Reference Materials

History

This document summarizes the key factors that have helped set the stage for the current performance management approaches.

The Centralized Federal Performance Management System

The Civil Service Reform Act of 1978 brought performance appraisal to the center of many aspects of personnel management. The Governmentwide system was standardized in the mid-1980's to use five rating levels and establish strict links between ratings and related personnel actions such as cash awards. Over the years, dissatisfaction with this one-size-fits-all approach increased. Rating inflation grew steadily and the entire system lost its credibility for all its stakeholders.

Previous Studies on Performance Appraisal

Several committees studied and recommended changes for the Federal performance appraisal system. In 1990, the Committee on Performance Appraisal for Merit Pay, a National Research Council committee established at OPM's request, reviewed current research on performance appraisal and merit pay and supplemented the research findings with an examination of the practices of private sector employers. In 1991, the Pay-for-Performance Labor-Management Committee examined ways to strengthen the linkage between the performance of Federal employees and their pay. Also that year, the Performance Management and Recognition System (PMRS) Review Committee was established to review and recommend improvements to the PMRS system of merit pay for the Government's mid-level managers. All three committees concluded that an appraisal approach must be flexible and decentralized so that it would be able to fit its context of both work technology and organization culture. Consensus was also clear about the value of involving employees in the design and implementation of appraisal and awards systems for increasing credibility and acceptance.

Additional Recommendations for Change

In its initial report, From Red Tape to Results (1993), the National Performance Review recommended a decentralized approach to performance management that would encourage employee involvement in system design, focus on improving performance, and maintain individual accountability. In its more detailed accompanying report, Reinventing Human Resource Management (1993), the NPR was more specific, proposing that decentralized systems should be developed by managers and employees and their representatives; policies should be revised to support team structures; and pass/fail appraisal should be possible. The National Partnership Council also supported the NPR recommendations and noted the shared interest of both labor and management to foster high-performance organizations. The President's Management Council called for more flexibility and decentralization, while emphasizing using appraisal to establish and maintain individual accountability.

Stakeholder Interests

Many stakeholders had voiced concerns about the Federal performance management system as it operated prior to the 1995 regulations. Employees were dissatisfied with the old system; it was the single greatest source of grievances. Unions expected change to the system based on the recommendations in the Pay-for-Performance Labor-Management Committee report. Management associations expected change based on the recommendations in the PMRS Review Committee report. Taxpayers wanted to see pay-for-performance and individual performance accountability systems for Federal employees in part because many believe that service is poor, that mediocre performance is tolerated, and that pay raises are automatic. Federal managers had been demanding change and expressing growing frustration with the system that did little to add value or help them actually manage performance. And Congress had expressed the strong need to maintain individual accountability through the appraisal process and to ensure that rewards are allocated appropriately and can be justified.

Conflicting Purposes

A principal source of these problems and stakeholders' concerns lay in the underlying conflict between two purposes system designers intended for the performance management procedures and requirements. First, performance appraisal was to be the means of establishing and maintaining individual accountability and the basis for making decisions about rewards and sanctions. But it was also supposed to lead to improved employee and agency performance. Experience has demonstrated that the hard links between ratings and rewards have led inexorably to inflated ratings against standards that do not serve as effective performance targets and stretch goals. While the private sector has not solved the problems this dual use of performance management systems can produce, it does appear that organizational commitment to the performance management system reduces the problems that occur when the summary appraisal is the focus of the system. When the emphasis is on managing—rather than primarily judging—performance, frequent feedback to performers allows for correction of performance deficiencies before the summary appraisal is made.

Credibility Requires Improved Measurement

As important as achieving a more effective balance between the reward allocation and performance improvement purposes of performance appraisal may be, the real key to increasing the credibility and utility of performance management processes lies in improving the performance measures that are used. Emphasizing individual accountability led to agencies establishing performance elements and standards that extracted process-input tasks and responsibilities from position descriptions. Although they were appropriate and usable for sustaining performance-based adverse actions before the Merit Systems Protection Board, such elements and standards often did not lend themselves to results measurement or goal setting. Also, although measuring individual outputs and results is usually possible, it may not be cost effective compared to the performance management value of measuring group or team outputs and results.

Governmentwide Performance Initiatives That Link to Performance Management

Fortunately, several Governmentwide initiatives are leading agencies to reexamine and improve their performance measures. The 1995 performance management regulations are primed to use those measures for managing and rewarding employees. Key performance initiatives require agencies to set goals and standards and to measure their performance in terms of results. When employee and group performance plans are aligned with these agency goals, everyone's efforts are focused on goal achievement and improving organizational performance. Setting goals and measuring performance are part of an effective performance management process. The Government Performance and Results Act of 1993 (GPRA) provides for the establishment of strategic planning and performance measurement in the Federal Government. It requires agencies to develop strategic plans and performance plans for program activities. Those performance plans establish objective, quantifiable, and measurable goals; establish performance indicators; and provide a basis for comparing program results with plan goals. And on September 7, 1993, the President issued Executive Order 12862, "Setting Customer Service Standards," which requires agencies to identify and survey their customers; post customer service standards and measure results against them; and publish a customer service plan that includes customer service standards and describes future plans for customer surveys.

Key Factors

The Centralized Federal Performance Management System
Previous Studies on Performance Appraisal
Additional Recommendations for Change
Stakeholder Interests
Conflicting Purposes
Credibility Requires Improved Measurement
Governmentwide Performance Initiatives that Link to Performance Management

Historical Chronology

A chronology of the major milestones in the evolution of employee performance management in the Federal Government is presented below.

Chronology of Employee Performance Management in the Federal Government
Year	Actions
1883	Pendleton Act, or Civil Service Act Provided a merit system to end favoritism Required promotions by merit competition, but no centralized appraisal system was established
1912	First Law on Appraisal An appropriations act directed the U.S. Civil Service Commission (now the U.S. Office of Personnel Management) to establish a uniform efficiency rating system for all agencies.
1923	Classification Act of 1923 Resulted in establishment of a "graphic rating scale" in 1924, which was used until 1935 Was effective, but unpopular Supervisor marked along a scale for each "service rendered"
1935	Uniform Efficiency Rating System The Civil Service Commission established, by regulation, the Uniform Efficiency Rating System, which was used until 1950. Factors were grouped under the headings Quality of Performance, Productiveness, and Qualifications There were five rating levels for each of the three categories, and also five summary rating levels.
1940	Ramspeck Act Directed establishment of independent Boards of Review to decide rating appeals in each agency Boards included the Civil Service Commission and employee representatives
1950	Performance Rating Act Purpose was to identify the best and weakest employees and to improve supervisor-employee relations Required the establishment of appraisal systems within all agencies, with prior approval by the Civil Service Commission Established three summary rating levels: Outstanding, Satisfactory, and Unsatisfactory Employees could still appeal ratings, but now through a statutory board of three members--one from an agency, one selected by employees, and the Chairman of the Civil Service Commission
1954	Incentive Awards Act Authorized honorary recognition and cash payments for superior accomplishment, suggestions, inventions, special acts or services, or other personal efforts
1958	Government Employees' Training Act Provided for training to improve performance and to prepare for future advancement
1962	Salary Reform Act Required an "acceptable level of competence" determination for granting General Schedule within-grade increases Provided for the denial of the within-grade increase when performance is below the acceptable level Authorized an additional step increase for "high-quality performance"
1978	Civil Service Reform Act Agencies required to develop appraisal systems for all Federal employees Established the U.S. Office of Personnel Management Required OPM’s approval of appraisal systems Appraisals must be based on job-related performance standards Agencies must encourage employee participation in establishing performance standards Eliminated appeal of appraisals outside an agency Results of the appraisal must be used as a basis for training, rewarding, reassigning, promoting, reducing in grade, retaining and removing employees Authorized removal of employees for unacceptable performance on one or more critical elements, but only after providing an opportunity to demonstrate acceptable performance; reduced the standard of proof from preponderance of evidence to substantial evidence Authorized appeal to the Merit Systems Protection Board of reductions in grade and removals Established a separate performance appraisal system for Senior Executive Service (SES) members Required one or more fully successful rating levels, a minimally satisfactory level, and an unsatisfactory level Required agency Performance Review Boards to make recommendations to appointing officials on final ratings Established performance-related pay authorities Provided for performance awards for career executives; required at least a Fully Successful rating and the recommendation of the Performance Review Board Provided for Senior Executive Service Meritorious (career) executive awards ($10,000 for sustained accomplishment over a period of years; limited to 5 percent of executives) and Distinguished (career) executives awards ($20,000 for sustained extraordinary accomplishment, limited to 1 percent of executives) Established Merit Pay for supervisors and management officials in Grades GS 13-15, with funding for merit increases limited to what agency would have paid as within-grade increases, quality step increases, and half of comparability adjustments (guaranteed employees half of comparability adjustments)
1984	Civil Service Retirement Spouse Equity Act Established a 5 percent minimum performance award for Senior Executive Service members Abolished Merit Pay System and established Performance Management and Recognition System (PMRS) covering supervisors and management officials in Grades GS 13-15 (same coverage as Merit Pay System) Guaranteed full comparability increases to PMRS Employees rated Fully Successful or higher, half to those with Minimally Successful rating, and none to those rated Unacceptable Guaranteed PMRS Employees merit increases of specific amount based on their performance ratings and position in pay range for their grade level Established performance awards program for PMRS employees, with a minimum funding level from 0.75 percent to 1.15 percent of estimated aggregate salaries over five years and required a minimum performance award of 2 percent of employee's salary for an Outstanding rating; set maximum award funding at 1.5 percent of estimated aggregate salaries Added performance appraisal revisions in PMRS requiring five summary rating levels, no forced distributions of ratings, and joint participation in setting standards
1985	Final Performance Management and Recognition System appraisal and pay regulations issued Implemented legal provisions regarding general increases, merit increases and performance awards Established procedures for determining merit increases and performance awards for "unrateable" employees Described pay-setting procedures when employees move between pay systems Established minimum appraisal periods and procedures for rating employees who are detailed to other positions Required higher-level approval of ratings and performance-based personnel actions
1986	Final Performance Management System regulations issued Issued appraisal regulations for General Schedule and Prevailing Rate employees and for SES members, which paralleled Performance Management and Recognition System appraisal regulations of 1985 Regulatory pay-for-performance system established Required Fully Successful rating for within-grade increases Required Outstanding rating for quality step increases Required Fully Successful rating for career-ladder promotions Required performance award program for General Schedule and Prevailing Rate employees
1989	Legislation extends the Performance Management and Recognition System (PMRS) Revised merit increase amount for Fully Successful employees in the middle-third of the pay range from one-third to one-half of a merit increase, to parallel step increases in the General Schedule Set minimum performance awards funding at 1.15 percent of estimated aggregate salaries for duration of the extension Allowed for the reassignment, removal or reduction in grade of PMRS employees who did not attain a fully successful level of performance after being given an opportunity to do so Revised Senior Executive Service appraisal regulations Permitted three to five summary rating levels, including Unsatisfactory, Minimally Satisfactory and Fully Successful levels specified in statute Deleted requirement for rating period to end between June 30 and September 30
1991	Legislation again extends the Performance Management and Recognition System Allowed using a written statement of work objectives to establish performance requirements Removed requirement for mandatory performance award for employees rated Outstanding and the accompanying 2 percent minimum award Federal Employees Pay Comparability Act Provided specific legislative authority for payment of rating-based cash awards to General Schedule employees like those authorized under the Performance Management and Recognition System Provided authority to grant paid time off as an award
1992	Revised regulations on summary rating levels for General Schedule and Prevailing Rate appraisal systems Allowed summary ratings at 3, 4, or 5 levels but required agencies to include Unacceptable, Fully Successful, and Outstanding levels.
1993	Performance Management and Recognition System terminated Provided for orderly termination of the PMRS, and payout of merit increases and performance awards based on October 1993 ratings Provided for phased conversion of employees not on a step rate back to step rates based on specified personnel changes Retained authority to pay employees at non-step rates until changes occur to place all employees on a step rate
1995	Revised performance management regulations Further decentralized the performance management program to allow agencies to develop programs to meet their individual needs and cultures Established eight permissible summary rating patterns, allowing from two to five levels for summary ratings Combined all award authorities in one part of the regulations, 5 CFR 451 Streamlined the appraisal system approval process
1997	Revised regulations on reduction in force and performance management Allowed flexible crediting of between 12 and 20 additional years of service retention credit for ratings of record given under different summary level patterns Retained traditional 12-16-20-year crediting when all ratings of record being credited were given under a single summary level pattern Revised credit averaging to use actual ratings of record given without "filling in the blanks" with presumed fully successful Removed use of presumed fully successful ratings and replaced them with credit based on the modal rating when employee had no ratings of record Provided for immediate or delayed implementation at agency discretion to allow for education, partnership and automated system revision efforts
1998	Revised regulations on ratings of record Codified long-standing OPM policy regarding ratings of record Described when a rating of record is considered final Prohibited retroactive, carryover and assumed ratings of record Provided limited circumstances under which an agency can change a rating of record
2000	Revised Senior Executive Service appraisal regulations Reinforced the link between performance management and strategic planning Required agencies to use balanced measures in evaluating executive performance Provided agencies more flexibility to tailor performance management systems to their unique missions
2002	Chief Human Capital Officers Act Established certification of performance appraisal systems for employees in senior-level (SL) and scientific or professional (ST) positions and SES members Required agencies to design and implement performance appraisal systems that make meaningful distinctions in performance for SES and SL/ST employees for appraisal systems to be certified Required agencies to obtain certification of performance appraisal systems from OPM, with the concurrence of the Office of Management and Budget, before applying a higher aggregate pay limitation, up to the Vice President’s salary Required the establishment of systems, standards, and metrics for assessing agencies’ management of human capital Required OPM to set standards for sustaining a culture that cultivates and develops a high-performing workforce OPM developed the Human Capital Assessment and Accountability Framework (HCAAF) to guide agencies in implementing the systems Established Chief Human Capital Officers (CHCO) and the CHCO Council Required the heads of 24 Executive Departments and agencies to appoint or designate CHCOs to serve as his/her agency’s chief policy advisor on all human resources management issues Established a CHCO Council to advise and coordinate the activities of member agencies on such matters as the modernization of human resources systems, improved quality of human resources information, and legislation affecting human resources operations and organizations Provided authority for the Department of Homeland Security to design its own human resources systems, including a pay-for-performance system Issued interim Presidential Rank Awards regulations Extended eligibility for Presidential Rank Awards to employees in SL/ST positions Codified long-standing OPM policy regarding rank awards for career members of the SES
2003	National Defense Authorization Act for Fiscal Year 2004 Established Human Capital Performance Fund to pay top-performing employees Not implemented due to lack of funding Provided agencies with additional resources to grant pay increases to their highest performing employees Provided authority for the Department of Defense to design its own human resources systems, including a pay-for-performance system Established a pay-for-performance system for members of the Senior Executive Service Replaced a six-level pay system with a single, open-range payband Removed annual across-the-board and locality pay adjustments and required pay adjustments based on performance Authorized agencies with certified performance appraisal system(s) to set higher pay (up to level II of the Executive Schedule)
2004	Issued interim regulations for Certification of Performance Appraisal Systems Established criteria and procedural requirements for the certification of SES and SL/ST performance appraisal systems Required agencies to submit evidence they have designed, implemented, and applied appraisal systems that make meaningful distinctions in performance and pay Issued final Senior Executive Service pay regulations Established rules for setting and adjusting SES pay on the basis of the employee’s performance and/or contribution to the agency’s performance Revised rules for paying performance awards and applying the aggregate limitation on pay Revised regulations on performance-based awards to non-GS employees Permitted agencies to grant performance-based cash awards to non-GS employees covered by 5 U.S.C. chapter 45 who are not covered by an explicit statutory authority to pay such awards
2005	Revised awards regulations on calculating the payment of performance-based awards Required agencies granting performance-based cash award as a percentage of basic pay to include locality payments and special rate supplements in computing the awards
2006	Established Performance Appraisal Assessment Tool (PAAT) for non-SES employees Designed to help agencies evaluate performance appraisal programs, identify strengths and weaknesses, and develop plans for making improvements to programs Revised awards regulations on performance-based awards Codified statutory threshold for performance-based cash awards (i.e., performance-based awards must be based on a rating of record of Fully Successful or higher) Required agencies to ensure that performance-based awards reflect meaningful distinctions based on levels of performance
2007	Established Performance Appraisal Assessment Tool (PAAT) for SES and SL/ST appraisal systems for determining certification Designed as an agency self-assessment tool for evaluating SES and SL/ST appraisal systems against certification criteria
2008	Senior Professional Performance Act Established access to higher pay for employees in SL/ST positions Authorized agencies with SL/ST certified performance appraisal system(s) to set higher pay (up to level II of the Executive Schedule) Removed locality pay adjustments Authorized certifications up to 24 months with a possible 6 month extension for SES and SL/ST appraisal systems Inspector General Reform Act of 2008 Prohibited an Inspector General from receiving any cash award or cash bonus Required each Office of Inspector General (OIG) be treated as a separate agency for provisions relating to SES Resulted in establishment of OIG SES appraisal systems separate from the agency SES system Resulted in OPM approval and certification of those systems
2009	Revised regulations on training and development of supervisors Required agencies to provide each supervisor and manager training on the use of appropriate actions, options, and strategies to mentor employees, improve employee performance and productivity, conduct employee performance appraisals in accordance with agency appraisal systems; and identify and assist employees with unacceptable performance
2011	Established Goals-Engagement-Accountability-Results (GEAR) Model Designed to help agencies create high-performing organizations that are aligned, accountable, and focused on results Recommended that agencies articulate a high-performance culture; align employee performance management with organizational performance management; implement accountability at all levels; create a culture of engagement; and improve the assessment, selection, development and training of supervisors Piloted at five CHCO agencies
2012	Established a model SES performance appraisal system Provided a more consistent and uniform framework to communicate expectations and evaluate the performance of SES members Focused on the role of and responsibility of SES members to achieve results through effective executive leadership with five performance elements based on the five Executive Core Qualifications (ECQ) Enhanced clarity, transferability, and equity in the development of performance requirements, the delivery of feedback, the derivation of ratings, and the link to compensation
2014	Issued final SL/ST pay regulations Established rules for setting and adjusting SL/ST pay on the basis of the employee’s performance and/or contribution to the agency’s performance, as determined under a rigorous performance appraisal system
2015	Introduced the Recruitment, Engagement, Diversity, and Inclusion (REDI) Roadmap Focused on Engagement aspect of GEAR in addition to improving hiring initiatives Provided agencies a roadmap to a skilled Federal workforce that is engaged, inclusive, and drawn from all segments of society Provided a data-driven, forward-looking human capital management strategy to help the Federal Government attract, develop, and retain a talented, engaged, and diverse workforce Supported agencies in measuring engagement through the Federal Employee Viewpoint Survey and by focusing on such drivers as leadership, inclusion, and supervision Revised Senior Executive Service appraisal regulations Provided a common framework and performance standards for agencies to use in designing their SES performance management systems Required agencies to use critical elements based on OPM-validated executive competencies to evaluate executive leadership and results Required agencies to establish five summary performance levels and derive an annual summary rating through a mathematical method Streamlined the Senior Executive Service (SES) performance appraisal system certification process Provided greater opportunity for agencies to partner with OPM and share responsibility for reviewing certification criteria
2016	Introduced Performance Management Plus Transitioned the work of the GEAR model to a “Performance Management Plus” philosophy – where the “Plus” is employee engagement Emphasized that agencies need to do more than simply perform the mechanical steps of performance management in compliance with law and regulations Encouraged agencies to empower and hold supervisors accountable for engaging their employees early and frequently throughout the performance period to drive accountability and to enable success