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Public Personnel Management 2016, Vol. 45(2) 171 –189

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Article

Administrative Values and Public Personnel Management: Reflections on Civil Service Reform

Gene A. Brewer1 and J. Edward Kellough1

Abstract Civil service reforms implemented over the past 35 years in many countries around the world have relaxed traditional merit system rules, decentralized the personnel function, and augmented agency and managerial discretion. One objective of these reforms has been to boost government productivity and increase the efficiency of core personnel management functions such as hiring and firing employees, but much of the available evidence suggests that reforms commonly implemented may serve political or ideological objectives better than performance-related goals. We argue for a fuller appreciation of the political motivations for reforms and a broader understanding of their implications.

Keywords civil service reform, merit systems, evidence-based reforms

Recommendations for reform aimed at improving the economy and efficiency of gov- ernment operations occur with relative frequency in countries around the world. In the recent past, many of these proposals have focused on civil service practices and have sought to relax merit system rules and decentralize public personnel management operations. Interest in these kinds of reforms began to emerge in the late 1970s as a reaction to the inflexibility of traditional civil service structures and the constraints those systems placed on managerial discretion in such core areas as hiring, placement, compensation, and discipline. Reform efforts continued through the 1990s and into the

1The University of Georgia, Athens, USA

Corresponding Author: Gene A. Brewer, Department of Public Administration and Policy, School of Public and International Affairs, The University of Georgia, 204 Baldwin Hall, Athens, GA 30602-1615, USA. Email: [email protected]

644626PPMXXX10.1177/0091026016644626Public Personnel ManagementBrewer and Kellough research-article2016

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first decade of the 21st century (Pollitt & Bouckaert, 2011). The themes were constant and included the reduction of civil service regulations, efforts to increase managerial discretion, and the implementation of performance-based incentives. Internationally, these actions were part of a larger movement known as the “New Public Management” that included, among other things, budgetary and procurement reforms and the transfer of government functions to private sector contractors (see, for example, Barzelay, 2001; Hood, 1991; Kettl, 1997; Lane, 2000; Pollitt, 1993; Pollitt & Bouckaert, 2011; Pollitt, Van Thiel, & Homburg, 2007).

In the United States, the Carter Administration achieved significant civil service reform in 1978, and the Clinton Administration and its National Performance Review advocated for and implemented additional reforms in the 1990s. President George W. Bush, in the aftermath of the September 11, 2001, terrorist attacks, implemented major personnel management changes in the new Department of Homeland Security and in the Department of Defense (Brook & King, 2007; Naff & Newman, 2004; Riccucci & Thompson, 2008; Underhill & Oman, 2007), but aspects of the Bush reforms faced significant legal challenges, and they were substantially eroded by the time the Obama Administration came to power (Kellough, Nigro, & Brewer, 2010). In contrast, more lasting reforms were implemented from the 1990s onward at the state level (Brewer, 2000, 2001; Hays & Kearney, 1997; Hays & Sowa, 2006; Kellough & Nigro, 2006; Kellough & Selden, 2003; National Commission on the State and Local Public Service, 1993; Nigro & Kellough, 2008). Among observers of reform, it is widely acknowl- edged that political leaders often see civil service reorganization as a means of enhanc- ing their political and ideological agendas, and reforms typically proceed without much systematic empirical investigation of their potential impact on the performance of core personnel management tasks (Brook & King, 2007; Jordan & Battaglio, 2014; Kellough et al., 2010; McGrath, 2013; Nigro & Kellough, 2008; Riccucci & Thompson, 2008; West & Bowman, 2004).

In this article, we investigate motivations for civil service reforms of the past few decades and the values associated with them. We focus on three popular reforms: (a) pay for performance, (b) the decentralization of personnel authority, and (c) the elimi- nation or reduction of merit system protections for public employees. We review avail- able evidence on the impacts of these reforms and note their normative underpinnings. We suggest that reforms often involve classic trade-offs such as that between equity and efficiency. Finally, we conclude by encouraging governments to collect and make available additional data that will be useful in assessing the operation and impact of changes to personnel policy and will help to inform future decisions regarding pro- posed reforms.

The Motivations for Reform

The push for civil service reform comes from multiple actors operating from a variety of motives, but because desired reforms typically require changes in civil service laws, political leaders, including elected legislators and executive branch officials, are almost always directly involved. In the U.S. states, for example, governors often lead

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reform efforts, as was the case with Zell Miller in Georgia, Jeb Bush in Florida, Haley Barbour in Mississippi, Mark Sanford in South Carolina, and Scott Walker in Wisconsin. Very often, political leaders advocating for civil service reform operate from an ideological point of view grounded on conservative principles regarding gov- ernment and public policy. These leaders typically favor market-based solutions to social problems and are likely to believe that prosperity is best promoted within a society “as a result of freedom of individual initiatives and not as a result of collective action” (de Montricher, 1998, p.122). Accordingly, government regulation and con- straints should be reduced whenever possible to produce cost savings and efficiency. With respect to the civil service, reforms designed to decentralize authority for person- nel policy, and to thereby reduce the delays that excessive centralized oversight can produce, are seen as keys to increasing efficiency. In addition, reforms have also focused on the introduction of performance-based incentives such as pay for perfor- mance (Brewer, 2000, 2001; Kellough & Selden, 1997; Milkovich & Wigdor, 1991; Organisation for Economic Co-operation and Development, 1999; Perry, Engbers, & Jun, 2009) and an expansion of the concept of employment at will (Battaglio, 2010; Battaglio & Condrey, 2009; Brewer & Walker, 2013; Coggburn, 2006; Coggburn et al., 2010; Condrey & Battaglio, 2007; Kim & Kellough, 2014).

While the ideological motivation for reform may be powerful, there usually is a pragmatic political interest at work as well. Of course, the idea that political office holders may be interested in the bureaucracy is not news. In the United States, political patronage was essentially unchallenged as the basis for appointment to civil service positions for the first 94 years of the Republic. Similarly, in the years following the Soviet Union’s collapse, newly independent countries relied extensively on patronage to fill bureaucratic positions. Patronage builds accountability to political authority, and to risk stating the obvious, political leaders in elected positions usually desire a public bureaucracy that is responsive to their policy preferences. Bureaucratic responsive- ness to politicians’ agendas helps to ensure that policies and programs consistent with those agendas are implemented faithfully. Responsiveness to political leadership is enhanced as control of the bureaucracy is strengthened. But traditional civil service merit systems, by design, limit political control of employees. To the extent that politi- cians generally would like to have greater political control over government employ- ees, constraints on political influence imposed by traditional civil service rules must be removed or reduced. As a result, there is a political interest in civil service reforms such as those intended to establish individual performance standards and incentives, reduce oversight by bi-partisan civil service commissions, and reduce employee rights in the workplace (Carroll, 1995). The objective is illustrated well by B. G. Peters and Pierre (2004) in the title of their edited volume on the topic that reads: Politicization of the Civil Service in Comparative Perspective: The Quest for Control.

In an empirical investigation of this subject, McGrath (2013) found that state-level politicians in the United States were willing to act on their preferences for “radical” civil service reform (characterized by the decentralization of the personnel manage- ment system) only when their political party held a majority of the seats in the state legislature. He found further that their probability of success in moving a reform

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forward depended on the size of their majority (McGrath, 2013); that is, reforms were more likely to be enacted when the size of the majority was larger. When the majority was small or thin, members of the majority party were more cautious as they realized that a switch in majority control could mean that their opponents could overturn any reform passed or might even benefit from the reform if they became the majority. Importantly, McGrath (2013) found also that the propensity for reform was tempered by the strength of public employee unions and by the proportion of seats in the legis- lature held by Democrats. The period of time covered by McGrath’s study was from 1996 to 2005. In short, reform during this period was more likely to occur in states where Republicans were in control politically, where their majority in the state legis- lature was significant, and where public employee unions were weak. The fact that reform was more probable when Republicans were in control is not surprising as the agenda fits well with a conservative political ideology, as noted above, and conserva- tives may be interested in reining in public bureaucracies that are perceived as sympa- thetic to liberal Democratic objectives.

Interestingly, while ideological and political motivations for civil service reform are important bases for action, reform packages are usually not sold to the public using those arguments. More commonly, politicians speak of the need to “modernize” the civil service and make it more efficient. They complain of lethargic public organiza- tions that need revitalizing. Remarks by Governor Zell Miller on reform in the state of Georgia in 1996 are instructive:

Folks, the truth of the matter is that a solution in 1943 [the year the merit system was established in Georgia] is a problem in 1996. The problem is governmental paralysis, because, despite its name our present merit system is not about merit. It offers no reward to good workers. It only provides cover for bad workers. (State of Georgia, 1996, pp. 6-7)

Similarly, the Director of Governor Miller’s Commission on Privatization (and for- mer State Labor Commissioner), Joe Tanner was quoted in the Atlanta Journal and Constitution as saying that the state’s civil service system was “rigid” and “inflexible.” He referred to the system as “antiquated,” but he went further to reveal what seems to be an ideological preference:

We don’t believe that public employees should have any protection that the private employees don’t have . . . Why should government be any different? (“Editorial: Merit in Personnel Reform,” 1995)

One might question how the age of a system should necessarily be an indicator of its quality. Whether a civil service system is “modern” or reflects the most recent fads in organization design should not alone determine its value. A more appropriate test is whether the principles underlying the system are sound and whether it promotes effec- tive and equitable performance of core personnel management functions such as hir- ing, promotion, compensation, and discipline. Governor Miller’s claim that the Georgia civil service system paralyzed state government in 1996 may have been a

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rhetorical flourish necessary, at least in part, to forcefully make a point. But there is no doubt that the dramatic reforms in Georgia (decentralization, pay-for-performance, and at-will employment) fit well with his political ideology and his desire to strengthen political control of the state bureaucracy (Nigro & Kellough, 2000).

There are, of course, many non-ideological or non-political reasons for reform. Practical problems often arise and require adjustments to the technology of public personnel management. For example, there may be a proliferation of job classification grades or separate pay systems. Pay grades are intended to reflect meaningfully dis- tinct levels of work deserving of different levels of compensation. As the number of pay grades increases, however, the overlap in pay between adjacent grades increases, given a reasonable range of salaries within each grade and the fact that the system can- not pay salaries significantly more than what the labor market allows. The overlap between grades erodes the distinctiveness and meaning of each separate grade. Notably, prior to the reforms in Georgia, there were approximately 58 separate pay grades in the state’s compensation system—an excessive number by any standard. That number was reduced by approximately one half in the reform advocated by Governor Miller. Similarly, large numbers of different pay systems can unduly restrict management’s ability to reassign or transfer employees. In the 1980s, the Reagan Administration confronted this problem and successfully reduced the number of fed- eral payroll systems from 132 to 53 (Pollitt & Bouckaert, 2011). It is also true that job descriptions may become outdated, that employee training may be ineffectively designed or delivered, and that hiring processes may be characterized by lengthy delays that result in many of the best applicants taking jobs elsewhere or withdrawing from the process. These kinds of problems are real, and reform measures should be implemented to address them.

Nevertheless, in discussions of reform, it is useful to remember that administrative arrangements are never value neutral (Waldo, 1948). Indeed, most reforms are pro- posed precisely because they advocate or promote particular values, but the value trade-offs implicit in the process are often overlooked: When administrative reforms advance one set of values, they often simultaneously neglect or suppress alternative values. The preference for one value over another is often obscured by the headline objectives of reforms—which have lately centered on reducing costs and increasing the efficiency of the civil service. In addition, reforms are typically presented with a sense of urgency, and reform proponents usually portray the status quo as wholly unsatisfactory. Nonetheless, efforts to alter any set of administrative structures or pro- cesses may at times solve some problems while creating others.

Civil Service Reform Reconsidered

Calls for personnel reform, whether referred to as reengineering, reinventing, or revi- talization, have stressed market-driven initiatives and the enhancement of managerial authority. As we have noted, the reforms are often a reaction to traditional merit- based civil service systems, which are designed to remove partisanship, favoritism, and patronage from the public service. Traditional systems rest on core principles

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including selection on the basis of open and competitive examinations, political neu- trality, and relative security of tenure. These principles are enforced through the promulgation of rules designed specifically to limit the discretion of managers, super- visors, and leaders of public agencies. The establishment and enforcement of such rules necessarily requires the presence of a central authority. In the United States, the original organization given that authority at the federal level was the U.S. Civil Service Commission (CSC), which was replaced by the U.S. Office of Personnel Management (OPM) following implementation of the Civil Service Reform Act of 1978.1 Central personnel agencies establish civil service regulations and review agency practices to enforce compliance. The unambiguous purpose is to restrict the actions of political executives and line managers.

But civil service system rules and restrictions can be excessive. The structures imposed are bureaucratic, slow, and cumbersome. The limitations on managerial dis- cretion and the additional layers of personnel system red tape can result in time delays and inefficiencies in essential public personnel administration processes involving employee recruitment, selection, management, and retention. Political leaders who seek reform are interested in finding ways to correct what they see as the excesses of traditional centralized personnel systems while “letting managers manage” and enhancing political control of the bureaucracy. More importantly, these reforms often change “who gets what, when and how” in government in line with the reformers’ ideological preferences (Lasswell, 1936).

Many of the reforms proposed as part of the new public management/reinventing government movement borrowed ideas from the concept of “reengineering” that had previously been popular in the private sector (Champy & Hammer, 1993; Obolensky, 1994; T. J. Peters & Waterman, 1984). The underlying premise was that organizational efficiency and effectiveness can be significantly improved by streamlining organiza- tional procedures, empowering managers to make more decisions at their levels in the hierarchy, and focusing on results rather than process. The manifestations of reform took shape in a number of ways, but as we have argued, much attention was paid to the implementation of pay for performance programs, the decentralization of personnel authority, and the elimination or reduction of merit system protections for public employees. These reforms are examined in more detail below.

Pay for Performance in the Public Sector

The logic of pay for performance is compelling. Typically, it simply requires that pay increases be associated with measured performance. When performance is high, higher pay increases should be granted; when performance is lower, pay increases should be lower or perhaps, if performance is unsatisfactory, there should be no pay increase at all. Essentially, the argument for this approach is that it will serve to motivate marginal performers to improve their productivity while good performers gain satisfaction from the knowledge that their efforts are recognized and rewarded. The most commonly implemented approach to pay for performance, known simply as merit pay, requires

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that individual employee performance (which is usually based on a supervisory rating) provide the basis for adjustments to individual pay.2

In the United States, the federal government began an experiment with merit pay following passage of the Civil Service Reform Act of 1978. The program targeted mid-level federal managers (i.e., managers in General Schedule and Equivalent Grades 13-15). Studies of the impact of that effort found, unfortunately, that employees cov- ered by the plan typically saw no credible link between pay and performance (Milkovich & Wigdor, 1991; Pearce, 1989; Perry, 1988-1989; Perry, Petrakis, & Miller, 1989; Siegel, 1987; U.S. General Accounting Office, 1984). Because the sys- tem was required to be budget-neutral in each agency (i.e., overall budget allotments for federal salaries were not allowed to increase simply because of the program), any large increases for selected employees had to be offset by smaller or no increases for others. This aspect of the program, coupled with the fact that supervisors often strug- gle with performance appraisal and find it difficult to draw sharp distinctions between employees, meant that pay increases under the system were usually not significantly different from what had occurred earlier. As a consequence, the motivational potential of the program was undermined (Brewer, Selden, & Facer, 2000; Perry, 1986). Studies of employee perceptions of the program found that many workers in the merit pay system believed that factors unrelated to performance were influencing ratings and subsequent pay decisions (Brewer & Walker, 2013; Milkovich & Wigdor, 1991).

Another example of merit pay was the program implemented in the state of Georgia following the 1996 reforms. This system was carefully planned and included a new performance appraisal process grounded on job-related performance standards along with written performance goals and expectations and new job descriptions (Kellough & Nigro, 2002). Nevertheless, a survey of employees conducted 5 years after the sys- tem was implemented showed that state workers had low levels of trust in the program and little confidence in its fairness. Employees and their supervisors both reported that it was not the best way to motivate state workers (Kellough & Nigro, 2002).

It is troubling to see the substantial effort expended on the development and imple- mentation of these merit pay incentive systems when they produce such discouraging results. Notably, employee criticisms of merit pay often focus on perceived problems with performance appraisal processes. Of course, performance appraisal is the founda- tion of pay for performance, and if the incentive system is to be effective, the appraisal process must be viewed by workers as reasonable and fair. That goal is, however, far more difficult to achieve than one might expect (Kellough, 2012).

Annual performance reviews can be traced to the Hawthorne studies in the Western Electric factory near Chicago in the 1930s, when researchers Elton Mayo and Fritz Roethlisberger discovered that social structure is an important element in the workplace and suggested that supervisors could manage people more effectively by having formal meetings with them. In 1950, the U.S. government institutionalized this idea with the Performance Rating Act, which required annual performance reviews for federal employees. These reviews were later coupled with bonuses and salary increases. Despite nagging problems through the years, one compelling motive for continuing the practice in government was that successful businesses were doing it. But a quick scan

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of the literature reveals that many businesses were experiencing similar problems with the practice, and some high profile companies have since abandoned it, including General Electric, Microsoft, Accenture, Adobe, Google, and Yahoo (Mosbergen, 2015).

Nevertheless, if formal performance appraisal is utilized, valid criteria and stan- dards for performance on specific jobs must be identified and used. Systematic job analysis and accurate job descriptions can provide an indispensable aid for selecting these criteria. One approach is to identify work outputs that are expected on a job. Such outputs could be identifiable products or services for which an employee may be held responsible. But it can be difficult to identify tangible outputs for many jobs. For example, consider the job of an office receptionist, or a budget analyst, or even a police officer. What are the specific work outputs they produce? Can we identify out- puts (i.e., specific products or services) that reflect the full scope of their jobs? How do we handle situations where an individual’s accomplishments are dependent upon the work of others? What outputs do we assess for individuals whose job duties vary widely from day to day? How can we encourage employees to be creative and innova- tive in their work? In addition, even if we can adequately identify outputs for jobs, how do we specify standards for performance on those outputs? How should decisions about standards for performance be made? While these difficulties may not be insur- mountable, they illustrate the complexity of performance assessment.

If work outputs are not easily defined, we often rely instead on assessments of employee behavior or even judgments of employee traits that are presumed to be asso- ciated with job performance. Employees may be assessed, for example, on the timeli- ness with which they submit reports or the quality of their interactions with the public. Judgments may be made about traits such as honesty, initiative, or diligence. The pro- cess invariably contains large elements of subjectivity. Of course, there is nothing wrong with asking supervisors to exercise judgment, but the fact that the process may not be built upon objective criteria means that disagreements can easily emerge with employees who are dissatisfied with the result and the pay raise that it produces. Dissatisfaction with the outcomes of subjective performance appraisals can limit or undercut the motivational potential of pay for performance and erode workplace morale. In this way, perceptions can be more important than reality.

An additional problem can arise from what may be called the dynamics of the appraisal process. The act of handing a subordinate an unsatisfactory or weak perfor- mance rating can be unpleasant for many supervisors, and obviously, documentation is needed to justify lower ratings. As a consequence, supervisors may find it easier to inflate performance ratings. Supervisors who already believe they have more than enough to do on their jobs can avoid extra work and possible confrontations with unhappy employees who receive poor ratings by simply adjusting their ratings upward. Research has long ago demonstrated that in some federal agencies, nearly every employee was rated “fully successful” or higher (Perry et al., 1989). As a consequence, little variation in the performance rating scores of employees translates into little vari- ation in pay raises. Most employees are likely to receive amounts close to what they would have received if percentage raises were distributed equally across the board.

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Studies of merit pay systems typically fail to uncover any evidence that the reform significantly increases employee motivation or productivity (Bowman, 2010; Haga, Richman, & Leavitt, 2010; Jordan & Battaglio, 2014; Kellough & Lu, 1993; Rusaw, 2009). In fact, some studies report that pay for performance actually has negative effects in that it erodes trust between employees and their supervisors, promotes dys- functional competition, and heightens levels of employee alienation from their organi- zations (Langbein, 2010; Pearce & Perry, 1983; Perry et al., 1989; Weibel, Rost, & Osterloh, 2010). Still, the concept of merit pay resonates well politically, especially when the public has a skeptical view of the efficiency of government operations and expects strict accountability for public employees. Under these circumstances, the reform becomes a potent symbol of politicians’ efforts to ensure that public employees are working hard and earning their keep. This may help to explain why political lead- ers embrace the concept without full consideration of what it might actually accom- plish. In other words, instituting a pay-for-performance system has powerful symbolic meaning, and politicians may extract political value or advantage from their efforts to implement it—regardless of whether any substantive performance improvement is realized. Importantly, this view comports with our underlying theme: Civil service reformers often have ulterior motives for enacting reforms that promise greater econ- omy and efficiency.

The Decentralization of Personnel Management Authority

A second theme popular among proponents of civil service reform initiatives in recent years is the idea that authority over public personnel management policy should be decentralized to the fullest extent possible. As noted earlier, in traditional civil service systems, the major responsibility for personnel policy rests in a central personnel agency. That agency retains responsibility for examining the qualifications of appli- cants, analyzing and classifying jobs, structuring the performance appraisal process, and determining pay and benefits. A major purpose of centraliz

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