Why business should care about civil service reform

A well-functioning government is essential for economic growth.


In the business world, government does not occupy much mental real estate. Aside from the occasional gripe over long lines at the post office or air travel delays, businesspeople usually limit their thinking about government to business risks created by shifting government policies, new regulations and, of course, taxes.

“Government’s vital role requires that, regardless of its size—and the political ideology of the people at the helm—government must work effectively.”
Yet government is critically important to business and economic activity, which is why a recent report by the Partnership for Public Service (a nonprofit group on whose Board I sit) is worth paying attention to from a business perspective.

Government provides the infrastructure that enables the movement of goods, services and people—by keeping roads maintained and mass transit operational for the daily commute, or by providing citizens with passports or visas for foreign travel. Government also sets standards so that the various systems businesses depend on work together. Government ensures that property is protected and respected—be it real, personal, or intellectual. Not to mention government is the sole provider of services for public safety, national defense, and disaster relief.

“Effective business function depends on effective government function.”
The government shoulders much or all of the responsibility for each of these critical functions, and many more. As populations increase, so does economic activity, leading to greater interdependence and interconnectedness that only intensifies this reliance on government. It is not a Republican issue or a Democratic issue—the critical importance of government is a simple fact.

Government’s vital role requires that, regardless of its size—and the political ideology of the people at the helm—government must work effectively. So what determines how effectively government works? It turns out government is no different from business: both fundamentally need people, tools, and leadership. Equally indispensable are effective systems for attracting, incentivizing, rewarding, and managing the people charged with making the enterprise work.

Therein lies the problem: the United States government has not changed its basic management system in some sixty years. It is operating under an outmoded system designed for a clerical and highly homogeneous workforce, based on traits of the current working generation’s parents and grandparents as they returned from World War II. Sixty years later, it is fair to say, the system is a mess. It is no longer even minimally fit for its purpose.

As the nonpartisan, nonprofit Partnership for Public Service concluded in its report:

Federal employee pay for professional and administrative occupations, for example, is not tied to the broader labor market, making it hard for government to compete with the private sector for talent. … Unable to compete for and retain some of the high-end skills and lacking the capacity to handle many critical day-to-day tasks, the government often has to look to outside contractors for the intellectual capital and know-how that is needed. … Top performers seldom receive sufficient rewards, poor per- formers are rarely fired or demoted, and managers are not held accountable for how well they manage employees or the outcomes of the work they oversee.

Fortunately, there is a solution at hand.

The Partnership for Public Service has put together a bold new civil service reform initiative to help the federal government finally re-engineer—from the ground up— the antiquated General Schedule (“GS”) system of management. The plan, authored in conjunction with the management consulting firm Booz Allen Hamilton, represents a bright, modern, simple new approach.

It recommends key changes in compensation and classification, performance management, leadership development, and hiring processes in the professional and administrative workforce, which accounts for roughly 65 percent of federal employees.

Among the key tenets of reform:

  • Setting pay for specific occupations in accordance with the general labor market;
  • Creating a common, yet flexible, civil service system for all of government to level the playing field in the competition for talent;
  • Streamlining the GS schedule and creating a dual-track system that better enables both technical experts and managers to progress in their careers and service to our nation; and
  • Making performance conversations meaningful by ensuring managers are trained and by awarding above-market pay to only those employees who perform above expectations.

In addition, the report recommends holding hiring managers accountable for bringing the right talent into their organizations and expanding the use of hiring flexibilities without compromising core principles such as preferences for veterans or merit-based selection; allowing direct-hire authority whenever agencies can show a shortage of “highly qualified” candidates; ensuring greater accountability and speedier justice for employees by consolidating the multiple complaint and appeal channels; and creating a four-tier executive service, with the fourth tier reserved for enterprise executives addressing critical needs or government-wide challenges. It also proposes filling key management positions with career executives to ensure long-term focus on the health of the organization.

It will be interesting to follow this new civil service reform initiative as it becomes a subject of Congressional debate. While it may not be the “sexiest” topic on Congress’s agenda, civil service reform is a critical issue to any American who cares about economic opportunity or business effectiveness.

Too often the potential for meaningful reform is overlooked, as businesspeople are resigned to government ineffectiveness. But effective business function depends on effective government function; government is just that important. It is high time it received the attention desperately needed to make our government effective.

David J. Kappos is a partner at the New York law firm Cravath, Swaine & Moore LLP, and a member of the Board of the Partnership for Public Service. He is the former Under Secretary of Commerce and Director of the U.S. Patent and Trademark Office (USPTO), a $3 billion federal agency with over 11,000 government workers. In 2013, the USPTO was rated the #1 agency in the federal government, among over 300 agencies, a rating correlated with dramatically improved performance and effectiveness.