United States General Accounting Office 

GAO Report to Congressional Requesters 

September 2003 HUMAN CAPITAL 

DHS Personnel 

System Design Effort 

Provides for 

Collaboration and 

Employee 

Participation 

GAO-03-1099


a
Highlights of GAO-03-1099, a report to 

congressional requesters 

The success of the transformation 

and implementation of the 

Department of Homeland Security 

(DHS) is based largely on the 

degree to which human capital 

management issues are addressed. 

Recognizing this, the legislation 

creating DHS provided it with 

significant flexibility to design a 

modern human capital 

management system. 

Congressional requesters asked 

GAO to describe the process DHS 

has in place to design its human 

capital system and involve 

employees, and analyze the extent 

to which this process reflects 

elements of successful 

transformations. 

As the process to develop and 

implement a new human capital 

system at DHS moves forward, we 

recommend that the Secretary of 

DHS and Director of OPM ensure 

that the human capital 

management system is designed to 

accomplish the mission, objectives, 

and goals of the department. In 

addition, we are recommending 

that the Secretary ensure that the 

communication strategy used to 

support the human capital system 

maximizes opportunities for 

employee involvement. 

DHS and OPM commented on a 

draft of this report and generally 

agreed with its content. The report 

was revised to reflect agency 

comments. 

www.gao.gov/cgi-bin/getrpt?GAO-03-1099. 

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact J. Christopher 

Mihm at (202) 512-6806, or mihmj@gao.gov. 

September 2003 

HUMAN CAPITAL 

DHS Personnel System Design Effort 

Provides for Collaboration and Employee 

Participation 

The effort to design a human capital management system for DHS generally 

reflects important elements of effective transformations. 

• 	 Leadership. One of the strengths of the effort to transform the culture 

of organizations going into DHS has been the on-going commitment of 

both DHS and Office of Personnel Management (OPM) leaders to 

stimulate and support the effort to design a human capital system. 

• 	 Strategic Goals. DHS is currently developing a strategic plan. Although 

DHS human resource leaders are included on the strategic planning 

team, it will not be complete until the end of September 2003. 

Consequently, DHS will need to ensure that the development of the 

human capital policy options is integrated with the accomplishment 

of DHS programmatic goals as defined in the forthcoming strategic 

plan. Such integration is important to ensure that the human capital 

system enables the department to acquire, develop, and retain the core 

competencies necessary for DHS to accomplish its programmatic goals. 

• 	 Key Principles. The DHS Secretary and OPM Director outlined four 

principles to serve as a critical framework for the human capital system. 

These principles appropriately identify the need to support the 

mission and employees of the department, protect basic civil service 

principles, and hold employees accountable for performance. 

• 	 Timeline. Agency officials established an ambitious 9- to 10-month 

timeline for completing the design process, aiming to issue final 

regulations in early 2004. Some DHS stakeholders we interviewed 

expressed concerns about the compressed schedule. Officials leading 

the design effort report the aggressive schedule is necessary to relieve 

employee anxiety and maximize the time available for implementation. 

• 	 Design Team. The design team includes staff from multiple 

organizational units within DHS, OPM, and the three major unions. 

• 	 Communication. DHS recently finalized a communication plan that 

provides a structured and planned approach to communicate with DHS 

stakeholders regarding the human capital system. Moving forward, DHS 

will need to provide adequate opportunities for feedback once the 

options are released. 

• 	 Employee Involvement. Employees are provided multiple opportunities 

to be included in the design process, including participation in the Core 

Design Team, the Town Hall meetings, the field team, the focus groups, 

and an e-mail mailbox for employee comments. 

Experience has shown that in making major changes in the cultures of 

organizations, how it is done, when it is done, and the basis on which it is 

done can make all the difference in whether it is ultimately successful. The 

analysis of DHS’s effort to design a human capital system can be particularly 

instructive in light of legislative requests for agency-specific human capital 

flexibilities at the Department of Defense and the National Aeronautics and 

Space Administration. 
Contents


Letter 1 

Results in Brief 5 

Background 8 

Design Process Provides for Collaboration 12 

DHS and OPM Leadership Stimulates and Supports the Human 

Capital Transformation 14 

DHS Personnel System will Need To Be Integrated with Mission and 

Program Goals 15 

Process Steered by Guiding Principles 16 

Ambitious Timeline Established 18 

Design Participants Represent a Mix of DHS and OPM 

Employees 20 

Communications Plan Recently Completed 22 

Design Process Provides for Employee Involvement 24 

Conclusions 26 

Recommendations for Executive Action 27 

Agency Comments and Our Evaluation 27 

Appendixes 

Appendix I: 

Appendix II: 

Appendix III: 

Appendix IV: 

Appendix V: 

Practices and Implementation Steps for Mergers and 

Transformation 29 

Design Process 31 

Characteristics of Core Design Team Members 34 

Comments from the Office of Personnel Management 36 

GAO Contacts and Staff Acknowledgments 38 

GAO Contacts 38 

Acknowledgments 38 

Tables Table 1: Positions Transferred to DHS as of March 8, 2003 11 

Table 2: Design Team Membership 34 

Table 3: Who Selected Design Team Member 34 

Table 4: Subgroup Membership 35 

Table 5: Human Capital Professional versus Other Experience 35 

Table 6: Years of Experience of Design Team Members 35 

Figures Figure 1: DHS Personnel System Design Process 6 

Figure 2: The Three Stages of the Design Process and Their 

Roles 13 

Page i GAO-03-1099 DHS Personnel System 
Contents 

Figure 3:	 Core Design Team Members Who Describe Themselves 

as Human Capital Professionals 21 

Figure 4:	 Percent of Core Design Team Members with Work 

Experience Outside Headquarters 21 

Figure 5:	 Key Practices and Implementation Steps for Mergers and 

Transformations 30 

Abbreviations 

AFGE American Federation of Government Employees


APHIS Animal and Plant Health Inspection Service


CIA Central Intelligence Agency


CPDF Central Personnel Data File


DHS Department of Homeland Security


DOD Department of Defense


DOJ Department of Justice


FACA Federal Advisory Committee Act


FBI Federal Bureau of Investigation


FEMA Federal Emergency Management Agency


FLETC Federal Law Enforcement Training Center


FTE full-time equivalent


INS Immigration and Naturalization Service


NAAE National Association of Agricultural Employees


NASA National Aeronautics and Space Administration


NSA National Security Agency


NTEU National Treasury Employees Union


OMB Office of Management and Budget


OPM Office of Personnel Management


TSA Transportation Security Administration


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Page ii GAO-03-1099 DHS Personnel System 
Page 1 GAO-03-1099 DHS Personnel System 

A

United States General Accounting Office 

Washington, D.C. 20548 

September 30, 2003 

The Honorable George V. Voinovich 

Chairman, Subcommittee on Oversight of Government 

Management, the Federal Workforce, and the 

District of Columbia 

Committee on Governmental Affairs 

United States Senate 

The Honorable Jo Ann Davis 

Chairwoman, Subcommittee on Civil Service and 

Agency Organization 

Committee on Government Reform 

United States House of Representatives 

The creation of the Department of Homeland Security (DHS) represents an 

historic moment for the federal government to fundamentally transform 

how the nation will protect itself from terrorism. DHS now has an 

opportunity—and a responsibility—to transform and integrate a disparate 

group of agencies with multiple missions, values, and cultures into a strong 

and effective cabinet department. Together with this unique opportunity, 

however, also comes significant risk to the nation that could occur if this 

transformation is not implemented successfully. In fact, we designated this 

implementation and transformation as high risk in January 2003.1 

We convened a forum in September 2002 to identify useful practices and 

lessons learned from major public and private transformations that DHS 

and other federal agencies could use to inform transformation efforts.2 

While no two mergers or transformation efforts are exactly alike and the 

“best” approach depends on a variety of factors specific to each context, 

there was general agreement on a number of key practices. These 

practices include: 

1

U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of Homeland Security, GAO-03-102 (Washington, D.C.: January 2003). 

2

U.S. General Accounting Office, Highlights of a GAO Forum: Mergers and 

Transformation: Lessons Learned for a Department of Homeland Security and Other 

Federal Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002). 

Page 1 GAO-03-1099 DHS Personnel System 
1.	 Ensure top leadership drives the transformation. Leadership 

must set the direction, pace, and tone and provide a clear, consistent 

rationale that brings everyone together behind a single mission. 

2.	 Establish a coherent mission and integrated strategic goals to 

guide the transformation. Together, these define the culture and 

serve as a vehicle for employees to unite and rally around. 

3.	 Focus on a key set of principles and priorities at the outset of 

the transformation. A clear set of principles and priorities serves as a 

framework to help the organization create a new culture and drive 

employee behaviors. 

4.	 Set implementation goals and a timeline to build momentum and 

show progress from day one. Goals and a timeline are essential 

because the transformation could take years to complete. 

5.	 Dedicate an implementation team to manage the transformation 

process. A strong and stable team is important to ensure that the 

transformation receives the needed attention to be sustained and 

successful. 

6.	 Use the performance management system to define 

responsibility and assure accountability for change. A “line of 

sight” shows how team, unit, and individual performance can 

contribute to overall organizational results. 

7.	 Establish a communication strategy to create shared 

expectations and report related progress. The strategy must reach 

out to employees, customers, and stakeholders and engage them in a 

two-way exchange. 

8.	 Involve employees to obtain their ideas and gain their 

ownership for the transformation. Employee involvement 

strengthens the process and allows them to share their experiences and 

shape policies. 

9.	 Build a world-class organization. Building on a vision of improved 

performance, the organization adopts the most efficient, effective, and 

economical personnel, system, and process changes and continually 

seeks to implement best practices. 

Page 2 GAO-03-1099 DHS Personnel System 
Building on the forum, we recently identified specific implementation steps 

for these key practices.3 (See app. I). Many mergers do not live up to their 

potential. Research suggests that the failure to adequately address a wide 

variety of people and cultural issues is at the heart of unsuccessful mergers 

and transformations. Therefore, strategic human capital management 

must be at the center of a successful transformation effort. The legislation 

creating DHS provided it with significant flexibility to design a modern 

human capital management system.4 Specifically, the department may 

deviate from requirements contained in Title 5 of the United States Code 

relating to performance appraisals, classification, pay rates and systems,5 

and adverse actions and appeals. However, the department may not 

deviate from other Title 5 provisions including the merit system principles, 

prohibited personnel practices, equal employment opportunity, civil 

service examination and selection, and pay administration.6 In addition, for 

hiring employees, the department may take advantage of the 

governmentwide personnel reform measures contained in the Homeland 

Security Act of 2002, including using a category rating system when 

evaluating applicants for employment and selecting qualified applicants for 

positions using direct hiring procedures.7 Regulations for the DHS human 

capital system are to be prescribed jointly by the Secretary of DHS and the 

Director of the Office of Personnel Management (OPM). The legislation 

also noted that it is the sense of the Congress that employees be involved in 

the creation of the new human capital system. 

In light of the challenge to transform the organizations joining the 

department and establish a modern human capital management system, 

you asked that we undertake a series of human capital engagements to 

assist DHS in its implementation efforts. As agreed with your office, this is 

one of several reports we will issue that will track how DHS begins to make 

use of its new human capital authorities. Specifically, this report 

3

U.S. General Accounting Office, Results-Oriented Cultures: Implementation Steps to 

Assist Mergers and Organizational Transformations, GAO-03-669 (Washington, D.C.: July 

2, 2003). 

4

Public Law 107-296, Nov. 25, 2002. 

5

The department may not however modify Senior Executive pay or fix employee pay in 

excess of the limitation on aggregate compensation payable under 5 U.S.C. 5307. 

6

Pay administration provisions include premium pay rules. 

7

Interim regulations implementing these authorities were issued by OPM in the Federal 

Register on June 13, 2003. 68 Fed. Reg. 35265. 

Page 3 GAO-03-1099 DHS Personnel System 
(1) describes the process DHS has in place to design its human capital 

system and involve employees and (2) analyzes the extent to which this 

process reflects what we have found to be important elements of 

successful transformations. 

To address our objectives, we reviewed documents relevant to DHS’s 

transformation and personnel system design effort and applicable laws and 

regulations. These included the April 2003 Human Resources Systems 

Design Team Resource Book, the weekly DHS newsletter, OPM data on 

DHS employees and unions, the June 2003 Communications Plan, and 

others. We interviewed officials from DHS and OPM headquarters who are 

involved in the effort to design the new human capital system. Human 

resource leaders from the five largest components within DHS were also 

interviewed – the Transportation Security Administration (TSA), Federal 

Emergency Management Agency (FEMA), the organizations formerly 

known as the Immigration and Naturalization Service (INS) and the U.S. 

Customs Service, and the U.S. Coast Guard – to learn their impressions of 

the design process. Interviews with officials from the three largest 

employee unions at DHS – the American Federation of Government 

Employees (AFGE), the National Treasury Employees Union (NTEU), and 

the National Association of Agricultural Employees (NAAE) – provided 

additional insights. We then analyzed the information gathered in light of 

seven of the nine transformation practices. Practice 6 was excluded from 

the analysis because the effort to design a human capital system includes 

the development of a performance management system and Practice 9 was 

excluded because developing an effective human capital system is one of 

many efforts required to become a world-class organization. We conducted 

our work in accordance with generally accepted government auditing 

standards between March and September 2003. 

The description and analysis of DHS’s effort to design a strategic human 

capital management system can be particularly instructive in light of 

legislation that requests additional authority for human capital 

management at the Department of Defense (DOD) and the National 

Aeronautics and Space Administration (NASA). We have consistently 

supported the need for government transformation and the concept of 

modernizing federal human capital policies, as underscored in recent 

testimonies and our January 2003 report which described why we find that 

strategic human capital management remains a governmentwide high-risk 

Page 4 GAO-03-1099 DHS Personnel System 
area.

8 This effort can also prove instructive for future human capital 

management and reorganization efforts within specific units of DHS as the 

new department is implemented and transformed over time into a cohesive 

organization. 

Importantly, while the design process used to develop the human capital 

system is significant, effective implementation of the system is similarly 

crucial to effective human capital management in the new department. In 

short, a successful design effort is essential to, but does not guarantee, 

effective implementation. 

Results in Brief	 DHS’s and OPM’s effort to design a new human capital system is 

collaborative and facilitates participation of employees from all levels of 

the department. The process is divided into three stages: research, 

outreach, and drafting of initial personnel system options; review of the 

options; and development of proposed regulations. First, the Core Design 

Team conducted research on human capital approaches, communicated 

with and gathered feedback from employees, and developed options. 

Second, the Senior Review Advisory Committee will review these options 

and forward its recommendations to the DHS Secretary and OPM Director. 

Third, the Secretary and Director will then propose draft regulations for the 

human capital system, engage in the statutory collaboration period, and 

issue final regulations by early 2004. The stages include employees from 

DHS and OPM, as well as representatives from the department’s three 

largest unions. See figure 1. 

8

U.S. General Accounting Office, Human Capital: Building on DOD’s Reform Effort to 

Foster Governmentwide Improvements, GAO-03-851T (Washington, D.C.: June 4, 2003); 

High-Risk Series: Strategic Human Capital Management, GAO-03-120 (Washington, D.C.: 

January 2003); and Managing for Results: Using Strategic Human Capital Management to 

Drive Transformational Change, GAO-02-940T (Washington, D.C.: July 15, 2002). 

Page 5 GAO-03-1099 DHS Personnel System 
Figure 1: DHS Personnel System Design Process 

This effort to design a human capital management system for DHS 

generally reflects what we have found to be important elements of effective 

transformations. 

•	 Ensure top leadership drives the transformation. One of the strengths 

of the effort to transform the culture of organizations going into DHS 

has been the on-going commitment of both DHS and OPM leaders to 

stimulate and support the effort to design a human capital system. 

•	 Establish a coherent mission and integrated strategic goals to guide the 

transformation. DHS is currently developing a strategic plan. Although 

DHS human resource leaders are included on the strategic planning 

team, the final plan will not be complete until late September 2003. 

Consequently, DHS will need to ensure that the development of the 

human capital policy options by the Core Design Team is integrated with 

the accomplishment of DHS programmatic goals as defined in the 

forthcoming strategic plan. Such integration is important to ensure that 

the human capital system enables the department to acquire, develop, 

and retain the core competencies necessary for DHS to accomplish its 

programmatic goals. Moving forward, it is essential that the Senior 

Review Advisory Committee, the Secretary, and the Director ensure that 

the new human capital system is aligned with the DHS strategic plan. 

•	 Focus on a key set of principles and priorities at the outset of the 

transformation. The Secretary and Director outlined four principles 

Page 6 GAO-03-1099 DHS Personnel System 
during the first design meeting in April that have served as a framework 

for the activities of the Core Design Team.

9 These principles 

appropriately identify the need to support the mission and employees of 

the department, protect basic civil service principles, and hold 

employees accountable for performance. 

•	 Set implementation goals and a timeline to build momentum and show 

progress. Agency officials established an ambitious 9- to 10-month 

timeline for completing the design process, aiming to issue final 

regulations in early 2004. Some DHS component human resource 

directors and other stakeholders we interviewed expressed concerns 

about the compressed schedule. Officials leading the Core Design Team 

report the aggressive schedule is necessary to relieve employee anxiety 

and maximize the time available for implementation within the 5-year 

window outlined in the DHS legislation. 

•	 Dedicate an implementation team to manage the transformation 

process. The membership of the design team includes participants from 

multiple organizational units within DHS, OPM, and the three major 

unions. 

•	 Establish a communication strategy to create shared expectations and 

report related progress. DHS recently completed a noteworthy and 

substantive communication plan that provides a structured and planned 

approach to communicate with DHS stakeholders regarding the human 

capital system. The objectives of the plan are to: raise awareness, 

disseminate information, and promote a clear understanding of the new 

human capital system; manage stakeholder expectations and address 

their concerns; and provide opportunities for a two-way dialogue. 

Building on its current efforts, DHS will need to continue to provide 

adequate opportunities for feedback once the options are released, 

including providing an adequate level of detail on how the new system 

will impact employees. 

•	 Involve employees to obtain their ideas and gain their ownership. 

Employees are provided with multiple opportunities to be included in 

the design process, including participation in the Core Design Team, the 

9

On July 25, 2003, the Core Design Team presented a set of five principles to the Senior 

Review Advisory Committee as a guide for developing the options to be presented in late 

September, building on the original four principles. 

Page 7 GAO-03-1099 DHS Personnel System 
Town Hall meetings, the focus groups, the field team, and an e-mail 

mailbox for employee comments. Continued employee involvement is 

critical as options are identified, regulations are proposed, and the 

human capital system is implemented. 

As the process to develop and implement a new human capital system at 

DHS moves forward, we are recommending that as the DHS strategic 

planning effort continues that the Secretary of DHS, in conjunction with 

the Director of OPM, ensure that the human capital management system is 

fully integrated with the accomplishment of the department’s mission, 

objectives, and goals. We are also recommending that the Secretary of DHS 

build on the progress that has been made and ensure that the 

communication strategy used to support the human capital system 

maximizes opportunities for employee involvement through the 

completion of the design process, the release of the system options, and 

implementation, with special emphasis placed on seeking the feedback and 

buy-in of frontline employees in the field. 

OPM provided written comments on a draft of this report, which are 

printed in appendix IV. DHS provided technical comments by e-mail. 

DHS and OPM generally agreed with the contents of the report. However, 

both DHS and OPM expressed a concern that we misunderstood the role of 

the field team in the design process. Each described the role of the field 

team as more limited than our original understanding. While gathering 

additional information from DHS, NTEU, AFGE, and NAAE to clarify the 

role and activities of the field team, we learned that its role evolved over 

the course of the design effort, that it had no decision-making role in the 

design process, and that it was used as a recurring focus group. 

Accordingly, we changed the draft to reflect the field team’s current role. 

DHS and OPM also provided a number of technical suggestions that have 

been incorporated where appropriate. 

Background	 The creation of DHS represents enormous leadership challenges, 

encompassing opportunities in multiple management areas. Sustained and 

inspired political and career leadership will be essential to successfully 

implementing the transformation of DHS. Success will also largely depend 

on its ability to attract and retain the right people; set the appropriate 

priorities for the department; and build effective partnerships with the 

appropriate public, private, and not-for-profit sector entities. 

Page 8 GAO-03-1099 DHS Personnel System 
Mission and Organization of 

DHS 

In establishing the new department, the Congress articulated a seven-point 

mission for DHS: 

• Prevent terrorist attacks within the United States. 

• Reduce the vulnerability of the United States to terrorism. 

• Minimize the damage and assist in the recovery from terrorist attacks. 

•	 Carry out all functions of entities transferred to the department, 

including by acting as a focal point regarding natural and man-made 

crises and emergency planning. 

•	 Ensure that the functions of the agencies within the department that are 

not directly related to securing the homeland are not diminished or 

neglected. 

•	 Ensure that the overall economic security of the United States is not 

diminished by efforts aimed at securing the homeland. 

•	 Monitor connections between illegal drug trafficking and terrorism, 

coordinate efforts to sever such connections, and otherwise contribute 

to efforts to interdict illegal drug trafficking. 

DHS is generally organized into four mission-related directorates: Border 

and Transportation Security, Emergency Preparedness and Response, 

Science and Technology, and Information Analysis and Infrastructure 

Protection. 

•	 The Border and Transportation Security directorate consolidates the 

major border security and transportation operations under one roof, 

including the U.S. Customs Service, parts of the Immigration and 

Naturalization Service (INS), the Transportation Security 

Administration (TSA), the Federal Law Enforcement Training Center 

(FLETC), The Federal Protective Service, the Office for Domestic 

Preparedness from the Department of Justice (DOJ), and part of the 

Animal and Plant Health Inspection Service (APHIS). 

•	 The Emergency Preparedness and Response directorate integrates 

domestic disaster preparedness training and government disaster 

response and includes the Federal Emergency Management Agency 

(FEMA), the Strategic National Stockpile and the National Disaster 

Page 9 GAO-03-1099 DHS Personnel System 
Medical System, the Nuclear Incident Response Team, the Domestic 

Emergency Support Teams from DOJ, and the National Domestic 

Preparedness Office from the Federal Bureau of Investigation (FBI). 

•	 The Science and Technology directorate coordinates scientific and 

technological advantages when securing the homeland and will include 

CBRN Countermeasures Programs, the Environmental Measurements 

Laboratory, the National Bio-Weapons Defense Analysis Center, and the 

Plum Island Animal Disease Center. 

•	 The Information Analysis and Infrastructure Protection directorate 

accesses and analyzes intelligence, law enforcement data, and other 

information involving threats to homeland security and evaluating 

vulnerabilities from state and local agencies, the private sector, and 

federal agencies such as the Central Intelligence Agency (CIA), FBI, and 

the National Security Agency (NSA). It includes the Critical 

Infrastructure Assurance Office, the Federal Computer Incident 

Response Center, the National Communications System, the National 

Infrastructure Protection Center, and the energy security and assurance 

program activities of the Department of Energy. 

In addition to the four mission-related directorates, the U.S. Secret Service 

and the U.S. Coast Guard remain intact as distinct entities in DHS; INS 

adjudications and benefits programs report directly to the Deputy 

Secretary as the Bureau of Citizenship and Immigration Services; and the 

Management Directorate is responsible for budget, human capital, and 

other general management issues. 

DHS’s People 	 DHS has approximately 155,000 civilian positions and 54,000 military 

positions in the U.S. Coast Guard, for a total of just over 209,000.10 (See 

10Based on positions transferred to DHS as of March 8, 2003, according to DHS, and GAO 

calculations using data from the Central Personnel Data File (CPDF) as of March 31, 2003. 

Additional positions were scheduled to transfer to the department after this date. Positions 

include full-time, part-time, and vacant, and do not represent full-time equivalent (FTE) 

employment or the total number of employees on board. The DHS-provided data are based 

on determination orders, but one DHS official acknowledged that the data were compiled 

differently by the various components. Furthermore, these data are preliminary and are 

expected to be adjusted based on continuing negotiations between DHS and other federal 

agencies. DHS was authorized 144,901 civilian FTEs and 37,074 military FTEs in the fiscal 

year 2003 budget, according to DHS. As of March 31, 2003, DHS had 160,201 full- and parttime civilian employees on board, according to CPDF. 

Page 10 GAO-03-1099 DHS Personnel System 
table 1.) Of the civilian employees, a vast majority transferred from seven 

organizations: TSA, INS, Customs, FEMA, the U.S. Coast Guard, the U.S. 

Secret Service, and APHIS. Of the civilian employees who transferred from 

these seven organizations, approximately 90 percent are stationed outside 

the Washington, D.C. metropolitan area. DHS employees work in over 300 

metropolitan statistical areas. 

Table 1: Positions Transferred to DHS as of March 8, 2003 

Positions 

Originating Department Originating Agency Transferreda 

Agriculture Import and Entry Inspectionb 2,655 

Commerce Critical Infrastructure Assurance 

Office 

Defense National Communications System 105 

Department of Energy 101 

Federal Emergency Management 

Agency 8,542 

General Services Administration 1,713 

Health and Human Services 

Justice Immigration and Naturalization 

Service 36,769 

Justice Other 385 

Transportation United States Coast Guardc 60,403 

Transportation Transportation Security 

Administration 68,859 

Transportation Other 

Treasury United States Customs Service 22,028 

Treasury United States Secret Service 6,251 

Treasury Federal Law Enforcement Training 

Center 922 

Treasury Other 191 

Total 209,105 

Source: DHS. 

a

This column reflects positions - full-time, part-time, and vacant - and does not represent FTE 

employment or the total number of employees on board. 

b

This represents a specific function from APHIS that was transferred to DHS. 

c

This represents both civilian and military U.S. Coast Guard positions. 

These employees serve in positions ranging from inspectors, investigators, 

police, and intelligence to attorneys and administrative services. DHS 

Page 11 GAO-03-1099 DHS Personnel System 

50 

91 

40 
employees are compensated under multiple pay and benefits systems, are 

hired using varied authorities, and undergo performance appraisals with 

different rating scales and factors. 

According to OPM, just over 49,000, or just under one-third, of DHS civilian 

employees are represented by unions. This includes 16 different unions 

divided into 75 separate bargaining units. The 3 unions representing the 

largest number of employees are AFGE, NTEU, and NAAE. AFGE 

represents almost 33,000 employees who were transferred from INS, the 

U.S. Coast Guard, FEMA, and others. NTEU represents over 12,000 

employees who were transferred largely from Customs. NAAE represents 

just over 2,000 employees who were transferred from APHIS. 

Design Process 

Provides for 

Collaboration 

DHS’s and OPM’s effort to design a new human capital system is 

collaborative and facilitates participation of employees from all levels of 

the department. The process is divided into three stages: research, 

outreach, and drafting of initial personnel system options; review of the 

options; and development of proposed regulations. First, the Core Design 

Team conducted research on human capital approaches, communicated 

with and gathered feedback from employees, and developed options. 

Second, the Senior Review Advisory Committee will review these options 

and forward its recommendations to the DHS Secretary and OPM Director. 

Third, the Secretary and Director will then propose draft regulations for the 

human capital system, engage in the statutory collaboration period, and 

issue final regulations by early 2004. The stages include employees from 

DHS and OPM, as well as representatives from the department’s three 

largest unions. This process is described in further detail in appendix II. 

As figure 2 shows, the Core Design Team, the first stage of the design 

process, is responsible for research, outreach, and drafting initial options 

for the personnel system. This group is led by an equal number of DHS and 

OPM executives. Members of the Core Design Team, which includes 

employees from headquarters, the field, and unions, are full-time 

participants who work on one of two subgroups: (1) pay and performance 

or (2) labor and employee relations—reflecting the areas of Title 5 from 

Page 12 GAO-03-1099 DHS Personnel System 
which DHS may deviate.11 The work of the Core Design Team is to result in 

a broad range of options for the Senior Review Advisory Committee by late 

September 2003. 

Figure 2: The Three Stages of the Design Process and Their Roles 

The second stage of the design process is made of the Senior Review 

Advisory Committee. The committee’s members include top executives 

from DHS, OPM, and the three major unions and they are advised by a team 

of external human capital experts. The committee is provided less than a 

month to review the system options and forward its iteration for the 

11The Homeland Security Act of 2002 gives DHS authority to deviate from the requirements 

of: Chapter 43 – performance appraisal; Chapter 51 – classification; Chapter 53 – pay rates 

and systems (except certain provisions); Chapter 71 – labor-management and employee 

relations; Chapter 75 – adverse actions; and Chapter 77 – appeals. 

Page 13 GAO-03-1099 DHS Personnel System 
Secretary and Director to consider.

12 The committee’s time frame for 

completing this task is October 2003. During the committee’s public 

deliberations, they may choose to eliminate, create, and/or prioritize the 

options, or may recommend implementation strategies. 

Once the Secretary and Director receive the list of options from the Senior 

Review Advisory Committee, they may edit, remove, or develop 

alternatives to the proposed options as the third stage of the design 

process. They expect to announce the proposed regulations in November 

2003, which will trigger the statutory collaboration process so final 

regulations can be issued in early 2004. As called for in the legislation, 

employee representatives have 30 calendar days to comment and make 

recommendations. The Secretary and Director are then to follow the 

provisions of the statutory reconciliation process for no less than 30 days.13 

DHS and OPM 

Leadership Stimulates 

and Supports the 

Human Capital 

Transformation 

DHS and OPM leaders have consistently underscored their personal 

commitment to the design process and speak openly in support of it. When 

the DHS legislation was under consideration, we testified that the single 

most important element of successful reorganizations is the sustained 

commitment of top leaders.14 In our report that describes the key practices 

for successful mergers and transformations, we note that top leadership 

that is clearly and personally involved provides stability and an identifiable 

source for employees to rally around during tumultuous times. The role of 

top leaders is also to ensure that transformation efforts stay on course by 

setting priorities, focusing on critical issues, and demonstrating a 

commitment to change. 

12An informal “planning committee,” or small working group of DHS, OPM, and union senior 

executives was assembled to provide staff support, highlight issues for discussion during 

public meetings, and potentially to set the meeting agendas for the Senior Review Advisory 

Committee. 

13Section 841 of the Homeland Security Act establishes a process for collaboration with 

employee representatives to provide notice of the proposed human resources management 

system, the opportunity to submit comments, and consultation over the recommendations 

made. 

14U.S. General Accounting Office, Homeland Security: Proposal for Cabinet Agency Has 

Merit, But Implementation Will be Pivotal to Success, GAO-02-886T (Washington, D.C.: 

June 25, 2002). 

Page 14 GAO-03-1099 DHS Personnel System 
DHS and OPM leaders are fulfilling these critical roles. For example, the 

DHS Under Secretary for Management and OPM’s Senior Advisor for 

Homeland Security cochair the Senior Review Advisory Committee. Other 

committee members are officials in key leadership positions at both OPM 

and DHS and the presidents of the three major unions. 

Senior officials from DHS, OPM, and DHS’s three largest unions are directly 

involved in the workings of the Core Design Team. Top leaders of DHS and 

OPM addressed employees at the Town Hall meetings, expressing their 

support for the transformation, and solicited feedback from those 

employees. Specific examples include the Under Secretary for 

Management writing to DHS employees in April and May 2003 to express 

her support of the design process and participating in a Town Hall meeting. 

Additionally, the Under Secretary for Border and Transportation Security 

participated in several Town Hall meetings to express his on-going support 

of the design process and to respond to questions from DHS employees. 

The Under Secretary for Emergency Preparedness and Response and the 

Commandant of the U.S. Coast Guard also participated in Town Hall 

meetings. At these meetings, union leaders have stood next to the agency 

leadership to express their support for the process, according to agency 

officials. Similarly, OPM’s Associate Director for Strategic Human 

Resources Policy and OPM’s Senior Advisor for Homeland Security also 

addressed DHS employees at Town Hall meetings, and responded to their 

questions. 

DHS Personnel System 

will Need To Be 

Integrated with 

Mission and Program 

Goals 

DHS will need to ensure that the development of the human capital policy 

options by the Core Design Team is integrated with the accomplishment of 

DHS programmatic goals as defined in the forthcoming strategic plan. 

Agency officials indicate that it is their intention that the personnel system 

design will be consistent with the strategic plan. We have reported, and the 

President’s Management Agenda reiterates, that leading organizations 

develop their workforce approaches as part of a strategic human capital 

plan as strategies for accomplishing their mission and programmatic goals. 

In light of this, we previously stated that the success of the DHS 

transformation requires the department to link its human capital strategy 

with its homeland security strategy.

15 

15GAO-03-102; and U.S. General Accounting Office, Homeland Security: Management 

Challenges Facing Federal Leadership, GAO-03-260 (Washington, D.C.: Dec. 20, 2002). 

Page 15 GAO-03-1099 DHS Personnel System 
DHS is currently developing a strategic plan. This effort began in mid-June 

and is expected to be completed by the end of September 2003 – a target set 

by the Office of Management and Budget (OMB). As explained previously, 

the Core Design Team began its work in late April 2003 and expected to 

report its proposed options in late September 2003. According to a DHS 

official leading the strategic planning effort, human capital officials are 

engaged in drafting the strategic plan. DHS human capital officials 

confirmed that they have reviewed drafts of the strategic plan. 

Moving forward, it is critical that the Senior Review Advisory Committee, 

the Secretary, and the Director make the link between the new human 

capital system and the accomplishment of DHS’s goals as outlined in the 

DHS strategic plan. Once a strategic plan is in place, DHS can then develop 

a strategic human capital plan that, in part, identifies core competencies for 

staff as a tool for attracting, developing, and rewarding contributions to 

mission accomplishment. For example, these competencies will be critical 

to creating a performance management system – a key task of the Core 

Design Team - that aligns daily operations with organizational goals and 

creates a “line of sight” and shows how team, unit, and individual 

performance can contribute to organizational results. We recommended 

that DHS, in conjunction with OPM and OMB, create an effective 

performance management system in December 2002.

16 Furthermore, if 

DHS decides to design and implement a pay-for-performance system, a set 

of strategic goals and validated competencies will be required so that DHS 

can identify the outcomes and results that employees are to be rewarded 

for accomplishing. 

Process Steered by 


Guiding Principles


The Secretary and Director outlined four principles to serve as a 

framework for the Core Design Team during their first meeting in April: 

•	 The system has to support both the mission and the people charged with 

implementing the mission. 

•	 Design Team members must leave preconceived notions at the door. 

They have an opportunity and responsibility to create a 21st century 

personnel system that is fair, performance based, and flexible. 

16GAO-03-260. We recently outlined key practices for effective performance management 

systems in Results-Oriented Cultures: Creating a Clear Linkage Between Individual 

Performance and Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003). 

Page 16 GAO-03-1099 DHS Personnel System 
• DHS must preserve and protect basic civil service principles. 

•	 DHS must hold people at all levels accountable for performance. The 

agency will link individual performance to organizational goals, with the 

ability to identify and reward exceptional service and deal with chronic 

poor performance. DHS can be a department that stands as a model of 

excellence. 

These principles can serve as core values for human capital management at 

DHS – values that define the attributes that are intrinsically important to 

what the new organization does and how it will do it. Furthermore, they 

represent the institutional beliefs and boundaries that are essential to 

building a new culture for the organization. Finally, they appropriately 

identify the need to support the mission and employees of the department, 

protect basic civil service principles, and hold employees accountable for 

performance. 

On July 25, 2003, the Core Design Team presented a set of five principles to 

the Senior Review Advisory Committee as a guide for developing the 

options to be presented in late September. These principles were drafted 

by the Core Design Team and reviewed by the field team, using the original 

four principles proposed by the Secretary and Director as a guide. The five 

principles are to ensure that the options developed are (1) mission 

centered, (2) performance focused, (3) contemporary and excellent, 

(4) generate respect and trust, and (5) based on merit system principles 

and fairness. 

Consistent with the principles outlined by the Secretary and Director and 

those presented to the Senior Review Advisory Committee, our interviews 

with the human resource leaders in the five largest DHS components 

identified two areas that they would like the new human capital system to 

address: the new DHS personnel system should provide for competitive, 

performance-based pay and should give managers the ability to quickly hire 

the right people with the skills the agency needs. First, individuals we 

interviewed hoped that the new system would address their concerns 

about the disparities in pay rates across DHS and expressed an interest in 

implementing performance-based pay, linked to the accomplishment of 

Page 17 GAO-03-1099 DHS Personnel System 
DHS’s mission, such that employees are more accountable.17 Two indicated 

that they would like the Core Design Team to propose legislation to address 

the differences in premium pay that currently exist. Second, and beyond 

the immediate task of the Core Design Team, there was an overwhelming 

interest in simplifying the hiring process.18 Officials in one component 

expressed their discontent with the amount of time between when a 

position is announced and when it is actually filled. One executive 

expressed an interest in more flexibility in hiring because the perception is 

that the current hiring process is only understandable to those already in 

the federal government.19 

Ambitious Timeline 

Established 

DHS and OPM established a 9- to 10-month timeline for completing the 

design process with the expectation that the final regulations will be issued 

in early 2004. Agency officials have publicized this timeline at Town Hall 

meetings across the country. Our reports on the successful practices of 

mergers and transformations have noted that the establishment of a 

timeline with specific milestones allows stakeholders to track the 

organization’s progress towards its goals. Publicizing the timeline and 

meeting its milestones can illustrate building momentum and demonstrate 

that real progress is being made. 

The design process officially began in early April 2003 when the Core 

Design Team convened for a 2-week leadership conference to learn about 

the various human capital management systems within the component 

agencies as well as those in other federal agencies and private firms. The 

Core Design Team began its research full time in late April. This team is 

expected to present its broad range of options to the Senior Review 

17We have recently reported on leading practices in performance management and 

performance-based pay. For example, see U.S. General Accounting Office, Human Capital: 

Building on the Current Momentum to Address High-Risk Issues, GAO-03-637T 

(Washington, D.C.: Apr. 8, 2003); and GAO-03-488. 

18As stated previously, the department may not deviate from the Title 5 provisions regarding 

civil service examination and selection procedures. However, DHS has the opportunity to 

address some of its hiring concerns through governmentwide human capital reform 

provisions in the Homeland Security Act of 2002, which allow for category-based rating and 

selection procedures and the ability to use direct-hire procedures. 

19We have recently reported on major challenges in the federal hiring process. For more 

information, see U.S. General Accounting Office, Human Capital: Opportunities to 

Improve Executive Agencies’ Hiring Processes, GAO-03-450 (Washington, D.C.: May 30, 

2003). 

Page 18 GAO-03-1099 DHS Personnel System 
Advisory Committee in late September 2003. The Senior Review Advisory 

Committee is allotted less than a month to develop its set of options in 

October 2003. The Secretary and Director will then select the options that 

will be submitted as officially proposed regulations available for comment. 

They expect to announce the proposed regulations in November 2003, 

which will trigger the statutory collaboration process so final regulations 

can be issued in early 2004. 

Although the establishment of a clear timeline is positive, a majority of 

DHS stakeholders we interviewed expressed concerns about its 

compressed schedule. There is some understanding that the timeline 

reflects an effort to take into account the final regulations in preparing the 

fiscal year 2005 budget that is submitted to the Congress in early 2004. 

However, a number of human resource directors said the “self-imposed, 

short” timeline would pose significant challenges for the Design Team. One 

director commented that the timeline was “ambitious” considering the 

amount of information that needs to be collected and analyzed. Most 

directors agreed that the lack of sufficient time to perform these tasks 

could prevent the Design Team from completing its work or cause it to 

propose options that had not been thoroughly researched. Furthermore, 

another stakeholder suggested that the timeline appears to allocate too 

much time to the development of options and not enough time to the 

consideration of which options to adopt. On the other hand, DHS and OPM 

leaders of the design effort agree that the timeline is aggressive, but said 

that a shorter time frame will serve to minimize employee anxiety. In 

addition, they said a tight design time frame is needed to provide adequate 

time for implementation, evaluation, and modification within the 5-year 

statutory window available for establishing the new system. 

While it is appropriate to develop and integrate the human capital systems 

within the department in a quick and seamless manner so that the 

department can begin to function as a cohesive entity, moving too quickly 

or prematurely can significantly raise the risk of doing it wrong. Having an 

ambitious timeline is reasonable only insofar as it does not impact the 

quality of the human capital system that is created. 

Page 19 GAO-03-1099 DHS Personnel System 
Design Participants 

Represent a Mix of 

DHS and OPM 

Employees 

Overall, the members of the Core Design Team represent multiple 

organizational components and the three major unions. The composition 

of the team is important because of the visual sign it communicates 

regarding which components are dominant and subordinate or whether the 

new organization is a “merger of equals.” It also helps employees see that 

they are being represented and that their views are being considered in the 

decision-making process. 

The 48 participants of the Core Design Team include personnel experts 

from OPM, DHS and its component agencies, line employees and managers 

from DHS headquarters and field offices; and professional staff from the 

three major unions.20 Specifically, the Core Design Team is composed of 24 

DHS employees, 16 employees from OPM, and 8 professional staff from the 

unions. This includes 27 staff members, 5 supervisors, 12 managers, and 3 

executives.21 Additionally, just over 60 percent of the members consider 

themselves human capital professionals,22 and about two-thirds have 

experience outside headquarters.23 (See figs. 3 and 4.) The majority of 

human resource officials we interviewed consider themselves to be 

adequately represented on the Core Design Team. Other characteristics of 

the team members are described in appendix III. 

20This summarizes data for those members on board as of July 11, 2003. Since that date, 

membership has changed. 

21Based on complete data for 47 participants. 

22Based on complete data for 46 participants. 

23Based on complete data for 39 participants. 

Page 20 GAO-03-1099 DHS Personnel System 
Figure 3: Core Design Team Members Who Describe Themselves as Human Capital 

Professionalsa 

a

Based on complete data for 46 participants. 

Figure 4: Percent of Core Design Team Members with Work Experience Outside 

Headquartersa 

a

Based on complete data for 39 participants. 

According to DHS officials, DHS-specific slots on the Core Design Team 

were filled by individuals chosen by agency executives after determining 

the number of seats to be allocated to the different agency components. In 

Page 21 GAO-03-1099 DHS Personnel System 
selecting team members, officials sought representation from across the 

organizational components of the department, individuals with field 

experience, and individuals with some expertise in human resources 

management. Race, gender, and occupational diversity were other factors 

considered when selecting participants. Additionally, NAAE selected one 

DHS employee to participate on the team and AFGE and NTEU each 

selected four professional staff members to participate. 

Communications Plan 

Recently Completed 

DHS recently completed a noteworthy communications strategy that 

provides a structured and planned approach to communicate with DHS 

stakeholders regarding the human capital system. The objectives of the 

plan are to: raise awareness, disseminate information, and promote a clear 

understanding of the new human capital system; manage stakeholder 

expectations and address their concerns; and provide opportunities for a 

two-way dialogue. We have recently reported that organizations 

undergoing a transformation should establish a communication strategy 

that ensures a consistent message is delivered and seeks to genuinely 

involve stakeholders in the process. 

The communications plan, completed in June 2003, represents an 

important and substantive effort and contains four broad pieces that are 

consistent with the key practices we have identified as important to 

successful communication during transformations. First, the plan 

identifies internal and external stakeholders, the concerns of each 

stakeholder group, and the specific communication channels to be used to 

communicate to that stakeholder group. Second, the plan articulates the 

key messages to be delivered to each stakeholder group. Third, an action 

plan identifies the communication channel to be used, the timeline for its 

use, and the DHS and OPM staff responsible for implementation. Finally, 

the plan identifies the feedback mechanisms to be used to ensure there is a 

two-way dialogue. 

Moving forward, DHS faces some challenges in successfully implementing 

its communications plan. First, in addition to the key messages articulated 

in the plan, DHS will need to provide information to clarify areas of 

confusion that were identified during our interviews. These include: 

•	 the roles OPM, DHS, and the Senior Review Advisory Committee have in 

the process; 

Page 22 GAO-03-1099 DHS Personnel System 
•	 the factors that will influence the Secretary and Director’s final 

decisions on which options to propose; 

• the role of the contractor in the design process; 

•	 the likelihood of the Core Design Team drafting legislative proposals for 

areas DHS does not have authority to change (i.e., premium pay and 

hiring); 

•	 the possibility of there being multiple personnel systems instead of one; 

and 

• the implementation process. 

A second challenge will be to ensure that preexisting communication 

channels within each departmental component deliver a message that is 

consistent in tone and content with the central communication strategy. 

We learned from three of the five components we interviewed that they use 

additional vehicles for providing and receiving information from 

employees. It may be appropriate to coordinate the messages sent to 

employees through these additional vehicles to minimize the perception 

that certain groups of employees are getting the “real” story. 

Building on the current effort, DHS will need to provide adequate 

opportunities for feedback once the options are released, including 

providing an adequate level of detail on how the new system will impact 

employees. The feedback mechanisms identified in the communications 

plan focus on gathering employee feedback prior to the options being 

released. For example, two of the three feedback mechanisms outlined in 

the communications plan will be completed before the system options are 

publicized. DHS also needs to ensure effective communication to 

employees and stakeholders after the options are released. For example, 

DHS should consider describing to employees how the comments collected 

during the Town Hall meetings and focus groups informed the design 

process. Furthermore, once options are selected, DHS will be faced with 

communicating how the changes will impact specific jobs, rights and 

protections, and daily responsibilities. DHS may find it necessary to 

further tailor and customize the details of the new human capital system to 

meet the specific needs of employees. 

Page 23 GAO-03-1099 DHS Personnel System 
Design Process 

Provides for Employee 

Involvement 

Employee perspectives on the design of the DHS human capital system are 

sought through many mechanisms, including the Core Design Team with its 

members from multiple DHS components, Town Hall meetings, focus 

groups, the field team, and an e-mail mailbox for employee comments. 

This reflects the Congress’ desire that employees be allowed to participate 

in a meaningful way in the creation of the new human capital system. 

Involving employees in planning helps to develop agency goals and 

objectives that incorporate insights about operations from a front-line 

perspective. It can also serve to increase employees’ understanding and 

acceptance of organizational goals and improve motivation and morale. 

The design process attempts to include employees by creating multiple 

opportunities for employees to provide feedback. While activity updates 

were provided in the DHS weekly newsletter and an e-mail mailbox for 

employees to submit their suggestions and comments was used, multiple 

Town Hall meetings and focus groups conducted between the end of May 

and the beginning of July 2003 were held in ten cities across the United 

States.24 According to DHS and OPM officials, these cities were chosen to 

ensure adequate representation of major DHS components and geographic 

diversity. The goal of the events was to promote two-way communication 

between management and employees and to gather employee perspectives 

on the personnel practices that exist in their agency and any proposed 

changes they would like to see. Each meeting hosted up to 200 DHS 

employees from the surrounding cities. 

At a typical Town Hall meeting, there was a general question and answer 

segment in which local employees had the opportunity to ask questions 

about the new system and express their overall concerns about DHS. If 

participants’ questions could not be addressed during the meeting due to 

time constraints, they could write their questions on note cards and give 

them to cognizant DHS and OPM officials in attendance. After the meeting, 

the Core Design Team held a series of six focus group sessions in each city 

to obtain their input and suggestions for the new human resource system. 

In most cities, five of the six sessions were devoted to hear employees’ 

views while the remaining session heard the views of supervisors and 

managers. Participants in the focus groups included both Town Hall 

24The ten cities were Atlanta, Georgia; Detroit, Michigan; El Paso, Texas; Los Angeles, 

California; Miami, Florida; New York, New York; Norfolk, Virginia; Seattle, Washington; 

Washington, D.C.; and Baltimore, Maryland. 

Page 24 GAO-03-1099 DHS Personnel System 
meeting attendees and those who were not able to attend the Town Hall 

session. 

The degree to which the information gathered in these sessions was used to 

inform the design process is not yet evident. On one hand, the Town Hall 

meetings and focus groups gathered suggestions and concerns from large 

numbers of employees from multiple organizational components in 

geographically diverse locations. However, once options for the human 

capital system are proposed it will be particularly important that 

employees have adequate opportunities to make a worthwhile 

contribution. 

In addition to the Town Hall meetings and focus groups, a field team made 

of 32 front-line DHS managers and staff, some of whom were selected by 

the major unions, was formed. During the design process, the field team 

provided insights about the department’s human capital challenges from a 

front-line perspective. These insights were gathered during the three 

meetings of the group -- the field team was convened during the first week 

of the 2-week April leadership conference, 2 days in July to react to the 

subgroups’ research, and for 2 days again in mid-September to react to the 

draft personnel system options before their submission to the Senior 

Review Advisory Committee in late September. 

According to documents drafted before the April leadership conference, 

provided by AFGE and NAAE, it was originally expected that the field team 

would review the work of the Core Design Team on a “regular basis” and 

then be used to “test the options against workplace realities.” One 

stakeholder added that it was his initial impression that the field team 

would serve as an “extension of the Core Design Team,” empowered to 

provide input throughout the entire design process. However, over time, 

the expected role of the field team evolved to that of a recurring focus 

group that had no formal decision-making role in the design process. 

Likewise, as the role for the field team evolved, so did its membership – 

additional nonunionized DHS employees were added to the team. One 

DHS official acknowledged that the field team has not had a great deal of 

involvement in the process, and that the expected role of the team changed 

over time. Officials in NTEU, AFGE, and NAAE additionally confirmed that 

the role of the field team changed over time. One union president 

described the diminished role as a “missed opportunity.” This official 

added that the lack of involvement and minimal communication with the 

Core Design Team has made it difficult for the field team to make a 

worthwhile contribution. 

Page 25 GAO-03-1099 DHS Personnel System 
Conclusions 	 DHS and OPM have developed a process to design the new personnel 

system that is stimulated and supported by top leadership in both 

organizations and is generally inclusive, both in terms of the membership 

of the Core Design Team and multiple opportunities to provide input. The 

process is also guided by core principles and an ambitious timeline. Our 

research shows that these key attributes are indispensable to successful 

transformations. This design process provides a model for DHS to 

consider as it makes other important decisions about the implementation 

and transformation of the department. 

Building on this progress, DHS will need to ensure that the development of 

the human capital policy options by the Core Design Team is integrated 

with the accomplishment of DHS programmatic goals as defined in the 

forthcoming strategic plan. Such a linkage can ensure that the new human 

capital approaches support and facilitate the accomplishment of DHS’s 

goals and objectives – a fundamental principle of the human capital idea. It 

will also assist the Core Design Team in identifying human capital 

programs that support the DHS mission, including the development of a 

performance management system which creates a “line of sight” that shows 

how team, unit, and individual performance can contribute to overall 

organizational goals. 

Additionally, DHS has acknowledged that work lies ahead for implementing 

better, more effective ways to communicate with and receive feedback 

from its employees. The development of the communications plan is an 

important and positive step. As DHS implements this plan it will need to 

provide information on areas of confusion that were identified during our 

interviews, including clarifying the role of DHS versus OPM in the system 

development. DHS will also need to ensure that a consistent message is 

communicated across DHS components. Finally, effective communication, 

characterized by a two-way dialogue, will be central to engaging employees 

in the remainder of the design process and ensuring it is transparent. 

Ultimately, an effective two-way communication strategy can ease 

implementation efforts. Once options for the human capital system are 

proposed it will be particularly important that employees have adequate 

opportunities to make a worthwhile contribution. Substantial involvement 

of field staff in the development and implementation of the new human 

capital system is essential given that over 90 percent of DHS civilian 

employees are in the field. Continued employee involvement will help to 

strengthen employee buy-in to the new human capital system. It is 

Page 26 GAO-03-1099 DHS Personnel System 
important to consider and use the solicited employee feedback to make any 

appropriate changes once this feedback is received. 

Recommendations for 

Executive Action 

DHS has developed an effective process to begin the formation of its new 

human capital system. Moving forward, it is critical that the new human 

capital system be linked to the DHS strategic plan and that DHS continue to 

communicate with and involve its employees. Accordingly, we are 

recommending that once the strategic plan is completed the Secretary of 

DHS and the Director of OPM ensure that the options selected for the new 

human capital system support and facilitate the accomplishment of the 

department’s strategic goals and objectives, as identified in the new 

strategic plan. In addition, we recommend that the Secretary of DHS 

clarify the role of the participants in the design effort and other areas of 

confusion identified by stakeholders during our interviews. Furthermore, 

consistent with the DHS communications plan, we recommend the 

Secretary ensure the message communicated across DHS components is 

consistent, and maximize opportunities for two-way communication and 

employee involvement through the completion of the design process, the 

release of the system options, and implementation, with special emphasis 

placed on seeking the feedback and buy-in of front-line employees in the 

field. 

Agency Comments and 

Our Evaluation 

OPM provided written comments on a draft of this report, which are 

printed in appendix IV. DHS provided technical comments by e-mail. 

DHS and OPM generally agreed with the contents of the report. However, 

both DHS and OPM expressed a concern that we misunderstood the role of 

the field team in the design process. Each described the role of the field 

team as more limited than our original understanding. While gathering 

additional information from DHS, NTEU, AFGE, and NAAE to clarify the 

role and activities of the field team, we learned that its role evolved over 

the course of the design effort, that it had no decision-making role in the 

design process, and that it was used as a recurring focus group. 

Accordingly, we changed the draft to reflect the field team’s current role. 

DHS and OPM also provided a number of technical suggestions that have 

been incorporated where appropriate. 

Page 27 GAO-03-1099 DHS Personnel System 
We are sending copies of this report to the Chairman and Ranking Minority 

Member, Senate Committee on Governmental Affairs; the Chairman and 

Ranking Minority Member, House Committee on Government Reform; the 

Chairman and Ranking Minority Member, House Select Committee on 

Homeland Security; and other interested congressional parties. We will 

also send copies to the Secretary of the Department of Homeland Security 

and the Director of the Office of Personnel Management. Copies will be 

made available at no charge on the GAO Web site at http://www.gao.gov. 

If you have any questions about this report, please contact me or Ed 

Stephenson on (202) 512-6806. Key contributors to this report are listed in 

appendix V. 

J. Christopher Mihm 

Director, Strategic Issues 

Page 28 GAO-03-1099 DHS Personnel System 
Appendix I 

Practices and Implementation Steps for 

Mergers and Transformation 

Implementing large-scale change management initiatives, such as mergers 

and organizational transformations, is not a simple endeavor and requires 

the concentrated efforts of both leadership and employees to realize 

intended synergies and to accomplish new organizational goals. At the 

center of any serious change management initiative are people—people 

define the organization’s culture, drive its performance, and embody its 

knowledge base. Experience shows that failure to adequately address— 

and often even consider—a wide variety of people and cultural issues is at 

the heart of unsuccessful mergers and transformations. Recognizing the 

“people” element in these initiatives and implementing strategies to help 

individuals maximize their full potential in the new organization, while 

simultaneously managing the risk of reduced productivity and 

effectiveness that often occurs as a result of the changes, is the key to a 

successful merger and transformation. Thus, mergers and transformations 

that incorporate strategic human capital management approaches will help 

to sustain agency efforts and improve the efficiency, effectiveness, and 

accountability of the federal government. 

GAO convened a forum on September 24, 2002, to identify and discuss 

useful practices and lessons learned from major private and public sector 

organizational mergers, acquisitions, and transformations. This was done 

to help federal agencies implement successful cultural transformations, 

including DHS. The invited participants were a cross section of leaders 

who have had experience managing large-scale organizational mergers, 

acquisitions, and transformations, as well as academics and others who 

have studied these efforts. We reported the key practices participants 

identified that can serve as the basis for subsequent consideration as 

federal agencies seek to transform their cultures in response to governance 

challenges. Since convening the forum, our additional work has identified 

specific implementation steps for these practices.1 (See fig. 5.) 

1

GAO-03-669. 

Page 29 GAO-03-1099 DHS Personnel System 
Appendix I


Practices and Implementation Steps for 


Mergers and Transformation


Figure 5: Key Practices and Implementation Steps for Mergers and Transformations 

Ensure top leadership drives the transformation. 

PRACTICE IMPLEMENTATION STEPS 

• Define and articulate a succinct and compelling reason for change. 

• Balance continued delivery of services with merger and 

transformation activities. 

• Adopt leading practices for results-oriented strategic planning and 

reporting. 

Establish a coherent mission and integrated strategic goals to 

guide the transformation. 

Focus on a key set of principles and priorities at the outset of 

the transformation. 

Set implementation goals and a timeline to build momentum 

and show progress from day one. 

• Embed core values in every aspect of theorganization to reinforce 

the new culture. 

• Make public implementation goals and timeline. 

• Seek and monitor employee attitudes and take appropriate followup actions. 

• Identify cultural features of merging organizations to increase 

understanding of former work environments. 

• Attract and retain key talent. 

• Establish an organizationwide knowledge and skills inventory to 

exchange knowledge among merging organizations. 

• Establish networks to support implementation team. 

• Select high-performing team members. 

• Adopt leading practices to implement effective performance 

management systems with adequate safeguards. 

• Communicate early and often to build trust. 

• Ensure consistency of message. 

• Encourage two-way communication. 

• Provide information to meet specific needs of employees. 

• Use employee teams. 

• Involve employees in planning and sharing performance 

information. 

• Incorporate employee feedback into new policies and procedures. 

• Delegate authority to appropriate organizational levels. 

• Adopt leading practices to build a world-class organization. 

Dedicate an implementation team to manage the 

transformation process. 

Use the performance management system to define the 

responsibility and assure accountability for change. 

Establish a communication strategy to create shared 

expectations and report related progress. 

Involve employees to obtain their ideas and gain ownership for 

the transformation. 

Build a world-class organization. 

Source: GAO. 

Page 30 GAO-03-1099 DHS Personnel System 
Appendix II 

Design Process


The process for creating a DHS human capital management system, jointly 

developed by DHS and OPM, calls for a design team made up of DHS and 

OPM employees and union representatives. The process is divided into 

three stages: research, outreach, and drafting of initial personnel system 

options; review of the options; and development of proposed regulations. 

Early 2004 is the expected date for the issuance of the personnel system’s 

final regulations. 

Core Design Team Is to 

Draft Options for the 

Personnel System 

Pay and Performance and Labor 

and Employee Relations 

Subgroups 

As the first stage of the design process, the Core Design Team engaged in 

efforts that serve as the basis for the work of the other two components. 

The 48 team participants included personnel experts from OPM, DHS, and 

its component agencies; line employees and managers from DHS 

headquarters and field offices; and professional staff from the three major 

unions.1 Members were assigned to one of two subgroups focusing on 

(1) pay and performance or (2) labor and employee relations. The 

management consulting firm Booz Allen Hamilton assisted the teams in 

their efforts. 

Each subgroup had two coleaders, one from OPM and one from DHS, to 

guide them. The subgroups performed their duties both collectively and 

separately. They convened jointly when there were common issues to 

discuss or to listen to presentations on human capital systems. For 

example, the teams heard presentations on the performance management 

and performance-based pay system at Internal Revenue Service (IRS); the 

human capital management systems at FBI and NSA; and the performance 

management, pay banding, and employee appeals process used at GAO. 

The pay and performance subgroup focused its work on the three chapters 

of Title 5 covering performance appraisal, classification, and pay rates and 

systems. According to the subgroup’s leaders, they identified 25 

researchable areas and assigned small teams to explore each. Subgroup 

members were assigned to work on multiple teams. Research areas 

included the structure of pay ranges, methods for categorizing types of 

work, and different appraisal and rating methods, for example. When 

asked about the initial findings of their research, the leaders of the pay and 

1

As noted previously, this summarizes data for those members on board as of July 11, 2003. 

Since that date, membership has changed. 

Page 31 GAO-03-1099 DHS Personnel System 
Appendix II 

Design Process 

performance subgroup indicated they identified many pay systems to 

consider and evaluate. 

The labor and employee relations subgroup focused on the three chapters 

of Title 5 covering labor-management relations, adverse actions, and 

appeals, to narrow its research. To gain a better understanding of these 

issues, the group invited agencies such as the Merit Systems Protection 

Board and the Federal Labor Relations Authority to make presentations. 

Areas that were researched included different levels of employee, union, 

and management rights; negotiation models; and how the success of labor 

relations programs, adverse action systems, and appeals systems is 

evaluated, for example. According to the subgroup leaders, they also 

researched both leading and failed practices in their subject areas. The 

group created interview guides to collect information in a consistent 

format. When asked about the initial findings of the research, the subgroup 

reported difficulty in identifying innovative labor relations models that can 

be applied to the federal system. 

Contractor Assistance	 To help facilitate its efforts in the design of the personnel system, DHS 

contracted with management-consulting firm Booz Allen Hamilton to 

provide support in project management, research, writing, staff support, 

and communications/publicity. In addition, it was responsible for planning 

the Town Hall meetings and facilitating the focus groups. According to the 

subgroup leaders, the contractor was expected to help design the format 

for the option papers but would not likely be involved in drafting the 

substance of the options. 

Senior Review Advisory 

Committee Is to Develop 

Final Set of Options 

The Senior Review Advisory Committee, the second stage of the design 

process, will receive the broad set of options from the Core Design Team. 

From this set of options the committee is expected to develop its final list 

of options for the Secretary and Director to consider.

2 Committee 

members are permitted to eliminate, create, or prioritize the options. In 

communicating its list of options to the Secretary and Director, it may 

present the strengths and weaknesses of each. This committee could 

potentially make recommendations related to implementation strategies. 

2

An informal “planning committee,” or small working group of DHS, OPM, and union senior 

executives was assembled to provide staff support, highlight issues for discussion during 

public meetings, and potentially to set the meeting agendas for the Senior Review Advisory 

Committee. 

Page 32 GAO-03-1099 DHS Personnel System 
Appendix II 

Design Process 

Meetings of the Senior Review Advisory Committee will be governed by the 

Federal Advisory Committee Act,3

 which requires meetings to be open to 

the public.4 

The Under Secretary for Management at DHS and the OPM Senior Advisor 

for Homeland Security cochair the Senior Review Advisory Committee. 

Committee members are officials in key leadership positions at both OPM 

and DHS. OPM representatives include the Senior Advisor for Homeland 

Security, the Associate Director for Strategic Human Resources Policy, the 

Associate Director for Human Capital Leadership and Merit System 

Accountability, and the Senior Policy Advisor to the Director and Chief 

Human Capital Officer. DHS representatives include the Commissioner of 

Customs and Border Protection, the Director of TSA, Director of the U.S. 

Secret Service, Director of the Bureau of Citizenship and Immigration 

Services, and the Director of Administration. Union representatives are the 

presidents from AFGE, NTEU, and NAAE. External experts with particular 

knowledge and experience in human capital management will serve as 

advisors. 

DHS Secretary and OPM 

Director Are to Propose 

Regulations for the 

Personnel System 

The Secretary of DHS and the OPM Director make up the final stage of the 

design process. Once they receive the list of options from the Senior 

Review Advisory Committee, they may edit, remove, or develop 

alternatives to the proposed options. The Secretary and the Director will 

then issue proposed personnel rules for the department. As called for in 

the DHS legislation, individuals affected by the proposed rules have 30 

calendar days to comment and make recommendations. The Secretary and 

Director are then to follow the provisions of the statutory reconciliation 

process for no less than 30 days.5 

3

5 U.S.C. App. 2, section 10. 

4

Notice of the official establishment of the Senior Review Advisory Committee was posted 

in the Federal Register on June 11, 2003. 68 Fed. Reg. 34994. 

5

Section 841 of the Homeland Security Act establishes a process for collaboration with 

employee representatives to provide notice of the proposed human resources management 

system, the opportunity to submit comments, and consultation over the recommendations 

made. 

Page 33 GAO-03-1099 DHS Personnel System 
Appendix III 

Characteristics of Core Design Team 

Members 

Characteristics of the 48 members of the Core Design Team are described 

in further detail in tables 2 through 6 below. The tables summarize data for 

those members on board as of July 11, 2003. Since that date, membership 

of the Core Design Team has changed. 

Table 2: Design Team Membership 

Agency Legacy Unit/Union Total 

DHS APHIS 1 

Coast Guard 2 

Customs 3 

FEMA 3 

FLETC 2 

INS 5 

Secret Service 2 

Treasury 3 

TSA 3 

DHS Total 

OPM 

Union Professional Staff	 AFGE 4 

NTEU 4 

Total Union Professional Staff 

Total Design Team 

Source: GAO. 

Table 3: Who Selected Design Team Member 

Organization that Selected 

Current Employer Member Total 

DHS NAAE 1 

DHS 23 

DHS Total 24 

OPM 16 

Union Professional Staff AFGE 4 

NTEU 4 

Total Union Professional Staff 8 

Total Design Team 48 

Source: GAO. 

Page 34 GAO-03-1099 DHS Personnel System 

24 

16 

8 

48 
Appendix III


Characteristics of Core Design Team 


Members


Table 4: Subgroup Membership 

Subgroup DHS OPM Union Total 

Pay and Performance 12 9 4 

Labor and Employee Relations 11 6 4 

No data 1 1 0 

Total 24 16 8 

Source: GAO. 

Table 5: Human Capital Professional versus Other Experience 

Human Capital Other 

Organization Professional Experience No Data Total 

DHS 12 12 0 

OPM 12 4 0 

Union 4 2 2 

Total 28 18 2 

Source: GAO. 

Table 6: Years of Experience of Design Team Members 

Agency 

Average Years of 

Federal Experiencea 

Average Years of 

Experience Outside 

Headquartersb 

DHS 21.7 

OPM 21.5 

Union 12.8 

Total 21.0 

Source: GAO.


a

Based on complete data for 41 participants.


b

Based on complete data for 39 participants.


Page 35 GAO-03-1099 DHS Personnel System 

25 

21 

2 

48 

24 

16 

8 

48 

9.9 

6.5 

4.0 

8.4 
Appendix IV 

Comments from the Office of Personnel 

Management 

Page 36 GAO-03-1099 DHS Personnel System 
Appendix IV


Comments from the Office of Personnel 


Management


Page 37 GAO-03-1099 DHS Personnel System 
Appendix V 

GAO Contacts and Staff Acknowledgments


GAO Contacts J. Christopher Mihm or Edward Stephenson, (202) 512-6806 

Acknowledgments	 In addition to the persons named above, Ellen V. Rubin, Tina Smith, Eric 

Mader, and Lou V.B. Smith made key contributions to this report. 

(450224) Page 38 GAO-03-1099 DHS Personnel System 
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