<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:30600.wais]
S. Hrg. 109--794
SENIOR EXECUTIVES: LEADING THE WAY IN FEDERAL WORKFORCE REFORMS
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HEARING
before the
OVERSIGHT OF GOVERNMENT MANAGEMENT,
THE FEDERAL WORKFORCE AND THE DISTRICT
OF COLUMBIA SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 26, 2006
__________
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
30-600 PDF WASHINGTON : 2007
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Brandon L. Milhorn, Staff Director
Michael L. Alexander, Minority Staff Director
Trina Driessnack Tyrer, Chief Clerk
OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota CARL LEVIN, Michigan
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Andrew Richardson, Staff Director
Richard J. Kessler, Minority Staff Director
Nanci E. Langley, Minority Deputy Staff Director
Emily Marthaler, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Akaka................................................ 1
Senator Voinovich............................................ 2
WITNESSES
Tuesday, September 26, 2006
Hon. Linda M. Springer, Director, Office of Personnel Management. 4
Brenda S. Farrell, Acting Director, Strategic Issues, Government
Accountability Office.......................................... 16
Carol A. Bonosaro, President, Senior Executives Association...... 18
Alphabetical List of Witnesses
Bonosaro, Carol A.:
Testimony.................................................... 18
Prepared statement........................................... 48
Farrell, Brenda S.:
Testimony.................................................... 16
Prepared statement........................................... 34
Springer, Hon. Linda M.:
Testimony.................................................... 4
Prepared statement........................................... 29
APPENDIX
Questions and answers submitted for the Record from:
Ms. Springer................................................. 52
Ms. Farrell.................................................. 63
Ms. Bonosaro................................................. 69
Letter dated November 17, 2006, from Carol A. Bonosaro........... 72
SENIOR EXECUTIVES: LEADING THE WAY IN FEDERAL WORKFORCE REFORMS
----------
TUESDAY, SEPTEMBER 26, 2006
U.S. Senate,
Oversight of Government Management,
the Federal Workforce, and the
District of Columbia Subcommittee,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 11:01 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. George V.
Voinovich, Chairman of the Subcommittee, presiding.
Present: Senators Voinovich and Akaka.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka [presiding]. On behalf of Senator Voinovich,
who will be here shortly, I call this hearing of the
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia to order. I would like
to welcome our witnesses who are here to discuss the Senior
Executive Service (SES) pay-for-performance system.
Today's hearing offers another opportunity to review the
challenges associated with moving to a pay-for-performance
system and to show agencies, such as the Departments of Defense
and Homeland Security, what works and what does not work.
This Administration is pushing to replace the current
personnel system with pay-for-performance. Such an obvious
pocketbook issue makes it imperative that, should any changes
occur, they start at the senior levels first. However, senior
executives and managers must have trust in a new system and
have confidence that the processes, by which their performance
is appraised and their compensation is determined, are fair.
Last week, the Senior Executives Association (SEA) released
the results of the survey of members and non-members on the SES
pay-for-performance system, which raise serious concerns. The
results are disturbing. Despite the Administration's claims
that the SES system is successful, the survey tells a different
story.
Respondents say that their new pay-for-performance system
lacks transparency, fails to link pay with performance ratings,
and serves no purpose other than lowering employee morale. I am
especially troubled that over half--that is, 53 percent--
believe that quotas were used to determine bonuses last year,
despite explicit Office of Personnel and Management (OPM)
regulations prohibiting such a practice.
Director Springer and I have met regarding the issue of
quotas, and I believe her when she says quotas are
unacceptable. However, if quotas are not being used, then there
is a serious perception problem that must be addressed. I look
forward to hearing what steps OPM is taking to resolve this
problem.
So let's be clear. The competitive selection process for
members of the SES should ensure that the best people are
leading the Federal Government. So when it comes to evaluating
the performance of these highly qualified individuals, high
performance ratings should be expected. Agencies that lower
ratings artificially to fit bell-shaped curves or institute
arbitrary quotas are not rewarding performance; rather, they
are showing how pay-for-performance can be unfair and
unobjective.
Director Springer, I want to thank you for your commitment
to work with agencies to address the problems raised by the SEA
survey. To me, the survey clearly demonstrates the need for
more rigorous certification criteria, as well as more training
and oversight by OPM. Right now, only one agency has full
certification and 25 have provisional certification. I just
wonder if we are giving agencies to much flexibility without
meeting what Comptroller General Walker calls the ``show me''
test.
If senior executives do not have faith in the fairness and
transparency of their pay system, I do not see how rank-and-
file employees would want to work under such a system.
I am so glad to see our Chairman back here at this moment,
and I look forward to hearing from our distinguished witnesses.
Mr. Chairman, thank you.
Senator Voinovich [presiding]. Thank you, Senator Akaka. I
really appreciate you starting this hearing. Ms. Springer, I
apologize to you for being late this morning. It is the first
time that this has happened, and it is the last time.
OPENING STATEMENT OF SENATOR VOINOVICH
Senator Voinovich. Today's hearing, ``Senior Executives:
Leading the Way in Federal Workforce Reforms,'' is very
important. As Congress continues to consider ways to better
position the government to be an employer of choice in the 21st
Century, reforms of the government's personnel systems, both
performance management and pay systems, have been a key focus.
We know that to effectively implement change throughout an
agency, the senior management must be committed to change and
lead by example. Government-wide reform has begun at the top,
and it must start at the top. When it comes to pay-for-
performance, the elite cadre of government leaders and managers
are leading the way.
The Senior Executive Service (SES) was established by the
Civil Service Reform Act of 1978. It provides a framework for
developing and managing executives in the Federal Government.
By definition, career members of the SES are talented
individuals. They must be able to lead change; they must be
able to lead people; they must achieve results; they must
possess business expertise; they must be able to build
coalitions; and they must maintain open communication. They are
really important people, and are leaders in the government.
In response to the continued problem of pay compression,
Congress authorized departments and agencies to develop and
implement pay-for-performance for the SES. If OPM, with the
Office of Management and Budget (OMB) concurrence, certifies an
agency's performance management system, the SES would be able
to earn pay at a higher rate. I was disturbed by some of the
information that Senator Akaka mentioned in his statement.
I was, and remain, a strong advocate of reform efforts
underway for the government's senior career civil servants. I
believe these reforms, if done well, will help the dedicated
members of SES better serve our Nation. The goal of all Federal
personnel reforms is the same: To build a better workforce. Why
is this important? The only way government, the various
departments and agencies, will succeed in accomplishing its
missions is to have motivated employees working towards the
strategic goals of their respective agencies. An effective
performance management system establishes for employees a clear
understanding of what is expected and demonstrates how each
individual contributed to advancing the agency's mission and
serving the American people.
Let me provide a concrete example of the service these
individuals provide to the American people. Each year, the
President recognizes a small group of career senior executives
who have demonstrated exceptional long-term accomplishments.
Michael McMullan, the Deputy Director of Beneficiary Services
at the Centers for Medicare and Medicaid Services, is a
recipient of the 2005 Presidential Rank Award for distinguished
senior professional service. Ms. McMullan developed CMS'
consumer information strategy, which includes plain-language
materials, a full-service toll-free telephone line, 1-800-
MEDICARE, and an award-winning Internet site. I can tell you it
was fantastic, and I saw first hand the available benefits all
over Ohio. It was amazing to me what they were able to do. She
is only one example of the excellence to be found in our SES
corps. We must do all we can to recognize, reward, motivate,
and retain these talented individuals.
As you know, we are 3 years into the implementation of
reforms. I look forward to hearing the testimony of our
witnesses to assess implementation, understand the current
status of reforms, and determine whether additional changes are
needed. We must do all we can to ensure success, and when I say
``we,'' I do mean ``we''--Congress, the Executive Branch, and
employee representative organizations.
You testified here before when we were talking about the
NSPS and its progress. The impression that I got from the
different comments I am receiving from various agencies is that
the preliminary work done for Spiral 1.1 was not done with the
Senior Executive Service. I am anxious to discuss this further.
As I have mentioned over and over again, if implementation is
not done correctly in the beginning, then its chances of being
successful and becoming a part of the system is not going to
happen.
So, again, I apologize for being late, and I am anxious to
hear your testimony.
TESTIMONY OF HON. LINDA M. SPRINGER,\1\ DIRECTOR, OFFICE OF
PERSONNEL MANAGEMENT
Ms. Springer. Thank you, Mr. Chairman and Senator Akaka,
and I appreciate both of you being able to come here,
especially arriving from Hawaii, Senator Akaka. So it is a
particular pleasure to be here today to discuss the progress to
date on the implementation of this performance-based pay system
for members of the Senior Executive Service. I do appreciate
the support and the interest of this Subcommittee and other
Members for effective performance management, and that is where
it begins. There is no basis for pay-for-performance unless the
performance management is present for the start of it.
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\1\ The prepared statement of Ms. Springer appears in the Appendix
on page 00.
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With regard to the SES, OPM has two roles to play in
successful implementation. The first role is to provide
agencies with the assistance they need to design and implement
these systems successfully. The second role is to oversee their
effectiveness and, chiefly, that is done through the
certification process that is outlined in the statute.
To guide agencies through the process, OPM published
detailed regulations with criteria in 2004 for agencies to
meet, as well as additional guidance since then as it has been
needed. We review the agency submissions for certification very
carefully and assign it to either one of two categories: either
provisional or 1-year certification, or a full certification
which lasts for 2 years and then would have to be re-upped,
depending on the extent to which the agency has satisfied us
that they have met the criteria. There are written standards
and criteria that need to be met for certification. Additional
concurrence is given, as you mentioned, Mr. Chairman, by OMB.
We are completing the third year of the certification
process, and each year we find that the agencies' data is more
complete, has more rigor, and is increasingly close to the
guidance. In the past, the executive performance plans that we
saw were not focused particularly on achievement, but more so
on activity, less on results, more on just actions and
activities, but less so on the actual result of those
activities. Today, the performance plans are better documented.
They have more measurable goals--and I want to underscore
measurable as opposed to quantifiable. Quantifying is one type
of measurement, but there are other types of measurement. So we
look for the broader definition of measurement and look for
that in the goals.
Good plans have written goals. They have requirements that
goals for each individual be in writing, that they are in
writing at the beginning of a performance cycle, that they are
agreed upon up front, and that those goals have ways to
determine the progress that is being made and, in fact, that
meets our definition of measurable. Quantifiable, again, is
just one type of that.
Agencies are using multi-level rating systems and making
meaningful distinctions in applying them. Now, I want to say
right here on the record very straightforwardly, quotas are
prohibited. There is nothing in our guidance that allows for
quotas. If we see them, we take actions. When they are brought
to our attention, as they have been recently in this study--and
Senator Akaka sent a letter to me earlier this year, I believe,
on it, or late last year it was, and we dealt with that
situation. So if we find quotas, we will deal with it.
Sometimes there is an appearance of a quota or there is a
perception of a quota. The terminology may be used. It may be
that a manager needs coaching to help them to understand that
they need to deal with a performance issue and not use the Cop-
out saying, ``well, I have a quota to meet and you are not
going to get it this year.'' That is not really a quota system,
but it is someone using that as a convenient excuse to manage
through a situation. And in some cases, there may legitimately
be misunderstandings of people thinking that we are looking for
quotas. We are not. So we will work very diligently, and we
have been whenever we see that, but I want to say very clearly
today that quotas are not allowed. They are prohibited. They
are bad.
But we are seeing increasing linkage between performance
and making decisions about the distinction between the
performance and the results and then what that means for
ratings of executives. And that is important. That is what we
are after--good distinctions, good goals, and measuring that,
and really rewarding people to the highest degree who are the
highest-level performers. It remains a work in progress, but we
believe that certification is having the desired effect--not
quotas, but the effect of driving improvement in agency
performance management. That is what we are after--better
performance, better management of performance--and that is what
we are starting to see.
We are currently preparing guidance for the 2007
certification cycle and will highlight areas of improvement.
Whether it is in training or whether it is in communication, we
will be able to look at the results of the study from the SEA
and very seriously see if there are things there that need to
be incorporated in our 2007 guidance.
One thing that I want to point out is that there is a gap
in the underlying statute. Right now agency certification
expires at the end of a calendar year. Most agencies are still
finishing up their cycle of performance reviews, and they are
not able to send in their new certification requirements until
sometime after January. So we have a period of time where, if
the certification has lapsed or expired, members of the SES who
have gotten up to that executive level II under a previous
certification are not able to get the increases, nor are people
able to be hired to take advantage of that higher executive
level II in that gap period.
We sent draft legislation up in June. We would like to work
with you on trying to get that implemented, and that would help
us to overcome this gap issue. We obviously want to take
maximum advantage, or allow agencies to take maximum advantage,
of that executive level II opportunity in their hiring.
Another limitation that is in the current statute is the
inability of the Senior-Level group, SL, and the Senior
Scientific and Technical personnel, the ST group, to have
access to executive level II pay. These are the very advanced,
very seasoned, very experienced technicians and technical
personnel. They have not chosen a management track, so they do
not fall under the SES provisions that allow them to have the
opportunity for higher pay at the executive level II. We think
that these personnel deserve that opportunity, and we think it
should be fixed. So we would like to work with you on that as
well.
OPM is committed to systems of compensation that reward
Federal employees for performance, in contrast to systems that
are driven by longevity. We steadfastly believe the SES system
is a good system. But we recognize--and in light of the current
survey that came out, we believe that there are some
inconsistencies in how it is being applied and implemented. We
believe it is an execution issue rather than the construct of
the system itself.
We are reviewing the study that was released last week by
the Senior Executives Association. I met with Ms. Bonosaro on
it the very day that it came out, and we believe it will help
us to understand some areas that previously we were not aware
that there may be either misconceptions or misapplications. And
we are going to work through the Chief Human Capital Officers
Council, among other areas, to work directly with agencies to
shore that up.
I do have one concern that I want to state publicly, and
that is that I think we have to be careful that we haven't
devalued the rating of a fully successful performer. Senior
executives, like anyone else, are hired with the expectation
that they will do a job and be high-level performers. That is
the expectation. No one is hired with the idea that they will
be poor performers or mediocre performers. When you hire
someone to do a job, you expect they will do it and do it well.
And that, in my mind, constitutes that they have done their job
successfully, fully successful.
Past practice has corrupted the definition of ``fully
successful'' to mean that if you do your job fully and do it
well, that equates to an outstanding rating. We believe that
the higher-level ratings, ``exceeds'' and ``outstanding,''
should be reserved for performance that is just that, and that
the ``fully acceptable'' or ``fully successful'' should be
viewed very positively and reflects the fact that the
commitment has been fulfilled between the employer at the
agency and the employee. And so that is another thing that I
personally believe needs to be reset as we go into a more fully
tiered evaluation system.
In closing, I remain fully convinced that performance-based
pay is critical to the success of an organization, and the
government is no exception. It is particularly critical for us,
as you say, Mr. Chairman, to be an employer of choice in the
years ahead in an increasingly tight labor market, and I think
performance-based pay is an important component, managed well,
executed properly. I am equally confident that the men and
women of the Senior Executive Association are capable of
managing and thriving in this system when it is done properly.
I appreciate the opportunity to testify here today, and I
will look forward to any questions that you may have.
Senator Voinovich. Thank you very much.
As you know, and I have made mention to Senator Akaka's
statement, the results of the survey the Senior Executives
Association released early last week. It does not provide a
positive assessment of implementation thus far. The SEA is
going to testify in the second panel and will discuss their
survey in more detail in their testimony.
I have repeatedly stressed to both the Department of
Defense and the Department of Homeland Security that a
fundamental goal of their new personnel system is employee
acceptance.
Since it is going to be brought up, what is OPM's response
to their findings?
Ms. Springer. Well, the initial response is that we want to
study it. We are certainly not taking a defensive posture. We
want to take to heart, very seriously, the issues that have
been raised there. I would say that these issues are raised to
a degree and a magnitude that we have not previously heard. We
have heard instances here and there, as Senator Akaka had
raised to us, about a quota perception, and we dealt with that
particular one. We have not heard it to the degree that it
appears to be coming out in this survey.
So the first step was to meet with the head of the SEA,
which I did. The second was to ask some additional questions.
She has already provided some additional information. I want to
get down beneath the surface on some of that information. The
CHCO Council will be meeting in November, and we are going to
put that on our agenda and review it. And as we prepare the
2007 guidance, OPM's 2007 guidance, we are going to reinforce
the execution issues that deal with the concerns that have been
expressed.
Senator Voinovich. Are you going to undertake your own
analysis of this so that you can review those and have them
reflected in what you are going to be doing next year?
Ms. Springer. Yes.
Senator Voinovich. Does OPM's review of agency
certification submissions include a review of the
communications strategy and training program?
Ms. Springer. It does not explicitly, Mr. Chairman. There
are many facets and many components, and we have been talking
about, in light of the study and some of the other things,
perhaps we need to highlight that more than we do today.
You raised earlier Spiral 1.1 of NSPS, and we had the
hearing last week on how the Department of Defense is doing
with their system. And one of the reasons why they have
achieved success so far is because of the training culture that
exists at DOD and the way that they have applied it to their
Spiral 1.1.
I think that you would find across the landscape of the
agencies, with the SES, varying degrees of that type of
training and communication. That, I think, maybe should be a
focus, a stronger focus in our process.
Senator Voinovich. We have heard good remarks on Spiral 1.1
of NSPS. It would seem to me that you might look at why that
has been successful to maybe incorporate some of that into the
SES system. It is obvious that is not as good as it should be.
Three years into implementation, only the Department of
Labor has full certification of its performance management
system. Congratulations, to Secretary Elaine Chao.
Why do you believe more departments and agencies have not
been able to obtain or maintain full certification? Has anybody
compared what Secretary Chao has done in her Department to get
an idea of how her work might be helpful to other departments?
Have any departments without certification discussed with the
people from the Department of Labor what they did? Are there
best practices that others could incorporate that would help
them get certification?
Ms. Springer. There are a few questions there, and I want
to answer all of them.
The first is that I do not see the fact that only one
agency has achieved full certification as necessarily a bad
thing. Certification is not a rubber stamp from OMB or OPM.
Certification has some very high standards, and so getting
provisional certification is a first step, but I think that it
recognizes that we are not going to give agencies full
certification unless they do have things in place that warrant
it. And we have not seen that to the degree we would like.
We have seen it at Labor. We have studied what Labor has
done, and one of the things I would like to do with the Chief
Human Capital Officers Council is to have best practices with
respect to the SES performance system, pay system, be an
initiative of theirs so that would be the opportunity. There is
a representative from every agency there to share best
practices. So that will be one of the things that we do to make
that happen.
Senator Voinovich. But do you know whether there has been
any meetings betwen Labor and other departments? If Labor is
doing a good job, what is it that they are doing that could be
replicated in other agencies?
Ms. Springer. OPM has done that. I do not know if other
agencies on their own initiative have visited to find out what
Labor has done. But OPM has done that, and we have set out very
clear standards and practices to the other agencies, here is
what makes for a successful system.
As I said earlier, I think we can go further in what makes
for successful execution of the system, not just the construct
of the system. I think we have done a pretty good job on the
construct. It is just how people were behaving in that system
where we need to focus now.
Senator Voinovich. Does your new person who is
quarterbacking that group of human capital folks have this on
his agenda?
Ms. Springer. Yes.
Senator Voinovich. I would like to know, what is the agenda
of the Human Capital Officers Council? One of the things that I
learned, particularly as governor of Ohio, is that if you get
folks together, it is amazing how much they help each other
instead of just dealing with problems in a vacuum when people
get together and talk, this type of synergism develops, and
they start to get excited. I think it would help a great deal
if you sat down with Ms. Bonosaro and her group and asked: What
are your observation or what is going right? I think that is
the best way to identify changes that are needed.
Ms. Springer. Yes. I could not agree with you more, and
that is one of the ways we will get at this.
Important enhancements were made this year to improve the
structure of the Chief Human Capital Officers Council (CHCOC),
which have been implemented for the Council Chair by the
Executive Director. First, in the spring of 2006, the Council
was expanded to include Deputy Chief Human Capital Officers.
The addition of the Deputy CHCOs serves three important
purposes, including (1) providing the Council's link to the
Federal human resource directors; (2) developing and sharing
best practices; and (3) ensuring continuity when there are
changes in leadership at the Council.
Second, the subcommittees were realigned and refocused to
reflect key human capital challenges facing Federal agencies.
The new alignment created six subcommittees, including:
Emergency Preparedness; Hiring and Succession Planning; Human
Resources Line of Business; Human Resources Workforce; Learning
and Development; and Performance Management. This new structure
allows the Chief Human Capital Officers, and their deputies, to
serve as leaders in these critical issue areas.
Third, OPM linked the goals and objectives from the
agency's ``2006-2010 Strategic and Operational Plan'' to each
subcommittee. The linkage will enable OPM to forge strategic
partnerships with the appropriate subcommittee representatives
and their staff members. In addition, this collaborative
approach, provide the subcommittees with the opportunity to
affect human capital policy and programmatic changes during the
developmental and implementation stages and will yield positive
achievable and recognizable outcomes.
Fourth, to allow for greater ownership, transparency and
accountability, each subcommittee drafted mission statements
and goals for FY 2007. The creation of the subcommittee plans
provides the foundation for the tasks and priorities that the
Council will address in the next 12 months. As indicated in
each of the subcommittee plans, the Chief Human Capital
Officers, the deputies, and their staffs will work closely with
OPM to achieve their objectives. Developing and fostering this
partnership will provide the subcommittees with the opportunity
to assess the current impediments to progress, compile and
share best practices, and make recommendations on strategic
human capital management challenges to OPM, the Council and its
stakeholders.
Fifth, the Council expanded the attendance of agency
representation for Training Academy sessions. For example, in
the past, the Council's Training Academy sessions were open to
CHCOs only. However, beginning in August 2006, each Council
member can send a total of three employees from their agencies
to attend these sessions. Due to this change, over 55 agency
representatives attended both the August session when the
Departments of Justice and Labor showcased their efforts to
conduct competency assessments of mission critical occupations
and the October session where OPM, OMB, the Department of the
Treasury, and the National Academy of Public Administration
highlighted the importance of linking agency human resource
offices into the competitive sourcing process.
Sixth, during the full-Council meetings, CHCOs have the
opportunity to share best practices from their agency. Examples
of best practice presentations included establishing effective
CHCO and Deputy CHCO working relations, which was conducted by
the Department of Energy in July and utilizing USAJOBS to
improve agency recruitment efforts by NASA in September.
Sharing best practices by CHCOs facilitates greater dialogue
and discussion during the full-Council meetings. In addition,
the agendas include dedicated time for the subcommittee chairs
to update the Council on their progress.
Over the past several months, a number of important human
capital issues have been discussed at the full-Council
meetings, including an in-depth conversation on the use of
human resource flexibilities, recruiting top talent for
management positions through the Presidential Management
Fellows Program, FY 2006 Senior Executive Service performance
data, and an update on the final regulations for hiring
individuals with disabilities. In addition, several best
practices were presented during the CHCO Council Training
Academy Sessions including one led by the Departments of Labor
and Justice on conducting competency assessments for mission
critical occupations. The subcommittees have also had best
practice demonstrations and discussions as well. For example,
the Emergency Preparedness Subcommittee received a briefing by
the Department of the Navy on their on-line system for tracking
employees during an emergency. Based on this briefing, several
CHCO agencies received follow-up sessions from the Navy.
Moving forward, the executive director will continue to
work with the Council to capitalize on this open and
collaborative environment and find innovative ways to discuss
cutting edge human capital issues affecting the Federal
Government and showcase best practices that foster learning for
the Chief Human Capital Officers community. For example, in our
November 2006 full-Council meeting, we will receive a briefing
from Christine Griffin, Commissioner of the Equal Employment
Opportunity Commission, on the hiring of individuals with
targeted disabilities and discuss the 2007 certification of
performance appraisal systems for senior executives, among
other items. Future meeting topics will be discussed by the
Council and finalized by the Executive Committee in the coming
months.
Senator Voinovich. Do you have the resources that you need
to do this?
Ms. Springer. Yes.
Senator Voinovich. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Director Springer, I mentioned in my opening statement
that, according to the SEA survey, 53 percent of respondents
claim their agencies use quotas. When you discover an agency
using quotas, what action does OPM take or do to address the
issue?
Ms. Springer. Well, first of all, OPM gets in direct
contact with that agency or that component of the agency, and
presents to them what we have learned and gives them an
opportunity to respond to it, in fairness to them. But then we
will sit down with them, we will review the program as they are
executing it, and see if there is, in fact, the use of quotas
or if, in fact, there is a perception because of something that
they are doing that would lead someone to think that there is a
quota. And whatever needs to be done there, we will fix.
Then we have a regular process of going back. It is not
exactly an audit, but of revisiting in areas that has been a
challenge.
Senator Akaka. From your statement, it seems as though
there is not a clear understanding as to what a quota is.
In your opinion, what constitutes a quota?
Ms. Springer. If a system has a goal to have X percent of
ratings at this level and Y percent at this level and another
percent at each of those levels, regardless of performance,
then that is a quota system because the main driver is reaching
a certain distribution. Our goal is not the distribution. Our
goal is developing performance and rewarding performance.
Now, it is conceivable, for example, in an agency that has
a small component of SES executives that they could all have an
outstanding year and all be at the highest level, and if that
is the way it comes out, if the goals that were established at
the beginning, well-articulated goals, measurable goals are all
achieved at that highest level, then that is fine. There is
nothing in our system that prohibits that.
What I think people have misconstrued is the fact that in a
group of 6,000 SES executives, 6,000-plus individuals, it is
hard to imagine that somewhere around 90 percent would all be
at not just fully successfully doing their job or even at
exceeds, but at the outstanding level. And that was the result
that we were getting before this system of really having clear
goals and making distinctions was in place. We had one agency
that had 1,000 SES, and in the year 2002 97 percent were all
rated outstanding. Now, intuitively that just does not make
sense.
And so I think that people have interpreted those types of
comments to mean that we are shooting for a lower percentage.
But what we are shooting for is not a percentage or a curve or
a certain distribution, but it is a fair and accurate
assessment based on performance.
Senator Akaka. Have you met with the SEA about quotas?
Ms. Springer. Well, we have started that process. The first
meeting I had with Ms. Bonosaro was the day that the survey
came out. I heard it was coming, and I asked her if she would
be good enough to come over and visit with me, and she did. And
I am sure we will have many more meetings.
Senator Akaka. The SEA survey also found that in smaller
agencies performance pay is restricted because of a shortage of
funds. How can small agencies implement a successful and fair
pay-for-performance system without additional funds?
Ms. Springer. The fund pool, the pay pool, is obviously an
issue for small agencies. It is an issue for large agencies,
too, candidly, because no one is without budget pressures. But
the fact of the matter is that each agency has to take some
responsibility for this. It is not just an OPM issue. As I
think one of you said earlier, we all have a part in making
this successful. So making sure the agencies have the funding
they need to reward their employees is not just an OPM issue.
It is an issue for that agency that feels they do not have it.
It is an issue for everyone who participates in the budget
process.
But where we have a particular role at OPM is make sure
that the system is in place, it is meeting standards, and that
right from the front end, the executive has clear, written
goals, good management has what they need to be successful, and
then at the end of the day, certainly we all need to work
together to make sure the funding is there so that they can be
rewarded appropriately.
Senator Akaka. I understand that OPM, with OMB's
concurrence, may suspend certification if an agency's pay-for-
performance system is not in compliance with the certification
criteria. You did mention in your remarks that certification is
having a desired effect. Has any agency's certification ever
been suspended?
Ms. Springer. To my knowledge, I do not think anyone ever--
no, the answer is no.
Senator Akaka. And can you provide additional details as to
what an agency would have to do in order to have certification
suspended?
Ms. Springer. It is really speculative, to be honest with
you, Senator. I have not ever come across it, nor would I
expect that to be the case. Let me get back to you on that, if
I may, because it is just very far removed from what we have
experienced or what we expect to experience. So I will get back
to you with that.
Senator Akaka. Director Springer, the merit system
principles call for equal pay for work of equal value. However,
under the SES pay-for-performance system, senior executives at
different agencies with the same performance rating do not
necessarily receive the same performance award.
In your opinion, how does the SES pay-for-performance
system comply with the principle of equal pay for equal work?
Ms. Springer. I think that it does in the sense that the
starting point is a job definition with certain
responsibilities and requirements and an individual who takes
on that role--and so they start at the same point. But then
from that point, each individual distinguishes themselves in a
given year by the level of their performance and the particular
requirements of that job in that agency. So you may have an
accountant in agency A and an accountant in agency B, or an
accounting executive, if you will, and they may in a given
year, even though on paper typically it looks like the same
position, have certain challenges in that year. And this system
would allow us to recognize the stellar performance, for
example, of an individual in a particularly challenging year
that went above and beyond the basic requirements of their job.
So I do not think they are at odds. I think it just gives
us the opportunity to acknowledge years that exceed or are
outstanding for a given individual and then reward those.
Senator Akaka. I understand that OPM conducts audits of
agencies to ensure adherence to the merit system principles.
Has OPM completed any audits of agencies' SES pay-for-
performance systems?
Ms. Springer. Yes, I was just checking. It really is each
year, in effect, by the recertification process, we are
examining what they have done in the previous year. So, in
effect, that is like an audit de facto, if you will, because
each year, with the exception of the agency that has the 2-year
full certification, we have to go back and review what they
have done, have they put it into practice and met the
expectations.
Senator Akaka. Thank you very much, Mr. Chairman.
Senator Voinovich. Senator Akaka, I would like to have
another 3 minutes for each one of us and then wrap it up here
because there are other witnesses.
Agencies are allocated funds every year. They also are
required to fund a cost of living increase for employees, pay
step increases, and so forth. Now, when we get to the Senior
Executive Service, is there a pool of money that is available
for them? And does that reflect the cost of living? How does
that work?
Ms. Springer. There are really two major components to the
compensation award and adjustments that are made for a given
individual in the SES, as I understand it. You have got a
percentage increase on their salary, and that is intended under
our system to recognize performance.
Senator Voinovich. Well, let me start off with this: We
pass a cost-of-living adjustment each year, X percent.
Ms. Springer. Right.
Senator Voinovich. Is that amount of money reflected in the
budget of the departments or do they have to funnel these
raises from existing funds?
Ms. Springer. Yes.
Senator Voinovich. And that is the money that you have to
work with.
Ms. Springer. That is my understanding. And then, in
addition, obviously, there is the bonus pool as well.
Senator Voinovich. Is that an extra sum of money that
departments are given, a bonus pool?
Ms. Springer. In developing their budget requests, agencies
project personnel costs across their entire workforce.
``Personnel compensation and benefits,'' the budget class or
category that includes General Schedule salary increases and
awards, also includes SES pay increases and awards. In
estimating the amounts needed, agencies rely on historical
projections. OMB's government-wide budget preparation
instructions (OMB Circular A-11) include directions on how to
reflect the effects of pay raises and assumptions about those
raises. Given the timing of the government's budget and
appropriations processes, these assumptions are estimates.
OMB's budget preparation instructions do not ask agencies to
isolate SES compensation from that of the general workforce.
OPM is not in a position to instruct agencies on how they
should allocate funds for executive compensation when they
develop their operating budgets after receiving their
appropriations.
With respect to SES bonuses, more specifically, it must be
noted that for the SES, a performance award is part of the
overall delivery mechanism for SES compensation, as legislated
by the Civil Service Reform Act of 1978. Agencies must adhere
to the funding limitations regarding the amount of performance
awards paid in any fiscal year, which are found in 5 U.S.C.
5384(b)(3). They usually do this by establishing an SES bonus
pool. The actual allocations used to fund this awards pool are
covered in the agency's annual operating budget process, as
salaries and expenses (or equivalent).
Senator Voinovich. It is my understanding that since the
implementation of the pay-for-performance system, there is no
guarantee of a pay adjustment for successfully rated employees.
One of the purposes of this system is to reward those that
should be rewarded.
The enabling statutes of the new systems at the Department
of Homeland Security and the Department of Defense also do not
have such a requirement. But the guarantee for at least a
market adjustment was incorporated in the final regulations of
both systems. Has OPM opened, or is it revisiting, such a
regulatory change for the SES?
Ms. Springer. Yes.
Senator Voinovich. OK. You can do that by regulation.
Ms. Springer. Well, I think we need to take a look at how
it would actually, in practice, happen. So I don't want to say
what the vehicle is. But we are open to exploring that.
Senator Voinovich. Well, I would like to conclude with this
comment. First of all, I know you are working at it, and you
have a lot of things on your plate. But I have invested an
enormous amount of time in workforce refroms. One year from now
I want the problems solved. That means that you get in there
with a microscope, and sit down with the organization that
represents the SES. I want this thing to be perfect. If it is
not--how do you expect us to have a successful rollout of this
into other areas of the Federal Government?
It is really disturbing to me, honestly, that this has not
worked the way it should work. I want it to work.
Ms. Springer. May I just respond to that?
Senator Voinovich. Yes.
Ms. Springer. Nobody wants it to work properly more than I
do, and I think we have to be very careful that we do not take
a survey a few hundred people out of over 6,000 in a new system
where there are some execution issues and let that paint a
picture that it either is a bad system or that it will not
work. It can work, and it is working in many places.
Senator Voinovich. But may I tell you something?
Ms. Springer. Yes.
Senator Voinovich. They should not be making the survey.
You should be making the survey. Employee acceptance of the
system is very important, but that does not mean that everybody
is going to be happy. But, overall, people should say: You know
what? This is neat. This is something that we have wanted for a
long time.
Ms. Springer. There is no question about it, and we do
surveys. We have not done one here yet because, candidly, what
we find is in surveys we have done of projects, demo projects,
other projects, it takes several years before the system really
takes hold and people see the value of it. And even there you
typically get only to a 70- or 80-percent level of satisfaction
with it, because there are some people who are not going to
come around as well as others.
And so I think it is a little bit premature. I think it is
helpful information. We take it seriously. As I say, I met the
very first day that it came out with--to get briefed on it
personally. There are things we are going to do. But I think we
have to be very careful, not just on the basis of that one
survey, to run to the conclusion that this is bad, it is not
working. A lot of people are very happy; even in the survey it
picks that up.
Senator Voinovich. Well, the fact is it is not where it is
supposed to be. Do you agree?
Ms. Springer. Agreed.
Senator Voinovich. OK. Has anybody ever sat down with David
Walker and his team to talk to them about what they did in
terms of when they implemented their program?
Ms. Springer. We are very familiar with GAO's approach.
When Comptroller General Walker undertook his multiyear efforts
to transform GAO and its workforce, he invested in an expansive
approach that developed, validated, and uses mission-focused
competencies as the key driver. As you know, OPM's work leading
the President's Management Agenda initiative on the Strategic
Management of Human Capital has also focused agencies'
attention on assessing and reducing gaps in the competencies
their mission-critical occupations require. GAO went on to link
its competencies to a broadly-drawn ``performance management
system'' that covers and integrates a host of human resources
management processes. Among those processes is the appraisal
process itself where judgments are made about the degree to
which expectations have been met and goals achieved. Within the
Executive Branch, agencies subject to the Government
Performance and Results Act of 1993 have been making progress
in emphasizing a results focus and improving measurement of
results. The Bush Administration has been determined to pursue
that results focus with respect to executive and employee
performance appraisal, so that has been the cornerstone of our
effort to improve executive and employee performance management
systems in the agencies. In many respects, the efforts of GAO
and the Executive Branch are congruent. Our work differs to
some degree in our results emphasis, particularly when it comes
to making judgments about whether agencies' executive appraisal
systems are making meaningful distinctions based on relative
performance, as the law requires when OPM certifies those
systems.
Senator Voinovich. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman. I have
other questions for Director Springer, I would like to submit
the rest of my questions for Director Springer for the record.
Senator Voinovich. Without objection.
Thanks for your testimony, and we want to work with you. I
know you have a tough job, but I want you to know that I have
told Clay Johnson that I am going to spend as much time as I
can working with OPM.
Ms. Springer. Good.
Senator Voinovich. I think that you are on the way to
shaping up OPM. I am proud of the progress that is being made,
and we want to do everything we can to help you. I think it is
really important, and I am going to get a letter off to my
friend, Rob Portman, that in this area, they should be really
looking at the budgets to make sure that you have got the
resources that you need to go forward and do this right.
Ms. Springer. Very good. We are always glad to get more
money.
Senator Voinovich. Thank you.
Senator Akaka. Thank you, Director Springer.
Senator Voinovich. Our next panel of witnesses, we have
Brenda Farrell, Acting Director Strategic Issues, at the GAO;
and Carol Bonosaro, President of the Senior Executives
Association.
We thank both of you for being here today, and I appreciate
the fact that both of you had an opportunity to hear the
testimony of Ms. Springer, and I would welcome any comments
that you have in regard to what she had to say here today. We
are trying to get the best information we can before this
Subcommittee.
Ms. Farrell, will you proceed?
TESTIMONY OF BRENDA S. FARRELL,\1\ ACTING DIRECTOR, STRATEGIC
ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Farrell. Thank you, Mr. Chairman.
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\1\ The prepared statement of Ms. Farrell appears in the Appendix
on page 00.
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Senator Voinovich, Senator Akaka, thank you for the
opportunity to be here today to discuss the Federal
Government's implementation of performance management systems
for the approximately 7,000 members of the Senior Executive
Service and those in senior positions. Let me briefly summarize
my written statement that is based on findings from our issued
reports.
First, I want to emphasize that implementing pay-for-
performance systems is a huge undertaking for organizations and
requires constant monitoring and refining in order to implement
and, very importantly, sustain them successfully. How it is
done, when it is done, and the basis on which it is done can
make all the difference in their success.
My written statement is presented in three parts. The first
addresses the performance management system's regulatory
structure. Overall, the regulations that OPM and OMB develop to
administer a performance-based pay system for executives serves
as an important step for agencies in creating a clear linkage
or line of sight between executives' performance and
organizational results. To qualify for the pay flexibilities,
OPM must certify, and OMB must concur, that an agency's system
meets nine criteria. The certification criteria are generally
consistent with key practices for effective performance
management that GAO has identified in prior work.
The second part of my statement addresses agencies' views
of OPM's certification process. In our ongoing work for this
Subcommittee and the Senate Committee on Homeland Security and
Governmental Affairs on OPM's capacity to lead and implement
human capital reform, we asked agency Chief Human Capital
Officers and Human Resource Directors to describe their
experiences with OPM's administration of the revised executive
performance system. We heard a number of concerns from agencies
regarding OPM's ability to communicate expectations, guidance,
and deadlines to agencies in a clear, consistent, timely
manner.
For example, one official noted that while OPM tries to
point agencies in the right direction, it will not give
agencies discrete requirements. This leads to uncertainty about
what agencies must and should demonstrate to OPM. Some agency
officials told us that, in some cases, OPM changed expectations
and requirements midstream, with little notice or explanations.
OPM explains that it intentionally allowed some ambiguity
in the regulations for the new system, in an attempt to provide
agencies with management flexibilities. However, OPM officials
agree that agencies need better guidance and are working on
improvements. The late issuance of guidance has also been
problematic for agencies. OPM did not issue guidance for 2006
until January of that year and then clarified this guidance in
a memorandum later that month.
The third part of my statement addresses the need for OPM's
oversight of the implementation of agencies' senior executive
performance systems. Most agencies have been challenged to
receive the full certification, meaning that the agency is able
to provide documentation showing that the agency has designed
and fully implemented a system meeting all nine criteria.
According to the latest OPM data, performance systems at 25
agencies have been certified during calendar year 2006. Of
these, only the Department of Labor's SES system, as you
earlier noted, received full certification. The remaining
systems at 24 agencies received only provisional certification,
meaning that the agency must provide documentation showing that
its performance system meets design criteria but insufficient
documentation exists to show that the system is fully
implemented.
These findings are not surprising. As GAO has noted in its
past work, agencies could find it initially difficult to
provide the necessary performance data as required for the two
appraisal periods preceding the certification request. In
addition, we reported that many agencies have undertaken
valuable efforts to link their executive management systems to
their organizational successes, but agencies need to strengthen
that linkage to use their performance systems more
strategically to achieve organizational goals.
Agencies receiving full or provisional certification can
use the higher pay rates. Going forward, it will be critical
for OPM to continue to closely monitor the certification
process to help ensure that provisional certifications do not
become the norm and agencies reach full certification by not
only developing but fully implementing systems for their senior
executives.
In summary, performance-oriented pay should only be one
part, a critical part, of a larger organizational effort to
improve the performance of an agency. High-performing
organizations understand that they need senior leaders who are
held accountable for results, drive continuous improvement, and
lead and facilitate efforts to integrate human capital
approaches with organizational goals. Although there have been
some challenges with the new senior executive performance
system, what will be important is how OPM works with agencies
to meet the full certification criteria.
Mr. Chairman, this concludes my statement. I will be happy
to take questions when you are ready.
Senator Voinovich. Thank you very much. Ms. Bonosaro,
welcome.
TESTIMONY OF CAROL A. BONOSARO,\1\ PRESIDENT, SENIOR EXECUTIVES
ASSOCIATION
Ms. Bonosaro. Chairman Voinovich, Ranking Member Akaka, I
am delighted to be here today, and the Senior Executives
Association truly appreciates your interest in this new SES pay
and performance management system, as well as your invitation
to testify.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Bonosaro appears in the Appendix
on page 00.
---------------------------------------------------------------------------
As you know, many reports and studies have pointed to both
the importance and the quality of the career Senior Executive
Service corps, including the 1993 Volcker Commission, which
observed, ``No organization in this country is more dependent
on qualified senior leadership than the Federal Government.''
Given this, it is clearly in the public interest to attract
and retain the best corps of senior executives possible and to
compensate them and manage their performance in as fair and
effective a manner as possible.
We have had a clear interest in seeing this new system with
the higher pay caps be successful, and all the association's
efforts have been directed to ensuring that result.
Over the past 2 years, we received complaints regarding the
system's implementation. When those concerns about the new
system persisted, we decided to conduct a survey to obtain
information from the executives themselves regarding their
experience with and views of the system. Through our
partnership with Avue Technologies, we surveyed 850
respondents, which is approximately 12 percent of the career
corps. We consistently urged executives, because this was a
voluntary survey, that we wanted to hear from both those who
believed the system was wonderful and those who believed it was
not wonderful. In other words, we wanted to hear both the good
and the bad.
The respondents' characteristics closely mirror that of the
senior executive corps, and I think that is very important
because they are, indeed, very representative. And especially
important is the fact that the salaries of those surveys almost
perfectly mirror that of the SES corps as a whole. Therefore, I
think you cannot argue persuasively that the respondents hold
negative views because somehow or other they have not fared as
well as others in this new system.
So the end result, I think, is a survey that sought
objective information, as well as opinion, and showed
substantial evidence of problems in the implementation of the
new system. To put it another way, although the provisions of
the statute and the regulations--with a few clear exceptions,
in our view--made sense, something has been ``lost in
translation'' as the system has been implemented.
The view of many survey respondents, as you know, is that
agencies' implementation of the pay system has often resulted
in a disconnect between ratings and pay adjustments, imposed
systems of arbitrary quotas, and failed to be transparent.
While over 96 percent of respondents believe they should be
held accountable for performance, 86 percent said the system
had no effect on their performance, and 56 percent said it had
no effect on their motivation. But 40 percent saw the system as
having a negative effect on morale.
The survey results clearly show three major issues that
must be addressed: Many senior executives believe that de facto
quotas are being enforced that are affecting their performance
ratings; senior executives see no clear, consistent correlation
between ratings and pay adjustments; and senior executives
doing a good job at the fully successful or higher level often
receive no salary adjustment.
Simply put, the SES pay-for-performance system needs
attention.
Senator Voinovich. You mean 15 percent of the highest rated
people got no increase?
Ms. Bonosaro. Well, in fact, let me give you a little more
detail on that because that was a number that took into account
those in rating systems that involved 3, 4, and 5 levels. But
if you look at those in 4-level systems, 7 percent of those
with the very highest rating received no raise and no bonus; 5
percent of those with outstanding ratings in a 5-level system
received no raise and no bonus.
Now, Director Springer notes that a fully successful rating
is a good rating and should be seen that way. But I think the
problem is that if there is no pay adjustment at least to keep
pace with the cost of living that one might receive, if all pay
adjustments are permissible and you are doing a successful job,
then the system is not making much sense. And so that is why we
recommend a legislative solution to resolve that problem.
Senator Voinovich. To make it mandatory?
Ms. Bonosaro. Yes.
Senator Voinovich. You are telling me that they did get a
cost of living?
Ms. Bonosaro. Correct. All pay adjustments are permissible
in the system, and they are all to be based upon performance.
None are required, so we have had--in fact, if you read through
the comments in the survey, there was one executive who was a
Presidential Rank Awardee who received nothing for an
outstanding rating. That sends a very wrong message.
Senator Voinovich. Is that in your survey?
Ms. Bonosaro. Yes.
Senator Voinovich. Specifically individuals that were in
that category?
Ms. Bonosaro. Yes.
Senator Voinovich. OK.
Ms. Bonosaro. We also believe the SES pay system should be
reformed to recognize the reality that performance awards
should become a substantial part of SES compensation. They
should count towards retirement, and our legislative proposal
suggests a way to do this.
We also propose that an agency be required to inform an
executive of his or her final rating and the reasons for it
within a reasonable period of time, namely, 60 days. Seventeen
percent of all respondents reported not having their ratings
discussed with them at all last year, while 37 percent received
only a cursory discussion.
We think our legislative proposals are especially necessary
because the most disturbing finding is that, with 31 percent of
the SES currently eligible to retire and 90 percent eligible to
retire over the next 10 years, 16 percent of the respondents
indicated they are accelerating their plans to separate due to
this new system.
Senator Voinovich. Sixteen percent?
Ms. Bonosaro. Sixteen percent. Forty-seven percent
indicated the new system has had a negative effect on interest
in the SES by GS-14s and GS-15s, and that I think is especially
unfortunate.
As Senator Akaka noted, 53 percent of those surveyed agreed
that agencies rated executives to achieve a forced quota in
2005. Therefore, we recommend a statutory prohibition against
the use of quotas or forced distributions. We recognize that
such a prohibition exists in regulation, but our hope is that
with a statutory prohibition, perhaps agencies will take this
more seriously.
We recommend that those entering the SES from the General
Schedule be assured of a minimum 5-percent increase in their
salary. At present, there is no requirement whatsoever, and
agencies have adopted a variety of practices.
To resolve the continuous round of certification and
recertification, we recommend that all certifications no longer
be on a calendar-year basis but last for 60 months, especially
since OPM can rescind recertification at any time. OPM should
provide clear and consistent advice to agencies on how to
comply with requirements for certification 6 months before the
recertification application is due or before decertifying an
agency.
Apart from the legislation we recommend, we believe that
OPM and the agencies themselves must take steps to examine
their practices and the problems identified in this report;
namely, they must determine what has contributed to these
results in spite of their best intentions. They need to look at
the message sent, I think, by the focus each year in OPM's
annual report on SES ratings, the focus on the number, the
percentage of drop in the highest ratings given. I think that
continual focus sends a message which may be unintended.
This is not an issue of pay. It is an issue of providing an
SES system that is guided by the public interest. The
successful mission accomplishment of the Federal Government
depends on the expertise and skills of current and future
highly qualified and experienced senior executives.
I will close with a comment from a survey respondent, and I
hope that you have an opportunity to read many of the comments
we provided in the report because they provide a very graphic
illustration of the survey data. A senior executive from the
Veterans Administration wrote, ``I have done about as well as
any executive could have asked for under the performance and
pay system. My pay raises and bonuses have been among the
highest in the agency. But I see systemic flaws which are, in
fact, demoralizing significant portions of our SES cadre and
will weaken its foundations in the future.''
Thank you for your time.
Senator Akaka. Mr. Chairman, I regret I must leave. I want
to thank the Chairman for holding this important hearing and
thank the witnesses for your testimony. And, Mr. Chairman, I
would like to submit my questions for the record.
Senator Voinovich. Without objection, and we expect the
witnesses to get back to Senator Akaka.
Thanks, Senator Akaka, for being here.
Ms. Bonosaro, were performance appraisals for the SES
conducted before this new system?
Ms. Bonosaro. Yes.
Senator Voinovich. And was that uneven throughout the SES,
some of it good, some of it bad?
Ms. Bonosaro. Well, we did a survey, in cooperation with
OPM in 1999, and at that time we knew that we had some of these
problems--in other words, some executives were not having
regular performance appraisals, sit-down conversations, and so
on.
I think one of the issues that has been misconstrued is
when we look back, as Director Springer referred to, there were
places that had 97 percent of their executives at the highest
rating, however, that occurred primarily in agencies such as
the Department of Defense with three-level systems, so the
highest rating was fully successful. One would, therefore,
expect you would have 97 percent of all people at that level.
I think performance evaluation has always been an issue,
people making time for it, making it meaningful. But I think
what we do know is that the executives who we talk to do not
feel as though they need that kind of system to motivate them.
They are so committed to their work, they work so hard, they
are so interested in what they are doing and committed to the
mission that a lot of them do not feel that this has added very
much, frankly.
Senator Voinovich. Well, it is a lot of work.
Ms. Bonosaro. Yes.
Senator Voinovich. It really is. If anybody has done it,
you know it is a lot of work. I did it when I was mayor, and it
was tough to get people to do it, to have them spend the time.
We do it in my office now.
It would seem to me, though, that members of the Senior
Executive Service would welcome the opportunity to sit down and
talk about what they are doing, what the goals are, how they
fit in the organization, set goals, and then periodically
review them. I know from experience that if somebody is doing a
good job, they would like to be recognized for it.
Ms. Bonosaro. I think it is clear that they do agree with
that, that if a system like this is handled in a meaningful
way, of course, they would support it. If, as Director Springer
says, goals are developed that make sense, that can be
measurable without being quantifiable, and that in the end you
are judged fairly on the basis of how well you did, instead of
being told that, well, we just cannot go in with that many
outstandings, so we are going to give you a fully successful.
That is where the pin goes in the balloon.
Senator Voinovich. Probably what is driving that is money,
isn't it?
Ms. Bonosaro. I think two things are driving it: In part
perhaps money, but I think there is a perception somewhere
along the way in the agencies that the way to be recertified is
to come in with lower--keep lowering the number of executives
being rated at the highest level.
Senator Voinovich. Well, basically what it should be is
that you should call it as it is.
Ms. Bonosaro. Yes.
Senator Voinovich. You don't sit down with a bell curve. It
should be based on reality and not on some type of comparative
or quota system.
Ms. Bonosaro. Well, if we, in fact, had a bell curve that
reflected reality, then you would have to wonder whether our
selection process for the SES were a problem, because we expect
these people to be very high performers.
Senator Voinovich. To be outstanding. Right, I get it.
Ms. Bonosaro. Yes.
Senator Voinovich. Are you familiar with the system at the
Department of Labor?
Ms. Bonosaro. No.
Senator Voinovich. I would really be interested to know
what it is that they are doing to have gained full
certification.
Ms. Bonosaro. Yes.
Senator Voinovich. It would be interesting to find out from
your folks over there how they feel about it and what things
were put in place there that are absent from other places.
Ms. Bonosaro. We can certainly try to do that. I think the
one caution I would make is that I would strongly suspect that
if we look at the report, there are agencies that were
provisionally certified as well. It may be that what got an
agency certified may not necessarily result in a better record
on the kind of problems that we have identified, because I
think that there is a disconnect somewhere along the way. I
think most of the Chief Human Capital Officers would tell you,
for example, that they have done everything possible to make
the system transparent, that they do not understand why these
executives say they have never seen the report or they do not
know anything about how other people are rated, or how they
stack up to others in the agency. But yet that is what we hear.
So somehow or other, that is why I think that not only OPM
but the agencies themselves have to sit down and take a hard
look at where this is getting lost in translation along the
way.
Senator Voinovich. Well, you know, I would really
appreciate some help on that because if somebody gets a
certification, not provisional but a real certification, it
indicates to me that they have got a system in place where the
people that are in the system feel that it is a good system,
that they have had the training and all the other incidental
things that are necessary to make it successful.
Ms. Bonosaro. I think one of the good questions to ask--and
we have tried to learn this ourselves without very much
success--is to gain a real understanding of what the
requirements are in that certification process.
I do know that they look at a sample of performance
standards for senior executives to determine that they are, in
fact, using measurable standards. But beyond that, I am not
certain that they are asking, well, how are you training others
in utilizing this system, for example.
I suspect, from what I hear and from talking with OPM
staff, that they are requesting data, they are looking at
standards, but I think the question of how are you putting this
in place--are you doing training and so on?--may be the missing
link. But I do not know that for a fact.
Senator Voinovich. Ms. Farrell, have you had a chance to
look at what I have just been talking about and what some of
these agencies are doing? Can you give me an idea, if you have
one, what are the things in place that are making one system
more successful than another one? Is there a formula that you
have that can guarantee that--maybe not guarantee, but at least
lend itself toward being successful with what we are trying to
accomplish here?
Ms. Farrell. I think you are right, Mr. Chairman, best
practices need to be shared, and the agencies that we have
spoken with, including DOD, are hungry to learn how to move
forward not only beyond establishing the framework for a
performance-based system but how to implement it. I think that
most of these agencies do have a handle on how to design such a
system, but they do not know how to move forward with
implementation.
There could be lessons learned, obviously, from DOL because
they have taken that next step. They are the only agency for
this calendar year that does have a system that is fully
implemented. That tells me that they are adhering to the nine
criteria in regulations, which I noted earlier in my statement,
follows the key practices that high-performing agencies use to
be effective with performance management.
I think that the CHCO Council is one venue to share the
best practices, and we have been meeting with OPM and do know
that the CHCO Council is planning to do more in that particular
area of sharing the certification lessons learned.
Senator Voinovich. I asked Ms. Springer the question of
does she have the resources to effectively certify agencies.
That is key. The answer to that was yes. Do you agree with
that?
Ms. Farrell. Well, as you know, we have an engagement
underway that is looking at OPM's capacity to lead reforms such
as the SES certification process, and they have been in a
transformation themselves since 2003 of going from the
rulemaker to the toolmaker. I do not think it is just a
question of do they have enough people, but do they have the
people with the right skills to help agencies, not just see if
an agency is in compliance with certification requirements, but
help the agency understand how to develop a road map or
implement that road map into implementation for a performance-
based appraised system.
Senator Voinovich. When is that report going to be issued?
Ms. Farrell. That will be due to you late November of this
year.
Senator Voinovich. Well, I have been trying to get OMB to
guarantee that agencies have the resources to do the job that
they are being asked to do. One of the things that disturbs me
is that the nondefense discretionary part of the budget is the
one that is getting squeezed. If you look at some of these
agencies, you are finding that they are flat-funded and, in
fact, their budgets have gone down because they are not being
adjusted for inflation, and they are just being squeezed to
death. I will be anxious to see what your report has to say in
that regard.
Are you familiar at all, Ms. Bonosaro, with what they are
doing over at OPM with the staff that do the certification?
Ms. Bonosaro. Well, we developed an awful lot of paper for
a long time, thinking we were obtaining the plans that were
coming in for certification, until we learned one day that the
actual performance management plans that were acceptable were
ones that had been, in fact, approved even prior to this new
system, and that where the action was was in the review of
these standards and looking at a lot of data about pay
adjustments and ratings and so on, which is why I agree with
what GAO has found. They are focusing on the structure of a
system, but not what happens when you actually put that into
implementation, as best we can tell.
Senator Voinovich. Is GAO in favor of this, if done
properly? Or do you think this is a hassle and agencies should
not get involved in it?
Ms. Bonosaro. Well, frankly, we thought we had pay for
performance because, as you know, the SES had a system of
bonuses and Presidential Rank Awards. But as you also know, we
had tremendous pay compression before this new system.
Senator Voinovich. Yes, pay compression.
Ms. Bonosaro. Tremendous. So this gave us the----
Senator Voinovich. And we lifted that. We worked very hard.
Ms. Bonosaro. Yes.
Senator Voinovich. They were limited, and we have increased
that cap. Then when they were receiving bonuses they would not
receive the full amount in a year because they would exceed the
cap.
Ms. Bonosaro. Yes, and we dealt with the annual
compensation limit.
I think what is unfortunate in the new system, though, is
that we did lose locality pay for these people, which is
another issue that we have addressed in our legislative
recommendations, and that presents a real issue when you think
about moving a senior executive, which as you know, is part of
the system. That is the risk you take, to be geographically
reassigned. Well, right now, God help you if you get moved from
Kansas City to San Francisco, because there are no locality pay
adjustments. And that, plus permissive cost-of-living
adjustments, if you combine this, a lot of this together, the
net result is you have those talented and smart GS-14s and GS-
15s who should be aspiring to the SES now looking at it saying,
Why would I want this?
And so our view is we have got to make this system work. It
has got to work well. And these are also the people who would
be implementing a system for the rest of the civil service. So
they have got to feel that they know that this can work well if
they are going to make a system like this work well for those
beneath them.
Senator Voinovich. Ms. Farrell, as GAO has evaluated other
personnel reforms, has GAO found the initial response the same
kind that we have had out of this recent survey? Are you
familiar with the survey?
Ms. Farrell. Well, the survey, as you know, was released
last Monday. I am familiar with it. We have not studied the
methodology. The study is a piece of information that adds, I
think, some value. We feel that OPM should not just be relying
upon numbers. It is important to consider if the agency's
performance-based system takes into account the client's needs
as well as the employee's. Surveys are one measure to determine
if the employees are actively involved in the design of the
system. To our knowledge, the Federal Human Capital Survey has
not taken employee feedback into account or how the agencies
been doing with their administration of the performance-based
system since 2004. Employee feedback on appraisal systems is
something that could be rolled into that survey.
Senator Voinovich. Well, I would be interested to get all
this information together to give us some kind of a blueprint
as to what needs to be done here in the next year or so to
shape this up, and perhaps get together more often with folks
over there to make sure that it happens.
The SEA has recommended a statutory change to prohibit
quotas or forced distribution of ratings under the system.
However, the regulations already prohibit quotas and forced
distribution.
How do you feel, Ms. Bonosaro, that a statutory provision
would be more effective than the current regulation?
Ms. Bonosaro. Well, obviously we have not proposed any
penalties here, but we hope that agencies would be inclined to
take a statutory prohibition more seriously.
There was one case of what we thought was pretty clear
evidence of a quota in effect at one agency, where there was a
set of PowerPoint slides that were being used to brief on the
new system, one of which was literally a normal distribution
curve. And we reported that to OPM. We never did learn what
action they took, but our understanding was later that the
recommendation was, well, why don't you eliminate the slide,
but we understand that this is just a--it was referred to as a
``notional concept.''
So that to us did not seem to send a very strong signal
that this is not the way to implement this system.
Senator Voinovich. Again, getting back to what I asked
earlier, has your organization looked at what different
agencies have done for training and preparation to go forward
with pay-for-performance systems?
Ms. Bonosaro. No.
Senator Voinovich. You have not. How about GAO? Will that
be in this report?
Ms. Farrell. No, that specifically will not. Our report
looks at not just the SES certification, but other activities
that OPM has had underway. The last time we looked at
performance-based systems for the senior executives was in
2004, right before this new certification process was launched.
At that time a number of agencies had efforts underway to fully
implement performance-based systems, but they weren't quite
there yet with implementations. Obviously there are best
practices. We are just not there yet.
If I can say, Mr. Chairman, we do feel that pay-for-
performance starts at the top with the senior leaders. The
senior leaders lead by example, and much can be learned from
the experience, as you acknowledged earlier, of implementing
such pay reforms for the senior leaders that then will cascade
down to employees in the rest of the agency. It is part of an
executive's stewardship responsibility for continuous
improvement, and a performance-based system is a tool to help
reach that end.
Senator Voinovich. Well, as I said, it would be interesting
to see what things Comptroller General Walker and his team put
in place to make this a successful system, and what may be
applicable to other agencies. In other words, here are the ten
things that you need to do if you want to have a successful
system. Training is a big thing.
Ms. Farrell. Right.
Senator Voinovich. Communication is another one; the kind
of commitment that is made from top management that this is a
priority, and will be done right. The system should show
employees how their job translates into the organization doing
a better job than what it was doing; the feeling of individuals
that are in the system that it is a fair system, it is
transparent, it is not arbitrary, some of the other criteria. I
would suspect that if we did a real investigation into
agencies, we would find out that some have done a terrific job
in that area and others have not done the job.
That is why I made reference to the Spiral 1.1 at NSPS,
that I think they have done a terrific job of educating and
informing people, and up to now they are buying into it. We
will see how it works out. So, I am anxious to see your report
and look at some of these other things. I would welcome any
other thoughts. I know you have made some recommendations for
statutory changes. I would be more than happy to look at them,
sit down with Senator Akaka, and see if we can get some kind of
consensus on them.
The SES are the leaders in the government, and a potential
90 percent turnover in 10 years is frightening. I think back in
2001 when I said by 2005 we were likely to lose--what was it? I
think 55 percent or even more of the workforce. I do not think
we have lost them as some anticipated, have we?
Ms. Bonosaro. No, although I think the numbers are inching
up a bit because OPM's retirement projections are continually
changing now, I gather, at least for the SES, based upon the
experience they are seeing. So it probably is inching up, but
not only do we want to keep them as long as we can, but the
critical thing that we are concerned about, indeed, is who will
follow in their footsteps.
Senator Voinovich. Yes. You said 15 percent of them are
thinking about tipping their hat earlier. I mean, the truth of
the matter is that many of these agencies are being run by
folks that could leave now, and they are sticking around,
frankly, I think, because they believe in their country and
feel good about the work that they are doing and making a
contribution. We certainly want to make sure that they are
happy with that and not have a system that encourages them to
leave.
Ms. Bonosaro. Well, unfortunately, that is a lot of what
comes through in the comments, and it is very sad because there
are people who absolutely love what they are doing and care
about their country, and in a couple of cases they say, ``I
have got to get out the door because what I am being subjected
to''--as I say, how it got translated down the line, ``just
makes no sense.''
Senator Voinovich. I want to ask you one last question. I
have been promoting, as Comptroller General Walker has, the
creation of a Chief Management Officer in both the Departments
of Homeland Security and Defense to really be dedicated to
systemic change. That individual would serve a 7-year term so
that some of these things that we are attempting to do have
continuity. And from my experience as a mayor and governor,
systemic change takes a long time to get done.
What do you think about that?
Ms. Bonosaro. Well, actually I do not think about that
because our board of directors has to think about that. We
discussed your proposal briefly a little while back, and our
board has to come back to it because they do take an issue like
that seriously, and will be happy to weigh in with you.
Senator Voinovich. OK. In other words, they have not taken
it up yet?
Ms. Bonosaro. Correct.
Senator Voinovich. I would really appreciate it if they
did. I lobbied Congress for 18 years as mayor, governor,
Chairman of the National Governors Association, and President
of the National League of Cities. What discouraged me so often
was how administrations often ignored the expertise of the
folks that really run the place. I hope that more of them feel
like they are not being ignored today than they were in the
past. They want to see organizations change for the better. It
seems to me that a lot of stuff just stops until the new
political team is in place, which can take a year. That is the
reason I think that having someone in charge of management
would make a great deal of sense. So I appreciate your looking
at it.
Ms. Bonosaro. We will be happy to.
Senator Voinovich. And I know, Ms. Farrell, that
Comptroller General Walker feels strongly about it.
Ms. Farrell. Yes, he does.
Senator Voinovich. As I say, I would like you to look at it
because none of these things get done around here until you get
a little traction, and you do not get traction until people
that are respected in organizations say this is a sensible
thing to do.
I want to thank you very much. This has been a very good
hearing. I am glad we had it. I keep asking people, How is the
SES pay-for-performance going? These reforms are so important.
If we cannot get this thing in the SES, the chances of growing
and cascading are out. Forget it, you know.
Ms. Bonosaro. Yes.
Senator Voinovich. So we want to work with you and make it
a success.
Ms. Bonosaro. Wonderful. We appreciate that.
Senator Voinovich. Thank you. The hearing is adjourned.
[Whereupon, at 12:33 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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