basic pay rates within any GS grade are set at one of 10 fixed step rates. Employees performing at an acceptable level of competence progress through the rate range in accordance with statutory waiting periods (one to three years depending on the step). In addition, employees may receive additional step increases--called Quality Step Increases (QSIs)--based on outstanding performance, subject to a limit of one QSI per year. While a special merit pay progression scheme applies to managerial employees covered by the Performance Management and Recognition System (PMRS), that system expires on October 31, 1993.

In recent years, several federal agencies have been conducting, with some success, special demonstration projects that tested broadbanding classification systems within the GS framework. A broadbanding system involves both the consolidation of job categories (job banding) and the merging of grades or pay ranges (grade banding). Tailored withinband pay progression schemes were also developed for each project. The oldest and most well-known broadbanding demonstration project is a Department of the Navy project covering two research laboratories in Southern California (commonly referred to as the China Lake project).

Need for Change

A strong case can be made that the current federal classification and basic pay system is in need of significant reform. The problems with the current system are summarized below:

Lack of Mission Focus.
The GS classification system was premised on the idea that internal equity would help the government more effectively and efficiently accomplish its various missions by ensuring that employees are compensated based on the difficulty and responsibility of their work, by addressing employee concerns about pay fairness, by reducing interagency competition for employees based on pay, and by simplifying the pay setting process. Over time, the ideal of internal equity has emerged as the supreme goal of the system, instead of being viewed as a means to attaining the larger goals associated with effective government. Consistent with the focus on internal equity, system administrators have sought to achieve greater precision, even though the additional precision did not result in--and perhaps even worked against--more effective government. A new and better balance is needed--a balance that can be achieved by a less precisionoriented classification system that provides for greater agency flexibility and is more supportive of agency missions without undermining the long-term governmentwide interests that originally prompted establishment of the system.

As a recent National Academy of Public Administration (NAPA) report notes, "The degree of precision with which jobs are classified under this [the General Schedule classification] system is neither warranted by the methodology nor necessary to support pay equity or to organize work efficiently."(4)

Low Credibility.
According to a recent survey of federal employees conducted by OPM, only 31 percent of employees agree that their pay is fair considering what other people in their organization are paid.(5) Thus, despite all the attempts to build precision into the system through central control and rules, the fairness of the system appears to be questioned by the vast majority of the people whose opinion is perhaps most important. Ironically, it appears that the more precision that is sought in job evaluation, the more likely that the measurements of equity will be incomplete (because equity factors that could be considered under a less precise approach have been eliminated) and open to criticism (due to the specificity of the measurements as well as the high expectations created by the precise approach). Furthermore, a precise system that cannot be easily enforced invites rule bending and breaking, which further undermines system credibility. In meetings with federal managers and personnel specialists, National Performance Review (NPR) staff were repeatedly told how agency managers are able to beat the system to get the results they want. There is a strong argument that the classification system would be viewed as more fair by employees if it were less precise but more honest about its reliance on human judgment.

According to James E. Colvard, former Deputy Director of OPM, "The current classification system allows the manager to be precisely wrong. What the manager needs is the opportunity to be roughly right."(6)

The GS classification system is difficult to understand and to use. This prevents managers--who actually best know the work being classified and its value to the organization--from assuming the primary role in classifying jobs. Instead, the system is largely run by OPM and agency personnel specialists with classification expertise (2,000 of whom are classified in a special Position Classification job series). The system's complexity promotes excessive paperwork and slow, cumbersome administrative procedures. It also makes it difficult to maintain currency. Over 7 percent of the standards are more than 20 years old.(7)

As the NAPA report notes, "In an era of growing pressures for efficiency, productivity, flexibility, customer satisfaction, and goal-directed results, the [General Schedule] classification system is mired in expensive, time-consuming, rule-driven complexity."(8)

Fragmented Accountability.
Accountability for classification is fragmented among OPM, agency personnel offices, and agency program managers. Not only does this fragmentation produce tension and conflict among the parties, but it also prevents any one party from assuming responsibility for the consequences of classification decisions. Since many federal managers do not operate under a fixed payroll budget or a total operating cost budget, they do not necessarily feel an obligation to consider the long-term cost consequences of classification actions. On the other hand, OPM and agency personnelists do not have to face the consequences that classification actions have on program missions. There is a clear need to consolidate accountability for mission and classification in one place. This suggests giving classification authority to line managers while ensuring that they are accountable for managing budget dollars prudently and paying employees fairly, in accordance with governmentwide standards.

The Federal Section of the International Personnel Management Association states that "the role of the personnel professional must be redefined to emphasize the desired shift to a consultative relationship with managers, rather than the heretofore traditional role of classification decision-maker."(9)

One-size-fits-all rigidity characterizes the GS classification and pay system. Agency managers point out that agencies have diverse missions, challenges, organizational structures, values, and cultures, and that they must respond to ever-changing external conditions. The classification system must not be so immutable that it cannot respond to new ways of designing work, the changing value of jobs, or changes in the work itself. While some flexibilities have been incorporated within the pay system (e.g., special salary rates and entry pay above the minimum rate) to compensate for the classification system's rigidity, the restrictions that accompany many of these pay flexibilities severely limit their usefulness. Even if the classification system is made more flexible, additional pay flexibilities are needed to allow agencies to respond to localized labor market fluctuations and to use pay progression schemes that better fit the culture and goals of the organization.

As the Merit Systems Protection Board noted, "These [General Schedule] grade level criteria have come to be viewed as 'cast in stone' . . . [r]esulting in virtually fixed and therefore unresponsive standards. . . . Since the classification standards aren't readily adapted to changes which may occur in how society values certain kinds of work, the classification system can rarely, if ever, be a proactive tool of personnel management policy."(10)

Hierarchical Orientation.
As currently administered, the GS classification system seems to facilitate or reinforce hierarchical structures. Part of the reason may lie in the reliance on specialized, narrow jobs, which tends to lead to the creation of organizational stovepipes structured by function instead of by mission. Perhaps more important is the fact that the classification system more readily provides higher grades for supervisory work than for expert-level nonsupervisory work. NPR staff heard from many different sources that supervisory positions are frequently created as a means of providing employees with higher grades. All of this suggests that a more flexible classification system designed to encourage more broadly defined jobs and to more readily permit dual career ladders could facilitate the streamlining or delayering of federal organizations.

Billions of dollars in precious tax revenues are squandered annually to support a federal management structure that is excessively bloated and that is unavailable to perform "front line production work." These needless layers upon layers of management are not benign. They significantly delay work product getting out timely and they micromanage to justify their existence thereby ultimately creating customer (public) dissatisfaction. The related pay and classification problems have contributed to this "pyramiding" of supervisors upon supervisors to justify grade levels.(11)

The interrelated problems described above point to the need for a new mission-driven classification and basic pay system--a system that achieves a better balance between flexibility and accountability, that is simpler to understand and administer, and that can be used proactively as a tool to help reshape the federal government. To achieve change in the classification and pay area without producing chaos, it is essential to develop a flexible system that allows agencies to take incremental steps based on their needs and levels of readiness to assume greater responsibilities.


  1. Remove all grade-level classification criteria from the law while retaining the 15-grade structure. (3)

The director of OPM should submit proposed legislation to Congress by fall 1994 that would repeal the classification criteria for the 15 grades in the General Schedule system now codified in law.(12)

The statutory classification criteria have remained essentially unchanged since 1949.(13) The government should have the flexibility to make changes in the classification criteria in response to changes in the work world without going through the legislative process. Initially, OPM should administratively adopt the existing criteria and then make changes as warranted.

In addition to providing needed flexibility, removing the classification criteria from the law would also help reinforce the idea that, like private sector employees, federal employees do not have a statutory entitlement to a precise grade or pay level.

2. Provide agencies with flexibility to establish broadbanding systems built upon the General Schedule framework. (3)

The director of OPM should submit proposed legislation to Congress by fall 1994 that would (1) authorize OPM to approve the banding of GS grades (and associated pay ranges), subject to the condition that the content definition of any band be linked to the GS grade-level definitions, and (2) reduce the restrictions on the demonstration project authority so that it can be a more proactive management tool. The proposed legislation should also include provisions making clear that matters relating to the setting of base pay rates are not conditions of employment subject to collective bargaining. Within one year of enactment of this legislation, OPM should publish detailed information on the initial set of options available to agencies under these new authorities.

OPM should work with agencies to develop standard banding patterns that incorporate job banding, grade banding, and within-band pay progression schemes. Some of these standard patterns may permit the incorporation of blue-collar jobs now under the Federal Wage System. Agencies can choose among the menu of standard patterns without need for OPM approval. In addition, agencies will be able to request OPM approval of minor variations in the standard patterns. OPM approval of these minor variations would not be time-limited.

Unique broadbanding systems that do not fit under one of the standard patterns should be approved under a revised demonstration project authority. The demonstration project authority should be revised by eliminating (1) the limit on the number of employees covered by any project, (2) the limit on the number of active demonstration projects permitted, (3) the requirement that Congress be notified regarding the tentatively approved project plan 180 days in advance of the beginning of the project, and (4) the requirement that OPM promulgate regulations.(14) OPM regulations on demonstration projects will be repealed and replaced with written guidance.(15) OPM will require only the minimum amount of data needed to evaluate the project, and overly burdensome quantitative research methodologies will not be imposed. Demonstration projects will be approved by OPM for a fiveyear test period, after which a successful project will be converted to a permanent alternative system. For broadbanding demonstration projects, OPM will publish special project approval criteria so that any agency meeting the criteria will be assured of approval.(16)

Based on tests in the federal government (e.g., the Navy's China Lake demonstration project) and on the experience of private sector companies with broadbanding systems, broadbanding does not appear to be a panacea. It carries its own set of challenges and may not be a good fit for every organization or every occupational group. Broadbanding can meet resistance in organizations in which hierarchical rank is important. It can also lead to increased salary costs if the organization does not have (1) managers who are skilled at managing employee pay, (2) an effective performance management system, or (3) appropriate budget controls. However, broadbanding does offer many potential benefits, including simplified classification procedures, empowered managers, more broadly skilled employees, greater lateral job mobility, more flexibility in establishing dual career ladders, and the opportunity to redesign work and create flatter organizations.(17) The recommended approach allows agencies that are ready to move toward broadbanding under a structured approach that manages the associated risks. It would also allow OPM to assume the role of facilitator and promoter of innovation.

3. Modify the standard 15-grade classification system that applies to those employees not covered by a broadbanding system. (3)

The director of OPM should submit proposed legislation to Congress by fall 1994 that amends the classification law to give employing agencies authority to make final classification decisions and to eliminate OPM's review and compliance authority, effective one year after enactment. During the one-year interim period, agencies should give appropriate training to line managers who will be given classification responsibilities and develop appropriate decision support systems (e.g., human resource planning and costing models). OPM should immediately begin the process of simplifying the standard classification system by reducing the number of job categories used for classification purposes and by developing abbreviated standards that focus solely on full-performance (i.e., journey) levels of work. In addition, as recommended earlier in HRM01, OPM should issue regulations by spring 1994 deleting the requirements that employees serve some minimum amount of time at a lower grade level to qualify for a higher grade (i.e., time-in-grade requirements).(18)

OPM should be responsible for developing and maintaining the classification tools to be used by agencies participating in the modified standard 15-grade classification system. OPM should publish the primary classification standard setting forth the basic evaluation criteria that will guide all classification decisions. In the first stage of the simplification effort, it should also publish 30 to 50 job-specific classification standards that cover only the most populous jobs and selected benchmarks. Eventually, all paper standards will be eliminated and replaced by a manager-friendly automated classification program. Since OPM standards will focus solely on full-performance levels of work, agencies will be free to assign grades to entry and developmental levels under their own authority and standards, consistent with job qualification requirements.(19)

Agencies should classify full-performance level jobs using the OPM standards, subject to a requirement that final classification decisions be made at a level of management that operates under a fixed budget that includes all pay-related costs. OPM will not have authority to overrule an agency classification action. Each department or agency should be required to provide for internal reviews of a position's classification when requested by an employee. A classification decision would be appealable to a body outside the agency, such as the Merit Systems Protection Board, only on the limited grounds that the decision constituted a prohibited personnel practice; the agency's judgments as to the value of different types of work would not be subject to review.(20)

A governmentwide job titling system should be retained to support a governmentwide human resources database and external salary surveys; however, job categories should be consolidated to the maximum extent appropriate. It is expected that the number of job series (currently over 450) would be reduced by one-half or more.

The modified standard classification system is expected to greatly simplify the job classification process and provide agencies and their line managers with greater flexibility along with accountability for proper administration. The link between classification and budget will be strengthened. With the elimination of its review and compliance authority, OPM would no longer have the role of classification police. The elimination of the time-in-grade requirements will allow managers to promote qualified employees without delay; in addition, since the minimum time-in-grade requirements seem to be viewed by many employees as length-of-service requirements triggering automatic promotion, their elimination may help reinforce the principle that promotions are based on qualifications and abilities, not longevity.

4. Provide agencies under the standard 15-grade system with additional flexibilities in setting base pay rates. (3)

The director of OPM should submit proposed legislation to Congress by fall 1994 that will modify the GS within-grade pay progression scheme. In addition, OPM should submit proposed legislation to Congress by fall 1994 that will provide employing agencies with certain additional flexibilities in setting base pay rates, effective one year after enactment (to correspond with the effective date of the classification system modifications). This latter piece of legislation will include provisions making clear that agency decisions to use or stop using any of the new pay flexibilities are not subject to collective bargaining.

The 15-grade pay structure and a standard within-grade pay progression scheme similar to the current scheme will be retained. However, the rigid 10-step framework for progression within each pay grade will be abandoned. Within-grade increases will be equal in dollar value to the current step increases and the waiting periods will remain essentially the same.(21) The main differences will be that Quality Step Increases or QSI's (perhaps renamed as Exceptional Performance Increases) can be less than a full within-grade increment and that an employee's initial rate in grade (upon hire or promotion) will not be required to equal a fixed step rate. This modified standard within-grade progression scheme will also apply to GS-13 to -15 managerial employees who are now covered by PMRS, which expires on October 31, 1993.

Agencies should also be able to establish special, alternative within-grade pay progression schemes through a revised demonstration project authority. For example, agencies may wish to experiment with schemes that base within-grade pay progression on the acquisition of specific skills and competencies or that move toward greater use of variable pay (i.e., one-time bonuses and awards) instead of base pay adjustments.

Agencies should be given discretionary authority to approve a base pay differential of 10 percent (of the GS base rate) for missioncritical positions with a grade no higher than GS-14 that, in the agency's judgment, are significantly undervalued under the standard classification criteria, based on the value assigned by the agency to those mission-critical positions relative to the value (i.e., grades) of other positions in the agency.

Agencies should be given discretionary authority to set entry pay up to 10 percent higher than the minimum rate of the entry grade if, in the agency's judgment, it is necessary to meet its recruitment goals. (The authority to set entry pay at any rate in the entry grade based on superior qualifications will also continue.)

Agencies should be given discretionary authority to establish, for grades GS-14 and below, local special rate schedules up to 10 percent higher than regular rates (including any locality pay adjustment) for occupations in which recruitment and retention efforts are significantly handicapped due to inadequate pay levels. These special rates can be phased out, at agency discretion; however, the phase-out must be conducted in a way that prevents any employee from suffering an absolute reduction in pay. Thus, agencies should be required to time the phase-out of a special rate to coincide with the effective date of general pay increases. (OPM's authority to approve higher special salary rates upon agency request will also continue. However, the rules for administering OPM-approved special rates should be modified expressly to allow agencies to phase out special rates at their discretion, consistent with the rules for agency-approved special rates.)(22)

The intent of the recommended changes is to provide agencies with greater flexibility. While the modifications to the standard withingrade pay progression scheme are not dramatic, they will eliminate unnecessary rigidity and allow agencies to make finer distinctions with respect to certain pay decisions. Also, those agencies that wish to adopt a special pay progression scheme can do so through the liberalized demonstration project authority, which will allow for permanent adoption of a successful project as an alternative system. The new flexibilities to increase base pay (subject to overall budget constraints) will permit agencies to respond quickly to special situations and reduce the temptation to manipulate the classification system. Given the visibility of the proposed pay flexibilities, agencies would have strong internal and external incentives to use them prudently. OPM evaluation and reporting on agency pay practices would reinforce accountability. The new rules for phasing out special salary rates would make clear that special rates are paid at agency discretion and are not a matter of statutory entitlement.

5. Establish reporting requirements that apply to both the modified standard system and any broadbanding system. (3)

In conjunction with the law changes proposed above, the director of OPM should submit proposed legislation to Congress by fall 1994 that would expressly authorize OPM to collect compensation data from agencies and require advance public notice of significant classification and pay actions. OPM will develop specific reporting requirements, including the following:

The overall fiscal impact of the proposed changes to the classification system (i.e., broadbanding and decentralization) can be monitored and controlled within agency budget constraints. Agency decisions could produce additional costs in some areas while providing offsetting savings in other areas. As the classification system is simplified and automated and as line managers assume responsibility for classifying positions, the amount of staff years devoted to classification by personnelists (and associated administrative costs) should be significantly reduced in the long term.

No cost estimate can be assigned to the special pay flexibilities being proposed since they are discretionary. It is presumed that agencies will have to absorb within their budgets any increased costs associated with use of these discretionary authorities. It should be noted that elimination of the fixed steps in the GS pay system would prevent $80 million in conversion costs (not anticipated in the President's budget) that would otherwise result from slotting PMRScovered managers back into a fixed-step schedule.

Cross References to Other NPR Accompanying Reports

Improving Financial Management,
FM04: Increase the Use of Technology to Streamline Financial Services.


  1. National Academy of Public Administration (NAPA), Modernizing Federal Classification: An Opportunity for Excellence (Washington, D.C., July 1991), pp. 20-21.
  2. Title 5, United States Code, sec. 5305.
  3. Title 5, United States Code, sec. 5304.
  4. NAPA, Leading People in Change: Empowerment, Commitment, Accountability (Washington, D.C., April 1993), p. 38.
  5. U.S. Office of Personnel Management, Survey of Federal Employees (Washington, D.C., May 1992), p. 60.
  6. NAPA, Modernizing Federal Classification, back cover.
  7. U.S. Merit Systems Protection Board (MSPB), OPM's Classification and Qualification Systems: A Renewed Emphasis, A Changing Perspective (Washington, D.C., November 1989), p. 12.
  8. NAPA, Leading People in Change, p. 38.
  9. International Personnel Management Association, Federal Section, "Critical Personnel Management Issues: Position Classification," February 1991, p. 6.
  10. MSPB, p. 10-11.
  11. Letter from John N. Sturdivant, National President of the American Federation of Government Employees, to Roy Tucker, member of the National Performance Review staff, May 14, 1993, p. 6.
  12. Title 5, United States Code, sec. 5104.
  13. Minor changes to the GS-5 and GS-7 definitions were made in the Federal Employees Salary Increase Act of 1958.
  14. Title 5, United States Code, sec. 4703.
  15. Title 5, Code of Federal Regulations, Part 470.
  16. In the case of occupational fields that do not fit well in the standard GS classification and pay framework, special governmentwide occupational systems can be approved by the President's Pay Agent (i.e., the director of OPM, the director of OMB, and the Secretary of Labor) under current law. See 5 U.S.C. 5392.
  17. Braddick, Carol A., Michael B. Jones, and Paul M. Shafer, "A Look at Broadbanding in Practice," Journal of Compensation and Benefits (July-August 1992), pp. 28-32; and U.S. Office of Personnel Management, Broad-banding in the Federal Government: Management Report (Washington, D.C., February 1993), pp. 14-22.
  18. See also "HRM01, Create a Flexible and Responsive Hiring System," action 5.
  19. Ibid.
  20. Title 5, United States Code, sec. 2302.
  21. See "HRM05, Strengthen Systems to Support Management in Dealing with Poor Performers," regarding proposed change that would bar a period of inadequate performance from being counted toward the waiting period for a within-grade increase.
  22. Under current law, employees' special rates can be reduced or terminated; however, such employees are covered by statutory pay retention rules that may provide entitlement to partial annual increases. At the same time, the law can be read to limit agencies' discretion to not apply general increases in pay and, thus, to effect a phase-out of special rates without absolute reductions in basic pay entitlement. Under the proposal, the law would be amended to make it clear that employees are not entitled to have a special salary rate automatically adjusted when there is a general increase in General Schedule rates.

Enable Managers to Empower, Develop, Train, Reward, and Discipline Employees

HRM03: Authorize Agencies to Develop Programs for

Improvement of Individual and Organizational Performance


Following the lead of the private sector, the Civil Service Reform Act of 1978 established governmentwide performance management systems for federal employees that linked employee pay to individual performance.

The system was designed to serve as a vehicle to improve agency and individual performance through improved communications of performance expectations between employees and supervisors. A yearly work plan, consisting of critical elements and performance standards, was envisioned to support agency planning and accomplishment of work. Ongoing feedback from the supervisor, including a formal, end-of-theyear appraisal, would provide feedback to the employee. Management decisions on promotions, awards, training, and retention were to be linked directly to the performance management process.(1)

Currently, there are separate performance management systems for supervisors and general managers (GM) included in the Performance Management and Recognition System (PMRS), and employees included in the General Schedule (GS). PMRS expires on October 31, 1993; thus, new legislation is required. Congress established a PMRS Review Committee as part of the PMRS Amendments of 1991 to advise the Office of Personnel Management (OPM) on improvements to PMRS. Congress reaffirmed its commitment to the linkage of pay and performance in the Federal Employees Pay Comparability Act (FEPCA) of November 5, 1990, and directed OPM to establish a Pay for Performance Labor Management Committee to advise OPM on the design and establishment of pay for performance systems for GS employees. In May 1993, OPM circulated a working draft proposal for changes in performance management systems titled "Principles and Features of Performance Management Reform." The OPM recommendations are similar to the National Performance Review recommended actions.

Need for Change

Performance management systems for GS and GM employees, in the view of virtually all observers (e.g., the General Accounting Office, Merit Systems Protection Board, National Academy of Public Administration, National Research Council, and academic researchers such as Perry and Ingraham), have not resulted in the desired improvements in individual and organizational performance. The failure of performance management systems to improve performance results from several factors:

The ideal performance management program will have one objective: improvement of individual and organizational performance. Agencies will be required to develop performance management programs that meet their unique needs and are consistent with the culture of their organization. Performance management programs will seek to improve the performance of all employees, both the majority of employees who meet performance expectations now and the few who do not. Employees and their representatives will be involved in design and implementation of performance management programs and with development of performance expectations.

Feedback on performance--during and at the end of the period--should be developmental in nature, focusing on how to improve future performance. To reinforce the emphasis on improvement of future performance, performance ratings and awards should be disassociated and independent of each other; i.e., after a determination is made that performance meets expectations, a further determination would be made to decide which of the employees who meet expectations will receive special recognition. Decisions about recognition could include factors unique to work group and organization mission and culture.


Authorize agencies to design their own performance management programs. (3)

By fall 1994, the director of OPM should submit draft legislation to Congress to authorize agencies to design and implement performance management programs based on the following principles:

Complete decentralization of performance management within a framework of broad, governmentwide principles is expected to result in development of agency-based performance management programs that meet each agency's unique needs. Agencies should be able to develop performance management programs that seek improved performance of all employees. Development of agency-based programs will result in programs that are owned by agency managers.

Involving employees and their representatives in development and implementation of performance management programs should result in programs that are owned by employees. Identifying a single objective for performance management makes it easier to achieve that objective, and to evaluate the success of performance management programs. Disassociating performance ratings and awards reinforces the emphasis on the objective of performance improvement. Agency heads, who are responsible for organizational performance, should be held accountable for development and use of performance management programs. Results-oriented accountability factors include improvements in organizational performance, ownership of the system by employees and supervisors, and the vigilance of employee unions and associations of management-level employees.


  1. International Personnel Management Association, Federal Section, "Critical Personnel Management Issues: Performance Management," December 1989, pp. 1-2.