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Setting the Stage for Performance Management Today This document summarizes the following key factors that have helped set the stage for the current performance management approaches:
The Centralized Federal Performance Management System. The Civil Service Reform Act of 1978 brought performance appraisal to the center of many aspects of personnel management. The Governmentwide system was standardized in the mid-1980's to use five rating levels and establish strict links between ratings and related personnel actions such as cash awards. Over the years, dissatisfaction with this one-size-fits-all approach increased. Rating inflation grew steadily and the entire system lost its credibility for all its stakeholders.
Previous Studies on Performance Appraisal. Several committees studied and recommended changes for the Federal performance appraisal system. In 1990, the Committee on Performance Appraisal for Merit Pay, a National Research Council committee established at OPM's request, reviewed current research on performance appraisal and merit pay and supplemented the research findings with an examination of the practices of private sector employers. In 1991, the Pay-for-Performance Labor-Management Committee examined ways to strengthen the linkage between the performance of Federal employees and their pay. Also that year, the Performance Management and Recognition System (PMRS) Review Committee was established to review and recommend improvements to the PMRS system of merit pay for the Government's mid-level managers. All three committees concluded that an appraisal approach must be flexible and decentralized so that it would be able to fit its context of both work technology and organization culture. Consensus was also clear about the value of involving employees in the design and implementation of appraisal and awards systems for increasing credibility and acceptance.
Additional Recommendations for Change. In its initial report, From Red Tape to Results (1993), the National Performance Review recommended a decentralized approach to performance management that would encourage employee involvement in system design, focus on improving performance, and maintain individual accountability. In its more detailed accompanying report, Reinventing Human Resource Management (1993), the NPR was more specific, proposing that decentralized systems should be developed by managers and employees and their representatives; policies should be revised to support team structures; and pass/fail appraisal should be possible. The National Partnership Council also supported the NPR recommendations and noted the shared interest of both labor and management to foster high-performance organizations. The President's Management Council called for more flexibility and decentralization, while emphasizing using appraisal to establish and maintain individual accountability.
Stakeholder Interests. Many stakeholders had voiced concerns about the Federal performance management system as it operated prior to the 1995 regulations. Employees were dissatisfied with the old system; it was the single greatest source of grievances. Unions expected change to the system based on the recommendations in the Pay-for-Performance Labor-Management Committee report. Management associations expected change based on the recommendations in the PMRS Review Committee report. Taxpayers wanted to see pay-for-performance and individual performance accountability systems for Federal employees in part because many believe that service is poor, that mediocre performance is tolerated, and that pay raises are automatic. Federal managers had been demanding change and expressing growing frustration with the system that did little to add value or help them actually manage performance. And Congress had expressed the strong need to maintain individual accountability through the appraisal process and to ensure that rewards are allocated appropriately and can be justified.
Conflicting Purposes. A principal source of these problems and stakeholders' concerns lay in the underlying conflict between two purposes system designers intended for the performance management procedures and requirements. First, performance appraisal was to be the means of establishing and maintaining individual accountability and the basis for making decisions about rewards and sanctions. But it was also supposed to lead to improved employee and agency performance. Experience has demonstrated that the hard links between ratings and rewards have led inexorably to inflated ratings against standards that do not serve as effective performance targets and stretch goals. While the private sector has not solved the problems this dual use of performance management systems can produce, it does appear that organizational commitment to the performance management system reduces the problems that occur when the summary appraisal is the focus of the system. When the emphasis is on managing—rather than primarily judging—performance, frequent feedback to performers allows for correction of performance deficiencies before the summary appraisal is made.
Credibility Requires Improved Measurement. As important as achieving a more effective balance between the reward allocation and performance improvement purposes of performance appraisal may be, the real key to increasing the credibility and utility of performance management processes lies in improving the performance measures that are used. Emphasizing individual accountability led to agencies establishing performance elements and standards that extracted process-input tasks and responsibilities from position descriptions. Although they were appropriate and usable for sustaining performance-based adverse actions before the Merit Systems Protection Board, such elements and standards often did not lend themselves to results measurement or goal setting. Also, although measuring individual outputs and results is usually possible, it may not be cost effective compared to the performance management value of measuring group or team outputs and results.
Governmentwide Performance Initiatives That Link to Performance Management.
Fortunately, several Governmentwide initiatives are leading agencies to reexamine and
improve their performance measures. The 1995 performance management regulations are primed
to use those measures for managing and rewarding employees. Key performance initiatives
require agencies to set goals and standards and to measure their performance in terms of
results. When employee and group performance plans are aligned with these agency goals,
everyone's efforts are focused on goal
achievement and improving organizational performance. Setting goals and measuring performance
are part of an effective performance management process. The Government Performance and
Results Act of 1993 (GPRA) provides for the establishment of strategic planning and
performance measurement in the Federal Government. It requires agencies to develop
strategic plans and performance plans for program activities. Those performance plans
establish objective, quantifiable, and measurable goals; establish performance indicators;
and provide a basis for comparing program results with plan goals. And on September 7,
1993, President Clinton issued Executive Order 12862, "Setting
Customer Service Standards," which requires
agencies to identify and survey their customers; post customer service standards and
measure results against them; and publish a customer service plan that includes customer
service standards and describes future plans for customer surveys.
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