Conducting a Business Process Review of White House Compensation Practices

Author: Candace Blair Cronin, Ph.D.

1. The Challenge The members of the Obama Administration have made the dire economic situation in our country their primary focus in 2009. For example, the Administration plans to fund up to $500 billion in new projects to boost government spending and the economy (Washington Post, December 7, 2008). The day following his inauguration as President, Obama froze the salaries of all White House staff who make more than $100,000. This salary freeze has implications for approximately 100 White House employees including the Chief of Staff, the National Security Adviser and the Press Secretary (The Associated Press, January 23, 2009). On Wednesday, January 21, 2009, Obama stated, "During this period of economic emergency…families are tightening their belts, and so should Washington." The President’s act demonstrates solidarity and understanding with the American public regarding the impact of the nation’s current recession. As of December 2008, the impact of the recession had catapulted the unemployment rate to 7.2 percent—a 16- year high—and resulted in the loss of more than 2.6 million jobs (The Associated Press, January 23, 2009). The recession has prompted organizations to take stock of their current employment and compensation practices. As an alternative to layoffs, many organizations are freezing or reducing compensation, limiting or ceasing 401(k) contributions and adopting other cost-efficient incentives to compensate for pay reductions. Examples provided by the Associated Press include the retailer Saks Inc., who restricted merit raises and 401(k) contributions. Likewise, FedEx and Caterpillar Inc. (the largest mining and construction equipment manufacturer) reduced executive compensation; for Caterpillar, reductions were up to 50 percent. While the President’s decision to place a freeze on salary increases for his staff is timely given this current economic environment, the Administration could still face possible repercussions of this decision from the staff impacted and those contemplating public service jobs. For example, following this decision, the Administration must consider whether current salaries of staff are equitable and how the decision will impact staff retention and morale. Furthermore, public servant jobs may become even more difficult to fill if salary disparities remain between those appointed officials and other public and private sector employees. Interestingly, the White House compensates its staff relatively equivalent or lower than officials in similar ranks within other international and state government offices. For example, the Chief Minister of the House of Commons for the United Kingdom has an annual salary of £138,724, roughly equivalent to $197,571. As of 2008, this is approximately $20,000 more than the salary of the White House Chief of Staff (who reports directly to the President) at $172,200 (Factsheet M6, Member Series). As of July 2008, the Director of Communications for the State of New York made $175,000 annually, which exceeded the White House Press Secretary’s salary by approximately $2,800. In reviewing salaries of other world leaders, many of the prominent leaders such as the French President Nicolas Sarkozy, U.K. Prime Minister Gordon Brown, and German Chancellor Angela Merkely all make between $340,000 and $450,000 per year, demonstrating the extent to which U.S. White House salaries are commensurate or less than other government public servants. President Obama’s salary is less than what Bertie Ahem, the Taoiseach of Ireland, was making in 2007, approximately $446,000 (TIME, October 31, 2007). Over the past two years, a central premise of the President’s campaign was transparency. The conduct of a comprehensive business process review of the White House compensation practices will further allow for transparency in practices. This review also would ensure compensation is equitable across staff by job requirements, help to identify cost-efficient employment practices, which will continue to motivate staff, and demonstrate the disparities that exist for public servants of the White House when compared to other government and private sector employees.

2. Business Process Review ICF International is experienced in the conduct of compensation studies using comprehensive business process review techniques. A business process review would consist of these four major phases: Conduct an internal review. This phase includes reviewing and validating current compensation practices. The conduct of this phase may include a review of background documentation (e.g., job descriptions, pay structure, benefits information). A comprehensive review of job information would help to identify key job requirements and the competencies needed to meet to those requirements. Following the review of documentation, the internal review may include interviews or focus groups with a sample of staff to determine perceptions regarding current compensation and benefits practices. The focus groups/interviews also would permit the researchers to identify the needs of staff, most desirable features of the current system and opportunities to increase cost efficiency while maintaining high morale. For example, the protocol may include questions regarding the impact of traditional and fringe employment benefits. The internal review may also use surveys to target a larger sample, for example, if the study were to include all White House staff. ICF’s Survey Research Center has more than two decades of experience conducting state- of-the-art surveys. We have conducted secure Web surveys for hundreds of public sector and classified clients. In separate studies for the U.S. Senate in 2006 and the U.S. House of Representatives in 2006 and 2008, we developed confidential Web-based surveys to identify compensation, benefits, and other employment practices across all Senate and 440 House member offices. The final phase of the interview review would include a comparison of the information collected through surveys, focus groups, and/or interviews with the job requirements and associated competencies to determine the appropriate pay structure. This comparison would help to identify current inequities in compensation practices and provide guidance as to where adjustments may be needed.

Conduct an external review. During this phase of the project, ICF identifies Federal agencies and other public and private sector organizations that have jobs with similar requirements to the job of interests in the study. ICF reviews public data available for the identified jobs through sources such as the Bureau of Labor Statistics Occupational Employment data, Federal agency Web sites, and state and local level compensation data by the State Employment Security Agency (www.careerinfonet.org). Additional data would be collected through benchmarking interviews. During these interviews, ICF would identify salary and benefits offered by the benchmarked agencies and lessons learned in implementing their compensation systems. Similar studies have been conducted for Congressional offices, Administrative Law Judges, Veterans Health Administration Chiropractors, and numerous other public and private sector agencies.

Design the business process. Next, ICF summarizes and compares the results of the internal and external reviews with the goal of identifying gaps between the current compensation practices and the practices of benchmark agencies with complimentary jobs. A key aspect of this phase is preparing recommendations for implementing an equitable compensation system (including benefits practices). Additionally, ICF would make recommendations for evaluating the effectiveness of the compensation system, including initial performance indicators to be used to measure the success of the refined compensation and benefits system.

Communicate findings. The project would culminate in a report summarizing the methods and results of the business process review, including an executive summary, which will help to communicate results of the project. ICF can prepare separate briefings for leadership, staff, and the general public. ICF’s Strategic Communications Group is available to support the development of all communications materials including White House internal reporting, Internet postings, briefings, and public relations messages. 3. The Outcome ICF will customize the business review process to answer questions of importance to the Obama Administration regarding current compensation practices. The study would be conducted by staff from ICF’s Applied Organization Research group, which consists of over 60 professionals including 25 Ph.D. level Industrial-Organizational Psychologists with specific expertise in evaluating, designing, and implementing compensation and classification systems, and conducting job analysis, selection, and benchmarking studies. ICF’s recommendations will provide guidance for decision makers on how to equitably compensate employees and further enhance the integrity of the Administration’s compensation practices. The recommendations also will include the allocation of jobs to specific pay grade ranges. Our business process review will identify areas for improvement and compensation alternatives for improving employee satisfaction while minimizing costs. For example, research has found that work-life benefits, when matched to the needs of employees, help employees better manage their personal and work obligations (Thomas & Ganster, 1995; Thompson, Beauvais, & Lyness, 1999). Research also has found well designed benefits practices to lead to increased employee loyalty and commitment and lower turnover intentions regardless of whether the employees actually used the programs (e.g., Grover & Crooker, 1995). Thus, organizations may reap a high return for minimal investment in benefits programs when they adopt appropriate practices. The goal of the recommendations will be to provide practical solutions for improving compensation practices including the restructuring of current benefits practices. In particular, our recommendations will:

Provide suggestions for employee benefits that are minimal cost to the White House yet achieve maximum results;

Provide guidance for personnel who may evaluate or implement future compensation practices;

Prepare materials the White House can distribute to businesses that aid in the designing or restructuring of compensation and benefits practices;

Reinforce the public perception that the Obama Administration respects the challenges of the current economic environment and intends to maintain transparency, equity, and cost-efficiency in its own practices;

Align with the Administration’s priorities to ensure workers are compensated fairly (e.g., Equal-Pay Act) (USA TODAY, January 29, 2009);

Lead to a decision process that is more efficient and effective for White House staff and maximize achievement of goals of this Administration; and

Identify cost-effective personnel practices that will enhance the attractiveness of public servant jobs. For more information, please contact ICF International, Candace Blair Cronin, Ph.D., at (512) 388-3387 or [email protected].

References Aversa, J. (2009). Pay Freezes Hit Workers_White House Not Spared. Found at http://www.google.com/hostednews/ap/article/ALeqM5iOh2ZouePb4m1Szadx_3zYbCh0wgD95SEPUO0, The Associated Press, January, 23, 2009. Crumley, B. (2007). Sarkoy Moves to Boost His Salary, Time, October 31, 2007. Gershman, J. (2008). How Payroll of Paterson Dwarfs All, The Sun, July 14, 2008. Grover, S. L., & Crooker, K. J. (1995). Who appreciates family-responsive human resource policies: The impact of family-friendly policies on the organizational attachment of parents and non-parents. Personnel Psychology, 48, 271-288. House of Commons Information Office. (2008). Retrieved January 31, 2009; from http://www.parliament.uk/documents/upload/M06.pdf Jackson, D. (2009). Obama Signs Equal-Pay Bill, USA TODAY, January 29, 2009. Shear, M.D. (2008). Obama Offers First Look at Massive Plan To Create Jobs, Washington Post, December 7, 2008. Thomas, L. T., & Ganster, D. C. (1995). Impact of Family-Supportive Work Variables on Work-Family Conflict and Strain: A Control Perspective. Journal of Applied Psychology, 80(1), 6-15. Thompson, C., Beauvais, L., & Lyness, K. (1999). When work-family benefits are not enough: The influence of work-family culture on benefit utilization, organizational attachment, and work-family conflict. Journal of Vocational Behavior, 54, 392-415.

About the Author This paper was written by Dr. Candace Blair Cronin, manager at ICF International. The author provides management consulting services to various federal, state, and local public and private sector agencies such as the U.S. Senate, U.S. House of Representatives, and U.S. Department of Homeland Security. The author is an expert on human resource and personnel practices including compensation, classification, job analysis, competency modeling, workforce development, succession planning, performance management, group facilitation, training, assessment development and validation, benchmarking studies, and survey design and administration. The author gratefully acknowledges comments and suggestions from Lisa Mallory-Hodge, senior vice president at ICF. The views expressed in this paper and any errors are those of the author and not necessarily those of ICF International.

About ICF International ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, climate change, environment, transportation, social programs, health, defense, and emergency management markets. The firm leverages its broad public- and private-sector experience to develop effective human capital strategies. ICF combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 3,000 employees serve these clients worldwide. ICF’s Web site is www.icfi.com.