Securities and Exchange Commission: Improving Personnel Management Is Critical for Agency's Effectiveness
Published: 2013-07-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Personnel management is important to the mission of federal agencies. Several high-profile enforcement failures have raised concerns about SECs personnel management. Section 962 of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandates GAO to report on SEC's personnel management. This report examines (1) SECs organizational culture and (2) its personnel management challenges and efforts to address these challenges.
GAO assessed SECs personnel management systems against OPM guidance and other criteria related to workforce planning and performance management (which includes appraisals and feedback); reviewed relevant reports; surveyed SEC employees and senior management (with 78 and 74 percent response rates, respectively) to gather their views on SECs organizational culture and personnel management practices; and spoke with former employees, the SEC Inspector General, representatives of the employees union, financial industry associations, consulting firms, and academics.
section_title: What GAO Found
paragraphs: Based on analysis of views from Securities and Exchange Commission (SEC) employees and previous studies from GAO, SEC, and third parties, GAO determined that SECs organizational culture is not constructive and could hinder its ability to effectively fulfill its mission. Organizations with constructive cultures are more effective and employees also exhibit a stronger commitment to mission focus. In describing SECs culture, many current and former SEC employees cited low morale, distrust of management, and the compartmentalized, hierarchical, and risk-averse nature of the organization. According to an Office of Personnel Management (OPM) survey of federal employees, SEC currently ranks 19th
SEC has not consistently or fully implemented effective personnel management. SEC has taken some steps, but most of its efforts were in the early stages and could be enhanced. GAO identified four key areas where continued improvement is needed: of 22 similarly sized federal agencies based on employee satisfaction and commitment. GAOs past work on managing for results indicates that an effective personnel management system will be critical for transforming SECs organizational culture.
Workforce planning. SEC has not yet developed a comprehensive workforce plan, including how it identifies its future leaders. Although SEC has taken some steps, such as identifying competency gaps and conducting leadership training, these efforts do not reflect all elements of effective workforce planning outlined in OPM guidance. OPM guidance calls on agencies to develop and implement plans to identify workforce needs and develop future leaders. Without fully implementing such practices, SEC will not be able to make well-informed decisions on how to best meet current and future agency needs.
Performance management. SECs implementation of its performance management system could be improved. SEC staff expressed many concerns about the system, such as an unclear link between their performance and ratings. SEC provided training to supervisors on how to use the system and obtained staff input on aspects of the system. However, SEC has not fully validated the system with its staff. Also, SEC does not have mechanisms in place to monitor supervisors use of the system. By not validating all aspects of the system and establishing mechanisms to hold supervisors accountable for appropriately using it, SEC is missing opportunities to enhance the credibility and effectiveness of its performance management system.
Communication and collaboration. SEC has made efforts to improve communication and collaboration (such as creating new subunits to facilitate joint work), but has not yet fully addressed barriers. Moreover, these efforts have not yet addressed all of the problems that the Inspector General found contributed to past enforcement failures. GAO has reported on leading practices that SEC could explore, including sustained management attention. Improving communication and collaboration within SEC is critical to its effectiveness.
Personnel management assessment. SEC has not implemented an accountability system to monitor and evaluate its personnel management. According to OPM guidance, such a system helps agencies assess whether personnel policies are effective. SEC officials explained that efforts were under way to develop a system. Until such an accountability system is implemented, it will be difficult for SEC to make necessary improvements and help ensure that its personnel management policies and programs align with its mission.
section_title: What GAO Recommends
paragraphs: GAO makes seven recommendations to improve SECs personnel management, including developing comprehensive workforce plans, implementing mechanisms to monitor how supervisors use the performance management system, conducting periodic validations of the system, exploring collaboration practices of leading organizations, and regularly assessing these efforts. SEC agreed with GAOs recommendations.

section_title: Letter
paragraphs: The Securities and Exchange Commission’s (SEC) mission is to protect  investors; maintain fair, orderly, and efficient securities markets; and  facilitate capital formation. To carry out its mission, SEC requires public  companies to disclose meaningful financial and other information to the  public, examines firms it regulates, and investigates potential securities  law violations. Over the past decade, the markets, products, and  participants that SEC oversees and regulates—including investment  advisers, mutual and exchange-traded funds, and broker-dealers—have  grown in size and complexity. Trading volume in the equity markets has  more than doubled, as have assets under management by investment  advisers.
As the markets grew in size and complexity over the past two decades,  investors experienced large losses during the 2007-2009 financial crisis  and through a few high-profile fraud cases, such as the failure of Bernard  L. Madoff Investment Securities LLC. The financial crisis highlighted the  interconnectedness and complexity of the growing financial markets as  securitized assets amplified losses across multiple markets. The crisis  also highlighted gaps and weaknesses in the supervision and regulation  of financial markets. To address such concerns, Congress enacted the  Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd- Frank Act). Among other things, the act expands SEC’s regulatory  responsibilities, including increased oversight of hedge funds and  derivatives. However, members of Congress and other stakeholders have  questioned SEC’s ability to effectively protect investors in light of the  growing complexity of the markets and past enforcement failures.
Effectively carrying out existing and new regulatory responsibilities  requires that SEC attract and retain a high-quality workforce. However,  we and others previously reported on the personnel management  challenges SEC has faced in building and retaining such a workforce.  These challenges included a lack of emphasis on personnel management  and weaknesses in linking pay and performance. SEC is not unique in  facing personnel management challenges. In 2001, we added strategic  human capital management to our list of high-risk areas because of the  long-standing lack of leadership on personnel matters across the  government.
Section 962 of the Dodd-Frank Act mandates us to examine SEC’s  personnel management, including the competence of professional staff,  the effectiveness of supervisors, and issues related to employee  performance assessments, promotion, and intra-agency communication.
Pub. L. No. 111-203, § 962, 124 Stat. 1376, 1908-09 (2010).
This report examines (1) what is known about SEC’s organizational  culture and (2) SEC’s personnel management challenges and its efforts  to address these challenges.
To document SEC’s organizational culture and personnel management  challenges, we reviewed management consultant reports, GAO reports,  and SEC reports and testimonies. We also interviewed former SEC  officials, the SEC Inspector General (IG), SEC union representatives and  members, management consultants, representatives from industry trade  groups, and academics with knowledge of SEC personnel management  issues. We examined SEC’s performance management policies,  procedures, and activities by reviewing agency documents related to  workforce and succession planning (such as recruitment and training  practices), performance appraisals, supervision, promotion processes,  and communication within and among divisions. We assessed the  policies, procedures, and activities against applicable federal regulations,  the Office of Personnel Management’s (OPM) Human Capital  Assessment and Accountability Framework (HCAAF), key human capital  practices and GAO standards for internal control, and SEC’s strategic  plan.
We also conducted semistructured one-on-one interviews, focus groups,  and two web-based surveys to gather employee views on SEC’s  organizational culture and the agency’s personnel management practices,  including areas where SEC has been doing well and areas in which there  are challenges. The scope of these efforts included employees in the five  divisions and one office (hereinafter, divisions) in SEC primarily  responsible for implementing the agency’s mission—Divisions of  Corporation Finance; Enforcement; Investment Management; Economic  and Risk Analysis; Trading and Markets; and the Office of Compliance  Inspections and Examinations (OCIE). In these divisions, we focused on  employees in four occupational categories—accountants, attorneys,  examiners, and financial analysts—that account for the majority of SEC  employees. We held one-on-one interviews with 129 nonsupervisory staff,  supervisors, and senior officers at SEC headquarters and regional offices  from July to September 2012. All employees in the relevant divisions and  occupational categories were invited to participate in the interviews. We  held 22 focus groups at headquarters and four regional offices with  nonsupervisory staff and supervisors in the divisions and occupational  categories within our scope. We selected the regional offices based on  factors including enforcement activity, geographic location, and staff size,  and randomly selected staff and supervisors from the relevant divisions  for our focus groups. We also implemented two web-based surveys of all  2,439 employees (nonsupervisory staff and supervisory) and 86 senior  officers in these divisions that fall within the four occupation groups. The  survey response rates were 78 and 74 percent, respectively. We do not  make any attempt to extrapolate the findings to the 22 percent of eligible  staff who chose not to complete our survey. We reviewed OPM’s 2012  Federal Employee Viewpoint Survey Results to obtain additional  perspectives from SEC staff on the agency’s personnel management- related issues.methodology.
Appendix I includes more information on our scope and  We conducted this performance audit from March 2012 to July 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient and appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: SEC is composed of a five-member Commission that oversees SEC  operations and provides final approval over staff interpretation of federal  securities laws, proposals for new or amended rules to govern securities  markets, and enforcement activities. The Commission, which is headed  by the SEC chairman, oversees 5 divisions and 23 offices, including 11  regional offices. Figure 1 further depicts SEC’s organizational structure.
SEC’s divisions are organized by functional responsibility. For example,  SEC’s responsibilities for reviewing corporate disclosures are housed  within the Division of Corporation Finance. Table 1 summarizes the roles  and responsibilities of the six divisions that primarily implement SEC’s  mission. These divisions are supported by other offices, such as the  Office of Financial Management and the Office of Human Resources  (OHR). In particular, OHR provides overall responsibility for the strategic  management of SEC’s personnel management and assesses compliance  with federal regulations for areas such as recruitment, retention,  leadership and staff development, and performance management. OHR  reports to SEC’s Office of the Chief Operating Officer (COO), which in  turn reports to the Commission.
To carry out its mission, SEC employs staff with a range of skills and  backgrounds, such as attorneys, accountants, and economists. As of  September 30, 2012, SEC employed 3,829 staff. Of these staff,  approximately 43 percent were attorneys, 26 percent were accountants or  financial analysts, and 4 percent were examiners. The remaining 27  percent were other professional, technical, administrative, and clerical  staff. To help SEC attract and retain qualified employees, Congress  enacted the Investor and Capital Markets Fee Relief Act (Pay Parity Act)  in 2002 that allowed SEC to implement a new compensation system with  unique pay scales comparable to those of other federal financial  regulators.Employees Union (hereafter, the SEC employees’ union).
subsections: section_title: SEC’s Performance Management System
paragraphs: SEC’s performance management system, also known as the Evidence- Based Performance Management System, includes individual  development plans for all employees, a performance appraisal rating  system, a feedback process, and a process for supervisors to deal with  poor performance. The current performance appraisal system has criteria  by which all SEC employees are rated in relation to work objectives and  competency-based performance standards, such as critical thinking and  teamwork. Staff are rated on the objectives and standards on a scale of  1-5. SEC calculates an overall rating for each employee by averaging  their ratings for the objectives and standards. As designed, employees’  ratings eventually would be used to calculate the employee’s pay-for- performance. SEC developed this system in 2010 and continues to  negotiate aspects of the design and implementation of its current  performance management system with the SEC employees’ union. For  example, to date SEC has not instituted the pay-for-performance aspect  of the system for nonsupervisory, bargaining unit staff because of  ongoing negotiations.
section_title: OPM’s Human Capital Assessment and Accountability Framework
paragraphs: OPM advocates the use of HCAAF, which is a set of tools and strategies  available to federal agencies that assist officials in achieving results in  personnel management programs. HCAAF guides the assessment of  agency efforts, while allowing enough flexibility for agencies to tailor these  efforts to their missions, plans, and budgets. The framework uses five  standards for success, lists key questions to consider, and suggests  performance indicators for measuring progress and results. The five  standards for success are as follows:
Strategic alignment. Agency strategies for human capital  management are aligned with mission, goals, and organizational  objectives and are integrated into its strategic plan and performance  budget.
Leadership and knowledge management. Agency leaders and  managers effectively manage people, ensure continuity of leadership,  sustain a learning environment that drives continuous improvement in  performance, and provide a means to share critical knowledge across  the organization.
Results-oriented performance culture. The agency has a diverse,  results-oriented, high-performing workforce and a performance  management system that effectively differentiates between high and  low levels of performance and links individual/team/unit performance  to organizational goals and desired results.
Talent management. The agency has closed gaps or deficiencies in  skills, knowledge, and competencies for mission-critical occupations,  and made meaningful progress toward closing such gaps or  deficiencies in all occupations used in the agency.
Accountability. A data-driven, results-oriented planning and  accountability system guides the agency’s decisions on human capital  management.
OPM has been providing some updates to the HCAAF model to federal  agencies; however, OPM officials with whom we spoke stated that  agencies would continue operating under the current HCAAF model until  the end of fiscal year 2013 because the updated version has not been  fully implemented. They noted that the updates to HCAAF reinforce  existing content and streamline the systems to make HCAAF more  practical to use. The updated version of HCAAF, called the Human  Capital Framework, reduces the number of systems from five to four  (strategic alignment, talent management, performance culture, and  evaluation).
section_title: SEC’s Organizational Culture Hinders Agency’s Ability to Effectively Fulfill Its Mission
paragraphs: Based on our analysis of the views of many SEC employees, our  previously issued reports on SEC, and recent studies from SEC and third  parties, we have determined that the agency’s organizational culture is  not constructive and could hinder its ability to effectively fulfill its mission.  Organizations with more constructive cultures generally perform better  and are more effective. Within constructive cultures, employees also  exhibit a stronger commitment to mission focus, accountability,  coordination, and adaptability. In describing the agency’s culture, many  current and four former SEC employees talked about low levels of  employee morale, employees’ distrust of management, and the  compartmentalized, hierarchical, and risk-averse nature of the  organization. These views are consistent with our past work as well as  the work of others.
SEC’s culture reflects low employee morale. More than half of  nonsupervisory staff and about 43 percent of supervisory staff disagreed  that employee morale is generally high most of the time. About a quarter  of senior officers had the same view (see table 2). We also found that  44.7 percent of nonsupervisory staff and 30 percent of supervisors did not  agree that management has taken steps to improve employee morale.
According to a number of staff who provided written survey comments,  morale is low for various reasons, ranging from lack of effective  leadership and communication to dissatisfaction with the performance  management system and opportunities for promotion. Furthermore, many  staff who participated in our one-on-one interviews commented that the  implementation of the five-point performance rating scale resulted in  arbitrary ratings and that they perceived favoritism in promotions.  Many  other staff commented that staff morale was low.  These sentiments were  similar to our past findings. For example, we reported in 2001 that SEC  had not created an organizational culture that ensured ongoing attention  to personnel management issues and that SEC staff did not think the  agency sufficiently valued and motivated staff. Our findings in this report  are also consistent with the Partnership for Public Service’s analysis of  OPM’s 2012 Employee Viewpoint Survey. The analysis found that  SEC’s overall index score—which measures staff’s general satisfaction  and commitment—declined from 73.1 in 2007 to 56 in 2012.with other midsize agencies, SEC ranked 19 of 22 in overall satisfaction  and commitment. The decrease in morale among staff may negatively  affect their productivity and commitment to the agency’s mission.
SEC’s culture reflects an atmosphere of distrust. When asked  whether there is an atmosphere of trust at SEC, many staff disagreed. As  shown in table 3, 40 percent of nonsupervisory staff and about 30 percent  of supervisory staff thought there was a lack of trust. About 17 percent of  senior officers voiced this viewpoint.
Survey respondents offered explanations for the lack of trust. From their  written comments on SEC’s organizational culture, lack of trust was  among the more frequently mentioned topics. For example, one survey  respondent indicated that the atmosphere of distrust was due to a lack of  direct communication with and knowledge sharing from managers. Based  on comments from several respondents, the adverse working relationship  between the union and management may have contributed to the level of  distrust between staff and upper management by constantly assuming the  worst in senior managers’ initiatives and other actions. The lack of trust  may undermine the working relationships between management and  staff.
SEC’s culture is compartmentalized. Many current and three former  staff described SEC’s culture as “siloed”—that is, work is  compartmentalized in each division and little communication,  collaboration, or movement occurs between the divisions. Despite recent  SEC efforts to improve intra-agency communication that we discuss later  in this report, issues remain. According to our survey, at least one-third of  nonsupervisory staff and supervisors said that in the past 12 months, they  had not contacted staff in other divisions (except for Enforcement) in the  home office for work-related issues, such as coordinating activities or  asking for expert advice. Further, about 21 percent of nonsupervisory  staff said that communication between other divisions on work-related  matters is not encouraged. Others have identified similar issues. For  example, a 2009 SEC IG report found that the Division of Enforcement  did not always seek assistance from other offices and divisions as  needed during its investigation of the Madoff Ponzi scheme; consequently  Enforcement staff had difficulty understanding key aspects of Madoff’s  fraud. Similarly, a 2011 SEC IG report found that the level of  communication between OCIE and Enforcement after a referral—that is,  noteworthy information from an OCIE examination passed on to  Enforcement for further investigation or action—was not always  consistent in the regional offices, which can hinder SEC’s ability to  achieve its mission.
In addition, the 2011 Boston Consulting Group’s report also noted that  SEC’s culture impaired communication and collaboration between  divisions. Each division’s internal structure was tailored to division- specific needs, and SEC historically placed limited emphasis on using  formalized mechanisms for cross-divisional collaboration.according to three former SEC officials, managers generally have not  encouraged staff to move between divisions and work in different areas.  The former officials told us that managers did not encourage staff to move  around because they were afraid to lose a staff slot in their division. One  former official explained that staff often were reluctant to discuss their  desire to rotate among divisions because such interest might be  misinterpreted as a desire to leave SEC. A compartmentalized  environment could result in missed opportunities for leveraging  knowledge and skills of staff across the divisions and may have  contributed to past enforcement failures.
SEC’s culture is hierarchical. Many current staff and two former SEC  officials described the agency’s culture as hierarchical. Close to 42  percent of nonsupervisory staff did not agree that they had a voice in  decisions that affected them and their work environment (see table 4).  One former SEC director told us that although nonsupervisory and lower- level supervisory staff might have the most knowledge of a particular  matter, they did not speak out very much because staff are not  encouraged to challenge ideas or challenge more senior-level staff.
The 2011 Boston Consulting Group report also stated that, while good  communication existed at the most senior level, information did not  always travel down as effectively as it should. Such hierarchical culture  may discourage open communication and innovation because staff may  be reluctant to speak up and share ideas.
SEC culture is risk averse. Many current staff and two former officials  described SEC’s culture as risk averse, and some also noted that  aversion to risk has grown in recent years. In our survey of SEC  employees, more than half of staff (supervisory and nonsupervisory) and  more than 62 percent of senior officers agreed that the fear of public  scandals may have contributed to the culture of risk aversion at SEC (see  table 5). For example, a few senior officers and staff surveyed remarked  that recent enforcement failures and related, sustained criticism from  members of Congress, SEC’s former Inspector General, and the public  has contributed to their unwillingness to take risks and innovate.
Furthermore, close to half of the staff (both nonsupervisory and  supervisory) agreed that the fear of being wrong has made some senior  officers reluctant to take a stand on important issues (see table 6). Many  current SEC staff we surveyed and two former SEC officials indicated that  added layers of review—which have been added because of this fear,  according to staff—not only decreased efficiency but also slowed decision  making.
A number of staff who responded to our survey provided specific  instances of risk aversion. For instance, according to a few survey  respondents, managers have been afraid to close cases or make  decisions because senior officers want to minimize the chances that they  would be criticized later. Another survey respondent added that, due to  such risk aversion, cases that address evolving market practices or  developments with little precedent may not be pursued.
We and others have previously reported similar results. In 2009, we found  that Enforcement’s internal system for case review slowed cases, created  an atmosphere of fear and insecurity, and may have created incentives  for staff to drop cases or narrow the scope of a review. Similarly, in  2010, the SEC IG reported that the desire for Enforcement staff to avoid  difficult cases was partly due to challenges in dealing with the agency’s  bureaucracy. According to a former SEC senior officer, the arduous  process of obtaining approval to recommend an enforcement action by  SEC headquarters was a factor in deciding which investigations to  pursue. The IG also noted there appeared to be an increased focus on  easier, “slam dunk” cases over those cases that looked to be complex  and more time consuming. As a result, the cases chosen for  investigations may not have effectively identified potential securities  violations.
As it takes years for an organization’s culture to take hold, it also may  take years to effect changes to that culture. Such change requires  sustained efforts by senior management to address challenges related to  organizational culture. We found that for organizations to successfully  transform themselves, they often must change their culture  fundamentally. An effective personnel management system is critical to  achieving this cultural transformation.
section_title: Improving Personnel Management Is Critical for SEC’s Effectiveness
paragraphs: SEC has not consistently or fully implemented practices for effective  personnel management practices. Specifically, we found deficiencies or  limitations in the areas of workforce and succession planning,  performance appraisals and incentives, and communication and  collaboration. SEC has taken some steps to address aspects of these  deficiencies or limitations, but most of the agency’s efforts are in the early  stages and could be enhanced. Prioritizing and enhancing personnel  management efforts are critical for SEC’s ability to achieve its mission  and goals. Moreover, sustained leadership and attention in these efforts  from SEC’s COO could help the agency overcome the natural resistance  to change, marshal the resources needed to implement change, and build  and maintain an organization-wide commitment to new ways of doing  business.
subsections: section_title: SEC Lacks Comprehensive Plans to Help Ensure Its Workforce Has the Necessary Skills
paragraphs: SEC has not yet developed a comprehensive workforce plan. A workforce  plan encompasses systematic processes for identifying and addressing  the gaps between current and future workforce needs. According to OPM  guidance, effective workforce plans align workforce requirements with  agency strategic plans, develop a comprehensive picture of gaps in  competencies and future requirements, and inform decision making about  how best to structure the organization and deploy the workforce. For  example, a workforce plan could provide SEC management information  on the types, number, and location of supervisory and nonsupervisory  staff. A plan could also help management determine the type of training  and other strategies needed to close gaps, while taking into consideration  factors including the ratio of management to staff, industry trends,  workforce diversity, and projections of retirements. Moreover, according  to OPM guidance, succession planning forms an integral part of  workforce planning and helps ensure an ongoing supply of qualified staff  to fill leadership and other key positions.concluded that such a plan is essential for helping ensure that SEC has   In September 2012, we  the right mix of talent, skills, and experience to execute its mission and  goals.
Key principles for effective workforce planning from our past work also  has shown that it is important for agencies to ensure that their strategic  workforce planning efforts (1) involve top management, staff, and other  stakeholders; (2) identify the critical skills and competencies that will be  needed to achieve current and future programmatic results, including  evaluation of gaps; (3) develop strategies that are tailored to address  skills gaps; (4) build the internal capability needed to address  administrative, training, and other requirements important to support  workforce planning strategies; and (5) include plans to monitor and  evaluate the agency’s progress toward meeting its human capital goals. These findings are consistent with OPM guidance.
GAO, Human Capital: Key Principles for Effective Workforce Planning, GAO-04-39  (Washington, D.C.: Dec. 11, 2003). effectively carry out remaining workforce planning goals. In May 2013,  SEC also hired a staff member with expertise in succession planning.
SEC also has initiated strategies, such as hiring and training, to close  skills gaps. For example, SEC’S OHR began working with the divisions to  hire staff with necessary specialized and financial industry expertise.  Many SEC staff with whom we spoke in one-on-one interviews indicated  that the recent actions SEC has taken helped address issues related to  the competence of staff across the agency. For example, our survey  showed that 86 percent of nonsupervisory staff and supervisors indicated  that their division was able to attract talented and qualified staff.  Additionally, the majority of nonsupervisory staff, supervisors, and senior  officers who responded to our survey indicated the training they received  provided them with the right skills to meet SEC’s needs. Furthermore,  participants in about half of our 22 focus groups said that training  opportunities had increased and improved in quality. Similarly, one  industry representatives with whom we spoke also told us that SEC staff  generally had the right set of skills to carry out SEC’s mission effectively.
SEC has also expanded developmental opportunities for staff. For  instance, SEC has increased technical and developmental opportunities  for nonsupervisory staff by offering leadership development courses  through SEC University.leadership courses, selected courses are made available for  nonsupervisory staff to promote career development to a managerial  position. SEC also has offered other tools, including a 360 degree   While all supervisors can take the core  feedback program and executive coaching service to support the  development of SEC’s supervisors.
While SEC has taken steps towards identifying and addressing its  workforce competency gaps, these efforts have not reflected all of the  elements of effective workforce planning and strategies articulated in  OPM guidance. During our review, OHR officials told us that the agency  has not conducted a thorough analysis of its workforce to  comprehensively identify competency gaps, including those related to the  right mix of staff to supervisors. Without a comprehensive approach to  identify these gaps, any strategies to address them will not be fully  effective. As indicated in our survey, more than 50 percent of  nonsupervisory staff and supervisors responded that management in their  divisions could do more to address skill gaps. Moreover, some SEC staff  and supervisors have raised questions about the appropriateness of the  ratio of staff to managers. For instance, SEC nonsupervisory and  supervisory staff with whom we spoke in the focus groups and those we  surveyed expressed varying views on the ratio of staff to managers; some  thought it was appropriate, others thought there were too many  managers. When we asked SEC’s OHR how they determined an  appropriate ratio, they told us that it is dependent on the complexity of the  program or activity. Historically, each division took the lead in making  those types of decisions, as well as decisions related to hiring and  identifying training needs.
Additionally, SEC has not developed a comprehensive management  succession program to fill agency supervisory positions, contrary to  regulatory requirements. Specifically, it lacks a transparent process for  leadership succession, including how it identifies and grooms high- potential leaders, as outlined in OPM guidance and federal regulations.
Staff also perceived the promotion process as unfair. The development of  a succession plan might help address pronounced staff dissatisfaction  with the promotion process. For example, a more transparent process  could enable staff to have a better understanding of how high-potential  leaders from within the agency are identified and make the promotion  process appear less unfair. While SEC has written selection criteria for  promotion, several nonsupervisory staff with whom we spoke in one-on- one interviews and whom we surveyed viewed SEC’s methods for  promoting individuals to supervisory positions as unclear and potentially  biased. Almost 55 percent of nonsupervisory staff responded that  promotion to management was mostly based on connections that staff  had with management (see table 7). In addition, participants in 7 of our 22  focus groups said that it was unclear how certain individuals were  selected for promotion. We found similarities between SEC employee  viewpoints and those of employees at other federal agencies. For  example, according to OPM’s 2012 Federal Employee Viewpoint Survey,  which surveyed employees from 82 federal agencies, comprising 97  percent of the agencies in the executive branch, 33.5 percent of  government employees responding to the survey agreed (or strongly  agreed) that promotions in their work unit were based on merit, about  29.2 percent neither agreed nor disagreed, and 37.3 percent disagreed  (or strongly disagreed).
Additionally, many staff we surveyed and with whom we spoke in one-on- one interviews also did not think there was much incentive to be  promoted into management positions. For example, slightly more than  half of nonsupervisory staff and almost 75 percent of supervisors who  responded to our survey indicated that there was not much incentive to  be promoted because the salary increase would be minimal (see table 8).  Staff in 7 of the 22 groups said staff had little incentive to become  managers because the differences in pay were minimal. Similarly, 1 in 10  staff with whom we met individually said there were no financial  incentives to apply for a promotion to the first-level supervisor position.  Senior officers had mixed views about the incentives for promotion.  According to OHR officials, the pay differential (traditionally, 6 percent)  between nonmanagers and managers has been eroded and in some  cases eliminated. Because of the federal pay freeze, while nonmanagers  have received merit increases every year, managers have not received  any increases.
Until SEC completes a comprehensive workforce plan, the agency will be  limited in its ability to meet its workforce needs. According to agency  officials, SEC has been slow to adopt comprehensive workforce planning  because human capital planning has not been considered an area of high  priority. OHR officials explained that SEC priorities were concentrated on  mission-critical functions and, as such, OHR focused on fulfilling and  complying with essential OPM reporting requirements because of  resource constraints. Additionally, OHR officials noted that, prior to the  recent release of SEC’s first human capital strategic plan in 2012, human  capital efforts generally were loosely put together and not formally linked  to SEC’s overall strategic plan. Our previous work has shown that  sustained leadership attention by the COO or other officials will be  important to address these concerns. Without comprehensive workforce  and succession plans, SEC will be limited in its ability to make well- informed decisions about how to best meet agency needs today and into  the future.
section_title: Implementation of SEC’s Performance Management System Could Be Improved
paragraphs: The design of SEC’s performance management system reflects some  characteristics of an effective system but could be improved. According to  OPM guidance (primarily HCAAF) and our past work, an effective  performance management system typically encompasses expectations  that are set for staff, monitoring of staff’s work that results in performance  appraisals, feedback to staff on their performance and ways to improve it,  and recognition of staff’s contributions.performance management systems include: performance appraisals that distinguish between levels of  performance and reward strong performance, meaningful and timely feedback discussions, actions to address poor performance, mechanisms to ensure supervisors properly use the system, and periodic staff validation of the system to ensure its credibility.
SEC’s performance management system includes an appraisal system  that consists of ratings designed to differentiate between levels of  performance. The performance management system also requires  supervisors and senior officers to use performance results to offer  feedback, identify developmental needs, and address instances of poor  performance. The system also includes steps and actions to address poor  performance.
However, our work, as well as outside studies, suggests that SEC’s  implementation of its performance management system could be  improved. SEC staff expressed many concerns about the implementation  of the performance management system. For example, staff expressed  concerns about the link between their performance and ratings, limited  performance incentives, unconstructive feedback, and the extent of  actions taken to address poor performance. SEC senior officers  expressed concerns about the system as well. By not addressing these  implementation concerns, the agency could face challenges in retaining a  high-quality workforce that is actively engaged in the work of SEC, which  in turn, could affect the agency’s ability to adequately carry out its  mission.
According to HCAAF, an effective performance management system  distinguishes between levels of performance and rewards strong  performance. Although the design of SEC’s performance appraisal  system reflects these elements, SEC staff raised a number of concerns  related to how the appraisal system is applied, and the link between their  performance and incentives (that is, pay and rewards). Our survey results  revealed that about 43 percent of nonsupervisory staff did not believe  their performance appraisals are fair and appropriate (see table 9).  Similarly, participants in the majority of the focus groups we conducted  with nonsupervisory staff stated that their ratings were arbitrary and not  meaningful, and that their ratings under the current appraisal system did  not fully reflect their accomplishments. In contrast, most supervisors and  senior officers that responded to our survey indicated that they thought  staff performance appraisals were fair and appropriate.
A 2012 study of SEC’s performance management system, conducted by  an independent third party, found similar results. Specifically, almost  half of the nonsupervisory staff that responded to that study’s survey  indicated that their appraisal rating did not accurately reflect their  performance. We compared SEC employee viewpoints from our survey to  those of employees at other federal agencies and identified differences.  According to OPM’s 2012 Federal Employee Viewpoint Survey, about 16  percent of employees government-wide responding to the survey  disagreed (or strongly disagreed) that their performance appraisal was a  fair reflection of their performance.
Staff also raised concerns about whether the system, as implemented,  rewarded strong performance. A little more than one-third of  nonsupervisory SEC staff who responded to our survey indicated that  there was a clear link between their performance and recognition of it;  about the same amount said that a clear link did not exist (see table 10).
We also heard concerns related to the link between performance and pay  from staff in our focus groups. According to nonsupervisory and  supervisory staff in 17 of the 22 focus groups we conducted, the  performance appraisal process was not meaningful, as bargaining unit  staff who received an acceptable rating received the same pay increase  (measured in percentage) regardless of the rating score. OHR officials  acknowledged that all bargaining unit staff across SEC that received an  acceptable rating received the same pay increase (percentage) during  fiscal year 2012. According to these officials, SEC has not been able to  implement the pay-for-performance element of the system because  negotiations with the employees’ union remain ongoing. Such across-the- board pay increases weaken the link between pay and performance. In  contrast, SEC has put in place pay-for-performance for supervisors and  senior officers. Most supervisors (almost 61 percent) and senior officers  (almost 60 percent) who responded to our survey said a clear link existed  between their performance and recognition of it.
Staff also expressed concerns with the awards process. SEC has an  awards program that is designed to recognize employee contributions  above and beyond normal job requirements and provide monetary and  nonmonetary awards. However, more than 60 percent of  nonsupervisory staff and about 43 percent of supervisory staff who  responded to our survey indicated that they did not think the criteria for  rewarding staff were clearly defined. In addition, staff in the majority of  nonsupervisory focus groups we conducted asserted that the awards  process was not transparent. For example, staff told us that it was unclear  what was required to receive an award for strong performance and why  some staff received awards and others did not. Senior officers with whom  we spoke in one division had similar perspectives and stated that the  criteria and tasks associated with different levels of awards were not  sufficiently transparent. In some of the focus groups we conducted, SEC  staff also told us that the awards themselves, partly due to budget  constraints, were not particularly meaningful. Some supervisors also  commented that they had few means to motivate staff.
According to OPM guidance, an effective performance management  system requires and encourages meaningful feedback discussions.  Moreover, it states that meaningful feedback provides opportunities for  supervisors to offer specific details on staff’s performance and  suggestions on how staff can improve certain aspects of his/her  performance. SEC requires supervisors and managers to conduct a  formal feedback meeting at the end of the performance cycle and to  provide feedback to each of their staff on their performance that is  specific, descriptive, and objective. SEC also encourages supervisors and  managers to solicit questions from staff during performance feedback  session.
The majority of SEC nonsupervisory and supervisory staff are generally  satisfied with the feedback they received. According to our survey of  nonsupervisory and supervisory staff, the majority of respondents  indicated that they received useful feedback from their direct supervisors  (see table 11).
However, some nonsupervisory staff raised concerns about the quality of  the feedback they received. About 20 percent of nonsupervisory staff that  responded to our survey indicated that they did not receive useful or  constructive feedback. Among these respondents, some commented that  the feedback was vague or did not provide specific suggestions for  improvement. Similarly, some staff in our focus groups said that they did  not receive meaningful feedback. We found similarities between SEC  employee viewpoints and those of employees at other federal agencies.  However, in the 2012 third-party study, nearly half of SEC employees  who completed the survey indicated that they had not received  meaningful feedback from their supervisors, and the study found that  about a quarter of the respondents did not indicate that they had a formal  feedback session during the annual rating period when the survey was  conducted.nonsupervisory and supervisory staff, timeliness was generally not  identified as an issue related to feedback.
In focus groups and interviews we conducted with  SEC has taken steps to address some staff’s concerns about feedback.  For example, SEC has provided training to supervisors on how to provide  clear performance expectations and effectively counsel staff on their  performance. However, implementing mechanisms to monitor  supervisors’ efforts to provide meaningful feedback could provide SEC  with greater assurance that its supervisors are providing feedback to staff  as intended and that staff have the information to maintain or adjust their  performance accordingly.
OPM guidance states that an effective performance management system  outlines actions that supervisors should take to address staff performance  and, in particular, staff who are not meeting performance expectations.  Such actions are important because they attempt to rectify poor  performance that could be affecting an agency’s ability to achieve its  mission or goals. SEC’s system includes a process to address poor  performing staff. Specifically, those who receive an overall rating of  unacceptable are placed on a performance improvement plan that  requires them to meet certain goals to demonstrate improvement. To  complete the improvement plan, staff must maintain the improved level of  performance for the duration of the plan. If staff do not improve and  sustain performance at an acceptable level during the duration of the  plan, SEC can demote or dismiss the staff.
Although SEC’s performance management system includes such  elements, employees reported concerns about how SEC addressed poor  performing supervisors and staff.
Poor performing supervisors. According to the results from our  survey, staff generally do not think SEC senior officers or supervisors  effectively deal with poor performers. About 56 percent of the  nonsupervisory staff and about 47 percent of supervisory staff who  responded to our survey indicated that senior officers do not deal  effectively with poor performing supervisors (see table 12). Similarly,  in about one-third of our focus groups, nonsupervisory staff and  supervisors both stated that SEC generally had not taken actions  against poor supervisors. In contrast, a little more than half of the  senior officers who responded to our survey reported that they dealt  effectively with poor-performing supervisors.
Poor performing staff. More than 50 percent of both nonsupervisory  staff and supervisors who responded to our survey indicated that  supervisors did not deal effectively with poorly performing staff (see  table 13). Some supervisors commented that dealing with poor- performing staff often is very time-consuming. Similarly, according to  results from OPM’s 2012 Federal Employee Viewpoint Survey, 43  percent of employees government-wide responding to the survey  disagreed (or strongly disagreed) that in their work unit, steps were  taken to deal with a poor performer who could not or would not  improve.
When we spoke to OHR officials about how SEC has dealt with poor  performing staff, they told us that actions taken against poor performing  staff are confidential and, as a result, SEC staff may not be aware of how  poor performance has been addressed. According to OHR officials, from  2007 through June 2013, SEC placed 38 staff under performance  improvement plans. Subsequently, 2 staff were terminated, 10 resigned, 3  were reassigned within SEC, 18 successfully completed the improvement  plan, 1 has a proposed removal pending, and 4 are still in the  performance improvement plan period as of June 2013.
According to OPM guidance, an effective performance management  system monitors how supervisors use the system and provide feedback  to staff, includes performance standards for supervisors in these areas,  and requires that supervisors’ performance in these areas be part of their  feedback and performance evaluations. Without such mechanisms, it is  more difficult to ensure accountability in how aspects of the performance  management system are applied, especially the performance appraisal  process whereby supervisors assess a subordinate’s performance,  develop a corresponding rating, recognize their performance, and deliver  feedback to the subordinate about his or her performance.
While SEC has performance standards related to supervisors’ use of the  performance management system, we did not identify specific  mechanisms for how SEC monitors supervisors’ use of the system. For  example, while staff have the option to prepare written narratives on how  they assess their own performance for that rating period, we did not  identify mechanisms that monitor how supervisors use information from  staff narratives to help ensure they prepare complete and accurate  appraisal ratings for staff. Senior officers in the six divisions told us they  reviewed narratives that supervisors wrote to support a subordinate’s  rating for the purpose of ensuring that the narrative supported the rating.  However, this only serves to ensure that the narrative supports a rating,  and not that the rating itself is an accurate representation of the  subordinate’s performance. For example, consistent with OPM guidance,  senior officers could assess how well supervisors monitor and assess  staff performance by comparing the summaries that staff prepare  assessing their own work against the ratings that supervisors prepare for  these staff. Moreover, we found that some supervisors with whom we  spoke have had limited discussions with their own supervisors about how  they use the system to recognize and reward strong staff performance,  provide feedback to staff, or take actions to deal with poor performance.
Without such mechanisms, there is an increased risk that accountability  for performance appraisal processes and activities—such as developing  ratings and delivering feedback—will be diminished. Mechanisms that  monitor how the system is being applied and used by supervisors, such  as ongoing feedback conversations between supervisors and their  superiors, could help ensure that staff are receiving appraisals that reflect  all of their performance during the rating period, are being provided  meaningful feedback, and that poor performance is addressed in a timely  and effective manner. Sustained management attention would help  encourage the development of such mechanisms.
We previously concluded that an effective performance management  system includes periodic validation of the system to help ensure its  credibility. Validating the system typically refers to obtaining staff input  and general agreement on the competencies, rating procedures, and  other aspects of the system.
SEC has taken some steps to obtain staff input on a portion of its  performance management system. Specifically, SEC sought staff input on  the creation of the performance standards for various occupations,  including attorneys and examiners. However, managers validated and  finalized these performance standards. Furthermore, we could not identify  additional SEC efforts to obtain staff input on other aspects of its  performance management system, such as the performance appraisal  process. The safeguards that we previously identified are key to  successful implementation of performance management systems in the  federal government. We identified these safeguards based on our work  looking at the performance management practices used by leading public  sector organizations in the United States and in other countries, as well  as our experiences in implementing a modern performance management  system for our own staff at GAO. Among these safeguards, we’ve stated  that it is vital for agencies to directly involve staff in the implementation of  all aspects of a performance management system. According to OHR  officials, they plan to validate the performance management system once  SEC and the union reach agreement on the revisions currently being  negotiated, but it is unclear when they will reach agreement since they  have been in negotiations for several years. Validating the performance  management system with staff input on aspects beyond performance  standards and objectives could help enhance the credibility of SEC’s  performance management system among its staff, including the ratings,  recognition, or feedback that they receive as a result.
section_title: SEC Has Yet to Fully Address Barriers to Communication and Collaboration
paragraphs: Although SEC has improved intra-agency communication and  collaboration, barriers still exist. As discussed previously in this report,  current and former SEC staff and others use words like “siloed  communication” and “hierarchical” to describe SEC’s culture. Such an  environment can hinder SEC’s ability to effectively carry out its mission by  limiting communication and collaboration among the divisions. For  example, as noted earlier in this report, SEC’s IG has reported on how  this lack of communication and collaboration may have contributed to  past enforcement failures.
According to HCAAF, supervisors and managers should foster an  environment of open communication. Such communication, as found in  our previous work, can facilitate a collaborative environment, enable more  efficient work processes, and prevent misunderstandings. Open and  effective communication occurs when information flows down, across,  and up the organization. Frequent communication among collaborating  divisions within an agency provides a means by which to facilitate working  across intra-agency boundaries. In prior work, we identified practices  that can help to enhance and sustain collaboration among federal  agencies, which can help to maximize performance and results, and have  recommended that agencies follow them. These collaborative practices  include identifying common outcomes, establishing joint strategies,  leveraging resources, determining roles and responsibilities, and  developing compatible policies and procedures, among others.
SEC has taken some steps to address its communication challenges and  enhance collaboration within and among divisions.
Enforcement created national specialized units to focus its  investigations on high-priority areas such as asset management,  market abuse, and structured and new products in August 2009. The  specialized units work with OCIE and other divisions to identify high- risk areas for further examination and investigation. Over the last  year, Enforcement also has taken steps to improve headquarters  interactions, including developing guidelines for the role of trial  counsel in investigations and investigative staff in litigated matters.  The division also formed an advisory committee, which according to  SEC officials includes supervisors and managers, to identify broader  cultural or structural reforms to improve coordination.
OCIE created the National Examination Program (NEP) in 2010 to  emphasize intra-agency collaboration and increase communication  among different regional offices and divisions. OCIE established a  standardized set of policies and procedures for conducting  examinations under NEP to enhance coordinated examination and  inspection activities. OCIE also established regular monthly national  teleconferences of examiners across regions and headquarters,  developed new processes for communicating with Enforcement about  new and pending examination referrals, and set mutual goals with  other divisions.
Several divisions also created new offices or subunits to help facilitate  communication and collaboration with other divisions. For example,  according to SEC officials, OCIE, Enforcement, and Investment  Management hired new communication managers in fiscal year 2013  to develop more robust internal communication within their programs.  In January 2013, SEC’s Office of Public Affairs established a cross- divisional internal communications working group to help ensure that  appropriate attention is given to internal communication within the  agency.
Both SEC staff and external stakeholders have started to see some  positive effects from the recent efforts to bolster communication and  collaboration. For example, when asked whether communication between  divisions on work-related matters was encouraged, about 54 percent of  nonsupervisory staff, 75 percent of supervisors, and 94 percent of senior  officers strongly or somewhat agreed that such communication was  encouraged. When asked about the effects of these recent efforts,  specifically those that senior officers were making to improve  communication and collaboration between divisions, many staff viewed  these efforts as positive. For example, nonsupervisory staff (38 percent)  and many supervisors (62 percent) thought that senior officers were  making a moderate to great effort to improve collaboration among  divisions. Representatives from one of the industry groups with whom  we spoke said recent improvements in coordination across SEC’s  regional offices has reduced the duplicative efforts that in the past  incurred unnecessary time and money. The representatives also noted  that in meetings with SEC, multiple SEC divisions often have been  represented.
Although the agency has taken efforts to improve its intra-agency  communication and collaboration, staff continued to identify barriers to  effective communication and collaboration among the divisions, within  divisions, and between staff and management, contrary to collaborative  best practices. For example, many nonsupervisory staff and supervisors  who responded to our survey commented on communication issues and  challenges, such as that they were frustrated that relevant and timely  information was not freely communicated across units because of the  need to obtain management approval to share such information. Rather  than leveraging resources, according to some staff, various divisions  function as individual “fiefdoms.” Former senior SEC officials with whom  we spoke individually explained that some supervisors and senior officers  felt the need to protect their “turf” and status in the agency by not sharing  information. Furthermore, representatives from SEC’s union told us that  management frowned on communication across divisions without going  through formal channels. As noted earlier, about one-third of the SEC  staff who responded to our survey said they had not contacted staff in  other divisions (outside of Enforcement) over the last year on work- related matters, such as coordinating activities or seeking expert advice.  But, according to senior officers with whom we spoke from multiple  divisions, cross-division communication and collaboration may not be  necessary in many instances. They told us that staff involved in  rulemaking are concentrated in a relatively small group of individuals, and  staff in similar specialized roles may have fewer work-related  opportunities or reasons to reach out across the agency for expertise or  to coordinate work.
SEC staff also said barriers to communication and collaboration among  offices in the same division exist. For example, they identified working  relationships between investigative and trial attorneys in headquarters as  a challenge. Senior officers in Enforcement told us in an interview that  investigative attorneys in headquarters end their involvement in a matter  once they complete their investigation and hand it off to the trial unit for  prosecution. Further, the two units report to different supervisors and are  located in different physical spaces, leading to inefficiencies due to a lack  of continuity and collaboration, which are essential when building and  prosecuting cases. For example, a trial attorney told us that there are  times when the evidence that the investigative attorneys produce is not  sufficient to successfully try a case and as a result they either have to  gather additional evidence, or they choose not to pursue the case and  waste the past efforts of the investigators. This process is inconsistent  with best practices related to intra-agency collaboration—such as  identifying joint strategies designed to help align different division and  subdivision activities and resources with the aim of achieving a common  outcome. In contrast, investigative and trial attorneys in the regional  offices work together collaboratively throughout the investigation and trial  phases. Both units report to the same supervisor and are co-located.  According to staff, reporting to the same supervisor and being co-located  helps the attorneys to stay in constant communication and collaborate  from the beginning to the end of a case, facilitating their work.
Concerns were also raised about the nature of communication between  managers and staff. Nonsupervisory staff were divided about whether  supervisors included staff in the flow of relevant information, but the  majority of supervisors thought they effectively included staff in the flow of  information (see table 14). Many nonsupervisory staff and supervisors  who responded to our survey commented that they were frustrated that  relevant and timely information was not freely communicated among  higher- and lower-level staff. For instance, several commented that the  downward flow of information was nearly nonexistent or filtered, while  upward flow (particularly staff suggestions to management) was not  encouraged. Some nonsupervisory staff with whom we spoke  characterized this as senior officers and supervisors “controlling” the flow  of information.
Staff views again were divided about support for two-way communication.  As shown in table 15, about half of the nonsupervisory and supervisory  staff indicated their divisions supported open and two-way communication  between staff and management. Roughly one-third of staff indicated that  their divisions did not support such communication. During our review, we  did not identify any steps that SEC has taken to systematically address  challenges associated with two-way communication between staff and  management.
Despite recent efforts to break down silos, we found that they continue to  exist, and communication between staff and management still tends to be  top-down. Such an environment can hinder SEC’s ability to effectively  carry out its mission by limiting communication and leading collaboration  practices. Without a sustained management focus on implementing  leading communication and collaboration practices, SEC continues to  face increased risks of inefficiencies and less-than-optimal decision  making about its market oversight, investigative, and enforcement  functions. SEC can also foster and encourage more communication and  collaboration among its staff by, for example, setting formal expectations  for its supervisors to foster an environment of communication and  collaboration, as well as recognizing exceptional teamwork, which it  currently does not. These efforts would be consistent with OPM guidance  in recognizing and rewarding an environment of teamwork.
section_title: SEC Has Not Developed a System to Monitor and Evaluate Its Personnel Management Activities
paragraphs: SEC has not developed an accountability system to monitor and evaluate  its personnel management programs and systems (such as its workforce  and succession planning functions and performance appraisal system).  According to HCAAF, an accountability system is intended to evaluate  results and provide consistent means for an agency to monitor and  analyze its performance on all aspects of human capital management  policies, programs, and systems.
The accountability system also contributes to an agency’s performance  by identifying and monitoring necessary improvements. The  accountability system should provide for annual assessments of an  agency’s progress and results related to human capital management. The  results should inform an agency’s human capital goals and objectives, in  conjunction with strategic planning and performance budgets. Moreover,  OPM officials also explained that the accountability system is an integral  part of an evaluation system that OPM uses to determine how well  agencies are monitoring and evaluating their human capital activities and  programs.
According to OHR officials, human capital functions at SEC had not been  a priority until 2009. As a result, limited resources had been allocated to  human capital functions, such as the development of an accountability  system. However, SEC’s OHR officials said they have been developing  such a system, and noted that implementing this comprehensive system  would be a multiyear project. However, during our audit, OHR officials did  not provide us with any specific documentation on the development of the  system, how it will be implemented, and what steps will be taken to  ensure its completion. In commenting on a draft of this report, SEC stated  that they have recently developed milestones and deliverables for the  implementation of the system, which SEC anticipates will be fully  implemented by the end of this calendar year.  Until a system is put into  place, SEC may be missing opportunities to take a more comprehensive  approach to improving its personnel management. Moreover, without the  information such a system generates, it will be difficult for SEC to identify  systemic problems related to its personnel management or to correct  them.
section_title: Conclusions
paragraphs: Maintaining a top-notch, high-performing workforce is critical to SEC  effectively carrying out its existing and new regulatory responsibilities in  increasingly complex markets. However, SEC’s organizational culture has  not been conducive to motivating and encouraging a high level of  performance—many staff indicated that morale is low and a significant  percentage characterize the atmosphere of the agency as one of distrust.  Successfully transforming organizational culture requires an effective  personnel management system. While personnel management  traditionally has not been a priority at SEC, the agency has placed a new  emphasis on it. However, continued work—and sustained leadership  attention—would help to address a number of personnel management  issues.
First, SEC lacks planning mechanisms to guide decision making about  the appropriate number and skill mix of staff and does not have a  transparent process to identify and develop potential leaders for future  needs. OPM guidance outlines elements of effective workforce and  succession plans, including action plans that help agencies move forward  expeditiously and maintain a focus on developing leaders with the  necessary managerial skills to effectively manage the agency’s  workforce. SEC is developing workforce and succession plans, but has  been slow to adopt such plans. Developing workforce and succession  plans in line with OPM guidance would help ensure that SEC’s planning  efforts were comprehensive, systematic, and forward looking and focused  on obtaining, training, and retaining the workforce and leadership to help  the agency achieve its mission.
Second, nonsupervisory and supervisory staff perceptions about SEC’s  performance appraisal system were broadly negative—many staff viewed  the way that the system was used as arbitrary and ineffective and some  supervisors expressed concern about the system lacking meaningful  incentives for strong performance. While SEC’s performance appraisal  system reflects many elements of OPM guidance, no system, regardless  of how well it is designed, will meet its intended purpose if it is not  implemented well. SEC’s implementation of its performance management  system could be improved by creating ways to monitor how supervisors  use the system to recognize and reward performance, provide meaningful  feedback, and effectively address poor performers and by conducting  periodic validations with staff input (and making changes, as appropriate),  consistent with key principles identified in our past work. Although  developing a performance appraisal system that is appreciated by all  SEC staff should not be the goal of SEC’s efforts, developing and  implementing a system that is credible is critical. Without a credible  system, its value and merit will continue to be questioned.
Third, while SEC has taken steps towards improving intra-agency  communication, roughly one-third of staff indicated that their divisions did  not support two-way communication between staff and management.  Because these are long-standing concerns, sustained leadership to  improve communication and collaboration within SEC is important and  exploring and implementing leading communication and collaboration  practices could better position SEC to address these issues. We  previously reported that top leadership attention of a COO could build and  maintain an organization-wide commitment to new ways of doing  business. Furthermore, SEC could implement incentives for all staff to  foster open communication and collaboration as well as hold them  accountable for doing so. For example, SEC could recognize exceptional  teamwork efforts through special awards and set formal expectations of  its supervisors to foster an environment of communication and  collaboration. By enhancing its ongoing efforts and taking more steps to  improve intra-agency communication throughout the agency, SEC can  improve operations and address widely held views of the agency as  “siloed” and “hierarchical.”
Finally, SEC has not yet implemented a system to continually monitor and  evaluate its personnel management system—the activities, policies, and  programs that include its workforce planning efforts and performance  appraisal system. According to OPM guidance, such routine monitoring  and evaluation enables agencies to refine and adjust their approaches to  help ensure the ongoing effectiveness of personnel management  activities. SEC has started work to develop an accountability system.   Prioritizing the development of such a system and ensuring that it is  consistent with HCAAF guidance and standards would put SEC firmly on  a path to better plan, sustain, and refine its personnel management  strategies over the long term.
section_title: Recommendations for Executive Action
paragraphs: To help SEC address identified personnel management challenges, the  Chairman should take the following seven actions.
To enhance SEC’s ability to strategically hire and retain the appropriate  number of staff with the requisite skill sets for today and in the future, the  Chairman of SEC should direct the COO and OHR to prioritize efforts to expeditiously develop a comprehensive workforce  plan, including a succession plan, and establish time frames for  implementation and mechanisms to help ensure that the plans are  regularly updated; and  incorporate OPM guidance as it develops its workforce and  succession plans, by developing a formal action plan to identify and  close competency gaps, and fill supervisory positions; and institute a  fair and transparent process for identifying high-potential leaders from  within the agency.
To help enhance the credibility of its performance management system,  the Chairman of SEC should direct the COO and OHR to  create mechanisms to monitor how supervisors use the performance  management system to recognize and reward performance, provide  meaningful feedback to staff, and effectively address poor  performance; for example, by requiring ongoing feedback discussions  with higher-level supervisors; and  conduct periodic validations (with staff input) of the performance  management system and make changes, as appropriate, based on  these validations.
To build on SEC’s efforts to enhance intra-agency communication and  collaboration, the Chairman should direct the COO to  identify and implement incentives for all staff to support an  environment of open communication and collaboration, such as  setting formal expectations for its supervisors to foster such an  environment, and recognizing and awarding exceptional teamwork  efforts; and explore communication and collaboration best practices and  implement those that could benefit SEC.
Finally, to increase accountability of SEC’s personnel management  system, the Chairman of SEC should direct the COO and OHR to prioritize and expedite efforts to develop and implement a system to  monitor and evaluate personnel management activities, policies, and  programs, including establishing and documenting the steps  necessary to ensure completion of the system.
section_title: Agency Comments
paragraphs: We provided SEC a draft copy of this report for review and comment.  SEC provided written comments that are reprinted in appendix V. In  written comments, SEC agreed with our recommendations. SEC  acknowledged that improvements could be made in SEC’s personnel  management and noted that our report contained useful information that  will help the agency strengthen personnel management. The letter also  stated that SEC was committed to investing the time and resources to  improve its organizational culture and personnel management. For  example, as we noted in our report, SEC plans to improve its ability to  identify and address workforce competency gaps through its newly  established workforce and succession planning function.  Three staff  members will coordinate all workforce succession planning agency-wide.  In addition, the letter noted that SEC recently implemented pay-for- performance for nonbargaining unit employees, would assess the impact  of the system on those employees, and offer additional training to  managers. SEC also agreed that interagency communication and  collaboration remained challenges, but said these issues were a top  priority and SEC would continue to leverage the results from the steps it  is taking to improve in this area.  For example, SEC indicated that OCIE  has recently formed nine specialized working groups, involving over 600  staff from across the agency, to facilitate the sharing of information on key  risk areas and industry trends. SEC also stated that it has recently added  an Assistant Regional Director of Operations position in each regional  office to help facilitate communication and ensure consistency across the  agency. Finally, SEC described its most recent progress—developing key  milestones and deliverables—in implementing an accountability system  and to monitor and evaluate the personnel management system by the  end of this calendar year. SEC anticipated that the system would address  the concerns we cited in this report about aligning human capital  practices and strategic goals. We updated our report to reflect SEC’s  recent progress on this issue.
We are sending copies of this report to interested congressional  committees and SEC. The report also is available at no charge on the  GAO website at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  A. Nicole Clowers at (202) 512-8678 or clowersa@gao.gov. 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 VI.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) what is known about the Securities and  Exchange Commission’s (SEC) organizational culture and (2) SEC’s  personnel management challenges and its efforts to address these  challenges. We focused the scope of our review on all five divisions and  one office primarily responsible for implementing the agency’s mission— Divisions of Corporation Finance; Enforcement; Investment Management;  Economic and Risk Analysis; Trading and Markets; and the Office of  Compliance Inspections and Examinations (OCIE). For purposes of this  report, we refer to these divisions and office as divisions. In the six  divisions, we focused on employees in four occupational categories  (accountants, attorneys, examiners, and financial analysts) that account  for the majority of SEC employees and on all senior officers in those  divisions. We reviewed management consultant reports, and SEC  reports, SEC IG reports, and testimonies to describe what is known about  SEC personnel management challenges and any agency initiatives  (either planned or under way) to address them during the past few years.  We reviewed the methodology of the management consultant reports and  SEC IG studies and determined that they were sufficiently reliable for the  purposes of our report; however, the results should not necessarily be  considered as definitive, given the potential methodological or data  limitations contained in the studies individually or collectively. We also  assessed SEC policies, procedures, and practices against applicable  federal regulations related to personnel management, the Office of  Personnel Management’s (OPM) Human Capital Assessment and  Accountability Framework (HCAAF), GAO reports on human capital  practices and standards for internal control, and SEC’s strategic plan for  fiscal years 2010-2015.
To conduct our work, we examined SEC policies and procedures for  carrying out personnel management responsibilities, including recruitment  and training, performance appraisal, supervision, promotion processes,  and communication within and among SEC divisions. In addition, we met  with SEC’s Office of Human Resources and senior leaders from the  divisions to discuss and collect information on their views on SEC’s  organizational culture, personnel management challenges, and future  plans to address these challenges. We also interviewed SEC’s Inspector  General officials, four former SEC employees, SEC union leaders and  members, two management consultants who previously worked with  SEC, representatives from two industry trade groups, and two academics  with knowledge of SEC personnel management issues to obtain their  views on the agency’s organizational culture, personnel management  challenges, and what, if anything, SEC can do to address these  challenges.
We also conducted eight semistructured group interviews with  nonsupervisory staff. Each group interview consisted of employees from  one division to facilitate rapport among the participants. To select  participants to take part in the first six sessions, we relied on the  assistance of SEC union leaders to recruit volunteers from each of the  divisions, To select participants for the last two sessions, we sent e-mails  to nonsupervisory staff who were not union members to invite them to  take part in group interview sessions for employees in the Division of  Enforcement and OCIE, two of the largest divisions at SEC. For each 2- hour interview, we asked participants to share their views on SEC’s  organizational culture, what was working well or not well in relation to  SEC personnel management, and what could be done to address any  challenges. The information we gathered during these interviews  provided an initial understanding of participants’ views on these issues  and was used to inform the design of later data collection methods.
Our methods for gathering perspectives from current SEC employees on  organizational culture and personnel management issues included  semistructured one-on-one interviews, focus groups, and two web-based  surveys of all SEC employees (including senior officers) in the selected  divisions and occupational groups. This combination of data collection  techniques was carried out sequentially, so that knowledge gained from  one technique could be used to inform the design of the next. For  example, based on information learned through our interview efforts, we  designed questions used in the focus group effort that followed.
Individual interviews. We interviewed 129 employees (92  nonsupervisory staff and 37 supervisors and senior officers) at SEC  headquarters (in person) and regional offices (by telephone or e-mail)  during 3 weeks from July through September 2012. We created  opportunities for all SEC employees from the six divisions and four  occupational categories to meet or communicate with us individually. At  headquarters, we established office hours during which employees could  speak with GAO analysts. To encourage open communication, we had  separate office hours for nonsupervisory and supervisory employees.  During the same period, we set up a GAO toll-free phone number and e- mail account to communicate with employees in the regional offices or  headquarters who could not attend the office hours. We asked certain key  questions of every person and interjected additional questions as  appropriate. We also presented SEC Section 962 of the Dodd-Frank Wall  Street Reform and Consumer Protection Act (Dodd-Frank Act), which  describes the elements of our study.
Pub. L. No. 111-203, § 962, 124 Stat. 1376, 1908-09 (2010). Section 962 of the Dodd- Frank Act mandated GAO to evaluate: (A) the effectiveness of supervisors in using the  skills, talents, and motivation of the employees of the Commission to achieve the goals of  the Commission; (B) the criteria for promoting employees of the Commission to  supervisory positions; (C) the fairness of the application of the promotion criteria to the  decisions of the Commission; (D) the competence of the professional staff of the  Commission; (E) the efficiency of communication between the units of the Commission  regarding the work of the Commission (including communication between divisions and  between subunits of a division) and the efforts by the Commission to promote such  communication; (F) the turnover within subunits of the Commission, including the  consideration of supervisors whose subordinates have an unusually high rate of turnover;  (G) whether there are excessive numbers of low-level, mid-level, or senior-level  managers; (H) any initiatives of the Commission that increase the competence of the staff  of the Commission; and (I) the actions taken by the Commission regarding employees of  the Commission who have failed to perform their duties and circumstances under which  the Commission has issued to employees a notice of termination. § 962(b)(1)(A)-(I).
SEC’s organizational culture, what was working well or not in relation to  personnel management at SEC, and what could be done to address  challenges. Employees were encouraged to talk openly and freely. To  maintain the confidentiality of individual responses, we collected and  analyzed the information by division and rank only, and aggregated our  findings so that no individual comments could be identified.
We conducted a content analysis to summarize key themes that emerged  from the individual interviews. Two GAO analysts independently read  notes from 23 interviews and made a judgment about appropriate codes  that described the themes. The analysts compared their decisions and  reconciled any disagreements, resulting in the following set of coding  categories: (1) personnel management areas in which SEC has been  doing well; (2) areas in which there might be challenges, including views  on SEC’s organizational culture; (3) any comments on initiatives under  way to address the challenges; and (4) any recommendations for  addressing the initiatives. This process was replicated several times  before finalizing the coding structure. Once the coding structure was  finalized, the content of 129 sets of notes was coded by one analyst and  then separately reviewed by a second analyst who indicated agreement  or disagreement with the code. The two analysts then made changes  based on their resolution to those differences.
Focus Groups. We conducted 22 focus groups with approximately 200  randomly selected SEC staff and supervisors at headquarters and in four  regional offices (Forth Worth, Texas; Los Angeles, California; Miami,  Florida; and New York, New York) from September through December  2012. We selected the regional offices based on factors including (1) the  size and significance of the regional office’s enforcement and examination  activities as well as the significance of the industry that the regional office  oversees; (2) efforts made by regional offices to identify and address  personnel management issues; and (3) geographical variation. For the  focus groups, we randomly selected supervisory and nonsupervisory staff  from Enforcement, Corporation Finance, and OCIE from a list SEC  provided. Although participants were randomly selected and represented  a broad cross-section of employees, our results are not statistically  generalizable. We held separate sessions for nonsupervisory and  supervisory staff. employees were able to attend.
For all 22 focus groups, all but a few selected  The moderator used a GAO-developed discussion guide to facilitate each  focus group session and encouraged participants to share their thoughts  and experiences related to SEC personnel management, organizational  culture, and what worked well (or not) in relation to these issues.  Participants also were encouraged to comment on initiatives to address  personnel management challenges and offer suggestions for  improvement. For each of the 22 focus groups, GAO analysts observed  and took notes of the discussion and reviewed them to identify recurring  themes such as training, leadership, performance management,  communication, and organizational culture. One GAO analyst conducted  an initial review of the notes and tabulated the frequency of statements  expressing certain themes, while a second analyst verified the information  to ensure the tabulation was accurate and that the analyst concurred with  the results.
Surveys. From January through March 2013, we conducted two separate  self-administered web-based surveys of all 2,439 listed employees  (nonsupervisors and supervisors) in four occupational categories and six  divisions, and all 86 senior officers in six divisions. That is, we performed  one survey of supervisory and nonsupervisory staff and one of senior  officers. We chose to survey all staff in the targeted divisions and  occupational groups instead of a sample to provide the largest feasible  number of SEC employees a chance to voice their opinions. Each survey  included questions on (1) personnel management issues related to  recruitment, training, staff development, and resources; (2)  communication between and within divisions and offices; (3) leadership  and management; (4) performance management and promotions; and (5)  organizational culture and climate. The separate survey of all SEC senior  officers (those at the SO-1, SO-2, and SO-3 pay grades) covered the  same topic areas, but omitted many questions not relevant for senior  officers and included additional questions specifically relevant for senior  officers.
A total of 1,905 nonsupervisors and supervisors responded to our staff  survey for a response rate of 78 percent. A total of 64 senior officers  responded to our senior officer survey for a response rate of 74 percent.  For the staff survey, we carried out a statistical nonresponse bias analysis  using available administrative data and determined that we could not  assume the nonrespondents were missing at random. For this reason, the  results of the staff survey are presented as tabulations from a census  survey. We do not make any attempt to extrapolate the findings to the 22  percent of eligible staff who chose not to complete our survey.
To minimize other types of errors, commonly referred to as nonsampling  errors, and enhance data quality, we employed recognized survey design  practices in the development of the questionnaires and the collection,  processing, and analysis of the survey data. To develop our survey  questions, we drew on information from the one-on-one interviews, focus  group sessions, and prior GAO SEC personnel management surveys. We  pretested the questionnaire with SEC employees. During survey  development, we reviewed the survey to ensure the ordering of survey  sections was appropriate and that questions in each section were clearly  stated and easily comprehended. A GAO survey expert reviewed and  provided feedback on our survey instrument. To reduce nonresponse,  another source of nonsampling error, we undertook an intensive follow-up  effort that included multiple e-mail reminders to encourage SEC  employees to complete the questionnaire. We minimized processing  errors by having a second independent data analyst conduct an accuracy  check of the computer programs used for data analysis. Also, having the  respondents complete questionnaires online eliminated errors associated  with manual data entry. On the basis of our application of these practices  and follow-up procedures, we determined that the data were of sufficient  quality for our purposes.
To analyze the information we obtained from the open-ended survey  responses, we reviewed all the comments and then reviewed the content  of three survey items in more detail to categorize the information into  different themes. For comments related to communication and culture at  SEC, one GAO analyst initially coded all the information and a second  analyst reviewed it separately. Both analysts resolved any coding  discrepancies before finalizing the results. Because of the large number  of comments relating to performance management, we limited our  analysis to the first 150 responses and identified examples of recurring  themes. We coded the comments as described above. Where coding by  the two analysts matched, we selected some responses to provide  anecdotes about perceived issues related to SEC performance  management. The responses are not representative of the views of all  SEC employees. We also reviewed OPM’s 2012 Federal Employee  Viewpoint Survey results to obtain additional perspectives from SEC staff  on the agency’s personnel management-related issues.
We conducted this performance audit from March 2012 to July 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: GAO Survey on SEC Personnel and Human Capital Management
paragraphs: From January through March 2013, we conducted two separate, self- administered, web-based surveys of: (1) all 2,439 listed employees  (nonsupervisors and supervisors) in four occupational categories and six  divisions and (2) all 86 senior officers in six divisions. We chose to  survey all staff in the targeted divisions and occupational groups instead  of a sample to provide the largest feasible number of SEC employees a  chance to voice their opinions. Each survey included questions on (1)  personnel management issues related to recruitment, training, staff  development, and resources; (2) communication between and within  divisions and offices; (3) leadership and management; (4) performance  management and promotions; and (5) organizational culture and climate.  The separate survey of all SEC senior officers (those at the SO-1, SO-2,  and SO-3 pay grades) covered the same topic areas, but omitted many  questions not relevant for senior officers and included additional  questions specifically relevant for senior officers. The survey is  reproduced below.
subsections: section_title: Survey Introduction
paragraphs: The U.S. Government Accountability Office, an independent agency of  Congress, has been mandated by the Dodd-Frank Act (Section 962) to  study personnel management at the Securities and Exchange  Commission (SEC), including issues related to human capital programs,  workforce planning, performance management, and communication. As a  part of our study, we are sending this questionnaire to attorneys,  accountants, examiners, and financial economists in the Divisions of  Corporation Finance, Enforcement, Investment Management, Trading  and Markets, Risk Strategy and Financial Innovation, and the Office of  Compliance Inspections and Examinations (OCIE) to obtain their opinions   Your cooperation is critical  about various aspects of working at the SEC.to providing the Congress with complete and balanced information on  how personnel management is functioning across these offices and  divisions within the SEC. This questionnaire should take about 30  minutes to complete.
The results of this questionnaire will be used to compile descriptive  information on SEC’s personnel management. GAO pledges to maintain  the confidentiality of the responses to this survey. Your information will be  kept confidential and will not be released outside GAO, unless compelled  by law or requested by the Congress. Our report will provide results in  summary form; individual answers may be discussed, but we will not  include any information that could be used to identify individual  respondents, and any link between the identification number assigned to  your questionnaire and your identifying information will be destroyed.
All of the questions in this survey can be answered by clicking on radio  buttons or providing comments in spaces provided at the end of each  section. Please complete the questionnaire within 10 business days of  receipt. This questionnaire is divided by topic into six sections:  1.  Recruitment, Training, Staff Development, and Resources  2.  Communication between and within SEC Divisions and Offices  3.  Leadership and Management  4.  Performance Management and Promotions  5.  Organizational Culture and Climate  6.  Demographics and Background Information; and  7.  Final Comments.
Although your participation is voluntary, we urge you to complete this  questionnaire. We cannot develop meaningful information without your  frank and honest answers.
Thank you very much for your time.
section_title: Survey Results of Nonsupervisors and Supervisors
paragraphs: 1. To what extent do you agree or disagree with the following statements  on recruitment, hiring and retention? (Select one response per item.) a. My division/office is able to attract talented and  qualified employees.  b. My division/office retains its most talented and  qualified employees.  c. Management usually hires employees who are a  good fit for SEC’s mission.  d. When new people start in jobs in my division/office,  they are given enough guidance and training.  e. Hiring is sometimes based more on personal  connections than on substantive experience or  qualifications.  f. Overall, SEC’s Office of Human Resources  provides timely support to my division/office.  g. SEC’s Office of Human Resources has the  necessary expertise to assist in recruiting and hiring  qualified employees.
2. To what extent do you agree or disagree with the following statements  on training and development opportunities? (Select one response per  item.) a. SEC management is committed to the ongoing  training and development of staff.  b. SEC needs to invest more in the development of  new staff.  c. The training I have received over the past three  years has provided me skills and experience to meet  SEC’s needs.  d. Employees in my division/office are currently given  the same opportunities to participate in training  programs and events.  e. Management in my division/office needs to do  more to address skills gaps.  f. Over the past three years, SEC’s leadership training  has been effective in improving the management  skills of supervisors and managers in my  division/office.
3. For those training opportunities that you have been involved with over  the past three years, to what extent, if at all, have the following types of  training provided information and knowledge that is directly relevant to  your work? (Select one response per item.)
4. Have there been opportunities over the past three years for you to  participate in training that provided the latest industry specific knowledge  relevant to your job with outside instructors who are experts in the field?  5. In general, how adequate, is the number of training opportunities that  provide the latest industry specific knowledge relevant to your job with  outside instructors who are experts in the field?
6. Over the past 3 years, how many times have you taken part in training  that provided the latest industry specific knowledge relevant to your job  that included outside instructors who are experts in the field?  7. If there are any other issues, details, or information concerning  recruitment, training, staff development and resources that you would like  us to know about, please use the space below to provide this information.
We will not present detailed comments.  8. To what extent do you agree or disagree with the following statements  regarding communication within your division/office and between your  division/office and other SEC offices and divisions? (Select one response  per item.) a. Supervisors and managers ensure that employees  are included in the flow of relevant information.  b. My division/office supports open, two-way  communication between staff and management.  c. Information is adequately shared across groups in  my division/office.  d. Communication across groups in my division/office  has improved over the past three years.  e. Overall, information and knowledge are shared  openly at all levels within my division/office.  f. In my division/office, communication between other  offices and divisions (such as between OCIE and  CorpFin) on work related matters is encouraged.
9. In the past 12 months, how often, if at all, did you typically contact  employees in the following Home Office divisions or offices for work- related issues such as to coordinate activities or ask for expert advice?  (Select one response per item. Select “Not Applicable” if you work in that  division or office.)
10. In the past 12 months, how often did employees in the following  Home Office divisions or offices get back to you promptly in response to  requests for assistance with work-related issues such as to coordinate  activities or provide expert advice? (Select one response per item. Select  “Not Applicable” if you work in that division or office or if you did not  communicate with that division or office in the past 12 months.)
11. In which location do you currently work?
11a. In the past 12 months, how often, if at all, did you typically  communicate with employees in the other division or office within your  Regional Office for work-related issues such as to coordinate activities or  ask for expert advice? (Select one response per item. Select “Not  Applicable” if you work in that Office or Division in your Regional Office.)
11b. In the past 12 months, how often did employees in the other division  within your Regional Office get back to you promptly in response to  requests for assistance with work-related issues such as to coordinate  activities or provide expert advice? (Select one response per item. Select  “Not Applicable” if you work in that Office or Division or if you did not  communicate with that division or office in the past 12 months.)
12. If there are any other issues, details, or information concerning  communication between and within divisions and offices that you would  like us to know about, please use the space below to provide this  information.
We will not present detailed comments.  13. To what extent do you agree or disagree with the following statements  regarding the quality of management and leadership in your  division/office. (Select one response per item.) a. Supervisors and managers in my division/office are  held accountable for achieving results that help SEC  meet its goals and priorities.  b. In my division/office, the roles and responsibilities  of supervisors and managers are clearly defined.  c. Supervisors and managers in my division/office are  genuinely interested in the opinions of their staff.  d. 360 degree feedback is an effective way for  employees to provide feedback on the performance of  their supervisors.  e. Promotion to management is mostly based on  technical skills.  f. Promotion to management is mostly based on the  ability to manage people effectively.  g. Promotion to management is mostly based on  connections that staff have with management.  h. There is not much incentive to get promoted into a  management position because the salary increase is  minimal.  i. Over the past 3 years, I have seen SEC staff leave  due to being dissatisfied with a supervisor or  manager.
14. Over the past three years, to what extent, if at all, have the Senior  Officers (SOs) in your division/office worked to make improvements in the  areas listed below? (Select one response per item. Please note that  “division/office” refers to your division or office (such as Corporation  Finance in the Home Office or a Division or Enforcement in a regional  office))
15. Over the past three years, to what extent, if at all, has management  solicited employees’ ideas and suggestions in developing initiatives  designed to improve communication, the performance management  system, and training opportunities? (Select one response per item.)
16. Over the past three years, how satisfied have you been with initiatives  management developed to improve communication, the performance  management system, and training opportunities? (Select one response  per item.)
17. Are the numbers of supervisors and managers currently in your  division/offices more than is needed, less than is needed, or an  appropriate amount given the current workload?  18. Are the numbers of levels of supervisions currently in your  division/offices more than is needed, less than is needed, or an  appropriate amount given the current workload?
19. What is your current, direct supervisor’s position or title?  20. To what extent do you agree or disagree with the following statements  regarding your current direct supervisors? (Select one response per  item.) a. Is knowledgeable in the issue areas I conduct   my work.  b. Has the skills and expertise to be an effective  supervisor or manager.  c. Does a good job in sharing information.  d. Clearly defines goals and expectations.  e. Provides useful and constructive feedback.  f. Will listen to me if we have differing ideas or  approaches.  g. Is willing to change his or her position when there  is compelling information.  h. Gives me the flexibility I need to do my job  effectively.  i. Spends too much time closely monitoring my work.
21. If there are any other issues, details, or information concerning  leadership and management at SEC that you would like us to know  about, please use the space below to provide this information.
We will not present detailed comments.  22. To what extent do you agree or disagree with the following statements  regarding how SEC management recognizes and rewards performance in  your division/office? (Select one response per item.) a. Overall, senior officers deal effectively with poor  performing supervisors and managers.
Strongly  Disagree/  Somewhat  disagree  56.2  b. Overall, supervisors and managers deal effectively  with poor performing staff.  c. Supervisors and managers are quick to provide  feedback to staff whose performance is unacceptable.  d. I know what is expected of me regarding my work  performance.  e. My direct supervisor provides sufficient  performance feedback.  f. The criteria for rewarding staff are clearly defined.  g. The criteria for promoting staff are clearly defined.  h. For promotion opportunities, the quantity of  reviews, exams, or cases is more important than their  complexity or difficulty.  i. The opportunities in my division/office to get  promoted into a management position are limited.  j. Favoritism is typically not an issue in promotions.
0.3  k. Promotions go to those who most deserve it.
Strongly  Disagree/  Somewhat  disagree  44.5  l. There is a clear link between my performance and  recognition of it.  m. Current performance incentives are effective tools  to motivate employees to perform well.
23. To what extent do you agree or disagree with the following statements  regarding SEC’s current performance management system? (Select one  response per item.) a. SEC’s 5-point rating system allows for an accurate  representation of my performance over the rating  period.
Strongly  Disagree/  Somewhat  disagree  52.4  b. How competencies are weighted accurately reflects  the relative importance of my work.  c. SEC’s performance management system uses  relevant criteria to evaluate my performance.  d. SEC’s performance management system allows  supervisors and managers to have a meaningful  discussion with their staff on how they are performing.  e. SEC’s performance management system provides  consistent standards for rewarding performance.  f. Changes need to be made to increase transparency  in the process used to rate my performance.
1.3  g. Calibration of performance ratings by management  improves fairness in the performance management  system.
Strongly  Disagree/  Somewhat  disagree  36.5  h. Employee performance appraisals are fair and  appropriate under SEC’s performance management  system.
24. if there are any other issues, details, or information concerning  performance management and promotions at SEC that you would like us  to know about, please use the space below to provide this information.
We will not present detailed comments.  25. To what extent do you agree or disagree with the following statements  regarding different aspects of organizational culture and climate within  your division/office? (Select one response per item.) a. There is an atmosphere of trust in my division/office.
Strongly  Disagree/  Somewhat  disagree  40.0  b. Employee morale is generally high most of the time.  c. I have a voice in decisions that affect me and my  work environment.  d. Management in my division/office has taken steps to  improve employee morale. e. Supervisors and managers in my division/office  tolerate honest mistakes as learning experiences.
0.3  f. Protecting investors is sometimes hampered by staff  or managers who view firms as places they can  potentially work at in the future.  g. There are clearly defined policies and procedures  for doing my work.  h. Innovative ideas are encouraged in my  division/office.  i. Fear of public scandals has made SEC overly  cautious and risk-averse.  j. In my view, the fear of being wrong makes  supervisors and managers in my division/office  reluctant to take a stand on important issues.  k. In my view, the fear of being wrong makes senior  officers in my division/office reluctant to take a stand  on important issues.
26. If there are any other issues, details, or information concerning the  organizational culture or climate at the SEC or in your division/office that  you would like us to know about, please use the space below to provide  this information.
We will not present detailed comments.
section_title: Survey Results of Senior Officers
paragraphs: 1. To what extent do you agree or disagree with the following statements  on recruitment, hiring and retention? (Select one response per item.) a. My division/office is able to attract talented and  qualified employees.  b. My division/office retains its most talented and  qualified employees.  c. When new people start in jobs in my division/office,  they are given enough guidance and training.  d. Hiring is sometimes based more on personal  connections than on substantive experience or  qualifications.  e. Overall, SEC’s Office of Human Resources provides  timely support to my division/office.  f. SEC’s Office of Human Resources has the  necessary expertise to assist in recruiting and hiring  qualified employees.
2. To what extent do you agree or disagree with the following statements  on training and development opportunities? (Select one response per  item.) a. SEC needs to invest more in the development of  new staff.  b. The training I have received over the past three  years has provided me skills and experience to meet  SEC’s needs.  c. Management in my division/office needs to do more  to address skills gaps.  d. Over the past three years, SEC’s leadership training  has been effective in improving the management skills  of supervisors and managers in my division/office.
3. For those training opportunities that you have been involved with over  the past three years, to what extent, if at all, have the following types of  training provided information and knowledge that is directly relevant to  your work? (Select one response per item.)
4. If there are any other issues, details, or information concerning  recruitment, training, staff development and resources that you would like  us to know about, please use the space below to provide this information.
We will not present detailed comments.  5. To what extent do you agree or disagree with the following statements  regarding communication within your division/office and between your  division/office and other SEC offices and divisions? (Select one response  per item.) a. My division/office supports open, two-way  communication between staff and management.  b. Information is adequately shared across groups in  my division/office.  c. Communication across groups in my division/office  has improved over the past three years.  d. Overall, information and knowledge are shared  openly at all levels within my division/office.  e. In my division/office, communication between other  offices and divisions (such as between OCIE and  CorpFin) on work related matters is encouraged.
7. To what extent do you agree or disagree with the following statements  regarding the quality of management and leadership in your  division/office. (Select one response per item.)
Do Not Know  Not Checked  a. In my division/office, the roles and responsibilities  of senior officers are clearly defined.  b. In my division/office, the roles and responsibilities  of non-senior officer supervisors and managers are  clearly defined.  c. Senior officers in my division/office are genuinely  interested in the opinions of their employees.  d. Non-senior officer supervisors and managers in my  division/office are genuinely interested in the opinions  of their staff.  e. 360 degree feedback is an effective way for  employees to provide feedback on the performance of  their supervisors.  f. Promotion to management is mostly based on  technical skills.  g. Promotion to management is mostly based on the  ability to manage people effectively.  h. There is not much incentive to get promoted into a  management position because the salary increase is  minimal.  i. Over the past 3 years, I have seen SEC staff leave  due to being dissatisfied with a supervisor or  manager.
8. Are the numbers of supervisors and managers currently in your  division/office more than is needed, less than is needed, or an  appropriate amount given the current workload?
9. Are the numbers of levels of supervisions currently in your  division/office more than is needed, less than is needed, or an  appropriate amount given the current workload?  10. If there are any other issues, details, or information concerning  leadership and management at SEC that you would like us to know  about, please use the space below to provide this information.
We will not present detailed comments.  11. To what extent do you agree or disagree with the following statements  regarding how SEC management recognizes and rewards performance in  your division/office? (Select one response per item.) a. Overall, senior officers deal effectively with poor  performing supervisors and managers.  b. I know what is expected of me regarding my work  performance.  c. My direct manager provides sufficient performance  feedback.  d. The opportunities in my division/office to get  promoted into a management position are limited.  e. There is a clear link between my performance and  recognition of it.  f. Current performance incentives are effective tools  to motivate employees to perform well.
12. To what extent do you agree or disagree with the following statements  regarding SEC’s current performance management system? (Select one  response per item.) a. SEC’s 5-point rating system allows for an accurate  representation of my performance over the rating  period.  b. How competencies are weighted accurately reflects  the relative importance of my work.  c. How competencies are weighted accurately reflects  the relative importance of my employees’ work.  d. SEC’s performance management system uses  relevant criteria to evaluate my performance.  e. SEC’s performance management system allows  supervisors and managers to have a meaningful  discussion with their staff on how they are performing.  f. The time it takes me to develop, review, and  formalize performance assessments under SEC’s  current performance management system is  unreasonable.  g. SEC’s performance management system provides  consistent standards for rewarding performance.  h. Changes need to be made to increase  transparency in the process used to rate my  performance.  i. Calibration of performance ratings by management  improves fairness in the performance management  system.  j. Employee performance appraisals are fair and  appropriate under SEC’s performance management  system.
13. If there are any other issues, details, or information concerning  performance management and promotions at SEC that you would like us  to know about, please use the space below to provide this information.
We will not present detailed comments.  14. To what extent do you agree or disagree with the following statements  regarding different aspects of organizational culture and climate within  your division/office? (Select one response per item.) b. Employee morale is generally high most of the  time.  c. I have a voice in decisions that affect me and my  work environment.  d. Senior officers in my division/office tolerate honest  mistakes as learning experiences.  e. Protecting investors is sometimes hampered by  staff or managers who view firms as places they can  potentially work at in the future.  f. There are clearly defined policies and procedures  for doing my work.  g. Innovative ideas are encouraged in my  division/office.  h. Fear of public scandals has made SEC overly  cautious and risk-averse.  i. In my view, the fear of being wrong makes  supervisors and managers in my division/office  reluctant to take a stand on important issues.  j. In my view, the fear of being wrong makes non- senior officers and managers in my division/office  reluctant to take a stand on important issues.
15. If there are any other issues, details, or information concerning the  organizational culture or climate at the SEC that you would like us to  know about, please use the space below to provide this information.
We will not present detailed comments.
section_title: Appendix III: Ratio of Staff to Supervisors and Senior Officers, Fiscal Years 2008-2012
paragraphs: Section 962 of the Dodd-Frank Act requires us to review whether there is  “excessive number of low-level, mid-level, or senior-level managers.” We  did not find standards for evaluating “excessive” number of supervisors  have not been established. Table 16 illustrates the ratio of supervisors to  nonsupervisors. Table 17 illustrates the ratio of senior officers to  nonsupervisors, and table 18 illustrates the ratio of senior officers to  supervisors.
section_title: Appendix IV: Percentage of Staff Who Left SEC, Fiscal Years 2008-2012
paragraphs: Among its provisions, Section 962 of the Dodd-Frank Wall Street Reform  and Consumer Protection Act requires us to review turnover rates within  SEC subunits. While staff turnover rates could be used to identify  potential areas for improvement and further develop current supervisors,  officials from the Merit Systems Protection Board noted that turnover was  not a good indicator of poor supervision for several reasons. For example,  staff may leave to pursue opportunities with a different employer or a  different career path, or for personal reasons. SEC officials also indicated  that staff facing potential removal or termination often would resign or  retire, rather than going through removal or termination. Tables 19 and 20  show the percentage of staff who left SEC from fiscal years 2008 through  2012 from headquarters and the 11 regional offices, respectively. Table  21 shows the total number of staff who left SEC during the same period.
section_title: Appendix V: Comments from the Securities and Exchange Commission
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact above, Triana McNeil (Assistant Director), Carl  Barden, Bethany Benitez, Pamela Davidson, Simin Ho, Chir-Jen Huang,  Catherine Hurley, Stuart Kaufman, Jonathan Kucskar, Tarek  Mahmassani, Marc Molino, and Barbara Roesmann made key  contributions to this report.