April 1997 Draft


Role of the Chief Operating Officer

The PBO concept is founded on a different management structure than that of the traditional federal government organization. The position, powers, and terms of employment of the Chief Operating Officer symbolize those differences and operationalizes them. The terminology, "Chief Operating Officer," is a departure from the traditional federal government title (e.g., Secretary, Administrator, Commissioner, etc.) and sets the stage for a more "business-like" connotation.


Creating a chief operating officer with the authority, responsibility, and accountability envisioned will require statutory changes. This is outlined in the model legislation in Appendix A. Temporary SES appointments can be made for up to three years to "kick start" a PBO. The Defense Commissary Agency is using this authority for its transitional chief executive officer. The advantage is that this can be done immediately. However, the executive would be limited in the maximum compensation allowable (currently $123,100 for salary and a possible SES bonus).

Joyce Edwards, OPM, can provide technical advice on using temporary appointment authority to establish a Chief Operating Officer position. She can be reached at (202) 606-1610.



Competition for COO positions: Should competition for COO positions be mandated? Options here include:

-- giving the head of the parent organization the discretion to decide whether to advertise and run open competition for the position.

-- including legislative language mandating open, advertised competition in all cases.

Having an highly competitive search for a COO is important to avoid the appearance of a political appointment. Further, an open search strengthens the probability that the right person will be hired for this critical position.

Appointment by Secretary vs. President: The Justice Department initially expressed concerns about the constitutionality of the appointment of a Chief Operating Officer by a secretary because it might violate the "appointments clause" in the Constitution, which requires appointment by the President. Justice interprets the appointments clause as applying to all persons who occupy an office and have "significant authority," i.e., that they are legally vested to do something that binds someone else without getting prior approval. However, upon further explanation of the role of the COO, the Department of Justice now agrees that the role of the Chief Operating Officer does not necessarily make that person a "superior officer," and therefore that person could be appointed by the Secretary.

Removal Authority: It is intended that the Chief Operating Officer serve on a non-partisan basis and would be removed for cause, such as the lack of performance. However the Justice Department objects to any legislative limitations on the President's prerogative to remove appointees. See Appendix A for the specific language.



A sample recruitment advertisement as well as a listing of generic leadership duties and responsibilities are included as an attachment to this appendix.



Term of appointment: The contract term probably should not exceed a period of 3-5 years. In determining the appropriate term length, an additional factor to consider would be whether the term should be equal to the planning horizon in the organization's strategic plan.

Termination: Career civil servants who compete for Chief Operating Officer positions would give up security of tenure in order to assume the new job, but on a case-by-case basis they might be given an option to return to a civil service position if they are not reappointed.



Who Writes the Agreement: The agreement would be negotiated jointly by the Secretary and the Chief Operating Officer, probably with input from stakeholder groups and any advisory boards associated with the PBO.

Role of OMB: The draft agreement will be subject to review by OMB to ensure the targets are measurable and sufficiently challenging.

Congressional role in negotiation of performance agreement: As with the issue of Chief Operating Officer appointment, this prototype provides no role for Congressional review of the performance agreements.

Public scrutiny of performance agreement: The performance agreement will be made public because:

-- the performance agreement defines the role of the new Chief Operating Officer position. Since this agreement makes possible the larger compensation package, openness would help to explain the reasonableness of the bonuses (if and when they are given) to the media and stakeholders.

-- public administration, whether in its traditional form or in this hybrid entrepreneurial form, cannot exclude effective relations with the press and public. How these external constituencies are managed has a tremendous impact on the success or failure of the enterprise. The media and public's awareness of the details in the performance agreement can help to build faith in the rigor of the performance-based accountability system.

Renegotiation of performance agreement: This prototype makes no provision for mid-year renegotiation of annual performance agreements. However, PBO candidate organizations may wish to devote some discussion to this issue during their developmental stage if they rely on appropriated funds for their operations. Dramatic changes in circumstances beyond the Chief Operating Officer's control (e.g., the budget impasse and furloughs experienced in 1996) may make it impossible for the Chief Operating Officer to achieve targets identified in the performance agreement. The PBO should consider whether there is a need to specify a process for the renegotiation as well as how disputes concerning any mid-year changes to the agreement should be handled.

The British experience with performance based organizations also identified two classes of problems that might arise in mid-year disputes over the performance agreement:

-- there may be political pressures on the agency that may lead the Secretary to amend the targets originally set. The could be handled through negotiations and announce the revised targets, but it needs to be handled carefully to respect the planning processes within the agency, and

-- attempts by policy or administrative units within the parent department to intervene in PBO activities to ensure that important departmental concerns, such as coordination of business activities or consistency in practices, are attended to.

Congressional review of annual performance: Although this appendix does not provide for formal Congressional review of the PBO's annual performance, PBO candidates may wish to consider establishing mechanisms to allow for some form of congressional review. The quality of the PBO's relationship with its congressional constituencies will play a large role in whether the PBO succeed or fails. Establishing mechanisms for keeping Congress regularly informed will be a necessary step in developing and maintaining such a good relationship. The PBO model bill would require PBOs to transmit an annual report to Congress through the head of the parent organization. Some PBOs may want to supplement this by conducting regular annual or semiannual information briefing with appropriate congressional committees or key staffers.



Pay Levels: The goal is to create compensation packages that would attract top managerial talent. Individual pay levels would be determined on a case-by-case basis; there is no intent for there to be any uniformity across the government. This may depend, in part, on the degree of flexibility on the part of different congressional committees. For example, in the case of the Patent and Trademark Office (a $660 million operation), the House Judiciary Committee determined in its 1996 version of its PBO legislation that it would not approve a pay and bonus package that would exceed the salary of a cabinet secretary ($148,000). Yet, in the case of the St. Lawrence Seaway Development Corporation's 1996 PBO proposal (a $10 million a year operation), the Chief Operating Officer's pay and bonus package could total $184,000. The model legislation in Appendix A provides a standard approach, but this might vary depending on the size of the PBO and the willingness of the cognizant congressional committee to ensure a competitive salary to attract appropriate management talent.

How is the Bonus Determined? The determination and size of the bonus, within the range set in statute, would be determined by the Secretary based on the performance of the organization. There will be notification to OMB, but the bonus does not fall under the purview of E.O. 12976, Compensation Practices of Government Corporations, which gives OMB authority to review certain bonus decisions. Instead, OMB will be involved in reviewing the draft performance agreements, which determine how the bonus would be earned. The size, who gives the bonus, and who approves it may vary from case to case.

Bonus pools: Some discussion may be necessary on whether the Chief Operating Officer bonus should be budgeted for or drawn from results of management efficiency initiatives. Some issues to consider here include:

-- significant management initiatives undertaken may very well not result in dollar savings and therefore not create any pool of monies for the bonus to be drawn from,

-- if the bonus is not specifically budgeted but is to be drawn from "dollars saved," would that change the importance of the performance indicators? For example, would initiatives resulting in dollars saved become more important that those resulting in outcomes without a monetary value (e.g., customer satisfaction)?


Following is sample position description that might serve as a prototype for candidate PBOs.

Sample Position Description for a Chief Operating Officer

In addition to mission-specific duties and responsibilities, the Chief Operating Officer position description should also incorporate general leadership duties and responsibilities as outlined below.

Goal Achievement

  1. Sets challenging goals consistent with the PBO vision.
  2. Clearly communicates the expectation of achieving goals.
  3. Implements effective measures to track conformity to standards.
  4. Produces results that meet quality standards.
  5. Continuously strives to improve work processes to achieve higher quality products and greater efficiency.

Business Orientation

  1. Applies general business concepts and principles (e.g. cost/benefit, return on investment, net present value, business process reengineering) in making business decisions.
  2. Proactively works to influence key agency policies and priorities to improve products and services for customers.
  3. Keeps up-to-date with economic, political, technological and social trends which affect the PBO.
  4. Effectively manages all available resources (e.g. people, funds, equipment, technology, facilities) to implement plans.
  5. Focuses on strategic issues and their long-term implications.


  1. Seizes opportunities to create new or cutting-edge programs to achieve goals.
  2. Energizes and supports people to be part of constructive change.
  3. Commits time and resources to promising new ideas.
  4. Embraces risk-taking.
  5. Deals well with setbacks; resilient, bounces back from failure or defeat.
  6. Learns from successes and mistakes.
  7. Quickly learns of and applies the latest technology and best practices in relevant areas of expertise.

Customer Orientation

  1. Listens and responds to all customers.
  2. Promotes positive customer relationships.
  3. Communicates the importance of customer service .
  4. Recognizes employees who provide quality customer service.
  5. Informs customers of future plans.
  6. Incorporates customer feedback into new strategies to achieve long-term benefit to customers.

Creative Problem Solving and Systems Thinking

  1. In dealing with issues, projects or problems, works toward a solution that recognizes the potential impact on the organization as a whole.
  2. Yields own organization's short-term interests for long-term benefits to the PBO and its customers.
  3. Analyzes problems by identifying alternative courses of action and evaluating their pros and cons in light of organizational goals.
  4. Formulates creative solutions by using "outside the box" thinking (e.g. using cutting-edge information, best practices and counter-intuitive concepts).

Sample Job Announcement Advertisement Used by the Defense Commissary Agency in the Wall Street Journal, July 15, 1996 (not shown in electronic version)

Other Potential Items to Mention in a Job Announcement

Candidates should have a successful track record at the top of a large and complex organization serving thousands of individual customers and employing a very large number of staff. Having set a strategic agenda, the ideal candidate will have successfully initiated and implemented a wide range of corporate policies, demonstrated sound financial management and possess a knowledge of large scale IT applications. Candidates should be sensitive to the political dimensions of the position and should also be able to demonstrate the ability to communicate clearly and convincingly to large audience.

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