U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

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Using Balanced Measures as a Basis for Managers' Incentive Pay

Vice President Gore urges Federal agencies to recognize managers using balanced measures, which should include:

• achievement of Government Performance and Results Act (the Results Act) goals;
• results of customer satisfaction surveys; and
• workplace quality, including training opportunities and working conditions.

Agencies can design incentive programs to reward managers in a variety of ways. The examples presented here illustrate three simple approaches:

• Traditional Performance Award Process
• Straight-Line Incentive Program
• Using an "Intensifier"
• Summary

Traditional Performance Award Process. Managers' performance plans can incorporate organizational performance in their performance elements. If ratings of record are based on elements that measure organizational goal achievement, customer satisfaction, and/or workplace quality, then performance awards based on those ratings of record will be rewarding good performance in these areas.

Straight-Line Incentive Program. Agencies can design an incentive program for managers that is separate from the appraisal process and that would be similar to a goal sharing program. The incentive program would set organizational performance goals for managers and grant awards based on the achievement of those goals. For example, if a manager's organization met its goals of (a) achieving Results Act objectives, (b) exceeding the previous year's customer satisfaction index by 5 percent, and (c) improving at least half its workplace quality indicators, the manager would receive a bonus equal to a percentage of his or her salary. Note goals must be met to receive the award in this example. A variation of this program gives the manager a third of the whole award amount if only one of the goals is met, two thirds of the amount if only two of the goals are met, and the whole amount if all three goals are met.

Using an "Intensifier." Another incentive program uses a set of goals as the criteria for granting an award, but also uses a separate factor that affects the amount paid, either positively or negatively. For example, a program could set the criteria for an award payout as the achievement of Results Act objectives and the achievement of a certain level of customer satisfaction. However, a third factor measuring workplace quality would be used as an "intensifier" to affect the amount of the award. If Results Act objectives are met and the organization achieves a certain level of customer satisfaction, a payout would be made. But if workplace quality indicator levels also are high, the manager would receive an additional 10 percent of the payout amount. However, if the goals are met but workplace quality indicator levels are low, the manager would receive 10 percent less than the full payout would have been.

Summary. These three examples show how awards programs can recognize managers for organizational performance. Agencies can design a variety of such programs within our current regulations to focus managers on achieving a balanced set of results.

Originally published on April 1999.