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Testimony: 

Before the Subcommittee on Oversight of Government Management, the 
Federal Workforce and the District of Columbia, Committee on Homeland 
Security and Government Affairs, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 10:45 a.m. EDT: 

Tuesday, September 26, 2006: 

Human Capital: 

Aligning Senior Executives' Performance with Organizational Results Is 
an Important Step Toward Governmentwide Transformation: 

Statement of Brenda S. Farrell Acting Director Strategic Issues: 

GAO-06-1125T: 

GAO Highlights: 

Highlights of GAO-06-1125T, testimony before the Subcommittee on 
Oversight of Government Management, the Federal Workforce and the 
District of Columbia, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate 

Why GAO Did This Study: 

The government’s senior executives need to lead the way in transforming 
their agencies’ cultures. Credible performance management systems—those 
that align individual, team, and unit performance with organizational 
results—can help manage and direct this process. In past work, GAO 
found that the performance management systems for senior executives 
fell short in this regard. In November 2003, recognizing that reforms 
were needed, Congress authorized a new performance-based pay system 
that ended the practice of giving annual pay adjustments to senior 
executives. Instead, agencies are to consider such factors as 
individual results and contributions to agency performance. If the 
Office of Personnel Management (OPM) certifies an agency’s new 
performance system and the Office of Management and Budget (OMB) 
concurs, the agency has the flexibility to raise the pay of its highest 
performing senior executives above certain pay caps. 

This testimony addresses (1) the performance management system’s 
regulatory structure, (2) OPM’s certification process and agencies’ 
views of it, and (3) OPM’s role in monitoring the system, and the 
number of agencies that have been certified to date. This statement is 
based on GAO’s issued work, which included interviews with senior OPM 
officials, agency Chief Human Capital Officers and Human Resource 
officers, and reviews of agency documents. 

What GAO Found: 

Overall, the regulations that OPM and OMB developed to administer a 
performance-based pay system for executives serve as an important step 
for agencies in creating an alignment or “line of sight” between 
executives’ performance and organizational results. To qualify for the 
pay flexibilities included in the statute, OPM must certify and OMB 
must concur that an agency’s performance management system meets nine 
certification criteria, including demonstrating that its performance 
management system aligns individual performance expectations with the 
mission and goals of the organization and that its system as designed 
and applied makes meaningful distinctions in performance. The 
certification criteria are generally consistent with key practices for 
effective performance management systems GAO identified that 
collectively create a line of sight between an individual’s performance 
and an organization’s success. To receive a full 2-calendar-year 
certification, an agency must document that its senior executive 
performance management system meets all nine of the criteria. Agencies 
can meet four of nine criteria and demonstrate that their system in 
design meets the remaining certification criteria to receive 1-year 
provisional certification and use the higher pay rates. 

Two divisions in OPM, as well as OMB, independently review agencies’ 
certification submissions. A number of agencies GAO contacted expressed 
concern over OPM’s ability to communicate expectations, guidance, and 
deadlines to agencies in a clear and consistent manner. OPM officials 
agreed that agencies need better guidance and were working on 
improvements. 

In monitoring agencies’ performance management systems, OPM can suspend 
an agency’s certification at any time with OMB concurrence if an agency 
is not complying with the certification criteria. According to OPM 
data, performance management systems at 24 agencies were certified 
during calendar year 2006. Of these, only the Department of Labor’s 
system received full certification; the remaining systems received only 
provisional certification. These findings are not surprising. As GAO 
has noted in its past work, agencies could find it initially difficult 
to provide the necessary performance data to receive full 
certification. Going forward, it will be important for OPM to continue 
to monitor the certification process to help ensure that provisional 
certifications do not become the norm, and agencies develop performance 
management systems for their senior executives that meet all of OPM’s 
requirements. 

The new performance management system for the government’s senior 
executives will help agencies align individual, team, and unit 
performance with organizational results. Although there have been some 
implementation challenges, what will be important is how OPM works with 
agencies to meet the certification criteria. Moreover, the lessons 
learned in implementing the senior executive performance management 
system can be applied to modernizing the performance management systems 
of employees at other levels. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-1125T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Brenda S. Farrell at 
(202) 512-3604 or farrelb@gao.gov. 

[End of Section] 

Chairman Voinovich, Senator Akaka, and Members of the Subcommittee: 

Thank you for the opportunity to be here today to discuss the federal 
government's implementation of pay-for-performance systems for the 
approximately 7,000 members of the Senior Executive Service (SES) and 
those in other senior positions. As we have consistently testified, and 
as the Subcommittee has recognized, an agency's human capital is its 
most important catalyst for transforming government to meet the current 
and emerging challenges of the 21st century. We have also highlighted 
how federal human capital systems designed in the past are outmoded 
and, in some cases, barriers to an agency's transformation. 

In our earlier work on senior executive performance management, we 
noted how high-performing organizations have recognized that a critical 
success factor in fostering a results-oriented culture is a performance 
management system that creates a "line of sight" showing how unit and 
individual performance can contribute to overall organizational goals 
and helping them understand the connection between their daily 
activities and the organization's success. We also discussed how high- 
performing organizations understand that they need senior leaders who 
are accountable for results, drive continuous improvement, and 
stimulate and support efforts to integrate human capital approaches 
with organizational goals and related transformation issues.[Footnote 
1] 

In 2002, we reported that significant opportunities existed to 
strengthen agencies' efforts to hold senior executives accountable for 
results through their performance management systems.[Footnote 2] In 
particular, we reported that more progress was needed in explicitly 
linking senior executives' performance expectations to the achievement 
of 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. 

Over the past few years, Congress and the administration have sought to 
modernize senior executive performance management systems. In November 
2003, Congress established a new performance-based pay system as part 
of the National Defense Authorization Act for Fiscal Year 2004[Footnote 
3] that is designed to provide a clear and direct linkage between 
performance and pay for the government's senior executives. 
Additionally, aspects of the legislation can help address two 
shortcomings with the previous pay system: pay compression, and the 
failure of agencies to make meaningful distinctions among senior 
executives' job performances. Pay compression occurred in part because 
the previous system had six pay levels. Because of pay caps and other 
factors, senior executives at the top three levels received essentially 
the same amount of base pay in a given year. For example, we reported 
that about 70 percent of SES members received the same basic pay due to 
compression in 2003.[Footnote 4] At the same time, the administration 
believed that agencies' performance management systems were not making 
meaningful distinctions in senior executives' performance as 
demonstrated by the large percentage that consistently received the 
highest ratings possible. 

The new pay system ended the practice of giving annual across-the-board 
or locality pay adjustments to senior executives. Instead, agencies are 
to base pay adjustments for senior executives on individual results and 
contributions to the agency's performance by considering the 
individual's accomplishments and such things as unique skills, 
qualifications, or competencies of the individual and the individual's 
significance to the agency's mission and performance. The system also 
replaced the six SES pay levels with a single, open-range pay band. 
Further, agencies can apply for certification of their performance 
appraisal systems by the Office of Personnel Management (OPM), with 
Office of Management and Budget (OMB) concurrence. Once an agency is 
certified, it has the flexibility to raise the pay of its highest 
performing SES members above certain pay caps. As an example, those 
agencies with certified performance management systems can increase 
base pay to $165,200 for 2006. This compares to a cap of $152,000 for 
base pay for those agencies without certified systems. OPM and OMB 
jointly issued regulations establishing the criteria for obtaining this 
certification in July 2004. 

In addition to SES employees, many agencies use senior employees with 
scientific, technical, and professional expertise, commonly known as 
senior-level (SL) and scientific or professional (ST) positions. SL/ST 
positions have a lower maximum rate of basic pay than SES employees, 
and unlike the SES, their individual rate of pay does not necessarily 
have to be based on individual or agency performance. However, an 
agency may apply to OPM and OMB for certification of its SL/ST 
performance management system, and if the system is certified as making 
meaningful distinctions in relative performance, an agency may raise 
the total annual compensation maximum for SL/ST employees to the salary 
of the Vice President. However, certification does not affect the 
maximum rate of basic pay of SL/ST employees. 

We believe the new senior executive pay-for-performance system is an 
important step in aligning individual, team, and unit performance with 
organizational results. Indeed, high-performing organizations have 
recognized that their performance management systems are strategic 
tools to help them manage on a day-to-day basis and achieve 
organizational goals in part by linking their senior executive 
performance management systems to their organizations' success. 
Moreover, the lessons learned from implementing the new senior 
executive pay system can inform efforts to modernize the pay systems 
under which other federal employees are compensated. Indeed, cascading 
aspects of this approach to other levels of employees can help agencies 
recognize and reward employee contributions and achieve the highest 
levels of individual performance. 

In my remarks today, I will discuss (1) the regulatory structure of the 
senior executive pay system and the importance of achieving a line of 
sight between executives' performance and organizational success by 
linking pay with performance, (2) the agency certification process and 
agencies' views of it, and (3) OPM's role in evaluating and monitoring 
the system, and the number of agencies that have been certified to 
date. 

Mr. Chairman, as you know, the Senate Committee on Homeland Security 
and Governmental Affairs and your Oversight of Government Management, 
the Federal Workforce, and the District of Columbia Subcommittee 
requested that we conduct a review of OPM to identify management 
challenges that could affect its ability to lead human capital reform 
efforts. As part of our review, we have interviewed or obtained written 
responses from all 23 members of the Chief Human Capital Officers 
Council (CHCO) and/or their corresponding agency human resource (HR) 
directors to gain a customer perspective of OPM's products and services 
and their views of OPM management challenges. We obtained agencies' 
views on their experiences with OPM's certification of SES pay-for- 
performance systems. Our forthcoming report on this work will be issued 
in November 2006 and will include the agencies' experiences with the 
certification process, as well as recommended actions to enhance OPM's 
capacity to lead and implement human capital reform overall. My 
statement today is based on our issued products which were conducted in 
accordance with generally accepted government auditing standards. 

The Regulatory Structure of the Senior Executive Performance Management 
System Helps Link Executives' Performance to Organizational Results: 

Overall, the regulations that OPM developed to administer a performance-
based pay system for senior executives serve as a substantive and 
positive step for agencies in holding senior executives accountable for 
their performance and contributions to organizational success. The new 
senior executive pay system raises the cap on base pay and total 
compensation. For 2006, the caps are $152,000 for base pay (Level III 
of the Executive Schedule) with a senior executive's total compensation 
not to exceed $183,500 (Level I of the Executive Schedule). If an 
agency's senior executive performance management system is certified by 
OPM and OMB concurs, the caps are increased to $165,200 for base pay 
(Level II of the Executive Schedule) and $212,100 for total 
compensation (the total annual compensation payable to the Vice 
President). 

To qualify for these flexibilities, agencies' performance management 
systems need to meet nine specified certification criteria, including 
demonstrating that the systems align individual performance 
expectations with the mission and goals of the organization and that 
its appraisal system as designed and applied makes meaningful 
distinctions in performance. 

To receive a full 2-calendar-year certification, an agency must provide 
documentation that its senior executive performance management system 
meets all nine of the criteria. Otherwise, agencies can meet four of 
nine criteria and demonstrate that their system in design meets the 
remaining certification criteria to receive 1-year provisional 
certification and use the higher pay rates. Agencies with 1-year 
provisional certification must reapply annually, and agencies with full 
certification must reapply every 2 years. Those agencies with more than 
one performance management system for their senior executive employees 
are to certify each system separately. 

The certification criteria are framed as broad principles designed to 
serve as guidelines to position agencies to use their performance 
management system(s) strategically to support the development of a 
strong performance culture and the attainment of the agency's mission, 
goals, and objectives. The certification criteria are generally 
consistent with our body of work identifying key practices for 
effective performance management.[Footnote 5] Specifically, we 
identified key practices, including aligning individual performance 
expectations with organizational goals, linking pay to individual 
performance, and making meaningful distinctions in performance, that 
collectively create a line of sight between an individual's performance 
and an organization's success. These practices are reflected in the 
final certification criteria. 

Key aspects of the OPM certification criteria, as outlined in the 
regulations, are as follows: 

(1) Alignment: Individual performance expectations must be linked to or 
derived from the agency's mission, strategic goals, program/policy 
objectives, and/or annual performance plan. 

(2) Consultation: Individual performance expectations are developed 
with senior employee involvement and must be communicated at the 
beginning of the appraisal cycle. 

(3) Results: Individual expectations describe performance that is 
measurable, demonstrable, or observable, focusing on organizational 
outputs and outcomes, policy/program objectives, milestones, etc. 

(4) Balance: Individual performance expectations must include measures 
of results, employee and customer/stakeholder satisfaction, and/or 
competencies or behaviors that contribute to outstanding performance. 

(5) Assessments and Guidelines: The agency head or a designee provides 
assessments of the performance of the agency overall, as well as each 
of its major program and functional areas. 

(6) Oversight: The agency head or designee must certify that (1) the 
appraisal process makes meaningful distinctions based on relative 
performance; (2) results take into account, as appropriate, the 
agency's performance; and (3) pay adjustments and awards recognize 
individual/organizational performance. 

(7) Accountability: Senior employee ratings (as well as subordinate 
employees' performance expectations and ratings for those with 
supervisor responsibilities) appropriately reflect employees' 
performance expectations, relevant program performance measures, and 
other relevant factors. 

(8) Performance Differentiation: Among other provisions, the agency 
must provide for at least one rating level above Fully Successful (must 
include an Outstanding level), and in the application of those ratings, 
make meaningful distinctions among executives based on their relative 
performance. 

(9) Pay Differentiation: The agency should be able to demonstrate that 
the largest pay adjustments and/or highest pay levels (base and 
performance awards) are provided to its highest performers, and that, 
overall, the distribution of pay rates in the SES rate range and pay 
adjustments reflects meaningful distinctions among executives based on 
their relative performance. 

In commenting on OPM's draft regulations, we included suggestions 
intended to help agencies broaden the criteria to reinforce cultures 
that are results oriented, customer focused, and collaborative in 
nature. For example, we suggested that OPM require agencies to have 
their senior executives identify specific programmatic crosscutting, 
external, and partnership-oriented goals or objectives in their 
individual performance plans to help foster the necessary 
collaboration, interaction, and teamwork to achieve results. 

Further, based on our previous testimony that performance management 
processes need to assure reasonable transparency,[Footnote 6] we noted 
the new performance management system should have adequate safeguards 
to ensure fairness and guard against abuse.[Footnote 7] Specifically, 
we suggested that OPM require agencies to build in safeguards as part 
of their senior executive performance management systems when linking 
pay to performance. For example, communicating the overall results of 
the performance management decisions to the senior executives, while 
protecting individual confidentiality, could help enhance the 
transparency of the performance management process. We also recognized 
that scalability needs to be considered, and that small agencies might 
face difficulties communicating overall results of the performance 
management process while protecting the confidentiality of the fewer 
numbers of senior executives. In response, OPM changed some aspects of 
its criteria by incorporating these suggestions into the interim final 
regulations. 

The Process for Certifying Agencies' Submissions: 

Agencies can submit their applications to OPM for certification anytime 
during the year. If fully certified, the certification is good for the 
remainder of the calendar year in which the agency applied, as well as 
all of the following calendar year. If provisionally certified, an 
agency's certification is only good for the calendar year in which it 
applied. For example, if an agency is provisionally certified in 
October 2005, its certification would expire in December 2005. To 
ensure the agency's submission is complete, the agency's OPM contact-- 
the Human Capital Officer (HCO)--first verifies that the application 
contains the required materials and documents. If complete, the HCO 
sends copies to the two OPM divisions responsible for reviewing the 
application, the Human Capital Leadership and Merit System 
Accountability (HCLMSA) division and the Strategic Human Resources 
Policy (SHRP) division, and an additional copy to OMB. An agency's 
submission is reviewed independently by representatives within HCLMSA 
and SHRP in an attempt to bring different organizational perspectives 
to the review. 

A submission is reviewed against the nine certification criteria, but 
each review team has its own method for analyzing the application. 
After an initial examination, the reviewers from HCLMSA and SHRP hold 
an informal meeting to discuss the submission. The reviewers meet again 
in a formal panel after a more thorough review, and this time they are 
joined by the HCO. This panel decides whether they have enough 
information to reach a certification decision about the agency. If the 
panel concludes there is not enough information to reach a decision, 
the HCO will request that the agency provide any missing or additional 
supporting information. If the panel decides there is sufficient 
information to reach a decision, it will either certify or reject the 
application. 

When an application is rejected, the HCO works with the agency to help 
modify its appraisal system so that it meets the criteria. If the 
application is approved, the HCO contacts OMB for concurrence. OMB uses 
the same nine criteria to evaluate agency applications, but primarily 
focuses on measures of agency performance. If OMB concurrence is not 
achieved, the HCO works with the agency to address OMB's concerns until 
resolution is reached. Once OMB concurs, the Director of OPM certifies 
the agency's appraisal system and the HCO provides additional comments 
to the agency on their system and identifies any improvement needs. For 
example, these comments may direct the agency to focus more on making 
meaningful distinctions in performance. 

Agencies' Experience in Implementing the Senior Executive Pay System 
Highlights Areas Where Improvements Might be Needed: 

In our ongoing work on OPM's capacity to lead and implement human 
capital reform, we asked agency chief human capital officers (CHCO) and 
human resource (HR) directors to describe their experiences with OPM's 
administration of the senior executive pay-for-performance 
certification process. As the Comptroller General testified before this 
Subcommittee in June 2006,[Footnote 8] we heard a number of concerns 
from agencies regarding OPM's ability to communicate expectations, 
guidance, and deadlines to agencies in a clear and consistent manner. 
When the senior executive certification process began in 2004, OPM 
provided agencies with limited guidance for implementing the new 
regulations. OPM's initial guidance consisted of a list of documents 
required for provisional and full certification and a sample cover 
letter to accompany each application. The lack of more specific 
guidance created confusion as agencies attempted to interpret the 
broadly defined regulatory criteria and adjust to the requirements for 
certification. Officials at a majority of the CHCO Council agencies 
told us they did not have enough guidance to properly prepare for 
certification. As a result, agencies did not fully understand what was 
required in the regulations to receive certification. 

For example, one official noted that while OPM tries to point agencies 
in the right direction, it will not give agencies discrete 
requirements. This leads to uncertainty about what agencies must and 
should demonstrate to OPM. Some CHCOs and HR directors also told us 
that, in some cases, OPM changed expectations and requirements 
midstream with little notice or explanation. However, OPM explains that 
it intentionally allowed some ambiguity in the regulations for the new 
senior executive appraisal system, in an attempt to provide agencies 
with management flexibilities. A senior OPM official said OPM did not 
provide agencies with "best practices" examples because OPM did not 
want agencies to think there was only one "right" way to get certified. 

Agencies also indicated that because OPM did not issue guidance for 
calendar year 2006 submissions until January 5, 2006, some were unable 
to deliver their submissions to OPM before the beginning of the 
calendar year. Further, OPM clarified this guidance in a January 30, 
2006, memorandum to agencies, telling agencies that senior executive 
performance appraisal systems would not be certified for calendar year 
2006 if the performance plans did not hold senior executives 
accountable for achieving measurable business outcomes. As a result, 
agencies had to revise their submissions, where necessary, to meet 
OPM's additional requirements. 

Some agencies indicated that OPM's late issuance of guidance also 
created an uneven playing field among agencies, as those that chose to 
wait until OPM issued guidance before applying for certification were 
unable to give their senior executives higher pay, while those who did 
not wait got certified sooner. OPM officials we spoke with about this 
agreed that they need to be able to provide clear and consistent 
guidance to agencies and said they are working to improve this. 
Further, they said their evaluation of agencies' submissions is 
evolving as their understanding of the senior executive certification 
criteria is increasing. 

OPM's Role in Evaluating and Monitoring the Pay-for-Performance System: 

The regulations include several positive internal checks and balances 
that should help maintain the rigorous application of the new senior 
executive pay system. As I noted earlier, agencies granted full 
certification are to have their systems renewed for an additional 2 
calendar years and agencies granted provisional certification are to 
reapply for certification after 1 calendar year in order to continue 
setting the rate of basic pay for senior executives at the higher 
level. In addition, OPM can suspend certification at any time during 
the certification period if it determines, with OMB concurrence, that 
the agency's system is not in compliance with the certification 
criteria. OPM's regulations also require review of each senior 
executive's rating by a performance review board appointed by the 
agency head. As noted above, the regulations also require oversight of 
the performance appraisal system by the agency head who must certify 
that the system makes meaningful distinctions in relative performance. 

According to OPM data, 26 performance management systems at 24 agencies 
were certified during calendar year 2006.[Footnote 9] Of these 26, only 
the Department of Labor's system received full certification. As of 
September 19, 2006, the remaining 25 systems received only provisional 
certification. These findings are not surprising. In our April 2005 
testimony before this Subcommittee, we stated that a number of agencies 
would be challenged in the short term to provide the necessary 
performance data on their senior executives in order to receive full 
certification or to maintain their certification (agencies must provide 
2 years of performance rating and bonus data showing that meaningful 
distinctions in senior executive performance were made to 
qualify).[Footnote 10] Other factors might also be at work. For 
example, a number of agencies have told us that the certification 
process is burdensome. One agency said that OPM's requirements for the 
certification of a submission are time intensive, laborious, and can 
disrupt an agency's recruitment and retention efforts. 

As we also noted at the April 2005 hearing, OPM will need to carefully 
monitor the implementation of agencies' performance management systems, 
especially those that have provisional certification. This is because, 
as I have stated earlier, agencies with provisional certification can 
still receive the flexibilities of the new pay system, even though they 
do not meet all of OPM's certification requirements. In other words, 
agencies can receive the benefits of the new pay-for-performance system 
without meeting all of its requirements and safeguards. We believe 
that, going forward, it will be important for OPM to continue to 
monitor the certification process, determine whether any obstacles are 
impeding agencies from receiving full certification, and take 
appropriate measures to address them. These actions will help ensure 
that agencies continue to make substantive progress toward modernized 
performance management systems, and that provisional certifications do 
not become the norm. 

Once agencies have provisional or full certification, OPM monitors 
senior executive performance appraisal systems by measuring the 
distributions of agencies' performance ratings and pay. This 
information helps OPM determine if agencies are making meaningful 
distinctions among the performance of their senior executives. Such 
distinctions are important because effective performance management 
requires the organization's leadership to make meaningful distinctions 
between acceptable and outstanding performance and appropriately reward 
those who perform at the highest level. 

In its Report on Senior Executive Pay for Performance for Fiscal Year 
2005, OPM stated that the data indicate that federal agencies are 
taking seriously the requirement to develop rigorous appraisal systems 
and to make meaningful distinctions in performance ratings and pay. All 
reporting agencies have moved away from pass/fail appraisal systems and 
now have at least one performance level above "fully successful." In 
2005, 43 percent of career SES governmentwide were rated at the highest 
performance level, compared to 75 percent in 2003 prior to the 
implementation of the SES pay-for-performance system. Further, OPM 
reported for fiscal year 2005 that the percentage of SES rated at the 
highest performance level declined 16 percent from the prior year. OPM 
also reported that the largest increases in salary went to SES rated at 
the highest performance level. Although SES pay and performance award 
amounts vary by agency based on factors such as compensation strategy, 
funding, and agency performance levels, OPM believes these general 
trends suggest a further refinement may be occurring in the process of 
distinguishing outstanding performers. 

Concluding Remarks: 

As we have said in our prior reports and testimonies, senior executives 
need to lead the way in transforming their agencies' cultures to be 
more results oriented, customer focused, and collaborative in nature. 
Credible performance management systems, specifically those that (1) 
align individual, team, and unit performance to organizational results; 
(2) contain built-in safeguards; and (3) are effectively implemented, 
can help manage and direct this process. 

The pay-for-performance system for the government's senior executives 
that I have discussed today is an important milestone on the march 
toward modern compensation systems that are more market based and 
performance oriented. Although OPM and agencies have encountered 
various challenges in implementing the system, such challenges are not 
surprising given the cultural shift that the new system represents. 
Moreover, just 2 years have passed since OPM issued its regulations for 
certifying agencies' pay-for-performance systems, and some growing 
pains are to be expected given agencies' lack of experience with 
performance management systems that meet OPM's requirements. Moving 
forward, what will be important is how OPM works with agencies to 
provide the tools and resources they need to design and implement 
performance management systems that meet the certification criteria in 
as streamlined a fashion as possible. 

The lessons learned in implementing the senior executive pay-for- 
performance system will be critical to modernizing the performance 
management systems under which other federal employees are compensated. 
In particular, establishing an explicit line of sight between 
individual, team, and unit performance and organizational success, as 
well highlighting opportunities to improve guidance, communications, 
transparency, and safeguards, will serve the government well moving 
forward. We stand ready to assist OPM and Congress in exploring and 
implementing these critical human capital reforms. 

Chairman Voinovich, Senator Akaka, and Members of the Subcommittee, 
this completes my prepared statement. I would be pleased to respond to 
any questions that you may have. 

Contact and Acknowledgments: 

For further information regarding this statement, please contact Brenda 
S. Farrell, Acting Director, Strategic Issues, at (202) 512-6806 or 
farrellb@gao.gov. Individuals making key contributions to this 
statement include Carole J. Cimitile, William Colvin, Laura Miller 
Craig, William Doherty, Robert Goldenkoff, Janice Latimer, Trina Lewis, 
Jeffrey McDermott, and Michael Volpe. 

FOOTNOTES 

[1] GAO, Human Capital: Senior Executive Performance Management Can Be 
Significantly Strengthened to Achieve Results, GAO-04-614 (Washington, 
D.C.: May 26, 2004). 

[2] GAO, Results-Oriented Cultures: Using Balanced Expectations to 
Manage Senior Executive Performance, GAO-02-966 (Washington, D.C.: 
Sept. 27, 2002). 

[3] Pub.L. No.108-136, Nov. 24, 2003. 

[4] GAO, Human Capital: Trends in Executive and Judicial Pay, GAO-06-
708 (Washington, D.C.: June 21, 2006). 

[5] GAO, Results-Oriented Cultures, Creating a Clear Linkage between 
Individual Performance and Organizational Success, GAO-03-488 
(Washington, D.C.: Mar.14, 2003). 

[6] GAO, Defense Transformation: Preliminary Observations on DOD's 
Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, D.C.: 
Apr. 29, 2003), p. 8. 

[7] GAO, Human Capital: Implementing Pay for Performance at Selected 
Personnel Demonstration Projects, GAO-04-83 (Washington, D.C.: Jan. 23, 
2004). 

[8] GAO, Office of Personnel Management: OPM is Taking Steps to 
Strengthen Its Internal Capacity for Leading Human Capital Reform, GAO-
06-861T (Washington, D.C: June 27, 2006). 

[9] An agency may have multiple performance management systems for 
senior employees--including SES and SL/ST members--and an agency must 
apply to OPM for certification of each system separately. In 2006, the 
National Aeronautics and Space Administration received separate 
certification for its Inspector General's Office and the Department of 
Defense received separate certification for its SL/ST systems. 

[10] GAO, Human Capital: Agencies Need Leadership and the Supporting 
Infrastructure to Take Advantage of New Flexibilities, GAO-05-616T 
(Washington, D.C.: Apr. 21, 2005). 

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