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Board Report: 2015-MO-B-006 March 31, 2015

The Board Can Enhance Its Diversity and Inclusion Efforts

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Promotions and Succession Planning

In the OIG's September 2014 Major Management Challenges for the Board of Governors of the Federal Reserve System, we reported on the Board's risk associated with staff retirement and turnover, as well as challenges the Board faces in replacing employees with specialized knowledge and skill sets. One way to address such challenges is through succession planning. GAO states that succession planning is a comprehensive ongoing process that provides for forecasting senior leadership needs, identifying and developing candidates with the potential to fill future leadership position openings, and selecting individuals from a diverse pool of qualified candidates to meet executive resource needs. Similarly, promotions can also be a vehicle for increasing agency diversity.

This section presents information on the Board's career-ladder promotions process as well as demographic statistics on promotions. We found that the Board started a formal succession planning process in late 2012, but it has not yet been fully implemented across all Board divisions.

The Board's Processes


Promotions at the Board may be made in a competitive manner or through career-ladder progression. A competitive promotion is a grade increase that results when an employee applies for a vacant position in a higher grade level than the current employee's grade level, competes from a pool of applicants, and is hired for the position. Competitive promotions are addressed in the Board's Vacant-Position Posting policy. Information on competitive promotions is included in the Recruiting and Hiring section of this report.

A career-ladder promotion is available to both wage and professional employees in positions that allow for the employee to be promoted to one or more sequentially higher pay grades within the career ladder for his or her position. Employees in such positions may become eligible for a career-ladder promotion once they complete any required time within the grade and have proven their ability to perform satisfactorily at the next-higher pay grade. An employee's manager or supervisor recommends an employee for a career-ladder promotion by preparing a written justification. Once the recommendation is approved within the respective division, Talent Acquisition processes the personnel action.

Succession Planning

According to GAO, agencies with effective succession planning and management efforts determine the critical skills and competencies that will be needed to achieve current and future program results; develop strategies tailored to address gaps in human capital approaches for enabling and sustaining the contributions of all critical skills and competencies; and address specific human capital challenges, such as diversity.44 In addition, succession planning is one of GAO's nine leading diversity management practices. In that context, GAO describes strategic planning as an ongoing, strategic process for identifying and developing a diverse pool of talent for an organization's potential future leaders.

The Board developed a two-phase, formal agency-wide succession planning program in late 2012 to help identify a diverse pool of candidates for senior management positions throughout the Board. The Board's program will identify development opportunities for employees to prepare them for potential advancement. Both phases entail planning discussions with Board senior management focusing on three elements: (1) employee performance, (2) learning agility, and (3) readiness.

Phase 1 discussions are held with Division Directors and Deputy Directors regarding their direct reports at the officer level. Phase 2 of the Board's succession planning program will involve discussions with officers regarding their managers. The Board currently does not have a formal plan for Board employees in nonsupervisory roles; however, divisions have engaged in informal succession planning practices that are separate from the Board's formal succession planning program.

Demographic Statistics

We conducted an analysis of career-ladder promotions for all three pay grade categories at the Board. For the purpose of this report, our analysis focuses on career-ladder promotions by race/ethnicity in 2011, 2012, and 2013 (figure 7). We did not conduct an analysis of the eligibility requirements based on time in grade for career-ladder promotions because these requirements vary by division and position type. In addition, an employee's performance rating may also factor into his or her eligibility. Therefore, the results of our trend analysis do not necessarily indicate discrimination or bias and could be due to a variety of factors.

In 2011 through 2013, the Board awarded a total of 610 career-ladder promotions. Of these 610 promotions,

  • 460 occurred in the all other professional employees and all wage employees category (FR-16 to FR-25 and WE-41 to WE-47)
  • 144 occurred in the mid-level professionals category (FR-26–FR-28)
  • 6 occurred in the senior managers and officers category (FR-29–00)45

As a percentage of the overall workforce during 2011–2013, female employees accounted for 44.89 percent of the workforce and received 42.13 percent of the career-ladder promotions. Male employees accounted for 55.11 percent of the workforce and received 57.87 percent of the career-ladder promotions.

Figure 7: Career-Ladder Promotions Awarded, by Race/Ethnicity, 2011–2013a

Source: OIG analysis of Board-provided data.

aOther includes (1) Native Hawaiian or Other Pacific Islander (Not Hispanic or Latino), (2) American Indian or Alaska Native (Not Hispanic or Latino), (3) Two or More Races/Ethnicities (Not Hispanic or Latino), and (4) Not Specified (i.e., individuals who chose not to disclose demographic data). Return to figure

For additional information on the 2011–2013 career-ladder promotions by sex, race/ethnicity, and age within each pay grade category, refer to appendix G.

The Board Is in the Process of Implementing Its Formal Succession Planning Process

The Board developed a two-phase, formal agency-wide succession planning program in late 2012 to help identify a diverse pool of candidates for senior management positions throughout the Board. Phase 1 of the Board's process has been implemented in 8 of the 14 divisions and the OIG. The Board anticipates implementing phase 1 in the remaining 6 divisions by 2016. Phase 2 will begin by the end of 2015. Both phases are scheduled for full implementation by 2017.

GAO's Diversity Management: Expert-Identified Leading Practices and Agency Examples defines succession planning as

a comprehensive, ongoing strategic process that provides for forecasting an organization's senior leadership needs; identifying and developing candidates who have the potential to be future leaders; and selecting individuals from among a diverse pool of qualified candidates to meet executive resource needs. . . . Succession planning and management can help an organization become what it needs to be, rather than simply recreate the existing organization.46

In addition, GAO reports that succession planning is also tied to the federal government's "opportunity to change" the diversity of its executives through new appointments.

Board officials informed the OIG that most divisions have performed some form of succession planning. For example, one Board division is developing a process to meet with every officer, manager, and supervisor to determine the developmental requirements for preparing a qualified replacement. Further, the division is developing key competencies for each pay grade and plans to identify training to complement these competencies. These steps are designed to guide staff members as they progress through the division's career ladder. Another division offers a robust staff development program that focuses on technical training and soft skills.47 Aside from the Board's formal succession planning program, Board divisions have taken actions to develop staff members.

Succession planning is associated with opportunities to change diversity at the executive level.48 Therefore, the establishment within the Board of a formal succession program may help the Board in its efforts to reach diversity and inclusion goals.

44. U.S. Government Accountability Office, Human Capital: Selected Agencies Have Opportunities to Enhance Existing Succession Planning and Management Efforts, GAO-05-585, June 2005. Return to text

45. All six promotions were from FR-28 to FR-29. Return to text

46. U.S. Government Accountability Office, Diversity Management: Expert-Identified Leading Practices and Agency Examples, GAO-05-90, January 14, 2005. Return to text

47. Soft skills include, but are not limited to, communication, self-awareness, motivation, social skills, and empathy. Return to text

48. U.S. Government Accountability Office, Diversity Management: Expert-Identified Leading Practices and Agency Examples, GAO-05-90, January 14, 2005. Return to text