Executive performance agreements said to improve agency results

Performance agreements between three agencies and their senior executives are leading to improved business results, according to a new General Accounting Office report.

In the report, "Emerging Benefits from Selected Agencies' Use of Performance Agreements" (GAO-01-115), GAO studied three agencies-the Education Department's Office of Student Financial Assistance (SFA), the Veterans Health Administration (VHA) and the Transportation Department-and found that performance agreements for senior executive were an important tool in improving overall agency performance.

Performance agreements set out specific goals for senior executives--both career officials and political appointees--that are tied to business results achieved by their agencies. Often, executive compensation is linked to meeting the goals.

SFA became a performance-based operation in 1998, and is required to use performance agreements. VHA and DOT have been using such agreements with top executives since the mid-1990s.

Although each agency in the study developed its own performance agreements based on its individual structures, GAO identified five common benefits of accountability measures:

• Strengthening the link between an agency's daily operations and its long-term goals. GAO found that holding executives accountable for reaching specific goals created a snowball effect that benefited the agency overall. For example, a program director within the FAA is responsible for developing a software system that will alert air traffic controllers when an aircraft falls below a certain altitude. That will help the FAA reduce the commercial air carrier fatal accident rate and ultimately help DOT fulfill its safety mission.
• Fostering collaboration among executives. Performance agreements force managers to reach across organizational boundaries to work together to accomplish strategic goals. The performance agreement of the VHA's mental health care director, for example, requires the director to work with officials at VA medical centers on mental health care policy.
• Encouraging discussions on how to improve overall agency performance. Bimonthly meetings between DOT's deputy secretary and managers to discuss individual goals led to the development of strategies that helped DOT agencies accomplish their missions. For example, the 1999 performance agreement for the head of the National Highway and Traffic Safety Administration (NHTSA) included a goal to boost nationwide seat belt use to 90 percent by 2005. To achieve that goal, NHTSA is expanding its Buckle Up America Campaign and will work more extensively with states to strengthen seat belt programs and enforce seat belt laws.
• Providing a results-oriented basis for managers' evaluations. Progress toward meeting goals plays a large role in determining senior managers' bonuses, according to the agencies studied. SFA, for example, plans to evaluate executives' performance based on how well senior managers meet the goals in their performance agreements, as well as the agency's overall performance in customer and employee satisfaction surveys.
• Maintaining focus on program goals during leadership transitions. DOT and VHA said that since annual performance agreements outline top priorities for executives, it is easier for new leaders to focus on the most important issues facing the agency.

In October, the Office of Personnel Management published new accountability measures for members of the Senior Executive Service, designed to strengthen the connection between performance management and agencies' strategic planning. Agencies will be required to weigh organizational results, customer satisfaction and employee perspectives in senior executive evaluations.

OPM held a seminar in Washington Tuesday aimed at helping senior executives understand the purpose of these accountability measures and the benefits of tying performance to results. J. Christopher Mihm, director of strategic issues at GAO, said performance measures are intended to hold executives accountable for understanding how achieving their own goals affects their agency's overall results.

"The point is not, can you control the outcome, but rather, did you use the tools at your disposal to influence the outcome?" Mihm said.

Earlier this month, GAO published a survey, "Managing For Results: Federal Managers' View Show Need for Ensuring Top Leadership Skills" (GAO-01-127), that found that many federal managers aren't using the performance information required under the Government Performance and Results Act to improve agency results.