Reform the federal pay scale to be much more performance-based. Supervisors are constantly evaluating employees, but it are dealing with a pay scale that gives very high base pay. Cut the base pay substantially and offer much more incentive for moving up in grade and step. This would save millions of dollars by cutting the wages of employees that may not be performing up to snuff, and many of them would choose to either perform better or to get out of the system. This would greatly improve efficiency in the system using performance ratings already in place. Reforming the pay scale could make the government much more competitive with the private sector in that high-performing employees would be compensated as such and low-performing employees would seek employment elsewhere.
Many people complain about the difficulty in eliminating low-performing employees, but under this system they would eliminate themselves. Rather than take a huge cut in pay - because they are falling to the base level - they would either improve their performance or quietly resign.
This could even be applied to Congress, making their salaries tied to their ability to get things done. If Congress is at a budget impasse, they should not get paid until the budget is passed - and then not get back pay. Pay based on performance is something that is hugely successful in private industry and it should be applied to the public sector as well.