United States Government Accountability Office

GAO Report to Congressional Requesters

OFFICE OF 

PERSONNEL 

MANAGEMENT 

Key Lessons Learned 

to Date for 

Strengthening 

Capacity to Lead and 

Implement Human 

Capital Reforms 

January 2007 

 

GAO-07-90 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

January 2007

OFFICE OF PERSONNEL MANAGEMENT

Key Lessons Learned to Date for 

Strengthening Capacity to Lead and 

Implement Human Capital Reforms 

Highlights of GAO-07-90, a report to

congressional requesters

www.gao.gov/cgi-bin/getrpt?GAO-07-90.

To view the full product, including the scope 

and methodology, click on the link above.

For more information, contact Brenda S.

Farrell at (202) 512-6806 or farrellb@gao.gov.

As the agency responsible for the 

federal government’s human

capital initiatives, the Office of

Personnel Management (OPM)

must have the capacity to

successfully guide human capital

transformations necessary to meet 

the governance challenges of the 

21st century. Given this key role, 

GAO was asked to assess OPM’s 

capacity to lead further reforms. In

June 2006, GAO testified on several

management challenges that OPM

faces. This report—the second in a 

series—supplements that

testimony and, using the new

senior executive performancebased pay system as a model for

understanding OPM’s capacity to

lead and implement reform, 

identifies lessons learned that can

inform future reforms. GAO 

analyzed relevant laws and

documents, and obtained views 

from the Chief Human Capital

Officers (CHCO) Council and 

human resource directors, the 

Office of Management and Budget

(OMB) staff, and OPM officials. 

What GAO Recommends

GAO is making recommendations 

to the Director of OPM to improve 

OPM’s capacity for future reforms 

by reexamining agencywide skills, 

and to address issues specific to

the senior executives’ pay systems, 

such as sharing best practices and

tracking progress towards goals. In

commenting on a draft of this 

report, OPM stated it has made

progress toward achieving its 

operational and strategic goals, but

neither agreed nor disagreed with

GAO’s recommendations. 

The congressionally authorized senior executive performance-based pay

system, implemented in 2004, provides an opportunity to learn from

experiences gained and apply those lessons to the design and

implementation of future human capital reforms. Under the performancebased system, before an agency can receive the new pay flexibilities, OPM, 

with concurrence from OMB, must certify that the agency’s appraisal system 

meets certain criteria. OPM is likely to play a similar leadership and

oversight role for future reforms. 

Lessons Learned from the Performance-based System and Other Human Capital Initiatives 

Ensure internal

OPM capacity to

lead and 

implement reform

Executive branch agencies noted a lack of knowledge and experience 

among OPM staff to design and implement key human capital

transformation efforts. GAO analysis of available OPM employee feedback 

data suggests that employees may not be receiving sufficient training to

enhance their skills and competencies. OPM has begun aligning its 

workforce skills to meet future needs but has not conducted an agencywide

skills assessment since updating its key strategic management documents.

Lesson: Ensure that OPM’s workforce is properly aligned to successfully 

design and implement human capital reforms, such as knowledge of

innovative classification and pay and compensation approaches, and

continue to prepare the workforce to meet changing demands of the future.

Ensure that 

executive branch

agencies’

infrastructures 

support reform

OPM’s approach to certifying agencies’ senior executive performance-based 

systems should more fully promote the building of the institutional

infrastructure, such as robust performance management systems with

adequate safeguards, within agencies needed to effectively implement the

reforms. Lesson: Assist agencies in building the necessary infrastructure for 

a performance-based system by providing front-end and ongoing 

involvement—building on progress made to date.

Collaborate with 

CHCO Council

Executive branch agencies said the certification process was a missed 

opportunity for OPM to better collaborate with the CHCO Council. One 

agency CHCO said OPM traditionally uses council meetings to present

information to the CHCOs, but does not always encourage discussions or 

seek input. Lesson: Cultivate effective partnerships with the CHCO Council

by engaging them to solicit their ideas and suggestions during system

design to build consensus and develop momentum for success. 

Develop clear and

timely guidance

The lack of clear and timely guidance from OPM created confusion as

agencies attempted to understand and implement the broadly defined 

regulatory criteria for certification. Lesson: Provide agencies with clear and 

timely guidance—being sensitive to other ongoing human capital activities—

to reach a common, consistent understanding and promote efficiency as

agencies adjust to new requirements for reforms. 

Share best

practices 

Executive branch agencies said OPM could have better facilitated sharing 

best practices to help them implement senior executive performance-based 

systems. Lesson: Facilitate the sharing of best practices for implementing 

human capital reforms by providing forums for agencies to learn from each

others’ experiences, share successful strategies, and avoid common pitfalls.

Solicit and 

incorporate 

feedback 

Executive branch agencies said there was no formal mechanism, such as a

customer survey, for them to provide feedback to OPM on its guidance and 

assistance. Lesson: Solicit feedback from executive branch agencies and 

incorporate to improve the implementation of human capital reforms. 

Track progress to 

ensure 

accountability 

OPM does not have an evaluation strategy for tracking the progress of the

agencies’ implementation of the new executive systems. Lesson: Develop 

a strategy to allow OPM, other federal agencies, and Congress to monitor 

progress toward achieving human capital reform goals. 

Source: GAO analysis. 
Contents 

Letter 1

Results in Brief 3

Background 9

Key Lessons Learned from the Senior Executive Performancebased Pay System and Other Human Capital Initiatives 14 

Conclusions 35

Recommendations for Executive Action 35 

Agency Comments and Our Evaluation 36 

Appendix I Scope and Methodology 38 

Appendix II Description of the Senior Executive Performance-based 

Pay System Certification Process 40 

Appendix III Agency Certification Status for Calendar Years 2004, 

2005, and 2006 as of October 2006 44 

Appendix IV Comments from the Office of Personnel Management 46 

Appendix V GAO Contact and Staff Acknowledgments 48 

Tables 

Table 1: Lessons Learned from the Performance-based System and 

Other Human Capital Initiatives 4 

Table 2: Senior Executive Performance Appraisal System 

Certification Criteria 41 

Figure 

Figure 1: Overview of Senior Executive Performance Appraisal 

System Certification Process 43 

Page i GAO-07-90 Key Lessons Learned 
Abbreviations 

CHCO Chief Human Capital Officer 

CPDF Civilian Personnel Data File 

DHS Department of Homeland Security 

DOD Department of Defense 

DOL Department of Labor 

EEO Equal Employment Opportunity 

EEOC Equal Employment Opportunity Commission 

FDIC Federal Deposit Insurance Corporation 

FHCS Federal Human Capital Survey 

GSA General Services Administration 

HCAAF Human Capital Assessment and Accountability Framework

HCLMSA Human Capital Leadership and Merit System Accountability 

HCO Human Capital Officer 

HR Human Resources 

HUD Department of Housing and Urban Development 

NASA National Aeronautics and Space Administration

NSPS National Security Personnel System 

OMB Office of Management and Budget 

OPM Office of Personnel Management 

PAAT Performance Appraisal Assessment Tool 

PMA President’s Management Agenda 

SBA Small Business Administration 

SES Senior Executive Service 

SHRP Strategic Human Resources Policy 

SL senior-level position 

ST scientific or professional position 

Page ii GAO-07-90 Key Lessons Learned 
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other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page iii GAO-07-90 Key Lessons Learned 
United States Government Accountability Office

Washington, DC 20548 

January 19, 2007 

The Honorable Joseph I. Lieberman 

Chairman 

The Honorable Susan M. Collins 

Ranking Minority Member 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Daniel K. Akaka 

Chairman 

The Honorable George V. Voinovich

Ranking Minority Member 

Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

Strategic human capital management is the centerpiece of federal 

agencies’ efforts to transform to meet the governance challenges of the 

21st century. Congress has provided agencies with exemptions from the 

old rules and with new hiring flexibilities to more strategically manage 

their workforces to help meet current and emerging demands, and the 

Department of Defense (DOD) and the Department of Homeland Security 

(DHS) are implementing legislated human capital reforms affecting 

performance-based pay systems, among other things. Strategic human 

capital management has become more important as changes in workforce 

demographics pose additional challenges. Baby boomers are likely to 

begin retiring in large numbers in the near future, while at the same time 

the labor force is growing at a much slower rate. Thus, those leaving jobs 

will outnumber those seeking jobs, further challenging the federal 

government to ensure that it recruits, hires, trains, develops, and motivates

the talent it needs to achieve meaningful results and to be competitive 

with the private sector. 

Senior executives need to lead the way in transforming their agencies to 

become more results oriented, collaborative in nature, and customer 

focused. Also, we have reported that the shift to market-based and more 

Page 1 GAO-07-90 Key Lessons Learned 
performance-oriented pay must be part of a broader strategy of change

management and performance improvement initiatives and cannot be 

simply overlaid on existing ineffective performance management systems.1

In 2003, Congress authorized a new performance-based pay system for 

members of the Senior Executive Service (SES). The Office of Personnel 

Management (OPM) has a key leadership role in leading and implementing 

this new system as well as other human capital initiatives and reforms. 

Thus, the lessons learned from implementing the new senior executive

performance appraisal system (the foundation of the SES pay reforms) 

and other governmentwide human capital initiatives provide valuable 

insight into OPM’s capacity to lead and implement human capital reforms. 

As the federal government’s human capital leader, OPM must have the 

capacity to effectively assist agencies and to successfully lead and 

implement these important human capital management transformations. 

To enhance its capacity to do so, OPM is working to transform its own 

organization from less of a rulemaker, enforcer, and independent agent to 

more of a consultant, toolmaker, and strategic partner. As reform 

initiatives move forward, it is increasingly important for OPM to complete 

this transformation and clearly demonstrate its capacity to lead and

implement such reforms. 

Given the importance of OPM’s key role, you asked us to assess the extent

to which OPM has the capacity to lead and implement governmentwide 

human capital reform. In June 2006, we testified before the Subcommittee 

that while OPM has made progress towards transforming itself to be a 

more effective leader of human capital reform, it could build upon this 

progress by addressing a number of management challenges.2

 This report 

supplements the information we provided in our June 2006 testimony, and 

as agreed with your offices is the second in a series of reports, and 

specifically identifies lessons that can be learned from OPM’s efforts to 

lead and implement the senior executive performance-based pay system

and other human capital initiatives that can be applied to ongoing and 

future human capital reform efforts. OPM officials agreed that its role in 

certifying senior executive performance appraisal systems is illustrative of

 1

GAO, Human Capital: Symposium on Designing and Managing Market-Based and More

Performance-Oriented Pay Systems, GAO-05-832SP (Washington, D.C.: July 27, 2005). 

2

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). 

Page 2 GAO-07-90 Key Lessons Learned 
the challenges OPM faces related to future human capital legislative 

reforms. As you have requested, we will continue to follow up on these 

and other issues related to OPM’s capacity to lead and implement human 

capital reforms including issues raised in our June 2006 testimony on 

OPM’s (1) leadership; (2) talent and resources; (3) customer focus, 

communication, and collaboration; and (4) performance culture and 

accountability. 

For this report, we reviewed and analyzed key documents related to the

senior executive performance-based pay system, including the legislation 

that authorized the pay flexibilities and the OPM and Office of 

Management and Budget (OMB) regulations developed to administer these 

systems. We also reviewed and analyzed other documents related to 

OPM’s process for certifying agency performance appraisal systems and 

conducted interviews with OPM’s five associate directors and other OPM 

staff, as well as staff from OMB involved in the appraisal system 

certification process. To obtain agency views on their experiences with 

the certification process, we interviewed 22 of the 23 members of the 

Chief Human Capital Officers (CHCO) Council and their corresponding 

agency human resource (HR) directors and obtained written responses 

from the 1 agency we did not interview. We also drew from our June 2006 

testimony that included data from the Civilian Personnel Data File (CPDF) 

and our analysis of the 2004 Federal Human Capital Survey (FHCS),3

 2005 

OPM focus groups, and 2006 OPM action plans to address problems 

identified. We also reviewed OPM’s March 2006 strategic and operational 

plan, associated workforce planning documents, and documentation on 

other OPM human capital initiatives, such as the Performance Appraisal 

Assessment Tool (PAAT) and agency beta sites for performance 

management below the senior level. Appendix I contains a detailed 

discussion of our scope and methodology. We conducted our work from

October 2005 to September 2006, in accordance with generally accepted 

government auditing standards. 

The congressionally authorized senior executive performance-based pay 

system, implemented in 2004 as well as OPM’s implementation of other 

governmentwide human capital initiatives, provides an opportunity to 

learn from experiences gained and apply those lessons to the 

Results in Brief 

 3

OPM developed the governmentwide Federal Human Capital Survey to assist agencies and 

OPM in better understanding specific and governmentwide agency workforce management 

conditions and practices in the areas of leadership, performance culture, and talent. 

Page 3 GAO-07-90 Key Lessons Learned 
implementation of future human capital reforms. More specifically, OPM 

has a key leadership and oversight role in the design and implementation 

of agencies’ senior executive performance-based pay systems and is likely 

to play a similar role in governmentwide human capital reform. For 

example, to qualify for the pay flexibilities under the statute, OPM must 

certify and OMB must concur that an agency’s senior executive appraisal

system meets specific criteria jointly developed by OPM and OMB. For 

lessons learned that can inform the design and implementation of 

additional human capital reforms, see table 1. 

Table 1: Lessons Learned from the Performance-based System and Other Human Capital Initiatives 

Ensure internal OPM capacity to 

lead and implement reform 

Executive branch agencies noted a lack of knowledge and experience among OPM staff to design 

and implement key human capital transformation efforts. GAO analysis of available OPM employee 

feedback data suggests that employees may not be receiving sufficient training to enhance their 

skills and competencies. OPM has begun aligning its workforce skills to meet future needs but has 

not conducted an agencywide skills assessment since updating its key strategic management 

documents. Lesson: Ensure that OPM’s workforce is properly aligned to successfully design and 

implement human capital reforms, such as knowledge of innovative classification and pay and 

compensation approaches, and continue to prepare the workforce to meet changing demands of 

the future. 

Ensure that executive branch 

agencies’ infrastructures support 

reform 

OPM’s approach to certifying agencies’ senior executive performance-based systems should more 

fully promote the building of the institutional infrastructure, such as robust performance 

management systems with adequate safeguards, within agencies needed to effectively implement 

the reforms. Lesson: Assist agencies in building the necessary infrastructure for a performancebased system by providing front-end and ongoing involvement—building on progress made to date. 

Collaborate with CHCO Council Executive branch agencies said the certification process was a missed opportunity for OPM to 

better collaborate with the CHCO Council. One agency CHCO said OPM traditionally uses council 

meetings to present information to the CHCOs, but does not always encourage discussions or seek 

input. Lesson: Cultivate effective partnerships with the CHCO Council by engaging them to solicit 

their ideas and suggestions during system design to build consensus and develop momentum for 

success. 

Develop clear and timely 

guidance 

The lack of clear and timely guidance from OPM created confusion as agencies attempted to 

understand and implement the broadly defined regulatory criteria for certification. Lesson: Provide 

agencies with clear and timely guidance—being sensitive to other ongoing human capital 

activities—to reach a common, consistent understanding and promote efficiency as agencies adjust 

to new requirements for reforms. 

Share best practices Executive branch agencies said OPM could have better facilitated sharing best practices to help 

them implement senior executive performance-based systems. Lesson: Facilitate the sharing of 

best practices for implementing human capital reforms by providing forums for agencies to learn 

from each others’ experiences, share successful strategies, and avoid common pitfalls. 

Solicit and incorporate feedback Executive branch agencies said there was no formal mechanism, such as a customer survey, to 

provide feedback to OPM on its guidance and assistance. Lesson: Solicit feedback from executive 

branch agencies and incorporate to improve the implementation of human capital reforms. 

Track progress to ensure 

accountability 

OPM does not have an evaluation strategy for tracking the progress of the agencies’ 

implementation of the new executive systems. Lesson: Develop a strategy to allow OPM, other 

federal agencies, and Congress to monitor progress toward achieving human capital reform goals. 

Source: GAO analysis.

Page 4 GAO-07-90 Key Lessons Learned 
Ensure internal OPM capacity to lead and implement reform.

Executive branch agency experiences with implementing the senior 

executive performance-based pay systems and other human capital efforts

point to a lack of knowledge and experience among OPM staff, and a 

majority of agency CHCOs and HR directors expressed concern with 

OPM’s ability to generally provide timely and accurate guidance to 

agencies both now and in the future. OPM’s capacity in technical areas 

such as pay and compensation may be dependent upon a few employees 

skilled in these areas. Also, our analysis of available OPM data suggests 

that overall employees may not be receiving sufficient training to enhance 

their skills and competencies. The problem of a lack of knowledge and 

experience may be compounded by the potential loss of institutional 

knowledge. OPM’s succession planning data show that as of July 2006, 

nearly half of its 376 supervisors, managers, and executives were eligible

for either early or regular retirement. Based on historical trend data, OPM 

projects an overall loss (including retirements) of roughly 65 to 75 

supervisory, managerial, and executive positions per year. 

OPM has begun to align its workforce skills and competencies to meet 

additional requirements stemming from future reforms and other 

environmental changes. For example, OPM conducted agencywide skills 

and competencies assessments in 2001 and 2003, and has conducted skills 

assessments for certain targeted occupations. Validating skills and 

competencies is important because the workforce skills and competencies 

needed to be a strategic partner, toolmaker, or consultant may be different

from those needed in the past to be a rulemaker or enforcer of regulations.

Importantly, OPM has recently updated several of its key strategic 

management documents. For example, in March 2006, OPM issued its 

Strategic and Operational Plan, 2006-2010—the starting point and basic 

underpinning for transformation. In August 2006, OPM updated its 

Corporate Leadership Succession Management Plan to include all of its

supervisory, management, and executive positions with succession 

planning profiles that contain a list of specific and general technical 

competency requirements for each position. At the end of September 2006, 

OPM issued its Plan for the Strategic Management of OPM’s Human

Capital for fiscal years 2006-2007. A new agencywide skills assessment 

would enable OPM to better align its workforce with needed resources to 

meet current and emerging demands.

Ensure that executive branch agencies’ infrastructures support 

reform. OPM’s approach to certifying agencies’ senior executive 

performance appraisal systems could more fully promote the building of 

the institutional infrastructure, such as robust performance management 

Page 5 GAO-07-90 Key Lessons Learned 
systems with adequate safeguards, within agencies needed to effectively 

implement the executive performance and pay reforms. Overall, the 

regulations that OPM and OMB developed to administer a performancebased 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. Agencies that are authorized to implement the 

new pay flexibilities will receive either a provisional or full certification. 

Provisionally certified agencies receive the same pay flexibilities as those 

with fully certified systems, even though agencies with provisional 

certification do not meet all nine of the certification criteria. In essence, 

the provisional category of certification constitutes a phased approach to 

implementing performance-based pay systems by allowing agencies to 

work toward meeting the full certification requirements as they are 

implementing the new authorities. Of the 33 performance appraisal 

systems that have been certified in 2006, only the Department of Labor’s 

SES system received full certification. OPM has opportunities to build on

the progress it has made and further strengthen its efforts. More 

specifically, additional front-end and ongoing OPM involvement appears to 

be needed to assist agencies in achieving and maintaining full certification.

Executive branch agency officials said OPM’s role in the certification 

process focuses more on enforcing rules regarding applications for 

certification, rather than guiding and assisting agencies in building the 

necessary infrastructure for a performance-based pay system. This is 

especially true as the standards for full certification are evolving and

becoming more difficult to meet. 

Collaborate with CHCO Council. Executive branch agency officials 

said the certification process was a missed opportunity for OPM to better 

collaborate with the CHCO Council. One agency CHCO told us that OPM 

traditionally uses council meetings to present information to the CHCOs, 

but does not always encourage discussions or seek the council’s input. 

OPM officials indicated that they provided the CHCO Council with 

opportunities to discuss the certification process. However, some CHCOs 

wanted more involvement in crafting the fundamental design and 

applicable issues of the certification process, rather than commenting on 

draft regulations after the fact. For example, CHCOs were given a very 

short time frame of 24 hours to review and comment on the proposed 

certification criteria. 

Develop clear and timely guidance. The lack of clear and timely 

guidance from OPM created confusion as agencies attempted to 

understand and implement the broadly defined regulatory criteria and 

adjust to the requirements for certification. Officials at a majority of the 

Page 6 GAO-07-90 Key Lessons Learned 
CHCO Council agencies told us they did not have enough initial guidance 

to properly prepare for meeting the certification criteria, and this problem 

has continued beyond the initial release of the regulations. OPM officials 

we spoke with agreed that OPM needs to provide clear and consistent 

guidance to agencies and said they are working to improve this. These 

officials said the certification of agency pay systems has been an iterative,

learning process, and OPM is positioning itself to provide more guidance 

to agencies.

Share best practices. Executive branch agency officials told us that 

OPM could have better facilitated the sharing of best practices to help 

them implement their performance-based pay systems. For example, 

executive branch agency officials said best practices for developing senior

executive performance measures are needed to make their performance 

plans more results based, as required for certification. Recently, OPM has 

taken steps to share information among agencies. In September 2006, OPM 

provided agencies’ executive resource directors with samples of actual 

agency senior executive performance plans, though OPM did not specify

why these samples were selected and if they should serve as best practices 

for other agencies. 

Solicit and incorporate feedback. OPM does not actively solicit and act 

on feedback from agencies on the implementation of the certification 

process. Executive branch agency HR directors said there was not a 

formal mechanism, such as a survey instrument, for agencies to provide 

feedback to OPM on its guidance and assistance to agencies. An OPM 

executive confirmed that OPM does not have a formal feedback

mechanism; however, this official said OPM converses with agencies 

regularly, so OPM did not feel the need to obtain information in this way. 

Also, OPM does not capture senior executive perceptions of the new 

performance appraisal system, and further, OPM does not require agencies 

to gather feedback from senior executives who are directly affected by the 

new appraisal systems, even though agencies are approaching the fourth 

year of implementation.

Track progress to ensure accountability. OPM does not have an 

evaluation strategy to track the progress of the overall results of the senior 

executive performance-based systems. OPM is taking steps to monitor 

how agencies are making meaningful distinctions in senior executive

performance—one of the nine criteria it has developed for certifying 

agencies’ senior executive performance appraisal systems. Once agencies

have provisional or full certification, OPM monitors this criterion by 

measuring the distributions of agencies’ performance ratings and pay. We 

Page 7 GAO-07-90 Key Lessons Learned 
have reported that agencies seeking human capital reform should consider 

doing evaluations that are broadly modeled on the evaluation 

requirements of the OPM demonstration projects. Under the 

demonstration project authority, agencies must evaluate and periodically

report on results, implementation of the demonstration project, cost and

benefits, impacts on veterans and other equal employment opportunity 

groups, adherence to merit system principles, and the extent to which the 

lessons from the project can be applied governmentwide. 

In addition to the lessons learned that can be applied to future human 

capital reforms, we are making a recommendation to the Director of OPM 

to help ensure that OPM has the skills and competencies needed to 

effectively assist executive branch agencies with future human capital

reform efforts by reexamining OPM’s current agencywide competency 

assessment to reflect changes in the human capital environment and 

demands of the future. Also, to assist agencies in meeting the requirements 

for certification of their senior executive performance appraisal systems, 

we are making recommendations to the Director of OPM to (1) develop 

and publish a timeline for the issuance of certification guidance with the 

input of the CHCO Council; (2) evaluate alternatives that could remedy the 

year-end time compression that agencies face when trying to meet OPM 

application requirements and avoid a gap in certification; (3) work with 

the CHCO Council to develop a formal mechanism for sharing leading 

practices for implementing human capital initiatives, such as the senior 

executive appraisal system and other performance management reform 

initiatives; (4) develop a formal feedback mechanism to obtain agencies’ 

views on OPM’s implementation of the certification process; (5) work with 

executive branch agencies to develop a systematic approach for obtaining

employee attitudes towards human capital reforms; and (6) develop a 

strategy to allow OPM, other executive agencies, and Congress to monitor 

the progress of implementation of the senior executive performance-based 

pay system. 

We provided OPM a draft of this report for its review and comment and 

received a written response from the Director of OPM. Director Springer 

said OPM has made progress towards achieving its operational and 

strategic goals since she became Director of OPM. The Director provided 

information that while beyond the scope of the report, nonetheless is 

helpful in understanding the context in which OPM is operating. 

Specifically, she commented that OPM associates have worked together 

and with agencies to achieve the objectives that are tied to OPM’s 

Strategic and Operational Plan, 2006-2010, and since March 2006, OPM 

has achieved its plan’s objectives, on time or ahead of schedule. While 

Page 8 GAO-07-90 Key Lessons Learned 
OPM neither agreed nor disagreed with our recommendations, the agency 

provided a number of technical comments and, where appropriate, we 

have made changes to the report language to reflect these comments. 

Director Springer’s letter on our draft report is found in appendix IV. 

OPM’s mission and responsibilities are found in Title 5 of the U.S. Code, 

which provides for the effective implementation of civil service laws, 

rules, and regulations. OPM also evaluates the effectiveness of personnel 

policies, agency compliance with laws, rules, regulations and office 

directives, and agency personnel management evaluation systems. Overall, 

OPM manages the federal government’s human capital and is charged with

helping agencies shape their human capital management systems and 

holding them accountable for effective human capital management 

practices. OPM does this in such a way to help ensure that: (1) the federal 

government acquires, develops, manages, and retains employees with the 

knowledge, skills, and abilities needed to deliver services that the 

American public want and deserve; and (2) agencies consistently uphold 

governmentwide values, such as merit system principles, veteran’s 

preference, and workforce diversity. OPM is also responsible for 

administering retirement, health benefits, and other insurance services to

government employees, annuitants, and beneficiaries. 

Background 

In January 2001, we added strategic human capital management to our list 

of federal programs and operations identified as high risk.4

 In a July 2001 

report, we evaluated OPM’s goals and measures for assessing the state of 

human capital at federal departments and agencies and found weaknesses 

in OPM’s measures of workforce skills and employee accountability and

made recommendations to help address these issues, among other things.5

OPM has since taken action on our recommendations. In a January 2003 

report, we examined OPM’s progress towards its own transformation, as 

OPM shifts its role from less of a rule maker and enforcer to more of a 

consultant and strategic partner in leading and supporting agencies’ 

human capital initiatives. We concluded that OPM should exert greater 

leadership to prepare the way for human capital reform.6

 4

GAO, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: January 2001). 

5

GAO, Office of Personnel Management: Status of Achieving Key Outcomes and

Addressing Major Management Challenges, GAO-01-884 (Washington, D.C.: July 9, 2001). 

6

GAO, Major Management Challenges and Program Risks, Office of Personnel

Management, GAO-03-115 (Washington, D.C.: January 2003). 

Page 9 GAO-07-90 Key Lessons Learned 
In June 2006, we testified before the Subcommittee that OPM has made 

commendable efforts towards transforming itself to being a more effective 

leader of governmentwide human capital reform. We noted however, that

it could build upon that progress by addressing challenges that remain in 

four key areas: (1) leadership; (2) talent and resources; (3) customer 

focus, communication, and collaboration; and (4) performance culture and 

accountability.7

 First, in the area of leadership, we reported that 

information from OPM employees based on our analysis of the 2004 FHCS 

suggests that information from their top leadership does not cascade

effectively throughout the organization and that many employees do not 

feel their senior leaders generate a high level of motivation and 

commitment in the workforce. These views on leadership were more 

strongly expressed by employees in OPM’s Human Capital Leadership and 

Merit System Accountability (HCLMSA) division—one of OPM’s key 

divisions and a unit responsible for partnering with agencies and vital to 

successful human capital reform efforts. In May 2006, OPM developed a 

series of action plans to address issues raised in the 2004 FHCS, including

a number of planned actions to improve overall and cross-divisional 

communication and employee views of senior management. 

Second, we reported that in the area of talent and resources, OPM has 

made progress in assessing current workforce needs and developing 

leadership succession plans; however, if OPM is to lead governmentwide 

human capital reform it can do more to identify the skills and 

competencies of the new OPM, determine any skill and competency gaps, 

and develop specific steps to fill such gaps. Third, we reported that the 

views of agency CHCOs and HR directors as well as OPM employees show

that OPM can improve its customer service and communication with 

agencies and that guidance to agencies is not always clear and timely. 

Executive branch agency officials also pointed to OPM’s Human Capital 

Officer (HCO) structure as a frequent barrier to efficient customer 

response and felt there are greater opportunities for OPM to dialogue and 

collaborate with CHCOs and HR directors. Fourth, with respect to 

performance culture and accountability, we reported that OPM has made

progress in creating a “line of sight” or alignment and accountability 

across its leaders’ expectations and organizational goals in its strategic 

and operational plan; however, success in achieving governmentwide 

reform objectives will rest, in part, on OPM’s ability to align performance 

 7

GAO-06-861T. 

Page 10 GAO-07-90 Key Lessons Learned 
and consistently support mission accomplishment for all employees of the 

organization.

As Congress and other stakeholders have recognized the importance of 

strategic human capital management, several legislative changes have

occurred. In November 2002, Congress passed the Homeland Security Act

of 2002,8

 which created DHS and provided the department with significant

flexibility to design, in consultation with OPM, a modern human capital 

management system affecting approximately 180,000 personnel. 

Specifically, the legislation granted DHS certain exemptions from the laws 

governing federal civilian personnel management in Title 5 of the U.S. 

Code—providing DHS with certain human capital flexibilities to establish 

a contemporary human capital system that will enable it to attract, retain, 

and reward a workforce able to meet its critical mission.9

To address governmentwide human capital management challenges, Title

XIII of the Homeland Security Act, also cited as the Chief Human Capital 

Officers Act of 2002, established CHCO positions in 23 agencies to advise 

and assist the heads of agencies and other executive branch agency

officials in their strategic human capital management efforts. The act also

created the CHCO Council to advise and coordinate the activities of 

members’ agencies on such matters as the modernization of human 

resources systems, improved quality of human resources information, and 

legislation affecting human resources operations and organizations.10 The 

act also included significant provisions related to direct hire authority, the 

use of categorical ranking in the hiring of applicants instead of the “rule of 

three,” expansion of voluntary early retirement and “buy-out” authority, a 

requirement to discuss human capital approaches in Government 

Performance and Results Act reports and plans, and a provision raising the 

total annual compensation limit for senior executives and other senior 

professionals in agencies with performance appraisal systems that have

 8

Pub. L. 107-296, Nov. 25, 2002. 

9

Full implementation of the DHS personnel system has stalled due to an appeals court 

decision invalidating portions of the personnel regulations that deal with labor

management relations. DHS has begun to transition nonunion employees to the new pay

system and to train employees about the new system. 

10The 25-member CHCO Council is composed of the Director OPM, who serves as 

chairman; the Deputy Director for Management of OMB, who acts as vice chairman; the

CHCOs of the 15 executive departments; and the CHCOs of 8 additional agencies 

designated by the OPM Director. 

Page 11 GAO-07-90 Key Lessons Learned 
been certified by OPM and OMB as making meaningful distinctions in 

relative performance. 

In November 2003, the National Defense Authorization Act for Fiscal Year 

200411 provided DOD—the largest federal employer—with authority, in 

conjunction with OPM, to establish a flexible and contemporary human 

resources system, including a new (1) pay and performance management 

system, (2) appeals process, and (3) labor relations system—which 

together comprise the National Security Personnel System (NSPS). Like 

the Homeland Security Act, this legislation granted DOD certain 

exemptions from Title 5 of the U.S. Code and provided significant 

flexibility for designing NSPS, allowing for a new framework of rules, 

regulations, and processes to govern how defense civilian employees are 

hired, compensated, promoted, and disciplined. The NSPS would cover 

approximately 700,000 employees.12

Also, in the National Defense Authorization Act for Fiscal Year 2004, 

Congress authorized a new performance-based pay system for members of 

the SES.13 Under the new system, which took effect in January 2004, senior 

executives no longer receive annual across-the-board or locality pay 

adjustments. Executive branch agencies must now base pay adjustments 

for senior executives on individual performance and contributions to 

agency performance through an evaluation of their unique skills, 

qualifications, or competencies, as well as the individual’s current 

responsibilities. The new 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 appraisal 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). 

 11Pub. L. No. 108-136, Nov. 24, 2003. 

12As with the DHS personnel system, full implementation of the NSPS has stalled due to a 

federal district court decision invalidating the labor relations and adverse action portions

of the regulations. DOD has already placed 11,000 nonunion employees under the new

system and began transitioning another 66,000 employees to the system in October 2006. 

13Prior to passage of the act authorizing the pay flexibilities, in October 2000, OPM 

amended regulations for senior executive performance management to help agencies hold 

senior executives accountable for organizational results, a mandate that originates in the

Civil Service Reform Act of 1978. 

Page 12 GAO-07-90 Key Lessons Learned 
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 

appraisal 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.14 However, certification does not affect the maximum rate of 

basic pay of SL/ST employees. 

To qualify for these pay flexibilities, OPM must certify and OMB must 

concur that an agency’s senior executive performance appraisal system 

meets certification criteria jointly developed by OPM and OMB. Two levels 

of performance appraisal system certification are available to agencies: 

full and provisional. To receive full certification, which lasts for 2 calendar 

years, the design of agency systems must meet nine certification criteria 

and agencies must provide documentation of prior performance ratings to

demonstrate compliance with the criteria. Agencies can receive 

provisional certification, which lasts for 1 calendar year, if they have 

designed but not yet fully implemented a senior executive performance 

appraisal system, or do not have a history of performance ratings that 

meets the certification criteria. In September 2006, we testified before the 

Subcommittee that the certification criteria are generally consistent with 

our body of work identifying key practices for effective performance 

management systems.15 In addition, we testified that these senior executive 

and senior-level employee performance-based pay systems serve as an

important step for agencies in creating alignment or “line of sight” 

between executives’ performance and organizational results. A detailed 

description of the certification criteria and process is provided in 

appendix II.

 14This authority was granted under the Homeland Security Act of 2002, Pub. L. 107-296,

Nov. 25, 2002. 

15GAO, Human Capital: Aligning Senior Executives’ Performance with Organizational 

Results Is an Important Step Toward Governmentwide Transformation, GAO-06-1125T 

(Washington, D.C.: Sept. 26, 2006). 

Page 13 GAO-07-90 Key Lessons Learned 
The congressionally authorized senior executive performance-based pay 

system, implemented in 2004, as well as OPM’s implementation of other 

governmentwide human capital initiatives, provides an opportunity to 

learn from experiences gained and apply those lessons to the 

implementation of future human capital reforms. As OPM is likely to play a 

similar leadership and oversight role in future reforms, the following 

lessons learned may also assist OPM as it moves forward in the design and 

implementation of other human capital reforms and initiatives. 

To successfully transform or implement a large-scale change initiative 

such as governmentwide human capital reform, an organization must 

fundamentally reexamine its processes, organizational structures, and 

management approaches—including its workforce capacity. Strategic 

workforce planning addresses two critical needs: (1) aligning an 

organization’s human capital program with its current and emerging 

mission and programmatic goals, and (2) developing long-term strategies 

for acquiring, developing, and retaining staff to achieve programmatic 

goals. As mentioned previously, in 2003, we reported that OPM was 

undergoing its own transformation—from less of a rulemaker to more of a 

consultant in leading and supporting executive agencies’ human capital 

management systems.16 As the organization transforms and OPM works to 

balance rules and tools and change its organizational culture, it is critical 

that OPM examine its internal capacity to ensure its workforce has the 

competencies to meet the multiple demands of the future and successfully 

implement human capital reforms. In particular, we have reported that a 

one-size-fits-all approach to human capital management is not appropriate 

for the challenges and demands government faces and that there should be 

a governmentwide framework to guide human capital reform.17 Thus, it is 

particularly important that OPM’s workforce have the knowledge, skills, 

and abilities to understand how to balance the need for consistency across 

the federal government with the desire for flexibility, so that they can 

assist individual agencies in tailoring their human capital systems to best 

meet their needs. Striking this balance will not be easy to achieve, but is 

Key Lessons Learned 

from the Senior 

Executive 

Performance-based 

Pay System and Other 

Human Capital 

Initiatives 

Ensure Internal OPM 

Capacity to Lead and 

Implement Reform 

 16GAO-03-115. 

17GAO and the National Commission on the Public Service Implementation Initiative, 

Human Capital: Principles, Criteria, and Processes for Governmentwide Federal 

Human Capital Reform, GAO-05-69SP (Washington, D.C.: Dec. 1, 2004). 

Page 14 GAO-07-90 Key Lessons Learned 
necessary to maintain a governmentwide system that is responsive enough 

to adapt to agencies’ diverse missions, cultures, and workforces. 

Executive branch agency experiences with implementing the senior 

executive performance-based pay systems and other human capital efforts

point to a lack of knowledge and experience among OPM staff. Several

executive branch agency officials commented that OPM conveyed a “we’ll 

know it when we see it” method of communicating expectations, and was 

thus unable to effectively communicate to agencies their expectations 

regarding the senior executive performance appraisal system certification

process. In addition, executive branch agency officials told us they believe

the DOD and DHS human capital reform efforts severely taxed OPM 

technical resources, specifically pay and compensation employees. One 

CHCO surmised that OPM’s capacity is dependent upon a few key 

employees skilled in these areas, particularly innovative pay and 

compensation approaches. An OPM senior executive confirmed this, 

telling us that turnover and retirement were problematic for pay and 

compensation experts at OPM. Also, a majority of agency CHCOs, HR 

directors, and their staffs expressed concern about whether OPM 

generally has the technical expertise needed to provide timely and 

accurate human capital guidance and advice both now and in the future.

We previously reported that problems arose for many agencies when 

technical questions had to be communicated via OPM HCOs to the policy 

experts at OPM.18 This issue may have been magnified for some agencies 

by the frequent turnover or reassignments among HCOs. The HCO position 

was established in 2003 at OPM as part of its transformation efforts to help 

improve customer service to agencies.

19 An executive branch agency

official told us that her agency was assigned four different HCOs in the last 

18 months. According to OPM’s most recent strategic human capital plan, 

OPM recognizes that HCO staff will need to develop greater familiarity 

with areas beyond each individual’s technical expertise and plans for its 

staff to gain “cross-functional knowledge” through means such as staff 

participation on cross-functional work groups that address various 

initiatives, training opportunities, and other developmental assignments 

that lend themselves to professional growth and development. 

 18GAO-06-861T. 

19Within the HCMLSA division, OPM assigns one HCO as the main point of contact to each

agency of the President’s Management Council and one to each cluster of small agencies. 

Page 15 GAO-07-90 Key Lessons Learned 
Further, our analysis of OPM’s agency results from the 2004 FHCS and 

2005 follow-up focus group data suggest that OPM employees may not be

receiving sufficient training to enhance their skills and competencies. OPM 

employees were not as close to the employees in the rest of government in 

agreeing with the statement “I receive the training I need to perform my 

job.” Fifty-three percent of OPM employees agreed with this statement as 

compared with 60 percent of employees from the rest of government. 

Focus group participants selected this item as one of the most important 

issues for OPM to address—expressing the view that OPM’s culture does 

not support training, employees do not have time to attend training 

classes, and managers are not given sufficient and timely training budgets. 

An OPM executive supported these views, stating that it can be a struggle

to convince managers that people should attend training. A former senior 

OPM official told us that he did not have an overall budget, including 

training, for his department while at OPM. 

OPM has begun to align its workforce skills and competencies to meet 

additional requirements stemming from future reforms and other 

environmental changes. For example, OPM conducted agencywide skills 

and competencies assessments in 2001 and 2003, and has conducted skills 

assessments for certain targeted occupations—information technology, 

human resource management, and selected mission-critical positions. 

Validating skills and competencies is important because the workforce 

skills and competencies needed to be a strategic partner, toolmaker, or 

consultant may be different from those needed in the past to be a 

rulemaker or enforcer of regulations. Importantly, OPM has also updated 

several of its key strategic management documents. First, in March 2006, 

OPM issued its Strategic and Operational Plan, 2006-2010—the starting 

point and basic underpinning for transformation. The plan’s strength is in 

its definition of clear, tangible goals and deliverables. However, the plan 

does not include a description of the relationship between the long-term 

goals and annual goals. 

Second, in August 2006, OPM updated its Corporate Leadership 

Succession Management Plan to include all of its supervisory, 

management, and executive positions with succession planning profiles 

that contain a list of specific and general technical competency

requirements for each position. This is important because the problem of a 

lack of knowledge and experience at OPM may be compounded by the 

potential loss of institutional knowledge. In June 2006, we testified that 

Page 16 GAO-07-90 Key Lessons Learned 
without careful planning, employee attrition, including senior executives, 

could pose the threat of an eventual loss in institutional knowledge, 

expertise, and leadership continuity at OPM.20 OPM’s succession planning 

data show that as of July 2006, nearly half of its 376 supervisors, managers, 

and executives were eligible for either early or regular retirement. Based 

on historical trend data, OPM projects an overall loss (including 

retirements) of roughly 65 to 75 supervisory, managerial, and executive

positions per year. Even more recently, at the end of September 2006, 

OPM issued its Plan for the Strategic Management of OPM’s Human 

Capital for fiscal years 2006-2007. According to OPM’s strategic human 

capital plan, voluntary attrition among employees overall at OPM has 

averaged approximately 11 percent over a 3-year period and voluntary 

retirements comprised approximately 25 percent of separations from 2003 

to 2006. 

OPM has developed strategies to help support its succession planning 

objectives, such as providing resources to improve and develop the 

competence of internal candidate pools to develop deep “bench strength.” 

In addition, OPM plans to target recruitment efforts around the critical and 

core competencies it has identified for each position and to use 

recruitment incentives and flexibilities to attract the most desirable 

candidates. These succession planning efforts are important because 

leading organizations engage in broad, integrated succession planning 

efforts that focus on strengthening both current and future organizational 

capacity. 

OPM’s ability to lead and oversee human capital management policy 

changes that result from potential human capital reform could be affected

by its internal capacity and ability to maintain the right skills and 

competencies of its workforce, as well as an effective leadership team. 

The steps taken by OPM demonstrate progress in achieving its 

transformation and it must continue on this path by closely monitoring its 

actions to align its workforce to meet current and emerging demands. A 

new agencywide skills assessment would enable OPM to better align its 

workforce with needed resources to meet such demands. Building and 

maintaining expertise in areas that will be critical to future reforms, such 

as classification and pay and compensation policy, and ensuring that OPM 

employees receive opportunities for training and development that will 

help them in assisting agencies with the implementation of reforms, are 

 20GAO-06-861T. 

Page 17 GAO-07-90 Key Lessons Learned 
critical for future reform success. These workforce and training goals and 

objectives also should be included in the means and strategies developed 

in OPM’s strategic planning process. Moving forward, OPM can continue 

to monitor implementation of long-term strategies to better prepare its 

workforce for change and continue to build its workforce capacity to meet 

the demands of the future. 

Ensure That Executive 

Branch Agencies’ 

Infrastructures Support 

Reform 

We have reported that the federal government should follow a phased 

approach towards human capital reforms that meets a “show me” test.21

That is, each agency should be authorized to implement a reform only 

after it has shown it has met certain conditions, including having the 

institutional infrastructure in place necessary for success. This 

infrastructure includes, at a minimum, a modern, effective, credible, and 

validated performance management system that provides a clear linkage

between institutional, unit, and individual performance-oriented 

outcomes, as well as providing for adequate internal and external 

safeguards to ensure fairness, and prevent abuse, and is 

nondiscriminatory. The absolutely critical role that a solid infrastructure 

plays has been amply demonstrated by our own and other organizations’ 

experiences in shifting to market-based and more performance-oriented 

pay. These experiences have shown that market-based and performanceoriented pay reforms cannot be simply overlaid on existing ineffective 

performance management systems, but must be part of a broader strategy

of change management and performance improvement initiatives. As the 

leader of the federal government’s human capital strategies, OPM plays a 

key role in fostering and guiding improvements in all areas of strategic 

human capital management across the executive branch. As part of its key 

leadership role, OPM can assist—and as appropriate, require—the building 

of the infrastructures within agencies needed to successfully implement 

and sustain human capital reforms and related initiatives. OPM can do this

in part by encouraging continuous improvement and providing appropriate 

assistance to support agencies’ efforts. 

As we testified in September 2006, 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 

 21GAO, Human Capital: Preliminary Observations on the Administration’s Draft 

Proposed “Working for America Act”, GAO-06-142T (Washington, D.C.: Oct. 5, 2005). 

Page 18 GAO-07-90 Key Lessons Learned 
organizational results.22 However, OPM’s approach to certifying agencies’ 

senior executive performance appraisal systems could more fully promote 

the building of the institutional infrastructures needed to effectively

implement the senior executive performance and pay reforms. 

Under OPM and OMB regulations, agencies that are authorized to 

implement the new pay flexibilities will receive either a provisional or full 

certification. Provisionally certified agencies receive the same pay 

flexibilities as those with fully certified systems, even though agencies 

with provisional certification do not meet all nine of the certification 

criteria. In essence, the provisional category of certification constitutes a 

phased approach to implementing performance-based pay systems by 

allowing agencies to work toward meeting the OPM and OMB full 

certification requirements as they are implementing the new authorities. 

Of the 33 performance appraisal systems that have been certified in 2006,

only the Department of Labor’s system for its senior executives received 

full certification.23 The remaining 32 systems received provisional 

certification, the majority of which were provisionally certified for the 

third straight year. (See app. III for the list of agencies that have received 

certification of their performance appraisal systems since 2004.) 

An agency that is provisionally certified must reapply annually rather than

the every 2 years that is required of agencies with full certification. This 

annual reapplication process for agencies with provisional certification is 

important in order to help ensure continued progress in fully meeting 

congressional intent in authorizing the new performance-based pay 

system. Moreover, continuing scrutiny from OPM and OMB is important 

because there is no required time frame under which a provisionally 

certified agency must demonstrate it meets all the OPM and OMB criteria 

and thereby receive full certification. In that regard, OPM’s January 2006 

guidance required agencies with provisional certification to submit 

information to OPM and OMB showing improvements the agency has 

made in response to comments from those agencies. This requirement was 

underscored in OPM’s October 31, 2006, guidance for calendar year 2007,

that asked agencies to highlight in their certification request any 

description or evidence of improvements made as a result of comments 

from OPM or OMB in response to the agency’s 2006 certification 

submission. 

 22GAO-06-1125T. 

23The Department of Labor’s SL/ST system has not reached full or provisional certification. 

Page 19 GAO-07-90 Key Lessons Learned 
As noted, OMB and OPM’s efforts represent an important step in fostering 

“lines of sight” within the agencies. Nonetheless, OPM has opportunities to 

further strengthen its efforts. More specifically, additional front-end and 

ongoing OPM involvement appears to be needed to assist agencies in

achieving and maintaining full certification. Executive branch agency

officials said OPM’s role in the certification process focuses more on 

enforcing rules regarding applications for certification, rather than guiding 

an agency to build the necessary infrastructure for a performance-based 

pay system. In addition, these executive branch agency officials said OPM 

has helped them improve their pay systems, but they also said OPM should 

provide more active assistance during the design and implementation of 

the system rather than waiting to evaluate the end results. Further, an 

agency CHCO said OPM is not prepared to interact with agencies to 

progressively develop and sustain their senior executive performancebased pay systems over time once they get through the certification 

process. 

Since the certification process started in 2004, OPM has raised the bar for

certification by placing a greater emphasis on measurable business 

outcomes. Raising the bar in the spirit of continuous improvement is 

appropriate, but agencies can not achieve the higher standards unless they 

are continually building the foundations essential to support augmented 

requirements and new improvements. The only two agencies that were 

fully certified in 2004, the General Services Administration (GSA) and the 

Pension Benefit Guarantee Corporation, were unable to retain full 

certification when they reapplied in 2006. An official from one of these 

agencies said they applied for full certification in 2006, but received

provisional certification because OPM had raised the bar for meeting full

certification. The agency official stated that upon receiving full 

certification in 2004, OPM stopped communicating with the agency about 

new developments in the certification process. In addition, this official 

said they were “left in the dark” about how OPM’s certification standards 

were potentially changing, and how the process for certification was 

evolving. It was not until 4 months after they submitted their application to 

recertify their system that OPM raised concerns regarding “weak” 

executive performance measures, though this agency believed that it had

achieved the requirement according to OPM’s guidance. The agency opted 

to accept provisional certification rather than redo its senior executive 

performance plans and wait for full certification.

In general, OPM has recognized that agencies need more assistance and 

guidance developing an infrastructure to support performance 

management systems for executive branch employees below the senior 

Page 20 GAO-07-90 Key Lessons Learned 
executive level. OPM developed the Performance Appraisal Assessment 

Tool (PAAT) and has promoted performance management beta sites to 

address this need.24 The PAAT provides agencies with an assessment tool 

that focuses on the design and implementation of performance 

management systems, the training and development of supervisors, and 

the agency’s accountability for the system. The PAAT helps agencies 

identify weaknesses in their performance management systems and 

provides agencies an opportunity to develop a comprehensive strategy for 

revising its performance management practices to better support a resultsfocused performance culture. The beta sites give agencies an opportunity 

to test their nonexecutive performance management systems on a small 

scale before expanding them agencywide. 

Agencies and OPM use the PAAT to evaluate the progress of the beta sites.

This approach of evaluating and testing allows agencies to build internal 

capacity, gain experience, and demonstrate that they are prepared to link

pay to performance for all employees. However, as one executive branch

agency official noted, the PAAT is used more by OPM to ensure 

accountability than to build agency infrastructure. Similar to concerns 

expressed about the senior executive system certification process, an 

agency HR director said OPM does not provide “up-front” implementation

plans to agencies that outline the required agency investment and 

infrastructure needed to successfully meet new human capital

requirements. 

Going forward, OPM can help agencies build this infrastructure by 

designing its human capital reform efforts to promote and support 

continuous agency improvement. OPM will need to expand the focus of its 

efforts to help identify the obstacles that are impeding agencies from 

achieving desirable human capital outcomes, and then take appropriate 

measures to address them and set mutually agreed-upon goals for 

improvement. These actions will help ensure that agencies continue to 

make substantive progress toward modernized, credible performance 

management systems, and that provisional certifications do not become 

the norm. OPM can also take steps to define what it will take in terms of 

fact-based and data-driven analyses for agencies to demonstrate that they

 24In June 2006, OPM established its beta site for its HCLMSA division to align employee 

performance expectations with agency strategic goals. In fiscal year 2007, OPM told us it 

plans to expand its beta site to other divisions, which will then cover approximately 70 

percent of the agency. 

Page 21 GAO-07-90 Key Lessons Learned 
are ready to receive this certification, and then help agencies develop the

infrastructure necessary to produce these results. 

Collaborate with CHCO 

Council 

Our prior work has found that high-performing organizations strategically 

use partnerships and that federal agencies, such as OPM, must effectively

manage and influence relationships with organizations outside of their 

direct control. High-performing organizations strengthen accountability 

for achieving crosscutting goals by placing greater emphasis on 

collaboration, interaction, and teamwork across organizational 

boundaries, to achieve results that often transcend specific boundaries. 

Communicating with stakeholders is especially crucial in the public 

sector, where policy making and program management demand 

transparency and a full range of stakeholders and interested parties are 

concerned not only with what results are to be achieved, but also which 

processes are used to achieve those results.25 Our prior work has identified 

a number of opportunities where OPM could improve its collaboration 

with stakeholders. In 2003, we reported that the lack of coordination 

between OPM and GSA, the lead agencies for the governmentwide 

telework initiative, created confusion for federal agencies in implementing 

their individual telework programs.26 More recently, our review of 

oversight of Equal Employment Opportunity (EEO) requirements and 

guidance found little evidence of OPM coordination with the Equal 

Employment Opportunity Commission (EEOC). Insufficient understanding 

of OPM and EEOC’s mutual roles, authority, and responsibilities resulted 

in a lost opportunity to realize consistency, efficiency, and public value in 

federal EEO and workplace diversity human capital management 

practice.27 We have also reported that using interagency councils has 

emerged as an important leadership strategy in both developing policies 

and gaining consensus and consistent follow-through within the executive 

branch.28 With respect to human capital reforms, we have reported that the 

 25GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned for a

Department of Homeland Security and Other Federal Agencies, GAO-03-293SP 

(Washington, D.C.: Nov. 14, 2002). 

26GAO, Human Capital: Further Guidance, Assistance, and Coordination Can Improve

Federal Telework Efforts, GAO-03-679 (Washington, D.C.: July 18, 2003). 

27GAO, Equal Employment Opportunity: Improved Coordination Needed between EEOC 

and OPM in Leading Federal Workplace EEO, GAO-06-214 (Washington, D.C.: June 16,

2006). 

28GAO-06-861T. 

Page 22 GAO-07-90 Key Lessons Learned 
CHCO Council should be a key vehicle for this needed collaboration and is

vital to addressing crosscutting federal government strategic human 

capital challenges.29

Executive branch agency officials said the senior executive performance 

appraisal certification process was a missed opportunity for OPM to better 

collaborate with the CHCO Council. One agency CHCO said OPM 

traditionally uses council meetings to present information to the CHCOs, 

but does not encourage discussions or seek the council’s input. Another 

agency CHCO said the council has rarely been used to debate new human 

capital policies. This one-way communication does not provide a forum 

for agency CHCOs to contribute ideas or discuss their experiences. Some 

CHCOs and HR directors pointed to OPM’s successful collaborative efforts 

through the CHCO Council, such as its assistance to agencies in the 

aftermath of Hurricane Katrina; however, they also told us that OPM 

misses opportunities to partner more effectively with agencies. An agency 

CHCO said that more robust policy discussion on the council would 

promote community building and collaboration among agencies and OPM. 

According to OPM officials, OPM provided the CHCO Council with 

opportunities to discuss the certification process. However, some CHCOs 

wanted more involvement in crafting the fundamental design and 

applicable issues of the certification process, rather than commenting on 

draft regulations after the fact. While the new interim final regulations 

were being developed and issued in 2004, OPM provided two presentations 

to the full CHCO Council on the new requirements for senior executive 

performance appraisal systems along with periodic updates. The CHCO 

Council minutes show that one presentation focused on the design of the 

new performance appraisal system and the second on the process for 

obtaining certification. Agency CHCOs were able to ask questions about 

the proposal and make suggestions. For example, one CHCO suggested 

that OPM reconsider the timing of the recertification process since it 

coincided with agencies’ annual performance appraisal cycle, and this has 

proven to be a key issue for the certification process. Further, CHCOs 

were given a very short time frame of 24 hours to review and comment on 

the proposed certification criteria. Executive branch agency officials 

overwhelmingly reinforced a need for OPM to do more to collaborate and 

facilitate information sharing with the council and HR directors. More 

 29GAO, Human Capital: Observations on Agencies’ Implementation of the Chief Human

Capital Officers Act, GAO-04-800T (Washington, D.C.: May 18, 2004).

Page 23 GAO-07-90 Key Lessons Learned 
collaboration with the CHCO Council during the design phase of human 

capital initiatives would enable OPM to incorporate agency suggestions 

and build a governmentwide consensus for reform. 

OPM staff involved with the certification process told us that in 2004, OPM 

sought input on the certification criteria from OMB and members of the 

CHCO Council. There were also opportunities for agency comments when 

the draft regulations were released and through the CHCO Council. In 

addition, the CHCO Council Subcommittee of Performance Management 

reviewed the process as well. However, most comments focused on pay 

flexibilities and not the certification process. 

OPM has taken some steps to improve the effectiveness of the council by 

expanding the membership to include deputy CHCO positions. Some 

deputy CHCOs are also the agencies’ HR directors, but others perform 

different deputy roles. Including deputy CHCOs will bring additional HR 

expertise and provide more leadership continuity to the council. An 

agency CHCO said OPM is taking other steps to improve collaboration 

with agencies, such as promoting more CHCO Academy30 meetings on the 

certification process and reinstituting executive resource forums, which 

help keep agency executive resources staff current on OPM’s certification 

policies. A recent executive resource forum gave agency executive

resource staff an opportunity to discuss common concerns about the 

certification process. 

Moving forward, collaboration will be critical as human capital reforms 

begin to take hold across government. If OPM is to lead reform 

successfully, it will need to strategically use the partnerships it has 

available to it, such as the CHCO Council and other key stakeholders. 

OPM can continue to build upon its expansion of the CHCO Council and 

promotion of CHCO Academies and executive resource forums. These are 

important steps toward building a collegial environment for debating and 

collaborating on future human capital reforms. 

 30The CHCO Academy was established as a forum for council members only, to discuss 

human resources issues, learn from one another in an informal setting, and share best 

practices in the strategic management of human capital. Academy sessions are scheduled 

throughout the year on the third Thursday of the month at OPM. 

Page 24 GAO-07-90 Key Lessons Learned 
Our work on high-performing organizations and successful 

transformations has shown that communication with customers should be 

a top priority and is central to forming the partnerships needed to develop

and implement transformation strategies. This communication is most 

effective when done early, clearly, and often. Providing agencies with clear 

and timely guidance is one way of effectively communicating with OPM’s 

customers. In the past, we have reported concerns with OPM’s 

communications pertaining to their leadership in implementing 

governmentwide human capital initiatives and have recommended ways in 

which OPM could improve its guidance to federal agencies. For example, 

in 2003 we reported that an initial lack of clarity in telework guidance for 

federal agencies from OPM led to misleading data being reported on 

agencies’ telework programs. As a result, we recognized the need for OPM 

to provide agencies with consistent, inclusive, and unambiguous support 

and guidance.

31

Develop Clear and Timely 

Guidance 

The initial lack of clear and timely guidance has hindered agency 

implementation of senior executive performance appraisal systems. When 

the certification process began in 2004, OPM provided agencies with 

limited guidance for implementing the new regulations. Officials at a 

majority of the CHCO Council agencies told us they did not have enough 

guidance to properly prepare for meeting the certification criteria. With 

the release of the regulations in 2004, 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 understand 

the broadly defined regulatory criteria and adjust to the requirements for 

certification. Agencies did not fully understand what the regulations 

required in order to receive certification, thus resulting in an inefficient 

process and increasing the workload of agency human resource staffs 

unnecessarily. 

According to executive branch agency officials, when contacting OPM for 

clarification or assistance with requirements, they received conflicting 

answers and advice. Executive branch agency HR directors said that they

sometimes received mixed messages on the certification process from 

OPM, and it appeared that answers would change depending on the 

individual an agency was working with at OPM. One agency CHCO said 

that rather than providing agencies with guidance, OPM tends to wait to 

 31GAO-03-679. 

Page 25 GAO-07-90 Key Lessons Learned 
receive the agency submission and then determine if it meets 

requirements. While OPM directs agencies to its Web site and online 

resources, an agency CHCO said they found this information useful, but 

this did not fulfill all of their information needs. OPM officials we spoke 

with about this agreed that they need to provide clear and consistent 

guidance to agencies and said they are working to improve this. They said

the certification of agency performance appraisal systems has been an

iterative, learning process, and OPM is positioning itself to provide more 

guidance to agencies. For example, OPM has continued to update its 

annual certification guidance to provide agencies with more assistance 

when developing their senior executive appraisal systems for certification.

The guidance for calendar year 2006 includes explicit examples from 

executive performance plans that comply with the certification criteria. 

The continued late issuance of certification guidance in the years since the

2004 regulations were released has plagued the process by delaying the 

certification of agency systems. Since certification of appraisal systems 

runs on the calendar year, an agency’s provisional certification expires on

December 31st unless they submit an application and receive certification

for the next calendar year. To avoid a gap in certification between 

calendar years, applications for appraisal system certification need to be

approved before January 1st. However, OPM did not issue guidance for 

calendar year 2006 until January 5, 2006, causing agencies to lose time in 

developing their 2006 applications for review and certification. This delay

was compounded when OPM clarified its guidance in a January 30, 2006, 

memorandum telling agencies that senior executive performance appraisal 

systems would not be certified for calendar year 2006 if the performance 

plans did not hold executives accountable for achieving measurable 

business outcomes. Some agencies had to revise their submissions, where 

necessary, to meet OPM’s additional requirements, causing further delays.

Untimely guidance has been a recurring problem with OPM’s 

implementation of the certification process, beginning when OPM initially 

developed the regulations for certifying appraisal systems. In late 

November 2003, Congress passed legislation to create the new senior 

executive performance-based pay system to take effect in January 2004; 

however, it took 8 months for OPM to publish the certification criteria 

included in the interim regulations when jointly released with OMB in July 

2004. As a result, agencies that were certified in 2004 were unable to 

operate under the higher executive pay caps until late in the calendar year. 

In December 2004, OPM issued guidance for calendar year 2005. The

guidance was issued before the start of the calendar year, but only by a 

few weeks. On November 1, 2006, OPM posted a memorandum to heads of 

Page 26 GAO-07-90 Key Lessons Learned 
departments and agencies from the Director of OPM, notifying them of 

guidance for agencies seeking certification for calendar year 2007. 

These delays and late revisions exacerbate the time crunch agencies face

when applying for certification. According to executive branch agency 

officials, after agencies’ performance cycles end on September 30, they 

essentially have 90 days until the end of the calendar year when their 

current certification expires if they are provisionally certified or in their 

final year of full certification. Within this time frame, agencies must 

conduct senior executive performance assessments and reviews, develop

performance plans for the next performance year, and compile agency and 

senior executive performance data for the certification application. The 

late release of certification guidance adds a level of uncertainty to the 

process that can delay an agency’s submission of its application until after 

the start of the calendar year. Some agencies delay preparing their 

certification applications because they do not know when OPM will 

release its annual guidance or if there will be any changes in requirements 

from the previous year. This creates a gap in certification after an agency’s 

current certification expires. Until the agency’s senior executive 

performance appraisal system is recertified, it must operate under the 

lower “uncertified” executive pay cap of $152,000 in 2006 ($13,200 less 

than for certified systems), while the cap on total compensation is 

$183,500 ($28,600 less than for certified systems).32

OPM has acknowledged that the pay limitations in this certification gap 

can negatively impact an agency’s ability to recruit, reassign, and retain 

qualified senior executives. Executive branch agency officials expressed 

similar concerns about how the certification gap limits their ability to 

attract and hire new executives. They also said the certification gap 

creates an uneven playing field between agencies with certified systems 

and agencies that are still awaiting recertification. In July 2006, OPM 

issued regulations to alleviate one of the concerns with the certification

gap. The regulations now allow agencies to increase the pay rates of senior 

executives once the agency is certified, even if it happens after the start of

the calendar year. These regulations resolve a symptom of the certification

gap, but do not address the underlying causes of the time crunch agencies 

 32A senior executive whose rate of basic pay is higher than the rate for uncertified systems

may not suffer a reduction in pay as a result of transferring to an agency with an uncertified 

system or as the result of a decision to suspend a system’s certification. Senior executives

will continue to receive their current SES rate, but are not eligible for a pay adjustment 

until they are assigned to a position under a certified system. 

Page 27 GAO-07-90 Key Lessons Learned 
face when applying for certification. Also, according to OPM officials, the

administration has submitted a legislative proposal to Congress to 

eliminate the calendar year basis for certification. However, such 

legislation has not been introduced. 

Moving forward, OPM could alleviate confusion, delays, and inefficiencies 

by providing agencies with clear and timely guidance for implementing 

human capital reforms. OPM needs to clearly communicate its 

expectations and provide agencies with adequate time to adjust to any 

changes in requirements. When designing new human capital initiatives, 

OPM could work with agencies to identify what guidance agencies will 

need and develop a timeline for when OPM will release such guidance. A 

different time frame for certifying performance appraisal systems could 

also help alleviate the time crunch agencies face when applying for 

certification.

Share Best Practices We have reported that leading practices and benchmarking are important 

to supporting agency transformation efforts, and often include case 

illustrations of leading practices in our reports. In May 2003, we 

recommended that OPM work to more thoroughly research, compile, and 

analyze information on the effective and innovative use of human capital 

flexibilities and more fully serve as a clearinghouse in sharing and 

distributing information.33 OPM began working with a contractor in the 

summer of 2005 to review hiring flexibilities and authorities to better 

determine which ones are used and not used, who is using them, and when 

and how they are being used; however, it is still unclear if OPM has 

created a “clearinghouse” of information to help agencies meet their 

human capital needs. In 2004, we stated that agencies need to provide 

OPM with timely and comprehensive information about their experiences 

in using various approaches and flexibilities to improve their hiring 

processes, and that OPM could serve as a facilitator in the collection and 

exchange of information about agencies’ effective practices and successful 

approaches.34

 33GAO, Human Capital: OPM Can Better Assist Agencies in Using Personnel

Flexibilities, GAO-03-428 (Washington, D.C.: May 9, 2003). 

34GAO, Human Capital: Additional Collaboration Between OPM and Agencies Is Key to 

Improved Federal Hiring, GAO-04-797 (Washington, D.C.: June 7, 2004).

Page 28 GAO-07-90 Key Lessons Learned 
Executive branch agency officials told us that OPM could have better 

facilitated the sharing of best practices for developing and implementing 

senior executive appraisal systems. According to OPM, in the last 3 years, 

it has reviewed and certified about 100 applications for appraisal system 

certification. OPM could use this archive of information to identify some 

best practices for developing certified systems, but OPM has not fully 

shared this information with agencies. Director Springer said OPM has met 

with officials from the only agency currently with full certification, the 

Department of Labor (DOL), to study what they have done right. However, 

Director Springer did not know if other agencies had taken the initiative to

contact DOL to learn from their success. A senior OPM official said OPM 

did not provide agencies with examples of “best practices” for certification 

applications because OPM did not want agencies to think there was only 

one “right way” to get certified. We have reported that a “one size fits all” 

approach to human capital management is not appropriate, but we also 

recognized the value of documenting a range of best practices which 

agencies can tailor to their specific needs. One agency HR director said 

agencies were anxious to learn about what was going on at other agencies

and did not understand why OPM was reluctant to share information. 

Without sufficient guidance from OPM, agencies relied on each other 

where possible to develop an understanding of the certification 

requirements. One CHCO also took the initiative to use CHCO Academy 

meetings to engender information sharing among agencies about the 

application process. However, agencies were unable to resolve 

uncertainties and disagreements about the regulatory requirements 

without clearer guidance from OPM. Executive branch agency officials 

said best practices for certification could help them improve the design of

their performance appraisal systems. For example, executive branch 

agency officials said best practices for developing senior executive 

performance measures would help them make their performance plans 

more results based, as required for certification. Recently, OPM has taken 

steps to share information among agencies. In September 2006, OPM 

provided agencies’ executive resource directors with samples of agency

senior executive performance plans, though OPM did not specify why 

these samples were selected and if they should serve as best practices for

other agencies. 

Moving forward, OPM should facilitate the sharing of best practices for 

human capital reforms among federal agencies. Director Springer has said 

she wants the CHCO Council to develop a best practices initiative to 

collect and share information on the certification process. The CHCO 

Council could be used to facilitate best practices for other human capital 

initiatives as well. Providing a forum for agencies to learn from each 

Page 29 GAO-07-90 Key Lessons Learned 
others’ experiences will allow agencies to share effective strategies and 

avoid common pitfalls. 

Solicit and Incorporate 

Feedback 

We have reported that communication during a transformation is not 

about just “pushing the message out.”35 Given the uncertainties that 

performance-based pay systems may generate for agencies and employees

accustomed to receiving more standardized pay increases, two-way 

communication is especially important in an environment of human 

capital reform. Creating opportunities for employees and customers to 

communicate concerns and experiences surrounding a transformation 

allows them to feel that their experiences are important and 

acknowledged. Once this employee and customer feedback is received, it

is important to use this solicited feedback to make any appropriate 

changes to the implementation of the transformation. For example, OPM 

uses its FHCS as an important method of gathering its own employee 

feedback and has used this information to take actions to improve its 

organization. In addition, OPM recognizes that it is important to notify and

involve the employees affected by personnel demonstration projects, 

which are similar to the senior executive performance-based pay system, 

though OPM does not require those implementing such demonstration 

projects to obtain feedback. However, according to its Demonstration 

Projects Evaluation Handbook, OPM suggests that a survey is one method 

that could be used to obtain employees’ views on the impact of the 

demonstration project to help develop lessons learned that could be 

shared with the affected agency, as well as governmentwide. We have also

reported that high-performing organizations understand they need to 

continuously review and revise their performance management systems 

through monitoring their systems, informally and formally, including 

listening to employees’ and stakeholders’ views.36

OPM does not actively solicit and act on feedback from agencies on the 

implementation of the certification process. Executive branch agency HR 

directors said there was not a formal mechanism, such as a survey 

instrument, for agencies to provide feedback to OPM on its guidance and 

assistance to agencies. An OPM executive within the HCLMSA division 

 35GAO-03-669. 

36GAO, Human Capital: Symposium on Designing and Managing Market-Based and 

More Performance-Oriented Pay Systems, GAO-05-832SP (Washington, D.C.: July 27, 

2005). 

Page 30 GAO-07-90 Key Lessons Learned 
confirmed that OPM does not have a formal feedback mechanism; 

however, this executive said OPM converses with agencies regularly so 

they did not feel the need to obtain information in this way. Informal 

feedback from agencies is primarily communicated through the HCOs. 

OPM holds regular meetings of the HCOs to discuss agency concerns. 

However, executive branch agency officials said OPM does not always act 

to address these concerns. OPM also gathers agency feedback through the 

CHCO Council and executive resource forums. OPM’s current feedback 

mechanisms are important and valuable, but they could be supplemented,

though not replaced, with more formal outreach. Formal feedback 

mechanisms can ensure that OPM gathers a full range of views by giving

everyone an opportunity to comment. Formal feedback also provides a 

mechanism for collecting the views of clients and employees in one place, 

allowing OPM to track and report progress over time. 

Also, OPM does not gather feedback from senior executives who are 

directly affected by the new performance appraisal systems and does not 

require agencies to survey senior executives, even though agencies are 

approaching the fourth year of implementation. Director Springer said 

OPM has not surveyed members of the SES about their attitudes towards 

the new system. In September 2006, she said it would be premature to 

conduct a survey before the system takes hold, but she did not say when 

the timing might be appropriate. Also, the 2006 FHCS, OPM’s most recent 

survey that gathers employees’ perceptions of federal human capital 

practices in their agencies, did not include any questions specifically

designed to gather feedback on changes to senior executive performance 

systems. However, Director Springer said OPM plans to analyze a recent

survey of SES members conducted by the Senior Executive Association to 

obtain the experience and views of SES members on the new executive 

systems.37

Going forward, OPM should recognize the usefulness of agencies’ and 

senior executive employees’ views on the certification process and 

identify a systematic approach to obtain feedback on this and future 

 37The Senior Executive Association (SEA) is a nonprofit professional association that

promotes public service and advocates the interests of career federal executives (both

active and retired). SEA conducted a voluntary survey to solicit SES members’ experience 

with the new SES system and involvement in its implementation, how the new system 

affected the member, perceptions of how the system affected the SES members’ 

colleagues, and views on how the new system might affect the future of human resources 

management in the federal government.

Page 31 GAO-07-90 Key Lessons Learned 
human capital reforms. Feedback mechanisms, such as survey or focus 

groups, could help OPM identify what its customers think OPM is doing 

well, and where OPM needs to improve. Once obtained, feedback 

information should be considered in developing new agency guidance and 

OPM should take steps to address any specific agency concerns, as 

appropriate.

Track Progress to Ensure 

Accountability 

High-performing organizations understand they need to continuously 

review and revise their performance management systems to achieve

results and accelerate change. These organizations continually review and

revise their human capital management systems based on data-driven 

lessons learned and changing needs in the environment. We have reported

that agencies seeking human capital reform should consider doing 

evaluations that are broadly modeled on the evaluation requirements of 

the OPM demonstration projects.38 Under the demonstration project 

authority, agencies must evaluate and periodically report on results, 

implementation of the demonstration project, cost and benefits, impacts 

on veterans and other equal employment opportunity groups, adherence to 

merit system principles, and the extent to which the lessons from the 

project can be applied governmentwide. Such an evaluation could ensure 

accountability, facilitate congressional oversight, allow for any midcourse 

corrections, and assist the agency in benchmarking its progress with other 

efforts. 

Also, monitoring the implementation of new pay systems is important 

because unintended consequences may arise. Organizations have found

they should be open to refining their systems. For example, we have 

reported that in order to spread the pay increases among as many 

employees as possible, the Federal Deposit Insurance Corporation (FDIC) 

found that managers tended not to award merit pay increases to topperforming employees when they were to be promoted in the career 

ladder and as a result, these high-performing employees were not getting

the merit pay increases they deserved. FDIC recognized that this 

unintended consequence needed to be corrected in future iterations of the 

pay system and managers needed help in learning how to make the 

necessary distinctions in employees’ contributions.39

 38GAO-05-1048T. 

39GAO-05-1048T. 

Page 32 GAO-07-90 Key Lessons Learned 
As we noted in our September 2006 testimony, OPM needs to carefully 

monitor the implementation of agencies’ senior executive performance 

management systems, especially those that have provisional certification.

40

This is because, as also noted earlier in this report, agencies with 

provisional certification have only met four of nine required criteria for 

certification and can still receive the pay flexibilities of the new system. In

other words, agencies can receive the benefits of the new pay-forperformance system without meeting all of its requirements and having 

safeguards in place. We testified in October 2005 that in our view such 

provisional certifications should not be an option under any broad-based

classification and compensation reform proposal.41

Although OPM does not have an evaluation strategy, it is taking steps to 

monitor how agencies are making meaningful distinctions in senior 

executive performance. Such distinctions are required by statute and are 

one of the nine criteria for certifying agencies’ senior executive 

performance appraisal systems (as shown in app. II). Once agencies have 

provisional or full certification, OPM monitors this criterion 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 as part of an effective performance management system are 

important because they allow the organization’s leadership to

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 fiscal

year 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 

 40GAO-06-1125T. 

41GAO-06-142T. 

Page 33 GAO-07-90 Key Lessons Learned 
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. 

Developing an evaluation strategy that works within OPM’s existing 

required systems—such as the Human Capital Assessment and 

Accountability Framework (HCAAF)42—is one approach that OPM can 

take to track agencies’ progress in implementing their senior executive

performance systems as well as hold them accountable for meeting OPM’s 

certification criteria. For example, DOD officials suggested that OPM 

could work with agencies to develop metrics under the HCAAF to 

determine whether agency performance management systems were 

making meaningful distinctions based on relative performance or other 

such important criteria. These metrics could be reported in current 

systems, such as the President’s Management Agenda (PMA).43

Because OPM carries out its role in a decentralized environment where the 

results of its efforts largely take place at federal agencies outside its direct

control, it is particularly important that OPM develop a strategy to track 

agencies’ progress in meeting its human capital reform goals. OPM could 

require evaluations that are broadly modeled on the evaluation 

requirements of the OPM demonstration projects. It can work within its 

currently required systems to make reporting requirements less onerous 

and part of agencies’ routines. As we testified in September 2006, in the 

future, OPM should maintain a focus on continuous improvement of 

agency systems by monitoring the certification process, determining 

whether any obstacles are impeding agencies from receiving full 

certification, and taking appropriate measures to address them.44

 42The HCAAF is a framework that OPM has developed over the last several years to help 

agencies develop and implement effective human capital management systems and 

improve their human capital management practices. The HCAAF fuses strategic human 

capital management to merit system principles and other civil service laws, rules, and

regulations. 

43The PMA has identified five governmentwide initiatives that are interrelated and support 

each other—improved financial performance, strategic management of human capital, 

budget and performance integration, electronic government, and competitive sourcing.

OPM is responsible for monitoring agency progress of the human capital initiative. 

44GAO-06-1125T. 

Page 34 GAO-07-90 Key Lessons Learned 
Significant reforms are already underway to modernize the federal 

government’s human capital management systems to better position 

agencies to meet the challenges of the 21st century. OPM is taking steps to 

better prepare itself and agencies for governmentwide human capital 

reform through the implementation of the senior executive performance 

appraisal system certification process, other performance management 

initiatives, such as its PAAT and beta sites, and other governmentwide 

human capital initiatives. These reform efforts present an opportunity for 

OPM to evaluate and learn from its approach to implementing these 

initiatives—lessons that can be applied to ongoing and future human 

capital reforms. OPM’s workforce and succession planning efforts are also 

vital to ensuring it has the internal capacity to lead and implement 

reforms. This includes building and maintaining the needed skills and 

competencies for OPM’s evolving role in assisting agencies. While OPM 

has taken steps through its planning efforts to assess its workforce needs, 

it can better prepare its workforce by reexamining its competencies in 

light of its updated strategic management framework in order to meet 

future demands. 

Agencies have raised concerns with OPM’s workforce capacity in general, 

and more specific concerns with OPM’s implementation of the senior 

executive performance appraisal system. These include the lack of clear 

and timely guidance, the need for more sharing of best practices, and the 

year-end time crunch agencies face gathering the required information for 

OPM to certify their systems. Further, OPM does not obtain formal 

feedback from agencies on the implementation of the executive systems to 

assist OPM in better understanding agency concerns and the difficulties 

they face with implementation. Although OPM recognizes the value of 

obtaining employees’ views on reform efforts, as it encouraged with past 

demonstration projects, it has not encouraged obtaining such feedback for 

the executive performance system. In addition, having an evaluation 

strategy to monitor agencies’ overall results of the senior executive

performance system could help ensure accountability and provide 

transparency for Congress, other agencies, and stakeholders.

To better align OPM’s workforce skills and competencies for future human 

capital reform efforts, we recommend that the Director of OPM: 

• Reexamine OPM’s agencywide skills and competency assessment in light

of its updated strategic management documents. 

Conclusions 

Recommendations for 

Executive Action 

Page 35 GAO-07-90 Key Lessons Learned 
To assist executive branch agencies in meeting the requirements for the 

certification of their senior executive performance appraisal systems, we 

recommend that the Director of OPM: 

• Develop and publish a timeline for the issuance of certification guidance.

This timeline should be developed with the input of the CHCO Council and 

provide agencies with adequate time to adjust to any changes in guidance. 

• Evaluate alternatives that could remedy the year-end time compression 

that agencies face when trying to meet OPM application requirements and 

avoid a gap in certification. 

• Work with the CHCO Council to develop a formal mechanism for sharing 

leading practices for implementing human capital initiatives, such as the 

senior executive performance appraisal certification and other 

performance management reform initiatives. This forum should include an

adequate range of examples and best practices so as not to promote onesize-fits-all solutions. 

• Develop a formal feedback mechanism to obtain agencies’ views on OPM’s 

implementation of the certification process. OPM should utilize this 

feedback to identify common agency concerns and develop action plans to

address these concerns. 

• Work with executive branch agencies to develop a systematic approach 

for obtaining employee attitudes towards human capital reforms. 

• Develop a strategy to allow OPM, other executive agencies, and Congress 

to monitor the progress of implementation of the senior executive 

performance-based pay system. 

We provided a draft of this report to the Director of OPM for review and 

comment. We received a written response from the Director, which is 

reprinted in appendix IV. The Director stated that OPM has made progress 

toward achieving its operational and strategic goals, but neither agreed 

nor disagreed with our recommendations. 

Director Springer provided a number of informative comments describing 

progress OPM has made towards achieving its planned goals, and 

initiatives undertaken to assist federal agencies with meeting their hiring

demands of the future. Director Springer said OPM has made progress 

towards achieving its operational and strategic goals since she became 

Director of OPM. The Director provided information that while beyond the 

Agency Comments 

and Our Evaluation 

Page 36 GAO-07-90 Key Lessons Learned 
scope of the report, nonetheless is helpful in understanding the context in

which OPM is operating. Specifically, she commented that OPM associates 

have worked together and with agencies to achieve the objectives that are 

tied to OPM’s Strategic and Operational Plan, 2006-2010, and since 

March 2006, OPM has achieved its plan’s objectives, on time or ahead of 

schedule. Also, OPM provided a number of technical comments and, 

where appropriate, we have made changes to the report language to 

reflect these comments. 

We are sending copies of this report to the Director of OPM, the Director 

of OMB, and other interested parties. Copies will be made available to 

others upon request. This report is also available at no charge on GAO’s 

Web site at http://www.gao.gov. 

If you or your staffs have any questions concerning this report, please 

contact me at (202) 512-6806. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix V. 

Sincerely yours, 

Brenda S. Farrell 

Acting Director, Strategic Issues 

Page 37 GAO-07-90 Key Lessons Learned 
Appendix I: Scope and Methodology 

Page 38 GAO-07-90 Key Lessons Learned 

Appendix I: Scope and Methodology 

To identify lessons learned to inform the Office of Personnel 

Management’s (OPM) capacity to lead and implement human capital 

reform, we reviewed OPM’s implementation of the senior executive 

performance appraisal system certification process. We reviewed and 

analyzed key documents including the legislation that authorized the new 

senior executive performance-based pay system and the regulations for 

the appraisal system certification process that were jointly issued by OPM 

and the Office of Management and Budget (OMB). We also reviewed and 

analyzed the subsequent guidance issued by OPM to agencies to prepare 

their certification applications, policy memos from OPM to agencies, and

other documentation related to the certification process. To gain an 

agency perspective of the certification process and to a limited degree on 

other performance management initiatives, such as the Performance 

Appraisal Assessment Tool (PAAT) and the performance management 

beta sites, we interviewed 22 of the 23 members of the Chief Human 

Capital Officers Council and/or their corresponding agency HR directors. 

The one agency that was not available for an interview provided us with 

written responses to our questions. In addition, we conducted interviews

with OPM’s five associate directors and other senior-level staff, such as the 

Chief Financial Officer and Chief Human Capital Officer, to obtain their 

views of OPM’s management practices. We were briefed by the OPM 

Director and other OPM officials on the OPM Strategic and Operational 

Plan, 2006-2010 and aspects of OPM’s human capital strategies and 

initiatives. We also interviewed staff from OMB related to their role in the 

performance appraisal system certification process. 

To evaluate OPM’s workforce capacity, we interviewed OPM’s former and 

current Chief Human Capital Officers and analyzed the OPM Strategic and 

Operational Plan, 2006-2010. To understand how OPM’s workforce is 

aligned to support the implementation of potential reforms, we analyzed a 

number of internal OPM documents such as its August 2006 Corporate 

Leadership Succession Management Plan and A Plan for the Strategic 

Management of OPM’s Human Capital fiscal years 2004-2007. As the Plan

for the Strategic Management of OPM’s Human Capital fiscal years 2006-

2007 was issued at the conclusion of our review, we were not able to 

analyze this document. 

To evaluate OPM’s efforts to build agency infrastructure, we reviewed 

documents related to OPM’s PAAT and the performance management beta

site initiatives. We selected these initiatives because of similarities to the 

certification process and their likelihood to yield tangible lessons related 

to OPM’s capacity to lead future reforms. 
Appendix I: Scope and Methodology 

To evaluate OPM’s feedback mechanisms, we reviewed survey questions 

included in the 2004 and 2006 Federal Human Capital Survey (FHCS). The 

2006 survey was launched in June 2006 and results are not yet available. 

To assess OPM’s measures for tracking progress, we analyzed operational 

goals in the OPM Strategic and Operational Plan, 2006-2010. We also 

reviewed OPM’s measures of senior executive performance ratings and 

pay in its Report on Senior Executive Service Pay for Performance for 

Fiscal Year 2005. 

We leveraged our work that resulted in our June 2006 testimony on OPM’s 

internal capacity.1

 We used the 2004 FHCS, the latest available survey data, 

and summaries of OPM’s 2005 focus groups to assess employee views of 

OPM’s organizational capacity. We reviewed OPM’s analysis of its 2004 

FHCS results and conducted our own analyses of survey results using 2002 

and 2004 FHCS data sets provided to us by OPM. On the basis of our 

examination of the data and discussions with OPM officials concerning 

survey design, administration, and processing, we determined that the data

were sufficiently reliable for the purpose of our review. We analyzed 

summaries of OPM employee focus groups that OPM conducted in fall 

2005 to understand factors contributing to employees’ responses on the 

2004 FHCS. We used the participant comments from these focus groups to 

illustrate employee perspectives. We also analyzed the May 2006 action 

plans developed by OPM to address issues identified in the focus groups. 

Other documents reviewed included our previous work related to OPM, 

high-performing organizations, organizational transformation, and human 

capital management reforms. We also reviewed GAO’s previous 

recommendations on a range of issues related to OPM’s human capital 

leadership role and internal management challenges. 

We conducted our work from October 2005 to September 2006 in 

accordance with generally accepted government auditing standards. 

 1

GAO-06-861T. 

Page 39 GAO-07-90 Key Lessons Learned 
Appendix II: Description of the Senior 

Executive Performance-based Pay System

Certification Process 

Page 40 GAO-07-90 Key Lessons Learned 

Appendix II: Description of the Senior 

Executive Performance-based Pay System 

Certification Process 

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 appraisal system is certified by the Office of 

Personnel Management (OPM) and the Office of Management and Budget

(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 senior executive pay flexibilities, agencies’ performance 

appraisal systems are evaluated against nine certification criteria. As 

shown in table 2, the certification criteria jointly developed by OPM and 

OMB are broad principles that position agencies to use their pay systems 

strategically to support the development of a stronger performance culture 

and the attainment of the agency’s mission, goals, and objectives. 

There are two levels of performance appraisal system certification 

available to agencies: full and provisional. To receive full certification, the

design of the systems must meet the nine certification criteria and 

agencies must provide documentation of prior performance ratings to 

demonstrate compliance with the criteria. Full certification lasts for 2 

calendar years. Agencies can receive provisional certification if they have 

designed but not yet fully implemented a senior executive performance 

appraisal system, or do not have a history of performance ratings that 

meets the certification criteria. Provisional certification lasts for 1 

calendar year. 
Appendix II: Description of the Senior 

Executive Performance-based Pay System

Certification Process 

Table 2: Senior Executive Performance Appraisal System Certification Criteria 

Summary of certification criteria for senior executive appraisal systems 

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. 

Consultation Individual performance expectations are developed with senior employee involvement and 

must be communicated at the beginning of the appraisal cycle. 

Results Individual expectations describe performance that is measurable, demonstrable, or 

observable, focusing on organizational outputs and outcomes, policy/program objectives, 

milestones, etc. 

Balance Individual performance expectations must include measures of results, employee and 

customer/stakeholder satisfaction, and/or competencies or behaviors that contribute to 

outstanding performance. 

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, such as reports of 

agency’s goals and other program performance measures and indicators, and evaluation 

guidelines based, in part, upon those assessments to senior employees, appropriate 

senior employee rating and reviewing officials. The guidance provided may not take the 

form of quantitative limitations on the number of ratings at any given rating level. 

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. 

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. 

Performance differentiation Among other provisions, the agency must provide for at least one rating level above Fully

Successful (must include an Outstanding level of performance), and in the application of

those ratings, make meaningful distinctions among executives based on their relative 

performance. 

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. 

Source: GAO analysis of OPM and OMB regulations. 

OPM’s role in the certification process begins when an agency submits a 

certification application to OPM. 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 

Page 41 GAO-07-90 Key Lessons Learned 
Appendix II: Description of the Senior 

Executive Performance-based Pay System

Certification Process 

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. The agency’s 

submission is reviewed independently by representatives within HCLMSA

and SHRP to bring different perspectives to the review. 

The submissions are evaluated against the nine certification criteria, but 

each review team has its own method for analyzing the application. After 

an initial review, the reviewers from HCLMSA and SHRP hold an informal 

meeting to discuss the submission. After a more thorough review, the 

reviewers meet again in a formal panel along with the agency’s HCO and 

decide 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 performance appraisal system so that it meets the criteria. If the 

application is approved by OPM, 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 performance appraisal system and 

the agency is formally notified with a letter. The HCO also 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. Figure 1 

provides an overview of the certification process. 

Page 42 GAO-07-90 Key Lessons Learned 
Appendix II: Description of the Senior 

Executive Performance-based Pay System

Certification Process 

Figure 1: Overview of Senior Executive Performance Appraisal System Certification Process 

Agency

submits

certification

request

OPM reviews

submission

OPM reviews

submission

HCO works with agency to address concerns

HCO works with agency to address concerns

HCO works with agency to get needed information

Enough

info?

OPM

certify?

Start

Contact

OMB for

concurrence

OMB

concurs?

Agency’s

system is

certified for

1 or 2

calendar

years

Yes Yes

Yes

No

No No

Source: GAO analysis.

Page 43 GAO-07-90 Key Lessons Learned 
Appendix III: Agency Certification Status for 

Calendar Years 2004, 2005, and 2006 as of 

October 2006 

Page 44 GAO-07-90 Key Lessons Learned 

Agency/board

System

(SES or SL/ST) 

1-year 

provisional (P) 

or 2-year full (F) 

certification

received

2004 2005 2006

Agency for International Development SES P P a

Broadcasting Board of Governors SES aP a

Consumer Product Safety Commission SES aP P

Department of Agriculture SES P P P 

Department of Commerce SES P P P 

Department of Defense SES a aP 

Department of Defense SL/ST a aP 

Department of Education SES aP P

Department of Energy SES P P P 

Department of Health And Human Services SES P P P 

Department of Homeland Security SES aP P

Department of Housing and Urban Development (HUD) SES P P a

HUD Office of the Inspector General SES P P P 

Department of Interior SES P P P 

Department of Justice SES P P P 

Department of Labor SES P P F (2006/2007)

Department of State SES P P a

Department of Transportation SES P P P 

Department of Treasury SES P P P 

Department of Veterans Affairs SES P P P 

Environmental Protection Agency SES P P P 

Equal Employment Opportunity Commission SES P P a

Federal Communications Commission SES P P P 

Federal Energy Regulatory Commission SES P P P 

Federal Trade Commission SES P P P 

General Services Administration SES F (2004/2005) P 

Merit Systems Protection Board SES P P P 

National Aeronautics and Space Administration (NASA) SES P P P 

NASA SL/ST a P a

NASA Office of the Inspector General SES a aP 

National Endowment for the Arts SES P P a

National Labor Relations Board SES P P a

National Science Foundation SES P P P 

Appendix III: Agency Certification Status for 

Calendar Years 2004, 2005, and 2006 as of 

October 2006 
Appendix III: Agency Certification Status for 

Calendar Years 2004, 2005, and 2006 as of 

October 2006 

Agency/board

System

(SES or SL/ST) 

1-year 

provisional (P) 

or 2-year full (F) 

certification

received

2004 2005 2006

National Transportation Safety Board SES a aP 

Nuclear Regulatory Commission SES P P a

Office of Government Ethics SES aP P

Office of Management And Budget SES aP P

Office of National Drug Control Policy SES P P P 

Office of Navajo and Hopi Indian Relocation SES aP a

Office of Personnel Management SES P P P 

Patent and Trademark Office/Commerce SES P P a

Pension Benefit Guarantee Corporation SL/ST F (2004/2005) P 

Railroad Retirement Board SES P P P 

Small Business Administration (SBA) SES P P a

SBA Office of the Inspector General SES P P a

Social Security Administration SES P P a

Surface Transportation Board SES a aP 

Source: GAO analysis based on OPM data. 

a

Agency did not submit an appraisal system application, submitted an application but was not

approved, or withdrew an application for OPM’s review. 

Page 45 GAO-07-90 Key Lessons Learned 
Appendix IV: Comments from the Office of Personnel 

Management 

 Page 46 GAO-07-90 Key Lessons Learned 

Appendix IV: Comments from the Office of 

Personnel Management 
Appendix IV: Comments from the Office of Personnel 

Management 

 Page 47 GAO-07-90 Key Lessons Learned 
Appendix V: 

St

GAO Contact and 

aff Acknowledgments

Page 48 GAO-07-90 Key Lessons Learned 

Appendix V: GAO Contact and Staff 

Acknowledgments 

Brenda S. Farrell, (202) 512-6806 or farrellb@gao.gov. 

In addition to the contact named above, Trina Lewis, Assistant Director; 

Thomas Beall; Carole J. Cimitile; William Colvin; Elizabeth Curda; S. Mike 

Davis; William Doherty; Charlene Johnson; Jeffrey McDermott; Michael 

Volpe; Katherine H. Walker; and Gregory H. Wilmoth made major 

contributions to this report. 

GAO Contact 

Acknowledgments 

(450440) 
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