BACKGROUND:

Pay for performance will likely be implemented for Foreign Service (FS) employees at the FO-1 level and below in April 2008. This means that these FS employees will lose their automatic step increases, which account for about half of an employee’s overall salary increase during the course of a typical career. Although pay for performance was implemented for Senior Foreign Service (SFS) employees during the last performance cycle, the impact on the senior ranks was not significant because of pay compression at the old pay caps. The pay implications are much more significant for FO-1s and below. Pay for performance is a major change in the way FSOs are compensated and has significant implications for the contract between FS employees and FAS. Chief among these is that the AFSA contract language does not provide a functional pay for performance framework.

Both GAO and the U.S. Merit Systems Protection Board have issued guidelines for agencies developing pay for performance systems. Among other things, credible and fair pay for performance systems require the following:
  • a rigorous performance evaluation system;
  • effective and fair supervisors who are able and willing to properly evaluate
     performance;
  • appropriate training for supervisors and employees;
  • adequate funding for pay increases and bonuses;
  • a mechanism to provide feedback to employees; and,
  • ongoing system evaluation.

Meeting these requirements will take time and effort. We need to make investments that extend far beyond the money needed to fund bonuses and pay increases.

In anticipation of pay for performance, the AFSA Management and Leadership Working Group developed a FS professional competencies framework, revised our evaluation criteria to emphasize leadership and management skills, and developed a performance assessment tool for selection board members. The FAA/AFSA Performance Management Working Group developed a system of work objectives and performance measures as a means of tying individual performance to agency goals and defined the specific responsibilities of the rating and reviewing officials. If implemented, these measures, along with a feedback mechanism from the selection boards, would help lay the groundwork for an effective pay for performance system and we are prepared to implement them, with management concurrence, in May or June 2006. To do this, we would need to open Article 25 of our contract. According to both AFSA legal counsel and the Federal Labor Relations Authority, this is permissible provided the FAS Administrator and AFSA concur.

Additional improvements we would like to explore include a training program for employees and supervisors on how to write work objectives and performance measures, a training program for selection boards on the FS professional competencies framework, and a comprehensive career development and leadership program for FSOs to help them develop the professional competencies. Addressing these human resource management issues would help ensure a fair and effective pay for performance system and would not require changes to our contract.

Prior to the implementation of pay for performance, we will need to negotiate the specifics of how employees will be compensated under the new system. Making the necessary preparations for pay for performance this appraisal cycle (2006-2007) will provide the experience needed to adjust the pay for performance language when contract negotiations are opened in full term bargaining later this year.

By beginning now and providing ourselves with the opportunity to remedy any problems, we will build employee confidence and trust in the system, which will be invaluable to the agency when we design a pay-for-performance system for the Civil Service. In addition, many of the steps AFSA is advocating are based on recommendations from OPM and will help the agency “get to green” on the OPM scorecard. (Please see the attached OPM proposal to the Human Capital Working Group on how to integrate competencies into performance management. Much of this work has already been completed by AFSA for the FS.)

RECOMMENDED ACTION:

Approve AFSA’s request to set up a formal mechanism to consult with FAS management on how to implement pay for performance for the current rating cycle of the Foreign Service (FS).

DECISION:

    a)  Approve AFSA’s request        _______________

    b)  Disapprove AFSA’s request    _______________

    c)  Discuss with Laura Scandurra _______________

Signed ________________________________________ Date ________________