Human Capital
Preliminary Observations on Final Department of Homeland Security Human Capital Regulations Gao ID: GAO-05-320T February 10, 2005At the center of any agency transformation, such as the one envisioned for the Department of Homeland Security (DHS), are the people who will make it happen. Thus, strategic human capital management at DHS can help it marshal, manage, and maintain the people and skills needed to meet its critical mission. Congress provided DHS with significant flexibility to design a modern human capital management system. DHS and the Office of Personnel Management (OPM) have now jointly released the final regulations on DHS's new human capital system. Last year, with the release of the proposed regulations, GAO observed that many of the basic principles underlying the regulations were consistent with proven approaches to strategic human capital management and deserved serious consideration. However, some parts of the human capital system raised questions for DHS, 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 DHS once the final regulations for the new system were issued. This testimony provides preliminary observations on selected provisions of the final regulations.
GAO believes that the regulations contain many of the basic principles that are consistent with proven approaches to strategic human capital management. For example, many elements for a modern compensation system--such as occupational clusters, pay bands, and pay ranges that take into account factors such as labor market conditions--are to be incorporated into DHS's new system. However, these final regulations are intended to provide an outline and not a detailed, comprehensive presentation of how the new system will be implemented. Thus, DHS has considerable work ahead to define the details of the implementation of its system and understanding these details is important in assessing the overall system. The implementation challenges we identified last year are still critical to the success of the new system. Also, DHS appears to be committed to continue to involve employees, including unions, throughout the implementation process. Specifically, according to the regulations, employee representatives or union officials are to have opportunities to participate in developing the implementing directives, hold four membership seats on the Homeland Security Compensation Committee, and help in the design and review the results of evaluations of the new system. Further, GAO believes that to help ensure the quality of that involvement, DHS will need to ensure sustained and committed leadership. A Chief Operating Officer/Chief Management Officer or similar position at DHS would serve to elevate, integrate, and institutionalize responsibility for this critical endeavor and help ensure its success by providing the continuing, focused attention needed to successfully complete the multiyear conversion to the new human capital system. DHS will need to establish an overall communication strategy. According to DHS, its planned communication strategy for its new human capital system will include global e-mails, satellite broadcasts, Web pages, and an internal DHS weekly newsletter. A key implementation step for DHS is to assure an effective and on-going two-way communication effort that creates shared expectations among managers, employees, customers, and stakeholders. 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. GAO's implementation of its own human capital authorities, such as pay bands and pay for performance, could help inform other organizations as they design systems to address their human capital needs. The final regulations for DHS's new system are especially critical because of the potential implications for related governmentwide reforms.
GAO-05-320T, Human Capital: Preliminary Observations on Final Department of Homeland Security Human Capital Regulations
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Testimony:
Before the Subcommittee on Oversight of Government Management, the
Federal Workforce, and the District of Columbia, Senate Committee on
Homeland Security and Governmental Affairs:
GAO:
For Release on Delivery Expected at 10:00 a.m. EST:
Thursday, February 10, 2005:
Human Capital:
Preliminary Observations on Final DHS Human Capital Regulations:
Statement of David M. Walker, Comptroller General of the United States:
GAO-05-320T:
GAO Highlights:
Highlights of GAO-05-320T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia, Committee on Homeland Security and Governmental
Affairs, U.S. Senate:
Why GAO Did This Study:
At the center of any agency transformation, such as the one envisioned
for the Department of Homeland Security (DHS), are the people who will
make it happen. Thus, strategic human capital management at DHS can
help it marshal, manage, and maintain the people and skills needed to
meet its critical mission. Congress provided DHS with significant
flexibility to design a modern human capital management system. DHS and
the Office of Personnel Management (OPM) have now jointly released the
final regulations on DHS‘s new human capital system.
Last year, with the release of the proposed regulations, GAO observed
that many of the basic principles underlying the regulations were
consistent with proven approaches to strategic human capital management
and deserved serious consideration. However, some parts of the human
capital system raised questions for DHS, 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 DHS once the final regulations for the
new system were issued.
This testimony provides preliminary observations on selected provisions
of the final regulations.
What GAO Found:
GAO believes that the regulations contain many of the basic principles
that are consistent with proven approaches to strategic human capital
management. For example, many elements for a modern compensation
system”such as occupational clusters, pay bands, and pay ranges that
take into account factors such as labor market conditions”are to be
incorporated into DHS‘s new system. However, these final regulations
are intended to provide an outline and not a detailed, comprehensive
presentation of how the new system will be implemented. Thus, DHS has
considerable work ahead to define the details of the implementation of
its system and understanding these details is important in assessing
the overall system.
The implementation challenges we identified last year are still
critical to the success of the new system. Also, DHS appears to be
committed to continue to involve employees, including unions,
throughout the implementation process. Specifically, according to the
regulations, employee representatives or union officials are to have
opportunities to participate in developing the implementing directives,
hold four membership seats on the Homeland Security Compensation
Committee, and help in the design and review the results of evaluations
of the new system. Further, GAO believes that to help ensure the
quality of that involvement, DHS will need to
* Ensure sustained and committed leadership. A Chief Operating Officer/
Chief Management Officer or similar position at DHS would serve to
elevate, integrate, and institutionalize responsibility for this
critical endeavor and help ensure its success by providing the
continuing, focused attention needed to successfully complete the
multiyear conversion to the new human capital system.
* Establish an overall communication strategy. According to DHS, its
planned communication strategy for its new human capital system will
include global e-mails, satellite broadcasts, Web pages, and an
internal DHS weekly newsletter. A key implementation step for DHS is to
assure an effective and on-going two-way communication effort that
creates shared expectations among managers, employees, customers, and
stakeholders.
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. GAO‘s implementation of its own human capital authorities,
such as pay bands and pay for performance, could help inform other
organizations as they design systems to address their human capital
needs. The final regulations for DHS‘s new system are especially
critical because of the potential implications for related
governmentwide reforms.
www.gao.gov/cgi-bin/getrpt?GAO-05-320T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Eileen Larence at (202)
512-6806 or larencee@gao.gov.
[End of section]
Chairman Voinovich and Members of the Subcommittee:
I appreciate the opportunity to be here today to provide our
preliminary observations on the Department of Homeland Security's (DHS)
final regulations on its new human capital system, which were published
last week jointly by the Secretary of DHS and the Director of the
Office of Personnel Management (OPM). As the title of this hearing
suggests--"Unlocking the Potential within Homeland Security: The New
Human Resources System"--at the center of any agency transformation,
such as the one envisioned for DHS, are the people who make it happen.
Thus, strategic human capital management at DHS can help it marshal,
manage, and maintain the people and skills needed to meet its critical
mission.
As we recently reported in our High-Risk Series, significant changes in
how the federal workforce is managed, such as DHS's new human capital
system, are underway.[Footnote 1] Consequently, there is general
recognition that the government needs a framework to guide this human
capital reform, one that Congress and the administration can implement
to enhance performance, ensure accountability, and position the nation
for the future. These final regulations, which according to DHS will
affect about 110,000 federal employees, are especially critical because
of their implications for governmentwide reforms. My statement today
makes three overall points.
First, DHS has considerable work ahead to define the details of the
implementation of its system and understanding these details is
important in assessing the overall system. Nonetheless, similar to the
observations we made a year ago on the proposed DHS human capital
regulations, we find that the final regulations contain many of the
basic principles that are consistent with proven approaches to
strategic human capital management, including several approaches used
by GAO.[Footnote 2] However, these final regulations are intended to
provide an outline and not a detailed, comprehensive presentation of
how the new system will be implemented. DHS is to issue implementing
directives to carry out any policy or procedure under the new system.
Thus, how it is done, when it is done, and the basis on which it is
done can make all the difference in whether DHS's human capital system
will be successful.
Going forward, DHS and other agencies must ensure they have the
institutional infrastructure in place to make effective use of their
new authorities. This institutional infrastructure includes, at a
minimum, a human capital planning process that integrates the agency's
human capital policies, strategies, and programs with its program
goals, mission, and desired outcomes; the capabilities to effectively
develop and implement a new human capital system; and importantly, the
existence of a modern, effective, and credible performance management
system that includes adequate safeguards to ensure fair, effective,
non-discriminatory, and credible implementation of the new system.
Second, DHS appears to be committed to continue to involve employees,
including union officials, throughout the implementation process,
another critical ingredient for success. Specifically, under the DHS
final regulations, employee representatives or union officials are to
have opportunities to participate in developing the implementing
directives, as outlined under the "continuing collaboration"
provisions; are to hold four membership seats on the Homeland Security
Compensation Committee; and are to help in the design and review the
results of evaluations of the new system. We believe that sustained and
committed leadership can provide the continuing, focused attention
needed to successfully complete this multiyear conversion to the new
human capital system and an ongoing two-way communication strategy can
help ensure the quality of that involvement.
Third, and finally, recent actions, as evidenced by these DHS final
regulations, have significant, precedent-setting implications for the
rest of government. They represent both progress and opportunities, but
also raise legitimate concerns. We are fast approaching the point where
"standard governmentwide" human capital policies and processes are
neither standard nor governmentwide. Human capital reform should avoid
further fragmentation within the civil service, ensure reasonable
consistency within the overall civilian workforce, and help maintain a
reasonably level playing field among federal agencies when competing
for talent. Further, human capital reform should maintain key merit
principles and appropriate safeguards against discrimination and other
prohibited personnel practices.
This morning I would like to provide some observations on the final DHS
regulations, discuss the multiple challenges that DHS confronts as it
moves towards implementation of its new human capital system, and then
suggest a governmentwide framework that can serve as a starting point
to advance human capital reform. Lastly, I will highlight some of GAO's
recent experiences in implementing a performance-based and market-
oriented pay system since we believe that other agencies can benefit
from our experiences.
Preliminary Observations on the Final DHS Human Capital Regulations:
The final regulations establish a new human capital system for DHS that
is intended to assure its ability to attract, retain, and reward a
workforce that is able to meet its critical mission. Further, the human
capital system is to provide for greater flexibility and accountability
in the way employees are to be paid, developed, evaluated, afforded due
process, and represented by labor organizations while reflecting the
principles of merit and fairness embodied in the statutory merit
systems principles.
Predictable with any change management initiative, the DHS regulations
have raised some concerns among employee groups, unions, and other
stakeholders because they do not have all the details of how the system
will be implemented and impact them. We have reported that individuals
inevitably worry during any change management initiative because of
uncertainty over new policies and procedures.[Footnote 3] A key
practice to address this worry is to involve employees and their
representatives to obtain their ideas and gain their ownership for the
initiative. Thus, a significant improvement from the proposed
regulations is that now employee representatives are to be provided
with an opportunity to remain involved. Specifically, they can discuss
their views with DHS officials and/or submit written comments as
implementing directives are developed, as outlined under the
"continuing collaboration" provisions. This collaboration is
consistent with DHS's statutory authority to establish a new human
capital system, which requires such continuing collaboration. Under the
regulations, nothing in the continuing collaboration process is to
affect the right of the Secretary to determine the content of
implementing directives and to make them effective at any time.
In addition, the final regulations state that DHS is to establish
procedures for evaluating the implementation of its human capital
system. High-performing organizations continually review and revise
their human capital management systems based on data-driven lessons
learned and changing needs in the environment. Collecting and analyzing
data is the fundamental building block for measuring the effectiveness
of these systems in support of the mission and goals of the agency.
We continue to believe that many of the basic principles underlying the
DHS regulations are generally consistent with proven approaches to
strategic human capital management. Today, I will provide our
preliminary observations on the following elements of DHS's human
capital system as outlined in the final regulations--pay and
performance management, adverse actions and appeals, and labor-
management relations.
Pay and Performance Management:
Last year, we testified that the DHS proposal reflects a growing
understanding that the federal government needs to fundamentally
rethink its current approach to pay and better link pay to individual
and organizational performance.[Footnote 4] To this end, the DHS
proposal takes another valuable step towards modern performance
management. Among the key provisions is a performance-based and market-
oriented pay system.
We have observed that a competitive compensation system can help
organizations attract and retain a quality workforce.[Footnote 5] To
begin to develop such a system, organizations assess the skills and
knowledge they need; compare compensation against other public,
private, or nonprofit entities competing for the same talent in a given
locality; and classify positions along levels of responsibility. While
one size does not fit all, organizations generally structure their
competitive compensation systems to separate base salary--which all
employees receive--from other special incentives, such as merit
increases, performance awards, or bonuses, which are provided based on
performance and contributions to organizational results.
According to the final regulations, DHS is to establish occupational
clusters and pay bands that replace the current General Schedule (GS)
system now in place for much of the civil service. DHS may, after
coordination with OPM, establish occupational clusters based on factors
such as mission or function, nature of work, qualifications or
competencies, career or pay progression patterns, relevant labor-market
features, and other characteristics of those occupations or positions.
DHS is to document in implementing directives the criteria and
rationale for grouping occupations or positions into clusters as well
as the definitions for each band's range of difficulty and
responsibility, qualifications, competencies, or other characteristics
of the work.
As we testified last year, pay banding and movement to broader
occupational clusters can both facilitate DHS's movement to a pay for
performance system and help DHS to better define occupations, which can
improve the hiring process. We have reported that the current GS system
as defined in the Classification Act of 1949 is a key barrier to
comprehensive human capital reform and the creation of broader
occupational job clusters and pay bands would aid other agencies as
they seek to modernize their personnel systems.[Footnote 6] Today's
jobs in knowledge-based organizations require a much broader array of
tasks that may cross over the narrow and rigid boundaries of job
classifications of the GS system.
Under the final regulations, DHS is to convert employees from the GS
system to the new system without a reduction in their current pay.
According to DHS, when employees are converted from the GS system to a
pay band, their base pay is to be adjusted to include a percentage of
their next within-grade increase, based on the time spent in their
current step and the waiting period for the next step. DHS stated that
most employees would receive a slight increase in salary upon
conversion to a pay band. This approach is consistent with how several
of OPM's personnel demonstration projects converted employees from the
GS system.
The final DHS regulations include other elements of a modern
compensation system. For example, the regulations provide that DHS may,
after coordination with OPM, set and adjust the pay ranges for each pay
band taking into account mission requirements, labor market conditions,
availability of funds, pay adjustments received by other federal
employees, and any other relevant factors. In addition, DHS may, after
coordination with OPM, establish locality rate supplements for
different occupational clusters or for different bands within the same
cluster in the same locality pay area. According to DHS, these locality
rates would be based on the cost of labor rather than cost of living
factors. The regulations state that DHS would use recruitment or
retention bonuses if it experiences such problems due to living costs
in a particular geographic area.
Especially when developing a new performance management system,
high-performing organizations have found that actively involving
employees and key stakeholders, such as unions or other employee
associations, helps gain ownership of the system and improves
employees' confidence and belief in the fairness of the
system.[Footnote 7] DHS recognized that the system must be designed and
implemented in a transparent and credible manner that involves
employees and employee representatives. A new and positive addition to
the final regulations is a Homeland Security Compensation Committee
that is to provide oversight and transparency to the compensation
process. The committee--consisting of 14 members, including four
officials of labor organizations--is to develop recommendations and
options for the Secretary's consideration on compensation and
performance management matters, including the annual allocation of
funds between market and performance pay adjustments.
While the DHS regulations contain many elements of a performance-based
and market-oriented pay system, there are several issues that we
identified last year that DHS will need to continue to address as it
moves forward with the implementation of the system. These issues
include linking organizational goals to individual performance, using
competencies to provide a fuller assessment of performance, making
meaningful distinctions in employee performance, and continuing to
incorporate adequate safeguards to ensure fairness and guard against
abuse.
Linking Organizational Goals to Individual Performance:
Consistent with leading practice, the DHS performance management system
is to align individual performance expectations with the mission,
strategic goals, organizational program and policy objectives, annual
performance plans, and other measures of performance. DHS's performance
management system can be a vital tool for aligning the organization
with desired results and creating a "line of sight" showing how team,
unit, and individual performance can contribute to overall
organizational results.[Footnote 8] However, as we testified last year,
agencies struggle to create this line of sight.
Using Competencies to Provide a Fuller Assessment of Performance:
DHS appropriately recognizes that given its vast diversity of work,
managers and employees need flexibility in crafting specific
performance expectations for their employees. These expectations may
take the form of competencies an employee is expected to demonstrate on
the job, among other things. However, as DHS develops its implementing
directives, the experiences of leading organizations suggest that DHS
should reconsider its position to merely allow, rather than require,
the use of core competencies that employees must demonstrate as a
central feature of its performance management system. Based on our
review of others' efforts and our own experience at GAO, core
competencies can help reinforce employee behaviors and actions that
support the department's mission, goals, and values and can provide a
consistent message to employees about how they are expected to achieve
results.[Footnote 9] For example, an OPM personnel demonstration
project--the Civilian Acquisition Workforce Personnel Demonstration
Project--covers various organizational units within the Department of
Defense and applies core competencies for all employees, such as
teamwork/cooperation, customer relations, leadership/supervision, and
communication.
Similarly, as we testified last year, DHS could use competencies--such
as achieving results, change management, cultural sensitivity, teamwork
and collaboration, and information sharing--to reinforce employee
behaviors and actions that support its mission, goals, and values and
to set expectations for individuals' roles in DHS's transformation. By
including such competencies throughout its performance management
system, DHS could create a shared responsibility for organizational
success and help assure accountability for change.
Making Meaningful Distinctions in Employee Performance:
High-performing organizations seek to create pay, incentive, and reward
systems that clearly link employee knowledge, skills, and contributions
to organizational results. These organizations make meaningful
distinctions between acceptable and outstanding performance of
individuals and appropriately reward those who perform at the highest
level.[Footnote 10] The final regulations state that DHS supervisors
and managers are to be held accountable for making meaningful
distinctions among employees based on performance, fostering and
rewarding excellent performance, and addressing poor performance. While
DHS states that as a general matter, pass/fail ratings are incompatible
with pay for performance, it is to permit use of pass/fail ratings for
employees in the "Entry/Developmental" band or in other pay bands under
extraordinary circumstances as determined by the Secretary.
DHS is to require the use of a least three summary rating levels for
other employee groups. We urge DHS to consider using at least four
summary rating levels to allow for greater performance rating and pay
differentiation. This approach is in the spirit of the new
governmentwide performance-based pay system for the Senior Executive
Service (SES), which requires at least four levels to provide a clear
and direct link between SES performance and pay as well as to make
meaningful distinctions based on relative performance.[Footnote 11]
Cascading this approach to other levels of employees can help DHS
recognize and reward employee contributions and achieve the highest
levels of individual performance.
Providing Adequate Safeguards to Ensure Fairness and Guard Against
Abuse:
As DHS develops its implementing directives, it also needs to continue
to build safeguards into its performance management system. A concern
that employees often express about any pay for performance system is
supervisors' ability to assess performance fairly. Using safeguards,
such as having an independent body to conduct reasonableness reviews of
performance management decisions can help to allay these concerns and
build a fair, credible, and transparent system.
It should be noted that the final regulations no longer provide for a
Performance Review Board (PRB) to review ratings in order to promote
consistency, provide general oversight of the performance management
system, and ensure it is administered in a fair, credible, and
transparent manner. According to the final regulations, participating
labor organizations expressed concern that the PRBs could delay pay
decisions and give the appearance of unwarranted interference in the
performance rating process. However, in the final regulations, DHS
states that it continues to believe that an oversight mechanism is
important to the credibility of the department's pay for performance
system and that the Compensation Committee, in place of PRBs, is to
conduct an annual review of performance payout summary data. While much
remains to be determined about how the Compensation Committee is to
operate, we believe that the effective implementation of such a
committee is important to assuring that predecisional internal
safeguards exist to help achieve consistency and equity, and assure
non-discrimination and non-politicization of the performance
management process.
We have also reported that agencies need to assure reasonable
transparency and provide appropriate accountability mechanisms in
connection with the results of the performance management
process.[Footnote 12] For DHS, this can include publishing internally
the overall results of performance management and individual pay
decisions while protecting individual confidentiality and reporting
periodically on internal assessments and employee survey results
relating to the performance management system. Publishing this
information can provide employees with the information they need to
better understand the performance management system and to generally
compare their individual performance with their peers. We found that
several of OPM's personnel demonstration projects publish information
for employees on internal Web sites that include the overall results of
performance appraisal and pay decisions, such as the average
performance rating, the average pay increase, and the average award for
the organization and for each individual unit.
Adverse Actions and Appeals:
DHS's final regulations are intended to simplify and streamline the
employee adverse action process to provide greater flexibility for the
department and to minimize delays, while also ensuring due process
protections. It is too early to tell what impact, if any, these
regulations would have on DHS's operations and employees or other
entities, such as the Merit Systems Protection Board (MSPB). Close
monitoring of any unintended consequences, such as on MSPB and its
ability to manage cases from DHS and other federal agencies, is
warranted.
In terms of adverse actions, the regulations modify the current federal
system in that the DHS Secretary will have the authority to identify
specific offenses for which removal is mandatory. In our previous
testimony on the proposed regulations, we expressed some caution about
this new authority and pointed out that the process for determining and
communicating which types of offenses require mandatory removal should
be explicit and transparent. We noted that such a process should
include an employee notice and comment period before implementation and
collaboration with relevant congressional stakeholders and employee
representatives. The final DHS regulations explicitly provide for
publishing a list of the mandatory removal offenses in the Federal
Register and in DHS's implementing directives and making these offenses
known to employees annually.
In last year's testimony, we also suggested that DHS exercise caution
when identifying specific removable offenses and the specific
punishment. When developing and implementing the regulations, DHS might
learn from the experience of the Internal Revenue Service's (IRS)
implementation of its mandatory removal provisions.[Footnote 13] We
reported that IRS officials believed this provision had a negative
impact on employee morale and effectiveness and had a "chilling effect"
on IRS frontline enforcement employees who were afraid to take certain
appropriate enforcement actions.[Footnote 14] Careful drafting of each
removable offense is critical to ensure that the provision does not
have unintended consequences.
Under the DHS regulations, employees alleged to have committed these
mandatory removal offenses are to have the right to a review by a newly
created panel. DHS regulations provide for judicial review of the
panel's decisions. Members of this three-person panel are to be
appointed by the Secretary for three-year terms. In last year's
testimony, we noted that the independence of the panel that is to hear
appeals of mandatory removal actions deserved further consideration.
The final regulations address the issue of independence by prescribing
additional qualification requirements which emphasize integrity and
impartiality and requiring the Secretary to consider any lists of
candidates submitted by union representatives for panel positions other
than the chair. Employee perception concerning the independence of this
panel is critical to the mandatory removal process.
Regarding the appeal of adverse actions other than mandatory removals,
the DHS regulations generally preserve the employee's basic right to
appeal decisions to an independent body--MSPB--but with procedures
different from those applicable to other federal employees.[Footnote
15] However, in a change from the proposed regulations in taking
actions against employees for performance or conduct issues, DHS is to
meet a higher standard of evidence--a "preponderance of evidence"
instead of "substantial evidence." For performance issues, while this
higher standard of evidence means that DHS would face a greater burden
of proof than most agencies to pursue these actions, DHS managers are
not required to provide employees performance improvement periods, as
is the case for other federal employees. For conduct issues, DHS would
face the same burden of proof as most agencies.
The regulations shorten the notification period before an adverse
action can become effective and provide an accelerated MSPB
adjudication process. In addition, MSPB may no longer modify a penalty
for a conduct-based adverse action that is imposed on an employee by
DHS unless such penalty was "wholly without justification." The DHS
regulations also stipulate that MSPB can no longer require that parties
enter into settlement discussions, although either party may propose
doing so. DHS expressed concerns that settlement should be a completely
voluntary decision made by parties on their own. However, settling
cases has been an important tool in the past at MSPB, and promotion of
settlement at this stage should be encouraged.
The final regulations continue to support a commitment to the use of
Alternative Dispute Resolution (ADR), which we previously noted was a
positive development. To resolve disputes in a more efficient, timely,
and less adversarial manner, federal agencies have been expanding their
human capital programs to include ADR approaches, including the use of
ombudsmen as an informal alternative to addressing conflicts.[Footnote
16] ADR is a tool for supervisors and employees alike to facilitate
communication and resolve conflicts. As we have reported, ADR helps
lessen the time and the cost burdens associated with the federal
redress system and has the advantage of employing techniques that focus
on understanding the disputants' underlying interests over techniques
that focus on the validity of their positions.[Footnote 17] For these
and other reasons, we believe that it is important to continue to
promote ADR throughout the process.
Labor-Management Relations:
Under the DHS regulations, the scope and method of labor union
involvement in human capital issues are to change. DHS management is no
longer required to engage in collective bargaining and negotiations on
as many human capital policies and processes as in the past. For
example, certain actions that DHS has determined are critical to the
mission and operations of the department, such as deploying staff and
introducing new technologies, are now considered management rights and
are not subject to collective bargaining and negotiation. DHS, however,
is to confer with employees and unions in developing the procedures it
will use to take these actions. Other human capital policies and
processes that DHS characterizes as "non-operational," such as
selecting, promoting, and disciplining employees, are also not subject
to collective bargaining, but DHS must negotiate the procedures it will
use to take these actions. Finally, certain other policies and
processes, such as how DHS will reimburse employees for any
"significant and substantial" adverse impacts resulting from an action,
such as a rapid change in deployment, must be negotiated.
In addition, DHS is to establish its own internal labor relations
board--the Homeland Security Labor Relations Board--to deal with most
agencywide labor relations policies and disputes rather than submit
them to the Federal Labor Relations Authority. DHS stated that the
unique nature of its mission--homeland protection--demands that
management have the flexibility to make quick resource decisions
without having to negotiate them, and that its own internal board would
better understand its mission and, therefore, be better able to address
disputes. Labor organizations are to nominate names of individuals to
serve on the Board and the regulations established some general
qualifications for the board members. However, the Secretary is to
retain the authority to both appoint and remove any member. Similar to
the mandatory removal panel, employee perception concerning the
independence of this board is critical to the resolution of the issues
raised over labor relations policies and disputes. These changes have
not been without controversy, and four federal employee unions have
filed suit alleging that DHS has exceeded its authority under the
statute establishing the DHS human capital system.[Footnote 18]
Our previous work on individual agencies' human capital systems has not
directly addressed the scope of specific issues that should or should
not be subject to collective bargaining and negotiations. At a forum we
co-hosted exploring the concept of a governmentwide framework for human
capital reform, which I will discuss later, participants generally
agreed that the ability to organize, bargain collectively, and
participate in labor organizations is an important principle to be
retained in any framework for reform. It was also suggested at the
forum that unions must be both willing and able to actively collaborate
and coordinate with management if unions are to be effective
representatives of their members and real participants in any human
capital reform.
DHS Confronts Many Challenges to Successful Implementation:
With the issuance of the final regulations, DHS faces multiple
challenges to the successful implementation of its new human capital
system. We identified multiple implementation challenges at last year's
hearing. Subsequently, we reported that DHS's actions to date in
designing its human capital system and its stated plans for future work
on its system are helping to position the department for successful
implementation.[Footnote 19] Nevertheless, DHS was in the early stages
of developing the infrastructure needed for implementing its new
system. For more information on these challenges, as well as on related
human capital topics, see the "Highlights" pages attached to this
statement.
We believe that these challenges are still critical to the success of
the new human capital system. In many cases, DHS has acknowledged these
challenges and made a commitment to address them in regulations. Today
I would like to focus on two additional implementation challenges--
ensuring sustained and committed leadership and establishing an overall
communication strategy--and then reiterate challenges we previously
identified, including providing adequate resources for implementing the
new system and involving employees and other stakeholders in
implementing the system.
Ensuring Sustained and Committed Leadership:
As DHS and other agencies across the federal government embark on
large-scale organizational change initiatives, such as the new human
capital system DHS is implementing, there is a compelling need to
elevate, integrate, and institutionalize responsibility for such key
functional management initiatives to help ensure their
success.[Footnote 20] A Chief Operating Officer/Chief Management
Officer (COO/CMO) or similar position can effectively provide the
continuing, focused attention essential to successfully completing
these multiyear transformations.
Especially for such an endeavor as critical as DHS's new human capital
system, such a position would serve to:
* elevate attention that is essential to overcome an organization's
natural resistance to change, marshal the resources needed to implement
change, and build and maintain the organizationwide commitment to new
ways of doing business;
* integrate this new system with various management responsibilities so
they are no longer "stovepiped" and fit it into other organizational
transformation efforts in a comprehensive, ongoing, and integrated
manner; and:
* institutionalize accountability for the system so that the
implementation of this critical human capital initiative can be
sustained.
We have work underway at the request of Congress to assess DHS's
management integration efforts, including the role of existing senior
leadership positions as compared to a COO/CMO position, and expect to
issue a report on this work next month.
Establishing an Overall Communication Strategy:
Another significant challenge for DHS is to assure an effective and
ongoing two-way communication strategy that creates shared expectations
about, and reports related progress on, the implementation of the new
system. GAO has reported this is a key practice of a change management
initiative.[Footnote 21] DHS final regulations recognize that all
parties will need to make a significant investment in communication on
the part of all parties in order to achieve successful implementation
of its new human capital system. According to DHS, its communication
strategy will include global e-mails, satellite broadcasts, Web pages,
and an internal DHS weekly newsletter. DHS stated that its leaders will
be provided tool kits and other aids to facilitate discussions and
interactions between management and employees on program changes.
Given the attention over the regulations, one of the most relevant
implementation steps is for DHS to continue two-way communication.
Communication is not about just "pushing the message out." Rather, it
should facilitate a two-way honest exchange with, and allow for
feedback from, employees, customers, and key stakeholders. This
communication is central to forming the effective internal and external
partnerships that are vital to the success of any organization.
Creating opportunities for employees to communicate concerns and
experiences about any change management initiative allows employees to
feel that their experiences are acknowledged and important to
management during the implementation of the merger and transformation.
Once this feedback is received, it is important to consider and use
this solicited employee feedback to make any appropriate changes to its
implementation. In addition, closing the loop by providing information
on why key recommendations were not adopted is also important.
Providing Adequate Resources for Implementing the New System:
OPM reports that the increased costs of implementing alternative
personnel systems should be acknowledged and budgeted for up
front.[Footnote 22] DHS estimates the overall costs associated with
implementing the new DHS system--including the development and
implementation of a new pay and performance system, the conversion of
current employees to that system, and the creation of its new labor
relations board--will be approximately $130 million through fiscal year
2007 (i.e., over a 4-year period) and less than $100 million will be
spent in any 12-month period.
We found that based on the data provided by selected OPM personnel
demonstration projects, direct costs associated with salaries and
training were among the major cost drivers of implementing their pay
for performance systems. Certain costs, such as those for initial
training on the new system, are one-time in nature and should not be
built into the base of DHS's budget. Other costs, such as employees'
salaries, are recurring and thus would be built into the base of DHS's
budget for future years.
We found that approaches the demonstration projects used to manage
salary costs were to consider fiscal conditions and the labor market
and to provide a mix of one-time awards and permanent pay increases.
For example, rewarding an employee's performance with an award instead
of an equivalent increase to base pay can reduce salary cost in the
long run because the agency only has to pay the amount of the award one
time, rather than annually. However, one approach that the
demonstration projects used to manage costs that is not included in the
final regulations is the use of "control points." We found that the
demonstration projects used such a mechanism--sometimes called speed
bumps--to manage progression through the bands to help ensure that
employees' performance coincides with their salaries and prevent all
employees from eventually migrating to the top of the band and thus
increase costs.
According to the DHS regulations, its performance management system is
designed to incorporate adequate training and retraining for
supervisors, managers, and employees in the implementation and
operation of the system. Each of OPM's personnel demonstration projects
trained employees on the performance management system prior to
implementation to make employees aware of the new approach, as well as
periodically after implementation to refresh employee familiarity with
the system. The training was designed to help employees understand
their applicable competencies and performance standards; develop
performance plans; write self-appraisals; become familiar with how
performance is evaluated and how pay increases and awards decisions are
made; and know the roles and responsibilities of managers, supervisors,
and employees in the appraisal and payout processes.
Involving Employees and Other Stakeholders in Implementing the System:
We reported in September 2003 that DHS's and OPM's effort to design a
new human capital system was collaborative and facilitated
participation of employees from all levels of the department.[Footnote
23] We recommended that the Secretary of DHS build on the progress that
had been made and ensure that the communication strategy used to
support the human capital system maximize opportunities for employee
and key stakeholder involvement through the completion of design and
implementation of the new system, with special emphasis on seeking the
feedback and buy-in of frontline employees. In implementing this
system, DHS should continue to recognize the importance of employee and
key stakeholder involvement. Leading organizations involve employee
unions, as well as involve employees directly, and consider their input
in formulating proposals and before finalizing any related
decisions.[Footnote 24]
To this end, DHS's revised regulations have attempted to recognize the
importance of employee involvement in implementing the new personnel
system. As we discussed earlier, the final DHS regulations provide for
continuing collaboration in further development of the implementing
directives and participation on the Compensation Committee. The
regulations also provide that DHS is to involve employees in
evaluations of the human capital system. Specifically, DHS is to
provide designated employee representatives with the opportunity to be
briefed and a specified timeframe to provide comments on the design and
results of program evaluation. Further, employee representatives are to
be involved at the identification of the scope, objectives, and
methodology to be used in the program evaluation and in the review of
draft findings and recommendations.
Framework for Governmentwide Human Capital Reform:
DHS has recently joined some other federal departments and agencies,
such as the Department of Defense, GAO, National Aeronautics and Space
Administration, and the Federal Aviation Administration, in receiving
authorities intended to help them manage their human capital
strategically to achieve results. To help advance the discussion
concerning how governmentwide human capital reform should proceed, GAO
and the National Commission on the Public Service Implementation
Initiative hosted a forum in April 2004 on whether there should be a
governmentwide framework for human capital reform and, if so, what this
framework should include.[Footnote 25] While there was widespread
recognition among the forum participants that a one-size-fits-all
approach to human capital management is not appropriate for the
challenges and demands government faces, there was equally broad
agreement that there should be a governmentwide framework to guide
human capital reform. Further, a governmentwide framework should
balance the need for consistency across the federal government with the
desire for flexibility so that individual agencies can tailor human
capital systems to best meet their needs. Striking this balance is not
easy to achieve, but is necessary to maintain a governmentwide system
that is responsive enough to adapt to agencies' diverse missions,
cultures, and workforces.
While there were divergent views among the forum participants, there
was general agreement on a set of principles, criteria, and processes
that would serve as a starting point for further discussion in
developing a governmentwide framework in advancing human capital
reform, as shown in figure 1.
Figure 1: Principles, Criteria, and Processes:
[See PDF for image] -graphic text:
Principles that the government should retain in a framework for reform
because of their inherent, enduring qualities:
* Merit principles that balance organizational mission, goals, and
performance objectives with individual rights and responsibilities;
* Ability to organize, bargain collectively, and participate through
labor organizations;
* Certain prohibited personnel practices;
* Guaranteed due process that is fair, fast, and final.
Criteria that agencies should have in place as they plan for and manage
their new human capital authorities:
* Demonstrated business case or readiness for use of targeted
authorities;
* An integrated approach to results-oriented strategic planning and
human capital planning and management;
* Adequate resources for planning, implementation, training, and
evaluation;
* A modern, effective, credible, and integrated performance management
system that includes adequate safeguards to ensure equity and prevent
discrimination.
Processes that agencies should follow as they implement new human
capital authorities:
* Prescribing regulations in consultation or jointly with the Office of
Personnel Management;
* Establishing appeals processes in consultation with the Merit Systems
Protection Board;
* Involving employees and stakeholders in the design and implementation
of new human capital systems;
* Phasing in implementation of new human capital systems;
* Committing to transparency, reporting, and evaluation;
* Establishing a communications strategy;
* Assuring adequate training.
Source: GAO.
[End of figure]
As the momentum accelerates for human capital reform, GAO is continuing
to work with others to address issues of mutual interest and concern.
For example, to follow up on the April forum, the National Academy of
Public Administration and the National Commission on the Public Service
Implementation Initiative convened a group of human capital
stakeholders to continue the discussion of a governmentwide
framework.[Footnote 26]
GAO's Experiences with Human Capital Reform:
As GAO has worked to support Congress in meeting its constitutional
responsibilities and to help improve the performance and ensure the
accountability of the federal government for the benefit of the
American people, this subcommittee and others in Congress have
continually provided us with the tools and authorities we need to carry
out these responsibilities. We believe that it is vitally important to
GAO's future that we continue modernizing and updating our human
capital policies and practices in light of the changing environment and
anticipated challenges ahead. Given our human capital infrastructure
and our unique role in leading by example in major management areas,
including human capital management, we believe that the federal
government will benefit from GAO's experience with pay bands, pay for
performance and other human capital reforms.
Unlike many executive branch agencies, which have either recently
received or are just requesting new broad-based human capital tools and
flexibilities, GAO has had certain human capital tools and
flexibilities for over two decades. As a result of your continued
support, GAO has been able to establish a successful track record with
the implementation of pay banding, pay for performance, and other human
capital authorities that have helped to ensure that GAO remains a world
class, professional services organization. In July 2004, the President
signed into law the GAO Human Capital Reform Act of 2004 (Human Capital
II), which, as you know, combines diverse initiatives that,
collectively, should further GAO's ability to enhance our performance;
assure our accountability; and help ensure that we can attract, retain,
motivate, and reward a top-quality and high-performing workforce
currently and in future years.[Footnote 27] It is our vision that these
initiatives not only ensure a high-performing workforce at GAO, but
also serve as guide to other agencies in their human capital
transformation efforts.
A key provision of Human Capital II is to allow the Comptroller General
to adjust the rates of basic pay of GAO employees on a separate basis
from the annual adjustments authorized for employees of the executive
branch. GAO is implementing a compensation system that places greater
emphasis on job performance while, at a minimum, protecting the
purchasing power of employees who are performing acceptably and are
paid within competitive compensation ranges. Since we testified before
your subcommittee last summer, GAO has taken steps that will enable it
to implement the pay adjustment provision. With the help of a human
resources consulting firm, GAO developed new market-based compensation
pay ranges for analysts, attorneys, and specialists that is already in
the first phase of implementation. With the new market-based pay
system, employee compensation will now consider current salary and
allocate individual performance-based compensation amounts between a
merit increase (i.e., salary increase) and a performance bonus (i.e.,
cash). This year, I provided all analysts, attorneys, and specialists
performing at the "meets expectations" level or above the across-the-
board pay adjustment applicable to the executive branch. Later this
year, GAO plans to conduct a similar study of market-based pay for the
remainder of GAO's workforce, who began the transition to performance-
based compensation in 2004 with the introduction of pay-banding and a
new competency-based performance appraisal system.
In addition, I and other GAO senior executives have continued to engage
in a broad range of outreach and consultation activities with GAO staff
before and during the implementation of the new market-based pay
system. For example, I met with senior executives and employee
representatives to obtain input about a new market-based approach and
held two televised chats to inform staff of the results of the review
and our plans for implementation. In addition, links from the GAO
internal home page were established that allowed employees to review a
series of fact sheets and explanatory charts, and to access copies of
the presentations.
Summary Observations:
The final regulations that DHS has issued represent a positive step
towards a more strategic human capital management approach for both DHS
and the overall government, a step we have called for in our recent
High-Risk report. Consistent with our observations last year, DHS's
regulations make progress towards a modern compensation system. DHS's
overall efforts in designing and implementing its human capital system
can be particularly instructive for future human capital reform.
Nevertheless, regarding the implementation of the DHS system, how it is
done, when it is done, and the basis on which it is done can make all
the difference in whether it will be successful. That is why it is
important to recognize that DHS still has to fill in many of the
details on how it will implement these reforms. These details do matter
and they need to be disclosed and analyzed in order to fully assess
DHS's proposed reforms. We have made a number of suggestions for
improvements the agency should consider in this process. It is equally
important for the agency to ensure it has the necessary infrastructure
in place to implement the system, not only an effective performance
management system, but also the capabilities to effectively use the new
human capital authorities and a strategic human capital planning
process. Without this infrastructure, DHS will not succeed in its
related reform efforts.
DHS appears to be committed to continue to involve employees, including
unions, throughout the implementation process, another critical
ingredient for success. Specifically, under DHS's final regulations,
employee representatives or union officials are to have opportunities
to participate in developing the implementing directives, as outlined
under the "continuing collaboration" provisions; hold four membership
seats on the Homeland Security Compensation Committee; and help in
evaluations of the human capital system. A continued commitment to a
two-way communication strategy that allows for ongoing feedback from
employees, customers, and key stakeholders is central to forming the
effective internal and external partnerships that are vital to the
success of DHS's human capital system. Finally, to help ensure the
quality of that involvement, sustained leadership in a position such as
a COO/CMO would serve to elevate, integrate, and institutionalize
responsibility for the success of DHS's human capital system and other
key business transformation initiatives.
Mr. Chairman and Members of the Subcommittee, this concludes my
prepared statement. I would be pleased to respond to any questions that
you may have.
Contacts and Acknowledgments:
For further information, please contact Eileen Larence, Acting
Director, Strategic Issues, at (202) 512-6806 or
[Hyperlink, larencee@gao.gov]. Major contributors to this testimony
include Michelle Bracy, K. Scott Derrick, Karin Fangman, Janice
Latimer, Jeffrey McDermott, Lisa Shames, and Michael Volpe.
[End of section]
Appendix I: "Highlights" from Selected GAO Human Capital Reports:
GAO Highlights:
Highlights of GAO-04-479T, testimony before subcommittees of the
Senate Committee on Governmental Affairs and the House Committee on
Government Reform
Why GAO Did This Study:
The creation of the Department of Homeland Security (DHS) almost one
year ago represents an historic moment for the federal government to
fundamentally transform how the nation will protect itself from
terrorism. DHS is continuing to transform and integrate a disparate
group of agencies with multiple missions, values, and cultures into a
strong and effective cabinet department. Together with this unique
opportunity, however, also comes significant risk to the nation that
could occur if this transformation is not implemented successfully. In
fact, GAO designated this implementation and transformation as high
risk in January 2003.
Congress provided DHS with significant flexibility to design a modern
human capital management system. GAO reported in September 2003 that
the design effort to develop the system was collaborative and
consistent with positive elements of transformation. Last Friday, the
Secretary of DHS and the Director of the Office of Personnel
Management (OPM) released for public comment draft regulations for
DHS‘s new human capital system. This testimony provides preliminary
observations on selected major provisions of the proposed system. The
subcommittees are also releasing Human Capital: Implementing Pay for
Performance at Selected Personnel Demonstration Projects (GAO-04-83)
at today‘s hearing.
What GAO Found:
The proposed human capital system is designed to be aligned with the
department‘s mission requirements and is intended to protect the civil
service rights of DHS employees. Many of the basic principles
underlying the DHS regulations are consistent with proven approaches
to strategic human capital management, including several approaches
pioneered by GAO, and deserve serious consideration. However, some
parts of the system raise questions that DHS, OPM, and Congress should
consider.
* Pay and performance management: The proposal takes another valuable
step towards results-oriented pay reform and modern performance
management. For effective performance management, DHS should use
validated core competencies as a key part of evaluating individual
contributions to departmental results and transformation efforts.
* Adverse actions and appeals: The proposal would retain an avenue for
employees to appeal adverse actions to an independent third party.
However, the process to identify mandatory removal offenses must be
collaborative and transparent. DHS needs to be cautious about defining
specific actions requiring employee removal and learn from the
Internal Revenue Service‘s implementation of its mandatory removal
provisions.
* Labor relations: The regulations recognize employees‘ right to
organize and bargain collectively, but reduce areas subject to
bargaining. Continuing to involve employees in a meaningful manner is
critical to the successful operations of the department.
Once DHS issues final regulations for the human capital system, it
will be faced with multiple implementation challenges:
* DHS plans to implement the system using a phased approach, however,
nearly half of DHS civilian employees are not covered by these
regulations, including more than 50,000 Transportation Security
Administration screeners. To help build a unified culture, DHS should
consider moving all of its employees under a single performance
management system framework.
* DHS noted that it estimates that about $110 million will be needed
to implement the new system in its first year. While adequate
resources for program implementation are critical to program success,
DHS is requesting a substantial amount of funding that warrants close
scrutiny by Congress.
* The proposed regulations call for comprehensive, ongoing
evaluations. Continued evaluation and adjustments will help to ensure
an effective and credible human capital system.
* DHS has begun to develop a strategic workforce plan. Such a plan can
be used as a tool for identifying core competencies for staff for
attracting, developing, evaluating, and rewarding contributions to
mission accomplishment.
The analysis of DHS‘s effort to develop a strategic human capital
management system can be instructive as other agencies request and
implement new strategic human capital management authorities.
www.gao.gov/cgi-bin/getrpt?GAO-04-479T.
To view the full testimony statement, click on the link above. For
more information, contact J. Christopher Mihm at (202) 512-6806 or
mihmj@gao.gov.
[End of GAO-04-479T Highlights]
GAO Highlights:
Highlights of GAO-04-790, a report to congressional requesters
Why GAO Did This Study:
DHS was provided with significant flexibility to design a modern human
capital management system. Its proposed system has both precedent-
setting implications for the executive branch and far-reaching
implications on how the department is managed. GAO reported in
September 2003 that the effort to design the system was collaborative
and consistent with positive elements of transformation. In February,
March, and April 2004 we provided preliminary observations on the
proposed human capital regulations.
Congressional requesters asked GAO to describe the infrastructure
necessary for strategic human capital management and to assess the
degree to which DHS has that infrastructure in place, which includes
an analysis of the progress DHS has made in implementing the
recommendations from our September 2003 report.
DHS generally agreed with the findings of our report and provided more
current information that we incorporated. However, DHS was concerned
about our use of results from a governmentwide survey gathered prior to
the formation of the department. We use this data because it is the
most current information available on the perceptions of employees
currently in DHS and helps to illustrate the challenges facing DHS.
What GAO Found:
To date, DHS‘s actions in designing its human capital management system
and its stated plans for future work on the system are helping to
position the department for successful implementation. Nonetheless,
the department is in the early stages of developing the infrastructure
needed for implementing its new human capital management system.
* DHS has begun strategic human capital planning efforts at the
headquarters level since the release of the department‘s overall
strategic plan and the publication of proposed regulations for its new
human capital management system. Strategic human capital planning
efforts can enable DHS to remain aware of and be prepared for current
and future needs as an organization. However, this will be more
difficult because DHS has not yet been systematic or consistent in
gathering relevant data on the successes or shortcomings of legacy
component human capital approaches or current and future workforce
challenges. Efforts are now under way to collect detailed human capital
information and design a centralized information system so that such
data can be gathered and reported at the departmentwide level.
* DHS and Office of Personnel Management leaders have consistently
underscored their personal commitment to the design process. Continued
leadership is necessary to marshal the capabilities required for the
successful implementation of the department‘s new human capital
management system. Sustained and committed leadership is required on
multiple levels: securing appropriate resources for the design,
implementation, and evaluation of the human capital management system;
communicating with employees and their representatives about the new
system and providing opportunities for feedback; training employees on
the details of the new system; and continuing opportunities for
employees and their representatives to participate in the design and
implementation of the system.
* In its proposed regulations, DHS outlines its intention to implement
key safeguards. For example, the DHS performance management system must
comply with the merit system principles and avoid prohibited personnel
practices; provide a means for employee involvement in the design and
implementation of the system; and overall, be fair, credible, and
transparent. The department also plans to align individual performance
management with organizational goals and provide for reasonableness
reviews of performance management decisions through its Performance
Review Boards.
www.gao.gov/cgi-bin/getrpt?GAO-04-790.
To view the full product, 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-04-790 Highlights]
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.
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]
GAO Highlights:
Highlights of GAO-05-69SP:
Why GAO Convened This Forum:
There is widespread agreement that the federal government faces a range
of challenges in the 21st century that it must confront to enhance
performance, ensure accountability, and position the nation for the
future. Federal agencies will need the most effective human capital
systems to address these challenges and succeed in their transformation
efforts during a period of likely sustained budget constraints.
More progress in addressing human capital challenges was made in the
last 3 years than in the last 20, and significant changes in how the
federal workforce is managed are underway.
On April 14, 2004, GAO and the National Commission on the Public
Service Implementation Initiative hosted a forum with selected
executive branch officials, key stakeholders, and other experts to
help advance the discussion concerning how governmentwide human
capital reform should proceed.
What Participants Said:
Forum participants discussed (1) Should there be a governmentwide
framework for human capital reform? and (2) If yes, what should a
governmentwide framework include?
There was widespread recognition that a ’one size fits all“ approach to
human capital management is not appropriate for the challenges and
demands government faces. However, there was equally broad agreement
that there should be a governmentwide framework to guide human capital
reform built on a set of beliefs that entail fundamental principles and
boundaries that include criteria and processes that establish the
checks and limitations when agencies seek and implement their
authorities. While there were divergent views among the participants,
there was general agreement that the following served as a starting
point for further discussion in developing a governmentwide framework
to advance needed human capital reform.
Principles:
* Merit principles that balance organizational mission, goals, and
performance objectives with individual rights and responsibilities;
* Ability to organize, bargain collectively, and participate through
labor organizations;
* Certain prohibited personnel practices;
* Guaranteed due process that is fair, fast, and final.
Criteria:
* Demonstrated business case or readiness for use of targeted
authorities;
* An integrated approach to results-oriented strategic planning and
human capital planning and management;
* Adequate resources for planning, implementation, training, and
evaluation;
* A modern, effective, credible, and integrated performance management
system that includes adequate safeguards to ensure equity and prevent
discrimination.
Processes:
* Prescribing regulations in consultation or jointly with the Office
of Personnel Management;
* Establishing appeals processes in consultation with the Merit
Systems Protection Board;
* Involving employees and stakeholders in the design and implementation
of new human capital systems;
* Phasing in implementation of new human capital systems;
* Committing to transparency, reporting, and evaluation;
* Establishing a communications strategy;
* Assuring adequate training;
www.gao.gov/cgi-bin/getrpt?GAO-05-69SP
To view the full product, 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-05-69SP Highlights]
[End of section]
(450384):
FOOTNOTES
[1] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005).
[2] GAO, Human Capital: Preliminary Observations on Proposed DHS Human
Capital Regulations, GAO-04-479T (Washington, D.C.: Feb. 25, 2004);
Posthearing Questions Related to Proposed Department of Homeland
Security (DHS) Human Capital Regulations, GAO-04-570R (Washington,
D.C.: Mar. 22, 2004); and Additional Posthearing Questions Related to
Proposed Department of Homeland Security (DHS) Human Capital
Regulations, GAO-04-617R (Washington, D.C.: Apr. 30, 2004).
[3] GAO, Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, GAO-03-669 (Washington,
D.C.: July 2, 2003) and Highlights of a GAO Forum: Lessons Learned for
a Department of Homeland Security and Other Federal Agencies, GAO-03-
293SP (Washington, D.C.: Nov. 14, 2002).
[4] GAO-04-479T.
[5] GAO-04-617R.
[6] GAO, Human Capital: Opportunities to Improve Executive Agencies'
Hiring Processes, GAO-03-450 (Washington, D.C.: May 30, 2003).
[7] GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, GAO-03-488
(Washington, D.C.: Mar. 14, 2003).
[8] GAO-03-488.
[9] GAO, Human Capital: Implementing Pay for Performance at Selected
Personnel Demonstration Projects, GAO-04-83 (Washington, D.C.: Jan. 23,
2004).
[10] GAO-03-488.
[11] For more information, see GAO, Human Capital: Senior Executive
Performance Management Can Be Significantly Strengthened to Achieve
Results, GAO-04-614 (Washington, D.C.: May 26, 2004).
[12] GAO-04-83.
[13] Section 1203 of the IRS Restructuring and Reform Act of 1998
outlines conditions for the firing of IRS employees for any of ten acts
of misconduct.
[14] GAO, Tax Administration: IRS and TIGTA Should Evaluate Their
Processing of Employee Misconduct Under Section 1203, GAO-03-394
(Washington, D.C.: Feb. 14, 2003).
[15] Employees under collective bargaining agreements can choose to
grieve and arbitrate adverse actions other than mandatory removals
through negotiated grievance procedures or take these actions to MSPB.
[16] GAO, Human Capital: The Role of Ombudsmen in Dispute Resolution,
GAO-01-466 (Washington, D.C.: Apr. 13, 2001).
[17] GAO, Alternative Dispute Resolution: Employers' Experiences With
ADR in the Workplace, GAO/GGD-97-157 (Washington D.C.: Aug. 12, 1997).
[18] National Treasury Employees Union v. Ridge, No. 1:05cv201 (D.D.C.
filed Jan. 27, 2005).
[19] GAO, Human Capital: DHS Faces Challenges in Implementing Its New
Personnel System, GAO-04-790 (Washington, D.C.: June 18, 2004).
[20] GAO, The Chief Operating Officer Concept and Its Potential Use as
a Strategy to Improve Management at the Department of Homeland
Security, GAO-04-876R (Washington, D.C.: June 28, 2004) and 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).
[21] GAO-03-669.
[22] U.S. Office of Personnel Management, Demonstration Projects and
Alternative Personnel Systems: HR Flexibilities and Lessons Learned
(Washington, D.C.: September 2001).
[23] GAO, Human Capital: DHS Personnel System Design Effort Provides
for Collaboration and Employee Participation, GAO-03-1099 (Washington,
D.C.: Sept. 30, 2003).
[24] GAO, Human Capital: Practices that Empowered and Involved
Employees, GAO-01-1070 (Washington, D.C.: Sept. 14, 2001).
[25] GAO and the National Commission on the Public Service
Implementation Initiative, Highlights of a Forum: Human Capital:
Principles, Criteria, and Processes for Governmentwide Federal Human
Capital Reform, GAO-05-69SP (Washington, D.C.: Dec. 1, 2004).
[26] See The National Commission on the Public Service Implementation
Initiative and The National Academy of Public Administration, A
Governmentwide Framework for Federal Personnel Reform: A Proposal
(Washington, D.C.: November 2004).
[27] For more information, see Public Law 108-271, July 7, 2004, and
GAO, GAO: Additional Human Capital Flexibilities Are Needed, GAO-03-
1024T (Washington, D.C.: July 16, 2003).
