Report - Government Executive

cooperation with ODNI. The review will focus on the performance elements, with a view
toward simplifying and reducing their number, ensuring their relevance and value, and verifying
that standards measure as intended. These steps should help to strengthen the performance
management system so that it is effective in achieving desired outcomes in a fair and equitable
manner.
EQUITY
PRINCIPLE
The system identifies the balance among the three aspects of equity: internal,
external/market, and performance/contribution.
In its 2004 report, 74 an Academy Panel noted that performance-based compensation systems are
designed to conform to “equity theory”—that is, employees perform best if they know their
compensation is commensurate with the work they perform and understand how others are
compensated. Employees expect equitable treatment, and their perceptions of equity affect job
satisfaction. The generally accepted elements of equity include internal, external/market, and
contribution equity.
In the federal government, internal equity traditionally has been achieved through the
classification process, which requires jobs with similar duties and responsibilities to be assigned
the same grade, resulting in “equal pay for equal work.” Under performance-based
compensation systems, however, internal equity is redefined so that individual performance has
greater impact on compensation, linking it more directly to accomplishments and organizational
contribution.. External/market equity advocates paying employees at salary levels comparable to
those available in other organizations, both inside and outside the federal government.
Contribution equity holds that employees who contribute or perform at higher levels deserve
higher salaries.
As discussed below, DCIPS’ design includes features that balance the three aspects of equity in
the performance management, pay pool, and market alignment features of the system.
Internal Equity/Organizational Contribution
Employees are more likely to accept compensation decisions if they perceive that the procedures
used to make them are fair and affect everyone the same. Under DCIPS, internal equity is
achieved by linking eligibility for salary increases and bonuses to employees’ ratings of record,
which reflect their accomplishments for the rating period and their achievement of specific
objectives supporting the organization’s mission, goals, and objectives. A Successful
performance rating entitles the employee to receive at least the “floor” 75 of the annual
74 2004 Academy Panel Design Principles Study, p. 15.
75 The minimum performance increase in base salary that an employee performing at the Successful level and
eligible for a performance payout may receive. USD(I) establishes the amount annually. Under DCIPS, the amount
initially equals the annual General Pay Increase that Congress authorizes annually for federal GS employees.
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