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SES Performance regulations

Tuesday, October 17, 2000
MEMORANDUM FOR: 
Heads Of Executive Departments And Agencies
From: 
Fedeal Register Online via GOP Access
Subject: 
SES Performance regulations

[Federal Register: October 13, 2000 (Volume 65, Number 199)]
[Rules and Regulations]              
[Page 60837-60845]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13oc00-1]                        


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                                                Federal Register
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having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
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[[Page 60837]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 430

RIN 3206-AI57


MANAGING SENIOR EXECUTIVE PERFORMANCE

AGENCY: Office of Personnel Management.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is amending its
regulations governing performance appraisal in the Senior Executive
Service (SES). The amended regulations will help agencies hold senior
executives accountable by: Reinforcing the link between performance
management and strategic planning; requiring agencies to use balanced
measures in evaluating executive performance; and giving agencies more
flexibility to tailor performance management systems to their unique
mission requirements and organizational climates.

EFFECTIVE DATES: November 13, 2000.

FOR FURTHER INFORMATION CONTACT: Anne Kirby, (202) 606-1610, or email
to SESmgmt@opm.gov.

SUPPLEMENTARY INFORMATION: OPM published a proposed rule in the Federal
Register on June 21, 2000 (65 FR 38442) to amend the regulations
governing SES performance appraisal. We received 15 written comments
during the public comment period: 7 from Federal departments and
agencies; 2 from professional organizations; and 6 from individuals. In
addition, we have discussed the proposals with a number of senior
executives and other stakeholders since publication of the proposed
rule. There was broad support for the proposed changes, especially
those that give agencies greater flexibility for tailoring their
performance management systems to their organizational and operational
needs. There was also general support for the concept of balanced
measurement, although some commenters said they need additional
information and guidance about using balanced measures. There were a
few suggested modifications to the proposals, and some commenters
proposed additional requirements. We discussed the public comments and
suggestions with a representative group of agency SES program managers.
We have included their views in our reactions to these comments and
suggestions.

Background

    The members of the Senior Executive Service (SES) are dedicated,
hard-working public servants. Individually and through the
organizations they lead, these senior executives strive to deliver
value to the American people. This results-orientation was central to
the original vision for the SES, outlined in the Civil Service Reform
Act (CSRA) of 1978. CSRA intended that SES performance management
systems:
     ``Ensure accountability for honest, economical, and
efficient Government''
     ``Assure that senior executives are accountable and
responsible for the effectiveness and productivity of employees under
them''
     ``Ensure that compensation, retention, and tenure are
contingent on executive success which is measured on the basis of
individual and organizational performance''
     ``Recognize exceptional accomplishment.''
    The Government Performance and Results Act (GPRA) of 1993 and the
National Partnership for Reinventing Government (NPR) validated this
original vision and challenged Government to shift its focus from
internal processes and outputs to results that are aligned with
customer expectations.
    In discussions with stakeholders that were triggered by OPM's 1998
Draft Framework for Improving the Senior Executive Service, executives
and others said the current regulations discourage results-oriented
performance management. They also told us that agency leaders must
drive the effort to strengthen their SES performance management
systems. Respondents to OPM's survey of the Senior Executive Service in
1999 reinforced these findings:
     Only 72% believed their performance rating represents a
fair and accurate picture of their performance;
     Only 48% felt that SES bonus determinations are based on
merit; and
     57% did not think poor performing executives are removed
from their positions.

(The survey findings are available on OPM's website (www.opm.gov/SES).)

    In response to these concerns, OPM proposed to amend the
regulations governing SES performance appraisal. The amended
regulations give agencies more flexibility to reinvigorate their SES
performance management systems--to focus on results over process. They
reinforce the agencies' responsibility to communicate performance
expectations and to use the results of the performance management
process as a basis for performance awards and other personnel
decisions. The regulations also require SES performance management
systems to balance organizational results with the needs and
perspectives of customers and employees.

Overall Approach

    Our intent was to substantially deregulate in order to give
agencies much more flexibility to tailor their systems and approaches
for managing senior executive performance to fit their unique and
changing mission and operational needs and organizational climates. We
pared many of the current regulatory requirements back to the statutory
requirements. We eliminated requirements that are unnecessarily
constraining and burdensome to agencies or are process-bound. The
changes balance the agencies' desire for maximum flexibility with the
need for a corporate approach that safeguards merit principles and
contributes to a better, more diverse, results-oriented Government. In
addition, we totally restructured the regulations to organize the
material more logically and to use plain language, as the President
directed in June 1998.
    We broadened the focus from determining annual summary ratings to
managing performance on an ongoing basis and shifted the emphasis from
process to results. The restructured regulations establish separate
sections on the key components of performance

[[Page 60838]]

management: planning and communicating, monitoring, appraising, and
rating performance and using performance results.
    As part of this expanded focus, we revised the purpose statement to
stress:
     Expecting excellence in senior executive performance;
     Holding executives accountable for results;
     Communicating regularly about goals and expectations;
     Appraising senior executive performance using measures
that balance organizational results with customer, employee, or other
perspectives; and
     Making performance the basis for pay, awards, and other
personnel decisions.

This emphasis is fundamental to the key regulatory changes.

    Most commenters supported this approach. One agency in particular
expressed appreciation for OPM's efforts to make the regulations as
open as possible, with few absolute restrictions. Four commenters
specifically mentioned support for reinforcing the links between SES
performance and agency strategic planning initiatives. Another agency
said the changes would help agencies hold senior executives
accountable.
    Two commenters questioned whether regulations are needed to
accomplish the goals of this initiative. One agency said that agencies
can align performance management systems with GPRA goals under current
regulations. A professional organization said rulemaking is not the
most appropriate vehicle for establishing guidelines for managing
performance, as this is an ever-evolving art. This organization
preferred that we use more informal methods to provide guidance to
agencies.
    It is true that many of the performance management improvements
included in these regulations can be implemented under the current
framework of law and regulation. In fact, several agencies have already
implemented innovative performance management systems which incorporate
balanced measures. However, many agencies told us that the current
regulations focus too much on process and inhibit results-oriented
performance management. They asked for more latitude to design
performance systems that better fit their organizational cultures and
operational goals. By overhauling these regulations, we hope to promote
a culture change--a culture change that views SES performance
management as a tool for driving results, instead of an irritating,
annual chore.

Key Changes in Current Requirements

    We modified system requirements to prescribe a framework for agency
systems that identifies key system components, without specifying how
these components will be implemented. Within this framework, agencies
can design performance management systems to meet their organizational
and operational needs. No commenters opposed this modification.
    We modified the minimum appraisal period. The current requirements
provide for a minimum appraisal period of 90-120 days. Agencies can
rate a senior executive's performance after he/she has completed the
minimum period, provided there is enough information on which to base a
rating. We proposed to keep the 90-day minimum, but remove the 120-day
cap to allow agencies to establish minimum appraisal periods that are
longer than 120 days. There was general support for this proposal.
However, one professional organization recommended that the minimum
appraisal period be lengthened from 90 days to 120 days because, in
their view, 90 days does not give sufficient time to form the basis for
a meaningful evaluation. The minimum appraisal period has always been
90 days, with the caveat that agencies can rate an executive's
performance only if there is enough information on which to base a
rating. To date, there has been no evidence of agency or senior
executive difficulty with the 90-day minimum. Further, the SES program
managers preferred to retain the 90-day minimum period, provided that
we also retain the caveat. Therefore, we are not adopting the
organization's recommendation. The final regulations reflect the
minimum appraisal provisions as proposed.
    We changed performance standards to performance requirements to
reflect the term used in statute, and eliminated the requirement to use
the term non-critical element. Agencies will establish performance
requirements for critical elements and any other performance elements
that will be used to appraise performance and derive the annual summary
rating. There were no objections to these changes, so they are adopted
as proposed.
    We modified rating level requirements to remove the requirement to
establish three rating levels for each critical element. The
performance on each critical element and any other performance elements
must be appraised. No commenters objected to these changes, so they are
adopted as proposed.
    We reduced the summary rating level requirements to the minimum
three summary rating levels prescribed in statute (i.e., fully
successful, minimally satisfactory, and unsatisfactory). We removed the
current maximum of five levels (i.e., no more than two levels above
fully successful). There were no objections to these changes, so they
are adopted as well.
    We revised rating terms to reflect the statutory requirement for an
annual summary rating. There are now only two rating terms: the initial
rating becomes initial summary rating and the final rating becomes the
annual summary rating. We removed references to other types of ratings.
There were no comments on these changes, so they are adopted as
proposed.
    We modified the method for deriving summary ratings to remove the
current requirement to give critical elements more weight than non-
critical elements in determining a summary rating. There were no
comments on this change, so it is adopted.

Balanced Measurement

    The regulations require agencies to evaluate senior executive
performance using measures that balance organizational results with
customer satisfaction, employee perspectives, and any other measures
agencies decide are appropriate. Introduction of the balanced scorecard
concept in 1992 by Robert Kaplan and David Norton of the Harvard
Business School as well as recent studies by the National Partnership
for Reinventing Government and others have shown that both the public
and private sectors are increasingly and successfully using balanced
measurement to help create high-performing organizations. They indicate
that an approach to performance planning, management, and measurement
that balances the needs and perspectives of customers, stakeholders,
and employees with the achievement of the organization's business or
operational results is critical to successful improvement efforts.
    By institutionalizing the use of balanced measures, the Government
acknowledges what its best executives have always known: leading people
and building customer coalitions are the foundation of organizational
success. In OPM's 1999 SES survey, career executives reported that
``leading people'' and ``building coalitions'' are the most important
contributors to executive success now, and they will be even more
important in the future.
    There is general support for the concept of balanced measurement,
although some commenters requested additional information and guidance
about using balanced measures. There

[[Page 60839]]

was consensus that the regulations should not prescribe how balanced
measures are imposed and implemented. The regulations require agencies
to evaluate senior executive performance using balanced measures, but
they do not dictate how. Agencies can define the measures, determine
the appropriate balance among the various measures, and decide an
implementation method that best meets their organizational and
operational needs.
    In discussions with stakeholders about the proposed regulations,
some have expressed anxiety about the measurement factors and what they
mean. Some fear that employee perspectives means a supervisor's
popularity with employees. Some said that senior executives have
multiple customers and stakeholders, many of whom have conflicting
views and interests. They are concerned that these considerations might
not be taken into account. A few worried that senior executives would
be held accountable for program results over which they have little or
no control. Others were concerned that using balanced measurement would
require agencies to invest in expensive surveys or sophisticated
measurement tools.
    These are all valid concerns, but agencies will have latitude under
the regulations to weigh employee and customer concerns in whatever
manner they decide is appropriate to their missions and structures. The
employee perspectives factor is not a ``popularity contest.'' Rather,
this factor focuses on such things as how executives lead and motivate
their employees, address job and training needs, and provide a healthy
working environment.
     Having multiple stakeholders is a ``given'' in the Federal
sector, where executives frequently have to balance the needs of a
variety of customers and stakeholders. For example, in regulatory
agencies, executives often make decisions that stakeholders do not
endorse. The customer satisfaction factor considers how executives deal
with stakeholders, balance the varying needs of customers, and build
partnerships and coalitions to achieve results. The issue is not always
whether customers or stakeholders agree with the decision, but how the
executives reach the decision; i.e., whether stakeholders have an
opportunity to participate in the decision-making and share their
views, whether customers are treated with interest and respect, etc.
     Regarding measurement, we believe that agencies can
measure results in ways that do not require elaborate systems.
    Further, agencies will have the flexibility to define measures and
design systems that fit their organizational and operational needs and
are aligned with their strategic and performance planning initiatives.
These flexibilities should enable agencies to address their senior
executives' concerns.
    Two commenters suggested mandating additional measures. One was the
addition of financial results to more directly reflect Kaplan and
Norton's balanced scorecard approach. The other proposed adding
diversity and representation.
    The National Partnership for Reinventing Government's August 1999
report on Balancing Measures states that, although there is no such
thing as a fixed and truly balanced set of measures, a balanced
approach should factor in at least employee, customer, and business
perspectives. Agencies may add other measures; however they must not
dilute the importance of the key measures. (The report on Balancing
Measures is available on the NPR website at: http://www.npr.gov.)
    We discussed these recommended additions with SES program managers,
who preferred that the regulations only specify the three most common
factors, i.e., organization results, customer satisfaction, and
employee perspectives. Most believed that the three key measures are
broad enough to incorporate diversity and financial measures. However,
agencies have the flexibility to address them as separate factors, if
they choose. Therefore, consistent with our approach to give agencies
as much flexibility as possible to develop measures that reflect their
overall mission strategies, we are not adopting the recommendations.
OPM will issue supplemental guidance and continue ongoing discussions
with stakeholders to help agencies address balanced measurement.

Additional Proposed Requirements

    Evaluation Criteria. Two commenters proposed that we mandate
additional evaluation criteria. One proposed to include selected
leadership competencies as an element of each executive's appraisal.
Another proposed a requirement that two of the executive core
qualifications for entry into the Senior Executive Service (leading
people and building coalitions) be made critical elements in all SES
appraisals.
    Strong and effective leadership is fundamental to executive
success; it is manifested through the three balanced measures. All new
career executives must demonstrate their leadership ability in five
areas (i.e., leading change, leading people, results-driven, business
acumen, and building coalitions). Some agencies have incorporated the
themes of these Executive Core Qualifications into their SES
performance management systems. We support this approach, but SES
program managers indicated that we should not dictate it. Since the
suggested changes would be inconsistent with the flexible approach
taken in the regulations, we are not adopting them.
    One commenter also suggested that an increased emphasis on
diversity and representation as an SES performance element would serve
to increase accountability for results. We agree that this is
important. The appraisal criteria in the revised regulations at
Sec. 430.307(a) address an executive's progress in meeting affirmative
action, equal employment opportunity, and diversity goals.
    Another commenter proposed that the regulations clarify that senior
executives are responsible and accountable for protecting the human and
workplace assets under their control and for ensuring that these assets
are used in ways that prevent pollution and use energy resources
efficiently. We believe that effectively managing the work environment
is inherent in both the ``organizational results'' and ``employee
perspectives'' factors of balanced measurement, which agencies can
describe in ways that are appropriate to their organizational needs.
Accordingly, we are not adopting this proposed addition.
    Supervisor Appraisals. An agency was concerned about the lack of
incentive for supervisors to conduct timely performance assessments.
The agency wanted the regulations to require that, before a supervisor
changes jobs or leaves an agency he/she be required to appraise the
performance of subordinate senior executives in writing. The proposed
regulations include requirements for appraisals of senior executives
who change jobs, but they are silent on departing supervisors. The
current regulations do not address this, but we have issued
supplemental guidance to agencies that encourages them to obtain
appraisal information from departing supervisors. We sought the views
of SES program managers, who felt that we should not mandate this as a
governmentwide requirement, but continue to address it in supplemental
guidance. We agree. Agencies have the latitude to include such a
requirement in their performance management systems.
    Written Progress Reviews. The same agency also felt that the
requirement for periodic progress reviews needed to be strengthened by
requiring that the

[[Page 60840]]

overall results of each progress review be documented in writing. We
shared this comment with the SES program managers, who did not support
the proposal. We understand the concern, but we prefer to let agencies
decide how best to ensure that there is ongoing communication between
supervisors and senior executives about their performance. The emphasis
should be on communication, rather than process or format.
    Performance Review Boards. A professional organization proposed
mandating that agencies include women, minorities, and people with
disabilities on Performance Review Boards (PRBs) in organizations,
organizational components, and geographical locations where minorities,
women, and persons with disabilities are determined to be
underrepresented in the workforce. We appreciate the concerns about
diversity that prompted this comment, but it might be difficult for
other than large departments and agencies to comply with such a
requirement. The revised regulations encourage agencies to include
women, minorities, and people with disabilities on PRBs. Including this
in the actual language of the regulation sends a strong message to
agency leadership. Further, we want to maintain the focus on the
substance of diversity and diverse viewpoints, rather than on numbers
or process.
    Editorial Suggestions. One commenter suggested more precise
language for clarity. For example, the commenter felt the term
``strategic planning initiatives'' might be misinterpreted as a
process-focused item, rather than a linkage between performance
accountability and an agency's long-term and annual goals and
objectives. By using this term, we intended a broad focus on strategic
and annual performance planning and evaluation efforts and any related
initiatives. In our view, using more precise terminology or definition
could narrow that focus or limit an agency's flexibility. Therefore, we
are not adopting the suggested language changes.

System Approval

    During the public comment period, we discussed with agency SES
program managers options for obtaining OPM approval of revised
performance management systems, in accordance with 5 U.S.C. 4312. The
general consensus was agency self-certification, similar to the method
used to approve performance management systems for the general
workforce to comply with requirements at 5 CFR 430.209 and 210. Under
this approach, OPM would develop a checklist of key system
requirements, and agencies would certify that their revised performance
management systems comply with these requirements and provide
supporting documentation as appropriate. OPM will provide these
materials and accompanying guidance to agencies within 60 days of the
publication of this final rule.

Additional Guidance

    OPM will issue additional guidance in various formats to help
agencies implement the changes, including examples of ways to use the
various flexibilities provided under these regulations. We will also
share information about how public and private sector organizations are
using balanced measurement to evaluate senior executive performance.

Table of Changes

    The following table lists the changes to the current regulations.
The ``current rule'' column lists the regulations in the current
subpart C affected by the final regulations. The ``final rule'' column
shows the disposition of the current rules. The third column explains
each change.

Current rule Final rule Explanation of change
430.301(a) 430.301(a) Plain language edits.
430.301(b) 430.301(b) Revises purpose to emphasize expectingexcellence, holding senior executivesaccountable for results, communicatinggoals and expectations, factoringbalanced measurement into performanceappraisal, and making performance thebasis for personnel decisions.
430.302(a) 430.302(a) Plain language edits.
430.302(b) 430.302(b) Plain language edits.
430.303 430.303 Revises definitions as follows:

Annual summary rating replaces the termsummary rating to reflect the statutoryterminology and means the overall ratinglevel the appointing authority assignsat the end of the appraisal period afterconsidering PRB recommendations.

Appointing authority is revised toclarify that this individual must beauthorized to make SES appointments.

Appraisal is replaced with performanceappraisal and edited for plain language.

Appraisal period reflects plain languageedits.

Appraisal system is replaced with theterm performance management system tobroaden the focus from the annualappraisal to managing performance on anongoing basis.

Balanced measures is added because theregulations require agencies to usebalanced measurement to evaluate seniorexecutive performance.

Critical element is broadened to coverthe senior executive's work, which mayinclude more than the duties of theposition, and focus on organizationalresults.

Final rating is replaced with the termused in statute, annual summary rating,and edited for plain language.

Initial rating is replaced with initialsummary rating and revised for clarity.

Non-critical elements is replaced withthe broader term, other performanceelements, which refers to components ofan executive's work that are notcritical but may be important enough tofactor into the executive's appraisal.

Performance is broadened from the focuson critical and non-critical elements ofthe position to the accomplishment ofwork described in the senior executive'sperformance plan.

Performance appraisal is added to replaceappraisal and edited for plain language.

Performance Appraisal System is replacedwith the term performance managementsystem, which refers to a framework ofpolicies and practices for planning,monitoring, developing, evaluating, andrewarding individual and organizationalperformance and for using performanceinformation as a basis for personneldecisions.

Performance Management Plan is deleted.The concepts are covered underperformance management system.

Performance plan is replaced with theterm senior executive performance planwhich is expanded to address work thesenior executive is expected toaccomplish and the requirements againstwhich performance will be evaluated.

Performance standard is replaced by theterm performance requirement used instatute and reflects plain languageedits.

Progress review reflects plain languageedits.

Rating of record is deleted.

Summary rating is replaced with annualsummary rating.

Strategic planning initiatives is addedbecause of new requirements for aligningperformance plans with strategicplanning.

430.304 430.304 Retitles section as SES PerformanceManagement Systems; edits substantiallyand restructures it to include the keycomponents of agency systems. Movesother requirements to other sections inthe subpart.
430.304(a) 430.304(a) Plain language edits.
430.304(b) 430.305(b) Moves critical element requirements toPlanning and Communicating Performance.Replaces reference to non-criticalelements with the broader otherperformance elements.
  430.307(a) Moves appraisal requirements toAppraising Performance; revises them toreflect deletion of term non-criticalelements.
  430.308(d) Moves summary rating requirements toRating Performance.
430.304(c) 430.304(b) Planning performance becomes a keycomponent of performance managementsystems.
  430.305(a) Moves requirements for individual seniorexecutive performance plans to Planningand Communicating Performance.
430.304(d)(1) 430.304(b) Replaces performance standards with thestatutory term performance requirements;some provisions are included inperformance management systemrequirements.
  430.305 Moves establishing and communicatingcritical elements and requirements toPlanning and Communicating Performance.
  430.307(a) Moves annual appraisal requirements toAppraising Performance.
430.304(d)(2) 430.304(b)(1), 430.305 Includes accomplishing organizationalobjectives in requirements to addressorganizational performance and to linkperformance management with GPRA goalsand with strategic planning initiatives.
430.304(e) 430.305(b) Revises section to eliminate therequirement to establish three ratinglevels for each critical element.Replaces performance standards withperformance requirements and moves it tosenior executive performance planrequirements under Planning andCommunicating Performance.
430.304(f) 430.304(c)(3) Edits derivation method requirements toremove references to non-criticalelements and moves it to systemrequirements. New section incorporatesrestriction on rating leveldistribution.
430.304(g) 430.304(c)(2) Modifies summary rating levelrequirements to reflect the statutoryrequirement for a minimum of threelevels. Removes the 5-level maximum andrating level numbers.
430.304(h) 430.306(c) Broadens requirement for performanceassistance to require agencies to helpsenior executives improve theirperformance, not just those who arerated less than fully successful, toreflect the emphasis on overallperformance improvement.
430.304(i) 430.309(c) Edits requirements for action on lessthan successful performance ratings andmoves them to the new section, UsingPerformance Results. This section isadded to focus on basing personneldecisions on performance.
  430.305 Adds two new sections on Planning andCommunicating Performance and MonitoringPerformance, which are key components ofperformance management systems.

Consolidates senior executive performanceplan requirements under Planning andCommunicating Performance.

  430.306 Consolidates progress review andperformance improvement requirementsunder monitoring performance.
430.305 430.307 Retitles heading as AppraisingPerformance, a key component ofperformance management systems.
430.305(a)(1) 430.304(c)(1) Moves appraisal period requirements toSystem Requirements.
  430.307(b) Moves rating performance on details andtemporary assignments to AppraisingPerformance. Replaces summary ratingrequirement with requirement to appraiseperformance and factor appraisal intoinitial summary rating.
430.305(a)(2) 430.304(c)(1)(ii) Edits provisions for terminating theappraisal period and moves them toSystem Requirements.
430.305(a)(3) 430.304(c)(1)(iii) Edits restriction on appraisals andratings during Presidential electionperiods and moves it to SystemRequirements.
430.305(b) 430.304(c)(1)(i) Revises minimum appraisal period toeliminate the 120-day maximum and movesit to System Requirements.
430.305(c) 430.307(a)(1) Deletes the requirement to appraise onnon-critical elements. Requiresappraisal on critical elements only--appraising other elements is optional.
430.305(d)(1) & 430.305(d)(2) 430.307(b)(1),430.307(b)(2),&430.307(b)(3) Substantially edits requirements for appraising performance on details and temporary assignments. Modifies thecurrent requirement for rating oncritical elements to appraisingperformance and factoring that appraisalinto the initial summary rating. Edits progress review requirements andmoves them to Monitoring Performance.
430.306 430.308 Retitles heading as Rating Performance, akey component of performance managementsystems.
430.306(a)(1) 430.308(a) Plain language edits.
430.306(a)(2) 430.308(a) Plain language edits.
430.306(a)(3) 430.308(b) Plain language edits.
430.306(a)(4) 430.308(b), 430.308(c) Plain language edits.
430.306(a)(5) 430.308(b) Removes specific section; provisions areinherent in higher level reviewrequirements.
430.306(b) 430.308(b) Adds requirement that higher levelreviewer may not change initial summaryrating, but can recommend a differentrating to PRB and appointing authority.Plain language edits.
  430.308(c) Adds new section in Rating Performance onPRB review for clarity.
430.306(c) 430.308(d) Changes term final rating to annualsummary rating for consistency withstatutory language and edits for plainlanguage.
430.306(d) 430.304(c)(3) Includes requirement in derivationmethods under System Requirements andedits for plain language.
430.306(e) 430.308(e) Includes provisions under new section,Extending the appraisal period; editsfor plain language.
  430.308(f) States statutory language that appraisalsand ratings are not appealable.
430.306(f) 430.307(b) Modifies requirement for summary ratingon transfer to a written appraisal whichthe gaining supervisor must factor intothe annual summary rating. Plainlanguage edits.
430.306(g) 430.308(a), 430.308(b), 430.311(c). Deletes section; incorporates requirements for executive notificationin relevant sections.

Edits documentation maintenancerequirements and moves them to Trainingand Evaluation.

430.307 430.310 Plain language edits.
430.307(a) 430.310(a)(1) Plain language edits.
430.307(b) 430.310(a)(4) Plain language edits.
430.307(c) 430.310(a)(2) Plain language edits.
430.307(d) 430.310(a)(3) Deletes reference to OPM authority towaive requirement for career majority onPRBs. Authority is stated in statute.
430.307(e) 430.310(b)(1) Plain language edits.
430.307(f) 430.310(b)(3) Plain language edits.
430.307(g) 430.301(b)(2) Plain language edits.
430.308 430.311(a), 430.311(b) Plain language edits.
430.309(a) 430.312(b) Plain language edits.
430.309(b) 430.312(c) Plain language edits.
430.310 430.312(a) Moves requirement to section on OPMreview of agency systems and edits forplain language.

E.O. 12866, Regulatory Review

    This final rule has been reviewed by the Office of Management and
Budget in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because the
regulations pertain only to Federal employees and agencies.

List of Subjects in 5 CFR Part 430

    Government employees, Performance management.

Office of Personnel Management.
Janice R. Lachance,
Director.

    Accordingly, OPM is amending 5 CFR Part 430 as follows:

PART 430--PERFORMANCE MANAGEMENT

    1. The authority citation for part 430 continues to read as
follows:

    Authority: 5 U.S.C. chapter 43.

    2. Subpart C is revised to read as follows:

Subpart C--Managing Senior Executive Performance

Sec.
430.301   General.
430.302   Coverage.
430.303   Definitions.
430.304   SES performance management systems.
430.305   Planning and communicating performance.
430.306   Monitoring performance.
430.307   Appraising performance.
430.308   Rating performance.
430.309   Using performance results.
430.310   Performance Review Boards (PRBs).
430.311   Training and evaluation.
430.312   OPM review of agency systems.

Subpart C--Managing Senior Executive Performance


Sec. 430.301  General.

    (a) Statutory authority. Chapter 43 of title 5, United States Code,
provides for performance management for the Senior Executive Service
(SES), the establishment of SES performance appraisal systems, and
appraisal of senior executive performance. This subpart prescribes
regulations for managing SES performance to implement the statutory
provisions at 5 U.S.C. 4311-4315.

[[Page 60843]]

    (b) Purpose. The regulations in this subpart require agencies to
establish performance management systems that hold senior executives
accountable for their individual and organizational performance in
order to improve the overall performance of Government by--
    (1) Expecting excellence in senior executive performance;
    (2) Linking performance management with the results-oriented goals
of the Government Performance and Results Act of 1993;
    (3) Setting and communicating individual and organizational goals
and expectations;
    (4) Systematically appraising senior executive performance using
measures that balance organizational results with customer, employee,
or other perspectives; and
    (5) Using performance results as a basis for pay, awards,
development, retention, removal, and other personnel decisions.


Sec. 430.302  Coverage.

    (a) This subpart applies to all senior executives covered by
subchapter II of chapter 31 of title 5, United States Code.
    (b) This subpart applies to agencies identified in section
3132(a)(1) of title 5, United States Code.


Sec. 430.303  Definitions.

    Terms used in this subpart are defined as follows:
    Appointing authority means the department or agency head, or other
official with authority to make appointments in the Senior Executive
Service.
    Appraisal period means the established period of time for which a
senior executive's performance will be appraised and rated.
    Balanced measures means an approach to performance measurement that
balances organizational results with the perspectives of distinct
groups, including customers and employees.
    Critical element means a key component of an executive's work that
contributes to organizational goals and results and is so important
that unsatisfactory performance of the element would make the
executive's overall job performance unsatisfactory.
    Other performance elements means components of an executive's work
that do not meet the definition of a critical element, but may be
important enough to factor into the executive's performance appraisal.
    Performance means the accomplishment of the work described in the
senior executive's performance plan.
    Performance appraisal means the review and evaluation of a senior
executive's performance against performance elements and requirements.
    Performance management system means the framework of policies and
practices that an agency establishes under subchapter II of chapter 43
of title 5, United States Code, and this subpart, for planning,
monitoring, developing, evaluating, and rewarding both individual and
organizational performance and for using resulting performance
information in making personnel decisions.
    Performance requirement means a statement of the performance
expected for a critical element.
    Progress review means a review of the senior executive's progress
in meeting the performance requirements. A progress review is not a
performance rating.
    Ratings: (1) Initial summary rating means an overall rating level
the supervisor derives from appraising the senior executive's
performance during the appraisal period and forwards to the Performance
Review Board.
    (2) Annual summary rating means the overall rating level that an
appointing authority assigns at the end of the appraisal period after
considering a Performance Review Board's recommendations. This is the
official rating.
    Senior executive performance plan means the written summary of work
the senior executive is expected to accomplish during the appraisal
period and the requirements against which performance will be
evaluated. The plan addresses all critical elements and any other
performance elements established for the senior executive.
    Strategic planning initiatives means agency strategic plans, annual
performance plans, organizational workplans, and other related
initiatives.


Sec. 430.304  SES performance management systems.

    (a) To encourage excellence in senior executive performance, each
agency must develop and administer one or more performance management
systems for its senior executives.
    (b) Performance management systems must provide for:
    (1) Planning and communicating performance elements and
requirements that are linked with strategic planning initiatives;
    (2) Consulting with senior executives on the development of
performance elements and requirements;
    (3) Monitoring progress in accomplishing elements and requirements;
    (4) At least annually, appraising each senior executive's
performance against requirements using measures that balance
organizational results with customer and employee perspectives; and
    (5) Using performance information to adjust pay, reward, reassign,
develop, and remove senior executives or make other personnel
decisions.
    (c) Additional system requirements.
    (1) Appraisal period. Each agency must establish an official
performance appraisal period for which an annual summary rating must be
prepared.
    (i) There must be a minimum appraisal period of at least 90 days.
    (ii) An agency may end the appraisal period any time after the
minimum appraisal period is completed, if there is an adequate basis on
which to appraise and rate the senior executive's performance.
    (iii) An agency may not appraise and rate a career appointee's
performance within 120 days after the beginning of a new President's
term of office.
    (2) Summary performance levels. Each performance management system
must have at least three summary performance levels: one or more fully
successful levels, a minimally satisfactory level, and an
unsatisfactory level.
    (3) Method for deriving summary ratings. Agencies must develop a
method for deriving summary ratings from appraisals of performance
against performance requirements. The method must ensure that only
those employees whose performance exceeds normal expectations are rated
at levels above fully successful. An agency may not prescribe a forced
distribution of rating levels for senior executives.


Sec. 430.305  Planning and communicating performance.

    (a) Each senior executive must have a performance plan that
describes the individual and organizational expectations for the
appraisal period and sets the requirements against which performance
will be evaluated. Supervisors must develop performance plans in
consultation with senior executives and communicate the plans to them
on or before the beginning of the appraisal period.
    (b) Senior executive performance plan requirements:
    (1) Critical elements. At a minimum, plans must describe the
critical elements of the senior executive's work and any other relevant
performance elements. Elements must reflect individual and
organizational performance.
    (2) Performance requirements. At a minimum, plans must describe the
level

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of performance expected for fully successful performance of the
executive's work. These are the standards against which the senior
executive's performance will be appraised.
    (3) Link with strategic planning initiatives. Critical elements and
performance requirements for each senior executive must be consistent
with the goals and performance expectations in the agency's strategic
planning initiatives.


Sec. 430.306  Monitoring performance.

    (a) Supervisors must monitor each senior executive's performance
during the appraisal period and provide feedback to the senior
executive on progress in accomplishing the performance elements and
requirements described in the performance plan. Supervisors must
provide advice and assistance to senior executives on how to improve
their performance.
    (b) Supervisors must hold a progress review for each senior
executive at least once during the appraisal period. At a minimum,
senior executives must be informed about how well they are performing
against performance requirements.


Sec. 430.307  Appraising performance.

    (a) Annual appraisals. Agencies must appraise each senior
executive's performance in writing and assign an annual summary rating
at the end of the appraisal period.
    (1) At a minimum, a senior executive must be appraised on the
performance of the critical elements in the performance plan.
    (2) Appraisals of senior executive performance must be based on
both individual and organizational performance, taking into account
such factors as--
    (i) Results achieved in accordance with the goals of the Government
Performance and Results Act of 1993;
    (ii) Customer satisfaction;
    (iii) Employee perspectives;
    (iv) The effectiveness, productivity, and performance quality of
the employees for whom the senior executive is responsible; and
    (v) Meeting affirmative action, equal employment opportunity, and
diversity goals and complying with the merit system principles set
forth under section 2301 of title 5, United States Code.
    (b) Details and job changes. (1) When a senior executive is
detailed or temporarily reassigned for 120 days or longer, the gaining
organization must set performance goals and requirements for the detail
or temporary assignment. The gaining organization must appraise the
senior executive's performance in writing, and this appraisal must be
factored into the initial summary rating.
    (2) When a senior executive changes jobs or transfers to another
agency after completing the minimum appraisal period, the supervisor
must appraise the executive's performance in writing before the
executive leaves.
    (3) The annual summary rating and any subsequent appraisals must be
transferred to the gaining agency. The gaining supervisor must consider
the rating and appraisals when developing the initial summary rating at
the end of the appraisal period.


Sec. 430.308  Rating performance.

    (a) Initial summary rating. The supervisor must develop an initial
summary rating of the senior executive's performance, in writing, and
share that rating with the senior executive. The senior executive may
respond in writing.
    (b) Higher level review. The senior executive may ask a higher
level official to review the initial summary rating before the rating
is given to the Performance Review Board (PRB). The senior executive is
entitled to one higher level review, unless the agency provides for
more than one review level. The higher level official cannot change the
supervisor's initial summary rating, but may recommend a different
rating to the PRB and the appointing authority. Copies of the
reviewer's findings and recommendations must be given to the senior
executive, the supervisor, and the PRB.
    (c) PRB review. The initial summary rating, the senior executive's
response to the initial rating, and the higher level official's
comments must be given to the PRB. The PRB must review the rating and
comments from the senior executive and the higher level official, and
make recommendations to the appointing authority, as provided in
Sec. 430.310.
    (d) Annual summary rating. The appointing authority must assign the
annual summary rating of the senior executive's performance, in
writing, after considering any PRB recommendations. This rating is the
official rating.
    (e) Extending the appraisal period. When an agency cannot prepare
an annual summary rating at the end of the appraisal period because the
senior executive has not completed the minimum appraisal period or for
other reasons, the agency must extend the executive's appraisal period.
The agency will then prepare the annual summary rating.
    (f) Appeals. Senior executive performance appraisals and ratings
are not appealable.


Sec. 430.309  Using performance results.

    (a) Agencies will use the results of performance appraisals and
ratings as a basis for adjusting pay, granting awards, and making other
personnel decisions. Performance information will also be a factor in
assessing a senior executive's continuing development needs.
    (b) A career executive whose annual summary rating is at least
fully successful may be given a performance award under part 534,
subpart D, of this chapter.
    (c) An executive may be removed from the SES for performance
reasons, subject to the provisions of part 359, subpart E, of this
chapter.
    (1) An executive who receives an unsatisfactory annual summary
rating must be reassigned or transferred within the Senior Executive
Service, or removed from the Senior Executive Service;
    (2) An executive who receives two unsatisfactory annual summary
ratings in any 5-year period must be removed from the Senior Executive
Service; and
    (3) An executive who receives less than a fully successful annual
summary rating twice in any 3-year period must be removed from the
Senior Executive Service.


Sec. 430.310  Performance Review Boards (PRBs).

    Each agency must establish one or more PRBs to make recommendations
to the appointing authority on the performance of its senior
executives.
    (a) Membership. (1) Each PRB must have three or more members who
are appointed by the agency head, or by another official or group
acting on behalf of the agency head. Agency heads are encouraged to
include women, minorities, and people with disabilities on PRBs.
    (2) PRB members must be appointed in a way that assures
consistency, stability, and objectivity in SES performance appraisal.
    (3) When appraising a career appointee's performance or
recommending a career appointee for a performance award, more than one-
half of the PRB's members must be SES career appointees.
    (4) The agency must publish notice of PRB appointments in the
Federal Register before service begins.
    (b) Functions. (1) Each PRB must review and evaluate the initial
summary rating, the senior executive's response, and the higher level
official's comments on the initial summary rating, and

[[Page 60845]]

conduct any further review needed to make its recommendations.
    (2) The PRB must make a written recommendation to the appointing
authority about each senior executive's annual summary rating.
    (3) PRB members may not take part in any PRB deliberations
involving their own appraisals.


Sec. 430.311  Training and evaluation.

    (a) To assure that agency performance management systems are
effectively implemented, agencies must provide appropriate information
and training to supervisors and senior executives on performance
management, including planning and appraising performance.
    (b) Agencies must periodically evaluate the effectiveness of their
performance management system(s) and implement improvements as needed.
    (c) Agencies must maintain all performance-related records for no
less than 5 years from the date the annual summary rating is issued, as
required in Sec. 293.404(b)(1) of this chapter.


Sec. 430.312  OPM review of agency systems.

    (a) Agencies must submit proposed SES performance management
systems to OPM for approval.
    (b) OPM will review agency systems for compliance with the
requirements of law, OPM regulations, and OPM performance management
policy.
    (c) If OPM finds that an agency system does not meet the
requirements and intent of subchapter II of chapter 43 of title 5,
United States Code, or of this subpart, it will direct the agency to
take corrective action, and the agency must comply.

[FR Doc. 00-26337 Filed 10-12-00; 8:45 am]
BILLING CODE 6325-01-U