Human Capital: Senior Executive Performance Management Can Be	 
Significantly Strengthened to Achieve Results (26-MAY-04,	 
GAO-04-614).							 
                                                                 
Congress and the administration have established a new		 
performance-based pay system for members of the Senior Executive 
Service (SES) that is designed to provide a clear and direct	 
linkage between SES performance and pay. Also, GAO previously	 
reported that significant opportunities exist for agencies to	 
hold the SES accountable for improving organizational results.	 
GAO assessed how well selected agencies are creating linkages	 
between SES performance and organizational success by applying	 
nine key practices GAO previously identified for effective	 
performance management. GAO selected the Department of Education,
the Department of Health and Human Services (HHS), and the	 
National Aeronautics and Space Administration (NASA).		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-614 					        
    ACCNO:   A10187						        
  TITLE:     Human Capital: Senior Executive Performance Management   
Can Be Significantly Strengthened to Achieve Results		 
     DATE:   05/26/2004 
  SUBJECT:   Performance measures				 
	     Compensation					 
	     Agency missions					 
	     Productivity in government 			 
	     Personnel evaluation				 
	     Personnel management				 
	     Employee incentives				 
	     Senior Executive Service				 

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GAO-04-614

United States General Accounting Office

                     GAO Report to Congressional Requesters

May 2004

HUMAN CAPITAL

  Senior Executive Performance Management Can Be Significantly Strengthened to
                                Achieve Results

                                       a

GAO-04-614

Highlights of GAO-04-614, a report to congressional requesters

Congress and the administration have established a new performance-based
pay system for members of the Senior Executive Service (SES) that is
designed to provide a clear and direct linkage between SES performance and
pay. Also, GAO previously reported that significant opportunities exist
for agencies to hold the SES accountable for improving organizational
results.

GAO assessed how well selected agencies are creating linkages between SES
performance and organizational success by applying nine key practices GAO
previously identified for effective performance management. GAO selected
the Department of Education, the Department of Health and Human Services
(HHS), and the National Aeronautics and Space Administration (NASA).

GAO makes specific recommendations to the agencies to reinforce the key
practices through their SES performance management systems. NASA concurred
with the recommendations, and HHS provided no comments. Education
described specific actions it plans to take to revise its system, which
are generally consistent with our recommendations. However, GAO disagrees
that Education has already implemented or does not need to implement two
of the recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-04-614.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at (202)
512-6806 or [email protected].

May 2004

HUMAN CAPITAL

Senior Executive Performance Management Can Be Significantly Strengthened to
Achieve Results

Senior executives need to lead the way to transform their agencies'
cultures to be more results-oriented, customer focused, and collaborative
in nature. Performance management systems can help manage and direct this
process. While Education, HHS, and NASA have undertaken important and
valuable efforts to link their career SES performance management systems
to their organizations' success, there are opportunities to use their
systems more strategically. For example, as indicated below by the
executives themselves, the agencies can better use their performance
management systems as a tool to manage the organization or to achieve
organizational goals.

As Congress and the administration are reforming SES pay to better link
pay to performance, valid, reliable, and transparent performance
management systems with reasonable safeguards are critical. Information on
the experiences and knowledge of these agencies should provide valuable
insights to other agencies as they seek to drive internal change and
achieve external results.

Percentage of Senior Executives Responding to a "Very Great" or "Great"
Extent on Their Agencies' Overall Use of Their SES Performance Management
Systems

Contents

  Letter

Results in Brief
Background
Performance Management Systems Can Be Used More Strategically

by Selected Agencies Selected Agencies Can Strengthen the Link between
Senior

Executive Performance and Organizational Success Conclusions
Recommendations for Executive Action Agency Comments and Our Evaluation

1 4 7

9

12 48 49 51

Appendixes

Appendix I:

Appendix II: Appendix III:

Appendix IV: Appendix V:

Appendix VI:

Appendix VII: Objective, Scope, and Methodology

Analyzed Agency Documents and Bonus and Rating Data, and

Interviewed Cognizant Agency Officials Assessed a Sample of Career SES
Individual Performance Plans Surveyed All Career SES at Each Agency

GAO Senior Executive Survey Data from Education, HHS, and NASA

Selected Elements of Education's, HHS's, and NASA's SES Performance
Management Systems

Education HHS NASA

Comments from the Department of Education

Comments from the Department of Health and Human Services

Comments from the National Aeronautics and Space Administration

GAO Contacts and Staff Acknowledgments

GAO Contacts Acknowledgments 54

54 55 57

61

73 73 74 77

82

85

86

89 89 89

Tables Table 1:	Percentage of Senior Executives at HHS as Compared to
Senior Executives Governmentwide Who Received Bonuses for Fiscal Years
2000 through 2003 34

                                    Contents

Table 2:	Percentage of HHS Senior Executives Who Received Bonuses and the
Bonus Amounts as a Percentage of Base Pay for Fiscal Year 2003 34

Table 3:	Percentage of NASA Senior Executives Who Received Bonuses and the
Bonus Amounts as a Percentage of Base Pay for the 2002 and 2003
Performance Appraisal Cycle 36

Table 4:	Percentage of Education Senior Executives Who Received Bonuses
and the Bonus Amounts as a Percentage of Base Pay for the 2003 Performance
Appraisal Cycle 37

Table 5: Disposition of SES Performance Plan Review, by

Agency 56 Table 6: Disposition of SES Survey, by Agency 58 Table 7: Number
of SES Out of Scope and Reason, by Agency 58

Figures Figure 1:

Figure 2:

Figure 3:

Figure 4:

Figure 5: Figure 6: Figure 7:

Percentage of Senior Executives Responding to a "Very
Great" or "Great" Extent on Their Agencies' Overall Use
of Their SES Performance Management Systems 10
Percentage of Senior Executives Responding to a "Very
Great" or "Great" Extent on Their Agencies' Use of Their
SES Performance Management Systems to Meet Key
Objectives 11
Of Those Senior Executives Who See a Connection
between Daily Activities and Organizational Goals to a
"Very Great" or "Great" Extent, Percentage Who FeltThat
Their System Holds Them Accountable to a "Very Great"
or "Great" Extent 13
Of Those Senior Executives Who Collaborate with Others
to Achieve Crosscutting Goals to a "Very Great" or
"Great" Extent, Percentage Who Felt They Are
Recognized to a "Very Great" or "Great" Extent 16
Percentage of SES Plans in HHS with Performance
Expectations Related to Collaboration 17
Percentage of SES Plans in Education with Performance
Expectations Related to Collaboration 19
Ofthe Senior Executives WhoFeltTheir Agency Formally
Provides Performance Information That Allows Them to
Track Their Work Unit's Performance, Percentage Who
Felt This Information Was Useful, Available, or Both to a
"Very Great" or "Great" Extent 21

Contents

Figure 8:	Of Those Senior Executives Who Took Action on Areas of
Improvement to a "Very Great" or "Great" Extent, Percentage Who Felt They
Are Recognized to a "Very Great" or "Great" Extent 23

Figure 9:	Of Those Senior Executives Who Felt the Competencies They
Demonstrate Help Them Contribute to Organizational Goals to a "Very Great"
or "Great" Extent, Percentage Who Felt They Are Recognized to a "Very
Great" or "Great" Extent 26

Figure 10: Percentage of Senior Executives Reporting They "Strongly Agree"
or "Agree" That They Are Rewarded for Accomplishments 29

Figure 11: Percentage of Senior Executives Reporting That They Understand
the Criteria Used to Award Bonuses by Extent 31

Figure 12: Percentage of NASA Senior Executives by Rating Level in the
2003 Performance Appraisal Cycle 35

Figure 13: Of Those Senior Executives Who Said They Had the Opportunity to
Be Involved, Percentage Who Said They Have Been Involved in Refining Their
Agency's SES Performance Management System 39

Figure 14: Of Those Senior Executives Who Said Formal Training Is
Available, Percentage Who Said They Have Participated in Formal Training
on Their Agency's SES Performance Management System 40

Figure 15: Percentage of Senior Executives at HHS Reporting Involvement
and Training Opportunities by Extent 41

Figure 16: Percentage of Senior Executives at NASA Reporting Involvement
and Training Opportunities by Extent 43

Figure 17: Percentage of Senior Executives at Education Reporting
Involvement and Training Opportunities by Extent 45

Figure 18: Percentage of Senior Executives Who Felt Their Agency's SES
Performance Management System Helped to Maintain a Consistent Focus on
Organizational Goals during Transitions by Extent 47

Contents

Abbreviations

CDC Centers for Disease Control and Prevention
EO equal opportunity
FDA Food and Drug Administration
GPRA Government Performance and Results Act of 1993
HHS Department of Health and Human Services
NASA National Aeronautics and Space Administration
OMB Office of Management and Budget
OPM Office of Personnel Management
PRB performance review board
SES Senior Executive Service

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States General Accounting Office Washington, D.C. 20548

May 26, 2004

The Honorable George V. Voinovich

Chairman

Subcommittee on Oversight of Government Management, the Federal Workforce,
and the District of Columbia Committee on Governmental Affairs United
States Senate

The Honorable Jo Ann Davis
Chairwoman
Subcommittee on Civil Service and Agency Organization
Committee on Government Reform
House of Representatives

High-performing organizations have recognized that effective performance
management systems can help them drive internal change and achieve
external results.1 Further, such organizations understand that they need
senior leaders who are held accountable for results, drive continuous
improvement, and stimulate and support efforts to integrate human capital
approaches with organizational goals and related transformation issues.
We previously reported that significant opportunities exist to strengthen
agencies' efforts to hold senior executives accountable for results
through
their performance management systems.2 In particular, more progress is
needed in explicitly linking senior executives' performance expectations
to
contributing to the achievement of results-oriented organizational goals,
fostering the necessary collaboration both within and across
organizational
boundaries to achieve results, and demonstrating a commitment to lead
and facilitate change.

Recently, Congress and the administration have sought to modernize senior
executive performance management systems. Congress established a new
performance-based pay system for members of the Senior Executive

1For additional information on the attributes of high-performing
organizations, see U.S. General Accounting Office, Highlights of a GAO
Forum on High-Performing Organizations: Metrics, Means, and Mechanisms for
Achieving High Performance in the 21st Century Public Management
Environment, GAO-04-343SP (Washington, D.C.: Feb. 13, 2004).

2U.S. General Accounting Office, Results-Oriented Cultures: Using Balanced
Expectations to Manage Senior Executive Performance, GAO-02-966
(Washington, D.C.: Sept. 27, 2002).

Service (SES) that is designed to provide a clear and direct linkage
between SES performance and pay. An agency can raise the pay cap for its
senior executives to $158,100 in 2004, with a senior executive's total
compensation not to exceed $203,000, if the Office of Personnel Management
(OPM) certifies and the Office of Management and Budget (OMB) concurs that
the agency's performance management system, as designed and applied, makes
meaningful distinctions based on relative performance. OPM and OMB are to
issue regulations prescribing the requirements agencies must meet to
obtain certification for these purposes. In a memo to the heads of
departments and agencies requesting their comments on the draft proposed
regulations outlining the certification criteria, the Director of OPM
stated that OPM and OMB plan to fully implement the regulations in time
for the fiscal year 2004 performance ratings and pay adjustments for the
senior executives.3 In addition, as part of the administration's
President's Management Agenda, OPM set a goal for 15 percent of the
agencies to link performance appraisals for senior executives to the
organization's mission and goals, and use their senior executive
performance management systems to make meaningful distinctions and provide
consequences based on performance by July 2004.

At your request, this report assesses how well selected agencies are
creating linkages between senior executive performance and organizational
success through their career senior executive performance management
systems. We selected the Department of Education, the Department of Health
and Human Services (HHS), and the National Aeronautics and Space
Administration (NASA) based on several factors, including mission, size,
organizational structure, and use of their performance management systems
for their career senior executives. Within HHS, we selected the Food and
Drug Administration (FDA) and the Centers for Disease Control and
Prevention (CDC) to determine how HHS's senior executive performance
management system cascades down to these operating divisions.

To meet this objective, we assessed how these agencies' career senior
executive performance management systems apply nine key practices for
effective performance management that we previously identified based on

3U.S. Office of Personnel Management, "Memorandum for Heads of Departments
and Agencies, Regulations Implementing the Senior Executive Service (SES)
Performance-Based Pay System" (Washington, D.C.: Apr. 28, 2004).

public sector organizations' experiences both here and abroad.4 These
practices are as follows.

1. Align individual performance expectations with organizational goals.

2. Connect performance expectations to crosscutting goals.

3.	Provide and routinely use performance information to track
organizational priorities.

4. Require follow-up actions to address organizational priorities.

5. Use competencies to provide a fuller assessment of performance.

6. Link pay to individual and organizational performance.

7. Make meaningful distinctions in performance.

8.	Involve employees and stakeholders to gain ownership of performance
management systems.

9. Maintain continuity during transitions.

We found that collectively these key practices create a "line of sight"
showing how unit and individual performance can contribute to overall
organizational goals and helping individuals understand the connection
between their daily activities and the organization's success.

We analyzed the agencies' SES performance management systems' policies and
guidance and other related documents; interviewed cognizant agency
officials; assessed a sample of career senior executives' individual
performance plans, which outline the performance expectations executives
are to achieve during the year; analyzed aggregate senior executive
performance rating and bonus data; and surveyed all career senior
executives in each agency to gain information on their experiences and
perceptions with regard to their senior executive performance

4U.S. General Accounting Office, Results-Oriented Cultures: Creating a
Clear Linkage between Individual Performance and Organizational Success,
GAO-03-488 (Washington, D.C.: Mar. 14, 2003).

management systems.5 We assessed the reliability of the senior executive
performance rating and bonus data provided by Education, HHS, NASA, and
OPM and determined that the data were sufficiently reliable for the
purposes of this report. Information on the experiences and progress of
the selected agencies should prove helpful to these agencies as well as
provide valuable insights to other agencies as they seek to use senior
executive performance management systems as a tool to drive internal
change and achieve external results. We are using these practices to
inform our internal senior executive performance management system.

We conducted our work from August 2003 through March 2004 in accordance
with the generally accepted government auditing standards. Appendix I
provides additional information on our scope and methodology. Appendix II
provides the complete survey results for each agency. Appendix III
provides information on selected elements of Education's, HHS's, and
NASA's SES performance management systems.

Results in Brief 	Education, HHS, and NASA have undertaken important and
valuable efforts to link their career senior executive performance
management systems to their organizations' success; however, there are
opportunities to use these systems more strategically to manage their
organizations and achieve organizational goals. Our review of senior
executives' performance plans showed that Education, HHS, and NASA have
begun to implement key practices to develop effective performance
management systems for their career senior executives. Specifically, we
found the following.

o 	All senior executives' performance plans in these agencies identified
individual performance expectations that aligned with organizational
goals. As a next step, setting specific levels of performance that are
linked to these organizational goals can help senior executives see how
they directly contribute to organizational results. While about 80 percent
of senior executives in HHS have set specific levels of performance linked
to organizational goals in their individual performance plans, only about
5 percent of senior executives in Education and about 1 percent

5For our review of a sample of SES performance plans, unless otherwise
noted, the margins of error are within +- 9 percentage points for HHS and
+- 6 percentage points for NASA. For Education, there is no sampling error
since we reviewed all the SES plans. For our SES survey, unless otherwise
noted, the margins of error are within +- 9 percentage points for
Education and +- 4 percentage points for HHS and NASA.

of senior executives in NASA have set specific levels of performance
linked to organizational goals.

o 	About two-thirds of senior executives' performance plans in HHS and
about one-third in Education identified a specific programmatic
crosscutting goal for collaboration. All senior executives' performance
plans in NASA included a general goal to achieve the mission of the
organization. As a next step, identifying the relevant internal or
external organizations with which they would collaborate can reinforce a
focus across organizational boundaries. About one-third or less of senior
executives at each of these agencies clearly identified the specific
internal or external organization(s) with which they would collaborate to
achieve crosscutting goals.

o 	All the performance plans of senior executives in NASA and almost all
in Education included competencies that are to address the achievement of
organizational results, employee perspectives, and customer satisfaction.
In HHS, about 94 percent of executives' plans identified competencies
related to organizational results, about 89 percent related to employee
perspectives, and about 61 percent related to customer satisfaction.

o 	At Education, approximately 98 percent of senior executives' plans
identified a performance expectation related to leading and facilitating
change, while approximately 25 percent of the executives' plans at HHS and
almost none at NASA identified such an expectation.

In addition, the agencies can use their senior executive performance
management systems to strengthen the link between their senior executives'
performance and their organizations' success by making meaningful
distinctions in performance through ratings and performance awards
(bonuses).

o 	While about 86 percent of HHS's senior executives received the highest
rating in fiscal year 2003, HHS has restricted the percentage of senior
executives who receive bonuses to generally no more than one-third at each
operating division each year since fiscal year 2001.

o 	About three-fourths of NASA's senior executives received its highest
rating, and about 52 percent of its senior executives received bonuses in
its 2003 performance appraisal cycle.

o 	Nearly all of Education's senior executives received its highest
rating, and about 63 percent of senior executives received bonuses in its
2003 performance appraisal cycle.

As a point of comparison, across the executive branch, agencies rated
about 75 percent of senior executives at the highest levels their systems
permitted, and approximately 49 percent of senior executives received
bonuses in fiscal year 2002, the most current year for which data are
available. The Director of OPM stated that while a growing number of
agencies have improved their distribution of ratings and bonuses, these
governmentwide data also suggest that more work is needed. In addition,
executive branch agencies can reward senior executives' performance in
other ways, such as nominations for Presidential Rank Awards or other
informal or honorary awards.

As reported through our survey, senior executives' perceptions underscore
that their agencies have opportunities to use their systems more
strategically.

o 	Generally, less than half of the senior executives at each agency feel
that their agency uses its performance management system to the fullest
extent possible, specifically by using the system as a tool to manage the
organization or to achieve organizational goals to a very great or great
extent.

o 	Less than half of the senior executives at each agency feel that their
performance management system is fully used to provide candid and
constructive feedback to help them maximize their contributions to
organizational goals to a very great or great extent.

o 	Of the senior executives who reported that their agency provided
performance information to track their work unit's performance, about 39
percent at NASA, about 33 percent at HHS, and about 31 percent at
Education found the performance information to be available when they need
it and useful for making improvements in their work unit's performance to
a very great or great extent.

o 	Of the senior executives who indicated that they took action to a very
great or great extent on areas of improvement based on the performance
information provided by their agency, about 65 percent at NASA, about 60
percent at HHS, and about 55 percent at Education felt

they were recognized to a very great or great extent through their
performance management systems for taking such actions.

o 	Senior executives at these three agencies were involved in refining
their performance management systems or participated in formal training
when given the opportunity. However, at all three agencies, at least
onethird of senior executives reported that they had no opportunity for
such involvement, and about one-fourth reported that no formal training
was available to them on their agency's performance management system.

We provided a draft of this report to the Secretaries of Education and HHS
and the Administrator of NASA for their review and comment. In addition,
we provided a draft of the report to the Directors of OPM and OMB for
their information. We received written comments from Education, HHS, and
NASA, which are presented in appendixes IV, V, and VI. NASA's Deputy
Administrator stated that NASA concurred with all the recommendations and
plans to implement the recommendations in its next SES appraisal cycle
beginning July 1, 2004. HHS's Acting Principal Deputy Inspector General
stated that HHS had no comments upon review of the draft report.

In responding to our recommendations, Education's Assistant Secretary for
Management and Chief Information Officer stated that Education plans to
revise its existing senior executive performance management system
dramatically given OPM's draft regulations for the new SES pay for
performance system and described specific actions Education plans to take.
These actions are generally consistent with our recommendations and their
successful completion will be important to achieving the intent of our
recommendations. While Education's actions are important steps, we
disagree that Education has fully implemented our recommendation to
provide performance information to help senior executive decision making
and does not need to implement our recommendation to require senior
executives to identify crosscutting goals and relevant internal or
external organizations to achieve them.

Background	In November 2003, Congress authorized a new performance-based
pay system for members of the SES.6 According to OPM's interim
regulations,

6National Defense Authorization Act for Fiscal Year 2004, Pub. L. No.
108-136, November 24, 2003.

SES members are to no longer receive annual across-the-board or locality
pay adjustments with the new pay system. Agencies are to base pay
adjustments for SES members on individual performance and contributions to
the agency's performance by considering such things as the unique skills,
qualifications, or competencies of the individual and their significance
to the agency's mission and performance, as well as the individual's
current responsibilities.

Specifically, the revised pay system, which took effect in January 2004,
replaces the six SES pay levels with a single, open-range pay band and
raises the pay cap for all SES members to $145,600 in 2004 (Level III of
the Executive Schedule) with a senior executive's total compensation not
to exceed $175,700 in 2004 (Level I of the Executive Schedule). If OPM
certifies and OMB concurs that the agency's performance management system,
as designed and applied, makes meaningful distinctions based on relative
performance, an agency can raise the SES pay cap to $158,100 in 2004
(Level II of the Executive Schedule) with a senior executive's total
compensation not to exceed $203,000 in 2004 (the total annual compensation
payable to the Vice President).

In an earlier step, to help agencies hold senior executives accountable
for organizational results, OPM amended regulations for senior executive
performance management in October 2000. These amended regulations
governing performance appraisals for senior executives require agencies to
establish performance management systems that (1) hold senior executives
accountable for their individual and organizational performance by linking
performance management with the results-oriented goals of the Government
Performance and Results Act of 1993 (GPRA); (2) evaluate senior executive
performance using measures that balance organizational results with
customer satisfaction, employee perspectives, and any other measures
agencies decide are appropriate; and (3) use performance results as a
basis for pay, awards, and other personnel decisions. Agencies were to
establish these performance management systems by their 2001 senior
executive performance appraisal cycles.

Performance Management Systems Can Be Used More Strategically by Selected
Agencies

High-performing organizations have recognized that their performance
management systems are strategic tools to help them manage on a day-today
basis and achieve organizational goals. While Education, HHS, and NASA
have undertaken important and valuable efforts to link their career senior
executive performance management systems to their organizations' success,
senior executives' perceptions indicate that these three agencies have
opportunities to use their career senior executive performance management
systems more strategically to strengthen that link. Based on our survey of
career senior executives, we estimate that generally less than half of the
senior executives at Education, HHS, and NASA feel that their agencies'
are fully using their performance management systems as a tool to manage
the organization or to achieve organizational goals, as shown in figure 1.

Figure 1: Percentage of Senior Executives Responding to a "Very Great" or
"Great" Extent on Their Agencies' Overall Use of Their SES Performance
Management

Systems

Your agency's SES performance management system is used as a tool to
manage the organization.

Percentage of SES 100

90

80

70

60

50

40

33

30

20

10

0 Agency

Education

HHS NASA Source: GAO.

Your agency's SES performance management system is used in achieving
organizational goals.

Percentage of SES 100

90

80

70

60

50 47

40

30

20

10

0 Agency

Notes: Based on GAO survey of career senior executives.

Senior executives in NASA and HHS who have served for less than 1 year
were more likely to respond "no basis to judge/not applicable." This was
not an issue for Education since fewer senior executives have served less
than 1 year.

Further, effective performance management systems are not merely used for
once-or twice-yearly individual expectation setting and rating processes.
These systems facilitate two-way communication throughout the year so that
discussions about individual and organizational performance are integrated
and ongoing. Effective performance management systems work to achieve
three key objectives: (1) they strive to provide candid and constructive
feedback to help individuals maximize their contribution and potential in
understanding and realizing the goals

and objectives of the organization, (2) they seek to provide management
with the objective and fact-based information it needs to reward top
performers, and (3) they provide the necessary information and
documentation to deal with poor performers. In this regard as well,
generally less than half of the senior executives felt that their agencies
are fully using their performance management systems to achieve these
objectives, as shown in figure 2.

Figure 2: Percentage of Senior Executives Responding to a "Very Great" or
"Great" Extent on Their Agencies' Use of Their SES Performance Management
                         Systems to Meet Key Objectives

Your agency's SES performance management system facilitates discussions
about your performance as it relates to organizational goals during the
year.

Percentage of SES

100 90 80 70 60

                                       48

50 40

30

20

10

0 Agency

Education

HHS NASA Source: GAO.

Your agency provides candid and constructive feedback that allows you to
maximize your contribution to organizational goals.

Percentage of SES

100

90

80

70

60

50 45

40

30

20

10

0 Agency

Your agency uses performance information and documentation to make
distinctions in senior executive performance.

Percentage of SES

100

90

80

70

60

50 47

40

30

20

10

0 Agency

Notes: Based on GAO survey of career senior executives.

Senior executives in NASA and HHS who have served for less than 1 year
were more likely to respond "no basis to judge/not applicable." This was
not an issue for Education since fewer senior executives have served less
than 1 year.

Selected Agencies Can Strengthen the Link between Senior Executive
Performance and Organizational Success

High-performing organizations have recognized that a critical success
factor in fostering a results-oriented culture is a performance management
system that creates a "line of sight" showing how unit and individual
performance can contribute to overall organizational goals and helping
them understand the connection between their daily activities and the
organization's success. Further, our prior work has identified nine key
practices public sector organizations both here and abroad have used that
collectively create this line of sight to develop effective performance
management systems.7 To this end, while Education, HHS, and NASA have
begun to apply the key practices to develop effective performance
management systems for their career senior executives, they have
opportunities to strengthen the link between their senior executives'
performance and organizations' success.

Align Individual Performance Expectations with Organizational Goals

An explicit alignment of daily activities with broader results is one of
the defining features of effective performance management systems in
highperforming organizations. These organizations use their performance
management systems to improve performance by helping individuals see the
connection between their daily activities and organizational goals and
encouraging individuals to focus on their roles and responsibilities to
help achieve these goals. Education, HHS, and NASA require their senior
executives to align individual performance with organizational goals in
order to hold them accountable for organizational results. Our review of
the senior executives' performance plans showed that all the plans at each
agency identified individual performance expectations that aligned with
organizational goals. In addition, nearly all of the senior executives at
each agency have reported that they communicate their performance
expectations to at least a small extent to those whom they supervise.
Cascading performance expectations in this way helps individuals
understand how they contribute to organizational goals.

Still, while most senior executives at each agency indicated that they see
a connection between their daily activities and organizational goals to a
very great or great extent, fewer of these senior executives felt that
their agency's SES performance management system holds them accountable
for their contributions to organizational results to a very great or great
extent, as shown in figure 3.

7GAO-03-488.

Figure 3: Of Those Senior Executives Who See a Connection between Daily
Activities and Organizational Goals to a "Very Great" or "Great" Extent,
Percentage Who Felt That Their System Holds Them Accountable to a "Very
Great" or "Great" Extent

Notes: Based on GAO survey of career senior executives.

The 95 percent confidence interval for the 50 percent of SES at Education
ranges from 40 to 60 percent, and for HHS, the 58 percent of SES ranges
from 53 to 62 percent.

These responses are generally consistent with our governmentwide surveys
on the implementation of GPRA. In particular, governmentwide, senior
executives have consistently reported that they are held accountable for
results. Most recently, we reported in March 2004 that 61 percent of
senior executives governmentwide feel they are held accountable for
achieving their agencies' strategic goals to a very great or great
extent.8

To reinforce the accountability for achieving results-oriented goals, we
have reported that more progress is needed in explicitly linking senior
executives' performance expectations to the achievement of these goals.9

Setting specific levels of performance that are linked to organizational
goals can help senior executives see how they directly contribute to
organizational results. While most senior executives at HHS have set
specific levels of performance in their individual performance plans, few
senior executives in Education and NASA have identified specific levels.

HHS requires its senior executives to set measurable performance
expectations in their individual performance plans that align with
organizational priorities, such as the department's "One-HHS" objectives
and strategic goals and their operating divisions' annual performance
goals or other priorities.10 We found that about 80 percent of senior
executives' performance plans identified specific levels of performance
linked to organizational goals. For example, a senior executive in CDC set
an expectation to "reduce the percentage of youth (grade 9-12) who smoke
to 26.5%," which contributes to CDC's annual performance goal to "reduce
cigarette smoking among youth" and the One-HHS program objective to
"emphasize preventive health measures (preventing disease and illness)."
However, specifying levels of performance varies across operating
divisions. We found that approximately 63 percent of senior executives at
FDA versus 80 percent at CDC identified specific levels of performance
linked to organizational goals in their individual performance plans.

Education requires its senior executives to include critical elements,
each with specific performance requirements, in their individual
performance plans that align with the department's goals and priorities,
including the President's Management Agenda, the Secretary's strategic
plan, the Blueprint for Management Excellence, and the Culture of
Accountability. We found that approximately 5 percent of senior
executives' performance plans identified specific levels of performance
linked to organizational goals.

8U.S. General Accounting Office, Results-Oriented Government: GPRA Has
Established a Solid Foundation for Achieving Greater Results, GAO-04-38
(Washington, D.C.: Mar. 10, 2004).

9GAO-02-966.

10The One-HHS management and program objectives reflect the goals and
priorities of the Secretary.

NASA requires its senior executives to include seven critical elements,
each with specific performance requirements that focus on the achievement
of organizational goals and priorities, in their individual performance
plans. For example, senior executives' performance plans include the
critical element "meets and advances established agency program objectives
and achieves high-quality results," and specifically "meets appropriate
GPRA/NASA Strategic Plan goals and objectives." Senior executives may
modify the performance requirements by making them more measurable or
specific to their jobs; however, only about 23 percent of senior
executives added performance requirements that are specific to their
positions in their individual performance plans.11 Also, about 1 percent
of senior executives have performance expectations with specific levels of
performance that are related to organizational goals in their individual
plans.

Connect Performance Expectations to Crosscutting Goals

As public sector organizations shift their focus of accountability from
outputs to results, they have recognized that the activities needed to
achieve those results often transcend specific organizational boundaries.
Consequently, organizations that focus on collaboration, interaction, and
teamwork across organizational boundaries are increasingly critical to
achieve results. In a recent GAO forum, participants agreed that
delivering high performance and achieving goals requires agencies to
establish partnerships with a broad range of federal, state, and local
government agencies as well other relevant organizations.12
High-performing organizations use their performance management systems to
strengthen accountability for results, specifically by placing greater
emphasis on collaboration to achieve results.

While most senior executives in each agency indicated that they
collaborate with others to achieve crosscutting goals, fewer of these
senior executives felt that their contributions to crosscutting goals are
recognized through their agency's system, as shown in figure 4.

11The 95 percent confidence interval for NASA ranges from 16 to 33
percent. 12GAO-04-343SP.

Figure 4: Of Those Senior Executives Who Collaborate with Others to
Achieve Crosscutting Goals to a "Very Great" or "Great" Extent, Percentage
Who Felt They Are Recognized to a "Very Great" or "Great" Extent

Percentage of SES

100

90

                                                 90 80 70 60 50 40 30 20 10 0

Education HHS Agency

You collaborate with others to achieve crosscutting goals.

                                      NASA

Of those who collaborate, you feel you are recognized through your
performance management system for contributing to crosscutting goals.

Source: GAO.

Note: Based on GAO survey of career senior executives.

We reported that more progress is needed to foster the necessary
collaboration both within and across organizational boundaries to achieve
results.13 As a first step, agencies could have senior executives identify
specific programmatic crosscutting goals that would require collaboration
to achieve in their individual performance plans. As a next step, agencies
could have senior executives name the relevant internal or external
organizations with which they would collaborate to reinforce a focus
across organizational boundaries. HHS, Education, and NASA are connecting
performance expectations to crosscutting goals to varying degrees.

13GAO-02-966.

While HHS does not require executives to identify programmatic
crosscutting goals specific to the individuals in their performance plans,
according to an agency official, it holds all senior executives
accountable for the crosscutting One-HHS program objectives, such as to
increase access to health care. We found that about 67 percent of senior
executives' performance plans identified a programmatic crosscutting goal
that would require collaboration to achieve, as shown in figure 5. The
extent to which the senior executives' performance plans identified
crosscutting goals varied across operating divisions. For example, 60
percent of the senior executives' plans in FDA identified crosscutting
goals compared with 50 percent of the plans in CDC. Few HHS senior
executives clearly identified the specific organization(s) either internal
or external with which they would collaborate.

Figure 5: Percentage of SES Plans in HHS with Performance Expectations
Related to Collaboration

Percentage of SES

100

90

80

70 67

60

50

40

30

20

10

0

Identified crosscutting goals

Identified internal organization Identified external organization Source:
GAO.

Note: GAO analysis based on review of career senior executives'
performance plans.

Positive examples of senior executives' plans at HHS that included
crosscutting goals, as well as either the internal or external
organizations with which they would collaborate to achieve these goals,
include the following:

o 	A senior executive in the National Institutes of Health set an
expectation to work with FDA and other agencies and organizations to
accelerate drug development by specifically working on the National Cancer
Institute/FDA task force to eliminate barriers and speed development.

o 	A senior executive in the Substance Abuse and Mental Health Services
Administration set an expectation to work collaboratively with the Office
of National Drug Control Policy, the Department of Energy, and the Office
of Juvenile Justice and Delinquency Prevention to increase the use of the
National Registry of Effective Programs in other federal agencies to
identify and provide for early intervention for persons with or who are at
risk for mental health or substance abuse problems.

As required by Education, all senior executives' performance plans
included the general performance expectation: "promotes collaboration and
teamwork, including effective union-management relations, where
appropriate." However, only about 32 percent of senior executives'
performance plans identified programmatic crosscutting goals on which they
would collaborate and few executives clearly identified the specific
organizations with which they would collaborate, as shown in figure 6.

Figure 6: Percentage of SES Plans in Education with Performance
Expectations Related to Collaboration

Percentage of SES

100

90

80

70

60

50

40

32

                                                                   30 20 10 0

Identified crosscutting goals Identified internal organization

Identified external organization Source: GAO. Note: GAO analysis based on
review of career senior executives' performance plans.

As required by NASA, all senior executives' performance plans included a
general expectation: "integrates One-NASA approach to problem-solving,
program/project management, and decision making. Leads by example by
reaching out to other organizations and NASA centers to collaborate on
work products; seeks input and expertise from a broad spectrum ...." This
expectation is designed to contribute to achieving NASA's mission. Only
about 1 percent of the executives clearly identified specific centers in
NASA and none of the executives clearly identified specific organizations
outside of NASA that they need to collaborate with to achieve crosscutting
goals.

Provide and Routinely Use Performance Information to Track Organizational
Priorities

High-performing organizations provide objective performance information to
executives to show progress in achieving organizational results and other
priorities, such as customer satisfaction and employee perspectives, and
help them manage during the year, identify performance gaps, and pinpoint
improvement opportunities. We reported that disaggregating performance
information in a useful format could help executives track their
performance against organizational goals and compare their performance to
that of the organization.14

HHS, NASA, and Education took different approaches to providing
performance information to their senior executives in order to show
progress toward organizational goals or priorities. While all three
agencies give their components the flexibility to collect and provide
performance information to their senior executives, Education also
provides performance information agencywide. Of the senior executives in
Education, HHS, and NASA who reported that their agency provided
performance information to track their work unit's performance, generally
less than half found the performance information to be useful for making
improvements, available when needed, or both to a very great or great
extent, as shown in figure 7.

14GAO-02-966.

Figure 7: Of the Senior Executives Who Felt Their Agency Formally Provides
Performance Information That Allows Them to Track Their Work Unit's
Performance, Percentage Who Felt This Information Was Useful, Available,
or Both to a "Very Great" or "Great" Extent

Education HHS NASA

Your agency formally provides performance information that is useful for
making improvements in your work unit's performance.

Your agency formally provides performance information that is available to
you when you need it.

Your agency formally provides performance information that is both
available and useful.

Source: GAO.

Notes: Based on GAO survey of career senior executives.

These responses are based on the 88 percent of senior executives at
Education, 84 percent at HHS, and 93 percent at NASA who reported that
their agencies provided performance information that allows them to track
their work unit's performance. Senior executives in HHS who have served
for less than 1 year were more likely to respond "no basis to judge/not
applicable."

Education provides various types of performance information to senior
executives intended to help them see how they are meeting the performance
expectations in their individual performance plans. A tracking system
monitors how Education is making progress toward its annual performance
goals and supporting action steps. Each action step has milestones that
are tracked and reported each month to the officials who developed and
have "ownership" for them. Education also collects performance information
on customer service and employee perspectives. For example, Education uses
an automated performance feedback process, whereby customers, coworkers,
and employees provide feedback at midcycle and the end of the performance
appraisal cycle on how the senior executives are meeting their individual
performance expectations and areas for improvement.15

15Agency officials indicated that they plan to reevaluate the use of this
system in the future given the changes occurring with the new SES pay
system.

HHS conducts an annual departmentwide quality of work life survey and
disaggregates the survey results for executives and other employees to
use. HHS compares the overall high or low results of its survey for HHS as
a whole to each operating division and to the component organizations
within operating divisions. In the 2003 survey, HHS added questions about
the President's Management Agenda, and each operating division had the
opportunity to add specific questions focusing on issues that it believed
were important to its employees, such as flexible work schedules or
knowledge management issues. In addition, HHS gives operating divisions
the flexibility to use other means of collecting and providing performance
information, and in turn, FDA and CDC give their centers and offices the
flexibility to collect and provide performance information. For example,
according to a CDC official, senior executives receive frequent reports,
such as the weekly situation reports, to identify priorities and help
communicate these priorities among senior executives.16 In addition, CDC
conducts a "pulse check" survey to gather feedback on employees'
satisfaction with the agency and disaggregates the results to the center
level. According to an agency official, CDC plans to conduct this survey
quarterly.

An official at NASA indicated that while NASA does not systematically
provide performance information to its senior executives on a NASA-wide
basis, the centers have the flexibility to collect and provide performance
information to their senior executives on programs' goals and measures and
customer and employee satisfaction. This official indicated that NASA uses
the results of the OPM Human Capital survey to help identify areas for
improvement throughout NASA and its centers. NASA provides the OPM Human
Capital survey data to its centers, showing NASA-wide and centerspecific
results, to help centers conduct their own analyses and identify areas for
improvement and best practices.

Require Follow-up Actions to Address Organizational Priorities

High-performing organizations require individuals to take follow-up
actions based on the performance information available to them. By
requiring and tracking such follow-up actions on performance gaps, these
organizations underscore the importance of holding individuals accountable
for making

16For more information on CDC's tracking of performance information, see
U.S. General Accounting Office, Centers for Disease Control and
Prevention: Agency Leadership Taking Steps to Improve Management and
Planning, but Challenges Remain, GAO-04-219 (Washington, D.C.: Jan. 30,
2004).

progress on their priorities. Within Education, only the senior executives
who developed the action steps for the annual performance goals are to
incorporate expectations to demonstrate progress toward the goal(s) in
their individual plans. HHS and NASA do not require senior executives to
take follow-up actions agencywide, but they encourage their components to
have executives take follow-up actions to show progress toward the
organizational priorities. Of the senior executives at each agency who
indicated that they took follow-up actions on areas of improvement,
generally less than two-thirds felt they were recognized through their
performance management systems for such actions, as shown in figure 8.

Figure 8: Of Those Senior Executives Who Took Action on Areas of
Improvement to a "Very Great" or "Great" Extent, Percentage Who Felt They
Are Recognized to a "Very Great" or "Great" Extent

Notes: Based on GAO survey of career senior executives. For Education, the
55 percent of SES has a margin of error of +-12 percent. For HHS, the 60
percent of SES who said they feel recognized for taking follow-up actions
has a margin of error of +-5 percent. Senior executives in NASA and HHS
who have served for less than 1 year were more likely to respond "no basis
to judge/not applicable." This was not an issue for Education since fewer
senior executives have served less than 1 year.

At Education, senior executives who developed the action steps for
Education's annual goals are required to set milestones that are tracked
each month using a red, yellow, or green scoring system; assess how they
are progressing toward the action steps and annual goals; and revise
future milestones, if necessary. According to agency officials, these
senior executives are to incorporate these action steps when developing
their individual performance plans. Senior executives are also to address
the feedback that their supervisors provide about their progress in
achieving their performance expectations.

HHS as a whole does not require senior executives to take follow-up
actions, for example, on the quality of work life survey results, or
incorporate the performance information results into their individual
performance plans. In addition, FDA and CDC do not require their senior
executives agencywide to take any type of follow-up actions. However, FDA
centers have the flexibility to require their senior executives to
identify areas for improvement based on the survey results or other types
of performance information. Similarly, CDC encourages its executives to
incorporate relevant performance measures in their individual performance
plans. For example, those senior executives within each CDC center
responsible for issues identified at emerging issues meetings are required
to identify when the issues will be resolved, identify the steps they will
take to resolve the issues in action plans, and give updates at future
meetings with the CDC Director and other senior officials.

NASA does not require its senior executives to take follow-up actions
agencywide on the OPM Human Capital Survey data or other types of
performance information, rather it encourages its centers to have their
executives take follow-up action on any identified areas of improvement.
However, an agency official stated that NASA uses the results of the
survey to identify areas for improvement and that managers are ultimately
accountable for ensuring the implementation of the improvement
initiatives.

Use Competencies to High-performing organizations use competencies to
examine individual Provide a Fuller Assessment contributions to
organizational results. Competencies, which define the of Performance
skills and supporting behaviors that individuals are expected to

demonstrate to carry out their work effectively, can provide a fuller
picture of individuals' performance in the different areas in which they
are appraised, such as organizational results, employee perspectives, and
customer satisfaction. We have reported that core competencies applied

organizationwide can help reinforce behaviors and actions that support the
organization's mission, goals, and values and can provide a consistent
message about how employees are expected to achieve results.17 Education
and NASA identified competencies that all senior executives in the agency
must include in their performance plans, while HHS gave its operating
divisions the flexibility to have senior executives identify competencies
in their performance plans.

Most of the senior executives in each agency indicated that the
competencies they demonstrate help them contribute to the organization's
goals to a very great or great extent. However, fewer of these executives
felt that they were recognized through their performance management system
for demonstrating these competencies, as shown in figure 9.

17U.S. General Accounting Office, Human Capital: Implementing Pay for
Performance at Selected Personnel Demonstration Projects, GAO-04-83
(Washington, D.C.: Jan. 23, 2004).

Figure 9: Of Those Senior Executives Who Felt the Competencies They
Demonstrate Help Them Contribute to Organizational Goals to a "Very Great"
or "Great" Extent, Percentage Who Felt They Are Recognized to a "Very
Great" or "Great" Extent

Percentage of SES

100

                                       94

90

80

70

60

50

40

30

20

10

0 Education HHS NASA

                                     Agency

The competencies you demonstrate help you contribute to the organization's
goals.

Of those who feel the competencies help contribute to organizational
goals, you feel recognized through your performance management system for
your demonstration of the competencies.

Source: GAO.

Notes: Based on GAO survey of career senior executives.

Senior executives in NASA and HHS who have served for less than 1 year
were more likely to respond "no basis to judge/not applicable." This was
not an issue for Education since fewer senior executives have served less
than 1 year.

Education requires all senior executives to include a set of competencies
in their individual performance plans. Based on our review of Education's
senior executives' performance plans, we found that all of the plans,
unless otherwise noted, included the following examples of competencies.18

18See app. III for more information on selected elements of Education's,
HHS's and NASA's SES performance management systems.

o 	Organizational results-"sets and meets challenging objectives to
achieve the Department's strategic goals."

o 	Employee perspectives-"fosters improved workforce productivity and
effective development and recognition of employees."19

o 	Customer satisfaction-"anticipates and responds to customer needs in a
professional, effective, and timely manner."

NASA requires all senior executives to include a set of competency-based
critical elements in their individual performance plans. Based on our
review of NASA's senior executives' performance plans, we found all of the
plans included the following examples of competencies.

o 	Organizational results-Understands the principles of the President's
Management Agenda and actively applies them; capitalizes on opportunities
to integrate human capital issues in planning and performance and to
expand e-government and competitive sourcing; and pursues other
opportunities to reduce costs and improve service to customers.

o 	Employee perspectives-Demonstrates a commitment to equal opportunity
and diversity by proactively implementing programs that positively impact
the workplace and NASA's external stakeholders and through voluntary
compliance with equal opportunity laws, regulations, policies, and
practices.

o 	Customer satisfaction-Provides the appropriate level of high-quality
support to peers and other organizations to enable the achievement of the
NASA mission; results demonstrate support of One-NASA and that stakeholder
and customer issues were taken into account.

According to an HHS official, the HHS senior executive performance
management system, while not competency based, is becoming more outcome
oriented. However, operating divisions may require senior executives to
include competencies. For example, senior executives in FDA and CDC
include specific competencies related to organizational results, employee
perspectives, and customer satisfaction in their

19About 98 percent of the senior executives at Education included a
competency related to employee perspectives.

individual performance plans. Based on our review of HHS's senior
executives' performance plans, we found that all of the plans at FDA and
CDC and nearly all across HHS identified competencies that executives are
expected to demonstrate.

o 	Organizational results-About 94 percent of HHS senior executives' plans
identified a competency related to organizational results. For example,
all senior executives' plans in FDA included a competency to "demonstrate
prudence and the highest ethical standards when executing fiduciary
responsibilities."

o 	Employee perspectives-About 89 percent of HHS senior executives' plans
identified a competency related to employee perspectives. For example,
senior executives in CDC are required to include a competency to exercise
leadership and management actions that reflect the principles of workforce
diversity in management and operations in such areas as recruitment and
staffing, employee development, and communications.

o 	Customer satisfaction-About 61 percent of HHS senior executives' plans
identified a competency related to customer satisfaction. For example, all
senior executives' plans in FDA included a competency to "lead in a
proactive, customer-responsive manner consistent with agency vision and
values, effectively communicating program issues to external audiences."

Link Pay to Individual and Organizational Performance

High-performing organizations seek to create pay, incentive, and reward
systems that clearly link employee knowledge, skills, and contributions to
organizational results. These organizations recognize that valid,
reliable, and transparent performance management systems with reasonable
safeguards for employees are the precondition to such an approach. To this
end, Education's, HHS's, and NASA's performance management systems are
designed to appraise and reward senior executive performance based on each
executive's achievement toward organizational goals as outlined in the
executive's performance plan. Overall, the majority of senior executives
at each agency either strongly agreed or agreed that they are rewarded for
accomplishing the performance expectations in their individual performance
plan or helping their agency accomplish its goals, as shown in figure 10.
These responses are similar to those from our governmentwide survey on the
implementation of GPRA. We reported that about half of senior executives
governmentwide perceive to a very great or great extent

that employees in their agencies received positive recognition for helping
their agencies accomplish their strategic goals.20

Figure 10: Percentage of Senior Executives Reporting They "Strongly Agree"
or "Agree" That They Are Rewarded for Accomplishments

Accomplishing the performace expectations
identified in my individual performance plan. Helping my agency accomplish
its goals.

                 Percentage of SES Percentage of SES 100 90 80

                                     68 70

                                     70 60

                                       50

                                       40

                                       30

                                       20

                               10 0 Agency Agency

Education HHS NASA

Source: GAO.

Notes: Based on GAO survey of career senior executives.

Senior executives in NASA and HHS who have served for less than 1 year
were more likely to respond "no basis to judge/not applicable." This was
not an issue for Education since fewer senior executives have served less
than 1 year.

We have observed that a performance management system should have adequate
safeguards to ensure fairness and guard against abuse. Such

20GAO-04-38.

safeguards will become especially important under the new performancebased
pay system for the SES. Education, HHS, and NASA have built the following
safeguards required by OPM into their senior executive performance
management policies.

o 	Each agency must establish one or more performance review boards (PRB)
to review senior executives' initial summary performance ratings and other
relevant documents and to make written recommendations to the agency head
on the performance of the agency's senior executives. The PRBs are to have
members who are appointed by the agency head in a way that assures
consistency, stability, and objectivity in senior executive performance
appraisals. For example, HHS specifically states that each operating
division will have one or more PRBs with members appointed by the
operating division head. HHS's PRB members may include all types of
federal executives, including noncareer appointees, military officers, and
career appointees from within and outside the department. In addition,
NASA's PRB is to evaluate the effectiveness of the senior executive
performance management system and report its findings and any appropriate
recommendations for process improvement or appropriate policy changes to
NASA management. For example, the PRB completed a study on NASA's senior
executive bonus system in 2003.

o 	A senior executive may provide a written response to his or her initial
summary rating that is provided to the PRB. The PRB is to consider this
written response in recommending an annual summary rating to the agency
head.

o 	A senior executive may ask for a higher-level review of his or her
initial summary rating before the rating is provided to the PRB. The
higherlevel reviewer cannot change the initial summary rating, but may
recommend a different rating to the PRB that is shared with the senior
executive and the supervisor. Upon receiving the annual summary rating,
senior executives may not appeal their performance appraisals and ratings.

We have observed that a safeguard for performance management systems is to
ensure reasonable transparency and appropriate accountability mechanisms
in connection with the performance management process. Agencies can help
create transparency in the performance management process by communicating
the overall results of the performance appraisal cycle to their senior
executives. Education, NASA, and HHS officials

indicated that they do not make the aggregate distribution of performance
ratings or bonuses available to their senior executives.

In addition, agencies can communicate the criteria for making
performance-based pay decisions and bonus decisions to their senior
executives to enhance the transparency of the system. Generally, less than
half of the senior executives at each agency reported that they understand
the criteria used to award bonuses to a very great or great extent, and
some senior executives at each agency reported that they do not understand
the criteria at all, as shown in figure 11.

Figure 11: Percentage of Senior Executives Reporting That They Understand
the Criteria Used to Award Bonuses by Extent

Percentage of SES

100

80

60

40

20

0 Education HHS NASA Agency

No

Moderate and small

Very great and great

Source: GAO.

Notes: Based on GAO survey of career senior executives.

For Education, the percentage of senior executives does not equal 100
percent due to rounding, and for HHS and NASA, due to the senior
executives who responded "no basis to judge/not applicable." Senior
executives in HHS who have served for less than 1 year were more likely to
respond "no basis to judge/not applicable."

Make Meaningful Distinctions in Performance

High-performing organizations make meaningful distinctions between
acceptable and outstanding performance of individuals and appropriately
reward those who perform at the highest level. Executive agencies can
reward senior executives' performance in a number of ways: through
performance awards or bonuses, nominations for Presidential Rank Awards,
or other informal or honorary awards. With the new performancebased pay
system for senior executives, agencies are required to have OPM certify
and OMB concur that their performance management systems are making
meaningful distinctions based on relative performance in order to raise
the pay for their senior executives to the highest available level.

Recently, the Director of OPM stated that agencies' SES performance
management systems should rely on credible and rigorous performance
measurements to make meaningful distinctions based on relative performance
in order for the new SES performance-based pay system to succeed.21 She
also noted that while a growing number of agencies have improved in their
distributions of SES ratings and awards based on agencies' fiscal year
2002 rating and bonus data, these data also suggest that more work is
needed. Specifically, see the following:

o 	Executive branch agencies rated about 75 percent of senior executives
at the highest level their systems permit in their performance ratings in
fiscal year 2002, the most current year for which data are available from
OPM-a decrease from about 84 percent the previous fiscal year.

o 	When disaggregating the data by rating system, approximately 69 percent
of senior executives received the highest rating under five-level systems
in fiscal year 2002 compared to about 76 percent in fiscal year 2001, and
almost 100 percent of senior executives received the highest rating under
three-level systems in both fiscal years 2001 and 2002.

o 	Approximately 49 percent of senior executives received bonuses in
fiscal year 2002 compared to about 52 percent the previous fiscal year.22

21U.S. Office of Personnel Management, "Memorandum for Heads of
Departments and Executive Agencies, Reporting SES Performance Ratings and
Awards for FY 2003" (Washington, D.C.: Feb. 12, 2004).

22By law, bonus amounts paid to individual career senior executives are
limited to from 5 to 20 percent of the executive's basic pay. Agency bonus
totals cannot exceed the greater of 10 percent of the aggregate career
senior executive basic pay or 20 percent of the average rates of career
senior executive basic pay.

At HHS, about 86 percent of senior executives received the highest
possible rating in fiscal year 2003 compared with approximately 99 percent
in fiscal year 2002. While HHS gives its operating divisions the
flexibility to appraise their senior executives' performance using a
three-, four-, or five-level performance management system, most of HHS's
operating divisions, including FDA and CDC, rate their senior executives
under a three-level system. Almost all of HHS's senior executives rated
under a three-level system received the highest rating of "fully
successful" in fiscal years 2002 and 2003.23 Approximately 23 percent of
senior executives rated under a five-level system received the highest
rating of "outstanding" in fiscal year 2003 compared with approximately 94
percent in fiscal year 2002.24

According to its Chief Human Capital Officer, HHS recognizes that its
rating systems do not always allow for distinctions in senior executives'
performance, and it has chosen to focus on the bonus process as the method
for reflecting performance distinctions. Senior executive bonuses are to
provide a mechanism for distinguishing and rewarding the contributions of
top performers, specifically for circumstances in which the individual's
work has substantially improved public health and safety or citizen
services. Since the fiscal year 2001 performance appraisal cycle, HHS has
restricted the percentage of senior executives' bonuses to generally no
more than one-third of each operating division's senior executives. HHS,
including FDA and CDC, is making progress toward distinguishing senior
executive performance through bonuses compared to the percentage of senior
executives governmentwide who received bonuses, as shown in table 1.

23Under HHS's three-level system senior executives may be rated at "fully
successful," "minimally satisfactory," or "unsatisfactory," and under a
five-level system, senior executives may be rated at these rating levels
as well as at "excellent" and "outstanding."

24In fiscal year 2002, only the Centers for Medicare and Medicaid Services
used a five-level rating system. In fiscal year 2003, the Indian Health
Service also used a five-level rating system.

Table 1: Percentage of Senior Executives at HHS as Compared to Senior
Executives Governmentwide Who Received Bonuses for Fiscal Years 2000
through 2003

                     Agency FY 2000 FY 2001 FY 2002 FY 2003

HHS (including CDC and FDA) 58 34 37

CDC 865239

FDA 723637

                     Governmentwide 51 52 49 Not available

Sources: HHS and OPM.

Note: The percentage of senior executives governmentwide who received
bonuses in fiscal year 2003 is not yet available.

Additionally, HHS generally limited individual bonus amounts to no more
than 12 percent of base pay for top performers in fiscal year 2003. Most
of the senior executives who received a bonus were awarded less than a 10
percent bonus in fiscal year 2003, as shown in table 2.

Table 2: Percentage of HHS Senior Executives Who Received Bonuses and the
Bonus Amounts as a Percentage of Base Pay for Fiscal Year 2003

              Bonus amount Senior executives who received bonuses

                                      12 3

                                      11 0

                                      10 6

                                       95

                                       84

                                       75

                                       62

                                       54

Total

Source: HHS.

Lastly, senior executive responses to our survey indicated that they did
not feel HHS was making meaningful distinctions in ratings or bonuses to a
very great or great extent. Approximately 31 percent of senior executives
felt that their agency makes meaningful distinctions in performance using
ratings; approximately 38 percent felt that their agency makes meaningful
distinctions in performance using bonuses.

NASA uses a five-level system to appraise senior executive performance.
More than three-fourths of the senior executives received the highest
rating of "outstanding" for the 2003 performance appraisal cycle (July
2002-June 2003), as shown in figure 12. The distribution of senior
executives across the rating levels was similar to the previous
performance appraisal cycle.

Figure 12: Percentage of NASA Senior Executives by Rating Level in the
2003 Performance Appraisal Cycle

0%

Unsatisfactory

1%

Minimally satisfactory

Fully successful

Highly successful

Outstanding

Source: NASA.

Note: Percentage of senior executives exceeds 100 percent due to rounding.

NASA's senior executive bonus recommendations are to be based solely on
exceptional performance as specified and documented in senior executives'
performance plans. While NASA established a fixed allocation of bonuses
for its organizations based on the total number of senior executives, an
organization can request an increase to its allocation. Sixty percent of
eligible senior executives within the organization's bonus allocation may
be recommended for bonuses larger than 5 percent of base pay.

For the 2003 appraisal cycle, the percentage of senior executives who
received bonuses increased from the previous year, as shown in table 3. An
agency official indicated that this increase resulted from a study NASA's
PRB conducted on the senior executive bonus system. The PRB reviewed
NASA's bonus system in the context of OPM's data on senior executive
bonuses across federal agencies and recommended that NASA revise its bonus
system to move NASA into the upper half of the number and average amount
of bonuses given across federal agencies. According to the PRB study, NASA
made this change to meet its management's need to reward more senior
executives while recognizing that bonus decisions must be based on
performance.

Table 3: Percentage of NASA Senior Executives Who Received Bonuses and the
Bonus Amounts as a Percentage of Base Pay for the 2002 and 2003
Performance Appraisal Cycle

                     Senior executives who received bonuses

                    Bonus amount       2002 cycle                  2003 cycle 
                              20                      6                     8 
                              15                      6                    11 
                              10                      6                     7 
                               5                     22                    26 
                           Total                     40 

Source: NASA.

During NASA's 2003 appraisal cycle, the Space Shuttle Columbia accident
happened. We reviewed the aggregate senior executive performance rating
and bonus data for that cycle; however, we did not analyze individual
senior executives' performance appraisals or bonus recommendations or
determine if those who received ratings of outstanding, bonuses, or both
were involved with the Columbia mission.

Lastly, senior executive responses to our survey indicated that about half
of the executives felt NASA was making meaningful distinctions in ratings
or bonuses to a very great or great extent. Approximately 46 percent of
senior executives felt that their agency makes meaningful distinctions in
performance using ratings; approximately 48 percent felt that their agency
makes meaningful distinctions in performance using bonuses.

Education uses a three-level rating system.25 About 98 percent of senior
executives received the highest rating of "successful" in the 2003
performance appraisal cycle (July 2002-June 2003), a slight decrease from
the previous performance appraisal cycle when all senior executives
received this rating. Education's senior executive bonus recommendations
are to be based on senior executives' demonstrated results and
accomplishments toward the department's strategic goals and organizational
priorities. About 63 percent of senior executives received bonuses in the
2003 appraisal cycle, compared to approximately 60 percent in the previous
appraisal cycle. The majority of the senior executives who received
bonuses were awarded 5 percent bonuses in the 2003 appraisal cycle, as
shown in table 4.

Table 4: Percentage of Education Senior Executives Who Received Bonuses
and the Bonus Amounts as a Percentage of Base Pay for the 2003 Performance
Appraisal Cycle

              Bonus amount Senior executives who received bonuses

                                      20 7

15-19

10-14

                                     6-9 15

                                      5 37

Total

Source: Department of Education.

Lastly, senior executive responses to our survey indicated that they did
not feel Education was making meaningful distinctions in ratings or
bonuses to a very great or great extent. Specifically, about 10 percent of
senior executives felt that their agency makes meaningful distinctions in
performance using ratings; about 33 percent felt that their agency makes
meaningful distinctions in performance using bonuses.

25Under Education's three-level system, senior executives may be rated at
"successful," "minimally satisfactory," and "unsatisfactory."

Involve Employees and Stakeholders to Gain Ownership of Performance
Management Systems

High-performing organizations have found that actively involving employees
and stakeholders when developing or refining results-oriented performance
management systems helps improve employees' confidence and belief in the
fairness of the system and increase their understanding and ownership of
organizational goals and objectives. Further, to maximize the
effectiveness of their performance management systems these organizations
recognize that they must conduct frequent training for staff members at
all levels of the organization.26

Generally, at Education, HHS, and NASA senior executives became involved
in refining the performance management system or participated in formal
training on those systems when provided the opportunities. Of the senior
executives at each agency who reported that they have been given the
opportunity to be involved in refining their agency's performance
management system to at least a small extent, most of these senior
executives said they took advantage of this opportunity, as shown in
figure

13.

26For more information on how to assess agencies' training and development
efforts, see U.S. General Accounting Office, Human Capital: A Guide for
Assessing Strategic Training and Development Efforts in the Federal
Government, GAO-04-546G (Washington, D.C.: March 2004).

Figure 13: Of Those Senior Executives Who Said They Had the Opportunity to
Be

Involved, Percentage Who Said They Have Been Involved in Refining Their
Agency's

SES Performance Management System

Percentage of SES

100

90

80

70

60 56

50

40

30

20

10

0 Education HHS NASA

                                     Agency

You have been given the opportunity to be involved in refining your
agency's system.

Of those who had the opportunity, you have been involved in refining your
agency's system.

Source: GAO.

Notes: Based on GAO survey of career senior executives.

The 95 percent confidence interval for the 76 percent of SES at Education
ranges from 63 to 87 percent.

Similarly, while less than three-fourths of the senior executives at each
agency said formal training on their agency's performance management
system is available to them, most of these senior executives said they
participated in the training, as shown in figure 14.

Figure 14: Of Those Senior Executives Who Said Formal Training Is
Available,

Percentage Who Said They Have Participated in Formal Training on Their
Agency's

SES Performance Management System

Percentage of SES

100

90

80

70 65

60

50

40

30

20

10

0 Education HHS NASA

                                     Agency

Formal training on your agency's system is available to you.

Of those who said formal training is available, you have participated in
formal training on your agency's system.

Source: GAO.

Notes: Based on GAO survey of career senior executives.

The 95 percent confidence interval for the 83 percent of SES at Education
ranges from 73 to 91 percent. For the question on the availability of
training, senior executives in HHS who have served for less than 1 year
were more likely to respond "no basis to judge/not applicable."

At all three agencies, a proportion of senior executives reported that
they had no opportunity to become involved with or trained on their
performance management systems. At HHS, about 38 percent of senior
executives said they did not have the opportunity to be involved in
refining their agency's system, while about 24 percent of senior
executives said formal training on their agency's system was not available
to them, as shown in figure 15.

Figure 15: Percentage of Senior Executives at HHS Reporting Involvement
and Training Opportunities by Extent

You have been given the opportunity
to be involved in refining your agency's Formal training on your agency's
system
system. is available to you.

Percentage of SES Percentage of SES

100

80

60

40

20

0

No

Moderate and small

Very great and great

Source: GAO.

Notes: Based on GAO survey of career senior executives.

Percentages do not add up to 100 percent due to senior executives who
responded "no basis to judge/not applicable." For the question on
training, senior executives who have served for less than 1 year were more
likely to respond "no basis to judge/not applicable."

According to an HHS official, the Office of the Secretary developed the
One-HHS objectives, the basis of its senior executive performance
management system, with input from the leadership of all HHS staff offices
and operating divisions. This official indicated that HHS conducted
extensive interviews to develop and validate the goals. All career senior
executives were briefed on the goals and offered training on development
of outcome-oriented individual performance objectives derived from those
goals. The agency official said that the operating divisions had the

flexibility to involve their senior executives in customizing the new
individual performance plans for their operating divisions.

According to HHS's guidance, the operating divisions are to develop and
provide training on the performance management system to their senior
executives on areas such as developing performance plans, conducting
progress reviews, writing appraisals, and using appraisals as a key factor
in making other management decisions. For example, according to an FDA
official, the Human Resources Director briefed all of the senior executive
directors on how to cascade the FDA Commissioner's performance plan into
their fiscal year 2002 individual plans and incorporate the One-HHS
objectives. FDA does not provide regular training to the senior executives
on the performance management system; rather the training is provided as
needed and usually on a one-on-one basis when a new senior executive joins
FDA. The agency official also stated that because few senior executives
are joining the agency, regular training on the system is not as
necessary.

About half of NASA's senior executives reported that they did not have the
opportunity to be involved in refining their agency's system, while about
21 percent of senior executives said formal training on their agency's
system was not available to them, as shown in figure 16.

Figure 16: Percentage of Senior Executives at NASA Reporting Involvement
and Training Opportunities by Extent

You have been given the opportunity
to be involved in refining your agency's Formal training on your agency's
system
system. is available to you.

Percentage of SES Percentage of SES

100

80

60

40

20

0

No

Moderate and small

Very great and great

Source: GAO.

Notes: Based on GAO survey of career senior executives.

Percentages do not add up to 100 percent due to senior executives who
responded "no basis to judge/not applicable."

According to an agency official, the NASA Administrator worked with the
top senior executives to develop a common set of senior executive critical
elements and performance requirements that reflect his priorities and are
central to ensuring a healthy and effective organization. The
Administrator then instructed the senior executives to review the common
critical elements and incorporate them into their individual performance
plans. When incorporating the elements into their individual plans, the
senior executives have the opportunity to modify the performance
requirements for each element to more clearly reflect their roles and
responsibilities.

According to NASA's guidance, the centers and offices are to provide
training and information on the performance management system to their
senior executives. In addition, an official at NASA said that most centers
and offices provide training to new senior executives on aspects of the
performance management system, such as developing individual performance
plans. Also, NASA provides training courses for all employees on specific
aspects of performance management, such as writing performance appraisals
and self-assessments.

Approximately half of Education's senior executives reported that they did
not have the opportunity to be involved in refining their agency's system,
while about one-fourth of the senior executives reported that formal
training on their agency's system was not available to them, as shown in
figure 17.

Figure 17: Percentage of Senior Executives at Education Reporting
Involvement and Training Opportunities by Extent

You have been given the opportunity
to be involved in refining your agency's Formal training on your agency's
system
system. is available to you.

Percentage of SES Percentage of SES

100

80

60

40

20

0

No

Moderate and small

Very great and great

Source: GAO.

Notes: Based on GAO survey of career senior executives.

Percentages do not add up to 100 percent due to senior executives who
responded "no basis to judge/not applicable."

An official at Education indicated that senior executives have the
opportunity to comment on changes proposed to the performance management
system by the Executive Resources Board. In addition, according to
Education's guidance, training for all senior executives on the
performance management system is to be provided periodically. An agency
official said that Education provided training for all managers, including
senior executives, on how to conduct performance appraisals and write
performance expectations near the end of the performance appraisal cycle
last year.

Maintain Continuity during Transitions

The experience of successful cultural transformations in large public and
private organizations suggests that it can often take 5 to 7 years until
such initiatives are fully implemented and cultures are transformed in a
substantial manner. We reported that among the key practices consistently
found at the center of successful transformations is to use the
performance management system to define responsibility and assure
accountability for change.27 The average tenure of political leadership
can have critical implications for the success of those initiatives.
Specifically, in the federal government the frequent turnover of the
political leadership has often made it difficult to obtain the sustained
and inspired attention required to make needed changes. We reported that
the average tenure of political appointees governmentwide for the period
1990-2001 was just under 3

28

years.

Performance management systems help provide continuity during these times
of transition by maintaining a consistent focus on a set of broad
programmatic priorities. Individual performance plans can be used to
clearly and concisely outline top leadership priorities during a given
year and thereby serve as a convenient vehicle for new leadership to
identify and maintain focus on the most pressing issues confronting the
organization as it transforms. We have observed that a specific
performance expectation in senior executives' performance plans to lead
and facilitate change during transitions could be critical as
organizations transform themselves to succeed in an environment that is
more results oriented, less hierarchical, and more integrated.29

While many senior executives at each agency reported that their agency's
senior executive performance management system helped to maintain a
consistent focus on organizational goals during transitions, the majority
of senior executives felt this occurred to a moderate extent or less, as
shown in figure 18.

27U.S. General Accounting Office, Results-Oriented Cultures:
Implementation Steps to Assist Mergers and Organizational Transformations,
GAO-03-669 (Washington, D.C.: July 2, 2003).

28U.S. General Accounting Office, High-Risk Series: Strategic Human
Capital Management, GAO-03-120 (Washington, D.C.: January 2003).

29GAO-03-488.

Figure 18: Percentage of Senior Executives Who Felt Their Agency's SES
Performance Management System Helped to Maintain a Consistent Focus on
Organizational Goals during Transitions by Extent

Percentage of SES

100

80

60

40

20

0 Education HHS NASA Agency

No

Moderate and small

Very great and great

Source: GAO.

Notes: Based on GAO survey of career senior executives.

Percentages do not add up to 100 percent due to senior executives who
responded "no basis to judge/not applicable." Senior executives in NASA
and HHS who have served for less than 1 year were more likely to respond
"no basis to judge/not applicable." This was not an issue for Education
since fewer senior executives have served less than 1 year.

According to an agency official, HHS as a whole struggles with transitions
between secretaries as with each change in leadership comes a change in
initiatives. Approximately 25 percent of HHS senior executives' plans
identified performance expectations related to leading and facilitating
change in the organization. For example, several senior executives' plans
identified actions the executives were going to take in terms of
succession planning and leadership development for their organizations.
Specifically, a senior executive in the National Institutes of Health set
the expectation to develop a workforce plan that supports the future needs
of the office,

including addressing such things as succession and transition planning.
About 33 percent of senior executives' plans in FDA and 15 percent in CDC
identified performance expectations related to leading and facilitating
change. To help address this issue of continuity in leadership and
transitions, HHS identified as part of its One-HHS objectives a goal to
"implement strategic workforce plans that improve recruitment, retention,
hiring and leadership succession results for mission critical positions."

Education requires all senior executives to include a general performance
expectation in their performance plans related to change: "initiates new
and better ways of doing things; creates real and positive change."
Approximately 98 percent of the senior executives' plans included this
expectation.

Almost none of the NASA senior executives' performance plans identified an
expectation related to leading and facilitating change during transitions.
An agency official indicated that while NASA did not set a specific
expectation for senior executives to include in their individual
performance plans, leading and facilitating change is addressed through
several of the critical elements. For example, for the "Health of NASA"
critical element, senior executives are to demonstrate actions that
contribute to safe and successful mission accomplishment and facilitate
knowledge sharing within and between programs and projects. We have
reported that NASA recognizes the importance of change management through
its response to the Columbia Accident Investigation Board's findings.30
NASA indicated that it would increase its focus on the human element of
change management and organizational development, among other things, to
improve the agency's culture.

Conclusions	Senior executives need to lead the way for federal agencies to
transform their cultures to be more results oriented, customer focused,
and collaborative in nature to meet the challenges of the 21st century.
Performance management systems can help manage and direct this
transformation process. Education, HHS, and NASA have undertaken important
and valuable efforts, but these agencies need to continue to make
substantial progress in using their senior executive performance
management systems to strengthen the linkage between senior executive

30U.S. General Accounting Office, NASA: Shuttle Fleet's Safe Return to
Flight Is Key to Space Station Progress, GAO-04-201T (Washington, D.C.:
Oct. 29, 2003).

performance and organizational success through the key practices for
effective performance management.

Consistent with our findings and OPM's reviews across the executive
branch, these agencies must use their career senior executive performance
management systems as strategic tools. In addition, as the administration
is about to implement a performance-based pay system for the SES, valid,
reliable, and transparent performance management systems with reasonable
safeguards are critical. The experiences and progress of Education, HHS,
and NASA should prove helpful to those agencies as well as provide
valuable information to other agencies as they seek to use senior
executive performance management as a tool to drive internal change and
achieve external results.

Recommendations for Executive Action

Overall, we recommend that the Secretaries of Education and HHS and the
Administrator of NASA continue to build their career senior executive
performance management systems along the nine key practices for effective
performance management. Specifically, we recommend the following.

The Secretary of Education should reinforce these key practices by taking
the following seven actions:

o 	Require senior executives to set specific levels of performance that
are linked to organizational goals to help them see how they directly
contribute to organizational goals.

o 	Require senior executives to identify in their individual performance
plans programmatic crosscutting goals that would require collaboration to
achieve and clearly identify the relevant internal or external
organizations with which they would collaborate to achieve these goals.

o 	Provide disaggregated performance information from various sources to
help facilitate senior executive decision making and progress in achieving
organizational results, customer satisfaction, and employee perspectives.

o 	Require senior executives to take follow-up actions based on the
performance information available to them in order to make programmatic
improvements, and formally recognize executives for these actions.

o 	Build in additional safeguards when linking pay to performance by
communicating the overall results of the performance management decisions.

o 	Make meaningful distinctions in senior executive performance through
both ratings and bonuses.

o 	Involve senior executives in future refinements to the performance
management system and offer training on the system, as appropriate.

The Secretary of HHS should reinforce these key practices by taking the
following seven actions:

o 	Require senior executives to clearly identify in their individual
performance plans the relevant internal or external organizations with
which they would collaborate to achieve programmatic crosscutting goals.

o 	Provide disaggregated performance information from various sources to
help facilitate senior executive decision making and progress in achieving
organizational results, customer satisfaction, and employee perspectives.

o 	Require senior executives to take follow-up actions based on the
performance information available to them in order to make programmatic
improvements, and formally recognize executives for these actions.

o 	Build in additional safeguards when linking pay to performance by
communicating the overall results of the performance management decisions.

o 	Make meaningful distinctions in senior executive performance through
ratings.

o 	Involve senior executives in future refinements to the performance
management system and offer training on the system, as appropriate.

o 	Set specific performance expectations for senior executives related to
leading and facilitating change management initiatives during ongoing
transitions throughout the organization that executives should include in
their individual performance plans.

The Administrator of NASA should reinforce these key practices by taking
the following eight actions:

o 	Require senior executives to set specific levels of performance that
are linked to organizational goals to help them see how they directly
contribute to organizational goals.

o 	Require senior executives to identify in their individual performance
plans programmatic crosscutting goals that would require collaboration to
achieve and clearly identify the relevant internal or external
organizations with which they would collaborate to achieve these goals.

o 	Provide disaggregated performance information from various sources to
help facilitate senior executive decision making and progress in achieving
organizational results, customer satisfaction, and employee perspectives.

o 	Require senior executives to take follow-up actions based on the
performance information available to them in order to make programmatic
improvements, and formally recognize executives for these actions.

o 	Build in additional safeguards when linking pay to performance by
communicating the overall results of the performance management decisions.

o 	Make meaningful distinctions in senior executive performance through
both ratings and bonuses.

o 	Involve senior executives in future refinements to the performance
management system and offer training on the system, as appropriate.

o 	Set specific performance expectations for senior executives related to
leading and facilitating change management initiatives during ongoing
transitions throughout the organization that executives should include in
their individual performance plans.

Agency Comments and 	We provided a draft of this report to the Secretaries
of Education and HHS and the Administrator of NASA for their review and
comment. We also

Our Evaluation	provided a draft of the report to the Directors of OPM and
OMB for their information. We received written comments from Education,
HHS, and

NASA, which are presented in appendixes IV, V, and VI. NASA's Deputy
Administrator stated that the draft report is generally positive and that
NASA concurred with all the recommendations and plans to implement them in
its next SES appraisal cycle beginning July 1, 2004. HHS's Acting
Principal Deputy Inspector General stated that HHS had no comments upon
review of the draft report.

In responding to our recommendations, Education's Assistant Secretary for
Management and Chief Information Officer stated that Education plans to
revise its existing senior executive performance management system
dramatically given OPM's draft regulations for the new SES pay for
performance system and described specific actions Education plans to take.
These actions are generally consistent with our recommendations and their
successful completion will be important to achieving the intent of our
recommendations.

However, Education stated that it does not plan to require the specific
identification of the internal/external organizations with which the
executives collaborate, as we recommended. We disagree that Education does
not need to implement this recommendation. Education is taking important
steps by requiring senior executives to include a general performance
expectation related to collaboration and teamwork in their individual
performance plans, but placing greater emphasis on this expectation is
especially important for Education. We reported that Education will have
to help states and school districts meet the goals of congressional
actions such as the No Child Left Behind Act.31 Consequently, Education
should require senior executives to identify the crosscutting goals and
relevant organizations with which they would collaborate to achieve them
in order to help reinforce the necessary focus on results.

Lastly, Education stated that it has fully implemented our recommendation
for providing senior executives disaggregated performance information from
various sources to help facilitate decision making and progress in
achieving organizational priorities. We disagree that Education has fully
implemented this recommendation. While we recognize Education's two
sources of agencywide performance information for its senior executives,
we also reported that only about one-third of the senior executives who

31U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of Education, GAO-03-99 (Washington, D.C.: January
2003).

reported that the agency provided performance information felt that the
performance information was useful for making improvements and available
when needed to a very great or great extent. Consequently, Education
should provide all of its senior executives performance information from
various sources that is disaggregated in a useful format to help them
track their progress toward achieving organizational results and other
priorities, such as customer satisfaction and employee perspectives.

As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its date. At that time, we will provide copies of this report to
other interested congressional parties, the Secretaries of Education and
HHS, the Administrator of NASA, and the Directors of OPM and OMB. We will
also make this report available at no charge on the GAO Web site at
http://www.gao.gov.

If you have any questions about this report, please contact me or Lisa
Shames on (202) 512-6806 or at [email protected] or [email protected]. Other
contributors are acknowledged in appendix VII.

J. Christopher Mihm Managing Director, Strategic Issues

Appendix I

                       Objective, Scope, and Methodology

To meet our objective to assess how well selected agencies are creating
linkages between senior executive performance and organizational success
through their performance management systems, we applied the key practices
we previously identified for effective performance management.1 We focused
on agencies' career Senior Executive Service (SES) members, rather than
all senior-level officials, because the Office of Personnel Management
(OPM) collects data on senior executives across the government. In
addition, career senior executives are common to all three of the selected
agencies and typically manage programs and supervise staff.

We selected the Department of Education, the Department of Health and
Human Services (HHS), and the National Aeronautics and Space
Administration (NASA) for our review to reflect variations in mission,
size, organizational structure, and use of their performance management
systems for career senior executives. Within HHS, we selected two of the
operating divisions-the Food and Drug Administration (FDA) and the Centers
for Disease Control and Prevention (CDC)-to determine how HHS's SES
performance management system cascades down to the operating division
level. We selected these two operating divisions after reviewing HHS's
strategic plan and its operating divisions' annual performance plans to
identify two agencies that contributed to the same HHS strategic goal(s)
through their annual performance goals. We then reviewed the SES
population data from OPM's Central Personal Data File to verify that the
two operating divisions each had a relatively large number of senior
executives.

To assess the agencies' senior executive performance management systems,
we did the following: Analyzed Agency We collected and analyzed each
agency's senior executive performance

management system policy manual; personnel policies and
memorandums;Documents and Bonus strategic plan and annual performance
plan; employee and customer and Rating Data, and satisfaction survey
instruments and analyses, as appropriate; and aggregate Interviewed
Cognizant trend data for senior executive performance ratings and bonus

distributions. In addition, we reviewed OPM's draft proposed
regulationsAgency Officials prescribing the criteria agencies must meet to
obtain certification of their

1GAO-03-488.

                  Appendix I Objective, Scope, and Methodology

systems, which OPM provided for review and comment to the heads of
departments and agencies, including GAO, on April 28, 2004.

We also assessed the reliability of the senior executive performance
rating and bonus data provided by Education, HHS, NASA, and OPM to ensure
that the data we used for this report were complete and accurate by (1)
performing manual and electronic testing of required data elements; (2)
comparing the data to published OPM data, when applicable; and (3)
interviewing agency officials knowledgeable about the data. We determined
that the data provided by the agencies and OPM were sufficiently reliable
for the purposes of this report.

We also interviewed the chief human capital officers at Education and HHS
as well as officials at all three agencies responsible for managing human
capital; implementing the strategic and annual performance plans; and
administering agencywide employee and customer satisfaction surveys, as
appropriate, and other agency officials identified as having a particular
knowledge about issues related to senior executive performance management.
In addition, we met with the President of the Senior Executives
Association to obtain her thoughts on the new SES performance-based pay
structure and performance management in general.

Assessed a Sample of Career SES Individual Performance Plans

We assessed a probability sample of SES individual performance plans at
HHS and NASA and all the SES plans at Education using a data collection
instrument we prepared in order to identify how senior executives were
addressing certain practices-aligning individual performance expectations
with organizational goals, connecting performance expectations to
crosscutting goals, using competencies, and maintaining continuity during
transitions-through their individual performance plans.

To randomly select the plans, we collected a list of all current career
senior executives as of August/September 2003 from each agency. Since
HHS's operating divisions develop their own SES performance plans and
implement their performance management systems, we drew the sample such
that it would include each operating division and be representative of all
of HHS. In addition to the stratified sample for HHS overall, we reviewed
all senior executives plans at FDA and CDC to ensure that estimates could
be produced for these operating divisions. For all three agencies, we
reviewed the individual performance plans most recently collected by the
human resources offices. We reviewed plans from the performance

                  Appendix I Objective, Scope, and Methodology

appraisal cycle for HHS covering fiscal year 2003, for Education covering
July 2002-June 2003, and for NASA covering July 2003-June 2004.

Sample Design	We selected and reviewed all senior executives' individual
performance plans from Education, a simple random sample from NASA, and a
stratified sample from HHS. The sample of SES performance plans allowed us
to estimate characteristics of these plans for each of these three
agencies. For each agency, the SES population size, number of SES plans in
sample, and number of plans reviewed are shown in table 5.

         Table 5: Disposition of SES Performance Plan Review, by Agency

Number of plans in Number of out of Number of plans Agency SES population
sample scope plans reviewed

HHS 334 125 7

- CDC (stratum 1) 20 20 0

-FDA (stratum 2) 40 40 0

- Rest of HHS (stratum 3) 274 65 7

Education 59 59 0

NASAa 397 86 0

Source: GAO.

aFor NASA, 5 of the 86 SES performance plans were not provided by the
agency; hence NASA's response rate is 94 percent.

We excluded out of scope cases from our population and sample, which
included senior executives who had retired or resigned, were not career
senior executives, or did not have individual performance plans because
they were either new executives or on detail to another agency. For HHS,
excluding CDC and FDA, we do not know the number of out of scope SES plans
in the entire senior executive population; however, there were seven out
of scope SES plans in our sample of performance plans. For this review, we
only estimate to the population of in scope SES plans.

Estimation and Sampling All population estimates based on this plan review
are for the target

Error	population defined as SES performance plans for the most recent year
available from each of the three agencies. For Education, we report actual
numbers for our review of individual performance plans since we reviewed
all the plans. For HHS and NASA, we produced estimates to the population

                  Appendix I Objective, Scope, and Methodology

of all SES performance plans in those agencies for the relevant year.
Estimates are produced using appropriate methods for simple random
sampling for NASA and for stratified random sampling for HHS. For NASA and
for each stratum for HHS, we formed estimates by weighting the data by the
ratio of the population size to the number of plans reviewed. For NASA, we
considered the 81 plans obtained and reviewed to be a probability sample.

The HHS and NASA performance plan samples are subject to sampling error.
There was no sampling error for the census review of senior executives'
performance plans for FDA, CDC, and Education. The effects of sampling
errors, due to the selection of a sample from a larger population, can be
expressed as confidence intervals based on statistical theory. Sampling
errors occur because we use a sample to draw conclusions about a larger
population. As a result, the sample was only one of a large number of
samples of performance plans that might have been drawn. If different
samples had been taken, the results might have been different. To
recognize the possibility that other samples might have yielded other
results, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval.

The 95 percent confidence intervals are expected to include the actual
results for 95 percent of samples of this type. We calculated confidence
intervals for this sample using methods that are appropriate for the
sample design used. For HHS estimates in this report, we are 95 percent
confident that when sampling error is considered, the results we obtained
are within +9 percentage points of what we would have obtained if we had
reviewed the plans of the entire study population, unless otherwise noted.
For NASA, the 95 percent confidence intervals for percentage estimates are
no wider than +6 percentage points, unless otherwise noted.

                              Surveyed All Career
                               SES at Each Agency

We administered a Web-based questionnaire to the study population of all
career senior executives at Education, HHS, and NASA to obtain information
on their experiences with and perceptions of their performance management
systems. We collected a list of all career senior executives and e-mail
addresses from each agency as of August/September 2003 to identify the
respondents for our survey. We structured the questionnaire around the key
practices we identified for effective performance management and included
some questions about senior executives' overall perceptions of their
performance management systems. The questions were nearly identical across
the agencies, though some

Appendix I Objective, Scope, and Methodology

introductory language and terminology varied. The complete questionnaire
and results are shown in appendix II.

Although all senior executives were sampled, in the implementation of the
survey, we found that some executives were out of scope because they
retired or resigned, were not career senior executives, or otherwise did
not respond. Table 6 contains a summary of the survey disposition for the
surveyed cases at the three agencies.

                 Table 6: Disposition of SES Survey, by Agency

                          Number of SES    Education        HHS          NASA 
                         SES population               59    329           397 
                       SES out of scope                2    12     
                           SES in scope               57    317           393 
                     Survey respondents               41    214           260 
                   In scope respondents               41    213           260 
               Out of scope respondents                0     1     
                          Response rate              72%    67%           66% 

Source: GAO.

Table 7 summarizes why individuals originally included in the target
population by each agency were removed from the sample.

Table 7: Number of SES Out of Scope and Reason, by Agency

                        Reason out of scope   Education      HHS         NASA 
             Noncareer SES (e.g., political                         
                 appointee or limited term)              0    1     
                              No longer SES              0    2             0 
                        Retired or resigned              2    8             3 
                   Not an SES member (e.g.,                         
                 General Schedule position)              0    1             0 
                              On sick leave              0    0             1 
                         Total out of scope              2    12            4 

Source: GAO.

                  Appendix I Objective, Scope, and Methodology

For Education, we surveyed a total of 57 career senior executives and
received completed questionnaires from 41 senior executives for a response
rate of 72 percent. For HHS, we surveyed a total of 317 career senior
executives and received completed questionnaires from 213 senior
executives for a response rate of 67 percent. For NASA, we surveyed a
total of 393 career senior executives and received completed
questionnaires from 260 senior executives for a response rate of 66
percent.

Estimation and Sampling Error

We obtained responses from across Education and from all subentities
within HHS and NASA and had no reason to expect that the views of
nonrespondents might be different from the respondents. Consequently, our
analysis of the survey data treats the respondents as a simple random
sample of the populations of senior executives at each of the three
agencies.

We also reviewed whether senior executives who have served less than 1
year at an agency tended to respond differently than those with more than
1 year of experience. We did find some differences on certain questions
for which individuals who served as senior executives for less than 1 year
were more likely to answer "no basis to judge/not applicable" and noted
these differences in the report. The estimated percentage of the senior
executives responding "no basis to judge/not applicable" to questions
ranged from 0 to 24 percent. Since this range is relatively wide, we have
reported "no basis to judge/not applicable" as a separate response
category for each question in appendix II.

The particular sample of senior executives (those who responded to the
survey) we obtained from each agency was only one of a large number of
such samples of senior executives that we might have obtained. Each of
these different samples might have produced slightly different results. To
recognize the possibility that other samples might have yielded other
results, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval. For Education,
unless otherwise noted, the survey responses have a margin of error within
+- 9 percent with a 95 percent level of confidence. For HHS and NASA,
unless otherwise noted, the survey responses have a margin of error within
+- 4 percent with a 95 percent level of confidence.

Nonsampling Error	In addition to sampling error, other potential sources
of errors associated with surveys, such as question misinterpretation, may
be present.

Appendix I Objective, Scope, and Methodology

Nonresponse may also be a source of nonsampling error. We took several
steps to reduce these other sources of error.

We conducted pretests of the questionnaire both with appropriate senior
executives in GAO and senior executives in the three agencies surveyed to
ensure that the questionnaire (1) was clear and unambiguous, (2) did not
place undue burden on individuals completing it, and (3) was independent
and unbiased. We pretested a paper copy of the survey with three senior
executives in GAO who did not work in the human capital area. We then had
a human resources professional with each agency review the survey for
agency-specific content and language. We conducted six pretests overall
with senior executives in the audited agencies-one at Education, three at
HHS, and two at NASA. The first four were conducted using a paper version
of the questionnaire and the final two were conducted using the Web
version.

To increase the response rate for each agency, we sent a reminder e-mail
about the survey to those senior executives who did not complete the
survey in the initial time frame and conducted follow-up telephone calls
to persons who had not completed the survey following the reminder e-mail.
The HHS and NASA surveys were available from October 22, 2003, through
January 16, 2004, and the Education survey was available from November 3,
2003, through January 16, 2004.

We performed our work in Washington, D.C., from August 2003 through March
2004 in accordance with generally accepted government auditing standards.

Appendix II

GAO Senior Executive Survey Data from Education, HHS, and NASA

We administered a Web-based questionnaire to the study population of all
career senior executives at Education, HHS, and NASA to obtain information
on their experiences with and perceptions of their performance management
systems.1 We structured the questionnaire around key practices we
identified for effective performance management.2 The response rates and
margins of error for each agency are as follows.

o 	For Education, we surveyed a total of 57 career senior executives and
received completed questionnaires from 41 senior executives for a response
rate of 72 percent. Unless otherwise noted, the survey responses have a
margin of error within +- 9 percent with a 95 percent level of confidence.

o 	For HHS, we surveyed a total of 317 career senior executives and
received completed questionnaires from 213 senior executives for a
response rate of 67 percent. Unless otherwise noted, the survey responses
have a margin of error within +- 4 percent with a 95 percent level of
confidence.

o 	For NASA, we surveyed a total of 393 career senior executives and
received completed questionnaires from 260 senior executives for a
response rate of 66 percent. Unless otherwise noted, the survey responses
have a margin of error within +- 4 percent with a 95 percent level of
confidence.

The information below shows the senior executives' responses for each
question by agency.3

1For HHS, when the question refers to "my agency" or "my organization," we
asked senior executives to respond regarding their operating divisions
within HHS. For the questions on performance information, we asked NASA
senior executives to respond on the extent that NASA or their center
formally provides performance information.

2GAO-03-488.

3Percentages for each question may not add to 100 due to rounding.

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

1. Align individual performance expectations with organizational goals.

You see a connection between your daily activities and the achievement of
organizational goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        45         43           8          5         0          0 
HHS              52         28          15          4         0          1 
NASA             64         27           8          2         0          0 

You communicate your performance expectations to the individuals who
report to you to help them understand how they can contribute to
organizational goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        30         50          10          0         0         10 
HHS              36         32          20         10         1          1 
NASA             48         42           8          1         0          2 

    You see a connection between your daily activities and HHS's priorities.

                                                                  No basis to 
          To a very To a great To a moderate To a small           judge / Not 
                        extent        extent     extent   To no    applicable 
       great extent                                      extent   
          (percent)  (percent)     (percent)  (percent) (percent)   (percent) 
HHS           48         35            11          2         0           4 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

2. Connect performance expectations to crosscutting goals.

You collaborate with others to achieve crosscutting goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        37         39          22          0         0          2 
HHS              52         35           9          3         0          1 
NASA             53         38           9          1         0          0 

 You identify strategies for collaborating with others to achieve crosscutting
    goals. You are recognized through your performance management system for
                      contributing to crosscutting goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        24         49          24          0         0          2 
HHS              42         43          10          3         1          1 
NASA             42         44          12          1         0          0 

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        32         20          17         20         7          5 
HHS              30         27          19         11         6          7 
NASA             35         32          20          7         5          1 

Education's survey questions:
Do you collaborate with other offices within Education to achieve
crosscutting goals?

                                 Does not apply 
                               given my current 
Yes (percent) No (percent)         position. 
                                      (percent) 
93                       2                 5 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

Do you collaborate with other agencies or organizations outside of
Education to achieve crosscutting goals?

                                                         Does not apply given
                                                         my current position.
                                         Yes (percent) No (percent) (percent)

83 125

HHS's survey questions:

Do you collaborate with other operating divisions within HHS to achieve
crosscutting goals?

                                Does not apply 
                              given my current 
Yes (percent) No (percent)        position. 
                                     (percent) 
87                       5                8 

Do you collaborate with other agencies or organizations outside of HHS to
achieve crosscutting goals?

                                 Does not apply 
                               given my current 
Yes (percent) No (percent)         position. 
                                      (percent) 
83                       7                10 

NASA's survey questions:

Do you collaborate with other centers within NASA to achieve crosscutting
goals?

                                 Does not apply 
                               given my current 
Yes (percent) No (percent)         position. 
                                      (percent) 
97                       2                 1 

Do you collaborate with other agencies or organizations outside of NASA to
achieve crosscutting goals?

                                                               Does not apply
                                                             given my current
                               Yes (percent) No (percent) position. (percent)

87 85

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

3. Provide and routinely use performance information to track
organizational priorities.

Your agency formally provides performance information that allows you to
track your work unit's performance.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        15         25          30         18         5          8 
HHS              18         24          28         14        11          5 
NASA             25         31          27         11         4          3 

Your agency formally provides performance information that allows you to
compare the performance of your work unit to that of other work units.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         5         13          18         35        18         13 
HHS               9         13          16         29        23         10 
NASA              6         23          31         20        13          7 

Your agency formally provides performance information that allows you to
compare the performance of your work unit to that of your agency.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         8         13          20         23        25         13 
HHS               9         16          21         22        20         12 
NASA              6         20          29         22        16          8 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

Your agency formally provides performance information that is available to
you when you need it.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        10         23          15         30        13         10 
HHS              13         23          23         17        16          8 
NASA             16         30          26         17         8          3 

Your agency formally provides performance information that is useful for making
                 improvements in your work unit's performance.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        10         25          20         20        18          8 
HHS              13         20          28         15        18          7 
NASA             15         28          27         17         9          5 

4. Require follow-up actions to address organizational priorities.

You identified areas for improvement based on performance information
formally provided by your agency.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        15         21          33         18         5          8 
HHS              17         26          22         12        11         13 
NASA             19         35          23          9         8          6 

            You took action on any identified areas of improvement.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        23         33          23          8         5          8 
HHS              25         35          14          6         7         12 
NASA             29         45          11          4         4          7 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

You documented areas for improvement in your individual performance plan.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        21         18          26          8        15         13 
HHS              18         25          23          9        13         13 
NASA             15         32          24         11         9          9 

You are recognized through your performance management system for taking
follow-up actions.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        15         18          26         13        18         10 
HHS              16         23          23         10        11         18 
NASA             15         36          23         10         7         10 

5. Use competencies to provide a fuller assessment of performance.

The competencies you demonstrate help you contribute to the organization's
goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        49         36          10          3         0          3 
HHS              68         26           4          1         0          1 
NASA             62         30           6          1         0          0 

You are recognized through your performance management system for your
demonstration of the competencies.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        28         26          18         18         3          8 
HHS              31         31          20          9         3          6 
NASA             36         36          16          7         3          2 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

6. Link pay to individual and organizational performance.

I am rewarded for accomplishing the performance expectations identified in
my individual performance plan.

                                                                  No basis to 
                                    Neither                                   
                                    agree               Strongly  judge / Not
               Strongly       Agree    or     Disagree  disagree   applicable 
                agree               disagree                      
                (percent) (percent) (percent) (percent) (percent)   (percent) 
EDUCATION           28        28        15        13         8           8 
HHS                 27        32        14        12        10           6 
NASA                38        30        12         8         7           5 

  I am rewarded for helping my agency accomplish its goals. You understand the
criteria used to award bonuses (e.g., cash awards). You understand the criteria
used to award pay level adjustments (e.g., an increase from SES level 1 to level
                                      2).

                                                                  No basis to 
                                    Neither                                   
                                    agree               Strongly  judge / Not
               Strongly       Agree    or     Disagree  disagree   applicable 
                agree               disagree                      
                (percent) (percent) (percent) (percent) (percent)   (percent) 
EDUCATION           23        31        21        13         8           5 
HHS                 28        32        13        13         8           7 
NASA                40        31        11         7         6           5 

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        18         26          21         15        21          0 
HHS              19         28          21         17        13          2 
NASA             15         29          20         23        12          2 

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        18         24          11         16        29          3 
HHS              17         22          23         16        19          3 
NASA             14         23          27         19        15          2 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

Pay level adjustments are dependent on an individual's contribution to the
 organization's goals. Bonuses are dependent on an individual's contribution to
                           the organization's goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         8         18          21         13        15         26 
HHS              15         25          26         13         8         14 
NASA             16         34          18         15         6         11 

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         5         26          15         21        13         21 
HHS              18         31          18         13         6         14 
NASA             26         28          20         13         4          9 

7. Make meaningful distinctions in performance.

Your agency's SES performance management system uses performance ratings
to make meaningful distinctions between acceptable and outstanding
performers.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         0         10          26         31        18         15 
HHS               6         25          25         10        15         19 
NASA             14         32          30         11         3         10 

Your agency's SES performance management system uses bonuses to make
meaningful distinctions between acceptable and outstanding performers.

                                                           No basis to        
                          To a great To a To a small                          
                To a very moderate                         judge / Not
             great extent   extent extent     extent To no extent applicable  
                (percent) (percent)        (percent)   (percent) (percent)    
                          (percent)                  
EDUCATION           10           23 10         21          15 21           
      HHS              11           27 22         11           7 23           
     NASA              19           29 20         14           4 15           
                                                               GAO-04-614 SES 
                              Page 69                  Performance Management 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

Your agency uses performance information and documentation to make
distinctions in senior executive performance.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         3         21          13         23        15         26 
HHS               8         26          24         12         5         25 
NASA             14         33          21         13         3         15 

Your agency provides candid and constructive feedback that allows you to
maximize your contribution to organizational goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         5         18          18         28        23          8 
HHS              10         26          28         13        17          6 
NASA             18         27          27         15        10          3 

8. Involve employees and stakeholders to gain ownership of performance
management systems.

You have been given the opportunity to be involved in refining your
agency's SES performance management system.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         8         13          10         15        49          5 
HHS              10         13          20         13        38          5 
NASA              6          7          15         15        51          6 

You have been involved in refining your agency's SES performance
management system.

                                                           No basis to        
                          To a great To a To a small                          
                To a very moderate                         judge / Not
             great extent   extent extent     extent To no extent applicable  
                (percent) (percent)        (percent)   (percent) (percent)    
                          (percent)                  
EDUCATION            8            11 5         11           61 5           
      HHS               9           13 17         14           43 5           
     NASA               5            5 13         14           58 5           
                                                               GAO-04-614 SES 
                              Page 70                  Performance Management 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

Formal training on your agency's SES performance management system is available
                                    to you.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         5         11          26         21        26         11 
HHS               8         12          25         14        24         17 
NASA              7         21          24         13        21         14 

You have participated in formal training on your agency's SES performance
management system.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         8          8          16         22        41          5 
HHS               8          7          23         16        42          4 
NASA              4         11          22         17        43          2 

Your overall involvement in the SES performance management system has
increased your understanding of it.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        10         13          13         26        28         10 
HHS              11         16          21         16        21         15 
NASA              8         19          27         16        17         13 

9. Overall perceptions of the SES performance management system.

Your agency's SES performance management system is used as a tool to
manage the organization.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         3         23          13         31        18         13 
HHS               6         23          35         15         8         12 
NASA              9         24          33         19         8          7 

Appendix II GAO Senior Executive Survey Data from Education, HHS, and NASA

Your agency's SES performance management system is used in achieving
organizational goals.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION         8         21          21         31        10         10 
HHS               9         27          32         11         7         12 
NASA             13         33          28         13         7          5 

Your agency's SES performance management system holds you accountable for
your contributions to organizational results.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        16         26          21         24         8          5 
HHS              22         27          27         12         3          8 
NASA             20         39          22         10         6          4 

Your agency's SES performance management system facilitates discussions
about your performance as it relates to organizational goals during the
year.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        10         26          18         18        21          8 
HHS              12         27          26         20         8          8 
NASA             18         31          22         15        10          5 

Your agency's SES performance management system helps to maintain a
consistent focus on organizational goals during transitions, such as
changes in leadership (at any level) and change management initiatives.

                                                                     No basis 
                                                                           to 
                                  To a        To a small              judge / 
             To a very To a great moderate                                Not 
               great       extent      extent     extent   To no   applicable 
              extent                                      extent   
             (percent)  (percent)   (percent)  (percent) (percent)  (percent) 
EDUCATION        10         15          26         18        21         10 
HHS              10         28          24         17        10         12 
NASA             13         24          24         20        11          9 

Appendix III

Selected Elements of Education's, HHS's, and NASA's SES Performance
Management Systems

                                   Education

Defining SES Performance Expectations

Education required all of its senior executives to include three critical
elements in their individual performance plans for the 2003 performance
appraisal cycle (July 2002-June 2003). The critical elements and examples
of the related individual and organizational performance requirements
include the following.

o 	Leadership, management, and coaching: Takes leadership in promoting and
implementing the department's mission, values, and goals; develops and
communicates a clear, simple, customer-focused vision/direction for the
organization and customers that is consistent with the department's
mission and strategic goals; fosters improved workforce productivity and
effective development and recognition of employees; and promotes
collaboration and teamwork, including effective union-management
relations, where appropriate.

o 	Work quality, productivity, and customer service: Produces or assures
quality products that are useful and succinct, that identify and address
problems or issues, and that reflect appropriate analysis, research,
preparation, and sensitivity to department priorities and customer needs;
anticipates and responds to customer needs in a professional, effective,
and timely manner; initiates new and better ways of doing things; and
creates real and positive change.

o 	Job specifics: Senior executives are to include performance
expectations that are applicable to their individual positions and support
their principal offices' goals as well as the department's strategic goals
and priorities, including the President's Management Agenda, the Blueprint
for Management Excellence, and the Culture of Accountability.

Appraising Performance	Education sets guidelines for its offices to follow
in appraising performance and recommending senior executives for bonuses.
The senior executive performance appraisals are to be based on
demonstrated results related to Education's goals and priorities,
including the President's Management Agenda, the Blueprint for Management
Excellence, the Culture of Accountability, and the Secretary's strategic
plan. In addition,

Appendix III Selected Elements of Education's, HHS's, and NASA's SES Performance
                               Management Systems

the senior executive's appraisal is to be based on both individual and
organizational performance, taking into account

o 	results achieved in accordance with the department's strategic plan and
goals, which are developed in accordance with the Government Performance
and Results Act of 1993 (GPRA);

o  customer satisfaction;

o  employee perspectives;

o 	the effectiveness, productivity, and performance quality of the
employees for whom the senior executive is responsible; and

o 	equal employment opportunity and diversity and complying with merit
systems principles.

In addition, the responses of the customers, coworkers, and employees
through the automated performance feedback process are to be considered in
determining the senior executive's performance rating.

Senior executives must receive a performance rating of "successful" to be
eligible for a bonus. Bonus recommendations are to be based on the senior
executive's demonstrated results and accomplishments toward the
department's strategic goals and organizational priorities.
Accomplishments should demonstrate how Education's achievements could not
have been possible without the senior executive's leadership and
contribution.

HHS

Defining SES Performance HHS required its senior executives to set
measurable, specific performance

Expectations	expectations in their fiscal year 2003 individual performance
plans (or performance contracts) that align with HHS's strategic goals,
the "One-HHS" management and program objectives, and their operating
divisions' annual performance goals. According to agency officials, senior
executives are to choose the One-HHS objectives and strategic and annual
performance goals that relate to their job responsibilities, and tailor
their

Appendix III Selected Elements of Education's, HHS's, and NASA's SES
Performance Management Systems

individual performance expectations to reflect these responsibilities in
their performance plans.

The One-HHS objectives, which reflect the program and management
priorities of the Secretary, include the following.

Management objectives: The purpose of the objectives is to better
integrate HHS management functions to ensure coordinated, seamless, and
results-oriented management across all operating and staff divisions of
the department.

1. Implement results-oriented management.

2. Implement strategic human capital management.

3. Improve grants management operation and oversight.

4. Complete the fiscal year 2003 competitive sourcing program.

5. Improve information technology management.

6. Administrative efficiencies.

7. Continue implementation of unified financial management system.

8. Consolidate management functions.

9. Achieve efficiencies through HHS-wide procurements.

10. Conduct program evaluations and implement corrective strategies for
any deficiencies identified.

Program objectives: The purpose of the objectives is to enhance the health
and well-being of Americans by providing for effective health and human
services and by fostering strong, sustained advances in the sciences
underlying medicine, public health, and social services.

1. Increase access to health care (Closing the Gaps in Health Care).

2. Expand consumer choices in health care and human services.

Appendix III Selected Elements of Education's, HHS's, and NASA's SES Performance
                               Management Systems

3.	Emphasize preventive health measures (Preventing Disease and Illness).

4.	Prepare for and effectively respond to bioterrorism and other public
health emergencies (Protecting Our Homeland).

5. Improve health outcomes (Preventing Disease and Illness).

6. Improve the quality of health care (21st Century Health Care).

7. Advance science and medical research (Improving Health Science).

8.	Improve the well-being and safety of families and individuals,
especially vulnerable populations (Leaving No Child Behind).

9. Strengthen American families (Working Toward Independence).

10. Reduce regulatory burden on providers, patients, and consumers of
HHS's services.

In addition to the annual performance goals, operating divisions may have
their senior executives include specific individual performance
expectations in their performance plans. According to an agency official,
the senior executives in FDA have set expectations in their plans that are
relevant to the work in their centers. For example, the senior executives
who work on issues related to mad cow disease in the Center for Veterinary
Medicine have included goals related to this type of work in their
individual performance plans.

Appraising Performance	HHS sets general guidance for operating divisions
to follow when appraising senior executive performance and recommending
senior executives for bonuses and other performance awards, such as the
Presidential Rank Awards. Overall, a senior executive's performance is to
be appraised at least annually based on a comparison of actual performance
with expectations in the individual performance plan. The operating
divisions are to appraise senior executive performance taking into account
such factors as

o  measurable results achieved in accordance with the goals of GPRA;

o  customer satisfaction;

Appendix III Selected Elements of Education's, HHS's, and NASA's SES Performance
                               Management Systems

o  employee perspectives;

o 	the effectiveness, productivity, and performance quality of the
employees for whom the executive is responsible; and

o 	meeting affirmative action, equal employment opportunity, and diversity
goals and complying with the merit systems principles.

In recommending senior executives for bonuses, operating divisions are to
consider each senior executive's performance, including the rating and the
extent of the executive's contributions to meeting organizational goals.
Senior executives who receive ratings of "fully successful" are eligible
to be considered for bonuses. For fiscal year 2003, bonuses generally were
to be recommended for no more than one-third of the operating division's
senior executives and awarded to only the exceptional performers.
Operating divisions were to consider nominating only one or two of their
very highest contributors for the governmentwide Presidential Rank Awards.
The greatest consideration for bonuses and Presidential Rank Awards was to
be given to executives in frontline management positions, with direct
responsibility for HHS's programs.

NASA

Defining SES Performance Expectations

NASA requires its senior executives to include seven critical elements,
which reflect the Administrator's priorities and NASA's core values of
safety, people, excellence, and integrity, in their individual performance
plans for the 2004 performance appraisal cycle (July 2003-June 2004).
Senior executives may modify the related performance requirements by
making them more specific to their jobs. These seven critical elements and
the related performance requirements are as follows.

o 	The President's Management Agenda: Understands the principles of the
President's Management Agenda and actively applies them; assures maximum
organizational efficiency, is customer focused, and incorporates
presidential priorities in budget and performance plans; capitalizes on
opportunities to integrate human capital issues in planning and
performance and expand electronic government and competitive sourcing; and
pursues other opportunities to reduce costs and improve service to
customers.

Appendix III Selected Elements of Education's, HHS's, and NASA's SES
Performance Management Systems

o 	Performance requirement: Applicable provisions of the agency human
capital plan are implemented; financial reports are timely and accurate;
clear measurable programmatic goals and outcomes are linked to the agency
strategic plan and the GPRA performance plan; and human capital,
e-government, and competitive sourcing goals are achieved.

o 	Health of NASA: Actions contribute to safe and successful mission
accomplishment and/or strengthen infrastructure of support functions;
increases efficient and effective management of the agency; facilitates
knowledge sharing within and between programs and projects; and displays
unquestioned personal integrity and commitment to safety.

o 	Performance requirement: Demonstrates that safety is the organization's
number one value; actively participates in safety and health activities,
supports the zero lost-time injury goals, and takes action to improve
workforce health and safety; meets or exceeds cost and schedule milestones
and develops creative mechanisms and/or capitalizes on opportunities to
facilitate knowledge sharing; and achieves maximum organizational
efficiency through effective resource utilization and management.

o 	Equal opportunity (EO) and diversity: Demonstrates a commitment to EO
and diversity by proactively implementing programs that positively impact
the workplace and NASA's external stakeholders and through voluntary
compliance with EO laws, regulations, policies, and practices; this
includes such actions as ensuring EO in hiring by providing, if needed,
reasonable accommodation(s) to an otherwise qualified individual with a
disability or ensuring EO without regard to race, color, national origin,
sex, sexual orientation, or religion in all personnel decisions and in the
award of grants or other federal funds to stakeholder recipients.

o 	Performance requirement: Actively supports EO/diversity efforts;
consistently follows applicable EO laws, regulations, Executive Orders,
and administration and NASA policies, and the principles thereof, in
decision making with regard to employment actions and the award of federal
grants and funds; cooperates with and provides a timely and complete
response to NASA's Discrimination Complaints Division, the U.S. Equal
Employment Opportunity Commission, and the courts during the
investigation, resolution, and/or litigation of

Appendix III Selected Elements of Education's, HHS's, and NASA's SES
Performance Management Systems

allegations of illegal discrimination under applicable EO laws and
regulations.

o 	Collaboration: Integrates One-NASA approach to problem solving,
program/project management, and decision making; leads by example by
reaching out to other organizations and NASA centers to collaborate on
work products; seeks input and expertise from a broad spectrum; and
demonstrates possession of organizational and interpersonal skills.

o 	Performance requirement: Provides the appropriate level of highquality
support to peers and other organizations to enable the achievement of the
NASA mission; results demonstrate support of One-NASA and that stakeholder
and customer issues were taken into account.

o 	Professional development: Has a breadth of experience in different
organizations, agencies, functional areas, and/or geographic locations;
demonstrates continual learning in functional and leadership areas, for
example, through advanced education/training or participating in seminars;
encourages and supports development and training of assigned staff; and
where feasible, seeks, accepts, and encourages opportunities for
developmental assignments in other functional areas and elsewhere in NASA,
with a focus on broadening agencywide perspective.

o 	Performance requirement: Participates in training/learning experiences
appropriate to position responsibilities and to broaden agencywide
perspective and actively plans for and supports the participation of
subordinate staff in training and development activities.

o 	Meets program objectives: Meets and advances established agency program
objectives and achieves high-quality results; demonstrates the ability to
follow through on commitments; and individual fits into longterm human
capital strategy and could be expected to make future contributions at a
higher level or in a different capacity at the same level.

o 	Performance requirement: Meets appropriate GPRA/NASA strategic plan
goals and objectives; customers recognize results for their highquality
and responsiveness to requirements/agreements.

Appendix III Selected Elements of Education's, HHS's, and NASA's SES Performance
                               Management Systems

o 	Implements a fair and equitable performance-based system within
organizational component (applicable only for supervisory positions):
Implements/utilizes a fair, equitable, and merit/performance-based
process/system for the evaluation of individuals for bonuses, promotions,
career advancements, and general recognition.

o 	Performance requirement: System reflects the key leadership, teamwork,
and professional excellence on which decisions are based; results have
credibility with supervisors, subordinates, and peers.

Appraising Performance	NASA provides guidance for the centers and offices
to follow in appraising senior executive performance and recommending
executives for bonuses or other performance awards, such as Presidential
Rank Awards or incentive awards. The senior executive's performance
appraisal is to focus on results toward the performance requirements
specified in the individual performance plan, specifically the
achievements that address the agency's goals rather than the quality of
effort expended. In addition, senior executive appraisals are to be based
on individual and organizational performance, taking into account such
factors as

o  results achieved in accordance with the goals of GPRA;

o  the effectiveness, productivity, and performance of assigned employees;

o  meeting safety and diversity goals;

o  complying with merit system principles;

o 	customer perspective focusing on customer needs, expectations, and
satisfaction;

o 	employee perspective focusing on employee needs, such as training,
internal processes, and tools to successfully and efficiently accomplish
their tasks; and

o 	business perspective focusing on outcomes and the social/political
impacts that define the role of the agency and the business processes
needed for organizational efficiency and effectiveness.

Appendix III Selected Elements of Education's, HHS's, and NASA's SES
Performance Management Systems

In considering customer, employee, and other stakeholder perspectives for
senior executive appraisals, rating officials may use formal mechanisms,
such as surveys, or less formal mechanisms, such as unsolicited customer
and employee feedback, and analysis of personnel data, such as turnover
rates, diversity reports, grievances, and workforce awards and
recognition.

All senior executives with annual summary ratings of "fully successful" or
higher are eligible to be considered for bonuses. Bonus recommendations
are to be based solely on exceptional performance as specified and
documented in the senior executive's performance plan.

                                  Appendix IV

                   Comments from the Department of Education

Appendix IV
Comments from the Department of
Education

Appendix IV
Comments from the Department of
Education

Appendix V

Comments from the Department of Health and Human Services

Appendix VI

Comments from the National Aeronautics and Space Administration

Appendix VI
Comments from the National Aeronautics
and Space Administration

Appendix VI
Comments from the National Aeronautics
and Space Administration

Appendix VII

                     GAO Contacts and Staff Acknowledgments

GAO Contacts	J. Christopher Mihm, (202) 512-6806 or [email protected] Lisa
Shames, (202) 512-6806 or [email protected]

Acknowledgments	In addition to the individuals named above, Janice Lichty
Latimer, Erik Hallgren, Ronald La Due Lake, Mark Ramage, Nyree M. Ryder,
and Jerry Sandau made key contributions to this report.

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