Report backs overhaul of executive pay, evaluation systems

The current pay and benefits system for senior executives does not properly compensate the government's top career leaders for outstanding performance, concludes a new report from the National Academy of Public Administration.

"Compensation and benefit incentives are not structured properly to reward executives for the risks they are expected to take and the performance they are expected to achieve," said the NAPA report, which the Office of Personnel Management requested.

Under federal law, salaries for the SES are capped at the third-highest pay level on the Executive Schedule, the five-level schedule in which salaries are set for members of Congress and executive branch political appointees. About 60 percent of the SES is paid at the current cap--$142,500.

Senior executives are also eligible to receive bonuses, but according to the NAPA report, the record on such incentives is "spotty as to their impact on SES members and aspirants." SES members and their supervisors are skeptical about whether the most deserving employees are recognized and whether "payouts serve as real incentives to further improve individual and organizational performance," the report said.

Though senior executives cite the level of compensation they get as an important factor in job satisfaction, they also seek respect from their peers, management support and the ear of their agency's leadership, according to the report. But pay issues are more "intractable" than these other factors, which are "well within the government's ability to solve through improved systems for recruitment, retention, continuous learning and performance management and accountability," the report said.

The report also said that too many executives receive high performance ratings, diminishing the job evaluation process and creating an environment where bonuses are more of an expectation than an incentive. According to OPM data for fiscal 2001, about 84 percent of senior executives received the highest rating in the three-, four- or five-level rating system at their agencies. At agencies with three-level rating systems, 99.5 percent of executives were awarded the top rating.

Though the NAPA report acknowledged that poor performance within the SES was rare, it recommended that the management review process make better distinctions in evaluating individual job performance.

The legislation passed last year to create the Homeland Security Department raised the limit on total compensation for senior executives, so that agencies wouldn't have to spread bonuses for top performers out over more than one year. But the law requires agencies to replace the existing process for certifying executives with a new system under which OPM and the Office of Management and Budget will certify agencies' performance appraisal systems for senior executives every two years.

In January, the Bush administration proposed to create a single SES pay category that, if in place today, would allow base salaries ranging from about $102,000 to $154,700. Political appointees could set executives' salaries at any amount within that range.

NAPA's report also included recommendations for increasing diversity within the SES ranks, attracting more candidates with strong leadership abilities rather than technical expertise, and implementing a governmentwide succession planning and leadership development program. If OPM decides to adopt the report's recommendations, NAPA will publish a second report focusing on how to implement them.

"The president is prepared to address the concerns NAPA raises, as he already has with his recent budget proposal to deal with executive pay compression and introduce more performance sensitivity into the way senior executives are paid," said OPM Director Kay Coles James.

OPM will be announcing initiatives soon that address areas the report explored, including strategic succession planning, leadership development, continuous learning and increasing diversity within the SES, according to an agency statement.

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