The R Word

Most people do not like to think or talk about RIF and they certainly do not want to do a RIF. But – think and talk about it we must. And in some agencies, leaders may have to more than that.

Most people would rather talk about the “A word”  – attrition. For many years that has been the preferred way to shrink the workforce. Attrition is less harsh, it does not force people out of their jobs, and presents fewer opportunities for favoritism or other bad things. So why would we ever consider RIF when we have the allegedly painless magic of attrition? There are at least three reasons.

  1. Attrition is random. It does not always happen where you need it. If we have an organization where we want to reduce the number of people in position A, but keep all that we have in position B, we have to pray that the people who leave are in position A. If not, we may find ourselves being unable to hire for the jobs we need and still having too many people in the positions we do not need. Multiply that by a few dozen types of jobs and it is easy to see how an agency could get itself into a bind.
  2. Prolonged pain. Attrition takes a downsizing process and drags it out for months or even years. The organization is constantly under stress, leaders may not see the need for rapid rethinking of processes and structures, and the workforce is asked to do more with less until they break.  It is not good the agency, its mission, or its workforce.
  3. Timing. This one is most important for our situation today. Attrition depends on people leaving. If they are leaving in large numbers (and from the right jobs), attrition can work well. But most agencies do not have high turnover rates. If an agency has a turnover rate of 5% and is told to take a 10% cut (the size of the reductions we are hearing about in the President’s budget plan) on October 1st, they have a problem. Turnover takes time, and in that agency with 5% turnover, it would take 2 years of hiring no one to meet the goal. That is 2 years too late. Agencies can increase turnover by offering buyouts and early retirement, but that takes time, and they either need more money to pay for the buyouts or they have to do them early in the fiscal year. Attrition is great for small reductions that do not have a budget deadline. For big reductions, the timing simply does not work.

So – if attrition can be bad, why not just go ahead and do a RIF right away? What could go wrong? In a word, everything. Here are just a few examples:

RIFs are disruptive. They follow a byzantine set of rules and scare the living daylights out of people. They sometimes scare away the best and most marketable members of the workforce, leaving the agency with the folks who cannot get a job elsewhere. They take time, and during that time the workforce may be consumed with talk of the RIF, rumors, suspicion, and fear. You can imagine what that does to morale and productivity.

Few federal agencies are prepared to run a RIF. My experience running too many large and small RIFs taught me many things, chief among them being that informed, thoughtful and thorough preparation is absolutely essential. There are so many ways that RIFs can blow up on agencies that failure to prepare almost guarantees a RIF will be a mess. And that’s just running the RIF itself. Absent the right preparation, the aftermath of the RIF will also be a mess, with RIF actions overturned on appeal and projected savings not materializing for years.

A clean RIF starts with clean records – something few agencies have. Most agencies have not looked at things like RIF competitive levels for many years. They have moved from very specific job descriptions to generic versions without considering what that will do to them in a RIF (hint – it isn’t good). They have not verified service computation dates. And they do not have processes in place to do those things.

Who knows how to run a RIF? RIF is a logical process, but most federal HR folks have never had to run a RIF. From one perspective that is great – they have avoided laying off their employees. From another perspective it is a big problem. If the first RIF you run affects a large portion of the workforce, and budget pressures mean it has to be right the first time, you are in trouble before you start.

The workforce does not understand the RIF rules. Why should they? The federal government has separated only a few hundred employees via RIF in recent years. Federal employees had no reason to try to learn how RIFs work. Now that RIFs are far more likely, that lack of knowledge is going to generate fear and stress.

The finances of RIF are another problem that most people have not thought about. RIF is expensive and it may not generate immediate savings. That means an agency may have to overshoot its reduction target to keep from busting the budget. Buyouts are a great tool that have proven their effectiveness. In fact, Congress should give every federal agency the increased ($40K) buyout cap that Defense got in the 2017 National Defense Authorization Act. But – buyouts cost up to $25K per employee. Severance pay is another RIF cost. An employee who is separated by RIF and who is not eligible to retire immediately gets severance pay. Severance can go as high as 52 weeks of pay. Another cost is lump sum annual leave. An employee who is separated or leaves voluntarily gets paid for accrued annual leave. That can easily add  10% of annual salary. So – if you separate a GS-12 who makes $90K per year and give that person 6 months of severance pay and their annual leave, that would cost $54K. If you do not make the RIF effective until mid-year, there is no dollar saving at all that year.

Lump sum leave, buyouts and severance pay do not take into account the biggest cost of RIF – grade and pay retention. Let’s say you abolish a GS-12 position where the employee makes that same $90K per year. The employee has enough seniority to bump or retreat into a GS-9 job. The GS-9 has enough seniority to bump or retreat to a GS-5. Both employees have been in the job long enough to qualify for grade retention. That means for the next 2 years, the former GS-12 and GS-9 will not lose a penny. The person who goes out the door is a GS-5 making $40K per year.  The job you abolished with the intent of saving $90K per year produces only $40K of savings. Once you add in the cost of severance pay and leave payout for the GS-5, the first year savings may drop to only $20K. Once the grade retention expires, the employees will receive pay retention. In most cases, they will never see an actual reduction in pay. They will simply get half of annual pay increases until their pay catches up. That will take years.

It is easy to see why a clean RIF is hard to come by. It can be done well, and it can be done in a way that does save money, but it takes time, careful analysis and planning, and a long-range view of consequences. I ran a RIF that affected more than 1500 people and we had no reversals on appeals, arbitrations or complaints. That took a lot of work and it was painful. Jump into it without the right preparation, and the consequences will be ugly.

The truth is that there is no painless way to dramatically shrink an organization. Agencies faced with that daunting task will need to make decisions that best serve the mission, while doing everything they reasonably can do to prepare and to look out for the interests of the workforce. It is not going to be easy, painless or without risk, but it can be done.

 

What Happened to All of the Young Federal Employees?

In 2009 there were 233,759 Federal employees under age 30 – now there are 176,533. In 2009 there were 224,775 employees age 60 and over. Now there are more than 268,000 and the number is growing. What happened? Why is the workforce getting older? Should we even care? After all, older employees are often more experienced, more stable in their careers, and likely to continue to working for a number of years.

The problem the government is facing is that the number of younger employees is a good indicator of the talent the government will have available for critical mid-career jobs in the next 15 – 20 years. The lack of 30 and under talent means we will be facing significant shortfalls as current mid-career and older employees retire. We have seen this problem before. During the Clinton administration, employees in human resources, procurement and other “control” jobs were significantly downsized. Every Chief Human Capital Officer and Chief Procurement Officer I have talked with says they are still paying the price for those cuts. When GS-14 and GS-15 jobs are advertised, the number of high quality candidates is often inadequate. These are jobs where we used to see large numbers of excellent applications. Now a handful of good candidates is considered to be a good result.

The current workforce demographics are shifting rapidly. When we look at Federal employment by age group, we see the number of under-30 employees is dropping precipitously (from 11.4% of the workforce to 8.5%) and the number of 60+ employees is growing (from 11.0% to 13%). The rapid shift of the workforce profile is significant and a bit shocking. While some of the change can obviously be attributed to employees aging out of the 29 and under and 30 – 59 categories, that doesn’t explain everything. Why are things changing so quickly? Are younger employees leaving faster than older ones? Is the government hiring fewer young employees?

Fed Employment trend - Agencies by age group

Turnover is Not the Problem

Some of these questions are easy to answer. Publicly available data show the number of people leaving government and the numbers who are hired. What we see is interesting – the raw number of young people leaving peaked in FY 2010 at 69,656, and dropped to only 46,319 in FY 2013. The number of mid-career (age 30 – 59) employees and the number of older employees leaving have increased. A higher turnover rate among younger employees is to be expected. Early in a career, more employees change jobs than they do later in their careers. In almost every occupation and in most employers, turnover is highest in the first two years of employment. The number of permanent employees under 30 who are quitting is up by about 2000 per year, but that is a small fraction of the drop in employment in that age group. What these numbers tell me is that we do not have the extreme problems with retention of younger workers that some argue we have. Quit rates are up, but overall losses of under-30 employees are down, not up.

Federal Departures from Civil Service by Broad Age Groups

Hiring is the Problem

Where we do see a clear problem is in hiring younger workers. Overall hiring is down across the board, but hires of young people have dropped far more than those of mid-career and older workers. The number of new hires under age 30 has dropped by 54.8% since FY 2009, while mid-career hiring has dropped 37.2% and age 60+ hiring has dropped 24.4%. It is clear that what is driving the number of younger employees down is not turnover – it is hiring. The intake of younger employees has dropped so much that, even though younger employees are actually quitting less than they did 5 years ago, the new hires are not keeping up.

Fed New Hires by Age Group 2009 Q1 2014

What is causing the hiring of young people to dry up? Three reasons stand out:

  • First is younger applicants’ lack of interest in Federal careers. In recent years we have seen pay freezes, a partial government shutdown and almost non-stop Fed-bashing by the press and members of Congress. Someone just starting a career is far less likely to choose an employer where they have difficulty getting pay raises, are vilified by the press and senior government officials, and run the risk of having their income cut off suddenly because of political fights in Congress.
  • Second is agencies hiring filling fewer entry level jobs because of budget cuts. An agency that can fill only a small percentage of its vacancies may elect to fill them with more experienced new employees who can be productive immediately. Until budgets stabilize, this problem is likely to persist.
  • Third is the lack of effective programs for hiring recent graduates. Two of the hiring programs that target such applicants are the Pathways and Presidential Management Fellows programs. A recent report by Jason Miller of Federal News Radio said neither program is meeting agency needs today. The Partnership for Public Service 2014 Chief Human Capital Officers survey showed agencies are not satisfied with the Pathways program and 47% are not using it in a meaningful way. Some argue the program’s public notice requirement are too onerous, while others say agencies simply have not adjusted to the program since it was deployed in 2012. Whatever the reason, there does not appear to be a clear “Pathway” to Federal service for recent graduates. That says nothing about the continuing challenges applicants of all ages face in navigating the overly complex and slow Federal hiring process.

The shift of the Federal workforce to one that is much older is likely to reignite talk of a pending retirement wave. Although previous predictions of retirement doom proved to be unfounded, they were based upon projections of a workforce that had hiring and turnover numbers closer to historical norms. This rapid demographic shift is unlike what we have seen in the past and it is safe to say no one knows when current employees will retire. Societal trends are moving in the direction of longer careers, both for lifestyle and economic reasons. That may mean the workforce will continue to increasingly be populated with older workers. If that continues, we are likely to see a retirement bubble at some point in the future. If the government develops a reputation as a workplace that is not hospitable to recruiting younger applicants, we will likely see the trend accelerating for a few years until something is done to proactively deal with it. Until that happens, we should expect to see these trends continue.

Federal agencies will face a number of challenges as the workforce profile becomes more titled toward older workers. In my next post I am going to address the consequences of these demographic shifts and what I believe the government must do to adapt.