Academic journal article Public Personnel Management

System Failure: Implementing Pay for Performance in the Department of Defense's National Security Personnel System

Academic journal article Public Personnel Management

System Failure: Implementing Pay for Performance in the Department of Defense's National Security Personnel System

Article excerpt


In 2003, in the early stages of the war on terrorism, Congress changed the civil service laws affecting the Department of Homeland Security and the Department of Defense. The Departments then adopted regulations designed to radically reform the civil service within their agencies. Two new personnel systems, the National Security Personnel System (NSPS) in the Defense Department and a corollary system, MaxHR in the Department of Homeland Security, contained significant changes in procedures for taking disciplinary actions, and for rights of appeal, obligations to bargain with unions, roles of third party agencies, and most significantly, in adopting pay for performance and new performance appraisal systems. The departments cited the need for new human resources systems based on the national security missions of their organizations.

The new personnel systems committed two of the largest federal agencies to replacing the venerable General Schedule (GS) performance rating and pay system affecting approximately a million civilian employees with personnel systems developed around the pay for performance model. The Bush Administration announced that NSPS and MaxHR were the beginning of reform; that the goal was to replace the outmoded GS system with a new more accountable pay for performance system for all civilian federal employees by 2010. (1)

In October 2009 after six years of controversial and limited implementation, Congress terminated the NSPS and repealed its enabling legislation. (2) Some 210,000 NSPS participants were scheduled to be returned to the GS system. Two years earlier, in 2007, after two federal courts rejected parts of the MaxHR system, the Department of Homeland Security had scrapped its pay for performance system. It too returned thousands of employees to the GS system. What happened? What lessons have been learned by the massive failure of the NSPS in DoD? What then is the future for pay for performance in the federal workforce?

This article examines DoD's NSPS initiative in the context of the history of pay for performance in the federal government. It describes the implementation problems, employee reactions, and political dynamics that sealed the fate of NSPS as a failed enterprise. It then discusses new directions in federal personnel management that in part take their direction from the NSPS experience.

While pay for performance for the federal service has had strong advocates for years, after 9/11 it became a policy objective of the Bush Administration. Laying the groundwork for change, Administration reports and testimony advocated new directions in personnel policies. An Office of Personnel Management (OPM) white paper on modernizing federal pay issued in 2002 stated, "The General Schedule system does not permit an agency to send strong messages about performance through base pay. The outcome is that even mediocre employees can prosper, and a better performer will not necessarily get better pay" (3)

The General Accounting Office (GAO) had advocated linking pay and performance in numerous reports and statements; in 2003, Comptroller General David M. Walker testified before the House Committee on the Armed Services, stating, "There is growing agreement on the need to better link individual pay to performance. Establishing such linkages is essential if we expect to maximize the performance and assure the accountability of the federal government for the benefit of the American people." (4) The Merit Systems Protection Board also recommended authorization of pay banding and performance-based pay in their report, Making the Public Service Work: Recommendations for Change, in 2002. (5)

In testimony before the Subcommittee on Civil Service and Agency Organization of the House of Representatives in April 2003, Dr. David Chu, the Pentagon's undersecretary for personnel and readiness, speaking of experience with pay for performance in demonstration projects in the department, stated, "Employees who perform well like pay for performance. …

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