Do hiring freezes work? It depends…

This post first appeared on Government Executive. Read the original article.

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It’s Cold Outside…and IN!

It’s a few days after Inauguration Day in Washington, D.C., and the temperature is still bitterly cold! But it’s not only freezing outside! It’s just as cold inside as well. Our new president has imposed a government-wide hiring freeze, so that attrition, both natural and incentivized, can work its magic and bring the federal government’s rolls down fast. But folks should not panic. We’ve been through this a couple of times before (at least I have, as have many of my gray-haired colleagues), and we’ve learned some lessons along the way, lessons that I hope the new administration is heeding. 

But before I offer up those lessons, one needs to start with a fundamental question—that is, do hiring freezes and attrition really work as intended—and the answer is that “it depends.” It depends on what you’re after, and if you’re after short term savings, that’s clearly the way to go. But that also has longer-term consequences that those who set annual agency budgets, appropriations and staffing priorities need to heed as well. 

A Few Factoids to Consider

First a factoid: Non-DOD agency budgets are upwards of 80% internal staff costs, and if you add contractors, that number can approach 90%. That’s how much it annually costs to pay those who do an agency’s work. 

And here’s a second factoid: On average, the federal government has an annual attrition or ‘quit’ rate (comprised of separations, resignations and regular retirements) of between 5% and 7%. With a workforce of almost 2.0 million employees, that means somewhere between 100,000 and 150,000 employees leave every year. And if you don’t back-fill all the vacancies they create, you get significant short-term savings…maybe even enough to satisfy the DOGE. 

Couple that with OPM-approved Voluntary Early Retirement Authority and Voluntary Separation Incentive Pay of $25,000 apiece, and you can bump that quit rate up by as much as a couple of percentage points. And if you want to go even further and separate all those in a probationary status (again, something the Trump administration is about to do), the numbers—and the savings—get even better.

So, There’s Good News and Bad News

So, if you want to reduce federal rolls quickly and in a big way, the Trump administration’s hiring freeze (plus attrition, of course) is the way to go. 

That’s the good news. The bad? When you reduce federal rolls this way, you can do so quickly and painlessly, but only your very best employees will leave…that is, the ones with the most experience, that have the most marketable skills (like cyber ninjas and nurses) and/or the highest performance. You’re literally at their mercy. They drive down the numbers individually, as they exercise their right to look elsewhere and that has performance consequences. In other words, the employees with other nongovernment employment opportunities will go. And of course, this also kills the prospect of recruiting new ones to replace them, but that’s for another day. 

To sum up, hiring freezes and attrition—even incentivized, VERA/VSIP-fueled attrition with lots of exceptions—results in severe skills imbalances over the medium and long term. But that matters only if one cares about them. If you don’t, if you’re just after savings, this is the way to go.  

However, if you worry about ‘hollowing out’ the government, about reducing its rolls to the point where it can’t perform its missions, what’s the alternative? It’s to first identify surplus skills and then conduct a merit-and-skills-based Reduction-in-Force. In other words, one can choose to use a scalpel, rather than the blunt instrument of freezes and attrition. That scalpel can be painful—after all, it guarantees that you’ll have involuntary separations—but it gets at reductions the “right” way: That is, by shedding those skills (and employees) who are truly surplus. 

Of course, that scalpel has other consequences too. It takes a lot of time—perhaps as much as a year, although I think that can be accelerated—and any savings are offset in the short term by the transaction costs of a RIF, as well as money for unemployment compensation, severance pay, buy-outs (which, for non-DOD agencies, remains frozen at $25.000 per taker, the same as in fiscal 1992, when they were first established), and the like. So, it’s complicated. But bottom line: while it takes longer and doesn’t save you as much as fast, RIFs can get you where you want to go too. And with fewer long-term consequences. 

And while a scalpel gets you to the same place, it means involuntary separations, and given today’s seniority-based RIF rules, those can have a disproportionate impact on those with the least of it. 

However, as I said, it’s complicated, and more importantly, there is an antecedent requirement that makes such an approach even more problematic in this inaugural year of the Trump Administration: To do this the right way—that is, with real, programmatic funding cuts and strategic workforce planning rather than an across-the-board, ‘salami slice’ approach to reductions—requires a thoughtful agency budget, something only the new Congress (working with the Trump White House and newly appointed agency heads) can provide. Will Congress exercise its constitutional authority to do so? Only time will tell, but while time is pending, all federal hiring seems to be frozen. 

A Short History Lesson

We went through this same Hobson’s Choice in DOD back in the early 1990s, when everyone was in search of the so-called ‘Peace Dividend’ at the end of the Cold War. In the Defense Department of 1992, that meant newly hired women and minorities would suffer. However, recall that that too was another presidential election year, so guess what? The George H. W. Bush administration chose the relatively painless way—a freeze + voluntary attrition, with the addition of newly-created VSIP to further drive down the rolls—and the Democrat-controlled Congress went along with it. 

The goal then was to bring down DOD military and civilian rolls (and budgets) as quickly as possible—we even had dramatic, congressionally imposed end-strength cuts to deal with—so that the resulting savings could be redirected to domestic programs and priorities. 

We told our DOD leadership, and through them the George H. W. Bush (and later, after he was elected, the Bill Clinton) White House, that we could do this the ‘easy and relatively painless way’ through a freeze and voluntary attrition, or we could use the far more painful and more attenuated scalpel of RIFs. We knew that the former would result in long-term skills imbalances, but in an election year—any election year—the choice was obvious. 

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