NSPS Staffing Flexibilities

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2. 2 5 CFR Regulatory Flexibilities Final Rule on Staffing & Employment: Alternative Promotion Procedures Alternate Certification Air Force HR Advisory 2007-30 Assessment Boards Vectoring � Development Teams Exceptional Performance Promotion Limited application to most organizations Draft NSPS Alternative Forms of Competition Guide Managerial reluctance When I was asked to speak on NSPS staffing flexibilities, what first came to mind were the 3 main internal flexibilities contained in both the existing NSPS Implementing Issuance on Staffing (subchapter 1950), as well as the Final Rule on NSPS Staffing and Employment. As you may know, the Final Rule on NSPS Staffing was published in January of this year and was to have been effective last week, 17 March, but it�s been placed on hold by the White House as part of a moratorium and review period for all proposed federal regulations. I don�t personally see anything very controversial in the Final Staffing Rule and presume it will eventually be implemented as written. The most noteworthy aspect of the Final Rule to me is the introduction of the career-conditional tenure system into NSPS to make it compatible with the GS system for RIF processing purposes. This slide lists the 3 NSPS promotion flexibilities which are alternate certification, assessment boards, and exceptional performance promotion. Alternate certification is the use of by-name requests to streamline the recruitment and staffing process. Basically, mgt can indicate their desired selectee and if the candidate ranks within the highest quality group based upon predetermined criteria for the position, he or she can be promoted without further competition or a vacancy announcement. Most AF bases are using this flexibility to good effect, although there are a few that have held out against it based on long-standing precedents at their particular location. In the AF we�ve published an HR Advisory on the subject that includes procedural guidance as well as a sample alternate certification request form. We�ve not used assessment boards as envisioned in the NSPS staffing rule per se, but we do have a long-standing tradition of vectoring our candidates for our higher-graded, centrally managed positions. The difference is that the vectoring process doesn�t result in a list of ranked candidates for management to select from � it�s more of an informal process where the career development team makes recommendations to the selecting official which can either be acted upon or ignored. Vectoring also serves as a form of career advisement to the candidates. We�re looking at the parallels between our current vectoring processes and NSPS assessment boards to see what sort of expansion makes sense for us as an agency to promote both flexibility and fairness. Exceptional performance promotion is a flexibility to consider for promotion only those employees in a given organization and function who have rec�d a Level 5 performance rating. The consensus in AF is that this is not appropriate for organizations having a mix of NSPS and GS employees, since the GS employees can�t compete in these situations. The majority of our organizations, of course, do have a mix of both NSPS and GS employees. Additionally, since less than 5% of AF employees receive a Level 5 rating, it has limited application for us. We have prepared a draft Alternate Forms of Competition Guide that has to some degree been held up by the uncertainty over the NSPS staffing rules. But we hope to have that finalized and published soon. We�ve detected a reluctance on the part of some mgrs to use these flexibilities, and that�s probably because of a lack of guidance and familiarity. We hope the Guide will better define appropriate processes and procedures for mgrs to follow and perhaps result in increased usage of these flexibilities. When I was asked to speak on NSPS staffing flexibilities, what first came to mind were the 3 main internal flexibilities contained in both the existing NSPS Implementing Issuance on Staffing (subchapter 1950), as well as the Final Rule on NSPS Staffing and Employment. As you may know, the Final Rule on NSPS Staffing was published in January of this year and was to have been effective last week, 17 March, but it�s been placed on hold by the White House as part of a moratorium and review period for all proposed federal regulations. I don�t personally see anything very controversial in the Final Staffing Rule and presume it will eventually be implemented as written. The most noteworthy aspect of the Final Rule to me is the introduction of the career-conditional tenure system into NSPS to make it compatible with the GS system for RIF processing purposes. This slide lists the 3 NSPS promotion flexibilities which are alternate certification, assessment boards, and exceptional performance promotion. Alternate certification is the use of by-name requests to streamline the recruitment and staffing process. Basically, mgt can indicate their desired selectee and if the candidate ranks within the highest quality group based upon predetermined criteria for the position, he or she can be promoted without further competition or a vacancy announcement. Most AF bases are using this flexibility to good effect, although there are a few that have held out against it based on long-standing precedents at their particular location. In the AF we�ve published an HR Advisory on the subject that includes procedural guidance as well as a sample alternate certification request form. We�ve not used assessment boards as envisioned in the NSPS staffing rule per se, but we do have a long-standing tradition of vectoring our candidates for our higher-graded, centrally managed positions. The difference is that the vectoring process doesn�t result in a list of ranked candidates for management to select from � it�s more of an informal process where the career development team makes recommendations to the selecting official which can either be acted upon or ignored. Vectoring also serves as a form of career advisement to the candidates. We�re looking at the parallels between our current vectoring processes and NSPS assessment boards to see what sort of expansion makes sense for us as an agency to promote both flexibility and fairness. Exceptional performance promotion is a flexibility to consider for promotion only those employees in a given organization and function who have rec�d a Level 5 performance rating. The consensus in AF is that this is not appropriate for organizations having a mix of NSPS and GS employees, since the GS employees can�t compete in these situations. The majority of our organizations, of course, do have a mix of both NSPS and GS employees. Additionally, since less than 5% of AF employees receive a Level 5 rating, it has limited application for us. We have prepared a draft Alternate Forms of Competition Guide that has to some degree been held up by the uncertainty over the NSPS staffing rules. But we hope to have that finalized and published soon. We�ve detected a reluctance on the part of some mgrs to use these flexibilities, and that�s probably because of a lack of guidance and familiarity. We hope the Guide will better define appropriate processes and procedures for mgrs to follow and perhaps result in increased usage of these flexibilities.

3. 3 Big Picture Flexibilities DoD Reassignments Internal flexibility; processed as transfers Usefulness in agency co-location or joint basing situations Pay Setting Up to 5% increase for reassignments Stress career progression as incentive for YA-2 to YC-2 moves Management-directed reassignment flexibility New hires � internal and external equity Need to set realistic expectations Looking at the bigger picture, there are many other flexibilities associated with NSPS. There�s a May 2008 letter from DoD granting authority for �DoD reassignments� � in essence, allowing us to treat any DoD civilian employee as an internal candidate for mgt-directed reassignments. So, for example, if you are an AF activity co-located with a Navy organization, you can name-request a Navy employee for one of your AF vacancies and forego the long, drawn-out advertisement and recruitment process you traditionally have to go through to select a non-AF employee. This could also be a very helpful flexibility as we posture ourselves for joint basing. I should also mention that this flexibility can also be used for non-NSPS positions, subject to collective bargaining agreements. Due to personnel systems limitations, these type of action are still processed in DCPDS as transfers, not reassignments. We all know that there are pros and cons to NSPS pay setting. One plus, for example, is that we can offer a pay increase of up to 5% for an NSPS reassignment, whereas no pay increase is typically associated with a GS reassignment. The down side, of course, is that what�s considered a reassignment under NSPS�s broad pay bands may have been considered a promotion under the GS system with a greater increase in pay, typically above 6%. I�m sure many of us could anecdotal evidence of the perceived inequities this has caused, but the bottom line is that under NSPS performance, and not merely movement into another position, is the primary determinant of pay. One recurring problem has been enticing employees to accept reassignment from non-supervisory YA-2 positions to supervisory YC-2 positions with a pay increase of not more than 5% -- some just don�t consider it worth the additional headaches. No easy solution here, but as managers we�re going to have to stress the career progression associated with a move to YC-2, which can serve as a springboard to future promotions, as well as the fact that YC-2 has a higher pay range. Don�t forget, too, that when worse comes to worse we have the right to mgt-reassign employees from YA-2 to YC-2 positions. Of course with new hires into NSPS, we theoretically have the ability to place them anywhere in the broad pay band. But realistically, and from a good management standpoint, we need to consider both internal and external equity when arriving at pay setting decisions for our job offers. Keep in mind, for example, that pay band YA-2 encompasses the old GS grades of 9 thru 13. If a YA-2 position really has a level of responsibility equivalent to a GS-9, do we want to offer GS-13 pay for it? Probably not. We have to consider, too, the de-motivating effect upon our current employees if we�re offering greatly higher starting pay without sufficient rationale. We need to set realistic expectations for both internal and external candidates on what they can realistically expect to earn in an NSPS position, despite the broad pay band that the position sits in. Looking at the bigger picture, there are many other flexibilities associated with NSPS. There�s a May 2008 letter from DoD granting authority for �DoD reassignments� � in essence, allowing us to treat any DoD civilian employee as an internal candidate for mgt-directed reassignments. So, for example, if you are an AF activity co-located with a Navy organization, you can name-request a Navy employee for one of your AF vacancies and forego the long, drawn-out advertisement and recruitment process you traditionally have to go through to select a non-AF employee. This could also be a very helpful flexibility as we posture ourselves for joint basing. I should also mention that this flexibility can also be used for non-NSPS positions, subject to collective bargaining agreements. Due to personnel systems limitations, these type of action are still processed in DCPDS as transfers, not reassignments. We all know that there are pros and cons to NSPS pay setting. One plus, for example, is that we can offer a pay increase of up to 5% for an NSPS reassignment, whereas no pay increase is typically associated with a GS reassignment. The down side, of course, is that what�s considered a reassignment under NSPS�s broad pay bands may have been considered a promotion under the GS system with a greater increase in pay, typically above 6%. I�m sure many of us could anecdotal evidence of the perceived inequities this has caused, but the bottom line is that under NSPS performance, and not merely movement into another position, is the primary determinant of pay. One recurring problem has been enticing employees to accept reassignment from non-supervisory YA-2 positions to supervisory YC-2 positions with a pay increase of not more than 5% -- some just don�t consider it worth the additional headaches. No easy solution here, but as managers we�re going to have to stress the career progression associated with a move to YC-2, which can serve as a springboard to future promotions, as well as the fact that YC-2 has a higher pay range. Don�t forget, too, that when worse comes to worse we have the right to mgt-reassign employees from YA-2 to YC-2 positions. Of course with new hires into NSPS, we theoretically have the ability to place them anywhere in the broad pay band. But realistically, and from a good management standpoint, we need to consider both internal and external equity when arriving at pay setting decisions for our job offers. Keep in mind, for example, that pay band YA-2 encompasses the old GS grades of 9 thru 13. If a YA-2 position really has a level of responsibility equivalent to a GS-9, do we want to offer GS-13 pay for it? Probably not. We have to consider, too, the de-motivating effect upon our current employees if we�re offering greatly higher starting pay without sufficient rationale. We need to set realistic expectations for both internal and external candidates on what they can realistically expect to earn in an NSPS position, despite the broad pay band that the position sits in.

4. 4 Pay & Recruitment Issues Intra-band salary controls True worth of position to organizational mission Trade-off � loss of maximum flexibility Market sensitivity Hard-to-fill and mission critical positions Competition within DoD No increase to base pay line with one-time costs Recruitment, relocation, retention allowances PCS expenses Student loan repayment What we need to consider, if we haven�t already done so, is the truth worth of a position to the organization�s mission. This needs to be a deliberate, well thought-out, documented decision involving key leadership and players from HR, manpower, and finance at the local level. These decisions need to be made before a position is recruited, and before job and pay offers are made to selectees. Is it wrong to draw parallels to our GS positions and pay scales when making this decisions? No. Will we ever get away from making such comparisons when we�re running dual systems as we seem to be relegated to do for the foreseeable future? No. Historically, we�ve been very internal-focused in DoD when considering the evaluation, classification, and relative worth of our civilian positions. And it�s true that for most of us, our primary competitors are other DoD and federal agencies. I think of San Antonio in particular, where I�m located � we have 5 military bases and all DoD agencies including the Fourth Estate are represented in our market. If you�re not offering competitive pay, benefits, or quality of work life, you may find yourself losing employees. But NSPS opens a whole new door for us, and forces us to take a better view of external market forces at play, including the private sector, particularly with respect to our mission critical and hard-to-fill positions. And what our mission critical and hard-to-fill positions are will vary from location to location, so this has to be approached and analyzed at the local level. We need to always figure into the equation the use of one-time recruitment costs that don�t increase our base pay line, such as recruitment, relocation, and retention allowances; payment of PCS expenses, and student loan repayments. What we need to consider, if we haven�t already done so, is the truth worth of a position to the organization�s mission. This needs to be a deliberate, well thought-out, documented decision involving key leadership and players from HR, manpower, and finance at the local level. These decisions need to be made before a position is recruited, and before job and pay offers are made to selectees. Is it wrong to draw parallels to our GS positions and pay scales when making this decisions? No. Will we ever get away from making such comparisons when we�re running dual systems as we seem to be relegated to do for the foreseeable future? No. Historically, we�ve been very internal-focused in DoD when considering the evaluation, classification, and relative worth of our civilian positions. And it�s true that for most of us, our primary competitors are other DoD and federal agencies. I think of San Antonio in particular, where I�m located � we have 5 military bases and all DoD agencies including the Fourth Estate are represented in our market. If you�re not offering competitive pay, benefits, or quality of work life, you may find yourself losing employees. But NSPS opens a whole new door for us, and forces us to take a better view of external market forces at play, including the private sector, particularly with respect to our mission critical and hard-to-fill positions. And what our mission critical and hard-to-fill positions are will vary from location to location, so this has to be approached and analyzed at the local level. We need to always figure into the equation the use of one-time recruitment costs that don�t increase our base pay line, such as recruitment, relocation, and retention allowances; payment of PCS expenses, and student loan repayments.

5. 5 Pay & Recruitment Issues Need for improved job marketing Innovative and realistic announcements AF Pilot Program March-July 09 Total Rewards focus in austere economy � DoD benefits package incredibly attractive Need for external staffing flexibilities? Expedited or direct hiring authorities Enabler for mission critical �lead market� strategy Dec 2008 OPM Report on NSPS We need to improve the way we market our jobs, and this is not just an HR function, it�s a management function too. Again, we need to set realistic expectations in our vacancy announcements as to the amount of pay we�re willing to offer for a given position. And we need to be innovative in our marketing approach. A DECA vacancy announcement that I saw recently really caught my eye � it contained a link to a short film highlighting the advantages and benefits of working for the agency � very innovative. We also need to keep a Total Rewards focus in mind, particularly given our difficult economic situation. Unfortunately for many workers and fortunate for us, the job market has turned into a buyer�s market. Even apart from that fact, though, compensation is so much more than setting base pay. How many private sector employers offer fixed annuity or even semi-fixed annuity retirement systems like we do? How many Fortune 500 companies still offer continuation of health insurance benefits into retirement? We offer an incredibly attractive benefits package, and need to do a better job of marketing this to potential employees. We can afford to offer less-than-market rate pay for some positions given the extent of our Total Rewards package. Despite the many flexibilities that NSPS offers, I don�t know that in most cases we�re filling jobs in a faster, more efficient manner. One area that we may need to partner with OPM on in the future is additional external recruitment flexibilities, such as expedited or direct hire authorities like those recently approved for acquisition positions. This could be a big benefit, especially for those mission critical, hard to fill jobs for which we want to lead the market. OPM�s December 2008 report on NSPS recognized We need to improve the way we market our jobs, and this is not just an HR function, it�s a management function too. Again, we need to set realistic expectations in our vacancy announcements as to the amount of pay we�re willing to offer for a given position. And we need to be innovative in our marketing approach. A DECA vacancy announcement that I saw recently really caught my eye � it contained a link to a short film highlighting the advantages and benefits of working for the agency � very innovative. We also need to keep a Total Rewards focus in mind, particularly given our difficult economic situation. Unfortunately for many workers and fortunate for us, the job market has turned into a buyer�s market. Even apart from that fact, though, compensation is so much more than setting base pay. How many private sector employers offer fixed annuity or even semi-fixed annuity retirement systems like we do? How many Fortune 500 companies still offer continuation of health insurance benefits into retirement? We offer an incredibly attractive benefits package, and need to do a better job of marketing this to potential employees. We can afford to offer less-than-market rate pay for some positions given the extent of our Total Rewards package. Despite the many flexibilities that NSPS offers, I don�t know that in most cases we�re filling jobs in a faster, more efficient manner. One area that we may need to partner with OPM on in the future is additional external recruitment flexibilities, such as expedited or direct hire authorities like those recently approved for acquisition positions. This could be a big benefit, especially for those mission critical, hard to fill jobs for which we want to lead the market. OPM�s December 2008 report on NSPS recognized

6. 6 Top 10 to Attract Employees Competitive health care benefits Competitive base pay Work / life balance Competitive retirement benefits Career advancement opportunities Challenging work The caliber of coworkers Pay raises linked to individual performance Recognition for work Reputation of the company Source: 2003 Towers-Perrin Talent Report

7. 7 Top 10 to Retain Employees Career Advancement Opportunities Retention of high-caliber people Overall work environment Development of employee�s skills Resources to get the job done Competitive base pay Clear goals from manager Challenging work Manager inspires enthusiasm Overall satisfaction with benefits Source: 2003 Towers-Perrin Talent Report

8. 8 Top 10 to Engage Employees Senior management interest in employees Challenging work Decision-making authority Customer orientation Career advancement opportunities Reputation of the company Collaboration with coworkers Resources to get the job done Input on decision making Senior management vision Source: 2003 Towers-Perrin Talent Report

9. Note that the Vertical �Pay� axis is really a salary range rotated up from the horizontal position Position-in-Range: Commonly accepted and used compensation principle �Reserves� the upper portions of the salary range for� Higher levels of performers/performance More complex/greater roles Although this model is primarily for pay pool applications/considerations in terms of number of shares and split between base and lump-sum (bonus), it can also be applied to pay-setting for new-hires and promotional increases Broadly speaking, although this refers to ONE salary range, i.e., YA2, it also recognizes that within the salary range � especially in a broadband system like NSPS � there are different levels of performance and job roles within this range Hence, the labels Investment (just learning), Intellectual Capital (these are the �workhorses� where most of the workforce will reside) and Asset (the Role Models) Pay progression is governed primarily by performance Note that the Vertical �Pay� axis is really a salary range rotated up from the horizontal position Position-in-Range: Commonly accepted and used compensation principle �Reserves� the upper portions of the salary range for� Higher levels of performers/performance More complex/greater roles Although this model is primarily for pay pool applications/considerations in terms of number of shares and split between base and lump-sum (bonus), it can also be applied to pay-setting for new-hires and promotional increases Broadly speaking, although this refers to ONE salary range, i.e., YA2, it also recognizes that within the salary range � especially in a broadband system like NSPS � there are different levels of performance and job roles within this range Hence, the labels Investment (just learning), Intellectual Capital (these are the �workhorses� where most of the workforce will reside) and Asset (the Role Models) Pay progression is governed primarily by performance

10. 10 The Performance Lever P75 randomly chosen�could be P85, P65, etc, but does require an analyses of what the average workforce salary is before making this decision (has impact on where to set the Lever � see next slide for Compa-ratios) Works as a �threshold� and guideline in determining both the number of shares as well as the split between base pay and lump-sum (bonus) This approach reflects both market data values and employee performance, since, by definition, range penetration beyond the salary range midpoint �exceeds� the organization�s competitive market payline. Walk thru the breakouts as shown in the slide Overall concept is that the highest/maximum base salary increases should go to the highest level performers Also continually re-sets the bar ? continual Role Model level of performance is required to eventually get to the range maximum The Performance Lever P75 randomly chosen�could be P85, P65, etc, but does require an analyses of what the average workforce salary is before making this decision (has impact on where to set the Lever � see next slide for Compa-ratios) Works as a �threshold� and guideline in determining both the number of shares as well as the split between base pay and lump-sum (bonus) This approach reflects both market data values and employee performance, since, by definition, range penetration beyond the salary range midpoint �exceeds� the organization�s competitive market payline. Walk thru the breakouts as shown in the slide Overall concept is that the highest/maximum base salary increases should go to the highest level performers Also continually re-sets the bar ? continual Role Model level of performance is required to eventually get to the range maximum