United States General Accounting Office

GAO Report to the Director, Office of

Management and Budget

July 1998 MANAGEMENT

REFORM

Agencies’ Initial Efforts

to Restructure

Personnel Operations

GAO/GGD-98-93

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-277016 

July 13, 1998

The Honorable Jacob J. Lew

Acting Director

Office of Management and Budget

Dear Mr. Lew:

Resource reductions and changing missions, coinciding with the

replacement of aging human resource management information systems,

are driving efforts in federal agencies to restructure their personnel

offices. Congress has made it clear, through enactment of a statutory

framework with the Government Performance and Results Act of 1993 as

its centerpiece, that it expects agencies to improve their accountability for

resources, including human resources, in accomplishing agency missions.

In addition, the National Performance Review (NPR), now called the

National Partnership for Reinventing Government, in 1993, recommended

that agencies reduce by half the costs of administrative positions,

including personnel positions, by 1999.

Between September 1993 and September 1997, the number of civilian

personnelists across government decreased by about 8,900 employees (or

about 21 percent). In order to gain an understanding of the initial effects of

this reduction, we reviewed four major federal departments to (1) describe

the activities they have undertaken in restructuring personnel offices and

operations; (2) ascertain what, if any, performance measures are in place

to gauge results of the restructuring efforts; and (3) identify issues

agencies may commonly encounter when, in restructuring their personnel

operations, they consider outsourcing automated personnel and/or payroll

services to another agency or the private sector.

The four departments whose personnel offices1

 we reviewed were the

Departments of Agriculture (USDA), Health and Human Services (HHS), the

Interior (DOI), and Veterans Affairs (VA), which together employ roughly

one-fourth of the nonpostal federal workforce. These four departments

provide or plan to provide personnel or payroll services to other federal

agencies. All four departments took slightly different approaches to

streamlining personnel operations and were in the early stages of

implementing restructuring plans in late 1997, when we were completing

our work. We use the term “restructuring” broadly to capture major

changes occurring in an organization, including reorganizations,

1

We use the term “personnel offices” with the understanding that some federal agencies use the term

human resource (HR) office and that the functions handled by a personnel office or an HR office can

vary by agency.

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consolidations, downsizing (reducing the size of the workforce), quality

improvements, streamlining efforts, the use of new technologies, and

reengineering personnel processes,2

 such as the process used to hire

employees.

Results in Brief Although the focus of agencies’ restructuring efforts differed across the

four departments, their streamlining plans included reducing the number

of employees working in personnel operations and automating

paper-based personnel processes to improve the responsiveness and

quality of personnel-related services. The departments and their agencies

made initial cuts in personnel staffing and, as they did, they consolidated

personnel offices and streamlined work processes to varying degrees. The

reduction in the number of personnelists at the four departments ranged

from 14 to 41 percent between September 1993 and September 1997.

However, even with reductions of this magnitude, the personnel servicing

ratios—a comparison of the number of employees served to the number of

personnelists servicing them—for three departments did not change

substantially. According to our analysis of federal workforce data

collected by the Office of Personnel Management (OPM), the departments’

ratios did not increase more because, coinciding with the decrease in the

number of personnelists, departmentwide downsizing had simultaneously

reduced the number of employees served. Nevertheless, as of

September 1997, the ratio ranged from 103:1 at VA to 47:1 at HHS.

The departments sought to boost the efficiency of their personnel offices

by automating their largely paper-based operations. To achieve this

increase in efficiency, the departments generally planned to have new

equipment and software in place before staff reductions were made.

However, that did not occur. The departments fell behind their original

milestones for implementing new personnel and payroll systems while

initial personnel staff reductions occurred which, in some cases, led to

delays in their overall scheduled completion dates. According to officials

at the four departments, converting to the new systems has taken much

longer than expected. A number of factors contributed to these milestone

delays, such as the need for greater system testing than was initially

anticipated.

The four departments, according to personnel officials, had few measures

in place to gauge the results of their personnel operations before

2

Business process reengineering is a systematic, disciplined improvement approach that critically

examines, rethinks, and redesigns mission-delivery processes in order to achieve dramatic

improvements in performance in areas important to customers and stakeholders.

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restructuring. However, officials in all four departments recognized the

need for measurement, were developing performance measures to assess

future efforts, and, in some cases, were seeking to more fully assess

current costs and performance to identify specific targets for

improvement. For example, VA and a USDA agency reported having

developed measures to evaluate certain outputs of their personnel

operations. A performance measure that personnel officials of the four

departments said they used was the personnel servicing ratio. Personnel

officials stressed that although the personnel servicing ratio is a broad

measure of efficiency, it does not measure how well a personnel office

meets the needs of its customers as they work to accomplish

organizational missions. The departments generally had not fully

implemented measures to assess such key performance results as how

responsive personnel offices have been to customers, the quality of

personnel services provided, and the cost of providing specific services.

Without performance measures, departments and component agencies will

find it difficult to determine the timeliness of personnel services, the

satisfaction levels of those who use the services, and other attributes of

effective personnel operations.

According to agency officials, among issues agencies may encounter when

purchasing personnel and payroll services are (1) the inability of service

providers to deliver services when scheduled, (2) the lack of a common

framework to identify the various services being offered, and (3) the lack

of common format and requirements to permit agencies to fully and

efficiently exchange automated personnel data.

In addition to providing personnel services to their component agencies,

the four departments were developing or purchasing automated personnel

systems with the intention of selling payroll or other key personnel

services to other agencies—also referred to as cross-servicing. Since their

automation plans in some cases were behind schedule, none of the four

could provide the upgraded personnel services as soon as planned. This

situation has already affected the plans of certain agencies to obtain

services, which is further complicated by the need for agencies to address

the Year 2000 date conversion problem. For example, the Department of

Energy (DOE) initially planned to use DOI’s payroll services because its own

payroll system was not Year 2000 compliant. However, DOE cancelled its

agreement because of the time and costs involved in building an interface

between their respective systems to allow the exchange of data. DOE plans

now to make its existing payroll system Year 2000 compliant.

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Agency officials with whom we spoke suggested that a framework was

needed with which agencies could obtain information on the personnel

services offered by other federal agencies, the costs of those services, and

their performance characteristics, including service-level standards. As

part of our review, we spoke with officials at several agencies who said

that their agencies were considering purchasing personnel and payroll

services from other federal agencies or the private sector. However, they

said that information available from provider agencies on the operational

performance and cost of personnel and payroll services was limited,

except for the National Finance Center. The four provider agencies we

reviewed had limited data on the specific costs of their personnel and

payroll processes, although they were beginning to capture more data.

Without adequate information on the services being offered, the service

quality, and their costs, an agency will have a difficult time making an

informed decision on whether to purchase personnel and payroll services

from another government agency.

Agency officials with whom we spoke also suggested the need for a

standard technical format and a core set of requirements for personnel

data that agencies are likely to exchange with each other. In April 1997, we

reported on the need for core requirements.3

 Since then, OPM has

rechartered the mission of the Federal Personnel Automation Council and

tasked it to develop a set of core data elements and requirements for

personnel information systems. Also, the President has established an

Administrative Management Council to direct attention to administrative

matters governmentwide. We are making recommendations designed to

focus these efforts on the parallel need for common performance

measures.

Background In the 1990s, Congress constructed a statutory framework to address

long-standing weaknesses in federal operations, improve federal

management practices, and provide greater accountability for the use of

resources and achieving results. This framework included as its essential

elements the Government Performance and Results Act of 1993 and key

financial management and information technology reform legislation: the

Chief Financial Officers Act of 1990—as expanded by the Government

Management Reform Act of 1994—and the Paperwork Reduction Act of

1995 and the Clinger-Cohen Act of 1996, respectively.

3

Management Reform: Initial Observations on Agencies’ Restructuring of the Human Resource

Management Function (GAO/GGD-97-68R, Apr. 14, 1997).

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In 1993, NPR recommended to the President that agencies reduce by half

the costs related to central management control positions, by 1999. NPR

targeted administrative costs and positions, such as managers, personnel

specialists, budget analysts, procurement specialists, and other

headquarters staff positions to reduce administrative layers at

headquarters and streamline field structures. NPR estimated that these

central control positions cost about $35 billion a year in salaries and

benefits. To achieve NPR’s streamlining goals, in 1994, the Office of

Management and Budget (OMB) required agencies to prepare streamlining

plans detailing, in addition to other things, how they planned to reduce

these targeted positions.

The typical federal personnel office carries out a wide range of functions

related to the management of an organization’s people, from the time they

apply for a position to the time they leave. This includes establishing

policies and carrying out activities, many of which are prescribed by

federal law. The range of personnel functions generally includes, but is not

limited to, recruitment and employment (including workforce diversity),

classification (i.e., determining the appropriate grade and classification

series of a position), merit promotion, and employee and labor relations. A

personnel office collects and maintains data related to the employment

process. Personnel activities include such tasks as advertising positions to

be filled, verifying candidate information, processing paperwork on health

insurance and other employee benefits, and processing paperwork on

employee discipline and promotions.

Although agencies use automation to store and analyze various pieces of

personnel information (e.g., employees’ occupations, grades, and

performance ratings) and process payroll data, personnel administration

has been largely a paper-based, labor-intensive operation, as often is the

case with administrative functions. Each year, hundreds of federal

personnel offices process millions of personnel actions that affect the

federal workforce of almost 1.9 million civilian, nonpostal employees. For

example, nearly every official personnel action affecting a specific

employee, such as a promotion, begins with the preparation of a Standard

Form 52, “Request for Personnel Action.” And when the request is

approved, it is followed by the preparation of a Standard Form 50,

“Notification of Personnel Action.” Figure 1 shows various processes that

typically are included in personnel operations.

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Figure 1: Federal Personnel Processes

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Source: GAO analysis.

Federal efforts to reduce administrative overhead positions, including

personnel, somewhat parallel streamlining efforts in the private sector.

For example, human resource managers in the private sector have been

asked to integrate the company’s personnel management practices with its

business goals and objectives while also providing cost-effective,

traditional personnel services. Private sector human resource managers

increasingly are expected to quantify their operations’ return on

investment or what “value-added” the function provides. In the federal

sector, cost concerns have forced managers to reexamine the role of the

personnel function and its relationship as a support function to the

mission of the agency. For example, the Results Act recognizes the

importance of human resource management as a key element for

achieving performance goals as part of agencies’ strategic and annual

performance plans. We have suggested that agencies’ performance plans

that contain a description of how workforce knowledge, skills, and

abilities can contribute to the achievement of program performance goals

would be most useful to congressional decisionmakers.4

4

Agencies’ Annual Performance Plans Under the Results Act: An Assessment Guide to Facilitate

Congressional Decisionmaking (GAO/GGD/AIMD-10.1.18, Feb. 1998, Version 1).

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In addition to the reexaminations that are taking place about the role of

the personnel function and its relationship to mission accomplishment, the

departments’ restructuring efforts also were taking place within a context

of evolving concerns about the federal human resource management

system’s statutory and regulatory framework. These concerns, which have

been expressed by agencies, OPM, NPR, and Congress, center on striking the

best balance among the priorities of managerial flexibility and

decentralization on the one hand, and systemwide consistency and

adherence to merit principles on the other. How these priorities are

balanced and any changes to current regulatory or statutory requirements

may have important implications for federal human resource management

and personnel offices, as well as how personnel services are provided to

line managers.

In planning how to restructure personnel operations and what personnel

processes to automate, agencies are now required by the Clinger-Cohen

Act of 19965

 to reassess their work processes to determine whether their

administrative and mission-related business processes should be improved

before investing in major information systems to support them. As federal

agencies decide how to streamline administrative support functions, they

must choose among options for providing automated personnel and

payroll services. Such options include purchasing personnel and/or payroll

services from another government agency (or franchise, also called

cross-servicing)6

 or contracting with the private sector.

Scope and

Methodology

To meet our first objective in this self-initiated review—to describe the

activities that have taken place in restructuring personnel offices and

operations—we first surveyed 24 CFO agencies (as designated by the Chief

Financial Officers Act of 1990), which employ most executive branch

employees—to identify those that were restructuring personnel

5

The Omnibus Consolidated Appropriations Act of 1997 (P.L. 104-208) renamed both the Federal

Acquisition Act of 1996 (P.L. 104-106, Div. D) and the Information Technology Reform Act of 1996 (P.L.

104-106, Div. E) as the “Clinger-Cohen Act of 1996.” For related reports see Executive Guide:

Improving Mission Performance Through Strategic Information Management and Technology

(GAO/AIMD-94-115, May 1994) and Business Process Reengineering Assessment Guide

(GAO/AIMD-10.1.15, Apr. 1997).

6

A franchise is an entrepreneurial activity within a government organization that provides common

administrative support services to other agencies or other components within the same agency. A

franchise may offer one or more common administrative services and generally conducts its business

(1) on a reimbursable basis, (2) in a manner that fosters competition, and (3) within appropriate

standards and legal authorities for both the service rendered and the method for accounting for

franchise expenditures and charges. Under such arrangements, a government entity remains fully

responsible for the provision of affected services and maintains control over management decisions,

while another entity operates the function or performs the service.

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operations. These 24 CFO agencies represent about 97 percent of the

nonpostal, full-time workforce of the executive branch. From among those

that were restructuring personnel operations, we reviewed USDA, DOI, HHS,

and VA to obtain further information about restructuring activities at these

agencies. We selected these agencies primarily because they said they

were using business process reengineering as an approach to restructuring

and/or were providing or planning to provide personnel and payroll

services to other agencies. We interviewed personnel officials from the

four departments and selected component agencies to obtain information

on the reasons for restructuring, the planning in preparation for

restructuring, the activities undertaken to restructure, and the status of

restructuring efforts. We also reviewed the restructuring plans of the four

departments and component agencies. (The component agencies we

reviewed are listed in app. I.)

To address our second objective—to ascertain what, if any, performance

measures are in place to gauge the results of restructuring activities—we

discussed with responsible officials of the four departments and

component agencies whether their organizations had or were developing

measures to assess the performance of the restructured personnel offices

and operations. Where measures were said to exist, we reviewed the

documentation that described and supported the measure. In addition, to

better understand the major issues associated with restructuring

personnel operations and performance measurement, we reviewed current

literature on the two subjects and spoke with performance measurement

experts from the National Academy of Public Administration (NAPA) and

the Saratoga Institute.7

In connection with our second objective, we computed one common

measure—the personnel servicing ratio—to assess progress in

restructuring. To compute the ratios, we obtained September 1993 and

September 1997 data from OPM’s Central Personnel Data File (CPDF) on the

number of employees and personnelists at the 24 agencies we surveyed.

These personnelists were in the federal Personnel Management and

Industrial Relations occupational group—GS-200s—that NPR specifically

targeted for reduction. We used the NPR definition of personnel specialist

with the understanding that some agencies classify some employees

working in personnel offices in other occupations, such as program

analysts (GS-345) or management analysts (GS-343). In addition, all

7

NAPA is an independent, nonpartisan, nonprofit, congressionally chartered organization that assists

federal, state, and local governments in improving their performance. The Saratoga Institute is a

human resources research and consulting company that specializes in benchmarking performance of

human resource management.

Page 9 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
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personnel specialists in the GS-200 group may not have worked in

personnel offices; some may have worked in allied offices, such as training

and counseling.

To address our third objective—to identify issues agencies may commonly

encounter as they consider purchasing automated personnel and payroll

services—we interviewed officials from the departments and component

agencies who were involved in the development or purchase of computer

hardware and/or software for use in personnel/payroll operations. We

obtained information from these interviews on the decision processes for

acquiring new technology, the challenges that surface in acquiring new

technology, and the status of implementing the new technology at their

departments and agencies. We also met with officials from OMB and OPM

and representatives of two governmentwide councils to discuss

governmentwide efforts to streamline personnel operations, including the

use of technology to automate personnel processes. (For additional

information on our objectives, scope, and methodology, see app. I.)

We did our work in the Washington, D.C., metropolitan area and at several

other locations listed in appendix I between October 1996 and

January 1998 in accordance with generally accepted government auditing

standards. We requested comments on a draft of this report from the

Directors of OMB and OPM, the Secretaries of DOE, DOI, HHS, USDA, and VA, or

their designees. A discussion of their comments appears at the end of this

letter, and their written comments are included in appendixes II through

VIII.

Agencies’ Activities to

Restructure Personnel

Offices

The four departments we reviewed generally approached the restructuring

of their personnel offices with the intent of achieving staff reductions.

Although all four departments reduced the number of personnelists they

employed by 14 percent or more, the personnel servicing ratio for three of

the four departments did not change as much. Another key component of

the departments’ restructuring plans was to install new

technology—hardware and/or software—to automate paper-based

personnel processes and thereby improve the responsiveness and quality

of personnel services. However, for various reasons, such as an agency

deciding to do additional system testing, these automation efforts had all

fallen behind schedule.

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Restructuring Approaches

Aimed at Achieving Staff

Reductions

The four departments we reviewed had all developed restructuring plans.

One of the primary goals of those plans was to reduce administrative staff,

including the number of employees working in personnel offices. In

reducing their administrative staffs, the departments were responding to a

number of factors. One major impetus was the 1993 NPR recommendation

to reduce administrative staff. Other major factors were the

governmentwide reality of operating with reduced budgets, exemplified by

a succession of budget agreements between Congress and the

administration, as well as the requirement in the Federal Workforce

Restructuring Act to reduce governmentwide full-time equivalent

positions. USDA was also responding to 1994 legislation that directed it to

reorganize and to reduce its workforce. There were also cases, such as VA,

where the departments or their agencies started their restructuring efforts

to improve customer service before governmentwide efforts began in the

1990s. In deciding how to restructure, each department had to confront its

own particular set of circumstances and challenges.

As of late 1997, officials in each of the four departments characterized the

status of their personnel office restructuring as generally nearing the end

of its initial stages of implementation. A brief summary of those

restructuring efforts is presented next.

Department of Agriculture’s

Restructuring Efforts

Between September 1993 and September 1997, USDA reduced its personnel

staff departmentwide from 2,463 to 2,035 employees, a decrease of about

17 percent. One of the primary reasons for this restructuring was a major,

departmentwide reorganization and downsizing required by the Federal

Crop Insurance Reform and Department of Agriculture Reorganization Act

of 1994.8

After reducing personnel staff, USDA initiated an HR project using a

business process reengineering approach to (1) define and document the

existing business framework through which personnel offices performed

their mission, (2) identify any problems that were present in personnel

operations, and (3) identify opportunities for improving those operations.

This project was part of an initiative—Modernization of Administrative

Processes Program—that USDA had begun in 1989 to streamline

administrative processes and supporting systems departmentwide.

8

The act requires USDA to (1) reduce the number of full-time equivalents (FTE) by at least 7,500 by the

end of fiscal year 1999, (2) reduce the number of FTEs so that the percentage reduction in

headquarters is at least twice the percentage reduction in the field offices, (3) consolidate

headquarters offices, and (4) combine field offices and jointly use field resources. We reported on

USDA’s response to the act in U.S. Department of Agriculture: Update on Reorganization and

Streamlining Efforts (GAO/RCED-97-186R, June 24, 1997).

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Although several of its projects would likely continue under other USDA

organizations, the modernization initiative itself was terminated in 1997 by

the Acting Assistant Secretary for Administration because the initiative

had only modest accomplishments. For example, only two of seven active

projects to improve the administrative function had reached the pilot

stage.

Certain USDA agencies had begun to restructure their personnel operations

apart from the 1989 initiative and the 1994 legislative mandate to

reorganize. For example, the Forest Service had been consolidating

personnel operations in its 10 regions since the mid-1980s, and had

eliminated 56 of its 160 personnel offices as of September 1997. It planned

to further reduce the 104 offices to fewer than 40.

Department of Health and

Human Services’ Restructuring

Efforts

HHS reduced its personnel staff by about 320 employees over the period

from September 1993 to September 1997, a decrease of about 14 percent.9

HHS’ restructuring efforts focused on reorganizing and consolidating the

department’s personnel offices. The individual agencies within HHS

developed separate plans to restructure their personnel offices in

conjunction with the departmentwide reorganization. According to HHS

personnel officials, the NPR recommendations, budget constraints, and

specific changes required by legislation were the primary motivators for

restructuring personnel operations. Other factors cited by HHS officials that

influenced HHS’ restructuring decision included OMB exerting pressure on

the department to improve its administrative processes and the findings of

two organizational studies conducted by HHS in 1993 and 1995.

HHS’ streamlining and reinvention strategy included three parts. The first

part of the strategy was to separate personnel policy from personnel

operations at HHS headquarters, which was accomplished in 1995. The

second part of the strategy was to create the Program Support Center,

which was established in 1995. The Center operates the automated

personnel and payroll system for the Department and provides personnel

administration services for the Office of the Secretary, the Administration

on Aging, and for the Center’s employees. According to HHS officials and

documents, establishing the Center has helped HHS reduce duplicative

administrative services and the number of administrative employees. The

9

According to OPM data, HHS had 2,265 personnelists as of September 1993. This number included

personnelists who were employed by the Social Security Administration (SSA). As of September 1997,

HHS had 1,240 personnelists, not including SSA’s employees. SSA separated from HHS in 1995 to

become an independent agency. To determine the change in the number of personnelists, we added

SSA’s personnelists to HHS’ personnelists for 1997 and then subtracted the 1993 figure from the new

1997 figure, for a reduction of 319 employees.

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third part of HHS’ restructuring strategy was to delegate authority in

personnel and other administrative and management operations to its

component agencies. For example, as part of HHS’ broader restructuring

efforts, HHS delegated to the health agencies that formerly comprised the

Public Health Service their own delegation of HR authorities.

Department of the Interior’s

Restructuring Efforts

DOI reduced its personnel staff from 1,787 to 1,062 employees between

September 1993 and September 1997, which was a decrease of about

41 percent. DOI’s nine bureaus mainly restructured their personnel offices

through consolidating offices, reorganizing bureaus, and downsizing the

workforce through attrition and reductions-in-force. For example, the

personnel office of DOI’s Office of Surface Mining agreed to provide

personnel services to the Bureau of Indian Affairs (BIA). After the

agreement was reached, DOI eliminated BIA’s personnel policy and

operations staff at its central office in Washington, D.C., which had

provided service to the Eastern Area. BIA also shifted coverage of

personnel services for the Eastern Area to the Anna Darco, Oklahoma,

area office and for BIA’s Education Division to the Albuquerque, New

Mexico, area office.

DOI departmental and bureau officials cited two reasons for restructuring

personnel operations in the department—budgetary constraints and NPR

recommendations and guidelines. In October 1994, after the bureaus

rejected an earlier proposal to regionalize all personnel operations, DOI

issued a plan for the department that detailed objectives, principles,

approaches, and strategies for streamlining administrative operations.

According to the plan, the bureaus were asked to review their

organizations to identify strategies to reduce management layers, increase

the span of control for supervisors, and reduce their headquarters’

functions by as much as 50 percent. Each bureau was to devise its own

plan to meet the departmental goals.

Under the streamlining plan, authority for personnel matters would be

delegated to line managers of DOI’s nine bureaus so that they could

accomplish operating missions. According to departmental and bureau

officials, this delegation has been made but with varying degrees of

success. According to officials at one bureau, the concept of managers

assuming personnel work was not realistic without fundamentally

changing the personnel requirements and the associated processes to

fulfill those requirements.

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Department of Veterans Affairs’

Restructuring Efforts

Between September 1993 and September 1997, VA reduced its personnel

staff from 2,880 to 2,387 employees, a decrease of approximately

17 percent. According to VA officials, although VA’s personnel staffing has

been reduced, customer satisfaction with personnel services was the

primary factor that led VA to restructure its personnel operations. VA’s

initial restructuring of personnel offices began in the Veterans Health

Administration and the Veterans Benefits Administration, which together

employ most of the VA workforce. Since then, VA has taken a

departmentwide approach to restructuring its personnel and payroll

operations, referred to as “HR LINK$.”

Key features of this departmentwide approach include a national “shared

service center” to process personnel transactions for all of VA and a newly

designed three-tiered approach to address the questions and concerns of

employees and managers. At the first tier, a generalist is to answer routine

inquiries and process simple transactions. If an inquiry goes beyond the

assistance the generalist can provide, it goes to a specialist at the second

tier who is to provide problem-solving, issue resolution, and advice or

counsel based on the specific needs of the case. If assistance is needed

above the specialist’s expertise, then a small staff of experts at the third

tier is to provide or facilitate answers on department policy, program

design, or resolve complex case work. VA had a four-phase strategy for

implementing the remaining activities of its restructuring plan and was in

the second phase as of late 1997. VA officials planned to complete

departmentwide implementation by December 1999.

According to VA officials and documents, VA’s aim in developing its

approach was to improve the delivery of personnel service and to have the

personnel function more directly assist program managers in

accomplishing the mission of the organization. To determine how

personnel services could be improved and made more useful to managers,

VA compared its personnel operations with the personnel operations of

leading private and public sector organizations and used a business

process reengineering approach to streamline its personnel processes.

Expanding on that effort, VA’s September 1997 HR managers’ conference

focused on how the human resource function can become a strategic

partner in supporting managers and employees in accomplishing VA’s

mission. The purpose of the conference, as stated in conference materials,

was “to develop effective strategies and accountable action plans, with

relevant stakeholders, to optimize value-added and measurable human

resource services for the changing VA, and to clarify responsibilities in the

new HR/Payroll model.”

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Personnel Servicing Ratios

Generally Did Not Change

Substantially

Personnel officials we interviewed referred to their personnel servicing

ratios as a key indicator when they spoke about restructuring personnel

operations. As previously stated, governmentwide reductions of

personnelists totaled about 8,900 employees or about a 21-percent

reduction. The reductions in the number of personnelists at the four

departments we reviewed ranged from 14 to 41 percent, or an average of

about 22 percent. In contrast to the large reductions in the number of

personnelists, however, the personnel servicing ratios for the departments,

except for DOI, did not change as substantially from September 1993 to

September 1997 because of downsizing in other parts of the agencies. For

example, although USDA reduced the number of personnelist by 17 percent,

USDA’s personnel servicing ratio decreased from 55 employees served by 1

personnelist (55:1) to 54 employees served by 1 personnelist (54:1), which

was still below the federal average of 56 employees served by 1

personnelist (56:1). DOI reduced its number of personnelists by 41 percent

and improved its servicing ratio from 48:1 to 68:1. VA’s 1993 and 1997

servicing ratios were well above the federal average at 95:1 and 103:1,

respectively. Table 1 shows the ratios for the four departments and the

ratios for the 24 CFO agencies combined. As mentioned previously, the 24

CFO agencies employ most of the federal civilian workforce.

Table 1: Personnel Servicing Ratios for

the 4 Departments and the 24 CFO

Agencies Combined, September 1993

and September 1997 Agency

Sept. 1993

personnel

servicing ratioa

Sept. 1997

personnel

servicing ratioa Change in ratio

USDA 55:1 54:1 (–1)

HHSb (with SSA) (57:1) 47:1 (64:1) n/a (7)

DOI 48:1 68:1 20

VA 95:1 103:1 8

24 CFO agencies 51:1 56:1 5

aThese data include part-time and temporary employees (see app. I). A department’s personnel

servicing ratio may be lower when excluding part-time and temporary employees. For example,

VA’s 1997 ratio when only including full-time, permanent employees was 83:1. These data do not

include vacant positions, which may also change an agency’s ratio.

bHHS’ 1993 ratio and bracketed 1997 ratio include personnelists employed by SSA. SSA

separated from HHS in 1995. Therefore, in 1993, all SSA employees were counted in HHS’

workforce, which was not the case in 1997. If SSA personnelists were added to the number of

HHS personnelists to make the 1997 data more comparable to 1993 data, HHS’ 1997 personnel

servicing ratio would be 64:1, rather than 47:1.

Source: GAO analysis of data from OPM’s CPDF, as of September 1993 and September 1997.

The personnel servicing ratios for the four departments did not increase

more because, at least in part, the overall number of employees served

Page 15 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
B-277016 

also decreased between September 1993 and September 1997. In addition

to reducing personnel staff, each department also downsized other parts

of its workforce. For example, according to data from OPM’s CPDF, USDA had

about 25,700 fewer employees in September 1997 than it did in

September 1993, a decrease of about 19 percent. In comparison, the

number of personnelists at USDA decreased by 17 percent.

Use of New Technology,

Key Component of

Restructuring Plans, Is

Behind Schedule

As part of their restructuring efforts, the four departments planned that

new hardware and/or software technology—designed to reduce

paperwork and workload for personnel staff—would be in place before

personnel staff reductions were made. To this end, each department was

developing or purchasing new technology for automating personnel

transactions.10 In some cases, the departments had begun to automate the

processes for classifying and staffing positions, which streamlined those

processes and reduced the time necessary to process certain transactions,

such as employee hiring and promotions. However, across all four

departments, much of the new automation was not in place even though

personnel staff reductions had occurred.

As of late 1997, the departments were behind their original milestones for

implementing the new personnel and payroll systems. For example, USDA

officials were deciding whether to provide an automated “front-end

processing” supplement to its core payroll/personnel system by developing

software in-house or purchasing commercially available software. Pilot

tests of both software products were planned to develop information on

which to base the decision. HHS’ Program Support Center, which is to serve

all of HHS, was converting its existing system to use commercially available

software to upgrade its personnel and payroll system, as well as testing the

converted system. DOI had been developing a system for processing

personnel and payroll transactions, including automating SF-52s, since the

late-1980s, but it was not fully operational departmentwide as of

January 1998. VA had rescheduled the opening of its national service center

from September 1997 to March 1998 to allow more time for programming

and testing the new information system. However, VA officials remained

confident that the new system would be implemented departmentwide by

December 1999, as projected, because key implementation steps were

being done in parallel rather than in sequence.

10As we noted earlier, USDA and VA officials used a business process reengineering approach; HHS

and DOI officials did not. With the passage of the Clinger-Cohen Act in 1996, agencies are now required

to assess and reengineer their paperwork processes before automating them.

Page 16 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
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Officials of the four departments and their agencies told us that efforts to

upgrade technology have been resource intensive and have taken longer

than expected. Specifically, some officials said that when restructuring

efforts began they had not fully appreciated the need to (1) assess existing

automated systems before making changes, (2) have technology in place

before downsizing personnel staff, and (3) allow sufficient time for testing

the new technology. One option these officials recommended to other

agencies to facilitate the conversion process was to consider purchasing

commercially available software rather than building new personnel

information and payroll systems in-house. Few commercial software

programs suitable to the departments’ needs, according to officials at two

departments, were available when the departments began to develop their

automated systems in-house.

Further complicating the system delays in the agencies is their need to

comply with the Year 2000 date conversion. In both the public and private

sectors, the way dates are recorded and computed in many computer

systems is at the root of the Year 2000 compliance problem. For the past

several decades, systems have typically used two digits to represent the

year, such as “97” representing 1997, to conserve electronic data storage

space and reduce operating costs. With this two-digit format, however, the

year 2000 is indistinguishable from 1900, 2001 from 1901, and so on. As a

result of this ambiguity, system or application programs that use dates to

perform calculations, comparisons, or sorting may generate incorrect

results. Payroll and personnel information systems and programs clearly

fit those categories. All four departments were aware of this problem and

were taking steps to address the issue. For example, according to DOI

officials, the personnel information and payroll system they are developing

is designed to be Year 2000 compliant. DOI plans to validate and test the

new system’s compliance in 1999.

Departments

Recognized Need for

More Performance

Measures to Better

Assess the Results of

Personnel Operations

The four departments we reviewed had only limited measures in place to

assess the performance of personnel offices and operations but were

developing further measures. A growing trend in industry and more

recently in government, according to HR experts, is the expectation that

the personnel function needs to quantify its operations’ return on

investment or what value-added the function provides to an organization.11

In addition, as we previously reported, without measures of performance,

it will be difficult to track the impact of recent activities to streamline

11For example, see Transforming the Civil Service: Building the Workforce of the Future, Results of a

GAO-Sponsored Symposium (GAO/GGD-96-35, Dec. 20, 1995).

Page 17 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
B-277016 

personnel operations and to know whether the intended results were

achieved.12

Limited Performance

Measures in Place to

Gauge the Results of

Restructuring

Focusing the measurement of personnel operations on results represents a

major shift for HR managers in the federal government. A 1993 study of

federal personnel offices, by the U.S. Merit Systems Protection Board

(MSPB), highlighted the fact that personnel offices in the federal

government have long been evaluated on the basis of compliance with

laws, rules, and regulations and not on service delivery or results.13 The

MSPB found little in the way of performance indicators of service delivery

in personnel operations. In our survey of the 24 CFO agencies, we found

that there had been little progress since the MSPB study was conducted.

The 24 CFO agencies reported little if any performance measurement

activity.

More specifically, when we spoke with personnel officials from the four

departments, they told us that they had few measures in place across the

department to track performance or to indicate what value-added services

personnel offices bring to the organization. These departments had not

routinely gathered the data needed to gauge operational efficiency and

effectiveness. For example, data were not usually gathered to measure the

costs of personnel and payroll processes or the level of satisfaction

customers had with the quality and timeliness of the services they

received. A 1996 USDA study identified 360 operational activities associated

with the delivery of personnel services but identified performance

measures for only 6 of them.

While not common, we did observe that some agencies had performance

measures in place that were not routinely being used elsewhere. For

example, at USDA’s Animal and Plant Health Inspection Service (APHIS),

officials said they had performance standards in place for a number of

years. As part of its performance standards, APHIS tracks how long it takes

to carry out certain activities, such as 34 days to complete the processing

of paperwork for promotions.

One performance measure that agencies’ personnel officials consistently

used was the personnel servicing ratio, as discussed earlier. For example,

12Business Process Reengineering Assessment Guide (GAO/AIMD-10.1.15, Apr. 1997) and Assessing

Risks and Returns: A Guide for Evaluating Federal Agencies’ IT Investment Decision Making

(GAO/AIMD-10.1.13, Feb. 1997).

13Federal Personnel Offices: Time for A Change? A Report to the President and the Congress of the

United States by the U.S. Merit Systems Protection Board, August 1993.

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DOI issued guidelines to the bureaus to attain a servicing ratio of 100

employees to 1 personnelist. VA had projected a target servicing ratio of

110 to 125 employees to 1 personnelist. The servicing ratio, while

providing a broad measure of efficiency and an indicator of progress in

restructuring, does not indicate how well an agency’s personnel office

meets the needs of its customers—managers and employees—or its

contribution to mission accomplishment. Performance indicators can aid

agencies’ efforts to improve service delivery, efficiency, and quality—key

goals of agencies’ restructuring efforts.

Agencies Were Developing

Performance Measures

Agency officials we interviewed in all four departments recognized the

need for measurement and were beginning to develop appropriate

measures to assess the performance of personnel offices. For example,

officials of HHS’ National Institutes of Health said they were working with

NAPA to develop specific measures to track the delegation of authority to

line managers and whether line managers believed that the personnel

systems were flexible and easier to use. According to HHS officials, HHS also

conducts an HR management indicators survey, which provides managers

with data on employee perceptions of organizational effectiveness. VA

sought to quantify the costs and performance of its personnel activities as

it was developing its restructuring initiative to identify specific

opportunities for improvement. Moreover, VA also recently developed

performance measures that it circulated for comment to its personnel

managers, including measures of users’ satisfaction with the new

automated personnel system and cost per employee for operating the new

human resource system. At USDA, the Natural Resources Conservation

Service also planned to use performance measures, for example, to

determine the time personnel staff take to provide lists of eligible

candidates to managers to fill vacant positions.

A 1997 NAPA study14 was commissioned by a number of federal agencies,

including HHS and VA, to help personnel offices design useful measurement

systems and to provide information and tools for that purpose. While the

study emphasized that there is no one-size-fits-all system of measurement,

it did identify four aspects of HR that should be measured. The four aspects

were (1) financial measures, such as cost per employee hired and litigation

costs; (2) customer satisfaction measures, such as those associated with

responsiveness and quality; (3) workforce capacity measures, such as

employee satisfaction and education; and (4) process effectiveness, such

as cycle time and productivity.

14Measuring Results: Successful Human Resources Management, NAPA, August 1997.

Page 19 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
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Governmentwide

Issues Concerning the

Purchase and Delivery

of Automated

Personnel Services

In restructuring its personnel operations, a federal agency may decide to

purchase personnel and payroll services rather than operate its own

systems. Congress and the current administration, as with prior

administrations, have encouraged federal agencies to provide

administrative services to other agencies on a reimbursable basis. The

Director of OMB was authorized by the Government Management Reform

Act of 1994 to designate a number of agencies that can establish pilot

franchise funds to provide common administrative support services.

Federal agencies may also contract with private companies for personnel

and payroll services. Among the issues that agencies may encounter if

purchasing personnel and payroll services is the inability of service

providers to deliver services when scheduled. Another issue is the lack of

a common framework in which to (1) compare the service quality of

personnel and payroll services that franchise and other federal agencies

will provide to agencies seeking services and (2) permit the efficient

exchange of automated personnel data between agencies and service

providers.

Services to Be Obtained

Through Cross-Servicing

May Not Be Available as

Planned

Each of the four departments is selling or planned to sell automated

personnel and/or payroll services to other federal agencies, which was one

reason why each department was upgrading its payroll and/or personnel

information system. Three of the four departments (DOI, HHS, and VA) were

franchise pilots, and USDA’s National Finance Center already provided

personnel and payroll services of some extent to 45 agencies, including us,

as of August 1997. As previously stated, the departments had all fallen

behind schedule in bringing their proposed systems to operational status.

This situation had already affected the plans of certain agencies to obtain

services. For example, DOI had agreed to provide payroll services to DOE if

it were feasible to build an interface with DOE’s human resource

information system under development using commercially available

software. Upon completion of a feasibility study, DOI estimated that it

would take at least 15 months beyond the scheduled delivery date to

provide payroll services to DOE because of the need to develop a computer

interface. DOI estimated that the interface would cost at least $3.4 million

to develop and between $450,000 and $675,000 annually to operate.

Because of the estimated time lag in the delivery of services and the

associated costs, DOE decided to cancel its agreement with DOI. DOE plans

to upgrade its existing payroll system and develop its own interface to

DOE’s new HR system, which, according to DOE officials, is Year 2000

compliant.

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The situation of an agency waiting for an uncertain length of time to

receive automated services is further complicated by the need for all

agencies to comply with the Year 2000 date conversion. According to DOE

officials, one reason why the Department decided to purchase payroll

services from DOI was because its existing personnel information and

payroll systems were not Year 2000 compliant. The officials said that DOE

will now have to upgrade its payroll system to make it Year 2000

compliant. Other agencies may face similar situations if they cannot obtain

personnel and payroll services in a timely manner from outside providers.

Lack of Common

Framework to Inform

Agencies About Services

That Are Available

A common concern among the department and agency officials we

interviewed was the lack of a common framework for restructuring

personnel processes and information systems. The officials suggested that

it would be useful to have, before entering into a cross-servicing

arrangement, descriptions of the services agencies are offering. The

descriptions could provide cost, performance, and other information

about a service that would help an agency to decide whether to develop

the service in-house or buy the service from another agency or the private

sector. According to USDA, several agencies have expressed to the

governmentwide Human Resource Technology Council that costs are not

comparable from one service provider to another because different

services are provided and different assumptions for including costs are

used to determine billing for these services.

As we reported in October 1997, experiences in private sector

organizations in purchasing automated administrative services show the

need to understand the cost drivers and performance requirements to

make effective “outsourcing” decisions.15 In our survey of the 24 CFO

agencies, several agencies reported that they were considering various

options for obtaining personnel and payroll services, such as

cross-servicing and outsourcing. However, agency officials told us that the

available information on operational performance and costs for personnel

and payroll services from other federal agencies were limited (e.g.,

information on whether the systems work together without costly

interfaces). This lack of information may be due in some measure to the

less-than-fully operational status of new systems that agencies may be

installing to provide cross-servicing or franchise services, such as was the

status in the four departments we reviewed. The four departments had

limited processes to routinely capture specific costs of their personnel and

15Financial Management: Outsourcing of Finance and Accounting Functions (GAO/AIMD/NSIAD-98-43,

Oct. 17, 1997).

Page 21 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
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payroll activities but were beginning to capture more cost data. For

example, VA and USDA officials were beginning to use activity-based costing

to determine what the costs were to conduct certain activities and were

using this information to help target improvements in their personnel

operations.16

Common Format to

Facilitate Data Exchanges

Was Being Developed

Department and agency officials we interviewed said it would be useful as

well to have a standard technical format for data that agencies are likely to

exchange with service providers. Standard technical formats, they said,

would enable an agency and its service provider to readily exchange

automated data.

In April 1997, we reported on agencies’ concerns about the lack of core

requirements for automated personnel and payroll systems.17 OPM recently

began taking positive steps to address these concerns by rechartering the

Federal Personnel Automation Council as the Human Resources

Technology Council. OPM has tasked the Council with developing a set of

core data elements and requirements for personnel information systems in

recognition of the need to develop a governmentwide strategy for using

automation technology. To improve the overall efficiency of agency

human resources operations, the President’s Management Council tasked

the Human Resources Technology Council to (1) review ongoing

development and modernization of human resource systems across the

government and (2) define and standardize essential functional or

information requirements. The Human Resources Technology Council

issued a report in November 1997 detailing its findings from a

governmentwide survey of human resources information systems.18 These

findings include the following:

• Human resources and payroll information systems should accommodate

the flexibility and discretion needed by agency management.

• Agencies should make every effort to adopt standard data elements and

descriptions to provide a degree of interoperability and compatibility of

human resources information systems across the government.

16Activity-based costing is a set of accounting methods used to identify and describe costs and required

resources for activities within processes.

17GAO/GGD-97-68R.

18Governmentwide Human Resources Information Systems Study, Human Resources Technology

Council, November 26, 1997.

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• Analytical processes should be used to critically examine, rethink, and

redesign agency human resources management programs before

embarking on the development of new information systems.

• Agencies should review other existing agency information systems to

determine if any one of them can satisfy their needs before making a

decision to purchase or develop a new system.

• Agencies’ decisions about how and when to replace current systems

should be based on a business case analysis.

The Human Resources Technology Council’s November 1997 report

recommends that the Council and OPM undertake further study to

• develop a strategy to move toward governmentwide electronic human

resources recordkeeping,

• evaluate the cost of implementation and maintenance of human resource

information systems,

• evaluate the best practices of other government entities and the private

sector, and

• ensure that up-to-date functional requirements and data elements are

identified in the payroll area.

In addition, in June 1997, the President established an Administrative

Management Council, acknowledging that administrative management

matters deserve attention across agency lines.

Conclusions Initial efforts to restructure personnel operations at USDA, HHS, DOI, and VA

were aimed at reducing personnel office staff and improving automated

systems. Upgrading system technology was a primary element of the

restructuring plans because the departments planned to increase

operating efficiencies and improve services by automating paper-based

personnel processes. Each department reduced the number of

personnelists it employed, with reductions ranging from 14 percent at HHS

to 41 percent at DOI. Each department as well was working to improve its

automated systems. However, the automation efforts were not completed

as planned before reductions in personnel staffing occurred. Automation

efforts had not been fully implemented throughout the departments, as of

late 1997.

Although some agencies were beginning to develop and implement

performance measures for personnel operations, it was difficult for them

to assess the performance of their restructured personnel offices because

Page 23 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
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the offices generally lacked baseline measures to gauge changes in

performance. The Government Performance and Results Act of 1993

requires federal agencies to assess how well they are performing and to do

so with appropriate performance measures. Without performance

measures, departments and agencies will be unable to determine the

timeliness of personnel services, the satisfaction levels of those who use

the services, and other attributes that they may associate with personnel

operations. Because personnel offices, regardless of department or

agency, generally carry out the same activities, some performance

measures would appear to have widespread application across agencies,

could be used to compare performance among agencies, and could help to

identify best practices in the delivery of federal personnel services.

Performance measures also provide a benchmark to assess the

effectiveness of reform efforts such as those taken by the four

departments we examined.

The lagging schedule at the four departments in upgrading the personnel

and payroll systems has had consequences beyond the four, since each

department is providing or plans to provide personnel and payroll services

to other agencies. An agency may sign up to use these services, in part,

because its own personnel information and payroll systems are not Year

2000 compliant. As discussed earlier, DOE changed its plans to use DOI’s

payroll services. One of the factors, which influenced that decision, was

the high cost to develop and maintain the DOI interface with DOE’s new HR

information system. The second factor was DOE’s lack of a “comfort zone”

between the projected date to complete the interface and the year 2000, in

the event delays were encountered in developing and testing the interface,

since DOE’s payroll system was not Year 2000 compliant. It is imperative

that payroll and personnel information systems, which use dates for many

computations and analyses, be Year 2000 compliant or that the agencies

have some backup means of accurately making the necessary

computations when 2000 arrives.

As agencies decide to use alternative approaches for delivering personnel

and payroll services, such as cross-servicing arrangements, they will need

to be assured that the services they are to receive under these

arrangements can and will meet their data and information needs. The

administration has recognized that a governmentwide framework for

cross-servicing arrangements is needed as agencies restructure personnel

operations. OPM’s Human Resources Technology Council has begun to

focus interagency efforts to develop such a framework. Agency officials

have suggested that the framework could include consistent policies, data

Page 24 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
B-277016 

formatting requirements, and pricing structures for cross-servicing. The

Council’s current efforts do not include developing common performance

measures. These initial efforts appear to be a good start and, with further

refinement, would assist agencies in providing common administrative

functions across the federal government as envisioned under the franchise

fund pilot program authorized by the Government Management Reform

Act of 1994.

Recommendations We recommend that the Director of OMB require agencies to develop

performance measures for personnel operations. The measures to be

developed should assess key areas, such as the costs of personnel

processes, customer satisfaction with personnel services, workforce

capacity, and process effectiveness.

To develop measures that would have widespread application, we

recommend that the Director of OPM, in conjunction with the President’s

Administrative Management Council, lead an initiative that helps agencies

develop common measures that could be used to make performance and

cost comparisons of personnel operations within agencies and across

government.

Agency Comments

and Our Evaluation

We obtained written comments on a draft report from OMB, OPM, and the

four departments (DOI, HHS, USDA, and VA) whose personnel restructuring

efforts we reviewed. We also obtained written comments from DOE

because it initially was evaluating alternatives, including using DOI’s payroll

services, for providing more efficient services to its employees. The

agencies’ written comments are included in appendixes II through VIII.

OMB’s Acting Deputy Director for Management said that our draft report

adds considerably to the governmentwide knowledge base on

implementation of new administrative systems, lessons to be learned, and

the need to employ appropriate measures to determine their effect on

organizational and workforce performance. OMB likewise supported the

need to achieve these objectives and was in general agreement with our

recommendations that agencies develop performance measures for their

personnel operations.

OMB agreed that agencies should employ performance measures in

assessing the operations of human resources management operations.

However, OMB also suggested it is premature to require individual agencies

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B-277016 

to develop such measures. Moreover, OMB suggested in its response that

we consolidate our recommendations to focus attention on OPM’s role in

developing a set of common performance measures for human resource

management operations.

While we are sensitive to OMB’s position, a common framework is

important to help guide agencies’ efforts and we do not agree that it is

premature to require agencies to develop such measures, given their

progress to date. In fact, to be most effective, we would expect that work

on our two recommendations would be done in tandem, thus building

synergies from efforts at both agency and governmentwide levels. As OMB

points out in its letter, the Merit Systems Protection Board has noted that

24 federal agency strategic plans identified at least one specific human

resource management objective and one or more implementing strategies,

and about half of those plans included performance measures that could

be used to assess whether the objectives were being met. We also point

out in our report that agencies were making progress in developing

performance measures for their personnel operations. Given the level of

investment in new HR information systems and the movement to

cross-servicing among agencies for HR and payroll services, we continue to

believe that it is important that agencies move quickly to develop baseline

measures to gauge their progress and performance. We agree with OMB

that OPM must play a central leadership role in helping to improve the

overall quality and responsiveness of human resource management in

agencies. However, OMB has a leadership role to play as well. OMB issues

the guidance for agencies’ annual performance plans and is a key recipient

and user of those plans.

The Director of OPM said that OPM shares an interest in working with the

Interagency Council on Administrative Management and other

organizations throughout the government to develop appropriate

performance measures, as our report recommends. The Director cited

OPM’s ongoing efforts with the agencies to develop a human resources

accountability model. OMB’s and OPM’s written comments are included in

appendixes II and III, respectively.

HHS’ Inspector General, DOI’s Assistant Secretary for Policy, Management

and Budget, and USDA’s Director for the Office of Human Resource

Management said that we had accurately reflected their HR restructuring

efforts over the past several years. The agencies provided information to

clarify and update the draft report, which we incorporated into this report

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where appropriate (see written comments and marginal notations in apps.

IV through VIII).

On the other hand, in VA’s May 22, 1998, letter, the Assistant Secretary for

Policy and Planning said that the draft report fell short in depicting the

scope, magnitude, and complexity of VA’s primary human resource

restructuring initiative—the “HR LINK$” project. He also stated that this

initiative is a model for the federal government. We believe that we have

accurately described VA’s personnel restructuring efforts. We agree with VA

that the “HR LINK$” project is a significant, large, and complex

undertaking. However, as the draft indicated, VA still faces significant

challenges in implementing its approach across the nation, including

incorporating technology upgrades and addressing important operational

details. VA was still in the prototype stage of the project and had not fully

implemented its project throughout the department at the conclusion of

this review. Because “HR LINK$” is in the prototype stage and

implementation challenges still remain, we believe it would be premature

to characterize the initiative as a model for the rest of the federal

government. VA’s written comments are included in appendix VIII.

We are sending copies of this report to the Chairman and Ranking

Minority Members of the Senate Committee on Governmental Affairs and

its subcommittees on International Security, Proliferation and Federal

Services and Oversight of Government Management, Restructuring and the

District of Columbia; the House Committee on Government Reform and

Oversight and its subcommittees on Civil Service and Government

Management, Information and Technology; the Secretaries of Agriculture,

Energy, Health and Human Services, the Interior, and Veterans Affairs; the

Director, OPM, and other interested parties. We will also make copies

available to others upon request.

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Major contributors to this report are listed in appendix IX. Please contact

me at (202) 512-8676 if you have any questions concerning this report.

Sincerely yours,

J. Christopher Mihm

Associate Director, Federal Management

 and Workforce Issues

Page 28 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Page 29 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Contents

Letter 1

Appendix I 

Objectives, Scope,

and Methodology

34

Appendix II 

Comments From the

Office of Management

and Budget

39

Appendix III 

Comments From the

Office of Personnel

Management

41

Appendix IV 

Comments From the

Department of

Agriculture

44

Appendix V 

Comments From the

Department of Energy

48

Appendix VI 

Comments From the

Department of Health

and Human Services

50

Page 30 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Contents

Appendix VII 

Comments From the

Department of the

Interior

54

Appendix VIII 

Comments From the

Department of

Veterans Affairs

55

Appendix IX 

Major Contributors to

This Report

62

Tables Table 1: Personnel Servicing Ratios for the 4 Departments and

the 24 CFO Agencies Combined, September 1993 and

September 1997

15

Table I.1: Component Agencies of the Four Departments That We

Reviewed

35

Figure Figure 1: Federal Personnel Processes 6

Page 31 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Contents

Abbreviations

APHIS Animal and Plant Health Inspection Service

BIA Bureau of Indian Affairs

CFO Chief Financial Officer

CPDF Central Personnel Data File

DOE Department of Energy

DOI Department of the Interior

FTE full-time equivalents

HHS Department of Health and Human Services

HR human resource

MSPB Merit Systems Protection Board

NAPA National Academy of Public Administration

NPR National Performance Review

OMB Office of Management and Budget

OPM Office of Personnel Management

SSA Social Security Administration

USDA Department of Agriculture

VA Department of Veterans Affairs

Page 32 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Page 33 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix I 

Objectives, Scope, and Methodology

We had three objectives in this self-initiated review. Our first objective was

to describe the activities that have taken place in restructuring federal

personnel offices and operations. Our second objective was to ascertain

whether performance measures are in place to gauge the results of the

restructuring efforts. Our third objective was to identify issues agencies

may commonly encounter when, in restructuring their personnel

operations, they consider purchasing automated personnel and/or payroll

services from another agency or the private sector.

To address our first objective (i.e., to describe activities that have taken

place in restructuring personnel offices and operations), we identified

federal agencies that were restructuring their personnel offices and

operations. We identified and focused on the 24 agencies that have

financial reporting responsibilities under the Chief Financial Officers (CFO)

Act. These 24 agencies represent about 97 percent of the career, full-time

employees of the executive branch, and account for over 99 percent of the

federal government’s net dollar outlay in fiscal year 1996. We surveyed

officials in the 24 agencies, asking a series of questions such as (1) which

administrative functions, if any, were being restructured and what

methods were used to restructure; (2) how they were measuring or

planned to measure the results of these efforts; and (3) whether new

technology (computer hardware and/or software) was part of the

restructuring plan. Information the officials provided to our questions

served as the basis for selecting the four departments we reviewed. We

used information obtained from the four departments to address all three

of our objectives.

We reviewed USDA, HHS, DOI, and VA because they reported (1) using

business process reengineering as an approach to restructuring,

(2) developing or purchasing new technology, and (3) providing or

planning to provide personnel and payroll services to other agencies.1

Because the personnel restructuring activities at USDA, HHS, and DOI were

decentralized, we obtained information from several of their respective

component agencies. We also obtained information from the three

agencies within VA, although the VA’s restructuring efforts were more

centralized. We generally selected those agencies in the four departments

that had the largest number of employees. Table I.1 lists by department the

component agencies we selected and reviewed.

1

Although the four departments reported using a business process reengineering approach, further

discussion with personnel officials after we selected the departments lead to a clarification that USDA

and VA had used a business process reengineering approach; HHS and DOI had not.

Page 34 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix I 

Objectives, Scope, and Methodology

Table I.1: Component Agencies of the

Four Departments That We Reviewed Department Component agency

Department of Agriculture Animal and Plant Health Inspection Service

Farm Service Agency

Forest Service

Natural Resources Conservation Service

Department of Health and Human Services Food and Drug Administration

Indian Health Service

National Institutes of Health

Department of the Interior Bureau of Indian Affairs

Bureau of Land Management

Bureau of Reclamation

National Park Service

Office of Surface Mining

Department of Veterans Affairs National Cemetery System

Veterans Benefits Administration

Veterans Health Administration

In addressing our first objective further, we interviewed personnel

officials of the four departments and the selected component agencies to

obtain information on (1) when restructuring began, (2) the rationale for

restructuring, (3) the plans developed for restructuring, (4) the activities

undertaken to restructure, and (5) the status of implementation. The

personnel officials we interviewed were from the central offices of the

departments and agencies, and regional and other field offices.

Specifically, at the field level, we interviewed personnel officials of

• the Bureau of Reclamation in Denver, Colorado;

• the Bureau of Land Management, Forest Service, Natural Resources

Conservation Service, Bureau of Indian Affairs, and Indian Health Service

in Albuquerque, New Mexico;

• the Bureau of Land Management’s state office in Santa Fe, New Mexico;

and

• the Veterans Health Administration in Bath, New York.

In addition, we reviewed the restructuring plans and other documentation

on restructuring provided by the four departments and their agencies. For

example, we examined the “Reengineering Blueprint” that details the

restructuring plans of the Natural Resources Conservation Service at USDA.

We also attended planning conferences held by VA for its human resource

managers.

Page 35 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix I 

Objectives, Scope, and Methodology

To address our second objective (i.e., to ascertain whether performance

measures are in place to gauge the results of the restructuring efforts), we

discussed with responsible officials whether the departments and agencies

had developed or were developing performance measures, whether the

measures were “benchmarked” against leading organizations, and whether

the performance measures were linked to the mission of the department

or agency. Where departments and agencies had developed performance

measures, we examined documents to determine what measures had been

developed. In addition, since the restructuring and integration of human

resource management is an evolving area in the private and public sectors,

we reviewed current literature and spoke with experts in the human

resource management area, including officials from NAPA and the Saratoga

Institute, to develop an understanding of the major issues associated with

restructuring personnel operations and performance measurement.

In discussing performance measures with the officials, we learned that the

one measure the departments and agencies all used was the personnel

servicing ratio, which compares the number of employees to the number

of personnelists serving them. To compute personnel servicing ratios for

the four departments and governmentwide and to determine how those

ratios may have changed because of restructuring, we obtained

September 1993 and September 1997 data from OPM’s Central Personnel

Data File (CPDF). The CPDF is a database that contains individual records

for most civilian federal employees and is a primary source of information

on the civilian workforce of the executive branch. Data in the CPDF are

supplied by the individual departments and agencies. We did not verify the

data we obtained from the CPDF database, although we have a review in

process that is examining the reliability of the CPDF database in general.

In obtaining information on staffing from the CPDF, we extracted data

governmentwide and for each of the 24 CFO agencies, which employ most

of the nonpostal civilian employees in the executive branch. In addition,

when extracting data on the staffing of personnel offices, we identified

only employees in occupational series GS-200-299, Personnel Management

and Industrial Relations, which was the personnel series that NPR had

targeted for downsizing.2

 We did not determine whether all of those who

were in the occupational series worked in a personnel office; some

unknown number may have worked in other human resource

organizations such as training offices. On the other side, we did not

identify employees who worked in personnel offices but who were not in

2

We excluded military personnelists in occupational series 204 and 205 since we focused our review on

civilian personnel.

Page 36 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix I 

Objectives, Scope, and Methodology

the GS-200 occupational series; for example, we did not identify

secretaries and clerks who worked in personnel offices. We extracted CPDF

data on all employees, including part-time and temporary employees. The

staffing numbers we use in this report provide approximate rather than

exact reflections of the changes in staffing (overall and in personnel

offices) at the four departments and governmentwide. Alternative

definitions of whom to count as personnelists could change the personnel

servicing ratio.

Finally, to address our third objective (i.e., to identify issues agencies

encountered as they purchased automated personnel and payroll services

from another agency or the private sector), we interviewed officials from

the departments and component agencies who were involved in the

development and/or purchase of new technology (hardware and software)

for personnel and/or payroll operations. From these interviews, we

obtained information on decision processes for acquiring new technology,

the challenges that surface in acquiring new technology, and status of

technology implementation. To observe agencies’ new technology, we

visited the Natural Resources Conservation Service’s automation test site

in Riverdale, Maryland, and the operations of automated administrative

service centers in Topeka, Kansas (operated by VA); Denver, Colorado

(operated by DOI); and Rockville, Maryland (operated by HHS). We also met

with officials from OMB and OPM and representatives from the CFO Council’s

Joint Systems Solutions Team and the former Federal Personnel

Automation Council to discuss governmentwide efforts to streamline

personnel operations.

The four departments and the component agencies had not completed

their personnel restructuring efforts as of late 1997. Thus, the information

we collected from them can provide only a view of their restructuring

efforts to date. Since the implementation efforts have not been completed,

we cannot conclude the outcome of their efforts. Furthermore, the

findings from the four departments and their component agencies may or

may not be representative of the remaining CFO agencies and other federal

agencies that may be restructuring their personnel offices and operations.

These findings, however, provide some indication of the kinds of issues

other agencies could face.

We obtained written comments from the Directors of OMB and OPM, the

Secretaries of DOE, DOI, HHS, USDA, and VA or their designees. We obtained

written comments from DOE because it initially was evaluating alternatives,

including using DOI’s payroll services, for providing more efficient services

Page 37 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix I 

Objectives, Scope, and Methodology

to its employees. A discussion of their comments appears at the end of the

report and their written responses are included in appendixes II through

VIII.

Page 38 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix II 

Comments From the Office of Management

and Budget

Page 39 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix II 

Comments From the Office of Management

and Budget

Page 40 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix III 

Comments From the Office of Personnel

Management

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

Page 41 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix III 

Comments From the Office of Personnel

Management

Page 42 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix III 

Comments From the Office of Personnel

Management

The following is GAO’s comment on the Office of Personnel Management’s

letter dated June 8, 1998.

GAO Comment 1. OPM notes in its response that OPM calculates the servicing ratio

differently than we did and suggests that we change the computation of

the ratios in our report. OPM also said that we used a broader definition of

personnelists than theirs in our ratio calculation. First, we include the

personnelists, as employees, in the calculation of total employees to

present a more complete measure of the personnelists’ workload.

Personnelists must still process personnel actions and payroll for their

own staff in the same manner as they would for other employees; and

therefore, we believe it is a more complete way to calculate the ratio.

Including personnelists in total employees serviced increases the servicing

ratios by one (e.g., VA’s 1993 ratio is 95:1 with personnelists included in

total employees versus 94:1 without personnelists included in total

employees). Second, we used the definition of personnelists as defined by

the National Performance Review. Contrary to OPM’s comment, we did not

include military personnel specialists in our calculation of the servicing

ratios (see app. I). We included part-time employees in our calculation to,

again, give a fuller efficiency measure of the personnelists’ workload, since

processing personnel actions for part-time employees generally requires

similar amounts of effort as required for full-time employees. As stated in

our report, we believe that the servicing ratio is a rough measure of

efficiency but does not capture the quality of the work performed.

Page 43 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix IV 

Comments From the Department of

Agriculture

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See footnote a,

p. 15.

Page 44 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix IV 

Comments From the Department of

Agriculture

Now on p.5.

Now on pp. 4 & 21.

Now on p. 13.

Page 45 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix IV 

Comments From the Department of

Agriculture

See comment 1.

See p. 8.

Page 46 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix IV 

Comments From the Department of

Agriculture

The following is GAO’s comment on the Department of Agriculture’s letter

dated June 3, 1998.

GAO Comment 1. While agencies have cited concerns about the need for changes to the

federal human resource management system’s statutory and regulatory

framework to assist the streamlining of their personnel operations, we

have previously reported that agencies are not always aware of the range

of flexibility they have, or have not taken full advantage of the available

flexibility. Nevertheless, as we noted in our report, any changes to current

regulatory or statutory requirements may have important implications for

federal human resource management, personnel offices, and how

personnel services are provided to line managers.

Page 47 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix V 

Comments From the Department of Energy

Now on pp. 4 & 20.

Page 48 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix V 

Comments From the Department of Energy

See p. 20.

See p. 24.

Page 49 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VI 

Comments From the Department of Health

and Human Services

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 50 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VI 

Comments From the Department of Health

and Human Services

See comment 1.

Now on p. 8.

Now on pp.12-13.

See p. 13.

See comment 2.

See comment 3.

Page 51 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VI 

Comments From the Department of Health

and Human Services

See p. 19.

Page 52 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VI 

Comments From the Department of Health

and Human Services

The following are GAO’s comments on the Department of Health and

Human Services letter dated May 26, 1998.

GAO Comments 1. While agencies have cited concerns about the need for changes to the

federal human resource management system’s statutory and regulatory

framework to assist the streamlining of their personnel operations, we

previously reported that agencies are not always aware of the range of

flexibility they have, or have not taken full advantage of the available

flexibility. Nevertheless, as we noted in our report, any changes to current

regulatory or statutory requirements may have important implications for

federal human resource management, personnel offices, and how

personnel services are provided to line managers.

2. HHS noted in its response that they believe the HHS’ ratio would be

clearer if SSA’s population was excluded in both 1993 and 1997. We

included SSA in the calculation of HHS’ 1993 ratio for HHS because SSA’s field

staff were serviced by HHS’ personnelists. If we were to calculate the 1993

ratio for HHS without SSA’s employees, the HHS’ ratio would be understated.

3. We agree with HHS’ statement that personnel offices perform different

functions in different work environments. This is part of the rationale for

our statement that the servicing ratio, although a general measure of

efficiency, does not adequately capture how well the work is performed,

since some offices may provide more services than others.

Page 53 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VII 

Comments From the Department of the

Interior

Page 54 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 55 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

Page 56 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

See comment 1.

Page 57 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

See comment 2.

See comment 3.

Page 58 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

Page 59 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

The following are GAO’s comments on the Department of Veterans Affairs

letter dated May 22, 1998.

GAO Comments 1. VA states that our report criticizes all agencies, including VA, for falling

behind schedule in efforts to restructure personnel operations. VA states

that “HR LINK$” is not simply an initiative to replace an aging legacy

human resources/payroll system. VA further explains that it is completely

reinventing and reengineering its entire HR and payroll processes.

However, VA also acknowledges that it has experienced some delays in

opening its shared service center, which it considers minimal. We have

included the factual information about agencies’ schedule delays in our

report because of its importance to Congress and to decisionmakers in

other federal agencies who also are making decisions about changes to

their personnel operations. We feel this is important, given the short time

frames to implement complex technology changes in HR and payroll

operations before the year 2000. Our draft also noted that, despite the

delays, VA remains confident of meeting its scheduled December 1999

completion date.

2. VA believes that (1) we did not adequately depict its experience in

developing performance measures and (2) servicing ratios are not critical

measures for determining its project’s success. On the contrary, the draft

noted that all four departments we reviewed recognized the need for more

performance measures to better assess the results of personnel operations

and described some of the agencies’ efforts to develop performance

measures. We pointed out that VA recently developed performance

measures that it circulated to its personnel managers for comment. In our

exit conference with VA officials, they acknowledged that their

performance measures (referred to in VA’s letter) were not implemented

throughout the Department. In regards to the servicing ratio, we agree

with VA that servicing ratios are not a critical measure for determining the

project’s success. We noted in our draft report that “the servicing ratio,

while providing a broad measure of efficiency and an indicator of progress

in restructuring, does not indicate how well an agency’s personnel office

meets the needs of its customers—managers and employees—or its

contribution to mission accomplishment.”

3. VA said we took a narrow view of all agencies’ projects, especially VA’s.

VA states that its plan is to achieve savings as different phases of the new

delivery model are implemented. VA acknowledges that staff reductions

have occurred before the delivery of new technology. As discussed in our

Page 60 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix VIII 

Comments From the Department of

Veterans Affairs

report, agencies’ plans called for new technologies and streamlining of

processes in order to achieve cost savings from staff reductions. Since

staff reductions have occurred before new technologies are in place, those

personnel staff remaining are doing the same work without gaining the

efficiencies that were expected from using the new technology.

Page 61 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
Appendix IX 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

John K. Needham, Assistant Director, Federal Management

 and Workforce Issues

Debra R. Johnson, Evaluator-in-Charge

Katharine Cunningham, Evaluator

Dion Anderson, Evaluator

Anthony Assia, Senior Evaluator

Michael J. O’Donnell, Personnel Advisor

Rudy Chatlos, Social Science Analyst

Greg Wilmoth, Social Science Analyst

Accounting and

Information

Management Division,

Washington, D.C.

John T. Christian, Ph.D., Senior Business Process Analyst

Office of the General

Counsel, Washington,

D.C.

James Rebbe, Attorney Advisor

(410134) Page 62 GAO/GGD-98-93 Efforts to Restructure Personnel Operations
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