Reform the General Schedule Classification and Basic Pay System Background Approximately 1.6 million federal civilian employees--about 75 percent of the nonpostal civilian workforce--are covered by the General Schedule (GS) classification and basic pay system. (The remaining 25 percent are covered under a variety of special pay systems, the largest of which is the Federal Wage System, which covers over 300,000 blue-collar employees in trades and crafts occupations.) The GS system was established in 1949 and was intended to provide a standard framework for establishing the pay hierarchy for federal employees in white-collar occupations. The central core of the GS classification system is codified in law. The law establishes 15 grades and describes the level of work at each grade. As stated in the law, the purpose of the classification system is to ensure that equal pay be provided for substantially equal work (by ensuring equal grade for equal work) and that work be classified based on its difficulty, responsibility, and qualification requirements. The law provides the Office of Personnel Management (OPM) with a central role in establishing classification standards and reviewing agency classification actions (through periodic audits and hearings of employee appeals). OPM has final authority in classification matters. OPM has established over 450 separate job categories called series. For example, there are 34 different series in the field of biological sciences alone, including such series as Plant Pathology, Plant Physiology, Plant Protection and Quarantine, Soil Science, and Irrigation System Operation. For many of these 450 series, OPM has published classification standards that agencies must apply in assigning grades to jobs. The series-specific classification standards describe the nature of work and set forth criteria or rules for determining the appropriate grade level. Series standards tend to be fairly detailed and can require considerable time and classification expertise to apply. Many of the standards have not been revised for many years and are viewed as out-of-date.(1) The GS basic pay structure is directly based upon the grades in the classification system. There are 15 overlapping pay ranges that correspond with the 15 grades. Until passage of the Federal Employees Pay Comparability Act of 1990 (FEPCA), the GS basic pay structure consisted of a single nationwide pay schedule (although higher special salary rates could be paid in response to significant recruitment and retention problems).(2) However, FEPCA now provides for locality-based comparability payments based on average pay disparities between federal and non-federal workers.(3) The same locality pay percentage will apply to all employees in a given local pay area, thus maintaining on a local basis the pay relationships among all jobs in the GS hierarchy of grades, consistent with the equal pay principle. By law, basic pay rates within any GS grade are set at one of 10 fixed step rates. Employees performing at an acceptable level of competence progress through the rate range in accordance with statutory waiting periods (one to three years depending on the step). In addition, employees may receive additional step increases--called Quality Step Increases (QSIs)--based on outstanding performance, subject to a limit of one QSI per year. While a special merit pay progression scheme applies to managerial employees covered by the Performance Management and Recognition System (PMRS), that system expires on October 31, 1993. In recent years, several federal agencies have been conducting, with some success, special demonstration projects that tested broadbanding classification systems within the GS framework. A broadbanding system involves both the consolidation of job categories (job banding) and the merging of grades or pay ranges (grade banding). Tailored within- band pay progression schemes were also developed for each project. The oldest and most well-known broadbanding demonstration project is a Department of the Navy project covering two research laboratories in Southern California (commonly referred to as the China Lake project). Need for Change A strong case can be made that the current federal classification and basic pay system is in need of significant reform. The problems with the current system are summarized below: Lack of Mission Focus. The GS classification system was premised on the idea that internal equity would help the government more effectively and efficiently accomplish its various missions by ensuring that employees are compensated based on the difficulty and responsibility of their work, by addressing employee concerns about pay fairness, by reducing interagency competition for employees based on pay, and by simplifying the pay setting process. Over time, the ideal of internal equity has emerged as the supreme goal of the system, instead of being viewed as a means to attaining the larger goals associated with effective government. Consistent with the focus on internal equity, system administrators have sought to achieve greater precision, even though the additional precision did not result in--and perhaps even worked against--more effective government. A new and better balance is needed--a balance that can be achieved by a less precision- oriented classification system that provides for greater agency flexibility and is more supportive of agency missions without undermining the long-term governmentwide interests that originally prompted establishment of the system. As a recent National Academy of Public Administration (NAPA) report notes, "The degree of precision with which jobs are classified under this [the General Schedule classification] system is neither warranted by the methodology nor necessary to support pay equity or to organize work efficiently."(4) Low Credibility. According to a recent survey of federal employees conducted by OPM, only 31 percent of employees agree that their pay is fair considering what other people in their organization are paid.(5) Thus, despite all the attempts to build precision into the system through central control and rules, the fairness of the system appears to be questioned by the vast majority of the people whose opinion is perhaps most important. Ironically, it appears that the more precision that is sought in job evaluation, the more likely that the measurements of equity will be incomplete (because equity factors that could be considered under a less precise approach have been eliminated) and open to criticism (due to the specificity of the measurements as well as the high expectations created by the precise approach). Furthermore, a precise system that cannot be easily enforced invites rule bending and breaking, which further undermines system credibility. In meetings with federal managers and personnel specialists, National Performance Review (NPR) staff were repeatedly told how agency managers are able to beat the system to get the results they want. There is a strong argument that the classification system would be viewed as more fair by employees if it were less precise but more honest about its reliance on human judgment. According to James E. Colvard, former Deputy Director of OPM, "The current classification system allows the manager to be precisely wrong. What the manager needs is the opportunity to be roughly right."(6) Complexity. The GS classification system is difficult to understand and to use. This prevents managers--who actually best know the work being classified and its value to the organization--from assuming the primary role in classifying jobs. Instead, the system is largely run by OPM and agency personnel specialists with classification expertise (2,000 of whom are classified in a special Position Classification job series). The system's complexity promotes excessive paperwork and slow, cumbersome administrative procedures. It also makes it difficult to maintain currency. Over 7 percent of the standards are more than 20 years old.(7) As the NAPA report notes, "In an era of growing pressures for efficiency, productivity, flexibility, customer satisfaction, and goal-directed results, the [General Schedule] classification system is mired in expensive, time-consuming, rule-driven complexity."(8) Fragmented Accountability. Accountability for classification is fragmented among OPM, agency personnel offices, and agency program managers. Not only does this fragmentation produce tension and conflict among the parties, but it also prevents any one party from assuming responsibility for the consequences of classification decisions. Since many federal managers do not operate under a fixed payroll budget or a total operating cost budget, they do not necessarily feel an obligation to consider the long-term cost consequences of classification actions. On the other hand, OPM and agency personnelists do not have to face the consequences that classification actions have on program missions. There is a clear need to consolidate accountability for mission and classification in one place. This suggests giving classification authority to line managers while ensuring that they are accountable for managing budget dollars prudently and paying employees fairly, in accordance with governmentwide standards. The Federal Section of the International Personnel Management Association states that "the role of the personnel professional must be redefined to emphasize the desired shift to a consultative relationship with managers, rather than the heretofore traditional role of classification decision-maker."(9) Inflexibility. One-size-fits-all rigidity characterizes the GS classification and pay system. Agency managers point out that agencies have diverse missions, challenges, organizational structures, values, and cultures, and that they must respond to ever-changing external conditions. The classification system must not be so immutable that it cannot respond to new ways of designing work, the changing value of jobs, or changes in the work itself. While some flexibilities have been incorporated within the pay system (e.g., special salary rates and entry pay above the minimum rate) to compensate for the classification system's rigidity, the restrictions that accompany many of these pay flexibilities severely limit their usefulness. Even if the classification system is made more flexible, additional pay flexibilities are needed to allow agencies to respond to localized labor market fluctuations and to use pay progression schemes that better fit the culture and goals of the organization. As the Merit Systems Protection Board noted, "These [General Schedule] grade level criteria have come to be viewed as 'cast in stone' . . . [r]esulting in virtually fixed and therefore unresponsive standards. . . . Since the classification standards aren't readily adapted to changes which may occur in how society values certain kinds of work, the classification system can rarely, if ever, be a proactive tool of personnel management policy."(10) Hierarchical Orientation. As currently administered, the GS classification system seems to facilitate or reinforce hierarchical structures. Part of the reason may lie in the reliance on specialized, narrow jobs, which tends to lead to the creation of organizational stovepipes structured by function instead of by mission. Perhaps more important is the fact that the classification system more readily provides higher grades for supervisory work than for expert-level nonsupervisory work. NPR staff heard from many different sources that supervisory positions are frequently created as a means of providing employees with higher grades. All of this suggests that a more flexible classification system designed to encourage more broadly defined jobs and to more readily permit dual career ladders could facilitate the streamlining or delayering of federal organizations. Billions of dollars in precious tax revenues are squandered annually to support a federal management structure that is excessively bloated and that is unavailable to perform "front line production work." These needless layers upon layers of management are not benign. They significantly delay work product getting out timely and they micromanage to justify their existence thereby ultimately creating customer (public) dissatisfaction. The related pay and classification problems have contributed to this "pyramiding" of supervisors upon supervisors to justify grade levels.(11) The interrelated problems described above point to the need for a new mission-driven classification and basic pay system--a system that achieves a better balance between flexibility and accountability, that is simpler to understand and administer, and that can be used proactively as a tool to help reshape the federal government. To achieve change in the classification and pay area without producing chaos, it is essential to develop a flexible system that allows agencies to take incremental steps based on their needs and levels of readiness to assume greater responsibilities. Cross References to Other NPR Accompanying Reports Improving Financial Management, FM04: Increase the Use of Technology to Streamline Financial Services. Endnotes 1. National Academy of Public Administration (NAPA), Modernizing Federal Classification: An Opportunity for Excellence (Washington, D.C., July 1991), pp. 20-21. 2. Title 5, United States Code, sec. 5305. 3. Title 5, United States Code, sec. 5304. 4. NAPA, Leading People in Change: Empowerment, Commitment, Accountability (Washington, D.C., April 1993), p. 38. 5. U.S. Office of Personnel Management, Survey of Federal Employees (Washington, D.C., May 1992), p. 60. 6. NAPA, Modernizing Federal Classification, back cover. 7. U.S. Merit Systems Protection Board (MSPB), OPM's Classification and Qualification Systems: A Renewed Emphasis, A Changing Perspective (Washington, D.C., November 1989), p. 12. 8. NAPA, Leading People in Change, p. 38. 9. International Personnel Management Association, Federal Section, "Critical Personnel Management Issues: Position Classification," February 1991, p. 6. 10. MSPB, p. 10-11. 11. Letter from John N. Sturdivant, National President of the American Federation of Government Employees, to Roy Tucker, member of the National Performance Review staff, May 14, 1993, p. 6.
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