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S. Hrg. 109–343

ALTERNATIVE PERSONNEL SYSTEMS: ASSESSING

PROGRESS IN THE FEDERAL GOVERNMENT

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 27, 2005

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Chief Counsel 

TRINA D. TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

NORM COLEMAN, Minnesota, Chairman 

TED STEVENS, Alaska 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

TARA E. BAIRD, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1

Senator Collins (ex officio) ............................................................................... 2

Senator Akaka .................................................................................................. 3

Senator Carper ................................................................................................. 31

WITNESSES 

TUESDAY, SEPTEMBER 27, 2005

Hon. Dan G. Blair, Deputy Director, U.S. Office of Personnel Management ..... 4

Hon. David M. Walker, Comptroller General, U.S. Government Accountability 

Office ..................................................................................................................... 6

Jeffery K. Nulf, Deputy Assistant Secretary for Administration, U.S. Department of Commerce ............................................................................................... 20

Arleas Upton Kea, Director, Division of Administration, Federal Deposit Insurance Corporation ............................................................................................. 22

Dr. Hratch G. Semerjian, Deputy Director, National Institute of Standards 

and Technology, Technology Administration, U.S. Department of Commerce ..................................................................................................................... 24

C. Morgan Kinghorn, Jr., President, National Academy of Public Administration ........................................................................................................................ 34

Colleen M. Kelley, National President, National Treasury Employees Union ... 36

John Gage, National President, American Federation of Government Employees, AFL–CIO ....................................................................................................... 39

ALPHABETICAL LIST OF WITNESSES

Blair, Hon. Dan G.: 

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 51

Gage, John: 

Testimony .......................................................................................................... 39

Prepared statement .......................................................................................... 128

Kea, Arleas Upton: 

Testimony .......................................................................................................... 22

Prepared statement .......................................................................................... 90

Kelley, Colleen M.: 

Testimony .......................................................................................................... 36

Prepared statement .......................................................................................... 119

Kinghorn, C. Morgan, Jr.: 

Testimony .......................................................................................................... 34

Prepared statement .......................................................................................... 114

Nulf, Jeffery K.: 

Testimony .......................................................................................................... 20

Prepared statement .......................................................................................... 82

Semerjian, Dr. Hratch G.: 

Testimony .......................................................................................................... 24

Prepared statement with an attachment ....................................................... 109

Walker, Hon. David M.: 

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 61

Page

IV

APPENDIX 

Michael B. Styles, National President, Federal Managers Association, prepared statement ................................................................................................... 146

Charts submitted by Mr. Blair for the record ....................................................... 157

Questions and answers submitted for the record from: 

Mr. Blair ............................................................................................................ 160

Mr. Walker with attachments ......................................................................... 166

Mr. Nulf ............................................................................................................. 176

Ms. Kea ............................................................................................................. 181

Mr. Kinghorn .................................................................................................... 189

Ms. Kelley ......................................................................................................... 191

Mr. Semerjian ................................................................................................... 193

Mr. Gage ............................................................................................................ 196

Mr. Styles .......................................................................................................... 198

(1)

ALTERNATIVE PERSONNEL SYSTEMS: ASSESSING PROGRESS IN THE FEDERAL GOVERNMENT 

TUESDAY, SEPTEMBER 27, 2005

U.S. SENATE, 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:07 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. George V. 

Voinovich, Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich, Collins (ex officio), Akaka, and Carper. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. The Subcommittee will please come to order. 

Good morning and thank you all for coming. I am particularly 

pleased that the Chairman of our Committee is here with us. 

Thank you for being here, and my good friend, Senator Akaka, the 

Ranking Member of the Subcommittee. 

Today’s hearing, Alternative Personnel Systems: Assessing Progress in the Federal Government, will assess the progress of Federal 

agencies in utilizing established workforce authorities to develop 

alternative personnel systems. 

I first of all would like to thank Senator Akaka for being at today’s hearing. Senator Akaka continues to be a strong partner in 

this Subcommittee’s efforts to address the Federal Government’s 

workforce challenges. Oversight of the Federal workforce by this 

Subcommittee this year has focused on recently enacted legislation. 

The Federal workforce is in a great state of change. Almost half of 

the Federal workforce will be transitioned into new personnel systems over the next several years, and all agencies now can use significant new flexibilities that have been provided to them. 

Further change for the remainder of the Federal workforce has 

been proposed, but that is not the subject of today’s hearing. Indeed, we must do our due diligence and determine how change has 

been managed. Congress cannot expect the Federal Government to 

successfully implement workforce reforms, however sound and meritorious in their own right, if the capacity of the Federal GovernVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
2

ment to implement the reform and accompanying change is lacking. Even the best ideas need to be tested and validated. 

As many of the reforms are so new that we cannot yet fully judge 

their effectiveness, alternative personnel systems might offer us 

the best window right now into change in the Federal workforce. 

The purpose of this hearing is to assess how existing alternative 

personnel systems, two at the Department of Commerce and one at 

the Federal Deposit Insurance Corporation, were developed, implemented, and subsequently refined. 

We hope to learn more about what rules were changed. We seek 

to learn how successfully these agencies managed difficult transitions. In my mind, this is just as important as any of the new 

workforce management concepts that are being employed. 

For example, what was the role of the key management agencies, 

such as the Office of Personnel Management? And is it indicative 

of its ability to drive and manage workforce transformation 

throughout the Executive Branch? Mr. Blair, you are completely familiar with this, and we will have a hearing later on about the capacity of OPM to handle this transition, particularly in oversight 

over the new personnel management systems. Do Federal managers require specialized and additional training before they use 

pay banding and classification? I would also like to learn how Federal employees have been involved in these alternative personnel 

systems. 

From their prepared statements, I know that the American Federation of Government Employees has opted out of participating in 

some of the new systems, while the National Treasury Employees 

Union members are participating at the Federal Deposit Insurance 

Corporation. I look forward to learning more about their experiences. 

It is important to learn the lessons from the experience of these 

agencies and others. We all want a better system, and although individuals may differ as to the details, this is not the key question. 

The key question is: What do we have to do to prepare and manage 

the transition from the old to the new? 

I hope that today we will develop a good sense of how these three 

Federal agencies have fared in this regard. 

Senator Akaka, since we have the Chairman of our Committee 

here, would you permit me to yield to our Chairman before your 

opening statement? 

Senator AKAKA. Yes. 

OPENING STATEMENT OF CHAIRMAN COLLINS 

Chairman COLLINS. Thank you very much, Mr. Chairman. 

First, let me take a moment to thank you and Senator Akaka for 

your continued leadership in ensuring that our Federal Government has the ability to recruit, retain, and reward the highest 

quality workforce needed to accomplish its many missions. Your 

December 2000 report to the President, ‘‘The Crisis in Human Capital,’’ highlighted the critical importance of addressing the government’s human capital challenges and helped our Committee to 

focus on the need for more flexible Federal personnel management 

systems. 

3

This hearing provides a valuable opportunity for the Committee 

to evaluate the success of the Federal Government’s current alternative personnel systems. It is particularly timely given the reforms underway at the Departments of Defense and Homeland Security, as well as the ongoing debate about whether and when to 

proceed with more comprehensive personnel reform. 

I look forward to learning more about the practical and cultural 

challenges associated with the development and implementation of 

the Federal Government’s existing alternative systems. I think that 

the Administration would have done well to focus more on what 

was working out there right now before moving to transform the 

personnel systems of large departments. 

I am particularly interested in learning how the agencies have 

worked with their employees to ensure that they have the necessary training and a clear understanding of the new systems as 

they were brought forward. I know that GAO did a lot of work in 

this area, and as a result, the employee acceptance of the new personnel systems has been quite high at the Government Accountability Office. 

Today’s dialogue will provide constructive guidance as we ensure 

that our civil service system continues to meet the government’s 

current and future workforce needs. So thank you so much for your 

leadership on this. Senator Voinovich, you truly are the Senate’s 

leader on human capital issues, and I appreciate your having this 

hearing. 

Senator VOINOVICH. Thank you, Madam Chairman. 

I would now like to call on the Ranking Member of our Subcommittee, Senator Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman, for holding this hearing, which I believe will make a huge difference because I believe in the future of our government and our country. 

You and I have been good partners. I very much appreciate, Mr. 

Chairman, working with you on such joint efforts like the chief 

human capital officers council and other workforce flexibilities. 

As you know, the first and third largest Federal agencies have 

been granted broad flexibility to develop their own personnel systems, and the Administration is endorsing similar authority for the 

rest of the government. I also want to thank Chairman Collins for 

her leadership on our full Committee. Our Committee has really 

been focusing, as she mentioned, which for me is very important, 

on existing systems and possible future systems. And I want to tell 

her that I enjoy working with her. 

Chairman COLLINS. Thank you. 

Senator AKAKA. Today’s hearing focuses on the effectiveness of 

existing alternative personnel systems. I am interested in learning 

from our witnesses how they designed and implemented pay for 

performance and other changes to their personnel systems. I am 

also interested in hearing from our union witnesses regarding any 

concerns they may have with these alternative personnel systems. 

And I believe today’s testimony will underscore the importance of 

meaningful employee input. 

4

1The prepared statement of Mr. Blair appears in the Appendix on page 51. 

Working with employees and their representatives will increase 

acceptance of the changes, improve employee morale, allow for 

quick identification and response to any problems, and improve the 

employee-manager working relationship in other areas as well. My 

goal is to solidify the acceptance of meaningful employee involvement in any personnel reform. 

I am curious to learn how our witness agencies have used what 

GAO and organizations such as NAPA have told us for years—that 

when implementing personnel reform, agencies need money to reward performance, training on how to measure performance, accountability for those in charge when problems arise, oversight to 

address such problems, and meaningful union and employee participation. 

Employees need to be assured that the reforms represent an improvement over the current system, that they will not be subjected 

to arbitrary adverse action because of the changes, and that any 

proposed changes will indeed work. 

I thank all of our distinguished witnesses for sharing their testimony with us today, and I thank you again, Mr. Chairman, for 

your continued diligence in making the Federal Government an 

employer of choice. Thank you. 

Senator VOINOVICH. Thank you, Senator Akaka. 

If the witnesses will please stand. As you know, the custom of 

this Subcommittee is swearing our witnesses. Do you swear that 

the testimony you are about to give this Subcommittee is the truth, 

the whole truth, and nothing but the truth, so help you, God? 

Mr. BLAIR. I do. 

Mr. WALKER. I do. 

Senator VOINOVICH. Time is always at a premium in the Senate, 

and we have three panels of distinguished witnesses today. I would 

ask that the witnesses limit their oral statements to 5 minutes, 

and remind everyone that their entire written statement will be inserted in the record today. 

On our first panel, we have the Hon. Dan Blair, the Deputy Director of the Office of Personnel Management, and the Hon. David 

M. Walker, Comptroller General of the United States. And I want 

to thank you both for coming. 

Comptroller General, I just want to thank you publicly for the 

tremendous support—and I am sure that the Chairman shares my 

appreciation—that you have given this Subcommittee over the 

years. So much of your testimony has been so valuable to us as we 

have crafted legislation to make a difference in our personnel systems here in the Federal Government. 

Mr. Blair, will you please proceed? 

TESTIMONY OF HON. DAN G. BLAIR,1 DEPUTY DIRECTOR, U.S. 

OFFICE OF PERSONNEL MANAGEMENT 

Mr. BLAIR. Thank you. Chairman Voinovich, Chairman Collins, 

and Senator Akaka, thank you for including me in this hearing 

today. On behalf of Director Springer, I want to thank you for the 

opportunity to appear before you here today. She was disappointed 

that the Subcommittee schedules and her schedules didn’t permit 

5

her to be here. She is looking forward to her next opportunity to 

testify. 

I think we have a good story to share with you today. 

Senator VOINOVICH. As I mentioned, we are looking forward to 

having Director Springer testify before the Subcommittee on the 

capacity of OPM to manage governmentwide transformation. 

Mr. BLAIR. I think she would jump at that opportunity. 

I have a longer statement, and I would ask that be included in 

the record as well. 

The concept of alternative personnel systems is most clearly connected with the demonstration projects that Congress authorized 

the Office of Personnel Management (OPM) to establish as part of 

the Civil Service Reform Act of 1978. That authority provided a 

means for the government to try out alternative merit-based approaches to specific personnel management tasks and processes before making them generally applicable and available. 

Alternatives successfully tested in some demonstration projects 

have already been made available governmentwide. These include 

recruitment and retention incentives and examining using category 

rating. We have leaders in Congress like you and the Subcommittee Members to thank for helping achieve this goal. That is 

why we particularly appreciate your interest today in the other 

broad category of alternative systems, those that try alternatives to 

the General Schedule classification and pay system, and those alternatives all emphasize performance. 

Across government, more than 90,000 employees are covered by 

such systems. They are employed by a variety of agencies, serve in 

a variety of occupations, and perform a variety of functions. Our 

test beds are not narrow. Together they provide significant and 

compelling evidence that these alternative approaches work and 

work well. 

We have been successful at meeting goals to better manage, develop, and reward employees through these alternative pay systems. Evaluations of these alternative systems, particularly the Department of Defense (DOD) labs, have produced evidence of success 

against several benchmarks. Better performers are paid more. Employees are more satisfied with their pay. Turnover among high 

performers is significantly reduced. Teamwork and morale have not 

suffered. Communication has improved, and so has trust in management. 

These agencies are better equipped to compete for talent. They 

use their pay systems to reinforce the message that performance 

makes a difference and will be rewarded. We understand that implementing these pay systems takes dedication and strong leadership and, of course, effective performance management systems. 

OPM plays a significant role in providing design assistance and 

support as well as ensuring that appropriate oversight and accountability are maintained. 

When one looks across these successful alternative pay systems, 

the original intent of the demonstration project authority remains 

unfulfilled. We believe the record is clear. These approaches can 

and do work, and we have shared with you and stakeholders our 

approach to do so. 

6

1The prepared statement of Mr. Walker appears in the Appendix on page 61. 

We are convinced some agencies are ready to implement these 

ideas now, and we are leading efforts at other agencies to ready 

themselves for such changes. Using the President’s management 

scorecard, we have set goals for agencies to demonstrate they are 

ready to move into systems where pay is more directly linked to 

performance. OPM and the Federal Government have already 

learned and applied lessons through these alternative personnel 

systems. We believe the time has come to allow these alternatives 

to achieve the same performance as other successful demonstration 

projects have earned. 

Title 5 should be amended to give all agencies carefully controlled access to the classification and pay approaches already tested successfully in these alternative pay systems and make them a 

permanent part of their strategic human capital management. 

That concludes my oral statement, Mr. Chairman. I am happy to 

answer any questions you may have. 

Senator VOINOVICH. Thank you, Mr. Blair. Mr. Walker. 

TESTIMONY OF HON. DAVID M. WALKER,1 COMPTROLLER 

GENERAL, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WALKER. Chairman Voinovich, Chairman Collins, and Senator Akaka, it is always a pleasure to be back before you. 

I would like to start off, if I can, with a brief comment on a strategic framework for addressing this Nation’s challenges. As you all 

know, GAO issued on February 16 of this year our ‘‘21st Century 

Challenges’’ report, which I believe provided a clear and compelling 

case on the need to fundamentally review and re-engineer the base 

of the Federal Government. One of the questions in the ‘‘21st Century Challenges’’ document is how should the Federal Government 

update its compensation systems to be more market-based and 

more performance-oriented, which is the subject of today’s hearing. 

I would like to commend you on addressing this important topic, 

and I hope to have the opportunity to work with the Senate Homeland Security and Governmental Affairs Committee and other committees to address this and other topics that need to be addressed. 

As you know, we are involved in this area from two perspectives: 

One, we are leading by example. We are in the vanguard of change. 

We are practicing what we preach, and we have real live examples 

of what works and what does not work. What we have done is one 

way, it is not the only way; but it is scalable, it is transferable, and 

we are trying to help others help themselves see the way forward 

in this area. 

Second, with regard to the work that we have done dealing with 

government at large, we strongly believe that a more market-based 

and more performance-oriented pay system is called for. The current classification and annual compensation adjustments that 

apply to a vast majority of the Executive Branch agencies, are 

based on the Federal workforce in the 1950s. Much has changed 

since the 1950s, and we need to update and modernize our policies 

to recognize 21st Century realities. 

At the same point in time, how it is done, when it is done, and 

on what basis it is done makes all the difference in the world as 

7

to whether or not you are likely to be successful or not. There 

needs to be a very inclusive and participatory process, working 

with employees, their representatives, and others in order to try to 

figure out the best way to move forward. 

At the same point in time, I don’t want to kid anybody. This is 

a very complex and controversial endeavor. It involves fundamental 

cultural transformation, and there will be segments of the population that will not like it, and that is a fact. Nonetheless, I believe 

very strongly that this is the way forward, and we need to make 

sure that we try to do it the right way in order to maximize the 

chance of success and to minimize the possibility of not only failure, but abuse of employees. 

There are three key themes that I think have to be kept in mind. 

First, a shift to a more market-based and performance-oriented pay 

system needs to be part of a more comprehensive change management and performance improvement strategy throughout the Federal Government. This is a means to an end. It is not an end in 

and of itself. But it is a critically important element. 

Second, more market-based and performance-oriented pay systems cannot be overlaid on most organizations’ existing performance management systems. Most of the current performance appraisal and management systems in the Federal Government, 

frankly, aren’t very good. They don’t provide for meaningful feedback to employees. They don’t provide meaningful distinctions between top performers and people who aren’t performing as well as 

they should. They don’t necessarily have adequate checks and balances to assure consistency throughout the organization and equity 

throughout the organization. It is not just having the authority to 

implement a market-based and performance oriented pay system, 

it is making sure that the infrastructure is in place before an agency can operationalize that authority. That is of critical importance. 

Third, organizations need to build up their basic management capacity, and they also have to engage in fundamental training, development, and a variety of communications initiatives in order to 

be able to make this shift successful. 

We believe that before Executive Branch agencies should be able 

to implement more market-based and performance-oriented compensation systems, they should be required to demonstrate to OPM 

that they have met certain critical criteria before they move forward. They need an objective third party to be able to do that because, otherwise, they could not only be hurting themselves and 

their employees, they could be tainting the water for broader-based 

reforms throughout the Federal Government. 

Again, I would be happy to answer any questions with regard to 

work that we have done in the past or with regard to our own experience, and thank you for the opportunity to be here. 

Senator VOINOVICH. Thank you, Mr. Walker. 

Madam Chairman, I am not aware of what your schedule is. If 

it is all right with you, Senator Akaka, I would be more than happy 

to let Chairman Collins start off with the questioning. 

Chairman COLLINS. Thank you very much, Mr. Chairman. That 

is very generous of you. I do have an Armed Services meeting right 

now, so I am being torn between two priorities. 

8

Mr. Blair, the Administration has proposed legislation that 

would extend certain personnel flexibilities, some of which are associated with the Departments of Defense and Homeland Security 

to agencies throughout the Federal Government. In drafting the 

proposal, did the Administration consider instead building upon the 

authority that OPM already has to work with agencies to develop 

more pilot projects or to expand existing ones rather than seeking 

legislation for a governmentwide approach? 

Mr. BLAIR. Right now, the authority we have for demonstration 

projects is severely limited. It is limited to no more than 10 

projects, I believe, and no more than 5,000 employees. we think 

that the experience that we have had, especially with the lab 

demos, offers us the experience base we need to apply it on a more 

governmentwide basis. 

I was glad to hear Mr. Walker’s comments. It is important that 

in expanding this, we make sure that there are safety measures in 

place, and that is one of the things that the proposal that we have 

drafted and is still subject to comment and review would do, is 

allow for OPM certification. But as far as the current demo 

projects, it is very limited in scope, and it doesn’t offer us the needed flexibility to expand it on a governmentwide basis as we would 

want. 

Chairman COLLINS. Mr. Walker made a very important point 

when he said you cannot just overlay a new system on an old system and think it is going to work. It takes a lot of training. I know 

this is an issue which Senator Voinovich has stressed, and that you 

need to make sure that managers understand the system, and that 

they are trained in it. 

The year 2000 baseline evaluation of the demonstration project 

at the Department of Commerce indicated that the employees felt 

that their supervisors were ‘‘too busy’’ to provide a greater level of 

attention to their individual performance appraisals. This is a fear 

that I hear expressed by Federal employees all the time—that 

there is not going to be the training and that their supervisors are 

not going to apply it fairly because they will not know exactly how 

to do it or it just will not be done. 

If you are going to try pay to performance, something I do 

strongly support, you have to have an infrastructure that ensures 

that you have trained, committed supervisors performing the appraisal. 

What steps is OPM taking to ensure that agencies’ managers are 

trained? And I would ask you that question with DHS and DOD 

as well as the pilot programs you have ongoing. 

Mr. BLAIR. I think you hit an important point. You know, what 

we have heard from the field in our feedback is not just that some 

managers aren’t prepared to do this, but the question is my manager is a bonehead and what am I supposed to do when that manager is in charge of my pay. Very legitimate question. 

One is training. We have to properly train our managers and supervisors to begin work that they should have been doing in the 

first place, but because of the lack of incentives in the current system, haven’t always been doing. 

In our President’s Management Agenda right now, in the scorecard, we are going to ask that agencies have robust performance 

9

management systems in place covering 60 percent of their workforce. It is a start. We are also asking that agencies develop what 

we call a beta site or a pilot project, essentially, whereby agencies 

would have robust performance management in place, having constant and ongoing feedback between supervisors and employers, 

and be ready to link at the appropriate time, when given the authorization, pay to performance. 

I think that this beta site concept is critical because it gives critical mass within an agency or department to begin expanding the 

performance management culture, which we need to do. 

Chairman COLLINS. Mr. Walker, you have emphasized not only 

the need for training, but also employee involvement and constant 

communication. What steps did GAO take to ensure that its workforce was prepared for the cultural changes associated with its shift 

to a pay-for-performance system since in my view you are a model 

that other agencies could learn from? 

Mr. WALKER. Thank you, Madam Chairman. We are not perfect. 

We never will be. But we try very hard to lead by example and to 

get this right. 

It starts with communication from the very top of the agency, in 

our case, myself. The case for change starts with explaining why 

the status quo is unacceptable, why there is a need for change, and 

then establishing mechanisms to make sure that employees and 

their representatives, to the extent that they are unionized, have 

a key part in helping to see the way forward from where we are 

at to where we need to be. The process needs to be very 

participatory, involving a lot of players, and considering information from a variety of parties. Ultimately the buck stops at the 

agency head’s desk, and obviously, before I make final decisions, we 

end up having informal focus groups and task teams, publish proposed regulations, and obtain comments on those proposed regulations before final decisions are made. 

I cannot emphasize enough the importance of making the case 

from the top, having consistent communications, and having a 

broad net of involvement by all key stakeholders. In the final analysis, there are people that are going to like and not like what ultimately gets decided on. But hopefully nobody will be able to 

credibly argue about the process. The process must have integrity. 

Everybody has to be heard. All of their thoughts have been considered, and that is really important for credibility in order to provide 

the necessary degree of trust. 

Chairman COLLINS. Thank you. 

And thank you so much, Mr. Chairman, for accommodating my 

schedule. I really appreciate it. 

Mr. WALKER. Mr. Chairman, can I mention one thing before 

Chairman Collins leaves? I know you are on the Armed Services 

Committee. I would like to have an opportunity in the near future 

to brief you on our recent report on military compensation. The average military compensation for active-duty military is $112,000 a 

year when the average compensation in the United States is 

$50,000. That system is fundamentally broken, just like the civilian 

pay system, and I would love to have a chance to talk to you about 

it. Thank you. 

10

1The charts submitted by Mr. Blair for the record appear in the Appendix on page 157. 

Chairman COLLINS. I would look forward to that. Thank you, Mr. 

Chairman. 

Senator VOINOVICH. Thank you, Madam Chairman. I just want 

to publicly say how much Senator Akaka and I appreciate the support that we are getting from you, too, in our endeavor over the 

last several years. Thanks. 

Chairman COLLINS. You are doing good work. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. 

I want to add to Chairman Collins, my thanks for the support 

she has given the Chairman and me on these critical human capital issues. Thank you. 

I want to add my welcome to our panelists, Mr. Blair and Mr. 

Walker. Director Blair, I am interested in knowing where agencies 

get the money to fund new training programs. You have mentioned 

this is one important part of moving into a new system. And, on 

average, what are the costs associated with training for demonstration projects? Can you comment on that? 

Mr. BLAIR. For the most part, agencies have funded the costs for 

training out of their existing budgets. Some agencies have independent authority, and I think you will hear more from them. They 

may have had alternative sources to fund these types of things. To 

expand this on a government-wide basis certainly is going to require some start-up costs, and there is no doubt about that, and 

let’s be up front about that. We will have to anticipate what those 

costs will be. 

At this present time, I don’t know what the exact costs of the 

demonstration projects have been, but I would be happy to provide 

that for the record.1

As far as the overall costs, agencies that have been part of these 

demo projects have funded it out of their current appropriations 

and have been able to do so without costs varying significantly 

from their General Schedule costs. 

Senator AKAKA. Mr. Walker. 

Mr. WALKER. Senator, in the case of GAO, we made a business 

case to the Congress, not only our oversight committees but also 

the appropriators. We were up front that there was going to be a 

one-time, up-front cost in moving from the old system to the new 

system. There are incremental costs, and I seriously question 

whether or not agencies will be able to fund that one-time incremental cost out of their baseline budget without having adverse implications in other areas. Designing these new systems and effectively implementing them includes training and development. 

The Administration, at one point in time, had requested a governmentwide human capital fund for pay for performance. While I 

don’t think that made sense, I do think that a governmentwide 

fund on which agencies might be able to draw upon as a basis to 

design and implement new performance appraisal systems and 

other actions that are necessary to build the infrastructure to make 

performance-based pay work would make sense. That is something 

that I think should be considered by the Congress because if agenVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
11

cies don’t have the necessary infrastructure in place, they will not 

be successful. 

Senator AKAKA. Yes, and I want to repeat that Director Blair had 

mentioned the importance of training in bringing this about, and 

I have said I am interested in how much it will cost, and, of course, 

to be sure that we have that money so that we can do it properly. 

Mr. BLAIR. Senator, if I may, I have in my report, according to 

GAO, start-up costs for designing, installing, and maintaining automation and data systems at one of the DOD laboratories cost 

$125,000 at NAVSEA’s Dahlgren Division, and the acquisition 

demo was $4.9 million. So let the record be clear there are those 

up-front costs that will have to be either funded or absorbed within 

existing budgets. Smaller organizations may be able to do so. For 

large organizations, it is going to be something that we will have 

to account for. 

Senator AKAKA. Mr. Blair, you said that in a pay-for-performance 

system, agencies need to have strong management systems in 

place. Do you feel that we do have that in our agencies, or is that 

something that we need to work on as well? 

Mr. BLAIR. I think we need to work on that, and we are doing 

that. As we speak, we have been urging agencies to move away 

from pass-fail systems because those systems don’t make meaningful distinctions in levels of performance. We have the revised Senior Executive Service (SES) system, which is relatively new but will 

be improving year after year, as it continues to operate. And that 

allows those meaningful distinctions in levels of performance to be 

recognized and tied to any pay increases. But most importantly, we 

are looking at what can we do within the current system to ensure 

that every—I don’t want to use the term ‘‘flexibility,’’ but that 

every opportunity is being used to enhance performance short of 

pay. So if pay is taken off the table, what can we do? 

We have asked agencies again to establish a pilot project in each 

of their own organizations which, short of linking it to pay, would 

have a performance management system up and running in place. 

Employees and supervisors would be providing meaningful feedback to one another. Expectations would be established, communications would be set, and what we would want to do is, from that 

pilot project within an agency, or a beta site, as we call it, have 

that expand to the rest of the agency or department in preparation 

for linking it to the reward system. 

In answer to your question, though, we are not there yet, but we 

are preparing agencies. 

Senator AKAKA. I have further questions for the next round. 

Thank you. 

Senator VOINOVICH. Mr. Blair, Mr. Walker has said that it would 

be a joke to overlap a new system on the current system of performance evaluation. What puzzles me is that performance appraisals are very important to management, and basically what Mr. 

Walker has said—and you can speak for yourself, Mr. Walker—is 

that effective systems are not in place. We have had hearings before about the performance systems rating, and that all employees 

are rated about 95 out of 100. I specifically might reference the 

General Services Administration where I have spent time with Mr. 

Perry, who, in spite of the fact GSA does not have the authority 

12

to implement pay for performance, he is instituting a whole new 

performance system as part of his management objectives in the 

Department. 

Don’t you believe that this might be the best way to move in 

preparation for the long-term goals of the proposed Working for 

America initiative that has been talked about? 

Mr. BLAIR. I think that is the direction we are moving. By requiring agencies to re-evaluate what their performance appraisal systems are and the performance management systems are, we are 

asking them to prepare themselves for the day that we can link it 

to pay. Are we there yet? Absolutely not. But we do have evidence 

and signs of success. The General Services Administration is one 

of them. The Department of Labor is another. And we are moving 

in that direction. 

Does it mean that you continue to do the same things the same 

old way? No. It means that you have to start focusing managerial 

attention and leadership on developing these systems in ways in 

which you have meaningful employee feedback, expectations are 

set up front, and distinctions are made between levels of performance. 

It is a cultural change. What we are trying to say within government now is that performance matters. Unfortunately, we have 

that undertow of the current General Schedule system that says 

time rather than performance matters, and we have to fight 

against that undertow. But we are urging and pushing agencies in 

the direction of developing and implementing and getting results 

from better performance management systems. 

Senator VOINOVICH. OK. And you think you can do that without 

the incentive of being tied to pay reform? 

Mr. BLAIR. We will do everything that we can, but I will tell you 

that providing that incentive of linking it to pay would be the primary driver in something like this. But short of that, we will continue within the Executive Branch and those agencies affected to 

make sure that we have better systems in place. But until you can 

actually say that your performance is linked to pay, you don’t have 

that hammer there to really put strength behind your performance 

management system. 

Senator VOINOVICH. One other question, and that is, have you 

identified an existing alternative personnel systems? 

Mr. BLAIR. Well, we have through the alternative personnel systems looked at benchmarks such as employee satisfaction, turnover 

rates, commitment to mission. And for the most part, we have seen 

increases in employee satisfaction, and employees don’t want to go 

back to the old systems that they had before these alternative systems. But I think that a driver here is how are we going to change, 

not only the culture, and the culture is that performance should 

matter, but also other values that are affected by that, such as 

commitment to mission, commitment to work, and job satisfaction. 

By better linking performance with pay, you start helping driving 

those other cultural changes as well. 

We have established well-known benchmarks for our demonstration projects, and in the Administration draft proposal, known as 

Working for America, agencies couldn’t move, and couldn’t link 

their performance management systems to pay until they are cerVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
13

1The chart submitted by Mr. Blair for the record appears in the Appendix on page 159. 

tified by OPM according to—I believe it is nine criteria that the 

draft legislation proposes. So what we are not proposing, is to turn 

a switch on overnight and suddenly overlay a pay system on top 

of the current performance management systems. We know we 

have a substantial amount of work to do. We are starting that 

work. I think we will be seeing progress over the next couple of 

years. But in no way would we say that we are turning a switch 

on today and that it would happen. It is going to take dedication 

and commitment from the Congress and from the Executive Branch 

to get this done, but we think it is very important because it is a 

value that we think that we should inculcate in the Federal Government. 

Senator VOINOVICH. Mr. Walker. 

Mr. WALKER. Two things, Mr. Chairman. 

First, if you want a high-performing organization, whether you 

are in the private sector, the government, or the not-for-profit sector, you must link institutional, unit, and individual performance 

measurement and reward systems on an outcome basis. There are 

some exceptions in the Federal Government, but the vast majority 

of the Federal Government has not done that. That is fundamental. 

That must be done first before you go to pay for performance. 

Frankly, even if you don’t have pay for performance, as you pointed 

out, you should do it anyway. 

Now, the other difficulty is that there hasn’t been a lot of incentives or accountability for people to do that in the past, in part because of the current classification and pay system. For most of the 

Executive Branch, 85 percent of the annual pay adjustments have 

nothing to do with skills, knowledge, and performance. They relate 

to the across-the-board pay adjustments and the passage-of-time 

step increases. Even the QSIs, the quality step increases, which are 

supposed to be performance-related, aren’t realistic because you 

have performance appraisal systems where everybody walks on 

water. Therefore, too many people get the increases. 

Therefore, when you have a situation where there is no meaningful distinction made between top performers and people who aren’t 

performing as well—you have a big problem. Don’t get me wrong, 

a vast majority of people in the Federal Government are dedicated 

and capable. They are just as good as the private sector, and are 

doing a really good job day in and day out. But when there is no 

meaningful distinction made between top and poor performers, it 

is a fundamental flaw in the system, and it needs to be corrected. 

But, again, how you do it, when you do it, and on what basis you 

do it matters to make sure that you are successful in the transition. 

Mr. BLAIR. Mr. Chairman, if I could add to that, in our demonstration project experience, we have seen that where we have 

had these linkages, we have had a better distribution in the performance ratings. I think we can certainly provide that for the 

record,1 but I think that it goes to show you that when the incentives are there, these government entities are up to the challenge 

and can perform. But where these incentives aren’t in place, it is 

harder to accomplish that kind of cultural change. 

14

Senator VOINOVICH. It will be interesting to hear from the folks 

that are talking about alternative personnel systems to just see 

how much the linkage to the pay was an incentive for them to 

move forward with their system. 

Senator Akaka. 

Senator AKAKA. Yes, Mr. Blair, you mentioned about OPM certifying agencies. I want to ask Mr. Walker the question. You testified 

that agencies should be authorized to implement reform only after 

they have met certain requirements, including an assessment of 

demonstrated institutional infrastructure and an independent certification by OPM. 

In your opinion, does OPM have the capacity to certify agencies, 

and if not, who should certify agencies? 

Mr. WALKER. For the Executive Branch, I think OPM is the logical choice. It has to be somebody independent from the line agency, and obviously there are a lot of very capable and dedicated people at OPM that have a lot of human capital and human resources 

expertise. 

I do, however, have a serious concern as to whether OPM has 

adequate capacity, both as to number and as to skills and knowledge, to be able to deal with a significant volume of certifications 

that may be required in any given period of time. I think that is 

a real issue. Frankly, I think one of the biggest transformation 

challenges in the Federal Government is OPM, and I have told 

Linda Springer that. 

Mr. BLAIR. If I can respond to that, Senator Akaka. I know that 

Mr. Walker and Director Springer have had conversations about 

this, and over the last decade, OPM has substantially changed 

from where it was 10, 15 years ago and is continuing to change. 

I think the evidence of our capacity and evidence of the willingness to build on our current capacity has been seen through our 

leadership role in the President’s Management Agenda. We are the 

only outside agency other than the Office of Management and 

Budget that owns an initiative, the Strategic Management of 

Human Capital, and we have been leading that now for 5 years 

and have been pushing agencies forward, constantly raising the bar 

for agencies to improve their management of human capital. 

Are we better off today than where we were last year? Absolutely. Are we going to be better off tomorrow than where we are 

today? We expect so and we are going to push agencies to do so. 

But, we are subject to the vagaries of the appropriations process. 

Just this past year, there were attempts to cut our appropriation 

from one of our policy shops which had been helping to drive that 

change. That is not helpful for us, and we understand that process 

can go through several permutations, and we understood the 

strains on the budget as well. But to cut our policy shop, the very 

people who are doing the work that Mr. Walker just described that 

we need to be doing seems to run counter to where we really want 

to be. 

And so I think that is one of the challenges to our capacity, is 

making sure that we have the proper funding and that we avoid 

attempts like that to undermine us that we have seen in the past. 

Senator AKAKA. Thank you, Mr. Blair. I would like to have you 

comment on this. In her testimony, Ms. Kelley at NTEU, writes 

15

that there is a shortage of information to indicate that alternative 

pay systems have had any significant impact on recruitment, on retention, or on performance, and that a January 2004 GAO report 

on demonstration projects found no evidence that the systems improved any of those measures. I would like to get your response on 

her comments. 

Mr. BLAIR. Well, Ms. Kelley is a friend of mine, and we were just 

talking before the hearing began on some other issues. And I certainly respect her point of view, but I strongly differ with that. We 

have had 25 years of experience at this, and the 25 years of experience shows that these are better alternatives to a 50-year-old system that is currently in place. 

Can any one of the demonstration projects be held up as an example of reform that can be extended out to the rest of the system? 

No. But taken in their totality, I think we have important lessons 

that we have learned, and those lessons are that performance does 

matter and that we can shed the 15-grade, 10-step General Schedule in favor of a better pay-banding system. We can have more 

market-based pay in something like that, as well as rewarding performance. When you give poor performers, high performers, outstanding performers, and mediocre performers the same pay raise 

in the same year, what message does that send? I don’t think it 

sends the appropriate message that we want to send to the American people nor our workforce, that your performance is valued and 

will be rewarded. 

Senator AKAKA. Mr. Walker, your comments? 

Mr. WALKER. Yes, Senator. To the extent that you move to a 

more market-based, skills-, knowledge-, and performance-oriented 

compensation system, I think you will find several things. The people that have the higher degrees of skills and knowledge and performance will like it. The younger people, by and large, because of 

their philosophy, will like it. At the same point in time, there are 

segments of the population who are good people, who are performing well day in and day out, that may not like it. The reason 

they may not like it is because right now under the Federal system, once you end up getting into a grade level—whether it is GS–

12, GS–15, whatever—you have an entitlement to make the pay 

cap. It is not a matter if you are going to make the pay cap. It is 

only a matter when you are going to make the pay cap if you stay 

there long enough, unless you are promoted. 

Since 85 percent-plus of Executive Branch pay adjustments are 

on autopilot and have nothing to do with skills, knowledge, and 

performance, by definition that can create a system where there is 

a negative correlation to skills, knowledge, and performance for 

people who are the pay cap because they are the people that didn’t 

get promoted. You can actually have people who are making more 

money than the people at the next level but have poorer performance and less responsibility because of the way the system is structured. 

The current system made sense when a significant majority of 

the Federal workforce was clerks, which it was in the 1950s. But 

now we have some of the most skilled, knowledgeable and dedicated people in this country working for the Federal Government, 

and we need to move to a system that reflects that fact. 

16

Senator AKAKA. Thank you, Mr. Walker. 

Mr. Chairman, I, too, have to go to Armed Services, but I am 

hoping to be back here as soon as I ask my questions there. Thank 

you very much. 

Senator VOINOVICH. Thank you, Senator Akaka. 

The point that was just made by Senator Akaka, again, I am 

anxious to hear from the folks that have put in alternative systems, personnel systems, about the impact that it has had on the 

agency’s effectiveness and performance. Mr. Walker, has it made a 

measurable difference at GAO? Is GAO a better organization, more 

effective, working harder and smarter and doing more with less? 

Mr. WALKER. It clearly has, but I can also say that we have 

made a number of other changes. This is one of many changes that 

we have made. 

I will also say, Mr. Chairman, we didn’t take a vote on this. 

When my predecessor, Chuck Bowsher, implemented broadbanding 

in 1989, he didn’t take a vote on whether or not we were going to 

go to broadbanding. More recently, we didn’t take a vote as to 

whether or not we were going to go to a more market-based performance compensation system. We didn’t take a vote as to whether we were going to go to skills-, knowledge-, and performancebased system. And there were differences of opinion. There were 

differences of opinion within our workforce, as there will be in others. Some people like it and some people don’t like it. It depends 

on where you sit and how you think it will affect you. That is 

human nature. It is understandable. 

But there is absolutely no question in my mind it has been a 

major contributor to our doubling our performance in virtually 

every category as compared to 5 years ago. 

Senator VOINOVICH. Mr. Blair, with the war in Iraq and now 

Hurricanes Katrina and Rita, some of my colleagues are talking 

about paying for the natural disasters out of an across-the-board 

reduction in various departments in the Federal Government. I 

have argued that, yes, we should look for economies, but there are 

so many unmet needs in some of these agencies that we have got 

to be careful about what we are doing. And the question I have is: 

Does the Administration understand the financial commitment that 

must be made in order to move forward with this human capital 

reform? 

How knowledgeable is this Administration in terms of the kind 

of financial commitment that is going to have to be made in the 

agencies to move with new systems like MaxHR and the Defense 

Department’s National Security Personnel System? 

Mr. BLAIR. Well, you are always going to have the budget considerations, and the budget considerations are going to be exacerbated 

by the disasters that have occurred over the last month in terms 

of Hurricanes Katrina and Rita. That is the atmosphere in which 

we are operating today. Are we going to be asked to do more with 

less resources? I think that is assumed. That is something that I 

think we can expect. I have no specific knowledge of anything, but 

I would just say from having two decades of experience here in 

Washington, you can see that happening. 

But you have to also ask the question: If not now, when? We are 

always going to have budget considerations on board like this, and 

17

if we are going to say that we spend—$105 billion or $108 billion 

a year on Federal payroll, are we spending it in the best way possible? I think the answer is no. 

So I think that we need to make a concerted effort to improve 

the way that we award these scarce dollars that we have, however, 

many dollars we have. And I think that we also need to say that 

in awarding that, what is the value that we want to place in our 

culture, in our Federal workplace culture? And I think that the 

value that we want to have is performance. Right now, time drives 

that. Time on the job is the factor for within-grades. Basically if 

you are on the job and have a pulse, you get the annual increase. 

I think that is the wrong value that we want to send. 

If we talk about the war for talent, being able to bring in the 

best and the brightest, being able to bring in good and high performers into a high-performing organization, having a multi-level, 

multi-step system, which is complicated and foreign to those who 

are not familiar with the Federal workforce, isn’t the best way of 

recruiting. We have seen with the demonstration projects that we 

can bring in better talent, and the best talent we bring in does, in 

fact, stay. 

But as far as the costs are concerned, the up-front costs, we will 

have to negotiate that as time goes on. We have to admit that 

those are going to be there, though. I think that to ignore that 

would be to ignore reality. We have to make sure that we have the 

investment in time and energy and resources in order to get this 

done. 

Senator VOINOVICH. It will be interesting to hear from the second 

panel what resources they needed. For example, have they hired 

consultants to help with implementing the new system? 

Mr. Walker, would you like to comment? 

Mr. WALKER. Yes, I can, several quick points. 

First, we did hire outside consultants to help us, and it did cost 

money. It was a one-time cost, and we will be happy to provide that 

for the record. I think it will provide you with a sense as to what 

that one-time investment might be for other agencies. 

Second, the across-the-board annual pay adjustment that the 

Deputy Director just referred to is—even unacceptable performers 

are currently entitled to that by law. Let me restate: Even unacceptable performers are entitled to it by law. I don’t know of anything that is performance-oriented about that. 

Third, I think the worst thing that Congress could do is acrossthe-board cuts. That is exactly the opposite of promoting high-performing organizations. That means that high-performing organizations would suffer just as much as ones that aren’t deserving, that 

haven’t done the job of re-engineering the base of their operations 

and transforming for the 21st Century. We need to look at the base 

of government. A vast majority of government is based on the 

1950s and 1960s, whether it is spending or whether it is tax policy. 

Our current base of government is not only unaffordable; it is 

unsustainable. And you know that, Mr. Chairman. You have read 

our ‘‘21st Century Challenges’’ document. I just wish all your colleagues would, because it is clear and compelling that our children 

and grandchildren are going to pay a huge price if we don’t start 

getting our act together soon. 

18

Thank you, Mr. Chairman. 

Senator VOINOVICH. When I was governor and mayor, our senior 

management was paid according to performance. Implementing 

that wasn’t easy. I will never forget it. At the State level, we talked 

about implementing it, but it was just such a gigantic task, we decided to spend our time on quality management. 

But I can tell you this, that through quality management, when 

I left the governor’s office, we had 17 percent less people working 

for the State of Ohio than we had when I came into office, except 

for the Department of Corrections. 

The point is we had a better workforce. People came to me and 

said through quality management, they participated, they were 

happier, they felt better about the job that they were doing. It 

made a big difference. It seems to me that if a new system isn’t 

going to make a difference in terms of, (1) the effectiveness of the 

organizations for the benefit of the people of the United States, 

and, (2) for the betterment of employees, then you have to ask 

yourself, well, why go through the exercise? 

So I am anxious to hear from our next witnesses about what impact these respective systems have made in their operations. Mr. 

Blair, I would like to say to you that at this stage, I am pleased 

with what is going on in the Department of Defense, even though 

the regulations are not final. Implementation will begin in several 

spirals. We have several of them in Ohio. I want you to know I am 

monitoring them to see what is happening. I have become familiar 

with the people involved in Ohio and what they are doing. I think 

it is important for your OPM to understand that a lot of this is in 

your hands. You are going to have to be as candid as you possibly 

can be with us and with the Administration in terms of the commitment of resources they are going to need to make this system 

a successful system. 

Mr. BLAIR. Well, Senator, we are certainly not shy internally 

about voicing our opinions about what would be needed in order to 

get the job done. And I think that you know from our relationship 

and the organization’s relationship with you, we have, I believe, a 

straight-talking relationship in which we value what you say and 

we share with you what our thoughts are. And I hope we can continue along those lines. 

We seem to have focused quite a bit on the start-up costs of these 

demonstration projects and what the start-up costs would be 

should a systemwide reform be enacted. Let’s remember what has 

been taking place, too, over the last 5 years in the Federal Government. You referenced a report that you provided to then-incoming 

President George Bush in 2000. I think that we have made substantial progress on the Strategic Management of Human Capital 

in those 5 years, and during those 5 years we have devoted significant resources to improving human capital management in government. We are not where we should be, and we are not where we 

want to be, but we are on the path of where we want to be. 

The efforts that we have put in over the last 5 years at your insistence and with your help will also enable us to better lay the 

foundation for this robust performance management system which 

would best be linked with pay. 

19

Senator VOINOVICH. I have just one last comment I will make, 

and that is, if we peel back a lot of the problems that we have in 

the hearings on FEMA and so forth—it is the issue of having the 

right people with the right knowledge and skills at the right place. 

And the public has got to understand, as well as Members of Congress, that people do make the difference. In any good organization 

you have good finance and you have good people; and the better the 

people that you have, the better the organization that you have. 

That is what we should be striving for—the best and the brightest 

people in the Federal Government. We should be able to attract 

them, and we should be able to motivate those individuals. How 

well we do on that is going to have a lot to do with what kind of 

a country we live in in the future. 

Mr. Walker. 

Mr. WALKER. I can underline that, Mr. Chairman. There is a natural tendency when something as tragic as Katrina happens or a 

similar event for the Congress to want to act and to provide support and assistance. Candidly, the Federal Government, as you 

know, tends to be a lag indicator. It tends to get involved late, in 

many cases when others have failed to act or when things go 

wrong. Government tends to do three things: one, throw spending 

at it, the more the better, the assumption is you care more if you 

spend more; two, throw tax preferences at it, again, the more the 

better, it shows that you care more; and, three, throw new players 

at it or new organizations at it. 

You hit the key. The key is not that. You can throw all kinds of 

money, you can throw all kinds of tax preferences, you can throw 

all kinds of players. But if you don’t have the right people with the 

right skills, the right knowledge, in the right place at the right 

time, and if we don’t have our organizational structures functioning 

given 21st Century realities, we are wasting a bunch of time and 

money, and we are never going to be effective. So you are so right, 

and that underlines the importance of this fundamental review and 

re-examination of the base of government, including the issue that 

you are holding a hearing on today. 

So thank you, sir. 

Senator VOINOVICH. Thank you very much. You are right. We are 

at it again, and we haven’t even heard from the agencies. Of 

course, I think that they have some responsibilities. In fact, several 

of us have written to Secretary Mike Chertoff and to Andy Card, 

requesting the Administration come back to us and tell us what it 

is that they are doing to respond to all of the questions being 

raised in the Congress. We should give them that opportunity. 

Rather than throw more money at a problem, we have to make 

people understand it is the quality of the people that we have that 

really make the difference. 

Thank you very much. 

Our next witnesses are the Hon. Jeffery K. Nulf, Deputy Assistant Secretary for Administration, Department of Commerce; Arleas 

Upton Kea, Director of the Division of Administration, the Federal 

Deposit Insurance Corporation, FDIC; and Dr. Hratch Semerjian, 

the Deputy Director of the National Institute of Standards and 

Technology. 

20

1The prepared statement of Mr. Nulf appears in the Appendix on page 82. 

I want to thank the witnesses for coming. As you know, it is customary to swear in witnesses. Before you sit down—if you will 

raise your right hand. Do you swear that the testimony you are 

about to give this Subcommittee is the whole truth, and nothing 

but the truth, so help you, God? 

Mr. NULF. I do. 

Ms. KEA. I do. 

Dr. SEMERJIAN. I do. 

Senator VOINOVICH. They all answered yes. 

Mr. Nulf, we will call on you first, and I thank you very much 

for being here today, and we are anxious to hear your testimony. 

Again, as I reminded the other witnesses, please keep your statement to 5 minutes, understanding that your full testimony will be 

part of the record, I would appreciate it. Thank you. 

TESTIMONY OF HON. JEFFERY K. NULF,1 DEPUTY ASSISTANT 

SECRETARY FOR ADMINISTRATION, U.S. DEPARTMENT OF 

COMMERCE 

Mr. NULF. Good morning, Mr. Chairman. Thank you for the opportunity to appear before you today on the Department’s efforts 

in managing alternative personnel systems. I have the honor of 

serving President Bush and Secretary Gutierrez as the Deputy Assistant Secretary for Administration at the Department of Commerce. As one of the principal tenets of President Bush’s Management Agenda, strategically managing Commerce’s workforce to better achieve our mission-critical objective is a key priority for Secretary Gutierrez and the Department. 

Commerce has been managing pay for performance since 1988. 

As Dr. Semerjian will testify, our involvement in alternative payfor-performance systems occurred at the National Institute of 

Standards and Technology following the success of China Lake. 

Based on the successful results achieved with that effort, we established the Commerce Demonstration Project in 1998. Over the last 

7 years, it has grown to 4,200 employees in five operating units 

stationed throughout the Nation. 

In October, we anticipate adding 33 employees represented by 

two local bargaining units that have asked to participate. We are 

also working with OPM to include 3,500 additional NOAA employees. 

The demo’s benefits are perhaps most clearly evident in five 

areas: 

One, performance. Under the demo, managers have greater flexibility to recognize the contributions made by high performers. 

Since pay level adjustments and bonuses are determined as part of 

the annual performance appraisal, the nexus between performance 

and salary is very clear to all employees at all levels. 

During our most recent program evaluation, 53 percent of supervisors in the demo project reported that they were able to identify 

and reward good performers under the new system as compared 

with 26 percent in the GS schedule. 

Two, recruitment. Recognizing the highly competitive job market 

in which we must operate, the demo provides managers with a real 

21

opportunity to effectively negotiate salaries with job candidates. 

The tool is serving us well, particularly in recruiting individuals 

with specialized skills in mission-critical occupations. The most recent evaluation of the demo indicated that 41 percent of participating supervisors believe that they are better equipped to recruit 

well-qualified employees as a result of being able to offer competitive salaries. Only 19 percent of GS supervisors felt the same way. 

Three, classification. Under the Commerce demo, the GS classification system of hundreds of career series has been streamlined 

into four career paths. This allows managers to more quickly advertise to fill vacancies and to consider a broader range of skill sets 

to meet their specific needs. 

Four, employee satisfaction. As employees and managers have 

gained experience with the demo, trust in the system has grown. 

Over half of the demo employees surveyed agreed that increases 

were directly related to an employee’s performance compared to 

roughly one-third within the GS schedule. 

Five, employee retention. It is clear that the demo project has 

had a positive effect on retaining good performers. Employees are 

rated on a 100-point scale. Those receiving a score of 40 or above 

are eligible to receive a bonus and/or pay increase. By allowing 

managers to better distinguish and reward differences in performance, we have found that turnover is lower among high performers, 

for example, a 1.5-percent turnover rate for those employees receiving 90 or above, while a 7.7-percent turnover rate for those employees receiving lower scores. 

Based on our experience, we believe that the success of alternative performance systems depends on several factors: 

Communication. We have learned that first and foremost a welldeveloped approach to educate employees and managers about any 

new system is essential. This helps to create a mutual understanding of the objectives of the new system and provide a shared 

perception that change will be implemented together as a team. 

Effective management. As with any personnel management system, if pay for performance is not managed well, it can be problematic. Employees need to feel confident that their rights are protected under a new system. Managers must have the skills needed 

to manage employees effectively. This can only be accomplished by 

providing training in performance management and performance 

feedback to all affected individuals. 

At Commerce, we provide quarterly briefings to all new demo 

employees and quarterly training on demo flexibilities to new supervisors. This year and last year we conducted training on performance feedback both for supervisors and employees at the end 

of the appraisal cycle to better position everyone for success. 

Routine and objective evaluation. Not only do annual evaluations 

ensure transparency to interested stakeholders and that the merit 

system principles are followed and the system is free of discriminatory reprisal, they also provide the basis on which human resource 

managers may objectively assess the success of the demo and determine any need for adjustment. 

At Commerce, such adjustments have included strengthening supervisory training in providing performance feedback; instituting 

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1The prepared statement of Ms. Kea appears in the Appendix on page 90. 

ance expectations to employees; establishing a centralized data 

manager to oversee and ensure the quality of automated systems 

and data collection; and adjusting how service retention credit is 

calculated based on performance rating. 

Furthermore, we are more closely examining the impact of the 

demo on minority employees by adding focus groups and expanding 

how we analyze the results for annual evaluations. 

We have had very good success with testing pay for performance 

and believe that the experiences that Commerce and other Federal 

agencies have had provide a sound basis on which we can continue 

to move forward. 

Change is never easy. Far-reaching changes to a decades-old system that will profoundly affect the work lives of hundreds of thousands of Federal employees will inevitably, and justifiably, cause 

concern and merit careful consideration. Based on our experience 

and that of Federal agencies across the government, however, we 

believe the tools are in place that are needed to continue the forward momentum initiated by the various demonstration projects. 

Thank you for giving me the opportunity to speak, sir, and I welcome your questions. 

Senator VOINOVICH. Thank you very much. Ms. Kea. 

TESTIMONY OF ARLEAS UPTON KEA,1 DIRECTOR, DIVISION OF 

ADMINISTRATION, FEDERAL DEPOSIT INSURANCE CORPORATION 

Ms. KEA. Good morning, Mr. Chairman, and thank you for the 

opportunity to testify on behalf of the Federal Deposit Insurance 

Corporation regarding our experiences administering and managing a personnel system at an independent Federal corporation. 

I will briefly highlight how the FDIC’s personnel system has 

helped us achieve our mission, the importance of flexible personnel 

policies in today’s rapidly changing financial industry, and our experience with ‘‘pay banding’’ and ‘‘pay for performance.’’

The FDIC has served as an integral part of our Nation’s financial 

system for over 70 years. Established at the depth of the most severe banking crisis in the Nation’s history, the immediate contribution of the FDIC was the restoration of public confidence in banks. 

Today, the FDIC’s mission remains unchanged. We maintain our 

Nation’s confidence in our financial system in three important 

ways: We insure the deposits held in our Nation’s banking system; 

we examine and supervise banks for safety and soundness and 

compliance with laws and regulations; and, we handle the resolution of failed banks when that becomes necessary. 

In carrying out its mission, the FDIC does not receive appropriated funds. The FDIC is funded by insurance assessments on 

the deposits held by insured institutions and by the interest earned 

on the deposit insurance funds. 

In the late 1980s and early 1990s, the FDIC faced a banking crisis unprecedented since the Great Depression. The FDIC successfully responded to that challenge as it has to other challenges 

throughout its history. 

23

Part of the reason for that success was the flexibility the FDIC 

had to adjust the size of its workforce rapidly and substantially. In 

the early 1980s, the FDIC employed 4,000 people. By the early 

1990s, the FDIC employed over 23,000 people, and today the FDIC 

employs fewer than 5,000 people. The FDIC was able to use its 

hiring flexibility in managing a mix of temporary, term, and permanent appointments to meet changing workforce needs and its 

authority to set compensation and benefits to encourage voluntary 

departures of employees through buyouts instead of involuntary, 

disruptive reductions in force. 

My written statement covers the history and the major lessons 

the FDIC has learned in using its flexibility to develop our personnel programs, and I would like to highlight five of the lessons 

that we believe may be of most interest to the Subcommittee. 

First, the rapidly changing technology in financial fields of the 

21st Century demand that government agencies have access to 

flexible hiring authority as a part of their staffing options. The 

FDIC used a temporary appointment authority to meet its fluctuating personnel needs during the banking crises of the 1980s and 

the 1990s. 

Over the past year, working with the U.S. Office of Personnel 

Management (OPM), the FDIC has received delegated authority to 

offer competitive term appointments with the possibility of conversion to a permanent position without further competition. This 

kind of approach should address our need to expand and contract 

the FDIC’s workforce to meet our future work challenges. 

The employees hired into this ‘‘Corporate Employee Program’’ are 

given introductory training in three critical business functions. 

They are then trained to become commissioned in one or more of 

these functions. If retained by the FDIC at the end of their term 

appointment, these employees will have a broad range of skills and 

perspective that will serve to benefit the Corporation. In addition, 

we are also close to finalizing delegated authority from OPM to 

quickly reemploy recent retirees to handle any banking crisis. 

My second point is that managing fluctuating personnel needs 

requires creative solutions. Setting targets and conducting RIFs is 

fast and effective, but such actions do not permit an organization 

to consider other more time-consuming and employee-friendly alternatives. For example, when the FDIC’s failure resolution activity 

declined, we knew we had employees with great ability but little 

work. And so to address this issue, we received authority from 

OPM to waive certain critical job level requirements and create a 

crossover program which allowed employees who were trained to 

handle bank failures to become bank examiner trainees without a 

significant reduction in pay. This was a very successful program. 

In addition, the FDIC’s compensation flexibility permitted us to 

offer more generous buyout programs than those offered in the Executive Branch. This also ensured that we had large numbers of 

voluntary separations of those in surplus positions. As we have 

used them, buyouts have taken a little bit longer, but they have 

saved money in the long run over RIFs, and they were better received by the employees. 

My third point is that compensation programs that recognize performance rather than longevity are very beneficial to organizations, 

24

1The prepared statement of Dr. Semerjian with an attachment appears in the Appendix on 

page 109. 

but they do need to be implemented very carefully. The experience 

at the FDIC is that pay-for-performance program implementation 

works best when executives lead by example and compensation 

changes are made first for the executives and then managers and 

supervisors. 

My fourth point is that it is important to listen to employee feedback and be willing to adapt and evolve any changes in performance-based programs. An organization should expect that implementing pay-for-performance systems will need to make changes 

based on practical experience and from the feedback from those involved and subjected to the program. 

The FDIC is currently on its fourth iteration of its pay-for-performance system for managers and executives and has made a 

number of changes based on feedback received from the surveys 

and focus groups tasked with suggesting improvements. We do 

have indications that our managers agree with this change in the 

pay philosophy and culture. They are committed, as we are, to improving the system going forward. 

My final and fifth point is that it is extremely important that the 

organization invest the time and effort to train both managers and 

employees on the new pay system, and that it create a system that 

is perceived to be fair by those evaluated and compensated under 

it. 

This concludes my oral statement, and I would be happy to answer any questions that you may have. 

Senator VOINOVICH. Thank you very much. Dr. Semerjian. 

TESTIMONY OF HRATCH G. SEMERJIAN,1 DEPUTY DIRECTOR, 

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY, 

TECHNOLOGY ADMINISTRATION, U.S. DEPARTMENT OF 

COMMERCE 

Dr. SEMERJIAN. Thank you, Mr. Chairman, and thank you for the 

opportunity to testify today before this Subcommittee regarding the 

Alternative Personnel Management System used at the National 

Institute of Standards and Technology. 

Originally founded in 1901 as the National Bureau of Standards, 

NIST is a non-regulatory Federal agency within the U.S. Commerce Department’s Technology Administration. NIST serves industry, academia, and other parts of the government by advancing 

measurement science, standards, and technology to enhance economic security and improve the quality of life for all Americans. In 

order to accomplish this mission, NIST has primarily relied on one 

key asset: Its staff of dedicated scientists and engineers, technicians, administrative, and support staff. Recognizing the need to 

attract and retain top-quality staff, NIST’s management worked 

with Congress, starting in the mid-1980s, to establish an alternative personnel management system. 

NIST’s Authorization Act for Fiscal Year 1987 established a 5-

year project to demonstrate an alternative personnel management 

system. The NIST demonstration system became permanent as of 

25

March 1996 through the National Technology Transfer and Advancement Act of 1995. 

The goals of the NIST system were to improve hiring of highquality personnel and retention of high performers in order to more 

effectively accomplish the mission and goals of NIST. Evaluations 

and feedback from managers and employees show that these 

changes have significantly improved NIST’s ability to recruit and 

retain high-quality staff. In addition, a basic objective of the original project was to design the system to serve as a model for simplifying and improving Federal personnel systems governmentwide, 

not just at NIST. The so-called new and improved system has dramatically changed NIST’s management of human resources. It also 

has provided a model of reform to other agencies within the Department of Commerce, such as the Technology Administration, 

NOAA, and the Bureau of Economic Analysis. And I understand 

NASA is in the process of implementing an APS based on the NIST 

experience. 

NIST’s alternative personnel management system has enabled us 

to do several things much better. Today, NIST competes more effectively in the labor market through more efficient and faster staffing 

mechanisms. NIST compensates and retains good performers more 

effectively. NIST has simplified, accelerated, and improved the 

classification process. We use performance appraisal results as the 

basis for granting pay increases and performance bonuses. NIST 

has streamlined the personnel Administration process through a 

reduction of paperwork, automation of personnel processes, and 

delegation. And, line management is more directly involved in the 

recruiting. 

The NIST system covers approximately 2,500 NIST employees in 

four career paths: Scientific and engineering professionals, technicians, administrative professionals, and administrative support 

staff. Senior Executive Service employees and ‘‘trades and craft’’—

wage grade—employees are not covered by this system. 

Since implementing the alternative personnel management system, according to an OPM report, NIST is more competitive for talent, has retained more top performers than a comparison group, 

and NIST managers reported significantly more authority to make 

decisions concerning employee pay. Key indicators of NIST’s ability 

to attract and retain world-class scientists and engineers are the 

numerous awards and recognition that NIST staff have received, 

since the implementation of the APMS. NIST staff have won two 

Nobel Prizes for Physics, been selected for a MacArthur ‘‘Genius’’ 

Award, received the National Medal of Science, received UNESCO’s 

2003 Women in Science Award, received 21 Presidential Early Career Awards for Science and Engineering, and 16 members of the 

staff have been inducted into the National Academies of Science 

and Engineering. 

While I would like to say everything has worked perfectly since 

its implementation, the fact is that NIST has had to make minor 

adjustments to the system over time. This was not unexpected, and 

has improved the functionality of the system. Over the years, both 

supervisory and nonsupervisory employees have provided ideas for 

improving the system, through focus groups and other forums. 

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ance appraisal and payout system in 1991, more recent feedback—

from the 2000 and 2002 NIST Employee Surveys, the NIST Research Advisory Committee’s 2002 Report, and stakeholder focus 

groups—has led to the latest changes which will be implemented 

during the next performance cycle. 

Starting on October 1, NIST will replace the current 100-point 

rating scale with six performance ratings and link pay increases to 

these ratings. This will simplify the system, strengthen the pay-forperformance link, and increase the transparency of the system. 

In its present form, I think the NIST system offers improvements 

in position classification, recruitment, extended probationary period 

for research positions, performance appraisal, pay for performance, 

automation and paperwork reductions, and delegations of authority 

to managers, all of which have many advantages over the current 

GS system. 

In conclusion, the NIST Alternative Personnel Management System is meeting its objectives to recruit and retain quality staff; to 

make compensation more competitive; to link pay to performance; 

to simplify position classification; to streamline processing; to improve the staffing process and get new hires on board faster; and 

to increase the manager’s role and accountability in personnel 

management. The NIST system continues to operate as an innovative personnel system which has a proven track record of demonstrating new ideas in the area of human resources management. 

Mr. Chairman, thank you for inviting me to testify today, and I 

would be happy to answer any questions you may have. 

Senator VOINOVICH. Thank you very much. 

My first observation is in the FDIC and in NIST, particularly in 

NIST, you are going after the best and brightest people in the 

country. The conclusion must have been made some time ago that 

if you were going to get them, you had to mirror the private sector 

or you were not going to be able to be competitive. I would like you 

to comment. Do you think at this stage, because of the new system, 

that you are in that position where you can be competitive? 

Dr. SEMERJIAN. From personal experience, I can assure you that 

we are a lot more competitive than we were 15 or 20 years ago. 

As a supervisor, when I was trying to recruit people, I felt that I 

had a high obstacle to jump over to be able to compete with offers 

from the private sector. I think we are doing much better in that 

regard. Our recruiting is much more successful, and our retention 

of our high-quality people is much better. Those two Nobel Prize 

winners are still at NIST. I am not sure that would not have been 

the case if we were operating in the old system. 

Senator VOINOVICH. In other words, could you comment on how 

pay for performance has helped? The question is: If I am being 

interviewed for a job at NIST, how important is it for me to know 

I am going to work for an organization that is going to pay me on 

the basis of my performance? 

Dr. SEMERJIAN. The people we recruit aren’t necessarily coming 

to NIST to get rich, so to speak, but obviously they have to have 

a reasonable living, and they want to make sure that they are not 

going to get stuck on some level, artificial level, that they have the 

opportunity to move up in terms of their salary as well as in the 

organization. And I think that the fact that we have this docuVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
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mented experience, where the statistics are actually on our website 

for everybody to see for transparency’s sake, I think, helps us a 

great deal in our recruitment. 

Senator VOINOVICH. In other words, they can see how you reward 

people. And, of course, once they are on board, that is very important in terms of retaining them. 

Dr. SEMERJIAN. Absolutely. 

Senator VOINOVICH. A very good friend of mine has a son—and 

I will not mention the agency he worked with, but he went to work 

for them for about a year and a half, and left. He just said that 

it was mediocrity. He felt that people were not being rewarded for 

what they were contributing, that it was an automatic thing, and 

he left them. 

Ms. Kea, how about the FDIC? How much of a difference has pay 

for performance made in recruiting and retention at FDIC? 

Ms. KEA. Thank you, Mr. Chairman. There are several areas, 

which we look at. First, I would like to say that there is a comparability statute, which does require us at the FDIC to remain 

comparable with the other financial institution regulators. That is 

one factor we look at as we are setting our pay and our benefits. 

But in addition to that, we do find——

Senator VOINOVICH. Just a minute. It is an independent agency, 

but you are allowed to establish compensation the FDIC maintains 

comparable with other regulatory agencies? 

Ms. KEA. That is correct, sir, and the history behind that is, I 

believe, Congress did not want us to be in danger, each of the financial institution regulators, of losing some of our best and brightest to the other financial institution regulators. And so each year, 

we do take that into consideration, and we share and exchange information. 

In addition to that, we do believe that we do lose employees in 

some instances to the industry which we regulate. We also have 

some difficulty attracting certain professionals in the area of research, which is the heart and soul of some of our work at the 

FDIC. We do believe that our flexibilities allow us the opportunity 

to do a better job of recruiting those individuals in particular. 

Senator VOINOVICH. Is pay for performance taken a factor in 

their coming to work with you? 

Ms. KEA. Yes, because it is the pay for performance that would 

allow us to give them increases in their pay. 

Senator VOINOVICH. And that helps with retention, too. 

Ms. KEA. Yes, sir. 

Senator VOINOVICH. I have a theory that one of the reasons why 

we had the tremendous scandal in our financial institutions is in 

part due to the Securities and Exchange Commission losing a lot 

of their people to other regulatory agencies because of their compensation. And, of course, we found out about it too late. 

At the FDIC, how do you determine whether or not the system 

is really working, that people indeed are being paid on the basis 

of their performance and it is not arbitrary? I am sure you hear 

constantly from folks that this is an arbitrary system, it is very 

subjective, not objective, and leads to favoritism and so forth. How 

do you guarantee that is not present in the organization? 

28

Ms. KEA. That is something that we pay a lot of attention to. We 

have tried to create a process that has transparency. We have welldefined objectives that are linked to the mission of each of the divisions, the offices, the branches, or the entire corporate mission. We 

publicize those. We provide training to our employees with regard 

to how they can achieve those objectives. 

We also provide, and invest, much time in training our managers 

on the new system. With regard to the nominations, that is a very 

rigorous process and a number of different individuals participate 

in that process. 

We provide a formal opportunity for our executive levels to give 

us feedback through a survey. We make adjustments based on 

what we hear in that survey. With regard to our bargaining unit 

employees, whether or not we conduct a survey is something that 

we would bargain with our union. We have not done that thus far, 

but we have found other means to get feedback from our employees. We have large employee gatherings, where our executives are 

available to hear feedback about our system. 

I should say that we are in our fourth iteration of our pay-forperformance system for our executives, and those changes have 

come directly from the feedback that we have heard. 

I should also mention——

Senator VOINOVICH. All of your employees are in pay for performance now, including those represented by unions? 

Ms. KEA. That is correct. 

Senator VOINOVICH. OK. 

Ms. KEA. I should also mention that every 3 years we bargain 

pay and compensation with our union. This year is a pay and compensation bargaining year, and we are in negotiations at this point 

with our union. 

Senator VOINOVICH. OK, but you negotiate the pay-for-performance system in place. 

Ms. KEA. In fact, the pay-for-performance system is something 

that is also subject to the negotiation. The system that we have in 

place right now today is one that the union did participate in the 

details of creating through that negotiation. 

Senator VOINOVICH. But it is a pay-for-performance system. 

Ms. KEA. Yes. 

Senator VOINOVICH. How long have you worked with the agency? 

Ms. KEA. I have been at the FDIC since June 1985, so it is over 

20 years. 

Senator VOINOVICH. OK. So you have a good indication of the history. How do you think that they feel about this new system, in 

terms of their happiness on the job and their productivity, selfworth? 

Ms. KEA. I would say that there are mixed reviews from the employees. We have some pretty specific information, as I indicated 

earlier, from our executives. Overall, they have indicated that they 

certainly prefer this. They think that it is more fair than everyone 

receiving the same pay for work that is at varying levels, of high 

or low contribution. 

We have also surveyed our non-bargaining unit employees, and 

they have confirmed to us that they certainly prefer a system that 

gives a greater reward for a greater contribution. 

29

I think that it is probably mixed with regard to the greater part 

of the population, the remaining part of the population, and the 

reason for that would be that it is a very large shift in the culture. 

I think as some comments have already been made by OPM and 

GAO, the culture has been one of everybody receiving everything 

across the board. This is a very different culture, one where you 

receive an award based on how great your contribution. 

I feel that this pay-for-performance system provides some sense 

of motivation and encouragement. I have been involved in some 

conversations with some of our employees where they wanted to 

know: Well, how did that employee get that? How can I get it? And 

what sort of plan can I put myself on where I can get that? 

Senator VOINOVICH. So you would agree that for management 

this has been helpful? 

Ms. KEA. Yes. 

Senator VOINOVICH. With respect to the organization, do you see 

it as a more efficient, vibrant organization that is getting the job 

done, with this system contributing to that? It has not been a negative but, rather, a positive type of exercise that has helped. 

Ms. KEA. I think that it has helped us to be more efficient as an 

organization in terms of achieving our mission. If you recall, when 

I gave the numbers of how we were a very small organization, we 

became very large in response to a crisis, and then we had to 

shrink back down. I think that there is no question we are doing 

much more work with a smaller number——

Senator VOINOVICH. You went from 4,000 to 23,000 employees, 

and then from 23,000 down to 5,000? 

Ms. KEA. Slightly under 5,000 today. 

Senator VOINOVICH. Amazing. 

Ms. KEA. So we are doing much more with fewer resources, and 

I think one of the ways that we have met that challenge is to provide these kinds of incentives to attract individuals and for those 

who are there to motivate them to work harder. 

Senator VOINOVICH. Thank you. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. Sorry I had to run 

off to another committee, but I am delighted to be back here to ask 

my questions. I want to add my welcome to the panel. 

Mr. Nulf, I understand that there are over 100 employees in Hawaii participating in a demonstration project at the Department of 

Commerce. Can you explain how pay for performance works for 

those employees who receive what we call a non-foreign COLA and 

whether it differs from the system in place for other employees? 

Mr. NULF. Thank you, sir. In Hawaii, as well as throughout, with 

the demo project in Commerce, my fellow members on the panel 

have been speaking to the fact of expectations being laid out and 

the pay-for-performance aspect that is brought to the table by ringing out an entitlement and rewarding your performers. At the end 

of the day, pay for performance does a number of things, some with 

purpose and some maybe as an indirect complement to what otherwise is going on. Your performers stay. We have 1.5-percent turnover in 90 and above. We have performers that are down into the 

40s that we have high turnover almost double-digit. 

I think those things are reflective of the fact that people want 

to be successful. When you put this type of system in place, I think 

30

it is well received by employees. I think the managers enjoy the 

flexibilities to it. But, most importantly, I think whether it is a 

team unit, a department, whether it is a group stationed in Hawaii, whether it is a group stationed here at the Herbert Hoover 

Building, people and teams and agencies want to be successful. I 

would agree with what Mr. Walker said earlier that the Federal 

workforce, on the whole, is an incredibly talented and diverse 

group of folks that are committed to what they are doing, and the 

opportunity to serve is extremely important. But the other aspect 

of that is people do have bills and people do have mortgages, and 

given the opportunity for your performers to have access to a greater degree than your lesser performers, I think it creates a win-win 

situation, sir. 

Senator AKAKA. The employees’ non-foreign COLA that we are 

talking about, will they be impacted at all? 

Mr. NULF. Will they be impacted? In what way, sir? 

Senator AKAKA. Well, will the COLA still be an allowance? 

Mr. NULF. Yes, sir. 

Senator AKAKA. And my question is how does this new system 

impact COLA? 

Mr. NULF. Yes, they receive their COLA for those that are in 

place regardless. And for those that are rated eligible by the performance ratings they receive, of course, the additional performance pay that is put on the table. But, yes, they are certainly eligible for COLAs, sir. 

Senator AKAKA. Will the COLA be reduced or increased based on 

performance? Do you have an idea at this point in time? 

Mr. NULF. I do not, sir. I can certainly respond back to this Subcommittee. 

Senator AKAKA. Thank you. My next question is to the entire 

panel. Was there an increase in the number of discrimination and 

unfair treatment complaints following the implementation of a payfor-performance system at your respective agencies? If so, what 

type of redress options do employees have if they believe their pay 

is based on matters other than their performance? 

Ms. KEA. I will speak first on behalf of the FDIC, and my answer 

is yes, we did see a number of increases in the number of complaints. These were either a labor grievance or an EEO complaint. 

Management feels, at the FDIC, that it is very important to have 

an appeals process to the pay-for-performance system. We anticipated that because it is such a great cultural change that there 

would be a number of such increases. 

I will say that with regard to the number of cases that have come 

through the system, a number of them have been overturned in 

favor of management. However, we do look at those cases and what 

is said in them, and if there are lessons to be learned, or if there 

is information that we find helpful, we certainly look at that information and use that as we try to improve our system. 

Senator AKAKA. Mr. Nulf. 

Mr. NULF. Yes, sir. In the early stages, we as well saw similar 

numbers, I would say, as we experienced within the GS. That being 

said, though, we have a focus similar to what has been testified 

today to make sure that the communication process and the involvement from affinity groups and monthly meetings and quarVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
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terly meetings with the CFO ASA, that all the various groups and 

everybody has a stake, if you will, in the process. And that has in 

the long run, certainly over the course of the last survey, in the 

last 5 years those numbers have gone down and, in fact, are below 

what we have otherwise with the GS schedule. 

Senator AKAKA. Dr. Semerjian. 

Dr. SEMERJIAN. Senator, we have not seen any major increase in 

grievances, but, first of all, I think NIST had a culture of technical 

excellence, so rewarding excellence was not a foreign concept. But, 

also, I think it is very important to make sure that we establish 

the metrics as part of the contract, so to speak, the performance 

agreement that we establish at the beginning of the year. We provided quite a bit of training for our managers to make sure that 

they know how to prepare appropriate performance agreements 

with the appropriate metrics. Performance appraisal is always a 

subjective process, of course. The question is how can we make it 

as objective as possible, and by establishing the metrics, the expectations at the beginning of the year, I think goes a long way to 

avoid those kinds of grievances. But we have not seen, when we 

started this process almost 20 years ago, any major increase. 

Senator AKAKA. Thank you for your responses. Mr. Chairman, 

my time has expired. 

Senator VOINOVICH. Senator Carper, welcome. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks, Mr. Chairman. I was just meeting with 

one of your constituents from Toledo, CEO of Owen Illinois, who 

used to run a big part of Dupont’s fibers business. He sends his 

best. He is interested in asbestos. 

Senator VOINOVICH. Hopefully we will get that bill. 

Senator CARPER. In Delaware, in my old job, as well as Governor 

Voinovich, we used to focus a lot on education, and we had a problem in my State, with being able to get enough well-qualified substitute teachers to show up on a daily basis at schools who could 

come into the classroom and do a good job when the regular teacher was not there. One of the ways that we finally settled on to address the problem was we tried to get retired teachers who still 

wanted to be in the classroom but they just did not want to do it 

every day, but they were willing to work as a substitute teacher. 

And the pay was not great, but what we finally worked out was 

an arrangement where they could come back to work as a substitute teacher, still receive their pension benefits, full pay, full 

pension pay, which you were entitled to, and they would also receive the daily stipend that was paid in a particular school district 

as a substitute teacher. 

I am told that you mentioned in your testimony before I got here, 

that the FDIC would like to have the authority to bring back some 

of your former employees with skills that might be needed when 

your workload increases, maybe for a merger or bankruptcy, or 

that kind of thing. 

I just shared with you one example of what we have done in a 

little State to enable us to do something like that with some success, and I just want to ask if you know of any other agencies that 

have a similar kind of authority, that I think you are looking for 

32

for the FDIC. Is there a model out there, at least at the Federal 

level, or maybe a non-Federal level, that you think could be adopted by the FDIC or other agencies in similar circumstances? 

Ms. KEA. Thank you, Senator Carper. That is a very good point, 

and we are very interested in bringing back our retirees, obviously, 

in the event of some catastrophic failures that would require more 

than the number of staff that we have available. It would be an 

excellent resource for being able to go out and get individuals who 

are already trained, have the knowledge in their head, and could 

be of immediate assistance to us. 

We have been in serious talks with OPM, and we would like to 

be able to waive the dual compensation to allow them to continue 

to receive their benefits and still be compensated during the time 

that they are working for us. We think that it is something that 

would work quite well, and, obviously, it would alleviate any increase in adding employees to the rolls of the FDIC. 

I am not aware, just off the top of my head, of what other organizations currently have that. That is some information that I would 

be happy to supply back to the Subcommittee, and I could do that. 

Senator CARPER. I understand, Dr. Semerjian, that you mentioned in your testimony that the National Institute of Standards 

and Technology is now, you believe, more competitive in hiring and 

maybe doing a better job of retaining folks, the kind of folks that 

you have been seeking to attract since you implemented this—I 

guess it is called an alternative personnel system. And I would just 

like to ask two questions. First, what aspects of that system do you 

think have contributed most to those improvements that have been 

noted? And, second, did the agency experience the kind of problems 

earlier that you face today? 

First of all, what aspect of the system do you think has contributed most to the improvements that have been noted? 

Dr. SEMERJIAN. Certainly, our ability to recruit high performers 

has been affected, as well as our ability to recruit in a timely fashion, because now we actually have direct hiring authority for our 

professionals. So that makes a huge difference when we are competing with other offers, so to speak, to be able to make a commitment as opposed to waiting months. 

But probably the biggest impact has also been in the retention 

area. 

Senator CARPER. How so? 

Dr. SEMERJIAN. As I had mentioned earlier, we have very high 

performers, such as Nobel Prize winners, and you could imagine 

they have a lot of transportability, so to speak, that they get a lot 

of offers just about every week. And to be able to retain them at 

NIST, we had to be fairly creative, and we have the tools, the ways 

of rewarding them through retention bonuses and other ways to 

keep them at NIST as part of our atmosphere, culture of technical 

excellence. 

Senator CARPER. OK. Good. Thanks. 

My last question is for Ms. Kea again, and I don’t know if we 

will have time for anyone else to comment, but I would at least ask 

you to start. I understand that Colleen Kelley from the Treasury 

Employees will testify later that the pay-for-performance system at 

the FDIC has been, in her view, demoralizing for at least some of 

33

the folks who work there. And I would like to ask you to comment 

on that, but I would also like to ask you to speak for a minute 

about how you—‘‘you’’ more broadly than ‘‘you’’ as an individual, 

but how you seek to make the system fair, treating other people 

the way we would want to be treated? 

I know there are always some bad apples in every agency. We 

have had bad apples in every outfit I have been a part of my whole 

life. So my guess is you probably have some, too. But we also strive 

to get everyone, I guess, up to a certain level. Any thoughts you 

have how you differentiate between employees that are doing a 

good job and those that are doing a great job? How do you all differentiate there? 

Ms. KEA. Thank you, Senator. First, I do want to say I have a 

great deal of respect for Ms. Kelley, but I do not agree with her 

opinion or her assessment that our current system has been demoralizing for employees. We actually have worked with the union in 

developing this system. I am not sure you were in the room when 

I did state earlier that we at the FDIC do negotiate pay and compensation, which includes our performance appraisal system with 

the union. We do that every 3 years. 

Senator CARPER. I was not here, no. 

Ms. KEA. This is a third year for us, and we are, in fact, in negotiations now currently with the union, and one of the items for discussion on the table is our performance evaluation system. We are 

very interested in hearing continuing and ongoing feedback from 

the union. 

With this program that we currently have in place—we started 

it at the executive level from the top going down—we surveyed our 

executives about the program and got pretty specific feedback. 

They indicated that they definitely felt that a system which gave 

them higher pay for higher performance, was more fair than one 

where everybody received the same pay but had unequal performance. 

We then implemented a similar pay-for-performance system with 

our non-bargaining unit employees, and we also surveyed them. 

And the feedback that we received was that they also felt that it 

was a more fair system than everybody receiving the same increase 

across the board. 

We have not implemented a formal survey for our bargaining 

unit employees. We would have to bargain, in fact, to do that. However, we found other ways to receive feedback. We go to staff meetings. We make managers available at the large staff meetings, and 

we try to talk to employees. We had a very through training system where we gave briefings and staff meetings to our employees 

about the new system so that they could understand what the goals 

were in order to be eligible for an increase in their pay. And we 

tried to link those to either a corporate mission or a mission at the 

branch level or at the division level, thereby giving everybody an 

opportunity to make a contribution and eliminating the thought or 

the philosophy that the nature of some jobs provide greater opportunities to make a contribution. We really focused on that. 

The review process for determining who would get the award was 

a very thorough one involving several levels. And, in fact, before 

the results were released, the union did get the opportunity to reVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
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1The prepared statement of Mr. Kinghorn appears in the Appendix on page 114. 

view those results just to look at them to see if there was some statistical imbalance. So we tried at all levels to build in some guarantees, some assurances, and to put as much transparency as we possibly could in the process. 

One thing that I also stated earlier is that we are in the fourth 

iteration of our pay-for-performance system for our executives, and 

we have changed it based on the feedback that we have received 

through that process. So we feel that while no system is perfect 

and we have had a number of different systems at the FDIC, we 

are committed to trying to refine the system based on the feedback, 

based on the involvement that we have from the individuals who 

are both managing it and those who are being subjected to it. 

Senator CARPER. All right. Great. 

Well, Mr. Chairman, you have been generous with the time. I 

thank you and I thank our witnesses for their comments and responses to these questions. Thank you. 

Senator VOINOVICH. I want to thank the witnesses for being here. 

There may be some other questions that we want to submit to you 

in writing. We would appreciate your getting back to us as soon as 

possible. We would like to have you stick around some more, but 

we have three other witnesses and it is 5 minutes after 12 o’clock. 

We have got to get on with our work. 

Thank you very much for coming. 

Senator VOINOVICH. Our next witness is Morgan Kinghorn, who 

is the President of the National Academy of Public Administration. 

Colleen Kelley is the National President of the National Treasury 

Employees Union. John Gage is the National President of the 

American Federation of Government Employees. 

It is good to see all of you again and welcome. Before you sit 

down, if you would raise your right hand and repeat after me. Do 

you swear that the testimony you are about to give this Subcommittee is the whole truth, and nothing but the truth, so help 

you, God? 

Mr. KINGHORN. I do. 

Ms. KELLEY. I do. 

Mr. GAGE. I do. 

Senator VOINOVICH. Mr. Kinghorn, if you will begin. 

TESTIMONY OF C. MORGAN KINGHORN, JR.,1 PRESIDENT, 

NATIONAL ACADEMY OF PUBLIC ADMINISTRATION 

Mr. KINGHORN. Thank you, Mr. Chairman, Senator Akaka, and 

Members of the Subcommittee, for inviting me to testify on a subject that I have certainly had a personal interest during my 25-year 

career and my 9-year career in the private sector and now in a nonprofit organization, about looking at the alternative public personnel systems. 

As President of the National Academy of Public Administration, 

I am really pleased to appear before you to provide some personal 

perspectives on the work of the Academy. As you know, the Academy is an independent, nonpartisan organization chartered by the 

Congress to give trusted advice. The views presented today are my 

own and are not necessarily those of the Academy as an institution. 

35

What I would like to do is really depart from my written testimony and reflect on what I have heard in the last 2 hours and really give you some perspectives that are contained in my testimony, 

but also really are based on my experience in both the private and 

public sector on what we really should be looking at. I think the 

fact that there is a consistency in what the Subcommittee is hearing really shows the long evolution of performance-based systems. 

They have been around for a long time, and they certainly can 

work. 

The first point I would like to make is I think the reforms in this 

system are absolutely essential. The Academy, about a year and a 

half ago, did ‘‘Conversations on Public Service,’’ which came out of 

our work on pay for performance and the Volcker Commission. In 

addition, there was a survey that OPM did about 3 years ago that 

I would like to share, two questions and answers that I think go 

to the point. 

One question that was asked was: ‘‘My performance appraisal is 

a fair reflection of my performance.’’ Sixty-five percent of the 

100,000 responders in the Federal Government said yes. There was 

obviously a lot of work going on in performance appraisals. The 

next question, though, is a little more interesting: ‘‘Our organization’s awards program provides me with an incentive to do my 

best.’’ Seventy percent of the responders neither agreed or didn’t—

disagreed or strongly disagreed. That would tell me that we have 

organizations that are certainly involved in some kind of performance evaluations, but it is unclear to me how they have been used. 

They certainly haven’t been used in terms of awards. So I think the 

system needs to be changed and probably needs to be changed fairly radically. 

Second, you have heard a lot about the importance in these systems at every level in the organization being involved. That is crucial. It also ties into why, in those organizations that are successful, it goes from the top of the organization down to the employee, 

and it is nearly always tied to a strategic plan and the objective 

of that organization. Without that, there is rarely a connection between employee performance, whether it is a manager or a working 

employee, and the agency’s core mission. 

You have also heard, which I completely agree with, on the 

transparency of the process and the transparency of the outcomes. 

I think that is crucial. When I came into consulting 13 years ago, 

after a 25-year career in the Federal Government, I came out of a 

structure where I started as a GS–9, ended as an SES–6, and really was appalled for those 25 years at the inability of the system 

to really appropriately differentiate between the best performers 

and, in particular, the average or mediocre performers. 

I came into a private sector organization that had pay for performance. However, it was often based on which partner in the consulting business liked you or didn’t like you. So when I became a 

partner 2 years later, I decided to change that process and basically created a peer review process in my practice—it was the second largest practice in PricewaterhouseCoopers at the time in the 

public sector—in which at the end of those review processes the 

transparency of the decisions to all the employees as well as the 

outcomes was pretty clear. It passed the laugh test, which is an imVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
36

1The prepared statement of Ms. Kelley appears in the Appendix on page 119. 

portant test to pass. Individuals may not have been happy with the 

outcome, but when they looked at who was rewarded, about 18 percent of the people got cash awards or bonuses or pay increases—

not a large number—they understood why, because there was a 

process in place, training in place, and everyone from the partner 

down to the employee was involved in that process. 

The final thing I would like to share with you is that I think one 

of our focuses needs to be on the future. Government is transforming in a variety of ways. What government does, how it does 

it, and who does it is changing radically. A lot of our discussion appropriately focuses on the current 2 million plus or minus Federal 

employees. But over the next 20 years, which these reforms will 

impact, we have a different workforce coming in from what our research tells us, one that demands different kinds of rewards, one 

that wants more agility in the way they work, more flexibility, the 

ability to move around quickly, the ability to move up, and not be 

hampered by what appears to them to be a very complex 25- to 30-

year career process called the General Service. So they really do expect change, and if they don’t get it, we won’t be able to retain 

them and we won’t be able to get them. 

Finally, I think we have to realize that there is a constistancy 

in this change. I ran a relatively small practice in Pricewaterhouse 

that was 600 people with 24 partners, but it was part of a 35,000-

person organization, all of which had pay for performance, which 

worked reasonably well. But we changed it nearly every year. We 

learned from the process. So I think if we attempt to create and 

wait for a process that is perfect, certainly for the individual agencies, all of whom are unique, have unique requirements, we are 

never going to get there. And with the changing nature of the 

workforce, where many programs that really the primary people involved are no longer Federal employees—they may be contractors, 

they may be for-profit, they may be nonprofit, they may be grantees, people receiving money from the Federal Government—the relationship of how we reward performers is going to change even 

further in the next 10 years. 

So I think clearly it is time to move on. We have learned a lot 

from both the experiments that have been performed, we have 

learned a lot from the private sector, and certainly from State and 

local governments who have been involved in this for a long time. 

I will be glad to answer any questions the Subcommittee may 

have of me. 

Senator VOINOVICH. Thank you very much. Ms. Kelley. 

TESTIMONY OF COLLEEN M. KELLEY,1 NATIONAL PRESIDENT, 

NATIONAL TREASURY EMPLOYEES UNION 

Ms. KELLEY. Thank you, Chairman Voinovich, and Ranking 

Member Akaka. I very much appreciate the opportunity to testify 

here today. 

I would like to comment specifically about three alternative pay 

systems that NTEU has been involved with: The FDIC system, 

which has been in effect for several years; the Department of 

37

Homeland Security system, which is still in the pre-implementation 

stage; and the IRS system that right now only applies to managers. 

I must say at the outset that I believe that these alternative personnel systems have very little positive impact on recruiting, retaining, and maximizing the performance of Federal employees. 

NTEU has bargained over compensation at the FDIC since 1997. 

While we have serious concerns about the current state of the pay 

system there, we strongly believe that, in the absence of a statutorily defined pay system, like the GS system, pay should be subject to collective bargaining, as it is in the private sector. Especially 

in a government environment, employees and the public need a 

credible means of ensuring that pay is set objectively. 

NTEU is at odds with the FDIC on the current system to determine performance pay. While the FDIC itself has stated that ‘‘more 

graduated levels of rewards are better than fewer levels,’’ it has 

dropped a multi-level performance evaluation system, and the 

FDIC has moved to a pass-fail performance evaluation system. 

Under this system employees who pass are eligible to be nominated 

by their supervisor for a pay increase that they call a Corporate 

Success Award. 

Now, NTEU insisted that there be some guarantee that front-line 

employees would have access to these Corporate Success Awards 

and that they would receive some of this money, so there is language that guarantees that at least one-third of bargaining unit 

employees, front-line employees, will receive these CSAs. But that 

one-third minimum might as well be a limitation because to date 

the FDIC has only been willing to recognize and reward one-third 

of the workforce. And the standards for who gets these increases 

are vague, they are subjective, and they are not apparent to those 

who are covered by the system. 

The application of this one-third limitation on the availability of 

pay adjustments and its lack of transparency have demoralized 

FDIC employees. Our members report that the system is divisive, 

it discourages teamwork, and it sends the message that two-thirds 

of the workforce are not contributing. The previous system at the 

FDIC, which was based on multi-level performance evaluations 

without limits on the number of employees who could receive additional pay, did have credibility with employees. The current system 

does not. 

DHS. While the pay-for-performance system at DHS has not yet 

been implemented, we are very concerned that it will push employees who are already demoralized out of the agency when the importance of keeping experienced, skilled employees is greater than 

ever. Let me be clear: The employee opposition to the proposed 

DHS system is not about ‘‘fear of change,’’ as some have tried to 

portray it. I know firsthand that this group of employees, who are 

entrusted with protecting our country from terrorists and other 

criminals, is not a fearful group. What they most object to about 

the proposed DHS system is that it will make it harder, not easier, 

to accomplish the critical mission of the agency. 

There are several reasons for this: One, the system is not set by 

statute or subject to collective bargaining as the FDIC’s system is, 

so there is nothing to provide it any credibility among employees. 

Two, the system will have employees competing against each other 

38

over small amounts of money, discouraging teamwork, which is 

critically important in law enforcement. Three, the system is subjective, which will lead to at least the appearance of favoritism. 

Four, the system is enormously complex, the administration of 

which will require huge amounts of money that is so much more 

desperately needed in front-line functions, not to mention siphoning off money that could go for more pay in a less administratively 

burdensome system. And, five, the draft competencies for the new 

DHS system do not recognize or reward the real work that these 

employees do to keep our country safe. 

The IRS. While employees represented by NTEU are not covered 

by a paybanding performance-based system at the IRS, IRS managers are. The Hay Group, a consultant which was hired by the 

IRS, did a senior manager payband evaluation on this system for 

the IRS last year. Here are just some of the results: 76 percent of 

covered managers felt the system had a negative or no impact on 

their motivation to perform their best; 63 percent said it had a negative or no impact on the overall performance of senior managers; 

only one in four senior managers agree that this paybanding system is a fair system for rewarding job performance or that ratings 

are handled fairly under the system; and increased organizational 

performance was not attributed to this paybanding system. 

The results of this IRS system are dismal, yet it is pointed to as 

a model for moving the whole Federal Government to a similar system. In fact, there is a dearth of information to indicate that alternative pay systems have had any significant impact on recruitment, retention, or performance. The GAO report I mentioned in 

my full testimony includes virtually no evidence that the systems 

improved any of those measures. In fact, the Civilian Acquisition 

Personnel Demonstration Project that was reviewed in that report 

had as one of its main purposes to ‘‘attract, motivate, and retain 

a high-quality acquisition workforce.’’ Yet attrition rates increased 

across the board under the pilot. 

NTEU is not averse to change. We have welcomed, at the FDIC 

and elsewhere, the opportunity to try new things and new ways of 

doing things. Based on my experience, these are the things I believe will have the most impact on the quality of applicants and the 

motivation, performance, loyalty, and success of Federal workers: 

One is leadership. Rules and systems don’t motivate people. 

Leaders do. 

Two, opportunities for employees to have input into decisions 

that affect them and the functioning of their agencies. Employees 

have good ideas that management is currently ignoring. 

And, three, a fair compensation system that has credibility 

among employees, promotes teamwork, is not administratively burdensome, and is appropriately funded. 

Unfortunately, I do not believe the systems that are currently 

being pursued by the Administration follow these standards. I ask 

that the Members of this Subcommittee closely review and analyze 

what data exists on these current alternative personnel systems 

that exist today. I don’t think the evidence supports their use as 

successful models across government. 

I thank you for the opportunity to testify and would welcome any 

questions that you have. 

39

1The prepared statement of Mr. Gage appears in the Appendix on page 128. 

Senator VOINOVICH. Thank you very much. Mr. Gage. 

TESTIMONY OF JOHN GAGE,1 NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL–CIO 

Mr. GAGE. Thank you, Mr. Chairman, for inviting me to testify 

today, and also thank you, Senator Akaka, for your support of Federal employees, not just on this Subcommittee but also the VA and 

Armed Services committees. 

I would like to focus my remarks today on the experience of 

AFGE Local 1904 at the Army’s Fort Monmouth, in New Jersey, 

which has had about 5 years of experience with the Acquisition 

Demonstration Project. I must say the demo at Fort Monmouth 

works relatively well for two primary reasons: Collective bargaining and funding. 

Crucial aspects of the system have been established through the 

process of collective bargaining, and the resulting collective bargaining agreements are fully enforceable. Labor and management 

have a respectful relationship, and the contracts negotiated between Local 1904 and local management reflect the good-faith efforts of both parties. In addition, the demo portion of the pay system is funded separately and is treated as a supplement. Virtually 

every employee covered receives his regular ECI and locality increase each year. The demo raises are on top of these regular 

across-the-board increases. Although money formerly used for within-grade and quality step increases is used for the demo, at Fort 

Monmouth additional program funds have been provided to allow 

the improvements in overall pay levels. 

My written testimony includes a description of some of the terms 

of the contract between AFGE Local 1904 and Fort Monmouth 

management. As you know, a contract such as this will be unenforceable in DOD and DHS once the NSPS and MaxHR go into effect. In fact, managers will not even have the authority or flexibility to negotiate with the local union or use a contract like this 

to navigate the inevitable conflicts that arise over how to implement a pay system that requires subjective evaluations. 

This contract, like all collective bargaining agreements, reflects 

a balance between the rights of management and workers subject 

to the constraint of mission accomplish. It reflects the joint acknowledgment of various roles and responsibilities and their limits. 

Despite the positives I have described, the demo at Fort Monmouth is far from perfect. Like all pay schemes that seek to individualize pay adjustments, it raises the question of what the system is trying to accomplish, whether those aims have been met, 

whether the pay system should get credit for improvements and 

results, and whether the costs associated with administering complex, multifaceted pay adjustment processes are offset by measurable benefits. 

The most important point is that the crucial protections for employees that are included in the Fort Monmouth demo are absent 

from both NSPS and MaxHR. The classification system at Fort 

Monmouth still provides a floor for an employee’s salary based on 

the duties and responsibilities of the job, and they are entirely obVerDate 0ct 09 2002 09:26 Apr 14, 2006 Jkt 024240 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 C:\DOCS\24240.TXT SAFFAIRS PsN: PAT
40

jective criteria. Collective bargaining rights are intact and fully exercised. 

The fact is that the demo at Fort Monmouth, and its success, has 

far more in common with the General Schedule than it does with 

either MaxHR or NSPS. Time and again the employees at Fort 

Monmouth urged me to tell you that they oppose the NSPS in the 

strongest possible terms and that the real reason that their project 

works as well as it does at Fort Monmouth is the strong, fair, and 

reliable system of checks and balances achieved and maintained 

through collective bargaining. 

Mr. Chairman, I know you brought up Katrina, and this past 

week or so I have received incredible reports of Federal workers, 

who have gone the extra mile. Social Security was down there instantly, gave out 30,000 checks to people who would not have gotten them through the mail or any other way. We have pictures of 

VA employees standing in knee-deep water doing their job. We received more volunteers from Border Patrol and Homeland Security 

to go down there on their own to help out. 

And, Senator, while you are sitting here trying to look at how to 

motivate employees, provide fair compensation, then we get hit last 

week with our retirement going from high three to high five, retiree health insurance being hit, paying for parking—and this 

comes to about $7 billion over 5 years. And, Senator, it is hard for 

Federal employees to see anything objective about new personnel 

systems, when they see in the wings our benefits, our retirement, 

and our pay ready to be slashed. 

So, Senator, I would like to commend you for having these hearings and for looking at Federal employment, but you have to realize that a tax on our current system certainly is nothing to do and 

will not help rewarding the best and brightest or attracting the 

new generation of Federal employees or retaining the ones that we 

have. 

Thank you, Senator. 

Senator VOINOVICH. Thank you very much, Mr. Gage. 

Senator Akaka, if it is all right, I will ask you to start asking 

questions. I have to excuse myself for a minute, but I will be back. 

Senator AKAKA [presiding]. Thank you very much, Mr. Chairman. I want to add my welcome to this panel, and thank you for 

your testimony. 

Ms. Kelley, I am concerned about what you said about the personnel system at FDIC. I want you to know that I plan to ask further questions of FDIC regarding the issues you raised. 

Ms. KELLEY. Thank you. 

Senator AKAKA. The FDIC, Ms. Kelley, as we know, is exempt 

from the prohibited personnel practices outlined in Title 5, other 

than the prohibition of retaliation for whistleblowing. Do you believe this exemption has an impact on the number of prohibited 

personnel practices at FDIC? 

Ms. KELLEY. We have been looking at this from a number of angles, Senator, including the pay system, and I don’t have any data 

that I could share with you right now. As we come to any conclusions or recommendations that we see as next steps, I would be 

glad to provide that to you. 

41

Senator AKAKA. Thank you, also, if you don’t have it now, maybe 

you can provide me with recommendations on how to fix or what 

you think is the way of fixing the problem. 

Ms. KELLEY. I would be glad to do that. 

Senator AKAKA. That is fair. 

Mr. Kinghorn, you raise a very interesting question and a very 

interesting issue in your testimony: The challenges associated with 

a multi-sector workforce. These issues are quite timely given the 

increasing number of contract employees working for the Federal 

Government. I am particularly interested in the first challenge you 

mentioned in your testimony regarding accountability. Do you have 

any suggestions as to how to assure accountability for a multi-sector workforce? 

Mr. KINGHORN. Senator Akaka, it is an incredibly growing issue. 

For some agencies, perhaps like NASA where there has been what 

we call multi-sector—we don’t think the term ‘‘blended workforce’’ 

works because we don’t think it is necessarily blended or working 

in all cases. But in many agencies, this is beginning to happen increasingly. So, I think it is one of the major frustrations people 

have. 

I think first of all, many organizations get into alternative work 

without really thinking through it strategically. I think the thing 

that bothers many Fellows of the Academy is that agencies and organizations and other people simply slip into the use of contractors, 

either because of crisis situations—and there is not really a strategic thought given to looking down the road, what could or could 

not happen and then building in some defense mechanisms per se, 

that if you are going to go that route, what do you really need to 

be careful of? And I think we have plenty of evidence in the last 

25 years where that has happened. 

So one of the key questions on how you deal with it is, you need 

to think about it in advance, and perhaps the Subcommittee can 

have some hearings on that subject as to when you go outside a 

Federal workforce or when a State goes outside its State public 

service. And this is beyond outsourcing and offshoring. What strategic thought was given to doing that? Was it an economic decision 

to save money? Which it generally has been. And have the 

downsides of that been examined? 

I don’t have any particular off-the-cuff sensibility that it is wrong 

to do that, but I think it needs to be given thought before it happens. 

The other question of accountability, if you look at the grant programs, I came out of the Environmental Protection Agency where 

I worked for nearly 10 years back in the 1980s, when the EPA obviously with its several statutes, probably 25 statutes, was really 

the fundamental enforcer of many of the programs until they were 

delegated to the States. You fast forward now 20 years later, and 

most of EPA’s programs are delegated, and they are paid for and 

managed through grants to grantees, whether they be States or 

other organizations. And I think that whole question of grant accountability, how do you hold a Federal employee who is issuing 

those grants—and we went through a period of 10 or 15 years 

where the accountability was purposely softened because we wanted block grants and other kinds of grants. What mechanisms do we 

42

need for the next 15 to 20 years to hold the right people accountable? 

I was at a large department’s senior executive training session 

about 2 weeks ago, mainly a grantee organization, and they are 

struggling with that now. What is their role in the 21st Century 

other than just being an oversight of grantees? Should they have 

a role that looks at best practices of how the grants are used? 

Should there be a stronger accountability role? 

So it really is a difficult question that not enough thought has 

been given to. 

Senator AKAKA. Yes, I agree and I would like to ask Mr. Gage 

and Ms. Kelley if they have any further comments on this. Mr. 

Gage. 

Mr. GAGE. Well, I think on the contracting side of it, clearly we 

are looking—what are there, 6 million contractor employees of the 

Federal Government now with no accountability that I can see? We 

have been asking for it in legislation, some sort of accountability. 

I think the mix of Federal employees and contractors on the work 

site is a confusing one, and it is something that I don’t think really 

contributes to good government. 

So I think when we are looking at pay for performance or any 

type of personnel system, I think accountability, not just for Federal employees, but also on the contractors and the work that they 

do or don’t do, is something that needs to be magnified. 

Ms. KELLEY. And I think that will become even clearer if you 

look closely at similar work done by Federal employees and that 

same kind of work being done by contractors. I think, unfortunately, we are going to see this in the very near future as the IRS 

moves forward with its plan to put collection tax accounts in the 

hands of private collection agencies, and there will be private collection agencies doing the tax collection work of the IRS instead of 

IRS employees. And we are going to see, I believe, a lot of accountability questions and conflicts here as this moves forward, and I 

will give you just one key example of this. 

There is a law today in effect that prohibits IRS employees from 

being evaluated on dollars collected. That law was put into place 

to protect taxpayers from the fear of aggressive collection tactics by 

Federal employees. So IRS employees cannot be evaluated on dollars collected. But within the next 12 months, private collection 

agencies are going to be paid by being able to keep up to 25 percent 

of what they collect from taxpayers. So they will be paid based on 

dollars collected, which is going to raise a lot of accountability 

issues when it comes to who should do this kind of work—IRS employees who are accountable or these private collection agencies 

who will be paid a bounty to do the same work. 

Senator AKAKA. Mr. Gage, you mentioned the proposals being 

floated by some to offset the funds government is spending for Hurricane Katrina. I share your concern with these proposals, and I assure you that those coming under the purview of this Subcommittee will be carefully reviewed if introduced in the Senate. 

We are concerned about that, and we will certainly be looking at 

it further. 

Mr. Gage, the Comptroller General said in his written testimony 

that the current pay system is outmoded because it rewards length 

43

of service over performance and contribution, automatically provides across-the-board annual pay increases, even to poor performers, and compensates employees living in various localities 

without adequately considering the local labor market rates. And 

my simple question to you is: Do you agree? 

Mr. GAGE. No, I don’t agree. I think there are a lot of straw men 

in that statement by the Comptroller General. 

Some of these, when you look at the statistics on the pay for performance, for instance, the one I testified up at Monmouth, in 5 

years two employees were unsuccessful. Two in 5 years. So that 

bugaboo about this system is going to weed out the non-performer 

is, I think, not accurate. 

Obviously, our members don’t like non-performers. They work 

next to them. If there is one, I think there is a peer pressure there 

that gets it moving. But I don’t think that saying that the old system is outmoded because there are—this bugaboo that the Federal 

Government employees just don’t work. And even under the payfor-performance systems—and I know there is another one in 

Huntsville, Alabama, and these are all scientists. I think in 4 years 

there was one Federal employee that was unsuccessful. 

I would like to comment on some things that Ms. Kelley said. 

First of all, the old system is old, therefore, we have to blow it up, 

and to say that this system will do all these things, there is really 

no information about that. 

The Fort Monmouth people that we talked about in preparation 

for this, they really feel that it was so much ado about nothing, 

that the new system is so complex and is so time-consuming and 

resource-swallowing that it really doesn’t motivate them. There is 

just a little bit of money involved, and that the amount of work 

that has to go into it really diverts from the mission rather than 

adds to it. 

If I had my say, I think we could do some tinkering, some serious 

tinkering with the current system, and have one that really works, 

not just for scientists, but we have to talk about those rank-andfile Federal employees who are in VA hospitals or in Social Security. These are not the high-grade types that most of these projects 

have involved. Here a consistency and a dedication is really required and necessary to do Social Security claims or VA service, 

and a lot of that simply will not be captured—a lot of that dedication simply will not be captured in this pay-for-performance system. 

Senator AKAKA. Ms. Kelley, do you agree, too? And finally I will 

ask Mr. Kinghorn. 

Ms. KELLEY. I think broad statements about the system being old 

and needing replacement are just that. They are very broad statements that don’t provide specifics. I would not say the GS system 

is perfect. There are surely things that if there are valid problems, 

we are more than willing to work with the Administration and 

with the agencies to address those. But in earlier testimony, just 

today, for example, Deputy Director Blair said that if an employee 

has a pulse, they receive a within-grade increase. 

Now, I would suggest that any manager who is implementing the 

current system that way should not be a manager. So once again, 

the problem is with the implementation of the system, not with the 

44

system itself. And if agencies cannot appropriately implement the 

GS system that has a lot of structure to it, then I think employees 

are absolutely right to doubt any agency’s ability to implement a 

system that doesn’t have those kinds of structures, that doesn’t 

provide for transparent and fair criteria. 

If the within-grade increase needs a framework around it as to 

what employees need to do to achieve that, then tell the employees 

what that is, and they will be glad to strive for that and to accomplish it. The things that need fixing are within the system, and the 

bigger problem, as far as I can see, across the board is implementation of the system. It is not the system itself. It is how agencies 

and managers implement it. That is only going to get worse in a 

system that is much more vague, which is exactly the road that all 

of these agencies are headed down, the ones that have the authority today and where the DHS and DOD and this Administration’s 

proposal are going. 

Senator AKAKA. Mr. Kinghorn. 

Mr. KINGHORN. I think the objective of a performance system—

and performance-based pay is one system. Over time my goal was, 

and still is in my own organization, which has one, is ultimately 

not to have anyone that is a poor performer. So the fact that in a 

system after a couple of years there were no poor performers could 

be the fact that grade creep has happened again, or it could be simply that the performance system, the ones I am familiar with, ultimately drives out the people that are poorer performers. But that 

is not the objective per se. The objective is to reward people, and 

that is the second step. 

Again, in systems that I have been familiar with, both in my current job and previously, is that the performance system measured 

performance, and then even people in the organizations I worked 

in that received satisfactory, and sometimes above satisfactory, did 

not receive pay. At the consulting firm, I think we had 2.2 percent 

of pay to reward people. That doesn’t sound like a lot of money, and 

it may not have been, but that is what we had. So we had a very 

high standard, and that is why people talked about the transparency of getting there was critically important, because you were 

not rewarding satisfactory people in that system, and you weren’t 

even rewarding above average people. 

So if you didn’t have transparency, it would have fallen apart, 

and in that practice, we improved retention. At one point we had 

about a 36-percent attrition rate in consulting, in the consulting 

business. That dropped down to 14 percent. Some of that was market, but some of it was the fact that people understood the performance system was much fairer. 

So you have to differentiate how you measure performance, I 

think, and its objectives, which can be different for different places, 

and then in that performance structure, with all the people you 

have, how do you use your reward system to provide the rewards? 

And some organizations might want to go down to satisfactory. 

Others want to stay at a higher end because they have certain objectives. And, again, as I suggested, you review that and the way 

you use both the system itself and the reward mechanisms might 

change, because your organization may change. Very different for 

NIST than it would be for IRS. 

45

Senator AKAKA. Thank you, panelists. Thank you, Mr. Chairman. 

Senator VOINOVICH [presiding]. Thank you, Senator Akaka. 

I am a little perplexed because we are moving forward with 

MaxHR at DHS and NSPS at the Department of Defense. What I 

hope that we get out of this hearing today is some benchmark information that should be followed implementing alternative systems in a fair way. I think we heard some good things about involving employees, and I would hope that we continue to get input 

from the unions on things that could be done administratively or 

legislatively. 

I am interested in hearing from you and your members in those 

agencies under an alternative personnel system, including the Department of Defense’s NSPS that are the first to transition in—

what do you call them again? 

Mr. GAGE. Spirals. 

Senator VOINOVICH. Spirals, thank you. We must get as much information on the transition as we possibly can from you. Ms. 

Kelley, do you represent anybody at the DFAS in Columbus? 

Ms. KELLEY. No. 

Mr. GAGE. We do. 

Senator VOINOVICH. That is right. You have a strong, active 

union there. I think I have met with the woman who leads that 

local. 

Mr. GAGE. That is right. Patty Viers. 

Senator VOINOVICH. Yes, she is terrific. I would really like to 

have input from people like Ms. Viers and others, so we can monitor and make corrections if necessary. 

Also, I was pleased to hear that OPM understands that there are 

many things that need yet to be done in terms of preparing for 

this. For example, having in place a performance evaluation system 

period, whether unionized or not, I think people like to know 

whether they are doing good or whether they need to make improvements. I think that helps everyone. 

So I just would like to say to you that we are going forward. It 

seems to me that we also ought to be looking at the kinds of employees involved in the various alternative personnel systems. Ms. 

Kelley, you just mentioned that there is a stark difference between 

NIST and other agencies. It is a whole different culture when competing for Ph.Ds, and if you didn’t have a pay-for-performance system in place, you may not get them to come to work for you, and 

for sure they wouldn’t stay very long. 

I think that there has to be some distinction between types of 

employees and a need to maintain comparability with the private 

sector. What kind of a system do agencies have in place in order 

to attract employees? And then once they are on board, how do you 

get them to stay? 

So I think maybe that is the direction that I would be interested 

in directing your reaction to. Maybe that is the direction that we 

should go and to make sure that this isn’t a one-size-fits-all because if we do, I don’t think we are going to be successful for anybody. 

Any reaction? 

Senator AKAKA. Mr. Chairman, let me say that I am so pleased 

to hear your comments on MaxHR at DHS and also NSPS at DOD. 

46

And I want you to know I look forward to working with you and 

your employee organizations on this. Thank you. 

Senator VOINOVICH. Thank you. 

Would you like to comment on what I just said? 

Mr. GAGE. Well, I agree with you. I think to say that we are 

going to have pay for performance, it is going to be based on these 

competencies and thrown out there, when most of the experience 

comes from scientists and that we really haven’t looked at the 

broad scope of Federal employment, and as we have been saying 

all along, I think this is a disaster for law enforcement. I don’t even 

think you should try it. I think in many of our other jobs where 

there is such a team element, I don’t think it is going to work there 

either. 

So I really respect and appreciate your comments that we have 

to try, since we are going down this road, but we definitely have 

to customize it to the different agencies and the different jobs. 

Ms. KELLEY. In my view, the accountability is what needs to be 

there, though, for the agencies because absent a collective bargaining agreement or a statutory definition of what their system is, 

they will be left to their own devices. And if there is not the leadership, if there is not the employee involvement, if there is not the 

transparency and the funding, it will fail. And the evidence or the 

facts as we have lived them, that I have presented in my testimony, are to highlight that, our biggest fear right now is that there 

are—we know that NSPS and MaxHR are moving forward. That is 

very clear. But the models that are being pointed to as a reason 

to expand governmentwide are full of flaws, and they should not 

be held up as a model to expand. 

There will be a lot of things I believe that can be learned from 

the DOD and DHS implementation. They are still in the pre-implementation stages. This rush to point to other systems in place—like 

the IRS management system. If the IRS managers who are under 

it give the feedback to the consultant hired by the IRS that we 

have in the report, these are the same managers that are then 

going to be responsible for implementing a paybanding system 

someday for the front-line employees? I mean, it is doomed to failure if that system is looked to as a model for something that should 

be rolled out in that or any other agency. 

For whatever reason, there seems to be a resistance or a hesitancy to acknowledge the flaws in these systems and to learn from 

them, and also to look and see what we can learn from DOD and 

DHS. You have such a variety of occupations within both of those 

agencies that cut across the gamut of Federal employees if you look 

at all of the employees in DHS and DOD. So you are going to have 

this wide range of everything from IT workers to accountants to 

lawyers to scientists to engineers, so all that experience will be 

there. And yet there seems to be no interest in seeing what can be 

learned from that and instead trying to point to these other APSs 

as models. And there is not one of them that I think employees 

should trust as the model that their system should be based on. 

So that is what I would ask, is for your help to acknowledge that 

there is a lot to learn, not because they can be applicable in every 

agency, but there will be things that should be looked to and not 

47

to buy into the reports that are issued about how great these other 

models are. 

Ask the employees who are living under them, and that is what 

I did before I submitted my testimony. And I do it every time I 

visit with them, and the feedback is consistent that these are not 

systems that should be in place for them today, much less be held 

up as a model anywhere else. 

Mr. KINGHORN. I think it would be unfortunate for the other million employees not covered by some of these new systems either to 

become at a competitive disadvantage in terms of the flexibilities 

of the systems but also just the confusion that could arise. So I certainly would support much like what the Administration has proposed. And if you look at the DOD and Homeland Security, 85 percent of it is probably very similar. There are some key differences, 

certainly, in the appeals process and collective bargaining, which I 

think are appropriate for discussion. But I think it would be unfortunate to have the rest of the million doing it piecemeal, either 

agency by agency, bureau by bureau. So I think that would be important to proceed. 

I think it does need a set of core values to work with what are 

many of the key elements under Title 5, everything from diversity 

in the workforce to inherently governmental work defined. And I 

think there does need to be a criteria in which OPM needs to look 

at these flexible authorities before implemented. But I really look 

toward the future of the civil service, and this civil service system 

does not attract and I don’t think will hold the kind of workforce 

that we are going to require in the next 20 years. Again, they need 

more agility. They need a different look at what career means. For 

them, career is going to be coming and going. It is going to be rare, 

I think, we can keep someone for 20 years in any organization, 

public or private. And if they see a system that prevents them from 

easy entry and easy exit and coming back perhaps, I think it will 

be difficult to attract the new government. 

People don’t like to change. I am no different than anyone else, 

and you have 2 million Federal employees, all of whom are dedicated. But I think we need to also look toward the new employees 

that we are going to be bringing in over the next two decades. 

Senator VOINOVICH. That is interesting. As I observe the workforce around the country, there are less and less places that you 

can go and have some sense of having a career. I think that is a 

real advantage in the Federal workforce. Individuals can come and 

work until retirement. I think people are looking for an opportunity 

where they can make a contribution, but at the same time have 

some security because there is such uncertainty today in the private sector. 

Mr. KINGHORN. I think it is mixed. I think as Mr. Gage has indicated—and I think we talked about it before—what might make 

sense for the IRS in its existing service centers, for example, or for 

law enforcement it may be different. But a lot of what I think government is going to be doing—and, again, this diverse workforce we 

are working with. What I have seen in terms of people I hired and 

I see people going in from the private sector finally, I don’t see 

them interested particularly in many cases in a 20- or 25-year career anywhere. 

48

Some agencies have had to deal with that. If you go to PTO or 

go to SEC, many people go into those organizations at a very young 

age out of school to get experience of how to understand the SEC 

and they leave. I think that concept is increasing. 

I agree with you. I enjoyed a 25-year career. But, I don’t think 

I am completely reflective of the new workforce that is coming in. 

But, clearly, there will be people that like the security, like the excitement, and do want to stay 30 years. But I am not sure the current system also rewards them in the appropriate ways, either. 

Senator VOINOVICH. It is interesting that Mr. Walker always 

talks about how well reform has worked. He is very careful to explain how elements are in place before reforms are implemented. 

The real question is are we going to commit the resources so that 

agencies can dot the I’s and cross the T’s so that new systems are 

successful? That is my real concern about all of this that we are 

undertaking. 

Also, I have to say this to you, Senator Akaka. I think that a lot 

of our colleagues don’t get it. I don’t think they do. I don’t think 

a lot of our colleagues understand how important people are in the 

Federal Government and how important they are to the system. 

We are going to do oversight of FEMA, but I am going to be really 

interested to see what happens at the Department of Homeland Security. In creating the Department, people from one organizational 

culture were merged with people from another. I would not be surprised if people in FEMA left because they didn’t like the merger. 

We had hearings and witnesses testified that employees were leaving because of changes in the culture of the new organization. 

So all of these things, I think, have to be examinted. We ought 

to consider what do agencies have to do to compete to get the people that they need. Then Congress must act. Implementing reform 

so it cascades, rather than doing massively across the board may 

be more effective. Your point is it should be available to all the 

agencies. The fact of the matter is that if you don’t commit the resources, then it is not going to work. 

Mr. KINGHORN. I would concur with that. I think everyone today 

I heard said that. Even in a small organization, in consulting, 

every partner is directly involved. And when we went through the 

evaluation process, we basically shut the place down for 5 days 

with the people involved and went through the evaluations. It is 

an enormous undertaking, and we knew what to expect. We were 

trained at what to expect. We were trained in a system that was 

different. And I think everyone’s concerns about that issue, I think 

you need to monitor that and keep oversight on it. 

Senator VOINOVICH. I just went through mine with my chief of 

staff. I am still not finished with it. I think the whole process is 

going to take 4 to 5 hours. I just think it is easier said than done. 

In some areas—maybe, Mr. Gage, you point out that because of the 

nature of some jobs, a different personnel system is needed. But we 

are moving, and the idea is moving, and we must do it right. 

Senator Akaka. 

Senator AKAKA. Mr. Chairman, I just want to tell you that I am 

concerned, as you are. There are those who feel that this is a program of the future. My concern is trying to overlay this throughout 

the whole system at one time. We should consider limiting this. 

49

Now that we have it at DHS and DOD, we should limit it to those 

two organizations and see how it works before expanding it to the 

total system, and we should correct whatever needs to be corrected 

before it is expanded. 

I would look forward to discussing that possibility. Thank you, 

Mr. Chairman. 

Senator VOINOVICH. Thank you for being here today. 

[Whereupon, at 1 p.m., the Subcommittee was adjourned.] 

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