VHA, with a fiscal year 1998 budget of over $18.5 billion and a workforce of about 190,000 employees, is charged with providing health care to the nation’s veterans and operates an integrated health care system that includes medical centers, outpatient clinics, nursing homes, and counseling centers. In October 1995, the House Committee on Veterans’ Affairs held a hearing on issues related to the management of VA’s health care system. The hearing raised concerns about how VHA manages the performance of its senior executives and deals with instances of poor performance and misconduct, particularly at the 173 medical centers. In October 1995, VHA implemented a major restructuring designed to address problems in operational efficiency, accountability, and the provision of quality health care. A significant component of that restructuring was the realignment of VHA’s management and field structure from 4 regional offices, each headed by a regional director who supervised the operation of 36 to 45 medical care facilities in his or her region, to 22 regional Veterans Integrated Service Networks. VHA designed the networks so that each, headed by a network director, is intended to coordinate the organization of various medical facilities in order to improve the efficiency of medical care provided to veterans in a geographic region. Typically, a medical center director, an associate or assistant director, and a chief of staff (collectively the “management triad”) have senior management responsibilities at each medical center. Medical center directors and network directors are senior executives who are appointed under either the Senior Executive Service (SES) or the Title 38 personnel system. Associate and assistant medical center directors are general schedule (GS) employees in grades 13 through 15. Chiefs of staff are appointed under Title 38. For purposes of this report, we referred to chiefs of staff as SES equivalents because of the breadth of their responsibilities and total pay. The appraisal systems governing the job-related performance of members of the management triads provide for an annual summary rating of one of five levels: Outstanding, Excellent, Fully Successful, Minimally Satisfactory, and Unsatisfactory. For the purposes of this report, we defined “poor or marginal performers” as those employees who, in the network directors’ view, performed at the Minimally Satisfactory or Unsatisfactory levels, whether or not they actually received such performance appraisal ratings. The appraisal systems also have provisions for managers to assist employees in improving their performance and to take formal, performance-based actions, such as demotions and removals, when their performance is rated less than Fully Successful. Like all VA employees, management triad members are expected to maintain high standards of conduct. Instances of misconduct, which we define as actions that would violate statutes, regulations, or VA policies, are subject to a departmental process of investigation and discipline calibrated to the offense. Misconduct includes, but is not limited to, such actions as misuse of government property, sexual harassment, and violations of travel regulations. To meet our objective of determining how VHA was identifying and dealing with poor and marginal performers at the triad level, we analyzed data obtained from VHA’s Management and Administrative Support Office on performance ratings, reassignments, and other performance-related actions. We did not verify the accuracy or completeness of these data, but we did follow up on the readily apparent omissions and inconsistencies we found in the data provided on ratings and other performance-related actions. Because VHA rating data indicated that no triad members received an official summary appraisal rating of less than Fully Successful during the 1994 through 1996 rating periods, we interviewed the 21 VHA network directors who were in their positions when we did the interviews during April to July 1997. Although VHA has 22 networks, we were able to interview only 21 of the 22 directors of these networks, because 1 had resigned from VA at the time we began our interviews in April. We did face-to-face interviews with 19 of the 21 network directors. For the remaining two directors, we did a teleconference with one and a videoconference with the other. We interviewed the network directors because they are directly responsible for rating and managing the medical center directors’ performance and are expected to be knowledgeable about, and ultimately responsible for, the ratings and performance of the associate and assistant medical center directors and chiefs of staff. Our purpose in interviewing the network directors was to (1) determine whether they believed some triad members were not performing to the Fully Successful level, despite what their official ratings showed; (2) identify what actions, if any, were taken to deal with the triad members whom they believed performed at a less than Fully Successful level; and (3) get their views on the effectiveness of the actions in dealing with the performance problems. We did not interview affected employees or representatives of VHA employee organizations. Consequently, we do not know whether their views on the effectiveness of the actions for dealing with poor or marginal performance would be similar to or different from the views expressed by the network directors. To facilitate the network directors being open and candid with us, we asked them to identify individuals, by position rather than by name, in their own networks whom they believed were poor or marginal performers, despite what the official ratings showed for 1994 through 1996. We also agreed to report the information that the network directors shared with us in a manner that would not identify them or their network. On the basis of the views expressed by the network directors during the interviews, we developed our definition of poor or marginal performers. To confirm our understanding of and obtain a consensus of the opinions expressed during the interviews, we sent a survey instrument to the network directors in July 1997 that summarized various opinions we had discerned in the interviews. All 21 network directors responded to the survey. We asked them if they agreed or disagreed with the 57 opinions or had “no basis” for comment because they either had no knowledge of the particular matter addressed in the opinion or believed they had not worked long enough at VHA to comment. We excluded the “no basis” responses in reporting the survey results, because we wanted to report the opinions of only network directors who had a basis for either agreeing or disagreeing with the opinions. We also excluded the “no responses” in order to use a more precise respondent base in reporting the survey results. The number of network directors who indicated “no basis” responses and “no responses” varied. For example, the number of network directors who indicated “no basis” ranged from no directors on 6 opinions to 10 directors on 1 opinion. Five network directors did not respond to 19 of the opinions. The average number of “no basis” and “no responses” was about four network directors per opinion. We also interviewed personnel officials in VHA’s Management and Administrative Support Office; VHA’s former Chief Network Officer, who was responsible for rating and managing the performance of the network directors; and officials at OPM who oversee agencies’ operation of the SES program. The purpose of the interviews with VHA officials was to corroborate the information provided by the network directors and to gather additional information about the number and management of poor and marginal performers at the management triad level the official record did not reflect, because the network directors were relatively new to their positions. At the time of our interviews with the network directors, nearly all of them had been in their positions 18 months. The purpose of our interviews with OPM officials was to help us determine whether actions taken by VHA to deal with poor or marginal performers were consistent with regulatory and statutory requirements. We did not attempt to judge the merits of the specific informal, performance-based actions taken. We asked officials of VHA’s Management and Administrative Support Office to confirm that the triad members whom the network directors identified to us by position and whom they believed were poor or marginal performers occupied those positions. We also asked them to provide information, if any, on other triad members not identified by the network directors who performed at a less than Fully Successful level at some point during fiscal years 1994 through 1996. VHA provided various documents that contained data on reassignments and other actions taken to address performance-related problems of triad members who had not been identified by the network directors. We also followed up on the informal, performance-based actions that VHA took during fiscal years 1994 through 1996 to deal with triad members who, according to the network directors’ views and data provided by VHA’s Management and Administrative Support Office, had been informally judged to be performing at a less than Fully Successful level. We did so by reviewing official personnel and employee performance files and collecting data from VHA’s Management and Administrative Support Office to determine whether (1) the less-than-satisfactory performers had been subjects of other informal actions or formal, performance-based actions as triad members during the 5-year period ending September 30, 1996; and (2) inconsistent personnel actions had occurred, such as less-than-satisfactory performers receiving performance awards in the same year that informal actions had been taken to deal with their performance. To meet our second objective of determining the effects, if any, of changes in organizational structure, policies, and procedures recently instituted by VHA on managing performance at the triad level, we interviewed personnel officials in VA’s Office of Human Resources Management (OHRM) and VHA’s Management and Administrative Support Office to identify the changes. We also reviewed various VHA documents to confirm that the recent changes had been implemented. These documents included samples of the network directors’ performance plans that contained new performance measures and directories and organization charts of VHA’s restructured field facilities. Finally, we asked the network directors for their views on the effects of these changes during our interviews and in our follow-up survey with them. We did not do an independent assessment of the effects of the changes.