Reform The General Schedule and Basic Pay System

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viewed as out-of-date.(1)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.