Excellence in Government

Recent Office of Personnel Management (OPM) regulatory changes that implement legislation enacted in 2004 require federal agencies to provide managers with better training throughout the supervisory phase of their careers.  The frequently stated purpose of this new focus on management training effectiveness is to strengthen each agency’s mission-accomplishment capabilities by closing what are commonly referred to as workforce talent or skills gaps.

The frequent use of the words “talent” and “skills” interchangeably indicates a widespread and potentially problematic blurring of the fundamental difference between these two different types of human capacities.  This misconception—which appears to exist among well-intentioned federal law makers and conscientious OPM regulators alike—could produce unrealistic and unrealized expectations for the legislatively mandated mission-integration of federal agencies’ management training and succession planning programs.

Talent, or what human performance researchers commonly refer to as “potential,” is not nearly as susceptible to enhancement through training as are knowledge and skills.  That is because most of the knowledge and skills needed to manage employees effectively are capacities which lie at or near the surface of an individual’s conscious awareness and can therefore be cultivated by targeted instruction and guidance.

In contrast, human performance research has shown that much of the talent or potential that ultimately distinguishes outstanding from average “people managers” is embodied in capacities which either reside at or are absent from the deeper levels of human consciousness and are therefore very difficult to create or increase through training or coaching.

For example, well-designed training programs can introduce newly minted supervisors and reintroduce experienced supervisors to those factual and how-to items—actions, options, strategies, techniques and procedures—which they need to know and use when:

1. conducting employee performance appraisals
2. dealing with unacceptable performance and poor performers
3. mentoring employees to improve their performance and productivity

But even the most thoughtfully conceived training cannot foster in current or future managers the underlying motivation needed to truly care about an employee’s professional development, or the underlying self-concept needed to actively embrace accountability for grooming employees to replace current managers.

As agencies begin to monitor their training efforts more strictly in compliance with the recent OPM regulation, the fundamental distinction between skills and talent has at least three significant implications:

•  First, since training often builds management skills but seldom increases management talent or potential, federal agencies will do well to remember the “make-or-buy” challenge of workforce development strategy and focus their hiring and promotions on potential while concentrating their training and coaching on skills (and knowledge).
• Second, agencies should use the results of relevant, valid and reliable job competency research to identify the specific management competencies associated with outstanding performance in each of their supervisory management jobs or job series.  (Management competencies are the personal characteristics that research has shown to drive outstanding performance in a particular organizational management job, role or function).
• Third, agencies should review published management competency inventories and dictionaries to determine which of their supervisory job competencies are surface-level or intermediate-level capacities for which incumbents and candidates can and should be trained and coached, and which of their supervisory job competencies are deeper-level or underlying capacities for which current and future supervisors can and should be selected and hired or promoted.

Agency heads and their human capital management teams must remain mindful of these important selection-versus-development guidelines and apply them judiciously if they expect to establish management training and succession programs that are in constructive compliance with the statutory provisions and implementing regulations of the 2004 Federal Workforce Flexibility Act.

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Why Manage Executives’ Perceptions? How senior executives perceive the results produced by their agency’s pay and performance appraisal systems has a critical bearing on their job satisfaction.  It also affects how they perceive their agency’s senior leadership, performance culture and talent management.  Federal agencies should therefore consider taking measures beyond those required by the Office of Personnel Management (OPM) to ensure that senior executives perceive the results produced by their pay and performance appraisal systems as fair and equitable.

Origin of SES Performance-Based Pay. Agencies have been shifting their Senior Executive Service (SES) members into OPM-certified pay and performance appraisal systems since July 2004.  That is when, as a precursor to the implementation of a new SES pay system, OPM first issued regulations establishing certification criteria for executive performance appraisal systems.

The new SES pay system required that OPM certify agencies’ executive performance appraisal systems, with OMB concurrence.  It allowed agencies with OPM-certified appraisal systems to pay their highest-performing SES members higher salaries and higher aggregate pay (salary plus cash performance award).  Today these performance-based pay systems cover virtually all 7,500 SES members in the federal executive branch’s civilian workforce.

OPM Criteria for Certifying Executive Performance Appraisal Systems. The OPM certification criteria represent several of the characteristics of effective performance appraisal systems.  The criteria require that a senior executive’s performance expectations:

• align with agency goals;
• hold executives accountable for achieving measurable results for at least 60% of their rating;
• include appropriate indicators of the use of employee and customer or stakeholder feedback and examples of leadership behavior that contributes to outstanding performance; and
• hold executives accountable for managing the performance of their subordinates and aligning subordinates’ performance plans with organizational goals.
• The OPM certification criteria also require agencies to:
• ensure that executives are involved in the development of their performance plans;
• train executives on the features of their pay and performance systems;
• inform executives of the ratings distributions and the pay adjustments and performance awards granted;
• make and communicate the results of appropriate organizational performance assessments and ensure that they are incorporated into the appraisal, pay and awards processes and are reflected in the ratings distribution; and
• ensure that final decisions about performance ratings, pay adjustments, rates of pay and performance awards are based on meaningful performance and pay distinctions.

Pay-for-Performance Perception Issues. OPM guidance memos to agencies make it clear that an important goal of these rigorous certification criteria is to prevent or dispel perceptions of quotas or “forced” ratings distributions skewed toward the lower rating levels.  Yet, despite the stringent OPM certification criteria, SES pay-for-performance systems may very well be at risk for perception issues of a different kind.

New data released by OPM show the agencies scoring highest on linking senior executive pay increases with performance ratings were not necessarily the ones that scored high on OMB’s assessments of program performance.  The OPM data also show the percentages of SES members receiving the highest possible performance ratings, the percentages receiving performance awards, and the average amounts of their performance awards all growing significantly since fiscal 2005.

These data could foster perceptions among executives already dissatisfied with some of their agency’s pay system results that agency rating distributions are gradually being “forced” or skewed toward the higher rating levels, albeit not to their personal benefit, and that some agencies’ organizational performance may not be receiving adequate consideration when the performance of their senior executives is assessed.

Why Performance-Based Pay Systems are Imperfect. Performance management systems throughout the federal government have been upgraded and judged against increasingly stringent standards ever since the Civil Service Reform Act of 1978 required agencies to use appraisal results as a basis for pay adjustments, performance awards and other personnel actions.  Despite these upgrades, more than three decades of federal agency performance management experience have shown that no appraisal system, regardless of how thoughtfully designed and diligently implemented, can operate flawlessly or in a manner even remotely resembling scientific precision.

Appraisal systems are conceived and operated by human beings and are therefore subject to human error.  This is particularly true of appraisal systems developed to assess the merit of performance at the senior executive level, where the complexity of the job content and job context requires a certain amount of qualitative and therefore disputable judgments about the relative value of efforts and outcomes.

How OPM Has Helped to Address Perception Issues. The OPM certification process has helped to ensure a degree of uniformity and standardization across the agencies’ SES pay and performance appraisal systems.  OPM’s dissemination of sample performance plans and a performance appraisal assessment tool built around the system certification criteria have helped executives, reviewers and appraisal system administrators to perform their respective roles more effectively.

What Can Agencies Do about Executives’ Perceptions? That said, something more may be required from the agencies themselves to manage executive perceptions of the results produced by their OPM-certified pay and performance appraisal systems.

For example,  we believe agencies should consider conducting more deeply probing assessments of their own appraisal systems and performance plans to determine not only whether their systems have sufficient rigor but also the extent to which their executives perceive the link between their pay and performance to be demonstrably stronger than the link between their pay and any other factor.

Build More “Best Practices” into Appraisal System Assessments. Toward this end, agencies should consider basing their appraisal system self-assessments on an expanded version of the OPM performance appraisal assessment tool that includes, at a minimum, the following well-known but often overlooked “best practices” of effective performance appraisal systems:

1. Leadership. Top management demonstrates clearly through words and actions that it strongly and unequivocally supports the system and is firmly committed its effectiveness.
2. Customization. The system is tailored (to the extent possible within OPM guidelines) to meet the unique performance management challenges and requirements of the agency.
3. Consequences. The system’s results are not merely recorded and placed in personnel folders, but are used and are perceived to be used to recognize top performers and to address performance problems.
4. Training. Raters are well-trained in the concept, philosophy and actual mechanics of the system—including in this case use of an expanded appraisal system assessment tool—as well as in how the system aligns with the agency’s goals and strategies and helps senior managers.
5. Feedback. Raters are skilled in conducting progress review and performance appraisal interviews, and they conduct and document both interviews in a timely manner.
6. Involvement. Users participate in the development and improvement of the system, and in the development of their performance plans.
7. Objectivity. Appraisals are directly linked to the job description of the executive whose performance is being evaluated, and the performance rating standards are as clear, concrete, objective and observable as possible.
8. Consistency. The system’s procedures and administration are standardized and uniform in their application.
9. Relevance. Appraisals are free of bias and are not influenced by race, sex, age, length of service or other irrelevant factors.
10. Transparency. The executive whose performance is being appraised has a right to know in advance of the performance period the identity of the person that will do the evaluation and the standards against which the executive’s performance will be evaluated.
11. Decentralization. To the greatest extent possible, each executive’s performance appraisal is done by a supervisory executive who is situated close to where the executive’s work is performed.
12. Documentation. Raters substantiate the performance ratings with reasons and examples that are carefully documented in writing and shared with the executive whose performance is being appraised.
13. Due Process. The system provides for a credible review of ratings by upper level managers, and for a meaningful appeals procedure to help ensure fairness.
14. Efficiency. The system is easy and economical to operate and administer; does not impose an unreasonable financial burden on the agency; and can be used by executives and system administrators without undue effort.
15. Oversight. The system has well-developed and well-implemented plans for monitoring and evaluating the appraisal process and outcomes to ensure that it is operating as planned and to identify areas for improvement in its design and administration.

Go Beyond Appraisal System “Best Practices” Whenever Necessary. Many of the items on this “best practices” check-list require a lot more than a cursory review.

For example, a particular agency’s appraisal system may not be perceived by senior executives as playing an appropriate role in their pay adjustments and performance awards (consequences) unless something more than the ratings distributions and average payouts are communicated to the executives covered by the system.  It may be desirable from time to time to disseminate information on the distributions and payouts by seniority, headquarters versus field, program area, length of service, or other categories, with explanations of disparate outcomes, depending on what misperceptions or misinformation the agency finds it necessary to dispel or correct.

For some senior executive positions, rating standards may not be perceived by the incumbents as clear, concrete, measurable and observable (objectivity) unless the agency takes the extra step of developing and disseminating rating scales on which the various rating levels are illustrated with examples of specific behaviors or results.  Training in the use of the behavior or results anchored rating scales might be needed to ensure their clarity and utilization.

Bottom Line: When it comes to managing senior executive perceptions of performance-based pay, the stakes—in terms of recruiting, retaining and motivating an outstanding executive workforce—are simply too high for agencies to rely solely on OPM’s compliance oriented implementing regulations and guidance.  Agencies should consider taking whatever additional actions are needed to continuously refine, improve and legitimize their SES performance appraisal systems.

Click here for more information on effective leadership development.

Research on leadership competencies has shown that, for complex executive roles, the critical indicators of superior performance are behavioral rather than cognitive in nature.  Simply put, this means that the particular ways in which organizational leaders actively use their knowledge or skills in given work situations is a better predictor of their ultimate  leadership  effectiveness than the breadth or depth of the knowledge and skills they possess.

Click here for more information on effective leadership development.