The Foreign Service Journal, February 2006

F E B R U A R Y 2 0 0 6 / F O R E I G N S E R V I C E J O U R N A L 39 F O C U S O N S E C . R I C E ’ S F I R S T Y E A R M C K INSEY R EDUX : W HAT I T G ETS R IGHT AND W RONG his past December, the Department of State released McKinsey and Company’s recent update of the study it did for State back in 1999. The full text of the management consulting firm’s report, “Winning the Next Phase of the War for Talent,” is avail- able on the intranet at: http://hrweb.hr.state.gov/dg/ pc/Docs/McKinsey2005ReportFINAL22July2005.doc. I was especially eager to read the report because of its important subject matter and because, while serving as AFSA VP for State, I was one of the 45 “current and for- mer employees” the McKinsey researchers interviewed earlier in 2005 as they gathered data. Not surprisingly, management is happy with the assessment, which credits State with substantial progress on talent management issues since 1999. McKinsey goes so far as to describe the amount of progress in recruiting and hiring, professional development, spousal employment and performance evaluation as “dramatic.” There is no dispute that State has made real progress on many fronts. From my perspective, however, having represented members of the Foreign Service with State management for four of the years the report covers, I see several serious flaws in the department’s practices that have yet to be corrected. The report itself warns that despite significant progress, there is still more the department should do to establish its commitment to people leadership. Yet it omits any mention of the sin- gle most important move the department could make to persuade employees it is truly committed to them: obtaining locality pay, also known as overseas compara- bility pay or OCP. A Question of Fairness The gap between Washington and overseas salaries grows wider every year. In 2006, those transferring over- seas will take a pay cut of 17.5 percent for doing what Congress created the Foreign Service to do: serve in for- eign countries. Before the decade is out, those serving overseas at the FS-1 level and below will give up one- fifth of their income for the privilege. (Beginning in 2004, Senior Foreign Service salaries were set at the Washington locality pay level. ) This ever-widening gap has significant implications for retention, motivation and productivity. In light of this, McKinsey and Company should have issued a clarion call for the department, led by Secretary Rice, to secure locality pay for all members of the Foreign Service, regardless of where they work. Its fail- ure even to mention the issue, even in a footnote, is a real disservice not only to thousands of hard-working T T HE M C K INSEY AND C OMPANY MANAGEMENT CONSULTING FIRM ’ S LATEST REPORT GENERALLY GIVES S TATE HIGH MARKS . B UT MUCH MORE REMAINS TO BE DONE . B Y L OUISE K. C RANE