Agencies await new standards on executive performance ratings

Legislation passed last year to lift the cap on bonuses for federal executives cannot be implemented until oversight agencies finalize a set of standards to ensure that only the best are singled out for awards-a process that will stretch at least into next month, according to the Office of Personnel Management.

A Jan. 24 memo made public by OPM this week reminded agencies that they cannot take advantage of the higher annual compensation limits for senior executives allowed by the 2002 Homeland Security Act until OPM and the Office of Management and Budget certify that their performance appraisal systems effectively distinguish average from outstanding executives.

But OPM and OMB have yet to release the standards that agencies will have to meet to be certified. The guidelines are currently in draft form, but have not been presented to OPM and OMB officials for review, according to an OPM spokesman. Agencies can expect to see them next month at the earliest, he said.

The homeland security legislation, passed in late November, raises the annual compensation limit for senior executives from the pay rate for Cabinet secretaries to the level for the vice president. Because of the current limit, many agencies have to pay executive bonuses over two years.

The law requires agencies to replace the existing process for certifying executives with a new process under which OPM and OMB will certify agencies' performance appraisal systems every two years. OPM and OMB are allowed to revoke certification for agencies failing to meet the standards at any time.

The current certification process dates back to 1989, and certifies individual executives as members of the Senior Executive Service every three years, based on their performance ratings. Over the past 12 years, only a handful of executives have lost their certification.

The higher limits on senior executive pay essentially mean that executives would be able to receive large bonuses-such as Presidential Rank Awards, which can amount to more than a third of an executive's annual salary-in one year, rather than having to have some of the money held over to a second year. But this may not be a big enough incentive to convince agencies to "jump through the new certification hoops," said Carol Bonosaro, president of the Senior Executives Association.

Many agencies' performance appraisal systems have come under fire recently because Bush administration officials say they do not provide incentives for workers to excel at their jobs. OPM Director Kay Coles James has urged agency leaders to make more "meaningful distinctions between those with a record of truly outstanding performance and those who did what was expected." Nearly 84 percent of federal executives received the highest performance ratings in fiscal year 2001, according to a letter James sent to agency chiefs in September.

Bonosaro expressed concern that the certification standards might force agencies to demonstrate they are making distinctions among employees by giving some employees lower ratings than they deserve.

But Carl DeMaio, president of the Performance Institute, an Arlington, Va.-based think tank, said he thinks the new certification standards will hold agencies accountable for a process they should have started on their own long ago. He said that many of the managers who have responded to Performance Institute surveys indicate they want a better way to ensure that awards are commensurate with performance.

DeMaio said he does not anticipate a lot of resistance to the new certification process, but acknowledged that more agencies would "come to the table" if OPM found ways to "sweeten the deal" by making more money available for bonuses.