Personnel Demonstration Project; Alternative Personnel Management System for the U.S. Department of Commerce

OFFICE OF PERSONNEL MANAGEMENT

Personnel Demonstration Project; Alternative Personnel Management

System for the U.S. Department of Commerce

AGENCY: Office of Personnel Management.

ACTION: Notice of modification to Department of Commerce Personnel

Management Demonstration Project.

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SUMMARY: Title VI of the Civil Service Reform Act, now codified in 5

U.S.C. 4703, authorizes the Office of Personnel Management (OPM) to

conduct demonstration projects that experiment with new and different

human resources management concepts to determine whether changes in

policies and procedures result in improved Federal human resources

management. OPM approved a demonstration project covering several

operating units of the U.S. Department of Commerce (DoC). 5 CFR 470.315

requires that modifications to approved demonstration project plans be

approved by OPM.

This notice announces the following changes to the project plan:

(1) Elimination of the assignment of numerical ranks from the

performance payout process, (2) expansion of performance-based

reduction-in-force (RIF) credit to include employees whose scores are

in the top 30 percent of scores in a pay pool, (3) authorization to

include clarifying guidance on bonuses in the Demonstration Project

Operating Procedures, and (4) addition of a requirement for close-out

ratings for demonstration project employees who are promoted or

competitively reassigned with a pay adjustment within the last 120 days

of the rating cycle.

All other existing provisions of the project plan will continue.

Employees will be notified of these changes through distribution of

copies of this notice within the participating organizations.

Additional briefings and training for supervisors and employees will

highlight the changes made by this notice.

DATES: This notice modifying the DoC Demonstration Project is effective

September 30, 1999.

FOR FURTHER INFORMATION CONTACT: Department of Commerce: Darlene F.

Haywood, U.S. Department of Commerce, 14th and Constitution Avenue,

NW., Room 5118, Washington, DC 20230, (202) 482-3620.

OPM: Gary Hacker, U.S. Office of Personnel Management, 1900 E

Street, NW., Room 7460, Washington, DC 20415, (202) 606-4212.

SUPPLEMENTARY INFORMATION:

1. Background

OPM approved the Department of Commerce (DoC) Demonstration Project

and published the final plan in the Federal Register on Wednesday,

December 24, 1997, Volume 62, Number 247, Part II. The project was

implemented on March 29, 1998, and it is expected to last for 5 years.

The key features of the project involve increased delegation of

authority and accountability to line managers, simplified

classification and broad banding, pay for performance, hiring and pay-

setting flexibilities, and modified RIF procedures.

2. Overview

The Departmental Personnel Management Board (DPMB) recently

approved four changes to the DoC Demonstration Project. These involve:

(1) Eliminating the assignment of numerical ranks as a factor in

determining annual pay increases, (2) expansion of RIF credit to

include employees whose scores are in the top 30 percent of scores in a

pay pool, (3) including clarifying guidance on bonuses in the

Demonstration Project Operating Procedures, and (4) adding a

requirement for close-out ratings for employees who are promoted or

reassigned with a pay adjustment during the last 120 days of the rating

cycle. The changes are responsive to concerns raised by employees,

supervisors, unions, and one employee organization. In addition to the

policy changes, the notice clarifies the pay-setting policy for new

hires into supervisory positions.

Office of Personnel Management.

Janice R. Lachance,

Director.

I. Executive Summary

The Department of Commerce (DoC) Demonstration Project utilizes

many features similar to those implemented by the National Institute of

Standards and Technology (NIST) Demonstration Project in 1988. The DoC

project supports several of the key objectives of the National

Performance Review: to simplify the classification system for greater

flexibility in classifying work and paying employees; to establish a

performance management and rewards system for improving individual and

organizational performance; and to improve recruiting and examining to

attract highly qualified candidates and hire them more quickly. The DoC

project will test whether the interventions of the NIST project, which

is now a permanent system, can be successful in other DoC environments.

The participating organizations include the Technology Administration,

the Bureau of Economic Analysis, the Institute for Telecommunication

Sciences, and three units of the National Oceanic and Atmospheric

Administration: Office of Oceanic and Atmospheric Research, National

Marine Fisheries Service, and the National Environmental Satellite,

Data, and Information Service.

II. Basis for Project Plan Modifications

A. Elimination of the Assignment of Numerical Ranks from the

Performance Payout Process

Current policy requires that rating officials rate their employees

and submit their recommended ratings and rankings to the pay pool

manager. Pay pool managers make final determinations on scores

recommended by subordinate rating officials and rank employees within

the pay pool. All employees having the same score receive the same

rank. Using rankings as a guide, pay pool managers make performance pay

decisions for all employees in the pay pool. Within a

[[Page 52811]]

pool, an employee may not receive a higher relative pay increase than a

higher-ranking employee or a lower relative increase than a lower-

ranking employee.

Rankings are a major concern for many employees who believe that

assigning numerical rankings to employees fosters divisive competition

in the work environment and undermines efforts to promote teamwork. For

these reasons, the Departmental Personnel Management Board (DPMB)

approved a policy change that eliminates the assignment of numerical

ranks as a factor associated with payout decisions. Instead, payout

decisions will be tied to the employee's relative score within a pay

pool and the pay increase ranges in the performance pay tables.

B. Close-Out Ratings

Under current policy, employees who are promoted or reassigned with

a pay adjustment within the last 120 days of the rating cycle are

considered unratable. Because they are unratable and receive no

performance score, these employees are also ineligible for performance-

based RIF credit. Since these employees are typically among the

highest-performing employees, denying them the opportunity to earn

additional RIF credit is inconsistent with the treatment of other

employees under the project.

To ensure equitable treatment of all high-performing employees, the

DPMB approved a modification to the project plan to require that

supervisors prepare close-out ratings of employees who are promoted or

reassigned with a pay adjustment within the last 120 days of the rating

cycle. The rating (approved by the responsible pay pool manager) will

serve as the rating of record for the current appraisal cycle, and the

resulting score will be considered in determining eligibility for RIF

credit.

C. Expansion of RIF Credit

Prior to conversion to the demonstration project, employees

expressed concern that many high-performing employees would not receive

any additional RIF credit under the demonstration project. In response

to these concerns, the DPMB expanded the percentage of employees

eligible for RIF credit from the top 10 percent to the top 20 percent

of scores in a pay pool. This change was effected prior to

implementation of the project.

The results of the first performance appraisal cycle indicate that

current policy on awarding additional performance-based RIF credit

under the project still does not provide a fair and equitable basis for

recognizing the value of performance contributions made by many high-

performing employees. As a result, some employees whose performance is

above average may receive no benefit of performance-based RIF credit.

Also, loss of a mechanism for recognizing these employees' valuable

contributions through earned RIF credit has created a morale issue.

To address this situation, the DPMB authorized modification of

demonstration project policy to further expand RIF credit to encompass

all employees whose scores are within the top 30 percent of scores in a

pay pool. These employees would earn a total of 10 years of credit for

the rating cycle and could accumulate a maximum of 30 years.

D. Clarification of Bonus Criteria

Demonstration project policy requires that bonuses be linked to the

annual performance appraisal and that they be awarded at the end of the

performance year in conjunction with decisions on pay increases.

However, after the first appraisal period, there was no consistency

across organizational lines in how bonuses were awarded, and absent any

definitive guidance, inconsistency in awarding bonuses will likely be a

continuing concern for employees. To ensure greater consistency in the

awarding of bonuses, the DPMB authorized the inclusion of guidance on

awarding bonuses in the Demonstration Project Operating Procedures.

III. Changes to Project Plan

The following directs readers to the substantive changes and a

technical clarification in the project plan. The following page numbers

refer to the pages in the final plan, published in the Federal Register

on December 24, 1997.

A. Page 67451: Revise the first sentence in Paragraph C.3, ``Link

Between Performance and Retention,'' as follows:

``An employee with an overall performance score in the top 30

percent of scores within a pay pool (See Performance Evaluation and

Rewards below.) will be credited with 10 additional years of service

for retention credit.''

B. Page 67454: Eliminate references to numerical rankings by

modifying the following paragraphs in Section E, ``Performance

Evaluation and Rewards:''

1. Modify the first section of Paragraph E.1, ``Introduction,'' as

follows:

``The most important feature of the performance evaluation system

is that it is based on the application of a weighted 100-point scoring

system in support of pay for performance. As in the current system,

each employee has an individual performance plan composed of several

performance elements. Through application of benchmark performance

standards and a 100-point scoring system, pay pool managers grant

performance pay increases according to employees' relative scores

within a pay pool. High-scoring employees within a pay pool receive

relatively high pay increases and lower-scoring employees receive

relatively lower pay increases.''

2. Eliminate Paragraph E.9, ``Performance Ranking,'' renumber

Paragraph E.10, ``Performance Pay Decisions,'' as Paragraph E.9;

renumber Paragraph E.11, ``Performance Bonuses'' as E.10, and E.12,

``Actions Based on Unsatisfactory Performance,'' as E.11. Modify

Paragraph E.9, ``Performance Pay Decisions,'' as follows:

9. Performance Pay Decisions

``For all employees in a peer group, rating officials submit

recommendations on ratings, scores, performance pay increases, and

bonuses to pay pool managers. A pay pool manager is a line manager who

manages his or her organization's pay increase and bonus funds. The pay

pool manager makes final decisions on ratings and scores and determines

the final order of scores for all peer groups in a pay pool.

The Performance Pay Table divides each band into three segments or

intervals. Each pay interval is linked to a range of potential

percentage pay increases beginning at zero and progressing to a maximum

performance pay increase (e.g., 0-10 percent). The maximum pay increase

an employee may receive, therefore, depends on the interval into which

the employee's salary falls. Based on the final order of scores, the

pay pool manager makes a performance pay decision for each employee.

The payout to an employee is a percentage of basic salary that is all

or a portion of the maximum potential pay increase. This amount is

known as the ``relative payout'' or the ``proportion-of-the-range.''

Within a pay pool, an employee may not receive a higher relative payout

than a higher-scoring employee or a lower relative payout than a lower-

scoring employee.''

C. Page 67454: Add the following to Paragraph E.7, ``Performance

Ratings.''

``If an employee is permanently promoted or competitively

reassigned (with a pay adjustment) from one demonstration project

position to another during the last 120 days of the rating cycle, the

supervisor of the position from which the employee was promoted or

competitively reassigned

[[Page 52812]]

will prepare a ``close-out'' rating within 30 days of the promotion or

pay adjustment. This rating (when approved by the responsible pay pool

manager over the old position) will serve as the rating of record for

the current appraisal cycle, and the resulting score will be used in

determining the employee's eligibility for reduction-in-force credit.''

D. Page 67454: Add the following to paragraph E.10, ``Performance

Bonuses.''

``Guidance on awarding bonuses is contained in the Demonstration

Project Operating Procedures, which are available to all rating

officials and to all employees covered by the project.''

E. Technical Clarification

Page 67452: In paragraph D.4, ``Supervisory Performance Pay,''

middle column: Modify the first full paragraph as follows:

``Incumbents of supervisory positions will be converted to the

project at their basic pay rates (including special rates or locality

pay) at the time of conversion. After the date of conversion, new hires

into supervisory positions will have their pay set at any salary within

the pay range of the applicable pay band, but not higher than the

maximum rate of the pay band.''

[FR Doc. 99-25606 Filed 9-28-99; 2:52 pm]

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