Results-Oriented Cultures
Using Balanced Expectations to Manage Senior Executive Performance Gao ID: GAO-02-966 September 27, 2002Effective performance management systems link individual performance to organizational goals. In October 2000, the Office of Personnel Management amended regulations to require agencies to link senior executive performance with organizational goals; to appraise executive performance by balancing organizational results with customer satisfaction, employee perspective, and other areas; and to use performance results as a basis for pay, awards, and other personnel decisions. Agencies were to establish these performance management systems by their 2001 senior executive performance appraisal cycles. Because they implemented a set of balanced expectations prior to the Office of Personnel Management requirement, GAO studied the Bureau of Land Management's, Federal Highway Administration's, Internal Revenue Service's, and Veterans Benefits Administration's use of balanced expectations to manage senior executive performance in order to identify initial approaches that may be helpful to other agencies in holding senior executives accountable for results.
The agencies GAO reviewed developed an initial set of balanced expectations for senior executives to address in their individual performance plans. GAO found that these agencies are in the early stages of using a set of balanced expectations to appraise senior executive performance and there are significant opportunities to strengthen their efforts as they move forward in holding executives accountable for results. Specifically, more progress is needed in explicitly linking executive expectations for performance to organizational goals. In addition, while these agencies address partnering with customers and other stakeholders, greater emphasis should be placed in fostering the collaboration within and across organizational boundaries to achieve results. Successful organizations understand that they must often change their culture to successfully transform themselves, and such change starts with top leadership. Senior executive performance expectations to lead and facilitate change could be a critical element as agencies transform themselves.
GAO-02-966, Results-Oriented Cultures: Using Balanced Expectations to Manage Senior Executive Performance
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United States General Accounting Office:
GAO:
Report to Congressional Subcommittees:
September 2002:
Results-Oriented Cultures:
Using Balanced Expectations to Manage Senior Executive Performance:
GAO-02-966:
GAO Highlights:
Highlights of GAO-02-966, a report to Subcommittees on International
Security, Proliferation, and Federal Services and on Oversight of
Government Management, Restructuring, and the District of Columbia,
Senate Committee on Governmental Affairs.
Why GAO Did This Study:
Effective performance management systems link individual performance to
organizational goals. In October 2000, the Office of Personnel
Management amended regulations to require agencies to link senior
executive performance with organizational goals; to appraise executive
performance by balancing organizational results with customer
satisfaction, employee perspective, and other areas; and to use
performance results as a basis for pay, awards, and other personnel
decisions. Agencies were to establish these performance management
systems by their 2001 senior executive performance appraisal cycles.
Because they implemented a set of balanced expectations prior to the
Office of Personnel Management requirement, GAO studied the Bureau of
Land Management‘s, Federal Highway Administration‘s, Internal Revenue
Service‘s, and Veterans Benefits Administration‘s use of balanced
expectations to manage senior executive performance in order to
identify initial approaches that may be helpful to other agencies in
holding senior executives accountable for results.
What GAO Found:
The agencies GAO reviewed developed an initial set of balanced
expectations for senior executives to address in their individual
performance plans. GAO found that these agencies are in the early
stages of using a set of balanced expectations to appraise senior
executive performance and there are significant opportunities to
strengthen their efforts as they move forward in holding executives
accountable for results. Specifically, more progress is needed in
explicitly linking executive expectations for performance to
organizational goals. In addition, while these agencies address
partnering with customers and other stakeholders, greater emphasis
should be placed in fostering the collaboration within and across
organizational boundaries to achieve results. Successful organizations
understand that they must often change their culture to successfully
transform themselves, and such change starts with top leadership.
Senior executive performance expectations to lead and facilitate change
could be a critical element as agencies transform themselves. The
agencies generally agreed with these conclusions, as well as the
selected initial implementation approaches GAO identified, as shown
below.
Selected Initial Implementation Approaches to Manage Senior Executive
Performance that May Be Helpful to Other Agencies:
Provide Useful Data. The agencies disaggregated data from agencywide
customer and employee surveys. In addition, the Bureau of Land
Management and Veterans Benefits Administration provide senior
executives with objective data through real-time data systems so that
executives can track their individual progress against organizational
goals.
Require Follow-up Action. The Internal Revenue Service requires senior
executives to develop action plans to follow up on customer and
employee issues identified through agencywide surveys. The Federal
Highway Administration requires executives to use 360-degree feedback
instruments to solicit employee views on their leadership skills and
then incorporate action items into their performance plans for the next
fiscal year.
Make Meaningful Distinctions in Performance. The agencies are working
at making distinctions in senior executive performance. To recognize
varying levels of significance and complexity among executive
performance, the Internal Revenue Service established an executive
compensation plan that assigns executives to bonus levels with
corresponding bonus ranges based on levels of responsibilities and
commitments.
This is a test for developing highlights for a GAO report. The full
report, including GAO's objectives, scope, methodology, and analysis is
available at [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-966].
For additional information about the report, contact J. Christopher
Mihm on (202) 512-6806. To provide comments on this test highlights,
contact Keith Fultz (202-512-3200) or email HighlightsTest@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Agencies‘ Balanced Expectations for Senior Executive Performance:
Initial Implementation Approaches to Manage Senior Executives‘
Performance:
Conclusions:
Agency Comments:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: BLM‘s Senior Executive Performance Plans:
Performance Elements:
Performance Standards for Elements:
Performance Standards for Summary Ratings:
Proposed Revisions for the 2002 Rating Year Performance Plans:
Appendix III: FHWA‘s Senior Executive Performance Plans:
Performance Elements:
Performance Standards for Elements:
Performance Standards for Summary Ratings:
Appendix IV: IRS‘s Senior Executive Performance Plans:
Performance Standards for Elements:
Performance Standards for Summary Ratings:
Appendix V: VBA‘s Senior Executive Performance Plans:
Performance Elements:
Performance Standards for Elements:
Performance Standards for Summary Ratings:
Revisions to the Fiscal Year 2002 Performance Plans:
Appendix VI: Comments from the Internal Revenue Service:
Tables:
Table 1: Examples of BLM‘s, FHWA‘s, IRS‘s, and VBA‘s Expectations for
Senior Executive Performance in Contributing to Organizational Results:
Table 2: Examples of BLM‘s, FHWA‘s, IRS‘s, and VBA‘s Customer
Satisfaction Expectations for Senior Executive Performance:
Table 3: Examples of BLM‘s, FHWA‘s, IRS‘s, and VBA‘s Employee
Perspective Expectations for Senior Executive Performance:
Table 4: IRS‘s Bonus Levels and Bonus Ranges of Base Salary for Senior
Executive Summary Evaluation Ratings:
Abbreviations:
BLM: Bureau of Land Management:
FHWA: Federal Highway Administration:
GPRA: Government Performance and Results Act:
IRS: Internal Revenue Service:
OPM: Office of Personnel Management:
RAC: resource advisory council:
VA: Department of Veterans Affairs:
VBA: Veterans Benefits Administration:
[End of section]
United States General Accounting Office:
Washington, D.C. 20548:
September 27, 2002:
The Honorable Daniel K. Akaka:
Chairman:
The Honorable Thad Cochran:
Ranking Minority Member:
Subcommittee on International Security, Proliferation, and Federal
Services:
Committee on Governmental Affairs:
United States Senate:
The Honorable Richard J. Durbin:
Chairman:
The Honorable George V. Voinovich:
Ranking Minority Member:
Subcommittee on Oversight of Government Management, Restructuring, and
the District of Columbia:
Committee on Governmental Affairs:
United States Senate:
Leading organizations have recognized that a critical success factor in
fostering a results-oriented culture is a performance management system
that creates a ’line of sight“ showing how unit and individual
performance can contribute to overall organizational goals and helping
them understand the connection between their daily activities and the
organization‘s success. Effective performance management systems first
align leadership‘s performance expectations with organizational goals
and then cascade performance expectations through all levels in the
organization. Effective systems are not merely once- or twice-yearly
expectation setting and appraisal tools, but can help the organization
manage on a day-to-day basis. Leading organizations use their
performance management systems to achieve results, accelerate change,
and facilitate communication throughout the year so that discussions
about individual and organizational performance are integrated and
ongoing. Thus, an effective performance management system can be a
strategic tool for organizations to drive internal change and achieve
external results.
We have observed that modernizing performance management systems and
linking them to agency strategic plans and desired outcomes should be a
top priority as agencies seek to transform their cultures in response to
existing and emerging challenges and opportunities. [Footnote 1]
Performance management systems in leading organizations typically seek
to achieve three key objectives. First, they strive to provide candid
and constructive feedback to help individual employees maximize their
contribution and potential in understanding and realizing the goals and
objectives of the agency. Second, they seek to provide management with
the objective and fact-based information it needs to reward top
performers. Third, performance management systems provide the necessary
information and documentation to deal with poor performers. Most
federal performance management systems fail to achieve these
objectives.
In January 2001, GAO designated strategic human capital management as a
governmentwide high-risk area. [Footnote 2] One of the key areas
challenging federal agencies is creating results-oriented
organizational cultures. Many agencies lack organizational cultures
that promote high performance and accountability, which are critical to
successful organizations. To help agency leaders effectively lead and
manage their people and integrate human capital considerations into
daily decision making and the program results they seek to achieve, we
developed a strategic human capital model. [Footnote 3] The model
highlights the kinds of thinking that agencies should apply, as well as
some of the steps they can take, to make progress in managing human
capital strategically. As detailed in that model, one critical success
factor is to link unit and individual performance to organizational
goals.
To help agencies hold senior executives accountable for organizational
results, the Office of Personnel Management (OPM) amended regulations
for senior executive performance management in October 2000. These
amended regulations on governing performance appraisals for senior
executives require agencies to establish performance management systems
that (1) hold senior executives accountable for their individual and
organizational performance by linking performance management with the
results-oriented goals of the Government Performance and Results Act of
1993 (GPRA), (2) evaluate senior executive performance using measures
that balance organizational results with customer satisfaction, employee
perspectives, and any other measures agencies decide are appropriate,
and (3) use performance results as a basis for pay, awards, and other
personnel decisions. Agencies were to establish these performance
management systems by their 2001 senior executive performance appraisal
cycles.
The first objective of this report was to describe the sets of balanced
expectations selected federal agencies used to appraise senior executive
performance for organizational results, customer satisfaction, and
employee perspectives. Our second objective was to identify the initial
implementation approaches these agencies have taken to manage senior
executive performance that may be helpful to other agencies as they
implement OPM‘s amended regulations governing senior executive
performance management systems. We selected the Bureau of Land
Management (BLM), Federal Highway Administration (FHWA), Internal
Revenue Service (IRS), and Veterans Benefits Administration (VBA)
because they used a set of balanced expectations to manage the
performance of all or a significant portion of their senior executives
prior to the OPM requirement. IRS incorporated balanced expectations
into its senior executive performance management system in response to
the Internal Revenue Service Restructuring and Reform Act of 1998; the
other agencies established their systems administratively to emphasize
senior executives‘ accountability for organizational results and other
expectations. As appropriate, agencies developed the performance
expectations for senior executives‘ individual plans to meet particular
program and management objectives and agency needs. To describe
agencies‘ expectations for senior executive performance, we used the
categories prescribed by OPM‘s regulations”organizational results,
customer satisfaction, and employee perspective. For additional
information on our objectives, scope, and methodology, see appendix I.
Results in Brief:
BLM, FHWA, IRS, and VBA are in the early stages of implementing new
performance management systems for their senior executives. Each
agency has taken the first step in developing an initial set of
expectations for senior executives to address in their individual
performance plans that are intended to balance accountability for
organizational results with a focus on customer satisfaction and a
consideration of employee perspectives. The agencies offered a menu of
expectations for senior executives to choose from and incorporate into
their individual performance plans. The agencies subsequently used
these expectations as the basis of senior executives‘ performance
appraisals.
* Organizational results. To appraise senior executives‘ contributions
to organizational results, the agencies identified (1) core competencies
and supporting behaviors for senior executives to follow that are
intended to achieve results, such as learning about current issues and
applying that knowledge to make sound decisions or pursuing business
excellence, and (2) to only a limited extent, targets for senior
executives to meet that are directly linked to organizational goals,
such as the average return on sales of acquired properties or the
percent of cases meeting accuracy standards.
* Customer satisfaction. The agencies set expectations for senior
executives to address customer satisfaction in their individual
performance plans and appraised their performance on the basis of
partnerships formed, customer feedback, and improved products and
services.
* Employee perspectives. The agencies set expectations for senior
executives to address employee perspectives in their individual
performance plans and appraised their performance on the basis of the
training provided to staff, safe and healthy work environment,
teamwork, employee satisfaction, and fairness and diversity.
In addition, we identified an initial set of selected implementation
approaches BLM, FHWA, IRS, and VBA are taking that may be helpful to
other agencies as they manage senior executive performance against
balanced expectations. BLM, FHWA, IRS, and VBA:
* Provide useful data. The agencies provide senior executives with
objective data to help them manage their balanced expectations during
the year. For example, data systems at BLM and VBA provide real-time
data to help senior executives track their individual performance
against organizational results and allow them to compare their
performance against others. In addition, the agencies disaggregated data
from agencywide surveys so that the results were applicable to the
senior executives‘ customers and employees.
* Require follow-up action. IRS and FHWA require senior executives to
identify action items to follow up on customer and employee issues. For
example, IRS requires executives to hold workgroup meetings and develop
action plans to follow up on customer and employee issues identified
through agencywide surveys. In addition, FHWA requires senior
executives to use 360-degree feedback instruments to solicit employee
views on the executives‘ leadership skills and then incorporate action
items into their individual performance plans based on the results.
* Make meaningful distinctions in performance. The agencies are working
at implementing effective performance management systems that make
meaningful distinctions in senior executive performance, such as by
identifying varying levels of significance and complexity among senior
executive performance and considering these levels in awarding bonuses.
Towards this end, IRS established an executive compensation plan for
determining base salary, performance bonuses, and other awards for
senior executives that corresponds bonus levels to different levels of
responsibilities and commitments. FHWA weights the elements it uses to
appraise senior executive performance to make distinctions among its
executives‘ performance.
BLM, FHWA, IRS, and VBA recognize that they are in the early stages of
implementation in using a balanced set of expectations as part of their
senior executive performance management systems. Not surprisingly,
therefore, there are significant opportunities to strengthen their
efforts as they move forward in holding senior executives accountable
for results. In particular, more progress is needed in explicitly
linking senior executive expectations for performance to results-
oriented organizational goals. Efforts at making this direct linkage
were often very limited. In addition, while these agencies address
partnering with customers and other stakeholders, greater emphasis
should be placed in fostering the necessary collaboration both within
and across organizational boundaries to achieve results.
Lastly, there is a growing recognition, driven by a variety of worldwide
trends and pressing long-term fiscal challenges, that the federal
government is on the brink of an enormous transformation in what the
government does, how it does business, and, in some cases, who does the
government‘s business. Ultimately, successful organizations understand
that they must often change their culture to successfully transform
themselves, and that such a change starts with top leadership. Senior
executive performance and accountability for change management will
therefore be critical to the success of the federal government‘s
transformation. A specific performance expectation to lead and
facilitate change could be a critical element as agencies transform
themselves to succeed in an environment that is more results oriented,
less hierarchical, and more integrated. The Commissioner of Internal
Revenue provided written comments generally agreeing with the contents
of a draft of this report. In addition, cognizant agency officials from
BLM, FHWA, and VBA generally agreed with a draft of this report.
Background:
Strategic human capital management, and specifically the need to develop
results-oriented organizational cultures, is receiving increased
attention across the federal government. The Congress has underscored
the consequences of human capital weaknesses through a wide range of
oversight hearings held over the last few years. In addition, to foster
a results-oriented culture in federal agencies, the Congress is
considering legislative proposals to, among other things, focus
attention on the impact poor performance can have on the effectiveness
of an organization and require agencies to have a chief human capital
officer to select, develop, and manage a productive, high-quality
workforce.
The President‘s Management Agenda, released in August 2001, identified
human capital as one of the five key governmentwide management
challenges currently facing the federal government. Subsequently, the
Office of Management and Budget and OPM developed criteria that
recognized the importance of creating a performance culture that
appraises and rewards employees based on their contributions to
organizational goals as a key dimension of effective human capital
management.
We developed a model of strategic human capital management to highlight
the kinds of thinking that agencies should apply, as well as some of the
steps they can take, to make progress in managing human capital
strategically. [Footnote 4] The model consists of eight critical
success factors, which are organized to correspond with four
cornerstones of effective strategic human capital management: (1)
leadership, (2) strategic human capital planning, (3) acquiring,
developing, and retaining talent, and (4) results-oriented
organizational cultures. Within the cornerstone of results-oriented
organizational cultures, a critical success factor is linking unit and
individual performance to organizational goals.
One way to reinforce accountability and alignment of individual
performance expectations with organizational goals is through the use of
results-oriented performance agreements. We have reported that other
countries have begun to use their performance management systems as a
strategic tool to help achieve results. [Footnote 5] In particular,
they use performance agreements to align and cascade organizational
goals to individual performance expectations through several levels in
their organizations. They also use performance agreements to help
identify the crosscutting connections both within and between agencies
and align the performance commitments of top-level executives with
broader governmentwide priorities.
Further, our work has shown that U.S. agencies have benefited from their
use of results-oriented performance agreements for political and senior
career executives. [Footnote 6] Although each agency developed and
implemented performance agreements that reflected its specific
organizational priorities, structures, and cultures, the performance
agreements met the following characteristics. They:
* strengthened alignment of results-oriented goals with daily
operations;
*
fostered collaboration across organizational boundaries;
* enhanced opportunities to discuss and routinely use performance
information to make program improvements;
* provided a results-oriented basis for individual accountability, and;
* maintained continuity of program goals during leadership transitions.
Prior to OPM amending its regulations on senior executive performance
management systems, BLM, FHWA, IRS, and VBA implemented systems that
used a set of balanced expectations to manage senior executive
performance. BLM implemented a balanced approach to manage its senior
executive performance to focus attention and accountability on
organizational priorities, make resource allocations, and minimize
employee frustration. BLM incorporated performance elements in senior
executives‘ individual performance plans for the rating year ending June
2000 that were structured around its strategic goals to (1) ’Restore and
Maintain the Health of the Land,“ (2) ’Serve Current and Future
Publics,“ and (3) ’Improve Organizational Effectiveness.“ BLM also
included a performance element in the senior executives‘ plans to
’Improve Human Resources Management and Quality of Work Life.“ (For
more information on BLM‘s senior executive performance plans, see app.
II.)
FHWA implemented a balanced approach to managing its senior executive
performance in response to its 1999 employee satisfaction survey.
Specifically, the majority of employees that responded indicated that
they did not understand their workgroup‘s role in implementing FHWA‘s
corporate management strategies that were based on the Malcolm
Baldridge National Quality Award and the Presidential Quality Award
Criteria”leadership, strategic planning, customer and partner focus,
information and analysis, human resource development and management,
process management, and business results. [Footnote 7] Beginning in
fiscal year 2000, FHWA appraised senior executives on these corporate
management strategies. (For more information on FHWA‘s senior executive
performance plans, see app. III.)
In response to the Internal Revenue Service Restructuring and Reform Act
of 1998, IRS initiated a method of measuring performance designed to
foster quality service, promote compliance with the tax laws, and
consider the impact on employees. In fiscal year 2000, IRS implemented
a senior executive performance management system that aligned the
executives‘ performance expectations with a set of balanced
expectations consisting of employee satisfaction, customer
satisfaction, and business results, and with two additional areas of
responsibility”leadership and equal employment opportunity. (For more
information on IRS‘s senior executive performance plans, see app. IV.)
VBA adopted a balanced scorecard approach in fiscal year 1999 as a
strategic management tool to drive organizational change, provide
feedback to employees on measures they can influence, link performance
appraisal and reward systems to performance measures, and provide
incentives to managers to work as teams in meeting performance
measures. [Footnote 8] Its scorecard included measures for accuracy,
speed and timeliness, unit cost, customer satisfaction, and employee
development and satisfaction. VBA incorporated these measures in the
performance appraisals for senior executives in its regional offices
where the majority of senior executives are located. (For more
information on VBA‘s senior executive performance plans, see app. V.)
Agencies‘ Balanced Expectations for Senior Executive Performance:
Effective performance management systems translate organizational
priorities and goals into direct and specific commitments that senior
executives will be expected to achieve during the year. To this end,
BLM, FHWA, IRS, and VBA developed a set of expectations for senior
executive performance that were intended to balance organizational
results, customer satisfaction, and employee perspectives and offered a
menu of expectations for senior executives to incorporate into their
individual performance plans. They appraised senior executives‘
contributions to organizational results by the core competencies and
supporting behaviors senior executives followed or the targets they
met. In addition, the agencies appraised senior executives‘ performance
against their expectations for customer satisfaction and employee
perspectives.
Organizational Results:
OPM‘s regulations emphasize holding senior executives accountable for
their individual and organizational performance by linking individual
performance management with results-oriented organizational goals. To
appraise senior executive contributions to organizational results, BLM,
FHWA, IRS, and VBA identified core competencies and supporting
behaviors for senior executives to follow, while VBA also identified
targets for senior executives to meet that are directly linked to
organizational results, as shown in table 1.
Table 1: Examples of BLM‘s, FHWA‘s, IRS‘s, and VBA‘s Expectations for
Senior Executive Performance in Contributing to Organizational Results:
Basis for senior executive appraisals: Core competencies and supporting
behaviors;
Examples of expectations to contribute to organizational results:
* Pursue business excellence through effective process management and
the application of balanced measures.
* Learn about current and emerging issues/developments in own field of
expertise and apply knowledge to make technically sound operational
decisions.
* Understand and plan for the condition and use of the public lands by
assuring that assessments and land use plans are completed.
* Improve program accountability and performance by staying within the
organizational cost targets and assuring the accuracy of cost data.
* Make progress in the improved use of existing automation tools.
* Develop and execute plans to achieve organizational goals.
* Develop critical business metrics to measure the overall quality of
processes and services and report results.
* Translate strategies into unit, division, team, and individual action
plans with performance measures based on the strategic objectives and
performance goals.
Basis for senior executive appraisals: Targets directly linked to
organizational results;
Examples of expectations to contribute to organizational results:
* Proportion of veterans who receive planned service and are
rehabilitated, compared with all veterans who exit the program.
* Average number of months from date of acquisition to the sale date of
properties acquired due to defaults on Department of Veterans Affairs‘
guaranteed loans.
* Average number of days from when the veteran begins ’employment
services“ status to when the veteran enters suitable employment.
* Percent of original and reopened compensation and pension claims and
appeals completed and determined to be technically accurate.
* Cost per compensation claim completed.
* Average return on sales of acquired properties.
Source: BLM, FHWA, IRS, and VBA fiscal year 2001 guidance.
[End of table]
Core competencies and supporting behaviors: The agencies identified core
competencies and supporting behaviors for senior executives to follow
that are intended to contribute to their agencies‘ achievement of
performance goals. For example, FHWA set a performance expectation for
senior executives to develop strategies to achieve FHWA‘s strategic
objectives and performance goals. To help meet this expectation, the
Director of Field Services-South convened the ’Southern Executive
Safety Summit“ in 2000 to address the region‘s highway fatality
rates”the highest in the nation”and their impact on FHWA achieving its
goal on safety. The participants, including state and federal
transportation and safety officials from the region, learned what each
state was doing to decrease fatality rates and discussed how to create
new safety strategies for each state and the region as a whole.
Following the summit, Kentucky, North Carolina, and Mississippi held
subsequent state safety summits and pursued numerous initiatives to
reduce fatalities. The senior executive reported in his self-assessment
for fiscal year 2001 that many states in the region have experienced a
reduction in the number of highway fatalities since the Southern
Executive Safety Summit, which is helping FHWA meet its goal of
reducing the number of highway-related fatalities by 20 percent in 10
years.
Similarly, to address IRS‘s performance expectation for senior
executives to develop and execute plans to achieve organizational
goals, a senior executive who is the area director for compliance in
New York has a performance expectation in his fiscal year 2002
individual performance plan to ensure that taxpayers affected by the
events of September 11, 2001, are treated and audited according to
their circumstances, and that the compliance guidelines and policy
regarding affected taxpayers are adhered to. In particular, these
taxpayers”including individuals and businesses”were not to be audited
for prior tax years before the end of March 2002, if such an audit was
necessary.
To contribute to its strategic goal to restore and maintain the health
of the land, BLM set an expectation for senior executives to understand
and plan for the condition and use of public lands. In particular, the
senior executive who heads the Colorado state office had a performance
expectation in her individual performance plan for the 2001 performance
appraisal cycle to conduct land use assessments and complete plans as
scheduled for the Gunnison Gorge National Conservation Area. In her
self-assessment for the 2001 performance appraisal cycle, she stated
that she began conducting land use assessments for Gunnison Gorge and
approved ’pre-plans,“ which outline the anticipated schedule, budget,
and stakeholder involvement to complete a land use plan.
Targets directly linked to organizational results: VBA identified
targets with specific levels of performance for senior executives to
meet. These targets link to the priorities in VBA‘s balanced scorecard
and the Department of Veterans Affairs‘ (VA) strategic goals. For
example, to contribute to VA‘s strategic goal to ’provide …One VA‘
world class service to veterans and their families through the
effective management of people, technology, processes and financial
resources“ and to address its priority of accuracy, VBA set a national
target of 72 percent for fiscal year 2001 for the accuracy rate of
original and reopened compensation and pension claims and appeals that
were completed and determined to be technically accurate. To contribute
to that national target, the senior executive in the Nashville regional
office had a performance expectation for his office to meet a target
accuracy rate of 59.2 percent. Similarly, to further contribute to VA‘s
strategic goal of world-class service and to address its priority of
speed and timeliness, VBA set a national target for property holding
time”the average number of months from date of acquisition to date of
sale of properties acquired due to defaults on VA guaranteed loans”of
10 months for fiscal year 2001. To contribute to the national target,
the same senior executive had a performance expectation for his office
to meet a target of 8.6 months.
Customer Satisfaction:
OPM‘s regulations recognize that senior executives in public sector
organizations face the challenging task of balancing the needs of
multiple customers, who at times may have differing or ever competing
expectations. Customer involvement is important to first make senior
executives aware of differing or competing expectations and to then
build partnerships and coalitions to reach mutual understanding of the
issues. To this end, BLM, FHWA, IRS, and VBA set expectations for
senior executives to address customer satisfaction in their individual
performance plans and appraised their performance on the basis of
partnerships, customer feedback, and improved products and services.
Examples of the agencies‘ expectations for customer satisfaction are
shown in table 2.
Table 2: Examples of BLM‘s, FHWA‘s, IRS‘s, and VBA‘s Customer
Satisfaction Expectations for Senior Executive Performance:
Basis for senior executive appraisals: Partnerships;
Examples of customer satisfaction expectations:
* Balance a variety of federal, state, and local interests through
timely and enhanced consultation, cooperation, and communication to
build consensus.
* Establish cooperative and constructive relationships, networks, and
alliances that facilitate input from a wide range of internal and
external stakeholders.
* Engage customers and stakeholders in alternative dispute resolution
to manage and/or resolve conflicts in a positive and constructive
manner.
Basis for senior executive appraisals: Customer feedback;
Examples of customer satisfaction expectations:
* Identify customer and partner needs and measure their level of
satisfaction.
* Receive and act upon feedback from customer surveys, listening
sessions, focus groups, and other learning techniques.
* Percentage of veterans giving a high rating on the satisfaction
surveys.
* Percentage of veterans‘ satisfaction with the way VBA handled their
claims.
Basis for senior executive appraisals: Improved products and services;
Examples of customer satisfaction expectations:
* Initiate actions and manage risks to develop new products and
services within or outside the organization.
* Use customer input to improve products and services to ensure
customer and partner needs are met.
* Act to continuously improve products and service.
* Percentage of callers who get through, but hang up before being
connected to an employee.
* Average length of time that a caller waits before being connected to
the telephone agent.
Source: BLM, FHWA, IRS, and VBA fiscal year 2001 guidance.
[End of table]
Partnerships: Partnerships and coalitions can help senior executives
work collaboratively with their customers to ensure that the
organization takes into account their multiple interests and achieves
results. BLM‘s senior executives have relied on resource advisory
councils (RAC) consisting of local residents with diverse interests as
a way to involve customers, identify issues, and reach a reasonable
degree of consensus regarding BLM‘s land management programs. To meet
BLM‘s expectation to establish cooperative and constructive
relationships that facilitate input from a range of stakeholders, the
senior executive who heads the Montana state office set an expectation
to expand partnerships and maintain close working relationships with
national interest groups in his individual plan for the 2001
performance appraisal cycle. This senior executive solicited feedback
from the Central Montana RAC to discuss among his customers how to
balance the ongoing, yet potentially competing uses”including
recreation, grazing, and oil and gas leases”of a 150-mile stretch of the
Missouri River and surrounding areas. According to the senior executive,
the RAC recommended that ongoing uses continue, but that this stretch
receive special protection from further development. In his self-
assessment for the 2001 performance appraisal cycle, the senior
executive stated that he continues to use the RAC as a highly effective
citizen advisory group that plays a significant role in land management
deliberations.
Customer feedback: Customer feedback can help senior executives
determine customers‘ needs and their levels of satisfaction with
existing products and services. To hold its senior executives
accountable for customer satisfaction, senior executives in VBA‘s
regional offices had performance expectations to meet targets for
veterans giving a high rating on satisfaction surveys. Specifically,
the senior executive in the Nashville regional office had a target in
fiscal year 2001 to attain 85 percent in overall satisfaction in a
national survey of customers using vocational rehabilitation and
employment services and support.
In addition, to address his performance expectation for customer
satisfaction, the senior executive who heads VBA‘s Waco regional office
convened frequent ’town hall“ meetings to listen to veterans‘ needs and
discuss VBA issues, such as legislative changes that affect the
processing of veterans‘ claims. According to this executive, the town
hall meetings helped improve his customer satisfaction levels because
veterans identified the concerns that were most important to them,
gained direct access to the VBA employees working on their benefit
claims, and were better able to understand the claims process.
Specifically, the senior executive reported in his self-assessment that
during fiscal year 2001 he worked with local service officers to
identify in advance those veterans planning to attend the town hall
meetings, had their claims folders available for review at the
meetings, and was thus able to enhance outreach programs.
Improved products and services: Senior executives can use the feedback
from customers to enhance the customers‘ understanding of the
organization and make improvements in the organization‘s products and
services. For example, to meet IRS‘s performance expectation for senior
executives to address customer satisfaction by continuously improving
products and services, a senior executive responsible for submission
processing and taxpayer assistance had a performance expectation in her
fiscal year 2001 individual performance plan to develop a communication
plan. This plan was intended to better serve customers by helping
improve their knowledge and understanding of the tax return process.
To hold its senior executives accountable for improved products and
services, VBA set targets for executives to achieve, such as the
abandoned telephone call rate”the percentage of callers who get through
to VBA, but are put on hold and hang up before being connected to an
employee. Specifically, for fiscal year 2001, the senior executive in
the Nashville regional office had a target for his office for an
abandoned telephone call rate of not more than 5 percent for customers‘
inquiries of VBA‘s benefit programs, such as compensation and pension
services.
Employee Perspectives:
OPM‘s regulations recognize that an agency‘s people are vital assets and
people achieve organizational goals and results. Accordingly, the
regulations call for senior executive performance plans and appraisals
to contain performance expectations on employees‘ perspectives. To this
end, BLM, FHWA, IRS, and VBA set expectations for senior executives to
address employee perspectives in their individual performance plans and
appraised their performance on the basis of the training provided to
staff, safe and healthy work environment, teamwork, employee
satisfaction, and fairness and diversity. Examples of the agencies‘
expectations for employee perspectives are shown in table 3.
Table 3: Examples of BLM‘s, FHWA‘s, IRS‘s, and VBA‘s Employee
Perspective Expectations for Senior Executive Performance:
Basis for senior executive appraisals: Training;
Examples of employee perspective expectations:
* Ensure that employees have the tools and training to perform their
jobs.
* Create an environment for continuous learning and development
opportunities.
* Ensure that plans exist and are adequately implemented to recruit,
train, retain, motivate, empower, and advance employees.
* Ensure workforce has skills aligned with the agency‘s objectives.
* Help attract and retain well-qualified employees.
* Ensure that the organization focuses appropriate resources on
employees‘ needs.
Basis for senior executive appraisals: Safe and healthy work
environment;
Examples of employee perspective expectations:
* Provide a safe, healthy work environment.
* Provide leadership and direction to identify initiatives that improve
the quality of worklife of employees.
* Commit resources to making the organization workplace friendly.
* Create an environment conducive to performance excellence and
personal and organizational growth.
Basis for senior executive appraisals: Teamwork;
Examples of employee perspective expectations:
* Effectively use ongoing feedback and coaching to promote cooperation,
teamwork, knowledge/skill sharing, and goal accomplishment.
* Motivate employees to achieve high performance through open and
honest communication and involve them in decision making.
* Promote and maintain an effective labor-management relations program
that incorporates the principles of partnership.
* Create an environment in which knowledge is managed, shared, and used
effectively.
Basis for senior executive appraisals: Employee satisfaction;
Examples of employee perspective expectations:
* Employees‘ satisfaction with their jobs.
* Employees‘ overall satisfaction with the organization.
Basis for senior executive appraisals: Fairness and diversity;
Examples of employee perspective expectations:
* Take steps to implement equal employment opportunity goals.
* Require all subordinate managers and supervisors to receive diversity
awareness and equal opportunity training.
* Establish a zero tolerance standard for discrimination, harassment,
and hostile work environments.
Source: BLM, FHWA, IRS, and VBA fiscal year 2001 guidance.
[End of table]
Training: Senior executives can provide employees with the necessary
training and continuous developmental opportunities to perform their
jobs more effectively. To address VBA‘s performance expectation for
senior executives to ensure that plans exist and are adequately
implemented to recruit, train, retain, motivate, empower, and advance
employees, the senior executive in VBA‘s Manila, Philippines, Regional
Office and Outpatient Clinic conducted focus groups to identify actions
needed to respond to the results of the 1999 employee survey. One
action was to task a training committee to develop and implement a
Training Needs Assessment tool to determine employees‘ training needs
and to schedule training for fiscal year 2002. The senior executive
stated in his self-assessment for fiscal year 2001 that the employees
and their supervisors used the assessment tool to establish individual
development plans and the training committee has been scheduling
training sessions to ensure that individual development plans are met.
To meet BLM‘s expectation for senior executives to help attract and
retain well-qualified employees, the senior executive who heads BLM‘s
Nevada state office set a performance expectation for the 2001
performance appraisal cycle to maintain a trained and motivated
workforce. This executive worked with his Human Resources Development
Committee, composed of representatives from the eight BLM field offices
in Nevada. The committee meets regularly to identify employee issues,
make recommendations, and implement actions. Specifically, with input
from the committee, the senior executive developed a Statewide
Mentoring Program to enhance and promote opportunities for employees‘
skill development and to assist them in achieving their career goals.
The senior executive did not discuss the mentoring program in his self-
assessment for the 2001 performance appraisal cycle, but generally
stated that his office provided training to enhance leadership and
interpersonal skills.
Safe and healthy work environment: Senior executives can provide
employees with safe, secure, and healthful work conditions to ensure
that the workspace is conducive to effective performance. To address
VBA‘s expectation for senior executives to provide a safe, healthy work
environment in fiscal year 2001, the senior executive who heads VBA‘s
Manila, Philippines, Regional Office and Outpatient Clinic worked with
employees to improve the security and safety of the regional office.
Specifically, to prepare the office in case suspicious materials are
received, the senior executive reviewed and updated its emergency
evacuation plan and then met with employees to ensure they understood
the plan‘s procedures and were comfortable with their responsibilities.
In addition, he worked with the Regional Security Office to provide
security awareness training to employees and held several emergency
drills to test employees‘ responses. He stated in his self-assessment
for fiscal year 2001 that while employees were still concerned with
security, he believed confidence in their safety and welfare had
improved.
Teamwork: Senior executives can encourage a teams-based approach to
help improve employee morale and job satisfaction by creating an
environment that is open to communication and has a sense of shared
responsibility for accomplishing organizational goals. To create an
environment in which knowledge is managed, shared, and used effectively,
FHWA encourages its senior executives to use organizational self-
assessments to solicit employee perspectives and gauge their employees‘
work environment. FHWA provides sample questions for these self-
assessments that are based on the Malcolm Baldridge criteria. For
example, the senior executive heading the Office of Information and
Management Services required each of her three divisions to complete an
organizational self-assessment in 2001. FHWA employees trained in the
Baldridge criteria facilitated the half-day sessions for each division.
As a result of the sessions, the office consolidated the three
divisions‘ self-assessments and summarized the office‘s ’strengths“ and
’opportunities for improvement“ in a report. The report identified one
of the office‘s strengths to be management‘s support and approval for
training, and one of its opportunities for improvement to be keeping
employees‘ individual development plans up to date. In response, the
senior executive identified in her individual performance plan a
specific expectation of updating individual development plans for every
employee by April 30, 2002.
To meet IRS‘s performance expectation for senior executives to motivate
employees to achieve high performance through open and honest
communication and involve them in decision making, a senior executive
who is the area director for compliance in New York included an
expectation in his fiscal year 2001 individual performance plan to look
for partnering opportunities to maximize problem resolution and employee
involvement, while developing and maintaining effective relationships
with the seven National Treasury Employees Union chapters in his area.
Employee satisfaction: Senior executives can monitor employees‘
satisfaction with their work environment to gauge if they feel empowered
and motivated to contribute to organizational goals. For senior
executives in the regional offices, VBA set a target for employee
satisfaction that senior executives were to achieve for fiscal year
2001. Based on a 1-to-5 scale, the target was set by estimating the
average response on two questions from the employee satisfaction
survey. The two questions ask about the employee‘s satisfaction with
his or her job and the employee‘s overall satisfaction with the
organization. For example, VBA set a national target score of 3.6 for
employee satisfaction in the compensation and pension services business
line in fiscal year 2001. All regional offices contribute to the target
for this business line. Specifically, the senior executive in the
Nashville regional office had a performance expectation for his office
to meet a target score of 3.5 for employee satisfaction.
Fairness and diversity: Senior executives can foster fairness and
diversity by protecting the rights of all employees, providing a fair
dispute resolution system, and working to prevent discrimination
through equality of employment and opportunity. To meet BLM‘s
performance expectation for senior executives to establish a zero
tolerance standard for discrimination, harassment, and hostile work
environments, a senior executive who heads BLM‘s Nevada state office
set an expectation in his individual plan for the 2001 performance
appraisal cycle that he would demonstrate commitment to
nondiscrimination in the workplace by ensuring fair access to
developmental opportunities for employees.
Initial Implementation Approaches to Manage Senior Executives‘
Performance:
While the four agencies tailored their performance management systems to
fit their organizational and operational needs, we identified an
initial set of implementation approaches that BLM, FHWA, IRS, and VBA
are taking that may be helpful to other agencies as they manage senior
executive performance against balanced expectations. BLM, FHWA, IRS,
and VBA:
* provide useful data;
* require follow-up actions, and;
* make meaningful distinctions in performance.
Provide Useful Data:
Providing objective data for organizational results, customer
satisfaction, and employee perspectives can help senior executives
manage during the year, identify performance gaps, pinpoint improvement
opportunities, and compare their performance to other executives.
Specifically, the agencies:
* developed data systems so that senior executives can track their
individual performance against organizational results, and;
* disaggregated customer and employee satisfaction survey data.
Developed data systems: To help senior executives see how they are
contributing to organizational results during the year, BLM and VBA
developed data systems for executives to use to track their individual
performance against organizational results. For example, BLM‘s
Director‘s Tracking System collects and makes available on a real-time
basis data on each senior executive‘s progress in their state offices
towards BLM‘s national priorities and the resources expended on each
priority. In particular, a BLM senior executive in headquarters
responsible for the wild horse and burro adoptions program can use the
tracking system to identify where the senior executives in the state
offices are against their targets and what the program costs have been
by state. Specifically, as of mid-June 2002, the BLM state director in
California had completed 532 adoptions at a total cost of $460,000
towards his target of 1,150 adoptions for fiscal year 2002. Similarly,
the state director in Montana had completed 46 adoptions at a total
cost of $63,000 towards his target of 300 adoptions.
VBA also developed a data system that tracks organizational and
individual performance. Its balanced scorecard data are updated monthly
and senior executives and other employees can access the data through
the agency‘s Intranet. The balanced scorecard compares actual
performance against the targets set for the national and regional
office levels. According to VBA officials, the scorecard helps
employees understand how they can affect the results of the
organization. Senior executives refer to the balanced scorecard data at
their leadership meetings, discuss how they performed relative to the
scorecard, and identify the causes behind outstanding and poor
performance.
Disaggregated survey data: Specific customer and employee feedback
helps senior executives pinpoint actions to improve products and
services for customers and to enhance employee satisfaction. BLM, FHWA,
IRS, and VBA disaggregated the data from agencywide customer and
employee satisfaction surveys so that the results were applicable to a
senior executive‘s customers and employees. For example, from its Use
Authorization Survey administered to its various customers in fiscal
year 2000, BLM disaggregated the survey data to provide the applicable
results to individual senior executives who head the state offices.
Specifically, the senior executive in the Montana state office received
data for his state showing that 81 percent of the grazing permit
customers surveyed gave a favorable rating for the timeliness of permit
processing and for service quality. In his self-assessment for the 2001
performance appraisal cycle, he stated that issuing grazing permits has
progressed without any problem or backlogs and that permittees have not
experienced any delays.
VBA disaggregates its survey results to the regional offices and policy
and program support offices that are larger than 15 employees in order
to allow the senior executives to determine actions that are
appropriate for their offices. In 2001, VBA administered its most
recent employee survey to measure aspects of organizational climate
related to high performance. For each question on the survey, VBA
provided the office results and the VBA average, as well as baseline
data from surveys conducted in 1997 and 1999. For example, 47 percent
of the employees surveyed in the St. Paul regional office either
strongly agreed or agreed that managers provided an environment that
supports employee involvement, contributions, and teamwork. According
to the 2001 survey results, this percentage is slightly higher than the
VBA average of 43 percent and indicated an improvement from the 33
percent the office scored on this question in both the 1997 and 1999
employee surveys. VBA compiles a national report of the results so that
senior executives can compare how their office scored against other
offices and VBA as a whole.
IRS disaggregates data to the workgroup level from its IRS/National
Treasury Employees Union Employee Satisfaction Survey, which measures
general satisfaction with IRS, the workplace, and the union. The Gallup
Organization administers this survey to all employees, which is
comprised of Gallup‘s 12 questions (’Q12“); [Footnote 9] additional
questions unique to IRS, such as views on local union chapters and
employee organizations; as well as questions on issues IRS has been
tracking over time. Gallup provides the results for each workgroup. For
example, a senior executive can compare how his workgroup performed to
other operating divisions and to IRS as a whole. Specifically, one
senior executive‘s workgroup scored 3.68 out of a possible 5 for
’having the materials and equipment they need to do their work right“
compared to the IRS-wide score of 3.58 on the survey. To allow senior
executives and managers to benchmark externally, Gallup compares each
workgroup‘s results to the 50th (median) and 75th (best practices)
percentile scores from Gallup‘s Q-12 database. To benchmark internally,
IRS provides the servicewide results from the previous year‘s survey in
each workgroup report.
Require Follow-up Actions:
As part of its senior executive performance management system, IRS and
FHWA require their senior executives to follow up on customer and
employee issues. To improve customer satisfaction, the Commissioner of
Internal Revenue set an expectation that the business units, headed by
senior executives, develop action plans based on customer survey data
that are relevant to the needs of their particular customers. IRS
provided guidance to senior executives and managers to help them
understand and interpret the customer survey data, identify areas for
improvement, and develop action plans to respond to customers‘ issues
and concerns.
For example, to address the customer satisfaction expectation in his
fiscal year 2002 individual performance plan, an IRS senior executive
who is the area director for compliance in Laguna Niguel, California,
requires each of his territory managers to present an action plan
identifying ways to improve low scores from customer surveys. He then
rolls up these managers‘ plans into a consolidated area action plan for
which he is responsible. Specifically, an expectation in his action
plan is to improve how customers are treated during collection and
examination activities by ensuring that examiners explain to customers
their taxpayer rights, as well as why they were selected for
examination and what they could expect. Further, the senior executive
plans to ensure that territory managers solicit feedback from customers
on their treatment during these activities and identify specific
reasons for any customer dissatisfaction. In his midyear self-
assessment for fiscal year 2002, the senior executive stated that
substantial progress is being made in achieving the collection and
examination customer satisfaction goals.
Similarly, to address employee perspectives, IRS requires senior
executives to hold workgroup meetings with their employees to discuss
the workgroups‘ Employee Satisfaction Survey results and develop action
plans to address these results. According to a senior executive in IRS‘s
criminal investigation unit, the workgroup meetings were beneficial
because they increased communication with employees and identified
improvements in the quality of worklife. For example, through the
workgroup meetings, employees identified the need for recruiting
supervisory special agents to even out some of the workload.
Subsequently, the senior executive set an expectation in his fiscal
year 2002 individual performance plan to ensure that the field office
has a strong recruitment program to attract viable candidates. He also
has an expectation to ensure his field offices hold timely workgroup
meetings and develop and implement action plans to address concerns
identified during these meetings.
To reinforce the importance of follow-up action, IRS developed a
Webbased database system to track workgroup issues across IRS.
According to an IRS official, the system is being upgraded to improve
its usefulness for senior executives and will allow them to track their
progress in completing the actions identified in the workgroup
meetings. In addition, all employees will be able to access summary
information to help identify trends in the data across workgroups. The
system will also provide employees with the opportunity to share best
practice information on resolved workgroup issues.
To help meet their employee perspective performance expectations, FHWA
requires senior executives to use 360-degree feedback instruments to
solicit employee views on their leadership skills. Based on the 360-
degree feedback, senior executives are to identify action items and
incorporate them into their individual performance plans for the next
fiscal year. FHWA piloted the 360-degree feedback instrument for half
its leadership team of senior executives in fiscal year 2001 and
scheduled the rest for fiscal year 2002. The 360-degree feedback
process is designed to provide an executive direct input from various
sources”peers, customers, and subordinates”and to compare those results
to a self-evaluation and input from a supervisor.
While the 360-degree feedback instrument is intended for developmental
purposes to help senior executives identify areas for improvement and is
not included in the executive‘s performance evaluation, executives are
held accountable for taking some action with the 360-degree feedback
results and responding to the concern of their peers, customers, and
subordinates. For example, based on 360-degree feedback, a senior
executive for field services identified better communications with
subordinates and increased collaboration among colleagues as areas for
improvement, and as required, he then incorporated action items into
his individual performance plan. In fiscal year 2001, he set a
performance expectation to develop a leadership self-improvement action
plan and identify appropriate improvement goals. In his self-assessment
for fiscal year 2001, he reported that he improved his personal contact
and attention to the division offices as evidenced by a 30 percent
increase in visits to the divisions that year. Also, he stated that he
encouraged his subordinates to assess their leadership skills.
Consequently, 9 of his 11 subordinates are using 360-degree feedback
instruments to improve their personal leadership competencies.
Make Meaningful Distinctions in Performance:
According to OPM, the amended regulations were designed to recognize
that effective performance management requires agency leadership to
make meaningful distinctions between acceptable and outstanding
performance of senior executives and to appropriately reward those who
perform at the highest level. Effective performance management systems
provide agencies with the objective and fact-based information they need
to distinguish levels of performance among senior executives and serve
as a basis for bonus recommendations.
OPM data on senior executive performance ratings indicate that agencies
across the federal government are not making meaningful distinctions
among senior executives‘ performance. Specifically, agencies rated about
85 percent and 82 percent of senior executives at the highest level
their systems permit in their performance ratings in fiscal years 2000
and 2001, respectively. Nearly all of the senior executives are rated
using three- and five-level rating systems with the majority of senior
executives rated under five-level systems. [Footnote 10] When
disaggregating the data by rating system, the percentage of senior
executives that received the highest level rating under five-level
systems was approximately 77 and 75 percent in fiscal years 2000
and 2001, respectively. In the same period, the percent of senior
executives receiving the highest level rating under three-level systems
was about 99 percent.
In addition, OPM data show that, governmentwide, approximately 52
percent of senior executives received bonuses each year since fiscal
year 1999. Between fiscal years 1999 and 2001, the average bonus payment
increased from about $10,200 to $12,300. [Footnote 11] OPM officials
told us that they plan to closely monitor the distribution of fiscal
year 2002 performance ratings and bonuses.
IRS, FHWA, VBA, and BLM recognize that they are still working at
implementing effective performance management systems that make
meaningful distinctions in senior executive performance. For example,
IRS established an executive compensation plan for determining base
salary, performance bonuses, and other awards for its senior executives
that is intended to explicitly link individual performance to
organizational performance and is designed to emphasize performance. To
recognize performance across different levels of responsibilities and
commitments, IRS assigns senior executives to one of three bonus levels
at the beginning of the performance appraisal cycle. Assignments depend
on the senior executives‘ responsibilities and commitments in their
individual performance plans for the year, as well as the scope of
their work and its impact on IRS‘s overall mission and goals. For
example, the Commissioner of Internal Revenue or Deputy Commissioner
assigns senior executives to bonus level three”considered to be the
level with the highest responsibilities and commitments”only if they
are a part of the Senior Leadership Team. IRS restricts the number of
senior executives assigned to each bonus level for each business unit.
In addition, for each bonus level, IRS establishes set bonus ranges by
individual summary evaluation rating, which is intended to reinforce the
link between performance and rewards. The bonus levels and
corresponding bonus amounts of base salary by summary rating are shown
in table 4.
Table 4: IRS‘s Bonus Levels and Bonus Ranges of Base Salary for Senior
Executive Summary Evaluation Ratings[A]:
Bonus level: 3;
Met: 5 to 10%;
Exceeded: 10 to 15%;
Outstanding: 15 to 20%.
Bonus level: 2;
Met: 5%;
Exceeded: 5 to 10%;
Outstanding: 10 to 15%.
Bonus level: 1;
Met: 0%;
Exceeded: 5%;
Outstanding: 5 to 10%.
[A] Bonuses paid to IRS career senior executives are governed by the
limits set forth in 5 USC 5384 and 9505, which provide that bonuses
shall be not less than 5 percent of basic pay.
Source: IRS guidance for fiscal year 2001.
[End of table]
To help ensure realistic and consistent performance ratings, each IRS
business unit has a ’point budget“ for assigning performance ratings
that is the total of four points for each senior executive in the unit.
After the initial summary evaluation ratings are assigned, the senior
executives‘ ratings are converted into points”an ’outstanding“ rating
converts to six points; an ’exceeded“ to four points, which is the
baseline; a ’met“ to two points; and a ’not met“ to zero points. If the
business unit exceeds its point budget, it has the opportunity to
request additional points from the Deputy Commissioner. IRS officials
indicated that none of the business units requested additional points
for the fiscal year 2001 ratings.
IRS piloted the compensation plan in fiscal year 2000 with the top
senior executives that report to the Commissioner of Internal Revenue
and used it for all senior executives in fiscal year 2001. For fiscal
year 2001, 31 percent of the senior executives received a rating of
outstanding compared to 42 percent for fiscal year 2000, 49 percent
received a rating of exceeded expectations compared to 55 percent, and
20 percent received a rating of met expectations compared to 3 percent.
In fiscal year 2001, 52 percent of senior executives received a bonus,
compared to 56 percent in fiscal year 2000. IRS officials indicated
that they are still gaining experience using the new compensation plan
and will wait to establish trend data before they evaluate the link
between performance and bonus decisions.
FHWA weights the elements it uses to appraise senior executive
performance to make meaningful distinctions among its senior executives.
These elements include (1) strategic and performance plan
accomplishments and corporate management improvements and results and
(2) job significance and complexity. The senior executives receive a
score totaling 100 points, with a maximum of 70 points for strategic and
performance plan accomplishments and corporate management improvements
and results, and a maximum of 30 points for job significance and
complexity. FHWA provides definitions for assigning points. For
example, to receive all 70 points for strategic and performance plan
accomplishments, the executive must achieve all the performance
expectations identified in the individual performance plan, including
exceptional advancement on the corporate management strategies. To
receive all 30 points for job significance and complexity, the
executive must have a position that is highly visible, with a high
degree of difficulty due to legislation, court decisions, political
pressures, and other factors. Rating officials use these scores in
assigning a rating to senior executives of ’achieved results,“
’minimally satisfactory,“ or ’unsatisfactory.“ In fiscal year 2001 and
2000, all 45 senior executives received a rating of achieved results.
FHWA recommended 20 of the 45 senior executives (44 percent) receive
bonuses in fiscal year 2001 and 22 of the 45 executives (49 percent)
in fiscal year 2000. For both years, each senior executive recommended
for a bonus received one.
For VBA, a task force was established in April 2001 to review VBA‘s
claims processing. It found that 82 percent of VBA‘s senior managers
were recommended to receive either a performance bonus or an increase in
senior executive rank in 2000 when performance for the organization as a
whole was considerably below program goals and performance varied
among regional offices. Stating that there must be appropriate rewards
for outstanding performance and negative consequences for those who do
not perform according to their performance agreement, the task force
recommended that detailed performance agreements be incorporated into
the performance standards for the senior executives in the regional
offices.
Following VA guidance for bonuses in fiscal year 2001, senior
executives in VBA receive bonuses by demonstrating significant
individual and organizational achievements during the performance
appraisal year as evidenced by clearly documented, specific executive
achievements, such as substantive improvements in the quality of work
or significant cost reductions. In fiscal year 2001, 50 percent of the
senior executives in VBA received a bonus, with 24 of the 50 executives
receiving the highest performance rating of ’outstanding.“
BLM appraises senior executives‘ performance and recommends them for
performance awards based on their achievement of the performance
elements in their individual performance plans and the executives‘
demonstration of leadership excellence. BLM rates its senior executives‘
performance as ’pass,“ ’provisional,“ or ’fail.“ Senior executives
receive a pass rating if they fulfill the fully successful standards
for the performance elements in their performance plans. All of the
senior executives received a pass rating in the 2000 and 2001
performance appraisal cycles. For the 2000 and 2001 performance
appraisal cycles, the Department of the Interior guidance limited BLM‘s
total number of senior executive nominations for performance awards,
including the Secretary‘s Executive Leadership Award, performance
bonuses, or pay rate increases, to no more than 45 percent or 9 of its
career senior executives as of the end of the appraisal cycles. Of
BLM‘s 17 rated career senior executives, 4 received performance
bonuses, 3 received pay rate increases, and 1 received the Secretary‘s
Executive Leadership Award in 2000. In 2001, of BLM‘s 19 rated career
senior executives, 5 received performance bonuses and 4 received pay
rate increases.
Conclusions:
Leading organizations use their performance management systems to
achieve results, accelerate change, and facilitate communication
throughout the year so that discussions about individual and
organizational performance are integrated and ongoing. Toward this end,
BLM, FHWA, IRS, and VBA are in the early stages of implementing their
new performance management systems for senior executives. In particular,
while these agencies identified core competencies and supporting
behaviors for senior executives to follow that are intended to
contribute to results, they identified to a much lesser extent targets
for senior executives to meet that are directly linked to
organizational goals. In addition, they identified expectations for
senior executive performance for customer satisfaction and employee
perspectives.
These agencies have taken the first steps in creating a performance
management system for senior executives that is a strategic tool for
holding individuals accountable for their contributions to results and
organizational success. Their initial implementation approaches to
manage senior executives‘ performance recognize the importance of
providing useful data so that executives can track their individual
performance against organizational results on a real-time basis and the
benefit of requiring follow-up action on customer and employee issues
through workgroup meetings and action plans. However, these agencies
also acknowledge that they are still working at implementing effective
systems that can make meaningful distinctions in performance.
There are significant opportunities to strengthen these efforts as they
move forward in holding senior executives accountable for results. In
particular, more progress is needed in explicitly linking senior
executive expectations for performance to results-oriented
organizational goals, fostering the necessary collaboration both within
and across organizational boundaries to achieve results, and
demonstrating a commitment to lead and facilitate change. These
expectations for senior executives will be critical to keep agencies
focused on transforming their cultures to be more results oriented,
less hierarchical, and more integrated, and thereby be better
positioned to respond to emerging internal and external challenges,
improve their performance, and assure their accountability.
Agency Comments:
We provided a draft of this report in August 2002 to the Secretaries of
the Interior, Transportation, the Treasury, and Veterans Affairs and the
Commissioner of Internal Revenue for their review. We received written
comments from the Commissioner of Internal Revenue stating that our
draft report accurately accounted for the factors that influence IRS‘s
executive performance management and compensation system (see app.
VI). In addition, cognizant agency officials from the Departments of the
Interior, Transportation, and Veterans Affairs responded that they
generally agreed with the contents of the draft report. In some cases,
they also provided technical comments to clarify specific points
regarding the information presented. Where appropriate, we have made
changes to this report that reflect these technical comments.
We are sending copies of this report to the Secretaries of the Interior,
Transportation, the Treasury, and Veterans Affairs; the Commissioner of
Internal Revenue; and the Director of OPM. We will also make this
report available to others upon request. In addition, the report will
be available at no charge on the GAO Web site at [hyperlink,
http://http://www.gao.gov].
If you have any questions about this report, please contact me or Lisa
Shames on (202) 512-6806 or mihmj@gao.gov. Janice Lichty and Bryan
Rasmussen were key contributors to this report.
Sincerely yours,
Signed by:
J. Christopher Mihm:
Director, Strategic Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To meet our objectives, we focused our review on federal agencies that
have implemented a set of balanced expectations in their performance
management systems for all or a significant portion of their senior
executives prior to the Office of Personnel Management (OPM) amending
the regulations. Based on research and interviews with knowledgeable
officials, we identified agencies that had relevant experience in using
a set of balanced expectations for senior executive performance
management systems. Among the possible agencies with relevant
experience, we selected the Bureau of Land Management (BLM), Federal
Highway Administration (FHWA), Internal Revenue Service (IRS), and
Veterans Benefits Administration (VBA) because they provided variation
in mission, size, and organizational structures.
To describe the sets of balanced expectations these agencies used to
appraise senior executive performance, we collected and analyzed
agencies‘ strategic plans, annual performance plans, and performance
reports; personnel policies and memoranda; survey instruments and
analyses; and the individual performance plans and self-assessments of
the senior executives we interviewed. We used the categories in OPM‘s
regulations to classify the agencies‘ expectations for senior executive
performance”organizational results, customer satisfaction, and employee
perspectives. Based on our review of the agencies‘ expectations, we
identified and categorized the general approaches that agencies took to
contribute to organizational results, customer satisfaction, and
employee perspectives, as shown in tables 1, 2, and 3 and included a
sample of expectations along these approaches. Our analysis and
characterization for categorizing the performance expectations and
examples of those expectations was independently reviewed and agreed
upon for the three categories.
To identify the initial implementation approaches these agencies have
taken that may be helpful to other agencies as they manage senior
executive performance against the balanced expectations, we interviewed
senior executives in person or over the telephone at the four agencies.
At BLM, FHWA, and VBA, we randomly selected 10 career senior executives
to interview at each agency, including 5 executives randomly drawn from
central headquarters and 5 executives randomly drawn from the field
offices. At IRS, because of the larger number of senior executives, we
randomly selected 21, or 10 percent, of the career senior executives to
interview, including at least 5 executives randomly drawn from central
headquarters and at least 5 executives randomly drawn from the field
offices. The random selections covered two or more levels of the
Executive Schedule for senior executives in each agency. This sample is
representative of the senior executives at their respective agencies.
We identified the examples described in this report through our
interviews with senior executives and other agency officials. We did
not independently verify the testimonial evidence from the interviews
or the documents that senior executives and agency officials provided
to us. We also did not attempt to assess the prevalence of the examples
we cite among the senior executives within the same agency. Therefore,
senior executives other than those cited for a particular example may,
or may not, be engaged in the same actions.
In addition, we spoke with the Commissioner of Internal Revenue, the
former Under Secretary of Benefits for VBA, and the former Deputy
Director for BLM to discuss their agencies‘ experiences and challenges
in implementing balanced expectations in their performance management
systems. We interviewed agency officials responsible for managing human
capital, implementing the Government Performance and Results Act
(GPRA), and administering agencywide customer and employee satisfaction
surveys, as well as other agency officials identified as having
particular knowledge of balanced expectations and performance
management in general. We spoke to OPM officials responsible for the
senior executive performance management regulations to discuss the
development and implementation of the regulations, as well as officials
responsible for amending and implementing the general workforce
performance management regulations. Lastly, we met with the President of
the Senior Executives Association and other subject matter experts from
the National Academy of Public Administration, Brookings Institution,
and PricewaterhouseCoopers Endowment for The Business of Government. We
performed our work in Washington, D.C. from October 2001 to July 2002 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: BLM‘s Senior Executive Performance Plans:
Performance Elements:
BLM‘s senior executive performance plans for the 2001 performance
appraisal cycle from July 1, 2000, through June 30, 2001, are structured
around four performance elements that correspond with BLM‘s strategic
goals. These performance elements and their fully successful performance
standards include the following.
Restore and maintain the health of the land: Understand and plan for the
condition and use of the public lands by conducting assessments and
completing land use plan evaluations; restore at-risk resources and
maintain functioning systems, particularly riparian areas and
watersheds; incorporate management land health standards into decisions
and plans; implement the National Fire Plan; and emphasize resource
protection by assuring that work commitments for monitoring and
inspection are met, appropriate enforcement actions are taken, and
results are recorded.
Serve current and future publics: Ensure the National Environmental
Policy Act and environmental analyses are sufficient to sustain program
decisions; reduce threats to public health, safety, and property by
completing deferred maintenance projects; continue action on energy and
mineral leases, permits, and claims; implement BLM‘s wild horse and
burro national strategy in accordance with program directives; and
improve land, resource, and title information by participating in the
development and implementation of bureauwide data standards.
Improve organizational effectiveness: Continue to improve customer
service through timely and enhanced consultation, cooperation, and
communication with government officials and others to build consensus;
review public comment cards and survey results to determine where
improvements can be made; expand partnerships to implement on-the-ground
activities; implement the service-first concept and improve overall
services; and improve program accountability and performance by staying
within the organizational cost targets and assuring the accuracy of cost
data, conducting the work aligned with cost targets, and improving work
processes and internal management practices based on analyses of
management and evaluation data, such as activity-based cost data.
Improve human resources management and quality of worklife: Develop a
strategy to provide for a needed workforce by developing and
implementing a response to the workforce plan; maintain a trained and
motivated workforce by implementing plans and strategies to improve the
satisfaction of BLM employees by assuring each employee has a current
position description and individual performance plan linked to the
strategic plan, and providing appropriate training for employees at all
levels; demonstrate improvement in diversity and composition of the
workforce as measured by the percent of hiring opportunities in which
diversity candidates are placed; demonstrate commitment to
nondiscrimination in the workplace by ensuring that individuals are not
denied employment or career advancement opportunities due to gender,
race, and other factors; and provide development opportunities to
subordinates to help them participate in the goal of achieving
workforce diversity.
Performance Standards for Elements:
BLM included the fully successful performance standards for each of the
performance elements in the executive‘s individual performance plans,
described above. Executives receive a rating of ’pass“ if they meet the
fully successful standard for an element. Executives could also receive
a rating of ’provisional“ or ’fail“ for each element.
Performance Standards for Summary Ratings:
Executives receive a summary rating of ’pass“ if they fulfill the fully
successful standards for all the performance elements in their
performance plans. Executives could also receive a summary rating of
’provisional“ or ’fail.“
Proposed Revisions for the 2002 Rating Year Performance Plans:
According to BLM officials, BLM is planning to revise the performance
elements in its senior executive performance plans for the 2002
performance appraisal cycle to reflect the priorities of BLM and the
Department of the Interior. The elements include GPRA, key management
objectives, the President‘s Management Agenda, and 4Cs philosophy
(consultation, cooperation, communication, all in the service of
conservation). Each performance element will include a fully successful
performance standard. The performance elements and standards include
the following.
* GPRA” (1) Restore and maintain the health of the land by conducting
assessments and completing land use plan actions as planned, (2) serve
current and future publics by ensuring the National Environmental
Policy Act and environmental analyses are sufficient to sustain program
decisions implementing the President‘s Energy Plan while assuring that
the National Environmental Policy Act and planning guidelines are met,
and (3) implementing BLM‘s wild horse and burro national strategy.
* Key management objectives”Implement the Director‘s priorities by (1)
assisting in the development of options to establish conservation
reserves, (2) improving the productivity and diversity of public lands,
(3) executing the National Fire Plan, (4) developing opportunities for
alternative sources of energy in land use planning and program
implementation, (5) completing new or revised land use plans as
proposed in congressional justifications, and (6) achieving targets for
abandoned mine lands/herd management areas consistent with the revised
wild horse and burro strategy and BLM‘s annual performance plan.
* President‘s Management Agenda”Improve financial management, improve
performance and budget integration, implement e-government, make
progress in the strategic use of human capital, and develop and
implement BLM‘s competitive sourcing plan. Specific ways to address
these areas were included.
* 4Cs philosophy”Demonstrate innovative approaches to implementing
the Secretary‘s 4Cs so that those impacted by BLM decisions are
considered and their concerns addressed; and demonstrate personal
leadership through significant contributions to achieving the
organization‘s goals, positioning the organization for the future,
through complex situations and working with others.
[End of section]
Appendix III: FHWA‘s Senior Executive Performance Plans:
Performance Elements:
FHWA‘s senior executive performance plans for fiscal year 2001 consist
of performance objectives that senior executives work to achieve during
the year. FHWA requires its senior executives to set critical and
noncritical performance objectives that are tailored to their
responsibilities within their respective offices and aligned with the
FHWA Administrator‘s performance agreement with the Secretary of
Transportation. These objectives are to contribute to FHWA‘s corporate
management strategies, which are based on the Malcolm Baldridge and the
Presidential Quality Award criteria. These criteria include the
following.
* Leadership”Strengthen FHWA‘s Leadership System, through training
and other developmental initiatives, for the agency‘s new organizational
culture; set the vision and direction, ensure accountability, and
provide the resources to deliver the products and services to the
customers in an excellent and timely manner.
* Strategic planning”Translate strategies into unit, division, team, and
individual action plans with performance measures based on the
strategic objectives and performance goals.
* Customer and partner focus”Identify customer and partner needs and
measure their level of satisfaction; achieve success through extensive
cooperation and partnering with state and local transportation agencies;
receive and act upon feedback from customers and use that information
to improve products and services to ensure customer and partner needs
are met.
* Information and analysis”Identify and develop key business
information systems that meet and track the Department of
Transportation and FHWA strategic goals; create an environment in
which knowledge, as a key asset of the agency, is managed, shared, and
used effectively.
* Human resource development and management”Increase employee
technical competence, authority, and the tools needed to meet agency
and customer needs; continue to develop and utilize the full potential
of the agency‘s human resources and create an environment that is
conducive to performance excellence and personal and organizational
growth.
* Process management”Design, manage, and improve key processes to
achieve better results; use customer- and employee-focused support,
service, and delivery processes to continually improve performance and
enhance products and services.
* Business results”Develop critical FHWA business metrics to measure
the overall quality of processes and services and report results; use
customer feedback and benchmark high-performance organizations to
continuously improve overall performance for the customers.
Performance Standards for Elements:
FHWA appraises senior executives on their achievement towards each
critical and noncritical performance objective.
Initial assessment ratings: For each performance objective in their
individual performance plan, senior executives receive an assessment of
’achieved results,“ ’minimally satisfactory,“ or ’unsatisfactory.“
* Achieved results”Performance that fully meets, exceeds, or
demonstrates sufficient progress toward the attainment of the objective
as defined by the performance targets.
* Minimally satisfactory”Performance that only partially meets or only
partially demonstrates sufficient progress toward the attainment of the
objective as defined by the performance targets.
* Unsatisfactory”Performance that fails to meet or demonstrate
sufficient progress toward attainment of the objective as defined by the
performance targets.
Performance Standards for Summary Ratings:
FHWA appraises senior executives on their achievement towards all the
performance objectives in their individual plans.
Summary ratings: Senior executives receive a summary rating on the
achievement of their performance objectives. The summary rating levels
include ’achieved results,“ ’minimally satisfactory,“ and
’unsatisfactory.“
* Achieved results”All critical objectives must be assessed achieved
results. No more than one noncritical objective can be assessed
minimally satisfactory and none can be assessed unsatisfactory.
* Minimally satisfactory”One or more critical objectives or two or more
noncritical objectives assessed minimally satisfactory, or one or more
noncritical objectives assessed unsatisfactory.
* Unsatisfactory”Unsatisfactory assessment on any critical objective.
[End of section]
Appendix IV: IRS‘s Senior Executive Performance Plans:
Performance Elements:
IRS‘s senior executive performance plans for fiscal year 2001 are
structured around responsibilities, commitments, and a retention
standard.
Responsibilities: The responsibilities reflect the core values of IRS
that are shared by all executives and managers for achieving performance
excellence. The responsibilities are structured around (1) leadership,
(2) employee satisfaction, (3) customer satisfaction, (4) business
results, and (5) equal employment opportunity.
* Leadership”Successfully leads organizational change, effectively
communicates the mission and strategic goals to employees and other
stakeholders, responds creatively to changing circumstances, and uses
sound judgment to make effective and timely decisions.
* Employee satisfaction”Ensures that a healthy work environment is
maintained, creates an environment for continuous learning and
development opportunities, and effectively uses feedback and coaching
to promote teamwork and skill sharing.
* Customer satisfaction”Listens to customers, analyzes their feedback to
identify their needs and expectations, builds strong alliances, and
involves stakeholders in making decisions and achieving solutions.
* Business results”Develops and executes plans to achieve
organizational goals, leverages resources to maximize efficiency and
produce high quality results, and learns about current and emerging
issues in own field of expertise.
* Equal Employment Opportunity”Takes steps to implement equal
employment opportunity; cooperates with equal employment opportunity
officials on complaints; assigns work and makes employment decisions
without regard to sex, race, color, national origin, and other factors;
and monitors work environment to prevent instances of prohibited
discrimination and/or harassment.
Commitments: Executives are to identify commitments they will
accomplish during the year that are based on the responsibilities. The
commitments describe a limited number of critical actions; objectives,
such as personal development objectives; and/or results that the
executive will work to achieve. They are specific to each executive and
should be derived from, and directly contribute to, the program
priorities and objectives established by the organization‘s annual
business or operations plan. In addition, senior executives are to
establish a principal commitment in their individual performance plans
focused on the overall attainment of objectives to accomplish the
operating division‘s performance plan.
Retention standard: IRS developed a performance standard relating to the
fair and equitable treatment of taxpayers that senior executives must
meet. [Footnote 12] The retention standard states: ’Consistent with the
individual‘s official responsibilities, administers the tax laws fairly
and equitably, protects taxpayers‘ rights, and treats them ethically
with honesty, integrity, and respect.“ According to IRS, the executive
and supervisor review the retention standard to ensure mutual
understanding.
Performance Standards for Elements:
IRS appraises senior executives on their achievement towards their
responsibilities, commitments, and retention standard.
Responsibilities: The executives receive a rating on how well they
achieved their responsibilities during the year and the actions taken
to support the accomplishment of the strategic goals and annual
business plan. These ratings include the following.
* Exceeded”In addition to placing appropriate emphasis on the five sets
of responsibilities, served as a role model in one or more of the five
sets. Actions taken were exemplary in promoting accomplishment of the
annual business plan and strategic goals.
*
Met”Placed appropriate emphasis on each of the five sets of
responsibilities. Appropriate actions were taken to support
accomplishment of the annual business plan and strategic goals.
* Not met”Placed insufficient emphasis on one or more sets of
responsibilities. Actions taken were inappropriate, ineffective, or
undermined strategic goals or annual business plan accomplishment.
Commitments: The executives receive a rating on how well they achieved
the desired results outlined in their performance commitments. The
ratings include the following.
* Exceeded”Overcame significant obstacles, such as insufficient
resources, conflicting demands, or unusually short time frames, in
achieving or exceeding desired results.
* Met”Achieved or made substantial progress toward achievement of
desired results.
* Not met”Did not achieve or make substantial progress toward
achievement of desired results.
Retention standard: Executives are rated on whether they met or failed
to meet their retention standard.
Performance Standards for Summary Ratings:
Senior executives receive a summary evaluation, which combines the
ratings they received for their responsibilities, commitments, and
retention standard. Summary evaluation ratings include the following.
* Outstanding”The executive met the retention standard and performed
as a model of excellence by exceeding the responsibilities and
commitments in the individual performance plan, despite constantly
changing priorities, insufficient or unanticipated resource shortages,
and externally driven deadlines. The executive consistently
demonstrated the highest level of integrity and performance in
promoting the annual business plan and IRS‘s strategic goals and
objectives. The executive‘s effectiveness and contributions had impact
beyond his or her purview.
* Exceeded”The executive met the retention standard and generally
exceeded both the responsibilities and commitments in the individual
performance plan. However, the executive may have met the retention
standard and demonstrated exceptional performance in either
responsibilities or commitments and met the expectations of the other.
The executive may have overcome significant organizational challenges,
such as coordination with external stakeholders (e.g., the National
Treasury Employees Union and the Congress) or insufficient resources.
The executive‘s effectiveness and contributions may have had impact
beyond his or her purview.
* Met”The executive met the retention standard and the responsibilities
and commitments in the individual performance plan with solid,
dependable performance. The executive consistently demonstrated the
ability to meet the requirements of the job. Challenges encountered and
resolved are part of the day-to-day operation and are generally routine
in nature.
* Not met”The executive failed to meet the retention standard,
responsibilities, and/or commitments. Repeated observations of
performance indicated negative consequences in key outcomes, such as
quality, timeliness, and business results. Immediate improvement is
essential.
[End of section]
Appendix V: VBA‘s Senior Executive Performance Plans:
Performance Elements:
VBA‘s performance plans for its senior executives in the regional
offices for fiscal year 2001 are structured around common performance
elements”service delivery, organizational support/teamwork, leadership
development, external relations, and workplace responsibilities.
Service delivery: The executive leads the regional office in the
pursuit of outstanding performance in all applicable program areas, and
as a team member helps the Service Delivery Network and VBA as a whole
to improve performance. Appropriate emphasis is placed on the balanced
scorecard and the executive‘s performance against the balanced scorecard
targets. The categories of the balanced scorecard include:
* customer satisfaction”organizational perspective from the viewpoint
of the veterans, service delivery partners, and other stakeholders;
* accuracy”the quality of work performed;
* speed or timeliness”the length of time it takes to complete specific
end products or work units;
* unit cost”costs associated with producing a service or a product;
and;
* employee development and satisfaction”the skill level of the
workforce, training needs, course development, and satisfaction with
the job and organization.
Organizational support/teamwork: The executive regularly participates in
activities and projects intended to further the goals of the Service
Delivery Network and VBA as a whole while functioning as a dedicated
and skillful team player. These activities typically require the
contribution of local resources such as projects at the national level,
special ad hoc efforts, and innovations. The executive is assigned to a
certain number of projects during the year in light of the size of the
executive‘s regional office.
Leadership development - executive competencies and qualifications: The
executive identifies developmental activities in a proposed leadership
development plan, which is to be submitted at the beginning of the
performance year. The executive engages in substantial personal
development activities such as attending training courses, reading
books, and undertaking projects in order to develop skills. These
activities focus on OPM‘s Executive Core Qualifications including
leading change, leading people, results driven, business acumen, and
building coalitions and communications.
External relations: The executive builds effective, productive
relationships with organizations external to VBA in order to further
the department‘s goals and interests. Examples of activities include
work on a Federal Executive Board project, participation in Veterans
Integrated Service Network meetings, and relations with the media,
congressional offices, and service organizations.
Workplace responsibilities: The executive assures a high quality of work
life for all employees of the regional office by:
* promoting and maintaining an effective labor-management relations
program that incorporates the principles of partnership;
* creating and maintaining a working environment that is free of
discrimination and one that assures diversity in the workplace;
* ensuring that plans exist and are adequately implemented to recruit,
train, retain, motivate, empower, and advance employees and that they
promote the needs and goals of the individual and the organizations;
and;
* providing a safe, healthy work environment.
VBA identified indicators of performance for this element including
performance management and recognition, employee development and
training, equal employment opportunity policy statement, physical plant
enhancements, and employee satisfaction surveys.
Performance Standards for Elements:
Senior executives receive a level of achievement of ’exceptional,“
’fully successful,“ or ’less than fully successful“ for each element in
their individual performance plan as measured against the established
performance requirements. For example, for organizational support and
teamwork, the executive‘s performance is acceptable if the rater
determines that completion of projects and innovations is substantially
equal to agreed-upon expectations and the executive demonstrates
cooperation with other executives in the attainment of these goals where
applicable. For elements where a level of achievement other than fully
successful has been assigned, the rating official must describe the
executive‘s achievements on additional pages.
* Exceptional”Fully successful performance requirements for the element
are being significantly surpassed. This level is reserved for employees
whose performance in the element far exceeds normal expectations and
results in major contributions to the organization.
* Fully successful”Performance requirements for the particular element
when taken as a whole are being met. This level is a positive indication
of employee performance and means that the employee is effectively
meeting performance demands for this component of the job.
* Less than fully successful”A level of performance that does not meet
the requirements established for the fully successful level. Assignment
of this achievement level means that performance of the element is
unacceptable.
Performance Standards for Summary Ratings:
The senior executives receive a summary rating level of ’outstanding,“
’excellent,“ ’fully successful,“ ’minimally satisfactory,“ or
’unsatisfactory“ performance based on the achievement levels assigned
for each performance element.
* Outstanding”Achievement levels for all elements are designated as
exceptional.
* Excellent”Achievement levels for all critical elements are designated
as exceptional. Achievement levels for noncritical elements are
designated as at least fully successful. Some, but not all, noncritical
elements may be designated as exceptional.
* Fully successful”The achievement level for at least one critical
element is designated as fully successful. Achievement levels for other
critical and noncritical elements are designated as at least fully
successful or higher.
* Minimally satisfactory”Achievement levels for all critical elements
are designated as at least fully successful.
* Unsatisfactory”The achievement level(s) for one (or more) critical
element(s) is (are) designated as less than fully successful.
Revisions to the Fiscal Year 2002 Performance Plans:
For fiscal year 2002, VBA revised its performance plans for the senior
executives in the regional offices to improve individual accountability
for performance elements by linking organizational performance goals and
actual performance with meaningful and measurable performance elements.
VBA outlined specific sub-elements for the service delivery element and
replaced the leadership development element with two additional
elements”program integrity and information security. These revisions
include the following.
Service delivery: This element focuses on the executive‘s performance
towards the balanced scorecard targets at the regional office and
national levels, in addition to specific performance priorities with
corresponding targets.
* Achieve monthly rating production goals”The executive will meet
monthly rating production goals in either 9 out of 12 months or meet or
exceed overall average monthly production goals.
* Improve the timeliness of rating end products completed”The executive
will meet the average days of completion for specific end products and
improve a specified percentage based on his or her office‘s performance
relative to the national performance. Also, the executive will improve
the cycle times of claims processing in development, rating, and
authorization time as shown in the Claims Automated Processing System
records. In addition to reducing the cycle time, the executive will
establish 70 percent of his or her claims, after December 1,
2001,within 7 days.
* Reduce total compensation and pension cases pending over 6 months”
The executive will improve a specified percentage based on the
percentage of fiscal year 2001 cases pending over 6 months. For
example, if an executive‘s office has over 50 percent of compensation
and pension cases pending over 6 months as of the end of fiscal year
2001, the executive will achieve a 5 percent improvement by the end of
the 2002 rating year.
* Reduce the pending inventory of compensation and pension claims” The
executive will reduce the number of rating and authorization cases
pending by set targets for each office. Meeting these targets will
reduce VBA‘s inventory of rating-related cases to a total of 315,586
cases and reduce VBA‘s authorization cases by at least 20 percent by
the end of the rating period.
* Reduce inventory of appeals and achieve improvement in remand
timeliness”The executive will reduce the total number of pending
appeals by 10 percent and will achieve a 10 percent improvement in the
average number of days a remand is pending.
* Achieve established balanced scorecard targets”The executive‘s
performance on this element will be determined by comparing the
regional office‘s performance towards the regional office scorecard
targets (weighted 80 percent) and the office‘s contribution to VBA‘s
national scorecard targets (weighted 20 percent). The executive must
achieve a minimum level of 90 percent of the composite target.
* Service delivery network resource center and regional processing
organization functions [Footnote 13]”Service delivery network resource
center executives are required to meet specific monthly production
targets either in 9 of 12 months or meet or exceed the overall average
of monthly production goals. Regional processing organization directors
will have an additional standard provided at a later date.
* Additional priorities as established by the Secretary for Veterans
Affairs will also be used to evaluate performance in this element.
Program integrity: The executive will lead his or her regional office to
ensure compliance with VBA‘s program integrity directives. The executive
is responsible for ensuring that program integrity initiatives and
policies are implemented, assessed through an effective internal
control process, and adjusted as necessary to achieve appropriate
results. The executive will accomplish this by adhering to VBA‘s
program integrity directives and the Inspector General recommendations
that are applicable and ensuring that on-site reviews do not reveal
critical flaws in oversight of program integrity issues.
Information security: The executive must exercise due diligence in
efforts to plan, develop, coordinate, and implement effective
information security procedures as identified by the Office of
Management and Budget, the National Institute of Standards and
Technology, Veterans Affairs‘ policies, and VBA guidance and policy
documents. The executive will have met this element by ensuring that
information system security plans exist and are implemented in
accordance with the National Institute of Standards and Technology and
Office of Management and Budget guidelines; ensuring that annual risk
assessments are conducted for each identified information
security”applications, hardware, software”to ensure that the identified
risks, vulnerabilities, and threats are addressed by appropriate
security controls; and ensuring that all employees comply with
departmental training requirements to understand their information
security responsibilities.
[End of section]
Appendix VI: Comments from the Internal Revenue Service:
Commissioner:
Department Of The Treasury:
Internal Revenue Service:
Washington, D.C. 20224:
September 9, 2002:
Mr. Michael Brostek:
Director, Tax Administration and Justice:
United States General Accounting Office:
Washington, D.C. 20548:
Dear Mr. Brostek:
Thank you for the opportunity to review and comment on your draft
report entitled "Results-Oriented Cultures: Initial Approaches to
Manage Senior Executive Performance Against Balanced Expectations (GAO-
02-966)." Upon review, we were pleased the report recognized the great
strides the IRS has made in redesigning our executive performance
management system to provide useful data, require follow-up actions,
and make meaningful distinctions in performance.
Your report is comprehensive and accurately accounts for the factors
that influence our executive performance management and compensation
system. While we have been pleased with the operation of the system
thus far, we realize, as you note in your report, that more needs to be
done with regard to explicitly linking executive expectations for
performance to organizational goals and objectives. We currently use
Performance Review Boards to ensure that the performance agreements and
evaluations of our executives align with and reflect the Service's
strategic goals, annual business plans, and organizational performance
measures. We are continually improving our organizational performance
measures to strengthen the linkage of executive expectations for
performance to those organizational performance measures.
You also note in your report that the culture change necessary for
organizational transformation begins at the top. We not only embrace
that notion in the IRS, we practice it. Concurrent with the
implementation of our new executive performance management system at
the top of the organization, we implemented a similar performance
management and compensation system for the next layer of management,
and we anticipate expanding that system to the rest of our managers in
FY 2003.
If you have any questions, you should feel free to contact Ronald P.
Sanders, the Service's Chief Human Resource Officer, at (202) 283-9200.
Sincerely,
Signed by
Charles O. Rossetti:
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Managing for Results: Using
Strategic Human Capital Management to Drive Transformational Change,
GAO-02-940T (Washington, D.C.: July 15, 2002).
[2] U.S. General Accounting Office, High-Risk Series: An Update, GAO-01-
263 (Washington, D.C.: January 2001).
[3] U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002).
[4] GAO-02-373SP.
[5] U.S. General Accounting Office, Results-Oriented Cultures: Insights
for U.S. Agencies from Other Countries‘ Performance Management
Initiatives, GAO-02-862 (Washington, D.C.: Aug. 2, 2002).
[6] U.S. General Accounting Office, Managing for Results: Emerging
Benefits From Selected Agencies‘ Use of Performance Agreements, GAO-01-
115 (Washington, D.C.: Oct. 30, 2000).
[7] The Malcolm Baldridge National Quality Award and the President‘s
Quality Award are given to organizations for their overall achievements
in quality and performance. In 2002, the President‘s Quality Award
criteria were reoriented to be consistent with the President‘s
Management Agenda.
[8] The balanced scorecard is a tool to measure performance at various
levels of an organization and to provide employees with data to help
them achieve individual and organizational results.
[9] Gallup identified 12 questions that measure employee perspective
and, according to Gallup, the responses to these questions link
directly to organizational outcomes.
[10] The rating levels for five-level systems include ’unsatisfactory,“
’minimally satisfactory,“ ’fully successful,“ ’first level above fully
successful,“ and ’second level above fully successful“; and the three-
level rating systems include ’unsatisfactory,“ ’minimally
satisfactory,“ and ’fully successful.“
[11] By regulation, bonus amounts paid to individual career senior
executives are limited to between 5 and 20 percent of the executive‘s
basic pay. Agency bonus totals cannot exceed the greater of 10 percent
of the aggregate career senior executive basic pay or 20 percent of the
average rates of career senior executive basic pay. In compliance with
the Internal Revenue Service Restructuring and Reform Act of 1998,
IRS‘s bonus totals cannot exceed 5 percent of the aggregate career
senior executive basic pay.
[12] For more information on IRS‘s retention standard, see U.S. General
Accounting Office, Tax Administration: IRS‘ Implementation of the
Restructuring Act‘s Personnel Flexibility Provisions, GAO/GGD-00-81
(Washington, D.C.: Apr. 28, 2000).
[13] VBA reorganized its regional office structure from nine service
delivery networks to four areas in May 2002. With the reorganization,
the service delivery network resource centers are now called resource
centers.
[End of section]
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