The Chief Operating Officer Concept and its Potential Use as a Strategy to Improve Management at the Department of Homeland Security
Gao ID: GAO-04-876R June 28, 2004In a May 18, 2004 letter, the Chairman of the House Select Committee on Homeland Security observed that many management and integration challenges remain at the Department of Homeland Security (DHS) and to strengthen the departmentwide reforms and transformation underway at DHS the Select Committee is considering options such as the Chief Operating Officer (COO) concept to help address these challenges. This letter describes the roles and responsibilities of an effective COO and presents certain options that could serve to strengthen and streamline management functions in a department as large and diverse as DHS. As agreed, we have summarized our reports on the COO concept, organizational transformation, as well as DHS's management and transformation challenges.
As DHS and other agencies across the federal government embark on large-scale organizational change initiatives in order to address 21st century challenges, there is a compelling need to elevate, integrate, and institutionalize responsibility for key functional management initiatives to help ensure their success. A COO or similar position may effectively provide the continuing, focused attention essential to successfully completing these multiyear transformations. However, the specific implementation of such an approach must be determined within the context of the particular facts, circumstances, challenges, and opportunities of each individual agency. In addition, certain mechanisms can serve to augment the COO position, and thus further strengthen and streamline management functions within an agency. These mechanisms include articulating the COO's role in statute in order to make clear its broad responsibilities, using performance agreements to clarify individual performance expectations, and setting a term appointment for the position to ensure accountability over the long term. Finally, strong and continuing congressional oversight can help determine how best to elevate, integrate, and institutionalize key management and transformation responsibilities in executive agencies.
GAO-04-876R, The Chief Operating Officer Concept and its Potential Use as a Strategy to Improve Management at the Department of Homeland Security
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June 28, 2004:
The Honorable Christopher Cox:
Chairman:
Select Committee on Homeland Security:
House of Representatives:
Subject: The Chief Operating Officer Concept and its Potential Use as a
Strategy to Improve Management at the Department of Homeland Security:
Dear Mr. Chairman:
In a May 18, 2004 letter, you observed that many management and
integration challenges remain at the Department of Homeland Security
(DHS) and to strengthen the departmentwide reforms and transformation
underway at DHS the Select Committee is considering options such as the
Chief Operating Officer (COO) concept to help address these challenges.
At your request, this letter describes the roles and responsibilities
of an effective COO and presents certain options that could serve to
strengthen and streamline management functions in a department as large
and diverse as DHS. As agreed, we have summarized our reports on the
COO concept, organizational transformation, as well as DHS's management
and transformation challenges.
On September 9, 2002, GAO also convened a roundtable of government
leaders and management experts to discuss the COO concept and how it
might apply within selected federal departments and agencies.[Footnote
1] The intent of the roundtable was to generate ideas and to engage in
an open dialogue on the possible application of the COO concept to
selected federal departments and agencies. There was general agreement
on a number of overall themes concerning the need for agencies to
elevate, integrate, and institutionalize attention on key management
challenges. Our prior work presented in issued reports on DHS's
management and transformation challenges was done in accordance with
generally accepted government auditing standards. Because this response
is based primarily on our previously issued work and the non-audit work
performed for the roundtable, we did not obtain agency comments on a
draft of this letter. However, we are sending a copy of this letter to
the Secretary of the Department of Homeland Security.
As DHS and other agencies across the federal government embark on
large-scale organizational change initiatives in order to address 21st
century challenges, there is a compelling need to elevate, integrate,
and institutionalize responsibility for key functional management
initiatives to help ensure their success. A COO or similar position may
effectively provide the continuing, focused attention essential to
successfully completing these multiyear transformations. However, the
specific implementation of such an approach must be determined within
the context of the particular facts, circumstances, challenges, and
opportunities of each individual agency. In addition, certain
mechanisms can serve to augment the COO position, and thus further
strengthen and streamline management functions within an agency. These
mechanisms include articulating the COO's role in statute in order to
make clear its broad responsibilities, using performance agreements to
clarify individual performance expectations, and setting a term
appointment for the position to ensure accountability over the long
term. Finally, strong and continuing congressional oversight can help
determine how best to elevate, integrate, and institutionalize key
management and transformation responsibilities in executive agencies.
DHS Faces Management and Organizational Transformation Challenges:
DHS faces enormous management and organizational transformation
challenges as it works to simultaneously establish itself, integrate
numerous entities and systems, and protect the nation from terrorism.
To achieve success, the result should not simply be a collection of
components in a new department, but the transformation of the various
programs and missions into a high-performing, focused
organization.[Footnote 2] However, the size, complexity, and importance
of DHS's mission make the challenges involved especially daunting. As a
reflection of this, in January 2003 we designated the implementation
and transformation of DHS as high risk.[Footnote 3] This determination
reflected the fact that DHS was formed from diverse components with a
wide array of existing major management challenges and program risks.
For example, one DHS directorate's responsibility includes the
protection of critical information systems that we already considered a
high-risk area. Also, many of the originating components--including the
Immigration and Naturalization Service, the Transportation Security
Administration, the U.S. Customs Service, the Federal Emergency
Management Agency, and the U.S. Coast Guard--individually faced one or
more major management challenge, such as strategic human capital risks,
critical information technology management challenges, or financial
management vulnerabilities.[Footnote 4]
The high-risk designation also reflected DHS's daunting management
challenge associated with the process of organizational integration and
transformation itself. During its first year of operations, nearly
180,000 employees from 22 different agencies with a combined budget of
over $30 billion became part of the new department. Moreover, we have
previously noted that successful merger and transformation efforts can
be much more difficult to achieve in the public sector than in the
private sector.[Footnote 5] Public sector transformation efforts, such
as that under way at DHS, must contend with more stakeholders and power
centers, less management flexibility, and greater transparency than in
the private sector. Organizational mergers of this magnitude carry
significant risks, including lost productivity and inefficiencies.
Furthermore, top officials in the public sector are typically political
appointees who do not stay in their positions long enough to
effectively address key transformation initiatives. Indeed, major
mergers and acquisitions in the private sector often do not live up to
their expectations, and in the short term, the experience of major
private sector mergers and acquisitions has been that productivity and
effectiveness actually decline.[Footnote 6] This can happen for a
number of reasons. For example, attention is concentrated on critical
and immediate integration issues and diverted from longer-term mission
issues. In addition, employees and managers inevitably worry about
their place in the new organization. The key is to adopt practices that
minimize the duration and the significance of factors that reduce
productivity and effectiveness.
The COO Concept Can Provide Needed Focus to Address Management and
Organizational Transformation Challenges:
The COO concept may provide federal agencies, such as DHS, with a tool
to provide the long-term attention required to effectively address
significant management challenges and transformational needs. Under
this concept, the COO provides a single organizational focus for key
management functions, such as human capital, financial management,
information technology, acquisition management, and performance
management as well as for selected organizational transformation
initiatives. Establishing a COO position can enable selected federal
agencies to address the following.
Elevate Attention on Management Issues and Transformational Change:
As a result of short-term priorities and other demands on the time of
agency heads and their deputies, they generally do not have the ability
to focus enough dedicated attention to management issues. However, the
nature and scope of the changes needed in many agencies require the
sustained and inspired commitment of the top political and career
leadership. As mentioned earlier, many of the originating
organizational components merged to create DHS brought with them
preexisting management challenges. Top leadership attention is
essential to overcome organizations' natural resistance to change,
marshal the resources needed to implement change, and build and
maintain the organizationwide commitment to new ways of doing business.
We have previously reported that building an effective DHS will require
consistent and sustained leadership from top management to ensure the
needed transformation of disparate agencies, programs, and missions
into an integrated organization.[Footnote 7] A COO position can provide
one potential approach for achieving this goal.
Integrate Various Key Management and Transformation Efforts:
By their very nature, the problems and challenges facing agencies are
crosscutting and thus require coordinated and integrated solutions.
However, the federal government too often places management
responsibilities, such as information technology, human capital, or
financial management, into "stovepipes" and fails to design and
implement organizational transformation efforts in a comprehensive,
ongoing, and integrated manner. In recent testimony before the Select
Committee, DHS's Deputy Secretary reported that DHS has consolidated 22
different personal property management systems into 3 and expects to
further reduce them to a single, departmentwide system over the next
few years.
The COO concept is consistent with the commonly agreed-upon governance
principle that there needs to be a single point within agencies with
the perspective and responsibility--as well as authority--to ensure the
successful implementation of functional management and, if appropriate,
transformation efforts. At the same time, given the competing demands
on deputy secretaries in executive branch departments across the
government to help execute the President's policy and program agendas,
it is not practical to expect that they will be able to consistently
undertake this vital integrating responsibility. Moreover, while many
deputy secretaries may be nominated based in part on their managerial
experience, it has not always been the case, and not surprisingly, the
management skills, expertise, and interests of the deputy secretaries
have always varied and will continue to vary.
To take advantage of the added status and visibility a COO position
would provide and in order to be successful, the COO will need to be
among an agency's top leadership (for example, a new level two position
with the title of deputy secretary for management or principal under
secretary for management). However, consistent with the desire to
integrate responsibilities, the creation of a senior management
position needs to be considered carefully with regard to existing
positions and responsibilities so that it does not result in
unnecessary "layering" at an agency.
Institutionalize Accountability for Addressing Management Issues and
Leading Transformational Change:
Management weaknesses in some agencies are deeply entrenched and long-
standing and will take years of sustained attention and continuity to
resolve. This is especially important since private sector experience
with mergers and acquisitions suggests that over 40 percent of
executives in acquired companies leave within the first year and 75
percent within the first 3 years.[Footnote 8] In addition, making
fundamental changes in agencies' cultures will also require a long-term
effort. In our previous work, we have noted that the experiences of
successful transformation initiatives in large private and public
sector organizations suggest that it can often take at least 5 to 7
years until such initiatives are fully implemented and the related
cultures are transformed in a sustainable manner.[Footnote 9] In the
federal government, the frequent turnover of the political leadership
has often made it extremely difficult to obtain the sustained attention
required to make needed changes. The creation of a COO position can
provide one way for institutionalizing accountability over the long
term.
Certain Mechanisms Can Augment the COO Position:
In the context of providing agencies with a tool to elevate, integrate,
and institutionalize responsibility for certain key management
functions and transformational efforts within federal agencies,
Congress can further enhance the importance and authority of the COO
position, and thus strengthen and streamline management functions
within a department. For example, Congress could articulate the COO's
broad responsibilities in statute. In 2003, Congress created the
position of Deputy Architect of the Capitol/COO; this official is
responsible for the overall direction, operation, and management of
that organization. Under the statute, besides developing and
implementing a long-term strategic plan, including a comprehensive
mission statement and an annual performance plan, the Deputy Architect/
COO is to propose organizational changes and new positions needed to
carry out the organization's mission and strategic and annual
performance goals.[Footnote 10]
Articulating the role and responsibilities of the COO in statute helps
to create unambiguous expectations for the position and underscores
Congress' desire to follow a professional, nonpartisan approach in
connection with these positions. In addition, it provides, in effect,
an implicit set of qualification standards and expectations that the
incumbents will have leadership experience in the areas that will be
within their portfolios. For example, under the statute, the Deputy
Architect/COO is to have strong leadership skills and demonstrated
ability in management, including such areas as strategic planning,
performance management, worker safety, customer satisfaction, and
service quality. Congress also set qualifications in statute when it
created the position of Chief Financial Officer (CFO) at 24 departments
and federal agencies. The CFOs are to "possess demonstrated ability in
general management of, and knowledge of and extensive practical
experience in financial management practices in large governmental or
business entities."[Footnote 11] In addition, Congress set the
qualifications for the position of Chief Information Officer (CIO) at
federal departments and agencies. CIOs are to "be selected with special
attention to the professional qualifications" required for records
management, information dissemination, security, and technology
management among others areas.[Footnote 12]
Another potentially important accountability mechanism to augment the
COO role is to use clearly defined, results-oriented performance
agreements accompanied by appropriate incentives, rewards, and
accountability mechanisms.[Footnote 13] Performance agreements for
senior leaders provide a potentially important mechanism for clarifying
expectations, monitoring progress, and assessing accountability. In
addition, we have reported on a number of benefits of performance
agreements.[Footnote 14] Performance agreements can:
* strengthen alignment of results-oriented goals with daily operations,
* foster collaboration across organizational boundaries,
* enhance opportunities to discuss and routinely use performance
information to make program improvements,
* provide a results-oriented basis for individual accountability, and:
* maintain continuity of program goals during leadership transitions.
While performance agreements can be implemented administratively as was
done in the Department of Transportation since the mid-1990s, Congress
has also required performance agreements in statute as well as provided
for performance assessments with consequences.[Footnote 15] For
example, in 1998 Congress established a COO position at the Department
of Education's Office of Student Financial Assistance.[Footnote 16] In
2000 we reported that the COO is to complete an annual performance
agreement with measurable organizational and individual goals that the
COO would be accountable for achieving. Further, the COO's progress in
meeting these goals is to form the basis of a possible performance
bonus of up to 50 percent of base pay, as well as any decisions to
remove or reappoint him or her. The COO is to enter into subsequent
performance agreements with the Office of Student Financial
Assistance's senior managers. Similarly, Congress made it clear in
statute that the Deputy Architect/COO may be removed from office for
failure to meet performance goals. Congress also required in statute
that annual performance reports contain an evaluation of the extent to
which the Office of the Architect of the Capitol met its goals and
objectives.
To help ensure accountability over the long term, setting a term
appointment can help provide the continuing focused attention essential
to successfully completing multiyear transformations, which can extend
beyond the tenure of political leaders. As mentioned above, large-scale
change initiatives and organizational transformations typically
require long-term, concerted effort, often taking years to complete.
Providing a COO with a term-appointment of about 5 to 7 years would be
one way to institutionalize accountability over extended periods needed
to help ensure long-term management and transformation initiatives are
successfully completed. No matter how the position is structured, it is
critical that the people appointed to these positions be vested with
sufficient authority to achieve results.
Finally, through enhanced oversight, Congress will need to continue to
be fully engaged in any ongoing discussions on how best to elevate,
integrate, and institutionalize key management and transformation
responsibilities and what role the COO concept should play in achieving
this goal. The Select Committee's record of holding oversight hearings
and its interest in considering a variety of potential strategies to
strengthen the management functions at DHS provides a clear example of
this engagement. For selected agencies, Congress may want to make the
COO subject to Senate confirmation to ensure that nominees have the
requisite leadership and management skills and the proven track records
in similar positions to successfully address the challenges facing
federal agencies. In creating such a position, Congress might consider
making certain subordinate positions, such as the CFO, not subject to
Senate confirmation.
We are sending copies of this letter to the Vice Chair and Ranking
Minority Member of the Select Committee on Homeland Security, the
Chairman and Ranking Minority Member of the Senate Committee on
Governmental Affairs, and the Secretary of the Department of Homeland
Security. In addition, we will make copies available to others upon
request. This letter will also be available on the GAO Web site at
www.gao.gov. If you have any questions concerning this letter, please
contact me on (202) 512-5500 or J. Christopher Mihm, Managing Director,
Strategic Issues, on (202) 512-6806 or at mihmj@gao.gov.
Sincerely yours,
Signed by:
David M. Walker:
Comptroller General of the United States:
(450333):
FOOTNOTES
[1] U.S. General Accounting Office, Highlights of a GAO Roundtable: The
Chief Operating Officer Concept: A Potential Strategy to Address
Federal Governance Challenges, GAO-03-192SP (Washington, D.C.: Oct. 4,
2002).
[2] For additional information on the attributes of high-performing
organizations, see U.S. General Accounting Office, Highlights of a GAO
Forum on High-Performing Organizations: Metrics, Means, and Mechanisms
for Achieving High Performance in the 21st Century Public Management
Environment, GAO-04-343SP (Washington, D.C.: Feb. 13, 2004).
[3] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
03-119 (Washington, D.C.: January 2003).
[4] GAO-03-119, and U.S. General Accounting Office, Major Management
Challenges and Program Risks: Department of Homeland Security, GAO-03-
102 (Washington, D.C.: January 2003).
[5] U.S. General Accounting Office, Highlights of a GAO Forum: Mergers
and Transformation: Lessons Learned for a Department of Homeland
Security and Other Federal Agencies, GAO-03-293SP (Washington, D.C.:
Nov. 14, 2002).
[6] U.S. General Accounting Office, Results-Oriented Cultures:
Implementation Steps to Assist Mergers and Organizational
Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).
[7] GAO-03-102.
[8] GAO-03-669.
[9] GAO-03-293SP.
[10] Section 1203 of Division H, Title I, Pub. L. No. 108-7, February
20, 2003, (The Consolidated Appropriations Resolution, 2003). The
Architect of the Capitol appointed the first COO on July 28, 2003.
[11] Pub. L. No. 101-576, November 15, 1990, 104 Stat. 2838.
[12] Pub. L. No. 104-13, May 22,1995, 44 U.S.C. §§3501-3521.
[13] U.S. General Accounting Office, Results-Oriented Government:
Shaping the Government to Meet 21st Century Challenges, GAO-03-1168T
(Washington, D.C.: Sept. 17, 2003).
[14] U.S. General Accounting Office, Managing for Results: Emerging
Benefits From Selected Agencies' Use of Performance Agreements, GAO-01-
115 (Washington, D.C.: Oct. 30, 2000).
[15] GAO-01-115, and U.S. General Accounting Office, Results-Oriented
Cultures: Creating a Clear Linkage between Individual Performance and
Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003).
[16] The name of the Office of Student Financial Assistance was changed
to Federal Student Aid on March 6, 2002.
