Assuring Responsive and Accountable Federal Executive Management

<RULE> OFFICE OF PERSONNEL MANAGEMENT <CFR>5 CFR Part 430</CFR> <DEPDOC>[Docket ID: OPM-2025-0006]</DEPDOC> <RIN>RIN 3206-AO81</RIN> <SUBJECT>Assuring Responsive and Accountable Federal Executive Management</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Personnel Management. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Office of Personnel Management (OPM) is issuing this final rule to remove the prohibition of a forced distribution of performance rating levels within the Senior Executive Service (SES) as well as eliminate diversity, equity, and inclusion (DEI) language within SES performance management regulations. Governmentwide SES ratings data have consistently shown that most SES receive the highest rating levels ( <E T="03">i.e.,</E> Levels 4 and 5) despite documented reports of SES failings. Allowing agencies to limit the highest SES rating levels will increase rigor in SES appraisal and lead to a more normalized distribution of SES ratings across the Federal Government. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective October 15, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Noah Peters, Senior Advisor to the Director, 202-606-8046 or by email at <E T="03">SESpolicy@opm.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> The Senior Executive Service (SES), established by the Civil Service Reform Act (CSRA) of 1978, was designed to form a corps of top-level Federal executives who provide leadership and continuity between political appointees and career civil servants. The SES operates under a unified personnel system with standardized executive qualifications and provides agencies flexibility in managing executive resources, all while preserving the public interest. In 2004, the SES transitioned to a pay-for-performance system under Section 1125 of Public Law 108-136 (November 24, 2003). This change replaced the prior six-level pay system with an open-range structure tied to individual performance. Automatic pay increases were eliminated, and compensation became contingent upon rigorous performance evaluations. Agencies had to obtain certification of their appraisal systems from the Office of Personnel Management (OPM) and the Office of Management and Budget (OMB) to exceed the standard SES pay cap of level III of the Executive Schedule. The intent of the pay-for-performance system is to attract top talent, reward high performers, and improve accountability. SES performance is assessed annually based on individual and organizational outcomes, as specified in 5 CFR part 430, subpart C. Ratings range from Level 1 “Unsatisfactory” to Level 5 “Outstanding.” In 2012, OPM issued a model SES performance appraisal system referred to as the “Basic SES Performance Appraisal System,”  <SU>1</SU> <FTREF/> which created a consistent and uniform framework to communicate expectations and evaluate the performance of SES members across agencies. The Basic SES Performance Appraisal System was later refined in 2016 following a 2015 Government Accountability Office (GAO) report  <SU>2</SU> <FTREF/> and OPM updates to SES performance management regulations. <FTNT> <SU>1</SU>  OPM, “ <E T="03">Senior Executive Service Performance Appraisal System,”</E> (January 4, 2012), available at <E T="03">https://www.opm.gov/chcoc/transmittals/2012/senior-executive-service-performance-appraisal-system_508.pdf.</E> </FTNT> <FTNT> <SU>2</SU>  Government Accountability Office, “ <E T="03">OPM Needs to Do More to Ensure Meaningful Distinctions Are Made in SES Ratings and Performance Awards, GAO Report to Congressional Requesters”</E> (January 2015), available at <E T="03">https://www.gao.gov/assets/gao-15-189.pdf.</E> </FTNT> Despite OPM's efforts to drive uniformity and consistency in the SES appraisal system, agencies have continuously struggled to ensure meaningful distinctions are made in SES performance ratings. According to the 2015 GAO report, about 85% of SES members received ratings of “Outstanding” or “Exceeds Fully Successful” from 2010 to 2013 while only 0.1% of senior executives in Chief Financial Officers Act agencies (see 31 U.S.C. 901) were rated at the lowest rating level. Similar patterns have continued; for the 2023 performance cycle, approximately 96% of SES members received top ratings ( <E T="03">i.e.,</E> Levels 4 and 5), while fewer than 0.5% were rated below “Fully Successful.”  <SU>3</SU> <FTREF/> <FTNT> <SU>3</SU>  SES ratings data submitted by individual agencies for SES performance appraisal system certification purposes. OPM manually compiled individual agency data to produce the fiscal year 23 SES ratings distribution data. </FTNT> This inflation in ratings undermines the SES appraisal system's integrity and the statutory requirement at 5 U.S.C. 4312(a)(3) to encourage excellence in performance. For instance, in 2014, despite a national scandal involving manipulated wait times and mismanagement at the Department of Veterans Affairs (VA), <SU>4</SU> <FTREF/> 80% of VA SES members received an “Outstanding” or “Exceeds Fully Successful” rating. <SU>5</SU> <FTREF/> OPM and GAO have both recognized the lack of meaningful distinctions in performance ratings as a critical issue. <FTNT> <SU>4</SU>  Department of Veterans Affairs Office of Inspector General, “ <E T="03">Review of Alleged Patient Deaths, Patient Wait Times, and Scheduling Practices at the Phoenix VA Health Care System,”</E> Report #14-02603-267, available at <E T="03">https://www.vaoig.gov/sites/default/files/reports/2014-08/VAOIG-14-02603-267.pdf.</E> </FTNT> <FTNT> <SU>5</SU>   <E T="03">See, supra,</E> footnote 2. </FTNT> Efforts to improve performance management, such as OPM's 2019 memorandum  <SU>6</SU> <FTREF/> to agencies on how to increase rigor in performance management through well-developed performance standards, have not been successful. The 2024 Federal Employee Viewpoint Survey showed that just 47% of employees agreed with the statement, “In my work unit, differences in performance are recognized in a meaningful way.” This was the lowest positive response rate for any question and has consistently been the lowest over the past three years. <SU>7</SU> <FTREF/> These patterns suggest a disconnect between executive performance ratings and actual organizational outcomes, raising concerns about accountability in key public service areas. <FTNT> <SU>6</SU>  OPM, “ <E T="03">Applying Rigor in the Performance Management Process and Leveraging Awards Programs for a High-Performing Workforce,”</E> available at <E T="03">https://www.opm.gov/chcoc/transmittals/2019/applying-rigor-performance-management-process-and-leveraging-awards-programs-high-performing_508_0.pdf.</E> </FTNT> <FTNT> <SU>7</SU>  FEVS Results for 2022 to 2024 available at <E T="03">https://www.opm.gov/fevs/reports/governmentwide-reports/.</E> </FTNT> This final rule removes the regulatory prohibition of forced distribution of performance ratings at 5 CFR 430.305(a)(5) and provides that OPM may establish a forced distribution of SES rating levels. Forced distribution involves assigning ratings based on pre-determined limits, such as reserving top ratings for a fixed percentage of performers. This approach aligns with performance practices in the private sector, where companies have used forced distribution of some sort in their performance evaluations. <E T="51">8 9</E> <FTREF/> <FTNT> <SU>8</SU>   <E T="03">See, e.g.,</E> “ <E T="03">Should a company rate its staff? A former Amazon exec says `stack ranking' is useful when done right,” CNBC,</E> December 5, 2023, available at <E T="03">https://www.cnbc.com/2023/12/05/stack-ranking-ex-amazon-exec-explains-the-performance-review-system.html.</E> <SU>9</SU>  “ <E T="03">Stack Ranking—All You Need to Know,” Medium</E> (April 3, 2020) available at <E T="03">https://medium.com/@corvisio/stack-ranking-all-you-need-to-know-a5339c27ad83.</E> </FTNT> Several foreign civil service systems including those in the UK, Germany, Portugal, and Indonesia have also implemented similar models. <SU>10</SU> <FTREF/> Research indicates that forced distribution, when implemented with appropriate oversight can promote merit-based rewards and increase organizational performance. <SU>11</SU> <FTREF/> This is particularly pertinent for the Federal Government because, unlike the private sector, the Federal Government lacks a profit motive to ensure meaningful evaluations of its executives. As such, the Federal Government must rely on accurate appraisals and meaningful distinctions in performance to ensure accountability, uphold public trust, and meet statutory obligations. <FTNT> <SU>10</SU>  “ <E T="03">Performance Appraisal in the EU Member States and the European Commission,”</E> ÚRAD VLÁDY SLOVENSKEJ REPUBLIKY (2017) available at <E T="03">https://www.eupan.eu/wp-content/uploads/2019/02/2016_2_SK_Performance_Appraisal_in_the_EU_Member_States_and_the_European_Commission.pdf.</E> </FTNT> <FTNT> <SU>11</SU>  Wijayanti, A., Sholihin, M., Nahartyo, E., & Supriyadi, S., <E T="03">What do we know about the forced distribution system: A systematic literature review and opportunities for future research,</E> Management Quarterly Review (2024). </FTNT> On January 20, 2025, President Trump issued a Presidential Memorandum titled “Restoring Accountability for Career Senior Executives,” (90 FR 8481; Jan. 30, 2025) (“Restoring Accountability Memo”), directing OPM and OMB to issue SES performance plans that agencies must adopt. The Memorandum's goal is to ensure SES members are held accountable to the President and the public and to reinvigorate the SES system by prioritizing merit and perfo ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 68k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━