U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

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First Annual Strategic Compensation Conference Looks to the Future

On September 8-9, 1999, the Office of Personnel Management (OPM) held its first national conference focused on compensation. Over 500 Federal employees attended "Strategic Compensation: Improving Results through Effective Pay, Classification and Performance Management," at the Hilton Alexandria Mark Center in Alexandria, Virginia. OPM Director Janice R. Lachance opened the conference with a thought-provoking review of where the Federal Government has been, where it is now, and why it needs to change for the future.

• Why does the Federal Government need to look to the future?
• What should be changed first?
• How do benefits fit into strategic compensation?

Why does the Federal Government need to look to the future? Fifty years ago, the Federal workplace was very different. Many people–mostly clerks–were needed to process vast amounts of information. The nature of the work and the low-tech communications available necessitated an extensive, inflexible hierarchy. Approximately 70 percent of the Federal workforce was below GS-7. Now, in 1999, 77 percent of Federal workers are above GS-7. The rigid chain-of-command that made sense in 1949 will not work today where a highly-educated workforce has instant access to information.

To keep up with the needs of today's workforce, the Federal Government will have to be flexible. It must be able to adjust and adapt to meet agency and employee needs and expectations. In today's world, we need more than just an unquestioning army of clerks. Today's employees must be able to take the initiative and responsibility to get the job done. To attract, manage, and retain these employees, the Federal sector must take a long, serious look at its overall compensation strategy. While pay is important, it must also look at other things that today's employees value–things like a chance to contribute, a working environment with the tools and resources to get the job done, opportunities to learn and grow, and opportunities to balance their work and personal lives.

Henry Romero, OPM's Associate Director for Workforce Compensation and Performance, and Ed Flynn, OPM's Associate Director for Retirement and Insurance, discussed activities and initiatives underway to address ways in which compensation can meet changing workforce needs and support strategic objectives.

What should be changed first? Change has already begun, according to Mr. Romero. The demonstration project authority allows agencies to test alternative human resources systems. Congress also has passed specific legislation that allows certain agencies to use pay systems other than the General Schedule (GS), such as broadbanding, which combines several GS grades into broad pay ranges. A few agencies have taken advantage of these opportunities.

But the real question is whether the Federal Government can improve the usefulness of its compensation tools while maintaining the equity required by law. The current General Schedule strives to maintain both internal and external equity, with classification to deal with internal equity and pay surveys and special rates to deal with external equity. But is this the right balance for today's Government? OPM will be looking at this question, as well as others, in partnership with Federal agencies, employee unions, management associations, public service organizations, and the Congress.

How do benefits fit into strategic compensation? Mr. Flynn explained that benefits are a large part of any compensation package. He observed that, "Employee benefits constitute a broad array of inducements that are earned as part of the compensation package. Employers offer a constantly evolving benefit package because the employment market is competitive and changing."

The Federal Government currently offers a wide variety of benefits, such as annual and sick leave, workers' compensation, health and life insurance, retirement annuities, the Thrift Savings Plan (TSP), flexitime, telecommuting, transportation subsidies, and employee development opportunities. These benefits have a value that can be calculated and are earned in return for work performed. In addition, benefits are constantly changing. Possible changes, including long-term care insurance and new TSP investment options, are part of the evolving picture for the Federal Government.

The Strategic Compensation Conference included many other valuable messages about current and prospective compensation tools. Descriptions of several presentations are included as articles in this edition of Workforce Performance.

For additional information, please contact us by email or call us at 202-606-2720.

Originally published on October 1999.