Human Resources: Changing Pay in Federal, State, City, and County Government Organizations

Rumor has it that two US Senators were having lunch. One said to the other, "What is it that costs Federal, State, city, and county governments and organizations billions each year and is the source of dissatisfaction for nearly everyone who´s involved with it?" The other Senator thought for a minute and then a smile appeared and she said, "How employees are paid". They both laughed. Whether this is true or not is up for question. However, have you ever heard anyone claim public sector pay systems are a "model" for other organizations to copy?

Without doubt, pay and benefit costs are among the largest costs of running Federal, State, county, city, and any other governmental agencies. This major cost is the most critical opportunity cost linking employees and customers. Someone said that ´you get what you pay for´. It may be time to search for better alternatives to communicate goals and expectations to employees throughout governmental organizations and agencies.

Jobs and pay are essentially ´owned´ by public employees. Many leaders and human resource experts and advisors have become highly risk adverse. At a recent public sector conference presentation on ´non-financial rewards´, we asked how many in the audience we asked how many organizations represented at the conference used non-financial rewards such as forms of recognition and celebration other than pay and benefits. Only two people out of about 300 raised their hands. At a private sector conference every hand would have gone up.

Some Foundational "To Dos"

And what can HR pros in the public sector advise their organizations to do to improve the pay and reward process? We know of no research in the public sector on ´what´s wrong with pay´, but we can translate the findings from our book, Pay People Right! Breakthrough Reward Strategies to Create Great Companies, from the private to the public sector. If any parallels exist between the private and public sector, the most significant changes to pay and rewards public organizations can make now include the following:

Make Managers Directly Accountable: Managers should be responsible for the performance management and pay allocation process. Doing an excellent job of managing employee performance and distributing pay adjustments to the best performers with the most needed skills falls in a manager´s court because the manager knows employee performance best.

Develop/Communicate Concrete Metrics: Public organizations need measurable, concrete, goals and objectives that, when they are achieved, add value to the organization. They should cascade from the overall objectives of the organization and organizational units. Teams, and employees, should have goals that add value to the overall organization´s goals. The number of goals assigned to employees should be limited to 3 to 5, so only the most essential goals are used. Limiting the number of goals to the most important ones also makes each goal important. For example if four goals are used each can be worth 25% of the overall performance value. This makes it difficult for employees to merely focus on the most attainable goals.

Design/Implement Effective Performance Management: Performance management is more than just the design of a workable "form" for documenting the performance process. In reality, excellent performance management can be documented effectively on a plain piece of paper. The important elements of performance management are the feedback and coaching process used to communicate with the employee about how they are doing, how this compares to performance expectations, what the employee must do to improve, and what the supervisor will do to help the employee improve performance.

Distribute Available Pay Adjustment Dollars to top 10/20% of Workforce: Typically public sector organizations spread any available increase dollars around ´like cream cheese on a bagel´. However, this flies in the face of reality since any organization relies more on people with certain critical skills and the competencies to translate these into performance outcomes. During a time of limited pay adjustment budgets, public organizations should identify these people objectively and reliably and direct a sufficient amount of any pay and reward dollars available to them, in order to reward key skills, competency, and performance. A prime reason for this is to set an example for the entire organization that shows skills and performance do count. This strategy is most appropriate for jobs in which performance is under the control of the individual. When performance is the product of interconnected team job duties, this approach increases conflict and reduces morale.

Ed Lawler confirms these points in his new book, Treat People Right! If you notice the similarity of titles it is because great minds do indeed think along the same track.

But the ''Punch Line'' is:Pay for Skill

The ´job´ as the center element of the workplace is obsolete. Jobs don´t do work, learn, grow, add value, deal with customers, improve performance, apply skill and competency, or adapt to the environment around them. The skill, competency, and performance of people is the core center of the workplace. So the public sector (and the private sector as well) must migrate from human resource systems designed around jobs to systems designed around people and their skill and competency.

The next "leading edge" idea (which is not a leading edge idea at all) is to pay for performance. And we mean really pay for performance. This is important because just acquiring skill and competence and ´proving it by taking a test´ isn´t enough. The secret sauce is translating it into performance and that is what critical skills and competencies are good for.

Case in point: Teachers are paid more for getting more training in key skill and competency areas. The more training courses they take and pass the more they are paid. However this is not paying for skill and competency. It is paying for training. The only time skill and competency is to be paid for is when it is translated into measurable performance improvement. Has the teacher converted what they learned into actionable performance? The argument always is that this is hard to measure. Then the next argument is to challenge the value of the training if organizations can´t determine whether performance was improved as people were paid more for receiving the training.

Pay For Skill/Competency

First generation skill pay has proven to be cumbersome and bureaucratic. We talk about this in our book, The New Pay: Linking Employee and Organizational Performance. But the advent of the Internet and the many web-based compensation platforms that give wide access to compensation pricing models, skill and competency pay will be ´the next great thing´ of this decade. Take a look at www.eriere.com for example.

The elements of an Internet-based skill and competency pay solution for the public sector will include the following:

Skills Library: An Internet-based way to access well defined skill combinations, in order to determine what skills are needed to perform in a specific organizational role, and to be able to use the definitions in the skills library to define the basic elements of work. The definitions should be concrete and based on real skill differences, not merely semantic differentials. The skill definitions should be standardized in order to provide a future for a large survey of the market value of specific skills.

Skill Profiling Capability: Based on the skills library, a way to develop accurate skill profiles that combine multiple skills and skill sets to match how work is actually performed in an organization. Provides profiles that combine skills that commonly appear together in work situations. Permits the organization to add or delete skills from a role being assigned to an employee flexibly to reflect actual skill needed to perform the required work.

Methodologies for Market Pricing Skills: Solutions for approximating the market value of skill, from the measured market value of defined jobs, to estimating the value of skills from the value of jobs that normally require these skills. Ultimately, being able to directly survey the market value of skills defined in the library permits organizations to ´anchor´ skill pay solutions in the market and prevents possible inflation of skill pay costs that may result from the absence of market information that guide the payment of certain skill combinations.

Skill Pay Programming: A system for paying employees for the skills they have and use to perform the work they are assigned. Linked with the skill library, the skill profile of the employee, and the ability to survey or approximate the market value of skills and skill profiles to how much the employee is paid. The solution will have the mechanics of how people´s pay is adjusted, how the acquisition of skills is paid for, how the application of skills is rewarded, what happens when skills become obsolete and employees need to acquire new skills, and the like. It is the ´how skill pay works´ part of the program.

Skill Performance Management: A methodology for the evaluation of skill competence and skill performance that results in the employee´s work performance. Standards of skill performance that can be evaluated by multiple means such as testing, observation, and in-work performance reviews. Linkages between the performance management outcome and other skill-based human resource tools. Tools that translate the acquisition and application of skill into performance provide guidelines that suggest what happens when a skill is learned and defines the importance of how fast a skill is learned. This helps the performance process by making qualitative and quantitative judgements about how well the skill is learned and applied.

Skill Training and Development: Teaching tools for skill development. Electronic education for managers to use to train employees and for employee self-learning. Teaching solutions that change to changes in skill needs. Linkages to performance management and skill pay to permit testing and evaluation as well as pay for accomplishment. Provides the educational tools employees and managers can use to develop the needed skills. Relates training and development to the process of evaluating whether or not the employees are performing at a satisfactory level. Also provides tools for skill improvement of skill is deficient.

Succession and Advancement: Skill progression tools that help create a way to move to a position of more responsibility by acquiring and applying skills the organization needs. Career tracks that are associated with skills, and how important or difficult to acquire and apply they are. Changes to how people grow and add value that are focused on demonstrating needed skills rather than jobs and job titles. Provides a ´career track´ to enable progression to roles needing more or different skills. Communicates a ´route´ for employees to follow to higher pay and more of the critical skills.

Recruitment, Selection, and Placement: Tools to help attract the people with the needed skills to the organization and subsequently select and place them in a role that utilizes these skills effectively. Methodologies that set a priority of keeping people with critical skills in the event of talent cutbacks. Facilitates evaluation of skills and hiring people with specific skills. Permits focusing on hiring people that satisfy skill needs, not just people who have held jobs with similar sounding titles in other organizations.

The future involves paying the person rather than the job. Jobs are inanimate and people do work. It´s essential to bypass the rigid job. Job descriptions do not change easily and what organizations need done evolves.

Conclusions

Public sector pay is a major opportunity cost. There has not been a major innovation or new direction to how public employees are paid in our memory. A search forliterature prior to writing this article suggested the reward innovation ´cupboard is bare´ for public organizations. However, changing pay and rewards in the public sector will be ´heavy lifting´, pure and simple.

Someone said, "There are two things you should never mess with: My kids and my pay" It may be time to consider messing with public sector pay. It certainly is a ´mess´ now so we have a great place to start to improve and experiment with new directions and solutions.