August 1996

Performance-Based Organizations

Results-oriented management, flexibility, and strict accountability will be the keystones of redesigned operations in Federal agency components designated as performance-based organizations (PBO's). PBO's are organizations with service delivery functions that can be tracked and measured reliably. Organizations already identified as candidate PBO's include:

• Patent and Trademark Office and National Technical Information Service, Department of Commerce.
• Defense Commissary Agency, Department of Defense.
• Office of Retirement Programs, Retirement and Insurance Service, OPM.
• Government National Mortgage Association and Federal Housing Administration (mortgage insurance services functions only), Department of Housing and Urban Development.
• St. Lawrence Seaway Development Corporation, Department of Transportation.

Creation of PBOs. The creation of PBO's flows from recommendations in the Vice President's National Performance Review to focus on results, customer service, and productivity in the Federal Government. Strong top management support at the departmental level is essential for organizations seeking status as PBO's. Final approval for candidate status is given by the Office of Management and Budget upon recommendation of the National Performance Review staff.

The PBO initiative in the Federal Government is based on an approach used successfully in the United Kingdom to manage agencies more efficiently and effectively in a period of declining resources. This approach allowed British agencies to reduce their operating costs an average of about 5 percent a year, over the past 8 years, while continuing to maintain or improve services to the public.

Features of a PBO. A defining feature of a PBO is the appointment of a chief executive officer (CEO), who will serve under a 3- to 5-year performance agreement and be held accountable for delivering services and achieving productivity and customer service goals specified in that agreement. A PBO will be allowed to pursue more flexible budget, personnel, and procurement rules if those flexibilities are necessary to achieve the results specified in their chief executives' performance agreements with agency/department heads.

In the area of performance management, PBO's will find they already have considerable freedom to design appraisal and award programs that support their missions, a results-based orientation, and their organizational cultures. New regulations, effective in September 1995, provided flexibilities designed to enhance managing and improving organizational performance while preserving well-established merit system principles (see the April 1996 cover story in Workforce Performance).

For this and other areas of human resource management, OPM developed a "Template of Personnel Flexibilities." The template outlines flexibilities that are already available to candidate PBO's (or any department or agency, for that matter), as well as those that could be pursued by establishing a personnel demonstration project jointly developed by the agency and OPM. Similar templates have also been developed to describe other existing administrative flexibilities, including, for example, procurement and property management. (For a copy of the personnel template, contact PMIAD.)

Each PBO will have some unique features and approaches. However, together they will help to demonstrate that Government agencies can, indeed, operate productively and efficiently to deliver agreed upon results.