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THE STATUS OF FEDERAL PERSONNEL REFORM

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 8, 2007

Serial No. 110–12

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

TOM LANTOS, California

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

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

——— ———

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

DAVID MARIN, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL SERVICE, AND THE DISTRICT OF

COLUMBIA

DANNY K. DAVIS, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JOHN P. SARBANES, Maryland

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio, Chairman

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

KENNY MARCHANT, Texas

JOHN M. MCHUGH, NEW YORK

JOHN L. MICA, Florida

DARRELL E. ISSA, California

——— ———

TANIA SHAND, Staff Director

(III)

C O N T E N T S

Page

Hearing held on March 8, 2007 .............................................................................. 1

Statement of:

Tobias, Robert, director, public sector executive programs, director,

ISPPI, School of Public Affairs, American University, Washington, DC;

Curtis Copeland, Specialist in American National Government, Congressional Research Service, Library of Congress, Washington, DC;

Charles Tiefer, professor of law, University of Baltimore, School of

Law, Baltimore, MD; Joseph Swerdzewski, president, Joseph

Swerdzewski & Associates, Hampton Cove, AL; Hannah Sistare, vice

president for academy affairs, director, human resources management

consortium, National Academy of Public Administration, Washington,

DC; and Kevin Simpson, executive vice president, general counsel,

Partnership for Public Service, Washington, DC ....................................... 33

Copeland, Curtis ........................................................................................ 52

Simpson, Kevin .......................................................................................... 101

Sistare, Hannah ........................................................................................ 88

Swerdzewski, Joseph ................................................................................. 80

Tiefer, Charles ........................................................................................... 65

Tobias, Robert ............................................................................................ 33

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

Copeland, Curtis, Specialist in American National Government, Congressional Research Service, Library of Congress, Washington, DC, prepared statement of ........................................................................................ 54

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 130

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

of Illinois, prepared statements of Mr. Pferrer and Ms. Kelley ................ 3

Marchant, Hon. Kenny, a Representative in Congress from the State

of Texas, prepared statement of .................................................................. 29

Simpson, Kevin, executive vice president, general counsel, Partnership

for Public Service, Washington, DC, prepared statement of ..................... 103

Sistare, Hannah, vice president for academy affairs, director, human

resources management consortium, National Academy of Public Administration, Washington, DC, prepared statement of .................................... 90

Swerdzewski, Joseph, president, Joseph Swerdzewski & Associates,

Hampton Cove, AL, prepared statement of ................................................ 82

Tiefer, Charles, professor of law, University of Baltimore, School of Law,

Baltimore, MD, prepared statement of ....................................................... 67

Tobias, Robert, director, public sector executive programs, director,

ISPPI, School of Public Affairs, American University, Washington, DC,

prepared statement of ................................................................................... 36

(1)

THE STATUS OF FEDERAL PERSONNEL

REFORM

THURSDAY, MARCH 8, 2007

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 3:05 p.m. in room

2154, Rayburn House Office Building, Hon. Danny K. Davis (chairman of the subcommittee) presiding.

Present: Representatives Davis of Illinois, Norton, Sarbanes,

Lynch, and Marchant.

Staff present: Tania Shand, staff director; Caleb Gilchrist, professional staff member; Cecelia Morton, clerk; LaKeshia Myers, editor/

staff assistant; Mason Alinger and Alex Cooper, minority professional staff members.

Mr. DAVIS OF ILLINOIS. The subcommittee will come to order.

Let me apologize to all of you for having to wait. This has been

one of those days where we have transacted a tremendous amount

of business and everybody has had some pretty heavy schedules,

and ours got caught in the midst of a legislative schedule that

wouldn’t wait. But we just finished votes, and that means that we

certainly won’t be disturbed between now and the time that we

end. Let me thank you for your patience and thank you for participating.

The hearing will come to order. Welcome Ranking Member

Marchant, members of the subcommittee, hearing witnesses, and

all of those in attendance. I welcome you to the first Federal Workforce, Postal Service, and District of Columbia Subcommittee hearing of the 110th Congress.

Hearing no objection, the Chair, ranking member, and subcommittee members will each have 5 minutes to make opening

statements if they so desire, and all Members will have 3 days to

submit statements for the record.

I look forward to working with all of the members of the subcommittee in a bipartisan fashion to move forward with the subcommittee’s agenda. That agenda includes addressing bread and

butter Civil Service issues such as benefits, compensation, public/

private competitions, and labor/management relations. The subcommittee is going to conduct aggressive postal oversight and monitor the implementation of the Postal Accountability and Enhancement Act of 2006, and it is going to protect and advance home rule

for the District of Columbia.

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This hearing is the first in a series of hearings that will be held

on Federal personnel reform. Today, we will hear from human resource stakeholders whose testimony will lay the foundation for

agency-specific personnel reform hearings.

At this point, I would like to ask unanimous consent that the testimony of Jeffrey Pferrer, a Stanford University professor, and Colleen Kelley, national president of NTEU’s statement will be submitted for the record.

Hearing none, so it will be.

[The prepared statements of Mr. Pferrer and Ms. Kelley follow:]

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Mr. DAVIS OF ILLINOIS. If the Federal Government is going to tinker with the employee protections of 1.8 million people and how

they earn a living and are represented in the workforce, it should

be evidence based. It should not be based on anecdotes, theories,

or ideology.

For example, some argue that Federal airport baggage screeners

at the Transportation Security Administration should not be allowed to unionize because it would hinder TSA’s ability to fight terrorism. There is no evidence that Federal employees who have been

allowed to join unions since 1978 have hampered our ability to

fight terrorism. However, there is plenty of evidence that management, particularly officials at the highest levels of our Government,

have made decisions that undermine our ability to fight terrorism.

Over the years we have heard testimony from numerous witnesses, some who will be testifying again today, that the keys to

successful personnel reform are significant funding to train managers and employees on new systems, collaboration with and buyin from employees, and that the new systems be fair, equitable,

credible, and transparent.

In reality, the evidence that we have to date indicates that in

most cases employees have not bought into these systems, funding

for these systems have been cut, and the systems do not appear to

be fair or transparent, much less credible. Today’s witnesses will

help us to better understand and evaluate how these new personnel systems are being implemented and how we can move forward

to ensure that we have a balanced and effective Federal personnel

system.

Now I would like to yield to the ranking member, Mr. Marchant,

5 minutes for an opening statement.

Mr. MARCHANT. Thank you, Mr. Davis. It is an honor to serve on

this subcommittee with you and be the ranking member. Thank

you for convening this hearing today. I look forward to working

with you over the coming days on many different issues faced in

the Subcommittee on Federal Workforce, Postal Service, and the

District of Columbia.

Today’s hearing will examine efforts in recent years to reform the

decades-old Civil Service system at a handful of Federal agencies,

specifically the Department of Defense, the Department of Homeland Security, the Transportation Security Administration, and the

Government Accountability Office. Congress authorized all four of

these agencies to overhaul their personnel systems in recent years.

Today’s hearing will give us an opportunity to evaluate the

progress that has been made to date.

In addition, Congress has also authorized reforms to the personnel systems at the National Aeronautics and Space Administration,

Securities and Exchange Commission, and the Internal Revenue

Service, and the Federal Aviation Administration. The efforts at

these agencies will presumably be the focus of future hearings.

Mr. Chairman, in conducting your first oversight hearing today,

I applaud you for gathering a panel of experts that will provide the

subcommittee with the analytical, dispassionate perspective on the

efforts to date to reform the existing Civil Service system and to

make recommendations as to where we might be able to help from

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here. I believe that this panel will help lay the foundation for subsequent hearings on the reform of all the other individual agencies.

As a newly appointed Ranking Member of the subcommittee, I

look forward to learning from the witnesses before us today and become better educated on the issues facing the Federal workforce in

the 21st century.

Thank you, Mr. Chairman.

[The prepared statement of Hon. Kenny Marchant follows:]

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

Now we will go to opening statements by Members. Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman. I believe these people

have suffered enough waiting for the work on the floor to be concluded. Mr. Chairman, I will submit my statement for the record,

if it would be allowed, and I would like to get a chance to hear from

this distinguished panel.

I want to thank the panel for helping the subcommittee with its

work.

I yield back.

Mr. DAVIS OF ILLINOIS. And it shall, indeed, be entered into the

record.

Ms. Norton.

Ms. NORTON. I thank you very much, Mr. Chairman, and I particularly thank you for having an early hearing on the status of the

Federal workforce. You and I have sat through a number of years

where, in amazement, we have seen the workforce going under unusual change, to put it politely, but I do believe that anyone who

cares about the efficiency and the realm of the Federal workforce

would want this hearing held now, given what I think most Members will agree is a major repair job of some kind that needs to be

done.

What began as an attempt by the administration at reform has,

by any standard, left the Federal workforce in disarray. Courts

have thrown out the attempt at a personnel system, and not only

thrown it out, but done so with quite caustic criticism. The GAO,

which touted itself as the pay for performance model and the pioneer in use of other management strengthening techniques, has

reaped the whirlwind with an organizing effort apparently underway at the GAO that, if I may say so, with responses or reported

responses from the GAO which, like much of the administration’s

reform, looks like it imitates some of the worst of the private sector

in opposing organizing efforts. That’s something that I would ask

subcommittee to look into specifically.

The administration after 9/11 seems to have taken the need to

organize new agencies like TSA to be brought into the Federal system in order to rigorize it with other Federal workers, and then

proceeded to take virtually all of the Civil Service and personnel

system safeguards out of the TSA system.

We use the 9/11 to look at the Department of Homeland Security,

which we just created, and the DOD, and essentially take away

Civil Service protections, bargaining rights. In effect, we use the

major agencies where most of the Federal workforce is to collapse

the usual safeguards and hope that we can get to what was left

and it would simply come tumbling down alongside it.

The fatal mistake, Mr. Chairman, if I may say so is not in reform, particularly after 9/11. It seems to me that was a perfect opportunity to step back and look at what must be done in an entirely new period in American life. It was the failure of the administration to do its homework, to ask first the basic question: why

do we have such a system? Why do we have a section that builds

in rights, for example, in the workplace? We have limited collective

bargaining, nothing like what is found in the workplace. Why do

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we have rights in the first place? Once we analyze that, we go from

there.

It’s not just the size of the workforce. It has a lot to do with the

history of corruption, but above all it has to do with the fact that

it is a public or Federal workforce and what the administration has

never understood, that due process protections of the Constitution

apply to public employees. You can’t get around that. Since you

can’t get around it, you have to find a way to do your reform consistent within it. If you don’t, the course will take care of the rest,

particularly if the protections, collective bargaining protections, are

taken away at the same time.

Mr. Chairman, in the post-9/11 period we have been more dependent on our Civil Service workforce than at any time in our history. They are now doing things not only to make Government run

in the usual fashion, but to protect the homeland, itself. It was just

the wrong time to send the system in spiral by trying all kinds of

things that each and every year it was clear were not only not

working, but producing an overall system far worse than the one

that was in place and far less efficient.

We have done major damage to the Civil Service system by taking actions of every variety. I admire your boldness. I do not admire your task and mission in attempting to repair what is left

while keeping reform of some kind ongoing.

I thank you, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Thank you very much, Ms. Norton.

Mr. Sarbanes.

Mr. SARBANES. Thank you, Mr. Chairman.

It is remarkable that the Federal workforce is able to get up

every morning and come to work under the conditions that have

existed in recent years. One sadly comes to the conclusion that

there is an agenda underway—and this administration is taking

the lead on it—to discredit the Civil Service, and in the process discredit the notion of good government.

I have been amazed in just the short time I have been here at

the number of hearings we have had that have focused in on practices that undermine our civil servants. For starters, cuts to resources that the Federal workforce needs to do its job properly; second, the outsourcing of governmental functions to private contractors who then are not managed properly, because, again, the oversight is not put there and there is lax accountability; and then,

third, in the name of ‘‘reform,’’ proposals for personnel systems

within the Civil Service that really undermine collective bargaining

rights and other rights and opportunities that our Federal employees deserve.

Then, of course, when agencies under-perform because of all

those pressures that are being brought to bear on the workforce,

the administration turns around and says, see, government doesn’t

work, and then cuts it again so it becomes this kind of potential

death spiral for all those folks that are trying to do the right thing

and improve the image of Government, as they should.

So I thank you for conducting the hearing. I think it is ironic

that in the name of Homeland Security the administration has

sought to cut a lot of corners and limit or escape the obligation

from enforcing the rights of the Federal workforce, because I cerVerDate 11-MAY-2000 13:58 Jul 23, 2007 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\DOCS\36547.TXT HGOVREF1 PsN: HGOVREF1
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tainly know that if I go to the airport I want that screener to have

high morale, to feel proud of what they do and good about what

they do, to have a sense of dignity and a sense of productivity, because they are going to do their job much better and much more

effectively, and that is going to protect our security much more

than anything else would do.

So, again, thank you for conducting the hearing and looking at

issues that really can improve morale, productivity, and the overall

good government that we are trying to provide to the taxpayers.

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

Now the subcommittee will hear testimony from the witnesses

before us today.

I would first like to introduce the witnesses, beginning with Mr.

Robert Tobias, who is a distinguished adjunct professor in residence at American University. Mr. Tobias teaches courses in public

management, leadership, alternate dispute resolution, and managing labor/management relations. He served on the Human Resource Management System Senior Review Advisory Committee,

which was charged with reviewing the work of the Department of

Homeland Security, Office of Personnel Management Design

Human Resources Team, and provided options to DHS and OPM’s

agency heads.

Next, we have Dr. Curtis Copeland. He is currently a specialist

in American Government at the Congressional Research Service

[CRS], within the U.S. Library of Congress in Washington, DC. His

specific area of research expertise is Federal rulemaking and regulatory policy. He is also head of the Executive and Judiciary Section with the CRS Government and Finance Division.

Next, we have Professor Charles Tiefer. He is a professor of law

at the University of Baltimore School of Law. Prior to joining the

University of Baltimore’s faculty in 1995, he served as Solicitor and

Deputy General Counsel of the U.S. House of Representatives for

11 years. He is a quoted expert on Federal Government and constitutional law.

Next, we have Mr. Joseph Swerdzewski. He is president of Joseph Swerdzewski and Associates, a human resources consultant

and training firm. The firm is involved in helping Federal agencies

with human resources reform initiatives and development of improved performance management systems. He served two terms

from 1993 to 2001 as the General Counsel of the Federal Labor Relations Authority, where he was responsible for the investigation

and prosecution of unfair labor practice violations.

Next, we have Ms. Hannah Sistare, who is vice president for

academy affairs at the National Academy of Public Administration.

She works with the Academy’s 600 distinguished fellows in their efforts to enhance government at all levels. She also directs the

Academy’s Human Resources Management Consortium and manages the National Commission on the Public Service Volcker Commission Implementation Initiative at the Academy.

Finally, Mr. Kevin Simpson is the executive vice president and

general counsel of the Partnership for Public Service. The Partnership is a nonpartisan, non-profit organization dedicated to revitalizing public service through a campaign of educational efforts, policy

research, public/private partnerships, and legislative advocacy.

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I want to thank each one of you for coming and being with us

this afternoon. It is the committee’s policy that all witnesses be

sworn in, and so if you would please rise and raise your right

hands.

[Witnesses sworn.]

Mr. DAVIS OF ILLINOIS. The record will show that each witness

answered in the affirmative.

Thank you very much.

Your entire statements will be included in the record. Of course,

the green light, as you have done this before, you know that the

green light indicates that you have 5 minutes in which to summarize your statement. The yellow light means your time is running

down and you have 1 minute remaining to complete your statement. And the red light means that your time has expired. Of

course, at the end of the day all kinds of things can happen.

Let me again thank you all for coming.

Mr. Tobias, would you begin?

STATEMENTS OF ROBERT TOBIAS, DIRECTOR, PUBLIC SECTOR EXECUTIVE PROGRAMS, DIRECTOR, ISPPI, SCHOOL OF

PUBLIC AFFAIRS, AMERICAN UNIVERSITY, WASHINGTON,

DC; CURTIS COPELAND, SPECIALIST IN AMERICAN NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE, LIBRARY OF CONGRESS, WASHINGTON, DC; CHARLES

TIEFER, PROFESSOR OF LAW, UNIVERSITY OF BALTIMORE,

SCHOOL OF LAW, BALTIMORE, MD; JOSEPH SWERDZEWSKI,

PRESIDENT, JOSEPH SWERDZEWSKI & ASSOCIATES, HAMPTON COVE, AL; HANNAH SISTARE, VICE PRESIDENT FOR

ACADEMY AFFAIRS, DIRECTOR, HUMAN RESOURCES MANAGEMENT CONSORTIUM, NATIONAL ACADEMY OF PUBLIC

ADMINISTRATION, WASHINGTON, DC; AND KEVIN SIMPSON,

EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL, PARTNERSHIP FOR PUBLIC SERVICE, WASHINGTON, DC

STATEMENT OF ROBERT TOBIAS

Mr. TOBIAS. Chairman Davis, Ranking Member Marchant, distinguished members of the subcommittee, I would like to thank you

for this opportunity to testify on the subject of personnel reform in

the Federal Government.

Congress gave the Secretaries of Defense and Homeland Security

the authority to design and implement broad personnel reforms in

their departments. My remarks will focus on pay for performance

and labor/management relations.

Creating a pay for performance system that actually increases,

that actually has the impact of increasing agency outputs and outcomes requires a two-step process. First is the creation of a performance management system that enables supervisors to more objectively discern the difference in performance based on outputs

and outcomes, rather than applying the more subjective works

hard standard. Next, once the discernment is completed, the reward attached to the outcomes must be sufficient to motivate behavior that increases individual and ultimately overall organizational performance.

Now, these steps have to be sequential. It is not possible to build

a successful pay for performance system onto an unsuccessful perVerDate 11-MAY-2000 13:58 Jul 23, 2007 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\36547.TXT HGOVREF1 PsN: HGOVREF1
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formance management system. Until a credible performance management system is in place, employees will continue to perceive bonuses and awards as arbitrary. Even if substantial sums of money

were made available, the money would not increase performance if

the performance management system is faulty.

Now, I think that it is imperative that we establish a culture of

performance where supervisors are able to credibly discern differences in employee outputs and outcomes. We don’t need legislation to accomplish the creation of a performance management system, but we do need recognition that achieving such a system requires a collaborative, long-term, disciplined effort by Presidents,

political appointees, SES executives, union leaders, and employees.

Both the promise of success and the cost of failure are large. I

reference an article in my prepared statement where the author

has concluded as virtually undisputed that goal setting does increase performance at all levels—individual, group, and organization.

Specific and challenging goals are associated with higher levels

of performance, more so than either no goals or general ‘‘do your

best’’ goals.

Now, the authors also point out that goal setting in the public

sector is much more difficult than the private sector. Output and

outcome goals are difficult to define for employees, managers, and

the public, yet, if successful, goal setting increases employee engagement, individual and organizational performance, and taxpayer satisfaction. It is an outcome worthy of pursuit. Creating a

performance management system, however, is very difficult. First,

agencies have to define what organizational output and outcome

means, and they have been struggling to achieve this since 1993

with the passage of the Government Performance and Results Act.

Agencies have made progress, but there is a long way to go.

Second, a plan must be created for translating the output agency

goals into individual goals that are linked to organizational goals.

Third, supervisors must spend time talking and listening to those

they manage, coaching, evaluating performance, and monitoring organizational goal achievement. For most managers in the Federal

Government, this is a very difficult challenge.

Currently, supervisors generally evaluate an employee’s performance on whether the employee works hard. If an employee works

hard, he or she is likely to be rated highly. Under a performance

management system, the standard would be ‘‘achieves results.’’

This would entail a change from a subjective evaluation of performance to a significantly increased focus on the achievement of objective performance results.

Long-term supervisory employee relationships have been built on

a works hard set of expectations. Those relationships would have

to evolve to accommodate another set of expectations. Supervisors

would have to be trained to expect results and evaluate employees’

work accordingly, and employees will want and expect support. It

doesn’t happen. Achieving this requires more than training on process. It requires a real focus on changing culture in an organization.

Supervisors are rated in the Federal Government for what they

do, as opposed to how well they manage. But if we want increased

organizational performance, that has to change. Employees have to

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be included as part of this effort, and they are not today. Employees have to learn. Managers have to learn. There has to be an exchange of what they do, how they do it, and how what they do are

linked to organizational goals. Union leaders have to be involved

in order to make this work. Union leaders have to be involved in

creating a performance management system, and they haven’t been

effectively involved. If they are involved, there are fewer impact

and implementation negotiations, there are fewer adversarial relationships, and faster implementation.

I also suggest that in order to be successful we need support

from Presidents and the Congress. If importance on increasing performance were measured by the rhetoric of Presidents, performance

would be important. If it were measured in terms of how much

time Presidents spend on this effort, I think we would see that

Presidents spend time on public policy creation, not public policy

implementation.

If we want public policy implementation to be effective, if we

want performance increases, there has to be a focus on public policy implementation starting at the top. Without Presidents spending time, political appointees won’t spend time because there is

only risk and no reward. Political appointees are evaluated not on

the basis of how well they implement public policy, but rather on

the public policy that they create.

So it seems to me that the President has to change his behavior

before political appointees will change their behavior, before the

Senior Executive Service will change their behavior, but I believe

it is important that we find a way, working collaboratively, to define, design, and implement a performance management system

that challenges employees to achieve agency mission by working

better.

I think that if we look at the pay for performance system and

evaluate its success, all we need to do is look at the surveys recently completed by the Senior Executive Association where the

performance system——

Mr. DAVIS OF ILLINOIS. I’m going to ask you to summarize.

Mr. TOBIAS. Am I over? I’m sorry.

Mr. DAVIS OF ILLINOIS. Yes. Wrap up. And, if I could just say to

the other witnesses, we don’t personally have any difficulty in

terms of listening. The ranking member has another appointment

that he is going to have to try to keep, and so I would like to ask

that the witnesses would stick to the 5-minute rule——

Mr. TOBIAS. I apologize.

Mr. DAVIS OF VIRGINIA [continuing]. So that he can hear each

one of the witnesses before he has to go, and have an opportunity

for questions. But thank you very much, Mr. Tobias.

[The prepared statement of Mr. Tobias follows:]

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Mr. DAVIS OF ILLINOIS. We will proceed to Mr. Copeland.

STATEMENT OF CURTIS COPELAND

Mr. COPELAND. Thank you very much, Mr. Chairman and members of the subcommittee. I am here to discuss several issues that

CRS was asked to address related to the implementation of the

GAO Human Capital Reform Act of 2004.

The first such issue is whether the Comptroller General told

Congress and GAO employees during consideration of the legislation that all employees who received a meets expectation performance evaluation would receive annual adjustments to their base

pay. The record indicates that the Comptroller General gave such

assurances on several occasions. For example, at a July 16, 2003,

hearing held by the predecessor to this subcommittee, the record

indicates the Comptroller General said GAO had agreed to ‘‘guarantee annual across-the-board purchase power protection and to

address locality pay considerations to all employees rated as performing at a satisfactory level or above, absent extraordinary economic circumstances or severe budgetary constraints.’’

He reiterated this concept several other times during his written

testimony, and he confirmed that assurance when answering questions from Representative Chris Van Hollen during the hearing.

Minority views in the House committee report on the GAO Reform Act state the Comptroller General has ‘‘assured GAO employees that anyone performing satisfactory work will receive at least

a cost of living adjustment.’’

During a September 16, 2003, hearing before the Senate Committee on Governmental Affairs the record indicates the Comptroller General told Senator Thomas Carper, ‘‘For the 97-plus percent

of our employees who are performing at an acceptable level or better, we will protect them against inflation, at a minimum.’’

The Senate Committee on Governmental Affairs report on the

GAO Reform Act states the committee had ‘‘received a commitment

from the Comptroller General that, absent extraordinary circumstances or serious budgetary constraints, employees or officers

who perform at a satisfactory level will receive an annual base pay

adjustment designed to protect their purchasing power.’’

The next issue CRS was asked to address was whether all GAO

employees with meets expectations ratings had received these annual adjustments. The short answer is no. According to GAO, 308

of 1,829 GAO analysts and specialists, about 17 percent, did not receive the 2.6 percent permanent pay increase that other GAO employees received in January 2006. These 308 employees all had

meets expectations ratings or better. Most of these employees were

at the second of GAO’s three-banded pay system, roughly GS–13

and 14 employees, but some employees at all three levels were affected.

In March 2006, the House Appropriations Committee asked GAO

to explain the difference between its statements in 2003 and its actions in 2006. GAO responded by saying the Comptroller General’s

statements in 2003 were ‘‘accurate at the time,’’ but that subsequent events had altered his views on this issue.

The most significant of these events was a market pay study by

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ployees were already paid more than what should be the maximum

pay for their positions.

Another question CRS was asked to address was whether the

Watson Wyatt study was correct that many GAO employees are, in

fact, overpaid. The only way to make such a determination is to understand how the Watson Wyatt study was conducted. Specifically,

what organizations were compared to GAO and what occupations

were compared to GAO analysts. GAO has declined to provide this

kind of detailed information to CRS, and it is not included in other

sources, including its annual report to Congress on the GAO Reform Act. Therefore, we are unable to offer any observations about

whether GAO employees are, in fact, overpaid.

Finally, CRS was asked to describe the financial implications of

the Comptroller General’s decisions to deny pay increases to certain GAO employees. Forecasting these kinds of financial implications is difficult and depends on a variety of factors; however, using

what we believe to be reasonable assumptions, it appears the financial implications may be significant. As detailed in my written

statement, by the year 2010 a GAO band 2A employee making

$110,000 a year in 2005 made far more than $10,000 a year behind

a comparable non-GAO Federal employee. Such a differential

would also have a significant impact on GAO employees’ pension.

Assuming retirement at 2010 and receiving a pension for 20 years

thereafter, a GAO employee could lose a cumulative total of base

pay and pension of nearly $120,000.

Mr. Chairman, this concludes my prepared statement. I would be

happy to answer any questions.

[The prepared statement of Mr. Copeland follows:]

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Mr. DAVIS OF ILLINOIS. Thank you very much.

We will go to Professor Tiefer.

STATEMENT OF CHARLES TIEFER

Mr. TIEFER. I applaud your holding hearings on this vital and

controversial topic, and I appreciate the opportunity to testify.

I am a professor of procurement law. I am the author of the book

‘‘Government Contract Law.’’

Pay for performance not only just hasn’t succeeded. One set of

numbers from TSA illustrate what it has done to morale. Of TSA

screeners, 82 percent, 17,000 who returned forms, 82 percent disagreed with the proposition high-performing employees are promoted; 86 percent disagreed with the proposition pay raises depend

on how well employees perform their jobs. There is no confidence

in the system.

But worse than that, it is not simply that it is not a success; it

has channeled scarce personnel resources, the money, the training,

the attention from the top level away from where they really could

be used and really are needed.

I testified last May at a hearing about Department of Homeland

Security, where you have a stark example. They have an impending shortage of people who can deal with IT, information technology, and procurement, and they should be devoting these personnel resources to training these people, recruiting them, retaining them. What happened? Because they diverted the resources

over to this thing, this personnel system, look at what happened

with FEMA after Hurricane Katrina. An agency which used to handle very competently disasters brought in a disastrous performance, itself. What it was doing personnel-wise was attending to the

wrong things.

An even more serious concern from the legal perspective is the

other radical elements besides pay for performance in the personnel reform of this administration. Suppressing collective bargaining, suppressing ruling out arbitration, doing away with appeal

rights, these are core elements in NSPS in the Department of Defense and in what was attempted in Max HR for the Department

of Homeland Security. They are the heart of labor representation.

Now, some mistakenly believe that the administration’s efforts in

that regard are just going to sort of run out of steam on their own

because of lack of appropriations to carry them out and because of

adverse legal decisions. As Delegate Norton’s opening statement

pointed out, courts have thrown out in their rulings aspects of

these personnel systems. But I have to note that the key decision

in this regard, which is a decision by the Department of Defense,

by Judge Sullivan of this District, is on appeal. It was heard by a

panel in December. This is a panel that has on it Judge

Cavanaugh, formerly White House Associate Counsel, and so it is

considered not impossible that he will rule and that the panel will

rule for the White House in this regard.

Now, the House voted in July 2006, to withhold funding of the

radical parts of NSPS, the ones I just ticked off, not the pay system, just the radical parts—the suppression of labor representation

that Judge Sullivan had held illegal. That vote did not become the

law, but, especially if there is an appellate ruling that overturned

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Judge Sullivan’s decision, that issue will be back front and center

for this Congress and hearings by this subcommittee will be absolutely crucial. This is the forum. This is the place where that issue

will be debated.

So much has changed since 2003, and it was a close decision

even then to give the authority that was given, that it is hard to

imagine the administration would be given a blank check to go

ahead.

Another somewhat technical issue I want to mention, as far as

we named the big systems. The big systems where personnel reform is taking place were all named earlier by Ranking Minority

Member Marchant, who had the number. But there is one specialized one, and that passed last September. The Director of National

Intelligence, John Negroponte, set in motion a pay banding system

for the 16 agencies of the intelligence community that are under

his supervision, which amount to about 50,000 civilians. DNI says

it is going to be asking the Congress for what it calls ‘‘gap filling

legislative authority’’ because it doesn’t have complete legislative

authority to do this. Its charter doesn’t give it that.

Well, this subcommittee needs, as it is doing oversight over these

personnel reforms, to get its views on this subject, so that when the

DNI—Director of National Intelligence—tells the intelligence committees on their annual bill that it is just gap filling, that they will

get someone who knows about personnel issues who says no, it is

more controversial than that.

That completes my testimony.

[The prepared statement of Mr. Tiefer follows:]

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Mr. DAVIS OF ILLINOIS. Thank you very much. Of course, we will

have opportunities during the question and answer period to dab

deeper and further into these issues.

Mr. Swerdzewski.

STATEMENT OF JOSEPH SWERDZEWSKI

Mr. SWERDZEWSKI. Thank you, Chairman Davis, Ranking Member Marchant, for the opportunity to speak to you today and testify.

Thank you for holding this hearing.

My firm has been actively involved in assisting unions and management with the implementation of NSPS. We have assisted in

understanding how the collective bargaining system will work

under SPS and assisting agencies with training their managers on

how performance management will work and the classification and

compensation systems. My summary remarks address two areas

which I think are of significant concern.

As you are aware and as the previous speaker noted, the labor

relations system, which is a crucial aspect of NSPS, is currently

subject to a Federal district court injunction. The Federal district

court in Washington, DC, has determined that the labor relations

system created by DOD does not meet the requirements Congress

established in the NSPS statute for collective bargaining. The case,

as mentioned, is current on appeal to a three-member panel of the

D.C. circuit.

The outcome of the litigation at this time is uncertain. The case

before the D.C. circuit concerning the implementation of the new

personnel system at the Department of Homeland Security was recently decided in favor of Federal unions. The D.C. circuit found

that the regulations DHS issued on labor relations, which are strikingly similar to the labor relations regulations of NSPS, violate the

union’s right to engage in collective bargaining.

The NSPS system was designed, premised on there being little

or no collective bargaining over any aspects of the new personnel

system. It was based on immediately terminating provisions of collective bargaining agreements, which it found were in conflict with

NSPS, and implementing the NSPS requirements without bargaining. This approach avoided bargaining with approximately 1,800

bargaining units in DOD.

While this was the approach chosen by DOD, there were numerous other alternative ways to implement NSPS, such as using ability to bargain at the national level with heads of DOD unions,

rather than with each individual union.

As a result of DOD deciding to begin implementation for non-bargaining unit employees, which is happening as we speak, DOD

could find itself with a bifurcated personnel system dependent on

the decision of the D.C. circuit. Should the D.C. circuit decision be

similar to the decision of DHS, DOD would have to determine

whether redesign of the system would be necessary to accommodate

the impact of collective bargaining. This would be a costly undertaking and time consuming.

Another option would be to bargain over NSPS under the current

title five labor relations statute, once again incurring significant

cost and delay for new potential litigation.

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However, should DOD be successful in the current litigation,

they would be faced with implementing the new system for a large

number of employees and then having its NSPS labor relation system subject to the NSPS labor relation sunset provision in 2009.

With the significant overhang of the entire labor relations controversy in DOD is that the labor relations system, itself, may be

sunset in 2009, with little time in between the time that a successful decision for a DOD would be implemented and new collective

bargaining taking place.

DOD is faced with a difficult decision. If it was to determine to

proceed with implementation of NSPS with the outcome of the litigation uncertain, it may end up with a dual personnel system with

attendant cost and inefficiency. A dual system increases the cost of

personal administration and can have significant impact on the morale of employees. It may lead to inevitable comparisons of which

employees are doing better under which system.

The second area of concern is tying a new performance management system to pay for performance before the performance system

has matured. Every performance management system has implementation problems and kinks as it is first implemented. Some of

these problems take a number of years to be worked out.

Performance management under NSPS is of significant new importance. It is just not an evaluation of performance, but it determines an employee’s pay, bonus, and, most importantly, particularly in the area of rack and potential RIFS, retention and RIF, it

significantly changes the aspect of how an employee is treated in

RIF, and also leads to potential for non-competitive promotion.

The new system has significant strengths; however, it will take

a period of time for employees and supervisors to be comfortable

with its use and impact. To prevent the possibility of significant

frustration with a new system and costs associated with disruption

cause, using a step-by-step approach implementing pay for performance would appear to be more cost effective.

Thank you for the opportunity of testifying today.

[The prepared statement of Mr. Swerdzewski follows:]

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

We will proceed to Ms. Sistare.

STATEMENT OF HANNAH SISTARE

Ms. SISTARE. Chairman Davis, Ranking Member Marchant,

members of the subcommittee, thank you for inviting me to testify

on the operation of pay for performance systems in the Federal

Government and recommendations for moving forward. My comments today represent my own views and those of a number of

Academy fellows with extensive experience in this field.

I appeared before this subcommittee in 2003 to discuss performance and pay recommendations of the National Commission on the

Public Service, chaired by Paul A. Volcker. The Volcker Commission was concerned that Federal personnel systems were not designed to establish and measure progress toward performance objectives and that the quality of performance was too often ignored.

Today, performance based management systems are being implemented at agencies across the Government.

The experts predicted from the beginning that the design and implementation of these systems would take time, focused effort, and

committed resources. This proved particularly true in the two huge

departments Congress provided with new authority to institute

such systems. The very size and complexity of Defense and Homeland Security has served to slow the process, and, as others have

commented, there have been other intervening factors.

Despite these difficulties with these agencies, there is evidence

that the Federal workforce and its leadership are more attuned to

performance than in the past. As the Volcker Commission and

many others have concluded, this change in the culture and operations of government is necessary for it to serve the public and the

Nation in the 21st century.

The Academy has assisted several Federal agencies by conducting readiness reviews for the implementation of performance management and performance based pay systems. These include the

FBI, the Navy, and the Federal Judiciary. Notably, the Academy

and the agencies that it has worked with have found that such

independent outside review is very helpful in identifying problem

areas that need to be addressed.

Based on a review of its own studies and those by others, the

Academy has produced a report on recommended actions for Federal agencies working to adopt pay for performance systems. We

have provided copies of this report for the subcommittee’s use. I

will note a few findings which we feel have particular applicability

for the successful implementation of pay for performance in the

Federal Government today.

The first set of factors have to do with readiness. First, top leadership that is committed and capable of leading organizational

change; preparation of first line supervisors for their critical role;

clearly defined organizational goals and objectives; necessary reporting systems and infrastructure; sufficient human and financial

resources; and an established policy and legal framework, including

a clear definition of employees who are covered and how the program policies will affect them.

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Factors contributing importantly to effective design and implementation are: top leadership support and expectations for the system, which is reinforced by managers and supervisors; a clear and

persuasive statement as to why the new system is needed, and its

anticipated benefits, particularly how it will contribute to employees’ ability to better accomplish their work; a well-established,

credible, valid performance management system; open communications and program transparency between and among all levels of

the organization; a commitment to test the system components and

refine them as needed; and a willingness to utilize independent reviewers to assess key steps in program design and implementation.

Some of these factors were identified early on in the Federal

Government’s pay for performance initiatives. Some have gained

clarity as systems have been implemented. All have been validated

by experience. They can serve as useful benchmarks for examining

pay for performance programs and development and implementation.

In studying the track record in pay for performance in the Federal Government and its future, we believe there are some preconditions to future success. First, leadership commitment to the

system—I have mentioned leadership three times now; commitment throughout the organization to the system; and recognition

and understanding of its importance in achieving program goals;

time for rehearsal, review, redesign, and retrying, all of which will

build participant buy-in and trust; and consensus among policymakers and the Executive as to the overall design, implementation,

cost, and financing of pay for performance systems and a commitment to support that consensus over a number of years.

That concludes my prepared remarks. I hope my comments and

this report will be of use to this subcommittee.

[The prepared statement of Ms. Sistare follows:]

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Mr. DAVIS OF ILLINOIS. Thank you very much. I am certain that

they shall.

We will proceed to Mr. Simpson.

STATEMENT OF KEVIN SIMPSON

Mr. SIMPSON. Thank you very much, Chairman Davis and Ranking Member Marchant.

I represent the Partnership for Public Service. We are a nonpartisan, non-profit organization. We are dedicated to revitalizing

the Federal Civil Service by inspiring a new generation to serve

our country and transforming the way the Federal Government

works.

I think the biggest contributions that we can make to this conversation are to convey, first of all, a sense of urgency about the

need for reform; two, a historical context for the different flexibilities and innovations that are represented by the two most currently prominent reform efforts at DOD and DHS; and, three, the

importance to this committee and to agencies of import focusing on

matrix during the course of implementing these new innovations.

First, the question of urgency. It is our long-held view at the

Partnership that modernizing current personnel systems is essential. Many personnel systems are still based on a general schedule

of pay and position classifications that was first implemented in

1949. The result is that the Federal Government’s current system

for recruiting talent, top to bottom, under-performs on almost every

task it has. It is slow in the hiring, it is insular in the promoting,

it is out of touch with actual performance and the rewarding, and

it is stingy with the training.

When young Americans are asked to picture themselves in public

service careers, they imagine being caught in stifling bureaucracies

where seniority and not performance rules. Perhaps most alarmingly, large numbers of employees, including many senior executives carrying a vast amount of institutional knowledge are soon

going to be retiring. The Federal Government will have to be much

more aggressive than it has in the past to attract new talent at all

levels, and the American people are increasingly concerned that

government is often unable to execute its assigned roles in a competent manner.

We strongly believe that the path to renewed vigor and competence requires continued innovation of the Federal Government’s

personnel system. The stakes are high and the status quo is unacceptable.

The next question is what shape should the reforms take, and

that is where an awareness of the historical context of these reforms becomes important. The new personnel systems we are talking about now at DOD and DHS did not develop in a vacuum.

Many elements of those new systems were drawn from preexisting

demonstration programs, and those programs have yielded measurable improvements in hiring and retention and employee engagement. Other elements, unfortunately, are brand new and essentially untested, including those in labor relations and employee appeals.

Now, over time many Federal agencies have made the case for

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ment, DOD and DHS are simply the latest and the largest. My

written testimony offers some detail about the progress that they

have made, but I would like to offer three over-arching observations about that track record.

First, past demonstration projects offer an assurance to employees and supervisors that reforms like recruitment flexibilities and

pay banding and revamped performance management systems can

work, but the converse is also true. The farther we step away from

those proven models, as in the proposed labor/management sections

of the NSPS, which would have no real precedent in the various

demonstration projects, the more difficult it is to draw on those

past experiences to ensure successful implementation.

Second, change can take time. Even successful demonstration

projects initially engendered employee resistance. That is only natural. People don’t like change. Over time, however, if the system

is being successfully implemented, you should see reduced levels of

resistance. For example, the pay banded pay for performance demonstration project at the Navy’s China Lake Naval Weapons Center

was initially favored by only 29 percent of employees, but by 1998

that number had grown to 71 percent. Significant organizational

change can frequently take 5 to 7 years to accomplish.

Third, as Congress weighs how to proceed with these personnel

reforms, it will be important to find agreement on what we hope

to achieve through these reforms and then regularly measure our

progress toward these goals. Choose your key matrix and stick with

them.

In that regard I would commend to your attention work that the

Partnership has done in the form of the best places to work

rankings, which build off of OPM’s Federal Human Capital Survey

to provide consistent measures over time of relative levels of employee engagements, as well as several other workplace environment characteristics, such as the quality of leadership that has

been mentioned quite a bit by the other panelists here, and support

for diversity.

More broadly, we recommend special attention to the areas of recruitment, retention, the existence and extent of skills gap, the

ability of performance management system to make meaningful

distinctions, and leadership.

That concludes my testimony. I look forward to answering your

questions.

[The prepared statement of Mr. Simpson follows:]

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Mr. DAVIS OF ILLINOIS. Thank you all so very much. I will begin

the questioning process.

Mr. Simpson, you indicated a sense of urgency relative to the

need for reform. Should we not be as urgent as you indicate? What

do you see happening, or what would be the consequences of a lack

of that urgency?

Mr. SIMPSON. I think our fear is that we see a continued deterioration of the ability of government to perform its core functions in

a competent and accountable way. Every organization depends on

its workforce to get its job done, and I think there is a growing consensus that the quality of your workforce influences the ability of

the organization to achieve its stated goals. I think what we fear

is that the ability of government to perform in the way the American taxpayer expects continues to decline if we don’t continue to

innovate on these systems.

Mr. DAVIS OF ILLINOIS. You stated in your written statement

that GAO has shared some of its annual employee survey results

with the Partnership in order to be included in your best places to

work in the Federal Government rankings. Since the Partnership

did not conduct the survey, itself, how knowledgeable are you as

to how GAO conducted the survey and whether or not the results

were validated?

Mr. SIMPSON. We had several discussions with GAO and we were

satisfied that the manner in which GAO implemented the survey

to their employees was comparable to the way in which the OPM

administers the FHCS across government, that employees were

free to fill out the survey and respond in ways that they thought

appropriate. In fact, the GAO, relative to many other Federal agencies, still registers at a very high level of employee engagement.

They are a very professional, dedicated, talented workforce.

Mr. DAVIS OF ILLINOIS. Were there questions in the survey specifically about pay increases and the band two split?

Mr. SIMPSON. The only questions that we used were those that

we could compare to the questions administered in the Federal

Human Capital Survey. I know that there are questions about satisfaction with pay, which we incorporated into our index, but I’m

sure that there are probably very specific questions unique to OPM

which we did not incorporate into our analysis.

Mr. DAVIS OF ILLINOIS. Then how comparable would you say that

the GAO study is to other Federal agency studies that you have reviewed or come into contact with?

Mr. SIMPSON. The GAO provided us enough data points with respect to overall employee engagement—and really this is just a

matter of essentially four key questions trying to gauge what your

overall satisfaction is with government—to allow us to include

them in our overall rankings. That’s all that was necessary for us

to incorporate them into the best places to work product. Beyond

that I can’t really speak in a very knowledgeable way to exactly

how well the GAO does or does not track the rest of the Federal

Human Capital Survey.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Ms. Sistare, in your written testimony you stated that, despite

the difficulties DOD and DHS are experiencing in implementing

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ductive work has been done and that the Federal workforce and its

leadership are increasingly more performance attuned. Specifically,

what productive work has been done by DOD and DHS in regards

to its personnel system?

Ms. SISTARE. Well, regarding those two agencies, I would say

that the initial work they have done, and redone in some cases

where they found they had problems, has started to lay the basis

for a performance management system. I distinguish that from performance based pay in that I think if a performance management

system is established appropriately, you are 80 percent of the way

there.

Now, my particular comment related more to the work that the

Academy has done in looking at work that has been done at other

agencies, the early work that was done in setting up demonstration

projects, work that has been done, for instance, at FAA where they

had trouble at first but have now gotten more on track. One of my

colleagues is working with the IRS and has found that many of the

components for performance management are in place. There still

is a need to pull it all together.

So my comment was not so much referring to DHS and DOD,

where they have had significant problems, but elsewhere in government where this kind of effort is ongoing.

Mr. DAVIS OF ILLINOIS. Thank you very much.

I would now yield to the ranking member, Mr. Marchant, for his

first round of questions.

Mr. MARCHANT. Thank you, Mr. Chairman.

I think on the first round I only have one question, and then ask

for a response from each of the panelists.

What would you have this committee do to correct these situations? We have been in a period of change now for almost a decade,

it looks like. There doesn’t seem to be a lot of happiness and joy

with the system. So we have a committee, we have a new majority,

we have kind of an opportunity now, so what would you have this

committee do? Would you have them withdraw the congressional

authorization to proceed with this whole concept?

Would you just drop the whole idea, go back to the way things

were before? Would you abbreviate the goals? Would you shorten

the timeframe for implementation? Would you file new bills? Would

you file legislation that gave specific guidance and direction to how

anything would be implemented?

It seems like there has been a lot of study about the subject and

how it has not worked. From my background and perspective, I

think the most important work this committee can do, Mr. Chairman, would be to come up with an idea, a better idea of how to

move forward.

I would like to have your response. We will just go in the same

order as the original witnesses, if you don’t mind.

Mr. TOBIAS. I think, Congressman Marchant, that the real focus

of attention needs to be on performance management, not pay for

performance; defining goals, creating evaluation systems, and supporting the change in the culture to a more results oriented situation in agencies. I believe that if employees see how their work is

linked to agency mission, that you will get a significant increase in

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employee engagement and productivity in agencies across the Government.

I think what has happened in DOD and DHS is that the focus

has been on the second step in the process, pay, and not enough

focus on the first step, a performance management system. So what

we have is people getting pay when there is no real distinctions

that are made on a credible basis of performance, so people get

very angry about that.

Until you have a performance management system in place, you

can’t have a pay for performance system. And, with respect to what

Congress can do about that, I think it goes in a couple of ways.

One, I think Congress, most committees, have not really cared

much about performance and what agencies achieve or don’t

achieve or whether the goals are outcome or works hard goals. I

think Congress is very concerned when the executive branch makes

a huge blunder, as it often does, but on a day-to-day basis or on

a week-to-week or month-to-month basis there’s not much attention

on the kind of performance goals that agencies create.

So I would urge more focus of attention on the kind of performance objectives that agencies create and whether or not they

achieve them. Do they create outcome performance goals and do

they achieve them? That would give the political appointees, the

Senior Executive Service reason for doing the hard work necessary

to create a performance management system.

Mr. COPELAND. Mr. Congressman, I am with CRS. CRS doesn’t

take positions on legislation or make recommendations, so I will

pass and leave it to my other panel members.

Mr. TIEFER. Too tempting for me. I can’t resist that way. I think

you could act on two different sets of things. One is that, as to the

parts of the personnel systems that impact collective bargaining,

arbitration, and appeal rights, the labor representation provisions,

you should de-authorize those. You should simply codify the decision of the D.C. circuit panel in the Chertoff case that did so for

the Department of Homeland Security and not wait for or not care

what happens with other.

And then, as for pay for performance, I think that you should report conditions such as the availability of sufficient money for

ample pay raises and say without these conditions being fulfilled,

without enough training, without the measures that people are

talking about here, and so forth, it can’t be ruled out.

Mr. SWERDZEWSKI. I would simply look at the same question that

Mr. Tobias talked about, which is the performance management

system, which to me is the key to the entire reform effort. The concept is you are trying to improve performance. Unfortunately, when

you immediately link pay to a brand new system it looks more like

cost containment to employees than improving performance, and

that’s a significant issue. It is a concern to managers, not just a

concern to employees, themselves.

Taking a new system such as performance management, having

dealt in the trenches with people trying to work with a new system

in SPS, they understand the value of linking organizational goals

to achievement. That’s a significant strength of the new NSPS system, linking those goals, making sure that people are actually getting results, not just simply performing duties.

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The problem with the system, however, is that it is very difficult

to take a one-size-fits-all system relating to 800,000 employees and

say it is going to work perfectly the first time out. It is a very complex system to begin with, and it is very difficult for an employee

to understand how something which is going to apply across the

board to everyone is going to apply to them, linking that directly

to their pay, and particularly more so than just their pay but to

their status in RIF, which really is a very significant issue to many

employees because of the ups and downs of what happens in DOD.

A step-by-step approach where Congress first authorizes a new

performance management system similar to the one authorized,

which is linking goals to achievement, and then reviewing and giving the agency an opportunity to show the results of that system

and then linking it to pay, if that is an appropriate process.

Ms. SISTARE. I definitely agree. Focus on performance management and getting it right first. Also, I would suggest that employees know more, not less, about how the system is going to affect

them and they have a chance to participate in the development of

those standards. I think some of the early regulations left a lot for

later manipulation. But maybe most important is that Congress

and the executive branch and all concerned parties reach consensus

on where we are going to go next and a commitment to understanding what resources that takes and a commitment to provide

them.

Mr. SIMPSON. I would like to associate myself with the comments

of the other members of the panel in terms of the importance of

putting performance management first, and I would add that I

think an appropriate thing to do would be to require agencies to

obtain some kind of outside certification that can be provided by

OPM or GAO or even NAPA that their system, in fact, does meaningfully differentiate between levels of performance, because I

think we all agree that is the predicate. Once that is in place, then

you increase dramatically the likelihood that your attempts to then

link pay to performance are going to succeed.

I also believe that Congress should probably revisit the labor

management and adverse appeal provisions of the NSPS, because

I think that they stand in the way in a very fundamental way of

the kind of employee buy-in and engagement and communication

between supervisors and employees that are going to be necessary

for the systems to succeed.

Mr. MARCHANT. Thank you, Mr. Chairman.

I would just have one followup question. Are you aware of any

major corporate or public entity that has gone into a performance

based management that did not have the element of the additional

pay that was mixed with it, that was successful that did not have

the element of additional pay involved in it, where it was performance based but there was no reward for the performance?

Mr. TOBIAS. In the article that I cited in my testimony the authors review about 2,600 situations where a combination of elements were examined. There are a subset of where only performance management was included. I don’t recall exactly which, but

the answer is yes.

Mr. SIMPSON. If I could offer one additional response, I also believe—and I would like to offer specifics in a supplemental submisVerDate 11-MAY-2000 13:58 Jul 23, 2007 Jkt 000000 PO 00000 Frm 00120 Fmt 6633 Sfmt 6633 C:\DOCS\36547.TXT HGOVREF1 PsN: HGOVREF1
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sion to the subcommittee—that you can have a successful and

there have been examples of successful performance management

systems without adding additional pay or adding additional resources. You take the resources you have and then improve the

way in which you are distributing them across your existing employees.

It also might not always be pay. Sometimes it is reward, recognition. So long as those recognition and other intangible rewards flow

from a credible determination by a manager that this person has

performed better than this person, or this team has performed better than this team, that is all you need for a strong performance

management system.

Mr. MARCHANT. Thank you, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Mr. Lynch is recognized for 5 minutes.

Mr. LYNCH. Thank you, Mr. Chairman. Again, thank you and the

ranking member for holding this hearing.

I would like to ask the panel—and, again, thank you for your

willingness to help this committee with its work. The National

Treasury Employees Union National President Colleen Kelley has

raised a number of, I think, valid concerns about the whole pay for

performance protocol, and just recognizing that the challenges we

have, with the massive impending retirements from the Federal

system is really at a critical level right now. We would be hard

pressed to replace these experienced, high-performing, very welltrained employees, and, as well, we are having tremendous turnover at DHS, you know, the baggage screeners, we have just got

big turnover with new employees. I think the system is bordering

on crisis.

Since it is really the organizations we want to work, we want

these—in other words, the airport is not safer just because one employee is doing their job. They need to all work as a cohesive team.

Same with all the departments and DHS, as well as Treasury.

It just seems to me that it is counter-intuitive to think that by

rewarding one employee here and there and denying pay to other

employees here and there in a system that may be working or may

not be working, it doesn’t achieve our goals. As a former iron worker, as someone who actually, you know, has a little bit of experience working in a union environment, it seems to me that would

be a disincentive.

As a worker, to me that would appear as just being favoritism,

because there is no system here. There is no objective system here

for when the extra pay is to be rewarded and to whom. So it will

appear, from a worker standpoint, as just being arbitrary. I think

it would be disastrous to morale in the workplace. That’s what I

am hearing. That is what I am hearing from the employees at

DHS.

I know that the National Treasury Employees Union has pointed

out that there was a study conducted—I believe it was the Hayes

Study that they referred to—that they did a senior manager pay

band evaluation on this system for the IRS in 2004. Here are some

of the results: one, 76 percent of the covered employees felt the system had a negative impact or no impact on their motivation to perform their best.

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Now, 63 percent said it had a negative or no impact on their

overall performance of senior managers. This is a quote from the

study: ‘‘only one in four senior managers agreed that the senior

management pay band evaluation is a fair system for rewarding job

performance or that ratings are handled under the system.’’ Last,

increased organizational performance is not attributed to this senior management pay band evaluation.

I think it is about leadership and about getting teams to work

together. You have positive peer pressure, you have leadership, and

that’s what leads these organizations to perform to our expectations. I just am a little bit frustrated in talking with the employees

because they are disheartened and there’s very poor morale.

One of the systems that has gone through the A–76 process and

has sort of adopted this model is the system that is in existence

right now over at Walter Reed. It went from a system of all Federal

employees that were doing a tremendous job, world class institution, they went in and did an A–76, all the Federal employees left.

Big exodus. They put in a bunch of employees who were not qualified, that were judged by the patients over there and the people

who are our constituents as being inadequately trained, and it has

just been a disaster over there.

I hope that, first of all, I would like to hear the thoughts of the

panel, rather than just going on, about the idea of working as a

team unit and as an organization to achieve the goal. It is no good

if I am a team leader and I am getting a good evaluation and all

my employees get lousy evaluations and don’t do their jobs. Why

the heck should I get a performance bonus? I’m not doing my job

because the people who work for me are not doing their job.

And right now, I don’t know, I was going to say this sounds good

on paper. It doesn’t even sound good on paper. I’m very discouraged

by it and I think there has to be a better way to get our act together here and get the most out of our employees. We can start

by treating them with a little bit of dignity and get them to work

together.

I will just yield. Try to do your best to respond. Thank you.

Mr. TOBIAS. Well, I think the issue of whether there should be

individual or group awards is a really critical question. I think that

is part of how you design the performance management system. Is

it you against you? Or is it you two working toward a common

goal? Getting that right, as you suggest, is an important element,

and it hasn’t been achieved.

I think the statistics that you cite point out the risk of going forward before you are ready. If the goal is to increase productivity

and the result is to decrease productivity, then you have had just

the opposite result, and I think that shows up in the statistics you

cite.

Mr. SWERDZEWSKI. One thing that has always struck me about

pay for performance is that it assumes that the most significant

factor that influences an employee’s performance in the Federal

sector is pay, which is basically a private sector model. Pay is what

you look for. Pay is what increases your esteem in the organization.

I think part of it is saying that pay is the most significant thing

that an employee looks for in the Federal sector, I think that’s

probably inaccurate.

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Many Federal employees did not come for pay, because many

Federal employees would have made a lot of money in the private

sector, not in the Federal sector. I think that’s part of the concept

of marrying the Federal employees’ public service, which is not

based on pay, which is based on avocation, which is based on something they want to do with being paid a living wage and being paid

a valid wage. It’s different than what the private sector is. The private sector does not necessarily have the same mission or the same

confidence in that mission that the Federal employees do.

Mr. LYNCH. I couldn’t agree with you more. I think, in closing—

and I want to yield back—when you look at many of the jobs that

are performed by Federal employees, you know, I just think of September 11th and the days thereafter. I was elected on September

11th. You know, we had 465 fire fighters who all went up the stairs

and public employees, all union employees, by the way, covered by

a collective bargaining agreement, heroes every one of them. All

those firefighters went up, did their jobs.

And in the days after that when we had the anthrax attacks here

in Washington the postal employees, in great risk to themselves—

you know, we were nervous at the time that the mails would stop,

that commerce would stop. It was the postal employees who went

to work, knowing that there was anthrax in some of those packages

at Brentwood and elsewhere, those loyal postal employees went to

work, not because of their pay scale but because they believed very

much in the work they were doing and they are as patriotic as anyone.

So I agree with what you are saying, that it is an avocation. It

really is. There is a lot more self satisfaction and self fulfillment

that goes into a lot of these jobs, although pay is definitely important. I want to say that. But I think this model misses a lot of that.

I think we have to just take another look.

I agree with the assessment that we have to make sure we have

this right before we implement it. Thank you.

I am sorry for going on, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. I think we are trying to get as much information, and I always think that passion helps to bring it out.

Ms. Norton.

Ms. NORTON. Thank you, Mr. Chairman.

I have a question first for Mr. Copeland. On page 10 of your testimony you indicated that, though you got some framework, some

general sense of so-called Wyatt study—and here I am quoting—

you were not told which companies, government units, or other organizations were included or which occupations in those organizations were used in the study and how they were matched to the

GAO occupations. Could a study be validated without this information?

Mr. COPELAND. Ms. Norton, I don’t believe so. I think in order

to validate a pay study you have to know basically what went into

it. You have to know what occupations were compared to a GAO

analyst. You would have to know what organizations were compared to GAO. Without that information, I think you would be at

a loss to know whether or not the study, itself, was valid.

Ms. NORTON. Well, I must say I am surprised, to say the least,

that GAO, whose job it is to pull such information out of others,

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would have declined to give that information about itself, particularly since it has literally preened before this committee about how

successful its own efforts have been. I note that for the record.

But let me tell you where I began. I began with the notion that

this system has been in place for a very long time, so it stands to

reason that if you favor a fair system, as I do, then the burden is

on you to, in fact, change it, as opposed to leaving it to people who

would essentially see it go to do so.

So you start out with I named some of the major assumptions I

believed were at the root of a system that otherwise would seem

quite mysterious. One was to avoid favoritism. Another was to

avoid corruption. Remember, a lot of these have to do not with efficiencies but with what to avoid. A third was simply to manage a

large number of employees, you know, almost 2 million.

There are other values, other reasons, but you ask anybody who

knows anything about the system in the broad, I think there would

be agreement on that. Therefore, if the GAO does not want to be

transparent about its study, then it seems to me they are stopped

right at the gate right then.

The whole notion of not getting information back, information at

least says to employees that they are basing this on something that

has been validated. Then they have to go from there if they have

other problems with it.

Second, just let me say that I also start from the notion that if

you have had a system in place for decades and you want to wean

people away from it, you had better think about how that is done,

especially if the perception is that you are asking them to give up

something that they had before. It may seem quite intangible. It

may be something like pay, which is the most tangible.

My own experience in the private sector, the fact is that I served

on the board of three Fortune 500 companies. One was unionized,

the other was not. I know for the record that one of the processes—

sorry, that’s the wrong word for it—one thing that the private sector does to keep unions out is to try to equalize the pay and benefits. So, to the extent that there is a perceived or actual reduction

in any, and you are trying to reform a system, you are not even

at the gate, much less out of the gate. How do you draw people to

a new system?

I think most in the private sector are results oriented, not process oriented. I am the first to agree that there are major differences and we can’t imitate that sector entirely, but in its results

orientation it is important to note that one of the things they would

to is to make sure employees didn’t think they were losing something. So there is something about beginning with pay. Some of you

have testified about this. Right out of the gate you say hey, by the

way, some of you are going to lose, and then you expect the whole

workforce to salute.

Mr. Simpson, on page 6 of your testimony, ‘‘changes that have occurred in the aforementioned agencies have been a mixed record,

to be sure, especially in terms of employee acceptance.’’ I appreciate

that you have gone through, in your testimony, those agencies. ‘‘We

note, however, that a number of the Federal agencies that have

been allowed to operate under alternative personnel systems, such

as SEC and NASA, and GAO—’’ better watch out whether or not

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you can continue to use that one—‘‘have consistently been rated by

their employees as among the top rated, best places to work.’’

Now, given the agencies—SEC, NASA, GAO—I ask you whether

you regard the employees of those agencies as typical of the Federal workforce.

Mr. SIMPSON. In some ways they are atypical, in that their level

of technical expertise and educational achievement is very, very

high. Overall, for the whole Federal workforce, that is a progression that has been happening for some time, as the Government

has moved from a largely clerical workforce to a more educated,

more accomplished set of workers. But I take your point that, to

some extent, smaller agencies with more focused missions, have an

easier time of cultivating high levels of employee engagement.

Ms. NORTON. So if you wanted to convince Federal employees,

unionized or not, that the movement of this system is going to be

fair, couldn’t your demonstration programs more clearly mirror the

average worker, particularly since the others are apparently being

asked or are going to be asked to accept the very same system that

is used for these top tier workers?

Mr. SIMPSON. I’m sorry, I didn’t catch that.

Ms. NORTON. I’m asking whether these demonstration projects

should be geared to the average employee if the average employee

in time will be asked to live under the same processes that have

been used for the top tier.

Mr. SIMPSON. If I understand your question correctly, Congresswoman, I do think that is a fair thing to ask of the people who may

be subjected to those demonstration project processes, with the caveats that we have talked about already, that there should be assurances that managers know how to differentiate in terms of performance and that there is buy-in from the employees about the

ways in which their performance is going to be measured and what

it is that the organization is trying to accomplish. Does that answer

your question?

Ms. NORTON. Well, of course. I think you have answered my

question. I think you have answered it honestly. If we are talking

about typical employees, you are not going to get them to think

they ought to go for pay for performance when you tested it with

master scientists, SEC employees, who, under Federal law, because

they compete with one another and they don’t want them stealing

one another, we have been very clear must, of course, meet market

rates, and that means these people are being very highly paid.

Again, one has to ask who is the Federal employee, and perhaps

get a composite. I appreciate your demonstration examples. I am

trying here to learn how to get the Federal employee to buy in. I

am very disturbed that the opposite has occurred. And GAO, which

is unionized, I mean, what do you have to do to teach employees?

And GAO wasn’t unionized, and now gets a union, or attempts to

get a union as a result here, does seem to me that that was not

the result that this administration desired. It has to be learned

from. I don’t want to keep the union out, but I would like the union

to come in in the usual way.

Normally, the Federal workforce has not been unionized because

there has been some radical transformation forced upon them.

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You and your agencies, I was curious. You named the FAA.

That’s an agency that is under my jurisdiction in another committee. You said for a time they seem to be the—and I realize they

are even more different—seem to be the negotiation of higher

wages for employees. Then you say the lesson learned here is that

some guidance from the Congress and clear expectations are beneficial in reform efforts.

What have you referenced? What should Congress have done

there? Because FAA were, in fact, bargaining for wages.

Mr. SIMPSON. You know, I am actually not familiar enough with

the situation at FAA to offer you an intelligent comment on that

particular piece of the testimony.

Ms. NORTON. Well, I appreciate that. Let me tell you what I

think you suggest here, at least in large. When employees accept

a new system—and the ranking member, it seems to me, was getting to this question when he asked about whether or not there had

been pay increases of any kind. I believe that was the word. But

his implication certainly was whether or not people thought they

were losing anything or gaining anything.

My question to you, or for that matter, to others, is whether or

not, when you are trying to accomplish a, let us say, very significant change in the system, whether you should assume that there

is going to have to be—forgive my use of this term—some version

of a quid pro quo. Yes, what you had here you are losing, but you

are not losing in the long run, and here is why. I wonder if any

of you sitting at that table would accept changes that did not assure you that, for what was taken from you, something perhaps entirely different but comparable enough would come forward so that

it was worth the change and it was worth your going along with

it without protest.

I am essentially asking whether you think, in the history of humankind, there are people who want to give up something without

recognizing that they are getting something in return, or whether

you think that efficiency for the Government, 9/11, changes that we

require should be enough for the average Federal employee to say,

OK, you say change, we give up. We won’t sue. We won’t unionize.

We understand what your needs are and we will do what you say.

Is that not counter-intuitive?

Mr. SIMPSON. My sense is, Congresswoman Norton, that it helps

if you can convey to a workforce that the implementation of a new

personnel system is never going to result in a reduction of the current set of benefits and pay that they have. I think workforces can

be persuaded to give up a certainty of a certain set level of benefits

in exchange for a less certain set of benefits if they are convinced

that those less certain set of benefits could be distributed in a way

that is credible, that tracks actual performance.

Ms. NORTON. And so, Mr. Simpson, you would say, for example,

that at GAO they should at least have been assured that the Wyatt

study was validated enough to make that assurance, wouldn’t you,

given what you just said?

Mr. SIMPSON. Yes.

Ms. NORTON. And if you were sitting at the GAO and you had

met what appeared to have been the standards set by the leadership, but the study hadn’t been viewed by any outside expert, could

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you possibly accept the changes that the GAO was asking you to

put into place?

Mr. SIMPSON. I think that goes to the attitudes that the GAO

employees have toward the ways in which GAO employees can

move up and flourish. Do they believe that their supervisors are

credible in the way in which they are distributing what rewards

are available to them to give?

Ms. NORTON. Does anyone else have an answer to that question?

I know some of the questions I am asking now are what can only

be called intuitive human actions and reactions. Really, I’m trying

to stay away from how much training you need, how good managers have to be, what the steps have to be. I am trying to step

back and look at the whole system and say it is after 9/11, haven’t

changed the system in three or four decades, go. How do I go at

it? The first thing I look at is what is the average person going to

respond to.

Mr. TOBIAS. Well, I think you are on to something, and what

were the changes that were implemented? Narrowing the scope of

bargaining so as to exclude unions and employees from the process,

the implementation of, as you suggest, a pay for performance system where people gave up and got little when this was supposed

to stimulate them or incentivize them to perform more. And I

think, in answer to your first question, what does somebody get

from participating in an effective performance in a system where

there is effective performance management.

The answer is it leverages why people come into the Federal

Government. If I come to the Federal Government and I come to

the SEC or I come to NASA, I come to HHS, or I come any place

else with the idea that I am going to make a difference and that

my work will make a difference in how the agency does its work,

and I have performance goals that are linked to that difference, I

will perform better, I will be more engaged, I will be more satisfied.

That has nothing to do with pay. It has only to do with setting targets that are clearly linked to my interests in why I came to the

agency in the first place.

Mr. COPELAND. With regard to GAO, clearly the GAO employees

were very concerned about the changes that were being proposed

by the GAO Human Capital Reform Act. The Comptroller General

mentioned those concerns in his testimony before this subcommittee 31⁄2 years ago and before the Senate. In fact, the GAO Employee Advisory Council said that the GAO employees were very

concerned about the changes. But the Comptroller General repeatedly assured them that if they met performance expectations they

would get a cost of living increase, and the fact that 308 employees

at GAO did not get that, despite those assurances, I think is the

source of a lot of the concerns and some of the activities that you

mentioned.

Ms. NORTON. Mr. Chairman, I do want to say that I think that

is a poison pill. I’m talking about a poison pill for doing this anywhere else in the workforce now. If you take the GAO, which is

generally accepting these changes, and then you have what appears to be a breaking of the word of top management, even though

they may slice it differently, that appearance is going to kill any

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acceptance for the rest of the workplace employees, especially those

at a lower level, which are most of them.

Finally, Mr. Chairman, may I say we are not even following our

own best practices, which are do as much centrally as possible. Do

as much quid pro quo or appearance of quid pro quo as possible.

I take the buy-outs during the Clinton administration, the huge

downsizing of the Federal workforce. Buy-outs are now going to be

far more punitive, and so they are being fought.

But essentially the Federal Government said here’s some money—I don’t know, it was $25,000 or something they were talking about. Anyway, we need all of them back now. But they said,

essentially, to those of you who are near retirement, here’s $25,000.

We have invested a lot of skills in you, so these employees knew

that they could go into the workforce, and a lot of them were Baby

Boomers, continue to earn, and then centrally thousands upon

thousands left. Not a peep. You didn’t hear the unions, you didn’t

hear studies, you didn’t hear GAO reports, because there was a

sensible way, not all this fancy stuff, just looking to how human

beings have to be treated in order to get them to lead.

Now we, of course, had other ways to thin the workforce. We

chose that way. It worked. I note again for the record, Mr. Chairman, I think we need to do a hearing on forced buy-outs such as

occurred in the Library of Congress, other agencies.

Finally, let me just cite perhaps the ultimate example of a sector

in terrible trouble, perhaps the worst trouble of all, and that’s the

manufacturing sector and the automobile industry, in particular.

Look at GM just floating downward. You can give it all the reasons

you want to. You can blame it on the union, you can blame it on

the cars, you can blame it on the global economy. But GM, there

are ways for an employer who has collective bargaining to quickly

get rid of these employees. One is to just shut the place down.

It is interesting how GM is proceeding. It, too, is proceeding on

a quid pro quo basis. Its health care is the problem. People are giving up and recognize they are giving up some of the best health

care in the planet in order to accept certain kinds of buy-outs. I cite

examples from our own workforce and our own experience, I cite

examples from perhaps the worst of the private experience to say

I think we have been playing around the edges of how people deal

with human experience and get people to want the same thing that

their adversary wants.

I think, Mr. Chairman, it may be too late, particularly with the

GAO experience. That will reverberate throughout the Federal

workforce like a wildfire, so whatever you are able to do, Mr.

Chairman, in repair work, I think at least for a long time is only

going to be repair work. I thank you for trying, and especially by

beginning with this hearing this afternoon.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Mr. Sarbanes.

Mr. SARBANES. Thank you, Mr. Chairman.

I wanted to see if you could validate a way that I am trying to

look at this and analyze it. We talked a lot about the performance

management system and whether the system, itself, that is being

implemented at DOD and DHS and so forth is well structured and

whether it makes sense, and so forth, and we have talked about

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whether you have to sort of nail down the performance management side of it first, in terms of people understanding clearly what

they are trying to achieve, and then maybe the pay portion of it

can come later. Those are all important things.

My colleague also addressed this issue of quid pro quo, that people aren’t going to buy into any system that they are transitioning

to unless they feel like they are getting something, but that is really just one side of the equation. The other side of the equation is

the conditions under which you implement any new system. In

other words, even if the system, itself, was the best system in the

world—and you have talked, Mr. Simpson, about how it could take

5 to 7 years to transition any workforce to change a culture from

where it has been to where it needs to be.

So even if the system, itself, is the best kind of system it can be,

the next question is: is the environment into which you are placing

it one that facilitates the transition or does not facilitate it. That

is what I am particularly interested in, because my sense is that

the conditions that the workforce is in now are ones that all contribute to resistance.

You are going into an environment where collective bargaining

rights are being challenged, where personnel are working under

difficult conditions where you don’t have enough personnel to handle the job, where they are subject to these outsourcing, which destroys morale, etc. So is that a fair point?

In other words, for those of you who have studied what makes

a transition in a performance evaluation system work best, isn’t it

highly relevant the conditions into which you are putting the system and you are making the transition?

Mr. SIMPSON. Congressman Sarbanes, I think you are on to

something. I think you are on to something, as Mr. Tobias would

say. It is particularly with respect to two points.

You know, challenges to collective bargaining are really very corrosive to employee trust and the ability of employees to communicate in a very effective way with supervisors inside of that agency, and it strikes me that I think that is a very hostile condition

in which to try to implement the kind of really more vigorous dialog that is necessary to implement any kind of pay for performance

system.

Pay for performance is a good goal, not just because it puts more

pay in the hands of people who are performing well, but it obligates

all of the parties to pay attention to what it is that the organization is trying to accomplish. It has a salutary effect of focusing

them on what it is that is good performance, what is exemplary

performance.

The question of resources is also incredibly important, as I have

tried to note in my opening remarks. Very frequently resources are

lacking with respect to particularly training and development of

the next generation of leaders in the Federal Government, and

those things are frequently being overlooked in the Federal space

and I think that when you are facing a challenge as large as DHS

they shouldn’t be, and that actually this subcommittee and Congress as a whole has a very important role to play in trying to

make sure that those kinds of needs are adequately resourced.

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Mr. TOBIAS. I agree totally, Congressman Sarbanes, and I would

put it this way: everything you have described increases the risk

that the effort will fail, and so if the issues that you identify are

not tended to, if they are not focused on, if they are not addressed

and satisfactorily resolved, it will make it very difficult if not impossible to do the steps that we have been describing today.

Mr. SARBANES. Right, and that doesn’t have to be about politics

or ideology; it could simply be saying when you implement reform,

particularly reform to an evaluation system, it is important, if you

want it to work, to make sure that the conditions that people are

working under are positive conditions or it is not going to work as

a matter of structure. Forget about whether you believe in unions

or you don’t believe in unions, whatever. You want that workforce

to feel like somebody respects them, is paying attention to them,

is giving them the resources they need, etc., because it is tough

enough to implement a system like this and make the transition,

even if all those conditions are the best they can be—and, of

course, they are not the best they can be.

So Mr. Chairman, along the lines of what the ranking member

said, I would hope that recommendations that come forward from

you and others as to what we can do with respect to improving this

transition would not only address the system, itself, as we have

done, but there would be a second set of recommendations that

says the conditions, the environment in which a change like this

is going to happen well has to be improved and supported and enhanced in the following ways or we can predict now that it is not

going to work.

I yield back.

Mr. DAVIS OF ILLINOIS. Thank you very much.

I have a few additional questions, if the panel doesn’t mind.

Dr. Copeland, let me ask you, last fall, in response to a request

that I made, you researched the GAO Human Capital Reform Act,

and are you aware of any statements made by the Comptroller

General or the GAO prior to the passage of the Reform Act in July

2004, indicating that a market-based pay study might prevent

GAO employees with meets expectations performance ratings from

receiving the annual pay adjustment?

Mr. COPELAND. Mr. Chairman, I am not aware of any such statements. The statements prior to the enactment of the legislation

centered—the caveat that was offered in relation to the failure to

provide these annual pay adjustments was whether there would be,

in the Comptroller General’s words, extraordinary economic conditions or severe budgetary constraints. No mention was made, to my

knowledge, of market pay studies as a possible intervening variable.

Mr. DAVIS OF ILLINOIS. You indicated in your testimony that

GAO would not discuss the details of how the Watson Wyatt Study

was prepared. Did you come across any information that would indicate that Watson Wyatt would allow GAO or other clients to preselect the organization occupations to which pay comparisons

would be made?

Mr. COPELAND. I did. One of Watson Wyatt’s brochures refers to

a product line known as peer pay reports, which they say—I will

just read briefly from it. It says, ‘‘Peer pay reports are custom comVerDate 11-MAY-2000 13:58 Jul 23, 2007 Jkt 000000 PO 00000 Frm 00130 Fmt 6633 Sfmt 6633 C:\DOCS\36547.TXT HGOVREF1 PsN: HGOVREF1
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pensation reports that include the responses of companies from our

data base that you decide are relevant for your information needs.’’

Their Web site goes on to describe these peer pay reports as allowing the client to review demographics and determine the best fit for

your sample, and then you pick the final list of companies to be included in your peer pay report. It goes on to say that if the onscreen report does not yield the data that you want, you may repeat the steps until the appropriate sample has been identified.

I would caveat this by saying I do not know that GAO used these

peer pay reports. I do not know the extent to which GAO pre-selected these companies. I just offer that as an observation that is

a product line that Watson Wyatt does offer.

Mr. DAVIS OF ILLINOIS. Let me ask you, in the course of your research did CRS ask to meet with GAO to obtain information on the

implementation of its new pay system. And, if so, did you meet

with GAO? And, if not, why not?

Mr. COPELAND. We did ask to meet with GAO. We scheduled a

meeting. The meeting was canceled the day before the meeting was

to occur. GAO indicated they would respond to our questions only

in writing.

Mr. DAVIS OF ILLINOIS. Did you send questions to GAO in advance of the proposed meetings? And did GAO answer all of the

questions? If not, which ones did GAO not answer and why?

Mr. COPELAND. We did submit questions. They answered most of

the questions, but not all. The questions that they didn’t answer

centered on issues related to the statutory authority under which

the Comptroller General decided that these 308 employees should

not receive an annual increase. The other questions that they did

not answer focused on the Watson Wyatt Survey, itself. The one

document, in particular, that we asked to receive that was referenced in another document, a 2004 document, they indicated was

deliberative in nature and therefore they would not provide it.

Mr. DAVIS OF ILLINOIS. Let me ask if each one of you would respond. Perhaps this will be our last question. Would it be accurate

to surmise that pay for performance is a very difficult system to actually design and implement, and that, if it is going to be used,

there are still a great many kinks that need to be worked out of

the system. I mean, those kinds have to be dealt with in an open,

honest kind of way from my assessment. Would you just respond,

and perhaps we will begin with you, Mr. Tobias, and go right

through and perhaps would end our hearing.

Mr. TOBIAS. I think a critical value in any effective pay for performance system is transparency, not 90 percent, not 95 percent,

but 100 percent transparency. You can’t have a credible pay for

performance system without 100 percent transparency. I think that

goes without saying. And I think it is also true that there is no

agency—not DOD, not DHS or anywhere else in the Federal Government—who has a performance management system in place

today that would be the basis for a fair, credible pay for performance system. They don’t have it.

So it seems to me that it is premature to be implementing pay

for performance when we don’t have a performance management

system in place. I believe that is why DHS 2 weeks ago backed

away from implementing a pay for performance system. They recVerDate 11-MAY-2000 13:58 Jul 23, 2007 Jkt 000000 PO 00000 Frm 00131 Fmt 6633 Sfmt 6633 C:\DOCS\36547.TXT HGOVREF1 PsN: HGOVREF1
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ognized that they have not gotten the performance management

system right, so they are not going forward with pay for performance. Not so in DOD.

Until you get it right, until you get the first step right, you

should not be taking the second step.

Mr. COPELAND. The difficulty that you mentioned in implementing a pay for performance system is evidenced by the fact that 26

years ago now I was working at GAO, and the second job that I

worked on at GAO was looking at the implementation of merit pay

for GS–13s to 15s. The end result of that review was that you really have to get the performance management system right first before you implement merit pay, so the comments made today are

very reminiscent of 25 years ago.

Mr. TIEFER. Mr. Chairman, I happen to agree with Mr. Tobias

completely. The example he picked is not a small example, it is a

giant example; namely, that the Department of Homeland Security

backed away 2 weeks ago because of, as you say, to put it mildly,

that it is very difficult to design and it has a lot of kinks.

To read from the Washington Post story at that time by Steve

Barr, the reason that it had to be lost momentum, the DHS system,

the personnel system for that Department, was because of overly

ambitious goals, adverse court rulings, and budget cuts. One would

imagine that one can’t quite understand why the Department of

Defense is moving forward. It just must assume that it has a budget flow that isn’t limited the way DHS is. Otherwise, it would see

reality also.

Mr. SWERDZEWSKI. Working with Federal employees for many

years and having asked this very simple question—what’s the

worst part of your performance management system, whatever the

system is—the worst part universally they seem to answer is: my

supervisor never talks to me, never tells me what my performance

is.

An essential part of performance management is the interaction

between supervisors and their employees. Those employees are concerned that they want to know where their performance is. That

issue, which is the interpersonal relationship, is not really addressed by any of the pay for performance systems, any of the performance management systems. It is the intangible which is the

glue, which is the teamwork, which was mentioned by one of the

Congressmen, that keeps people working successfully, is this relationship. When we have pay for performance, which includes significant levels of review and performance ratings that go well above

the level of the individual’s supervisor, we have undermined that

confidence and we have undermined that support.

These issues have to be resolved. Employees need to understand

that they can trust this system before the supervisor who never

talks to them has significant sway over their future with the Federal Government.

Ms. SISTARE. Well, as I posit that, by definition a successful performance management system includes those conversations, and

until people are able to have them they are not going to have a successful system. But those successful conversations, when they take

place, can drive individual productivity and performance and Government’s meeting its missions.

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Mr. SIMPSON. I don’t think there is any doubt that effective leadership is important in terms of getting the greatest productivity out

of an organization. Leaders can also use pay for performance systems to aid and abet their own leadership abilities and their ability

to engage and cultivate engagement among their staff. Clearly,

their transparency and their credibility are important factors in

their ability to effectively use pay for performance systems. I think

there have been records of achievement and benefits achieved

through pay for performance systems in the demonstration projects

that we referenced in our written remarks.

Mr. DAVIS OF ILLINOIS. Well, let me thank each one of you for

not only your contribution but also for your patience and your willingness to perhaps readjust and to be here longer than we had anticipated. Of course, sometimes schedules are such that there isn’t

much that you can, in fact, do about it. But we want to thank you

also because you have contributed significantly to the very first

hearing of this subcommittee during this session of the Congress.

We think that it sort of sets precedent for what is yet to come, so

we look forward to continuing to interact with all of you in a very

meaningful way.

Again, I want to thank you for having come, and we appreciate

your participation.

This hearing is now adjourned, and without objection it stands

adjourned.

[Whereupon, at 5:10 p.m. the subcommittee was adjourned.]

[The prepared statement of Hon. Elijah E. Cummings and additional information submitted for the hearing record follow:]

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