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44–579 PDF 2009

S. Hrg. 110–814 

IMPROVING PERFORMANCE: A REVIEW OF PAYFOR-PERFORMANCE SYSTEMS IN THE FEDERAL 

GOVERNMENT 

HEARING 

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE, AND THE 

DISTRICT OF COLUMBIA SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JULY 22, 2008 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

DANIEL K. AKAKA, Hawaii, Chairman 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

GEORGE V. VOINOVICH, Ohio 

TED STEVENS, Alaska 

TOM COBURN, Oklahoma 

JOHN WARNER, Virginia 

RICHARD J. KESSLER, Staff Director 

THOMAS J.R. RICHARDS, Professional Staff Member 

JENNIFER A. HEMINGWAY, Minority Staff Director 

JESSICA K. NAGASAKO, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Akaka .................................................................................................. 1 

Senator Voinovich ............................................................................................. 14 

WITNESSES 

TUESDAY, JULY 22, 2008 

Hon. Linda M. Springer, Director, U.S. Office of Personnel Management ......... 3 

Richard A. Spires, Deputy Commissioner for Operational Support, Internal 

Revenue Service ................................................................................................... 5 

Gale Rossides, Deputy Administrator, Transportation Security Administration, U.S. Department of Homeland Security .................................................... 6 

Ronald P. Sanders, Associate Director of National Intelligence for Human 

Capital, Office of the Director of National Intelligence .................................... 8 

Bradley Bunn, Program Executive Officer, National Security Personnel System, U.S. Department of Defense ....................................................................... 10 

J. Christopher Mihm, Managing Director of Strategic Issues, U.S. Government Accountability Office .................................................................................. 12 

Carol A. Bonosaro, President, Senior Executives Association ............................. 29 

John Gage, President, American Federation of Government Employees ........... 31 

Colleen M. Kelley, National President, National Treasury Employees Union ... 33 

Jonathan D. Breul, Executive Director, IBM Center for the Business of Government, and Partner, IBM’s Global Business Services ................................... 35 

Charles H. Fay, Professor, School of Management and Labor Relations, Rutgers University ..................................................................................................... 36 

ALPHABETICAL LIST OF WITNESSES

Bonosaro, Carol A.: 

Testimony .......................................................................................................... 29 

Prepared statement .......................................................................................... 119 

Breul, Jonathan D.: 

Testimony .......................................................................................................... 35 

Prepared statement .......................................................................................... 161 

Bunn, Bradley: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 82 

Fay, Charles H.: 

Testimony .......................................................................................................... 36 

Prepared statement .......................................................................................... 165 

Gage, John: 

Testimony .......................................................................................................... 31 

Prepared statement .......................................................................................... 134 

Kelley, Colleen M.: 

Testimony .......................................................................................................... 33 

Prepared statement .......................................................................................... 149 

Mihm, J. Christopher: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 94 

Rossides, Gale: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 62 

Sanders, Ronald P.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 68 

Page

IV 

Spires, Richard A.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 54 

Springer, Hon. Linda: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 49 

APPENDIX 

Chart submitted by Ms. Kelley ............................................................................... 177 

Background .............................................................................................................. 178 

Federal Managers Association (FMA), prepared statement ................................. 191 

Letter to Senator Akaka from Carol A. Bonosaro, dated July 28, 2008 ............. 198 

Questions and Responses for the Record from: 

Ms. Springer ..................................................................................................... 199 

Mr. Spires .......................................................................................................... 207 

Ms. Rossides ...................................................................................................... 209 

Mr. Sanders ....................................................................................................... 221 

Mr. Bunn ........................................................................................................... 235 

Mr. Mihm .......................................................................................................... 245 

Ms. Bonosaro ..................................................................................................... 248 

Mr. Gage ............................................................................................................ 250 

Ms. Kelley ......................................................................................................... 253 

Mr. Breul ........................................................................................................... 258 

Mr. Fay .............................................................................................................. 260 

(1) 

IMPROVING PERFORMANCE: A REVIEW OF 

PAY-FOR-PERFORMANCE SYSTEMS IN THE 

FEDERAL GOVERNMENT 

TUESDAY, JULY 22, 2008 

U.S. SENATE,

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

MANAGEMENT, THE FEDERAL WORKFORCE,

AND THE DISTRICT OF COLUMBIA,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:06 p.m., in room 

342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, Chairman of the Subcommittee, presiding. 

Present: Senators Akaka and Voinovich. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. This hearing will come to order. 

I want to thank all the witnesses for being here. It is good to 

shake your hands and to see you again, and especially I am glad 

to see Director Linda Springer. As many of you know, Director 

Springer announced that she will step down next month. I want to 

take this opportunity to thank her for her many years of public 

service and wish her the best of luck in the future. Ms. Springer, 

it was a pleasure to work with you and you have done a great job 

in the time that you have been here. God bless your way. 

Today, the Subcommittee will examine pay-for-performance systems across the Federal Government. We have a full hearing today, 

so I will try to keep my opening remarks brief. 

Pay-for-performance systems have increased in the Federal Government out of a desire to improve the link between an employee’s 

pay and his or her performance. Ideally, the better someone performs, the greater their pay. 

Since the Department of Navy demonstration project at China 

Lake began in 1980, the Federal Government has tinkered with 

pay and performance systems outside of the General Schedule (GS). 

The authority to implement pay-for-performance systems have been 

given to Federal agencies for employees in the Senior Executive 

Service and to the Internal Revenue Service, the Federal Aviation 

Administration, the Department of Defense, Transportation Security Administration, the Department of Homeland Security, components in the intelligence community, the Government Accountability Office, and many other agencies. 

2 

1The chart from TSA appears in the Appendix on page 177. 

When Congress granted Federal agencies statutory authority to 

develop pay-for-performance systems, employee and management 

groups expressed many concerns with the ability of Federal agencies to design systems that are transparent, fairly evaluate employees’ performance, provide a fair appeals process, include employees 

and their representatives in the design and implementation of 

these systems, provide sufficient training to managers and employees to implement systems, and budget sufficient funds to properly 

reward employees for their performance. I share many of these concerns, which unfortunately have become reality. 

Federal pay-for-performance systems have often been modified 

from those in corporate America to address budgetary constraints. 

I continue to hear from employees that their performance rating 

and pay awards depend not only on their performance, but rather 

on that of other employees who are in competition with too limited 

resources to reward performance. 

If the Federal Government is serious about new and more rigorous pay-for-performance systems, it must invest in those systems 

with enough money to provide a real performance incentive. Part 

of this investment requires taking the extra time and effort to ensure that employees are involved in the development of these systems and have a clear understanding of how they operate. 

According to the last SES human capital survey, nearly 30 percent of respondents do not understand how increases in their salary and bonuses are determined. The 2007 DHS employee survey 

found that 55 percent of TSA employees do not believe their pay 

is based on their performance, and 48 percent do not believe their 

pay awards depend on how well they perform their jobs. If employees do not understand their pay system, or think it is unfair, it will 

not work. 

Moreover, employee buy-in is essential to the government’s effectiveness and efficiency. If employees are not involved and their concerns are not addressed, morale will drop and hinder agency mission. 

A recent report from the DHS Inspector General on TSA’s responsiveness to address employee concerns acknowledges that low 

employee morale at TSA continues to be an issue and can contribute to high attrition rates. The estimates for TSA’s attrition 

rate range from 17 to 20 percent. This is too high.1

The GS system is not perfect. However, there are clear rules on 

how employees will be paid and under what circumstances pay increases are awarded. I am worried that we are spending hundreds 

of millions of dollars to transition away from the GS into new payfor-performance systems at the cost of employee morale and agency 

mission. 

I look forward to hearing from our witnesses on the implementation of pay-for-performance systems in the Federal Government. 

My friend, colleague, and Ranking Member, Senator Voinovich, 

will be here shortly. So let’s proceed to the first panel. 

On our first panel this afternoon is Linda Springer, Director, 

U.S. Office of Personnel Management; Richard Spires, Deputy 

Commissioner for Operational Support, Internal Revenue Service; 

3 

1The prepared statement of Ms. Springer appears in the Appendix on page 49. 

Gale Rossides, Deputy Administrator, Transportation Security Administration; Dr. Ronald Sanders, Associate Director of National 

Intelligence for Human Capital, Office of the Director of National 

Intelligence; Brad Bunn, Program Executive Officer, National Security Personnel System, U.S. Department of Defense; and Christopher Mihm, Managing Director of Strategic Issues, Government 

Accountability Office. 

As you know, our Subcommittee requires that all witnesses testify under oath. Therefore, I ask all of you to please stand and 

raise your right hand. 

Do you solemnly swear that the testimony you are about to give 

this Subcommittee is the truth, the whole truth, and nothing but 

the truth, so help you, God? 

Ms. SPRINGER. I do. 

Mr. SPIRES. I do. 

Ms. ROSSIDES. I do. 

Mr. SANDERS. I do. 

Mr. BUNN. I do. 

Mr. MIHM. I do. 

Senator AKAKA. Thank you very much. Let it be noted for the 

record that the witnesses have answered in the affirmative. 

Before we begin, I want to remind all of you that although your 

oral statement is limited to 5 minutes, your full written statement 

will be included in the record. 

Director Springer, will you please begin with your statement. 

TESTIMONY OF HON. LINDA M. SPRINGER,1 DIRECTOR, U.S. 

OFFICE OF PERSONNEL MANAGEMENT 

Ms. SPRINGER. Thank you, Mr. Chairman. I want to take a moment to thank you for the wonderful working relationship that you 

have led, along with Senator Voinovich, with the Office of Personnel Management (OPM), and with me personally during these 

years. It couldn’t have been a more professional and more effective 

relationship. I thank you for your support and your interest in the 

workforce and for the work we have done together. So thank you 

very much, sir. 

I want to talk today specifically about our progress with alternative pay systems in the Federal Government. OPM has been very 

active in monitoring these programs and in supporting implementation. In 2007, we issued three major reports on progress and 

today I would like to characterize just how we have been evolving 

in the Federal Government in this area. 

There are three main periods of time that I want to comment on: 

The 25-plus years of alternative pilots and programs prior to 2004, 

the three major legislative initiatives that occurred after 2004, and 

then the current activities. So, that will sort of be the framework 

for my comments. 

For those older alternative systems that began, as you said, in 

1980 with the China Lake project, OPM maintains an archive of 

data that we use to evaluate these programs and how they are 

doing. In 2005, we issued a report summarizing these 25 years 

from 1980 on and reached several conclusions as a result of our 

4 

work. Among those were that performance, rather than tenure, 

drove pay in those systems. Success of the systems depended on effective implementation. And that over time, with the proper implementation, employees did support alternative pay systems. It was 

noted that progress in some organizations was slower than others, 

as you would expect with new programs, but that overall, there 

were clearly positive trends. 

Now, beginning in 2004, several legislative initiatives covered 

large groups of employees. The Senior Executive Service (SES) has 

been covered by a program that was required to make distinctions 

based on performance and certified by OPM with Office of Management and Budget (OMB) concurrence. In 2004, 76 percent of the 

SES members were covered by certified programs. Over the past 3 

years, that has grown to 99 percent. Virtually all of these programs 

now meeting certification. 

OPM recently conducted a survey of SES members, and among 

other things, we asked about the system, and we found that 93 percent of the SES believe that their pay should be based on performance, and 91 percent believe that they should be held accountable 

for achieving results. I think that is a testimony to the high performance standards of the Senior Executives. 

We work closely with Chief Human Capital Officers to promote 

and to communicate the best practices of the SES. There is more 

to do and we are continuing to work collaboratively with the Chief 

Human Capital Officers to help this program work even better. 

The National Security Personnel System (NSPS) has been a focal 

point for OPM. We work closely with the Department of Defense 

(DOD) on regulations, including the more recent ones that are required by the 2008 Defense Authorization Act. Our review of 

NSPS, as we have said in our published report, indicates that both 

employees and supervisors are developing a better understanding 

of expected performance and how their jobs link to the organization 

and to performance ratings and pay. 

The Department of Homeland Security (DHS), the third major 

system as a result of legislation, has not progressed to that same 

point, although the TSA has initiated its own Performance Accountability and Standards System and the information on that 

has been provided separately in the testimony provided to the Subcommittee. 

Currently, OPM has been working with agencies that of their 

own initiative believe they are ready under a demonstration program authority to test on a very measured basis performance-based 

systems for components of their agencies. These are not large 

projects. They are very self-contained and measured. They range 

from around 100 people up to maybe 2,500. There are currently 

five demonstration projects underway and they really are a logical 

step after that component of an agency has established the right 

performance infrastructure and they believe they are ready to move 

to test and learn from how a performance-based pay system could 

work. 

As I mentioned in the beginning of my remarks, OPM has issued 

a report on the status of all performance-based pay systems from 

all of these periods. Our report concluded that pay-for-performance 

systems continue to be successful and provide a strong link beVerDate Nov 24 2008 08:30 May 11, 2009 Jkt 044579 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 P:\DOCS\44579.TXT SAFFAIRS PsN: PAT
5 

1The prepared statement of Mr. Spires appears in the Appendix on page 54. 

tween pay and performance rather than under systems where longevity is an important factor. It only comes after effort and hard 

work, but we believe that these systems are better able to recruit 

and retain a high-quality workforce. I am personally convinced that 

pay-for-performance systems can be effective for the Federal workforce when they are done properly. 

Mr. Chairman, I thank you again for the opportunity to be here 

today and look forward to answering your questions. 

Senator AKAKA. Thank you very much, Ms. Springer. Mr. Spires. 

TESTIMONY OF RICHARD A. SPIRES,1 DEPUTY COMMISSIONER 

FOR OPERATIONAL SUPPORT, INTERNAL REVENUE SERVICE 

Mr. SPIRES. Thank you, Chairman Akaka. I am pleased to be 

here today to discuss the IRS’s efforts to implement pay-for-performance and respond to any questions from the Subcommittee. It 

is an important issue as the Federal Government continues to look 

at ways to recruit and retain talented managers. 

While I have worked at the IRS in various capacities since 2004, 

I have spent more than 20 years in private industry where pay-forperformance is commonplace, and from the perspective of the companies with which I was associated, has had great success. I recognize that there is not a perfect correlation between government and 

private enterprise and what works in one may not in the other. 

And in my 4-plus-year tenure at the IRS, I have seen some of the 

reasons why. However, the development of a strong pool of talented 

employees is such a critical issue for any enterprise that it is important that innovative programs be attempted. 

In many respects, the IRS has been at the forefront of the payfor-performance program in the Federal Government. We have 

been dealing with it for over 7 years as we have implemented such 

a system for our more than 7,000 managers. Though there have 

been some bumps along the way, the creation of pay bands and 

compensating employees for the quality of their work rather than 

their tenure with the agency has helped the IRS respond to the 

challenges presented in turning the agency into a modern and more 

efficient organization. 

My written statement lays out much of the background of how 

we got into pay-for-performance and describes in some detail how 

we implemented the program and discusses some of the obstacles 

we faced. I want to focus my remarks this afternoon on two things. 

First, I want to outline the areas in which pay-for-performance has 

benefited our agency. Second, I want to offer some of the lessons 

we have learned so that other agencies that follow us can benefit 

from our experiences and have an easier transition. 

Perhaps the greatest benefit of pay-for-performance for the IRS 

has been the opportunities afforded us in implementing the dramatic overhaul of the agency mandated by the IRS Restructuring 

and Reform Act of 1998. Specifically, the implementation of a new 

performance management system allowed us to link manager performance to the functional goals of the organization. Managers and 

their supervisors jointly develop specific performance commitments 

as part of annual performance plans that are designed to further 

6 

1The prepared statement of Ms. Rossides appears in the Appendix on page 62. 

the goals of the functional unit and the IRS. The pay flexibilities 

have enabled IRS to strengthen the linkage between manager performance and the overall IRS goals. 

In addition, the overall job satisfaction among our managers, 

based on annual employee survey results, has been on an upward 

path since 2005. 

Despite these benefits, the road has not always been smooth and 

without controversy. Let me offer several lessons we have learned, 

and frankly are still learning, that may benefit other agencies in 

the Federal Government. 

First, agencies should move deliberately and cautiously to implement the program that is right for their organization, recognizing 

that any change in the way employees are paid will raise concerns 

on their part. 

Second, communication is critical. Employees must understand 

how the program will work and how they will be affected. There 

must also be forums to have their questions answered. 

Third, an effective performance evaluation system must be in 

place. Employees must understand the basis for their evaluation, 

and there should be a review system in place to make sure evaluations are being made on a consistent basis. 

Fourth, supervisors and employees must be trained properly on 

how to use the system and make sound evaluations. 

Fifth, ongoing program evaluation is essential to ensure that the 

pay-for-performance system is operating as intended, and agencies 

must be willing to modify and revise to meet the changing needs 

of their organization. 

And finally, evaluations must be made free of any discrimination 

based on race, gender, age, or national origin. 

I am proud to say that an overall evaluation of the IRS program 

by a third-party contractor found that since fiscal year 2004, there 

have been no disparate impact on any group of managers. The contractor analyzed the trends of the ratings data grouped by race, 

gender, age, and national origin. In each group, ratings trended in 

a similar path to the average ratings across all groups. 

Thank you again, Mr. Chairman, for the opportunity to be here 

and I will be happy to respond to any questions. 

Senator AKAKA. Thank you very much, Mr. Spires. Ms. Rossides. 

TESTIMONY OF GALE ROSSIDES,1 DEPUTY ADMINISTRATOR, 

TRANSPORTATION SECURITY AGENCY, U.S. DEPARTMENT 

OF HOMELAND SECURITY 

Ms. ROSSIDES. Good afternoon, Chairman Akaka and Ranking 

Member Voinovich. I am pleased to be here today to discuss TSA’s 

progress on our pay-for-performance system known as PASS. I am 

honored to represent the thousands of TSA employees, our Transportation Security Officers, who serve to ensure the safety and security of two million passengers a day. These women and men are 

dedicated security professionals with one of the most difficult jobs 

in government. These officers are the most tested in the Federal 

workforce. 

7 

Twenty-two thousand of our officers have been with TSA from 

the beginning. They have participated in the largest stand-up of a 

Federal agency in 50 years. They have stayed with us as we have 

responded to the evolving threat by continuously enhancing the security processes while also helping us build the infrastructure and 

the human capital system to properly pay, train, reward, and recognize their performance. They stayed for the mission. 

There are two reasons TSA relies on pay-for-performance. Security is the first and foremost. Second, it is to instill a culture of 

high performance and accountability in our workforce. 

Performance on the job has a special meaning to us. Let me be 

very direct. Our job is to stop a terrorist attack. Our officers work 

in an environment in which 99.9 percent of the people they see 

every day are not a threat, but the threats against our aviation 

system remain. TSOs want to get passengers through the security 

check point with a high degree of confidence that they have 

stopped anyone seeking to do harm. Your safety is their priority. 

How does PASS improve security? When you get paid more to do 

a better job, you do a better job. PASS is targeted to reward excellent performance. That is an incentive to perform at the highest 

levels to which you are capable. PASS rewards the individual performance necessary to achieve TSA’s organizational goals and that 

increases security. 

TSA’s pay-for-performance system is driven by validated data. Its 

performance metrics are standardized, measurable, observable, and 

almost completely objective. PASS has been adjusted based on the 

feedback from our officers about what the real job is. Our officers 

have told us that they want a pay-for-performance system because 

they know what is at stake. They want to know that their fellow 

officers are equally competent. 

But building a pay-for-performance system takes time. It takes 

employee engagement. It takes leadership. It takes flexibilities in 

the human capital system. It takes continuous improvement. And 

it takes constant communication. But for us, it is essential. 

In my 30 years of Federal service, 23 of them with the General 

Schedule, I have never been more sure of anything. The pay-forperformance system is the best way in this post-September 11, 

2001 environment for TSA to manage and ensure the quality of 

persons on the front line. The effectiveness of PASS is proven by 

the statistics. More than half of our TSO workforce has been on the 

job for 4 years or more. TSA supervisors have a significant stake 

in the PASS program, as well. Successful implementation of the 

program is a component of their own PASS ratings. 

At TSA, pay-for-performance ensures the technical proficiency of 

the people on the front line. Our goal is for our officers to be 

switched on and always at the ready. Pay-for-performance drives 

their higher level of performance because their earning power is directly tied to their learning power. 

The senior leadership of TSA is passionately dedicated to its people and to the principles of pay-for-performance. We are committed 

to using the flexible human capital system provided under ATSA 

to make TSA a model performance-based organization. We are 

building a culture in which our workforce is actively engaged. It is 

8 

1The prepared statement of Mr. Sanders appears in the Appendix on page 68. 

through listening and working collaboratively with all of our officers to find solutions that will continue to meet our challenges. 

While significant advancements are being made in our technology and our security processes, each day’s success begins and 

ends with our officers. They are TSA’s greatest investment. They 

are everyday heroes. In this War on Terror, the individual motivation of our officers to excel is critical to our success. We rely on the 

best to do the best at the security job, and pay-for-performance is 

vital to sustaining this top-performing workforce. 

I look forward to answering your questions. Thank you. 

Senator AKAKA. Thank you very much, Ms. Rossides. Dr. Sanders. 

TESTIMONY OF RONALD P. SANDERS,1 ASSOCIATE DIRECTOR 

OF NATIONAL INTELLIGENCE FOR HUMAN CAPITAL, OFFICE 

OF THE DIRECTOR OF NATIONAL INTELLIGENCE 

Mr. SANDERS. Good afternoon, Mr. Chairman and Senator Voinovich. Thank you for the invitation to testify at today’s hearing. It 

is my pleasure to provide a status report to this Subcommittee on 

one of the Intelligence Community’s most important strategic 

human capital initiatives, the National Intelligence Civilian Compensation Program. 

Our program is modeled after the National Geospatial Intelligence Agency’s innovative performance-based pay system, which 

has been operating successfully for a decade. The product of over 

2 years of extensive interagency collaboration, the NICCP’s five enabling IC directives have now been issued by the Director of National Intelligence. However, because of our complex statutory context, they will be implemented via departmental and agency personnel regulations. For example, DOD will do so with authorities 

established under Title 10 of the Code, CIA under Title 50, and so 

forth. 

Why are we doing this? Today’s complex national security challenges underscore the need for an IC workforce that is second to 

none. Outmoded civilian personnel policies and practices, especially 

those dealing with pay and performance management, are an impediment to excellence. The NICCP will replace them with a 21st 

Century pay and performance management program that is far 

more performance-based and market sensitive. In so doing, it will 

also transcend departmental and agency boundaries to better integrate and unify the Intelligence Community, while rewarding and 

reinforcing behaviors that are transformational in their own right, 

such things as analytic integrity, collaboration and information 

sharing, and critical thinking. 

Further, the program will, to the extent permitted by law, assure 

a level playing field among our 17 agencies, most of which are in 

six cabinet departments. Most of the major IC agencies are not covered by Title 5. When you add them to those that are, you have 

six separate statutory personnel systems in the IC, each with different authorities and flexibilities. 

Employee input has played a significant part in our design process. According to our surveys, less than a third of our employees 

9 

believe their pay depends on how well they perform. Conversely, 

less than a third of our workforce believes that management takes 

steps to deal with poor performers. These results suggest that a 

majority of the IC’s employees want a stronger link between performance and pay, but they also have concerns. 

We heard as much in a series of focus groups we held in each 

of our major agencies. In all, several hundred employees and supervisors were involved. We have tried to address those concerns in 

our final design. 

With the final IC directives all signed, departments and agencies 

have begun communicating these changes to employees through 

dozens of town hall meetings and focus groups, websites and satellite broadcasts, even blogs. These efforts have reached thousands 

of employees and will continue throughout our implementation. 

Our directives establish rigorous safeguards and oversight mechanisms to ensure that our system is credible, transparent, and 

above all, merit-based. For example, the directives require that all 

employees receive written performance expectations up front, with 

final ratings subject to at least two levels of management review, 

one of which is at the agency level specifically intended to protect 

against unlawful discrimination. 

The directives also prohibit ratings quotas and forced distributions, and to ensure transparency in the performance pay process, 

they establish a standard mathematical formula and two additional 

levels of management review to ensure consistency and fairness in 

pay decisions. 

We have also begun delivering a comprehensive training curriculum for managers, HR specialists, and employees that not only 

covers the technical aspects of the system, but the soft skills that 

are just as critical. Those involved in the performance pay process 

get even more instruction, including training to identify and correct 

any implicit or unintentional bias against protected classes of employees in the performance evaluation and performance pay process. 

Finally, the directives establish an IC human capital board to 

oversee the entire effort. Chaired by the Principal Deputy Director 

of National Intelligence, the board is comprised of the deputy directors of each of our intelligence agencies—the senior career officials—as well as the IC’s Chief of EEO and Diversity. 

The system is fully funded in the National and Military Intelligence Programs of record and will be phased in over the next 5 

years. It will be implemented agency by agency, with DIA this fall, 

with most remaining defense agencies and part of the FBI implementing through the end of 2009. The CIA and the Office of the 

Director of National Intelligence will follow about a year after that. 

In each case, performance pay decisions will typically follow 12 to 

15 months thereafter, so we are approaching this with all deliberation. However, phases will ultimately be event-driven based on the 

readiness of each IC agency to proceed, not a calendar date. 

To implement this program throughout the IC, we need some additional authorities and assistance from the Congress. As it stands 

today, our smaller elements, those covered by Title 5, do not have 

the statutory authority to implement the system. To remedy this, 

the Administration’s 2008 intelligence authorization proposed that 

10 

1The prepared statement of Mr. Bunn appears in the Appendix on page 82. 

the DNI be authorized to extend flexibilities that Congress has 

given one IC agency to those that may not have it to keep the playing field level. As it did last year, the Senate Select Committee on 

Intelligence has included this provision in its Intelligence Authorization Act, S. 2996, and we ask for your support. 

In conclusion, the NICCP is an essential ingredient of the IC’s 

transformation. The first pay-for-performance system that is truly 

interdepartmental and interagency in nature, it was conceived 

through intensive collaboration and the final result will help the IC 

develop a stronger sense of unity and common purpose. That translates into mission success, the ultimate aim of the Intelligence Reform and Terrorism Prevention Act. 

Thank you very much. I look forward to your questions. 

Senator AKAKA. Thank you very much, Dr. Sanders, for your 

statement. Mr. Bunn. 

TESTIMONY OF BRADLEY BUNN,1 PROGRAM EXECUTIVE OFFICER, NATIONAL SECURITY PERSONNEL SYSTEM, U.S. DEPARTMENT OF DEFENSE 

Mr. BUNN. Mr. Chairman and Senator Voinovich, thank you for 

the opportunity to speak with you today about the National Security Personnel System at the Department of Defense. 

Successful NSPS implementation remains a critical transformation priority for the Department, and while we are still relatively early in our implementation, it is clear that NSPS is taking 

root. As of today, we have over 180,000 employees operating in the 

system. I would like to give you an update today on our progress. 

We are just over 2 years into the implementation, and like any 

major transformation, we have had our share of successes and challenges. We believe, however, that NSPS is working. The active engagement and participation of our senior leaders, most notably 

Deputy Secretary of Defense, Gordon England, speaks volumes to 

the importance of our civilian workforce and the role NSPS plays 

in the transformation of our Department. 

The design of NSPS has been deliberate, well managed, and 

transparent, based on guiding principles that include putting mission first, respecting our employees, valuing talent, performance, 

and commitment to public service, and ensuring flexibility and accountability. 

It will take some time before the Department fully realizes all 

the benefits NSPS was designed to produce, but we are already 

seeing a powerful return on investment. An unprecedented training 

effort focused on performance management, greater and more frequent communication between employees and supervisors. They 

are talking about performance, results, and mission alignment. 

And better tools to compete for talent and reward exceptional performance. Overall, we are seeing positive movement in individual 

and organizational behaviors toward a performance culture. These 

returns are cause for optimism. 

In April 2006, we began implementing the human resources provisions of NSPS. Over that 2-year period, we have converted approximately 182,000 employees and will convert another 15,000 to 

11 

20,000 beginning this fall. These transitions were preceded by comprehensive and extensive training to senior leaders, managers, supervisors, and employees with a particular focus on performance 

management. From the beginning of the program, we have worked 

to ensure that our organizations have sufficient time and resources 

to accomplish the training, prepare their employees, and implement when they are ready. 

Several factors have contributed to our success to date, including 

the extensive consultations the Department and the Office of Personnel Management carried out with our stakeholders in the design process, the value and investment placed in monitoring implementation and making adjustments along the way, and perhaps 

the most important factor, the emphasis and resources we have 

dedicated to NSPS training, one of the most extensive civilian 

human capital training initiatives ever undertaken by the Department. As of June 2008, our employees have completed over a halfmillion NSPS-related courses. 

Late last year, we completed our second full performance cycle 

under NSPS, resulting in performance-based salary increases and 

bonuses for over 100,000 employees in January. This was the culmination of a rigorous and robust performance evaluation and pay 

pool process that assigns ratings based on objective criteria and allocates rewards based on those ratings. The pay pool process, which 

has a proven track record in our personnel demonstration projects, 

is designed to ensure that appraisals and pay decisions are accomplished in a consistent, fair, and deliberate manner. 

To ensure fairness in the system, we designed safeguards into 

the process. In addition to the thorough reviews of performance 

evaluations through the pay pool process, employees have the right 

to challenge their rating in a formal reconsideration process. Also, 

we have been very clear in our regulations, policies, and training 

that forced distribution of ratings is prohibited. 

One of the key ingredients to effective program management is 

program evaluation. The Department has an ongoing evaluation effort to ensure the system is delivering the results we expect. Although we have not formally reported findings from our internal 

assessments, I can share some of what we are hearing and seeing. 

NSPS is clearly a significant change for our workforce. It requires more time and energy than previous systems and many of 

our employees are not yet completely comfortable with the system. 

Performance plans and assessments need improvement, as many 

are struggling with translating organizational goals into individual 

measurable job objectives. Employees have also expressed concern 

over the pay pool process, how it works and whether it produces 

fair results, and many are having trouble accepting a more rigorous 

evaluation system. 

Despite those concerns, it is clear that NSPS employees have a 

better understanding of how their jobs relate to the mission and 

goals of the organization. They see a stronger link between pay and 

performance. And there is increased dialogue between employees 

and supervisors about performance. 

So far, the results we are seeing are similar to the experience of 

our personnel demonstration projects and other alternative personnel systems. We have said from the beginning that we expect 

12 

1The prepared statement of Mr. Mihm appears in the Appendix on page 94. 

it to take 3 to 5 years for employees to fully understand and embrace the system. However, we continuously monitor and assess 

NSPS and look for ways to address employee concerns by making 

adjustments to the system and improving our communications tools 

and training. 

Is NSPS working? We believe it is. It will take time, however, 

to assess how well NSPS is working through thoughtful and thorough analysis and assessment. We also know that transformation 

takes time and can’t be achieved overnight. In the meantime, we 

continue to gather information, listen to our workforce, and do 

what is necessary to ensure the system is credible, effective, and 

fair. 

Thank you, Senator Voinovich and Mr. Chairman, for your ongoing support for our DOD civilian workforce and for providing this 

opportunity to share our experiences about NSPS. I look forward 

to your questions. 

Senator AKAKA. Thank you very much, Mr. Bunn, for your statement. Mr. Mihm. 

TESTIMONY OF J. CHRISTOPHER MIHM,1 MANAGING DIRECTOR OF STRATEGIC ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. MIHM. Chairman Akaka and Senator Voinovich, it is a great 

honor to appear before you again today and I appreciate the opportunity. My specific role today is to discuss the preliminary results 

of our review of selected agencies’ SES policies and procedures for 

performance pay. 

As you know, successfully implementing the SES performance 

management pay authorities the Congress has provided is important for any number of reasons. First, leading organizations have 

recognized that effective performance management systems create 

a line of sight to help ensure that individual and organizational 

performance are aligned and thereby are effectively contributing to 

the meaningful results and outcomes that citizens value. 

Further, effective agency-wide pay-for-performance initiatives 

must begin, in our view, at the SES level and then cascade down 

throughout the organization. In short, the SES must lead by example on performance management and pay reforms. The data that 

Director Springer quoted from the survey clearly indicates that the 

SES appreciates that it needs to have the leadership role in this. 

Finally and especially important this year, effective performance 

management systems that link programs and daily operations to 

significant results can provide continuity during the upcoming 

Presidential transition by maintaining a consistent focus on results. Clearly, the new team will have a different set of goals and 

a different set of performance measures, but what the Administration with the current efforts of Congress and the agencies now are 

delivering is a ready-made vehicle the next Administration can use 

in order to implement its policy priorities. 

My prepared statement focuses on agencies’ policies and procedures for SES performance management and pay in a number of 

important areas, and our forthcoming report will discuss OPM and 

13 

OMB’s oversight role and make recommendations to selected agencies, OPM, and OMB in that regard. 

My bottom line today is that the agencies are making positive 

steps in addressing three important aspects of their performance 

pay systems. First, all of the agencies that we reviewed have policies in place that require Senior Executive performance expectations to be aligned with organizational results and for organizational performance to be factored into SES appraisal systems. However, on the other hand, OPM has found that while many agencies 

are doing a good job of this alignment, some performance plans fall 

short of identifying the specific measures used to determine whether or not the results are achieved. In other words, there is alignment at the front end. We need better data at the back end to see 

whether or not the success is actually taking place. 

Second, all of the selected agencies had multiple rating levels in 

place for assessing SES performance, and as one would expect, in 

general, those SESes with the highest ratings received the largest 

bonuses. Several of the agencies, such as the Nuclear Regulatory 

Commission, Department of State, Department of Energy, have designed their appraisal systems to help allow for differentiations 

when assessing and rewarding executive pay by establishing tier 

structures or prescribed performance payout ranges based on the 

resulting performance rating. Tier structures identify up front that 

certain SES positions have greater complexity, greater responsibility for managing risk, greater responsibility for achieving outcomes, and therefore should have greater opportunities for higher 

bonus and pay awards. 

Third, all of the selected agencies have built safeguards into 

their SES performance management systems, such as predecisional checks—you have heard a number of those today, of performance appraisal recommendations through higher-level reviews, 

as well as publishing information on aggregate results to help enhance the credibility, fairness, and transparency of their systems. 

However, on the other hand, this is one area where much more 

work needs to be done. Sixty-five percent of the respondents to the 

OPM survey that Director Springer was mentioning—these are of 

SES—said that they were not given summary information of their 

agency’s performance ratings, bonuses, and pay adjustments. This 

information is important in order to let someone know where they 

stand in the organization so that they can identify and take meaningful action in order to improve performance. It is both a transparency and fairness aspect as well as important to improving individual and organizational performance. 

In summary, through the combined efforts of Congress, members 

of the SES, OPM, OMB, and the agencies, much progress on SES 

performance management has been made over the last several 

years. The key now, in our view, is to maintain and build on that 

progress and for the next Administration to use the SES performance management system to achieve additional results. 

Mr. Chairman and Senator Voinovich, this concludes my statement and I would obviously be happy to answer any questions you 

may have. 

Senator AKAKA. Thank you very much, Mr. Mihm, for your statement. 

14 

Now I would like to ask Senator Voinovich for his statement. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Thank you very much, Mr. Chairman. I 

apologize for being late. We had the new President and the Prime 

Minister of Kosovo here and I have been working on those issues 

for a long time and I thought it was important that I at least congratulate them and have a chance to visit with them, so I hope you 

understand. 

I would like to begin by thanking my good friend and partner on 

human capital issues, Senator Akaka, for holding this hearing. 

This is one of so many hearings that we have had over the last 

number of years on human capital. We want to make sure that the 

Federal Government has the right people at the right place at the 

right time to get the job done, and it is an issue that I have been 

involved with during my entire time on this Subcommittee because 

of my strong belief in the need for the government to invest first 

and foremost in its workforce. 

The Federal Government has begun an important cultural transformation in how it manages its most important asset, its people. 

As we hear the testimony today, I would remind our other colleagues that such transformation does take time. Understanding 

and accepting the systems being implemented at several agencies 

require a change in thinking and an emphasis on continuous improvement, and we have again heard that from the witnesses here. 

In commenting on management, Harold Geneen, former Chairman of International Telephone and Telegraph said, ‘‘It is an immutable law in business that words are words, explanations are explanations, promises are promises, but only performance is reality.’’ 

Our next generation workforce no longer seeks to work for an organization with the idea that they will stay there their entire professional career. People are looking to work hard and be recognized 

and rewarded, and that is why I have introduced the Federal 

Workforce Performance Appraisal and Management Improvement 

Act, which would require that Federal employees receive a written 

performance appraisal annually. Current law only requires periodic 

appraisals for job performance. 

The legislation would also require that an individual’s performance appraisal be aligned with the agency’s strategic goals and be 

developed with the employee. The performance appraisal system 

would make meaningful distinctions among employee performance 

and require agencies to use this information in making personnel 

decisions. 

I know there are a couple provisions of the bill that cause some 

concern because of the fact that it would prevent an employee from 

receiving an annual pay adjustment if that employee has not 

earned a ‘‘successful’’ performance appraisal. Mr. Chairman, I 

would argue that we owe the American taxpayer something to better ensure that they are getting value for their hard-earned dollar. 

I would remind those who have concerns that before an agency 

would even reach the point where an underperforming employee 

would not receive a pay increase, the agency would be required 

work with the Office of Personnel Management to develop and refine its performance appraisal system. In other words, if they don’t 

15 

have a good appraisal system in place, and again, and we have 

heard this from witnesses, pay for performance doesn’t work. Employees would have then 1 year under the performance appraisal 

system to understand how it would be used to make pay decisions. 

These decisions would not be arbitrary or capricious. Managers 

would be required to receive appropriate training to judge the performance of their subordinates, make expectations clear to employees, and give constructive feedback. People want to know whether 

they are doing good or whether they are doing bad. The last thing 

they would like is to be ignored. This would support the Chairman’s bill to improve the training provided to the Federal workforce. 

The only way the Federal Government will succeed in accomplishing its many missions is to have motivated employees working 

towards the strategic goals of their respective agencies. Challenges 

facing our Nation, from gas prices and the growing budget deficit 

to our crumbling infrastructure, are too significant to rely on an 

antiquated pay system which rewards tenure, and I think that is 

more important today than ever before. 

Everywhere I go today, whether it is in government or the private sector, we have a human capital crisis. Everybody is going to 

be out there trying to find the best and the brightest people to 

come to work for them, and I think that pay-for-performance, if 

properly implemented and explained and so on, is a real asset to 

our ability to attract the kind of people that we want to work for 

the Federal Government. It is going to be a challenge that we are 

going to have to continue to work on, but one I think that is very 

worthwhile. 

Thank you, Mr. Chairman. 

Senator AKAKA. Thank you very much, Senator Voinovich. And 

now we will have the questions. 

Director Springer, according to OPM’s 2007 report on pay-for-performance, the 2007 DHS employee survey, the recent SES employee survey, and other reports, there are mixed results on the 

success of pay-for-performance systems. Employees are not necessarily satisfied with their pay. They do not completely understand the pay system and many do not see meaningful distinctions 

in their performance evaluations. Earlier this year, the FDIC suspended its pay-for-performance system based in part on declining 

employee support. 

Your message at this hearing is that pay-for-performance systems are a success in Federal agencies based on numerous evaluations that you have had. Our reading is not along those lines. If 

employee surveys point to problems within these pay systems, 

what other evaluations are you basing the success of the pay-forperformance systems on? 

Ms. SPRINGER. Mr. Chairman, it is important to draw the distinction between the execution of specific programs and the notion of 

performance-based pay. What we find in the surveys, like the SES 

survey, is that most of our respondents do believe that performance 

should be a factor in determining pay. 

In the areas where the implementation has not been at the level 

that we would expect, that doesn’t negate the premise that people 

do believe that their performance should be recognized. It is more 

16 

a matter of execution and how that has proceeded. It also, in some 

cases, is a function of training and just the basic infrastructure 

being in place. I believe both you and Senator Voinovich, as well 

as the panelists, have acknowledged that is foundational and critical to the success. 

What I would say is that in the systems where the underlying 

infrastructure is in place, that you find a better result and better 

acceptance, and that is why we are encouraging this more measured demonstration approach that only proceeds when the agency 

has the infrastructure in place. But it doesn’t negate the fundamental belief that most people believe that their performance rightfully should be a factor in determining pay. 

Senator AKAKA. Mr. Spires, Ms. Rossides, Mr. Sanders, and Mr. 

Bunn, how are your agencies using the employee surveys and feedback to address the issues with pay-for-performance systems? Mr. 

Spires. 

Mr. SPIRES. Yes, Mr. Chairman. We conduct an employee survey 

every year and some of those questions go to the heart of how we 

evaluate and reward our employees. On the not-so-positive side of 

this, our employees and our managers who are under pay-for-performance system tell us that we are still not yet measuring performance as well as we should. To distinguish those that are outstanding versus those that are just satisfactory or even below. 

Likewise, we are also told by our employees and managers that we 

are not yet dealing with poor performers as well as we need to. 

But again, we think that a pay-for-performance system that we 

have implemented and have rolled out to our managers actually 

addresses some of these concerns. In fact, we are seeing increases 

in our employee satisfaction scores overall and we are seeing increases in these particular questions that have to do with how we 

both evaluate and we reward our managers. 

Senator AKAKA. Ms. Rossides. 

Ms. ROSSIDES. Yes, Mr. Chairman. We take a look at both TSA’s 

survey results and the DHS survey results and look at all of the 

questions and the issues directly impacting the workforce. But the 

survey results give us the opportunity to focus on things like the 

importance of communicating directly with the employees on our 

pay-for-performance system and we have put a number of things 

in place this year to make that system transparent to the workforce. 

Every TSO today can actually access their performance record 

online. We have direct communications with the TSOs on a quarterly basis. So the survey results really targets the leadership’s attention on what our employees are asking for, what kind of information, and clarity around those survey results. 

We are also corporately, all of the operating components are taking the DHS survey results and looking at what issues are common 

to all of the DHS workforce in terms of our law enforcement and 

security occupations. So those surveys are very valuable to us to 

help us guide the areas we need to focus on to improve the system. 

Senator AKAKA. Dr. Sanders. 

Mr. SANDERS. Mr. Chairman, we start with our surveys. We do 

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17 

munity. And as I mentioned, those survey results suggest that our 

employees want this kind of system. 

Let me tell you a statistic that may surprise you. About 50 percent of Intelligence Community employees have 5 years or less of 

service. And to be quite blunt, they are not going to have the patience to stay with us for a system that is based on tenure and 

time in grade. That is what they tell us in the focus groups. 

We have reached thousands of employees in focus groups, 800 in 

the Office of the Director of National Intelligence alone, which is 

not much bigger than that, and that demographic and their views 

suggest that we need to develop and deploy this kind of system if 

we really want to win that war for talent that Senator Voinovich 

talked about. 

Senator AKAKA. Mr. Bunn. 

Mr. BUNN. Mr. Chairman, we have been using surveys for many 

years to assess the satisfaction of our civilian workforce. About 3 

years ago, we started targeting the NSPS population both pre-implementation and post-implementation so that we could zero in on 

what the folks under NSPS are thinking about performance management, about pay and other workforce issues. We have been able 

to begin trending how our NSPS employees, what their attitudes 

are in comparison to the rest of the workforce. It is a cornerstone 

of our program evaluation effort. 

That is how we are getting the valid employee feedback on what 

is going on with NSPS, in addition to visits to installations, focus 

groups with employees, and other normal outreach mechanisms. 

But we spend a lot of time focusing our questions specifically for 

our NSPS workforce and they have been extremely helpful so far 

as we have done our internal assessments, and we will continue to 

do that throughout the program. Thank you. 

Senator AKAKA. Mr. Bunn, as you know, one of the main concerns raised by Federal employee unions over the recently proposed 

NSPS regulations is the definition of the term ‘‘rate of pay.’’ The 

employee unions argue that the definition used by DOD and OPM 

would limit bargaining over procedures and work arrangements for 

determining overtime work, including rotation, seniority, and other 

methods for selecting employees fairly. Is it your intention to deny 

unions the ability to bargain over these type of issues? 

Mr. BUNN. That is not our intention. We have heard the concerns 

through our formal public comment period with our recent revised 

regulations that were published back in May and through the national consultation process with the unions, their concerns over 

how we have defined the term ‘‘rate of pay.’’ 

Rate of pay is a term that is in the Defense Authorization Act 

from 2008 and it is specifically referenced as something that is not 

negotiable under NSPS. However, the term is not defined in the 

law and it is used in many different ways in current law, rule, and 

regulation. So what we attempted to do in our proposed regulation 

is define it in the context of NSPS. 

We fully recognize that Chapter 71 of Title 5 applies with respect 

to collective bargaining in NSPS, but that term is one of the limitations in terms of collective bargaining, so we have attempted to 

deal with that in the regulation. 

18 

We are taking those concerns to heart. We are looking at that 

language that we have used. But we have no intention of denying 

the unions what they may bargain under the law under Chapter 

71. 

Senator AKAKA. OK. Can you elaborate on what exactly DOD is 

attempting to limit bargaining over? 

Mr. BUNN. I think what the issue is, Mr. Chairman, is how we 

use the term, what we call applicability and conditions with respect 

to rate of pay. We understand that Congress’s intent was to provide 

for collective bargaining for our bargaining unit employees who 

would be brought under NSPS with a limitation on bargaining over 

pay, which most Federal employees don’t have a right to bargain 

over now. But there was a provision in the law that allowed for 

bargaining over procedures and arrangements with respect to that, 

which is a term of art in the labor relations arena. 

What we have attempted to do is build and construct where we 

have some uniformity in how that bargaining would be done and 

define what is really meant by rate of pay, so, for example, decisions around modifying our pay band structure or adjusting the 

pay bands on an annual basis or the funding that goes into performance-based pay pools. There are certain things that we think 

are appropriate for bargaining under Chapter 71 rules and under 

the now Chapter 99 rules, but there are things that would remain 

off the table. So what we have attempted to do is define those 

things. 

So for purposes of things like overtime, determining applicability 

on who would receive overtime, things that are currently in collective bargaining agreements, it is not our intent to go in and overturn those kinds of things that are currently bargained over in 

DOD. 

Senator AKAKA. Well, thank you. 

Mr. BUNN. Thank you, sir. 

Senator AKAKA. Senator Voinovich. 

Senator VOINOVICH. Thank you, Mr. Chairman. Before I ask my 

questions, I would like to thank Ms. Springer and Mr. Spires for 

your service in the Federal Government. I understand that both of 

you are going to be leaving. Ms. Springer and I got to know each 

other quite well over the years. She served over at the Office of 

Management and Budget and they convinced her to come back into 

government and I think you have done a really outstanding job 

over there. I appreciate your service and wish you good luck in our 

next endeavor. 

Mr. Spires, I am not that familiar with your record, but thank 

you very much. I was impressed with what you had to say about 

what you are doing at the IRS. 

Director Springer, OPM has an important operational responsibility to work with Federal departments and agencies to ensure reforms of performance management systems provide employees a 

fair and transparent system with meaningful opportunities to enhance communication, improve individual performance, and I 

would like to know how OPM has met this responsibility. Perhaps 

you could also make reference to a meeting in July that you had 

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19 

ice. I would like to know what you have tried to do to make sure 

that these systems that we are putting in are robust and also 

maybe some of the things that you have learned from that meeting 

you had on July 14, 2008. 

Ms. SPRINGER. Thank you, Senator. Let me also say that it has 

been a pleasure to work with you. As I said to Senator Akaka, 

there is really no better champion in the Senate than both of you 

for the Federal workforce, so thank you. 

With respect to our oversight and our work with the agencies, 

one of the key things that we use is our Performance Appraisal Accountability Tool (PAAT) and there is a version of that specifically 

for the SES. The Chief Human Capital Officers (CHCO) Council, 

has worked with us in developing that, and that is one of the principal tools we use with each agency. We have OPM aligned with 

our different agencies so that there are dedicated people that work 

closely with the CHCOs and the performance managers at each 

agency. 

So, not only do we work with them to assess their infrastructure 

and each of the things that the panelists have mentioned here 

today in their practice of performance development and monitoring, 

goal setting, all of the things, we assess them and give them a 

score based on that tool. 

The community represented by the CHCO Council, half career, 

deputies that are career officials, have helped us develop that tool 

and they use it, as well, for their own diagnostic through the year. 

We have had, as you have said, several sessions with the Council 

and the Subcommittee on Performance to have those agencies that 

score well on that tool share their best practices. In our hearing a 

year ago, you encouraged us to actually be more proactive in that 

area and use that council, and we have been doing that. Those performance-based pay practices are being adopted. They are being 

documented. They are being shared and our agencies tell us that 

that is helpful. 

We are also having a CHCO Council Training Academy. That is 

the formal educational arm of the Council, again, dedicated in August to the SES survey and the agencies’ practices that we learned 

there that got high marks. So the July meeting, the upcoming August meeting, all of these as well as the collaborative effort in developing our assessment tools help OPM to do that work. 

Senator VOINOVICH. We have talked in the past about the SES 

and how it in certain areas has been very well received, in others, 

it has not. Can you give me an example of where you have had an 

agency where from the survey their folks weren’t real happy and 

how your intervention has made any difference in terms of the next 

survey? 

Ms. SPRINGER. If I may get back to you on that, I can give you 

some specific examples. However, I will tell you that in addition to 

getting agencies to reach a level of performance, there also is the 

effort of keeping the ones who have achieved it performing at that 

high level, as well. We are not focused just on the ones that need 

remediation, but also on maintaining the ones that have been doing 

a good job. But we will get you that information, Senator. 

Senator VOINOVICH. Well, I think that if we are going to make 

any progress in this area, even this proposed legislation I am 

20 

thinking about, it has got to start with the Senior Executive Service. And if you have people in there who are not happy with the 

system or don’t feel that it has been implemented the way it is supposed to, the chances of making any progress with the rest of the 

agency, I think is remote. So I think that work is really very important, and I would really like to get your best guesstimate about 

which agencies are your super performers, and then your candid 

opinion about where we need to do some improvement. 

Ms. SPRINGER. We will get that. 

Senator VOINOVICH. Dr. Sanders, you have described a very comprehensive program that you have put together. I have two questions for you. One is, I just didn’t realize all these agencies, Senator Akaka—— 

Mr. SANDERS. That is what keeps me awake at night. 

Senator VOINOVICH. It is unbelievable. What guarantee do we 

have that when the next Administration comes in, that all this 

work that you have done is going to prove fruitful? 

Mr. SANDERS. I don’t know if there is a guarantee. As I believe 

you have heard Director McConnell testify, the personnel authorities of the Director of National Intelligence are somewhat ambiguous and the directives I have talked about, and maybe there is 

some good news here, the directives that I have talked about are 

literally agreements, treaties amongst the various departments and 

agencies in the IC. So where that legal authority is vague, the fact 

is you have cabinet Secretaries and agency heads who have said 

that ambiguity notwithstanding, we are going to agree as a matter 

of policy to move forward as a community, cutting across all of 

those departmental and agency lines. So while those regulations 

may not be ‘‘imposed,’’ by the DNI, the fact that they were collaboratively derived may, frankly, make them more resilient in this 

transition. At least that is what I hope. 

Senator VOINOVICH. Have you identified folks within the agencies 

where you are going to have a change in leadership that are committed to moving forward with this? 

Mr. SANDERS. As I indicated, this effort has been largely led by 

the agency deputy directors, which are the senior career officials 

across the board, and that was done deliberately to ensure that we 

do have that continuity. They will be there through the transition 

and be prepared to brief the new agency heads. 

In that regard, many of our agency heads are uniformed military, 

so they do transition independently of Presidential elections. We 

have already been able to sustain some of that continuity with the 

change in leadership in individual agencies. 

Senator VOINOVICH. And you sense an understanding about how 

important this is for their ability to retain the folks they have and 

to attract other ones and they get that? 

Mr. SANDERS. Yes, sir, I believe they do. We literally need a 

workforce that knows something about everything. We are at the 

cutting edge of this competition, this war for talent with the private sector, with other Federal agencies, and I think they understand that in order to keep that keen edge, in order for us to be 

competitive in that regard, we need the kinds of flexibilities that 

this system will give us. They also need that level playing field so 

21 

that no one IC agency enjoys a competitive advantage over the others. 

And since I have the floor, let me put one other thing on your 

radar screen for this Subcommittee. One of the things that I worry 

about is executive pay compression. 

Senator VOINOVICH. I was just going to ask you about it. 

Mr. SANDERS. This Subcommittee had a hand in fixing that problem 4 years ago. The passage of time has eroded those great benefits. And one of the things that I worry about is that your very 

best-performing executives, who will by definition be the first to 

reach that cap, are suddenly now against the ceiling. There are literally no financial rewards, at least those that go to base pay and 

annuity. This is something that I would ask this Subcommittee, the 

full Committee, this Administration and the next to take on before 

it becomes a crisis. 

Senator VOINOVICH. We certainly will take that under advisement. When you are hiring new people, does the fact that you are 

implementing this performance system have any impact at all on 

their decisionmaking? In other words, we assume that it does, and 

I have mentioned that. But of anybody at the table, have you found 

that the fact that you do have this system in place has made your 

agency more attractive in terms of hiring folks? 

Mr. SANDERS. Anecdotally, we get lots of stories from our recruiters, and as you may know, we get 100,000 to 150,000 resumes a 

year, the Nation’s very best and brightest, and we have had to 

equip our recruiters with an information sheet on our pay-for-performance effort because that is a constant question amongst the 

best and brightest. 

What are the rules of engagement when it comes to compensation? Will I be paid based on results or will I be paid based on tenure? And, of course, these are in most cases pretty young, pretty 

aggressive, very talented people, scary smart, and they, of course, 

want to be paid on the basis of results. 

Senator VOINOVICH. Well, I know this, not anecdotally, but probably during the last maybe 6 or 7 years I have had at least a halfdozen people tell me they left the Federal service because they just 

felt that everyone was treated the same way and there wasn’t any 

recognition for people who were performing at a higher level and 

cited that they were going someplace else where maybe their hard 

work and talent would be more appreciated than working for the 

Federal Government. Go ahead. 

Senator AKAKA. Thank you very much, Senator Voinovich. 

Ms. Rossides, according to a TSA briefing for Subcommittee staff, 

TSA uses quotas in its pay-for-performance system. I understand 

that unlike other Federal agencies, TSA is not prohibited from 

using quotas. However, I am concerned that the use of quotas undermines the pay-for-performance system. No matter how well an 

employee performs, he or she may not get a significant pay increase. Given that the use of quotas is prohibited in other agencies, 

why is TSA using them? 

Ms. ROSSIDES. Mr. Chairman, we do not use quotas at all in our 

pay-for-performance system. In fact, we have what we have described to our employees as a rate and rank system. We have a 

sum of money that is part of our appropriation and the employees 

22 

are scored at the end of the performance cycle under our pay-forperformance system based upon their performance during the year 

and they receive basically a rating on a scale of 100 points. And 

then depending upon the distribution of the performance of those 

employees, we give out our bonuses and pay awards based on that. 

But we do not have quotas under our system. 

Senator AKAKA. At our hearing on the SES in 2006, Director 

Springer, you were crystal clear on the fact that quotas are prohibited for the SES pay-for-performance system. However, despite 

OPM and other agencies issuing regulations barring the use of 

quotas or a forced distribution of performance ratings, I continue 

to hear from employees, not just in the SES, that agencies are, in 

fact, using quotas. What guidance is OPM providing agencies on 

making meaningful distinctions in performance? 

Ms. SPRINGER. In our annual guidance, which came out not long 

after that hearing, we added a dedicated section to agencies to reiterate to them that quotas were prohibited. That we would be including in our audit work reviews to make sure, to see if we spotted any instances of it. We also in cases where it came to our attention that an employee of an agency felt that they were subject to 

a quota, we wrote letters back to that agency to deal with it. 

We have through the CHCO Council and very specific written 

communications of guidance to agencies reiterated very strongly 

that this is prohibited. It will be a constant effort for us of vigilance 

to make sure that, (A) we respond to what is reported to us, and 

(B) to generally, as a matter of course, be on the lookout. 

Senator AKAKA. Thank you. Dr. Sanders, you state that IC employees will be evaluated on behaviors such as personal leadership, 

integrity, collaboration, and critical thinking. However, there is a 

dark side to promoting uniformity in the intelligence community in 

that it may promote a uniformity of analysis. I fear that convention 

and safe thinking will be rewarded and risk taking will be discouraged as more and more managers are trained to do performance 

evaluations with a common perspective. Analysis may miss what is 

important in order to conform with group thinking. 

Differences of interpretation are important, and many have argued, as an example, that if the President has listened to the State 

Department’s view of Iraq’s weapons of mass destruction analysis, 

his decision to go to war would have been different. 

What have you built into your performance evaluation process to 

ensure that not all analysts think alike and are not pressured into 

conforming their independent analysis to political pressure? 

Mr. SANDERS. In fact, Senator, the very definitions of the words 

you described and the behaviors that we are trying to elicit 

amongst IC employees guard against that. For example, the definition of the performance element, Personal Leadership and Integrity 

includes the courage to speak truth to power. So employees have 

a set of behavioral definitions that deal with that specifically. Managers and executives, in their performance plans, under the behavioral part of them, are specifically charged with promoting and encouraging that courage to speak truth to power. 

The same thing with collaboration. We have taken great care to 

define collaboration. It is not consensus. It is not group think. It 

is sharing information, but it is also conforming to analytic craft 

23 

trade standards, which require alternative analysis. We want the 

sharp edges of a debate on any given intelligence topic to be exposed in the IC. So these definitions are deliberately intended and 

deliberately defined to do that, to guard against the very dysfunctions that you have described. 

Senator AKAKA. Thank you. Ms. Springer, under the IRS pay-forperformance system, it is possible for a GS employee to get a higher rate of pay than their manager. According to a report from the 

Treasury Inspector General for Tax Administration on the IRS payfor-performance system, this is a disincentive for GS employees to 

become managers. Similarly, under the SES pay-for-performance 

system, GS–14s and 15s are guaranteed pay raises that SES employees are not. Dr. Sanders points out the same problem in his 

testimony, that high-performing GS–15s are less likely to move 

into the SES if pay continues to erode. 

Do you see a disincentive for GS–14s and 15s to enter into the 

SES because pay is not guaranteed under the SES pay-for-performance system? And if so, what do you plan to do about that? 

Ms. SPRINGER. I think that there are several proposals that have 

been offered to deal with the disincentive from a pay standpoint of 

moving from the upper General Schedule levels into the SES. One 

of those that has been proposed, for example, is an automatic pay 

increase when you move up to the SES. That is something that we 

would be interested in exploring and working with the Subcommittee on. And, the SEA, I might add. 

The whole challenge, and I don’t think this is so much a performance-based pay issue as it is generally a pay issue, and the problem 

that you have moving from the one system to the other is a real 

issue and it is becoming increasingly so. I think that, clearly, we 

need to do something. If we don’t, and if in the next Administration 

this isn’t taken on, I think we will see more and more people disinclined to move into the SES. And, that is certainly not a desirable outcome. 

But one that I would suggest off the bat that OPM and others 

working with your Subcommittee should do is to look at that proposal of an automatic increase. 

Senator AKAKA. Thank you very much, Director Springer. 

Mr. Mihm, as the various employee surveys show, there are still 

many concerns that employees have with the pay-for-performance 

systems. In 6 months, the new Administration will take office. 

What are the top three employee concerns that you think should 

be addressed before the transition occurs? 

Mr. MIHM. Well, before the transition occurs, I think it will be 

very difficult because I think the top employee concerns, at least 

that we have seen in looking across the various agency surveys, 

and frankly GAO’s, as well—we are not perfect by any means in 

this, our own employee concerns show these types of things—are 

long-term issues that need to be addressed. 

The first, I would say, Mr. Chairman, is the clarity, honesty, and 

integrity of the entire performance management system. It is something there has been a lot of discussion about here this afternoon, 

something that you have certainly pointed out, of making sure that 

we have a good, validated, robust performance management system 

in place that has the confidence of managers and employees that 

24 

we are accurately measuring and fairly measuring what we purport 

to measure. So that would be the first issue. 

Second is, to make sure that we have adequate training in place, 

both for supervisors and managers. One of the things that you 

mentioned in your opening statement, sir, was about the costs associated with doing pay-for-performance the right way. In fact, kind 

of the flip side to that is that if you want to try and kill it, the 

way to kill it is try and do it on the cheap because the experience 

from the demonstration projects, and our experience in GAO is it 

takes an investment. It is an investment that is worth it, but it 

takes an investment if you are going to do pay-for-performance. It 

takes an investment initially in technology and making sure you 

get a robust performance management system, but it takes an investment in training, and that is an ongoing investment that you 

have to make. 

And it is not just on how to do a performance appraisal. It is 

training on how to manage, how to lead, how to supervise, and 

there are huge gaps across the Federal complex in those types of 

basic leadership and supervisory skills. 

And then the third key area I would say is making sure that we 

have the alignment in place, and this is making sure that the organizational goals cascade all the way down into individual performance expectations because that is going to be a key part of the transition. Because of the work of the Congress, the work of the agencies here and other agencies, they really have put in place a system 

that the next Administration, the next Congress can use as they 

are implementing their program priorities to make sure that they 

cascade down throughout the organization. It is by no means perfect, as you have been hearing. But it has taken a lot of work to 

get to where we are now. That is a tool that the next Administration, the next Congress can use in order to deliver effective results 

for the American people. 

So I would say those are three key things we should focus on. 

Senator AKAKA. Thank you very much, Mr. Mihm. Senator 

Voinovich. 

Senator VOINOVICH. One of the things that I would be interested 

in knowing more about is training. With NSPS, for example, did 

the Department use a train-the-trainer model, or am I mistaken? 

Did you bring in other people to do it? I thought you trained the 

trainer and then you worked it out within the organization. Did 

that interfere with the job of those individuals that were taken off 

whatever they were doing to become involved in the training, and 

second of all, in terms of your budgets as to the allocation of resources for training? 

I go back to my early days here when I did a survey when I first 

came to the Congress and I sent a letter out to 12 agencies and 

I asked them, how much money do you spend on training, and I 

think all of them said that they didn’t know except one, and they 

said, we know but we won’t tell you. [Laughter.] 

Senator VOINOVICH. So I would like you to comment on both of 

those things, or anybody who wants to chip in on this question. We 

will start with you, Mr. Bunn. 

Mr. BUNN. Senator, thank you. We used kind of a hybrid approach with respect to how we trained our workforce on NSPS. We 

25 

certainly did the core development of the training, the materials, 

and delivery through a train-the-trainer approach, and that was for 

a couple of reasons. One, we wanted to ensure that we maintained 

control over the content and that the training materials themselves 

were of high quality and that we had the best control possible over 

those. We also wanted to ensure that we had a cadre of performance management experts that we could tap into as we moved 

through the process and institutionalized NSPS and pay-for-performance throughout the Department. 

So we made a conscious choice to, in some cases, take people off 

of what they were doing and get them those competencies and 

skills in performance management, and it wasn’t just their platform training skills but it was actually their performance management skills that we are now able to tap into. 

We did use some external training vehicles, contractors. We 

brought in some retirees from various sources to help with training, but that was mostly to offset the load. But we certainly used 

our own internal resources to do that. 

Senator VOINOVICH. What guarantee did you have that the last 

spiral received as much training as the first spiral, because Senator 

Akaka and I had a chance to visit with that first group of individuals and then in Ohio, I had a chance to visit with some of those 

folks. But one of the questions I had was that you started out with 

this great program and people understood it. What did you put in 

place to guarantee that that training was consistent with what you 

had in the beginning? 

Mr. BUNN. Well, we certainly applied the resources to it and 

maintained the momentum as demonstrated by the resources we 

put to the whole program. We have spent millions of dollars implementing NSPS. It is no secret. We have reported on that before. 

And the majority of the resources we have spent have been on 

training. 

What is interesting, Senator, there was a lot of attention paid to 

the first adopters, what we call our spiral 1.1s, those first organizations that came in, and we certainly saw the return on that investment. There was leadership engagement from all corners of the Department, including the organizations themselves. 

I would probably point to the engagement of Deputy Secretary 

England and his engagement and leadership in maintaining cognizance over NSPS for the past 3 to 4 years as probably the biggest 

factor in ensuring that we had the resources as we went through 

implementation. 

And what we are seeing so far in our employee surveys is that 

the folks who came in in the second and third tranches of NSPS, 

actually, the training was a little bit better than the very first set, 

mostly—and it makes sense—we learned lessons. We adjusted our 

training materials. We adjusted the content based on feedback we 

got from those first organizations and actually delivered a better 

product. We are also working on ensuring that we have institutionalized that training really from here on out so that we maintain and sustain the training as part of our normal human capital 

training for any organization that comes under NSPS. 

26 

Senator VOINOVICH. But the thing that really helped out was 

that Mr. England made it a very high priority and stayed on top 

of it. 

Mr. BUNN. Absolutely, and to this day, he has maintained his 

awareness and he is very much in charge of NSPS. 

Mr. SPIRES. I might just add real quickly that once our system 

had been set up, one of the things that we did was brought in an 

independent contractor with specialty in this area. This enabled 

focus groups and other types of evaluations to go on directly from 

the employees so that we could get candid feedback as to what was 

working well. But more importantly, what was not working well, 

and have adjusted based on feedback. 

Senator VOINOVICH. That was your snapshot to look at how 

things were going? 

Mr. SPIRES. Yes, sir. 

Senator VOINOVICH. Ms. Rossides, I travel around the country 

and I have a special relationship with your people because I have 

a pacemaker, so I get a chance to talk to a lot of them. 

Ms. ROSSIDES. Yes. [Laughter.] 

Senator VOINOVICH. And I do my own survey as I go along. And 

I must say that in the last couple of years, things have gotten better. The issue seems to be two things, that some of the employees 

are not aware of the flexibilities that are available to them, particularly if they have a gripe that they want to have taken care of, 

and the others are complaining, some of them, that the system of 

evaluation is too objective and that there isn’t enough subjectivity 

in the evaluation. So I don’t know whether you would comment on 

both those things. 

And last but not least, I know that there is going to be an effort 

made to eliminate the flexibilities that we gave your agency when 

it came into being because we had to stand up, some 50,000 people 

overnight. What would be your opinion in the event that these 

flexibilities were yanked and we went away from this very aggressive experiment? Fifty-five-thousand people in performance evaluations, it is a big deal. 

Ms. ROSSIDES. Yes, sir, it is, and if I could start with that because I think the flexibilities that ATSA provided to TSA are enormously critical to our success in building this agency and continuously improving its performance. And specifically, those flexibilities 

have allowed us to provide to our front-line officers differences in 

pay for hard-to-fill airports, for example. It has allowed us to pay 

our part-time TSOs the full-time equivalency under health benefits. 

Those flexibilities have allowed us to build this pay-for-performance system and to continue to improve it. 

Our PASS system is only in its third year, and as a lot of my 

colleagues here have said, it takes several years to get it right. And 

our commitment is to make sure that we continuously improve 

upon this and hear from our officers, just like you do. 

The system is predominately objective. Roughly 70 percent of the 

assessment of the officers is an objective assessment. It is based on 

their performance on critical aspects of the job, including their ability to recognize explosive devices on the X-ray. It is based specifically on their training that they complete. And honestly, we think 

27 

in the long term, this percentage of objectivity will help to build the 

credibility of the system for the officers and for the managers. 

Last, I would say that this entire process requires the commitment of the top leadership, and your question to Dr. Sanders about 

the importance of continuing this kind of a system, we know we 

have several years of continuous improvement in this system. The 

leadership of TSA is predominately career people. Our succession 

plan for both the transition and the long-term maturity of TSA is 

to ensure that we have career people in the jobs, both in our 

human capital arena, but across the whole organization. And this 

is something that you can’t start and stop in a year. This is something that takes years to perfect because when you are rolling out 

something like this to 55,000 people, it is an enormous transition. 

But we believe very strongly it is critical to our mission success. 

The kinds of feedback that you are getting, the kinds of experience that you see as a passenger who requires special attention, 

shall we say, because of your pacemaker, is exactly the kind of concrete skill that we are building in our officers, and that is exactly 

what we are trying to measure through this pay-for-performance 

system. 

Senator VOINOVICH. Thank you. 

Ms. ROSSIDES. Thank you. 

Senator AKAKA. Thank you, Senator Voinovich. 

I have a question to Mr. Bunn and Mr. Spires. DOD is required 

to make meaningful distinctions in performance and not institute 

a quota system or engage in forced distribution. It has come to my 

attention that some DOD managers have been told that most employees should receive a performance rating of three. This looks a 

lot like forced distribution. 

At the IRS, the Federal Mangers Association issued comments on 

regulations to revise the IRS broadbanding system and called for 

the elimination of performance rating caps or quotas. 

Can both of you tell me what measures you are taking to ensure 

that you are making meaningful distinctions in performance and 

not arbitrarily lowering scores? Mr. Bunn. 

Mr. BUNN. Mr. Chairman, I will start. We have heard that kind 

of feedback. I think the results, as demonstrated through this past 

performance cycle, say otherwise. We have a five-level system, as 

you mentioned. We had over 100,000 people rated. Roughly 57 percent of those folks were rated at level three, 36 percent were rated 

at level four, which is ‘‘exceeds expectations,’’ and about 5 percent 

were considered role model, and then less than 2 percent were unacceptable or what we call ‘‘fair’’ performers. So that distribution, 

I think, shows that we are making meaningful distinctions. 

We did set the bar high when we developed our performance 

evaluation system to ensure that it was rigorous and not that the 

expected outcome would be a three, a valued performer, but that 

it would take a lot to get above the valued performer level three. 

And I think, as I said before, when you look at the overall results, 

I think we have made meaningful distinctions, and those performance ratings also drove performance-based salary increases and bonuses. So the meaningful distinctions extended not only to the ratings, but also into the rewards and salary increase aspect of it. 

28 

So I would argue that we have taken great pains to ensure that 

we don’t have forced distribution. Certainly all of our training materials, all of our regulations and policies prohibit forced distribution. It could be that there is some miscommunication out there 

about what the expectation should be, and we have through our 

evaluation process gathered feedback on that—and will take the 

steps necessary to make sure that what we are training and what 

we are communicating are appropriate. Thank you. 

Senator AKAKA. Mr. Spires. 

Mr. SPIRES. Mr. Chairman, first, I would like to say that there 

are many differences in my having come into the government from 

my 20 years in the private sector. But this challenge of how do you 

distinguish performance, but then also have the issue of limited 

amount of cash at play is a classic problem that not only faces 

those of us in the Federal Government, but in the private sector, 

as well. The issue of grade inflation comes into play here significantly, as well. 

Specifically at the IRS, we have some guidelines because we 

don’t want to have grade inflation in the sense that you get a lot 

of people at the ‘‘outstanding’’ level unless they deserve to be at 

that level. We have a system that has some checks and balances. 

We issue guidance, and I call it guidance—it is not a quota system—but is guidance around what we would expect the distribution to look like. 

However, we have Performance Review Boards at both the organizational level and at the enterprise level across all of the IRS. 

Managers can come in and they can make a case for why individuals, for instance, in their organization should be rated at generally a higher level than the overall average and make that case. 

So it is that balance point. We are trying to strike for balance. 

We don’t have a system where essentially you can rate everybody 

‘‘outstanding’’ and that will hold. Again, from a grade inflation perspective, is that really the case? It is tough. I mean, this is a tough 

problem because you are asking managers to rate their employees 

and to be open and honest. But also to give them the right rating. 

It is that balance point that we are striking by providing some 

guidance. Also having a process through these Performance Review 

Boards to ensure that we are doing the right things if people truly 

are operating at an outstanding level. 

Senator AKAKA. Thank you very much. 

Now, I have one final question not related to pay-for-performance 

and this is to Mr. Bunn. As you know, last year’s NDAA contained 

a provision I authored to help reemployed annuitants at DOD who 

were forced to retire due to a reduction in force. I have employees 

in Hawaii who continue to ask me when DOD will issue regulations on that provision. Can you tell me the status of those regulations? 

Mr. BUNN. I can certainly take that question back. That is not 

within my portfolio, but I am aware of that issue. I know that the 

policy that you are talking about is in the final stages of review 

within the Department and it should be out soon, but I will certainly get back to you with a more specific estimate for when the 

policy will be out. 

Senator AKAKA. I would appreciate that. 

29 

1The prepared statement of Ms. Bonosaro appears in the Appendix on page 119. 

Mr. BUNN. Yes, sir. 

Senator AKAKA. Again, I want to say thank you to this panel for 

your responses. It will certainly help us in what we are trying to 

do. So thank you very much. 

[Pause.] 

I want to welcome our second panel, Carol Bonosaro, President, 

Senior Executives Association; John Gage, President of American 

Federation of Government Employees; Colleen Kelley, National 

President, National Treasury Employees Union; Jonathan Breul, 

Executive Director, IBM Center for the Business of Government; 

and Dr. Charles Fay, Professor, School of Management and Labor 

Relations, Rutgers University. 

As you know, our Subcommittee requires that all witnesses testify under oath, so I ask all of you to please rise and raise your 

right hand. 

Do you solemnly swear that the testimony you are about to give 

the Subcommittee is the truth, the whole truth, and nothing but 

the truth, so help you, God? 

Ms. BONOSARO. I do. 

Mr. GAGE. I do. 

Ms. KELLEY. I do. 

Mr. BREUL. I do. 

Mr. FAY. I do. 

Senator AKAKA. Thank you very much. Let the record show that 

the witnesses answered in the affirmative, and let me remind you 

that although your oral statement is limited to 5 minutes, your full 

statement will be included in the record. 

It is good to see you again, Ms. Bonosaro. Please proceed with 

your statement. 

TESTIMONY OF CAROL BONOSARO,1 PRESIDENT, SENIOR 

EXECUTIVES ASSOCIATION 

Ms. BONOSARO. Mr. Chairman, the Senior Executives Association 

appreciates the opportunity to share our experiences and views related to the current SES pay-for-performance system. 

Since the creation of the SES in 1978, with its performance 

awards and Presidential Rank Awards, its members have been subject to a rigorous pay-for-performance system. That system was 

changed, as you know, in 2003 and has been in effect now for three 

cycles. A system that was meant to be transparent, flexible, and to 

reward performance has instead become a disincentive for many of 

the best employees who might otherwise desire to join the SES. 

Senior Executives take on more duties, work longer hours, and 

have fewer rights than GS–15 managers, yet they receive no locality pay, no compensatory time, and no guaranteed annual pay 

raises, unlike General Schedule employees. With a large number of 

Senior Executives eligible to retire, it is critical that issues with 

the current pay system be corrected so that we will retain a highly 

qualified pool of applicants to fill their positions. 

A comprehensive survey of the SES that SEA undertook in 2006, 

continued feedback from our members, and a survey recently completed by OPM shows several areas of concern with the system, inVerDate Nov 24 2008 08:30 May 11, 2009 Jkt 044579 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 P:\DOCS\44579.TXT SAFFAIRS PsN: PAT
30 

cluding pay overlap between GS–15s and the SES, perceived 

quotas, and lack of transparency in both the rating and pay adjustment processes. 

One of the most disturbing findings of the SEA’s survey was the 

opinion of 47 percent of the respondents that GS–14s and 15s are 

losing interest in applying to the SES. The OPM survey reported 

that only half of Senior Executives believe that the current system 

is helpful in recruiting qualified applicants to the SES. Anecdotal 

evidence we continue to receive indicates that the narrowing gap 

between SES pay and GS pay, coupled with the inconsistency of 

the SES system, result in a less attractive Senior Executive Service. 

Another issue highlighted by the SEA’s survey was the perception that agency quotas, not actual performance, drive decisions 

about performance levels and salary adjustments. Downward pressure on rating levels exists within many agencies and we continue 

to receive reports from executives whose ratings were reduced 

without explanation. 

The certification process itself is a cumbersome one that some 

smaller agencies do not even attempt. It must be done every 1 or 

2 years, and often the decision to certify does not come until well 

into the performance cycle. 

We are also concerned with the consistency by which the SES 

pay system is being implemented. The OPM survey found that 

communication of the results of the system to executives—ratings, 

pay adjustments, performance awards—varied greatly from agency 

to agency. However, the greatest inconsistency has arisen from the 

total discretion that agencies have with regard to pay, and it is not 

unusual to find a disconnect between ratings and pay adjustments. 

As one Senior Executive told us, he received no pay increase for 

several years despite receiving ‘‘fully successful’’ ratings for his performance at the Department of Energy. Largely because of this, he 

voluntarily resigned his position in the SES to move back to the 

‘‘EJ’’ excepted service, where he then received the same 4.49 percent pay increase given to GS employees this year in the Washington region. 

Our written testimony provides several other examples of this inconsistent and, on its face, arbitrary treatment. 

In the 3 years of experience under the new system, one of the 

most striking results is the low salary adjustments. In 2007, the 

most recent year for which data is available, or at least was available prior to today, those SES rated ‘‘fully successful’’ the year before received an annual average salary increase of only 2 percent, 

substantially below the increase, 2.64 percent, received by GS employees in the Washington, DC area. 

Given these issues with the pay system, it is no wonder that 

some who might otherwise aspire to the SES now perceive that the 

risks far outweigh the rewards. 

SEA’s recommendations for legislative fixes to the pay system include ensuring at least a minimum annual increase for those rated 

‘‘fully successful’’ or better and including performance awards and 

retention allowances in the high-three retirement calculation. I 

think this would no doubt go a long way towards dealing with the 

pay compression Director Sanders referred to and even that Dr. 

31 

1The prepared statement of Mr. Gage appears in the Appendix on page 134. 

Springer admitted in her testimony, or in her response to your 

question, that pay compression is a problem. 

We also recommend a longer certification period, guaranteed 

funding of at least minimum SES salary adjustments, a minimum 

increase in pay for new Senior Executives, rules for pay tiers if an 

agency has them, feedback to Senior Executives, and greater transparency in the Administration of these systems. 

It is SEA’s hope that with the adoption of our recommendations, 

the SES pay system will be one that adequately and fairly compensates those who perform the most challenging and important 

jobs in the career civil service and which will continue to attract 

quality candidates in the future. Thank you. 

Senator AKAKA. Thank you very much, Ms. Bonosaro. Mr. Gage. 

TESTIMONY OF JOHN GAGE,1 PRESIDENT, AMERICAN 

FEDERATION OF GOVERNMENT EMPLOYEES 

Mr. GAGE. Thank you, Mr. Chairman, for the opportunity to testify today. I will focus my remarks on the National Security Personnel System and TSA’s past system. And thank you, too, Mr. 

Chairman, for your leadership in the 2008 National Defense Authorization Act, which in addition to excluding blue collar workers 

from NSPS, the law fully restored collective bargaining rights. 

But AFGE remains profoundly concerned about the NSPS pay 

system. There are many issues, including new illegal restrictions 

on bargaining rights, the disconnection between pay and performance, despite what employees have been told, the requirement that 

performance ratings be pushed into a forced distribution or bell 

curve, the suppression of wages by permitting bonuses to be paid 

instead of base salary increases, and the virtual elimination of 

merit promotion. 

On May 22, DOD proposed revised NSPS regulations which cynically and purposely attempt to evade Congress’s mandate for collective bargaining. DOD intends to implement these regulations in 

October, preventing the next Administration from reviewing the 

pay system and making adjustments before it goes into effect. This 

double-cross is unfortunate, but predictable. We strongly urge the 

Congress to block the implementation of the May 22 proposed regulations. 

Section 9902(e)(9) of the 2008 NDAA clearly says any rate of pay 

established or adjusted in accordance with the requirements of this 

section shall be non-negotiable but shall be subject to procedures 

and appropriate arrangements of Paragraphs 2 and 3 of Section 

7106(b), the labor statute. And yet in its proposed regulations, 

DOD has broadened its definition of rate of pay to include the 

phrase, ‘‘and the conditions defining applicability of each rate.’’ The 

proposed regulation goes on to list conditions defining applicability 

of each rate for a dozen pages, clearly intending to eliminate any 

bargaining of the very procedures and arrangements Congress 

mandated that DOD negotiate. 

It is an act of cynicism and defiance on DOD’s part to think it 

can define itself out of its statutory obligation. We urge the Senate 

to clarify in the Fiscal Year 2009 Defense Authorization Act that 

32 

rate of pay does not include conditions defining applicability of 

each rate. 

The 2008 NDAA also ensures that an NSPS employee will be 

guaranteed 60 percent of the GS nationwide pay adjustment and 

100 percent of the GS locality adjustment every year, provided that 

the employee is rated above ‘‘unacceptable.’’ As you know, DOD 

was prepared to give only 50 percent of the pay adjustment to employees in 2008 and none of its annual adjustment in 2009. The 

new law ensures that the full amount of the nationwide pay adjustment go for base pay increases. 

But to ensure the viability of the DOD pay system, DOD must 

be required to adjust its pay bands by the full amount of the nationwide pay adjustment, just as grades in the GS system are adjusted annually. In DOD’s proposed regulations, the Secretary can 

adjust different pay bands by different amounts and the minimum 

and maximum rates of each pay band by different amounts. 

Mr. Chairman, we have heard from so many managers and employees about the implementation of this new pay system. They 

complain that it is unpredictable, unfair, and opaque. Supervisors 

have been ordered to withhold information from their employees 

about their ratings. The pay pools are required to force performance ratings into a bell curve, and the decision about how and by 

how much to compensate an employee for performance is completely arbitrary. 

When supervisors substitute bonuses for salary increases, workers lose not only in base salary, but also in their defined benefit 

pensions and in contributions to the Thrift Savings Plan. The result, Mr. Chairman, is the suppression of wages and benefits for civilian DOD employees. 

Under NSPS, promotions are rare. Employees might be given additional duties by their supervisor with a subjective pay raise or 

bonus in what NSPS calls reassignments, but there will be no clear 

pathway to that advancement, nor is there a requirement that the 

reassignment be open to competitive or even that other employees 

know about the opportunity. The Merit Promotion System will be 

all but dead. Bias and favoritism are inevitable. 

On Transportation Security Officers, Mr. Chairman, TSOs continue to be drastically underpaid, around $30,000 annually. TSOs 

are subject to the pay system known as PASS. While it is virtually 

impossible to obtain data or even basic information about how the 

system is supposed to work, to make matters worse, TSA continually changes the playing field. Employees believe that PASS is 

based on favoritism, not performance. Last December, TSA disclosed that TSOs would receive a smaller pay raise in 2008 than 

in 2007, even if they received the same or better performance rating as the previous year. 

On March 25 of this year, TSA Administrator Hawley sent a 

memo to all TSOs making changes to PASS, agreeing that it had 

become too complicated and that TSOs are being trained and tested 

on different standards and these standards do not reflect how TSOs 

do their job. Yet in May, TSA implemented the infamous image 

test, and in a stroke of astounding contradiction continued to hold 

flawed previous test results against TSOs. 

33 

1The prepared statement of Ms. Kelley appears in the Appendix on page 149. 

To make matters worse, TSOs still have limited access to image 

test training. The new training software is not available at all airports and in some cases does not work. Trainers are given wrong 

information about identifying threat objects during the test, which 

led directly to TSO test failure. 

TSOs with excellent work histories and commendations have 

been told they may lose their jobs. But instead of correcting the 

test and properly training TSOs, the agency has come up with another policy that continues to hold previous test failures against 

TSOs but allows management to retain and retrain whoever they 

want, making the new and improved image testing even more unfair than it was. 

TSA consistently ranks at the bottom of all surveys of employee 

morale in the Federal Government. This workforce is too important 

to be treated so callously. These workers need a rational pay system before the attrition rate climbs higher. AFGE urges the Subcommittee to end the PASS system and place TSOs under the General Schedule that applies to other Federal workers, including their 

colleagues throughout DHS. 

That concludes my statement, Mr. Chairman. 

Senator AKAKA. Thank you very much, Mr. Gage. Ms. Kelley. 

TESTIMONY OF COLLEEN M. KELLEY,1 NATIONAL PRESIDENT, 

NATIONAL TREASURY EMPLOYEES UNION 

Ms. KELLEY. Thank you very much, Chairman Akaka, Ranking 

Member Voinovich, for the invitation to discuss pay-for-performance systems in the Federal Government. 

The President’s fiscal year 2009 budget submission reaffirmed 

his commitment to replace the current GS pay system with a more 

subjective pay banding system. OPM’s December 2007 report touts 

the Administration’s alternative so-called pay-for-performance systems now in many Federal agencies as successful experiments. 

NTEU does not agree with the notion that the GS system needs 

to be replaced, and I believe the evidence is now clear that current 

pay-for-performance systems have not been successful. To the 

contrary, alternative pay systems have produced a litany of failed 

experiments, widespread employee dissatisfaction, inequitable distribution of resources, abuse in ratings systems, and rampant employee confusion leading to low morale. I don’t know of one pay-forperformance system that currently gets good reviews from employees who are working under it. 

The goals of recruiting and retaining high-quality employees and 

better accomplishing the agency mission are simply not being met 

by these pay systems. NTEU believes that for a pay system to be 

credible and effective, it must either be set in statute, like the GS 

system, so everyone understands the rules and consequences, or 

there must be collective bargaining so employees can have a role 

in the pay system and can have remedies for unfairness. 

The Transportation Security Administration has neither collective bargaining nor a statutory pay system. It is a prime example 

of the failure of a current pay-for-performance system. Under the 

TSA PASS system, employees are constantly tested, but if they fail, 

34 

they are not told what they did wrong. The training is minimal. A 

majority of Transportation Security Officers do not even know what 

is expected of them to get a pay raise. Only 21 percent of TSA employees believe that promotions are based on merit. Fewer than one 

in four believe that their pay raise is determined by their performance. 

The PASS system has resulted in the highest attrition rate in the Federal Government, and now TSA has awarded a $1.2 billion contract to Lockheed Martin to perform its human resource activities, 

including pay. NTEU believes this taxpayer money could be better 

spent by putting TSOs under the existing GS pay system and increasing staffing and reducing airport congestion, rather than increasing contractor profits. TSOs must also be afforded collective 

bargaining rights like their coworkers throughout the Federal Government. 

At the IRS, where we heard earlier that managers are under a 

pay banding system, the Federal Managers Association has spoken 

out against the system’s forced pay quotas and they said that pay 

was not necessarily dependent upon performance ratings. In addition, the Treasury Inspector General for Tax Administration found 

a number of deficiencies in the IRS managers’ pay-for-performance 

system. A July 2007 TIGTA report states, ‘‘The IRS risks reducing 

its ability to provide quality service to taxpayers because the IRS 

pay-for-performance system potentially hinders the IRS’s ability to 

recruit, retain, and motivate highly skilled leaders.’’ If these alternative pay systems are jeopardizing the achievement of an agency’s 

core mission, in this case to provide quality service to taxpayers, 

how can we justify continuing or even expanding their use? 

Even at agencies where pay is negotiated through collective bargaining, NTEU has seen problems. In September 2007, NTEU won 

an important legal battle when an arbitrator ruled that the Security and Exchange Commission system was found to discriminate 

against African-American employees and employees that were 40 

years of age and older. The SEC has since agreed to freeze its 

flawed merit pay system and is working with NTEU. 

Similar problems existed at the FDIC, where we collectively bargain over pay. Only 12 percent of employees surveyed found that 

the pay system rewarded performance there at the FDIC. To Chairman Bair’s credit, that program was also suspended and NTEU is 

also working with that agency on a revision. 

The GS system, though much maligned, has rules, standards, 

and evaluations which must be written. Employees receive withingrade raises and career ladder promotions based on performance 

criteria. Locality adjustments make it market sensitive. Flexibilities, like awards, quality step increases, telework, student loan repayment, and others, are authorized and should be used more extensively to attract and keep talented employees in government. 

In conclusion, NTEU supports a moratorium on new pay-for-performance systems and a review of those that are in place to see 

whether they are successful in accomplishing their goals. Those 

that are failing should be canceled. NTEU also strongly believes 

that collective bargaining over pay must be provided to employees 

under alternative pay systems to provide employees with a check 

on abuse. 

35 

1The prepared statement of Mr. Breul appears in the Appendix on page 161. 

Thank you again for the opportunity to testify and I would welcome any questions you have. 

Senator AKAKA. Thank you very much, Ms. Kelley. Mr. Breul. 

TESTIMONY OF JONATHAN D. BREUL,1 EXECUTIVE DIRECTOR, 

IBM CENTER FOR THE BUSINESS OF GOVERNMENT, AND 

PARTNER, IBM’S GLOBAL BUSINESS SERVICES 

Mr. BREUL. Thank you, Chairman Akaka and Senator Voinovich, 

for the opportunity to discuss performance pay systems in the Federal Government. 

The question of how to compensate civil servants remains what 

I would call a thorny issue. Public sector positions no longer necessarily offer a job for life, and Federal departments and agencies 

are increasingly in competition with the private sector to recruit 

and retain top performers. One solution widely used in some parts 

of the private sector is to replace or complement the traditional 

civil service system of automatic salary increases based on length 

of service with financial reward for good performance, or performance-based pay. 

In order to gain a better understanding of the challenges and 

issues related to performance-related pay, the IBM Center has 

sponsored and published three recent research reports by public 

management experts. The first report, ‘‘Designing and Implementing Performance-Oriented Pay Band Systems,’’ is by Jim 

Thompson at the University of Chicago. According to Professor 

Thompson, pay banding is not a new concept to the public sector. 

The essential concept is that for purposes of salary determination, 

positions are placed within broad bands instead of narrow grades. 

And according to Mr. Thompson, the preponderance of data shows 

that these systems have achieved high levels of employee acceptance. However, the degrees of success seem to vary depending on 

how well those systems have been designed and implemented. 

Mr. Thompson’s report goes on to describe nine different performance-oriented pay band systems that have been in operation in 

the government, in some cases for more than two decades. He 

makes the case that successful designs are those that, one, achieve 

a balance between efficiency, equity, and employee acceptance; two, 

acknowledge the soft as well as the hard design features; and 

three, fit the organizational context. 

A second IBM report is ‘‘Managing for Better Performance: Enhancing Federal Performance Management Practices,’’ by Howard 

Risher and Charles Fay, who is sitting to my left. The authors of 

this report recognize that performance management is recognized 

worldwide as a critical factor in helping individuals and organizations achieve their goals. When done correctly, performance management becomes a powerful and effective tool to drive individual 

and organizational performance. When done poorly, it can create 

an atmosphere of distrust between managers and employees, ultimately limiting performance and the organization’s ability to 

achieve its full potential. 

Fay and Risher argue that the responsibility for effective management of employee performance rests squarely on the shoulders 

36 

1The prepared statement of Mr. Fay appears in the Appendix on page 165. 

of executives and front-line managers. They emphasize the management of employee needs are a core responsibility of every manager. In this view, it is critical that managers understand and effectively practice the fundamentals of performance management, 

including planning, monitoring, developing, appraising, and rewarding employee performance. 

The third report is ‘‘Pay for Performance: A Guide for Federal 

Managers,’’ by Howard Risher. Risher insists that research over 

the years confirms that organizations benefit when they recognize 

and reward employee and group performance. He explains that for 

the new system to succeed, managers need to be comfortable with 

their new role in overseeing such systems. This makes it essential 

for them to play a role in planning and implementing the new systems. 

Risher argues that pay-for-performance, including the reward 

system, must be an integral part of an organization’s overall strategy to create a performance culture. Further, he contends that Federal agencies will have to overcome barriers of cynicism and distrust among Federal employees, and there will be what he calls 

bumps and detours along the way, so agencies must expect to adjust their plans with experience. 

He concludes that, in the end, the new policy can be expected to 

contribute to improved agency performance. Importantly, however, 

Risher warns that the transition will not be easy. ‘‘This may prove 

to be the most difficult change any organization has ever attempted,’’ but in the end, he believes it will better serve the needs 

of the Federal Government than the current General Schedule salary system. 

In conclusion, the question of how to compensate public employees remains a thorny one. Performance pay is an appealing idea, 

but research indicates that implementation, as well as improving 

government performance, remains complex and deceptively difficult, both technically and politically. 

Thank you, Chairman Akaka and Senator Voinovich, for holding 

this important hearing and for remaining engaged on the important issue of improving management and performance of government. 

Senator AKAKA. Thank you very much, Mr. Breul. Dr. Fay. 

TESTIMONY OF CHARLES H. FAY,1 PROFESSOR, SCHOOL OF 

MANAGEMENT AND LABOR RELATIONS, RUTGERS UNIVERSITY 

Mr. FAY. Chairman Akaka and Senator Voinovich, thank you for 

giving me the opportunity to testify on compensation and pay-forperformance again. Given my background, it should be obvious I 

have a bias favoring strong performance management systems and 

pay-for-performance in general. When well designed and well implemented, these systems can and do increase employee understanding of what is required of them and increase both their performance and organizational outcomes. Flawed programs can and 

do decrease productivity and employee job satisfaction. 

37 

I think it is appropriate for the government to institute pay-forperformance systems. It is clear that agencies have done their 

homework in studying the large literature on private sector performance management and pay-for-performance systems. That 

said, I see many of the same problems in the various systems implemented by government agencies that plague similar systems in 

the private sector. 

First of all, these programs seem too ambitious. They are trying 

to do too much, too fast, for too many. 

Second, the culture that makes ‘‘meets standards’’ performance a 

failure, and it is in most of these systems, needs to be changed. 

When ‘‘meets standards’’ is a failure, you are going to end up with 

an excellence entitlement mentality and no system will be able to 

differentiate high performers from standard performers. 

Third, managers need to be held accountable in terms of pay and 

their own performance for performance management and pay-forperformance. Many managers think they are far too busy to do 

pay-for-performance, to do performance management, and if managers don’t have time to manage, it is questionable what they 

should be doing. 

The programs and particularly the DOD programs confuse market adjustments and performance bonuses. Employees expect to be 

kept whole against market, and it is clear from union and employee complaints that they know the difference between market 

adjustments and performance bonuses. Hence, all the arguments 

about comparison with GS, which is getting the FEPCA adjustments, as compared to what is happening in the pay-for-performance systems. The market adjustment issue is particularly important to government workers because they generally make less than 

equivalent private sector workers, especially from about GS–8 or 

GS–9 upwards. 

For a variety of reasons, government employees are much more 

heavily unionized than private sector employees. You can’t simply 

import private sector programs into government and expect them 

to work well. Unions in general are opposed to performance management and pay-for-performance systems because employees and 

employee representatives lose partial control of terms and conditions, and you have heard that again today. I hear both that employee representatives have been active in the design and Administration of these systems and that they have been precluded from 

participating in that. In a unionized organization, they should be 

very heavily involved in designing and implementing the systems. 

Having bonus pools, as the Department of Defense system does, 

where ratings and bonuses are calibrated, is one of the better designed approaches in these systems. However, calculating the 

bonus pool solely as a function of the salaries of the members of 

the pool is inappropriate. It rests on the assumption that the aggregate performance of employees making up each pool is equal 

across pools and that the employees of each pool are equally strategic to the agency or the department. Neither of these assumptions is likely to be accurate. 

Calibration committees should not be negotiating ratings or 

awards. When bonuses appear to employees to be a function of the 

negotiating skill of their manager, or when there is a drive for 

38 

some specific distribution of ratings, the whole system loses any 

value in motivating those employees. 

At the same time, there should be an effort to standardize reward share numbers across pools. A ‘‘meets standards’’ employee 

should receive the same number of shares regardless of the pool to 

which he or she is assigned. Similarly, the range of share measures 

that each performance level can be assigned is problematic. When 

a ‘‘meets standards’’ can be assigned any one of four or five different sets of performance shares, it is clear that there is lots of 

room for bias and arbitrariness in the system. 

Performance management systems and pay-for-performance systems for employees who work as parts of groups or teams need to 

have team citizenship taken into account as part of their performance. Otherwise, they will be motivated to maximum individual 

performance even at the expense of suboptimizing group performance. Performance ought to be rated and rewarded at the level at 

which it occurs, and particularly in the kind of service jobs at the 

government, it rarely occurs at the individual level. 

It is not clear what evaluation systems have been built into the 

various pay-for-performance systems. The previous panel discussed 

some of that, but I will make one point about that in a minute. 

The 2007 Annual Employee Survey results of the Department of 

Treasury, for example, notes that only 27 percent of employees believe pay raises are determined on how well employees perform 

their job. Only 32 percent of employees state they typically receive 

formal or informal feedback from their supervisor. Those are signs 

of a broken system or one that never worked in the first place. 

Furthermore, I think that just looking at employee reactions to 

systems is really the wrong measure and I was surprised that none 

of the people on the previous panel spoke to the real issue that private sector organizations always look for as a measure of goodness 

of the pay-for-performance system, and that is the performance of 

the organization gets better. If you are tying individual criteria and 

performance criteria, to organizations’ success, then the measure of 

success of the system is whether the organization increases its success. 

Thank you. I will be happy to answer any questions. 

Senator AKAKA. Thank you very much, Dr. Fay. 

My first question is to all of the witnesses. As we discussed on 

the first panel, I continue to hear from employees about the use of 

quotas or forced distribution of ratings. Can each of you discuss 

your thoughts on the use of quotas and how you would recommend 

agencies avoid actual or perceived quotas. Ms. Bonosaro. 

Ms. BONOSARO. Well, it has been an interesting phenomenon to 

watch. I think certainly in the first year or two, our strong suspicion is that many agencies felt that the way to achieve certification with the Office of Personnel Management and OMB of their 

systems was to show a substantially lower number of outstanding 

ratings, to push the ratings down. I think there was just no doubt 

that—let us simply say there was an informal message that was 

operating within the agencies. 

My guess is that is less true now. However, we still have examples of executives who find that their ratings have been reduced 

without explanation. Whether that arises because that political suVerDate Nov 24 2008 08:30 May 11, 2009 Jkt 044579 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 P:\DOCS\44579.TXT SAFFAIRS PsN: PAT
39 

perior is unwilling to actually address substantial issues with the 

executive’s performance or whether there is a hang-over, if you 

will, about the need to suppress higher ratings, it is very difficult 

to tell because very few of the people involved, the individual executives, want anyone to move forward and make a case out of 

them. They value their jobs and they recognize that doing that is 

not going to be to their ultimate advantage. 

I think, too, that there has been finally one unfortunate example 

that we faced where Navy had literally a PowerPoint presentation 

with a graph, a normal distribution curve, which they were using 

with regard to the SES system, and when we brought it to OPM’s 

attention, their ultimate conclusion was that it was not a quota, it 

was a notional system, and I frankly don’t quite understand what 

that meant, but rather that it was some generalized idea of perhaps how ratings should look. 

With regard to a remedy, the OPM regulations prohibit the use 

of quotas. I think that one remedy is certainly for OPM to be willing to quickly jump on every instance we can bring to their attention where we can convince an executive to permit us to do that, 

and another is to put that prohibition in statute, to make clear that 

we take it seriously. We don’t have any particular recommendation 

for what the penalty should be if the statute is violated, but I think 

it would send a message that we are serious about this. 

And then finally, I think the message that Director Springer 

talked about has to be reinforced every year and pushed down 

through the agencies, that there is a clear interest in evaluating 

and rating every executive fairly and not with regard to some presupposed outcome. 

Senator AKAKA. Thank you. Mr. Gage. 

Mr. GAGE. Senator, just look at the time line, what DOD does in 

rating an employee. In October, the supervisor gives the employee 

a performance plan. The following September, the supervisor has 

to rate the employee on that performance plan, but he is forbidden 

to talk to the employee about that rating or to give him that rating. 

Then in October, he has to sit down and do a new performance 

plan, even though he doesn’t know what is going to happen with 

his original rating, nor does the employee. 

The rating in November, or what the supervisor submitted, that 

rating goes to the pay pool. They do whatever they want, which is 

a forced distribution and apply these ratings to a curve. Then in 

January, the supervisor is finally told what the rating is for the 

employee and how much money the employee will get or not get. 

If this is transparent—employees are not fools, Senator. They understand that the supervisor’s rating, which should be the employee’s performance matched to that performance plan, has nothing to 

do with the real rating he is going to get or the money he is going 

to receive. 

So I suggest that the Subcommittee just look at DOD’s own time 

line and see if it is believable, that there is not a bell curve or a 

forced distribution going on. Employees already know there is. 

Senator AKAKA. Ms. Kelley. 

Ms. KELLEY. Whether agencies acknowledge there is a quota system or not, there is, and it happens for two reasons. One, because 

they have this notional idea of how the workforce is performing 

40 

and should be distributed, which really just makes a farce of the 

system. If you announce that only 25 percent of employees or some 

fill-in-the-blank percentage can be ‘‘outstanding’’ or excel or a role 

model or whatever the new term of the year is, the fact is, what 

you are saying to the other 75 percent of the employees is no matter how well you do, even if you are doing exactly the same thing 

as those top 20 or 25 percent, there are too many of you to be rated 

that way. So it makes the whole system a farce, and from there, 

the conversation has nowhere to go but down and it has zero credibility for employees. 

But one of the other reasons that I believe it happens is because 

of limited resources in the Federal Government. When the agencies 

are given their budgets, they then decide how they are going to divide that up, and it is a system that requires that if one employee 

is going to get more, that another employee will get less based on 

however the agency decides to distribute their funds. 

So there is a very real issue within the Federal Government 

when it comes to appropriations, but then if the agencies are not 

making wise decisions, it leads to very serious problems like we 

saw in the FDIC and in the SEC. In both of those cases, the agency 

announced—they announced as part of their program a forced distribution system, that only 25 percent of the employees in the 

FDIC, they said, could be rated at the highest level, and it had 

nothing to do with their annual evaluation or whatever their rating 

was. It was their rating plus some invisible criteria that managers 

would come up with. They actually gave it a name. They called it 

a Corporate Contribution Factor. You will find a definition of it nowhere in English, anyway, that employees can hang their hat on. 

And the system, as a result, had zero credibility, again, with employees. 

Now, as I said, the good news is the FDIC and the SEC are now 

sitting down with NTEU to fix that system. But whether they 

admit it or not, there is a forced distribution system and a quota 

system. They can come up with all the names with it that they 

want and they can say that it is a suggestion, that it is not written 

in stone, but it is implemented as if it is written in stone, in our 

experience. 

Senator AKAKA. Mr. Breul. 

Mr. BREUL. Mr. Chairman, I don’t think there is any real room 

for a quota. What I would do is reframe the question a little differently and ask how many employees receive an honest performance appraisal that tells them where they really stand. It was my 

experience in government for many years that too often, very few 

receive a real honest appraisal of where they stand, and I think 

this is equally unacceptable. 

Managers can’t call themselves managers unless they regularly 

tell their people what they are doing well and how they need to improve. So the whole notion of an honest, transparent appraisal system, I think is an essential element here. 

Senator AKAKA. Thank you. Dr. Fay. 

Mr. FAY. Yes, Senator Akaka. You know, faculty deal with the 

same problem all the time in grading. Everybody wants to make 

an A. It doesn’t happen that way. What does happen is if you develop a measure of learning or performance that accurately deVerDate Nov 24 2008 08:30 May 11, 2009 Jkt 044579 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 P:\DOCS\44579.TXT SAFFAIRS PsN: PAT
41 

scribes or accurately taps what people are supposed to have done, 

then if you rate against standards, you will get whatever distribution you get. I think it would be great if every employee in the government got an ‘‘outstanding’’ and deserved it. I think it is pretty 

bad if they all get it and they don’t deserve it, but I think it is 

equally bad if 57 percent of them get a ‘‘meets standards’’ just for 

some financial purpose. 

As a couple of people have said, employees are not stupid. They 

figure this stuff out and nothing loses credibility for a system faster 

than having any kind of artificial constraint on where people come 

out. 

Private sector organizations face the same problem and what 

they do is a senior manager will go into a junior manager and say, 

‘‘I noticed you gave everybody in your unit an ‘outstanding.’ If they 

are all outstanding, how come your department is a failure?’’ That 

is, performance rating has to roll up the organization just as the 

goals of the organization roll down, and if a department is performing in an outstanding fashion against whatever criteria the organization has set for that unit, then maybe everybody in the department does deserve an ‘‘outstanding.’’ If the department is failing, maybe everybody deserves a ‘‘non-acceptable.’’ 

Senator AKAKA. Thank you very much, Dr. Fay. Senator Voinovich. 

Senator VOINOVICH. I am certainly glad that I am here today to 

hear this testimony. I am going to get the transcript of what Mr. 

Gage and Ms. Kelley had to say today and I am going to get it over 

to the Departments and get to the bottom of this, because if what 

you are saying is true, it is shocking. It is not what we intended 

to do. So I just want you to know that we are definitely going to 

follow up on what we have heard today, or I have heard today. 

How much do you think of some of what is going on is the result 

of agencies not having the budget that they ought to have and they 

are trying to figure out how they can cut back, and as a result of 

that, the systems get shortchanged? 

Mr. GAGE. I think that is at the bottom of this whole system. I 

have talked with some of our base commanders, who are very good 

people and have run very fair bases, and they said, ‘‘with this new 

pay-for-performance, my money is very tight. Of course, I am going 

to tap into that and I am not going to use it for employees. I am 

almost forced to do it.’’ 

So I think this is just an elaborate scheme, Senator, to reduce 

overall Federal pay. And if you go through the mechanics of it like 

we have had to do just to try to understand it, it is just fraught 

with bias and prejudice and it is a system that it is going to be 

very hard to get out—it is just not going to be named abuse. 

So I had better ideas of this. I think Colleen did, too. We really 

tried to work with some of these agencies. DOD refused to work 

with any of the unions. But I am really concerned that this is the 

end of the good part of the civil service as we know it. 

Ms. KELLEY. I think definitely the resources is the starting point 

of the problem, but they are given X resources and then the question is how you spend it, and whether you are going to build a system that has any credibility to employees or not. That is not what 

has been done. In fact, as I listened to Dr. Fay, I will give you anVerDate Nov 24 2008 08:30 May 11, 2009 Jkt 044579 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 P:\DOCS\44579.TXT SAFFAIRS PsN: PAT
42 

other example of what we see happen often that is, managers receive bonuses and awards and not one employee in their group is 

recognized with an award or any kind of recognition. So how could 

that manager be so successful if every one of their employees were 

just OK and did nothing to be recognized? 

I mean, there are a lot of flaws in the system that, for me, are 

about implementation. So even if you start with the fact there is 

not enough money, which there is not, and the agencies need to be 

funded to be able to recognize the top performers, that money 

should be provided. But whatever the pool of money is, then the 

credibility with which it is distributed is about implementation. 

So it is really a two-part question for me. It is, yes, the resources 

are needed, but then the agencies should be accountable for the implementation of how they spend that money and how they recognize and reward employees. And today, I have yet to see a system 

that I could point to that I would say NTEU would support, and 

I would like to see that. I have looked at every one of these systems 

that OPM and that the Administration point to as successes and 

employees will tell you every one of them is an abysmal failure. 

Senator VOINOVICH. Ms. Bonosaro, would you like to comment, 

and then I have another question for you. 

Ms. BONOSARO. I think that certainly has been somewhat of a 

problem in regard to the SES system, and obviously all of the pay 

adjustments in the Senior Executive Service are now totally discretionary with the agencies so that even budget issues aside, an 

agency could determine not to grant any pay adjustments. But certainly we have seen some examples over the years where budget 

has entered into it. I think right now, there has been a decision at 

the NLRB, for example, to give no performance awards because of 

budgetary problems. 

I think, too, that sometimes what we have thought is that perhaps the reason that performance awards have been more forthcoming than more substantial pay adjustments in the SES is because you don’t then build that into salary. It is a one-time payment. So that is one of the reasons why one of the legislative provisions we are recommending is to guarantee that some budget be 

devoted to the system. 

Senator VOINOVICH. We have had 2 or 3 years of pay for performance in SES and we still have some agencies that are doing great 

and others are not doing so great. Would you like to comment 

about, first of all, where the agencies aren’t doing a good job, at 

least from the surveys that come back, if OPM has really done an 

adequate job of getting in there and working with them to find out 

what is wrong and why it is not working in terms of what they are 

doing versus another agency where the folks understand the system and seem to be satisfied with it. 

Ms. BONOSARO. Well, I think just taking one of the areas where 

the differences between agencies, where it is most obvious was with 

regard to transparency and communicating results and information 

about the system, and there were tremendous differences between 

the agencies, which was really difficult to understand because it is 

not rocket science to share these results with executives. 

I think there, OPM Director Springer really did make a very 

strong effort as part of the certification process to make clear to 

43 

agencies that communication was critical. So it really is difficult to 

understand what is going on there. 

I honestly don’t have a good enough sense of exactly what they 

are doing beyond the work in the CHCO Council with regard to 

some of the agencies. 

One of the problems, I think, that makes it difficult to fully understand some of the disconnects is that all of the data we see, for 

example, with regard to pay adjustments, are averages. So when 

we see, for example, that Senior Executives rated ‘‘fully successful’’ 

receive an average 2 percent pay increase, we don’t know how 

many receive no pay increase or how many receive a 1 percent pay 

increase or a 5 percent pay increase. So some of the data really 

masks some of the differences. 

But there are very clear differences and I think one of the really 

striking things were some of the poor results at OMB, which is 

charged with acting with regard to agency certifications in the system. So it is, frankly, a bit baffling. 

Senator VOINOVICH. I am very frustrated because we still have 

some poor performers out there, and apparently even with OPM involved. Is it your impression that is not being done, that there is 

not enough concern at OMB to try to make sure that the system 

is successful, or do you think they are just hiding behind the budget, too? 

Ms. BONOSARO. I honestly don’t know. I wish we had a good answer for you. I think a lot of this—we have to go back to the beginning and the fact that this legislation was adopted with no hearings. There is no legislative history. So in essence, OPM developed 

regulations that took almost a year to do. Agencies didn’t get 

geared up quickly enough, and then they were scrambling. I think 

the learning curve has been pretty steep and there wasn’t enough, 

at least early enough on, not sharing between the agencies that 

knew what they were doing or trying to do it well and enough clear 

guidance from OPM. But then you had two agencies both involved 

in looking at these systems. So I think, frankly, it didn’t get off to 

a very good launch and now you are trying to clean it up, frankly. 

Senator VOINOVICH. Is the CHCO Council doing any good? I 

mean, it has been in place for 5 years and we have elevated human 

capital to a higher level, supposedly, in the Federal Government 

where people are paying more attention to the people that work in 

the agencies. Is it—or you don’t see any difference? 

Ms. BONOSARO. Those of us at this table are invited to the CHCO 

Council meetings once a year, so it is a little difficult to comment 

on what they are doing the rest of the time. 

One of the things, though, that we do believe is that if we still 

had the office in OPM that oversaw—that was kind of a focal point 

for the Executive Corps, that we would have a much clearer understanding of what they were doing and there would be some clearer 

direction. Now, OPM, Linda Springer may well disagree with that, 

but there are several parts of OPM that have been involved in this 

process and I think one clear focal point, having this under their 

wing, certainly would have been helpful. And also a good deal more 

sharing among the agencies that were doing well. It is just my impression that did not get started early enough and well enough. 

44 

Senator VOINOVICH. Well, I will just finish up with this, that I 

think the communication is extremely important and there ought 

to be a vehicle there at OMB for that to go on. I know way back 

when we got started, I think President Clinton had where you had 

a chance to meet with the Administration. Wasn’t there something 

set up in the President’s office where the unions had a chance to 

come in and talk to some folks and have a chance to have your 

voice heard at a high level? 

Mr. GAGE. Yes. 

Senator VOINOVICH. One of the things that Senator Akaka and 

I might do is just to maybe look at some of these things, and whoever the next President is, make some recommendations on how we 

think we can improve the situation to get this flow of information. 

I can’t believe, you say you can’t even get over and talk to the people at the Defense Department. That is just incredible. Thanks. 

Senator AKAKA. Thank you, Senator Voinovich. 

Mr. Gage, you heard Mr. Bunn’s response to my question over 

DOD’s intention with the definition of rate of pay. What are your 

thoughts on his answer? 

Mr. GAGE. Well, they have taken ‘‘rate of pay,’’ which is pretty 

simple, three words, and wrote about 12 pages of regulations that 

it would go into every aspect of pay, even procedures put in for fairness to employees over time, differentials in pay, night differentials. It would be all subject to management discretion, non-negotiable, can’t talk about it. 

Don’t take my word, Senator. It is right there in the regulations. 

We have had a number of experts around and met with all our people and I feel it is really—it is shameful, what they did, especially 

after Congress very directly told them that this stuff was negotiable and restored our bargaining rights, and for them to come 

about regulations and then try to submit it at the end of this Congress, and you know this 60-day rule, if you all don’t do anything, 

it is in effect, and it is just—well, I think it is dirty pool. It is certainly not the way to have a discussion or a collaboration on something as important as this. 

Senator AKAKA. Dr. Fay, you testified for pay-for-performance to 

work in the Federal Government, there has to be a legitimate appeals system in place for employees who feel they have been treated arbitrarily or in a biased fashion. What in your opinion comprises an adequate appeals system? Do you believe the systems in 

place at Federal agencies, particularly ones we have discussed 

today, have adequate appeals systems? 

Mr. FAY. I can’t speak to all of those agencies, but let me give 

you an example from IBM, which is a non-unionized company, generally speaking. They have a system where if an employee feels 

that he or she has been mistreated, arbitrarily treated by the organization, that they go first to the HR unit. If the HR unit cannot 

resolve it to the employee’s satisfaction, it then goes into a system 

where someone from a different part of the organization comes in 

and hears it, hears the problem and makes a decision. 

When it first started, there were a significant number of those 

where managers got fired, got pay reduced, had a variety of bad 

things happen to them. As time has gone on, managers understand 

45 

that you can’t treat people arbitrarily or unfairly and so a far 

smaller percentage do, in fact, turn out in favor of the employee. 

But they still run—and another thing they do that I think is 

pretty remarkable, very few private companies do this, they put the 

person who made the complaint into a pool with other people who 

have made complaints. They select another pool who are equivalent 

in terms of their performance, in terms of their education, a variety 

of things. So they have parallel pools. And then they track the 

pools and make sure that people who filed a complaint don’t end 

up out in limbo or laid off or anything at any greater rate than 

members of the other pool. 

That is, they go beyond just hearing and correcting when they 

see things are bad. They do two things I think are important. One 

is that managers who do behave in an arbitrary, capricious fashion 

feel it. They learn not to do that very quickly if they stay. And then 

second, they follow up to make sure that the employee does not suffer from having made a complaint, whether it is a supported complaint or not a supported complaint. You know the problems that 

whistleblowers in government agencies have and this was IBM’s 

attempt, and a very successful one, to prevent people who filed this 

particular kind of complaint from being retaliated against. 

Senator AKAKA. Well, let me ask my final question to Mr. Gage 

and Colleen Kelley. I am very concerned about the low morale reported at TSA and the disturbing picture painted by the responses 

to the 2007 DHS employee survey. Based on feedback that you all 

received from employees, what are the biggest concerns employees 

have with the TSA Performance and Accountability Standards System (PASS)? Mr. Gage. 

Mr. GAGE. I interview TSA employees probably once a month 

and, for instance, they are supposed to do this one test with a contractor and it basically is they have to pat down, I believe it is a 

Lockheed contractor person and they don’t get any feedback from 

the person they are patting down. But if they do something wrong 

in that pat down, they see that they are rated badly for that very 

important standard and they don’t know why. Their supervisor 

doesn’t know why. He wasn’t there. He didn’t do it. 

So there are so many of these things, while they say they are objective standards, they are not objective as far as the employee is 

concerned. He doesn’t even know what he did wrong. And I hear 

that again and again and again. The same thing with the image 

test, which is completely unfair. Yet they say, well, you flunked the 

test, but why did I flunk it? How did I flunk it? What did I do 

wrong? I think I am a good TSO Officer. 

So I think that is one of the big things, but the other thing is 

the inflexibility of their leave policies and working conditions. 

Those are really the two big complaints that I get. 

Ms. KELLEY. And I would add that the third one is the issue of 

pay and pay raises. There is no TSO who knows what it is they 

have to do to get a better pay raise next year, and they would tell 

you that pay raises are distributed based on favoritism and cronyism, not based on skills; not based on performance of the job. 

And they would say that in the same way it is true for promotions, 

whether it is to a lead TSO position or to a manager position. 

Senator AKAKA. Senator Voinovich. 

46 

Senator VOINOVICH. As I say, I do my own personal survey and 

the last couple of years, I am getting better responses from people, 

but I will say that some of them think that their evaluation is too 

subjective. I am aware of the fact that somebody else is doing it, 

and what you are basically saying is that once it is done, employees 

don’t get any feedback about where it was that they failed and they 

are left in the dark about their performance. 

Mr. GAGE. And by a contractor. 

Senator VOINOVICH. Yes. I wasn’t aware of the details of the contract. 

Ms. KELLEY. Well, the $1.2 billion contract I mentioned is a new 

Lockheed Martin contract, and that is for them to develop and deliver a human resources system and delivery of their pay system. 

So that is an additional $1.2 billion, with a B, contract, in addition 

to the one that Mr. Breul mentioned where they actually come in 

and conduct the testing of the TSOs. 

Senator VOINOVICH. How long ago was that contract signed? 

Ms. KELLEY. I believe within the last 6 to 8 weeks. It is very recent. 

Senator VOINOVICH. I will check into it. 

Mr. Gage, you testified that DOD refused to work with the 

unions. Do you have any examples of when you have been over 

there and tried to get some input with them, and who do you contact there? 

Mr. GAGE. Well, I have known Mary Lacey for a long time. I used 

to—when she was down at Indian Head. It was pretty clear during 

the last session of Congress where we were at loggerheads certainly on the collective bargaining aspects of NSPS, and we tried 

some negotiation—one meeting. But it was very obvious that there 

just wasn’t discussion. There just wasn’t an attitude of, well, what 

are your concerns and how can we work to answer some of your 

concerns. 

It was basically very—and through the whole collaboration process, it was an our way or the highway type of approach and there 

was no collaboration. There was no discussion. And I thought that 

was kind of odd because Ms. Lacey and I had done a lot of business 

in the past. But on this—this was a much different thing. I think 

DOD as an organization had their mind made up and they were 

going to do it their way and there was no looking back and no turning around. 

Senator VOINOVICH. I think one of the things that I understood 

was is that in terms of the implementation of the system, the people that are going into the system now are really not the unionized 

employees. 

Mr. GAGE. Oh, yes. Well, they haven’t been. But under these new 

regulations—see, we have wage grade exempted. They are out of 

NSPS totally. Why, you might ask? That is a good question. But 

the GS, the GS people now are the ones that are—the GS bargaining unit, non-management types, they are the ones that will be 

going into NSPS in these coming spirals under these new regulations that they put in. So we are completely concerned about that 

and—— 

47 

Senator VOINOVICH. My understanding is that they still have to 

go down some more spirals before they touch those people in the 

Defense Department that are members of your union—— 

Mr. GAGE. They are talking about this fall, or the fall next year. 

Senator VOINOVICH. Next year. 

Mr. GAGE. Yes. 

Senator VOINOVICH. And that part of the reason why that they 

may not have had the level of discussion you would like is because 

they haven’t gotten to your people yet. That is what I have heard. 

When we have had Mary Lacey in, she seems to be very committed 

to the system. 

Thank you. 

Senator AKAKA. Well, I want to thank this panel. The performance of Federal agencies, as we know, depends on the ability of its 

workforce to trust the system that governs employee pay and performance. From improving transparency and communication to 

ending quotas or the perception thereof, there remain many problems with pay-for-performance systems at Federal agencies. We 

must address these issues in order to maintain the integrity and 

the trust of our civil service and ensure that the Federal Government is an employer of choice. 

Again, I want to thank all of the witnesses for being here today. 

I look forward to continuing to work with you and with Senator 

Voinovich to address these issues. 

The hearing record will remain open for 1 week for additional 

statements and questions from Members. 

This hearing is adjourned. 

[Whereupon, at 4:56 p.m., the Subcommittee was adjourned.] 

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