Abstract
Federal merit pay for mid-level managers was implemented ten years ago with the expectation that it would significantly improve the productivity and efficiency of the federal bureaucracy. Research indicates that the outcomes of the merit pay intervention are not as intended; and, in fact, may be negative for large numbers of competent civil service employees. While specific research is limited, there have been significant studies to base the assumption that federal merit pay has failed to meet these objectives. The problem, however, was found to be larger than a simple failure to enhance productivity. As technical skills are becoming more important, federal employment is becoming less attractive, largely because federal compensation practices are increasingly non-competitive with the private sector. The federal government, then, is faced with a dual dilemma: a continuing loss of qualified people and a growing difficulty in attracting skilled technical and professional people. An action research design was utilized: (1) to systematically study and evaluate the development and implementation of merit pay, as experienced by one element of the federal sector, the United States Air Force (USAF); (2) to devise a strategic process for the construction of a model, within federal constraints, that eliminates or diminishes the unintended outcomes of merit pay; and (3) to formulate a developmental and summative evaluation plan for this revised system. Results of this study indicate that problems associated with federal employment are due to more than just an ineffective reward system. Civil Service is constrained by an inadequate compensation system and personnel practices that are rigid and inflexible. The structure operates against the effective organization and utilization of human resources. Systemic inefficiencies prevent the effective use of scarce funding. A set of integrated proposals was designed as a broad-based attempt to resolve this problem by allowing maximum managerial flexibility in the hiring, utilizing, compensating, and rewarding of the federal work force. Procedures and practices were decentralized; methods were devised to increase civilian payroll funding; and, local authority was granted to decide on the method and amount of funds distribution.