[Federal Register Volume 65, Number 199 (Friday, October 13, 2000)]
[Rules and Regulations]
[Pages 60837-60845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26337]



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  Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / 
Rules and Regulations  

[[Page 60837]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 430

RIN 3206-AI57


MANAGING SENIOR EXECUTIVE PERFORMANCE

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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

SUMMARY: The Office of Personnel Management (OPM) is amending its 
regulations governing performance appraisal in the Senior Executive 
Service (SES). The amended 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 giving agencies more 
flexibility to tailor performance management systems to their unique 
mission requirements and organizational climates.

EFFECTIVE DATES: November 13, 2000.

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

SUPPLEMENTARY INFORMATION: OPM published a proposed rule in the Federal 
Register on June 21, 2000 (65 FR 38442) to amend the regulations 
governing SES performance appraisal. We received 15 written comments 
during the public comment period: 7 from Federal departments and 
agencies; 2 from professional organizations; and 6 from individuals. In 
addition, we have discussed the proposals with a number of senior 
executives and other stakeholders since publication of the proposed 
rule. There was broad support for the proposed changes, especially 
those that give agencies greater flexibility for tailoring their 
performance management systems to their organizational and operational 
needs. There was also general support for the concept of balanced 
measurement, although some commenters said they need additional 
information and guidance about using balanced measures. There were a 
few suggested modifications to the proposals, and some commenters 
proposed additional requirements. We discussed the public comments and 
suggestions with a representative group of agency SES program managers. 
We have included their views in our reactions to these comments and 
suggestions.

Background

    The 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 the American people. This results-orientation was central to 
the original vision for the SES, outlined in the Civil Service Reform 
Act (CSRA) of 1978. CSRA intended that SES performance management 
systems:
     ``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 this 
original vision and challenged Government to shift its focus from 
internal processes and outputs to results that are aligned with 
customer expectations.
    In discussions with stakeholders that were triggered by OPM's 1998 
Draft Framework for Improving the Senior Executive Service, executives 
and others said the current regulations discourage results-oriented 
performance management. They also told us that agency leaders must 
drive the effort to strengthen their SES performance management 
systems. Respondents to OPM's survey of the Senior Executive Service in 
1999 reinforced these findings:
     Only 72% believed their performance rating represents a 
fair and accurate picture of their performance;
     Only 48% felt that SES bonus determinations are based on 
merit; and
     57% did not think poor performing executives are removed 
from their positions.

(The survey findings are available on OPM's website (www.opm.gov/SES).)

    In response to these concerns, OPM proposed to amend the 
regulations governing SES performance appraisal. The amended 
regulations give agencies more flexibility to reinvigorate their SES 
performance management systems--to focus on results over process. They 
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 regulations also require SES performance management 
systems to balance organizational results with the needs and 
perspectives of customers and employees.

Overall Approach

    Our intent was to substantially deregulate in order to give 
agencies much more flexibility to tailor their systems and approaches 
for managing senior executive performance to fit their unique and 
changing mission and operational needs and organizational climates. We 
pared many of the current regulatory requirements back to the statutory 
requirements. We 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, more diverse, results-oriented Government. In 
addition, we totally restructured the regulations to organize the 
material more logically and to use plain language, as the President 
directed in June 1998.
    We broadened the focus from determining annual summary ratings to 
managing performance on an ongoing basis and shifted the emphasis from 
process to results. The restructured regulations establish separate 
sections on the key components of performance

[[Page 60838]]

management: planning and communicating, monitoring, appraising, and 
rating performance and using performance results.
    As part of this expanded focus, we revised the purpose statement 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 regulatory changes.

    Most commenters supported this approach. One agency in particular 
expressed appreciation for OPM's efforts to make the regulations as 
open as possible, with few absolute restrictions. Four commenters 
specifically mentioned support for reinforcing the links between SES 
performance and agency strategic planning initiatives. Another agency 
said the changes would help agencies hold senior executives 
accountable.
    Two commenters questioned whether regulations are needed to 
accomplish the goals of this initiative. One agency said that agencies 
can align performance management systems with GPRA goals under current 
regulations. A professional organization said rulemaking is not the 
most appropriate vehicle for establishing guidelines for managing 
performance, as this is an ever-evolving art. This organization 
preferred that we use more informal methods to provide guidance to 
agencies.
    It is true that many of the performance management improvements 
included in these regulations can be implemented under the current 
framework of law and regulation. In fact, several agencies have already 
implemented innovative performance management systems which incorporate 
balanced measures. However, many agencies told us that the current 
regulations focus too much on process and inhibit results-oriented 
performance management. They asked for more latitude to design 
performance systems that better fit their organizational cultures and 
operational goals. By overhauling these regulations, we hope to promote 
a culture change--a culture change that views SES performance 
management as a tool for driving results, instead of an irritating, 
annual chore.

Key Changes in Current Requirements

    We modified system requirements 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 organizational 
and operational needs. No commenters opposed this modification.
    We modified the minimum appraisal period. The current requirements 
provide for a minimum appraisal period of 90-120 days. Agencies can 
rate a senior executive's performance after he/she has completed the 
minimum period, provided there is enough information on which to base a 
rating. We proposed to keep the 90-day minimum, but remove the 120-day 
cap to allow agencies to establish minimum appraisal periods that are 
longer than 120 days. There was general support for this proposal. 
However, one professional organization recommended that the minimum 
appraisal period be lengthened from 90 days to 120 days because, in 
their view, 90 days does not give sufficient time to form the basis for 
a meaningful evaluation. The minimum appraisal period has always been 
90 days, with the caveat that agencies can rate an executive's 
performance only if there is enough information on which to base a 
rating. To date, there has been no evidence of agency or senior 
executive difficulty with the 90-day minimum. Further, the SES program 
managers preferred to retain the 90-day minimum period, provided that 
we also retain the caveat. Therefore, we are not adopting the 
organization's recommendation. The final regulations reflect the 
minimum appraisal provisions as proposed.
    We changed performance standards to performance requirements to 
reflect the term used in statute, and eliminated the requirement to use 
the term non-critical element. Agencies will establish performance 
requirements for critical elements and any other performance elements 
that will be used to appraise performance and derive the annual summary 
rating. There were no objections to these changes, so they are adopted 
as proposed.
    We modified rating level requirements to remove the requirement to 
establish three rating levels for each critical element. The 
performance on each critical element and any other performance elements 
must be appraised. No commenters objected to these changes, so they are 
adopted as proposed.
    We reduced the summary rating level requirements to the minimum 
three summary rating levels prescribed in statute (i.e., fully 
successful, minimally satisfactory, and unsatisfactory). We removed the 
current maximum of five levels (i.e., no more than two levels above 
fully successful). There were no objections to these changes, so they 
are adopted as well.
    We revised rating terms 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. We removed references to other types of ratings. 
There were no comments on these changes, so they are adopted as 
proposed.
    We modified the method for deriving summary ratings to remove the 
current requirement to give critical elements more weight than non-
critical elements in determining a summary rating. There were no 
comments on this change, so it is adopted.

Balanced Measurement

    The regulations require agencies to evaluate senior executive 
performance using measures that balance organizational results with 
customer satisfaction, employee perspectives, and any other measures 
agencies decide are appropriate. 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, 
and employees 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 OPM's 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.
    There is general support for the concept of balanced measurement, 
although some commenters requested additional information and guidance 
about using balanced measures. There

[[Page 60839]]

was consensus that the regulations should not prescribe how balanced 
measures are imposed and implemented. The regulations require agencies 
to evaluate senior executive performance using balanced measures, but 
they do not dictate how. Agencies can define the measures, determine 
the appropriate balance among the various measures, and decide an 
implementation method that best meets their organizational and 
operational needs.
    In discussions with stakeholders about the proposed regulations, 
some have expressed anxiety about the measurement factors and what they 
mean. Some fear that employee perspectives means a supervisor's 
popularity with employees. Some said that senior executives have 
multiple customers and stakeholders, many of whom have conflicting 
views and interests. They are concerned that these considerations might 
not be taken into account. A few worried that senior executives would 
be held accountable for program results over which they have little or 
no control. Others were concerned that using balanced measurement would 
require agencies to invest in expensive surveys or sophisticated 
measurement tools.
    These are all valid concerns, but agencies will have latitude under 
the regulations to weigh employee and customer concerns in whatever 
manner they decide is appropriate to their missions and structures. The 
employee perspectives factor is not a ``popularity contest.'' Rather, 
this factor focuses on such things as how executives lead and motivate 
their employees, address job and training needs, and provide a healthy 
working environment.
     Having multiple stakeholders is a ``given'' in the Federal 
sector, where executives frequently have to balance the needs of a 
variety of customers and stakeholders. For example, in regulatory 
agencies, executives often make decisions that stakeholders do not 
endorse. The customer satisfaction factor considers how executives deal 
with stakeholders, balance the varying needs of customers, and build 
partnerships and coalitions to achieve results. The issue is not always 
whether customers or stakeholders agree with the decision, but how the 
executives reach the decision; i.e., whether stakeholders have an 
opportunity to participate in the decision-making and share their 
views, whether customers are treated with interest and respect, etc.
     Regarding measurement, we believe that agencies can 
measure results in ways that do not require elaborate systems.
    Further, agencies will have the flexibility to define measures and 
design systems that fit their organizational and operational needs and 
are aligned with their strategic and performance planning initiatives. 
These flexibilities should enable agencies to address their senior 
executives' concerns.
    Two commenters suggested mandating additional measures. One was the 
addition of financial results to more directly reflect Kaplan and 
Norton's balanced scorecard approach. The other proposed adding 
diversity and representation.
    The National Partnership for Reinventing Government's August 1999 
report on Balancing Measures states that, although there is no such 
thing as a fixed and truly balanced set of measures, a balanced 
approach should factor in at least employee, customer, and business 
perspectives. Agencies may add other measures; however they must not 
dilute the importance of the key measures. (The report on Balancing 
Measures is available on the NPR website at: www.npr.gov.)
    We discussed these recommended additions with SES program managers, 
who preferred that the regulations only specify the three most common 
factors, i.e., organization results, customer satisfaction, and 
employee perspectives. Most believed that the three key measures are 
broad enough to incorporate diversity and financial measures. However, 
agencies have the flexibility to address them as separate factors, if 
they choose. Therefore, consistent with our approach to give agencies 
as much flexibility as possible to develop measures that reflect their 
overall mission strategies, we are not adopting the recommendations. 
OPM will issue supplemental guidance and continue ongoing discussions 
with stakeholders to help agencies address balanced measurement.

Additional Proposed Requirements

    Evaluation Criteria. Two commenters proposed that we mandate 
additional evaluation criteria. One proposed to include selected 
leadership competencies as an element of each executive's appraisal. 
Another proposed a requirement that two of the executive core 
qualifications for entry into the Senior Executive Service (leading 
people and building coalitions) be made critical elements in all SES 
appraisals.
    Strong and effective leadership is fundamental to executive 
success; it is manifested through the three balanced measures. All new 
career executives must demonstrate their leadership ability in five 
areas (i.e., leading change, leading people, results-driven, business 
acumen, and building coalitions). Some agencies have incorporated the 
themes of these Executive Core Qualifications into their SES 
performance management systems. We support this approach, but SES 
program managers indicated that we should not dictate it. Since the 
suggested changes would be inconsistent with the flexible approach 
taken in the regulations, we are not adopting them.
    One commenter also suggested that an increased emphasis on 
diversity and representation as an SES performance element would serve 
to increase accountability for results. We agree that this is 
important. The appraisal criteria in the revised regulations at 
Sec. 430.307(a) address an executive's progress in meeting affirmative 
action, equal employment opportunity, and diversity goals.
    Another commenter proposed that the regulations clarify that senior 
executives are responsible and accountable for protecting the human and 
workplace assets under their control and for ensuring that these assets 
are used in ways that prevent pollution and use energy resources 
efficiently. We believe that effectively managing the work environment 
is inherent in both the ``organizational results'' and ``employee 
perspectives'' factors of balanced measurement, which agencies can 
describe in ways that are appropriate to their organizational needs. 
Accordingly, we are not adopting this proposed addition.
    Supervisor Appraisals. An agency was concerned about the lack of 
incentive for supervisors to conduct timely performance assessments. 
The agency wanted the regulations to require that, before a supervisor 
changes jobs or leaves an agency he/she be required to appraise the 
performance of subordinate senior executives in writing. The proposed 
regulations include requirements for appraisals of senior executives 
who change jobs, but they are silent on departing supervisors. The 
current regulations do not address this, but we have issued 
supplemental guidance to agencies that encourages them to obtain 
appraisal information from departing supervisors. We sought the views 
of SES program managers, who felt that we should not mandate this as a 
governmentwide requirement, but continue to address it in supplemental 
guidance. We agree. Agencies have the latitude to include such a 
requirement in their performance management systems.
    Written Progress Reviews. The same agency also felt that the 
requirement for periodic progress reviews needed to be strengthened by 
requiring that the

[[Page 60840]]

overall results of each progress review be documented in writing. We 
shared this comment with the SES program managers, who did not support 
the proposal. We understand the concern, but we prefer to let agencies 
decide how best to ensure that there is ongoing communication between 
supervisors and senior executives about their performance. The emphasis 
should be on communication, rather than process or format.
    Performance Review Boards. A professional organization proposed 
mandating that agencies include women, minorities, and people with 
disabilities on Performance Review Boards (PRBs) in organizations, 
organizational components, and geographical locations where minorities, 
women, and persons with disabilities are determined to be 
underrepresented in the workforce. We appreciate the concerns about 
diversity that prompted this comment, but it might be difficult for 
other than large departments and agencies to comply with such a 
requirement. The revised regulations encourage agencies to include 
women, minorities, and people with disabilities on PRBs. Including this 
in the actual language of the regulation sends a strong message to 
agency leadership. Further, we want to maintain the focus on the 
substance of diversity and diverse viewpoints, rather than on numbers 
or process.
    Editorial Suggestions. One commenter suggested more precise 
language for clarity. For example, the commenter felt the term 
``strategic planning initiatives'' might be misinterpreted as a 
process-focused item, rather than a linkage between performance 
accountability and an agency's long-term and annual goals and 
objectives. By using this term, we intended a broad focus on strategic 
and annual performance planning and evaluation efforts and any related 
initiatives. In our view, using more precise terminology or definition 
could narrow that focus or limit an agency's flexibility. Therefore, we 
are not adopting the suggested language changes.

System Approval

    During the public comment period, we discussed with agency SES 
program managers options for obtaining OPM approval of revised 
performance management systems, in accordance with 5 U.S.C. 4312. The 
general consensus was agency self-certification, similar to the method 
used to approve performance management systems for the general 
workforce to comply with requirements at 5 CFR 430.209 and 210. Under 
this approach, OPM would develop a checklist of key system 
requirements, and agencies would certify that their revised performance 
management systems comply with these requirements and provide 
supporting documentation as appropriate. OPM will provide these 
materials and accompanying guidance to agencies within 60 days of the 
publication of this final rule.

Additional Guidance

    OPM will issue additional guidance in various formats to help 
agencies implement the changes, including examples of ways to use the 
various flexibilities provided under these regulations. 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 the changes to the current regulations. 
The ``current rule'' column lists the regulations in the current 
subpart C affected by the final regulations. The ``final rule'' column 
shows the disposition of the current rules. The third column explains 
each change.

----------------------------------------------------------------------------------------------------------------
              Current rule                         Final 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.
                                                                       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.

[[Page 60841]]

 
                                                                       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 system.
                                                                       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), 430.305.....  Includes accomplishing organizational
                                                                        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 performance plan
                                                                        requirements under Planning and
                                                                        Communicating Performance.
430.304(f)..............................  430.304(c)(3)..............  Edits derivation method requirements to
                                                                        remove references to non-critical
                                                                        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 performance
                                                                        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
                                                                        performance 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.
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.

[[Page 60842]]

 
430.305(c)..............................  430.307(a)(1)..............  Deletes the requirement to appraise on
                                                                        non-critical elements. Requires
                                                                        appraisal on critical elements only--
                                                                        appraising other elements is optional.
430.305(d)(1) & 430.305(d)(2)...........  430.307(b)(1),               Substantially edits requirements for
                                           430.307(b)(2),               appraising performance on details and
                                           &430.307(b)(3).              temporary assignments. Modifies the
                                                                        current requirement for 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 performance 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 provisions under new section,
                                                                        Extending the appraisal period; edits
                                                                        for plain language.
                                          430.308(f).................  States statutory language that appraisals
                                                                        and ratings are not appealable.
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), 430.308(b),      Deletes section; incorporates
                                           430.311(c).                  requirements for executive notification
                                                                        in relevant sections.
                                                                       Edits documentation maintenance
                                                                        requirements 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 final 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 is amending 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 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.

[[Page 60843]]

    (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.
    (b) Senior executive 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

[[Page 60844]]

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 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 appraisal 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 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

[[Page 60845]]

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. 00-26337 Filed 10-12-00; 8:45 am]
BILLING CODE 6325-01-U