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Comptroller Justin Wilson, left, attends a meeting of the State Funding Board in Nashville.
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Republican Gov. Bill Haslam
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State comptroller's audit

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What auditors found

Comptroller audit findings on implementation process for Gov. Bill Haslam's pay-for-performance plan for state employees under his 2012 TEAM Act.

Human Resource Department needs to improve communication with state agencies, publish a training schedule, and adhere to its policies and procedures for tracking mandatory training.

Department faced challenges with the rollout of Get SMART.er (Specific, Measurable, Achievable, Relevant and Time Sensitive curriculum) in Performance Management training with providing enough facilitators and addressing difficult transition of changing culture to new performance management system.

Most agencies reported that raters lack proficiency in SMART-based goals and in completing qualitative evaluations.

A number of weaknesses in performance management model could affect objectiveness and fairness of new approach.

Timeline

State Human Resources Department officials say they pulled out every conceivable stop to ensure its Strategic Learning Solutions Division (SLS) provided sufficient training to 8,500 managers and supervisors to objectively and fairly implement Gov. Bill Haslam's merit-pay plan with new evaluations under the 2012 TEAM Act:

› March 2012: Department launches Specific, Measurable, Achievable, Relevant and Time Sensitive (SMART) curriculum to teach supervisors to write new performance plans.

› July 2012: All executive branch supervisors trained in SMART Performance Planning through a "train-the-trainer model."

› October 2012: External coaches hired to assist with auditing performance plans to ensure SMART criteria compliance. Internal audit finds many agencies still struggling to write SMART-level plans.

› October 2012: External coaches hired to work with agencies to strengthen performance plans of their executives.

› January 2013: External coaches retained to work with agencies to strengthen supervisors' skills in writing SMART performance plans.

› April 2013: SLS updates SMART curriculum with a pre/post-test to ensure supervisors retained course content.

› July 2013: External coaches brought back to strengthen supervisors' skills with SMART writing clinics, providing real-time feedback and critiques on employee performance plans.

› August 2013: SLS launches Performance Coaching to teach supervisors how to coach and manage employee behavior for "culture of continuous feedback."

› October 2013: Human Resources launches Performance Management online learning to train supervisors on newly updated performance management process in state's Edison computer system. Elements of SMART and performance coaching incorporated.

› January 2014: Human Resources and Edison IT team launch webinars to navigate update online performance management system.

› April 2014: SLS hires external coaches to continue teacher agency supervisors Performance Coachng.

› March 2015: SLS pilots Get SMART.er curriculum three times to solidify most effective curriculum to meet needs of supervisors in various agencies.

› April 2015: Human Resources launches Get SMART.er Coaching for Higher Performance program.

Source: Comptroller's audit

NASHVILLE — Republican Gov. Bill Haslam's plan to eliminate across-the-board pay raises for 40,000-plus executive-branch employees and replace them with a merit-pay system is now a reality.

But even as the state prepares to deliver the pay-for-performance raises this month, there is major disagreement between state auditors and top Human Resources Department officials about the new system.

A new performance audit by Comptroller Justin Wilson's office questions whether enough managers and supervisors were adequately trained to ensure the new standards, employee performance plans and evaluations work objectively and fairly as promised.

Auditors also warned that "a number of weaknesses in the performance management model could affect the objectiveness and fairness of the process."

Human Resources Commissioner Rebecca Hunter and department officials rejected many of the findings. A former Hamilton County government personnel chief, Hunter said auditors' concerns about training are misplaced.

"We feel very confident that our learning initiatives are competent and effective," Hunter told a joint House and Senate Government Operations Subcommittee during a Dec. 16 hearing on the audit.

Hunter later added, "I think our biggest challenge here was the timing of the audit was in the middle of our efforts to make the process better."

Auditors at the hearing stuck by their concerns.

Pay for performance is a key provision in Haslam's 2012 landmark Tennessee Excellence, Accountability, and Management (TEAM) Act.

TEAM rewrote decades-old civil service laws to promote Haslam's vision of a better-trained, better-managed and high-performing workforce. The act rewards those who do well under a five-tier evaluation system, and makes it easier to fire poor performers.

Hunter and her top deputies describe a "massive culture change" now taking effect after more than three years of hard work.

The audit lays out the sometimes painful details of significant challenges faced by the Human Resources officials who spearheaded training for managers and supervisors across 33 executive departments and agencies.

Among them was having only 14 facilitators in the department's Strategic Learning Solutions Division tasked with training 8,500 executive branch managers and supervisors by July 31, 2015, as "raters" for the new process, auditors said in one finding.

"While the department admirably took on this overwhelming task, and while the training material is beneficial to managers and supervisors, the execution of training was problematic," auditors said.

Most agencies reported the "raters" — that is, the managers and supervisors who write up the new employee performance plans and evaluate workers on them — "lack proficiency in developing" new employee goals or "completing qualitative evaluations."

The new employee goals are known as Specific, Measurable, Achievable, Relevant and Time-sensitive (SMART). Based on interviews or emailed questionnaires to human resources officers, talent managers, training coordinators and performance management coordinators at 25 agencies, auditors said 60 percent of officials reported their raters "are not adequately trained in developing " such goals.

Hunter acknowledged a long and difficult process to train 8,500 managers and supervisors in 23 departments and 10 agencies to an entirely new way of managing, coaching and evaluating workers.

"This truly was a Herculean effort," Hunter told lawmakers last month, noting her department changed curriculum three times in response to concerns voiced by legislators and others.

The SMART training on how to write performance plans, for example, was supplemented in March and April by a new program dubbed Get SMART.er, Hunter said.

That was intended to ensure supervisors had the skills to coach employees to higher performance, she said.

In its official response to the audit, Human Resources officials said 93 percent of the 1,388 supervisors who took the Get SMART.er workshop and responded to the survey said their learning objectives were met.

During the hearing, Hunter and other officials sought to reassure lawmakers, saying managers and supervisors trained by Human Resources went on to train others in their respective departments.

The state also hired outside coaches and offered online instruction, she said. Her department was committed to doing whatever necessary to make the new system work, Hunter said.

In one finding, auditors said the department may need to modify the current performance evaluation model.

"We found difficulties in the areas of difficult-to-manage job duty measurements, time requirements, change in job duties or supervisor, and work performed outside stated goals," the auditors said.

In discussions with officials from cabinet-level departments, auditors said they found 43 percent "stated they have job positions that are difficult to measure."

***

Under the new five-tier evaluation systems, workers in the two bottom evaluation categories — those with "marginal" or "unacceptable" evaluations — would get no merit pay raises. Most workers are expected to fall into a middle category as "valued" employees.

The Tennessee State Employees Association said it has been told by Human Resources those workers would see a 2.5 percent raise. "Advanced" workers would see 3 percent and "outstanding" employees 4 percent.

But to receive an "outstanding" rating, an employee would have to achieve "measurable improvements in organizational performance," which auditors said will be out of reach for most workers.

The department says the rating system is fair, noting that under the old system 85 percent of workers fell into the two top categories.

During the December hearing, Senate Government Operations Committee Chairman Mike Bell, R-Riceville, told Hunter the new system was a "massive undertaking and a massive change of culture."

"I do believe the audit's very helpful," Bell said. "It points out it wasn't the smoothest rollout."

Bell told the Times Free Press last week the comptroller review "was not the most flattering audit I've seen."

"There were a number of issues the auditors brought out. It is a massive undertaking and a massive change in the way the state does business and manages its employees."

Asked if he is OK on implementing merit pay, Bell said, "I am right now, anyway. We will hear again from the department [during the legislative session] and ask for an update."

The TEAM Act allows the General Assembly to grant across-the-board raises if state revenue is adequate.

Contact staff writer Andy Sher at asher@timesfreepress.com, 615-255-0550 or follow via twitter at AndySher1.

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