Human Capital
Continued Monitoring of Internal Safeguards and an Action Plan to Address Employee Concerns Could Improve Implementation of the National Security Personnel System Gao ID: GAO-09-840 June 25, 2009DOD is in the process of implementing this human capital system, and according to DOD, about 212,000 civilian employees are currently under the system. On February 11, 2009, however, the House Armed Services Committee and its Subcommittee on Readiness asked DOD to halt conversions of any additional employees to NSPS until the administration and Congress could properly address the future of DOD's personnel management system. On March 16, 2009, DOD and the Office of Personnel Management (OPM) announced an upcoming review of NSPS policies, regulations, and practices. According to DOD, the department has delayed any further transitions of employees into NSPS until at least October 2009--pending the outcome of its review. Furthermore, on May 14, 2009, the Deputy Secretary of Defense asked the Defense Business Board to form what has become this task group to review NSPS to help the department determine, among others things, whether NSPS is operating in a fair, transparent, and effective manner. This statement focuses on the performance management aspect of NSPS specifically (1) the extent to which DOD has implemented internal safeguards to ensure the fairness, effectiveness, and credibility of NSPS and (2) how DOD civilian personnel perceive NSPS and what actions DOD has taken to address these perceptions. It is based on the work we reported on in our September 2008 report, which was conducted in response to a mandate in the National Defense Authorization Act for Fiscal Year 2008. This mandate also directed us to continue examining DOD efforts in these areas for the next 2 years. We currently have ongoing work reviewing the implementation of NSPS for the second year, and we also will perform another review next year.
DOD has taken some steps to implement internal safeguards to help ensure that the NSPS performance management system is fair, effective, and credible; however, we believe continued monitoring of safeguards is needed to help ensure that DOD's actions are effective as implementation proceeds. Specifically, we reported in September 2008 that DOD had taken some steps to (1) involve employees in the system's design and implementation; (2) link employee objectives and the agency's strategic goals and mission; (3) train and retrain employees in the system's operation; (4) provide ongoing performance feedback between supervisors and employees; (5) better link individual pay to performance in an equitable manner; (6) allocate agency resources for the system's design, implementation, and administration; (7) provide reasonable transparency of the system and its operation; (8) impart meaningful distinctions in individual employee performance; and (9) include predecisional internal safeguards to determine whether rating results are fair, consistent, and equitable. For example, all 12 sites we visited trained employees on NSPS, and the DOD-wide tool used to compose self-assessments links employees' objectives to the commands' or agencies' strategic goals and mission. However, we determined that DOD could immediately improve its implementation of three safeguards. Although DOD civilian employees under NSPS responded positively regarding some aspects of the NSPS performance management system, DOD does not have an action plan to address the generally negative employee perceptions of NSPS identified in both the department's Status of Forces Survey of civilian employees and discussion groups we held at 12 select installations. According to our analysis of DOD's survey from May 2007, NSPS employees expressed slightly more positive attitudes than their DOD colleagues who remain under the General Schedule system about some goals of performance management, such as connecting pay to performance and receiving feedback regularly. For example, an estimated 43 percent of NSPS employees compared to an estimated 25 percent of all other DOD employees said that pay raises depend on how well employees perform their jobs.
GAO-09-840, Human Capital: Continued Monitoring of Internal Safeguards and an Action Plan to Address Employee Concerns Could Improve Implementation of the National Security Personnel System
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Statement before the National Security Personnel System Task Group,
Defense Business Board:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 1:00 p.m. EDT:
Thursday, June 25, 2009:
Human Capital:
Continued Monitoring of Internal Safeguards and an Action Plan to
Address Employee Concerns Could Improve Implementation of the National
Security Personnel System:
Statement of Brenda S. Farrell, Director:
Defense Capabilities and Management:
GAO-09-840:
Mr. Rudy deLeon and Members of the Task Group:
Thank you for the opportunity to discuss the first of our three
congressionally directed reports on the implementation of the
Department of Defense's (DOD) National Security Personnel System
(NSPS). As you know, DOD is in the process of implementing this human
capital system, and according to DOD, about 212,000 civilian employees
[Footnote 1] are currently under the system. On February 11, 2009,
however, the House Armed Services Committee and its Subcommittee on
Readiness asked DOD to halt conversions of any additional employees to
NSPS until the administration and Congress could properly address the
future of DOD's personnel management system. On March 16, 2009, DOD and
the Office of Personnel Management (OPM) announced an upcoming review
of NSPS policies, regulations, and practices. According to DOD, the
department has delayed any further transitions of employees into NSPS
until at least October 2009--pending the outcome of its review.
Furthermore, on May 14, 2009, the Deputy Secretary of Defense asked the
Defense Business Board to form what has become this task group to
review NSPS to help the department determine, among others things,
whether NSPS is operating in a fair, transparent, and effective manner.
Today, my statement will focus on the work we conducted in 2008
reviewing DOD's implementation of NSPS.[Footnote 2]
As we have previously reported, the implementation of NSPS could have
far-reaching implications for civil service reform across the federal
government, because NSPS could serve as a baseline for governmentwide
transformation in human capital. Key components of NSPS include
compensation, classification, and performance management. Our review
focused on the performance management aspect of NSPS. We have
previously reported that effective performance management systems are
not merely used for once or twice-yearly individual expectation setting
and rating processes, but are tools to help the organization manage on
a day-to-day basis. These systems are used to achieve results,
accelerate change, and facilitate two-way communication throughout the
year so that discussions about individual and organizational
performance are integrated and ongoing.[Footnote 3] OPM recognizes that
performance management systems are to extend beyond rating individual
performance.[Footnote 4] According to OPM, performance management is
the systematic process by which an organization involves its employees--
as individuals and members of a group--in improving organizational
effectiveness in the accomplishment of the mission and goals.
Prior to the enactment of the NSPS legislation, in a series of
testimonies in 2003, we raised a number of critical issues about the
proposed regulations for NSPS.[Footnote 5] Since then, we have provided
congressional committees with information and analyses on DOD's process
to design NSPS, the extent to which DOD's process reflects key
practices for successful transformation, the need for internal controls
and transparency of funding, and the most significant challenges facing
DOD in implementing NSPS.[Footnote 6] In addition, we have previously
reported that in general, successful transformations of large
organizations can take from 5 to 7 years to achieve in a sustainable
manner. Similarly, reports published by OPM have shown that
organizational transformations, such as the adoption of a new
performance management system, often entail fundamental and radical
changes to an organization that require an adjustment period to gain
employee acceptance and trust.[Footnote 7] While GAO supports human
capital reform in the federal government, how such reform is done, when
it is done, and the basis upon which it is done can make all the
difference in whether such efforts are successful. Specifically, we
have noted in testimonies and reports that DOD and other federal
agencies must ensure that performance management systems contain
appropriate internal safeguards. Implementing internal safeguards is a
way to help ensure that pay-for-performance systems in the government
are fair, effective, and credible. We developed an initial list of
safeguards based on our extensive body of work looking at the
performance management practices used by leading public sector
organizations both in the United States and other countries.[Footnote
8]
Additionally, the National Defense Authorization Act for Fiscal Year
2008 required us to determine the extent to which DOD had effectively
incorporated certain specific accountability mechanisms and internal
safeguards (both of which I refer to as safeguards) in NSPS and to
assess employee attitudes toward NSPS.[Footnote 9] The safeguards we
used in our review are as follows:
* involve employees, their representatives, and other stakeholders in
the design of the system, to include employees directly involved in
validating any related implementation of the system;
* assure that the agency's performance management system links employee
objectives to the agency's strategic plan, related goals, and desired
outcomes;
* implement a pay-for-performance evaluation system to better link
individual pay to organizational performance, and provide an equitable
method for appraising and compensating employees;
* provide adequate training and retraining for supervisors, managers,
and employees in the implementation and operation of the performance
management system;
* institute a process for ensuring ongoing performance feedback and
dialogue between supervisors, managers, and employees throughout the
appraisal period, and setting timetables for review;
* provide a means for ensuring that adequate agency resources are
allocated for the design, implementation, and administration of the
performance management system;
* assure that there are reasonable transparency and appropriate
accountability mechanisms in connection with the results of the
performance management process, including periodic reports on internal
assessments and employee survey results relating to performance
management and individual pay decisions while protecting individual
confidentiality;
* assure that the agency's performance management system results in
meaningful distinctions in individual employee performance; and:
* assure that certain predecisional internal safeguards exist to help
achieve consistency, equity, and nonpoliticization of the performance
management process (e.g., independent reasonableness reviews by a third
party or reviews of performance rating decisions, pay determinations,
and promotions before they are finalized to ensure that they are merit-
based, as well as pay panels that consider the results of the
performance appraisal process and other information in connection with
final pay decisions).
My statement focuses on the performance management aspect of NSPS
specifically (1) the extent to which DOD has implemented internal
safeguards to ensure the fairness, effectiveness, and credibility of
NSPS and (2) how DOD civilian personnel perceive NSPS and what actions
DOD has taken to address these perceptions. It is based on the work we
reported on in our September 2008 report,[Footnote 10] which was
conducted in response to a mandate in the National Defense
Authorization Act for Fiscal Year 2008. This mandate also directed us
to continue examining DOD efforts in these areas for the next 2 years.
We currently have ongoing work reviewing the implementation of NSPS for
the second year, and we also will perform another review next year.
To determine the extent to which DOD had implemented safeguards to
ensure the fairness, effectiveness, and credibility of NSPS, we
identified, as mentioned before, safeguards specified in the National
Defense Authorization Act for Fiscal Year 2008, as well as other key
internal safeguards that GAO had previously identified, and analyzed
regulations and other guidance provided by officials in DOD and the
headquarters of the four components--the Army, the Navy, the Air Force,
and the Fourth Estate.[Footnote 11] We also reviewed documents, such as
pay pool business rules and regulations, that we obtained during 12
site visits--3 for each component--to military installations. The sites
were selected because they contained a large number or concentrated
group of civilian employees who had been placed under NSPS and were
geographically distributed throughout the United States. Further, we
interviewed appropriate agency officials at various levels within DOD
and conducted interviews with officials of various management levels at
each site we visited. In addition, to determine how DOD civilian
employees perceive NSPS, we analyzed the results of DOD's May 2006,
November 2006, and May 2007 Status of Forces Survey of civilian
employees--the most recent surveys available at the time of our review.
These surveys gauged initial employee attitudes toward NSPS. We also
conducted small group discussions with employees and supervisors at
each of the 12 sites we visited. While the information from our
discussion groups is not generalizable to the entire population of DOD
civilians, it provides valuable insight into civilians' perceptions
about the implementation of NSPS. We conducted our work in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
DOD Has Taken Some Steps to Implement Internal Safeguards, but
Additional Monitoring Is Needed to Ensure the Fairness of NSPS:
DOD has taken some steps to implement internal safeguards to help
ensure that the NSPS performance management system is fair, effective,
and credible; however, we believe continued monitoring of safeguards is
needed to help ensure that DOD's actions are effective as
implementation proceeds. Specifically, we reported in September
2008[Footnote 12] that DOD had taken some steps to (1) involve
employees in the system's design and implementation; (2) link employee
objectives and the agency's strategic goals and mission; (3) train and
retrain employees in the system's operation; (4) provide ongoing
performance feedback between supervisors and employees; (5) better link
individual pay to performance in an equitable manner; (6) allocate
agency resources for the system's design, implementation, and
administration; (7) provide reasonable transparency of the system and
its operation; (8) impart meaningful distinctions in individual
employee performance; and (9) include predecisional internal safeguards
to determine whether rating results are fair, consistent, and
equitable. For example, all 12 sites we visited trained employees on
NSPS, and the DOD-wide tool used to compose self-assessments links
employees' objectives to the commands' or agencies' strategic goals and
mission. However, we determined that DOD could immediately improve its
implementation of three safeguards.
* First, DOD's implementation of NSPS does not provide employees with
adequate transparency over their rating results because it does not
require commands or pay pools to publish their respective ratings and
share distributions to employees. According to DOD, distributing
aggregate data to employees is an effective means for providing
transparency, and NSPS program officials at all four components'
headquarters told us that publishing overall results is considered a
best practice. In addition, 3 of the 12 sites we visited decided not to
publish the overall final rating and share distribution results.
Without transparency over rating and share distributions, employees may
believe they are not being rated fairly, which ultimately can undermine
their confidence in the system. To address this finding, we recommended
that DOD require overall final rating results to be published. DOD
concurred with this recommendation and, in 2008, revised its NSPS
regulations and guidance to require commands to publish the final
overall rating results.
* Second, NSPS guidance may discourage rating officials from making
meaningful distinctions in employee performance because this guidance
emphasized that most employees should be evaluated at "3" (or "valued
performer") on a scale of 1 to 5. According to NSPS implementing
issuance, rating results should be based on how well employees complete
their job objectives using the performance indicators. Although DOD and
most of the installations we visited emphasized that there was not a
forced distribution of ratings, some pay pool panel members
acknowledged that there was a hesitancy to award employee ratings in
categories other than "3." Unless NSPS is implemented in a manner that
encourages meaningful distinctions in employee ratings in accordance
with employees' performance, there will be an unspoken forced
distribution of ratings, and employees' confidence in the system may be
undermined. As a result, we recommended that DOD encourage pay pools
and supervisors to use all categories of ratings as appropriate. DOD
partially concurred with this recommendation, and in April 2009, DOD
issued additional guidance prohibiting the forced distribution of
ratings under NSPS.
* Third, DOD does not require a third party to analyze rating results
for anomalies prior to finalizing ratings. To address this finding, GAO
recommended that DOD require predecisional demographic and other
analysis; however, DOD did not concur, stating that a postdecisional
analysis is more useful. Specifically, in commenting on our prior
report, DOD stated that its postdecisional analysis of final rating
results by demographics was sufficient to identify barriers and
corrective actions. We are currently assessing DOD's postdecisional
analysis approach as part of our ongoing review of the implementation
of NSPS.
Although DOD Civilian Employees under NSPS View Some Aspects of the
System Positively, DOD Does Not Have a Plan to Address the Generally
Negative Employee Perceptions of the System:
Although DOD civilian employees under NSPS responded positively
regarding some aspects of the NSPS performance management system, DOD
does not have an action plan to address the generally negative employee
perceptions of NSPS identified in both the department's Status of
Forces Survey of civilian employees and discussion groups we held at 12
select installations. According to our analysis of DOD's survey from
May 2007, NSPS employees expressed slightly more positive attitudes
than their DOD colleagues who remain under the General Schedule system
about some goals of performance management, such as connecting pay to
performance and receiving feedback regularly. For example, an estimated
43 percent of NSPS employees compared to an estimated 25 percent of all
other DOD employees said that pay raises depend on how well employees
perform their jobs.[Footnote 13]
However, in some instances, DOD's survey results showed a decline in
employee attitudes among employees who have been under NSPS the
longest. Employees who were among the first employees converted to NSPS
(designated spiral 1.1) were steadily more negative about NSPS from the
May 2006 to the May 2007 DOD survey. At the time of the May 2006
administration of the Status of Forces Survey for civilians, spiral 1.1
employees had received training on the system and had begun the
conversion process, but had not yet gone through a rating cycle and
payout under the new system. As part of this training, employees were
exposed to the intent of the new system and the goals of performance
management and NSPS, which include annual rewards for high performance
and increased feedback on employee performance. As DOD and the
components proceeded with implementation of the system, survey results
showed a decrease in employees' optimism about the system's ability to
fulfill its intent and reward employees for performance. The changes in
attitude reflected in DOD's employee survey are slight but indicate a
movement in employee perceptions. Most of the movement in responses was
negative. Specifically, in response to a question about the impact NSPS
will have on personnel practices at DOD, the number of positive
responses decreased from an estimated 40 percent of spiral 1.1
employees in May 2006 to an estimated 23 percent in May 2007. Further,
when asked how NSPS compared to previous personnel systems, an
estimated 44 percent said it was worse in November 2006, compared to an
estimated 50 percent in May 2007. Similarly, employee responses to
questions about performance management in general were also more
negative from May 2006 to May 2007. Specifically, the results of the
May 2006 survey estimated that about 67 percent of spiral 1.1 employees
agreed that the performance appraisal is a fair reflection of
performance, compared to 52 percent in May 2007. Further, the number of
spiral 1.1 employees who agreed that the NSPS performance appraisal
system improves organizational performance decreased from an estimated
35 percent to 23 percent.
Our discussion group meetings gave rise to views consistent with DOD's
survey results. Although the results of our discussion groups are not
generalizable to the entire population of DOD civilians, the themes
that emerged from our discussions provide valuable insight into
civilian employees' perceptions about the implementation of NSPS and
augment DOD's survey findings. Some civilian employees and supervisors
under NSPS seemed optimistic about the intent of the system however,
most of the DOD employees and supervisors we spoke with expressed a
consistent set of wide-ranging concerns. Specifically, employees noted
(1) NSPS's negative effect on employee motivation and morale, (2) the
excessive amount of time and effort required to navigate the
performance management process, (3) the potential influence that
employees' and supervisors' writing skills have on panels' assessments
of employee ratings, (4) the lack of transparency and understanding of
the pay pool panel process, and (5) the rapid pace at which the system
was implemented, which often resulted in employees feeling unprepared
and unable to find answers to their questions. These negative attitudes
are not surprising given that organizational transformations often
entail fundamental and radical change that requires an adjustment
period to gain employee acceptance and trust.
To address employee attitudes and acceptance, OPM issued guidance that
recommends--and we believe it is a best practice--that agencies use
employee survey results to provide feedback to employees and develop
and implement an action plan that guides their efforts to address the
results of employee assessments. However, according to Program
Executive Office officials, DOD has not developed a specific action
plan to address critical issues identified by employee perceptions,
because the department wants employees to have more time under the
system before making changes. Without such a plan, DOD is unable to
make changes that address employee perceptions that could result in
greater employee acceptance of NSPS. We therefore recommended, in our
September 2008 report,[Footnote 14] that DOD develop and implement a
specific action plan to address employee perceptions of NSPS
ascertained from DOD's surveys and employee focus groups. The plan
should include actions to mitigate employee concerns about, for
example, the potential influence that employees' and supervisors'
writing skills have on the panels' assessment of employee ratings or
other issues consistently identified by employees or supervisors. DOD
partially concurred with our recommendation, noting that it will
address areas of weakness identified in its comprehensive, in-progress
evaluation of NSPS and that it is institutionalizing a continuous
improvement strategy. Since our 2008 review, NSPS officials at DOD have
told us that they are working on an action plan; however, to date the
department has not provided us a plan for review.
Concluding Observations:
DOD's implementation of a more performance-and results-based personnel
system has positioned the agency at the forefront of a significant
transition facing the federal government. We recognize that DOD faces
many challenges in implementing NSPS, as any organization would in
implementing a large-scale organizational change. NSPS is a new
program, and organizational change requires time for employees to
accept. Continued monitoring of internal safeguards is needed to help
ensure that DOD's actions are effective as implementation proceeds.
Moreover, until DOD develops an action plan and takes specific steps to
mitigate negative employee perceptions of NSPS, DOD civilian employees
will likely continue to question the fairness of their ratings and lack
confidence in the system. The degree of ultimate success of NSPS
largely depends on the extent to which DOD incorporates internal
safeguards and addresses employee perceptions. Moving forward, we hope
that the Defense Business Board considers our previous work on NSPS as
it assesses how NSPS operates and its underlying policies.
This concludes my prepared statement. I would be happy to respond to
any questions that you or members of the subcommittee may have at this
time.
Contact and Acknowledgments:
For further information about this statement, please contact Brenda S.
Farrell, Director, Defense Capabilities and Management, at (202) 512-
3604, or farrellb@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. Key contributors to this statement include
Marion Gatling (Assistant Director), Lori Atkinson, Renee Brown, and
Lonnie McAllister.
[End of section]
Appendix I: "Highlights" from Selected GAO Reports on NSPS and
Performance Management:
GAO-09-464T:
GAO Highlights:
Highlights of GAO-09-464T, a testimony before the Subcommittee on
Readiness, Committee on Armed Services, House of Representatives.
Why GAO Did This Study:
The Department of Defense (DOD) is in the process of implementing its
new human capital system for managing civilian personnel”the National
Security Personnel System (NSPS). Key components of NSPS include
compensation, classification, and performance management.
Implementation of NSPS could have far-reaching implications, not just
for DOD, but for civil service reform across the federal government. As
of February 2009, about 205,000 civilian employees were under NSPS.
Based on GAO‘s prior work reviewing performance management in the
public sector, GAO developed an initial list of safeguards that NSPS
should include to ensure it is fair, effective, and credible. In 2008,
Congress directed GAO to evaluate, among other things, the extent DOD
implemented accountability mechanisms, including those in 5 U.S.C.
section 9902(b)(7) and other internal safeguards in NSPS.
This statement is based on GAO‘s September 2008 report, which
determined (1) the extent to which DOD has implemented internal
safeguards to ensure NSPS was fair, effective, and credible; and (2)
how DOD civilians perceive NSPS and what actions DOD has taken to
address these perceptions. For that report, GAO analyzed relevant
documents and employee survey results; interviewed appropriate
officials; and conducted discussion groups at 12 selected
installations. GAO recommended ways to better address the safeguards
and employee perceptions.
What GAO Found:
While DOD has taken some steps to implement internal safeguards to
ensure that NSPS is fair, effective, and credible, in late 2008, GAO
found that the implementation of three safeguards could be improved.
First, DOD does not require a third party to analyze rating results for
anomalies prior to finalizing ratings, and thus it does not have a
process to determine whether ratings are nondiscriminatory before they
are finalized. Without a predecisional analysis, employees may lack
confidence in the fairness and credibility of NSPS. To address this
finding, GAO recommended that DOD require predecisional demographic and
other analysis; however, DOD did not concur, stating that a
postdecisional analysis is more useful. GAO continues to believe this
recommendation has merit. Second, the process lacks transparency
because DOD does not require commands to publish final rating
distributions, though doing so is recognized as a best practice by DOD.
Without transparency over rating distributions, employees may not
believe they are being rated fairly. To address this finding, GAO
recommended that DOD require publication of overall final rating
results. DOD concurred with this recommendation and in 2008 revised its
guidance to require such publication. Third, NSPS guidance may
discourage rating officials from making meaningful distinctions in
employee ratings because it indicated that the majority of employees
should be rated at the ’3“ level, on a scale of 1 to 5, resulting in a
hesitancy to award ratings in other categories. Unless implementation
of NSPS encourages meaningful distinctions in employee performance,
employees may believe there is an unspoken forced distribution of
ratings, and their confidence in the system will be undermined. To
address this finding, GAO recommended that DOD encourage pay pools and
supervisors to use all categories of ratings as appropriate. DOD
partially concurred with this recommendation, but has not yet taken any
action to implement it.
Although DOD employees under NSPS responded positively regarding some
aspects of performance management, DOD does not have an action plan to
address the generally negative employee perceptions of NSPS. According
to DOD‘s survey of civilian employees, generally employees under NSPS
are positive about some aspects of performance management, such as
connecting pay to performance. However, employees who had the most
experience under NSPS showed a negative movement in their perceptions.
For example, the percent of NSPS employees who believe that NSPS will
have a positive effect on DOD‘s personnel practices declined from an
estimated 40 percent in 2006 to 23 percent in 2007. Some negative
perceptions also emerged during discussion groups that GAO held. For
example, employees and supervisors were concerned about the excessive
amount of time required to navigate the process. While it is reasonable
for DOD to allow employees some time to accept NSPS, not addressing
persistent negative employee perceptions could jeopardize employee
acceptance and successful implementation of NSPS. As a result, GAO
recommended that DOD develop and implement an action plan to address
employee concerns about NSPS. DOD partially concurred with GAO‘s
recommendation, but has not yet developed an action plan.
View [hyperlink, http://www.gao.gov/products/GAO-09-464T] or key
components. For more information, contact Brenda S. Farrell at (202)
512-3604 or farrellb@gao.gov.
[End of GAO-09-464T highlights]
GAO-08-773:
GAO Highlights:
Highlights of GAO-08-773, a report to congressional committees.
Why GAO Did This Study:
The Department of Defense (DOD) has begun implementing the National
Security Personnel System (NSPS), its new human capital system for
managing civilian personnel performance. As of May 2008, about 182,000
civilian employees were under NSPS. DOD‘s implementation of NSPS will
have far-reaching implications for DOD and civil service reform across
the federal government. Based on our prior work looking at performance
management in the public sector and DOD‘s challenges in implementing
NSPS, GAO developed an initial list of safeguards that NSPS should
include to ensure it is fair, effective, and credible. Congress
required GAO to determine (1) the extent to which DOD has implemented
internal safeguards to ensure the fairness, effectiveness, and
credibility of NSPS; and (2) how DOD civilian personnel perceive NSPS
and what actions DOD has taken to address these perceptions. To conduct
this work, GAO analyzed relevant documents and employee survey results;
interviewed appropriate officials; and conducted discussion groups with
employees and supervisors at 12 selected installations.
What GAO Found:
While DOD has taken some steps to implement internal safeguards to
ensure that NSPS is fair, effective, and credible, the implementation
of some safeguards could be improved. Specifically, DOD has taken steps
to (1) involve employees in the system‘s design and implementation, (2)
link employee objectives and agency goals, (3) train employees on the
system‘s operation, (4) require ongoing performance feedback between
supervisors and employees, (5) better link individual pay to
performance, (6) allocate agency resources for the system, (7) include
predecisional safeguards to determine if rating results are fair and
nondiscriminatory, (8) provide reasonable transparency, and (9) provide
meaningful distinctions in employee performance. GAO believes continued
monitoring of all of these safeguards is needed to ensure that DOD‘s
actions are effective as more employees become covered by NSPS. GAO
also determined that DOD could immediately improve its implementation
of three safeguards. First, DOD does not require a third party to
analyze rating results for anomalies prior to finalizing employee
ratings, and therefore it is unable to determine whether ratings are
fair and nondiscriminatory before they are finalized. Second, the
process lacks transparency because DOD does not require commands to
publish final rating distributions, though doing so is recognized as a
best practice by DOD and GAO. Third, NSPS guidance may discourage
rating officials from making meaningful distinctions in employee
ratings because it indicated that the majority of employees should be
rated at the ’3“ level, on a scale of 1 to 5, resulting in a hesitancy
to award ratings in other categories. Without steps to improve
implementation of these safeguards, employee confidence in the system
will ultimately be undermined.
Although DOD employees under NSPS are positive regarding some aspects
of performance management, DOD does not have an action plan to address
the generally negative employee perceptions of NSPS. According to DOD‘s
survey of civilian employees, employees under NSPS are positive about
some aspects of performance management, such as connecting pay to
performance. However, employees who had the most experience under NSPS
showed a negative movement in their perceptions. For example, the
percent of NSPS employees who believe that NSPS will have a positive
effect on DOD‘s personnel practices declined from 40 percent in 2006 to
23 percent in 2007. Negative perceptions also emerged during discussion
groups that GAO held. For example, employees and supervisors were
concerned about the excessive amount of time required to navigate the
process. Although the Office of Personnel Management issued guidance
recommending that agencies use employee survey results to provide
feedback to employees and implement an action plan to guide their
efforts to address employee assessments, DOD has not developed an
action plan to address employee perceptions. While it is reasonable for
DOD to allow employees some time to accept NSPS because organizational
changes often require time to adjust, it is prudent to address
persistent negative employee perceptions. Without such a plan, DOD is
unable to make changes that could result in greater employee acceptance
of NSPS.
What GAO Recommends:
GAO is recommending that DOD improve the implementation of some
safeguards and develop and implement an action plan to address employee
concerns about NSPS. DOD generally concurred with our recommendations,
with the exception of one requiring predecisional review of ratings.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-773]. For more
information, contact Brenda S. Farrell at (202) 512-3604 or
farrellb@gao.gov.
[End of GAO-08-773 highlights]
GAO-07-851:
GAO Highlights:
Highlights of GAO-07-851, a report to congressional committees
Why GAO Did This Study:
Given a large-scale organizational change initiative, such as the
Department of Defense‘s (DOD) National Security Personnel System
(NSPS), is a substantial commitment that will take years to complete,
it is important that DOD and Congress be kept informed of the full cost
of implementing NSPS. Under the Comptroller General‘s authority to
conduct evaluations on his own initiative, GAO analyzed the extent to
which DOD has (1) fully estimated total costs associated with the
implementation of NSPS and (2) expended or obligated funds to design
and implement NSPS through fiscal year 2006. GAO interviewed department
officials and analyzed the NSPS Program Executive Office‘s (PEO), and
the military services‘ and the Washington Headquarters Services‘
(hereafter referred to as the components) cost estimates and reports of
expended and obligated funds.
What GAO Found:
DOD‘s November 2005 estimate that it will cost $158 million to
implement NSPS does not include the full cost that the department
expects to incur as a result of implementing the new system. Federal
financial accounting standards state that reliable information on the
costs of federal programs and activities is crucial for effective
management of government operations and recommend that full costs of
programs and their outputs be provided to assist Congress and
executives in making informed decisions on program resources and to
ensure that programs get expected and efficient results. The full cost
includes both those costs specifically identifiable to carry out the
program, or direct costs, and those costs that are common to multiple
programs but cannot be specifically identified with any particular
program, or indirect costs. While the standards emphasize that full
cost information is essential for managing federal programs, their
activities, and outputs, the standards also provide that items may be
omitted from cost information if that omission would not change or
influence the judgment of a reasonable person relying on the cost
information. Based on GAO‘s review of documentation provided by DOD and
discussions with department officials, GAO found that DOD‘s estimate
includes some direct costs, such as the start-up and operation of the
NSPS PEO and the development and delivery of new NSPS training courses,
but it does not include other direct costs such as the full salary
costs of all civilian and military personnel who directly support NSPS
activities departmentwide. Before developing its estimate, DOD had not
fully defined all the direct and indirect costs needed to manage the
program. Without a better estimate, decision makers”within DOD and
Congress”will not have complete information about whether adequate
resources are being provided for implementing NSPS.
The total amount of funds DOD has expended or obligated to design and
implement NSPS during fiscal years 2005 through 2006 cannot be
determined because DOD has not established an oversight mechanism to
ensure that these costs are fully captured. In May 2005, the NSPS
Senior Executive established guidance for tracking and reporting NSPS
implementation costs that requires the components to develop mechanisms
to capture these costs and to report quarterly their costs to the NSPS
PEO. However, this guidance does not define the direct and indirect
costs DOD requires that the components capture. DOD‘s pervasive
financial management deficiencies have been the basis for GAO‘s
designation of this as a high-risk area since 1995. GAO‘s review of
submitted reports from the components found that their official
accounting systems do not capture the total funds expended or obligated
to design and implement NSPS. Without an effective oversight mechanism
to ensure that the official accounting systems capture all appropriate
costs, DOD and Congress do not have visibility over the actual cost to
design and implement NSPS.
What GAO Recommends:
GAO recommends that DOD define all costs needed to manage NSPS, prepare
a revised estimate of those costs for implementing the system in
accordance with federal financial accounting standards, and develop a
comprehensive oversight framework to ensure that all funds expended or
obligated to design and implement NSPS are fully captured and reported.
In reviewing a draft of this report, DOD generally concurred with GAO‘s
recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-851].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Derek Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of GAO-07-851 highlights]
GAO-06-227T:
GAO Highlights:
Highlights of GAO-06-227T, a testimony to the Committee on Homeland
Security and Governmental Affairs, U.S. Senate:
Why GAO Did This Study:
People are critical to any agency transformation because they define an
agency‘s culture, develop its knowledge base, promote innovation, and
are its most important asset. Thus, strategic human capital management
at the Department of Defense (DOD) can help it marshal, manage, and
maintain the people and skills needed to meet its critical mission. In
November 2003, Congress provided DOD with significant flexibility to
design a modern human resources management system. On November 1, 2005,
DOD and the Office of Personnel Management (OPM) jointly released the
final regulations on DOD‘s new human resources management system, known
as the National Security Personnel System (NSPS).
Several months ago, with the release of the proposed regulations, GAO
observed that some parts of the human resources management system
raised questions for DOD, OPM, and Congress to consider in the areas of
pay and performance management, adverse actions and appeals, and labor
management relations. GAO also identified multiple implementation
challenges for DOD once the final regulations for the new system were
issued.
This testimony provides GAO‘s overall observations on selected
provisions of the final regulations.
What GAO Found:
GAO believes that DOD‘s final NSPS regulations contain many of the
basic principles that are consistent with proven approaches to
strategic human capital management. For instance, the final regulations
provide for (1) a flexible, contemporary, market-based and performance-
oriented compensation system”such as pay bands and pay for performance;
(2) giving greater priority to employee performance in its retention
decisions in connection with workforce rightsizing and reductions-in-
force; and (3) involvement of employee representatives throughout the
implementation process, such as having opportunities to participate in
developing the implementing issuances. However, future actions will
determine whether such labor relations efforts will be meaningful and
credible.
Despite these positive aspects of the regulations, GAO has several
areas of concern. First, DOD has considerable work ahead to define the
important details for implementing its system”such as how employee
performance expectations will be aligned with the department‘s overall
mission and goals and other measures of performance, and how DOD would
promote consistency and provide general oversight of the performance
management system to ensure it is administered in a fair, credible,
transparent manner. These and other critically important details must
be defined in conjunction with applicable stakeholders. Second, the
regulations merely allow, rather than require, the use of core
competencies that can help to provide consistency and clearly
communicate to employees what is expected of them. Third, although the
regulations do provide for continuing collaboration with employee
representatives, they do not identify a process for the continuing
involvement of individual employees in the implementation of NSPS.
Going forward, GAO believes that (1) DOD would benefit from developing
a comprehensive communications strategy, (2) DOD must ensure that it
has the necessary institutional infrastructure in place to make
effective use of its new authorities, (3) a chief management officer or
similar position is essential to effectively provide sustained and
committed leadership to the department‘s overall business
transformation effort, including NSPS, and (4) DOD should develop
procedures and methods to initiate implementation efforts relating to
NSPS.
While GAO strongly supports human capital reform in the federal
government, how it is done, when it is done, and the basis on which it
is done can make all the difference in whether such efforts are
successful. DOD‘s regulations are especially critical and need to be
implemented properly because of their potential implications for
related governmentwide reform. In this regard, in our view,
classification, compensation, critical hiring, and workforce
restructuring reforms should be pursued on a governmentwide basis
before and separate from any broad-based labor-management or due
process reforms.
What GAO Recommends:
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-227T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Derek B. Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of GAO-06-227T highlights]
GAO-05-730:
GAO Highlights:
Highlights of GAO-05-730, a report to Congressional Committees
Why GAO Did This Study:
The Department of Defense‘s (DOD) new personnel system¾the National
Security Personnel System (NSPS)¾will have far-reaching implications
not just for DOD, but for civil service reform across the federal
government. The National Defense Authorization Act for Fiscal Year 2004
gave DOD significant authorities to redesign the rules, regulations,
and processes that govern the way that more than 700,000 defense
civilian employees are hired, compensated, promoted, and disciplined.
In addition, NSPS could serve as a model for governmentwide
transformation in human capital management. However, if not properly
designed and effectively implemented, it could severely impede progress
toward a more performance- and results-based system for the federal
government as a whole.
This report (1) describes DOD‘s process to design its new personnel
management system, (2) analyzes the extent to which DOD‘s process
reflects key practices for successful transformations, and (3)
identifies the most significant challenges DOD faces in implementing
NSPS.
What GAO Found:
DOD‘s current process to design its new personnel management system
consists of four stages: (1) development of design options, (2)
assessment of design options, (3) issuance of proposed regulations, and
(4) statutory public comment, meet and confer with employee
representatives, and congressional notification. DOD‘s initial design
process was unrealistic and inappropriate. However, after a strategic
reassessment, DOD adjusted its approach to reflect a more cautious and
deliberative process that involved more stakeholders.
DOD‘s NSPS design process generally includes four of six selected key
practices for successful organizational transformations. First, DOD and
OPM have developed a process to design the new personnel system that is
supported by top leadership in both organizations. Second, from the
outset, a set of guiding principles and key performance parameters have
guided the NSPS design process. Third, DOD has a dedicated team in
place to design and implement NSPS and manage the transformation
process. Fourth, DOD has established a timeline, albeit ambitious, and
implementation goals. The design process, however, is lacking in two
other practices. First, DOD developed and implemented a written
communication strategy document, but the strategy is not comprehensive.
It does not identify all internal stakeholders and their concerns, and
does not tailor key messages to specific stakeholder groups. Failure to
adequately consider a wide variety of people and cultural issues can
lead to unsuccessful transformations. Second, while the process has
involved employees through town hall meetings and other mechanisms, it
has not included employee representatives on the working groups that
drafted the design options. It should be noted that 10 federal labor
unions have filed suit alleging that DOD failed to abide by the
statutory requirements to include employee representatives in the
development of DOD‘s new labor relations system authorized as part of
NSPS. A successful transformation must provide for meaningful
involvement by employees and their representatives to gain their input
into and understanding of the changes that will occur.
DOD will face multiple implementation challenges. For example, in
addition to the challenges of continuing to involve employees and other
stakeholders and providing adequate resources to implement the system,
DOD faces the challenges of ensuring an effective, ongoing two-way
communication strategy and evaluating the new system. In recent
testimony, GAO stated that DOD‘s communication strategy must include
the active and visible involvement of a number of key players,
including the Secretary of Defense, for successful implementation of
the system. Moreover, DOD must ensure sustained and committed
leadership after the system is fully implemented and the NSPS Senior
Executive and the Program Executive Office transition out of existence.
To provide sustained leadership attention to a range of business
transformation initiatives, like NSPS, GAO recently recommended the
creation of a chief management official at DOD.
What GAO Recommends:
GAO is making recommendations to improve the comprehensiveness of the
NSPS communication strategy and to evaluate the impact of NSPS. DOD did
not concur with one recommendation and partially concurred with two
others.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-730].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Derek B. Stewart at (202)
512-5559 or stewartd@gao.gov.
[End of GAO-05-739 highlights]
GAO-03-488:
GAO Highlights:
Highlights of GAO-03-488, a report to congressional requesters:
Why GAO Did This Study:
The federal government is in a period of profound transition and faces
an array of challenges and opportunities to enhance performance, ensure
accountability, and position the nation for the future. High-performing
organizations have found that to successfully transform themselves,
they must often fundamentally change their cultures so that they are
more results-oriented, customer-focused, and collaborative in nature.
To foster such cultures, these organizations recognize that an
effective performance management system can be a strategic tool to
drive internal change and achieve desired results.
Based on previously issued reports on public sector organizations‘
approaches to reinforce individual accountability for results, GAO
identified key practices that federal agencies can consider as they
develop modern, effective, and credible performance management systems.
What GAO Found:
Public sector organizations both in the United States and abroad have
implemented a selected, generally consistent set of key practices for
effective performance management that collectively create a clear
linkage”’line of sight“”between individual performance and
organizational success. These key practices include the following:
1. Align individual performance expectations with organizational goals.
An explicit alignment helps individuals see the connection between
their daily activities and organizational goals.
2. Connect performance expectations to crosscutting goals. Placing an
emphasis on collaboration, interaction, and teamwork across
organizational boundaries helps strengthen accountability for results.
3. Provide and routinely use performance information to track
organizational priorities. Individuals use performance information to
manage during the year, identify performance gaps, and pinpoint
improvement opportunities.
4. Require follow-up actions to address organizational priorities.
By requiring and tracking follow-up actions on performance gaps,
organizations underscore the importance of holding individuals
accountable for making progress on their priorities.
5. Use competencies to provide a fuller assessment of performance.
Competencies define the skills and supporting behaviors that
individuals need to effectively contribute to organizational results.
6. Link pay to individual and organizational performance. Pay,
incentive, and reward systems that link employee knowledge, skills, and
contributions to organizational results are based on valid, reliable,
and transparent performance management systems with adequate
safeguards.
7. Make meaningful distinctions in performance. Effective performance
management systems strive to provide candid and constructive feedback
and the necessary objective information and documentation to reward top
performers and deal with poor performers.
8. Involve employees and stakeholders to gain ownership of performance
management systems. Early and direct involvement helps increase
employees‘ and stakeholders‘ understanding and ownership of the system
and belief in its fairness.
9. Maintain continuity during transitions. Because cultural
transformations take time, performance management systems reinforce
accountability for change management and other organizational goals.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-488].
To view the full report, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at
(202) 512-6806 or mihmj@gao.gov.
[End of GAO-03-488 highlights]
[End of section]
Related GAO Products:
Post-Hearing Questions for the Record Related to the Department of
Defense's National Security Personnel System (NSPS). [hyperlink,
http://www.gao.gov/products/GAO-06-582R]. Washington, D.C.: March 24,
2006.
Human Capital: Designing and Managing Market-Based and More Performance-
Oriented Pay Systems. [hyperlink,
http://www.gao.gov/products/GAO-05-1048T]. Washington, D.C.: September
27, 2005.
Questions for the Record Related to the Department of Defense's
National Security Personnel System. [hyperlink,
http://www.gao.gov/products/GAO-05-771R]. Washington, D.C.: June 14,
2005.
Questions for the Record Regarding the Department of Defense's National
Security Personnel System. [hyperlink,
http://www.gao.gov/products/GAO-05-770R]. Washington, D.C.: May 31,
2005.
Post-hearing Questions Related to the Department of Defense's National
Security Personnel System. [hyperlink,
http://www.gao.gov/products/GAO-05-641R]. Washington, D.C.: April 29,
2005.
Human Capital: Selected Agencies' Statutory Authorities Could Offer
Options in Developing a Framework for Governmentwide Reform.
[hyperlink, http://www.gao.gov/products/GAO-05-398R]. Washington, D.C.:
April 21, 2005.
Human Capital: Preliminary Observations on Proposed Regulations for
DOD's National Security Personnel System. [hyperlink,
http://www.gao.gov/products/GAO-05-559T]. Washington, D.C.: April 14,
2005.
Human Capital: Preliminary Observations on Proposed Department of
Defense National Security Personnel System Regulations. [hyperlink,
http://www.gao.gov/products/GAO-05-517T]. Washington, D.C.: April 12,
2005.
Human Capital: Preliminary Observations on Proposed DOD National
Security Personnel System Regulations. [hyperlink,
http://www.gao.gov/products/GAO-05-432T]. Washington, D.C.: March 15,
2005.
Human Capital: Principles, Criteria, and Processes for Governmentwide
Federal Human Capital Reform. [hyperlink,
http://www.gao.gov/products/GAO-05-69SP]. Washington, D.C.: December 1,
2004.
Human Capital: Implementing Pay for Performance at Selected Personnel
Demonstration Projects. [hyperlink,
http://www.gao.gov/products/GAO-04-83]. Washington, D.C.: January 23,
2004.
Human Capital: Building on DOD's Reform Efforts to Foster
Governmentwide Improvements. [hyperlink,
http://www.gao.gov/products/GAO-03-851T]. Washington, D.C.: June 4,
2003.
Human Capital: DOD's Civilian Personnel Strategic Management and the
Proposed National Security Personnel System. [hyperlink,
http://www.gao.gov/products/GAO-03-493T]. Washington, D.C.: May 12,
2003.
Defense Transformation: DOD's Proposed Civilian Personnel System and
Governmentwide Human Capital Reform. [hyperlink,
http://www.gao.gov/products/GAO-03-741T]. Washington, D.C.: May 1,
2003.
[End of section]
Footnotes:
[1] According to DOD, as of June 2009 there are approximately 212,000
employees under NSPS.
[2] GAO, Human Capital: DOD Needs to Improve Implementation of and
Address Employee Concerns about Its National Security Personnel System,
[hyperlink, http://www.gao.gov/products/GAO-08-773] (Washington, D.C.:
Sept. 10, 2008).
[3] GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, [hyperlink,
http://www.gao.gov/products/GAO-03-488] (Washington, D.C.: Mar. 14,
2003); Results-Oriented Cultures: Modern Performance Management Systems
Are Needed to Effectively Support Pay for Performance, [hyperlink,
http://www.gao.gov/products/GAO-03-612T] (Washington, D.C.: Apr. 1,
2003); and Comptroller General's Forum: High-Performing Organizations:
Metrics, Means, and Mechanisms for Achieving High Performance in the
21st Century Public Management Environment, [hyperlink,
http://www.gao.gov/products/GAO-04-343SP] (Washington, D.C.: Feb 13,
2004).
[4] Office of Personnel Management, A Handbook for Measuring Employee
Performance: Aligning Employee Performance Plans with Organizational
Goals (Washington, D.C., September 2001).
[5] GAO, Defense Transformation: Preliminary Observations on DOD's
Proposed Civilian Personnel Reforms, [hyperlink,
http://www.gao.gov/products/GAO-03-717T] (Washington, D.C.: Apr. 29,
2003); Defense Transformation: DOD's Proposed Civilian Personnel
Systems and Governmentwide Human Capital Reform, [hyperlink,
http://www.gao.gov/products/GAO-03-741T] (Washington, D.C.: May 1,
2003); and Human Capital: Building on DOD's Reform Effort to Foster
Governmentwide Improvements, [hyperlink,
http://www.gao.gov/products/GAO-03-851T] (Washington, D.C.: June 4,
2003).
[6] GAO, Human Capital: DOD Needs Better Internal Controls and
Visibility over Costs for Implementing Its National Security Personnel
System, [hyperlink, http://www.gao.gov/products/GAO-07-851]
(Washington, D.C.: July 16, 2007), and Human Capital: Observations on
Final Regulations for DOD's National Security Personnel System,
[hyperlink, http://www.gao.gov/products/GAO-06-227T] (Washington, D.C.:
Nov. 17, 2005).
[7] See GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, [hyperlink,
http://www.gao.gov/products/GAO-03-669] (Washington, D.C.: July 2,
2003); Major Management Challenges and Program Risks: A Governmentwide
Perspective, [hyperlink, http://www.gao.gov/products/GAO-03-95]
(Washington, D.C.: January 2003); and [hyperlink,
http://www.gao.gov/products/GAO-08-773]. Also, see Office of Personnel
Management, Working for America: Alternative Personnel Systems in
Practice and a Guide to the Future (Washington, D.C., October 2005).
[8] GAO, Post-Hearing Questions for the Record Related to the
Department of Defense's National Security Personnel System (NSPS),
[hyperlink, http://www.gao.gov/products/GAO-06-582R] (Washington, D.C.:
Mar. 24, 2006), and Posthearing Questions Related to Strategic Human
Capital Management, [hyperlink,
http://www.gao.gov/products/GAO-03-779R] (Washington, D.C.: May 22,
2003).
[9] Pub. L. No. 110-181, § 1106(c) (2008). Specifically, section
1106(c)(1)(B) directs GAO to conduct reviews in calendar years 2008
through 2010 to evaluate the extent to which the DOD has effectively
implemented accountability mechanisms, including those established in 5
U.S.C. § 9902(b)(7) and other internal safeguards. The accountability
mechanisms specified in 5 U.S.C. § 9902(b)(7) include those that GAO
previously identified as internal safeguards key to successful
implementation of performance management systems.
[10] [hyperlink, http://www.gao.gov/products/GAO-08-773].
[11] The Department of the Navy's NSPS policies encompass Marine Corps
civilians. The Fourth Estate includes all organizational entities in
DOD that are not in the military departments or the combatant commands,
for example, the Office of the Secretary of Defense, the Joint Staff,
the Office of the Inspector General, the defense agencies, and DOD
field activities.
[12] [hyperlink, http://www.gao.gov/products/GAO-08-773].
[13] The estimated percentages from the Status of Forces Survey of
civilian employees are based on a 95 percent confidence interval and
margin of error within +/-2 percent as reported in DOD's Defense
Manpower Data Center's Status of Forces Survey of civilian employees.
For further details about the survey, see [hyperlink,
http://www.gao.gov/products/GAO-08-773].
[14] [hyperlink, http://www.gao.gov/products/GAO-08-773].
[End of section]
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