Report touts progress linking execs’ pay, performance

Agencies have improved since 2004 in linking senior executives' salaries and awards more closely to job performance, according to a new report by the Office of Personnel Management.

The report highlights fiscal 2006 rating, pay and awards data for Senior Executive Service employees working under pay-for-performance systems in more than 25 agencies.

In a memo to heads of federal agencies, OPM Director Linda Springer said agencies are linking executive performance with organizational goals and results. Training also has become a major factor, "ensuring that executives understand how their pay for performance systems operate and reporting to executives the results of rating, pay and awards determinations," she said.

Agencies reported data on 7,137 senior executives for fiscal 2006. They received an average salary adjustment of 3.1 percent, down from 3.8 percent in fiscal 2005, the report found. The average rate of basic pay rose from $151,266 in fiscal 2005 to $154,960 in fiscal 2006.

The percentage of career SES employees receiving performance-based awards in fiscal 2006 was 67.2 percent, compared to 66.5 percent the previous year, the report found. The average payout for awards was $13,292 last year, with NASA offering the highest average award -- $17,139. The Nuclear Regulatory Commission and the Veterans Administration followed NASA for top award payouts, with averages of more than $16,600.

Meanwhile, 44.7 percent of all SES employees received top ratings last year, compared to 44.5 percent in fiscal 2005. For those who earned top ratings under a five-level system, the average salary adjustment was 3.7 percent of basic pay, and the average performance award was 9.3 percent, averaging a total performance-based payout of 13 percent. Career SES employees receiving minimally successful or unacceptable ratings received neither a salary adjustment nor an award.

Carol Bonosaro, president of the Senior Executives Association, said the report indicates a large gap between performance-based salary adjustments and awards. "Basically, what the system appears to have done is, in order to receive a cost-of-living adjustment, you need to exceed expectations at least or be outstanding at best," she said. "The bottom line is that the performance awards are critical in a system where the pay adjustments are not terribly substantial."

Because performance-based awards represent significantly larger monetary increases than the average salary adjustment, SEA has been lobbying to include bonuses and awards in executives' "high three" average salary, which is used to calculate retirement benefits.

Bonosaro also said the fact that 44.7 percent of senior executives were rated as outstanding indicates that achieving such a rating is difficult. She said that because the most experienced and brightest employees are in the SES, it seems feasible that many would achieve top ratings.

"You wouldn't expect a basketball team to have a bell curve of height," Bonosaro said. "Don't expect a bell curve of achievement among this group."