Hiring Freeze, Hiring Thaw, Hiring Freeze? What OMB’s April 12 Memo Really Says

Last week, OMB Director Mick Mulvaney published a new memo (OMB M-17-22) to agency heads titled “Comprehensive Plan for Reforming the Federal Government and Reducing the Federal Civilian Workforce.” When people read the memo, the lede was something along the lines of “Trump lifts hiring freeze.” Later, folks started noticing other parts of the memo, including its focus on dealing with poor performers. There is actually a lot of news in the memo’s 14 pages, so let’s break it down and see what it really says.

“Begin taking immediate actions to achieve near-term workforce reductions and cost savings, including planning for funding levels in the President’s Fiscal Year (FY) 2018 Budget Blueprint”

The key word here is “begin.” Later in the memo (page 10) it says “To support the goals of the FY 2018 President’s Budget Proposal, OMB directs agencies to identify workforce reductions over a four-year period (FY 2018 through 2022) consistent with discretionary outyear levels included in the FY 2018 Budget this spring and forthcoming OMB guidance on FY2019 Budget submissions. Agencies should begin planning for these reductions now, as achieving associated personnel reductions takes time to implement and realize savings.”  Even though the president’s “skinny budget” proposed large reductions in employees in Fiscal 2018, the new memo appears to recognize that it is too late to do widespread reductions in force this year or next. An agency running a RIF would need to get people off the payroll very early in the fiscal year to have any chance of realizing savings from the RIF. The longer they wait, the less likely they are to save anything. In fact, running a RIF later than the first quarter of the fiscal year would likely cost an agency more than it would save by getting the employees off the payroll. That is due to the costs of severance pay, buyouts and lump-sum annual leave payments. Spreading the reductions over several fiscal years is more prudent and could be accomplished with far less disruption.

“To facilitate any necessary reductions, OPM will provide streamlined templates to agencies for requesting approval to offer Voluntary Early Retirement Authority and Voluntary Separation Incentive Payments (VERA/VSIP) and OPM will provide expedited reviews for most requests within 30 days. However, eliminating unnecessary vacant positions can begin immediately” (emphasis added). There are two key points here. First, there is clearly an intent to use early retirement and buyouts to mitigate the effects of reductions. That is good news. Second, the administration expects agencies to start reducing now. That means an agency that is projected to have large reductions is going to be expected to show results in this fiscal year. For those agencies, the hiring thaw is going to revert right back to a hiring freeze of some sort. We have a already seen that in State and other agencies. I know some folks believe the agencies should wait until the budget is passed before they start making cuts. However, if they keep hiring until they have a firm budget, they are likely to find themselves in a deeper hole.

“Develop a long-term workforce reduction plan.” Again we see the emphasis on “long term.” The memo requires agencies to determine what the right numbers and grades of employees should be, rather than simply looking at previous budgets. It directs agencies to revise their organizations, delayer them, and pay particular attention to “deputy positions, lower level chief of staff positions, special projects, and management analysts that may duplicate the work performed in such areas as procurement, human resources, and senior management.”  This section was written by someone who has worked in the federal government. That last section was a direct swipe at the “shadow” staff in many agencies that act as go-betweens between managers and service providers. The Trump administration is not the first to try to solve the “shadow office” problems. My guess is they will not be the last. Playing whack-a-mole with shadow staffs is bureaucratic game that is rarely satisfying to any of the participants.

Shared services also get a mention in the memo. As I have written before, there is a good case to be made that the government buys the same services far too many times. Agencies are encouraged to look at “alternative service delivery models” and to “streamline mission support functions.” There is nothing new in that recommendation, but the memo does encourage use of outsourcing, insourcing and other options that would provide “greater efficiency while maintaining or improving quality.” The nod to insourcing is a bit of a surprise, but given that some of the better shared services organizations are in government agencies, it is a good idea. The overall move to more shared services is sound, and is a good example of using a business-like approach that can work effectively. The memo also encourages use of “Best in Class” contract vehicles. It avoids the false binary choice between insourcing and outsourcing and recognizes that there are many ways to deliver shared services effectively. Those who argue such work should always be done in-house may be unhappy, as might a handful of large companies that advocate for outsourcing everything to them. All told, this section of the memo is a common sense approach that should not draw too much criticism.

“Streamline policy creation by eliminating the common tendency to recraft/restate policy for a component or regional office.” Another provision written by someone with experience in government, this one is addressing the all too common tendency of people at every level of an agency to create “policy” documents that are not policy are rarely necessary. It is a good way to eliminate unnecessary work.

Plan to maximize employee performance. This section focuses on steps agencies can take to increase performance, with the emphasis very heavily on dealing with poor performers. Among other things, it requires agencies to update their policies on dealing with poor performance and conduct, limiting the use of administrative leave, providing transparency in the performance improvement plan (PIP) process, training managers and supervisors, building accountability in manager performance plans, and establishing “real-time manager support mechanisms.” All of those are reasonable proposals, but that last part is the most significant. One of the biggest problems with dealing with poor performance and misconduct is that managers often get no support when they try to do it. Senior political appointees often want no controversy, so they want problems to just go away. Lawyers often want to settle every case. Every step of the way, there is another hurdle. It is no wonder that dealing with poor performers is a perennial issue in the Federal Employee Viewpoint Survey. These support mechanisms have a good chance of making a difference and are an excellent idea.

While dealing with poor performers is a great idea and would probably win praise from a wide range of people, what was missing from the memo is dealing with good performers. The percentage of federal employees who should be fired because of their conduct or performance is most likely small. Even if we take a huge percentage – say 10% – that are problem employees, then deal with them effectively, we are left with the remaining 90%. Those are the folks who get the government’s work done. How they are doing, and how they are treated, is more likely to have a significant impact on government performance. Even if you take into account the demotivating effect of poor performers, the fact is that the good employees do the work. They need good training. They need recognition when they do a great job. They need to be treated as the valuable contributors that they are. Good employers in the private sector recognize that an act accordingly. Let’s hope there is more to come on this issue.


Hiring Freezes Have Consequences – And So Do Budgets

President Trump’s hiring freeze has been in place since January 23, 2017. Judging by the emails, comments, calls and questions I am receiving, there are still agencies that have questions about what they can and cannot do during the freeze.

Add to that the uncertainty about the FY 2018 (and beyond) budget, and it is understandable that many federal employees worry that winter is coming for the federal workforce. President Trump’s Executive Order today directing OMB to come up with a plan for reorganizing the Executive Branch adds even more urgency to the discussion regarding the size of the workforce. After watching the goings on for the last 2 months, I am not ready to pronounce gloom and doom for the workforce, but I do believe federal agencies and the workforce are in for more change than they have experienced in the past several decades.

Let’s take a look at a few examples. The Department of Defense is on the list of favored agencies that are likely to receive a plus up from the budget process. In a typical year, Defense hired just over 90,000 people last year. With the freeze in place, they are continuing to hire in a lot of positions, but they are also building up a backlog of unfilled jobs. Other Departments are in the same position. Homeland Security has exempted many of its jobs because they are engaged in border security, immigration enforcement, and other national security related jobs. But what about the rest? Last year DHS hired almost 21,000 people. Other agencies that have few jobs that are tied directly to national security or public safety are continuing to amass a large backlog of unfilled jobs.

Trying to catch up after the freeze is lifted would be a big problem if the intent is to do some trimming of agency payrolls. In this case, it appears that the intent is to do more than trim. Rather than modest cuts that rein in the federal payroll, it appears the administration is interested in far more significant cuts. Recent reporting in the Washington Post, Fox News and other outlets is pointing to much larger cuts, with some agencies seeing double-digit reductions in their labor budgets.

So why am I not taking the gloom and doom view? Presidential budget requests are not enacted by the Congress with no changes. In fact, the reception the President’s budget gets from the House and Senate is typically rejection. The likelihood of the Congress enacting all of the cuts the President is suggesting and doing them all at once in 2018 is remote. Many of the agencies are very popular with the American people. Many of the programs they run are popular. Decimating popular programs and/or agencies can have electoral consequences that members of Congress do not want. That said, republican budget proposals in recent years have called for some significant cuts in non-Defense programs. I expect to see budget cuts in many agencies, but I expect them to be tempered by Congress.

So – does that mean agencies have no worries and do not need to prepare for the worst? Absolutely not. In fact, any responsible agency that is in the budget crosshairs should begin planning TODAY for a significant reduction in Fiscal 2018. Even agencies that may be safe from a mission perspective will have to look at the cost of mission support services. That means not adding new staff (even if the freeze is lifted) unless not hiring them risks mission failure. It means preparing a plan to do downsizing in an orderly way. Agencies should be running the numbers to see what kind of attrition they can expect. What would early retirement produce? Would buyouts help? If so, how much? Does the agency have the money in FY 2017 to incentivize turnover now, to lessen the burden on the 2018 budget?

Downsizing effectively is far more than just letting people go out the door and not replacing them, Agencies must rethink their work, their missions, and how they get things done. An agency with 10,000 employees cannot operate in exactly the same way if it has to make do with 9,000 employees. That means new organizations, new job descriptions, new performance objectives, better work processes, and more. All of that takes time.

Agencies should also begin planning for reduction in force. No one wants to hear that, but the truth is that few agencies are prepared to run a RIF. Getting ready takes months. Running the RIF takes months. Doing the right thing and trying to minimize the number of people who are involuntarily separated takes months. If agencies wait until a budget is passed, or at least until the numbers are more certain, they will box themselves into a corner that is almost impossible to get out of. As I said in a post on March 3, RIF is expensive and the aftermath of RIF is more expensive.

If agencies do decide to begin planning now for what might happen with the Fiscal 2018 budget, they are not selling out their workforce. They are doing the right thing and trying to be prepared for what might happen. That is what leaders do. Because it is so important, agency leaders should be upfront with their workforce about what they are doing. Do not plan behind closed doors, hoping the workforce will not find out about it and get scared. They will find out about it. And they are already scared. Federal employee should be treated like the adults they are. Planning for downsizing without telling the employees builds more fear and it builds mistrust. When an agency is facing tremendous change, more communication is not only better, it is absolutely essential.





icf_logo_color        napa-logo      pps-logo