Key Practices for Effective Performance Management

An effective performance management system can be a strategic tool to  drive internal change and achieve desired results. We found that public  sector organizations in the United States and abroad have implemented a  selected, generally consistent set of key practices as part of their  performance management systems. Federal agencies can implement these  practices to develop effective performance management systems that help  create the line of sight between individual performance and organizational  success and transform their cultures to be more results-oriented, customer- focused, and collaborative in nature. Align Individual Performance Expectations with Organizational Goals

An explicit alignment of daily activities with broader results is one of the  defining features of effective performance management systems in high- performing organizations. Consequently, organizations that are flatter and focused on collaboration,  interaction, and teamwork across organizational boundaries are  increasingly critical to achieve results. Provide and Routinely Use Performance Information to Track Organizational Priorities

High-performing organizations provide objective performance information  to individuals to show progress in achieving organizational results and  other priorities, such as customer satisfaction and employee perspectives,  and help individuals manage during the year, identify performance gaps,  and pinpoint improvement opportunities. Require Follow-up Actions to Address Organizational Priorities

High-performing organizations require individuals to take follow-up actions  based on the performance information available to them. By requiring and  tracking such follow-up actions on performance gaps, these organizations  underscore the importance of holding individuals accountable for making  progress on their priorities. Competencies, which define the  skills and supporting behaviors that individuals are expected to exhibit to  carry out their work effectively, can provide a fuller picture of an  individual’s performance. Link Pay to Individual and Organizational Performance

High-performing organizations seek to create pay, incentive, and reward  systems that clearly link employee knowledge, skills, and contributions to  organizational results. At the same time, these organizations recognize that  valid, reliable, and transparent performance management systems with  adequate safeguards for employees are the precondition to such an  approach. 4.) In doing so, performance management systems in high- performing organizations typically seek to achieve three key objectives:  (1) they strive to provide candid and constructive feedback to help  individuals maximize their contribution and potential in understanding and  realizing the goals and objectives of the organization, (2) they seek to  provide management with the objective and fact-based information it needs  to reward top performers, and (3) they provide the necessary information  and documentation to deal with poor performers. Involve Employees and Stakeholders to Gain Ownership of Performance Management Systems

High-performing organizations have found that actively involving  employees and stakeholders, such as unions or other employee  associations, when developing results-oriented performance management  systems helps improve employees’ confidence and belief in the fairness of  the system and increase their understanding and ownership of  organizational goals and objectives.
Why GAO Did This Study

The federal government is in a period of profound transition and faces an array of challenges and opportunities to enhance performance, ensure accountability, and position the nation for the future. High-performing organizations have found that to successfully transform themselves, they must often fundamentally change their cultures so that they are more results-oriented, customer-focused, and collaborative in nature. To foster such cultures, these organizations recognize that an effective performance management system can be a strategic tool to drive internal change and achieve desired results. Based on previously issued reports on public sector organizations' approaches to reinforce individual accountability for results, GAO identified key practices that federal agencies can consider as they develop modern, effective, and credible performance management systems.

What GAO Found

Public sector organizations both in the United States and abroad have implemented a selected, generally consistent set of key practices for effective performance management that collectively create a clear linkage--"line of sight"--between individual performance and organizational success. These key practices include the following. (1) Align individual performance expectations with organizational goals: An explicit alignment helps individuals see the connection between their daily activities and organizational goals; (2) Connect performance expectations to cross-cutting goals: Placing an emphasis on collaboration, interaction, and teamwork across organizational boundaries helps strengthen accountability for results; (3) Provide and routinely use performance information to track: organizational priorities. Individuals use performance information to manage during the year, identify performance gaps, and pinpoint improvement opportunities; (4) Require follow-up actions to address organizational priorities: By requiring and tracking follow-up actions on performance gaps, organizations underscore the importance of holding individuals accountable for making progress on their priorities; (5) Use competencies to provide a fuller assessment of performance: Competencies define the skills and supporting behaviors that individuals need to effectively contribute to organizational results; (6) Link pay to individual and organizational performance: Pay, incentive, and reward systems that link employee knowledge, skills, and contributions to organizational results are based on valid, reliable, and transparent performance management systems with adequate safeguards; (7) Make meaningful distinctions in performance: Effective performance management systems strive to provide candid and constructive feedback and the necessary objective information and documentation to reward top performers and deal with poor performers; (8) Involve employees and stakeholders to gain ownership of performance management systems: Early and direct involvement helps increase employees' and stakeholders' understanding and ownership of the system and belief in its fairness; and (9) Maintain continuity during transitions: Because cultural transformations take time, performance management systems reinforce accountability for change management and other organizational goals.