oversight

Human Capital Management: FAA's Reform Effort Requires a More Strategic Approach

Published by the Government Accountability Office on 2003-02-03.

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

                United States General Accounting Office

GAO             Report to Congressional Requesters




February 2003
                HUMAN CAPITAL
                MANAGEMENT
                FAA’s Reform Effort
                Requires a More
                Strategic Approach




GAO-03-156
                a
                                                February 2003


                                                HUMAN CAPITAL MANAGEMENT

                                                FAA’s Reform Effort Requires a More
Highlights of GAO-03-156, a report to the       Strategic Approach
Chairman, Subcommittee on Aviation,
House Committee on Transportation and
Infrastructure; Chairman, House
Committee on Government Reform; and
another requester




In 1996, the Federal Aviation
Administration (FAA) undertook a
                                                In 1996, FAA initiated human capital reform initiatives in three broad areas,
human capital reform effort under               some of which required exemption from title 5, and some of which have
one of the most flexible human                  been fully implemented. FAA has not yet completed implementation of
capital management environments                 some key initiatives. For example, FAA’s new compensation system
in the federal government,                      remains unimplemented for about one-quarter of the agency’s workforce—
including broad exemptions from                 those staff whose unions have not reached agreements with FAA. FAA’s
title 5 laws governing federal                  need to implement initiatives among a workforce with a wide range of skills
civilian personnel management.                  and to negotiate changes with multiple unions were among factors that
GAO was asked (1) to examine the                affected the pace and extent of reform implementation.
changes FAA initiated in its reform
effort, including whether they
                                                Selected Initiatives within the Three Areas of FAA’s Reform, Including Whether an
required an exemption from title 5
                                                Exemption from Title 5 Was Required and Implementation Status
and their implementation status;
(2) determine the effects of the
reform effort according to available
data and the views of FAA officials,
managers, and employees; and (3)
assess the extent to which FAA’s
reform effort incorporated
elements that are important to
effective human capital
management.



This report makes
recommendations to enable FAA to
develop a more strategic approach
to its reform effort. By building               FAA had little data with which to assess the effects of its reform effort.
elements that are important to                  While FAA human capital officials cited positive effects of FAA’s reform
effective human capital                         effort, the views of managers and employees GAO interviewed were
management into its approach,
                                                generally less positive.
FAA will be better able to evaluate
the effects of its initiatives, use the
evaluations as a basis for any                  FAA’s lack of empirical data on the effects of its human capital initiatives is
strategic improvements, and hold                one indication that it has not fully incorporated elements that are important
agency leadership accountable.                  to effective human capital management into its overall reform effort. These
FAA will also be better able to                 elements include data collection and analysis, performance goals and
share its results with other federal            measures, and linkage of reform goals to program goals. FAA human
agencies and Congress.                          resource management officials said that the agency should have spent more
                                                time to develop baseline data and performance measures before
The Department of Transportation                implementing the broad range of reforms but that establishing these
and FAA officials generally agreed              elements was a complex and difficult task. FAA has also not gone far
with our recommendations.
                                                enough in establishing linkage between reform goals and overall program
 www.gao.gov/cgi-bin/getrpt?GAO-03-156.         goals of the organization. GAO found that the lack of these elements has
                                                been pointed out repeatedly in evaluations of FAA’s human capital reform
 To view the full report, including the scope
 and methodology, click on the link above.      effort, but FAA has not developed specific steps and time frames by which
 For more information, contact Gerald           these elements will be established and used for evaluation. Incorporation of
 Dillingham, Ph.D., at (202) 512-2834 or        these elements could also help FAA build accountability into its human
 dillinghamg@gao.gov.
                                                capital management approach.
Contents



Letter                                                                                                 1
                             Results in Brief                                                          3
                             Background                                                                6
                             FAA Initiated Personnel Changes in Three Broad Areas, Some of
                               Which Required Exemptions from Title 5                                  9
                             Key Elements of Personnel Reform Have Not Yet Been Fully
                               Implemented                                                            17
                             FAA Had Little Data on Reform’s Effects, and Views of FAA Officials
                               Often Differed from Views of Managers and Employees We
                               Interviewed                                                            24
                             FAA Has Not Fully Incorporated Elements Needed for Effective
                               Human Capital Management                                               35
                             Conclusions                                                              44
                             Recommendations                                                          45
                             Agency Comments and Our Evaluation                                       46


Appendixes
              Appendix I:    Scope and Methodology                                                    49
             Appendix II:    Structured Interview Form and Selected Results                           51
             Appendix III:   Elements for Effective Human Capital Management                          61
             Appendix IV:    Core Compensation Pay Bands and Grade Conversion for
                             2002                                                                     64
              Appendix V:    FAA Human Resource Management Office’s Balanced
                             Scorecard Performance Measures                                           66
             Appendix VI:    GAO Contacts and Staff Acknowledgments                                   68
                             GAO Contacts                                                             68
                             Staff Acknowledgments                                                    68


Tables                       Table 1: Overview of Human Resource Management Office’s
                                      Balanced Scorecard Performance Measures                         39
                             Table 2: Chronology of Internal and External Evaluations of FAA’s
                                      Personnel Reform                                                41


Figures                      Figure 1: Implementation Status of Selected Initiatives within the
                                       Three Areas of FAA’s Personnel Reform That Did or Did
                                       Not Require an Exemption from Title 5                           4




                             Page i                                   GAO-03-156 Human Capital Management
Contents




Figure 2: Selected FAA Human Capital Reform Initiatives and Their
           Need for an Exemption from Title 5                              10
Figure 3: Career Level Pay Bands for Job Categories under Core
           Compensation                                                    12
Figure 4: Implementation Status of Selected FAA Personnel
           Reform Initiatives                                              18
Figure 5: Compensation Systems Applicable to FAA’s Workforce               20
Figure 6: Compensation of Air Traffic Controllers in Field Facilities
           and Regional and Headquarters Offices, 2002                     26
Figure 7: Number of FAA Employees Represented by Unions,
           1991-2001                                                       28
Figure 8: Inspector General’s Comments on the Effects of
           Personnel Reform on Hiring Times                                29
Figure 9: Funding Alternatives Used for Managers’ PCS
           Promotional Moves between Field Facilities, Fiscal Years
           1999-2001                                                       31
Figure 10: Number of Formal EEO Complaints by Year                         34
Figure 11: FAA Employees’ Views on the Model Work
           Environment                                                     35
Figure 12: Volpe Center’s Views on Importance of Linkage                   40
Figure 13: Study’s Views on FAA’s Implementation of Personnel
           Reform                                                          43
Figure 14: Inspector General’s Views on FAA’s Implementation of
           Personnel Reform                                                43
Figure 15: Consultant’s Views on FAA’s Implementation of Personnel
           Reform                                                          44
Figure 16: Eight Critical Success Factors Corresponding with the
           Four High-Risk Human Capital Challenges That Can Help
           Agencies Manage Human Capital Strategically                     62
Figure 17: Six Key Practices for Effective Use of Human Capital
           Flexibilities                                                   63




Page ii                                    GAO-03-156 Human Capital Management
Contents




Abbreviations

CFR         Code of Federal Regulations
EEO         Equal Employment Opportunity
FAA         Federal Aviation Administration
FAACMA      FAA Conference Managers Association
FLRA        Federal Labor Relations Authority
GFT         Guaranteed Fair Treatment
GS          General Schedule
NAPA        National Academy of Public Administration
NATCA       National Air Traffic Controllers Association
OMB         Office of Management and Budget
OPM         Office of Personnel Management
PCS         Permanent Change of Station




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Page iii                                          GAO-03-156 Human Capital Management
A
United States General Accounting Office
Washington, D.C. 20548



                                    February 3, 2003                                                                       Leter




                                    The Honorable John L. Mica
                                    Chairman, Subcommittee on Aviation
                                    Committee on Transportation and
                                      Infrastructure
                                    House of Representatives

                                    The Honorable Thomas M. Davis III
                                    Chairman, Committee on Government
                                      Reform
                                    House of Representatives

                                    The Honorable David Weldon, M.D.
                                    House of Representatives

                                    The Federal Aviation Administration (FAA) is managing its personnel under
                                    one of the most flexible human capital management environments in the
                                    federal government. This is a result of 1995 legislation that granted the
                                    agency broad exemptions from laws governing federal civilian personnel
                                    management found in title 5 of the United States Code. Congress provided
                                    these flexibilities in response to FAA’s position that the inflexibility of
                                    federal personnel systems was one of the most important constraints to the
                                    agency’s ability to be responsive to the airline industry’s needs and to
                                    increase productivity in air traffic control operations. In 1996, FAA
                                    announced a sweeping reform of its personnel management system. As we
                                    have reported,1 major change initiatives generally require a minimum of 5
                                    to 7 years to provide meaningful and lasting results, and so FAA’s
                                    implementation of personnel reform should now be approaching a point
                                    where such results might be discernable. As some other federal agencies,
                                    such as the National Aeronautics and Space Administration, have
                                    requested similar human capital flexibilities, and others, such as the
                                    Transportation Security Administration, are now operating under similar
                                    exemptions from title 5 requirements, FAA’s experiences in implementing
                                    its flexibilities could provide valuable information to Congress in
                                    considering whether to grant the use of such flexibilities at other agencies
                                    and in overseeing their use.


                                    1
                                     U.S. General Accounting Office, Managing for Results: Using Strategic Human Capital
                                    Management to Drive Transformational Change, GAO-02-940T (Washington, D.C.: July 15,
                                    2002).




                                    Page 1                                         GAO-03-156 Human Capital Management
You asked us to review the status of FAA’s personnel reform. As agreed, we
answered the following questions:

• What changes did FAA initiate after being granted broad flexibilities in
  1995 and to what extent did these changes require exemptions from
  title 5?

• What is the status of the implementation of FAA’s human capital reform
  initiatives, and what factors have affected the pace and extent of
  implementation?

• What are the effects of FAA’s human capital reform initiatives according
  to data collected by FAA and the views of FAA human resource and
  labor management officials, managers and employees, and unions?

• To what extent has FAA’s reform effort incorporated elements that are
  important to effective human capital management in the federal
  government?

To answer these questions, we reviewed personnel management
requirements in title 5 and the changes FAA made to its personnel
management system as a part of the agency’s reform effort. We collected
and analyzed internal and external evaluations of different aspects of FAA’s
personnel reform and the available data on the results of reform. We
discussed reform with agency managers and human resource management
officials and union representatives and conducted 176 structured
interviews of randomly selected managers and employees in 27 field
facilities nationwide, 6 of FAA’s 9 regional offices, and FAA headquarters.
Because of limitations inherent in the relatively small sample size, we did
not generalize the views and opinions of those randomly interviewed to all
FAA employees. To augment the views and opinions collected from the
structured interviews, we obtained and analyzed the data available on the
results of the various initiatives provided by FAA’s Office of the Assistant
Administrator for Human Resource Management and the lines of business2
and obtained the views of FAA senior managers in the five lines of business
and representatives of employee associations. Finally, we considered FAA’s
reform effort in light of elements of strategic human capital management


2
 FAA is composed of five separate organizations or lines of business: Air Traffic Services,
Research and Acquisitions, Regulation and Certification, Airports, and Commercial Space
Transportation.




Page 2                                              GAO-03-156 Human Capital Management
                   that we developed in 2002 and assessments of human capital management
                   efforts and agencies’ use of personnel flexibilities that we

                   have performed at other agencies.3 Appendix I contains a more detailed
                   description of the scope and methodology of our work. A copy of our
                   structured interview questions with selected employee responses is
                   provided in appendix II. We conducted our work from November 2001 to
                   October 2002 in accordance with generally accepted government auditing
                   standards.



Results in Brief   In its human capital reform effort, FAA initiated changes in three broad
                   areas—compensation and performance management, workforce
                   management, and labor and employee relations—some of which required
                   exemptions from title 5. In the area of compensation and performance
                   management, FAA introduced two initiatives—a new, more flexible pay
                   system in which compensation levels are set within broad ranges, called
                   pay bands, and a new performance management system intended to
                   improve employees’ performance through more frequent feedback with no
                   summary rating. Both new systems required an exemption from title 5. In
                   the area of workforce management, FAA undertook initiatives in workforce
                   planning (the process by which an organization plans and manages the size,
                   capabilities, diversity, and deployment of its workforce), hiring, training,
                   and relocation of employees. While the planning and training initiatives
                   generally did not require exemptions from title 5, other workforce
                   management initiatives did require exemptions. In particular, exemption
                   from title 5 requirements allowed FAA to establish its own competitive
                   hiring process and bypass centralized government hiring system
                   requirements. Finally, initiatives in the area of labor and employee relations
                   included the establishment of new groups to represent unions and
                   employees and a new policy initiative to promote diversity and an open
                   work environment. Neither initiative required exemption from title 5,
                   which continues to govern FAA’s labor relations.

                   While FAA has fully implemented some or all initiatives in each of the three
                   broad areas of the reform effort it began in 1996, some key initiatives have


                   3
                    U.S. General Accounting Office, A Model of Strategic Human Capital Management, GAO-02-
                   373SP (Washington, D.C., March 15, 2002); U.S. General Accounting Office, Human Capital:
                   Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-02
                   (Washington, D.C.: Dec. 6, 2002).




                   Page 3                                              GAO-03-156 Human Capital Management
                                           not yet been fully implemented, and the pace and extent of implementation
                                           have been affected by several factors. In the area of compensation and
                                           performance management, FAA’s new compensation system has not yet
                                           been implemented for about one-quarter of the agency’s workforce whose
                                           unions have not reached a new pay agreement with FAA. FAA’s new
                                           performance management system had been implemented for about 20
                                           percent of the total workforce (15 percent nonunion employees and 5
                                           percent union employees) at the time of our review. In the area of
                                           workforce management, FAA implemented most initiatives in 1996 by
                                           allowing managers in the lines of business immediate use of new
                                           agencywide flexibilities for hiring and training employees. While FAA
                                           established similar agencywide policies for developing workforce plans for
                                           staff, this initiative has not been fully implemented. In the area of labor and
                                           employee relations, FAA implemented initiatives establishing new
                                           partnership forums for union and nonunion employees and a new model
                                           work environment program. While we did not determine all of the factors
                                           that may have affected the pace and extent of implementation, FAA’s need
                                           to implement initiatives among a workforce with a wide range of skills and
                                           workplace environments and to negotiate changes with 48 bargaining units
                                           within FAA’s nine unions were among factors that affected the pace and
                                           extent of reform implementation. Figure 1 shows selected initiatives in
                                           each of the three areas of reform, along with whether they required
                                           exemptions from title 5 and their implementation status.



Figure 1: Implementation Status of Selected Initiatives within the Three Areas of FAA’s Personnel Reform That Did or Did Not
Require an Exemption from Title 5




                                           Page 4                                        GAO-03-156 Human Capital Management
FAA had little data with which to assess the effects of its reform effort.
While FAA human capital officials cited positive effects of FAA’s human
capital reform effort, the views of managers and employees and union
representatives were generally less positive. In the area of compensation
and performance management, FAA had not systematically collected or
analyzed data to support human resource management officials’ view that
compensation changes had increased the agency’s ability to attract and
retain employees. At the same time, many FAA managers and employees
we interviewed were critical of the new compensation system. Nearly two-
thirds (110 out of 176) of those we interviewed disagreed or strongly
disagreed that the new pay system is fair to all employees. We were able to
find evidence of specific concerns regarding unfairness in disparities in pay
for air traffic controllers. In addition, according to representatives of
FAA’s Office of Labor Relations and employee unions, a general sense of
unfairness over pay among some FAA employees outside of air traffic
services has led to increased unionization among FAA employees. The
number of employees in unions, as a percentage of the workforce,
increased from 63 percent in 1995 to almost 80 percent in 2001. In the area
of workforce management, human resource management officials provided
limited data collected only for air marshals to support their view that
external hiring times had decreased from an average of 6 months to as little
as 6 weeks. In contrast, only 12 of the 46 managers we interviewed said that
the speed of hiring has improved. Finally, FAA labor management officials
cited a limited amount of data that indicated that the number of grievances
filed at the national level by employees represented by unions had
increased as evidence that new employee-union forums had not improved
labor management relations. The managers and employees we interviewed
had mixed views on the impact of labor and employee relations reform
initiatives.

FAA’s lack of empirical data on the effects of its human capital initiatives is
one indication that it has not fully incorporated elements that we and
others have identified as important to effective human capital management
into its reform effort. These elements include data collection and analysis,
performance goals and measures, and linkage of reform goals to program
goals. Systems to gather and analyze relevant data provide a basis against
which performance goals and measures can be applied. FAA human
resource management officials said that the agency should have spent
more time to develop baseline data and performance measures before
implementing the broad range of reforms but that establishing these
elements was a complex and difficult task. They said FAA was under
significant pressure to rapidly implement reforms and that one impact of



Page 5                                      GAO-03-156 Human Capital Management
             FAA’s incremental approach to implementing the reforms was that baseline
             measures tended to change as more people were brought under the
             reformed systems. FAA has also not gone far enough in establishing linkage
             between reform goals and overall program goals of the organization,
             another element we have identified as important to effective human capital
             management. We found that the lack of these elements has been pointed
             out repeatedly in evaluations of FAA’s human capital reform effort, but FAA
             has not developed specific steps and time frames by which these elements
             will be established and used for evaluation. Incorporation of these
             elements could also help FAA build accountability into its human capital
             management approach.

             This report makes recommendations designed to enable FAA to develop a
             more strategic approach to its reform effort. By building these elements
             into its approach, FAA will be better able to evaluate the effects of its
             reform initiatives, use the evaluations as a basis for any strategic
             improvements to its human capital management approach, and hold
             agency leadership accountable for the results of its human capital
             management efforts. Doing so would also enable the agency to share its
             results with other federal agencies and Congress. In commenting on the
             draft of this report, the Department of Transportation and FAA generally
             agreed with the report’s recommendations. They emphasized the
             complexity of the reform effort and said they have been making significant
             progress in developing needed elements for measuring the effectiveness of
             the new programs.



Background   The FAA’s mission is to provide a safe and efficient national aerospace
             system. FAA’s key aviation functions include regulating compliance with
             civil aviation safety standards and air commerce, operating the national air
             traffic management system, and assisting in the development of airports.
             The achievement of FAA’s mission is dependent in large part on the skills
             and expertise of its workforce. FAA consists of nearly 50,000 people,
             organized into 5 lines of business and several staff offices. Its workforce
             provides aviation services including air traffic control, maintenance of air
             traffic control equipment, and certification of aircraft, airline operations
             and pilots. FAA’s human resource management office is responsible for
             managing agencywide implementation of personnel reform and providing
             policy and guidance to regional human resource management divisions that
             manage the implementation of personnel reform within their areas of
             responsibility.




             Page 6                                    GAO-03-156 Human Capital Management
In September 1993, the National Performance Review concluded that
federal budget, procurement, and personnel rules prevented FAA from
reacting quickly to the needs of the air traffic control system for new and
more efficient equipment and flexibilities for attracting and hiring staff. In
May 1994, building on these concerns, Congress directed the Secretary of
Transportation to undertake a study of management, regulatory, and
legislative reforms that would enable FAA to provide better air traffic
control services without changing FAA’s basic organizational structure. The
resulting FAA report to Congress, issued in August 1995,4 concluded that
the most effective internal reform would be to exempt FAA from most
federal personnel rules and procedures.5

In reporting on FAA’s request for these exemptions in October 1995, we
concluded that, if the Congress decided to provide FAA with new personnel
authority, the agency could be used to test changes before they were
applied governmentwide.6 At that time, we emphasized the importance of
establishing goals prior to the application of the new authority, noting that
an evaluation of FAA’s efforts after some experience had been obtained
would be important for determining the success of the effort and its
governmentwide applicability.

On November 15, 1995, Congress, in making appropriations for the
Department of Transportation, directed the FAA Administrator to develop
and implement a new personnel management system.7 The law exempted
FAA from most provisions of title 5 of the United States Code and other
federal personnel laws.8 The law required that FAA’s new personnel
management system address the unique demands of the agency’s


4
 Federal Aviation Administration, Background Paper: Personnel Management Reform for
the Federal Aviation Administration (Washington, D.C.: August 1995).
5
 Unless explicitly exempted by law, all federal agencies must follow federal personnel rules
and regulations under title 5 U.S.C., including rules governing how agencies (1) pay and
reward employees; (2) hire, train, and transfer personnel; and (3) conduct labor and
employee affairs.
6
U.S. General Accounting Office, Exempting FAA From Procurement and Personnel Rules,
GAO/RCED-96-27R (Washington, D.C.: Oct. 27, 1995).
7
P. L. 104-50, Fiscal Year 1996 Department of Transportation Appropriations Act.
8
 Congress did not exempt FAA from provisions of title 5 pertaining to veterans’ preference;
antidiscrimination; federal retirement, unemployment and insurance coverage; and
limitations on the right to strike.




Page 7                                             GAO-03-156 Human Capital Management
workforce, and, at a minimum, provide greater flexibility in the
compensation, hiring, training and location of personnel. Subsequent
legislation9 reinstated title 5 requirements related to labor-management
relations, and the Federal Aviation Reauthorization Act of 1996 placed
additional requirements on FAA by requiring that any changes made to
FAA’s personnel management system be negotiated with the agency’s
unions. Accordingly, compensation levels became subject to negotiations
with employee unions. On April 1, 1996, FAA introduced its new personnel
management system.

In January 2001, we designated strategic human capital management as a
governmentwide high-risk area.10 As our January 2001 High-Risk Series and
Performance and Accountability Series reports make clear, serious human
capital shortfalls are eroding the ability of many agencies, and threatening
the ability of others, to economically, efficiently, and effectively perform
their missions.11 In 2002, our studies of human capital management in the
federal government identified a variety of elements—critical success
factors and practices for effective implementation of flexibilities—that are
important for consideration of federal human capital management efforts.
For example, systems to gather and analyze data, performance goals and
measures, linkage between human capital management goals and program
goals of the organization, and accountability are among the elements that
we have identified as essential for effective strategic human capital
management. Appendix III provides an overview of our March 2002 model
for strategic human capital management12 and key practices for federal
agencies’ effective use of human capital flexibilities we identified in
December 2002.13

Many of these elements relate directly to weaknesses we have identified in
our recent reviews of FAA. For example, in July 2001, we reported that a


9
P. L. 104-122, Further Continuing Appropriations, Fiscal Year 1996, March 29, 1996.
10
   U.S. General Accounting Office, High-Risk Series: An Update, GAO-01-263 (Washington,
D.C.: January 2001).
11
 U.S. General Accounting Office, Performance and Accountability Series—Major
Management Challenges and Program Risks: A Governmentwide Perspective, GAO-01-241
(Washington, D.C.: January 2001).
12
     GAO-02-373SP.
13
     GAO-03-02.




Page 8                                             GAO-03-156 Human Capital Management
                       lack of performance measurement, evaluation, and rewards hindered the
                       effectiveness of rulemaking reforms.14 In October 2001, we reported that
                       the overall effectiveness of FAA’s training for air traffic controllers was
                       uncertain and that FAA had not measured productivity gains from changes
                       in controllers’ duties.15 We reported in June 2002 on FAA’s difficulties in
                       acquiring and developing staff to meet agency needs through air traffic
                       control workforce planning.16 Most recently, we reported in October 2002
                       on the inability of air traffic control management to determine the impact
                       of new relocation policies because of a lack of baseline data.17



FAA Initiated          Once exempted from most provisions of title 5, FAA initiated a broad set of
                       personnel changes. For the purposes of this report, we grouped them into
Personnel Changes in   the areas of compensation and performance management, workforce
Three Broad Areas,     management, and labor and employee relations. Figure 2 shows some of
                       the major initiatives in each area, as well as whether they required
Some of Which          exemptions from title 5 personnel rules.
Required Exemptions
from Title 5




                       14
                        U.S. General Accounting Office, Aviation Rulemaking: Further Reform Is Needed to
                       Address Long-standing Problems, GAO-01-821 (Washington, D.C.: July 9, 2001).
                       15
                        U.S. General Accounting Office, Air Traffic Control: FAA Enhanced the Controller-In-
                       Charge Program, but More Comprehensive Evaluation Is Needed, GAO-02-55 (Washington,
                       D.C.: Oct. 31, 2001).
                       16
                          U.S. General Accounting Office, Air Traffic Control: FAA Needs to Better Prepare for Impending
                       Wave of Controller Attrition, GAO-02-591 (Washington, D.C.: June 14, 2002).
                       17
                        U.S. General Accounting Office, Air Traffic Control: Impact of Revised Personnel
                       Relocation Policies Is Uncertain, GAO-03-141 (Washington, D.C.: Oct. 31, 2002).




                       Page 9                                                GAO-03-156 Human Capital Management
Figure 2: Selected FAA Human Capital Reform Initiatives and Their Need for an Exemption from Title 5




                                          a
                                           FAA is not exempt from title 5 requirements governing labor-management relations.




New Compensation and                      FAA required exemption from title 5 rules in order to implement its new,
Performance Management                    broadbanded pay structure. Before obtaining that exemption, FAA paid its
                                          employees according to the General Schedule (GS) pay system mandated
Systems Required Title 5                  by title 5.18 In its 1995 report to Congress, FAA stated that the GS pay
Exemption                                 system—which rewarded employees for their length of service, rather than
                                          for their competencies, skills, or accomplishments—resulted in multiple
                                          levels of supervisors at the same grade level and pay range, an inability to
                                          grant pay increases until statutorily mandated time or experience
                                          requirements were satisfied, and the administrative burden of
                                          administering about 35 special GS pay rates that were exceptions to regular
                                          pay ranges. The Office of Personnel Management (OPM) echoed these
                                          concerns in an April 2002 report.19 OPM concluded that the GS system’s
                                          narrow pay ranges, time-based pay progression rules and across-the-board
                                          delivery of annual increases was not effective in promoting performance-
                                          based pay.


                                          18
                                           The GS pay system, as defined in title 5 U.S.C. 5332, consists of 15 grades and 10 steps
                                          within each grade—each grade representing a salary range and each step indicating the level
                                          of pay an employee receives in that salary range. Over time, an employee’s pay increases as
                                          the employee progresses through the steps within the grade or is promoted. An agency must
                                          determine that an employee’s performance is at least acceptable (i.e., “fully successful”)
                                          before the employee is granted the within grade step increase.
                                          19
                                           Office of Personnel Management, A Fresh Start for Federal Pay: The Case for
                                          Modernization (Washington D.C.: April 2002).




                                          Page 10                                                GAO-03-156 Human Capital Management
Once exempted from these provisions of title 5, FAA replaced the
traditional grade and step pay system with a broadbanded pay structure
that provides for a wider range of pay and greater managerial flexibility to
attract, retain, and reward employees. The new pay band system includes
plans tailored to specific employee segments: a core compensation plan for
the majority of nonunion employees and negotiated versions of the core
compensation pay plan for employees represented by unions; a unique pay
plan for air traffic controllers and air traffic managers; and an executive
pay plan for nonpolitical executives, managers, and some senior
professionals.

To illustrate the pay band system, under core compensation, the GS 15-
grade pay schedule and step pay increases were replaced with a system in
which employees are placed in a pay band under nine job categories
including a specialized category that comprises eight specialized
occupations. Each career category contains two to five pay bands. Each
pay band represents a minimum and a maximum range of pay. For
example, the base pay for a band “D” clerical support employee is at least
$23,600 but no more than $35,400. Figure 3 shows the distribution of pay
bands for career level job categories under core compensation. (For a more
detailed comparison of the GS system and core compensation plan, see
app. IV.)




Page 11                                   GAO-03-156 Human Capital Management
Figure 3: Career Level Pay Bands for Job Categories under Core Compensation




                                        Note: Additional pay bands apply to management levels for all of the job categories with the exception
                                        of students.


                                        In its 1995 report to Congress, FAA reported that the federal performance
                                        management system under title 5 limited the ability of agency managers to
                                        reward their best employees. After being exempted from this system, FAA
                                        incorporated performance management elements into the new
                                        compensation system to encourage results-oriented behavior and to
                                        recognize and reward performing employees via permanent annual salary
                                        increases. For example, under its core compensation plan, all employees
                                        are eligible for a permanent pay increase, called an organizational success
                                        increase, based on the Administrator’s assessment of the extent to which
                                        the entire agency has achieved its annual agency goals. In addition, notably
                                        high-performing individuals may receive an additional permanent pay
                                        increase, called a superior contribution increase, based on supervisory




                                        Page 12                                                  GAO-03-156 Human Capital Management
recommendation.20 FAA has criteria for awarding superior contribution
increases. These criteria include collaboration, customer service and
impact on organizational success. Additional criteria may be used by some
lines of business and staff offices because of their unique needs. FAA is not
required to grant cost of living allowances or locality pay increases but
elected to continue providing these pay adjustments, which are generally
applicable to the federal pay system.21

FAA’s 1995 report to Congress also stated that the federal performance
management system limited the ability of agency managers to deal with
unacceptable performance. FAA’s legislative exemption from title 522
enabled the agency to establish its new performance management system.
According to human resource management officials, this system focuses on
human capital development by helping to make individual employees
aware of their roles and responsibilities in helping the agency achieve its
program goals and provides ongoing feedback and written evaluations to
improve individual employee performance. The new performance
management system incorporates a variety of feedback approaches in
addition to traditional supervisor-to-employee feedback, including
performance plans that discuss managers’ and employees’ agreements
regarding job expectations and feedback from the employee to the
supervisor. At the end of the performance evaluation cycle, employees
receive a narrative performance summary instead of a year-end rating that
defines employees’ performance in specific categories.23 The performance
summary reflects an assessment of achievements based on outcomes and
expectations, while professional competencies such as collaboration and
customer service are elements of the new compensation system. As a
result, the performance management system is not directly linked to pay
for performance elements of FAA’s new compensation system. While FAA’s
program documentation described union involvement and the use of

20
 Under core compensation, employees that do not meet minimum requirements do not
receive either of the permanent pay increases.
21
 Cost of living allowances are base pay differentials paid to employees working in locations
outside the contiguous United States that have substantially different local economies.
Federal pay rules provide locality pay for approximately 30 metropolitan areas and one area
covering the “rest of the United States.”
22
     5 U.S.C. 4302(b) and 5 C.F.R. 430.201.
23
 Title 5 requires the development and submission of a summary rating; since FAA’s new
system does not include a summary rating, the agency’s exemption from title 5 enabled FAA
management to adopt the new system.




Page 13                                            GAO-03-156 Human Capital Management
                          employee focus groups in the development of the system, FAA did not
                          systematically validate the final version of the performance management
                          system with all employees before beginning implementation in 2002.
                          Human resource officials said they planned to validate the new system by
                          obtaining employee input through an employee attitude survey in 2003 and
                          through continuing negotiations with employee unions and that these
                          would allow for continuing refinements.



Some Workforce            Some of FAA’s workforce management reform initiatives required
Management Initiatives    exemption from title 5 while others did not. For example, FAA’s workforce
                          planning initiative did not require an exemption from title 5. On the other
Required Exemption from
                          hand, changes in procedures governing hiring and locating staff, as well as
Title 5                   some training initiatives, such as fee-for-service training programs, did
                          require exemptions from title 5.

                          In requesting exemption from title 5 requirements governing hiring and
                          locating staff in 1995, FAA cited inefficiencies of working through OPM to
                          hire and geographically place qualified staff at key facilities or to reassign
                          employees in response to changing needs. According to an FAA staffing
                          task force, the agency had lost highly qualified candidates because
                          managers could not fill jobs in a timely manner. FAA estimated that it took
                          an average of 6-8 months to bring a new hire onboard from outside the
                          federal service using OPM as a hiring source and that it took, on average, 60
                          days to permanently fill a position internally. FAA also considered OPM
                          allocations for executive positions excessively rigid, as any increases to the
                          allocation provided had to be supported by the Department of
                          Transportation and approved by OPM.24 Moreover, FAA stated that the
                          temporary internal movement process (from one FAA location to another),
                          also governed by OPM regulation, was equally inflexible because it limited
                          the duration of temporary assignments, and imposed onerous processing
                          requirements. The movement process required paperwork to be processed
                          every 120 days and could require up to seven separate personnel actions for
                          a 2-year temporary assignment.

                          FAA’s 1995 request for flexibilities in the area of training was based on
                          perceived redundancies and inefficiencies in its training programs.
                          According to an FAA personnel reform training task force report in 1996,


                          24
                               5 U.S.C. 3392, 3393.




                          Page 14                                    GAO-03-156 Human Capital Management
centralized agency training programs required by title 525 provided standard
training that did not always address specific business needs. FAA also
requested exemption from title 5 in order to have flexibility to provide
unfunded or partially funded moves of employees to locations where they
and their skills are most needed. According to FAA Air Traffic Services and
human resource management officials, FAA historically interpreted title 5
rules as a requirement to fully reimburse all Permanent Change of Station
(PCS) moves since the agency considered all such moves to be in the
interest of the federal government.

After Congress provided FAA with its new flexibilities, FAA developed a
new framework for workforce planning to guide executive, occupational,
and managerial/supervisory workforce planning. This did not require an
exemption from title 5. With regard to hiring, FAA used its exemption from
title 5 to establish hiring policies that allow FAA to hire applicants directly
from outside the government and from other federal agencies without
going through OPM. To do so, FAA established three hiring approaches: (1)
using centralized registers, (2) announcing vacancies, and (3) authorizing
on-the-spot hiring.26 According to FAA human resource management
officials, the agency also used its exemption from title 5 to streamline
staffing by decreasing the number of appointment types from 14 to 2
(temporary and permanent) and hiring authorities from approximately 500
to 1.27 FAA also established a flexible system for adjusting the number of
executive positions in response to shifting agency priorities. This new
system allows the Administrator to establish new executive positions and
reassign and select the top management team.

In the area of training, FAA (1) delegated responsibility for managing
training funds and programs to its lines of business, (2) allowed users to
select training from multiple providers, (3) created fee-for-service training



25
     5 U.S.C. 4107.
26
 FAA uses on-the-spot hiring for specific occupations designated as hard-to-fill (such as
engineers at certain levels) and for special appointing authorities such as outstanding
scholar and welfare-to-work.
27
  According to the Accompanying Report to the National Performance Review, HRM01:
Create a Flexible and Responsive Hiring System Office of the Vice President, (Washington,
D.C.: 1993): the federal hiring “system is overly constrained by statute and regulation; over
300 appointing authorities provide little useful management information and require
interpretation by personnel specialists.”




Page 15                                             GAO-03-156 Human Capital Management
                                programs, and (4) provided broader authority to fund degree programs for
                                employees. The latter two initiatives required exemptions from title 5.28

                                Another area of workforce management for which FAA used its exemption
                                from title 5 requirements was relocating employees. 29 As part of its reform,
                                FAA delegated the authority to determine eligibility for and amount of
                                benefits to each line of business and provided three PCS funding options:
                                (1) full PCS reimbursement, (2) fixed relocation payments,30 and (3)
                                unfunded moves. As before reform, if the move is in the interest of the
                                government, FAA will fully reimburse the individual for costs associated
                                with the move.31 Under the new PCS rules, if FAA determines that it will
                                derive some benefit from a move, even though the move is not in the
                                interest of the government, the agency may offer a fixed relocation
                                payment of up to $25,000. If a move is not in the interest of the government
                                and FAA does not determine that it will derive some benefit from the move,
                                there is no basis for offering PCS funding. However, as a result of FAA’s
                                personnel reform, employees may choose to make unfunded moves at their
                                own expense for personal reasons, to gain experience needed for
                                professional advancement, or for promotion.



Most Labor and Employee         FAA was ultimately not exempted from title 5 requirements governing
Relations Initiatives Did Not   labor-management relations. As part of its overall reform effort, it
                                undertook several initiatives in the area of labor relations that did not
Require Exemptions
                                require exemption from title 5. For example, FAA and its unions
                                established a new forum—the National Labor Management Partnership
                                Council—for union representatives and senior management to exchange
                                information and ideas. To improve overall employee relations, FAA also
                                established a new forum for nonunion employees to facilitate
                                communications between employees and FAA management that also did



                                28
                                 While FAA was granted an exemption from title 5 training requirements by Congress, the
                                President also has the authority to exempt federal agencies from title 5 training
                                requirements (5 U.S.C. 4102(b)).
                                29
                                     5 U.S.C. 5724 and 5724a.
                                30
                                     For a more detailed discussion of FAA’s use of PCS benefits, see GAO-03-141.
                                31
                                  Under title 5 rules, federal agencies may elect to pay for the expenses of transportation of
                                immediate family and of household goods and personal effects to and from the assignment
                                location for a PCS move when it is in the interest of the federal government.




                                Page 16                                               GAO-03-156 Human Capital Management
                    not require an exemption from title 5.32 Similarly, in consultation with union
                    and nonunion employee groups, FAA developed a new policy promoting a
                    Model Work Environment to create and maintain an effective working
                    environment for its employees by managing diversity and practicing equal
                    employment opportunity and affirmative action. In addition, on July 1,
                    1998, FAA established an Accountability Board to standardize procedures
                    to insure management's uniform and effective handling of sexual
                    harassment allegations and related misconduct of a sexual nature. In July
                    2000, the scope of the Board was expanded to include harassment and
                    other misconduct that creates or may create an intimidating, hostile or
                    offensive work environment based on race, color, religion, gender, sexual
                    orientation, national origin, age and disability. The establishment of the
                    Board did not require exemption from title 5.

                    FAA required exemption from title 5 to establish the Guaranteed Fair
                    Treatment Program, an alternative dispute resolution method in which a
                    three-person review panel adjudicates employee grievances. FAA intended
                    the new program to be the only method by which employees not covered
                    by a union agreement could seek administrative reviews of grievances and
                    to replace the traditional approach under title 5 rules involving the Merit
                    Systems Protection Board.33 (As discussed later, FAA was later required by
                    Congress to reinstate the traditional title 5 process and now offers
                    employees the choice of the two processes for resolving disputes.)



Key Elements of     While FAA has completed many of the initiatives that required changes to
                    policy and procedures, it has not yet completed implementation of some of
Personnel Reform    the more complex elements of the personnel reform it began in 1996,
Have Not Yet Been   specifically compensation and performance management systems and
                    workforce planning initiatives (see fig. 4). FAA officials said that the
Fully Implemented   diversity of skills and duties of FAA’s workforce as well as negotiations
                    with unions that represented a large number of employees has slowed
                    somewhat the pace and extent of implementation of compensation and
                    performance management initiatives.


                    32
                         5 C.F.R. 251.
                    33
                       OPM has recognized the need to reduce costly and time-consuming formal complaints and
                    grievances and encourages federal agencies to resolve disputes at the lowest possible level
                    through a variety of alternative dispute resolution methods (60 Federal Register 47039,
                    September 11, 1995).




                    Page 17                                            GAO-03-156 Human Capital Management
Figure 4: Implementation Status of Selected FAA Personnel Reform Initiatives




According to the Assistant Administrator for Human Resource
Management, FAA’s implementation strategy was to establish a broad
policy framework and then focus incrementally on individual elements of
reform to eventually achieve full implementation. Between April 1996 and
October 1998, for certain workforce management and labor and employee
relations initiatives, FAA defined the new flexibilities available through
agencywide “corporate” policies and then empowered the individual lines
of business to adapt and make use of the new tools as appropriate.
According to human resource management officials, these initiatives
helped FAA “jump-start” its reform effort, while other reform initiatives,
such as compensation, required varying incremental degrees of
development because of the diverse characteristics of FAA’s workforce.
Human resource management officials said other initiatives, such as
workforce planning, were considered to be of a lower priority in terms of
implementation.




Page 18                                      GAO-03-156 Human Capital Management
Most Employees Are Paid     As of September 30, 2002, FAA had fully implemented its broadbanded
Under New Compensation      compensation plans, including the performance incentive increases, for
                            about three-quarters of the agency’s workforce. About 8,000 nonunion
Systems, but                employees are paid under the core compensation plan, all senior
Implementation of the New   executives (about 180) are paid under the executive compensation plan,
Performance Management      and about another 9,000 employees represented by three of FAA’s nine34
System Has Been Limited     unions are paid under negotiated versions of the core compensation plan.
                            Because the performance incentive elements of the new system were not
                            incorporated until late 2001, fiscal year 2002 will be the first year in which
                            all employees under core compensation experience a full cycle with all the
                            elements of its reformed compensation system fully in place.35 In addition,
                            more than 19,000 air traffic controllers are paid according to a specialized,
                            negotiated pay plan that includes pay banding36 and superior contribution
                            increases. The remainder of FAA’s workforce (about 13,000),37 most notably
                            those union employees whose union has not reached a new agreement with
                            FAA, continues to be compensated under the traditional GS grade and step
                            system under title 5 rules, as shown in figure 5.




                            34
                              Nine different unions represent various employee segments at FAA. Bargaining units
                            within each union represent a specific employee segment based on profession or technical
                            area. For example, NATCA has a bargaining unit called NATCA-AT for air traffic controllers,
                            as well as five separate bargaining units collectively known as NATCA-AF, which represents
                            engineers and architects that manage the maintenance of equipment at air traffic control
                            facilities and perform other air traffic-related operations. In total, there are 48 different
                            bargaining units at FAA.
                            35
                             The research and acquisition organization and the office of the chief information officer
                            participated in a pilot of the complete Core Compensation Plan, which included assessment
                            and payout under the organizational and individual performance-based pay elements.
                            36
                             Air traffic control pay bands are based on the amount of air traffic and complexity of
                            airspace controlled by its field facilities, rather than solely on the roles and responsibilities
                            of the air traffic control position description.
                            37
                              In addition, approximately 330 FAA employees are paid under a prevailing rate,
                            locality-based system similar to that applicable to federal blue-collar employees.




                            Page 19                                               GAO-03-156 Human Capital Management
Figure 5: Compensation Systems Applicable to FAA’s Workforce




Note: “Other” includes the wage grade plan for employees paid by the hour.


The implementation of FAA’s new performance management system has
not yet been completed for most FAA employees. In 1995, prior to its
reform effort and in response to new performance management regulations
issued by OPM,38 FAA decided to establish a separate way of managing
performance. At this time, it uncoupled its performance management
system from its compensation system, based performance appraisals on a
two-tiered evaluation (“meets expectations” or “does not meet
expectations”) of employees’ performance against performance standards,
provided for year-end summary ratings, and established supplemental
criteria (such as making a significant contribution to the efficiency,
economy, or improvement of government operations) to use as a basis for
merit pay. In 1999, as part of its reform effort, FAA began development of a
new performance management system. This new system consists of a
narrative evaluation of employees’ performance against performance
standards combined with feedback and coaching. The new performance

38
 Office of Personnel Management, Deregulation of Performance Management and
Incentive Awards: Final Rule, 5 C.F.R. 430 et al., 60 Federal Register 43936, August 23, 1995.




Page 20                                                 GAO-03-156 Human Capital Management
                           management system does not provide for a year-end summary rating or a
                           basis for merit pay. Instead, the new compensation system includes criteria
                           that are separate and distinct from the performance management system
                           (such as collaboration, customer service, and impact on organizational
                           success) for awarding merit-based pay raises, which are called superior
                           contribution increases. FAA implemented this new performance
                           management system on October 1, 2001, for the Office of Human Resource
                           Management, the Office of Regions and Center Operations, and the
                           Regulation and Certification line of business. Since October 2001,
                           additional staff in a variety of FAA organizations have been placed under
                           the new performance management system, bringing the total under the
                           system to about 20 percent of FAA’s total workforce. As with the
                           compensation system, the new performance management system must be
                           included in the negotiated agreements with FAA’s employee unions.



While Most Workforce       FAA implemented most workforce management initiatives in 1996 by
Management Initiatives     defining the flexibilities available through agencywide “corporate”
                           policies39 and empowering the individual lines of business to adapt and
Have Been Completed,
                           make use of the new tools as appropriate for their staff. The individual lines
Workforce Planning Is in   of business adapted agencywide policies detailing the flexibilities available
Progress                   for hiring, training, and relocating employees by issuing parallel policies to
                           guide their respective workforces and address any applications unique to
                           their staff. While FAA established similar agencywide corporate policies
                           and guidance for developing workforce plans for three staff levels—
                           executive, managerial and supervisory, and occupational—this initiative is
                           still under way. 40 FAA began its executive workforce planning in
                           November 2000. Development of Individual Development Plans for
                           executives—the final element of the executive workforce planning effort—
                           was originally scheduled to be finalized in August 2001 but was still under
                           way at the time of our review. FAA has not yet initiated its managerial and
                           supervisory workforce planning effort. This effort is set to begin in fiscal

                           39
                                Agencywide policies governing travel were published in 1998.
                           40
                            Workforce planning is the process by which an organization plans and manages the size,
                           capabilities, diversity, and deployment of its workforce. It should include developing
                           strategies for integrating hiring, recruiting, training, and other human capital activities in a
                           manner that meets the agency’s long-term objectives to ensure that appropriately skilled
                           employees are available when and where they are needed to meet an agency’s mission.
                           Workforce plans should include the collection of valid and reliable data on such indicators
                           as distribution of employee skills, retention rates, and retirement eligibility by occupation
                           and organizational unit.




                           Page 21                                               GAO-03-156 Human Capital Management
                             year 2003. FAA’s occupational workforce planning, which was originally
                             scheduled to be completed in September of 2001, was still under way at the
                             time of our review. Human resource management officials said that four of
                             the five lines of business—Airports, Air Traffic Services, Regulation and
                             Certification, and Research and Acquisitions—had completed their
                             occupational workforce plans, and the remaining line of business—
                             Commercial Space Transportation—was still developing a plan.



Labor and Employee           FAA announced a series of agencywide policies governing labor and
Relations Initiatives Have   employee relations in 1996 that established the National Labor
                             Management Partnership Council, the National Employees Forum, the
Been Implemented
                             Guaranteed Fair Treatment Program, and a policy promoting a Model Work
                             Environment. FAA required less time to develop and implement these
                             changes because comparable labor and employee representative groups
                             were already in place prior to the reform effort and FAA had existing
                             appeal processes and workplace improvement policies that served as a
                             basis for the Guaranteed Fair Treatment Program and Model Work
                             Environment.



Characteristics of FAA’s     The variety of skills and areas of technical expertise represented in FAA’s
Workforce and the Need to    workforce has affected the implementation of the agency’s new
                             compensation plan. For example, the agency has a unique pay plan for air
Negotiate Changes Have
                             traffic controllers in the field based on the complexity of the facility, while
Affected the Pace and        FAA’s new core compensation plan is based on the duties and
Extent of Reform             responsibilities of 16 different types of positions (ranging from students to
Implementation               pilots to physicians).

                             The schedule for implementing changes in compensation and performance
                             management has been dictated, in part, by the timing of negotiations with
                             employee unions and the ability of FAA and its unions to reach agreement
                             on the new systems. For example, because FAA’s contract with the National
                             Air Traffic Controllers Association (NATCA), the organization representing
                             FAA’s largest group of unionized employees, had expired, management had
                             to negotiate a new agreement in 1998 before it had completed development
                             of its new core compensation pay plan. While the air traffic pay plan, like
                             the core compensation plan, is intended to include annual pay increases
                             based on individuals’ performance, these performance-based increases
                             have not been implemented as intended due to an unresolved dispute
                             between NATCA and FAA management over the details of implementation.
                             As a result, the air traffic pay plan distributed annual performance-based


                             Page 22                                     GAO-03-156 Human Capital Management
incentive pay equally among all union members for fiscal years 1999, 2000,
and 2001, unlike the core compensation plan developed for the rest of the
agency in which only higher performing individuals may receive
performance-based incentive pay. At the time of our review, FAA and the
air traffic controllers union had not yet determined how fiscal year 2002
and future years’ incentive pay increases would be allotted.

According to human resource management officials, the new core
compensation has not been negotiated for union employees that represent
about 30 percent of FAA’s total workforce, and the need to negotiate the
incorporation of compensation and performance management initiatives
into union contracts has increased the length of time needed to negotiate
some contracts. For example, before 1996, FAA and the Professional
Airways System Specialists union took from 3 to 14 months to negotiate an
agreement, but the negotiation time more than doubled to 29 months for
the latest agreement. FAA and the National Association of Air Traffic
Specialists have been attempting to negotiate a new contract since 1997,
and the parties had not yet reached agreement at the time of our review.
Labor relations officials attributed increases in negotiation times to the
expanded scope of contract negotiations, which now includes negotiating
compensation that historically was not negotiated. The performance
management system has also not yet been implemented for most of the
unionized segments of the agency’s workforce. According to FAA officials,
2,324 union employees in FAA’s Office of Regions and Center Operations
and Office of Public Affairs, representing only about 5 percent of FAA’s
total workforce represented by unions, were under the new system at the
time of our review.




Page 23                                  GAO-03-156 Human Capital Management
FAA Had Little Data on        FAA had little or no data on the effects of many of the reform initiatives.
                              Human resource management officials cited positive effects of the reform
Reform’s Effects, and         initiatives in the areas of compensation41 and workforce management,
Views of FAA Officials        while in the area of labor and employee relations, labor management
                              officials provided a limited amount of data suggesting that labor relations
Often Differed from           had not improved. Managers and employees with whom we spoke in our
Views of Managers and         interview effort generally cited less positive views on the effects of reform
Employees We                  initiatives.
Interviewed

FAA Lacked Data on Effects    FAA had not systematically collected or analyzed data to determine
of Compensation Changes;      whether the new compensation system had achieved its objective of
                              increasing the agency’s ability to attract and retain employees. Human
Officials Said Compensation
                              resource management officials said the new compensation system had
Changes Increased             achieved this objective. They said the initiative had made the agency more
Flexibility, While Managers   competitive in hiring because FAA can now offer higher starting salaries
and Employees Perceived       within the wider-range of pay afforded by the pay bands. In addition, air
Inequities in the New Pay     traffic officials we spoke with said that the air traffic control pay plan has
System                        made it easier to staff hard-to-fill positions at busier air traffic facilities.
                              They noted, however, that they did not have a definition for hard-to-fill
                              positions and had not tracked the extent to which positions they might
                              consider hard to fill had been filled more or less quickly since the new pay
                              plan was instituted.

                              In contrast, many FAA managers and employees we interviewed were
                              critical of the new compensation system. Nearly two-thirds of those
                              responding to our structured interview (110 of 176) disagreed or strongly
                              disagreed that the new pay system is fair to all employees.42 While we did
                              not attempt to evaluate the concerns raised during interviews, we did find
                              some evidence that helps explain these perceptions of unfairness. For
                              example, concerns about air traffic controller pay disparities are supported


                              41
                               Because 2001 was the first year of implementation for the new performance management
                              system, we did not obtain views on its effects.
                              42
                               In our interview, we did not specifically ask whether managers’ and employees’ perception
                              of the fairness of the new compensation system was based on its treatment of protected
                              categories such as sex or race, but no interviewees mentioned this issue in their elaboration
                              of their views.




                              Page 24                                             GAO-03-156 Human Capital Management
by a Department of Transportation Inspector General report. This report
found that FAA’s initial implementation of the new compensation system
led to inequities in pay between air traffic managers, supervisors, and
specialists in field facilities, who are covered by the air traffic pay plan that
FAA negotiated with NATCA in October 1998, and a much smaller group of
air traffic managers and supervisors in regional and headquarters locations,
who (together with other FAA managers and employees) are covered by
the new core compensation plan. Because of differences between the two
plans, managers and employees transferring from regional and
headquarters locations to field facilities were not eligible for the same pay
increases as those who were already assigned to field facilities in October
1998.

To address this situation, FAA issued new guidance in July 2001 that
established consistent rules for setting pay when employees move within
and among the various pay systems in FAA, including movements between
field positions and positions in regional offices and headquarters. Even so,
perceptions of unfairness persist. According to the President of the FAA
Conference Manager’s Association (FAACMA), the new guidance created
the perception among some managers and employees of a financial
disincentive for air traffic controllers to move from field facilities to
regional offices or headquarters to gain supervisory and managerial
experience. Further, the FAACMA President, as well as some controllers
with whom we spoke, stated that such a move would result in a significant
loss of pay—generally about $10,000 to $20,000. “Because of pay
discrepancies,” one regional air traffic manager said, “we can’t get highly
paid employees to move over to management positions.” Human resource
management officials said that, while some field employees who move to
positions in regional offices or headquarters would see a pay reduction of
$10,000 or $20,000, not all such moves would result in such a pay reduction.

According to our review of FAA’s July 29, 2001, guidance, an unfair
disparity in pay between air traffic controllers would be created only when
managers and employees were paid above or below established pay bands.
At our request, FAA analyzed the salaries of its air traffic control staff and
determined that 327, or fewer than 2 percent, of about 20,000 controllers
(including supervisors, managers, and employees) were paid above current
pay band maximums. (FAA’s analysis did not identify any staff being paid
below established pay band minimums for their positions.)

When we compared the distribution of 2002 base pay for all air traffic
controllers in field facilities and in regional and headquarters facilities, we



Page 25                                      GAO-03-156 Human Capital Management
found that the regional and headquarters controllers are generally paid less
under core compensation than the field controllers are paid under the air
traffic pay plan. As shown in figure 6, the percentage of controllers paid
between $100,000 and $130,000 is smaller in the regions and in
headquarters than in the field. This is consistent with FAA’s goal of
providing higher levels of pay to controllers in an operational environment.
In addition, the percentage of controllers paid between $60,000 and $80,000
is greater in the regions and in headquarters than in the field.



Figure 6: Compensation of Air Traffic Controllers in Field Facilities and Regional and
Headquarters Offices, 2002




According to human resource management officials, the pay rates of many
field employees and supervisors can be accommodated within the pay
ranges of regional office and headquarters management positions, as
shown above. Thus, they said that pay discrepancies should not affect the
ability to entice field employees to move into management positions.
However, it is understandable that some air traffic managers and
controllers perceive a financial disincentive for moving from the field to a
regional office or headquarters because, although the range of pay under


Page 26                                         GAO-03-156 Human Capital Management
both systems is comparable, the number of higher paid positions is greater
in the field than in the regional offices or headquarters. To the extent that
these perceptions persist, FAA may find it more difficult to place its most
experienced air traffic managers in regional offices and headquarters.
However, this disparity is consistent with FAA’s goal of basing pay on the
operational environment and is explicitly stated in FAA’s July 2001 pay plan
for air traffic managers and controllers.

A general perception of unfairness regarding FAA’s new compensation
system has led to increased unionization among FAA employees outside of
the air traffic services line of business as well as within it, according to
both internal and external sources. FAA human resource officials said that
considerable unionization began before such systems as core
compensation were implemented and that most concerns cited during
unionization efforts were of uncertainty and loss of guarantees, not of
unfairness. However, the introduction of the pay system corresponded with
an acceleration in the increase in employees seeking union representation
after FAA began its reform effort. For example, employees represented by
unions (as a percentage of FAA’s total workforce) increased from 63
percent prior to the reform in 1995 to 66 percent in 1998 and to 79 percent
by 2001. FAA labor relations officials and FAA spokespersons for new
unions at FAA told us that a perceived inequity regarding pay was the prime
reason new unions were formed. A 1999 study by the National Academy of
Public Administration (NAPA) also found that real and perceived inequities
in levels of pay were “major contributors to the view among a growing
number of [FAA] employees that you must belong to a union to get your fair
share.”43 A more recent FAA study in 2001 likewise acknowledged that the
new pay system “may be one possible explanation” for the increase in
unionization.44 Between 1998—when FAA began testing and
implementing its new pay system—and 2001, the number of employees
choosing representation by unions increased nearly 20 percent (from about
32,800 to more than 38,800 employees). Figure 7 shows the number of FAA
employees represented by unions from 1991 through 2001.




43
 Personnel Reform in the Federal Aviation Administration, National Academy of Public
Administration, August 1999.
44
   Phase II Evaluation: A Snapshot of Core Compensation Plan Implementation in FAA,
Assistant Administrator for Human Resource Management Evaluation Staff, FAA,
September 2001.




Page 27                                        GAO-03-156 Human Capital Management
Figure 7: Number of FAA Employees Represented by Unions, 1991-2001




Because FAA had not completed a full appraisal cycle for staff under its
new performance management system at the time of our review, FAA had
little data, and we were not able to obtain the views of managers and
employees on the effects of the new system. We noted that FAA’s
performance management approach does not use a multi-tiered rating
system to rate performance. We have previously raised concerns that such
approaches may not provide enough meaningful information and
dispersion in ratings to recognize and reward top performers, help
everyone attain their maximum potential, and deal with poor performers.
According to human resource management officials, the compensation
system provides a means of recognizing and rewarding top performers
through separate assessments not directly linked to performance
assessments under the performance management system.

The measurable element related to performance management is the
number of employees that receive superior contribution increases under
FAA’s new compensation system. About 20 percent of employees are to
receive the highest superior contribution increases (1.8 percent addition to
base pay) and 45 percent are to receive the next highest level of superior
contribution increases (0.6 percent increase in base pay).




Page 28                                    GAO-03-156 Human Capital Management
Human Resource                 Whereas human resource management officials provided some limited data
Management Officials Had       to support their views that reform initiatives had improved the agency’s
                               flexibility in hiring and relocating employees, the managers we spoke with
Limited Data to Support        were less likely to see positive results. According to human resource
Their Views that Workforce     management officials, FAA’s use of the new hiring flexibilities, though
Management Initiatives Had     restricted by hiring freezes, has reduced external hiring times from an
Increased Flexibility, While   average of 6 months to as little as 6 weeks. They said the examples they
Some FAA Managers Were         provided for air marshal hiring were intended to provide an illustration that
Less Positive                  the policies allow positions to be filled quickly, even in the case of large
                               recruitment efforts. However, the Department of Transportation’s Office of
                               Inspector General, when reviewing FAA’s personnel reform in 1998,
                               questioned FAA’s ability to support this assertion in the absence of data.45
                               (See fig. 8.)



                               Figure 8: Inspector General’s Comments on the Effects of Personnel Reform on
                               Hiring Times




                               Throughout our review, we asked FAA officials from both the human
                               resource management office and lines of business for any documentation
                               or data to support the reduction in hiring times and they were unable to
                               provide any such data. At the close of our review, however, human
                               resource management officials cited some limited data resulting from the
                               Federal Air Marshal Program. According to FAA human resource
                               management officials, the program following the terrorists’ attacks on
                               September 11, 2001, was one of the largest recruitment efforts ever
                               undertaken by FAA. (FAA received and processed more than 200,000
                               applications.) According to FAA officials, it would not have been possible
                               to fill the air marshal positions in the numbers and time frames required
                               without the flexibilities available under FAA’s personnel system. They
                               provided data reflecting a sample of approximately 1,000 candidates for the


                               45
                                Department of Transportation, Office of Inspector General, Personnel Reform: Recent
                               Actions Represent Progress But Further Effort Is Needed To Achieve Comprehensive
                               Change, Sept. 30, 1998.




                               Page 29                                          GAO-03-156 Human Capital Management
air marshal positions. Of those candidates hired, about 30 percent (140)
were hired and placed within 6 weeks. In total, 70 percent (333) were hired
and placed within 8 weeks.46

In contrast to the positive views of human resource management officials,
FAA managers had less positive views on the effects of hiring reforms,
while employees, who are less involved in the hiring process, had mixed
views. Among the 46 managers we interviewed, only about a third (15)
agreed or strongly agreed that the initiatives have improved the ability of
their line of business or staff office to fill job vacancies. Furthermore, only
12 of the 46 managers believed the speed of hiring has improved. These
opinions, while not necessarily representative of all FAA managers today,
are similar to the views expressed by FAA managers in 1998.47 According to
a survey FAA conducted then, 34 percent of managers responding said that
FAA’s streamlined staffing procedures had made it easier to fill vacancies in
their organization, and 32 percent said the speed of hiring had improved.

Human resource management officials also said that new policies
governing the relocation of employees had given managers more flexibility
in relocating employees and employees more flexibility in making career
decisions. Under these new policies, FAA may provide fixed relocation
payments as well as full funding for PCS moves, and it allows unfunded
moves, which were not allowed under FAA's prior policy. Figure 9 shows
that the majority of moves between field offices for managers from fiscal
year 1999 through 2001 (the only years and type of moves for which data
were available) were unfunded.




46
 GAO is conducting a separate review of the hiring and recruitment program for federal air
marshals.
47
 FAA Personnel Reform: Implementation Status Report, prepared for FAA by the Human
Resources Research Organization, January 1998.




Page 30                                           GAO-03-156 Human Capital Management
Figure 9: Funding Alternatives Used for Managers’ PCS Promotional Moves between
Field Facilities, Fiscal Years 1999-2001




In contrast to the positive views of FAA human resource management
officials, FAACMA representatives raised concerns about the impact of the
new policies in the air traffic services line of business, suggesting that they
might have unintended consequences, including a reduction in the number
of qualified applicants, a reduction in the diversity of potential applicant
pools and subsequent discrimination in filling positions, and a negative
impact on employee morale if fluctuations in the annual funding for
relocation payments led to disparities in the payments for comparable
moves over time.48 Air traffic officials said they were still reviewing these
concerns and planned to comment in the near future.49




48
     FAACMA, Legislative Briefing Book, 107th Congress-Second Session, March 2002.
49
 For more information about FAA’s new PCS policies and FAACMA’s concerns, see GAO-03-
141.




Page 31                                             GAO-03-156 Human Capital Management
FAA Had Some Data              Although FAA’s Office of Labor Relations did not have historical,
Suggesting Mixed Effects of    agencywide data to quantify an increase in grievances, FAA labor
                               management officials said the number of grievances50 filed at the national
Labor and Employee             level by employees represented by unions had increased and this increase
Relations Initiatives, While   was a sign that the initiatives had not achieved the reform objective of
Officials, Managers, and       establishing a collaborative labor-management relations environment that
Employees Held a Variety of    would minimize the traditional adversarial relationship. They said that the
Views                          number of grievances filed began to increase following personnel reform
                               changes the agency had made. For example, they noted that in 1999, the
                               core compensation plan was implemented and grievances increased.
                               However, human resource officials said that grievances by union
                               employees could not have pertained to implementation of the
                               compensation pilot because the pilot test only applied to nonunion
                               employees, not to union employees. The Office of Labor Relations
                               implemented a new system for tracking grievance data in October 2001 and
                               began systematically collecting information on the sources (such as
                               headquarters, regions, and unions) and subject (such as compensation, use
                               of leave, and discipline) of grievances filed across the agency.

                               While limited data suggested that FAA’s introduction of an alternative
                               dispute resolution program for employees not represented by unions did
                               reduce the processing times for resolving appeals, employees’ reactions to
                               the new system suggest that many employees did not see this initiative as
                               an improvement. FAA introduced its internal alternative dispute resolution
                               approach—the Guaranteed Fair Treatment Program—in April 1996 in an
                               effort to streamline the appeals process. This approach met with resistance
                               from employees and led Congress, in 2000, to reinstate the traditional title 5
                               process that uses the Merit Systems Protection Board.51 As a result, FAA
                               now offers employees the choice of using either the guaranteed fair
                               treatment program or the traditional title 5 process. The only data human
                               resource officials were able to provide on appeals dated back to fiscal year
                               1997. Although these data are old, they indicated that for fiscal year 1997,
                               appeals went through the guaranteed fair treatment process more quickly
                               (5 to 7 months) than through the Protection Board process (10 months).
                               Even so, the Deputy Assistant Administrator for Labor Relations said that
                               employees, who have been able to choose between the two processes, have


                               50
                                Grievances are concerns expressed by an employee or the union about a condition of
                               employment or an allegation that a contract has not been properly interpreted and applied.
                               51
                                    P.L. 106-181, sec. 307.




                               Page 32                                           GAO-03-156 Human Capital Management
generally not chosen to use the guaranteed fair treatment process. He said
that one reason employees have not used the guaranteed fair treatment
process is because its potential benefits, such as the employee’s right to
help select the arbitrator, have not been effectively communicated to them.
In addition, according to the Deputy Assistant Administrator, both FAA
managers and union leaders have complained about having to pay the cost
of the arbitrator, while employees have complained about having to pay
their own legal fees for attorneys regardless of the outcome of the appeal.
FAA reimburses an employee’s legal fees if the employee wins his/her
appeal when using the Protection Board's process.

Most FAA managers and employees we interviewed said that labor and
employee relations had changed in the last 5 years. For example, 130 of the
176 managers and employees we interviewed agreed or strongly agreed
that labor-management relations had changed in the last 5 years. Of those
130, 75 said that labor-management relations had declined. Similarly, 130 of
the 176 managers and employees we interviewed said employee morale had
changed in the last 5 years, and of those 130, 99 said that employee morale
had declined. While employees’ perceptions regarding the changes in labor
and employee relations cannot be linked directly to FAA’s personnel
reform, some employees cited specific reform initiatives, such as
compensation and the Model Work Environment established to improve
employee relations, when discussing the decline of labor-management
relations and morale.

Union representatives for three of FAA’s nine unions said that a complaint
filed against FAA by the Federal Labor Relations Authority (FLRA) in
March 2001 had reduced collaboration between labor and management.
FLRA charged FAA with bargaining in bad faith because it had refused to
sign an agreement negotiated with the American Federation of State,
County and Municipal Employees, a union that represents employees at
FAA headquarters. FAA management did not sign the agreement and
submitted it instead to the Office of Management and Budget (OMB) for
review. OMB subsequently disapproved some portions of the contract.
Following an investigation of the circumstances, FLRA directed FAA
management and the union to sign and implement the contract. However,
in September 2002, an administrative law judge recommended that FLRA
dismiss the union's complaint, finding that FAA clearly gave notice to the
union of the OMB approval condition and that the union agreed to that
condition.




Page 33                                   GAO-03-156 Human Capital Management
In the area of employee relations, FAA provided us with some data that
may support the views of FAA officials that the Model Work Environment
has had a positive effect. A recent decline in the number of equal
employment opportunity (EEO) complaints may, to an unknown extent,
reflect the effects of FAA’s Model Work Environment. These complaints are
concerns expressed by employees about legally prohibited discrimination
on the basis of race, color, religion, sex, national origin, age, or handicap.
An analysis by FAA’s Office of Civil Rights of data it had collected on the
number and types of formal EEO complaints showed that while such
complaints increased in the years immediately following the
implementation of the Model Work Environment in 1996, they began to
decline 3 years later. As figure 10 shows, the number of EEO complaints
increased from 412 in 1996 to 635 in 1998 and then declined to 485 in 2001.



Figure 10: Number of Formal EEO Complaints by Year




Note: The most frequently filed complaints between 1997 and 2001 were for promotion/nonselection
and nonsexual harassment, followed by complaints about terms or conditions of employment,
assignment of duties, and training.


About three-quarters of the FAA managers and employees we interviewed
(134 of 176) agreed or strongly agreed that they understood the goals of the
Model Work Environment. These goals include reflecting diversity and
eliminating discrimination and harassment in the workplace, which are
common causes of equal employment opportunity complaints. While some
employees cited positive effects of the program, other employees were



Page 34                                               GAO-03-156 Human Capital Management
                        skeptical of its impact. Figure 11 illustrates FAA employees’ divergent
                        views on the Model Work Environment.



                        Figure 11: FAA Employees’ Views on the Model Work Environment




                        Note: Quotations are from an FAA employee in headquarters and an air traffic employee in a regional
                        office, respectively.


                        Even though the decrease in the number of EEO complaints cannot be
                        directly linked to the Model Work Environment initiative, the availability of
                        data and analysis on EEO complaints could provide one objective basis for
                        FAA to discuss the effects and assess the efficacy of this policy and address
                        the concerns of those employees who view its impact less positively.



FAA Has Not Fully       FAA’s lack of empirical data on the reform effort’s effects is one indication
                        that it has not fully incorporated elements that we and others have
Incorporated Elements   identified as important to effective human capital management into its
Needed for Effective    reform effort. Systems to gather and analyze relevant data provide a basis
                        against which performance goals and measures can be applied. FAA human
Human Capital           resource management officials said that the agency should have spent
Management              more time to develop baseline data and performance measures before
                        implementing the broad range of reforms but that establishing these
                        elements was a complex and difficult task. They said FAA was under
                        significant pressure to rapidly implement reforms and that one impact of
                        FAA’s incremental approach to implementing the reforms was that baseline
                        measures tended to change as more people were brought under the
                        reformed systems. FAA also has not gone far enough in establishing linkage
                        between reform goals and program goals of the organization, another
                        element we have identified as important to effective human capital
                        management. We found that the lack of these elements has been pointed
                        out repeatedly in evaluations of FAA’s human capital reform effort, but FAA
                        has not developed specific steps and time frames by which these elements
                        will be established and used for evaluation. Incorporation of these
                        elements could also help FAA build accountability into its human capital
                        management.



                        Page 35                                                GAO-03-156 Human Capital Management
FAA’s Human Capital          The lack of baseline and comparative data for analysis and the lack of
Reform Effort Lacks          performance goals and measures has made it difficult to objectively
                             evaluate the effects or success of FAA’s reform effort. Systems to gather
Needed Data Collection and   and analyze relevant data provide a basis against which performance goals
Analysis, Performance        and measures can be applied. FAA human resource management officials
Goals and Measures, and      agreed that the agency should have spent more time to develop baseline
Linkage of Reform Goals to   data and performance measures before implementing the broad range of
Program Goals of the         reforms but said that establishing measures and goals and reaching
Organization                 consensus on their use was a complex and difficult task with which all
                             federal agencies struggle. They said the agency was under significant
                             pressure to rapidly implement reforms, and that one impact of FAA’s
                             incremental approach to implementing the reforms was that baseline
                             measures tended to change as more people were brought under the
                             reformed systems.

                             Human resource management officials also said that, while FAA has not
                             systematically collected data and analyzed results to identify the benefits of
                             all of the reform initiatives, the Office of Human Resource Management has
                             taken a number of steps since 1998 to increase evaluation and
                             measurement of some human resource management activities and outputs.
                             Actions they cited (in addition to the previously discussed evaluations of
                             compensation implementation) included meeting with consultants, human
                             resource managers and intergovernmental groups and providing briefings
                             to FAA management. While we were in the final stages of our review, they
                             prepared, in response to our request, an informal report52 that described
                             the type of measures they were planning to, or had recently begun to apply
                             as part of a “Balanced Scorecard” approach53 to assessing human resource
                             management activities. The measures in the scorecard approach are based
                             on existing sources of data—customer surveys conducted by the
                             Department of Transportation and FAA employee attitude surveys—as well
                             as new data related to the hiring process, such as the “Time to Fill” (a
                             vacancy) questionnaire, results from employment selection feedback
                             questionnaires, a survey for new recruits and, since December 1999, a
                             separation survey for employees leaving the agency. Human resource

                             52
                                Office of the Assistant Administrator for Human Resources Management, “An Informal
                             Discussion of the FAA’s Human Resource Management Balanced Scorecard” August 21,
                             2002.
                             53
                               A scorecard approach is a framework for measuring and managing performance also used
                             by OMB and OPM to track how well departments and agencies are executing management
                             initiatives.




                             Page 36                                          GAO-03-156 Human Capital Management
officials said they had been “strategically refining” the employee attitude
survey since 1995 to address key human capital issues, such as clarity of
performance expectations and workforce planning.

Our work on strategic human capital management in the federal
government has found that many federal agencies have difficulties in
defining goals and measures and developing and using performance
information to evaluate the effectiveness of human capital management
efforts but that high-performing organizations do so. In cases where
evaluations show that sufficient progress is not being made, high-
performing organizations use data to identify opportunities for
improvement. Similarly, the National Association of Public Administration
(NAPA) has reported the need for performance data, goals, and evaluation
to determine progress, make midcourse corrections, and assign
accountability for achieving the desired outcomes in federal human capital
management efforts.54 NAPA reported that, in the absence of such
systematic evaluation information, the human capital management process
will be driven by anecdotal information that may, or may not, reflect the
condition of human capital management in the organization.

Elements we have identified55 as facilitating the success of improvement
initiatives include establishing

• clear goals and objectives for the improvement initiative,

• concrete management improvement steps that will be taken,

• key milestones that will be used to track the implementation status, and

• cost and performance data that will be used to gauge overall progress.

In addition to the lack of performance data, the performance goals and
measures for personnel reform in FAA’s human resource management and
strategic mission plans are qualitative and do not consistently lend
themselves to measurement or assessment, as they are not specific,


54
 National Academy of Public Administration, Implementing Real Change in Human
Resources Management: The Case for Transforming Public-Sector Human Resources
Management, July 2000.
55
 U.S. General Accounting Office, Management Reform: Elements of Successful
Improvement Initiatives, GAO/T-GGD-00-26 (Washington, D.C.: Oct. 15, 1999).




Page 37                                         GAO-03-156 Human Capital Management
measurable, and time-based. For example, the goal related to reform in
FAA’s 1999 human resource management strategic plan is to “ensure that
FAA has the right people doing the right work at the right time at the right
cost” and has the following measures associated with it:

• increased flexibility to pay competitive salaries;

• increased ability to attract and retain high performers;

• increased managerial flexibility to assign, locate, and manage the
  performance of employees more effectively; and

• decreased hire cycle time.

This goal and its associated measures do not lend themselves to specific,
quantitative, and time-based evaluation. For example, while “decrease hire
cycle time” implies that hire cycle time will be measured as part of
evaluating the achievement of this goal, it does not establish a quantitative
basis for assessment or specify a period of assessment. A more specific,
quantitative, and time-based measure might be to “decrease median or
average hire cycle time by September 2003 by X percent (from median or
average cycle time for fiscal year 2002) for Y percent of all new hires.”

We reported on FAA’s weaknesses in developing and using performance
information in our report on the results of governmentwide surveys of
performance management issues in May 2001.56 In that report, we found
that FAA managers we surveyed reported they did not consistently use
performance measures or data and that FAA was worse than the rest of the
federal government on multiple aspects of performance measurement and
the use of performance information. For example, we found that the
agency was statistically significantly lower than the rest of the government
in the percentage of managers who reported that they had outcome,
customer service, or quality performance measures; and in the percentage
of managers who reported that they used performance information to set
program priorities, allocate resources, adopt new approaches, or
coordinate program efforts.



56
 U.S. General Accounting Office, Managing For Results: Federal Managers’ Views on Key
Management Issues Vary Widely Across Agencies, GAO-01-592, (Washington, D.C. May 25,
2001).




Page 38                                         GAO-03-156 Human Capital Management
At the time of our review, human resource management officials were still
in the process of developing baseline data, performance goals and
measures and were still working to identify potential linkages between its
human capital management reforms and program goals of the organization.
The types of data and measures proposed by human resource management
officials are comparable to those that have been historically suggested—
many of them since FAA initiated development of its personnel reform in
1995—and their implementation is an important effort. However, the
balanced scorecard measurement approach proposed by human resource
management officials focuses primarily on the work environment and
processes within the Office of Human Resource Management and the hiring
process rather than on the many other human capital management reform
initiatives being implemented across the agency. According to FAA human
resource management officials, the office had been working for more than
a year to expand the scope of the scorecard to incorporate measures with
wider implications for all of FAA in response to discussions with human
resource managers and based on information from FAA customers and
employees. Table 1 provides an overview of the balanced scorecard
measures proposed by the human resource management office,
highlighting those that focus on the activities and output of the Office of
Human Resource Management. An expanded overview of these
performance measures that includes areas of measurement and proposed
data sources is provided in appendix V.



Table 1: Overview of Human Resource Management Office’s Balanced Scorecard
Performance Measures

Measurement
perspectives    Performance measures
Customer        Human Resource         Human Resource         Human Resource
                Management Office      Management Office      Management Office
                service excellence     consultation and       innovation and
                                       expertise valued       leadership
Performance     Human Resource         Efficient use Of Human Improved practices
                Management Office      Resource Management within Lines of
                results meet goals     Office resources       Business
Internal        Consistent human      Effective labor-        Attract and retain
processes       resource management management                high caliber
                policy interpretation relationships           employees
Human Resource Empowered Human         Satisfied Human     Rewarding Human
Management      Resource               Resource Management Resource
Office employee Management Office      Office employees    Management Office
                employees                                  work environment




Page 39                                       GAO-03-156 Human Capital Management
(Continued From Previous Page)
Measurement
perspectives          Performance measures
Learning and          Capitalize on Human     Increase Human             Leverage Human
growth                Resource                Resource Management        Resource
                      Management Office       Office capacity to         Management Office
                      talent                  improve                    data/information
Source: FAA.

Note: Shaded areas indicate measures focused internally on the Office of Human Resource
Management.


Clearly linking an agency’s overall human capital management strategy to
its program goals is another element we have identified as key to effective
human capital management. In a 1997 review of FAA’s personnel reform,
the Volpe National Transportation Systems Center highlighted this issue of
linkage, as shown in figure 12.57



Figure 12: Volpe Center’s Views on Importance of Linkage




While FAA has taken some steps to link its human capital reform initiatives
to its program goals, these steps do not go far enough to help the agency
measure the reform’s success. Specifically, FAA incorporated various
aspects of personnel reform into its 1999 strategic human resource
management plan,58 which stated that performance measurement was to
focus on attaining organization goals but did not establish the measures
with which to do so. Similarly, FAA’s 2001 strategic plan, prepared under
the Government Results and Performance Act, includes a goal for the
agency to “fundamentally change the way it operates by implementing
personnel reform” but does not explicitly link this goal for personnel
reform to organizational program goals of aviation safety and system
efficiency. Human resource management officials said that organizational
and individual incentive goals established under the compensation system

57
 Volpe National Transportation Center, FAA Personnel Reform Evaluability Assessment,
April 1997.
58
     Federal Aviation Administration, Human Resources Strategic Plan 1999-2002, April 1999.




Page 40                                               GAO-03-156 Human Capital Management
                                            explicitly linked individual performance to agency goals including safety
                                            and system efficiency and that the standards for performance under FAA’s
                                            new performance management system directly reflect agency and
                                            organizational programmatic goals. Nonetheless, linkage between FAA’s
                                            personnel reform goals and the agency’s programmatic goals continues to
                                            be weakened by a lack of specific, quantitative, and time-based measures
                                            and goals.

                                            FAA’s lack of relevant data, analysis, and performance goals and measures
                                            has been repeatedly articulated since 1995 by other internal and external
                                            reviews of the reform effort. While these reviews have called for FAA to
                                            incorporate these elements into its reform effort, and several recent studies
                                            have also highlighted the issue of linkage, FAA has not established and
                                            carried out a plan with specific steps and time frames for doing so. A
                                            chronology of these studies is provided in table 2.



Table 2: Chronology of Internal and External Evaluations of FAA’s Personnel Reform

Date             Evaluation                               Result
October 1995     Exempting FAA From Procurement and       In reporting on FAA’s request for legislative flexibilities, GAO emphasized
                 Personnel Rules, U.S. General            the importance of establishing goals prior to the application of the new
                 Accounting Office                        authority, noting that an evaluation of FAA’s efforts after some experience
                                                          had been obtained would be important for determining the success of the
                                                          effort and its governmentwide applicability.
December 1995    Best Practices in HRM: Briefing to FAA   An evaluation briefing prepared for FAA’s personnel reform task forces
                 Personnel Reform Task Forces, FAA        identified measurement of human resource practices and processes as an
                                                          essential element for creating a strategic context for personnel reform.
March 1996       Proposed Personnel Reform Evaluation     This report identified evaluation measures for FAA’s personnel reform and
                 Strategy, FAA                            strategies for engaging stakeholders in measuring the results of reform
                                                          initiatives.
April 1997       FAA Personnel Reform Evaluability        The Center conducted an assessment to evaluate potential performance
                 Assessment, Volpe National               indicators for measuring the effectiveness of reform efforts and concluded
                 Transportation Systems Center            that reform principles were not stated in terms of tangible outcomes that
                                                          could be easily measurable and there was no clear sense of priority among
                                                          them.
September 1997   The FAA Human Resource Management This study linked the reform initiatives with proposed indicators of reform
                 System Evaluation Plan: Interim Report, implementation, and potential intermediate and final outcomes to facilitate
                 Human Resources Research                program evaluation.
                 Organization
January 1998     FAA Personnel Reform: Implementation     This report identified a lack of baseline set of data and concluded “there
                 Status Report, Human Resources           has been no effort to establish systematic measurement systems over the
                 Research Organization                    remaining course of personnel reform implementation. Without baseline
                                                          data and the ability to measure current status it is difficult to assess
                                                          whether or not objectives are being met.”




                                            Page 41                                            GAO-03-156 Human Capital Management
(Continued From Previous Page)
Date             Evaluation                                 Result
September 1998   Personnel Reform: Recent Actions           This report concluded that FAA had not identified the specific results it
                 Represent Progress But Further Effort Is   expects to achieve from these programs or established outcome goals and
                 Needed to Achieve Comprehensive            measures to accurately demonstrate that its personnel reform initiatives
                 Change, Department of Transportation       were effective in resolving the original problems that led to reform.
                 Office of Inspector General
September 1998   The FAA Personnel Reform Evaluation        This report presented a general framework for evaluation of personnel
                 Plan, Human Resources Research             reform initiatives and concluded, “…it is critical for the agency to develop
                 Organization                               and implement evaluation and measurement systems to assess the results
                                                            and success of these large-scale HRM [human resource management]
                                                            change efforts.”
April 1999       FAA Manager Satisfaction with              This study recommended that FAA develop a strategy for personnel reform
                 Personnel Reform Implementation and        to identify long-term objectives and outcomes, address how reforms would
                 HR Customer Service, Human                 support accomplishment of mission goals, assess the current status of
                 Resources Research Organization            implementation, develop performance measures, and develop a
                                                            comprehensive schedule for implementing reform initiatives.
July 1999        Personnel Reform Evaluation Database: This report provides a framework for the development of a database to
                 Baseline Report, FAA                  evaluate personnel reform measures.
August 1999      Personnel Reform in the Federal            The Academy concluded that the lack of baseline data and specific
                 Aviation Administration: Three Year        measures to assess the effectiveness of personnel reform and establish a
                 Status Report, National Academy of         basis for continuous improvement was a major issue for FAA that “must be
                 Public Administration                      resolved if personnel reform is to achieve its full potential.”
November 1999    A Communication Strategy for Improved This report provides a framework for encouraging the evaluation and
                 HRM Evaluation and Measurement, FAA measurement of human resource management programs and services
                                                       and cultivating, understanding, and using evaluation tools, data, reports
                                                       and recommendations to improve the quality of human resources products
                                                       and services.
January 2002     Human Resource Performance                 This briefing recommends expanding the focus of the Office of Human
                 Measures for the FAA, Booz-Allen-          Resource Management’s balanced scorecard to additional measures
                 Hamilton                                   dealing with attracting and retaining a talented workforce, as well as linking
                                                            the outputs/outcomes of human resource initiatives to the agency’s
                                                            mission goals.
September 2002   Federal Aviation Administration: Five-     This most recent study of the agency’s progress in personnel reform found
                 Year Review of Personnel Reform and        that the reform effort had suffered from a shortage of baseline data and
                 Strategies for the Future, Deloitte &      metrics to measure the impact of various initiatives on agency operation
                 Touche, LLP                                and strategic objectives. Accordingly, the report recommended that the
                                                            Office of Human Resource Management expand the collection of hard data
                                                            and the use of objective metrics to evaluate the effectiveness of personnel
                                                            reform initiatives.
                                            Source: GAO.


                                            Several of these studies also attributed problems related to a lack of
                                            ownership for the reform effort or a lack of accountability for
                                            implementation or results. For example, in 1999, the National Academy of




                                            Page 42                                               GAO-03-156 Human Capital Management
Public Administration identified the lack of ownership for personnel
reform as a challenge that must be resolved.59 (See fig. 13.)



Figure 13: Study’s Views on FAA’s Implementation of Personnel Reform




As shown in figure 14, a 1998 departmental review found that FAA had not
clearly established accountability for implementation of the reform
initiatives.60



Figure 14: Inspector General’s Views on FAA’s Implementation of Personnel Reform




According to the most recent assessment of the status of FAA’s personnel
reform, published by a consultant in September 2002 and shown in figure
15, a lack of ownership and inconsistent support for personnel reform by
FAA’s executive management team has impaired reform implementation
efforts. 61




59
 National Academy of Public Administration, Personnel Reform in the Federal Aviation
Administration: Three Year Status Report, August 1999.
60
 Department of Transportation, Office of Inspector General, Personnel Reform: Recent
Actions Represent Progress But Further Effort Is Needed To Achieve Comprehensive
Change, Sept. 30, 1998.
61
 Deloitte & Touche, LLP, Federal Aviation Administration: Five-Year Review of Personnel
Reform and Strategies for the Future, (McLean, VA., Sept. 2002.) p. 6.




Page 43                                          GAO-03-156 Human Capital Management
              Figure 15: Consultant’s Views on FAA’s Implementation of Personnel Reform




              Our work on effective human capital management at federal agencies has
              found that building accountability into an agency’s human capital approach
              is important to the effective use of human capital flexibilities. Furthermore,
              we have found that in high performing organizations, managers are held
              accountable for achieving strategic goals, and clearly defined performance
              expectations are in place to hold employees and teams at all levels
              accountable. Establishing systems for gathering performance data and
              incorporating specific, time-based performance measures and goals that
              are linked to the agency’s program goals into the reform effort would
              improve the agency’s ability to set more meaningful strategic goals for its
              human capital reform effort and more clearly defined performance
              expectations for its human capital management. Together, this would help
              the agency build accountability into the reform effort and its overall human
              capital management approach.



Conclusions   Congress granted FAA flexibilities in its human capital management so that
              the agency could more effectively manage its workforce and achieve its
              mission. Yet, more than 7 years after the agency received broad exemptions
              from laws governing federal civilian personnel management, it is not clear
              whether and to what extent these flexibilities have helped FAA to do so. It
              is clear that FAA has faced significant challenges in implementing its
              human capital reform initiatives and evaluating the success of its effort.
              Challenges, including implementing reform initiatives throughout its
              workforce with a wide range of skills and negotiating agreements with
              employee unions, reflect difficulties that may be faced by other federal
              agencies that seek to implement human capital management flexibilities.

              FAA is not able to determine the effectiveness of its human capital reform
              initiatives because it has not incorporated key elements of effective human
              capital management into its effort thus far. While FAA has established
              preliminary linkages between its reform goals and the agency’s program




              Page 44                                     GAO-03-156 Human Capital Management
                  goals, the lack of explicit linkage will make it difficult to assess the effects
                  of the reform initiatives on the program goals of the organization even after
                  data, measurable goals, and performance measures for human capital
                  management efforts are established. FAA has acknowledged the
                  importance of establishing these elements. It has repeatedly said that it is
                  working to collect and analyze data and develop performance goals and
                  measures, but it has not completed these critical tasks, nor has it
                  established specific steps and time frames by which it will do so. As FAA
                  moves forward, a more strategic approach to its reform effort would allow
                  it to better evaluate the effects of its reform initiatives, use the evaluations
                  as a basis for any strategic improvements to its human capital management
                  approach, and hold agency leadership accountable for the results of its
                  human capital management efforts. Doing so would also enable the agency
                  to share its results with other federal agencies and Congress.



Recommendations   In order to acquire the information needed to make more informed
                  strategic human capital decisions and better ensure that FAA’s personnel
                  reforms achieve their intended results in a timely fashion, we recommend
                  that the Secretary of Transportation direct the FAA Administrator to

                  • develop empirical data and establish specific, measurable, time-based
                    goals and performance measures related to these goals; and use them to
                    evaluate the effects of the reforms on the agency’s human capital
                    management, programs, and mission so that the agency can make any
                    needed improvements. Developing these evaluation tools is particularly
                    urgent for those initiatives, such as FAA’s new compensation system for
                    air traffic employees, for which possible negative effects have been
                    raised by employees; and FAA’s new performance management system.

                  • define and describe explicit linkages between human capital
                    management reform initiatives and program goals of the organization.

                  • establish time frames by which data will be collected and analyzed and
                    by which goals, performance measures, and explicit linkage will be
                    established and used to evaluate the success of the reform initiatives
                    and hold agency leadership accountable for the results of its human
                    capital management efforts.




                  Page 45                                      GAO-03-156 Human Capital Management
Agency Comments and   We provided a draft of this report to the Department of Transportation for
                      its review and met with Department of Transportation officials, including
Our Evaluation        FAA's Assistant Administrator for Human Resource Management, to obtain
                      their comments. The department officials generally agreed with the
                      report's recommendations and indicated that the findings presented in the
                      audit report would be useful as FAA moves forward with its human capital
                      reforms. They also noted issues in three areas.

                      First, these officials emphasized that implementing a new human capital
                      system within an existing workforce presented FAA with a significant
                      challenge, given the size of FAA's workforce, the large unionized
                      population, and the variety of occupations and functions within the agency.
                      Second, while these officials agreed that establishing more definitive
                      measures and baseline data, as identified in our recommendations, are
                      important in determining the effectiveness of the new human capital
                      programs, they stated that they have been making significant progress in
                      developing those measures.

                      Third, in responding to our concern that FAA is not able to determine the
                      effectiveness of its human capital reform initiatives because it has not
                      incorporated key elements of effective human capital management into its
                      effort, these officials told us that FAA used the results of its pilot testing
                      and phased implementation approach to modify systems to ensure
                      effectiveness before full implementation and that subsequent assessments
                      were conducted to determine whether the programs were accomplishing
                      the intended goals. They said that FAA already has substantial information
                      to indicate that its new programs and initiatives are on the right track and
                      should be effective in meeting the reform effort’s intent. As examples, they
                      referred to reviews by NAPA and the consulting firm Deloitte & Touche,
                      which they said had characterized FAA’s human capital reforms as “state-
                      of-the-art.” The officials stated that FAA’s design process had been
                      characterized in the NAPA review as yielding high-quality policies, and
                      FAA’s reform effort had been characterized in the NAPA review as heading
                      in the right direction and as “a change management issue that is
                      unparalleled in the federal sector.” They further stated that Deloitte &
                      Touche’s review had found that the guiding principles and objectives of
                      FAA’s personnel reform were sound, and that some programs have already
                      been largely successful, such as streamlined recruitment and staffing
                      processes. Notwithstanding the characterizations in these assessments,
                      both NAPA and Deloitte & Touche raised concerns about issues we found
                      in our review, particularly FAA’s lack of baseline data and specific



                      Page 46                                    GAO-03-156 Human Capital Management
performance measures to assess the effectiveness of its reform effort and
establish a basis for continuous improvement.

Department officials also said that FAA’s new human capital system is
consistent with the President’s Management Agenda and the
Administration’s Human Capital Plan, and that other federal officials have
touted the types of programs FAA developed and implemented as the wave
of the future for the rest of the federal government. FAA emphasized that
its agency is unique among federal agencies in implementing a
performance-based and market-based pay system applicable to both
nonunion and union employees, which clearly links annual pay
adjustments to key agency programs and to individual employee
performance and contributions. We agree that other federal agencies
considering human capital reform may find FAA’s programs and
experiences useful to consider, as FAA was granted human capital
flexibilities in 1995 and has been working since to implement its human
capital reform effort. In fact, we feel that this increases the importance of
FAA’s efforts to effectively evaluate its reform. However, based on our prior
work on human capital management, we found in our review that FAA’s
efforts to link its human capital reform initiatives to its program goals do
not go far enough to help the agency measure the reform’s success and that
linkage between FAA’s personnel reform goals and the agency’s
programmatic goals continues to be weakened by a lack of specific,
quantitative, and time-based measures and goals.

FAA also provided technical clarifications, which we included in the report
where appropriate.


We are sending copies of this report to the Administrator, Federal Aviation
Administration. We also will make copies available to others upon request.
In addition, the report will be available at no charge on the GAO Web site at
http://www.gao.gov.




Page 47                                    GAO-03-156 Human Capital Management
If you or your staff have any questions about this report, please call me at
(202) 512-3650. Key contacts and major contributors to this report are
listed in appendix VII.




Gerald L. Dillingham, Ph.D.
Director, Physical Infrastructure Issues




Page 48                                    GAO-03-156 Human Capital Management
Appendix I

Scope and Methodology                                                                      AA
                                                                                            ppp
                                                                                              ep
                                                                                               ned
                                                                                                 n
                                                                                                 x
                                                                                                 id
                                                                                                  e
                                                                                                  x
                                                                                                  Iis




             To determine the human capital changes that FAA initiated after being
             granted broad flexibilities in 1995 and the extent to which these reform
             initiatives required exemptions from title 5, we reviewed federal personnel
             management requirements under title 5, agency documents identifying
             personnel reform initiatives, and reports by OPM on personnel
             management flexibilities already available under title 5. We also discussed
             the changes with officials from FAA’s Office of the Assistant Administrator
             for Human Resource Management and OPM.

             To determine the status of implementation of FAA’s personnel reform and
             factors that have affected reform implementation, we collected and
             analyzed internal and external evaluations—including those conducted by
             the Department of Transportation’s Office of Inspector General and
             NAPA—of different aspects of FAA’s personnel reform and the available
             data on the results. We also discussed the status of, and barriers to,
             implementation of personnel reform initiatives with FAA human resource
             management officials and representatives from the lines of business.

             To determine the views of FAA managers and employees on the effects of
             FAA’s personnel reform initiatives we conducted a series of structured
             interviews with 176 randomly selected FAA managers and employees. Our
             structured interview included questions about how the agency manages its
             employees, compensation and performance management, and labor and
             employee relations. We discussed the design of these questions with
             officials from FAA and with representatives from FAA’s five largest
             unions—the National Air Traffic Controllers Association (about 19,500
             members), the Professional Airways Systems Specialists (about 11,600
             members), the National Association of Air Traffic Specialists (about 2,300
             members), the American Federation of State, County and Municipal
             Employees (about 2,000 members), and the American Federation of
             Government Employees (about 1,500 members). We then pre-tested the
             structured interview with managers and employees in FAA’s Southern
             Region and made appropriate revisions.

             To maximize our chances of obtaining the views of managers and
             employees across the different segments of FAA’s workforce, we applied a
             judgmental stratification to our random sample (therefore, it may not be
             representative of the actual composition of FAA’s workforce): 25 percent
             managers, and 75 percent employees; and 60 percent Air Traffic
             Services/air traffic control staff, 40 percent from the rest of FAA. In
             addition, for non-headquarters respondents, we selected 70 percent of our
             respondents from field facilities and 30 percent from regional offices. Our



             Page 49                                   GAO-03-156 Human Capital Management
Appendix I
Scope and Methodology




respondents were randomly selected from electronic lists of names
provided by FAA.

We conducted our structured interviews at FAA headquarters in
Washington, D.C.; FAA’s Mike Monroney Aeronautical Center in Oklahoma
City, Oklahoma; and field facilities and regional offices in six of FAA’s nine
geographic regions, including offices in the immediate vicinity of
Anchorage, Alaska; Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Los
Angeles, California; and New York City, New York. Field facilities we visited
included air traffic control towers, en route centers, automated flight
service stations, terminal radar approach control centers, airports district
offices, and flight standards district offices. A total of 176 FAA staff
participated in our survey throughout the months of May, June, July, and
August 2002. The information obtained through this survey pertains to only
these 176 respondents and cannot be generalized to any other population.
However, because we selected interview respondents at random, we have
increased the chances of capturing the breadth of opinions across the
agency. A copy of our structured interview and the summary results for our
close-ended questions is provided in appendix II. To augment the views and
opinions collected from the structured interviews, we also obtained the
views of FAA senior managers or representatives of all five lines of
business and representatives of employees’ associations.

To determine the extent to which FAA management and employees’ views
were supported by data, we examined the results from FAA’s employee
attitude surveys conducted between 1997 and 2000, as well as other
internal surveys of executives, managers, and supervisors related to
various aspects of FAA’s personnel reform effort. In addition, we collected
available data from FAA’s Office of Human Resource Management and
Office of Civil Rights.

To determine how FAA’s experiences compared with our findings from our
human capital management work at other agencies, we reviewed our
human capital management audit work that focused on federal agencies’
efforts to implement improvement initiatives and human capital
flexibilities, as well as work conducted by other organizations involved in
assessing federal agencies’ reform efforts including OPM and NAPA, and
we compared our findings on FAA’s experiences with these findings.

We conducted our work in accordance with generally accepted government
auditing standards from November 2001 through October 2002.




Page 50                                    GAO-03-156 Human Capital Management
Appendix II

Structured Interview Form and Selected
Results                                                                                                       Appendx
                                                                                                                    Ii




                          STRUCTURED INTERVIEW FORM AND SELECTED RESULTS
                                                                     ATC (A)/Non-ATC (NA): ________
                                                       Regional Office (RO)/Field Office (FO): ________
                                                   Manager or Supervisor (MS)/Employee (E): ________
                                                Location (AT, AN, CH, DA, NY, LA)/ID Number:________

              Thank you for meeting with us today. We work with the General Accounting Office in
              Washington DC and we’ve been asked by Congress to see how the personnel reforms at
              FAA are going. One of the ways we’re doing that is by asking FAA employees like you to
              tell us about how the personnel reforms here are affecting you, your ability to perform
              your work, and your unit’s ability to achieve its mission- in both good and bad ways.
              We’re going to several different regions and talking to many employees- we selected your
              name at random and appreciate your willingness to talk to us. I will be asking you a
              series of questions, some you can answer from a range of standard responses like
              strongly agree to strongly disagree, and others will give you an opportunity to provide a
              little bit more specific information. ____ will be taking notes to be sure that we capture
              all you have to say. Your responses are confidential- we won’t report your name with
              anything you say here and we’ll report our results as a summary of what everyone tells
              us. The entire interview should take about 30 minutes. Do you have any questions
              before we begin?

              (Personnel reform includes: hiring, training, compensation, performance
              management, labor and employee relations, among others.)

                 1. To start with, how knowledgeable are you about FAA’s personnel reform efforts?
                    Which reform(s) do you know most about? Least about?

              Section A

              The first set of questions I’ll ask deal with how FAA manages its workforce. For the next
              question and others throughout the survey, I’d like you to use this scale for your answer-
              please tell me if you strongly agree (SA), agree (A), disagree (D) or strongly disagree (SD).

                 2. I receive the training I need to do my job effectively.

              Circle response:             SA     A       D      SD     NA/Don’t know
                     ____




                          Page 51                                          GAO-03-156 Human Capital Management
         Appendix II
         Structured Interview Form and Selected
         Results




                   Strongly         Agree          Disagree         Strongly       NA/Don’t
                    Agree            N                N             Disagree        Know
                      N                                                N              N
Total                 42              93                30             8              3

Managers             11               29                 5             0                1
Employees            31               64                25             8                2

ATC                  20               48                13             4                2
Non-ATC              22               45                17             4                1

Field Office         27               51                14             3                2
Regional             15               42                16             5                1
Office


   3. Could you give me more detail about that? How has the fact that the lines of
      business are responsible for funding and managing training affected the amount
      and/or quality of training you’ve received?


   4. What, if any, training do you need that your line of business (or staff office) has not
      provided?


   5. Using the scale again: The ability of my line of business (or staff office) to efficiently
      and effectively fill job vacancies has improved in the last 5 years.

Circle response:              SA    A       D      SD        NA/Don’t know
       ____

                   Strongly         Agree          Disagree         Strongly       NA/Don’t
                    Agree                                           Disagree        Know
Total                 12              35                55             47             27

Managers              3               12                18             10               3
Employees             9               23                37             37              24

ATC                   7               15                26             31               8
Non-ATC               5               20                29             16              19

Field Office          9               22                22             29              15
Regional              3               13                33             18              12
Office




         Page 52                                               GAO-03-156 Human Capital Management
            Appendix II
            Structured Interview Form and Selected
            Results




   6. Has the speed of hiring improved? How? {Pause for response} Has the quality of
      candidates improved? How?


Section B

The next set of questions I’ll ask deal with the new pay and performance management
systems including the new pay bands and pay-for-performance system, as well as, the
“meets/does not meet standards” performance rating system implemented in 1996.

   7. Using the scale again: I am better off under the new pay band system than under
      the grade and step pay system.

Circle response:                 SA   A       D      SD        NA/Don’t know
       ____

                      Strongly        Agree          Disagree         Strongly     NA/Don’t
                       Agree                                          Disagree      Know
Total                    40            45                 28             32           31

Managers                 7             18                  9              7             5
Employees               33             27                 19             25            26

ATC                     36             20                 9              12            10
Non-ATC                  4             25                 19             20            21

Field Office            38             18                 10             13            18
Regional                 2             27                 18             19            13
Office


   8. Using the scale again: I think the new pay system is fair to all employees.

Circle response:                 SA   A       D      SD        NA/Don’t know
       ____

                      Strongly        Agree          Disagree         Strongly     NA/Don’t
                       Agree                                          Disagree      Know
Total                    16            37                 58             52           13

Managers                 0              7                 18             20             1
Employees               16             30                 40             32            12

ATC                     15             21                 24             23            4
Non-ATC                  1             16                 34             29            9




            Page 53                                              GAO-03-156 Human Capital Management
         Appendix II
         Structured Interview Form and Selected
         Results




Field Office         16             23                 26             21            11
Regional              0             14                 32             31             2
Office


   9. What do you like about the new pay system? Is there anything you don’t like about
      the new pay system?


   10. Using the scale again: Separating cash awards from performance appraisals has
       made the appraisal process more fair.

Circle response:              SA   A       D      SD        NA/Don’t know
       ____

                   Strongly        Agree          Disagree         Strongly     NA/Don’t
                    Agree                                          Disagree      Know
Total                 14            46                 49             23           44

Managers              4             16                 12              7             7
Employees            10             30                 37             16            37

ATC                  10             23                 25             8             21
Non-ATC               4             23                 24             15            23

Field Office         10             24                 23             11            29
Regional              4             22                 26             12            15
Office


   11. Using the scale again: The way my most recent formal performance appraisal was
       handled gave me useful information for improving my performance.

Circle response:              SA   A       D      SD        NA/Don’t know
       ____

                   Strongly        Agree          Disagree         Strongly     NA/Don’t
                    Agree                                          Disagree      Know
Total                 16            56                 57             33           14

Managers              3             15                 21              6             1
Employees            13             41                 36             27            13

ATC                   8             28                 31             17             3
Non-ATC               8             28                 26             16            11




         Page 54                                              GAO-03-156 Human Capital Management
         Appendix II
         Structured Interview Form and Selected
         Results




Field Office         10             28                 30             19            10
Regional              6             28                 27             14             4
Office




   12. Using the scale again: Awards and recognition more appropriately reflect
       employees’ performance today than 5 years ago.

Circle response:              SA   A        D     SD        NA/Don’t know
       ____

                   Strongly        Agree          Disagree         Strongly     NA/Don’t
                    Agree                                          Disagree      Know
Total                 14            40                 71             28           23

Managers              3             14                 19              7             3
Employees            11             26                 52             21            20

ATC                   9             26                 29             16             7
Non-ATC               5             14                 42             12            16

Field Office          9             27                 30             17            14
Regional              5             13                 41             11            9
Office


   13. Using the scale again: FAA’s process for promotion better targets qualified people
       now than it did 5 years ago.

Circle response:              SA   A        D     SD        NA/Don’t know
       ____

                   Strongly        Agree          Disagree         Strongly     NA/Don’t
                    Agree                                          Disagree      Know
Total                 0                34              65             43           34

Managers              0             13                 15             12             6
Employees             0             21                 50             31            28

ATC                   0             13                 35             25            14
Non-ATC               0             21                 30             18            20




         Page 55                                              GAO-03-156 Human Capital Management
          Appendix II
          Structured Interview Form and Selected
          Results




Field Office           0             18                 29             28              22
Regional               0             16                 36             15              12
Office

   14. To what extent have managers and supervisors become more (or less) accountable
       for achieving agency goals in the last 5 years?

        Section C

The next set of questions I’ll ask deal with labor relations and employee relations.

   15. Using the scale again: FAA’s employee unions have had a positive impact on
       implementing personnel reform in the agency.

Circle response:               SA   A       D      SD        NA/Don’t know
       ____

                    Strongly        Agree          Disagree         Strongly      NA/Don’t
                     Agree                                          Disagree       Know
Total                  31            55                 50             25            15

Managers               4              9                 15             14               4
Employees             27             46                 35             11              11

ATC                   23             30                 19             9               6
Non-ATC                8             25                 31             16              9

Field Office          25             34                 19             8               11
Regional               6             21                 31             17               4
Office

   16. Do you think labor-management relations have changed in the last 5 years? (As
       applicable) How? What specifically has driven this change?


   17. Do you think employee morale has changed in the last 5 years? (As applicable) How?
       What specifically has driven this change?


   18. Using the scale again: FAA employees had sufficient opportunities to provide input
       for personnel reform policies and initiatives before they were finalized and
       implemented.

Circle response:               SA   A       D      SD        NA/Don’t know
       ____




          Page 56                                              GAO-03-156 Human Capital Management
         Appendix II
         Structured Interview Form and Selected
         Results




                   Strongly        Agree          Disagree         Strongly     NA/Don’t
                    Agree                                          Disagree      Know
Total                 9             52                 44             36           35

Managers              2             13                 16             12              3
Employees             7             39                 28             24             32

ATC                   6             23                 20             22             16
Non-ATC               3             29                 24             14             19

Field Office          6             31                 20             17             23
Regional              3             21                 24             19             12
Office


   19. Using the scale again: I understand the goals of the Model Work Environment.

Circle response:              SA   A       D      SD        NA/Don’t know
       ____

                   Strongly        Agree          Disagree         Strongly     NA/Don’t
                    Agree                                          Disagree      Know
Total                 34            100                30             4            8

Managers             19             23                  3             1              0
Employees            15             77                 27             3              8

ATC                  19             50                 13             2              3
Non-ATC              15             50                 17             2              5

Field Office         17             57                 17             1              5
Regional             17             43                 13             3              3
Office


   20. Please describe the effect Model Work Environment has had (if any) on employee
       morale.



   21. Using the scale again: I have received sufficient and timely information on
       personnel reform changes that affect my job.

Circle response:              SA   A       D      SD        NA/Don’t know
       ____




         Page 57                                              GAO-03-156 Human Capital Management
            Appendix II
            Structured Interview Form and Selected
            Results




                      Strongly        Agree          Disagree         Strongly     NA/Don’t
                       Agree                                          Disagree      Know
Total                    10            101                41             17           7

Managers                 2             25                 16              3            0
Employees                8             76                 25             14            7

ATC                      5             45                 22             9             6
Non-ATC                  5             56                 19             8             1

Field Office             6             57                 19             11            4
Regional                 4             44                 22             6             3
Office


   22. What personnel reforms have been particularly well communicated? Which
       method(s) of communication work(s) best or would work best? Worst?


Section D

The last set of questions deal with the overall result of personnel reforms at FAA.

   23. Using the scale again: Personnel reform has made FAA a better place to work.

Circle response:                 SA   A       D      SD        NA/Don’t know
       ____

                      Strongly        Agree          Disagree         Strongly     NA/Don’t
                       Agree                                          Disagree      Know
Total                    11            60                 58             32           15

Managers                 3             12                 23              7             1
Employees                8             48                 35             25            14

ATC                      7             33                 27             13            7
Non-ATC                  4             27                 31             19            8

Field Office             8             38                 27             13            11
Regional                 3             22                 31             19            4
Office



   24. Using the scale again: Personnel reform will make FAA a better place to work.




            Page 58                                              GAO-03-156 Human Capital Management
           Appendix II
           Structured Interview Form and Selected
           Results




Circle response:                SA      A          D     SD        NA/Don’t know
       ____

                     Strongly           Agree           Disagree          Strongly     NA/Don’t
                      Agree                                               Disagree      Know
Total                   14               84                   34             25           19

Managers                6                26                    7              5             2
Employees               8                58                   27             20            17

ATC                     8                40                   19             10            10
Non-ATC                 6                44                   15             15            9

Field Office            8                51                   14             13            11
Regional                6                33                   20             12            8
Office


   25. What are the 3 most positive outcomes of FAA’s personnel reform efforts?


   26. What are the 3 most negative outcomes of FAA’s personnel reform efforts?


   27. What kinds of comments have you heard about the personnel reforms we’ve been
       discussing today from your co-workers?


   28. Do you have any suggestions for improving FAA’s implementation of personnel
       reform?


Okay, although we won’t be using your name with this information, I would like to ask just
a couple of questions about your position here.

   29. How long have you worked at FAA?                  _____.

                                Median Mean            Standard
                                                       Deviation
   Total                         16.0       16.4          9.6

   Managers                      20.0       20.7          9.2
   Employees                     15.0       14.9          9.4

   ATC                           19.0       18.2          8.1
   Non-ATC                       14.0       14.7         10.7




           Page 59                                                   GAO-03-156 Human Capital Management
           Appendix II
           Structured Interview Form and Selected
           Results




   Field Office                 17.0        15.7         8.8
   Regional Office              15.0        17.3         10.6


   30. Are you a bargaining unit employee?

Circle response:                Yes     No

                      Yes              No
Total                 111              65

Managers               5               41
Employees             106              24

ATC                   57               30
Non-ATC               54               35

Field Office          74               23
Regional              37               42
Office


(If the answer is yes) Which one? _________________

% of Total     AFGE    AFSCME          NAGE        NAATS NATCA PAACE            PASS    Don’t
Population                                                                              Know
Total            1          22              1        3          55       2       20       7

Managers         0           2              1        0           0       0        2       0
Employees        1          20              0        3          55       2       18       7

ATC              0          4               1        1          47       0       3        1
Non-ATC          1          18              0        2           8       2       17       6

Field            1          0               1        2          45       2       17       6
Office
Regional         0          22              0        1          10       0        3       1
Office


Thank you very much for answering my questions today. We really appreciate your time, and
the feedback we get from you will help FAA and Congress make future decisions about
personnel reform.




           Page 60                                               GAO-03-156 Human Capital Management
Appendix III

Elements for Effective Human Capital
Management                                                                                                 Appendx
                                                                                                                 iI




               In March 2002, we issued a model for strategic human capital management
               that incorporates lessons learned in our reviews of other agencies’ human
               capital management practices, as well as our own experiences.62 The
               model identifies eight critical success factors and highlights some of the
               steps agencies can take to make progress in managing human capital
               strategically. These eight factors, shown in figure 16, are organized in pairs
               to correspond with the four governmentwide high-risk human capital
               challenges that our work has shown are undermining agency effectiveness.




               62
                  U.S. General Accounting Office, A Model of Strategic Human Capital Management, GAO-02-
               373SP (Washington, D.C.: March 15, 2002).




               Page 61                                             GAO-03-156 Human Capital Management
Appendix III
Elements for Effective Human Capital
Management




Figure 16: Eight Critical Success Factors Corresponding with the Four High-Risk
Human Capital Challenges That Can Help Agencies Manage Human Capital
Strategically




In November 2002, we issued a report that identified six key practices for
federal agencies’ effective use of human capital flexibilities that
incorporate the concepts and critical factors of our model.63 Based on our



Page 62                                      GAO-03-156 Human Capital Management
                                            Appendix III
                                            Elements for Effective Human Capital
                                            Management




                                            interviews with human resource management directors from across the
                                            federal government, we identified the following key practices that agencies
                                            should implement to use human capital flexibilities effectively, as shown in
                                            Figure 17.



Figure 17: Six Key Practices for Effective Use of Human Capital Flexibilities




                                             U.S. General Accounting Office, Human Capital: Effective Use of Flexibilities Can Assist
                                            63

                                            Agencies in Managing Their Workforces, GAO-03-02, (Washington, D.C.: Nov. 2002).




                                            Page 63                                               GAO-03-156 Human Capital Management
Appendix IV

Core Compensation Pay Bands and Grade
Conversion for 2002                                            Appendx
                                                                     iIV




              Page 64        GAO-03-156 Human Capital Management
Appendix IV
Core Compensation Pay Bands and Grade
Conversion for 2002




Notes: Does not include locality pay.
Blank cells indicate no old grade equivalent to new pay band for manager levels.




Page 65                                                  GAO-03-156 Human Capital Management
Appendix V

FAA Human Resource Management Office’s
Balanced Scorecard Performance Measures                                                                                                    Append
                                                                                                                                                x
                                                                                                                                                i
                                                                                                                                                V




                  Performance measures
Measurement         Areas of measurement
perspectives             (proposed data sources)
Customer          Human Resource Management              Human Resource Management Office Human Resource Management Office
                  Office service excellence              consultation and expertise valued innovation and leadership
                                                                                             Customer perceptions regarding
                   Customer perceptions regarding         Customer perceptions regarding     personnel reform
                   human resource management              human resource management office   Human resource management office
                   office service quality and             consultation & staff expertise     & line of business human capital
                   timeliness                               (employee surveys)               management efforts
                     (employee surveys)                                                       (employee surveys)
Performance       Human Resource Management              Efficient use of Human Resource          Improved practices within Lines of
                  Office results meet goals              Management Office resources              Business

                   Percentage of human resource           Human resource management office         Knowledge transfer
                   management office projects             spending                                 Improved line of business processes
                   completed on time                        (budget & accounting data)             & practices
                                                          Human resource management office         Meet unique needs
                     (human resources office              labor distribution
                     reporting system)                      (cost accounting system)                 (employee surveys)
Internal          Consistent human resource              Effective Labor-Management               Attract and retain high caliber
processes         management policy interpretation       Relationships                            employees

                                                          Consolidation in bargaining units        Timeliness of
                                                          Partnership Council meeting              automated/nonautomated selections
                  (Personnel management                   attendance                               Percentage of voluntary & involuntary
                  evaluations, human resource                                                      attrition
                  management office policy training         (data on grievances and
                  evaluations)                              unauthorized labor practices)            (Selecting official interview data)
Human             Empowered Human Resource               Satisfied Human Resource Office          Rewarding Human Resource
Resource          Management Office employees            Management employees                     Management Office work environment
Management                                                Human Resource Management                Human Resource Management Office
Office employee    Human Resource Management              Office employee perceptions of job       employee perceptions regarding
                   Office employee perceptions of         satisfaction and perceptions             communication
                   empowerment                            regarding commitment to service          Performance rewarded

                     (employee surveys)                     (employee surveys)                       (employee surveys)
Learning and      Capitalize on Human Resource           Increase Human Resource                  Leverage Human Resource
growth            Management                             Management                               Management Office data/information
                  Office talent                          Office capacity to improve                Availability and quality of data
                   Identify and close skill gaps           Increase in professional credentials      (human resource management
                     (skills/training assessment for         (skills/training assessment for         office information system audit)
                     human resources office)                 Human Resource Management             Timeliness and responsiveness to
                   Implement Human Resource                  Office)                               internal Human Resource
                   Management Office workforce             Percentage of personnel,                Management Office requests
                   planning                                compensation, and benefits funding        (employee survey)
                     (human resource management            spent on training
                     office reporting system)                (budget & accounting data)
Source: FAA.




                                               Page 66                                             GAO-03-156 Human Capital Management
Appendix V
FAA Human Resource Management Office’s
Balanced Scorecard Performance Measures




Note: Shaded areas indicate measures focused internally on the Office of Human Resource
Management.




Page 67                                              GAO-03-156 Human Capital Management
Appendix VI

GAO Contacts and Staff Acknowledgments                                                       Appendx
                                                                                                   iVI




GAO Contacts      Gerald L. Dillingham, Ph.D. (202) 512-3650
                  Christopher A. Keisling     (404) 679-1917



Staff             In addition to those individuals named above, William Doherty, Michele
                  Fejfar, David Hooper, Jason Schwartz, E. Jerry Seigler, Margaret Skiba,
Acknowledgments   Tina Smith, Alwynne Wilbur, and Kristy Williams made key contributions to
                  this report.




(540006)          Page 68                                  GAO-03-156 Human Capital Management
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