Fear Not: The Case for Shared Services in Government

The Federal government, much like any other organization, either provides for itself or buys a wide range of overhead services to support its operations. Overhead is not a derogatory term – it is just the term that is applied to services that are necessary to support the mission of an agency. Missions do not get accomplished without overhead services. While overhead services such as Human Resources, Financial Management, or Contracting support follow laws and regulations that are remarkably consistent across agencies, most agencies have dedicated internal service providers. The result is a level of redundancy and cost that diverts scarce resources to overhead functions rather than agency missions. Faced with decreasing budgets and shocks such as sequestration, agencies can no longer afford to carry out business-as-usual with respect to common support services. Secretary of Defense Chuck Hagel challenged his Department and its stakeholders to “…challenge all past assumptions…” and “put everything on the table.”

“We need to challenge all past assumptions, and we need to put everything on the table.  For example, it is already clear to me that any serious effort to reform and reshape our defense enterprise must confront the principal drivers of growth in the department’s base budget – namely acquisitions, personnel costs, and overhead.”

Secretary of Defense Chuck Hagel – April 3, 2013

One good example of overhead services that whould be “on the table” is Human Resources/EEO. Looking only at the number of Federal employees in those occupations, we see 2% of the Federal workforce in the HR/EEO (41,929 employees) job series. Because both HR and EEO offices also employ people in other job series, such as IT, budget, and administration, my experience is that as many as a quarter of the people in HR offices are not in HR series. That means another half percent of the Federal workforce are HR in non-HR job series. The number may be higher. Assuming that conservative number, 2.5% of the Federal workforce exists to provide HR services to the government.

Federal Employees in HR/EEO Job Series

Job Series

# of Employees

Average Salary

Total Cost














+ 30% Fringe


Total Cost



If we look only at the costs of the Human Resources/EEO workforce (in salary and fringe benefits cost of employees in the 201 (HR Specialist), 203 (HR Clerk and Assistant) and 260 (Equal Employment Opportunity) job series is more than $4 billion. HR/EEO organizations also employee people in other job series, such as budget, clerical and information technology, and the common “catch-all” 301 job series. Use of the 301 series for HR has increased in recent years as a way of reducing the apparent number of HR professionals, and to support grades that are often not as easily obtained in the more prescriptive 201, 203 and 260 job series. In addition to the non-HR/EEO job series, HR/EEO service organizations also purchase contract support. The number of dollars devoted to such services is difficult to identify, government-wide it is certainly in the hundreds of millions and perhaps more. Because the costs of common services are buried in agency budgets, the number is rarely examined as a single cost. The time has come to begin that examination and find ways to reduce the cost to a more manageable level.

There are many side effects of failure to consolidate overhead services. Chief among them is the lack of money for training staff and modernizing systems and processes. An agency with redundant overhead organizations will cut costs by taking away everything but salary dollars and leaving the overhead functions with few resources to do anything other than pay their employees. It is rare to find an HR office that is adequately resourced, even when the agency is spending more on such services than would seem necessary. The agency wonders why it is not getting great support, the employees in the support organizations wonder why they cannot get training or adequate tools to do their work, and everyone wonders why it does not get better. An agency, its employees and its HR staff are far better off with one or two well-staffed, trained and resourced HR offices than they are with ten marginally staffed and resourced organizations that struggle to provide good service.

I have heard people saying for years that services cannot be consolidated because their agency is unique. While it may make us feel better to say we are unique, the truth is most agencies are not. The plethora of different rules, processes and systems is the result of choice rather than absolute necessity. Although agencies tend to create their own operating policies and directives for HR services, those rules are usually created because they can be, not because of a compelling business argument. Not only that, attempts to consolidate HR/EEO services are typically met with fierce resistance. When the Department of Defense proposed consolidating HR services in the 1980s, one of the services responded with the objection that their civilian HR services were at the heart of their warfighting capabilities. When faced with that type of opposition, the proposal was dropped. Eventually, the DoD elected to “regionalize” its HR services in a way that protected most of the parochial interests that objected to the previous consolidation proposal. The result was a model that few DoD leaders and virtually no one in HR would consider to be effective or efficient.

When the Defense Logistics Agency proposed a real consolidation of HR services, Pentagon officials supported it as a means of seeing if consolidation could actually work. Studies of the DLA HR transformation have shown it was completely successful, reduced costs, and dramatically improved the quality of services. The proposed transformation was not universally accepted in DLA. In fact, many affected managers, field Commanders and Senior Executives were vehemently opposed. One SES referred to it as “the most brutal proposal I’ve ever seen.” Another said he would rather have bad service he controlled than good service someone else controlled. One General said it was doomed to failure and would generate no savings, even if it could be implemented, which he doubted. They were wrong. Not only did the consolidation work, it saved money and provided more resources for the consolidated offices to get their work done. Many of the savings came from elimination of redundant management structures. Rather than having seven HR offices, each with an HR Director, staff directors, and support teams for each, there were two HR offices. Rather than having seven sets of HR tools, we had one. Rather than having seven sets of operating procedures, we had one. DLA is not the only example of effective HR consolidation. Agencies as diverse as the Department of the Treasury, NASA, the Department of Commerce and the Department of the Interior have had similar successes. That kind of consolidation and cost reduction is not radical. It is not risky, and it is not new and different. It is a tried and proven approach to delivering services.

What was driving those objections, and what bold leaders in government will face today, is fear. Fear of loss of control. Fear of loss of influence. Fear of failure. Fear of services that are worse than before. Overcoming those fears is critical if government is going to transform itself today. If those fears drive debates about overhead services, imagine how people will respond when asked to do the same thing for mission services. How will any real consolidation of services, elimination of redundant missions and consolidation of agencies take place? We have proven in multiple agencies that support services can be effectively and efficiently consolidated, yet that knowledge has not been translated into government wide measures to dramatically transform support services. It is time to take that step.

Should We Replace the General Schedule?

I’ve written recently about the civil service reforms of the last century that created the General Schedule and why I believe it may have outlived its usefulness. The General Schedule worked well when half of Federal employees were GS-5 and below and most of the rest of the workforce was spread out over the remaining grades. Today, 7.4% of the Federal workforce is GS-5 and below. Grade levels are increasing, the number of positions in the top grades is increasing, and grade compression at the top of the range is beginning to create significant issues. Today’s post will address some fallacies about the General Schedule. Next week I will address some facts about the workforce and its demographics. Finally, the following week I will address the consequences of grade compression and what we can do to replace the General Schedule with something more useful for today’s workforce and labor market.

Fallacies About the General Schedule

When I talk with people in and out of government, I hear a number of fallacies regarding the General Schedule. Here are just a few:

  • We do not need to worry about the General Schedule, because the majority of Federal employees are not covered by it. More than 1.4 million employees are covered by the General Schedule. Another 30K are covered by pay plans that tie their pay directly to GS rates. These “Standard GSEG” plans cover 71% of the non-postal workforce.
  • “Grade creep” in the GS is caused by outsourcing, automation and the growing complexity of Federal jobs. It is true that many lower graded jobs have been outsourced and that technology has eliminated many others. Outsourcing and technology could explain the absence of jobs at lower grades, but they do not explain the increase in positions at GS-12 and above. For that, we need to look at the complexity of Federal jobs and the issue of grade creep as a solution to pay and retention problems. It is true that some jobs are more complex than they were in the past and there are some new categories of positions that simply didn’t previously exist (such as cyber security). Those do not explain the significant increase in grades for jobs that are not highly technical. For that, we have to look at retention issues, the competition for talent in the Washington, DC metro area, and the reduced emphasis on accurate position classification. For example, in 1998 we had 128,038 jobs in the GS-5XX Budget and Accounting job family. Now we have 122,344 in the same type of jobs. Many other occupations and the workforce as a whole show similar trends. Look at what has happened to the grade distribution in this one job family:



    % Change

    GS-5XX Total (incl non-GSEG)




    GS-5XX GSEG-1/15
















  • GS within grade increases (WGI) are tied to performance, so they are not automatic. In the last numbers I can find (2009), the WGI denial rate was 0.06%. Although the Federal workforce is excellent, it strains credulity to argue that only 0.06% of WGI-eligible GS employees performed at a less-than-fully-successful level.
  • Since passage of the Federal Employees Pay Comparability Act of 1990, GS pay is based on market rates by locality. FEPCA established locality pay and requires that pay increases be set based upon the Bureau of Labor Statistics Employment Cost Index. The locality areas are so broad that they do not accurately reflect either the cost of living or the cost of labor. For example, rural parts of West Virginia are located in the Washington, DC locality. The Federal Salary Council produces a set of recommendations every year that show salary disparity numbers the process produces. For 2014, the disparity averages 34.6%. For some occupations, that may be reasonable. For many others it is absurd. While locality pay differences are a factor in setting pay rates for the GS, pay has never matched the Federal Salary Council recommendations.
  • Studies show Federal employees are overpaid/underpaid. While there are those who say Federal employees are overpaid and those who say they are underpaid, the truth is that both are right and both are wrong. The Federal workforce is not a monolith, and accurate sweeping statements about pay are not possible. Some employees are overpaid, others are underpaid. The process attempts to compute pay based upon broad averages that mean nothing for individual categories of positions. Pay decisions are complicated by the political nature of Federal pay and the attempts of politicians to use the Federal workforce as a proxy for anti or pro-government beliefs. Both sides produce studies that “prove” their side is right.  A 2012 GAO report looked at 6 studies that attempted to compare Federal and private sector pay and total compensation. GAO concluded the studies’ results varied because their methods, data sources and approaches were different.The report said “The differences among the selected studies are such that comparing their results to help inform pay decisions is potentially problematic. Given the different approaches of the selected studies, their findings should not be taken in isolation as the answer to how federal pay and total compensation compares with other sectors.” The bottom line is that we have absolutely no idea if pay for Federal employees is consistent with private sector pay for a given type of job in a given location.The data is not there and it may not serve the interests of politicians to actually find out what the truth is.
  • Job classification reviews ensure job series and grades are appropriate for each position. The number of HR people doing job classification has dropped significantly as agencies have delegated classification authority, used standardized position descriptions, and turned to automated classification systems. Those automated systems often allow a manager or HR specialist to classify a position by starting with a desired grade level and having the system produce duties statements that match the grade. This backwards approach, combined with grade level increases driven by competition for talent, has resulted in continuous grade creep for many years.
  • Replacing the GS means we have to have a pay-for-performance system like the failed National Security Personnel System. NSPS failed for a number of political and practical reasons – not the least of which was political and union opposition because it included an attempt to undermine the rights of of employees to organize and bargain collectively. The GS system is not a performance system, it is a pay system. There are many ways to handle pay that do not require burdening managers who are not trained in pay management with the requirement to set pay. Performance-based pay is an option, but most likely not the best one.

These are but a few of the fallacies surrounding the General Schedule. That they are accepted as Gospel, and serve as the basis for many of the debates about the future of Federal pay policy is a little frightening. If we want Federal employees to have competitive pay that is based on the realities of the labor market where we compete for talent, we have to start facing facts. Next week I will outline some of those facts and how they should be considered when considering next steps on Federal pay.