Efforts to improve government management typically focus on proven practices in the private sector. To be sure, there are differences between the business and the government executive -- compensation is the most obvious -- but both are the front line for planning and management of their organizations. Both are accountable for the performance of the operations they lead. Federal executives have less discretion to redirect staff and budgeted funds, but they are accountable for delivering expected results.
The foundation for planning, managing and evaluating executive performance in business has not changed in decades. The core practice is based on individual performance goals that align with and contribute to organizational goals. I managed the executive pay and performance system in a large conglomerate in the 1970s -- I was a tenderfoot -- and again for a hospital management company a decade ago. The differences were minor. A subtle change is the recognition that goal management should be responsive to events throughout the year.
An Amazon search on “executive performance management” produced 1,097 books. When I added the phrase “in government” the list dwindled to 58, and the titles suggest the focus is on organizational, not executive, performance. No one apparently has focused on the latter.
However, the recently revised federal regulations on managing senior executive performance suggest the purpose is the same in both sectors. That suggests it is fully appropriate to compare the revised approach for SESers with the best thinking from the private sector.
The recently released book Leadership Capital Index by David Ulrich, my favorite management guru, provides a valuable framework for looking at the revised SES process. For Ulrich, the way companies manage performance should be important to investors. For the same reasons, government performance management should be important to the public. Every federal leader should read at least the chapter titled “Performance Accountability Process.”
One problem that has nothing to do with Ulrich’s book is that after reading the regs twice, it is still not clear what performance plans will look like. (Whatever happened to President Clinton’s “No Gobbledygook” award?)
This may sound facetious, but it leads to an important point: One of the very real differences when compared with the private sector is that many elected and appointed officials have not had reasons to develop the skills important to planning performance and defining goals. Their interest and expertise is public policy, not day-to-day management. They have not sat through management courses common at the corporate leadership level.
Agencies should consider defining a new role for coaches to facilitate and strengthen the process. Having access to someone with expertise would benefit everyone. Coaches could also enhance the consistency of the goal setting. It would also be improved by another trend from industry, calibration committees to review performance goals and year-end ratings
In the business world individual performance goals are universal, extending down into the professional ranks. When employees reach the executive level they have lived with the process for years. At each level supervisors rely on goals to manage their people. At each level they know they are accountable and will be rewarded for achieving their goals.
It’s not simply that goal-setting skills are important, however; it’s the process of goal-based management. In well-managed companies managers have regular meetings, at least monthly, in which they discuss progress, developments, etc. The process is ongoing and future-oriented, focusing on progress and steps to succeed.
Ulrich refers to this as the “performance accountability process.” It starts with top management’s commitment. Everyone has to understand how important it is.
He argues that the effectiveness of the process has little to do with forms or specific policies; it’s “more the ability to have a candid, thorough, positive and specific performance conversation with employees.”
The conversations should produce “clear standards of what makes good performance,” and the standards should “differentiate high- from low-performing employees,” he writes. The new regs do that. However, the requirement that each of the five performance ratings be defined will make it difficult to modify standards as the year unfolds. It’s unnecessarily bureaucratic. The best practice today is three levels, delimited by “outstanding,” “satisfactory” and “unacceptable.”
There has to be agreement on what’s expected and the “standards linked to consequences,” Ulrich says. That is a key to accountability. There has to be an expectation of consequences.
Ulrich notes, “Differentiated performance requires differentiated consequences. Consequences can be positive or negative, financial and nonfinancial. Positive financial results have the benefit of being precise, measurable and comparable across positions and people.”
A prominent difference in business is that companies rely on “reward systems that drive behavior,” he says. The prospect of rewards is central to performance management in business. Ulrich cites a study that concluded only 18 percent of rewards are tied to salary increases. The rewards “that drive behavior,” he notes, are cash incentives and stock.
Another difference is that companies rely on outside board members to review and finalize executive rewards. Investors would not trust insiders. That’s true in hospitals as well.
Ulrich refers to a “rewards diagnostic” developed by another management expert, Steve Kerr. It asks whether the response to four innovative actions -- innovation is always necessary for improved performance -- is likely to be positive, negative or unpredictable. The individual actions are:
- Coming up with or trying new ideas
- Exceeding authority to get job done
- Presenting the boss with an unpopular view
- Violating the chain of command, if necessary
Negative answers would suggest innovation is discouraged.
The accountability process “begins and ends with positive accountable conversations,” Ulrich argues, adding that investors (think “the public”) should monitor how “well leaders have positive conversations to set expectations, link behavior and outcomes, and manage rewards.”
It’s unfortunate his book was not published earlier. It’s possible his expertise would have proved valuable in redefining the regs on managing senior executive performance.