The federal workforce faces a number of critical challenges that must be addressed to fulfill the increasingly complex demands placed upon federal agencies. For example, the looming retirement bubble will require the replacement of a significant portion of the federal workforce, and the technical skills required in today's workplace demand advanced employee training efforts.

Accordingly, during the next four years, improving federal human resource (HR) systems will be critical. To provide the level of service our public expects from the federal government, we must address significant HR issues. These issues include compensation, federal recruitment and selection, training and development, and employee and labor relations.

Strategic Compensation Policy

The issue of federal pay has taken on renewed importance in recent years. Mirroring discussions taking place at the state and local levels of government, policymakers and independent researchers have devoted a great deal of attention to comparing federal employee pay rates to those in the private sector, as well as to strategies for ensuring that federal HR management systems can recruit and retain the best and brightest candidates to meet the mission goals of the future.

Perhaps the most contested issue in recent federal pay discussions concerns the proper methodological approach for both comparing federal and private sector pay rates and providing annual pay increases to employees. The Federal Employees Pay Comparability Act of 1990 (FEPCA) requires the U.S. Federal Salary Council to make annual pay rate recommendations to the president's pay agent based upon salary survey data provided by the Bureau of Labor Statistics (BLS). With comparability estimates constructed from a survey of occupational salaries in the private sector, BLS data has consistently highlighted that, on average, federal employees working in the General Schedule (GS) system tend to be substantially underpaid compared to their private-sector counterparts. But when disaggregated by grade level, lower graded employees tend to be overpaid, while higher graded employees are generally underpaid.

The 2010 BLS estimates in Table 1 highlight the distinct break in federal pay comparability for those employees in grade levels higher than GS-7, with higher graded employees experiencing pay gaps of up to 31 percent in some cases.

While there is considerable disagreement as to whether occupation-based pay comparisons provided by the BLS accurately capture comparability levels between the federal government and private sector, perhaps the most significant shortcoming of the federal government's existing approach is that it fails to account for differences in pay comparability between grade levels within the GS system. As mandated by FEPCA, the Federal Salary Council can make only one annual pay adjustment recommendation for the entire GS system. In practice, this means that annual pay increases are applied uniformly across all pay grades, thus overlooking variation in pay comparability between grade levels.

While the council has historically recommended pay increases at levels aimed to bring average pay rates within 5 percent of private sector pay rates (as mandated by FEPCA), actual pay increases have been much smaller (between 1 percent and 3 percent), and have had the ultimate effect of increasing pay premiums for lower graded employees without substantially affecting underpayment for higher graded employees.

(NOTE: see Budgets column, p. 10, for more on methods of federal-private pay comparisons.)

Recommended Actions

The federal pay-setting policy leaves much to be desired. The next president and Congress should reform the current system to allow federal agencies and managers to better compete in the broader labor market. While we acknowledge concerns with the current process for estimating pay comparability, two relatively simple policy reforms would provide immediate improvements.

  • The president and Congress should end the practice of across-the-board GS pay scale increases to address public-private pay disparities and allow for grade-level adjustments based upon disaggregated comparability estimates. This policy shift would grant the Federal Salary Council and president's pay agent the ability to strategically target pay increases for those GS grade levels found to be the furthest below the private-sector labor market, but it also would allow for general cost-of-living adjustments.
  • The president and Congress should expand the pay ranges within the existing GS to allow for greater pay progression within GS grade levels. Current pay ranges are insufficient to accommodate acceptable pay progression and ultimately contribute to salary compression at the higher grade levels. When combined with the first recommendation, this system reform would provide employees with greater opportunities to progress within existing grade levels without the need to consistently seek out higher graded positions in an effort to increase relative pay.

Streamlining Recruitment

The federal workforce is aging significantly. The Office of Personnel Management (OPM) recently announced a dramatic increase in retirement applications during the 2011 fiscal year and expects higher levels of retirements to continue between 2012 and 2016. As it will need to hire a significant number of new employees, the federal government should reform agency hiring systems.

Research by the Merit Systems Protection Board (MSPB) has found that the federal government has generally been quite successful in hiring talented individuals with the skills necessary to carry out agency missions. Despite this success, however, the MSPB has identified several significant shortcomings in the federal hiring process. These include inefficient and overly complex hiring systems, inadequate employment branding strategies, ineffective assessment systems, and a lack of expertise among federal human resources managers in cutting-edge recruitment and retention strategies.

Recommended Actions

Five recommendations can start the reform process, based on MSPB research.

  1. Improve the strategic perspective of hiring. Agencies should view and manage hiring as a critical business process, not an administrative function. Recruitment and selection should be designed to make a continuous, long-term investment in attracting a high-quality workforce capable of accomplishing the organization's mission. Recent efforts to improve internships, the Presidential Management Fellowship program, and other recruitment strategies are quite positive. Discussions of agency branding and hiring system reforms should be integrated with the overall strategic plan and mission of respective agencies.
  2. Agencies should assess their internal hiring processes, procedures, and policies. This can better identify barriers to quality, timely, and cost-effective hiring decisions. Often, hiring barriers are self-imposed and rooted in past practices without a strategic guiding principle.
  3. Agencies, with the assistance of OPM, should employ rigorous assessment strategies that emphasize selection quality, not just cost and speed. In particular, agencies should develop and use assessment instruments that have a relatively strong ability to predict future performance. Multiple assessment tools used in succession can improve the effectiveness of the assessment process by managing the candidate pool and narrowing the field of qualified candidates.
  4. Agencies should improve efforts to manage the applicant pool while making the process manageable for applicants. Recent improvements to USAJobs.gov and the developing use of mobile e-recruitment platforms have brought significant strides in this area. However, there is still a need to continue to improve recruitment strategies, vacancy announcements, and communication with applicants.
  5. Human resources staff and selection officials need to be appropriately trained to think strategically and carry out the full range of services necessary to implement an efficient recruitment and hiring system. In particular, OPM should bolster its efforts to inform hiring officials about their critical role in the hiring process, the importance of using good assessment tools, what assessment tools are available to them, and how to use the probationary period to alleviate selection mistakes.

Enhancing Training and Development

Today, the training, development, and educational needs for the federal workforce are among the most demanding of any organization. Federal workers must come with higher levels of education to qualify for their professional jobs.

Despite aspersions in the political arena, federal agencies are expected to be organizational role models, technological trendsetters, and articulators of best practices.

Recommended Actions

The president and Congress should reinvigorate federal training and development efforts to complement compensation policies aimed at rewarding individual effort and achievement. Specifically, we recommend the following:

  • Increase emphasis on training and development at the highest levels of the federal government's political and bureaucratic leadership.
  • Set aside specific funds for training and development activities. A source or fixed percentage of funding not subject to normal budgetary pressures should be set aside to fund training and development activities.
  • The federal leadership should encourage a cultural shift that values and rewards training and development. If training and development are shown to be valued and rewarded in the federal work place for a sustained amount of time, a shift in the organizational culture will have begun.
  • Close ties between training and development and career progression. A revitalized federal compensation system that links salary progression to individual achievement can most easily be accomplished through career ladders linked to individual training and development accomplishment.

These four recommendations provide the basis for creating a revitalized federal workforce that recognizes and rewards its talented seasoned workers and creates an organizational environment that attracts the talented workers needed to guide the federal government though the years ahead.

Improving Employee Relations

Given restrictions on directly negotiating issues related to pay and benefits, federal unions have historically focused their collective bargaining efforts on employee working conditions. However, the ongoing political discussion concerning federal employee pay and benefits, coupled with ongoing federal employee pay freezes, has chilled overall labor–management relations at the federal level. The cooperation of federal employee unions will be key to initiating meaningful and comprehensive reform efforts affecting all facets of the federal human resource management system.

The Obama administration recently created the National Council on Federal Labor-Management Relations (NCFLRM). The 17-member council is comprised of management representatives from across the federal government and is co-chaired by the OPM director and the OMB deputy director. Seven union officials, five agency representatives, the chair of the Federal Labor Relations Authority, and the presidents of the Senior Executives Association and the Federal Managers Association make up the remainder of the council. The council provides for overall coordinative efforts concerning federal labor–management relations.

Recommended Actions:

Given the need for full labor cooperation to implement critical human resources management reforms, we recommend the following actions:

  • Union cooperation should be sought in implementing comprehensive human resource management reform efforts.
  • NCFLMR is an excellent avenue to increase overall coordinative efforts between federal management and employee unions; its use should be encouraged.
  • Federal management, unions, and other interested groups should begin a coordinated effort to improve the image of the federal workforce. Such an effort will enhance recruitment and selection efforts as well as dispel inaccurate perceptions of the federal workforce. The NCFLMR should coordinate these efforts in cooperation with the American Society for Public Administration, the National Academy of Public Administration, the National Association of Schools of Public Affairs and Administration, the Partnership for Public Service, and other public-service organizations.

Accomplishing the above recommendations regarding the four major issues—compensation, recruitment and selection, training and development, and employee and labor relations—will lead to a revitalized and strengthened federal workforce able to meet the expectations of the American people.