OPM has a key leadership and oversight role in the design and  implementation of executive branch agencies’ SES performance-based  pay systems by certifying that the agencies’ systems meet certain criteria. Most Senior Executives Continued to Receive High Performance Ratings and Performance Awards for Fiscal Years 2010 through 2013

		For Fiscal Years 2010 through 2013, Approximately 85 Percent of Career SES Received the Two Highest Ratings

In 2003, when Congress refined the pay systems for members of the SES  by requiring a clearer link between performance and pay, many senior  executives were receiving the top rating. Selected Departments’ SES Performance Management Systems Are Becoming Standardized, but Disparities in Rating Distributions and Pay Remain for Fiscal Year 2013

		Selected Departments’ SES Performance Systems Used or Were Converting to the New SES System

According to a 2012 OPM document on the new SES performance  appraisal system, with a different SES system in each agency,  inconsistency among the executive branch agencies was a problem  because of different definitions for rating levels across government, a mix  of four- and five-level rating systems, and variable application of rating  levels in evaluating SES—which led to a disparity in the ratings  distribution across government. OPM guidance states that, for agencies seeking  access to higher levels of pay through certification, PRBs are to ensure  meaningful distinctions in executive performance and that pay increases  and performance awards are made based on individual and  organizational performance. Consistent with Government-wide Data, Selected Departments Rated SES Primarily in the Top Two Categories for Fiscal Year 2013

All five departments rated the majority of SES in the top two categories,  indicating little differentiation between executives in their ratings. However, for fiscal year 2013, four out of five selected departments  awarded the same or higher performance awards as a percentage of  base salary to SES with lower ratings as was awarded to those SES with  higher ratings. The new system provides for the uniform  administration of SES executive branch performance management  systems by promoting consistency, clarity, and transferability of  performance standards and ratings across agencies. According to OPM officials, in 2015 OPM plans to convene a cross- agency working group that is to revisit the SES certification process. As  part of this effort, it will be important for OPM and the working group to  consider whether—given the continued high SES performance ratings— the new system is contributing to making meaningful distinctions in  performance ratings and awards, and if not, what refinements are  needed. If the  performance definitions cannot be consistently applied across the  government, creating a uniform framework to communicate expectations  and evaluate the performance of SES members will be difficult to attain. Recommendation for Executive Action

As OPM convenes the cross-agency working group, we recommend that  the Director of OPM, as the head of the agency that certifies—with OMB  concurrence—SES performance appraisal systems, consider the need for  refinements to the performance certification guidelines addressing  distinctions in performance and pay differentiation. The objectives of this report were to (1) describe key characteristics of the  awards, such as rating and awards distributions, award amounts, and  percentage of executives receiving awards, from fiscal years 2010  through 2013, and (2) describe and assess the extent to which selected  departments’ SES performance appraisal systems factored in  organizational and individual performance and made meaningful  distinctions in their fiscal year 2013 performance awards. Selected case studies  included the Departments of Defense (DOD), Energy, Health and Human  Services (HHS), Justice (DOJ), and Treasury. Appendix III: Career Senior Executive Service (SES) Ratings and Performance Awards at the 24 Chief Financial Officers (CFO) Act Agencies for Fiscal Year 2013

	Percent of career SES at each rating level

Office of Personnel Management (OPM), Small Business Administration (SBA), and Social Security  Administration (SSA).
Why GAO Did This Study

The career SES, a cadre of senior leaders, has a pay-for-performance compensation system, which includes annual cash performance awards. OPM has a key leadership and oversight role in the implementation of the SES pay-for-performance system, including the certification of SES performance appraisal systems.
GAO was asked to examine SES performance awards. Specifically, this report (1) describes key characteristics of executive branch agency ratings and performance awards for fiscal years 2010 through 2013, and (2) provides a more in-depth look at five departments' fiscal year 2013 ratings and awards.
GAO analyzed data from OPM on the 24 CFO Act agencies for fiscal years 2010 through 2013. GAO also selected five case study departments: Defense, Energy, Health and Human Services, Justice, and Treasury and examined how they factored organizational and individual performance into their fiscal year 2013 SES performance awards.

What GAO Found

In 2012, the Office of Personnel Management (OPM) facilitated development of a new Senior Executive Service (SES) performance appraisal system with a more uniform framework to communicate expectations and evaluate the performance of executive branch agency SES members. The new system is expected to promote consistency, clarity, and transferability of performance standards and ratings across agencies. To obtain SES appraisal system certification for agencies seeking access to higher levels of pay, agencies are required to make meaningful distinctions based on the relative performance of their executives as measured through the performance and pay criteria. Further, if the modal rating is at the highest level of “outstanding,” agencies must provide an acceptable justification to OPM for the high level. (The modal rating is the rating level assigned most frequently among the actual ratings.)
More than 85 percent of career Chief Financial Officers (CFO) Act agency SES were rated in the top two of five categories for fiscal years 2010 through 2013, and career SES received approximately $42 million in awards for fiscal year 2013. The average award amount was higher for executives with higher ratings.
In a closer examination of five departments for fiscal year 2013, GAO found that they used or planned to use OPM's new SES performance system. The departments also had performance plans with links between individual SES responsibilities and organizational goals. Similar to the government-wide results, departments rated SES primarily in the top two categories. Four out of five departments awarded the same or higher performance awards to some SES with lower ratings. Department officials gave several reasons for giving lower-rated SES higher performance awards, including that they considered relative contributions, and that the awards were consistent within subcomponents of the department.
OPM plans to convene a cross-agency working group in 2015 to revisit the SES certification process. It will be important for OPM and the working group to consider whether, given the continued high SES performance ratings, the new SES appraisal system is contributing to making meaningful distinctions in performance ratings and awards without creating forced distributions, and if not, what refinements are needed.

What GAO Recommends

GAO recommends that the Director of OPM consider various refinements to better ensure the SES performance appraisal system certification guidelines promote making meaningful distinctions in performance. Options could include not certifying appraisal systems where the modal rating is “outstanding.” OPM disagreed with the recommendation stating that, among other things, it could result in forced distributions in ratings. GAO maintains that additional action should be considered to ensure equity in ratings and performance awards across departments.