oversight

Human Capital: DHS Personnel System Design Effort Provides for Collaboration and Employee Participation

Published by the Government Accountability Office on 2003-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Requesters




September 2003
                 HUMAN CAPITAL
                 DHS Personnel
                 System Design Effort
                 Provides for
                 Collaboration and
                 Employee
                 Participation




GAO-03-1099

                 a

                                                September 2003


                                                HUMAN CAPITAL

                                                DHS Personnel System Design Effort
Highlights of GAO-03-1099, a report to          Provides for Collaboration and Employee
congressional requesters
                                                Participation



The success of the transformation               The effort to design a human capital management system for DHS generally
and implementation of the                       reflects important elements of effective transformations.
Department of Homeland Security
(DHS) is based largely on the                   • 	 Leadership. One of the strengths of the effort to transform the culture
degree to which human capital
                                                    of organizations going into DHS has been the on-going commitment of
management issues are addressed.
Recognizing this, the legislation                   both DHS and Office of Personnel Management (OPM) leaders to
creating DHS provided it with                       stimulate and support the effort to design a human capital system.
significant flexibility to design a             • 	 Strategic Goals. DHS is currently developing a strategic plan. Although
modern human capital                                DHS human resource leaders are included on the strategic planning
management system.                                  team, it will not be complete until the end of September 2003.
                                                    Consequently, DHS will need to ensure that the development of the
Congressional requesters asked                      human capital policy options is integrated with the accomplishment
GAO to describe the process DHS                     of DHS programmatic goals as defined in the forthcoming strategic
has in place to design its human
capital system and involve                          plan. Such integration is important to ensure that the human capital
employees, and analyze the extent                   system enables the department to acquire, develop, and retain the core
to which this process reflects                      competencies necessary for DHS to accomplish its programmatic goals.
elements of successful                          • 	 Key Principles. The DHS Secretary and OPM Director outlined four
transformations.                                    principles to serve as a critical framework for the human capital system.
                                                    These principles appropriately identify the need to support the
                                                    mission and employees of the department, protect basic civil service
As the process to develop and                       principles, and hold employees accountable for performance.
implement a new human capital                   • 	 Timeline. Agency officials established an ambitious 9- to 10-month
system at DHS moves forward, we                     timeline for completing the design process, aiming to issue final
recommend that the Secretary of                     regulations in early 2004. Some DHS stakeholders we interviewed
DHS and Director of OPM ensure                      expressed concerns about the compressed schedule. Officials leading
that the human capital                              the design effort report the aggressive schedule is necessary to relieve
management system is designed to                    employee anxiety and maximize the time available for implementation.
accomplish the mission, objectives,             • 	 Design Team. The design team includes staff from multiple
and goals of the department. In
                                                    organizational units within DHS, OPM, and the three major unions.
addition, we are recommending
that the Secretary ensure that the              • 	 Communication. DHS recently finalized a communication plan that
communication strategy used to                      provides a structured and planned approach to communicate with DHS
support the human capital system                    stakeholders regarding the human capital system. Moving forward, DHS
maximizes opportunities for                         will need to provide adequate opportunities for feedback once the
employee involvement.                               options are released.
                                                • 	 Employee Involvement. Employees are provided multiple opportunities
DHS and OPM commented on a                          to be included in the design process, including participation in the Core
draft of this report and generally                  Design Team, the Town Hall meetings, the field team, the focus groups,
agreed with its content. The report                 and an e-mail mailbox for employee comments.
was revised to reflect agency
comments.
                                                Experience has shown that in making major changes in the cultures of
                                                organizations, how it is done, when it is done, and the basis on which it is
www.gao.gov/cgi-bin/getrpt?GAO-03-1099.         done can make all the difference in whether it is ultimately successful. The
                                                analysis of DHS’s effort to design a human capital system can be particularly
To view the full product, including the scope
and methodology, click on the link above.       instructive in light of legislative requests for agency-specific human capital
For more information, contact J. Christopher    flexibilities at the Department of Defense and the National Aeronautics and
Mihm at (202) 512-6806, or mihmj@gao.gov.       Space Administration.
Contents




Letter                                                                                                 1
                             Results in Brief                                                          5
                             Background                                                                8
                             Design Process Provides for Collaboration                                12
                             DHS and OPM Leadership Stimulates and Supports the Human
                               Capital Transformation                                                 14
                             DHS Personnel System will Need To Be Integrated with Mission and
                               Program Goals                                                          15
                             Process Steered by Guiding Principles                                    16
                             Ambitious Timeline Established                                           18
                             Design Participants Represent a Mix of DHS and OPM
                               Employees                                                              20
                             Communications Plan Recently Completed                                   22
                             Design Process Provides for Employee Involvement                         24
                             Conclusions                                                              26
                             Recommendations for Executive Action                                     27
                             Agency Comments and Our Evaluation                                       27


Appendixes
              Appendix I:    Practices and Implementation Steps for Mergers and
                             Transformation                                                           29
             Appendix II:    Design Process                                                           31
             Appendix III:   Characteristics of Core Design Team Members                              34
             Appendix IV:    Comments from the Office of Personnel Management                         36
              Appendix V:    GAO Contacts and Staff Acknowledgments                                   38
                             GAO Contacts                                                             38
                             Acknowledgments                                                          38


Tables                       Table 1:   Positions Transferred to DHS as of March 8, 2003              11
                             Table 2:   Design Team Membership                                        34
                             Table 3:   Who Selected Design Team Member                               34
                             Table 4:   Subgroup Membership                                           35
                             Table 5:   Human Capital Professional versus Other Experience            35
                             Table 6:   Years of Experience of Design Team Members                    35


Figures                      Figure 1: DHS Personnel System Design Process                             6
                             Figure 2: The Three Stages of the Design Process and Their
                                       Roles                                                          13



                             Page i                                      GAO-03-1099 DHS Personnel System
Contents




Figure 3:	 Core Design Team Members Who Describe Themselves
           as Human Capital Professionals                                              21
Figure 4:	 Percent of Core Design Team Members with Work
           Experience Outside Headquarters                                             21
Figure 5:	 Key Practices and Implementation Steps for Mergers and
           Transformations                                                             30




Abbreviations

AFGE                  American Federation of Government Employees

APHIS                 Animal and Plant Health Inspection Service

CIA                   Central Intelligence Agency

CPDF                  Central Personnel Data File

DHS                   Department of Homeland Security

DOD                   Department of Defense

DOJ                   Department of Justice

FACA                  Federal Advisory Committee Act

FBI                   Federal Bureau of Investigation

FEMA                  Federal Emergency Management Agency

FLETC                 Federal Law Enforcement Training Center

FTE                   full-time equivalent

INS                   Immigration and Naturalization Service

NAAE                  National Association of Agricultural Employees

NASA                  National Aeronautics and Space Administration

NSA                   National Security Agency

NTEU                  National Treasury Employees Union

OMB                   Office of Management and Budget

OPM                   Office of Personnel Management

TSA                   Transportation Security Administration





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Page ii                                               GAO-03-1099 DHS Personnel System
A

United States General Accounting Office
Washington, D.C. 20548



                                    September 30, 2003

                                    The Honorable George V. Voinovich
                                    Chairman, Subcommittee on Oversight of Government
                                      Management, the Federal Workforce, and the
                                      District of Columbia
                                    Committee on Governmental Affairs
                                    United States Senate

                                    The Honorable Jo Ann Davis
                                    Chairwoman, Subcommittee on Civil Service and
                                      Agency Organization
                                    Committee on Government Reform
                                    United States House of Representatives

                                    The creation of the Department of Homeland Security (DHS) represents an
                                    historic moment for the federal government to fundamentally transform
                                    how the nation will protect itself from terrorism. DHS now has an
                                    opportunity—and a responsibility—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, we designated this
                                    implementation and transformation as high risk in January 2003.1

                                    We convened a forum in September 2002 to identify useful practices and
                                    lessons learned from major public and private transformations that DHS
                                    and other federal agencies could use to inform transformation efforts.2
                                    While no two mergers or transformation efforts are exactly alike and the
                                    “best” approach depends on a variety of factors specific to each context,
                                    there was general agreement on a number of key practices. These
                                    practices include:




                                    1
                                     U.S. General Accounting Office, Major Management Challenges and Program Risks:
                                    Department of Homeland Security, GAO-03-102 (Washington, D.C.: January 2003).
                                    2
                                     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).




                                    Page 1                                             GAO-03-1099 DHS Personnel System
1.	 Ensure top leadership drives the transformation. Leadership
    must set the direction, pace, and tone and provide a clear, consistent
    rationale that brings everyone together behind a single mission.

2.	 Establish a coherent mission and integrated strategic goals to
    guide the transformation. Together, these define the culture and
    serve as a vehicle for employees to unite and rally around.

3.	 Focus on a key set of principles and priorities at the outset of
    the transformation. A clear set of principles and priorities serves as a
    framework to help the organization create a new culture and drive
    employee behaviors.

4.	 Set implementation goals and a timeline to build momentum and
    show progress from day one. Goals and a timeline are essential
    because the transformation could take years to complete.

5.	 Dedicate an implementation team to manage the transformation
    process. A strong and stable team is important to ensure that the
    transformation receives the needed attention to be sustained and
    successful.

6.	 Use the performance management system to define
    responsibility and assure accountability for change. A “line of
    sight” shows how team, unit, and individual performance can
    contribute to overall organizational results.

7.	 Establish a communication strategy to create shared
    expectations and report related progress. The strategy must reach
    out to employees, customers, and stakeholders and engage them in a
    two-way exchange.

8.	 Involve employees to obtain their ideas and gain their
    ownership for the transformation. Employee involvement
    strengthens the process and allows them to share their experiences and
    shape policies.

9.	 Build a world-class organization. Building on a vision of improved
    performance, the organization adopts the most efficient, effective, and
    economical personnel, system, and process changes and continually
    seeks to implement best practices.




Page 2                                        GAO-03-1099 DHS Personnel System
Building on the forum, we recently identified specific implementation steps
for these key practices.3 (See app. I). Many mergers do not live up to their
potential. Research suggests that the failure to adequately address a wide
variety of people and cultural issues is at the heart of unsuccessful mergers
and transformations. Therefore, strategic human capital management
must be at the center of a successful transformation effort. The legislation
creating DHS provided it with significant flexibility to design a modern
human capital management system.4 Specifically, the department may
deviate from requirements contained in Title 5 of the United States Code
relating to performance appraisals, classification, pay rates and systems,5
and adverse actions and appeals. However, the department may not
deviate from other Title 5 provisions including the merit system principles,
prohibited personnel practices, equal employment opportunity, civil
service examination and selection, and pay administration.6 In addition, for
hiring employees, the department may take advantage of the
governmentwide personnel reform measures contained in the Homeland
Security Act of 2002, including using a category rating system when
evaluating applicants for employment and selecting qualified applicants for
positions using direct hiring procedures.7 Regulations for the DHS human
capital system are to be prescribed jointly by the Secretary of DHS and the
Director of the Office of Personnel Management (OPM). The legislation
also noted that it is the sense of the Congress that employees be involved in
the creation of the new human capital system.

In light of the challenge to transform the organizations joining the
department and establish a modern human capital management system,
you asked that we undertake a series of human capital engagements to
assist DHS in its implementation efforts. As agreed with your office, this is
one of several reports we will issue that will track how DHS begins to make
use of its new human capital authorities. Specifically, this report

3
 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).
4
Public Law 107-296, Nov. 25, 2002.
5
 The department may not however modify Senior Executive pay or fix employee pay in
excess of the limitation on aggregate compensation payable under 5 U.S.C. 5307.
6
Pay administration provisions include premium pay rules.
7
 Interim regulations implementing these authorities were issued by OPM in the Federal
Register on June 13, 2003. 68 Fed. Reg. 35265.




Page 3                                                GAO-03-1099 DHS Personnel System
(1) describes the process DHS has in place to design its human capital
system and involve employees and (2) analyzes the extent to which this
process reflects what we have found to be important elements of
successful transformations.

To address our objectives, we reviewed documents relevant to DHS’s
transformation and personnel system design effort and applicable laws and
regulations. These included the April 2003 Human Resources Systems
Design Team Resource Book, the weekly DHS newsletter, OPM data on
DHS employees and unions, the June 2003 Communications Plan, and
others. We interviewed officials from DHS and OPM headquarters who are
involved in the effort to design the new human capital system. Human
resource leaders from the five largest components within DHS were also
interviewed – the Transportation Security Administration (TSA), Federal
Emergency Management Agency (FEMA), the organizations formerly
known as the Immigration and Naturalization Service (INS) and the U.S.
Customs Service, and the U.S. Coast Guard – to learn their impressions of
the design process. Interviews with officials from the three largest
employee unions at DHS – the American Federation of Government
Employees (AFGE), the National Treasury Employees Union (NTEU), and
the National Association of Agricultural Employees (NAAE) – provided
additional insights. We then analyzed the information gathered in light of
seven of the nine transformation practices. Practice 6 was excluded from
the analysis because the effort to design a human capital system includes
the development of a performance management system and Practice 9 was
excluded because developing an effective human capital system is one of
many efforts required to become a world-class organization. We conducted
our work in accordance with generally accepted government auditing
standards between March and September 2003.

The description and analysis of DHS’s effort to design a strategic human
capital management system can be particularly instructive in light of
legislation that requests additional authority for human capital
management at the Department of Defense (DOD) and the National
Aeronautics and Space Administration (NASA). We have consistently
supported the need for government transformation and the concept of
modernizing federal human capital policies, as underscored in recent
testimonies and our January 2003 report which described why we find that
strategic human capital management remains a governmentwide high-risk




Page 4                                       GAO-03-1099 DHS Personnel System
                    area.8 This effort can also prove instructive for future human capital
                    management and reorganization efforts within specific units of DHS as the
                    new department is implemented and transformed over time into a cohesive
                    organization.

                    Importantly, while the design process used to develop the human capital
                    system is significant, effective implementation of the system is similarly
                    crucial to effective human capital management in the new department. In
                    short, a successful design effort is essential to, but does not guarantee,
                    effective implementation.



Results in Brief	   DHS’s and OPM’s effort to design a new human capital system is
                    collaborative and facilitates participation of employees from all levels of
                    the department. The process is divided into three stages: research,
                    outreach, and drafting of initial personnel system options; review of the
                    options; and development of proposed regulations. First, the Core Design
                    Team conducted research on human capital approaches, communicated
                    with and gathered feedback from employees, and developed options.
                    Second, the Senior Review Advisory Committee will review these options
                    and forward its recommendations to the DHS Secretary and OPM Director.
                    Third, the Secretary and Director will then propose draft regulations for the
                    human capital system, engage in the statutory collaboration period, and
                    issue final regulations by early 2004. The stages include employees from
                    DHS and OPM, as well as representatives from the department’s three
                    largest unions. See figure 1.




                    8
                     U.S. General Accounting Office, Human Capital: Building on DOD’s Reform Effort to
                    Foster Governmentwide Improvements, GAO-03-851T (Washington, D.C.: June 4, 2003);
                    High-Risk Series: Strategic Human Capital Management, GAO-03-120 (Washington, D.C.:
                    January 2003); and Managing for Results: Using Strategic Human Capital Management to
                    Drive Transformational Change, GAO-02-940T (Washington, D.C.: July 15, 2002).




                    Page 5                                             GAO-03-1099 DHS Personnel System
Figure 1: DHS Personnel System Design Process




This effort to design a human capital management system for DHS
generally reflects what we have found to be important elements of effective
transformations.

•	 Ensure top leadership drives the transformation. One of the strengths
   of the effort to transform the culture of organizations going into DHS
   has been the on-going commitment of both DHS and OPM leaders to
   stimulate and support the effort to design a human capital system.

•	 Establish a coherent mission and integrated strategic goals to guide the
   transformation. DHS is currently developing a strategic plan. Although
   DHS human resource leaders are included on the strategic planning
   team, the final plan will not be complete until late September 2003.
   Consequently, DHS will need to ensure that the development of the
   human capital policy options by the Core Design Team is integrated with
   the accomplishment of DHS programmatic goals as defined in the
   forthcoming strategic plan. Such integration is important to ensure that
   the human capital system enables the department to acquire, develop,
   and retain the core competencies necessary for DHS to accomplish its
   programmatic goals. Moving forward, it is essential that the Senior
   Review Advisory Committee, the Secretary, and the Director ensure that
   the new human capital system is aligned with the DHS strategic plan.

•	 Focus on a key set of principles and priorities at the outset of the
   transformation. The Secretary and Director outlined four principles



Page 6                                          GAO-03-1099 DHS Personnel System
   during the first design meeting in April that have served as a framework
   for the activities of the Core Design Team.9 These principles
   appropriately identify the need to support the mission and employees of
   the department, protect basic civil service principles, and hold
   employees accountable for performance.

•	 Set implementation goals and a timeline to build momentum and show
   progress. Agency officials established an ambitious 9- to 10-month
   timeline for completing the design process, aiming to issue final
   regulations in early 2004. Some DHS component human resource
   directors and other stakeholders we interviewed expressed concerns
   about the compressed schedule. Officials leading the Core Design Team
   report the aggressive schedule is necessary to relieve employee anxiety
   and maximize the time available for implementation within the 5-year
   window outlined in the DHS legislation.

•	 Dedicate an implementation team to manage the transformation
   process. The membership of the design team includes participants from
   multiple organizational units within DHS, OPM, and the three major
   unions.

•	 Establish a communication strategy to create shared expectations and
   report related progress. DHS recently completed a noteworthy and
   substantive communication plan that provides a structured and planned
   approach to communicate with DHS stakeholders regarding the human
   capital system. The objectives of the plan are to: raise awareness,
   disseminate information, and promote a clear understanding of the new
   human capital system; manage stakeholder expectations and address
   their concerns; and provide opportunities for a two-way dialogue.
   Building on its current efforts, DHS will need to continue to provide
   adequate opportunities for feedback once the options are released,
   including providing an adequate level of detail on how the new system
   will impact employees.

•	 Involve employees to obtain their ideas and gain their ownership.
   Employees are provided with multiple opportunities to be included in
   the design process, including participation in the Core Design Team, the


9
 On July 25, 2003, the Core Design Team presented a set of five principles to the Senior
Review Advisory Committee as a guide for developing the options to be presented in late
September, building on the original four principles.




Page 7                                                 GAO-03-1099 DHS Personnel System
                 Town Hall meetings, the focus groups, the field team, and an e-mail
                 mailbox for employee comments. Continued employee involvement is
                 critical as options are identified, regulations are proposed, and the
                 human capital system is implemented.

              As the process to develop and implement a new human capital system at
              DHS moves forward, we are recommending that as the DHS strategic
              planning effort continues that the Secretary of DHS, in conjunction with
              the Director of OPM, ensure that the human capital management system is
              fully integrated with the accomplishment of the department’s mission,
              objectives, and goals. We are also recommending that the Secretary of DHS
              build on the progress that has been made and ensure that the
              communication strategy used to support the human capital system
              maximizes opportunities for employee involvement through the
              completion of the design process, the release of the system options, and
              implementation, with special emphasis placed on seeking the feedback and
              buy-in of frontline employees in the field.

              OPM provided written comments on a draft of this report, which are
              printed in appendix IV. DHS provided technical comments by e-mail.

              DHS and OPM generally agreed with the contents of the report. However,
              both DHS and OPM expressed a concern that we misunderstood the role of
              the field team in the design process. Each described the role of the field
              team as more limited than our original understanding. While gathering
              additional information from DHS, NTEU, AFGE, and NAAE to clarify the
              role and activities of the field team, we learned that its role evolved over
              the course of the design effort, that it had no decision-making role in the
              design process, and that it was used as a recurring focus group.
              Accordingly, we changed the draft to reflect the field team’s current role.
              DHS and OPM also provided a number of technical suggestions that have
              been incorporated where appropriate.



Background	   The creation of DHS represents enormous leadership challenges,
              encompassing opportunities in multiple management areas. Sustained and
              inspired political and career leadership will be essential to successfully
              implementing the transformation of DHS. Success will also largely depend
              on its ability to attract and retain the right people; set the appropriate
              priorities for the department; and build effective partnerships with the
              appropriate public, private, and not-for-profit sector entities.




              Page 8                                        GAO-03-1099 DHS Personnel System
Mission and Organization of   In establishing the new department, the Congress articulated a seven-point
DHS                           mission for DHS:

                              • Prevent terrorist attacks within the United States.

                              • Reduce the vulnerability of the United States to terrorism.

                              • Minimize the damage and assist in the recovery from terrorist attacks.

                              •	 Carry out all functions of entities transferred to the department,
                                 including by acting as a focal point regarding natural and man-made
                                 crises and emergency planning.

                              •	 Ensure that the functions of the agencies within the department that are
                                 not directly related to securing the homeland are not diminished or
                                 neglected.

                              •	 Ensure that the overall economic security of the United States is not
                                 diminished by efforts aimed at securing the homeland.

                              •	 Monitor connections between illegal drug trafficking and terrorism,
                                 coordinate efforts to sever such connections, and otherwise contribute
                                 to efforts to interdict illegal drug trafficking.

                              DHS is generally organized into four mission-related directorates: Border
                              and Transportation Security, Emergency Preparedness and Response,
                              Science and Technology, and Information Analysis and Infrastructure
                              Protection.

                              •	 The Border and Transportation Security directorate consolidates the
                                 major border security and transportation operations under one roof,
                                 including the U.S. Customs Service, parts of the Immigration and
                                 Naturalization Service (INS), the Transportation Security
                                 Administration (TSA), the Federal Law Enforcement Training Center
                                 (FLETC), The Federal Protective Service, the Office for Domestic
                                 Preparedness from the Department of Justice (DOJ), and part of the
                                 Animal and Plant Health Inspection Service (APHIS).

                              •	 The Emergency Preparedness and Response directorate integrates
                                 domestic disaster preparedness training and government disaster
                                 response and includes the Federal Emergency Management Agency
                                 (FEMA), the Strategic National Stockpile and the National Disaster


                              Page 9                                       GAO-03-1099 DHS Personnel System
                    Medical System, the Nuclear Incident Response Team, the Domestic
                    Emergency Support Teams from DOJ, and the National Domestic
                    Preparedness Office from the Federal Bureau of Investigation (FBI).

                 •	 The Science and Technology directorate coordinates scientific and
                    technological advantages when securing the homeland and will include
                    CBRN Countermeasures Programs, the Environmental Measurements
                    Laboratory, the National Bio-Weapons Defense Analysis Center, and the
                    Plum Island Animal Disease Center.

                 •	 The Information Analysis and Infrastructure Protection directorate
                    accesses and analyzes intelligence, law enforcement data, and other
                    information involving threats to homeland security and evaluating
                    vulnerabilities from state and local agencies, the private sector, and
                    federal agencies such as the Central Intelligence Agency (CIA), FBI, and
                    the National Security Agency (NSA). It includes the Critical
                    Infrastructure Assurance Office, the Federal Computer Incident
                    Response Center, the National Communications System, the National
                    Infrastructure Protection Center, and the energy security and assurance
                    program activities of the Department of Energy.

                 In addition to the four mission-related directorates, the U.S. Secret Service
                 and the U.S. Coast Guard remain intact as distinct entities in DHS; INS
                 adjudications and benefits programs report directly to the Deputy
                 Secretary as the Bureau of Citizenship and Immigration Services; and the
                 Management Directorate is responsible for budget, human capital, and
                 other general management issues.



DHS’s People 	   DHS has approximately 155,000 civilian positions and 54,000 military
                 positions in the U.S. Coast Guard, for a total of just over 209,000.10 (See


                 10
                    Based on positions transferred to DHS as of March 8, 2003, according to DHS, and GAO
                 calculations using data from the Central Personnel Data File (CPDF) as of March 31, 2003.
                 Additional positions were scheduled to transfer to the department after this date. Positions
                 include full-time, part-time, and vacant, and do not represent full-time equivalent (FTE)
                 employment or the total number of employees on board. The DHS-provided data are based
                 on determination orders, but one DHS official acknowledged that the data were compiled
                 differently by the various components. Furthermore, these data are preliminary and are
                 expected to be adjusted based on continuing negotiations between DHS and other federal
                 agencies. DHS was authorized 144,901 civilian FTEs and 37,074 military FTEs in the fiscal
                 year 2003 budget, according to DHS. As of March 31, 2003, DHS had 160,201 full- and part-
                 time civilian employees on board, according to CPDF.




                 Page 10                                                 GAO-03-1099 DHS Personnel System
table 1.) Of the civilian employees, a vast majority transferred from seven
organizations: TSA, INS, Customs, FEMA, the U.S. Coast Guard, the U.S.
Secret Service, and APHIS. Of the civilian employees who transferred from
these seven organizations, approximately 90 percent are stationed outside
the Washington, D.C. metropolitan area. DHS employees work in over 300
metropolitan statistical areas.



Table 1: Positions Transferred to DHS as of March 8, 2003

                                                                                           Positions
Originating Department                      Originating Agency                          Transferreda
Agriculture                                 Import and Entry Inspectionb                           2,655
Commerce                                    Critical Infrastructure Assurance
                                            Office                                                   50
Defense                                     National Communications System                          105
Department of Energy                                                                                101
Federal Emergency Management
Agency                                                                                             8,542
General Services Administration                                                                    1,713
Health and Human Services                                                                            91
Justice                                     Immigration and Naturalization
                                            Service                                               36,769
Justice                                     Other                                                   385
Transportation                              United States Coast Guardc                            60,403
Transportation                              Transportation Security
                                            Administration                                        68,859
Transportation                              Other                                                    40
Treasury                                    United States Customs Service                         22,028
Treasury                                    United States Secret Service                           6,251
Treasury                                    Federal Law Enforcement Training
                                            Center                                                  922
Treasury                                    Other                                                   191
Total                                                                                         209,105
Source: DHS.
a
 This column reflects positions - full-time, part-time, and vacant - and does not represent FTE
employment or the total number of employees on board.
b
    This represents a specific function from APHIS that was transferred to DHS.
c
 This represents both civilian and military U.S. Coast Guard positions.


These employees serve in positions ranging from inspectors, investigators,
police, and intelligence to attorneys and administrative services. DHS


Page 11                                                         GAO-03-1099 DHS Personnel System
                 employees are compensated under multiple pay and benefits systems, are
                 hired using varied authorities, and undergo performance appraisals with
                 different rating scales and factors.

                 According to OPM, just over 49,000, or just under one-third, of DHS civilian
                 employees are represented by unions. This includes 16 different unions
                 divided into 75 separate bargaining units. The 3 unions representing the
                 largest number of employees are AFGE, NTEU, and NAAE. AFGE
                 represents almost 33,000 employees who were transferred from INS, the
                 U.S. Coast Guard, FEMA, and others. NTEU represents over 12,000
                 employees who were transferred largely from Customs. NAAE represents
                 just over 2,000 employees who were transferred from APHIS.



Design Process   DHS’s and OPM’s effort to design a new human capital system is
                 collaborative and facilitates participation of employees from all levels of
Provides for     the department. The process is divided into three stages: research,
Collaboration    outreach, and drafting of initial personnel system options; review of the
                 options; and development of proposed regulations. First, the Core Design
                 Team conducted research on human capital approaches, communicated
                 with and gathered feedback from employees, and developed options.
                 Second, the Senior Review Advisory Committee will review these options
                 and forward its recommendations to the DHS Secretary and OPM Director.
                 Third, the Secretary and Director will then propose draft regulations for the
                 human capital system, engage in the statutory collaboration period, and
                 issue final regulations by early 2004. The stages include employees from
                 DHS and OPM, as well as representatives from the department’s three
                 largest unions. This process is described in further detail in appendix II.

                 As figure 2 shows, the Core Design Team, the first stage of the design
                 process, is responsible for research, outreach, and drafting initial options
                 for the personnel system. This group is led by an equal number of DHS and
                 OPM executives. Members of the Core Design Team, which includes
                 employees from headquarters, the field, and unions, are full-time
                 participants who work on one of two subgroups: (1) pay and performance
                 or (2) labor and employee relations—reflecting the areas of Title 5 from




                 Page 12                                       GAO-03-1099 DHS Personnel System
which DHS may deviate.11 The work of the Core Design Team is to result in
a broad range of options for the Senior Review Advisory Committee by late
September 2003.



Figure 2: The Three Stages of the Design Process and Their Roles




The second stage of the design process is made of the Senior Review
Advisory Committee. The committee’s members include top executives
from DHS, OPM, and the three major unions and they are advised by a team
of external human capital experts. The committee is provided less than a
month to review the system options and forward its iteration for the


11
   The Homeland Security Act of 2002 gives DHS authority to deviate from the requirements
of: Chapter 43 – performance appraisal; Chapter 51 – classification; Chapter 53 – pay rates
and systems (except certain provisions); Chapter 71 – labor-management and employee
relations; Chapter 75 – adverse actions; and Chapter 77 – appeals.




Page 13                                                GAO-03-1099 DHS Personnel System
                        Secretary and Director to consider.12 The committee’s time frame for
                        completing this task is October 2003. During the committee’s public
                        deliberations, they may choose to eliminate, create, and/or prioritize the
                        options, or may recommend implementation strategies.

                        Once the Secretary and Director receive the list of options from the Senior
                        Review Advisory Committee, they may edit, remove, or develop
                        alternatives to the proposed options as the third stage of the design
                        process. They expect to announce the proposed regulations in November
                        2003, which will trigger the statutory collaboration process so final
                        regulations can be issued in early 2004. As called for in the legislation,
                        employee representatives have 30 calendar days to comment and make
                        recommendations. The Secretary and Director are then to follow the
                        provisions of the statutory reconciliation process for no less than 30 days.13



DHS and OPM             DHS and OPM leaders have consistently underscored their personal
                        commitment to the design process and speak openly in support of it. When
Leadership Stimulates   the DHS legislation was under consideration, we testified that the single
and Supports the        most important element of successful reorganizations is the sustained
                        commitment of top leaders.14 In our report that describes the key practices
Human Capital           for successful mergers and transformations, we note that top leadership
Transformation          that is clearly and personally involved provides stability and an identifiable
                        source for employees to rally around during tumultuous times. The role of
                        top leaders is also to ensure that transformation efforts stay on course by
                        setting priorities, focusing on critical issues, and demonstrating a
                        commitment to change.




                        12
                           An informal “planning committee,” or small working group of DHS, OPM, and union senior
                        executives was assembled to provide staff support, highlight issues for discussion during
                        public meetings, and potentially to set the meeting agendas for the Senior Review Advisory
                        Committee.
                        13
                           Section 841 of the Homeland Security Act establishes a process for collaboration with
                        employee representatives to provide notice of the proposed human resources management
                        system, the opportunity to submit comments, and consultation over the recommendations
                        made.
                        14
                         U.S. General Accounting Office, Homeland Security: Proposal for Cabinet Agency Has
                        Merit, But Implementation Will be Pivotal to Success, GAO-02-886T (Washington, D.C.:
                        June 25, 2002).




                        Page 14                                               GAO-03-1099 DHS Personnel System
                       DHS and OPM leaders are fulfilling these critical roles. For example, the
                       DHS Under Secretary for Management and OPM’s Senior Advisor for
                       Homeland Security cochair the Senior Review Advisory Committee. Other
                       committee members are officials in key leadership positions at both OPM
                       and DHS and the presidents of the three major unions.

                       Senior officials from DHS, OPM, and DHS’s three largest unions are directly
                       involved in the workings of the Core Design Team. Top leaders of DHS and
                       OPM addressed employees at the Town Hall meetings, expressing their
                       support for the transformation, and solicited feedback from those
                       employees. Specific examples include the Under Secretary for
                       Management writing to DHS employees in April and May 2003 to express
                       her support of the design process and participating in a Town Hall meeting.
                       Additionally, the Under Secretary for Border and Transportation Security
                       participated in several Town Hall meetings to express his on-going support
                       of the design process and to respond to questions from DHS employees.
                       The Under Secretary for Emergency Preparedness and Response and the
                       Commandant of the U.S. Coast Guard also participated in Town Hall
                       meetings. At these meetings, union leaders have stood next to the agency
                       leadership to express their support for the process, according to agency
                       officials. Similarly, OPM’s Associate Director for Strategic Human
                       Resources Policy and OPM’s Senior Advisor for Homeland Security also
                       addressed DHS employees at Town Hall meetings, and responded to their
                       questions.



DHS Personnel System   DHS will need to ensure that the development of the human capital policy
                       options by the Core Design Team is integrated with the accomplishment of
will Need To Be        DHS programmatic goals as defined in the forthcoming strategic plan.
Integrated with        Agency officials indicate that it is their intention that the personnel system
                       design will be consistent with the strategic plan. We have reported, and the
Mission and Program    President’s Management Agenda reiterates, that leading organizations
Goals                  develop their workforce approaches as part of a strategic human capital
                       plan as strategies for accomplishing their mission and programmatic goals.
                       In light of this, we previously stated that the success of the DHS
                       transformation requires the department to link its human capital strategy
                       with its homeland security strategy.15


                       15
                          GAO-03-102; and U.S. General Accounting Office, Homeland Security: Management
                       Challenges Facing Federal Leadership, GAO-03-260 (Washington, D.C.: Dec. 20, 2002).




                       Page 15                                              GAO-03-1099 DHS Personnel System
                       DHS is currently developing a strategic plan. This effort began in mid-June
                       and is expected to be completed by the end of September 2003 – a target set
                       by the Office of Management and Budget (OMB). As explained previously,
                       the Core Design Team began its work in late April 2003 and expected to
                       report its proposed options in late September 2003. According to a DHS
                       official leading the strategic planning effort, human capital officials are
                       engaged in drafting the strategic plan. DHS human capital officials
                       confirmed that they have reviewed drafts of the strategic plan.

                       Moving forward, it is critical that the Senior Review Advisory Committee,
                       the Secretary, and the Director make the link between the new human
                       capital system and the accomplishment of DHS’s goals as outlined in the
                       DHS strategic plan. Once a strategic plan is in place, DHS can then develop
                       a strategic human capital plan that, in part, identifies core competencies for
                       staff as a tool for attracting, developing, and rewarding contributions to
                       mission accomplishment. For example, these competencies will be critical
                       to creating a performance management system – a key task of the Core
                       Design Team - that aligns daily operations with organizational goals and
                       creates a “line of sight” and shows how team, unit, and individual
                       performance can contribute to organizational results. We recommended
                       that DHS, in conjunction with OPM and OMB, create an effective
                       performance management system in December 2002.16 Furthermore, if
                       DHS decides to design and implement a pay-for-performance system, a set
                       of strategic goals and validated competencies will be required so that DHS
                       can identify the outcomes and results that employees are to be rewarded
                       for accomplishing.



Process Steered by 
   The Secretary and Director outlined four principles to serve as a
                       framework for the Core Design Team during their first meeting in April:
Guiding Principles

                       •	 The system has to support both the mission and the people charged with
                          implementing the mission.

                       •	 Design Team members must leave preconceived notions at the door.
                          They have an opportunity and responsibility to create a 21st century
                          personnel system that is fair, performance based, and flexible.


                       16
                        GAO-03-260. We recently outlined key practices for effective performance management
                       systems in Results-Oriented Cultures: Creating a Clear Linkage Between Individual
                       Performance and Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003).




                       Page 16                                             GAO-03-1099 DHS Personnel System
• DHS must preserve and protect basic civil service principles.

•	 DHS must hold people at all levels accountable for performance. The
   agency will link individual performance to organizational goals, with the
   ability to identify and reward exceptional service and deal with chronic
   poor performance. DHS can be a department that stands as a model of
   excellence.

These principles can serve as core values for human capital management at
DHS – values that define the attributes that are intrinsically important to
what the new organization does and how it will do it. Furthermore, they
represent the institutional beliefs and boundaries that are essential to
building a new culture for the organization. Finally, they appropriately
identify the need to support the mission and employees of the department,
protect basic civil service principles, and hold employees accountable for
performance.

On July 25, 2003, the Core Design Team presented a set of five principles to
the Senior Review Advisory Committee as a guide for developing the
options to be presented in late September. These principles were drafted
by the Core Design Team and reviewed by the field team, using the original
four principles proposed by the Secretary and Director as a guide. The five
principles are to ensure that the options developed are (1) mission
centered, (2) performance focused, (3) contemporary and excellent,
(4) generate respect and trust, and (5) based on merit system principles
and fairness.

Consistent with the principles outlined by the Secretary and Director and
those presented to the Senior Review Advisory Committee, our interviews
with the human resource leaders in the five largest DHS components
identified two areas that they would like the new human capital system to
address: the new DHS personnel system should provide for competitive,
performance-based pay and should give managers the ability to quickly hire
the right people with the skills the agency needs. First, individuals we
interviewed hoped that the new system would address their concerns
about the disparities in pay rates across DHS and expressed an interest in
implementing performance-based pay, linked to the accomplishment of




Page 17                                       GAO-03-1099 DHS Personnel System
                     DHS’s mission, such that employees are more accountable.17 Two indicated
                     that they would like the Core Design Team to propose legislation to address
                     the differences in premium pay that currently exist. Second, and beyond
                     the immediate task of the Core Design Team, there was an overwhelming
                     interest in simplifying the hiring process.18 Officials in one component
                     expressed their discontent with the amount of time between when a
                     position is announced and when it is actually filled. One executive
                     expressed an interest in more flexibility in hiring because the perception is
                     that the current hiring process is only understandable to those already in
                     the federal government.19



Ambitious Timeline   DHS and OPM established a 9- to 10-month timeline for completing the
                     design process with the expectation that the final regulations will be issued
Established          in early 2004. Agency officials have publicized this timeline at Town Hall
                     meetings across the country. Our reports on the successful practices of
                     mergers and transformations have noted that the establishment of a
                     timeline with specific milestones allows stakeholders to track the
                     organization’s progress towards its goals. Publicizing the timeline and
                     meeting its milestones can illustrate building momentum and demonstrate
                     that real progress is being made.

                     The design process officially began in early April 2003 when the Core
                     Design Team convened for a 2-week leadership conference to learn about
                     the various human capital management systems within the component
                     agencies as well as those in other federal agencies and private firms. The
                     Core Design Team began its research full time in late April. This team is
                     expected to present its broad range of options to the Senior Review

                     17
                        We have recently reported on leading practices in performance management and
                     performance-based pay. For example, see U.S. General Accounting Office, Human Capital:
                     Building on the Current Momentum to Address High-Risk Issues, GAO-03-637T
                     (Washington, D.C.: Apr. 8, 2003); and GAO-03-488.
                     18
                      As stated previously, the department may not deviate from the Title 5 provisions regarding
                     civil service examination and selection procedures. However, DHS has the opportunity to
                     address some of its hiring concerns through governmentwide human capital reform
                     provisions in the Homeland Security Act of 2002, which allow for category-based rating and
                     selection procedures and the ability to use direct-hire procedures.
                     19
                        We have recently reported on major challenges in the federal hiring process. For more
                     information, see U.S. General Accounting Office, Human Capital: Opportunities to
                     Improve Executive Agencies’ Hiring Processes, GAO-03-450 (Washington, D.C.: May 30,
                     2003).




                     Page 18                                                GAO-03-1099 DHS Personnel System
Advisory Committee in late September 2003. The Senior Review Advisory
Committee is allotted less than a month to develop its set of options in
October 2003. The Secretary and Director will then select the options that
will be submitted as officially proposed regulations available for comment.
They expect to announce the proposed regulations in November 2003,
which will trigger the statutory collaboration process so final regulations
can be issued in early 2004.

Although the establishment of a clear timeline is positive, a majority of
DHS stakeholders we interviewed expressed concerns about its
compressed schedule. There is some understanding that the timeline
reflects an effort to take into account the final regulations in preparing the
fiscal year 2005 budget that is submitted to the Congress in early 2004.
However, a number of human resource directors said the “self-imposed,
short” timeline would pose significant challenges for the Design Team. One
director commented that the timeline was “ambitious” considering the
amount of information that needs to be collected and analyzed. Most
directors agreed that the lack of sufficient time to perform these tasks
could prevent the Design Team from completing its work or cause it to
propose options that had not been thoroughly researched. Furthermore,
another stakeholder suggested that the timeline appears to allocate too
much time to the development of options and not enough time to the
consideration of which options to adopt. On the other hand, DHS and OPM
leaders of the design effort agree that the timeline is aggressive, but said
that a shorter time frame will serve to minimize employee anxiety. In
addition, they said a tight design time frame is needed to provide adequate
time for implementation, evaluation, and modification within the 5-year
statutory window available for establishing the new system.

While it is appropriate to develop and integrate the human capital systems
within the department in a quick and seamless manner so that the
department can begin to function as a cohesive entity, moving too quickly
or prematurely can significantly raise the risk of doing it wrong. Having an
ambitious timeline is reasonable only insofar as it does not impact the
quality of the human capital system that is created.




Page 19                                        GAO-03-1099 DHS Personnel System
Design Participants   Overall, the members of the Core Design Team represent multiple
                      organizational components and the three major unions. The composition
Represent a Mix of    of the team is important because of the visual sign it communicates
DHS and OPM           regarding which components are dominant and subordinate or whether the
                      new organization is a “merger of equals.” It also helps employees see that
Employees             they are being represented and that their views are being considered in the
                      decision-making process.

                      The 48 participants of the Core Design Team include personnel experts
                      from OPM, DHS and its component agencies, line employees and managers
                      from DHS headquarters and field offices; and professional staff from the
                      three major unions.20 Specifically, the Core Design Team is composed of 24
                      DHS employees, 16 employees from OPM, and 8 professional staff from the
                      unions. This includes 27 staff members, 5 supervisors, 12 managers, and 3
                      executives.21 Additionally, just over 60 percent of the members consider
                      themselves human capital professionals,22 and about two-thirds have
                      experience outside headquarters.23 (See figs. 3 and 4.) The majority of
                      human resource officials we interviewed consider themselves to be
                      adequately represented on the Core Design Team. Other characteristics of
                      the team members are described in appendix III.




                      20
                       This summarizes data for those members on board as of July 11, 2003. Since that date,
                      membership has changed.
                      21
                           Based on complete data for 47 participants.
                      22
                           Based on complete data for 46 participants.
                      23
                           Based on complete data for 39 participants.




                      Page 20                                               GAO-03-1099 DHS Personnel System
Figure 3: Core Design Team Members Who Describe Themselves as Human Capital
Professionalsa




a
Based on complete data for 46 participants.




Figure 4: Percent of Core Design Team Members with Work Experience Outside
Headquartersa




a
Based on complete data for 39 participants.


According to DHS officials, DHS-specific slots on the Core Design Team
were filled by individuals chosen by agency executives after determining
the number of seats to be allocated to the different agency components. In


Page 21                                        GAO-03-1099 DHS Personnel System
                      selecting team members, officials sought representation from across the
                      organizational components of the department, individuals with field
                      experience, and individuals with some expertise in human resources
                      management. Race, gender, and occupational diversity were other factors
                      considered when selecting participants. Additionally, NAAE selected one
                      DHS employee to participate on the team and AFGE and NTEU each
                      selected four professional staff members to participate.



Communications Plan   DHS recently completed a noteworthy communications strategy that
                      provides a structured and planned approach to communicate with DHS
Recently Completed    stakeholders regarding the human capital system. The objectives of the
                      plan are to: raise awareness, disseminate information, and promote a clear
                      understanding of the new human capital system; manage stakeholder
                      expectations and address their concerns; and provide opportunities for a
                      two-way dialogue. We have recently reported that organizations
                      undergoing a transformation should establish a communication strategy
                      that ensures a consistent message is delivered and seeks to genuinely
                      involve stakeholders in the process.

                      The communications plan, completed in June 2003, represents an
                      important and substantive effort and contains four broad pieces that are
                      consistent with the key practices we have identified as important to
                      successful communication during transformations. First, the plan
                      identifies internal and external stakeholders, the concerns of each
                      stakeholder group, and the specific communication channels to be used to
                      communicate to that stakeholder group. Second, the plan articulates the
                      key messages to be delivered to each stakeholder group. Third, an action
                      plan identifies the communication channel to be used, the timeline for its
                      use, and the DHS and OPM staff responsible for implementation. Finally,
                      the plan identifies the feedback mechanisms to be used to ensure there is a
                      two-way dialogue.

                      Moving forward, DHS faces some challenges in successfully implementing
                      its communications plan. First, in addition to the key messages articulated
                      in the plan, DHS will need to provide information to clarify areas of
                      confusion that were identified during our interviews. These include:

                      •	 the roles OPM, DHS, and the Senior Review Advisory Committee have in
                         the process;




                      Page 22                                      GAO-03-1099 DHS Personnel System
•	 the factors that will influence the Secretary and Director’s final
   decisions on which options to propose;

• the role of the contractor in the design process;

•	 the likelihood of the Core Design Team drafting legislative proposals for
   areas DHS does not have authority to change (i.e., premium pay and
   hiring);

•	 the possibility of there being multiple personnel systems instead of one;
   and

• the implementation process.

A second challenge will be to ensure that preexisting communication
channels within each departmental component deliver a message that is
consistent in tone and content with the central communication strategy.
We learned from three of the five components we interviewed that they use
additional vehicles for providing and receiving information from
employees. It may be appropriate to coordinate the messages sent to
employees through these additional vehicles to minimize the perception
that certain groups of employees are getting the “real” story.

Building on the current effort, DHS will need to provide adequate
opportunities for feedback once the options are released, including
providing an adequate level of detail on how the new system will impact
employees. The feedback mechanisms identified in the communications
plan focus on gathering employee feedback prior to the options being
released. For example, two of the three feedback mechanisms outlined in
the communications plan will be completed before the system options are
publicized. DHS also needs to ensure effective communication to
employees and stakeholders after the options are released. For example,
DHS should consider describing to employees how the comments collected
during the Town Hall meetings and focus groups informed the design
process. Furthermore, once options are selected, DHS will be faced with
communicating how the changes will impact specific jobs, rights and
protections, and daily responsibilities. DHS may find it necessary to
further tailor and customize the details of the new human capital system to
meet the specific needs of employees.




Page 23                                        GAO-03-1099 DHS Personnel System
Design Process          Employee perspectives on the design of the DHS human capital system are
                        sought through many mechanisms, including the Core Design Team with its
Provides for Employee   members from multiple DHS components, Town Hall meetings, focus
Involvement             groups, the field team, and an e-mail mailbox for employee comments.
                        This reflects the Congress’ desire that employees be allowed to participate
                        in a meaningful way in the creation of the new human capital system.
                        Involving employees in planning helps to develop agency goals and
                        objectives that incorporate insights about operations from a front-line
                        perspective. It can also serve to increase employees’ understanding and
                        acceptance of organizational goals and improve motivation and morale.

                        The design process attempts to include employees by creating multiple
                        opportunities for employees to provide feedback. While activity updates
                        were provided in the DHS weekly newsletter and an e-mail mailbox for
                        employees to submit their suggestions and comments was used, multiple
                        Town Hall meetings and focus groups conducted between the end of May
                        and the beginning of July 2003 were held in ten cities across the United
                        States.24 According to DHS and OPM officials, these cities were chosen to
                        ensure adequate representation of major DHS components and geographic
                        diversity. The goal of the events was to promote two-way communication
                        between management and employees and to gather employee perspectives
                        on the personnel practices that exist in their agency and any proposed
                        changes they would like to see. Each meeting hosted up to 200 DHS
                        employees from the surrounding cities.

                        At a typical Town Hall meeting, there was a general question and answer
                        segment in which local employees had the opportunity to ask questions
                        about the new system and express their overall concerns about DHS. If
                        participants’ questions could not be addressed during the meeting due to
                        time constraints, they could write their questions on note cards and give
                        them to cognizant DHS and OPM officials in attendance. After the meeting,
                        the Core Design Team held a series of six focus group sessions in each city
                        to obtain their input and suggestions for the new human resource system.
                        In most cities, five of the six sessions were devoted to hear employees’
                        views while the remaining session heard the views of supervisors and
                        managers. Participants in the focus groups included both Town Hall


                        24
                         The ten cities were Atlanta, Georgia; Detroit, Michigan; El Paso, Texas; Los Angeles,
                        California; Miami, Florida; New York, New York; Norfolk, Virginia; Seattle, Washington;
                        Washington, D.C.; and Baltimore, Maryland.




                        Page 24                                                GAO-03-1099 DHS Personnel System
meeting attendees and those who were not able to attend the Town Hall
session.

The degree to which the information gathered in these sessions was used to
inform the design process is not yet evident. On one hand, the Town Hall
meetings and focus groups gathered suggestions and concerns from large
numbers of employees from multiple organizational components in
geographically diverse locations. However, once options for the human
capital system are proposed it will be particularly important that
employees have adequate opportunities to make a worthwhile
contribution.

In addition to the Town Hall meetings and focus groups, a field team made
of 32 front-line DHS managers and staff, some of whom were selected by
the major unions, was formed. During the design process, the field team
provided insights about the department’s human capital challenges from a
front-line perspective. These insights were gathered during the three
meetings of the group -- the field team was convened during the first week
of the 2-week April leadership conference, 2 days in July to react to the
subgroups’ research, and for 2 days again in mid-September to react to the
draft personnel system options before their submission to the Senior
Review Advisory Committee in late September.

According to documents drafted before the April leadership conference,
provided by AFGE and NAAE, it was originally expected that the field team
would review the work of the Core Design Team on a “regular basis” and
then be used to “test the options against workplace realities.” One
stakeholder added that it was his initial impression that the field team
would serve as an “extension of the Core Design Team,” empowered to
provide input throughout the entire design process. However, over time,
the expected role of the field team evolved to that of a recurring focus
group that had no formal decision-making role in the design process.
Likewise, as the role for the field team evolved, so did its membership –
additional nonunionized DHS employees were added to the team. One
DHS official acknowledged that the field team has not had a great deal of
involvement in the process, and that the expected role of the team changed
over time. Officials in NTEU, AFGE, and NAAE additionally confirmed that
the role of the field team changed over time. One union president
described the diminished role as a “missed opportunity.” This official
added that the lack of involvement and minimal communication with the
Core Design Team has made it difficult for the field team to make a
worthwhile contribution.



Page 25                                      GAO-03-1099 DHS Personnel System
Conclusions 	   DHS and OPM have developed a process to design the new personnel
                system that is stimulated and supported by top leadership in both
                organizations and is generally inclusive, both in terms of the membership
                of the Core Design Team and multiple opportunities to provide input. The
                process is also guided by core principles and an ambitious timeline. Our
                research shows that these key attributes are indispensable to successful
                transformations. This design process provides a model for DHS to
                consider as it makes other important decisions about the implementation
                and transformation of the department.

                Building on this progress, DHS will need to ensure that the development of
                the human capital policy options by the Core Design Team is integrated
                with the accomplishment of DHS programmatic goals as defined in the
                forthcoming strategic plan. Such a linkage can ensure that the new human
                capital approaches support and facilitate the accomplishment of DHS’s
                goals and objectives – a fundamental principle of the human capital idea. It
                will also assist the Core Design Team in identifying human capital
                programs that support the DHS mission, including the development of a
                performance management system which creates a “line of sight” that shows
                how team, unit, and individual performance can contribute to overall
                organizational goals.

                Additionally, DHS has acknowledged that work lies ahead for implementing
                better, more effective ways to communicate with and receive feedback
                from its employees. The development of the communications plan is an
                important and positive step. As DHS implements this plan it will need to
                provide information on areas of confusion that were identified during our
                interviews, including clarifying the role of DHS versus OPM in the system
                development. DHS will also need to ensure that a consistent message is
                communicated across DHS components. Finally, effective communication,
                characterized by a two-way dialogue, will be central to engaging employees
                in the remainder of the design process and ensuring it is transparent.
                Ultimately, an effective two-way communication strategy can ease
                implementation efforts. Once options for the human capital system are
                proposed it will be particularly important that employees have adequate
                opportunities to make a worthwhile contribution. Substantial involvement
                of field staff in the development and implementation of the new human
                capital system is essential given that over 90 percent of DHS civilian
                employees are in the field. Continued employee involvement will help to
                strengthen employee buy-in to the new human capital system. It is




                Page 26                                       GAO-03-1099 DHS Personnel System
                      important to consider and use the solicited employee feedback to make any
                      appropriate changes once this feedback is received.



Recommendations for   DHS has developed an effective process to begin the formation of its new
                      human capital system. Moving forward, it is critical that the new human
Executive Action      capital system be linked to the DHS strategic plan and that DHS continue to
                      communicate with and involve its employees. Accordingly, we are
                      recommending that once the strategic plan is completed the Secretary of
                      DHS and the Director of OPM ensure that the options selected for the new
                      human capital system support and facilitate the accomplishment of the
                      department’s strategic goals and objectives, as identified in the new
                      strategic plan. In addition, we recommend that the Secretary of DHS
                      clarify the role of the participants in the design effort and other areas of
                      confusion identified by stakeholders during our interviews. Furthermore,
                      consistent with the DHS communications plan, we recommend the
                      Secretary ensure the message communicated across DHS components is
                      consistent, and maximize opportunities for two-way communication and
                      employee involvement through the completion of the design process, the
                      release of the system options, and implementation, with special emphasis
                      placed on seeking the feedback and buy-in of front-line employees in the
                      field.



Agency Comments and   OPM provided written comments on a draft of this report, which are
                      printed in appendix IV. DHS provided technical comments by e-mail.
Our Evaluation
                      DHS and OPM generally agreed with the contents of the report. However,
                      both DHS and OPM expressed a concern that we misunderstood the role of
                      the field team in the design process. Each described the role of the field
                      team as more limited than our original understanding. While gathering
                      additional information from DHS, NTEU, AFGE, and NAAE to clarify the
                      role and activities of the field team, we learned that its role evolved over
                      the course of the design effort, that it had no decision-making role in the
                      design process, and that it was used as a recurring focus group.
                      Accordingly, we changed the draft to reflect the field team’s current role.
                      DHS and OPM also provided a number of technical suggestions that have
                      been incorporated where appropriate.




                      Page 27                                       GAO-03-1099 DHS Personnel System
We are sending copies of this report to the Chairman and Ranking Minority
Member, Senate Committee on Governmental Affairs; the Chairman and
Ranking Minority Member, House Committee on Government Reform; the
Chairman and Ranking Minority Member, House Select Committee on
Homeland Security; and other interested congressional parties. We will
also send copies to the Secretary of the Department of Homeland Security
and the Director of the Office of Personnel Management. Copies will be
made available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me or Ed
Stephenson on (202) 512-6806. Key contributors to this report are listed in
appendix V.




J. Christopher Mihm
Director, Strategic Issues




Page 28                                      GAO-03-1099 DHS Personnel System
Appendix I

Practices and Implementation Steps for
Mergers and Transformation

               Implementing large-scale change management initiatives, such as mergers
               and organizational transformations, is not a simple endeavor and requires
               the concentrated efforts of both leadership and employees to realize
               intended synergies and to accomplish new organizational goals. At the
               center of any serious change management initiative are people—people
               define the organization’s culture, drive its performance, and embody its
               knowledge base. Experience shows that failure to adequately address—
               and often even consider—a wide variety of people and cultural issues is at
               the heart of unsuccessful mergers and transformations. Recognizing the
               “people” element in these initiatives and implementing strategies to help
               individuals maximize their full potential in the new organization, while
               simultaneously managing the risk of reduced productivity and
               effectiveness that often occurs as a result of the changes, is the key to a
               successful merger and transformation. Thus, mergers and transformations
               that incorporate strategic human capital management approaches will help
               to sustain agency efforts and improve the efficiency, effectiveness, and
               accountability of the federal government.

               GAO convened a forum on September 24, 2002, to identify and discuss
               useful practices and lessons learned from major private and public sector
               organizational mergers, acquisitions, and transformations. This was done
               to help federal agencies implement successful cultural transformations,
               including DHS. The invited participants were a cross section of leaders
               who have had experience managing large-scale organizational mergers,
               acquisitions, and transformations, as well as academics and others who
               have studied these efforts. We reported the key practices participants
               identified that can serve as the basis for subsequent consideration as
               federal agencies seek to transform their cultures in response to governance
               challenges. Since convening the forum, our additional work has identified
               specific implementation steps for these practices.1 (See fig. 5.)




               1
               GAO-03-669.




               Page 29                                      GAO-03-1099 DHS Personnel System
                                                 Appendix I

                                                 Practices and Implementation Steps for 

                                                 Mergers and Transformation





Figure 5: Key Practices and Implementation Steps for Mergers and Transformations

                        PRACTICE                                                         IMPLEMENTATION STEPS
  Ensure top leadership drives the transformation.                   • Define and articulate a succinct and compelling reason for change.
                                                                     • Balance continued delivery of services with merger and
                                                                       transformation activities.
  Establish a coherent mission and integrated strategic goals to     • Adopt leading practices for results-oriented strategic planning and
  guide the transformation.                                            reporting.

  Focus on a key set of principles and priorities at the outset of   • Embed core values in every aspect of theorganization to reinforce
  the transformation.                                                  the new culture.
  Set implementation goals and a timeline to build momentum          • Make public implementation goals and timeline.
  and show progress from day one.                                    • Seek and monitor employee attitudes and take appropriate follow-
                                                                       up actions.
                                                                     • Identify cultural features of merging organizations to increase
                                                                       understanding of former work environments.
                                                                     • Attract and retain key talent.
                                                                     • Establish an organizationwide knowledge and skills inventory to
                                                                       exchange knowledge among merging organizations.
  Dedicate an implementation team to manage the                      • Establish networks to support implementation team.
  transformation process.                                            • Select high-performing team members.
  Use the performance management system to define the                • Adopt leading practices to implement effective performance
  responsibility and assure accountability for change.                 management systems with adequate safeguards.
  Establish a communication strategy to create shared                • Communicate early and often to build trust.
  expectations and report related progress.                          • Ensure consistency of message.
                                                                     • Encourage two-way communication.
                                                                     • Provide information to meet specific needs of employees.
  Involve employees to obtain their ideas and gain ownership for     • Use employee teams.
  the transformation.                                                • Involve employees in planning and sharing performance
                                                                       information.
                                                                     • Incorporate employee feedback into new policies and procedures.
                                                                     • Delegate authority to appropriate organizational levels.
  Build a world-class organization.                                  • Adopt leading practices to build a world-class organization.
Source: GAO.




                                                 Page 30                                                 GAO-03-1099 DHS Personnel System
Appendix II

Design Process



                                The process for creating a DHS human capital management system, jointly
                                developed by DHS and OPM, calls for a design team made up of DHS and
                                OPM employees and union representatives. The process is divided into
                                three stages: research, outreach, and drafting of initial personnel system
                                options; review of the options; and development of proposed regulations.
                                Early 2004 is the expected date for the issuance of the personnel system’s
                                final regulations.



Core Design Team Is to          As the first stage of the design process, the Core Design Team engaged in
Draft Options for the           efforts that serve as the basis for the work of the other two components.
                                The 48 team participants included personnel experts from OPM, DHS, and
Personnel System
                                its component agencies; line employees and managers from DHS
                                headquarters and field offices; and professional staff from the three major
                                unions.1 Members were assigned to one of two subgroups focusing on
                                (1) pay and performance or (2) labor and employee relations. The
                                management consulting firm Booz Allen Hamilton assisted the teams in
                                their efforts.

Pay and Performance and Labor   Each subgroup had two coleaders, one from OPM and one from DHS, to
and Employee Relations          guide them. The subgroups performed their duties both collectively and
Subgroups                       separately. They convened jointly when there were common issues to
                                discuss or to listen to presentations on human capital systems. For
                                example, the teams heard presentations on the performance management
                                and performance-based pay system at Internal Revenue Service (IRS); the
                                human capital management systems at FBI and NSA; and the performance
                                management, pay banding, and employee appeals process used at GAO.

                                The pay and performance subgroup focused its work on the three chapters
                                of Title 5 covering performance appraisal, classification, and pay rates and
                                systems. According to the subgroup’s leaders, they identified 25
                                researchable areas and assigned small teams to explore each. Subgroup
                                members were assigned to work on multiple teams. Research areas
                                included the structure of pay ranges, methods for categorizing types of
                                work, and different appraisal and rating methods, for example. When
                                asked about the initial findings of their research, the leaders of the pay and




                                1
                                 As noted previously, this summarizes data for those members on board as of July 11, 2003.
                                Since that date, membership has changed.




                                Page 31                                                GAO-03-1099 DHS Personnel System
                          Appendix II
                          Design Process




                          performance subgroup indicated they identified many pay systems to
                          consider and evaluate.

                          The labor and employee relations subgroup focused on the three chapters
                          of Title 5 covering labor-management relations, adverse actions, and
                          appeals, to narrow its research. To gain a better understanding of these
                          issues, the group invited agencies such as the Merit Systems Protection
                          Board and the Federal Labor Relations Authority to make presentations.
                          Areas that were researched included different levels of employee, union,
                          and management rights; negotiation models; and how the success of labor
                          relations programs, adverse action systems, and appeals systems is
                          evaluated, for example. According to the subgroup leaders, they also
                          researched both leading and failed practices in their subject areas. The
                          group created interview guides to collect information in a consistent
                          format. When asked about the initial findings of the research, the subgroup
                          reported difficulty in identifying innovative labor relations models that can
                          be applied to the federal system.

Contractor Assistance	    To help facilitate its efforts in the design of the personnel system, DHS
                          contracted with management-consulting firm Booz Allen Hamilton to
                          provide support in project management, research, writing, staff support,
                          and communications/publicity. In addition, it was responsible for planning
                          the Town Hall meetings and facilitating the focus groups. According to the
                          subgroup leaders, the contractor was expected to help design the format
                          for the option papers but would not likely be involved in drafting the
                          substance of the options.



Senior Review Advisory    The Senior Review Advisory Committee, the second stage of the design
Committee Is to Develop   process, will receive the broad set of options from the Core Design Team.
                          From this set of options the committee is expected to develop its final list
Final Set of Options
                          of options for the Secretary and Director to consider.2 Committee
                          members are permitted to eliminate, create, or prioritize the options. In
                          communicating its list of options to the Secretary and Director, it may
                          present the strengths and weaknesses of each. This committee could
                          potentially make recommendations related to implementation strategies.


                          2
                           An informal “planning committee,” or small working group of DHS, OPM, and union senior
                          executives was assembled to provide staff support, highlight issues for discussion during
                          public meetings, and potentially to set the meeting agendas for the Senior Review Advisory
                          Committee.




                          Page 32                                               GAO-03-1099 DHS Personnel System
                          Appendix II
                          Design Process




                          Meetings of the Senior Review Advisory Committee will be governed by the
                          Federal Advisory Committee Act,3 which requires meetings to be open to
                          the public.4

                          The Under Secretary for Management at DHS and the OPM Senior Advisor
                          for Homeland Security cochair the Senior Review Advisory Committee.
                          Committee members are officials in key leadership positions at both OPM
                          and DHS. OPM representatives include the Senior Advisor for Homeland
                          Security, the Associate Director for Strategic Human Resources Policy, the
                          Associate Director for Human Capital Leadership and Merit System
                          Accountability, and the Senior Policy Advisor to the Director and Chief
                          Human Capital Officer. DHS representatives include the Commissioner of
                          Customs and Border Protection, the Director of TSA, Director of the U.S.
                          Secret Service, Director of the Bureau of Citizenship and Immigration
                          Services, and the Director of Administration. Union representatives are the
                          presidents from AFGE, NTEU, and NAAE. External experts with particular
                          knowledge and experience in human capital management will serve as
                          advisors.



DHS Secretary and OPM     The Secretary of DHS and the OPM Director make up the final stage of the
Director Are to Propose   design process. Once they receive the list of options from the Senior
                          Review Advisory Committee, they may edit, remove, or develop
Regulations for the       alternatives to the proposed options. The Secretary and the Director will
Personnel System          then issue proposed personnel rules for the department. As called for in
                          the DHS legislation, individuals affected by the proposed rules have 30
                          calendar days to comment and make recommendations. The Secretary and
                          Director are then to follow the provisions of the statutory reconciliation
                          process for no less than 30 days.5




                          3
                          5 U.S.C. App. 2, section 10.
                          4
                           Notice of the official establishment of the Senior Review Advisory Committee was posted
                          in the Federal Register on June 11, 2003. 68 Fed. Reg. 34994.
                          5
                           Section 841 of the Homeland Security Act establishes a process for collaboration with
                          employee representatives to provide notice of the proposed human resources management
                          system, the opportunity to submit comments, and consultation over the recommendations
                          made.




                          Page 33                                               GAO-03-1099 DHS Personnel System
Appendix III

Characteristics of Core Design Team
Members

               Characteristics of the 48 members of the Core Design Team are described
               in further detail in tables 2 through 6 below. The tables summarize data for
               those members on board as of July 11, 2003. Since that date, membership
               of the Core Design Team has changed.



               Table 2: Design Team Membership

               Agency                            Legacy Unit/Union                           Total
               DHS                               APHIS                                          1
                                                 Coast Guard                                    2
                                                 Customs                                        3
                                                 FEMA                                           3
                                                 FLETC                                          2
                                                 INS                                            5
                                                 Secret Service                                 2
                                                 Treasury                                       3
                                                 TSA                                            3
               DHS Total                                                                       24
               OPM                                                                             16
               Union Professional Staff	         AFGE                                           4
                                                 NTEU                                           4
               Total Union Professional Staff                                                   8
               Total Design Team                                                               48
               Source: GAO.




               Table 3: Who Selected Design Team Member

                                                 Organization that Selected
               Current Employer                  Member                                      Total
               DHS                               NAAE                                           1
                                                 DHS                                           23
               DHS Total                                                                       24
               OPM                                                                             16
               Union Professional Staff          AFGE                                           4
                                                 NTEU                                           4
               Total Union Professional Staff                                                   8
               Total Design Team                                                               48
               Source: GAO.




               Page 34                                            GAO-03-1099 DHS Personnel System
Appendix III

Characteristics of Core Design Team 

Members





Table 4: Subgroup Membership

Subgroup                                          DHS         OPM        Union       Total
Pay and Performance                                 12           9           4         25
Labor and Employee Relations                        11           6           4         21
No data                                              1           1           0          2
Total                                               24          16           8         48
Source: GAO.




Table 5: Human Capital Professional versus Other Experience

                        Human Capital               Other
Organization              Professional         Experience         No Data            Total
DHS                                    12                12              0             24
OPM                                    12                 4              0             16
Union                                   4                 2              2              8
Total                                  28                18              2             48
Source: GAO.




Table 6: Years of Experience of Design Team Members

                                                                         Average Years of
                                                 Average Years of      Experience Outside
Agency                                         Federal Experiencea         Headquartersb
DHS                                                            21.7                    9.9
OPM                                                            21.5                    6.5
Union                                                          12.8                    4.0
Total                                                          21.0                    8.4
Source: GAO.

a
Based on complete data for 41 participants.

b
Based on complete data for 39 participants.





Page 35                                                   GAO-03-1099 DHS Personnel System
Appendix IV

Comments from the Office of Personnel
Management




              Page 36          GAO-03-1099 DHS Personnel System
Appendix IV

Comments from the Office of Personnel 

Management





Page 37                                   GAO-03-1099 DHS Personnel System
Appendix V

GAO Contacts and Staff Acknowledgments




GAO Contacts       J. Christopher Mihm or Edward Stephenson, (202) 512-6806



Acknowledgments	   In addition to the persons named above, Ellen V. Rubin, Tina Smith, Eric
                   Mader, and Lou V.B. Smith made key contributions to this report.




(450224)           Page 38                                      GAO-03-1099 DHS Personnel System
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