DEFCON NSPS Briefing Las Vegas, Nevada, Jan 05

1. DEFCON NSPS Briefing Las Vegas, Nevada, Jan 05 Green Slides = DoD Expectations/Limits Red Slides = Union Analysis/Concerns

2. DOD--NSPS January 2005

3. TIMEFRAME • 30 days comment period • 30 days meet and confer • 30 days Congressional notice • July 1 – Labor Relations implementation • LR sunsets 2009 • Spiral 1—Up to 300,000 employees • Spiral 1.1, 1.2 & 1.3 - every six months • Sec Def must certify Spiral1 before Spiral 2

4. Six Key Parameters • High Performing Workforce • Agile & Responsive Workforce • Credible & Trusted • Fiscally Sound • Supporting Infrastructure • Schedule

5. High Performance Workforce • Transparent—clear and understandable • Credible—trusted • Performance and pay linked • Ongoing feedback • Simplified veterans’ preference • Reward system for indiv. & teams

6. Agile Workforce • Hire faster • Easily down-sized –Layoffs • Flexto compete and contract out • Easily deployable or moveable • No unnecessary rules that restrict management action

7. Credible and Trusted • Fair & transparent appraisal system • Dialogue between supervisor & employee • Due Process assured • LR that addresses right to bargain while meeting DOD mission • Performance expectations and salary must be equitable and understood

8. Fiscally Sound • Conform to OMB fiscal guidance • Cost Neutral • 2004-2008 total comp cannot decrease below what it would have been • System provides for cost discipline • Manage human resources to budget at unit level

9. Supportive Infrastructure • Easy IT software • Change & communications training • Technical training (pay pools, etc) • Processing RIFS thru automated process • Personnel data accessible • Mass conversions into NSPS

10. Other NSPS Requirements • Collaborationwith OPM and DHS • May be reduced availability of training funds which demos indicated was necessary—must solved to meet statutory requirement for training and retraining on performance management system

11. DHS • Collective Bargaining • Implementing regulations not negotiable • Agency regulations not negotiable • Contract provisions in conflict will be unenforceable

12. DHS Collective Bargaining • “Permissive” subjects made “prohibitive”

13. DHS Collective Bargaining • Management Rights • No bargaining over procedures or arrangements for most management rights except for layoffs, discipline, promotion • No bargaining over “covered by”

14. DHS LR • Labor Board appointed by Secretary • Handles Negotiability and Impasses as one • Handles bargaining related ULP's • FLRA handles other actions

15. DHS Adverse Actions • Can arbitrate or MSPB • Mitigation limited-”wholly unjustified” • Performance actions: • With PIP-substantial evidence • Without PIP-preponderance of evidence

16. DHS Performance Management • No requirement for written standards • Evaluate assignments • Evaluations could be changed by higher levels before you see to “balance out”, i.e. your manager deemed too easy with too many high ratings • Can grieve & arbitrate ratings using current standards

17. DHS Pay Systems • Regulations are very nonspecific • Compensation Committee with Unions • To work out more strategic questions • Review annual survey data • Secretary makes final decisions • Northrup Grumman hired to advise • No longer to use BLS salary data—hire private company to provide salary data

18. DHS Pay System • Bait and Switch –promise employees more money based on “more market sensitive” and “if they perform” • 1st Criteria-Budget and Cost (OMB) • Would not guarantee raises to match market.Pay Band would only adjust if entry rate of market increases. • Questions over size of companies to be surveyed.

19. DHS Pay System • Pay Bands – No grievance over placement • Payout controlled by budget not performance. • No guarantees like: • Outstanding---4% • Above Average—3% • Average 1% • Pay Pools—move money to favored groups

20. DHS Pay System • Likely effect for most people: • Lower salary increases • Which will lead to a lower retirement

21. Pay for Performance Issues • Most supporters say if you can’t put more money into play—system will not succeed • FAA Problems—Discrimination Lawsuits • Top employees don’t get base salary increases---- only cash bonuses • One employee calculated loss of $300,000 in lost retirement if retired for 25 years • Top mgmt said employees should understand tight budgets of the agency (Sound Familiar?)

22. No Pay for Performance Issues • Remember Merit Pay in 1980’s • It was applied to managers only—it was pay for performance with no new money—just move money around. Created uproar in management and after three attempted fixes—it failed and was killed in early 90’s. If it failed then, why resurrect it for everybody now?

23. No Pay for Performance Issues • DOD POINTS TO Pay Demo’s as evidence of Success • SO I reviewed DOD’s own report and data • Here is what I found…….

24. DOD Demonstration Report • PURPOSE: To Improve Effectiveness • Found: Limited impact on effectiveness • Wave 1 Survey – only 37% responded favorably that demo improved operations • Wave 2 Survey – only 27% responded favorably • Wave 1 & 2 were demos’ grouped by start

25. DOD Demonstration Report • 12 demos and no measurable increase in effectiveness and only a small minority saw any improvement. • Failed to meet the #1 Objective of Overhaul • If no real difference, then why waste the time , energy and resources and turmoil?

26. DOD Demonstration Report • 2nd Objective-Lift pay restraints to be more competitive in recruitment • Found:Demos did not see improvement in offer/acceptance ratios from pre-demonstration levels

27. DOD Demonstration Report • Performance Ratings Fairness – • Objective to improve with better Training and Communication since current systems called “lousy” and high quality performance system “key” to successful pay for performance program

28. DOD Demonstration Report • Performance Rating Fairness Comparison • GS------68%-73% fair and accurate • Wave 1-55%-61% fair & accurate • Wave 2 -55% & 67% fair (but 55% came in most recent survey year i.e.., getting worse)

29. DOD Demonstration Report • Rating Fairness Perception by Minorities • Worse under new more flexible systems • GS-Improved from 64% in 96 to 70% in 2001 • Wave 1 only 56% in 96 decreased to 49% in 2001 • Does greater latitude lead to increased favoritism and discrimination?

30. DOD Demonstration Report • Objective: Improve perception of external pay equity • Perception of pay “inequality” with surrounding employers increased between 96 and 01 • The competitive problem cannot be solved by this scheme. It takes $$$!!!

31. DOD Demonstration Report • Objective: Increased Organizational Commitment • Found:No difference between demo and non-demo employees

32. DOD Demo Report • Objective: Critical retention would improve • Found:No discernable difference between demo and non-demo groups.

33. DOD Demo Report • DOD actually put more money into these demos to make them work to the degree some say they worked. • However DOD has stressed that it will NOT have more money, but at best it will be budget neutral thereby generating far worse results than are depicted under the demos.