In contrast, USAID did not provide its PRB members and other  reviewing officials with any specific information on organizational  performance to help inform their senior executive appraisal  recommendations for the fiscal year 2007 appraisal cycle. As required for  certification, all of the selected agencies have four or five rating levels in  place for assessing senior executive performance. For the fiscal year 2007  appraisal cycle, senior executives were concentrated at the top two rating  levels, as shown in figure 1. While OPM officials have certified that the selected agencies’ systems are  making meaningful distinctions, performance ratings at the selected  agencies raise questions about the extent to which meaningful distinctions  based on relative performance are being made and how OPM applies this  criterion, as indicated in figure 1. OPM has an opportunity to  strengthen its communication with agencies and executives regarding the  importance of using a range of rating levels when assessing performance  while avoiding the use of forced distributions. 2). All of  the selected agencies have safeguards including higher-level reviews of  performance appraisal recommendations, PRBs, and transparency in  communicating the aggregate results, although agencies varied in how  they implemented such safeguards. Performance review boards. While generally satisfied  with OPM’s and OMB’s oversight, officials at the selected agencies said  OPM could strengthen its communication with agencies and executives on  how it uses the SES performance appraisal data and the correlation  between ratings and performance pay in determining whether agencies are  making meaningful distinctions based on relative performance. Further communication from OPM is important in order for agencies to  have a better understanding of how they are being held accountable for  these certification criteria and make the necessary improvements to their  systems to maintain certification. Prior to receiving an extended certification coverage period,  the agency officials acknowledged that their systems would have to be  operating at the fully certified level. Moving forward, it will also be important for OPM and OMB to  identify ways to improve the certification process and make it more  streamlined while ensuring that agencies have the guidance, tools, and  training they need to implement effective performance appraisal and pay  systems for their senior executives. To help improve agencies’ understanding of certain aspects of the  certification decisions, we recommend two areas for the Acting Director  of OPM to take action to strengthen OPM’s communication with agencies  and executives on  the importance of making meaningful distinctions in performance  while avoiding the use of forced distributions and that a fully  successful rating is valued and rewarded and    how it uses the SES performance appraisal data and the correlation  between ratings and performance pay in determining whether agencies  are making meaningful distinctions based on relative performance as  measured though the pay and performance differentiation certification  criteria. GAO staff who made major contributions to  this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This report examines selected agencies’ policies and procedures for their  career Senior Executive Service (SES) performance appraisal and pay  systems in (1) factoring organizational performance into senior executive  performance appraisal decisions, (2) making meaningful distinctions in  assessing and rewarding senior executive performance, and (3) building  safeguards into senior executive performance appraisal and pay systems. In addition, this report examines how the Office of Personnel Management  (OPM) and the Office of Management and Budget (OMB) are providing  oversight in the certification of the senior executive performance-based  pay system through their statutory roles. We selected the U.S.
Why GAO Did This Study

Agencies are allowed to raise pay caps for their Senior Executive Service (SES) members if the Office of Personnel Management (OPM) certifies and the Office of Management and Budget (OMB) concurs that their appraisal systems meet applicable criteria. As requested, this report examines selected agencies' policies and procedures for (1) factoring organizational performance into SES appraisal decisions, (2) making meaningful distinctions in SES performance and (3) building safeguards into SES systems. Also, this report examines OPM and OMB oversight in certifying the pay systems through their statutory roles. GAO selected six agencies based on mission, structure, and number of career SES variations. GAO analyzed the agencies' policies and fiscal year 2007 aggregate SES appraisal data and OPM guidance.

What GAO Found

All of the selected agencies--the U.S. Departments of Defense, Energy, State, and the Treasury; U.S. Nuclear Regulatory Commission; and USAID--have policies in place that require senior executives' performance expectations to be aligned with organizational results and organizational performance to be factored into appraisal decisions. While almost all of the agencies provided and communicated the importance of considering organizational performance, USAID did not provide its performance review board members (PRB) and other reviewing officials with any specific information on organizational performance to help inform their executive appraisal recommendations. All of the selected agencies have multiple rating levels in place for assessing senior executive performance. For the fiscal year 2007 appraisal cycle, senior executives were concentrated at the top two rating levels, which raises questions about the extent to which meaningful distinctions based on relative performance are being made and how OPM applies this criterion. OPM has an opportunity to strengthen its communication with agencies and executives on the importance of using a range of rating levels when assessing performance while avoiding the use of forced distributions. All of the selected agencies have safeguards, including higher level reviews of performance appraisal recommendations, PRBs, and transparency in communicating the aggregate results, although agencies varied in how they implemented such safeguards. While generally satisfied with OPM's and OMB's oversight, officials at the selected agencies said OPM could strengthen its communication with agencies and executives on how it uses the SES performance appraisal data and correlation between ratings and performance pay in determining whether agencies are making meaningful distinctions based on relative performance. Further communication from OPM is important in order for agencies to have a better understanding of how they are being held accountable for these certification criteria and make the necessary improvements to their systems to maintain certification. Further, senior-level officials at the selected agencies suggested options--such as moving to an electronic submission process and lengthening the certification coverage beyond 2 years once their systems are operating at the fully certified level--to increase the efficiency of the process. Moving forward, it will be important for OPM and OMB to identify ways to improve the certification process and make it more streamlined while ensuring that agencies have the guidance, tools, and training they need to implement effective performance appraisal and pay systems for their senior executives.