Date of Award
Master of Public Administration (MPA)
Those closest to the field of public administration, either through scholarly or practitioner roles, know very well that pay systems within the federal government are in dire need of new ideas. The General Schedule was established 60 years ago with the passage of the Classification Act of 1949. Since that time, the federal pay system has done quite well in establishing internal fairness and equality for workers within its purview. Starting in the 1970s, however, the General Schedule has fallen under increasing criticism for its failure to provide federal workers with an incentive to do better work or take on more demanding levels of responsibility.
Recent federal efforts to reform human capital management and increase organizational performance have attempted to connect strategic goals with employee performance objectives. Reforming or replacing the General Schedule has been deemed an ancillary, yet crucial, step in this process. The plans, as carried out, typically provide top performers in federal agencies with bonuses in addition to their base pay. A variety of test programs have been authorized and executed to evaluate the efficacy of these programs.
Academic research suggests that the type of pay scheme implemented by an organization can have many unintended impacts. The General Schedule is an internally rigid system that reduces subjectivity in employee evaluations, but it does this by sacrificing rewards for high achievers. Pay-for-performance systems respond well to the accomplishments of hard workers, but also introduce a larger degree of subjectivity into the system by providing monetary rewards based on supervisory evaluations. If this subjectivity is not properly controlled, it could result in increased levels of discrimination within the organization.
When the Notification and Federal Employee Antidiscrimination and Retaliation (No FEAR) Act of 2002 was passed, it required federal agencies to collect data on discrimination complaints within each agency on a yearly basis. These data, once collected, must be published in all agencies’ websites. Complaint activity is broken down in these reports based on total numbers of complaints, the basis of complaints, complaints actually resulting in a finding of discrimination, the processing time of complaints, and many more categories. The data create a very detailed view of each agency’s discrimination levels and provide a useful medium for analyzing the impacts pay-for-performance reforms have within an agency.
The purpose of this study is to identify and describe any discriminatory impacts pay-for-performance reforms might cause within public organizations. This research identified three particular programs, those carried out by Government Accountability Office, Securities and Exchange Commission, and Federal Deposit Insurance Corporation, for evaluation. These agencies were chosen due to their similarities. All three instituted their pay system reforms at a similar point in time, have comparable numbers of employees, and are independent federal agencies. These organizations make up the experimental group of this research. Controlling for size and type of agency reinforces the validity of the results in that they are not subject to unpredictable influences resulting from the variations.
Nine other agencies were selected as a control group against which the experimental group was compared. No agencies in the control group have implemented pay-for-performance reforms. However, they do retain the other common similarities of the experimental group. The control group was comprised of other independent federal agencies with at least 1,000 employees.
By utilizing time series analyses and independent samples t-tests to examine the EEOC data provided by the agencies, the study found no connection between pay-for-performance reforms and discrimination. Three hypotheses were tested that led the research to this conclusion. First, it was hypothesized that the control group would have a lower rate of discrimination complaints than the experimental group. Next, the research anticipated that the post-intervention totals for the experimental group would be higher than the pre-intervention totals. Lastly, SEC was predicted to have a significantly lower incident rate of discrimination reporting than FDIC or GAO due to its strict internal review process. In all cases, the statistical analysis returned results that showed no significant difference between the variables. Therefore, all three hypotheses were rejected and it was determined that pay-for-performance reforms had no discernable impact on organizational discrimination levels.
The time series analysis did provide interesting insight into employee reactions to the policy introduction. For each agency in the experimental group, the year immediately following the reforms displayed a marked increase in discrimination complaints. Within a few years of the initial introduction of the reforms, complaint activity had returned to levels similar to what was observed prior to the policy intervention. This trend seems to indicate a linkage between pay-for-performance reform and the initial perception of discrimination among employees. Actual findings of discrimination did not increase during this time and complaint levels, so no connection can be made between the pay system changes and discrimination.
Future administrators considering implementing adjustments or reforms to their existing pay structures may wish to carefully consider the impacts such changes have on their workers. Having one’s pay altered or being passed over for a bonus is not easily taken by most, and without understanding the new system, many employees may find it to be discriminatory in nature. This study concludes that while continual consideration should always be given to the discriminatory impacts new policies may have on employees, prudent public managers should educate their subordinates on the specifics of new pay systems before they are introduced. Communication with employees and the consideration of feedback and suggestions from them occur on a continual basis. This recursive cycle will ultimately lead to plans that attract a wider base of support, facilitate compromise between staff and managers, and reduce the amount of apprehension found among employees after the programs are implemented.
Goddard, Stephen R., "Federal Pay-for-Performance Reform and Organizational Discrimination: Lessons, Impacts, and Guidance for the Future" (2009). Dissertations, Theses and Capstone Projects. 41.