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DECISION TIME: A NEW HUMAN RESOURCES MANAGEMENT SYSTEM AT THE DEPARTMENT OF

HOMELAND SECURITY

HEARING

BEFORE THE

SUBCOMMITTEE ON CIVIL SERVICE

AND AGENCY ORGANIZATION

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

OCTOBER 29, 2003

Serial No. 108–162

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

JOHN SULLIVAN, Oklahoma

NATHAN DEAL, Georgia

CANDICE S. MILLER, Michigan

TIM MURPHY, Pennsylvania

MICHAEL R. TURNER, Ohio

JOHN R. CARTER, Texas

WILLIAM J. JANKLOW, South Dakota

MARSHA BLACKBURN, Tennessee

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

CHRIS BELL, Texas

———

BERNARD SANDERS, Vermont

(Independent)

PETER SIRH, Staff Director

MELISSA WOJCIAK, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHILIP M. SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON CIVIL SERVICE AND AGENCY ORGANIZATION

JO ANN DAVIS, Virginia, Chairwoman

TIM MURPHY, Pennsylvania

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

ADAH H. PUTNAM, Florida

NATHAN DEAL, Georgia

MARSHA BLACKBURN, Tennessee

DANNY K. DAVIS, Illinois

MAJOR R. OWENS, New York

CHRIS VAN HOLLEN, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

RONALD MARTINSON, Staff Director

CHAD BUNGARD, Deputy Staff Director and Senior Counsel

CHRIS BARKLEY, Clerk

TANIA SHAND, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on October 29, 2003 .......................................................................... 1

Statement of:

Hannah S. Sistare, executive director, National Commission on the Public

Service; John Gage, national president, American Federation of Government Employees; Colleen M. Kelley, national president, National

Treasury Employees Union; and George Nesterczuk, president,

Nesterczuk & Associates .............................................................................. 36

James, Ronald L., Chief Human Capital Officer, Department of Homeland Security; and Steven R. Cohen, Senior Adviser, Homeland Security, Office of Personnel Management ......................................................... 10

Letters, statements, etc., submitted for the record by:

Cohen, Steven R., Senior Adviser, Homeland Security, Office of Personnel

Management, prepared statement of .......................................................... 21

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois, prepared statement of ................................................................ 6

Davis, Hon. Jo Ann, a Representative in Congress from the State of

Virginia, prepared statement of ................................................................... 3

Gage, John, national president, American Federation of Government Employees, prepared statement of .................................................................... 47

James, Ronald L., Chief Human Capital Officer, Department of Homeland Security, prepared statement of .......................................................... 13

Kelley, Colleen M., national president, National Treasury Employees

Union, prepared statement of ...................................................................... 79

Nesterczuk, George, president, Nesterczuk & Associates, prepared statement of ........................................................................................................... 101

Sistare, Hannah S., executive director, National Commission on the Public Service, prepared statement of ............................................................... 39

(1)

DECISION TIME: A NEW HUMAN RESOURCES

MANAGEMENT SYSTEM AT THE DEPARTMENT OF HOMELAND SECURITY

WEDNESDAY, OCTOBER 29, 2003

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CIVIL SERVICE AND AGENCY

ORGANIZATION,

COMMITTEEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:05 a.m., in room

2154, Rayburn House Office Building, Hon. Jo Ann Davis of Virginia (chairman of the subcommittee) presiding.

Present: Representatives Jo Ann Davis of Virginia, Murphy,

Blackburn, Mica, Danny K. Davis of Illinois, Norton, and Van

Hollen.

Staff present: Ronald Martinson, staff director; B. Chad Bungard,

deputy staff director & senior counsel; Robert White, director of

communications; Vaughn Murphy, legislative counsel; John

Landers, detailee; Christopher Barkley, legislative assistant/clerk;

Tania Shand, minority professional staff member; Earley Green,

minority chief clerk; and Jean Gosa, minority clerk.

Mrs. DAVIS OF VIRGINIA. The Subcommittee on Civil Service and

Agency Organization will come to order.

Thank you all for joining us today at this important hearing.

When Congress created the new Homeland Security Department

last year, we included in the legislation a directive to the Secretary

and the head of the Office of Personnel Management to develop a

new, modern system of personnel management that would fit the

unique needs of the new department. We hold this hearing today

at a point in time when the establishment of that system is nearing.

Last week, a Senior Review Committee, made up of officials from

DHS and OPM the employee unions and outside experts, met for

3 days in public to discuss the many options, 52 in total, that are

on the table. These proposals would affect pay, classification, employee appeals, adverse actions, and labor management relations,

every major element of a human resources system.

I applaud the design team and the Senior Review Committee for

the many months of work on this issue. We gave you an important

task and you have taken it very seriously. That was illustrated

very clearly by the sessions last week.

We are holding this hearing now, while the decisionmaking

progress is ongoing, due to the significance of this process. I think

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all of us are aware that the choices made by Secretary Ridge and

Director James are likely to reverberate throughout the Federal

Government. Homeland Security is viewed as a test to see how the

principles of performance-based management work when put into

practice on a large scale, how it will work. If the new department

does indeed move away from the General Schedule and some of the

statutory Civil Service provisions of Title 5, its success or failure

in doing so will be a lesson for other departments and agencies.

So it is important that we get this right. And I hope I can make

it through this hearing and keep my voice going, so you will have

to bear with me. I say ‘‘we’’ because, after all, Congress gave the

department this authority to waive several provisions of Title 5,

and we specifically required the department to develop a new personnel system. We have a lot invested in this process, too. We want

this to be a success. We want the department to have the flexibility

it needs to meet its critical mission, and we want it to do so while

creating a workplace environment where good workers are rewarded and poor performers are rehabilitated or removed.

One of the interesting items to emerge from last week’s public review sessions, I believe, was the wide agreement that poor performers have no business working for the Federal Government. I think

this issue really gets at the essence of creating a real, credible, performance-based management system and an effective pay-for-performance plan.

Such a system begins with an effective way to measure performance. Managers must be accustomed to giving real performance

ratings, not simple pass/fail marks, to their employees, and these

ratings must have a direct relation to duties and responsibilities of

each employee. This takes training, to be sure, but it also requires

a willingness to make hard choices, and it demands that managers

are held accountable for their decisions.

Once you have a credible tool for measuring performance, and

managers who understand the system and want to implement it,

it is fairly logical to have a system that rewards the best performers and does not coddle the worst. I hope and expect that this is

the direction the Department of Homeland Security is heading. I

look forward to our discussion today, and I thank you all for being

here.

[The prepared statement of Hon. Jo Ann Davis follows:]

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Mrs. DAVIS OF VIRGINIA. I would now like to recognize the ranking minority member of this subcommittee, Mr. Danny Davis, for

an opening statement.

Mr. DAVIS OF ILLINOIS. Madam Chairwoman, I think your voice

is going to be fine, and I want to thank you for calling this hearing.

The process that agency officials at the Department of Homeland

Security and the Office of Personnel Management designed to help

develop the new personnel rules at DHS has been hailed as being

very collaborative and inclusive.

A local columnist in last Sunday’s paper described a recent personnel development working session as, ‘‘Bush administration appointees and Federal union leaders gathered around a table and

tried to step outside their adversarial relationship. For 3 days, officials from the Department of Homeland Security and Federal

unions took stock of one another as they discussed how best to

overhaul pay and work force rules affecting 180,000 Civil Service

employees.’’

I am pleased that DHS’ human resources development process

has been collaborative and inclusive, as called for in the Homeland

Security Act. However, the act also expresses the ‘‘Sense of Congress’’ that the ‘‘human resources management system envisioned

for the Department should be one that benefits from the input of

its employees.’’

It is not enough only to solicit the ideas of DHS employees and

union officials. Their ideas and proposals must be considered and

reflected in the proposed personnel system.

It is my understanding that the 52 personnel system options that

have now been forwarded to the Secretary of DHS and the Director

of OPM for consideration range from keeping the current General

Schedule pay system to implementing a new performance-based

pay system. In the area of collective bargaining, some options increase management rights by limiting the issues that can be bargained over, and other options increase union rights by expanding

the scope of bargaining.

The Secretary of DHS and the Director of OPM have a difficult

but congressionally stated responsibility to design a system that reflects the ideas and concerns of the employees who are the bread

and butter of this agency. I hope that the much touted collaborative design process results in a human resources system that reflects the views of all those involved in the design process itself.

Collaboration requires a tremendous amount of give and take. It

also requires a great deal and a high level of sensitivity. I trust

that process can in fact be implemented, and it can be done successfully.

I look forward to hearing from the witnesses and learning where

they believe there is room for consensus and compromise in design

of a new personnel system at DHS.

And again, Madam Chairwoman, I thank you for holding this

hearing and look forward to the discussion which will ensue.

[The prepared statement of Hon. Danny K. Davis follows:]

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Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Davis.

Mr. Murphy.

Mr. MURPHY. Thank you, Madam Chairwoman. I just want to

add my hopes too that throughout these hearings we will hear certainly some great ideas for moving the Department of Homeland

Security forward as a model for helping Government run more efficiently and to do what you had said, to make sure that good workers get rewarded and those who are not working, we find other

ways of either helping to improve their performance or helping

them move on.

But above all, I want to make sure that all the parties involved,

we hear from them, whether they are representing the workers or

representing administration on this. I want to hear how people are

working together to resolve any issues or, in the future, how they

will do so. Those are some of the things that I hope, as we hear

testimony, I will hear some elaboration on.

Thank you, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Mr. Mica.

Mr. MICA. Thank you, Chairman Davis. Good to be with you this

morning. I think this is an appropriate and long overdue hearing,

but timely in that we need to make decisions on new human resource management system at Homeland Security.

Homeland Security is a unique consolidation of many agencies,

and I know that there has been an air of uncertainty among the

work force because of the nature of the consolidation and some of

the reorganization of activities within one of our largest agencies

of the Federal Government.

I wanted to speak for just a second, and, again, I think this is

very important. I think that we have to respect the service and the

loyalty of many of those who serve the country in Civil Service positions, but also keep in mind that no one is entitled to a position

forever in the Federal Government, and times do change and responsibilities change and organizations change.

Having chaired the Civil Service Subcommittee, I watched in awe

some of the transition of the Department of Defense and the

downsizing that it faced in the post-cold war period, and they did

it, for the most part, without a whimper. Maybe that is the nature

of the Department of Defense. And many of the positions, too, were

represented by organized labor. But I think folks have to realize

that the purpose of Civil Service was to make certain that there

was not political interference, that there wasn’t the hiring of folks

on nepotism basis, and that people weren’t dislodged from their positions solely on the basis of political convenience, transition, and

patronage.

So we have to keep in mind that the private sector does make

these transitions, that the Defense Department and others have

made these transitions, and that there will be consolidations and

new experience. We live in a different era.

All that said, we need to do our best again to properly retrain,

to reassign, and to place those who have been loyal in their service

to the Federal Government; I respect that. My folks were both

lowly paid State civil servants at one time, so I have a great respect for that.

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The final point that I wanted to make is on one of the largest

components of Homeland Security, and that is the Transportation

Security Administration. It was created with a core of some existing Department of Transportation, and other security-related

transportation employees. It expanded and grew to 55,000 plus, I

am told. And one of the things in helping to create and establish

that agency, we wanted to make certain that we did, because of the

nature of their responsibility, also the importance of accountability

in a security system of that sort, was not to have that agency as

part of Title 5. And I think that is important that we continue to

respect that decision. Most of the folks who are employed are

screeners.

We converted the airline screening responsibility to Federal responsibility, but I may remind the subcommittee and Members of

Congress and others that we do have a transition provision which

we put in the legislation to allow for private screening, all with

Federal supervision and Federal responsibility and oversight audit,

and that will continue. We now have five demonstration projects

that are working very successfully, but I think that airports will

soon be demanding to opt out, and they have that right, 1 year

from this month. I have asked TSA to ensure a smooth transition,

and I think that it is important that the uniqueness of the creation

and the responsibility of this new agency, and particularly the

screening responsibilities, be recognized with both the past intent

and the current operations and the future conduct of this important responsibility, and it will transition. This is not unlike the European transition of that screening responsibility, but it does involve a large portion of the number of people who are now under

the purview of Homeland Security.

So a lengthy opening statement, but willing to work, as chairman

of the Aviation Subcommittee and with the Civil Service Subcommittee, I am proud to be a member of the committee. I, again,

appreciate your fulfilling your responsibilities and taking up this

issue, and look forward to hearing the witnesses.

And thank you again, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Mica, and we certainly

appreciate your experience and expertise on the Civil Service Committee and all that you have done with Homeland Security and the

TSA.

Ms. Holmes Norton, do you have an opening statement?

Ms. NORTON. I don’t have a formal opening statement, Madam

Chairwoman. I appreciate this hearing and thank you for this

hearing. I just want to say as we begin this process with the Department of Homeland Security, and I am a member of the Select

Committee on Homeland Security, that we don’t go through another very polarizing process of the kind we have just finished on

the Department of Defense. That was not a model of how to go

about dealing with the interests of efficiency and the justifiable interest of the people who work in the Department. You can’t organize a department around the people who work there, and it is

time the Government, if it is going to reorganize these functions,

took their cue from the way in which the Fortune 500 does it. I

served on the board of three Fortune 500 companies, and I watched

how companies had to be elastic and flexible and change, particuVerDate 11-MAY-2000 10:50 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 D:\DOCS\94775.TXT HGOVREF1 PsN: HGOVREF1
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larly as the economy changes. I have never seen anything like the

DOD process. Any company that went through that would be

throwing its best people out the window and telling them to go

search for other jobs, because people are not going to stand for

changes that don’t take them into account; and I hope that is the

kind of process we are about to embark upon here, or I think we

are going to have the same kind of polarized response that we had

with respect to the Department of Defense.

And I thank you very much, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Thank you, Ms. Norton.

I ask unanimous consent that all Members have 5 legislative

days to submit their written statements and questions for the hearing record, and that any answers to written questions provided by

the witnesses also be included in the record. Without objection, so

ordered.

I ask unanimous consent that all exhibits, documents, and other

materials referred to by Members and the witnesses may be included in the hearing record, and that all Members be permitted

to revise and extend their remarks. Without objection, it is so ordered.

On the first panel we are going to hear from the two key agencies making the final decision about the new personnel system.

First today will be Ronald L. James, the Chief Human Capital Officer at the Department of Homeland Security. He will surely have

a lot to say on this topic. Next will be Mr. Steven R. Cohen, Senior

Advisor for Homeland Security Issues at the Office of Personnel

Management. Joining him behind the table will be Ronald P. Sanders, Associate Director for Strategic Human Resources Policy at

OPM.

We have also asked the Merit Systems Protection Board to submit a written testimony for the record, which they are happy to do.

The MSPB has also played a significant role in the development of

the new personnel system at DHS.

It is standard practice for this committee to administer the oath

to all witnesses, so I am going to ask, if everyone is here from the

second panel as well as the first panel, we will just swear everybody in at one time. If you will please stand, I will administer the

oath.

[Witnesses sworn.]

Mrs. DAVIS OF VIRGINIA. Let the record reflect that the witnesses

have answered in the affirmative, and please be seated.

Mr. James, we will begin with you. We have your full written

statement in the record, and if you would just like to give a summary or say whatever you would like to say, you have 5 minutes.

STATEMENTS OF RONALD L. JAMES, CHIEF HUMAN CAPITAL

OFFICER, DEPARTMENT OF HOMELAND SECURITY; AND STEVEN R. COHEN, SENIOR ADVISER, HOMELAND SECURITY, OFFICE OF PERSONNEL MANAGEMENT

Mr. JAMES. Good morning, Chairwoman Davis and distinguished

members of the subcommittee. I am Ron James, Chief Human Capital Officer at DHS. Thank you for the opportunity to appear before

you today.

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DHS was created with the overriding mission of protecting the

Nation against future terrorist attacks. Component agencies analyze threats and intelligence, guard our borders and airports, protect our critical infrastructure, and coordinate the response of our

Nation for future emergencies. DHS is also committed to and being

sensitive to protecting the rights of American citizens and enhancing public services such as natural disaster assistance by dedicating specific teams to these important missions.

In creating the Department, Congress provided a historic opportunity to design a 21st century human resource management system that is fair, effective, and flexible. We, and I, take this very

personally, have a responsibility to create an innovative system,

while at the same time preserving basic Civil Service principles for

our DHS loyal, effective, and hard-working employees.

Our Department has an incredibly important mission. Whatever

system we develop must be mission-centered first and foremost.

Day in and day out, our mission is preventing terrorist attacks

within the United States, reducing the vulnerability of the United

States to terrorism, and minimizing the damage and assisting in

the recovery from terrorist attacks that do occur within the United

States. The design must facilitate our ability to perform this mission. In order for us to achieve this mission, the system created

must be performance-focused, contemporary, and excellent. The

system must generate respect and trust and be based on merit

principles and fairness.

We have a responsibility to put into place a human resources

management system that meets employees needs, while at the

same time creates a high performing organization, one which will

effectively help us fight the war on terrorism. The American public

is depending on us to create such a system.

The bottom line: the world has changed, jobs have changed, missions have changed, and our human resources system needs to

change as well to support this new environment. The current system, while it has many positive features, is insufficient to meet our

needs and the different circumstances that we have faced since

September 11.

In order to successfully lead implementation of the national

strategy for Homeland Security, the Department must excel at the

management of its most precious resource: its people.

We are and have been following a process, and are committed to

following a process that ensures maximum collaboration with our

employees and their representatives, stakeholders, and subject

matter experts. We created a Design Team of DHS front-line employees and managers, union representatives, and HR professionals

from OPM and DHS. This team began its research and design work

in early April and presented to a Senior Review Committee a wide

range of options for pay, performance management, classifications,

labor relations, adverse actions and appeals at the end of September. Their commitment and hard work have been absolutely exceptional, and we owe all of them a big and a gigantic thank you.

The SRC met last week for 3 days to deliberate the options developed by the HR Design Team, and, as others have mentioned, the

team and the committee is very diverse. The committee had a very

candid and thorough and thoughtful discussion about the options

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and key issues related to them. Committee members openly shared

their individual perspectives, and although there was and will continue to be disagreement at times, the dialog created new possibilities for a fair, credible HR system through listening and mutual

understanding.

One thing was clear: each and every SRC member agreed upon

the need for the HR system to support the vital mission of the Department of Homeland Security and its employees. All SRC members agree they wanted to develop a system that is fair, credible,

and transparent, and one that creates an environment for openness, inclusiveness, and accountability.

Based on the discussions from the meeting, the SRC will produce

a summary report over the next 2 weeks. The report will be available to members of this committee as well as the general public.

The report will be forwarded to Secretary Ridge and OPM Director

James, no relation. The Secretary and Director will issue proposed

new personnel rules for the Department early next year. The proposed regulations will be available for public comment for a 30-day

period, and the issuance of the regulations will also trigger the congressionally mandated collaboration period with our employees’

representatives, which includes notice of the proposals. And I

might add that even though that is just being triggered now, the

ongoing dialog has been continuing with our employee representatives and employees since April of this year.

We know change is difficult, but change is inherent in the creation of the Department of Homeland Security. It is incumbent on

us to realize that changes which may result from this process will

need time to design in detail. We will need to train our employees

and managers, as we will need to assess the effectiveness of these

changes and continue to make improvements. We are up to the

challenge.

Thank you, and I welcome any questions you may have.

[The prepared statement of Mr. James follows:]

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Mrs. DAVIS OF VIRGINIA. Thank you, Mr. James.

Mr. Cohen, we have your complete statement, but you are recognized for 5 minutes to either summarize or whatever. Thank you.

Mr. COHEN. Thank you, Madam Chairwoman. Good morning,

members of the committee. I am Steve Cohen, and I serve as Senior Advisor for Homeland Security at the Office of Personnel Management, and I thank you for the opportunity to testify on the design of a modern, merit-based human resources management system for the Department of Homeland Security. As you have indicated, Madam Chairwoman, I have with me Dr. Ronald Sanders,

who serves as Associate Director for our Division of Strategic

Human Resources Policy at OPM.

For well over a century, our Civil Service system has served this

country and its citizens well. Most importantly, it has served as a

source of strength and continuity during periods of crisis in our history, and as a model for the rest of the world.

Today, as never before, our basic Civil Service system is facing

a major challenge to its very existence. A system that has served

us so well in the past has grown out of date and unresponsive to

the needs of today and the likely needs of the future.

The Homeland Security Act of 2002, which was signed by President Bush just last November, presented to the Secretary of the

Department of Homeland Security, Tom Ridge, and to the Director

of the Office of Personnel Management, Kay Coles James, an unprecedented opportunity to address that challenge and, by so doing,

to demonstrate to the world that what was created 120 years ago

can be updated once again to reflect the needs of a new era while

still holding true to those ideals that we all value so very deeply:

merit, veterans preference, due process, and protections against

prohibited personnel practices, discrimination, and reprisal for

whistle blowing.

Secretary Ridge and Director James addressed this challenge to

our Civil Service system by creating a Department of Homeland

Security human resources management design process that has

been, at their direction, inclusive, collaborative, thorough, and

timely. It has won the praise of the General Accounting Office in

a recent study entitled ‘‘DHS Personnel Design Effort Provides for

Collaboration and Employee Participation.’’ It has won the praise

of top managers of the Department of Homeland Security and the

presidents of the three major employee unions within the Department: the American Federation of Government Employees, the National Treasury Employees Union, and the National Association of

Agriculture Employees.

The design process has demonstrated that an atmosphere of mutual respect and trust can be created within which labor and management can work effectively together, even when that atmosphere

was originally one of distrust and animosity, and even when disagreements continue to exist. It also will shortly demonstrate that

human resource systems can be developed to meet the unique

needs of any organization and its employees, and at the same time

serve well the American people and our obligation to preserve the

world’s greatest Civil Service system and the core values I mentioned previously.

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At the heart of the DHS human resources design process was an

outstanding design team, as was indicated by Mr. James, a team

made up of managers and employees from DHS, technical experts

from OPM and DHS, and professional staff representatives from

the Department’s three major employee unions, those that I mentioned previously. The nature of this highly collaborative design effort has been recognized as being the first of its kind and as a

model for others to follow in the future.

To meet the charge of Director James, the team cast a wide net

in its research efforts, examining HR policies and practices in private sector companies, non-profit organizations, State and local

governments, and other Federal agencies. The team met with highly regarded human resources experts, academics, and practitioners,

and with over 2,000 front-line DHS employees, managers, and supervisors at town hall meetings and focus group interviews.

Relying on that broad approach as its foundation, the team created the 52 human resources options in the areas of pay, classification, performance management, labor management relations, adverse actions, and appeals that were the subject of 3 days of intense discussion just last week by a highly select Senior Review

Committee. I was honored to serve as co-chair of that committee,

along with Janet Hale, Under Secretary of Management for DHS.

The report of that committee’s deliberations is scheduled to be

submitted to Secretary Ridge and to Director James within the

next 2 weeks. That report will serve as the foundation for the subsequent decisions of the Secretary and the Director that will ultimately result in a human resources management system for the

Department that is both responsive to the uniquely critical mission

of the Department and to the need to protect the basic Civil Service

rights of its employees, and that will also serve as a model for the

rest of the Government.

Thank you again for the opportunity to testify. I will be happy

to answer any questions the committee may have.

[The prepared statement of Mr. Cohen follows:]

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Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Cohen. I would like to

thank you and Mr. James both for agreeing to testify here before

us today.

I would like to now yield to our Civil Service Subcommittee ranking member, Mr. Danny Davis. You have the floor.

Mr. DAVIS OF ILLINOIS. Thank you very much, Madam Chairwoman.

Mr. Cohen, you just testified that Secretary Ridge and Director

James will have 52 options in terms of development of a system.

Would both of you comment on how you think they will go through

the process of ferreting out and making use of those options to arrive at a conclusion?

Mr. COHEN. I would be happy to, sir. I think, first of all, it is important to note that the 52 options were presented or were developed as a way of, one, categorizing all of the different possibilities,

or at least most of the different possibilities that could be considered in a broad range. When we are looking at performance management, labor relations, appeals, and the others, they covered as

broad a range as they could of possible actions to take. Those options were considered very carefully, as indicated previously, by the

Senior Review Committee, and the report of that Senior Review

Committee, that which will go to the Secretary and the Director,

will basically summarize the discussion, the sense of where the

committee members were coming as they deliberated not option by

option, but the parts of the various programs that we are considering. So the report will not, as I say, go from option 1 to option 52,

but, rather, it will cover all of the significant parts of those various

programs and will present to the Director the various views of the

committee members.

As the Secretary and the Director then review the materials before them, they will have the options themselves, and they will also

have the summary of those deliberations, that is, all of that material that we hope will be helpful to them as they go about their

thought processes.

Mr. DAVIS OF ILLINOIS. So they will be summarized and grouped

together.

Mr. COHEN. That is correct.

Mr. DAVIS OF ILLINOIS. Mr. James.

Mr. JAMES. I would just echo Steve’s comments and maybe just

give an example. For example, among the first five options, one essential element is that they basically say the status quo, release

simply variations of the status quo. And I would echo Steve’s comments, that is, if there is some desire to mix and match, that could

be one element, that some portion of what is current could come

out of those first five options. So I think the Secretary will get a

document that will point to him like options and will basically say

these are the status quo, these options have this element of fairness with regard to due process that was a concern of the committee, and this seemed to be the sense of this group of individuals

or this seemed to be the sense of this one individual.

As to the second part of your question, the Secretary does plan

to consult with the senior staff, obviously. He also plans to meet

once again, probably at the end of the first week of November or

the beginning of the second week of November, with at least, at a

25

minimum, the presidents of the three largest unions who represent

our employees. So there will be ongoing dialog and ongoing collaboration and ongoing requests for input and ongoing requests for

feedback from a number of sources.

Mr. DAVIS OF ILLINOIS. It is my understanding that a Booze,

Allen, Hamilton report prepared for the administration noted that

Homeland Security employees who participated in focus groups

during the summer voiced reservations about pay banding and

other performance-based alternatives. Do any of the pay-related

personnel options reflect the concerns that were raised by employee

groups in the focus activity?

Mr. JAMES. Mr. Davis, not only was that expressed at the town

meetings and in the focus group, it was also expressed at the Senior Review Committee. And while I don’t want to pretend to summarize any consensus that came out of the committee, there were

individuals who spoke eloquently to the issue of if you want to do

pay banding, you really need to build credibility and fairness and

accountability in the performance system, and it was said time and

time again that a critical condition precedent to any pay banding

would be training of managers, getting an understanding and getting a buy-in. And it is my belief, again, I have not seen the report

and I am not sure it will be written, that those kind of elements

that were articulated at the Senior Review Committee will in fact

go forward and the Secretary will have those kind of words, those

kind of concerns in front of him.

Mr. COHEN. If I may add to that, sir. I agree totally. In addition

to that, as was indicated earlier, the options do obviously contain

a broad range of possibilities, and the status quo is always one of

them, and that is in fact reflected in one of the options. When we

talk about the General Schedule, for example, that is there as it

presently exists, and it is there also with modification. So my point

simply is that we do believe that the design options that were put

together reflect this broad range, that which would indeed reflect

the concerns of the employees and others who feel they like the

predictability of the system that presently exists, along with others

who believe that this is really the time for change.

Mr. DAVIS OF ILLINOIS. Thank you, gentlemen, very much.

And thank you, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Davis.

Mr. Murphy.

Mr. MURPHY. Thank you, Madam Chairwoman.

And thank you, panelists. I appreciate your being here. And

clearly as I read through many of these options, there is a lot of

work that has gone behind them, and I am sure a lot yet to be understood, because they appear so complex. But let me ask, in this

process I think both of you alluded to the inclusiveness issue here,

working with groups along the way. Can you elaborate on the extent that employee groups have been involved in working on these

plans, because obviously having the early buy-in and working together is going to be instrumental in maintaining that along the

way?

Mr. COHEN. I would be happy to, sir. Our basic design team consisted of employees and managers from the Department of Homeland Security. It also consisted of a field review team that had a

26

large number of individuals, field employees and managers, from

the Department of Homeland Security who reacted to where we

were heading. As we indicated earlier, we met with over 2,000 of

the DHS employees and managers in our various visits across the

country to major locations of DHS employment. These visits included town hall meetings as well as the focus group meetings that

we alluded to earlier. And their thoughts, of course, were very

much considered.

Also a major portion of this design effort and what made it, I

think, so unique is that part of the basic team itself included professional staff from the three major unions that we referred to earlier. So they worked with us, the union representatives I am referring to, worked with us from day one up through to today, and, of

course, members of the Senior Review Committee included the

presidents of those unions. So we really do believe that as part of

this process we did the best that we could to assure that employee

views and the views of their representatives were well represented.

Mr. MURPHY. As you continue on with this and looking at these

many options, you are not going to be using all of them, obviously,

but could you describe the next steps in terms of selecting the options that will be put into place? Will there be a mixture of these

depending upon people’s job classifications? Sometimes it appears

least confusing if there are multiple levels. Could you clarify what

you are going to do and how you are going to do that?

Mr. COHEN. Yes. The next step will be for a report to go to Secretary Ridge and Director James that will include the summary of

the discussions of the Senior Review Committee along with the options themselves. As Mr. James indicated earlier, the Secretary

and the Director will then not only obviously carefully review with

their staff all of those materials, but they will be consulting with

MSPB, they will be meeting with the union presidents we mentioned earlier.

Mr. MURPHY. Are you going to present all the options to them

or recommend certain ones proceed forward?

Mr. COHEN. I’m sorry?

Mr. MURPHY. Are you going to be presenting all the options to

them or recommend that certain ones be put forward?

Mr. COHEN. To the Secretary and to the Director?

Mr. MURPHY. Yes.

Mr. COHEN. They will be getting all of the options, basically,

which is a result of the product of the design team, along with the

results of the discussion on those options that was held by the Senior Review Committee members.

Mr. MURPHY. I am just wondering at this point if there were

some recommendations for certain ones to be implemented; that

there was some agreement among all the parties who have been

discussing this to say these are the ones that you think are the

most workable, fair, clear, transparent, etc.

Mr. COHEN. The discussion didn’t go that way in terms of the

Senior Review Committee process, and that was rather deliberate.

We did not start with option 1 and go through to option 52. Frankly, we thought it would be much more productive, rather than

doing it in that manner, to talk about the major elements of the

programs that we were talking about, and when it was appropriate

27

or when it seemed to fit properly, many of the individual members

would refer back to option 32 or 33 or option 4 or what have you.

But we didn’t either discussion, nor will we present the report option by option.

What I think is important to keep in mind is that these options

really are intended to be conceptual in nature; I mean, we could

have added more. When you look at a pay banding system, for example, there are a variety of different approaches that could be

used, and we certainly didn’t make an attempt to identify each and

every one and present them that way. So they are intended to be

conceptual, and what we fully expect is that when the Director and

the Secretary sit down and ultimately design what they believe

would make most sense for the Department, they will be looking

at broad program elements as opposed to specific options per se.

Mr. MURPHY. All right, thank you.

Thank you, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Murphy.

Ms. Holmes Norton.

Ms. NORTON. Thank you very much, Madam Chairwoman.

Do you see what you are doing as a model for other agencies? We

have been trying to figure out how the administration is going

about this management reform involving human resources. We

didn’t know whether DOD was the template. We noted some differences. It seemed to be even more severe than the statute setting

up the Department of Homeland Security.

I suppose I should be asking Mr. Cohen. Are you doing this on

an agency-by-agency basis? What are you doing?

Mr. COHEN. There are many who have asked the same question.

What we are doing, of course, is in response to really the unprecedented authority that the Congress gave to the Secretary and to

the Director to develop a new personnel system for the Department

in the six areas that we talked about earlier. Without that congressional authority, we wouldn’t be able to propose the design of the

system as we are doing it.

Ms. NORTON. Well, wait a minute. I don’t recall that it was specific authority for the DOD at the time they proceeded.

Mr. COHEN. No, this was contained within the Homeland Security Act.

Ms. NORTON. I understand that. But you said without this authority you implied there is nothing you would be doing or could

do.

Mr. COHEN. We couldn’t be basically reshaping all of those chapters within Title 5 as we presently have the authority to do.

Ms. NORTON. Are you reshaping those because you regard these

functions that have been placed in the new Department to be essentially different from the functions when they were spread out

among the other departments? And if so, how is that?

Mr. COHEN. Not that the functions are different, but I think

there are two issues here. One is the critical mission of the Department of Homeland Security, which in many respects makes the

outmoded Civil Service system all the more outmoded. The other

is, as I was alluding to earlier in my statement, the basic concern

that we have for our entire Civil Service system, and that, indeed,

it needs to be updated and made more responsive to the needs of

28

today and the needs of the future. We are looking at this opportunity to shape a personnel system for Homeland Security that is

indeed mission-oriented and is reflective of the unique needs of the

Department, but at the same time one that can be used as a model

for the rest of the Government.

Ms. NORTON. Well, of course, that is why we are going to look

at it very closely.

Mr. COHEN. Yes, ma’am.

Ms. NORTON. This, in a real sense, is not like the rest of the Government. That is why you were given the statutory authority to do

something very different, because the agency is very different. The

whole notion of defending the homeland with an agency within the

merit system is very different, I suppose, from what DHS does or

what the Department of Labor does and the rest.

I found your testimony very thin, and I think the reason is that

we have called you as we had to, because we are about to adjourn,

I hope. We called you at a point before this report was issued. Do

I recall in this testimony you said there would be a report in 2

weeks?

Mr. COHEN. Within 2 weeks, yes, ma’am.

Ms. NORTON. So this is a kind of, we are going to try to do everything right testimony, and I suppose without the report or your

willingness to talk about the report at this time, it is difficult to

get to what is really happening with respect to this process. Therefore, I must ask you what you regard as the major differences between you and employees that have arisen thus far in the process,

since we get no sense of anything but a broad process from your

testimony?

Mr. James.

Mr. JAMES. Can I have the question repeated?

Ms. NORTON. I would like to know what are the major issues between the Department and its employees at this time.

Mr. JAMES. The major issue is one of trust and lack of confidence

in the current performance appraisal system.

Ms. NORTON. Mr. James, you misunderstand me. By issue I

mean substantive issues.

Mr. JAMES. Well, I will try to repeat what I heard and the concerns I heard raised, and the concerns I heard raised were about

trust.

Ms. NORTON. Trust is not a substantive issue.

Mr. JAMES. Well, I don’t know how to answer the question.

Ms. NORTON. It is a relationship issue. You know, this is a congressional committee. I am trying to find out what are the major

issues. Let me put it this way. What are the major issues that you

have been discussing with employees? You are very proud of this

design system. All I am trying to find out is how it works. What

are you talking about?

Mr. JAMES. The major issues have been the ones that have been

outlined: pay, labor relations, the appeals process, employee scale.

Ms. NORTON. So what have been the major differences on those

issues?

Mr. JAMES. Well I will give you the kind of concerns I have heard

echoed. The question is like if you have an internal panel, will we

still have due process; will you have union participation; will there

29

be employee involvement in that process. But with all due respect,

that goes to an issue of trust, and that is a substantive issue.

Ms. NORTON. Well, they seem to be very specific issues that can

be answered yes, you will or no, you won’t, or let us work it out.

Mr. JAMES. And that has been the process, it is like let us talk

about how can we balance the agency’s mission and actually talking to people about what the mission is and talking about how do

you in fact still have due process and at the same time get to a

faster resolution. Because it is unfair to employees, it is unfair to

the agencies to have an interminable process that goes on where

employees are in limbo for 2 or 3 years. Those are concerns that

were raised by employees, those were concerns that were raised by

managers; and, in fact, on that issue, what I heard, and this is my

individual I heard, was agreement. And I come from the experience

of dealing with the Teamsters, and I am just absolutely amazed

that people are talking, because that is the first major issue, is getting the people to the table and talking about the issues and saying

we disagree about this. You know, what is the level of due process?

If you change pay, how can I be assured that I can trust my manager not to do the old boy system or the old girl system?

Ms. NORTON. Madam Chairwoman, I see my time is expired.

Mr. James, I just want to say, in closing, that the issue is not

trust. What did Ronald Reagan say? Don’t trust, just verify? I don’t

think the employees can ever know whether management, with

changes from administration to administration or from person to

person, is somebody you can trust. The question is does the system

work. So I have great problems with your framing these notions in

a way that does not allow the committee or the employees to know

whether it is working because of systems that are in place that

would enable us to know, and I tell you trust isn’t one of them. I

don’t know what that means as an approach to a system.

Mr. JAMES. If you install new systems in response to concerns

being raised by employees, one issue discussed is how do we measure that we in fact have done what we promised to do, that we are

being fair, that we are being effective; and part of that is initially

the commitment of continued talk. I come from a private sector experience, 25 years mergers and acquisitions, and the reason that

50 percent of the private sector acquisitions fail is because they fail

to involve their employees; they fail to develop their trust, they

keep them in the dark, they don’t let them know what is going on.

And I see that issue as fundamental to building any kind of platform in terms of talking about issues.

Mrs. DAVIS OF VIRGINIA. Thank you, Mr. James.

Thank you, Ms. Norton. We may have time for a second round.

Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Madam Chairwoman, and thank

you for holding this hearing at this particular juncture; I think it

is important that we get an update before the recommendations are

forwarded to the Secretary and the Director.

And I thank both of you gentlemen for being here today. And I

have read ahead to some of the testimony from some of the others

who were involved in this process, Mr. Gage of AFGE, and Ms.

Kelley of NTEU, and both of them have strongly praised the process you have gone through as being a collaborative process that did

30

bring people together, it was inclusive, and so I congratulate you

on that. But I want to get to this question of credibility and trust,

because now as I understood your answers to Mr. Murphy’s questions, these 52 options are now being forwarded without being further condensed, really, they are being forwarded to the Secretary

and the Director, is that correct?

Mr. COHEN. That is correct, along with an analysis of their evaluation by the Senior Review Committee and others.

Mr. VAN HOLLEN. But among those 52 options are obviously very

different routes that can be taken on each of these issues, like employee rights, grievance process, and all that, isn’t that correct?

Mr. COHEN. That is correct, sir.

Mr. VAN HOLLEN. Right. So the credibility that you have gained

by making this an inclusive process, and that will disappear tomorrow if what happens is those 52 recommendations are forwarded to

the Directors and all of a sudden they come out with conclusions,

it would seem as if this whole process had been wasted time because they are the conclusions that are most diametrically opposed

to the interests and rights of employees. It will all be seen as a big

sham if that is the final result. So I am a little troubled by the fact

that this collaborative process, this group is not, and I don’t know

if Mr. Murphy was suggesting this, but in listening to your answers, I thought it would be a good idea, if the people who spent

the most time looking at these issues maybe narrowed the options

a little more so that out of this process didn’t come recommendations in the final form from the Secretary and the Director that

were least beneficial to the employees, because that trust that you

said is a little bit shaky, but I think you have gained some trust

in this collaborative process, but it will be gone tomorrow if this all

looks like the books were cooked from the beginning with a predetermined answer.

I would like you to respond to that.

Mr. COHEN. I would be happy to, sir. I indicated that we didn’t

specifically eliminate options, but maybe I ought to put it a little

bit differently and better. The result of the discussion will show

what was discussed and obviously, therefore, what wasn’t discussed, and it will make it clear, or we will make sure that it

makes it clear, those options that really were not discussed by the

committee and, therefore, by definition, were not considered to be

significant enough or important enough or did not get the support

of various members of the committee where that exists; and that

will be made clear.

But beyond that, the process will not end with the report of the

committee and the options going to the Secretary and the Director.

There will be discussions with the union presidents. There will be

further consultation. There will be consultation with MSPB and

others. And there has been a commitment made by the Secretary

and others throughout the Department of Homeland Security and

certainly echoed, to the extent that we can, at OPM, that there will

be collaboration and involvement with the unions and the employees and representatives in the development and implementation of

whatever it is that ultimately is resolved or developed.

Mr. James talked about trust, and that is really important. The

other, I think, major aspect here to consider is the unique mission

31

of the Department of Homeland Security, and why that unique

mission, we believe, creates the need for different systems. It creates the need to look at, for example, in the labor relations area,

the scope of bargaining and the timing of that bargaining when

critical conditions develop; or the appellate process or whatever. It

is that unique nature in that organization that is responsible for

keeping this country safe that forces us to take a look at how these

processes work that were really developed for a totally different

age.

Mr. VAN HOLLEN. Just to very quickly followup. I appreciate

that. As I read the testimony, there is a recognition of that on all

sides, that we need to make sure that the system is consistent with

the mission. But even within those parameters, as your report

shows, there are lots of different options. I mean, let us just take

the issue of having an independent appellate board. I mean, it may

be true that you need to have an expedited procedure. I think the

critical issue, as one example, is the independence of the board that

is resolving disputes. Because if it is a body that is clearly answerable primarily to the Secretary or the Director only, and doesn’t

have independence, it is not going to have any credibility with the

employees going forward. That is just one example. There is a big

difference between negotiations and consultation when it comes to

bargaining rights.

So within your 52 options there is lots of room for maneuverability, and what I am suggesting is if you forward 52 options to the

Secretary and Director, and they end up with a proposal that is at

the end of the spectrum that is least favorable to the rights of the

employees, then I think the whole process, which currently has

credibility, will become discredited.

And I thank you, Mr. Chairman.

Mr. MURPHY [assuming Chair]. Thank you. I guess it is back to

me for some questions here.

And a lot of this comes down to, I guess, what is going to be in

the reports. Let me ask, first of all, is there going to be a draft of

this or are you going to be releasing the whole report in its final

form when you come up with this?

Mr. JAMES. One of the things that the Secretary has decided is

that in order to make sure that the report fairly and accurately reflects the views of the members, he has decided to extend the process slightly so that the report can go in draft form to every single

member of the Senior Review Committee so they can make comments, edits, criticisms, and the like. So the answer to the question

is no, there are not going to be a public draft, but the Secretary

has committed to making sure that while people may disagree with

what was said, that their views were accurately reflected. And that

is why it is going to be at least probably another week or two.

Mr. MURPHY. When you say not a public draft, does that mean

we are included in the public, members of this committee?

Mr. JAMES. No. Congress will be one of the first after the members get their views in, and then the report is considered final, absolutely.

Mr. MURPHY. It is critical that the DHS’ new human capital system is linked to the DHS strategic plan. But has DHS implemented

a strategic plan? Does the Department plan on implementing a perVerDate 11-MAY-2000 10:50 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 D:\DOCS\94775.TXT HGOVREF1 PsN: HGOVREF1
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sonal management system that supports and facilitates the strategic goals outlined in the strategic plan? Is there a strategic plan?

Mr. JAMES. There is a strategic plan in progress that is being

staffed currently, and that plan will obviously be impacted by the

elements from the various options that the Secretary and Director

James decide that will go in the regulations; and that will further

determine the balance of the strategic plan.

Mr. MURPHY. And I would think that these two have to be working together.

Mr. JAMES. Pardon for the interruption, but they are inextricably

intertwined. The answer is yes.

Mr. MURPHY. So we can expect those reports to be paralleled reports? I am just curious what the timeframe is and knowing what

the strategic plan is, along with the human capital plan, timeframe-wise.

Mr. JAMES. If I can get back to you on that, but let me sort of

walk at it this way. Hopefully, after consultation by the Secretary

and with Director James, the regs will hopefully be published early

next year. There will be a comment period that is required, so we

are probably talking about early next year before we have final

published regulations. And we are going to need what are going to

be the final regulations, the final published regulations before we

can complete our strategic plan and begin that process. So I think

my best guess is that we are talking about the spring or late winter of next year.

Mr. MURPHY. OK. One other line I want to ask about, and that

is as people from Homeland Security are working here, there inevitably will be times when this clashes with the public, as they try,

for example, at airports or aspects of interfacing directly with the

public and the public may feel inconvenienced as luggage is taken

and reviewed, etc. How will these plans work in terms of making

sure that if public does raise some complaints about employees,

that those are going to be handled in a fair way? I mean, there obviously will be some disagreements in terms of what really happened, and as someone is inconvenienced, tempers may flare and

they may say things which may not always be accurate. We want

to be fair for employees here but obviously protect security. What

are the mechanisms in place for this to make sure that those are

appropriately weighted and handled to protect the needs of our Nation as well as the employee rights here?

Mr. JAMES. There are a couple of processes, and I am not qualified to speak to one, but just as an overview, the Department has

hired an ombudsman. Part of the responsibility of that office, which

is independent of the Secretary, is to in fact investigate, interview,

inquire about complaints, for example, of passengers who feel they

have been abused or feel they have been mistreated. So there is

that separate, independent component. And there is, within TSA,

a review process by supervisors and managers that is part of their

personnel process to in fact respond to inquiries, complaints, and

to do interviews and do investigations.

Mr. MURPHY. Well, I know probably every member of this panel

has probably been stopped at airports checks, so I know they certainly are thorough and fair about those things as well.

Thank you.

33

Mr. Davis.

Mr. DAVIS OF ILLINOIS. No further questions.

Mr. MURPHY. No further questions? Then I will just keep going,

then. Thank you, Mr. Davis.

I want to go back to some of these questions about what we may

expect here in terms of this. It is hard to guess right now, because

you are coming up with this report, the 52 options, etc., but it

seems to me that a tremendous amount of work has gone through

this panel. And I know as I read through these options, without

having been to many of these meetings, they are pretty difficult to

understand in terms of what are all the specific meanings of these

phrases in here, etc., but surely something must have come out of

this in discussions with the many partners at the table of seeing

what are some of the more efficient mechanisms to use. So let me

ask about what you may see as efficient mechanisms to use in evaluating employee performance and meeting the strategic needs of

DHS.

As part of this, have you reviewed what has worked outside of

the Government sector, what has worked in private industry, what

has worked with other labor management issues in terms of implementing some of these options?

Mr. COHEN. Yes, sir, we have. That was a very important aspect.

In fact, more than half of the time spent with the design team that

started around April 1st or April 2nd was in research and data

gathering, that form, indeed, the bulk of the time of the members

design team. We did look at what other governments were doing,

State and local; we did look at what the subject matter experts told

us would make most sense, and academics, as well as the literature

search and all that we could really do to see what was going on

and what worked best; and we think that the options reflect that.

So, yes, that very much was taken into account.

Mr. MURPHY. So given that, I am just curious, then, because I

thought the idea was, when you are going to present this information to the Secretary, that there is not going to be any particular

recommendations that come through all this. I mean, I just would

think that there would be something out of all these options. You

are saying this appears like it might work for these kinds of jobs

and this mechanism might work for these job descriptions.

Mr. COHEN. Yes. What the Secretary and the Director will get,

of course, are the best thoughts of the members of the Senior Review Committee and their staff, and further consultation. So, sure,

they are going to be getting recommendations based on what the

discussions told us and what our literature search has revealed and

everything else, so certainly. But it is not going to be in terms of

a specific option, necessary, but rather in terms of a system. There

are, for example, when we talk about pay for performance or performance management based systems, we look at those that are

time-based, that are basically the systems that exist today, the

General Schedule. You know, how long you have served in a particular job is the basic determinant as to whether or not you are

going to get a next increase. We look at that. We look, rather, at

results-oriented, which is really where we believe we should be

going, with results-oriented systems, those that focus on performance, those that focus on competency, those that focus on the reVerDate 11-MAY-2000 10:50 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 D:\DOCS\94775.TXT HGOVREF1 PsN: HGOVREF1
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sults of individuals, on teams, on organizations. That is the type

of change that we are talking about; that is the type of thing that

we think will be important for the Department.

Mr. MURPHY. Thank you, Mr. Cohen.

Ms. Holmes Norton, you have further questions?

Ms. NORTON. Thank you very much, Mr. Chairman. I just have

one question about the process.

Look, I fully appreciate that when you are putting a new human

resources system in place, somebody has to do that, management

has to do that. You can’t have that system put in place by a group;

that is not the point. I ran an agency when it was very, very troubled, the Equal Employment Opportunity Commission, so I know

something about what management faces when a system is completely up in the air and you are trying to change everything; and,

in a real sense, that is what I was trying to do, reorganize from

top to bottom. So everybody is concerned about what is going to

happen with her job, and that is natural, but the buck stops with

management. The question then becomes how management deals

with that buck.

Now, as far as I am concerned, you are already way ahead of the

game. I remember sitting here when the DOD reorganization was

before us, and there were bitter complaints from employees that

the consultation was a sham, that they hadn’t been consulted on

many things, and I thought the whole process was a total disaster;

and you are having just the opposite being said by your own

unions, and that I want to say puts you way ahead of the game,

as far as I am concerned.

I also think you are in a quandary. It is true that there is this

long list of options and everybody would like to see those options

winnowed down, but at the same time management has to understand what all those options are. I note a 30-day period, I think

it is in your testimony, after management has chosen its version

of the options, and I would like to ask you about that period. I don’t

expect that during that period everything is open for discussion

and we can start all over again, but I am wondering how you see

that period being used by all who want to comment, but especially

employees, who are most directly affected.

Mr. COHEN. As you indicate, there is a 30-day public period comment that follows the issuance of the proposed regulations, and

then there is yet another 30 days. There is a basic 60-day, minimum 60-day period reconciliation, consultation, and the like that

was written into the law itself. But that is minimum. And I am certain that if there is the need for further discussion felt by the Secretary and by the Director, further discussion with the union leadership and whomever else that they feel it might be necessary to

consult with, I am certain that 60-day period will be extended to

the extent that it is necessary.

No one is going to, I am sure, and I can’t speak for them, but

I certainly feel comfortable in saying no one is going to rush to

judgment. As you indicated earlier, and has been indicated, this is

a very, very critical issue that we are dealing with here; it involves

the lives of all of the employees of the Department, it involves our

security, it involves other aspects of the Federal Government. So

these issues are not going to be taken lightly, I am certain.

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Ms. NORTON. When I came to the EOC, I found out that the

APA, the Administrative Procedure Act, didn’t have to be followed.

I, indeed, insisted upon following it in the way you, of course,

under the statute are doing, which is to say to put everything out

for comment and to receive comment. And I can’t say enough about

how important comments were in keeping us from making mistakes. You live only in your own brain and your own head. The notion that comments are necessary is a fool’s errand.

Mr. Cohen, I must say I was pleased by your answer regarding

the period of time and that there is no rush here. It is a whole

great big agency you are dealing with. No one has done it before.

If the public is commenting, of course, what they will do is they

will write comments and you look very closely at those comments.

Mr. COHEN. Yes, ma’am.

Ms. NORTON. Is it possible that employees could have face-to-face

meetings, understanding that the parameters are limited and that

people are not negotiating? But assuming that comments in fact

help to improve a system, do you envision that the comment period

could involve face-to-face discussions and meetings with employees

about the final option or the proposed option that is on the table?

Mr. COHEN. I don’t want to preclude anything in terms of the

Secretary and the Director; that will ultimately be their decision.

They certainly are committed to meeting with and will indeed be

meeting with the employee representatives, without any question.

Whether they will subsequently feel that another round of town

hall meetings or something might be desirable, I really can’t speculate; I honestly don’t know.

Ms. NORTON. I appreciate your response.

Thank you, Mr. Chairman.

Mr. MURPHY. Thank you, Ms. Norton.

Just as a reminder, members of the committee will have 5 legislative days to submit other questions, so if any members will have

questions, I hope you will get back to us in a timely response.

I would like to thank this panel for participating, and we will

move on to the next panel now. Thank you.

I would like to invite our second panel of witnesses to please

come forward to the witness table. And first off we will hear from

two employee groups. I will go ahead and introduce them as they

come forward. John Gage, the national president of the American

Federation of Government Employees, making his first appearance

before this subcommittee. Welcome, Mr. Gage.

Beside him will be Ms. Colleen Kelley, national president of the

National Treasury Employees Union, who is also with us today.

Next we have Hannah Sistare, the executive director of the National Commission on the Public Service, also called the Vocal

Commission. The bipartisan Vocal Commission has been instrumental in making far-reaching recommendations to improve the

Civil Service. And last we will hear from George Nesterczuk, president of Nesterczuk & Associates, who has a long history of expertise in Civil Service reform.

I believe you all took the oath before. Am I correct? Thank you

very much. The panel will now be recognized for an opening statement. We will ask you to summarize your testimony in 5 minutes

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time, and any fuller statement you may wish to make will be included in the record.

I would like to welcome you, Ms. Sistare. Thank you for being

with us today. You are recognized for the first 5 minutes, if you are

ready.

STATEMENTS OF HANNAH S. SISTARE, EXECUTIVE DIRECTOR,

NATIONAL COMMISSION ON THE PUBLIC SERVICE; JOHN

GAGE, NATIONAL PRESIDENT, AMERICAN FEDERATION OF

GOVERNMENT EMPLOYEES; COLLEEN M. KELLEY, NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES

UNION; AND GEORGE NESTERCZUK, PRESIDENT,

NESTERCZUK & ASSOCIATES

Ms. SISTARE. Thank you very much. Mr. Chairman, Congressman Davis, and other members of the subcommittee, thank you for

inviting me to testify on behalf of the National Commission on the

Public Service on the performance management recommendations

made by the Commission and how they relate to the pay system

now being designed for the Department of Homeland Security.

The Commission gave substantial weight to the role of performance in assuring the future health of the public service. Commission Chairman Paul Volcker introduced the Commission report

writing: ‘‘Disciplined policy direction, operational flexibility, and

clear and high performance standards are the guiding objectives of

our proposals.’’

The bipartisan group of public servants who made up this Commission was united by a deep concern about the level of public

trust in Government. The decline in trust during the past 40 years

deprives our Government and Government officials of the support

they need, and it discourages talented Americans from joining the

Federal service.

Whatever the full range of causes, surveys have shown a strong

correlation between public trust and Government performance.

The Commission identified several barriers to improve Government performance, including: a system under which most pay increases are based on time on the job and geographic location; employee appraisal systems where nearly everyone is rated superior,

surpassing even Lake Woebegone, where everyone is merely above

average; pay caps, which in an ever-increasing number of cases

make it impossible to reward strong performance; bonus systems

that are so underfunded that they are spread around like peanut

butter to give everyone a little taste; a conviction held by twothirds of the Federal work force that management doesn’t deal adequately with poor performance; and an organizational structure

which produces duplication overlap and gaps in program application, and which is burdened with excessive numbers of political appointees.

How would the Commission recommend that the Department of

Homeland Security rectify such problems in its own HR system design?

Organizationally, the Department’s design is consistent with the

Commission’s vision of mission-centered departments with considerable operating flexibility. But also, to protect against abuse, the

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partment specify the principles that would underlie any personnel

system that was established.

The Department of Homeland Security authorizing statute did

set out important core principles, rights and responsibilities, but as

Paul Volcker noted in speaking to this issue last week, the principles and protections spelled out in the statute have not been sufficient to assuage the concerns of many who will be affected by

these new systems. Clearly, employees are still concerned about the

assurance of fundamental fairness, objectivity, and due process protections in a pay-for-performance system.

In light of these concerns, the Commission and the National

Academy of Public Administration jointly sponsored a public forum

last week with the goal of informing and advancing the debate

about performance-based pay. From this discussion, we were able

to identify some lessons that have proven important in the successful adoption of pay for performance in the private sector, in GAO,

and at the IRS.

There was considerable agreement among the participants about

the safeguards that were necessary for a pay-for-performance system to be effective. The safeguards that most felt should be assured

at DHS and elsewhere are: a credible appraisal methodology; a

transparent system; a timely set of processes; consultation with

those affected; peer review, possibly even by a neutral third party;

ongoing communication, including feedback from all involved;

training of managers and supervisors, who themselves would be

evaluated how well they manage performance. And as former Secretary Donna Shalala noted in her testimony before this committee

last March, you have to have credible people in both political and

career management positions for such a system to work. And finally, of great importance, training of employees to participate in

the system.

To this list, Paul Volcker and his fellow Commissioners would

add the protection of careful and ongoing oversight by the responsible leadership in the executive branch and by the Congress.

Participants in the forum also identified several factors for which

implementers must be prepared: one, adequate time for the adoption of such a system. GAO began laying its groundwork many

years ago, and this may require a phased implementation starting

with those agencies or units that are ready to do a good job. Verifiable performance systems, where individual performance is linked

to organizational goals and sound performance management systems, including agreement and buy-in among all those who are

part of the system; culture change, which also takes time. Adequate funding. There must be enough money to make meaningful

rewards for a commendable performance. Careful assessment. Pay

for performance is very complicated because it is difficult, once you

get below the clear top performers, to really make meaningful distinctions.

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In conclusion, I thank the subcommittee again for its interest in

the Commission’s work, and the Commission and the National

Academy of Public Administration hope these recommendations

made by participants at the forum will be of value to the subcommittee in its work.

Thank you.

[The prepared statement of Ms. Sistare follows:]

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Mr. MURPHY. Thank you, Ms. Sistare.

Now proceed on and recognize Mr. Gage. Thank you for being

with us today. You may proceed with your opening statement for

5 minutes.

Mr. GAGE. Thank you. You have my prepared comments and

those reflecting the attitudes of our membership and employees in

Homeland Security regarding this process. I am sorry if my remarks led many of you to believe that we were entirely pleased

with the inclusion in the system in this process of developing these

new personnel systems.

My experience last week in the 3-day debate, if you will, left me

with some mixed feelings. Much of the rhetoric and theory behind,

for instance, pay for performance, is something that, as a negotiator of union contracts and someone who has really worked most

of their adult life in trying to develop good performance plans that

people have confidence in and also that recognize the important

missions of the management of these agencies, I was a little bit lost

in the lack of details that are being put forward in these options.

I have seen this before, some high-sounding academic type plans,

and I think the round file is full of them. It is for agencies, I think,

and practical operational managers, and those are the ones myself

and I think Colleen tried to talk to last week when we were there,

that there really is a threat that some of these theories really are

a black hole of resources and maybe full-time employment for

human resource specialists.

Let me give you some examples. And, first of all, when you look

at the research, and I have heard a lot said this morning about the

research, not one of these pay-for-performance plans shows any increase in employee productivity. Not one. I was really struck by

that when I looked at the research that was done. Second, they all

are admitting that there are problems with employee acceptance of

these systems. And I will give you a good reason, and just one, and

that is this idea that is littered through the pay-for-performance

options, and that is forced distributions. Now, what that means is

going into a pay-for-performance system someone has to pay for it.

And the way these systems, the options are rigged is that there are

a predetermined number or percentage of employees that is

deemed up front that they will not get any money at all. That

money will then be given to high performers, with a couple cuts in

between.

The problem I have with that is that it doesn’t reflect a modern,

and especially law enforcement type of work force. To say that hard

working people are no longer being measured against a performance standard, but they are subject to a predetermined cut of

whether they will receive base pay, I think that putting in a system like that will have no credibility with employees, and it is a

basic flaw of the pay-for-performance systems. The reams of material that are going to come down from some lucky consultant about

all these performance standards and all these technical ways to

judge performance are going to be a drain on resources, but they

really are false because an employee is not really being compared

to a performance standard and judged on what he does; he is being

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nition, is being said that they will receive no money and that the

performance is not acceptable.

That is a cannibalism that I think destroys the type of unity and

cohesiveness that is needed, especially in law enforcement. Most of

our law enforcement people, in the border patrol, in customs, and

INS, really scratch their heads when they look at how this system

will be implemented. For instance, some of our law enforcement

border patrol, some see their supervisors once a week, some once

every 6 months. Others, for instance, our adjudicators in the legacy

INS, right now the state of supervisor, and for a lot of reasons, is

not good. We have, for instance, 57 employees who are adjudicators, some of them trainees, and they are supervised by two temporary supervisors who are located in a building 30 miles away.

There has been a real problem in getting supervisors because of a

test that has been imposed by OPM, which really limits management’s judgment in determining who can be a supervisor.

Now, we have some suggestions, and I hope this committee really

interjects some practicality and some realism into what is going on.

When I hear the theorists say that we have to go full speed ahead,

we have to throw out the classification system, we have to throw

out all performance management, we have to throw out the Federal

pay system because the iron is hot, and don’t worry, managers, you

are going to get criticism, there is going to be disruption in the

agencies, but take it all up front, now, that is irresponsible. That

doesn’t match the mission of this agency. That is HR theorists really imposing a system that they don’t know that it will work, and

I believe won’t work.

Now, many of the operational managers, and I think this was a

good thing at the meeting that we had last week, after they heard

kind of a debunking of some of this theory and really ideology,

began to say, well, we can’t judge whether it will take away collective bargaining rights or union rights; we haven’t even seen this

system, no one has seen this system. There are some conceptual options that are up.

Now, I really think that before we decide on anything about this

system, that we ought to get some real meat and potatoes, a little

more chicken on the bone to take a look at this system that is

being talked about in these conceptual means, because the harm

this can do to an agency work force, especially one that is good, especially one that is a law enforcement type of work force, where

that unity and that cohesiveness and that teamwork are essential

to getting this mission done, to really drive a supervisory work

force that is not equipped to do this and can’t make these types of

discussions I think is something that we ought to really take a look

at, and I am hoping this committee will moderate.

One thing that really irritates me, though, is to say that even

though we don’t know what the system is going to look like, the

one thing we know is there can’t be collective bargaining and there

can’t be independent employee rights, appeal rights. Now, that is

a notion that I hope we debunked last week. We have put up recommendations here, practical recommendations. For instance,

using our career ladder. We also think that adding a grade at the

top for super achievers and solid techniques or leads would really

go to solving the problem of people topping out in grade.

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Also at the bottom, Madam Chairwoman, on poor performers, we

think we have some answers to that on poor performers. Nobody

likes to see poor performers. I mean, our work force certainly

doesn’t like to see someone who is not pulling their fair share. But

to determine that 20 percent of our people are going to be poor performers, that is wrong and theoretical, and can’t be part of the system. I think that we can go into poor performers in a better way.

We have agreed already with management, and I think that Colleen and I could sit down with the agency managers and work out

some systems on collective bargaining and appeals in an hour; and

that is to speed up collective bargaining, to speed up the time it

takes for appeals. But this committee, and I think the American

public, really should stop and slow down this headlong plunge into

a new system that is based on some premise that there can be no

collective bargaining and there can be no outside independent appeals.

Wiping out employee rights before a new system is known or designed, implemented or tested, is just wrong. It will certainly not

enhance our national security, and it will end up harming it, as

morale plummets in the face of this confusion and anger. The

stakes are high at DHS. The pay-for-performance ideas that appear

to have found favor with some individuals in OPM are among the

most indefensible and dangerous. The agency needs to slow down

and think before it unleashes a program that will be a competition

among those who must cooperate and an enormous strain on resources that are desperately needed for the urgent task of national

security.

I thank you for the opportunity to testify today, Madam Chairwoman, and I would be happy to answer any questions.

[The prepared statement of Mr. Gage follows:]

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Mrs. DAVIS OF VIRGINIA [resuming Chair]. Thank you, Mr. Gage.

Ms. Kelley, it is always good to have you back here testifying.

You are recognized for 5 minutes.

Ms. KELLEY. Thank you, Madam Chairwoman.

Ranking Member Davis, distinguished members of the subcommittee, thank you very much for the opportunity to testify on

the human resources management options that are being considered for the Department of Homeland Security.

I have the honor of representing over 12,000 Federal employees

who are now in the new Department, and I am proud to have

served as the representative for NTEU last week on the Senior Review Committee. This committee was the most recent part of a

process that, to date, has been OK. But the real test for this process, as Mr. Van Hollen mentioned earlier, is what final decisions

are actually made by Secretary Ridge and Director James, and if

they are reflective of this process.

NTEU believes that in order for any new human resources management system to be accepted by employees as fair and ultimately

to be successful, it is essential that it incorporate a number of basic

Federal employee protections.

Concerning labor relations, NTEU strongly believes that any

labor relations systems must preserve the right to organize and to

bargain collectively. The scope of bargaining and the bargaining

process must allow meaningful negotiations over working conditions, and not simply consultation. It is also essential that any new

labor relations system balance the agency’s legitimate need to address national security matters against the Homeland Security

Act’s statutory guarantee of collective bargaining rights.

In the area of adverse actions and appeals for Federal employees

in the DHS, it is essential that any new DHS human resource

management system includes an adverse action and appeal process

that treats employees fairly and ensures that their due process

rights are protected. Employees must be given reasonable notice

and an opportunity to make a meaningful reply before disciplinary

action is taken against them. Employees must be able to appeal

agency actions to an independent adjudicator whose decisions are

subject to judicial review and agencies should bear the burden or

proving just cause for actions taken against employees. In a workplace without these bedrock protections, employee morale will suffer, which in turn will adversely affect performance.

NTEU also strongly believes that in designing pay, classification,

and performance management systems for DHS certain core principles must be honored and applied.

First, any changes must be justified by mission needs and designed to minimize the burden on managers, on supervisors, and

employees to administer and implement the systems so that all can

remain focused on the mission to protect homeland security.

NTEU does not believe that radical changes are needed in the

pay, performance, and classification systems. More importantly,

employees in Homeland Security consistently stated this in the

town hall meetings and focus groups. The basic structure of these

systems is sound, and they must be fair, credible, and transparent

to employees, but also to provide opportunities to recognize and to

reward superior performance.

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This is not to suggest that NTEU opposes any changes in the

status quo. We believe some modifications could be made that

would improve the HR systems for the benefit of DHS and its employees, as well as for the accomplishment of its mission. Options

that provide fairness by ensuring that employees who meet all performance expectations identified by management must receive annual pay increases that at least include the amount of the General

Schedule increase plus some reasonable amount to recognize an individual’s successful performance or a step in the right direction.

NTEU also does not support diverting all or part of the GS increase to fund a pay-for-performance fund, or trying to implement

a pay-for-performance system on a cost-neutral basis. Many of the

options prepared by the DHS design team would make fundamental changes to the basic pay system for DHS employees by eliminating the GS grade structure. NTEU does not support these options, as we believe they are unduly disruptive to employees, to the

agency, and its mission, and are not justified by business or mission needs.

The Homeland Security Act requires the Secretary and the Director to review pay and benefit plans that are applicable to DHS employees, and to recommend a plan to eliminate disparities in pay

and benefits, especially among law enforcement personnel.

Among the issues that must be considered is the need to provide

20-year law enforcement retirement to CBP officers. Recently, DHS

announced its ‘‘One Face at the Border’’ initiative and the creation

of a CBP officer position which combines the duties of three positions, customs inspectors, immigration inspectors, and agriculture

inspectors, into one job. We have concerns about this initiatives impact on maintaining the expertise of legacy customs, INS, and

APHIS inspectional personnel. We have written to Secretary Ridge

and expressed NTEU’s belief that inspectors and canine enforcement officers of the CBP should receive the same law enforcement

retirement benefits as those received by other Federal law enforcement personnel.

In conclusion, NTEU supports the mission and the personnel of

the Department of Homeland Security. NTEU wants the same

thing that I believe everyone wants who has had anything to do

with the creation of this Department: we want a workplace environment where employees can be successful and do the quality

work they want to do, and can be recognized and rewarded for

doing that work, and can be treated with dignity and respect.

It would be a mistake to underestimate the impact that a new

human resources system at DHS could have on all employees. A

human resource system that is fair, credible, and transparent not

only can coexist with the mission of homeland security, but it must

coexist if employees and the Department are to be successful.

Thank you.

[The prepared statement of Ms. Kelley follows:]

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Mrs. DAVIS OF VIRGINIA. Thank you, Ms. Kelley.

Mr. Nesterczuk, you are recognized for 5 minutes.

Mr. NESTERCZUK. Thank you, Chairwoman Davis, Mr. Davis. I

want to thank you for the opportunity to express my views here

today on the issues that are before you. I was specifically asked to

address the questions of adverse actions and the appeals process.

Let me begin by making a comment about the Senior Review Advisory Committee. I have a full statement for the record. I just want

to summarize the key points.

I was an observer in that process last week, I sat through the

public hearings, and it was a first-rate set of debates. The staff prepared the members, I think, very well, they briefed them very well;

you saw the options packages that were prepared. And if nothing

else, they will serve as a reference guide for other agencies around

town who may be considering various types of modifications and reforms to their Civil Service rules. It doesn’t mean that they would

necessarily undertake as broad or vast a set of changes as DHS is

facing; nevertheless, that compendium of options will be very, very

useful to a large number of agencies.

Let me address the questions on the adverse actions and appeals

procedures. Just so that we stay focused on what that represents,

it is a set of procedures that currently are fairly cumbersome, don’t

necessarily serve all agencies well, particularly an agency like

Homeland Security, with a national security and law enforcement

focus. It takes a lot of time to go through there, and there are cases

that we have seen in the past that have taken months and even

years to finally adjudicate.

I would underscore that 98 to 99 percent of Federal employees

will spend 20, 30, 40 years in their Federal careers without ever

going through that process. Let us keep in mind that is a safety

net for a very small number of employees that fall afoul of the system, either violating the rules or not meeting standards of performance.

Now, one of the things that is really wrong with the current system, it creates a level playing field in effect between management

and some of these problem employees. There is a great burden on

managers to prove their case. There is a perception, in effect, that

a poor performer’s judgment is equal to that of the manager who

wants to take the performance-based action against him or her. In

many cases managers have to spend more time dealing with problem performers than with good performers. That sends a wrong

message to the system, to the entire work force, and it creates an

entitlement paradigm, in effect, in the work force. That is one of

the things that is important for DHS to change if they are going

to be a performance-driven organization of excellence.

Now, again, let me underscore 98 to 99 percent of Federal employees will spend 20, 30, or 40 years in their Federal career without ever having to resort to an appeal. We are talking about a very

small statistical number of people. Now, what kinds of reforms

might DHS undertake? There is a variety of options that are presented. I am not going to go through all of those. We don’t know

which ones are going to be ultimately recommended. What I found

interesting was that in addition to the status quo options, there

were options that provided for a little more of the status quo, a litVerDate 11-MAY-2000 10:50 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 D:\DOCS\94775.TXT HGOVREF1 PsN: HGOVREF1
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tle less of the status quo, as well as some that provided real significant change to the current system; and those are the ones that I

tended to focus on because I feel some radical changes do need to

be entertained in the adverse action and appeals area.

Specifically, on pay for performance and performance review situations, that should be the sole purview of management. None of

those questions should be appealable. Any pay determination, any

performance appraisal should be the responsibility of management;

it is management’s job to effectuate those actions. It should definitely be subject to review, higher level review to ensure that there

is fairness and uniformity in application of the pay and performance systems across the organization, but the results of those actions should not be appealable.

In the case of misconduct, I believe only removal actions or suspensions of 30 days or longer should go through the full appeal

process. Those are very cumbersome. Those are the instances

where significant harm can be afforded an employee if management makes a mistake; and management can and does make mistakes, they don’t necessarily walk on water in all circumstances. So

the appeal process should take that under consideration.

Finally, what kind of adjudication? I think an external panel to

handle appeals to maintain some credibility in that appeals process, when it is necessary to exercise it, is probably the appropriate

way to go.

Those are all options that are presented as part of the reviews

for the Senior Review Advisory Committee, so I have touched on

those. There are many others that are far closer to the current status quo.

Let me make one final comment. We talk a great deal about good

performers and the soundness of the Federal work force, and what

a great work force it is, and I am a firm believer in that; I have

had hands-on experience in the Federal work environment. When

it comes to evaluating managers, however, very often the debate

turns sour. One would think that there is a lack of competence in

the management levels of the work force, that we can’t trust them

to do their jobs, including evaluating employees, and so we have to

create all these special safeguards and procedures to review their

work products and to second guess them.

I would remind you that managers come out of that same Federal work force that we all think so highly of. It is not like, 1 day,

when they are selected to be managers, they take dumb pills or

stupid pills and all of a sudden lose all common sense. So as we

get through this debate, let us keep that in mind. We are talking

about basically the recruitment pool for the management work

force, and it is a fairly decent work force. Thank you.

[The prepared statement of Mr. Nesterczuk follows:]

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Mrs. DAVIS OF VIRGINIA. Thank you, sir.

And thank all of you for your patience and being willing to be

here to testify today.

I will yield now to our ranking member, Danny Davis. Mr. Davis,

you have the floor for questions.

Mr. DAVIS OF ILLINOIS. Thank you very much, Madam Chairwoman.

Ms. Kelley and Mr. Gage, am I to discern from your testimony

that collective bargaining and independent appeal rights are two

areas relative to options that you have some serious concerns about

and have really drawn a place in the sand in terms of where you

are probably willing to go with that?

Ms. KELLEY. Yes, Mr. Davis. Collective bargaining and appeal

rights are two of the critical areas. In our discussions regarding

collective bargaining, the idea of replacing collective bargaining

with consultation is one that I think actually is totally opposite of

what is intended by the act. There has been a lot of discussion

about need for change in regard to the mission of the Department,

and I think history has shown, since September 11th, that when

incidents occurred, when changes need to be made in working conditions, that employees did what they needed to do in order to

make the country safe and to help the Department be successful,

and no one was waiving their collective bargaining agreement saying I don’t have to do this or I don’t want to do that because of

this agreement.

So I think the history and the recognition is there on the part

of employees and the union that when there are issues that working conditions cannot be addressed before implementation because

of whether they are national security issues or decisions that the

Department feels it needs to make because of information it has,

which we heard a lot about last week at the Senior Review Committee, was a lot of the information that the senior executives have

from intelligence briefings, of course, are not available to and

would not be available to the unions and to employees; and I accept

that. I accept there will be those situations. But I believe that a

framework can be designed that acknowledges those legitimate situations, and that they are not the rule for how we operate between

the unions and the Department, but that there are those situations

and that they may then have the need for what we would call postimplementation bargaining should a situation last for a long period

of time.

And I guess going to that issue as well as the adverse actions,

one of the comments I would like to add to that Mr. Cohen made

on the prior panel, when he talked about these options, he talked

about them as conceptual; and there surely are some of them that

are conceptual, but I would suggest that if you have looked at the

52 options, there are many of them that are very, very specific, and

that is for a very valid reason. The options that NTEU helped to

draft or support were specific because we were trying to be responsive to the legitimate business interests that we heard identified by

OPM and the Department throughout the design process. So we

have gone to great lengths to provide specifics that have been responsive, and see those options that we have put forth for support

as much more than just conceptual.

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Mr. GAGE. I would just like to add that every argument that was

brought forth saying that some collective bargaining or employee

appeals were damaging to the mission of this agency were debunked. Collective bargaining is the only checks and balances that

exist, as well as an independent employee appeal for these personnel systems, and to get rid of them at a time when proposals are

out there that a manager or superviser can determine an employee’s base pay, to think that there won’t be mistakes I think is an

illusion. Good managers like checks and balances, good managers

are not afraid of collective bargaining, and good managers certainly

want a mistake in management down the chain to be able to be

looked at and to be handled fairly. It is just incredible to me that

before these systems are even devised, the first decision is that we

can’t have collective bargaining and we can’t have independent employee appeals, and I think both of those statements are wrong and

illogical, and will result in any system that management comes up

with to have just no credibility in the work force.

Mr. DAVIS OF ILLINOIS. Ms. Sistare and Mr. Nesterczuk, could

you respond to the union’s positions relative to the comments they

have just made?

Ms. SISTARE. Speaking to the Commission’s report on these

issues, the Commission recognized the role for collective bargaining, certainly, in the Federal system, and the preservation, again,

of the basic principles on which the Federal system is established.

Mr. NESTERCZUK. I think it will probably ultimately come down

to looking at collective bargaining in the proper context; not isolated as an entity onto itself, but in the context of certain kinds of

actions. They will probably reserve certain actions for management

exclusively and will probably negotiate with representatives on

other issues. It is just difficult for me to try to second-guess where

that unity of thought might occur.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Davis.

Mr. Murphy.

Mr. MURPHY. Thank you, Madam Chairwoman.

Mr. Gage, you had mentioned some things that really caught my

interest. You talked about some of the employees really may not

see their supervisor perhaps sometimes once a week, perhaps once

in 6 months; they may not even be on the same site, and so it

would be hard to evaluate them. You also brought up a point and

I want to make sure I understand it. You talked about this 20 percent issue, that 20 percent will not do well. Do you see the way

that some of these evaluation systems go is much like a bell curve

or something, some who will be at the very top will get big raises,

some will be in the middle, and some, no matter how well they do,

will not see any benefits from this?

Mr. GAGE. That is exactly it. I think the financing of many of

these options that are neutral are based exactly on that, a bell

curve where you take away from the bottom, even though they may

be producing according to their performance standards, but just

how the thing is defined and how it is set up, that they are not

going to be eligible for pay raises and that money will be used to

do the top. And that really is driving a round peg in a square hole,

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because our work force is not made up of these arbitrary percentages of poor performers and good performers.

Mr. MURPHY. I was struck by Ms. Sistare’s comment before about

the Lake Woebegone effect; sometimes evaluations is everybody is

above average or superior. And I am sure you wouldn’t want to see

a system like that too, because that could be unfair in terms of rewarding people who are not performing. But let me ask you about

ways we can do this.

Is part of what you see in interference here, if there was a finite

amount of dollars and say we can only reward people so much, so

we are only going to reward those on top, that may be part of the

problem. But another part I wonder about is this. When some of

the organizations require teamwork, and some may not, depending

upon the type of job description, but some of the organizations may

require that. Do you see this as helping or interfering with developing teamwork if they recognize that some people are going to be

getting the increase and some are not on the team?

Mr. GAGE. I think it is going to be terrible for trying to continue

the teamwork that we have in our law enforcement; it just breaks

away the entire unity and cohesiveness that law enforcement organizations have been trying to build. And it takes away from the

mission. Most of these performance standards, and I have been

doing this for years, they are gobbledygook; they really don’t help

a supervisor evaluate employee performance. And many of the good

agencies have seen the time, effort, and the results of these type

of really top-down, heavily theoretical types of systems as just

being a resource drain. So I think for a lot of reasons, but especially how these systems will break that cohesiveness in law enforcement, you have to go slow and really determine and test the

effects this will have on employee morale.

Mr. MURPHY. Well, then in terms of going slow, not for the sake

of going slow, but for the sake of being effective, I assume you

mean on that, as these reports come out, will there be parts that

you might be able to recommend and say that some of these options may work better with implementing now in terms of phasing

them in, so some may work well with some departments, but not

others, so that we can be most effective? Will there be some things

you will be able to recommend?

Mr. GAGE. I hope so. We have already made some recommendations. For instance, on the whole collective bargaining and appeals,

I think that we can sit down and really clean that up to make an

efficient, speedy appeals and collective bargaining system and just

take that right off the table. This delay and all that, we can take

those straw men really right off the table. And I also think some

existing systems we have, for instance, like career ladders, tinkering with those solves a big one of management’s objectives, and

that is let people move up according to their performance, and that

is the basic pay banding. But using the career ladders is a system

we already have; people know about. Just removing the time in

grade, where you can’t move up until you fulfill a time in grade,

moving that out of it is certainly something we could support and

I think would help the agency right now in recruiting and retaining

some of these law enforcement personnel.

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Mr. MURPHY. I might add, without having gone through all these

options in detail, but I also recognize with some employees sometimes, in my own business that I ran or once when I worked in a

Federal program, that sometimes a person who may not be getting

the best rating, the answer is not that they are a bad person or

bad worker, it is just that is not the best job for them. And I would

hope that part of the options that might go with this is working

with the people in a very proactive way, of saying, Mr. Smith or

Ms. Doe, you are a great worker, but we have to find another place

for you to show that greatness. And I hope that is part of the options that come through in these things.

Unfortunately, I have to leave to go to some other meetings, but

I would like to continue our discussion at some point about some

of the issues you see about collective bargaining and how we might

protect it in a way that helps DHS, helps the employees for all the

mutual goals, as Ms. Kelley, you outlined so clearly. We have mutual goals in this, and I welcome the opportunity to continue those

discussions with all of you. Thank you.

Mr. GAGE. Thank you.

Mr. MURPHY. Thank you, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Thank you, Mr. Murphy.

Ms. Holmes Norton.

Ms. NORTON. Thank you, Madam Chairwoman.

Mr. Sistare and Mr. Nesterczuk, I have a question for you about

pay-for-performance, because, when it gets down to it, that seems

to be what this is all about; that is the major concern. In fact, it

seems to be the major push of the administration. One could argue

that there is a structural flaw in pay-for-performance that has

nothing to do with the agency, but originates with the Congress.

Without adequate funding, which, of course, depends upon us, what

is the key pay-for-performance from simply redistributing the scarcity imposed by Congress? And agencies have seen what that

means; that is nothing new. And if you can’t predict what Congress

will do each year, how can you know that pay-for-performance

would work? I would like both of you take a stab at that.

Mr. NESTERCZUK. Well, I am a firm believer in the concept; I

have seen it work back in the 1980’s in the old PMRS, the Performance Management Recognition System, that we used to run for

merit-pay managers. It suffered, as you said, from the funding scenario, the lack of funding, in that good performers were very happy

because they moved right through the grade structure and up the

steps, much faster than they would have otherwise; so there was

a favorable comparison to where they might have been had they

not gone into merit pay. The poorer performers, moving more slowly, still had the old General Schedule to say, well, at this point in

this year or next year I will be earning such and such, and, yes,

I am now behind the curve. And then some folks in the middle

started to slip, so there was a very adverse comparison compared

to the General Schedule, so that hurt. And that was a situation

where you started with the same level of funding and you basically

redistributed, reprogrammed available funds.

The expectations for any pay-for-performance system have to be

carefully managed to avoid that same pitfall in the future, and to

get it started with credibility, I don’t see how you can avoid adding

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more money, spending more in payroll than you currently do. Eventually, as things sort out, you will get redistributions that will start

to mirror a status quo for a good part of the work force, accelerate

the better ones and the slower ones will fall behind.

One thing that I would recommend that DHS do now if they get

serious about pay-for-performance, is to take the bottom end of performers and withhold the normal pay increases, the step increases

within grades, etc., just withhold them as a signal that some component of pay today will now be evaluated on the basis of performance and awarded on the basis of performance.

Ms. NORTON. I am sorry, I don’t know what you mean by withhold. What do you mean withhold them?

Mr. NESTERCZUK. Just don’t provide the within grades or the

step increases of a poor performer that currently is basically automatically awarded. There is a statutory requirement that says, yes,

you can withhold that for less than adequate performance.

Ms. NORTON. So you mean if somebody gets a poor performance,

at that point you would not allow.

Mr. NESTERCZUK. Yes. Correct.

Ms. NORTON. I see.

Mr. NESTERCZUK. It requires first promoting a performance management system, and then on the basis of that taking the pay actions. But at that point you could start to change the culture and

get people to learn to accept the fact that, yes, pay will be awarded

on the basis of performance without basically staying budget neutral at the beginning.

Ms. NORTON. Ms. Sistare.

Ms. SISTARE. The Volcker Commission felt that you did have to

adequately fund these systems to have them work. You raised the

issue if Congress did not. I think it is up to the administration and

the Department in adopting and selling such a system to get buyin, from Congress as well, that the system has to be funded to be

effective.

Ms. NORTON. Well, of course. I mean, I just think you have demonstrated what I mean by a structural flaw. Congress couldn’t if it

wanted to bind itself to adequately fund any system. And as long

as we have the form of Government we have, one has to wonder

about a pay-for-performance system. I hope I don’t have to go down

the things we are not funding now that we promised employees. I

see that as a fundamental question. Those of you who are for payfor-performance, you have to tackle that question to be credible

yourselves.

I want to know how the employee representatives respond to Mr.

Nesterczuk’s notion that somebody gets a poor performance, and as

a result of a poor performance. You are not dealing now with anybody except somebody who has been found to be a poor performer.

A person hasn’t been fired, now. How do you respond to the notion

that you can withhold the in-step increases and the pay for increases for that person?

Ms. KELLEY. The current system provides for that today. There

is no need for a new HR system to allow that to happen; it should

be happening.

Ms. NORTON. Even the step increases?

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Ms. KELLEY. Yes. That should be happening. If a manager is

properly trained and supported in the work that they are doing, of

evaluating their employees; and very often I think that is the problem, is that managers are not provided with the training or the

support to make those distinctions about performance and, therefore, they don’t step up to that. But that process exists today. If

there is an employee who is not performing acceptably in their job,

they should be identified, they should be given appropriate notice.

What we call in our negotiated agreements a performance improvement period so that they can have every opportunity to bring their

performance up to an acceptable level. But during that time their

within grade is denied. So that is a process that exists today and

should be implemented today, and there is no need for a new HR

system to do that.

Ms. NORTON. Thank you very much, Madam Chairwoman.

Mrs. DAVIS OF VIRGINIA. Thank you, Ms. Norton.

We do have several votes, but we have a few minutes before we

have to go, so I am going to ask a question to all of you. Should

employees have a right of appeal on all performance appraisals if

the Department creates a system where the appraisal determines

the amount of each individual pay increase?

Mr. NESTERCZUK. I will start.

Mrs. DAVIS OF VIRGINIA. Anybody can start.

Mr. NESTERCZUK. No, absolutely not.

Mrs. DAVIS OF VIRGINIA. Ms. Sistare.

Ms. SISTARE. At our forum, that view was expressed, but the

view that was held by a greater number of people was that there

should be an independent perhaps peer review of the entire system

so that there was an ongoing check to make sure it was working.

Ms. KELLEY. Yes, there definitely needs to be a process for employees to appeal. The idea that they would be harmed financially

based on a decision that may not be based with ill intent. I am not

even assuming that is the starting point from this, but everyone is

human. Managers manage in different ways; they are provided

with different training, they have different spans of control of the

number of employees and the locations of employees that they supervise; they have different first-hand knowledge of that. And there

needs to be a process to ensure that there is credibility and transparency to the system, or it will not be accepted by employees.

Mr. GAGE. I would like to go even a little further. If you don’t

have an independent review, an independent appeal, this system

will end up as one of patronage and basic unfairness, and it will

be management by coercion, intimidation, and fear. But we are not

talking about full-blown MSPB appeals. Most of our contracts have

provisions called mini-arbitrations, where performance issues are

worked out in an expedited type of hearing, which is informal by

nature and fact-finding. So there is not a big time delay or a big

resource issue involved with appealing these things. But if employees do not see an independent review, and if supervisors don’t see

an independent review, I think the decisions are starting to be

made in a way that just doesn’t go to judging performance, but is

more toward some elements in a work site that I don’t think anybody here wants to instill.

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Mrs. DAVIS OF VIRGINIA. To those of you who said that there

should be an appeal on all performance appraisals, can you explain

how the Department could operate efficiently if every appraisal or

every performance-based increase or decrease, or what have you,

would probably trigger an appeal? I mean, how could the Department operate efficiently under that system?

Mr. GAGE. Everyone doesn’t generate an appeal; however, when

one sees an organization this big, there are going to be those situations which are blatantly unfair. And to let a work force see that

a supervisor can do something which is seen as blatantly unfair,

with no avenue or recourse, just spreads through the work force

and will just kill credibility in this system. Usually in the pay-forperformance area it is not the bottom-feeders that make the appeals, it is those people who see themselves as outstanding and

have always been outstanding, have felt that way, and through arbitrary numbers they get dropped down a notch. The good workers

are usually the ones that are upset by this type of forced distribution system.

Ms. KELLEY. I would just add that NTEU has some experience

with agencies where they have pay systems that are different than

the GS system because they are not funded through appropriated

funds, and in our experience the assumption that the system would

be clogged with appeals just is not true. Whether it is the FDIC

or ATF or the SEC, there are a small number of employees who

use that process, and it is, in my experience, as John described,

those who are designated average because of whether it is a forced

distribution or just a manager evaluation, that believes factors

were not considered that would acknowledge their outstanding performance and thus would result in some additional pay for them.

So I do not think that there is any experience out there that

shows that it would bring the system to a halt. And if the system

is built, one that is credible and transparent that lets employees

know how they are being evaluated, that alone will eliminate many

of the appeals and bring them to a realistic number.

Mr. NESTERCZUK. If I might make a comment. It is not just a

question of efficiency or bringing the system to a halt; it is also the

responsibility of management to issue those performance appraisals. They are not subject to debate; they are not a tit-for-tat. Those

managers basically assign work, they evaluate that work throughout the course of the year. They are in the best position to make

an ultimate judgment as to how the performance laid out for the

course of the year. Plus they have the perspective of looking at

peers, a cohort, and, with a second level review, an organizational

perspective. To put that up for grabs in some appeal process makes

absolutely no sense to me.

Mrs. DAVIS OF VIRGINIA. I am going to have to cut you all off because I have to go vote. I do have some more questions, and if I

could just impose upon each of you, I would like to send them to

you in writing and get you to respond back for the record, if you

don’t mind. And I do apologize. I would let you stay here and come

back and ask more questions, but it is just me, and I don’t want

to hold you up.

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But I do thank you all for being here today. And if any of the

other Members have additional questions for our witnesses today,

they can submit them for the record.

In closing the second panel, I would like to again thank all of the

witnesses for being here, and again I appreciate all your input and

all your expertise, and wish I could just sit here and ask you a

bunch more questions, but thank you all so much.

The hearing is adjourned.

[Whereupon, at 12:14 p.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]

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