DECISION MEMO ON PERSONNEL INCENTIVE SYSTEM REFORMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00363R001002200006-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 4
• Document Creation Date: December 20, 2016
• Document Release Date: March 24, 2008
• Sequence Number: 6
• Publication Date: March 23, 1983
• Content Type: MEMO

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SUBJECT: Decision i{iemo on .Personnel Incentive
System Reforms
Originator: Ed Meese
Date:. March 23, 1983
Action Forcing Event: On Wednesday, January 12, 1983, the
Cabinet Council on rlanagement and Administration (CCMA) endorsed
for transmittal to the President four proposals developed by the
Office of Personnel Management. The proposals which were
designed to create or enhance incentives in the Federal personnel
system, and which involve changes in regulation or OPM guidance,.
are presented here for general policy approval. If approved, the
proposed regulations or guidance will be published in the Federal
Register for public review and comment. Concurrent with the
transmittal of this memorandum, the regulations are proceeding
through the OMB clearance process.
Analysis: At present, the Federal government's personnel system
contains what might be termed "negative incentives." The system
frequently makes creative and productive work`=e very difficult.
Annual "comparabila_ty?' increases in pay are given to all,
regardless of performance. Decisions to lay off employees rely
too heavily on seniority, rather than on performance. Negative
incentives encourage employees to work overtime, rather than
regular .hours. Labor negotiations often focus on trivial
matters, while major initiatives are discouraged. The result is'
an incentive system badly in need of reform.
Proposals: The following OPM proposals were considered and.
endorsed by the CCMA to deal with the above problems. They were.
routed to the major departments for comment.
A. Reduction-in-Force Reform
The Problem: Separations in a government reduction-in-force
are now based largely on seniority. As a result, many good
performers are dismissed, while many poor ones are retained. In
addition, the "last-hired, first-fired" method produces an
inordinately adverse effect on women and .minorities. The present
"bump and retreat" rules also produce needless disruption by
affecting 3 to 5 employees for every one separated, and results
in absurd situations c~>here employees making $50,000 a year are
sorting mail.
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The Solution: This proposed regulation caould retain the four
factors now considered in determining retention order in a RIF;
tenure (career./career--conditional), veterans preference,
seniority and performance. It would reverse the. order in which
the last two factors are considered. Employees would be grouped
according to performance appraisals, and then within those
categories according to seniority. This would more likely ensure
that the best workers would be kept in a RIF, while not
disregarding seniority as a factor.
Only Treasury and State dissent. They suggest that the
subjective nature of performance appraisal makes this factor less
effective and more open to litigation than seniority.
Other features of this proposal would:
1) increase flexibility for setting competitive areas
(allowing agencies to minimize disruption for
organizational units which are not the target of a RIF};
2) limit "bump" and "retreat" (eJ_iminating procedures unde r
which the government ends up with $50,000 a year ,clerks);
3) exempt reclassification and reassignments from RIF
procedures; and _
4) increase the notice period for people suk::~ect to RIF from
5 to 10 days.
All agencies that commented concurred with these features,. with
Justice suggesting slightly more restrictive procedures.
Decision:
Approve ~ Approve as amended Reject No Action
B. A Performance-Based Incentive System (PHIS}
The Problem: Longevity, not performance, is the basis upo:1
which the vast majority of Federal employees now advance in pay.
As a result, poor performers receive pay raises they may not
deserve, while outstanding performers .receive insufftci_ent
monetary reward for the contributions they make.
The Solution: This regulation requires that decisions to
increase employee pay be based on the performance appraisal
required under the Civil Service Reform Act. It will:
1) standardize performance appraisal systems to establish
clear linkage between performance and pay;
2) make within-grade increases for General Schedule
employees dependent on performance;
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3)
standardize the merit pay system to be compatible
the new General Schedule system, and guarantee
comparability to managers rated "fully successful";
with
full
and
4)
integrate the quality step increase program, the
incentive awards program, and within-grade increases to
form an incentive pay pool from which better performers
will receive higher pay increases.
This system will link pay to performance for the bulk of 'Federal
white collar workers for the first.time, and give executive and
managers an invaluable tool in encouraging the best possible
performance from government employees.
All who commented concurred, except Treasury and State. Treasury
feels that merit pay has not worked, performance appraisal
systems are weak, OPM control is counter to the Civil Service
Reform Act, and that new legislation is likely required. State
welcomes guidance in this area, but feels that the system would
not work for al.l employee grades, and ttzat there would not be
sufficient funds for significant pay raises.
Decision:
Approve Approve as amended Reject No Action
C. Overtime Pay Equity
she Problem: Under the Fair Labor Standards Act (FI~SA),
Federal employees must be paid overtime at an amount which is the
greater of either the method of calculation used by the
Department of Labor, or that which OPr1 uses under Title 5 of the
U.S. Code. OrigiiZally, OPM tied general schedule exemptions to
the DOL levels, but over the years, Federal pay for these grades
has grown while DOL rates have not. The result is that the
Federal government pays more people more overtime benefits than
the private sector.
The Solution: The proposed regulation would make Federal
government practices closer to, but still more generous than,
private sector practices, and would:
1) set a new linking procedure;
2) reduce the so-called "upset" salary for overtimA
exclusion from $429 to $318 per week;
3) reduce the "minimum" for automatic overtime coverage from
$318 to $257; and
4) allow exceptions for air traffic controllers, law
enforcement officers and firefighters.
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Rost of the employees who would be affected by this change work
for the Department of Defense, and in fact this proposal was
developed in conjunction with the Navy.
All agency comments concurred in this.
Decision:
Approve Approve as amended Reject No Action
D. Management Rights and the Scope of Bargainin Consultation
The Problem: "Management rights" which clearly must be
reserved fo the decision-making authority of agency heads and
executives are defined only broadly in-the law. A second group
of management concerns are placed, by law, in a category subject
to collective bargaining at agency option. The result of these
vague, broad listings in the statute is that labor unions
constantly test how far they can stretch negotiability in Federal
sector bargaining.
The Solution: This proposed guideline seeks to ensure the
protection of essential management prerogatives by clearly
specifying what is negotiable and what is not. It would be
issued in the form of management guidance, rather than
regulation, but would serve to give agency negotiators a "hook"
on which to hang their efforts. to prevent encroachment in these
areas. The proposal involves listing areas "were we consider
consu_l.tation with pubJ_ic empl.ayee unions appropriate and
desirable, i.e., occupational safety and health, "guaJ_ity
circles," and the like. This will heJ_p reorient Federal sector
collective bargaining toward positive, vital areas.
All agencies, except State, concurred in the need far this
clarification. State feels that OPM is diminishing its
credibility with this proposal.
Decision:
Approve Approve as amended Reject No Action
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