[Federal Register Volume 65, Number 120 (Wednesday, June 21, 2000)]
[Proposed Rules]
[Pages 38442-38448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15641]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / 
Proposed Rules  

[[Page 38442]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 430

RIN 3206-AI57


Managing Senior Executive Performance

AGENCY: U.S. Office of Personnel Management.

ACTION: Proposed rule with request for comment.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) proposes to amend its 
regulations governing performance appraisal in the Senior Executive 
Service (SES). The proposed regulations will help agencies hold senior 
executives accountable by: reinforcing the link between performance 
management and strategic planning; requiring agencies to use balanced 
measures in evaluating executive performance; and increasing agency 
flexibility to tailor performance management systems to their unique 
mission requirements and organizational climate.

DATES: Comments must be submitted on or before August 21, 2000.

ADDRESSES: Send or deliver written comments to Joyce Edwards, Director, 
Office of Executive Resources Management, U.S. Office of Personnel 
Management, 1900 E Street NW, Room 6484, Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT: Anne Kirby, (202) 606-1610, or email 
to [email protected].

SUPPLEMENTARY INFORMATION: The 7,000 members of the Senior Executive 
Service (SES) are dedicated, hard-working public servants. Individually 
and through the organizations they lead, these senior executives strive 
to deliver value to Americans.
    This results-orientation was central to the original vision for the 
SES. As envisioned by the Civil Service Reform Act (CSRA) of 1978, SES 
performance management systems should:
     ``Ensure accountability for honest, economical, and 
efficient Government;''
     ``Assure that senior executives are accountable and 
responsible for the effectiveness and productivity of employees under 
them;''
     ``Ensure that compensation, retention, and tenure are 
contingent on executive success which is measured on the basis of 
individual and organizational performance;''
     ``Recognize exceptional accomplishment.''
    The Government Performance and Results Act (GPRA) of 1993 and the 
National Partnership for Reinventing Government (NPR) validated the 
CSRA's original vision and challenged Government to shift its focus 
from internal processes and outputs to results that are aligned with 
customer expectations.
    In the discussions triggered by OPM's 1998 Draft Framework for 
Improving the Senior Executive Service, executives and other 
stakeholders indicated that our current regulations discourage results-
oriented performance management. In addition, stakeholders told us that 
agency leaders must drive the effort to strengthen their SES 
performance management systems. Respondents to the 1999 Survey of the 
Senior Executive Service reinforced these findings:
     Only 72% believe their performance rating represents a 
fair and accurate picture of their performance;
     Only 48% believe SES bonus determinations are based on 
merit; and
     57% do not think poor performing executives are removed 
from their positions.
    Survey findings are available on OPM's website (www.opm.gov/SES).
    The proposed SES performance management regulations give agencies 
flexibility to reinvigorate their SES performance management systems--
to focus on results over process. They also reinforce the agencies--
responsibility to communicate performance expectations and to use the 
results of the performance management process as a basis for 
performance awards and other personnel decisions.
    The proposed regulations also require SES performance management 
systems to balance organizational results with the needs and 
perspectives of customers and employees. Introduction of the balanced 
scorecard concept in 1992 by Robert Kaplan and David Norton of the 
Harvard Business School as well as recent studies by the National 
Partnership for Reinventing Government and others have shown that both 
the public and private sectors are increasingly and successfully using 
balanced measurement to help create high-performing organizations. They 
indicate that an approach to performance planning, management, and 
measurement that balances the needs and perspectives of customers, 
stakeholders, employees, or others with the achievement of the 
organization's business or operational results is critical to 
successful improvement efforts.
    By institutionalizing the use of balanced measures, the Government 
acknowledges what its best executives have always known: leading people 
and building customer coalitions are the foundation of organizational 
success. In the 1999 SES survey, career executives reported that 
``leading people'' and ``building coalitions'' are the most important 
contributors to executive success now, and they will be even more 
important in the future.

Overall Approach

    Subpart C is totally revised to organize the material more 
logically and to use plain language, as directed by the President in 
June 1998.
    The purpose statement is revised to stress:
     Expecting excellence in senior executive performance;
     Holding executives accountable for results;
     Communicating regularly about goals and expectations;
     Appraising senior executive performance using measures 
that balance organizational results with customer, employee, or other 
perspectives; and
     Making performance the basis for pay, awards, and other 
personnel decisions.
    This emphasis is fundamental to the key changes in the subpart.
    The proposals broaden the focus from the annual summary rating 
aspects of performance appraisal to managing performance on an ongoing 
basis and shift the emphasis from process to results. The subpart is 
restructured to establish separate sections on the key components of 
performance management: planning and communicating, monitoring, 
appraising,

[[Page 38443]]

and rating performance and using performance results.
    The proposals pare many of the current regulatory requirements back 
to the statutory requirements and remove others to give agencies more 
flexibility to design performance management approaches that better fit 
their unique and changing mission needs and organizational climate. We 
have eliminated requirements that are unnecessarily constraining and 
burdensome to agencies or are process-bound. The changes balance the 
agencies' desire for maximum flexibility with the need for a corporate 
approach that safeguards merit principles and contributes to a better, 
results-oriented Government. This approach is also consistent with 
OPM's earlier initiative to provide more flexibility in how agencies 
implement performance management for the general workforce (August 23, 
1995 Federal Register, 60 FR 43936).

Key Changes in Current Requirements

    System requirements are modified to prescribe a framework for 
agency systems that identifies key system components, without 
specifying how these components will be implemented. Within this 
framework, agencies can design performance management systems to meet 
their unique mission requirements and organizational climate.
    Minimum appraisal period is modified to permit agencies to 
establish minimum appraisal periods that are longer than 120 days. The 
minimum appraisal period must be at least 90 days, as currently 
required, provided there is enough information on which to base a 
rating.
    Performance standards are now called performance requirements to 
reflect the term used in statute. Performance requirements will be 
established for critical elements and any other performance elements 
that will be used to appraise performance and derive the annual summary 
rating. The term noncritical element is no longer required.
    Appraisal criteria are amended to require balanced measurement.
    Rating level requirements are modified to remove the requirement to 
establish three rating levels for each critical element. The 
performance of each critical element and any other performance elements 
must be appraised.
    Summary rating level requirements are modified to the minimum three 
summary rating levels prescribed in statute (i.e., fully successful, 
minimally satisfactory, and unsatisfactory). The current maximum of 
five levels (i.e., no more than two levels above fully successful) is 
removed.
    Rating terms are revised to reflect the statutory requirement for 
an annual summary rating. There are now only two rating terms: the 
initial rating becomes initial summary rating and the final rating 
becomes the annual summary rating. References to other types of ratings 
are removed.
    Method for deriving summary ratings is modified to remove the 
current requirement to give critical elements more weight than non-
critical elements in determining a summary rating.

Additional Guidance

    OPM will issue additional guidance in various formats to help 
agencies implement the changes, including model performance management 
systems and examples of ways to use the various flexibilities provided 
under these regulations. This guidance will address how agencies are to 
obtain OPM approval of revised performance management systems, in 
accordance with 5 U.S.C. 4312. We will also share information about how 
public and private sector organizations are using balanced measurement 
to evaluate senior executive performance.

Table of Changes

    The following table lists all of the proposed changes to the 
current regulations. The ``current rule'' column lists the regulations 
in the current subpart C that are affected by the proposed regulations. 
The ``proposed rule'' column shows the disposition of the current 
rules. The third column explains each change.

----------------------------------------------------------------------------------------------------------------
              Current rule                       Proposed rule                   Explanation of change
----------------------------------------------------------------------------------------------------------------
430.301(a)..............................  430.301(a).................  Plain language edits.
430.301(b)..............................  430.301(b).................  Revises purpose to emphasize expecting
                                                                        excellence, holding senior executives
                                                                        accountable for results, communicating
                                                                        goals and expectations, factoring
                                                                        balanced measurement into performance
                                                                        appraisal, and making performance the
                                                                        basis for personnel decisions.
430.302(a)..............................  430.302(a).................  Plain language edits.
430.302(b)..............................  430.302(b).................  Plain language edits.
430.303.................................  430.303....................  Revises definitions as follows:
                                                                         Annual summary rating replaces the term
                                                                       summary rating to reflect the statutory
                                                                       terminology and means the overall rating
                                                                       level the appointing authority assigns at
                                                                       the end of the appraisal period after
                                                                       considering PRB recommendations.
                                                                         Appointing authority is revised to
                                                                       clarify that this individual must be
                                                                       authorized to make SES appointments.
                                                                         Appraisal is replaced with performance
                                                                       appraisal and edited for plain language.
                                                                         Appraisal period reflects plain
                                                                       language edits.
                                                                         Appraisal system is replaced with the
                                                                       term performance management system to
                                                                       broaden the focus from the annual
                                                                       appraisal to managing performance on an
                                                                       ongoing basis.
                                                                         Balanced measures is added because the
                                                                       regulations require agencies to use
                                                                       balanced measurement to evaluate senior
                                                                       executive performance.
                                                                         Critical element is broadened to cover
                                                                       the senior executive's work, which may
                                                                       include more than the duties of the
                                                                       position, and focus on organizational
                                                                       results.
                                                                         Final rating is replaced with the term
                                                                       used in statute, annual summary rating,
                                                                       and edited for plain language.
                                                                         Initial rating is replaced with initial
                                                                       summary rating and revised for clarity.
                                                                         Non-critical elements is replaced with
                                                                       the broader term, other performance
                                                                       elements, which refers to components of
                                                                       an executive's work that are not critical
                                                                       but may be important enough to factor
                                                                       into the executive's appraisal.

[[Page 38444]]

 
                                                                         Performance is broadened from the focus
                                                                       on critical and non-critical elements of
                                                                       the position to the accomplishment of
                                                                       work described in the senior executive's
                                                                       performance plan.
                                                                         Performance appraisal is added to
                                                                       replace appraisal and edited for plain
                                                                       language.
                                                                         Performance Appraisal System is
                                                                       replaced with the term performance
                                                                       management system, which refers to a
                                                                       framework of policies and practices for
                                                                       planning, monitoring, developing,
                                                                       evaluating, and rewarding individual and
                                                                       organizational performance and for using
                                                                       performance information as a basis for
                                                                       personnel decisions.
                                                                         Performance management plan is deleted.
                                                                         The concepts are covered under
                                                                       performance management systems.
                                                                         Performance plan is replaced with the
                                                                       term senior executive performance plan
                                                                       which is expanded to address work the
                                                                       senior executive is expected to
                                                                       accomplish and the requirements against
                                                                       which performance will be evaluated.
                                                                         Performance standard is replaced by the
                                                                       term performance requirement used in
                                                                       statute and reflects plain language
                                                                       edits.
                                                                         Progress review reflects plain language
                                                                       edits.
                                                                         Rating of record is deleted.
                                                                         Summary rating is replaced with annual
                                                                       summary rating.
                                                                         Strategic planning initiatives is added
                                                                       because of new requirements for aligning
                                                                       performance plans with strategic
                                                                       planning.
430.304.................................  430.304....................  Retitles section as SES Performance
                                                                        Management Systems; edits substantially
                                                                        and restructures it to include the key
                                                                        components of agency systems. Moves
                                                                        other requirements to other sections in
                                                                        the subpart.
430.304(a)..............................  430.304(a).................  Plain language edits.
430.304(b)..............................  430.305(b).................  Moves critical element requirements to
                                                                        Planning and Communicating Performance.
                                                                        Replaces reference to non-critical
                                                                        elements with the broader other
                                                                        performance elements.
                                          430.307(a).................  Moves appraisal requirements to
                                                                        Appraising Performance; revises them to
                                                                        reflect deletion of term non-critical
                                                                        elements.
                                          430.308(d).................  Moves summary rating requirements to
                                                                        Rating Performance.
430.304(c)..............................  430.304(b).................  Planning performance becomes a key
                                                                        component of performance management
                                                                        systems.
                                          430.305(a).................  Moves requirements for individual senior
                                                                        executive performance plans to Planning
                                                                        and Communicating Performance.
430.304(d)(1)...........................  430.304(b).................  Replaces performance standards with the
                                                                        statutory term performance requirements;
                                                                        some provisions are included in
                                                                        performance management system
                                                                        requirements.
                                          430.305....................  Moves establishing and communicating
                                                                        critical elements and requirements to
                                                                        Planning and Communicating Performance.
                                          430.307(a).................  Moves annual appraisal requirements to
                                                                        Appraising Performance.
430.304(d)(2)...........................  430.304(b)(1)..............  Includes accomplishing organizational
                                          430.305....................   objectives in requirements to address
                                                                        organizational performance and to link
                                                                        performance management with GPRA goals
                                                                        and with strategic planning initiatives.
430.304(e)..............................  430.305(b).................  Revises section to eliminate the
                                                                        requirement to establish three rating
                                                                        levels for each critical element.
                                                                        Replaces performance standards with
                                                                        performance requirements and moves it to
                                                                        senior executive plan requirements under
                                                                        Planning and Communicating Performance.
430.304(f)..............................  430.304(c)(3)..............  Edits derivation method requirements to
                                                                        remove references to noncritical
                                                                        elements and moves it to system
                                                                        requirements. New section incorporates
                                                                        restriction on rating level
                                                                        distribution.
430.304(g)..............................  430.304(c)(2)..............  Modifies summary rating level
                                                                        requirements to reflect the statutory
                                                                        requirement for a minimum of three
                                                                        levels. Removes the 5-level maximum and
                                                                        rating level numbers.
430.304(h)..............................  430.306(c).................  Broadens requirement for performance
                                                                        assistance to require agencies to help
                                                                        senior executives improve their
                                                                        performance, not just those who are
                                                                        rated less than fully successful, to
                                                                        reflect the emphasis on overall
                                                                        performance improvement.
430.304(i)..............................  430.309(c).................  Edits requirements for action on less
                                                                        than successful performance ratings and
                                                                        moves them to the new section, Using
                                                                        Performance Results. This section is
                                                                        added to focus on basing personnel
                                                                        decisions on performance.
                                          430.305....................  Adds two new sections on Planning and
                                                                        Communicating Performance and Monitoring
                                                                        Performance, which are key components of
                                                                        performance management systems.
                                                                        Consolidates senior executive plan
                                                                        requirements under Planning and
                                                                        Communicating Performance.
                                          430.306....................  Consolidates progress review and
                                                                        performance improvement requirements
                                                                        under monitoring performance.
430.305.................................  430.307....................  Retitles heading as Appraising
                                                                        Performance, a key component of
                                                                        personnel management systems.
430.305(a)(1)...........................  430.304(c)(1)..............  Moves appraisal period requirements to
                                                                        System Requirements.
                                          430.307(b).................  Moves rating performance on details and
                                                                        temporary assignments to Appraising
                                                                        Performance. Replaces summary rating
                                                                        requirement with requirement to appraise
                                                                        performance and factor appraisal into
                                                                        initial summary rating.
430.305(a)(2)...........................  430.304(c)(1)(ii)..........  Edits provisions for terminating the
                                                                        appraisal period and moves them to
                                                                        System Requirements.

[[Page 38445]]

 
430.305(a)(3)...........................  430.304(c)(1)(iii).........  Edits restriction on appraisals and
                                                                        ratings during Presidential election
                                                                        periods and moves it to System
                                                                        Requirements.
430.305(b)..............................  430.304(c)(1)(i)...........  Revises minimum appraisal period to
                                                                        eliminate the 120-day maximum and moves
                                                                        it to System Requirements.
430.305(c)..............................  430.307(a)(1)..............  Revises requirement to require appraisal
                                                                        on critical elements only `` appraising
                                                                        other elements is optional.
430.305(d)(1) and 430.305(d)(2).........  430.307(b)(1),               Substantially edits requirements for
                                           430.307(b)(2), and           appraising performance on details and
                                           430.307(b)(3).               temporary assignments. Modifies the
                                                                        current requirement for a rating on
                                                                        critical elements to appraising
                                                                        performance and factoring that appraisal
                                                                        into the initial summary rating.
430.305(e)..............................  430.306(b).................  Edits progress review requirements and
                                                                        moves them to Monitoring Performance.
430.306.................................  430.308....................  Retitles heading as Rating Performance, a
                                                                        key component of personnel management
                                                                        systems.
430.306(a)(1)...........................  430.308(a).................  Plain language edits.
430.306(a)(2)...........................  430.308(a).................  Plain language edits.
430.306(a)(3)...........................  430.308(b).................  Plain language edits.
430.306(a)(4)...........................  430.308(b), 430.308(c).....  Plain language edits.
430.306(a)(5)...........................  430.308(b).................  Removes specific section; provisions are
                                                                        inherent in higher level review
                                                                        requirements.
430.306(b)..............................  430.308(b).................  Adds requirement that higher level
                                                                        reviewer may not change initial summary
                                                                        rating, but can recommend a different
                                                                        rating to PRB and appointing authority.
                                                                        Plain language edits.
                                          430.308(c).................  Adds new section in Rating Performance on
                                                                        PRB review for clarity.
430.306(c)..............................  430.308(d).................  Changes term final rating to annual
                                                                        summary rating for consistency with
                                                                        statutory language and edits for plain
                                                                        language.
430.306(d)..............................  430.304(c)(3)..............  Includes requirement in derivation
                                                                        methods under System Requirements and
                                                                        edits for plain language.
430.306(e)..............................  430.308(e).................  Includes under new section, extending the
                                                                        rating period; edits for plain language.
                                          430.308(f).................  States statutory language regarding
                                                                        appealability of appraisals and ratings.
430.306(f)..............................  430.307(b).................  Modifies requirement for summary rating
                                                                        on transfer to a written appraisal which
                                                                        the gaining supervisor must factor into
                                                                        the annual summary rating. Plain
                                                                        language edits.
430.306(g)..............................  430.308(a).................  Deletes section; incorporates
                                          430.308(b).................   requirements for executive notification
                                                                        in relevant sections.
                                          430.311(c).................  Edits documentation maintenance and moves
                                                                        them to Training and Evaluation.
430.307.................................  430.310....................  Plain language edits.
430.307(a)..............................  430.310(a)(1)..............  Plain language edits.
430.307(b)..............................  430.310(a)(4)..............  Plain language edits.
430.307(c)..............................  430.310(a)(2)..............  Plain language edits.
430.307(d)..............................  430.310(a)(3)..............  Deletes reference to OPM authority to
                                                                        waive requirement for career majority on
                                                                        PRBs. Authority is stated in statute.
430.307(e)..............................  430.310(b)(1)..............  Plain language edits.
430.307(f)..............................  430.310(b)(3)..............  Plain language edits.
430.307(g)..............................  430.301(b)(2)..............  Plain language edits.
430.308.................................  430.311(a) 430.311(b)......  Plain language edits.
430.309(a)..............................  430.312(b).................  Plain language edits.
430.309(b)..............................  430.312(c).................  Plain language edits.
430.310.................................  430.312(a).................  Moves requirement to section on OPM
                                                                        review of agency systems and edits for
                                                                        plain language.
----------------------------------------------------------------------------------------------------------------

E.O. 12866, Regulatory Review

    This proposed rule has been reviewed by the Office of Management 
and Budget in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because the 
regulations pertain only to Federal employees and agencies.

List of Subjects in 5 CFR Part 430

    Government employees, Performance management.

Office of Personnel Management.
Janice R. Lachance,
Director.
    Accordingly, OPM proposes to amend 5 CFR Part 430 as follows:

PART 430--PERFORMANCE MANAGEMENT

    1. The authority citation for part 430 continues to read as 
follows:

    Authority: 5 U.S.C. chapter 43.

    2. Subpart C is revised to read as follows:

Subpart C--Managing Senior Executive Performance

Sec.
430.301   General.
430.302   Coverage.
430.303   Definitions.
430.304   SES performance management systems.
430.305   Planning and communicating performance.
430.306   Monitoring performance.
430.307   Appraising performance.
430.308   Rating performance.
430.309   Using performance results.
430.310   Performance Review Boards (PRBs)
430.311   Training and evaluation.
430.312   OPM review of agency systems.

Subpart C--Managing Senior Executive Performance


Sec. 430.301  General.

    (a) Statutory authority. Chapter 43 of title 5, United States Code, 
provides for performance management for the Senior

[[Page 38446]]

Executive Service (SES), the establishment of SES performance appraisal 
systems, and appraisal of senior executive performance. This subpart 
prescribes regulations for managing SES performance to implement the 
statutory provisions at 5 U.S.C. 4311-4315.
    (b) Purpose. The regulations in this subpart require agencies to 
establish performance management systems that hold senior executives 
accountable for their individual and organizational performance in 
order to improve the overall performance of Government by--
    (1) Expecting excellence in senior executive performance;
    (2) Linking performance management with the results-oriented goals 
of the Government Performance and Results Act of 1993;
    (3) Setting and communicating individual and organizational goals 
and expectations;
    (4) Systematically appraising senior executive performance using 
measures that balance organizational results with customer, employee, 
or other perspectives; and
    (5) Using performance results as a basis for pay, awards, 
development, retention, removal, and other personnel decisions.


Sec. 430.302  Coverage.

    (a) This subpart applies to all senior executives covered by 
subchapter II of chapter 31 of title 5, United States Code.
    (b) This subpart applies to agencies identified in section 
3132(a)(1) of title 5, United States Code.


Sec. 430.303  Definitions.

    Terms used in this subpart are defined as follows:
    Appointing authority means the department or agency head, or other 
official with authority to make appointments in the Senior Executive 
Service.
    Appraisal period means the established period of time for which a 
senior executive's performance will be appraised and rated.
    Balanced measures means an approach to performance measurement that 
balances organizational results with the perspectives of distinct 
groups, including customers and employees.
    Critical element means a key component of an executive's work that 
contributes to organizational goals and results and is so important 
that unsatisfactory performance of the element would make the 
executive's overall job performance unsatisfactory.
    Other performance elements means components of an executive's work 
that do not meet the definition of a critical element, but may be 
important enough to factor into the executive's performance appraisal.
    Performance means the accomplishment of the work described in the 
senior executive's performance plan.
    Performance appraisal means the review and evaluation of a senior 
executive's performance against performance elements and requirements.
    Performance management system means the framework of policies and 
practices that an agency establishes under subchapter II of chapter 43 
of title 5, United States Code, and this subpart, for planning, 
monitoring, developing, evaluating, and rewarding both individual and 
organizational performance and for using resulting performance 
information in making personnel decisions.
    Performance requirement means a statement of the performance 
expected for a critical element.
    Progress review means a review of the senior executive's progress 
in meeting the performance requirements. A progress review is not a 
performance rating.
    Ratings:
    (1) Initial summary rating means an overall rating level the 
supervisor derives from appraising the senior executive's performance 
during the appraisal period and forwards to the Performance Review 
Board.
    (2) Annual summary rating means the overall rating level that an 
appointing authority assigns at the end of the appraisal period after 
considering a Performance Review Board's recommendations. This is the 
official rating.
    Senior executive performance plan means the written summary of work 
the senior executive is expected to accomplish during the appraisal 
period and the requirements against which performance will be 
evaluated. The plan addresses all critical elements and any other 
performance elements established for the senior executive.
    Strategic planning initiatives means agency strategic plans, annual 
performance plans, organizational workplans, and other related 
initiatives.


Sec. 430.304  SES performance management systems.

    (a) To encourage excellence in senior executive performance, each 
agency must develop and administer one or more performance management 
systems for its senior executives.
    (b) Performance management systems must provide for:
    (1) Planning and communicating performance elements and 
requirements that are linked with strategic planning initiatives;
    (2) Consulting with senior executives on the development of 
performance elements and requirements;
    (3) Monitoring progress in accomplishing elements and requirements;
    (4) At least annually, appraising each senior executive's 
performance against requirements using measures that balance 
organizational results with customer and employee perspectives; and
    (5) Using performance information to adjust pay, reward, reassign, 
develop, and remove senior executives or make other personnel 
decisions.
    (c) Additional system requirements.
    (1) Appraisal period. Each agency must establish an official 
performance appraisal period for which an annual summary rating must be 
prepared.
    (i) There must be a minimum appraisal period of at least 90 days.
    (ii) An agency may end the appraisal period any time after the 
minimum appraisal period is completed, if there is an adequate basis on 
which to appraise and rate the senior executive's performance.
    (iii) An agency may not appraise and rate a career appointee's 
performance within 120 days after the beginning of a new President's 
term of office.
    (2) Summary performance levels. Each performance management system 
must have at least three summary performance levels: one or more fully 
successful levels, a minimally satisfactory level, and an 
unsatisfactory level.
    (3) Method for deriving summary ratings. Agencies must develop a 
method for deriving summary ratings from appraisals of performance 
against performance requirements. The method must ensure that only 
those employees whose performance exceeds normal expectations are rated 
at levels above fully successful. An agency may not prescribe a forced 
distribution of rating levels for senior executives.


Sec. 430.305  Planning and communicating performance.

    (a) Each senior executive must have a performance plan that 
describes the individual and organizational expectations for the 
appraisal period and sets the requirements against which performance 
will be evaluated. Supervisors must develop performance plans in 
consultation with senior executives and communicate the plans to them 
on or before the beginning of the appraisal period.

[[Page 38447]]

    (b) Performance plan requirements:
    (1) Critical elements. At a minimum, plans must describe the 
critical elements of the senior executive's work and any other relevant 
performance elements. Elements must reflect individual and 
organizational performance.
    (2) Performance requirements. At a minimum, plans must describe the 
level of performance expected for fully successful performance of the 
executive's work. These are the standards against which the senior 
executive's performance will be appraised.
    (3) Link with strategic planning initiatives. Critical elements and 
performance requirements for each senior executive must be consistent 
with the goals and performance expectations in the agency's strategic 
planning initiatives.


Sec. 430.306  Monitoring performance.

    (a) Supervisors must monitor each senior executive's performance 
during the appraisal period and provide feedback to the senior 
executive on progress in accomplishing the performance elements and 
requirements described in the performance plan. Supervisors must 
provide advice and assistance to senior executives on how to improve 
their performance.
    (b) Supervisors must hold a progress review for each senior 
executive at least once during the appraisal period. At a minimum, 
senior executives must be informed about how well they are performing 
against performance requirements.


Sec. 430.307  Appraising performance.

    (a) Annual appraisals. Agencies must appraise each senior 
executive's performance in writing and assign an annual summary rating 
at the end of the appraisal period.
    (1) At a minimum, a senior executive must be appraised on the 
performance of the critical elements in the performance plan.
    (2) Appraisals of senior executive performance must be based on 
both individual and organizational performance, taking into account 
such factors as--
    (i) Results achieved in accordance with the goals of the Government 
Performance and Results Act of 1993;
    (ii) Customer satisfaction;
    (iii) Employee perspectives;
    (iv) The effectiveness, productivity, and performance quality of 
the employees for whom the senior executive is responsible; and
    (v) Meeting affirmative action, equal employment opportunity, and 
diversity goals and complying with the merit system principles set 
forth under section 2301 of title 5, United States Code.
    (b) Details and job changes. (1) When a senior executive is 
detailed or temporarily reassigned for 120 days or longer, the gaining 
organization must set performance goals and requirements for the detail 
or temporary assignment. The gaining organization must appraise the 
senior executive's performance appraised in writing, and this appraisal 
must be factored into the initial summary rating.
    (2) When a senior executive changes jobs or transfers to another 
agency after completing the minimum appraisal period, the supervisor 
must appraise the executive's performance in writing before the 
executive leaves.
    (3) The annual summary rating and any subsequent appraisals must be 
transferred to the gaining agency. The gaining supervisor must consider 
the rating and appraisals when developing the initial summary rating at 
the end of the appraisal period.


Sec. 430.308  Rating performance.

    (a) Initial summary rating. The supervisor must develop an initial 
summary rating of the senior executive's performance, in writing, and 
share that rating with the senior executive. The senior executive may 
respond in writing.
    (b) Higher level review. The senior executive may ask a higher 
level official to review the initial summary rating before the rating 
is given to the Performance Review Board (PRB). The senior executive is 
entitled to one higher level review, unless the agency provides for 
more than one review level. The higher level official cannot change the 
supervisor's initial summary rating, but may recommend a different 
rating to the PRB and the appointing authority. Copies of the 
reviewer's findings and recommendations must be given to the senior 
executive, the supervisor, and the PRB.
    (c) PRB review. The initial summary rating, the senior executive's 
response to the initial rating, and the higher level official's 
comments must be given to the PRB. The PRB must review the rating and 
comments from the senior executive and the higher level official, and 
make recommendations to the appointing authority, as provided in 
Sec. 430.310.
    (d) Annual summary rating. The appointing authority must assign the 
annual summary rating of the senior executive's performance, in 
writing, after considering any PRB recommendations. This rating is the 
official rating.
    (e) Extending the rating period. When an agency cannot prepare an 
annual summary rating at the end of the appraisal period because the 
senior executive has not completed the minimum appraisal period or for 
other reasons, the agency must extend the executive's appraisal period. 
The agency will then prepare the annual summary rating.
    (f) Appeals. Senior executive performance appraisals and ratings 
are not appealable.


Sec. 430.309  Using performance results.

    (a) Agencies will use the results of performance appraisals and 
ratings as a basis for adjusting pay, granting awards, and making other 
personnel decisions. Performance information will also be a factor in 
assessing a senior executive's continuing development needs.
    (b) A career executive whose annual summary rating is at least 
fully successful may be given a performance award under part 534, 
subpart D, of this chapter.
    (c) An executive may be removed from the SES for performance 
reasons, subject to the provisions of part 359, subpart E, of this 
chapter.
    (1) An executive who receives an unsatisfactory annual summary 
rating must be reassigned or transferred within the Senior Executive 
Service, or removed from the Senior Executive Service;
    (2) An executive who receives two unsatisfactory annual summary 
ratings in any 5-year period must be removed from the Senior Executive 
Service; and
    (3) An executive who receives less than a fully successful annual 
summary rating twice in any 3-year period must be removed from the 
Senior Executive Service.


Sec. 430.310  Performance Review Boards (PRBs).

    Each agency must establish one or more PRBs to make recommendations 
to the appointing authority on the performance of its senior 
executives.
    (a) Membership. (1) Each PRB must have three or more members who 
are appointed by the agency head, or by another official or group 
acting on behalf of the agency head. Agency heads are encouraged to 
include women, minorities, and people with disabilities on PRBs.
    (2) PRB members must be appointed in a way that assures 
consistency, stability, and objectivity in SES performance appraisal.
    (3) When appraising a career appointee's performance or 
recommending a career appointee for a performance award, more than one-
half

[[Page 38448]]

of the PRB's members must be SES career appointees.
    (4) The agency must publish notice of PRB appointments in the 
Federal Register before service begins.
    (b) Functions. (1) Each PRB must review and evaluate the initial 
summary rating, the senior executive's response, and the higher level 
official's comments on the initial summary rating, and conduct any 
further review needed to make its recommendations.
    (2) The PRB must make a written recommendation to the appointing 
authority about each senior executive's annual summary rating.
    (3) PRB members may not take part in any PRB deliberations 
involving their own appraisals.


Sec. 430.311  Training and evaluation.

    (a) To assure that agency performance management systems are 
effectively implemented, agencies must provide appropriate information 
and training to supervisors and senior executives on performance 
management, including planning and appraising performance.
    (b) Agencies must periodically evaluate the effectiveness of their 
performance management system(s) and implement improvements as needed.
    (c) Agencies must maintain all performance-related records for no 
less than 5 years from the date the annual summary rating is issued, as 
required in Sec. 293.404(b)(1) of this chapter.


Sec. 430.312  OPM review of agency systems.

    (a) Agencies must submit proposed SES performance management 
systems to OPM for approval.
    (b) OPM will review agency systems for compliance with the 
requirements of law, OPM regulations, and OPM performance management 
policy.
    (c) If OPM finds that an agency system does not meet the 
requirements and intent of subchapter II of chapter 43 of title 5, 
United States Code, or of this subpart, it will direct the agency to 
take corrective action, and the agency must comply.

[FR Doc. 00-15641 Filed 6-20-00; 8:45 am]
BILLING CODE 6325-01-P