SES Performance-Based Pay System and FY04 Year End Activities Jack Kelly Office of the Deputy Under Secretary December 15, 2004

2 Outline Purpose Issue Background & Discussion

3 Purpose Information Briefing SES Pay/Performance System OPM/OMB Provisional Certification End-of-Year/PRB Activities and Lessons Learned NOAA Bonus and Pay Adjustment Criteria STs/SLs Certification Next Steps

4 Issue Regulations regarding the SES performance-based pay system, and associated certification criteria, have added new requirements which will continue to impact the performance management as well as the Department’s and NOAA’s End-of-Year SES activities.

5 Background and Discussion President Proposed in FY 2004 Budget Passed as part of DOD FY 2004 Authorization Coupled with Homeland Security Act Premise: Higher Performance = Higher Pay Greater Pay Range (Base, Aggregate) Higher Individual Base Pay Levels Locality and Across-the-Board Adjustments Eliminated The New SES Pay/Performance System

6 Background and Discussion SES Pay – Minimum and Maximum $145,600 = EX Level III $158,100 = EX Level II $203,000 is equivalent to the total annual compensation payable to the Vice President

7 Background and Discussion Types of Certification Full Performance system designed and fully implemented Documented differentiation for 2 appraisal periods Meet all 9 certification criteria Certification granted for 2 calendar years Provisional Performance system designed, but not fully implemented or applied Not fully implemented/applied certification criteria Certification granted for 1 calendar year

8 Background and Discussion 9 Certification Criteria Alignment – Individual performance expectations must be derived from/linked to the agency’s mission, strategic goals, program/policy objectives, and/or annual performance plan Consultation – Individual performance expectations are developed with senior employee involvement and must be communicated at the beginning of the appraisal cycle Results – Individual expectations describe performance that is measurable, demonstrable, or observable, focusing on organizational outputs and outcomes, policy/program objectives, milestones, etc.

9 Background and Discussion 9 Certification Criteria (continued) Balance – Individual performance expectations must include measures of results, employee and customer/stakeholder satisfaction and/or competencies or behaviors that contribute to outstanding performance Assessments and Guidelines – Agency head/designee provides assessments comparing performance of agency and each major program and functional areas with agency’s GPRA goals and other program performance measures Oversight – Agency head/designee must certify (1) appraisal process makes meaningful distinctions based on relative performance, (2) results take into account, as appropriate, the agency’s performance, and (3) pay adjustments & awards recognize individual/organizational performance

10 Background and Discussion 9 Certification Criteria (continued) Accountability- Senior employee ratings (and subordinates, as applicable) appropriately reflect performance expectations, program performance measures, and other factors Performance Differentiation - Agency must provide for at least one rating level above Fully Successful (must include an Outstanding level), and in the application of those ratings, make meaningful distinctions among executives based on their relative performance Pay Differentiation – Agency should be able to demonstrate that the largest pay adjustments and/or highest pay levels (base and performance awards) are provided to its highest performers, and that overall, the distribution of pay rates in the SES rate range and pay adjustments reflects meaningful distinctions among executives, based on their relative performance

11 Background and Discussion Department-wide request for provisional certification approved by OPM/OMB 11/18/04. Appraisal System –Demonstrates strong performance culture and attainment of agency mission –Rating levels clearly differentiate –Clearly defined process for reviewing ratings –Results that make meaningful distinction Pay range - $104,927- $158,100 Aggregate Pay Limitation - $203,000 DOC’s provisional certification expires end of CY2004

12 Background and Discussion OPM/OMB will continue to focus on : Pay differentiation between Level II and Level III Performance differentiation Performance distinctions in the ratings of direct reports of SES and appraisals of their direct reports that reflect individual and organizational performance

13 Background and Discussion NOAA Approach – The number of Outstanding ratings should be no higher than the aggregate number of the other ratings. Exceptions - rare and require compelling justification. NOAA’s SES performance ratings and recommendations to DOC evidenced meaningful distinctions in: Ratings Pay Adjustments Bonuses Executives’ performance appraisals, ratings and award recommendations were based on individual and organizational performance. DOC’s organizational assessment of NOAA’s performance was positive. End-of-Year SES Activities

14 Background and Discussion End-of-Year SES Activities SES Accomplishment Summaries were to: Address each performance element Incorporate individual and organizational performance Be at least 1, but not longer than 2, pages in length Be in a font no smaller than 12 pitch Focus on results and tangible outcomes, objectives, targets, measures and metrics met Use numbers to reflect results to the extent you can

15 Background and Discussion End-of-Year SES Activities NOAA’s Performance Review Board reviewed 129 SES/ST/SL performance appraisals, narrative summaries and ratings. The PRB is responsible for ensuring: Consistency of ratings/performance distinctions across organizational lines Narrative justifications support ratings and award recommendations Performance expectations are linked to or derived from organizational goals Narrative justifications reflect both individual and organizational performance Appropriate format and content

16 Background and Discussion PRB Shares Lessons Learned Clearer guidance is needed to ensure: Consistency across the Line and Staff Offices Uniform format Content that supports alignment with DOC/NOAA Strategic Plan Narrative justifications support the ratings Accomplishments distinguish between individual and organizational performance – organizational accountability vs. individual achievements Individual Accomplishment Examples: * Serves as Goal Team lead. * Served on Council which produced NOAA-wide implementation plan. Organizational Accomplishment Example: * The Office developed the communications plan. Mid-term performance guidance will incorporate information needed for the end-of-year close out activities.

17 Background and Discussion Format and Content Guidance for Writing Self-Assessments 12-pitch font – Times New Roman - 2 pages or less List and bold each element – include percentage/weight Margins – 1 inch top and bottom/left and right Allow for space between elements (no long, multi-sentence paragraphs) Limit Acronyms - spell out the first time List accomplishments not activities Focus on individual accomplishments and clarify your contribution to organizational achievements Include context of accomplishments Use numbers to reflect results

18 Background and Discussion Guidance for Writing Supervisory Narratives Ensure write up is consistent with assigned rating Ensure accomplishments are aligned with individual as well as organizational performance Identify the employee’s individual achievements within the context of the organization’s accomplishments Not enough to say a goal has been met, need to provide context End each element with a rating

19 DOC increased the bonus pool from 6% to 7% of salaries – nearly a 17% increase. For the first time DOC gave NOAA the discretion to allocate the DOC bonus hold back. NOAA Bonus Criteria – Executives with both Outstanding and Commendable ratings were eligible to receive bonuses. Not all executives with Commendable ratings will receive a bonus. DOC Pay Adjustment Criteria – Executives were eligible as follows to receive a pay adjustment increase: Up to 2 percent for Fully Successful Up to 4 percent for Commendable Up to 6 percent for Outstanding Every eligible Senior Executive received a Performance Based Pay Adjustment. Background and Discussion NOAA Bonus and Pay Adjustment Criteria

20 Background and Discussion STs/SLs Certification NOAA has 14 Senior Professionals DOC preparing ST/SL provisional certification package Working group consisting of HR representatives from NOAA, NIST, and NASA reviewing ST/SL performance plans. The goal is to recommend improvements in performance appraisal forms/format as well as consistency of elements.

21 Next Steps PRB to propose revisions to Support of Corporate NOAA performance element to distinguish from DOC’s Leadership and Management element. Open Discussion