The National Security Personnel System was the Defense Department's attempt at pay-for-performance. Implemented in 2006, the system gave the Pentagon more flexibility in hiring and paying its civilian employees. However, NSPS was criticized for inconsistencies and pay inequities, leading to a decision to end NSPS as part of the National Defense Authorization Act of 2010. More than 225,000 employees have transitioned out of NSPS.

As DoD turns its attention to developing a system to succeed NSPS, The Federal Drive with Tom Temin spoke with a panel of experts about the lessons learned from NSPS and the future of pay-for-performance in the federal government.

• Pat Tamburrino, Deputy Assistant Secretary of Defense, Civilian Personnel Policy
• Patrick Nealon, Director of Deloitte Consulting LLP's Federal Total Rewards practice
• Bob Tobias, former member of the Defense Business Board task group that studied NSPS

DoD will release details of the successor of NSPS to Congress next month, Tamburrino said, but declined to provide specifics. However, the fundamental idea of effective performance management will remain in place.

The Defense Business Board found the performance management portion of NSPS was "excellent," Tobias said. But the board added that the pay-for-performance portion should be "significantly restructured."

The system was a "one-size-fits all" system, Nealon said. "For a performance management system, that often doesn't work, especially when you're looking at large populations like we had with the Defense Department."

Nealon said there was a disconnect between how first-level supervisors were implementing pay-for-performance and how NSPS required them to manage workers.

"As we look at performance management systems in many cases, an organization puts a tremendous amount of effort, time, money, resources into implementing something that becomes almost a compliance mechanism," Nealon said. "It becomes an appraisal system and not a performance management system."

Managers must think about performance and communication differently. "It's not about the 365th day," Tobias said. Supervisors need to have "real-time engagement and not a perfunctory conversation that occurs once a year," he said.

In the past year, DoD has had an increased focus on supervisor training, Tamburrino said. Specifically, new supervisors must now go through a mandatory protocol training and then refresher training, which includes how to be a mentor and have "difficult" conversations when they are warranted.

"Supervision is an art," Tamburrino said. He added that the forthcoming report will put a greater emphasis on the selection of supervisors.

The Pentagon also made efforts to include all stakeholders in the development of the system.

DoD used three labor management design teams consisting of more than 100 individuals, Tamburrino said. They worked for about 18 months, and nearly seven months full-time, to design the system, he said.

"What the Department of Defense will give to the Congress is the report of the three labor management design teams," Tamburrino said. "And that's their report. That will not be edited by Department of Defense leadership."

Tobias said the collaboration with stakeholders will be evident in how the system is implemented. With NSPS, DoD had attempted to roll out the system too fast and "drove off a cliff." The new system, to be rolled out in February, was developed slowly with agreement across stakeholders, he said.

"Based on that agreement, there will be a very, very fast implementation," Tobias said.

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