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A Study of the Causes of the Failure of the National Security Personnel System

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A Study of the Causes of the Failure of the National Security Personnel System

Andre Zephrine
M. Pantaleo, Ph.D., M.B.A.
Strayer University
April 25, 2010

Context of the Problem
The National Security Personnel System (NSPS) is a pay system based upon the caveat of being paid for performance. It was created in 2006 through Congressional authorization especially for the Department of Defense (DoD). Implementation of the system began in 2006 as a replacement for the General Schedule grade and step (GS) system used by the rest of the federal government. NSPS’s policies differ concerning hiring, reassignment, pay, promotion, tenure and recognition. Under the GS system, there are automatic pay increases which do not exist under NSPS.
On October 29, 2009, President Obama signed legislation that repealed NSPS and restored DoD employees to the GS pay system. Full implementation of the switch back to the GS system is to occur no later than January 1, 2012. This research proposal proposes that NSPS did not succeed because of poor consideration for review boards, self evaluation, and allowances of discrimination through intention – speculatively – and more importantly unintentionally. This research proposal also posits that because of adverse impacts, similar systems would also be unsuccessful.

Statement of the Problem
The National Security Personnel System (NSPS) is a pay-for-performance pay system which replaced the General Schedule (GS) grade and step system for the Department of Defense (DoD). Its purpose is to provide more flexibility in establishing pay levels. The system caused many an inequality, an example is that employees at certain grade levels, managers especially, received more pay increases. Analyses found white employees received higher average performance ratings, bonuses, and salary increases than employees of other races and ethnicities. Employees working at DoD agencies gained higher performance ratings and payouts than civilian employees in the US Army, Navy and Air Force. NSPS also lead to problems with employee retention within the DoD because of the perceived and proven unfairness and discriminatory impact it has had. Therefore, the research will look into the mechanics of NSPS to explore why the system failed and how its failure most likely will not lead to very similar systems in the future.

Research Questions
This research will address what factors led to NSPS being ultimately unsuccessful. The data collected will show that NSPS was in its inception and initial practice doomed for failure because of poor consideration for review boards, self-evaluation, and chances for discrimination. The following questions will be used to gather the information: 1. Are performance objectives clearly delineated and/or enumerated? 2. Was training available and duly exercised so that employees were prepared for self-evaluation? 3. What factors allowed for discrimination? 4. Have NSPS’s goals been reached during its current run?

Significance of the Study
According the Washington Headquarters Services, a DoD Field Activity, NSPS is the DoD’s pay system that was to value employee performance and contributions, encourage communication, support broader skill development, and promote excellence in the workplace (n.d.). NSPS was to serve as a different approach to the GS grade system used by the rest of government. If it succeeded then, it would be implemented in other parts of the government. A study by the American Federation of Government Employees (AFGE) found that “the empirical analysis of DoD’s own 2009 NSPS data shows that the system discriminates against racial and ethnic minorities” (2009). Evidence in another AFGE study implies strongly that even if NSPS did not intend to discriminate against any employee, the system has resulted in discriminatory outcomes and practices (AFGE 2009). In his article in the Federal Times, Stephen Losley (Aug 2008) finds that “the first [NSPS] payout of performance-based pay raises and bonuses in January was riddled with inequalities [such as] white employees receiving higher average performance ratings, salary increases and bonuses; Asian-American employees receiving higher performance ratings than blacks . . . but significantly smaller pay raises and bonuses; [and] women receiving larger total payouts overall than . . . their male counterparts even though they both received the same performance ratings on average.” The Civilian Personnel Management Service (CPMS) holds that NSPS promotes fairness through a more “accountable, flexible, results-oriented civilian workforce [which can] efficiently respond to difficult situations, proactively seek solutions, expand workforce capabilities, improve the capacities of our allies abroad, and strengthen our global force posture” (2006). That the system facilitated an environment of unintentional unfairness is evidential in being wary of similarly crafted systems which undermine the goals for which such systems are set.

Research Design and Methodology
Both quantitative and qualitative research will be used. Quantitative research will cover surveys using statistical data about pay increase amounts under various characteristics such as race, grade level, gender, and/or ethnicities. Empirical data featured in inter and intra-governmental studies, inter and intra-agency studies, DoD data and fact sheets, and independent studies will be used to track pay increases and the effects of adverse impacts. Qualitative research will be used through surveys that cover the opinions of DoD employees concerning the NSPS system and through examples of speculatively intentional discrimination. A combination of the both forms of research will be exercised because the failure of the systemis based on empirical and behavioral data.

Organization of the Study
Chapter two is the Literature Review.
Chapter three will discuss performance/job objectives. These objectives will be define as per DoD guidelines, and the research will take into account AFGE surveys which employees filled out enumerating their feelings about performance objectives.
Chapter four will discuss training: its methods and its effect on self-evaluation and employee retention.
Chapter five will discuss the factors which allowed for discrimination. The research will analyze the moments in the NSPS process that allows for discrimination, data that provides discriminatory outcomes, and controversial happenstances.
Chapter six will discuss the goals that NSPS delineated. Using data from survey and governmental and non-governmental analyses, the research will determine whether those goals were met.
Chapter seven shall cover a summary of the research findings and conclusions on the research for the reader. The ultimate fate of NSPS will be discussed by the researcher, and recommendations on the plausibility of future similar systems will be presented to the Human Resources Directorate Learning and Development Assistant Director.

CHAPTER TWO: LITERATURE REVIEW
The National Security Personnel System (NSPS) is a pay-for-performance pay system created in 2004 under Congressional authorization for the Department of Defense (DoD). The system was subsequently implemented in the middle of the year in 2006. NSPS serves as a replacement for the General Schedule grade and step system used by the rest of the federal government. NSPS’s policies differ when concerning hiring, reassignment, collective bargaining, pay, promotion, tenure, performance measurement and recognition, etc (National Security Personnel System, n.d.). Under the GS system, there are automatic pay increases. These increases do not exist under NSPS.
On October 29, 2009, President Obama signed legislation that repealed NSPS and restored DoD employees to their previous pay system. Full implementation of this legislation is to occur no later than January 1, 2012. NSPS failed at the hands of discrimination, unclear initial guidelines, training objectives, and through other circumstances, many of which were unintentional.
According to DoD (2006), NSPS changes some fundamental business practices: job objectives will have a line of sight to organizational objectives; raises and bonuses will be based on performance; and salaries will be based on market conditions. HR Elements for Managers, Supervisors, & Employees: A Guide to NSPS states:
NSPS performance management is an ongoing process that begins with the onset of the annual performance cycle where you and your supervisor discuss the year ahead, establish expectations, and develop your performance plan, including job objectives. The cycle ends the appraisal process where your supervisor submits your recommended rating of record, number of shares, and payout distribution to the pay pool panel for consideration. The graphic below shows how the NSPS performance management and pay pool process interact. (Department of Defense, 2006).

An increase in pay – base pay increase, or bonuses – is determined by a committee or pay pool. These pay pools are made up of a committee of managers who must assess the employee’s performance through an appraisal review. The employee must write a self-assessment to document his or her accomplishments under the following guidelines: 1. Restate their understanding of your objectives. Paraphrasing their job objectives and contributing factors gives your supervisor a clear picture of how well you performed. 2. Highlight their most significant achievements for the rating cycle. Stick with documenting what she or he believes mattered most. 3. Make the connection between what she or he did and why it matters to your organization. Highlight what she or he achieved or contributed such as a cost saving to the organization or a solution that enables employees to better perform their jobs. 4. Cite instances where their actions or conduct exemplified your contributing factors. Highlight specific instances where their behavior made a positive difference in the outcome of a job objective. 5. Note challenges she or he faced and how she or he fared. Overcoming challenges is an important part of their overall performance. Challenges may be technical or interpersonal in nature. They may also involve succeeding despite limited resources or difficult circumstances. (DoD, 2006).
Though ideally, such a system can truly foster an improvement in employee performance (because better performance equals better pay), there is no standard to which a pay pool approves the employee. While guidelines are given to employees in writing an assessment of their progress and meeting-of-objectives for the terms, the pay pools themselves don’t have an enumerated set of guidelines by which to assess the employee.
The American Federation of Government Employees (AFGE) is an American labor union which represents about 600,000 government employees, 5000 District employees, and is affiliated with the AFL-CIO. AFGE performed a series of analyses on NSPS ever since its inception and implementation. The most recent analysis, Analysis of 2009 DoD NSPS Payout Data “focuses on performance ratings, percentage pay increases and bonuses paid in January 2009 to about 167,000 civilian DoD employees who work under the NSPS” (2009). Using data obtained from the Defense Civilian Personnel Data System, allowing analysis by age, race, ethnicity, gender and component, the analysis found (2009):
There are three main stages in the NSPS pay structure when discrimination can enter and begin to affect pay raises and bonuses. [They are] when performance objectives are written and weighted, when performance ratings are assigned, and when the decision is made regarding how many pay pool shares and what size bonus to award to a work with a given performance rating.
The analyses together also measured adverse impact. Adverse impact is a legal concept rather than a statistical one. In this context, measuring adverse impact means starting from an assumption that NSPS is not inherently or intentionally discriminatory; however, the analyses sought “whether in practice NSPS has resulted in discrimination in the form of lower performance ratings, raises, bonuses, or total payouts for any particular demographic group” (AFGE, 2009). Discrimination was found in performance ratings, raises, bonuses and total payouts. This research proposal proposes that NSPS did not succeed because of poor consideration for review boards, self-evaluation, and allowances of discrimination through intention – speculatively – and, more importantly, unintentionally. This research proposal also proposes that because of adverse impacts, similar systems would also be unsuccessful.

CHAPTER 3: METHODOLOGY
An argument against the National Security Personnel System (NSPS) is that its guidelines were chiefly unclear. The question of whether or not an employee’s performance objectives were entirely clear was raised by many a Department of Defense (DoD) employee in surveys completed by the unions AFGE and NTEU and through comments left to online articles regarding NSPS. Another argument against NSPS is that there was not enough training done so that employees could well self-evaluate and that Managers/Supervisors could evaluate the employees’ self evaluations fairly and without bias based upon guidelines and objectives that NSPS laid out.
The methodology used will be chiefly a qualitative one where in which the researcher shall use the following information to address the makeup of NSPS and compare it to the most often used GS System which is based more upon time spent rather than pay-for-performance. The research gathered will also point out objectives and guidelines NSPS made for employees and managers to address within self-evaluation(s), managerial evaluation and the pay pool evaluation process. Some quantitative data will be presented.
The National Security Personnel System sought to make payment scales based on performance, hence its being a pay-for-performance system. This type of system was modeled after what occurs in corporate business culture as far as pay is usually concerned. If one brings about good results such as increased productivity or profits, lessoning costs, then one is more likely to receive a raise and/or bonus. In corporate culture if someone does a good job, then their pay usually increases because of their actions.
Most governmental systems go against the corporate model. Increases are made depending on the amount of time one spends at a certain level. The GS system is used for about 71 percent of all federal civilian employees. Each GS grade has 10 steps. Within-grade increases (WGIs) or step increases are periodic increases in an employee’s rate of basic pay from one step of the grade of his or her position to the next higher step of that grade (Office of Personnel Management, 2010). Permanent employees gain WGIs when they meet three requirements established by law (5 U.S.C. 5335): 1. The employee's performance must be at an acceptable level of competence. To meet this requirement, an employee's most recent performance rating of record must be at least Level 3 ("Fully Successful" or equivalent). 2. The employee must have completed the required waiting period for advancement to the next higher step. 3. The employee must not have received an "equivalent increase" in pay during the waiting period.
These criteria explain a system where in which an employee gains advancement based upon minimally satisfactory work for a certain amount of time. It garners a pay increase for “time-spent” rather “work done”. An employee can be granted a “quality step increase” which advances the employee one step within grade regardless of the time spent at the previous step. Within different agencies and considering the job description, a GS position may provide for advancement within a career ladder – a situation within which an employee performing satisfactorily will advance between GS grades. This usually occurs on an annual basis until he or she has reached the top GS grade for that job. Promotions can also advance a person from one grade to another. This would usually involve advancement beyond a top grade to either a managerial position or a specialized technical position.
Under NSPS, employees are assigned to one of four Career Groups (CG): Standard, Medical, Scientific and Engineering, and Investigative and Protective Services. Each CG has its own pay schedules (PS) which function like steps within the GS systems. These PS further break down into two or more pay bands (PB) which were determinants of an employee’s salary.
The Standard CG has four pay schedules. The Professional/Analyst (YA) schedule includes positions in both professional and analytical occupations and consists of three pay bands. The Technician/Support (YB) schedule includes technician and support work and consists of three pay bands. Supervisor/Manager (YC) is for supervisorial and managerial positions and includes three pay bands. Student (YP) provides noncompetitive appointments of students to federal positions.
The Scientific and Engineering CG has three pay schedules which cover technician, professional, and supervisory work. Professional (YD) is limited to professional engineering and science disciplines and includes three pay bands. Technician/Support (YE) includes specialized technician work in support of professional engineering and scientific work and has four pay bands. Supervisor/Manager (YF) is for those who supervise work in this CG and includes three pay bands.
The Medical CG has four pay schedules. Physician/Dentist (YG) is limited to physicians and dentists, based on distance compensation practices and career progression, and has two pay bands (DoD, 2006). Professional (YH) includes all other professionals in the medical field and has three pay bands. Technician/Support (YI) includes specialized technician and other medial and health support work. It has three pay bands. Supervisor/Manager (YJ) is comprised of those who supervise work in the Medical CG and four pay bands. Also, only supervisory physicians and dentists are eligible for PB4.
The Investigative and Protective Services career group has four pay schedules. Investigative (YK) covers investigative and security work and has three pay bands. Fire Protection (YL) applies to firefighters, fire chiefs, and fire protection inspectors/specialists and has four pay bands. Police/Security Guard (YM) has two pay bands and applies only to police officers and security guards. Supervisory/Manager is comprised of those who supervise work in this CG and consists of three pay bands.
After one’s CG is chosen and enumerated, that employee is then entered into a certain pay band. Pay increases were contingent upon completion of performance or job objectives. NSPS had some criteria concerning job objectives. They were “linked to the mission or goals of the organization, focused on results and described a future situation or expected outcome, [to encompass] the [grand schema] of an employee’s work – not small daily tasks; and appropriate to the pay band and salary of the individual” (PEO NSPS, 2006). Job objectives could be weighted based upon a scale of 100%. The lowest weight that an object could hold was 10%. Everyone within NSPS was to be assigned at least one objective; though, using 3 to 5 objectives is best. Also managers and/or supervisors must be assigned “at least one job objective that directly addresses his or her managerial role under NSPS” (PEO NSPS, 2006).
Job objectives were also given the moniker SMART objectives. Each letter in the acronym had a specific meaning (PEO NSPS, 2006): 1. S - Specific means that an observable action, behavior, or achievement is described. It also can mean that the work relates to a rate of performance, frequency, percentage, or other number. The job objective should be specific about the result, not the way it is achieved. 2. M - Measurable (or observable or verifiable) means that a method or procedure must exist to assess and record the quality of the outcomes. Some work is measured easily; in other cases, behaviors or results need to be verified or observed. 3. A - Aligned means drawing a line of sight between job objectives throughout the organization so that all are working toward the same goal. This improves the performance of the team, the command, and the entire organization. 4. R – Realistic/Relevant: Realistic means the achievement of a job objective is something an employee or a team can do to support a work-unit goal. The job objective is achievable with the resources and personnel available and within the time available. Relevant implies that the job objective is important to the employee and the organization. 5. T - Timed (or timely, time-bound) means there is a point in time when the job objective will start or when it will be completed.
For review board consideration – what managerial review boards had to consider when rating an employee – there were Effective Job Objectives. Review boards and managers/supervisors were to consider certain questions/ideas when writing job objectives (PEO NSPS, 2006): whether or not the job objectives were results-focused and focused upon ‘large buckets’ of work for which the employee was responsible; if a ‘line of sight’ could be drawn between job objectives and the organization’s mission and goals; whether or not the job objectives were appropriate for the employee’s salary level, pay schedule, and pay band; and lastly, whether or not the job objectives were written in a SMART framework in order for the supervisor and employee to be on the same page of what was expected.
The Mandatory Supervisory Job Objective was the object assigned to managers and/or supervisors. As state before, each manager/supervisor had to have at least one objective which directly addressed their managerial role. It also had delineating criteria to which it was to adhere (PEO NSPS, 2006): 1. Communicating performance expectations and holding employees responsible for accomplishing them. 2. Making meaningful distinctions among employees based on performance and contribution. 3. Fostering and rewarding excellent performance. 4. Addressing poor performance. 5. Ensuring that employees are assigned a rating of record when required. 6. Adhering to laws and regulations governing merit-systems principles, prohibited personnel practices, and equal employment opportunity.
The job/performance objectives that were delineated were quite broad in scope. The objectives applied to many a job and a nuanced situation. Nuances occurred because of the job and/or position involved, the tasks within those jobs and positions, the manager’s style, situation criteria. The employee may also have had a hand in crafting his or her job objectives. A manager/supervisor would have to agree with the objectives that were delineated, but for equal and/or comparable positions, disparate changes could occur.
Because of their vagueness many an employee felt as if his or her manager or supervisor would not fairly grade them. In 2008, according to a survey taken by the American Federation of Government Employees (AFGE), “employees who agreed that their performance appraise was a fair reflection of their performance dropped from 67 percent in 2006 to 52 percent in 2007”. The study also noted that “employees who believe the system [had] a positive effect [fell] from 40 percent in 2006 to 23 percent in 2007” (AFGE, 2008). Employees surveyed by the Department of Defense through SRA International declared by majority that NSPS had not improved the link between pay and performance, or communications between supervisors and employees regard performance expectations or feedback (SRA International, 2009). Focus groups also expressed doubt as to whether performance ratings matched actual performance. According to the survey (SRA International, 2009), employees generally saw “NSPS as worse than the GS system for hiring, placement, and promotions” especially because of the clarity that did not exist about job/performance objectives.
The methodology used here was chiefly qualitative in that the opinions of employees within the Department of Defense was the leading charge against the National Security Personnel System. Some quantitative methods were used in the form of percentages given due to measurable data such as the percentage of the US Government that uses the GS system; another form of quantitative data was the percentages derived from surveys completed by the federal unions AFGE and NTEU. Because of the evaluating qualities of NSPS, results upon its successfulness are therefore more qualitative as evaluating as directed by NSPS was left more broad in scope rather than having specific measurable values. The following chapter shall address the results found based upon the data gathered using these methodologies.

CHAPTER 4: RESULTS
The data gathered in Chapter 3 showed the differences between the GS system and NSPS. One can see how the two have some aspects that are quite relatable. The GS system is comprised of grade which determines a federal employee’s level of expertise and salary. Within each grade are steps where based upon time spent or upon awards and/or bonuses one can gain smaller increases in one’s salary. Comparatively NSPS has pay schedules which compare to a grade. Within each pay schedule existed pay bands which compare to steps. Different pay schedules were applicable to employees based upon his or her job description. Rather than gaining increases based upon time spent, an employee under NSPS went through evaluations under a committee which determined whether or not an employee received pay increases.
As was stated in Chapter 1, this research seeks to find what factors within NSPS caused the system to fail and how its failure would shape the future of such systems. After reading data from surveys from Department of Defense employees, one can see an unfavorable downturn in employee’s feelings and thoughts about NSPS and how it affected their jobs. NSPS caused adverse impacts within DoD agencies and operations. According to Fick (1997), in US employment law an adverse impact is
A theory of liability that prohibits an employer from using a facially neutral employment practice that has an unjustified adverse impact on members of a protected class. A facially neutral employment practice is one that does not appear to be discriminatory on its face; rather it is one that is discriminatory in its application or effect.
Another definition for adverse impact is an unintentional form of discrimination which occurs when identical standards or procedures are applied to everyone, despite the fact that they lead to a substantial different in employment outcomes for the members of a particular group and they are unrelated to success on a job (Aguinis, 2004). NSPS is a prime example of adverse impacts occurring. As mentioned in Chapter 3, the Pentagon commissioned a report on NSPS by SRA International called NSPS Spiral 1 Evaluation Report. One of its findings was that

References
5 U.S.C. § 5311–5318 — Executive Schedule
5 U.S.C. § 5331–5338 — General Schedule
American Federation of Government Employees. (2009). Analysis of DoD 2009 NSPS payout Data. Retrieved October 27, 2009 from http://www.afge.org/index.cfm?page=home&fuse=document&documentID=2214
American Federation of Government Employees. (2009). 2009 payout of NSPS statistical report. Retrieved October 27, 2009 from http://www.afge.org/index.cfm?page=home&fuse=document&documentID=2213
American Federation of Government Employees. (2009). NSPS faq - january 2010 payout. Retrieved October 27, 2009 from http://www.afge.org/index.cfm?page=home&fuse=document&documentID=2217
American Federation of Government Employees. (2009). NSPS repealed with signing of 2010 national defense authorization act. Retrieved November 1, 2009 from http://www.afge.org/Index.cfm?Page=PressReleases&PressReleaseID=1067
Civilian Personnel Management Service. (n.d.). What is NSPS? Retrieved October 26, 2009 from http://www.cpms.osd.mil/nsps/whatisnsps.html
Civilian Personnel Management Service. (2008). NSPS final regulations. Retrieved November 1, 2009 from http://www.cpms.osd.mil/nsps/docs/NSPSFederalRegister2008FinalRule.pdf
Department of Defense. (2006). HR elements for managers, supervisors, & employees: A guide to NSPS. Arlington, VA: Program Executive Office
Exec. Order No. 11348, 3 C.F.R. 1966-1970 reprinted as amended by E.O.12071 44 FR 1055, 3 C.F.R. (1978)
Fick, B. (1997). The American Bar Association Guide to Workplace Law: Everything You Need to Know About Your Rights As an Employee or Employer. New York, NY: Times Books
Gibson, M., Cummings, E., Edwards, D., & Orr, A. (Oct 2009). Inside government @ AFGE radio. Retrived Nov 1, 2009 from http://www.afge.org/Index.cfm?Page=InsideGovernment#audioFile#
Greenberg, J. (2004). Increasing employee retention through employee engagement. AlphaMeasure Ezine. Retrieved May 28, 2010, from http://ezinearticles.com/?Increasing-Employee-Retention-Through-Employee-Engagement&id=10575
Noe, R. (1999). Employee training Development. New York, NY: Irwin/McGraw-Hill Public Law No.110-181 section 1106 Public Law No.110-417 section 1106
Ryan, R.M., & Deci, E.L. (Jan 2000). Self-Determination theory and facilitation of intrinsic motivation, social development, and well-being. American psychologist association (Vol. 55). (pp. 68–78). Retrieved June 1, 2010, from http://psych.rochester.edu/SDT/documents/2000RyanDeciSDT.pdf
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