Step 2: Decentralizing Personnel Policy

Our federal personnel system has been evolving for more than 100 years--ever since the 1881 assassination of President James A. Garfield by a disappointed job seeker. And during that time, according to a 1988 Office of Personnel Management publication: ...anecdotal mistakes prompted additional rules. When the rules led to new inequities, even more rules were added. Over time...a maze of regulations and requirements was created, hamstringing managers...often impeding federal managers and employees from achieving their missions and from giving the public a high quality of service.

Year after year, layer after layer, the rules have piled up. The U.S. Merit Systems Protection Board reports there are now 850 pages of federal personnel law--augmented by 1,300 pages of OPM regulations on how to implement those laws and another 10,000 pages of guidelines from the Federal Personnel Manual.

Catch-22 Our federal personnel system ought to place a value on experience. That's not always the case. Consider the story of Rosalie Tapia. Ten years ago, fresh from high school, she joined the Army and was assigned to Germany as a clerk. She served out her enlistment with an excellent record, landed a job in Germany as a civilian secretary for the Army, and worked her way up to assistant to the division chief. When the Cold War ended, Tapia wanted to return to the U.S. and transfer to a government job here. Unfortunately, one of the dictates contained in the government's 10,000 pages of personnel rules says that an employee hired as a civil servant overseas is not considered a government employee once on home soil. Any smart employer would prefer to hire an experienced worker with an excellent service record over an unknown. But our government's policy doesn't make it easy. Ironically, Tapia landed a job with a government contractor, making more money-- and probably costing taxpayers more-- than a job in the bureaucracy would have paid.
On one topic alone--how to complete a standard form for a notice of a personnel action- -the Federal Personnel Manual contains 900 pages of instructions. The full stack of personnel laws, regulations, directives, case law and departmental guidance that the Agriculture Department uses weighs 1,088 pounds.

Thousands of pages of personnel rules prompt thousands of pages of personnel forms. In 1991, for example, the Navy's Human Resources Office processed enough forms to create a "monument" 3,100 feet tall--six times the height of the Washington monument. Costs to the taxpayer for this personnel quagmire are enormous. In total, 54,000 personnel work in federal personnel positions. See Note 23 We spend billions of dollars for these staff to classify each employee within a highly complex system of some 459 job series, 15 grades and 10 steps within each grade.

Does this elaborate system work? No.

After surveying managers, supervisors and personnel officers in a number of federal agencies, the U.S. Merit Systems Protection Board recently concluded that federal personnel rules are too complex, too prescriptive, and often counterproductive.

Talk to a federal manager for 10 minutes: You likely will hear at least one personnel horror story. The system is so complex and rule-bound that most managers cannot even advise an applicant how to get a federal job. "Even when the public sector finds outstanding candidates," In 1989, Paul Volcker's National Commission on the Public Service explained, "the complexity of the hiring process often drives all but the most dedicated away." Managers who find it nearly impossible to hire the people they need sometimes flaunt the system by hiring people as consultants at higher rates than those same people would earn as federal employees. The average manager needs a year to fire an incompetent employee, even with solid proof. During layoffs, employees slated to be laid off can "bump" employees with less seniority, regardless of their abilities or performance--putting people in jobs they don't understand and never wanted.

Vice President Gore heard many stories of dissatisfaction as he listened to federal workers at meetings in their agencies. A supervisor at the Centers for Disease Control complained that it can take six to eight months and as many as 15 revisions to a job description in order to get approval for a position he needs to fill. A secretary from the Justice Department told the Vice President she was discouraged and overworked in an office where some secretaries were slacking off--with no system in place to reward the hard workers and take action against the slackers.

A worker from the Agency for International Development expressed her frustration at being so narrowly "slotted" in a particular GS series that she wasn't allowed to apply for a job in a slightly different GS series --even though she was qualified for the job. An Air Force lieutenant colonel told the vice president that her secretary was abandoning government for the private sector because she was blocked from any more promotions in her current job series. The loss would be enormous, the colonel told Gore, because her secretary was her "right-hand person". One of the Labor Department's regional directors for unemployment insurance complained that even though he is charged with running a multimillion a year program, he isn't allowed to hire a $45,000-a-year program specialist without getting approval from Washington.

To create an effective federal government, we must reform virtually the entire personnel system: recruitment, hiring, classification, promotion, pay, and reward systems. We must make it easier for federal managers to hire the workers they need, to reward those who do good work, and to fire those who do not. As the National Academy of Public Administration concluded in 1993, "It is not a question of whether the federal government should change how it manages its human resources. It must change."

Action: OPM will deregulate personnel policy by phasing out the 10,000-page Federal Personnel Manual and all agency implementing directives.

See Note 24

We must enable all managers to pursue their missions, freed from the cumbersome red tape of current personnel rules. The President should issue a directive phasing out the Federal Personnel Manual and all agency implementing directives. The order will require that most personnel management authority be delegated to agencies' line managers at the lowest level practical in each agency. It will direct OPM to work with agencies to determine which FPM chapters, provisions, or supplements are essential, which are useful, and which are unnecessary. OPM will then replace the FPM and agency directives with manuals tailored to user needs, automated personnel processes, and electronic decision support systems.

Once some of the paperwork burden is eased, our next priority must be to give agency managers more control over who comes to work for them. To accomplish this, we propose to radically decentralize the government's hiring process.

Action: Give all departments and agencies authority to conduct their own recruiting and examining for all positions, and abolish all central registers and standard application forms.

See Note 25

We will ask Congress to pass legislation decentralizing authority over recruitment, hiring, and promotion. Under the present system, OPM controls the examination system for external candidates and recruits and screens candidates for positions that are common to all agencies, with agencies then hiring from among candidates presented by OPM. Under the new system, OPM could offer to screen candidates for agencies, but agencies need not accept OPM's offer.

Under this decentralized system, agencies will also be allowed to make their own decisions about when to hire candidates directly--without examinations or rankings - -under guidelines to be drafted by OPM. Agencies able to do so should also be permitted to conduct their own background investigations of potential candidates. We will make sure the system is fair and easy for job applicants to use, however, by making information about federal job openings available in one place. In place of a central register, OPM will create a government-wide, employment information system that allows the public to go to one place for information about all job opportunities in the federal government.

First, we must cut the waste and make government operations more responsive to the American people. It is time to shift from top-down bureaucracy to entrepreneurial government that generates change from the bottom up. We must reward the people and ideas that work and get rid of those that don't.

President Bill Clinton February 17, 1993

Next, we must change the classification system, introduced in 1949 to create fairness across agencies but now widely regarded as time-consuming, expensive, cumbersome, and intensely frustrating--for both workers and managers.

After an exhaustive 1991 study of the system, the National Academy of Public Administration recommended a complete overhaul of the system. Classification standards, NAPA argued, are "too complex, inflexible, out-of-date, and inaccurate," creating "rigid job hierarchies that cannot change with organizational structure." They drive some of the best employees out of their fields of expertise and into management positions, for higher pay. And managers seeking to create new positions often fight the system for months to get them classified and filled. See Note 26

There is strong evidence that agencies given authority to do these things themselves can do better. Using demonstration authority under the 1978 Civil Service Reform Act, several agencies have experimented with simpler systems. In one experiment, at the Naval Weapons Center in China Lake, California, and the Naval Oceans Systems Center, in San Diego, the system was simplified to a few career paths and only four-to-six broad pay bands within each path. Known as the "China Lake Experiment," it solved many of the problems faced by the two naval facilities. It:

classified all jobs in just five career paths--professional, technical, specialist, administrative and clerical;

folded all GS (General Schedule) grades into four, five, or six pay bands within each career path;

allowed managers to pay market salaries to recruit people, to increase the pay of outstanding employees without having to reclassify them, and to give performance-based bonuses and salary increases;

automatically moved employees with repeated marginal performance evaluations down to the next pay band; and

limited bumping to one career path, and based it primarily on performance ratings, not seniority.

Another demonstration at McClellan Air Force Base, in Sacramento, California, involved "gainsharing"--allowing employees to pocket some of the savings they achieved through cooperative labor-management efforts to cut costs. It generated $5 million in productivity savings in four years and saw improved employee performance; fewer grievances; less sick leave and absenteeism; and improved labor-management relations.

A third demonstration at more than 200 Agriculture Department sites tested a streamlined, agency-based recruiting and hiring system that replaced OPM's register process. Under OPM's system, candidates are arrayed and scored based on OPM's written tests or other examinations. In USDA's demonstration, however, the agency grouped candidates by its own criteria, such as education, experience or ability, then picked from those candidates. A candidate might qualify for a job, for example, with a 2.7 college grade point average. Agencies could create their own recruitment incentives, do their own hiring, and extend the probationary period for some new hires. Managers were far more satisfied with this system than the existing one.

Action: Dramatically simplify the current classification system, to give agencies greater flexibility in how they classify and pay their employees.

See Note 27

We will urge Congress to remove all the 1940s-era grade-level descriptions from the law and adopt an approach that is more modern. In addition, Congress should allow agencies to move from the General Schedule system to a broad-band system. OPM should develop such standard banding patterns, and agencies should be free to adopt one without seeking OPM's approval.

When agency proposals do not fit under a standard pattern, OPM should approve them as five-year demonstration projects that would be converted to permanent "alternative systems" if successful. OPM should establish criteria for broad-banding demonstration projects, and agencies' projects meeting those criteria should receive automatic approval.

These changes would give agencies greater flexibility to hire, retain, and promote the best people they find. They would help agencies flatten their hierarchies and promote high achievers without having to make them supervisors. They would eliminate much valuable time now lost to battles between managers seeking to promote or reward employees and personnel specialists administering a classification system with rigid limits. Finally, they would remove OPM from its role as "classification police." To accompany agencies' new flexibility on classification and pay, they must also be given authority to set standards for their own workers and to reward those who do well.

Action: Agencies should be allowed to design their own performance management and reward systems, with the objective of improving the performance of individuals and organizations.

See Note 28

The current government performance appraisal process is frequently criticized as a meaningless exercise in which most federal employees are given above-average ratings. We believe that agencies will be able to develop performance appraisals that are more meaningful to their employees. If they succeed, these new approaches will send a message that job performance is directly linked to workers' chances for promotion and higher pay.

Current systems to assess on-the-job performance were designed to serve multiple purposes: to enhance performance, to authorize higher pay for high performers, to retain high performers, and to promote staff development. Not surprisingly, they serve none of these purposes well.

Performance management programs should have a single goal: to improve the performance of individuals and organizations. Agencies should be allowed to develop programs that meet their needs and reflect their cultures, including incentive programs, gainsharing programs, and awards that link pay and performance. If agencies--in cooperation with employees--design their own systems, managers and employees alike should feel more ownership of them.

Finally, if performance measures are to be taken seriously, managers must have authority to fire workers who do not measure up. It is possible to fire a poor worker in the federal government, but it takes far too long. We believe this undermines good management and diminishes workers' incentives to improve.

Action: Reduce by half the time required to terminate federal managers and employees for cause and improve the system for dealing with poor performers.

See Note 29

Agencies will reduce the time for terminating employees for cause by half. For example, agencies could halve the length of time during which managers and employees with unsatisfactory performance ratings are allowed to demonstrate improved performance.

To support this effort, we will ask OPM to draft and Congress to pass legislation to change the required time for notice of termination from 30 to 15 days. This legislation should also require the waiting period for a within-grade increase to be extended by the amount of time an employee's performance does not meet expectations. In other words, only the time that an employee is doing satisfactory work should be credited toward the required waiting period for a pay raise.