“Federal Government agencies are moving to better align pay with performance and create organizational cultures that emphasize performance rather than tenure,” noted U.S. Merit Systems Protection Board (MSPB) Chairman Neil A.G. McPhie in the MSPB’s recent report, “Designing an Effective Pay for Performance Compensation System.”

“However,” he also advised, “agencies must invest time, money, and effort in the design of their pay for performance compensation systems in order to succeed.” To help agencies understand the critical prerequisites to success and key decision points, the MSPB conducted a review of professional and academic writings on the topic of pay for performance and summarized the research findings in this user-friendly guide.

One key finding in the report revealed that to achieve success, agencies must devote substantial resources to make pay for performance work. In addition to the funding necessary to support meaningful performance-based pay increases, effective pay for performance systems also require credible performance evaluation systems and supervisors who are able and willing to accurately assess performance and distribute pay increases accordingly. Hence, agencies must carefully select and train supervisors to ensure they play this critical role. Agencies will also need to conduct ongoing evaluations of the pay system to ensure that the outcomes of the pay system are fair.

The report notes that although the requirements listed above are universal, the long-standing merit principles of providing ‘equal pay…for work of equal value’ and ‘appropriate incentives and recognition…for excellence in performance’ are best met by agencies designing pay for performance systems to suit their individual missions, workforces, and circumstances. Accordingly, “Designing an Effective Pay for Performance System” discusses the important choices that agency leaders will make during the design and implementation of a pay for performance compensation system. According to Chairman McPhie, “this discussion is intended to help agency leaders better understand how they can adapt pay for performance systems to their organizations and to help them choose wisely among alternatives for measuring and rewarding performance.”

The MSPB is an independent, quasi-judicial agency with responsibility for deciding Federal employee appeals from personnel actions taken against them, protecting the integrity of the civil service and other Federal merit systems, and conducting studies of the civil service and other merit systems in the Executive Branch. To request a printed copy of the report, e-mail STUDIES@mspb.gov; call (202) 653-6772, extension 1350; or write: Merit Systems Protection Board, Office of Policy and Evaluation, 1615 M Street, NW, Washington, DC, 20419. The report may be downloaded from the Studies page of the Board’s website at www.mspb.gov.