Agencies lower executives’ ratings, limit bonuses

Some federal agencies are getting tougher on senior executives, issuing lower performance ratings and giving out fewer bonuses, according to a new report. More agencies may start following suit.

From 2000 to 2001, the Internal Revenue Service, the Veterans Benefits Administration and the Federal Highway Administration reduced the percentage of bonuses they handed out to executives, the General Accounting Office said in a report issued Friday. The IRS and the VBA also issued far fewer top performance ratings to executives than most agencies did in 2001.

"Effective performance management systems provide agencies with the objective and fact-based information they need to distinguish levels of performance among senior executives and serve as a basis for bonus recommendations," GAO said in the report, "Using Balanced Expectations to Manage Senior Executive Performance" (02-966).

Across government, 82 percent of federal executives received the highest possible ratings on their performance evaluations and 52 percent received bonuses in 2001, the General Accounting Office said. Critics argue such figures show that most agencies aren't using ratings and bonuses to motivate executives to improve performance.

The Office of Personnel Management in 2000 ordered agencies to better link executive evaluations with organizational goals and use performance evaluations to make decisions about pay and bonuses. GAO studied four agencies that are ahead of the pack in following through on OPM's order.

The report suggests executives can take a financial hit when their agencies change their evaluation programs.

At the Veterans Benefits Administration, 82 percent of senior managers were recommended for bonuses or promotions in 2000, even though the agency didn't hit its goals and some offices performed better than others. The agency set up detailed performance agreements for senior executives for 2001. As a result, only 50 percent of senior executives received bonuses in 2001.

Only 31 percent of executives at the Internal Revenue Service received an outstanding rating in 2001, compared to 42 percent for 2000. The decline in executives receiving bonuses was less drastic, from 56 percent to 52 percent.

At the Federal Highway Administration, the number of executives who got bonuses went down from 49 percent in 2000 to 44 percent in 2001.

The percentage of executives who got bonuses at the Bureau of Land Management stayed roughly the same, at 47 percent. Unlike the other agencies included in the study, BLM uses a pass-fail system to evaluate executives.

GAO found that the agencies it studied are using several tactics that other agencies could adopt to improve their executive evaluation systems.

  • They provide useful data to their executives so that executives can track their individual progress against agency goals.
  • They require that their executives develop follow-up plans to improve on areas that need improvement.
  • They make meaningful distinctions among executives instead of giving every executive the highest rating or spreading bonuses evenly.
In addition, the four agencies have developed evaluation systems that rate executives on basic business results, customer satisfaction and employee opinions of their performance. That so-called "balanced scorecard" or "balanced expectations" approach has been widely adopted in the private sector to evaluate organizations' and executives' performance.

Other agencies have started implementing similar evaluation systems.

"More progress is needed in explicitly linking senior executive expectations for performance to 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," the GAO report said.

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