Financial Regulators Generally Have Linked Pay to Performance, but Two Regulators Still Provided Increases to Performers at All Levels

All of the regulators awarded some performance-based increases during  the appraisal cycles we reviewed that were linked to employees’  performance ratings, although two financial regulators also provided  annual pay adjustments to employees, regardless of performance, during  the appraisal cycles we reviewed. Some Financial Regulators Did Not Fully Implement the Safeguard of Providing Overall Ratings and Pay Increase Results to All Employees, Which Would Increase Transparency in Their Performance-Based Pay Systems

The extent to which the financial regulators shared the overall results of  performance ratings and pay increase decisions with all employees varied,  and some agencies did not make this information widely available to  employees. We have previously reported that the safeguard of  communicating the overall results of performance appraisal and pay  increase decisions while protecting individual confidentiality can improve  transparency by letting employees know where they stand in the  organization. Agencies Have Taken Various Actions to Seek to Maintain Pay and Benefits Comparability

Financial regulators have hired external compensation consultants to  conduct individual, formal comparability surveys, exchanged pay and  benefits information, explored the feasibility of conducting a common  survey, and adjusted pay and benefits to seek to maintain pay and benefits  comparability. Finally,  partly on the basis of the results of the comparability surveys and  discussions among the agencies, the financial regulators have adjusted  their pay and benefits policies in their efforts to seek to maintain  comparability. According to agency  officials, factors such as the year an agency first became subject to  comparability provisions, budget constraints, the needs and preferences of  different workforces, and ways to attract and retain workforces play a role  in compensation decisions and contribute to the variations in pay ranges  and benefits. The number of employees  who moved to another financial regulator ranged from a low of 16 of 1,362  who moved or resigned in fiscal year 1997 to a high of 97 of 1,229 who  moved or resigned in fiscal year 1991. The total number of financial  regulator employees was 15,400 and 19,796 during those 2 years,  respectively. Although the regulators have  incorporated many of the key practices for effective performance  management systems, opportunities exist for a number of them to make  improvements as they continue to refine their systems. Objectives, Scope, and Methodology

The objectives of this report were to (1) review how the performance- based pay systems of 10 federal financial regulatory agencies are aligned  with six key practices for effective performance management systems, (2)  review actions these 10 agencies have taken to assess and implement  comparability in compensation, and (3) review the extent to which  individuals in selected occupations have moved between or left any of the  agencies. We also analyzed agency data on performance ratings to determine the  distribution of employee performance ratings at each agency. The four additional practices are:  Align individual performance expectations with organizational goals. Use competencies to provide a fuller assessment of performance. Involve employees and stakeholders to gain ownership of performance  management systems. The specific ways in which the financial regulatory agencies have  connected performance expectations to crosscutting goals vary. Agency officials emphasized that it was  not their goal to have identical pay and benefits packages; rather, they  considered pay and benefits as a total package when seeking to maintain  pay and benefits comparability and when setting pay and benefits policies  aimed at recruiting and retaining employees. We found that the movement of employees among the financial  regulators was very low and presented no discernible trend, but that 86  percent (13,433 of the 15,627) of employees leaving the regulators  voluntarily (i.e., moving or resigning) resigned from the federal  government.
Why GAO Did This Study

Congress granted financial regulators flexibility to establish their own compensation systems and required certain agencies to seek to maintain comparability with each other in pay and benefits to help the agencies overcome impediments to recruiting and retaining employees and avoid competing for the same employees. In response to a request, this report reviews (1) how the performance-based pay systems of 10 financial regulators are aligned with six key practices for effective performance management systems, (2) the actions these agencies have taken to assess and implement comparability in pay and benefits, and (3) the extent to which employees in selected occupations have moved between or left any of the agencies. GAO analyzed agency guidance and policies, agency data on performance ratings and pay increases, agency pay and benefits surveys, data from the Central Personnel Data File, and interviewed agency officials.

What GAO Found

The 10 federal financial regulatory agencies have generally implemented key practices for effective performance management but could improve implementation of certain practices as they continue to refine their systems. All of the financial regulators awarded some pay increases during the appraisal cycles we reviewed that were linked to employees' performance ratings, although two also provided across-the-board pay adjustments, even to employees who had not received acceptable performance ratings, weakening the linkage of pay to performance. Both agencies have indicated in the future annual pay adjustments will not be awarded to unsuccessful performers. The agencies have generally aligned individual performance expectations and organizational goals, connected performance expectations to crosscutting goals, used competencies to provide a fuller assessment of performance, and involved employees and stakeholders in the process. All of the agencies built safeguards into their performance management systems to enhance credibility and fairness. However, the extent to which the agencies communicated overall results of performance rating and pay increase decisions to all employees varied, and some could increase transparency by letting employees know where they stand relative to their peers in the organization, while protecting individual confidentiality. Financial regulators have hired external compensation consultants to conduct pay and benefits comparability surveys, exchanged pay and benefits information, explored the feasibility of conducting a common survey, and adjusted pay and benefits to seek to maintain comparability with each other. Although financial regulators have adjusted pay and benefits partly based on the results of their comparability efforts, there is some variation in pay ranges and benefit packages among the agencies. According to agency officials, factors such as the year the agencies first became subject to comparability provisions, budget constraints, and the needs and preferences of workforces play a role in compensation decisions and contribute to this variation. Furthermore, agency officials emphasized that it was not their goal to have identical pay and benefits packages; rather, they considered pay and benefits as a total package when seeking to maintain comparability and when setting pay policies aimed at recruiting and retaining employees. Between fiscal years 1990 and 2006, few employees moved among financial regulators and the movement among these agencies presented no discernible trend. Specifically, 86 percent (13,433) of the 15,627 employees that left during this period (i.e., moving or resigning but not retiring), resigned from federal employment. Annually, the percentage of employees who moved to another financial regulator ranged from a low of 1 percent in fiscal year 1997 (16 out of the 1,362 who moved or resigned) to a high of 8 percent in fiscal year 1991 (97 out of the 1,229 who moved or resigned). The total number of financial regulatory employees was 15,400 and 19,796 during those 2 years, respectively.