U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

79–887 PDF 2003

S. Hrg. 107–470

THE FEDERAL WORKFORCE: LEGISLATIVE

PROPOSALS FOR CHANGE

HEARINGS

BEFORE THE

INTERNATIONAL SECURITY, PROLIFERATION AND

FEDERAL SERVICES SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

MARCH 18 AND 19, 2002

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

JOSEPH I. LIEBERMAN, Connecticut, Chairman

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

FRED THOMPSON, Tennessee

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ROBERT F. BENNETT, Utah

JIM BUNNING, Kentucky

JOYCE A. RECHTSCHAFFEN, Staff Director and Counsel

RICHARD A. HERTLING, Minority Staff Director

DARLA D. CASSELL, Chief Clerk

INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES

SUBCOMMITTEE

DANIEL K. AKAKA, Hawaii, Chairman

CARL LEVIN, Michigan

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

THAD COCHRAN, Mississippi

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

ROBERT F. BENNETT, Utah

NANCI E. LANGLEY, Deputy Staff Director

DENNIS WARD, Minority Staff Director

BRIAN D. RUBENS, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Akaka .................................................................................................. 1, 45

Senator Voinovich ............................................................................................. 2, 46

WITNESSES

MONDAY, MARCH 18, 2002

Hon. Kay Coles James, Director, Office of Personnel Management .................... 6

Hon. David M. Walker, Comptroller General, General Accounting Office ......... 7

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

(NTEU) .................................................................................................................. 21

Bobby L. Harnage, Sr., National President, American Federation of Government Employees, AFL–CIO ................................................................................. 23

G. Jerry Shaw, General Counsel, Senior Executives Association ........................ 25

John C. Priolo, General Executive Board Member, Federal Managers Association (FMA) ............................................................................................................ 27

TUESDAY, MARCH 19, 2002

Paul C. Light, Senior Advisor, National Commission on the Public Service,

and Vice President and Director of Governmental Studies, The Brookings

Institution ............................................................................................................. 48

Carolyn Ban, Dean, Graduate School of Public and International Affairs,

University of Pittsburgh, and President, National Association of Schools

of Public Affairs and Administration .................................................................. 49

Max Stier, President, Partnership for Public Service ........................................... 51

Steven J. Kelman, Professor of Public Management, John F. Kennedy School

of Government, Harvard University ................................................................... 53

ALPHABETICAL LIST OF WITNESSES

Ban, Carolyn:

Testimony .......................................................................................................... 49

Prepared statement .......................................................................................... 207

Harnage, Bobby L., Sr.:

Testimony .......................................................................................................... 23

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

James, Hon. Kay Coles:

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

Prepared statement .......................................................................................... 77

Kelley, Colleen M.:

Testimony .......................................................................................................... 21

Prepared statement .......................................................................................... 111

Kelman, Steven J.:

Testimony .......................................................................................................... 53

Prepared statement .......................................................................................... 221

Light, Paul C.:

Testimony .......................................................................................................... 48

Prepared statement .......................................................................................... 191

Priolo, John C.:

Testimony .......................................................................................................... 27

Prepared statement .......................................................................................... 178

Page

IV

Shaw, G. Jerry:

Testimony .......................................................................................................... 25

Prepared statement of Carol A. Bonosaro with attachments, submitted

by Mr. Shaw .................................................................................................. 144

Stier, Max:

Testimony .......................................................................................................... 51

Prepared statement .......................................................................................... 215

Walker, Hon. David M.:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 95

APPENDIX

Majority Subcommittee Memorandum ‘‘The Federal Workforce: Legislative

Proposals for Change,’’ with attachments .......................................................... 232

‘‘Changing Role of NRSROs’’ submitted by Glenn Reynolds, CreditSights,

Inc. ......................................................................................................................... 241

Questions and responses from Senators Akaka and Voinovich for:

Ms. James ......................................................................................................... 263

Mr. Walker ........................................................................................................ 277

Ms. Kelley ......................................................................................................... 284

Mr. Harnage ...................................................................................................... 286

Mr. Shaw ........................................................................................................... 289

Mr. Priolo .......................................................................................................... 291

Ms. Ban ............................................................................................................. 294

Questions and responses from Senator Akaka for:

Mr. Light ........................................................................................................... 299

Dr. Kelman ........................................................................................................ 300

Questions and responses from Richard N. Brown, Directing Business Representative, National Federation of Federal Employees Federal District I,

and Frank Carelli, Jr., Director, Government Employees, International Association of Machinists and Aerospace Workers, AFL–CIO ............................. 301

(1)

THE FEDERAL WORKFORCE: LEGISLATIVE

PROPOSALS FOR CHANGE

MONDAY, MARCH 18, 2002

U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES, OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC.

The Committee met, pursuant to notice, at 9:36 p.m., in room

SD–342, Dirksen Senate Office Building, Hon. Daniel K. Akaka,

Chairman of the Subcommittee, presiding.

Present: Senators Akaka and Voinovich.

OPENING STATEMENT OF SENATOR AKAKA

Senator AKAKA. The Subcommittee hearing will come to order.

This morning, we begin 2 days of hearings on the Federal workforce and several legislative proposals offered by Senator George

Voinovich and Senator Fred Thompson.

We have with us a distinguished group of witnesses both today

and tomorrow who will share their insights on how to best meet

the challenges of recruiting and retaining the people that agencies

need to carry out their missions. I thank you all for being with us

today and I wish to extend a special hello to John Priolo, Director

of the Hawaii Chapter of the Federal Managers Association, who

will testify on behalf of his association’s President, Michael Stiles.

Unfortunately, Senator Cochran and Senator Thompson are unable to be with us today. However, I am delighted to be joined by

my colleague, and I would say buddy and good friend, the Senator

from Ohio, who has championed the importance of a strong Federal

workforce. I appreciate his support today, just as I was pleased to

support him during the many hearings he held on these issues.

I will not recount statistics or talk about my concern over the

loss of critical institutional knowledge, and I leave the discussion

of the bills to our panelists. I will, however, talk about the men and

women who make up our government’s workforce. I am pleased

that in the wake of the terrorist attacks last fall, anti-government

rhetoric has abated and a higher percentage of young Americans

say they would consider Federal service as a job option.

We saw that for every essential service these attacks disrupted,

the government responded quickly and effectively. Our Nation’s recovery is being aided through the talents and professionalism of

our Federal workforce, who are selflessly supporting the efforts of

armed forces abroad. After September 11, more than 2,100 Federal

employees were deployed in disaster response teams, and to this

2

day, thousands of Federal employees are responding to the war on

terrorism as a part of their normal duties.

The Federal workforce is this Nation’s backbone and I think it

is time to drop the pejorative use of the word ‘‘bureaucrat.’’ Our

hearing continues the dialogue on what needs to be done to make

government service more attractive to young people and to inspire

and compensate those who have chosen government as their job

choice.

Just last week, this Subcommittee heard from agency and expert

witnesses that the lack of employees with language, science, and

technical skills threaten our national security. That hearing focused on S. 1800, a bill I introduced with Senators Durbin and

Thompson and cosponsored by Senators Cochran, Collins, and

Voinovich. As we examine the Thompson and Voinovich legislative

proposals, I want to make sure that the bills will not cause harm

to either employees or their agencies.

Federal agencies have been operating under flattened budgets for

years and the administration’s fiscal year 2003 budget proposal,

after removing funding for homeland security and defense purposes, would see this discretionary spending decline by 1 percent.

This leaves no room to fund recruitment, retention, and training

programs. Moreover, the lack of parity between the pay of civilian

workers and military service members sends the wrong message to

prospective and current Federal employees.

I support good management and I want to make sure that we

have the right people and the right skills to operate the government in an effective, efficient, and economic manner. But I do not

see how we can expect young people to consider government employment if we are unable to provide them with comparable pay,

benefits, and opportunities for training.

How do we advertise the government as an employer of choice if

agencies lack funding for incentives, including money to implement

fully the student loan repayment program? How do we balance recruitment and retention goals with this administration’s goals for

competitive sourcing? These are among the questions I hope we

will answer today. There must be a commitment from the highest

levels of government and a willingness to allocate the resources

necessary to achieve a strong and vibrant workforce.

Again, I wish to thank our witnesses for being with us today.

You deserve our gratitude for your commitment to our Federal

service system, and together, we face this new kind of national

emergency in our country.

Now, I would like to yield to Senator Voinovich for any statement

he may have.

OPENING STATEMENT OF SENATOR VOINOVICH

Senator VOINOVICH. Thank you, Mr. Chairman. I want to extend

my deep appreciation to you for holding this hearing on The Federal Workforce: Legislative Proposals for Change. I would also like

to welcome our witnesses and I want to thank you for being here

today.

Mr. Chairman, I would like to congratulate you on the hearing

that we held last week on S. 1800, the homeland security workforce

bill you introduced with Senators Durbin and Thompson this past

3

December. I am very happy to be a cosponsor of that legislation.

I think the witnesses offered some excellent testimony on the national security aspect of the human capital crisis, demonstrating

again the real urgency of this issue.

As you know, Mr. Chairman, reforming the Federal Government’s strategic human capital management has been my highest

priority as a Member of this Subcommittee and I know you share

my concern over this human capital crisis. You have been an important leader on this issue and I want to thank you personally for

attending all of the hearings I held on human capital during the

time that I was Chairman of the Oversight of Government Management Subcommittee. It is encouraging to me that we have forged

a productive bipartisan partnership on this issue, which is so important to our Nation.

Because of your participation in those hearings, we were able to

produce a report called ‘‘Report to the President: The Crisis in

Human Capital,’’ summarizing the hearings that we had and making recommendations for action, and that was the report that we

were able to give the incoming new administration, a benchmark

on our progress at that time.

In addition to the Subcommittee’s activities, other government offices and agencies are addressing the human capital crisis, which

is very encouraging, and several have joined us today. In January

2001, Comptroller General David Walker designated strategic

human capital management as a governmentwide high-risk area,

and he has also been elevating the profile of and developing solutions to this problem as a top priority. To quote Mr. Walker’s admonition, and David, this is going to be famous, ‘‘Too often, we

have treated Federal employees as costs to be cut, rather than assets to be valued.’’ I think that is really it in a nutshell. That is

what our past has been and we need to change that.

Last August, the Bush Administration prioritized strategic management of human capital as its No. 1 governmentwide management initiative. OPM Director Kay James has done an excellent job

moving her agency and the Federal Government in the right direction when it comes to Federal personnel issues. Kay, I really appreciate how conscientious you have been in picking the ball up and

carrying it, and we are pleased that you are here today.

Mr. Chairman, I have also been working closely with other Federal organizations, particularly our employee unions, organizations

that are important to our efforts to address the Federal Government’s human capital challenges. Bobby and Colleen, I am grateful

for the partnership that we have forged during my time here in the

U.S. Senate.

I would like to take this opportunity to state publicly that my

legislation is just a down payment on reform. I would like to encourage you, Mr. Chairman—and you have already spoken about

this—to hold hearings later this year on issues such as pay comparability and compensation, health care benefits, and the performance of Federal agencies.

Just last week, Steve Barr’s ‘‘Federal Diary’’ column in The

Washington Post offered another example of how far Federal pay

lags behind comparable positions in the private sector—and often

among agencies—citing that there was a 40 percent gap between

4

the SEC and other banking agencies. A comprehensive examination

of these important but long-overlooked aspects of the human capital crisis and a strategic plan for action are urgently needed as

next steps in the process of reforming the Federal Government’s

personnel systems. I know, Kay, you have put together a draft to

try to respond to that problem, and it is going to cost more money.

Let us face it. We are just going to have to be realistic and face

up to it.

I would also like to acknowledge Carol Bonosaro of the Senior

Executives Association. Carol has provided a number of excellent

recommendations for strengthening our legislation, as has John

Priolo of the Federal Managers Association.

A great deal of action has been taken to address the human capital crisis over the last several years, and we are building momentum daily for the passage of reform legislation in Congress. The

continued involvement of these people and organizations and many

other stakeholders is critical to our success in solving these problems. I would particularly like to thank Pat McGinnis for her leadership on the human capital crisis as President for the Council for

Excellence in Government. Pat has just done a wonderful job.

Many people and organizations have had an impact on the provisions in our bill. As you know, my original proposal, S. 1603, was

improved several times before I introduced it in October. Since

then, we have continued to solicit the advice of many stakeholders,

including a number of them that are here in this room. Currently,

I am working on a draft manager’s amendment that combines part

of S. 1603 with S. 1639, the administration’s human capital proposal, which I introduced last November. I believe this compromise—representing the efforts of the Bush Administration, our

colleagues on this Subcommittee, and many others that are here— is really something that we can be proud of.

It is my sincere hope that we can advance legislation through the

Governmental Affairs Committee that will incorporate the best elements of my proposal and the broad array of others that have been

introduced in the 107th Congress, such as S. 1800. I am extremely

optimistic that we can enact legislation this year that will really

make a difference to the Federal workforce.

All the bills that I have discussed, as well as several others, including important flexibilities and innovative programs designed to

make the Federal Government a more attractive employer for applicants. In the interest of time, Mr. Chairman, as you did, I am

not going to get into the specifics of this legislation, but I would

mention that a lot of work has gone into it. If you want to make

change, you have to first underscore urgency for change and then

you have to have a vision, and I think that we do have a vision.

Now we have got to make sure that people understand that there

is an urgency to achieve the change we envision.

Senator Akaka, last week you mentioned the words of former

Secretary of Defense James Schlesinger, who testified before our

Subcommittee last March when he said, ‘‘Fixing the personnel

problem is a precondition of fixing virtually everything else that

needs repair in the institutional edifice of the U.S. security policy.’’

He was a member of the U.S. Commission National Security in the

21st Century.

5

Then last week again, Lee Hamilton, another member of that

Commission, reiterated this point before this Subcommittee when

he said, ‘‘although there has been renewed public interest in national security work since September 11, the U.S. Government

faces a serious problem in attracting and retaining talented people

for key jobs in national security departments and agencies.’’ That

conclusion was backed up by a poll that the Partnership for Public

Service conducted. People are more interested in government today

as a result of September 11, but the issue is, are we going to be

able to take advantage of that renewed interest to recruit them?

Each day, it seems we learn of a new example that verifies this

testimony and demonstrates anew the enormous impact of the

human capital crisis on our national security and our economic

prosperity. At the Immigration and Naturalization Service, there

are only 2,000 agents to enforce immigration within U.S. borders.

This has resulted in an enormous workload that requires the INS

to focus on their most serious cases, such as deportation of immigrant felons. This leaves little time to round up student no-shows,

including at least two of the September 11 hijackers.

In no way, Mr. Chairman, do I condone the fact that the INS

failed to properly screen the applications of these evil-doers. However, the human capital problem INS faces must be addressed in

a priority fashion if we are to prevent similar instances from occurring again.

As I mentioned earlier, at the Securities and Exchange Commission, staffing levels have failed to keep pace with the agency’s

growing workload and salaries are not aligned with other Federal

agencies due to a lack of resources.

At the Central Intelligence Agency, Director Tenet in recent testimony before Congress said that, within 3 years, between 30 and

40 percent of his workforce will have been there for less than 5

years, and he proposed overhauling the compensation system to

keep the ‘‘best and brightest,’’ and those with more experience.

Last week, Administrator Joe Allbaugh of the Federal Emergency Management Agency, testified before the Environment Committee that he is probably going to lose 55 percent of his workforce

in the next 2 to 3 years. And he said, after September 11, many

of them, as I am sure is the case at a lot of other Federal agencies,

have basically said, look, I reevaluated my life. I am retiring. Many

of them were not thinking of retiring. But now they are going to

take early retirement to spend more time with their families.

So this is a real crisis that we need to face up to if we are going

to deal with our homeland security and our war against terrorists

abroad. I am very pleased, Mr. Chairman, that you are holding the

hearings today and tomorrow, and I hope that our colleagues will

understand how urgent this situation is so that we can move on

with this legislation. Thank you very much.

Senator AKAKA. Thank you very much, Senator, for your urgent

statement here.

Our first panel needs no introduction, but before we begin, I wish

to thank both of you for the outstanding support you and your staff

provide to this Committee and this Subcommittee. I ask that you

limit your oral statements to 5 minutes. However, please be asVerDate 11-MAY-2000 09:31 Feb 12, 2003 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 79887.TXT SAFFAIRS PsN: SAFFAIRS
6

1The prepared statement of Ms. James appears in the Appendix on page 77.

sured that your full written statements will be made a part of the

record.

Director James, you may now proceed.

TESTIMONY OF HON. KAY COLES JAMES,1 DIRECTOR, OFFICE

OF PERSONNEL MANAGEMENT

Ms. JAMES. Thank you, Mr. Chairman and other distinguished

Members of the Subcommittee. Thank you very much for inviting

me here today and for holding these very important hearings to

bring these issues to the forefront of the American people and to

Members of Congress and to all those who are interested in our

Federal workforce.

Among the goals that I identified when I was confirmed for this

position were that we would aggressively go after recruiting the

best and the brightest in public service and expediting streamlining

the Federal Government’s hiring process. Immediately after being

sworn in, I reoriented the focus of our agency and OPM began to

provide tailored assistance to agencies governmentwide through

strike forces staffed by some of the best career professionals that

this country has. They are equipped with outstanding skills and

have been providing service to our agencies around the Federal

Government.

Since September 11, however, the world has changed and OPM

has accelerated the pace of our activities to support the growing

human capital demands across government. Consistent with the

pledge that I made before you in June, we are working to place

tools in the hands of managers responsible for reshaping their

workforces to meet current and emerging needs.

The legislation that we are discussing today furthers these objectives and is consistent with the pledge that I made to ensure that

agencies are accountable to merit principles and other civil service

core values, whether the agency is exempt from or bound by the

traditional civil service system. I want to acknowledge and offer appreciation for the work of Senators Lieberman, Akaka, Thompson,

and Voinovich, who are key leaders in this legislative effort. Without your leadership, I am not sure we would be at this place and

the Federal civil servants would not be well served, and so thank

you very much.

As you all know, good government is not a partisan issue. This

Committee on Governmental Affairs has a long history of working

in a bipartisan manner to improve the operation of government. Indeed, this Committee oversaw the enactment of the Government

Performance and Results Act and the Clinger-Cohen procurement

reforms, and now the Committee has the opportunity to move forward on reforms to improve the way we manage the people who

serve in the Federal Government, the people we need to successfully wage the war against terrorism and to protect our security at

home.

In that spirit of cooperation, David Walker, who has provided so

much leadership on this issue at the General Accounting Office,

has agreed to work with OPM and OMB on a common set of

human capital management standards for Federal agencies. This

7

1The prepared statement of Mr. Walker appears in the Appendix on page 95.

collaboration between the Legislative and Executive Branches, I believe, promises improvements which will lead to better management of the Federal workforce and will result in shared measurable

criteria for judging that performance, and so David, I wanted to

thank you this morning for your leadership on these very important issues and for the work that we have been able to do together.

But in addition to clear standards and assistance that OPM is

providing, our agencies and managers must have greater flexibility

to manage their workforces effectively to keep high performance on

the job and to compete successfully in the market for talent. Over

the last 2 months, OPM and OMB have worked in partnership to

train over 500 senior managers on the many flexibilities that already exist. The legislation before you today provides a very vital

step toward giving Federal agencies the additional tools that they

need.

Many of the changes are technical fixes that remove barriers to

efficient management and allow even better use of the flexibilities

currently in place. Two of the bills, S. 1612 and S. 1639, contain

proposals developed by the administration. S. 1603 includes many

of the same provisions but differs in some ways. I will briefly outline the specific Federal employee management reforms that we at

OPM believe to be essential, summarizing my written statement.

I respectfully respect, and you have already granted that we should

include that.

There are many. I will just mention them because of time, and

I would also say that I am very pleased with the level of cooperation that exists between staffs. As we work through this, I feel confident that we will be able to resolve those and end up with one

bill we can all support.

As you know, we are talking about voluntary separation incentives, recruitment and retention incentives, relocation payments,

and new hiring flexibilities, and we want to do all of this within

the context of making sure that core merit system principles are

protected, that veterans’ preference is, in fact, protected, and we

also know that we have a lot that we need to do to promote and

encourage and look at how we treat our senior executives.

In closing, Senators, I would just say that there is a lot of work

to be done and that, again, I am very encouraged with the level of

cooperation that exists on these important issues. We have got to

keep this issue before the American people, and I think with the

leadership that you are providing, we can do that and we will get

legislation that we can pass.

Senator AKAKA. Thank you very much, Director James, for your

statement.

Mr. Walker, you may proceed with your statement.

TESTIMONY OF HON. DAVID M. WALKER,1 COMPTROLLER

GENERAL, GENERAL ACCOUNTING OFFICE

Mr. WALKER. Thank you, Chairman Akaka and Senator

Voinovich. Let me first at the outset thank you for holding this

hearing and thank you for both of your leadership in this important area. Clearly, you are making a difference and this is an area

8

where we critically need to make additional progress as quickly as

possible.

As Senator Voinovich mentioned, people represent our most valuable asset. Government is a knowledge-based enterprise. People are

the source of all knowledge. It is time that we recognize that and

it is time that we come into the 21st Century with regard to our

strategies, policies, and practices dealing with our most valuable

asset, namely our people.

As you know, GAO designated strategic human capital management, or I should say the lack thereof, as a high-risk area in January 2001. Significant attention has been given to this area. That

is appropriate. When we put something on the high-risk list, we

want to bring light to a subject. With light comes heat and with

heat comes action, and action is exactly what is needed in this

area.

I am pleased to say that there is a lot of additional attention and

increasing momentum to take necessary steps in this area. The

President in August 2001 made strategic human capital management the No. 1 item on his management agenda. That was also a

positive first step. That was, in part, due to the encouragement of

Director James, and I am sure Director Daniels from OMB, as well,

and I commend them for that.

We have said all along that it is going to take many players

working together collaboratively to make real progress in this area,

and we have a lot of players here today and others that are not

able to be here with us today but some of which will be here tomorrow who are contributing positively in that regard.

In GAO, we have said we need to take a three-step approach.

First, agencies need to do everything that they can administratively. Eighty percent-plus of what needs to get done can be done

within the context of current law. Agencies need to get on doing it.

Second, there need to be incremental legislative reforms that provide management with reasonable flexibility, yet incorporate adequate safeguards to prevent abuse of employees.

And third, we need to move towards comprehensive civil service

reform under which more decisions in the Federal Government are

based on the skills, knowledge, and performance of the individuals

rather than the passage of time or the rate of inflation.

Senators, I found last year, for example, that over 80 percent of

the billions of dollars that were appropriated by this Congress for

compensation was on auto pilot. It was automatically predetermined who was going to get the money, based upon cost-of-living

increases and based on locality pay, and it had absolutely nothing

to do with performance. That is unacceptable. It is unacceptable for

any enterprise and it is unacceptable, I am sure, from the standpoint of the taxpayers, as well. So ultimately, we are going to have

to take that issue on.

Some agencies are making progress administratively, but not

enough. We need to make more progress in this area. One area

that is critically important and where more progress needs to be

made is in the area of performance management. Most agencies do

not have modern, effective, credible, and properly validated performance appraisal systems that link their strategic plan, their

core values, and desired outcomes with both executive-level perVerDate 11-MAY-2000 09:31 Feb 12, 2003 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 79887.TXT SAFFAIRS PsN: SAFFAIRS
9

formance appraisals all the way down cascading within the organization. This is critically important to maximize performance and

assure accountability. It is also critically important to make sure

that we are making progress to effectuate the needed cultural

transformation in government.

We at GAO are trying to do three things. One, help others to

help themselves in this critically important area. We earlier published a self-assessment guide. We are today publishing a new strategic human capital model that is available on our website. We

have obtained input from a variety of parties, including OPM and

OMB, of which we are very appreciative, and I look forward to

working with Director James and Director Daniels and others to

try to see if we can come up with a single set of tools and methodologies which the Executive Branch may end up mandating and

which we can help to make sure that people are making appropriate progress in this area.

Second, we are conducting a variety of audits and evaluations in

this area for the Congress in order to assess to what extent people

are making progress.

And third and not least, we are leading by example. We are practicing what we preach, and I think that is critically important.

I would say that the act that is before us, the Human Capital

Act today, represents a positive step, and as Senator Voinovich

said, a first step in what will be a long and winding road. But it

is a positive first step and I commend you for it. There are a number of positive provisions in this legislation that I think would help

meet the two objectives that I mentioned, provide management reasonable flexibility and at the same point in time incorporating appropriate safeguards to prevent abuse.

There are several areas that I would like for you to consider as

you look forward on this legislation, items that you may want to

consider incorporating.

First, I think consideration should be given to providing OPM

the authority to provide class or agency-specific broadbanding for

certain critical occupations. It is important that in doing so, however, that agencies understand what skills and knowledge they

need and that they have appropriate performance management

systems to properly implement broadbanding.

Second, I believe that it is important in looking at the early out

and buyout authority that performance be able to be considered in

determining who would be granted an early out or buyout. I do not

believe that it is appropriate to consider performance in determining what functions or positions would be offered early outs or

buyouts. However, I do believe that it is important that management have the ability to say no if one of the top performers wants

to exit under this program. It is time that the government start

managing based upon dollars and results, not FTEs, and this provision is a positive first step to doing that.

Third, I think it is critically important that independent and objective studies be done of the real pay gap. We have had a tremendous debate for a number of years. It is time that we get the facts.

Reasonable people can differ on how best to proceed, but we need

the facts on the pay gap.

10

In addition, we need additional facts on the existing performance

appraisal systems that agencies have, and I think a study is necessary there.

And last but not least before I close, Mr. Chairman, I believe the

time is coming, if it is not already here, that the Federal Government is going to need to consider whether or not major departments and agencies need to have chief operating officers, individuals who are focused on trying to deal with the basic good government infrastructure issues that are not partisan in nature and that

should span administrations. We have a significant amount of

turnover among political appointees and it is understandable that

political appointees are focused primarily on the President’s agenda, the department head’s agenda, but somebody needs to be focused on the good government items that span administrations and

require extended amounts of time in order to effectively address.

Having chief operating officers who are under performance contracts with a term appointment who might be able to be extended

at least one term, I think would represent a positive step to try to

make real progress in these areas and to help effectuate the needed

cultural transformation in government. These would be in addition

to, not in lieu of, the current deputy secretaries, who are properly

focused on the President’s as well as the Secretary’s priorities and

agenda, and should be. But there are things that just do not get

done under the current system that need to get done. Thank you.

Senator AKAKA. Thank you very much for your statements.

Director James must leave by 10:30, so with your indulgence,

Mr. Walker, Senator Voinovich and I will direct our questions to

her first, and I will limit my questions also.

Director James, I want to thank you for your statement and for

all that you are doing. The bills under consideration today would

provide agencies expanded authorities for recruitment, retention,

and training. However, the compensation gap between the government and the private sector also plays a critical role in whether

people consider a career in government.

I understand that OPM will release a white paper on pay shortly, which I hope will address this problem. Added to the pay issue

is the fact that most agencies are unable to use existing authorities

for employee incentives because of budgetary constraints. My question is, what do you feel are the most critical funding requirements

to address the government’s human capital needs?

Ms. JAMES. Thank you, Mr. Chairman. Let me say a couple of

things. Yes, we will be releasing a paper fairly soon, and before we

can get to the point where we come up with a solution, much as

you are doing here today, I think it is important to bring to the

attention of the American people and to policy makers the importance of compensation, the outdated system under which we are

currently operating, our inability in many cases to be able to tie

pay and performance. So the first leg of our very long journey will

simply be to ask the question, to raise the issues, and to begin a

dialogue.

Second, I would say that in the whole arena of issues facing us

right now, recruiting, hiring, retaining employees, that I would not

like to place a value on which is more important and where do we

need to put the compensation dollars. While we are aggressively

11

looking for tools and mechanisms for recruiting, I think at the

same time we have to make sure that our current employees know

the value that we place on them. They have a knowledge base

which a new hire would not have. They have experience and they

have wisdom.

So at the same time that we are trying to recruit and attract the

best and brightest, I think that we have to look at putting resources behind retaining those employees that we currently have.

I would not like to rank them and put them in priority order because I think they are all important.

Senator AKAKA. I know you have to leave. I have a final question

to you and then I will yield to Senator Voinovich.

The proposals we are reviewing today are intended to allow agencies to better recruit and retain the people they need. However,

some of our next witnesses believe that personnel ceilings act as

barriers to this objective. How can recruitment incentives be reconciled in the current personnel ceiling limitations?

Ms. JAMES. Well, let me say that in recruiting, particularly people that we need in critical positions in the higher ranks of our government, that the current issue that we have before us with SES

pay compression. Sometimes when you bring someone in, it defies

logic to explain to them what this system is and when they are

brought in at a certain level in a senior position what that means.

I think that those issues have to be addressed in the broader context of total compensation reform. It does not make sense to many

individuals, particularly—and I recently had that experience in trying to bring someone in at a senior level and saying, this is your

starting salary and will pretty much be your salary for the entire

time you are in the Federal Government. Those are issues that we

must address.

Senator AKAKA. Let me yield to—— Ms. JAMES. Mr. Chairman, before you yield, I do want to say

thank you and that I would request to leave to attend a funeral of

a very dear friend. Many of you may remember Elaine Crispin, who

was Nancy Reagan’s press secretary. I had the privilege of working

with her at ONDCP in a previous administration. She was a great

woman and her memorial service is at 11 o’clock this morning.

Senator AKAKA. I am sorry to hear that. Senator Voinovich.

Senator VOINOVICH. Kay, we have talked a lot and spent a lot of

time together. Would you like to just comment on what provisions

of this legislation you think will be the most helpful to you?

Ms. JAMES. I do want to comment on that and I want to comment

on one proposal that David Walker has laid before us this morning,

as well.

I think that we are absolutely right when we talk about the flexibilities that managers currently have before them. I think it is also

important for legislators as they are considering this legislation to

understand that these are tried and true. These proposals that

they have before them have been tried in pilot projects and been

found to be effective, and so as a result of that, they are things that

we are ready to take governmentwide.

Which are most important and will be most helpful? I think anything that will help us to attract and maintain employees are helpful and many of those provisions will. I think that the targeted

12

buyouts are an important measure so that we can have an efficient

right-sizing of government and not just downsizing of government,

that we can target those buyouts to where they are needed.

I think the provisions that are in the bill for the SES senior managers, where we are able to allow them to get their full bonuses

in a year, will do much to encourage those in our senior management ranks, who are doing a fabulous job on behalf of their government, are very important.

I think our ability to pay bonuses to individuals and relocation

fees, these are all things that folks are used to getting in the private sector and will help us, I think, to compete aggressively for

those individuals so that we are not losing the talent to the private

sector and can attract them to the public sector.

I just have one comment, and I know David feels very strongly,

and this is newsworthy because David and I hardly ever disagree,

ever, and so this is newsworthy because this is one where we do,

and that is on the chief operating officers. My take on that is that

this is a new administration and this President has designated

chief operating officers. What is different, I think in this particular

case, is that maybe historically and traditionally, chief operating

officers have not focused on management but have focused on advancing the President and/or the Secretary’s agenda.

This President, as you know, is the first MBA President and this

President cares a great deal about management, and in the portfolio of activities that these now-designated chief operating officers

have is the management of these agencies, and as you know, the

President has given them five management agenda items, and I

think any CEO coming into an organization feels strongly that they

would like to have their chief operating officer be the one that is

going to be responsible for implementation.

I think that David is absolutely right when he says we need chief

operating officers who are, in fact, focused on management agenda

items. So we will continue to work through that and I am sure that

we can come up with something that will be mutually agreeable to

all, and as I said, that is about the only thing I can find that we

might disagree on.

Senator VOINOVICH. Thank you very much. I would like to say

that one of the concerns that I had, in fact, one of the things that

we worked with Mr. Walker on, was a questionnaire for political

appointees that the administration was recruiting to find out

whether or not they knew anything about management. That is the

key——

Ms. JAMES. I do remember some of those questions during the

confirmation process, Senator, yes.

Senator VOINOVICH. The problem is, does the Federal Government recruit individuals that appreciate how important management is. That is the big hurdle. I know that Donna Shalala, who

headed up the Department of Health and Human Services, said

that when she came through her confirmation hearing, no one ever

asked her one question about management, not one, and she had

one of the largest agencies in the Federal Government.

Mr. WALKER. Can I comment quickly, Senator?

Senator VOINOVICH. Yes.

13

Mr. WALKER. I am confident that we probably can work something out that would make sense here. I have no doubt whatsoever

that this President, that OMB, that OPM, that the cabinet secretaries and the President’s management council are committed to

making meaningful progress on management issues during this administration. I have no doubt about that.

However, that is this administration and that is these individuals. The issues that we are talking about here will concern every

administration, will span every individual who ends up having a

responsible position, and I think history has shown that there has

not been an adequate amount of sustained attention over time

which is going to be necessary in order to make the type of cultural

transformation we are talking about, and what we know for sure

is it will take more years than the current incumbents are in their

jobs.

Senator VOINOVICH. I will say this to you, that I think that setting a precedent is very important and this is very interesting.

When I left the governor’s office, several of the people who were my

cabinet directors stayed on. Governor Taft kept them on because

they were talented professionals. For example, in the Department

of Transportation, he promoted an individual to the position of Director of Highways. A new administration can set a new tone for

what is expected, through actions like these.

I am hoping down the road here in the next year or so, Mr.

Chairman, we can start talking about quality management and empowering the people who work in Federal agencies to have more to

say about the direction of those agencies. And again, if you get that

going in an administration, that can carry over from one administration to the next.

Last but not least, I am going to be meeting with Mitch Daniels

today. I am very impressed with what you are doing, Kay. I am

very impressed with what Sean O’Keefe did and I am pleased that

the administration brought Bob O’Neill in from the National Academy of Public Administration to help them develop their recommendations in the area of human capital. But we still do not

have a Deputy Director for Management in the Office of Management and Budget, and I really believe, in spite of the great job that

you are doing over at OPM, we need somebody in the administration who concentrates on nothing but the President’s management

agenda, somebody who gets up every morning and stays up late at

night working on that agenda and who can keep hammering away

at it and be your partner in getting the job done. I hope that you

would encourage the President and Mr. Daniels and others in the

administration that we need to get that management person in the

Office of Management and Budget.

Thank you. If you want to take off, you can.

Senator AKAKA. Thank you very much, Senator Voinovich.

As I said, you are looking forward to leaving at 10:30 and I see

we have a few minutes. I would like to ask you another question,

Director James.

Ms. JAMES. Certainly.

Senator AKAKA. It is along the line of this management that Senator Voinovich has been speaking about. As we heard from the

Comptroller General of GAO, GAO has developed a new model of

14

strategic human capital management. This model was developed

independently of OMB, OMB’s performance ranking scorecard that

shows how agencies are meeting the President’s management agenda and will aid OMB in evaluating agencies’ budget requests.

From what I have heard, the GAO model would provide managers and employees with clearly defined objectives and goals. I

would be interested to hear your views on the GAO model—— Ms. JAMES. Certainly.

Senator AKAKA [continuing]. And how you believe it could be integrated into OMB’s scorecard approach.

Ms. JAMES. Thank you. The GAO was very gracious in allowing

us the opportunity to review that model and we had some input

into that. We are still working to make sure that we are not confusing Federal agencies by having standards out there that come

from OMB, and from GAO, and they are pulling their hair out and

saying, well, which standard do we adopt and how do we know we

have made it and how do we turn to green on the President’s scorecard, because as you know, this President and all of his managers

are taking his management agenda so seriously because you know

that you get more of what you measure, and so this President has

decided to measure how effectively his managers are adopting the

management agenda.

So with that, our staffs have been working to incorporate it and

come up with one standard so that we will not offer confusion to

the Federal workforce and to managers as they utilize this new

tool. What you will probably end up with is the GAO model, and

we may add one or two things that we think are important that

are not reflected in that model.

But I think basically what you are going to see is we are trying

to reach consensus on that in the interest of not confusing the Federal workforce. The model is an excellent one and we very much

endorse and support what the General Accounting Office is doing.

Senator AKAKA. You had another comment on that?

Senator VOINOVICH. No, I do not.

Mr. WALKER. Mr. Chairman, if I can note, this is an exposure

draft and so, therefore, we will be experimenting and others will

be experimenting with this over the next several months, and as

a result, this gives us a period of time that we can do exactly what

Director James said, see if we can work together towards one that

we can all agree with, and I am confident that is going to be possible.

Ms. JAMES. I am, too.

Senator AKAKA. Thank you so much, Director James.

Ms. JAMES. Thank you very much, and I appreciate your indulgence.

Senator AKAKA. You may be excused.

Ms. JAMES. Thank you.

Senator AKAKA. Mr. Walker, I thank you for your patience. I am

pleased that you unveiled the GAO strategic human capital model

at our hearing this morning. I believe it is a good complement to

the OMB scorecard.

My first question is a theoretical one, but because GAO provides

nonpartisan assistance to Congress, I thought you might be able to

offer an unbiased view. Every administration comes into office with

15

a specific agenda and I feel that we must separate policy from politics. Friday’s Washington Post included an article on career attorneys in the Justice Department Civil Rights Division. Let me be

clear, I am not commenting on the merits of this issue but rather

a statement made by aides to the Attorney General who described

the transferring of certain responsibilities traditionally handled by

career lawyers to political appointees in this way. I quote from the

article, ‘‘Aides describe the actions as part of the normal process of

a new administration taking over an agency previously led from a

different political viewpoint.’’

Mr. Walker, how can we best achieve reform of the civil service

system without imposing changes dictated by political considerations?

Mr. WALKER. Whichever administration is in, they are going to

end up having certain priorities that they believe need to be

pushed. They are going to allocate resources based upon what they

believe those priorities should be and they are going to have certain principles or strategies that they want to try to employ in

doing that.

I do, however, believe that it is important to recognize that civil

servants represent a vast majority of the Federal workforce. Civil

servants are to be professional, objective, as appropriate, and nonpartisan in nature. In order for us to be successful in the human

capital area, it is going to take the combined efforts and appropriate collaboration between both political and career officials, and,

I might add, also between labor and management, whether the employees are organized, then obviously the bargaining unit, if they

are not organized, then through other means such as our Employee

Advisory Council in our case because we do not have a bargaining

unit.

I do not know all the details of that particular situation, Senator.

I had some concerns when I read that article, as well, but quite

frankly, I do not have all the facts and so it would be premature

for me to try to specifically address that situation based on one

newspaper article.

Senator AKAKA. Thank you for that response.

You have said on many occasions that agencies already have 90

percent of the flexibilities they need. Your comments prompted

some of us on this Subcommittee to ask GAO to review the use of

flexibilities currently available to Federal agencies to better recruit

and retain Federal workers. However, we know that agencies have

used them sparingly, mostly because of lack of resources.

In her written testimony, Colleen Kelley draws attention to the

statistic that in fiscal year 1998, less than one-fourth of 1 percent

of the Federal workforce received any form of recruitment, retention, or relocation incentives. Do you believe that agencies will be

more likely to use the flexibilities offered under these legislative

proposals than to use the ones that currently exist, and if so, why?

Mr. WALKER. I believe that this will be a positive step forward

and it will help. I also believe, however, that we have got to recognize that it is not a panacea. In some cases, people are not using

the flexibilities because they have not been properly educated with

regard to what the existing flexibilities are. In some cases, they

16

have not used the flexibilities because of the priorities that they

have set.

For example, we all have a certain amount of money that we

have been allocated in order to accomplish our various missions.

Unfortunately, many agencies have tended to manage more based

on FTEs rather than dollars or results, and in some cases, people

have decided to try to maximize the number of FTEs they have

rather than deciding that, well, I need to manage to a budget.

For example, at GAO, we do not always use our total FTE limit.

Sometimes we make a conscious judgment that we are going to

have certain incentives to attract people, certain incentives to retain people, or training, development, other types of things where

we are investing in our existing workforce and we may have somewhat fewer people than we are authorized to have. On the other

hand, we are investing more in those people that we do have.

So I think it is a combination of education and setting priorities.

Let me also say that I think it is personally inappropriate to be

managing based on FTEs, period, either way. In other words, I

think it is inappropriate to have arbitrary FTE caps. It would be

much better if we managed to dollars and managed to results and

recognize that, over time, we are going to be much better off if people are held accountable for managing to a dollar budget and managing to desired outcomes and results rather than an historical

FTE approach.

Senator AKAKA. Thank you for that response.

You mention in your testimony that GAO has a chief human capital officer. I have a three-prong question for you. Has this approach worked? Were there any problems associated with creating

this new position? And if this provision of the bill becomes law,

what advice would you have for agencies?

Mr. WALKER. Well, first, I would argue that I am the chief

human capital officer at GAO. I think it is appropriate to recognize

that if people are your most valuable asset, and in our case, they

are really the only asset we have that will help us get our job done

on a recurring basis. So I think the agency head clearly has to

spend time.

Second, our executive committee, which is comprised of myself,

our chief operating officer, our chief mission support officer, and

our general counsel, spends from 25 percent to 35 percent of its

time on human capital issues. So a significant chunk of the time

of our top executive body is spent on human capital issues.

We do have a human capital officer, Jesse Hoskins, who came to

us within the last year or so with an extensive background at local

and State Government in the human capital area and also had

some prior Federal experience. He is doing an excellent job in trying to help us lead by example in this area. But for him to be successful, he has to have the support of the agency head, he has to

have support of the executive committee, and he has to have the

support of a variety of other players because you need to have line

management very much involved in this area, as well. It is not

something you delegate to the human capital function.

As far as the provision under this bill, I think it is appropriate

to provide flexibility to allow agencies to decide how best to accomplish the intent of this bill as to who is going to be responsible priVerDate 11-MAY-2000 09:31 Feb 12, 2003 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 79887.TXT SAFFAIRS PsN: SAFFAIRS
17

marily on a day-to-day basis for the human capital activities. At

the same point in time, I think it is critically important that we

recognize that human capital is fundamentally different than

human resources, which was fundamentally different than personnel. We are talking about a strategic position. We are talking

about a person that has the ability to deal at the executive level,

as a partner sitting at the table, trying to determine what modern,

effective, and credible strategies in the human capital area need to

be designed and deployed in order to achieve the objectives of the

agency.

Some people who are currently in the personnel or human resources function in government may be able to make that transition, but not all. And so it is critically important that you have the

right kind of person with the right kind of skills and knowledge to

be able to perform that role in order to be effective. That may be

the case at some agencies. In some cases, they may have to hire,

which we did in our case, to have somebody who can fit that need.

Senator AKAKA. I want to thank you very much, Mr. Walker, for

your insights and your advice. I wish I had more time, but we have

another panel, so I will yield to Senator Voinovich for his questions

to you.

Senator VOINOVICH. We have talked about the fact that, since

September 11, there is a new attitude toward working for the Federal Government. We have had a couple of sessions at Harvard,

and I have had a chance to talk to some of the students there. Ten

years ago, about 75 percent of John F. Kennedy School graduates

would go into government. Now, about 30 percent of them are

going.

I believe that if we do not capitalize on this new interest in government, not only by young people but also some ‘‘dot-com’’ people

that are out there today who may be looking around for more stable employment at mid-level positions, what is your advice on how

we would best capitalize on this new opportunity that we have?

Mr. WALKER. First, I think it is a positive step that people are

not bashing Federal employees as much as they used to, which is

clearly inappropriate and counterproductive. I mean, if they are

our most valuable asset, then we need to be doing things to attract

and retain good people in the Federal Government and we need to

recognize that, that is a fundamental part of us being successful in

government.

Second, clearly, the statistics show that there are a lot more people interested in public service of which government service is a

subset of public service and the Federal Government is only one

level of government. You have obviously had leadership responsibilities at all three major levels of government, Senator Voinovich,

and you know that. You have been on the front line.

I think we cannot be deceived by numbers. The fact is while

there are a lot more people who are interested in government service, while applications are up, we need to make sure that we have

an ability to get back to people in a timely manner to let them

know, to acknowledge that we have received their application and

to let them know what the prospects are for there to be a match

and what kind of timing that they can expect to have a decision.

18

My brother is somebody who was with a dot-com that became a

dot-bomb, and he has been trying for months to do something in

public service and it has been a case study in what is wrong with

our system, just frustration after frustration after frustration in

lack of communication.

I think we also have to recognize it is not just getting into government, it is keeping good people, and that is making some of the

changes to where we are investing in our people, we are having

more empowerment involving our people, that we are creating

learning organizations, that we are allowing people to be promoted,

recognized, and rewarded based upon their skills, knowledge, and

performance, not their passage of time and rate of inflation.

And so I think that it is going to be more important for us over

time to be able to do those kinds of things that it will take to keep

people in government and to recognize that we will never pay the

same that the private sector pays. But then again, we should not

have to, because we have something that we can offer here the private sector never can and that is the ability to truly make a difference for your country and for other people.

Senator VOINOVICH. Another thing that I am looking at is this

issue of pay comparability. Pay is not necessarily an incentive but

it is a disincentive if it is not comparable. You were commenting

that 80 percent of the people are on automatic pilot. Part of the

reason for that, I believe, is that we have never made enough

money available in the personnel area so that the government can

offer anything but a cost-of-living adjustment. So if agencies do not

have the money to reflect performance evaluations, most managers

just ignore that process because it does not make any difference.

And that gets into the issue of broadbanding, which is something

that you have talked about that managers must have some more

flexibility, but that cannot have an impact unless they have the

money in order to make broadbanding work. So pay comparability,

it seems to me, is something that needs to be reinvented.

The other thing that is of concern to me currently is the issue

of outsourcing. Again, when I talked with these students at Harvard, I would ask, ‘‘Where are you going to go?’’ They would answer, ‘‘Well, I can go to work for a nonprofit or I can go to work

for somebody that has a contract with the Government.’’ If you anticipate that a large share of the Federal jobs are going to be gone

in an exciting area, and I am interested in your reaction, is that

a disincentive for wanting to come to work for the Federal Government?

Mr. WALKER. We clearly need to reform how we go about making

key decisions in the competitive sourcing area right now. As you

know, the Congress passed an act about a year and a half ago asking me, as Comptroller General, to chair a panel dealing with competitive sourcing issues. We have had a number of meetings. We

are scheduled to issue our report by May 1. We will hit that date.

That panel is comprised of a number of leaders, both within the

government, with employee organizations, including Bobby

Harnage and Colleen Kelley, who are going to be on a panel after

me, and a variety of other respected individuals in academia and

the private sector.

19

I expect that we will be making recommendations for consideration by this Congress and I would hope that the Congress will

give serious consideration to that, because clearly, there are certain

aspects of the current system that are broken and that need attention.

Senator VOINOVICH. One of the frustrations that I have is that,

if you look at the motivation of people who work for an agency, one

of our problems today is that we have had this reduction in the

workforce without consideration to proper reshaping. I think that

is one of the reasons why we find ourselves in this position is that,

during those years, they just lopped people off without considering

what skills they needed to get the job done. Also, I think, it cast

a bad reflection on working for the government in general because

the 1990’s downsizing was on autopilot.

If we want to attract and retain people today, to set up targets

of 5 percent, 15 percent, 50 percent is counterproductive. The issue

becomes, are the executives in the departments going to be spending their time trying to figure out what they can outsource to meet

a target or are they going to be spending their time trying to figure

out what kind of a workforce they need to get the job done. Again,

I would like your comment on this.

Do we not have a situation here where we have one message that

says, shape up your workforce and keep the people that you need

and attract the people that you need to get the job done, and on

the other hand it says, concentrate on what positions in your shop

can you outsource?

Mr. WALKER. Competitive sourcing, I would say, is one element

that you need to look at as a potential tool. It is a tool to enhance

performance, to improve economy, and assure accountability, but

how you go about it matters.

My personal opinion is, it is inappropriate to have quantitative

or percentage targets in this area. One needs to be able to have a

more informed judgment based upon past experience, based upon

public and private sector trends, about targeting areas of opportunity where you think it may make sense to do it without having

arbitrary number or percentage targets in this area. I think that

sends a mixed signal and I expect that is one of the issues that the

panel will end up deciding whether or not to make a specific recommendation on in our May 1 report.

Senator VOINOVICH. One last question and that is on training.

This legislation talks about training. I would like you to comment

about how important you think it is that we have allocated resources for training in the departments in terms of attracting and

retaining people to the public service.

Mr. WALKER. I think it is critically important. A number of the

people that we have are very good people, but they need help in

a variety of areas, whether it be dealing with new technology,

whether it be dealing with how to effectively manage people,

whether it be dealing with difficult situations, whether it be technical training. We have to invest in our people.

World class organizations make training a top priority and they

invest in their people, and it is not just the current people you have

but these new people that we are trying to bring in. One of the primary factors that they will use in determining whether or not they

20

are going to stay or how long they are going to stay is are they

learning? Are they growing? Is their employer investing in them?

And if the answer to any one of those three questions is no, then

the likelihood that you are going to have turnover increases exponentially, and so it is, therefore, critically important, and one of the

areas that I have set as a top priority for GAO this year is we are

investing more in training. We are doing more to invest in our people. We are developing this fiscal year a modern and forward-looking training and development program for our staff that will be implemented over the future and we are allocating dollars to be able

to make sure that it is real, not just form, but there is substance

behind that form.

Senator VOINOVICH. And I suspect it is your intention to use that

also as a recruitment tool when you are going out trying to get the

best and brightest people to come, because people want to come to

work for an organization where they are going to learn and grow

and see a future. And if the word is that there is no money for

training it is a disincentive to come to work there. You get to a

point where the agency needs some new people, and rather than

giving current employees training and upgrading their skills, they

look around to try and find some way they can to farm their work

out to somebody. Who wants to go to work for that kind of an operation?

Mr. WALKER. You have to invest in your people. They have to believe that they are part of a learning organization, and it is particularly important for us. We are fortunate. We have a lot of people who want to work for GAO and our applications to work at

GAO have tripled in the last year. I think some of that is the economy, but some of it is because we are trying to lead by example

and truly make our organization a world class professional services

organization who just happens to be in the government.

Senator VOINOVICH. I would think that many other secretaries of

departments ought to look at the good role model that you have put

together at GAO. I think if we could get some of that throughout

the Federal Government, we would see a whole lot better situation.

Thank you.

Mr. WALKER. Thank you, Senator. We are not perfect, we never

will be, but we are sure trying hard, that is for sure.

Senator AKAKA. Mr. Walker, we really appreciate you taking

time from your schedule to be with us this morning and I thank

you very much for your insights and your advice and what you

have said this morning will be useful to this Subcommittee. Thank

you very much.

Mr. WALKER. Thank you, Mr. Chairman. Thank you, Senator.

Senator AKAKA. I would like to ask our second panel to come forward and be seated. We have with us four individuals whose commitment to Federal workforce issues is well known.

I am pleased to welcome Colleen Kelley, National President of

the National Treasury Employees Union; Bobby Harnage, National

President of the American Federation of Government Employees;

Jerry Shaw, on behalf of Carol Bonosaro, President of the Senior

Executive Association; and John Priolo, a member of the General

Executive Board of the Federal Managers Association, President of

21

1The prepared statement of Ms. Kelley appears in the Appendix on page 111.

FMA Zone 7 and a longtime employee at the Pearl Harbor Naval

Shipyard in Hawaii.

Again, we appreciate your being with us today. Before we begin,

I ask that you limit your oral statements to 5 minutes. However,

please be assured that your full written statements will be made

a part of the record.

Ms. Kelley, we will begin with your statement.

TESTIMONY OF COLLEEN M. KELLEY,1 NATIONAL PRESIDENT,

NATIONAL TREASURY EMPLOYEES UNION (NTEU)

Ms. KELLEY. Thank you very much, Chairman Akaka and Senator Voinovich. I am very pleased to be here today on behalf of the

150,000 Federal employees represented by NTEU. I think we all

share the same goal. We want to entice the brightest, the most talented, and the most committed employees to public service and to

ensure that the Federal Government becomes and continues to be

the employer of choice.

A decision to fully implement FEPCA and to provide compensation mirroring that received by the private sector would do more

to address the recruitment and retention problems in the Federal

Government than all of the Federal Government’s other incentive

programs combined. In spite of this, of course, the President’s 2003

budget proposes a 4.1 percent pay raise for the military while at

the same time suggesting that the Nation’s civilian workforce deserves only a 2.6 percent raise. This is not a proposal that the administration would make or one that Congress will support if we

are serious about the human capital crisis. While I accept that S.

1603 is offered as a downpayment on the human capital crisis, in

NTEU’s view, any human capital legislation worth passing must

address the crisis in Federal pay.

The Federal Health Benefits Program, too, must be addressed.

This program has become too expensive for current employees and

unattractive to prospective employees. Legislation is pending before

this Committee, S. 1982, that would increase the employer FEHBP

premiums from the current 72 percent to the more common industry standard of 80 percent. This would represent a modest step, yet

the legislative proposals pending before this body today do nothing

to address this issue, either.

Likewise, the administration’s blind targets for contracting out

15 percent of all commercial activities work of Federal employees

by the end of 2003 continues to erode the morale of the Federal

workforce and cannot possibly attract prospective employees. Arbitrary one-size-fits-all quotas will not work. Would you seriously

consider employment with the Federal Government knowing that

your job may be contracted out from under you to meet an arbitrary number? I do not think so.

And I do want to thank Senator Voinovich for speaking out at

the March 6 hearing on this issue. These mindless quotas show a

lack of wisdom of the impact they have for the government as a potential employer. Congress must let the administration know that

these quotas are counterproductive and will not stand. Until that

22

happens, the Federal Government will continue to send negative

messages to current and to prospective employees.

NTEU appreciates S. 1603 drawing attention to the need for

properly training employees. However, it does not address the resource problems that prevent agencies from adequately training

their employees. This legislation also suggests changes in hiring,

and NTEU questions the advisability of moving away from the current rule of three. A new hiring system must be considered fair by

employees, preserve merit principles, and lead to the best candidate being hired. Critics of the Department of Agriculture hiring

system have raised questions about expanding that system governmentwide. In addition, a December 2001 MSPB report raises questions about the protection of Federal merit hiring in today’s decentralized hiring system. With the lack of expertise in assessing the

candidates found in so many agencies, we believe that there should

be further discussions with this Subcommittee on these issues.

S. 1603 would also grant critical pay authority to Federal agencies on a limited basis. Serious questions about the use of critical

pay authority and how it has been used to date in the Federal Government have been raised and, I believe, need to be addressed before proceeding any further on this issue.

NTEU does not support language in S. 1603 reducing poor performance employee notices of termination from 30 to 15 days. Rather than focusing on the notice period to employees, NTEU believes

that it makes better sense to train managers and to help managers

develop the necessary skills to manage, mentor, and motivate their

employees.

I also want to comment on several provisions of S. 1612, the

Managerial Flexibility Act of 2001. NTEU objects to changing the

nature of demonstration projects as well as permitting them to be

made permanent without Congressional approval. We also object to

provisions that would grant certain management-level employees 8

hours of leave each pay period. Rank-and-file Federal employees

must work 15 years before earning 8 hours of annual leave per pay

period. If Congress believes that annual leave limits are a barrier

to hiring, then the system should be reformed and it should be reformed for all Federal employees.

NTEU also opposes Title II of S. 1612, which would require agencies to pre-fund retirement and health benefit costs for their future

retirees, subjecting these mandatory payments to the annual appropriations process. If Congress did not appropriate the money,

agencies would be faced with several choices: To restrict retiree

benefits, to curtail employee training, to reduce public services, or

to conduct a reduction in force, a RIF. And these possibilities are

not far-fetched. As you noted, Chairman Akaka, domestic discretionary spending suggested in the President’s 2003 budget declines

by 1 percent compared to the 2002 budget. These retirement costs

are already accounted for through mandatory payments to the retirement fund. This change is unnecessary and NTEU will strenuously oppose it.

I thank you for the opportunity to appear today and look forward

to any questions you might have.

Senator AKAKA. Thank you very much for your statement, Ms.

Kelley.

23

1The prepared statement of Mr. Harnage appears in the Appendix on page 128.

Mr. Harnage, please proceed with your statement.

TESTIMONY OF BOBBY L. HARNAGE, SR.,1 NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL–CIO

Mr. HARNAGE. Chairman Akaka and Ranking Member Voinovich,

thank you for the opportunity to testify on the draft proposals addressing various Federal personnel issues. In your invitation, you

requested that I address five broad questions regarding the draft

proposals. I have addressed all five in my written statement and

today I would like to focus on just two.

But first, I want to commend the Chairman as well as Senator

Voinovich and Senator Thompson for removing several of the provisions of the Federal Human Capital Act of 2001 and the Managerial Flexibility Act which AFGE had opposed. We were particularly

gratified to see that the draft proposals exclude extending to OPM

the authority to make alternative personnel systems permanent

without the approval of Congress and shifting Federal employees’

earned retirement benefits from mandatory to discretionary accounts. In addition, we were pleased to see that the draft proposals

rejected the concept of a one-on-one ratio for buyouts and full time

equivalent eliminations.

Chairman Akaka, you asked me to respond to two extraordinarily important questions that are often excluded from the debate over how to address the human capital crisis, first, how recruitment and retention concerns could be balanced with the administration’s privatization quotas, and second, how the gap between the compensation offered to private sector employees and

that offered to Federal employees can be addressed. These questions hold the solution to the Federal Government’s human capital

crisis. The draft proposals, while clearly well intended, offered little

of substance that will affect the rank-and-file Federal employees

AFGE represents.

However, if the administration’s privatization quotas go forward

and they succeed in handing over 425,000 Federal jobs to the contract, civil service reforms, such as those of either the draft proposals, S. 1612 or S. 1603, will become truly irrelevant. There will

be no civil service, just a corps of political appointees of acquisition

officers churning through the revolving door between contracting

agency and contractor.

Likewise, the large growing gap between the pay and benefits

provided to employees of large private sector firms and unionized

State and local government employees on the one hand and Federal

employees on the other hand is not a mere detail. A decade after

the bipartisan Federal pay law was signed by the elder President

Bush, Federal salaries still lag the private sector by 22 percent.

Thirteen years after the CRS wrote the definitive report showing

FEHBP to be inferior to the plans in the most successful private

firms and largest States by a substantial margin, the benefit gap

has also worsened. There is no excuse, no physical excuse, no excuse that data describing the dimensions of the gaps were not

24

available, no excuse that unions were intransited and unwilling to

negotiate even partial solutions.

The draft proposals include broad authority to provide large recruitment and retention bonuses to select Federal employees. We

could not pretend that bonuses, especially bonuses that come at the

expense of adequate staffing or adequate salaries and salary adjustments, will improve the government’s ability to recruit and/or

retain Federal employees. Bonus payments do not count as basic

pay for purposes of retirement or annual salary adjustments. If, in

fact, they are designed to recruit for temporary positions or to recruit those with an intention to remain only a short time with an

agency, it must also be said that they are not a solution to the

human capital crisis as we understand it.

The government’s crisis is that it is on the verge of losing its

workforce to retirement, privatization, and more lucrative offers of

State and local governments and the private sector. When the

workforce leaves, it takes its institutional knowledge, skill, experience, and the public sector’s devotion to the common good. Bonuses

will not solve such a problem.

Mr. Chairman, you also asked if the human capital crisis could

be solved in the context of the administration’s privatization

quotas, as they call them, competitive sourcing targets. The short

answer is that unless the administration rescinds its privatization

quota, the government’s recruitment and retention problems will

only worsen. The Department of Defense has recently acknowledged that its plan is to automatically replace retiring Federal employees with contractor employees. As agencies are forced to privatize half of the so-called commercial jobs on their FAIR Act list,

they will increasingly follow DOD examples.

The administration’s privatization quotas should not be referred

to as competitive sourcing initiatives. AFGE does not oppose competitive sourcing. In fact, our position is that Federal agencies

should be permitted to contract out commercial work, but only if

it can be shown that through public-private competition it will be

less costly to taxpayers than continued in-house performance. Only

through public-private competition can taxpayers learn whether

their interest is to have the government’s work performed in-house

by Federal employees or contracted out to the private sector.

As I have mentioned, there is no way to avoid the fact that Federal salaries are inadequate and that the health insurance program

is inferior. Solving the human capital crisis requires paying higher

Federal salaries and improving both the affordability and quality

of the health plan.

We have our own recommendations on civil service reform. I believe it is necessary for the true and lasting solution to the human

capital crisis. Components of this package are in S. 1152, the

Truthful Responsibility, Accountability, and Contracting Act,

TRACT, to make sure that contracting out only occurs when publicprivate competition shows it is in the public interest to do so, and

S. 1982, Senator Barbara Mikulski’s bill to improve the funding for

the Federal health benefit program.

We commend the Subcommittee for taking the issue of the

human capital crisis so seriously and we look forward to continuing

25

1The prepared statement of Ms. Bonosaro with attachments submitted by Mr. Shaw appears

in the Appendix on page 144.

to work with you on this issue. I would be happy to answer any

questions that you might have.

Senator AKAKA. Thank you very much. We appreciate your testimony, Mr. Harnage. Mr. Shaw, you may go ahead with your statement.

TESTIMONY OF G. JERRY SHAW,1 GENERAL COUNSEL, SENIOR

EXECUTIVES ASSOCIATION

Mr. SHAW. Mr. Chairman, I apologize that President Carol

Bonosaro was unable to attend today. She became ill this morning.

I am the General Counsel for the Association. I was one of the

founders of the Senior Executives Association while I was a career

executive in the Chief Counsel’s Office of IRS and subsequently

was the first President of the Association and have been its General Counsel ever since its inception some 23 years ago.

We appreciate this opportunity to testify and we want to commend you and Senator Voinovich and Senator Thompson for their

concern and efforts on behalf of the Federal workforce. The Subcommittee has requested that we address several questions. It will

come as no surprise that SEA will focus its remarks on the questions of compensation and in particular with regard to the executive corps.

First, an aside. The chief operating officer which is proposed by

the OMB Director has been something that the SEA has supported

for a number of years. We have put together a number of proposals

along that line and we think it would be a great idea and it is

something, I think, that could truly be revolutionary in changing

agencies and bringing about some continuity in the workforce.

The compensation gap for career executives with private industry

was well illustrated by a 1996 study by the Hay Group, which

showed that average SES total compensation, including bonuses—

and this is total cash compensation—for jobs of exactly the same

difficulty in the private sector would have required that SES pay

be increased by a range of 46 to 137 percent to obtain comparability with the private sector. Now, obviously, that is not going

to happen, and SEA does not propose that.

However, money, while not a motivator, is a substantial demotivator and what it goes to is the person’s perception of their

own worth. This kind of a gap with the lack of raises in 5 out of

the last 8 years for the career SES has truly damaged their morale.

Many of them have stayed on in Federal service just because of the

September 11 crisis and thereafter.

In 2000, GAO projected that by fiscal year 2005, 70 percent of

all career executives would be eligible to retire. It behooves us, I

believe, to ensure that we retain as many of these highly capable,

experienced, and accomplished executives as possible while we develop and have in place the necessary talent to succeed those who

do retire. Yet right now, we are driving these executives out and

discouraging middle managers on the executive track because of

failure to address the pay compensation problem, which has

reached critical proportions within the corps.

26

SEA welcomes the provision of S. 1603 which would raise the

total annual compensation cap to the Vice Presidential level but it

would do nothing to affect compensation other than to allow employees to receive their earned bonuses and awards in the year in

which they were earned.

While the Association does not objection to Section 205, which

would shift oversight for critical pay positions from OMB to OPM,

we are in strong opposition to any substantial expansion of the use

of this critical pay authority throughout the Federal Government.

Reliance on this authority would continue the piecemeal attack on

the pay compression problem which is most severe in the SES

ranks.

After having their pay frozen in 5 of the last 8 years, the pay

cap has filtered down through the six pay levels or ranks of the

SES until approximately 70 percent of all career executives receive

the same pay. ES–4, 5, and 6, the top three ranks, are now all

capped at Executive Level 3 in all 32 localities. ES–3 is now capped

in 15 localities. In Houston and San Francisco, even ES–2 is

capped. This would be similar to having a pay cap and earnings by

GS–15s, 14s, 13s, and 12s all being paid the same pay as GS–11s.

We do not believe the administration or Congress would or could

allow that to happen. They should not allow that to continue in the

SES. The situation is unfair and would be unthinkable in any private sector corporation, yet is tolerated by both the administration

and Congress. It must be rectified with legislation. H.R. 1824 and

S. 1129 would raise the statutory maximum on pay and we strongly support those efforts by Congressman Davis and Senator Warner.

The current system, in fact, encourages early or immediate retirement by eligible career executives. From 1994 to 2001, the average annual COLA adjustment on retirement annuities was 2.5 percent per year, higher than the average SES pay increase of 1 percent over the same period. This results in SESers losing 1.5 percent

of their retirement annuity for each year they remain in the government. Is it any wonder the best of them feel compelled to retire

as soon as they are eligible?

Substantial use of critical pay authority has been tested in only

one agency. The experience, while being studied, is not uniform

and there must be much more study before critical pay authority

should be extended anywhere else in government.

In closing, we believe it is critical that the Congress and the administration consider and respond to the full range of human capital issues and reject continuation of piecemeal approaches. Agency

and occupation-based fixes approved by Congress are fragmenting

the civil service, creating a crazy quilt of personnel and pay systems across the government without addressing fundamental

issues affecting the workforce. At the executive level in particular,

pay compression has clearly contributed to the pressure by agencies for separate systems. In addition, however, we have heard over

and over from agency officials of the need for additional career executive positions so that they can be independent of the OPM allocation process.

During the Clinton Administration, the career Senior Executives

Service was downsized by almost 20 percent and that downsizing

27

1The prepared statement of Mr. Priolo appears in the Appendix on page 178.

is having a substantial impact today. We believe that the top ranks

were thinned unnecessarily. The ratio of SES positions to the rest

of the Federal workforce, after all, is very slight, and the number

of positions in the executive corps should be increased to enable

agencies to meet their mission.

Finally, the use of existing flexibilities and authorities is limited

by a lack of funding and a lack of an effective mechanism for agencies to share successful approaches. Therefore, the pressure for designer systems will continue unabated and new authorities will

continue to proliferate unless and until the underlying problems

are addressed through a coherent governmentwide solution which

provides overarching principles, flexibility within limits, and some

bottom line of uniformity.

Thank you, Mr. Chairman. Thank you, Mr. Voinovich.

Senator AKAKA. Thank you very much, Mr. Shaw, for your statement. Mr. Priolo.

TESTIMONY OF JOHN PRIOLO,1 GENERAL EXECUTIVE BOARD

MEMBER, FEDERAL MANAGERS ASSOCIATION (FMA)

Mr. PRIOLO. Chairman Akaka, Senator Voinovich, on behalf of

the nearly 200,000 managers and supervisors in the Federal Government whose interests are represented by the Federal Managers

Association, I would like to thank you for inviting FMA to present

our views. My statements are my own as a member of FMA and

do not represent the official views of the Department of Defense or

of the Navy.

Mr. Chairman, thank you for the kind introduction. I would be

remiss if I did not personally thank you for your support over the

years of my chapter, Chapter 19 at Pearl Harbor Naval Shipyard.

Your efforts have been instrumental, particularly in the area of

workforce revitalization at the shipyard whereby we have been able

to hire over 520 new apprentices and 100 engineers over the past

4 years.

Established in 1913, FMA is the largest and oldest association of

managers and supervisors. We are responsible for daily management and supervision of government programs and personnel and

possess a wide breadth of experience and expertise that we hope

will be helpful in seeking to address the human capital crisis that

we are currently faced with.

Before I present FMA’s perspective, I would like to take this opportunity to thank you, along with Senators Cochran, Durbin,

Voinovich, Thompson, and Collins for your leadership on S. 1799

and S. 1800, providing additional educational benefits for employees at those Federal agencies responsible for homeland security. It

is not a focus of today’s hearings, but they are certainly critical elements in the human capital discussion.

As well documented and certainly mentioned quite often today,

we have been downsized by more than 400,000 positions from 1993

to 2000 and we are continually being asked to do more with less,

to compete with the private sector, to streamline procurement, and

at the same time deliver higher quality service to the American

public. Civil servants have proven time and time again that we are

28

more than capable of fulfilling our duty, but we need civil service

reform to increase the efficiency of the Federal Government.

We are facing a human capital crisis. We need added flexibility

to use existing resources to recruit new talent and prevent the

‘‘brain drain’’ that will occur with the retirement of so many career

civil servants.

As the number of civilian employees continues to shrink, the task

of doing what is best for the American people becomes more and

more difficult. There are fewer graduating college seniors that view

the public sector as a desirable employment option, though that

seems to be changing, hopefully. The hiring procedures takes so

long that it becomes a deterrent to bring on board personnel, and

it becomes an impractical option for mid-career professionals to

transfer into the Federal Government. And finally, our salaries still

lag far behind those of the private sector.

Hiring policies continue to be patterned after a World War II era

process. We post a vacancy, interview, offer a position, and it can

take a year to accomplish all of that. A lot of the best people in

that chain go somewhere else. We have got to shorten that, and I

am certainly pleased to see OPM attempting to make inroads in

those areas.

We need alternate ways of evaluating job applicants. We need to

be able to directly hire candidates when we have identified shortages or critical need. We need to have the authority to fill positions

within respective agencies in an expedited fashion. We believe fulltime equivalent ceilings must be made more flexible rather than

use hard and fast numbers. Let us manage to the dollars instead

of to the numbers.

S. 1639 offers some improvements in the area of hiring personnel

and retaining personnel, because truly, ‘‘you get what you pay for.’’ Retention bonuses do not always have to take the form of financial

incentives. When we talk to personnel exiting the Federal service,

they complain about a lack of recognition, of a long-term sense of

purpose, and career progression. That is not dollars speaking,

though dollars are clearly important. That is frustration at a lack

of development of the folks we already have on board.

We are supportive of S. 1603 to develop a career training officer.

We are supportive of pilot individual learning accounts as a way

of, again, developing our personnel and our future leaders. All

agencies should have structured developmental programs, be they

SES or, in our case, generally second- and third-line managers and

supervisors.

Obviously, I will never get through this report, but I would like

to wrap it up without going too far over, since you have my written

remarks. We would like to serve as a sounding board for Congress

and the administration to ensure that decisions are made rationally and provide the best value for the American taxpayer. We recognize, and value the importance of a top notch civil service in the

future.

Again, we would like to thank you, Mr. Chairman, for providing

an opportunity to present our views. We look forward to working

with the administration as well as with the Congress to deal with

the government’s workforce challenges in our mutual pursuit of excellence in public service.

29

Again, I would be happy to answer any questions you may have.

Senator AKAKA. Thank you very much, Mr. Priolo, for your insightful observations.

The proposals we are reviewing today are intended to allow agencies to better recruit and retain the people needed to carry out

their agencies’ missions. However, as Mr. Priolo said in his testimony, FTE ceilings must be made more flexible in order to allow

Federal managers to fill positions of critical need in an expedited

manner.

My question is, to all of you, do personnel ceilings act as barriers

to recruitment and retention? How do these ceilings influence agency recruiting? What recommendations do you have for an employee

and managerial perspective? Let me start with my left. Ms. Kelley.

Ms. KELLEY. Thank you, Mr. Chairman. In my experience, personnel ceilings are not the impediment to agency hiring. The impediment are resources. It is the bottom line; agency funding dollars. In many agencies, as we speak right now, hiring that they

had planned to do based on last year’s budget is not being done.

It is now being delayed because part of the January pay raise for

Federal employees was not fully funded in their agency budget and

they are having to make up that money somewhere else and it is

coming in the way of delayed hiring that they desperately need.

But in my experience, it is not about the FTE ceilings, it is about

the overall agency budget and even if they were to hire with the

funds that they had, what it leaves is nothing for flexibilities.

When Comptroller General Walker talked about using resources,

making a choice of whether to use them for FTEs or for flexibilities, in my experience, again, that is a difficult, if not an impossible, choice for agencies to make.

For example, in both the IRS and the U.S. Customs Service, they

have had staffing shortages for many years. In Customs, this has

been exacerbated after September 11. We did not have enough inspectors on the borders before September 11. Now they are working

12- and 16-hour days 5 and 6 days in a row with no additional

staffing.

So the idea of taking resources that are not even there for adequate staffing and then converting them to flexibilities is one that

I have a hard time putting together in most of the agencies that

I am familiar with.

Senator AKAKA. Mr. Harnage.

Mr. HARNAGE. Yes. The personnel ceilings or FTE ceilings, we

have been told now for 4 or 5 years that they do not manage by

FTEs, but you and I both know that they do and that they have

a ceiling, and very often, that determines the funding. It is sort of

an argument of the chicken or the egg, which one comes first, but

much of the funding is reduced based on the expectations of being

limited in the manpower ceilings and the FTEs. So it is sort of an

argument either way you want to take it.

But, sure, it is a barrier in hiring and I think a lot of that has

to do with the level of approval. When OMB comes out with a manpower ceiling, whether it be suggested or actually in writing, then

that goes to the agency and then the agency passes that on down

the different lines of management. And so when a manager has a

vacant position, it has to go all the way back up through that line

30

before they can get approval to fill it and it appears to be a very

long delay in hiring when really it is the FTE ceiling that is causing that delay.

Sometime when we have more time, I will give you my Air Force

experience in weight control, which very much resembles the FTE

ceilings. But it is a way of OMB measuring the funding. Therefore,

they are bean counters, and that is what they are doing with the

FTEs. That is the way they are controlling the funding.

Our position is, simply, let the managers be managers. They

have a mission. They should be able to come forward with a plan

that reaches the goal of that mission and whatever number of employees it takes to be efficient and effective, that is how many you

approve without a magical number being picked out of the air and

that seems to be what this administration as well as the past administration has tried to do.

Senator AKAKA. Thank you. Mr. Shaw.

Mr. SHAW. I agree with both Mr. Harnage and Ms. Kelley. An

experience that I saw—in fact, I was thinking about David Walker’s brother-in-law where he was trying to come into government.

It depends on the time of year how fast that process is going to

work. For example, let us assume that Congress delayed the

amount of salaries or did not fully fund the salaries. What they will

do is put off the hiring process. They will not hire until the back

end. Then they really try to hire everybody. Then you have got to

get them trained, and then the next year, depending on how much

Congress gives them, determines whether the agency can keep

them or not.

It is a very difficult process, but in one situation, an individual

was offered a job in February, and the decision was not made until

September because there was a requirement that all the people in

this agency be trained on a particular program and they used all

their money for training so they could not afford to fund the hiring

until the last month of the fiscal year. So that FTE, to which

$30,000 was allocated, was used in the early part of the year to pay

for training and other things and, therefore, they could not fill the

position until the end of the fiscal year because they were counting

on the new funding to pay for it.

So it is a chicken-egg. Everybody wants to know whether an

agency has grown, has got more employees or less employees, so

you have to count them somehow on the one hand. On the other

hand, when you give people specific numbers and there are so

many dollars that goes with each number, you can play with the

dollars to try to meet your needs and, therefore, the hiring process

can really get slowed down in some situations.

Senator AKAKA. Mr. Priolo.

Mr. PRIOLO. I must agree with everyone else on this panel. I

work at a Navy shipyard. We fix ships. Our motto is we keep them

fit to fight. We send them out to harm’s way. Every year, we do

more work than what we plan on. Things happen when you work

ships as hard as we work them nowadays. Obviously, it is a Department of Defense issue. It is a serious concern and we certainly

cannot solve that here.

But FTEs hard and fast are an impediment because then we

have to decide, do we fix ships or do we hire the personnel we need

31

so that we will be able to fix ships 5 years from now when those

people get qualified and the existing folks retire? It is all rolled up

together. It is all one big circular problem that we have got to

break so that we can do our jobs and to get our jobs accomplished.

Ms. Kelley, you mentioned your concerns over the quotas for contracting out that are in the President’s management agenda. How

do the objectives for contracting out prevent the legislative proposals we are considering today from achieving high recruitment

and retention?

Ms. KELLEY. I think the quotas send a very negative message to

those who are even considering Federal service. They do not provide any rhyme or reason or any kind of an explanation or expectation that you would have a position in 3, 4, or 5 years as these

quotas move forward. There is no explanation or criteria within

agencies other than if they are commercial activities, if they are

designated as commercial activities on the FAIR lists.

Other than that, there is no criteria in looking at the agency’s

mission, at the overall budget, at how that fits into the operations

of the agency as a whole, how long they have done those jobs, if

there is a better way to do them, and to provide them with the resources to become more efficient. So I think it flies right in the face

of the language in the legislation that is being discussed today. I

think the quotas just derails it every step of the way because of the

message that they send.

Senator AKAKA. Thank you, Ms. Kelley.

Mr. Priolo, I want to thank you for joining us today all the way

from Hawaii. Your testimony raised a number of questions, not all

of which I will have time to ask. You heard Ms. Kelley and Mr.

Harnage express their opposition to changing the termination notification time from 30 days to 15 days. Do you believe 15 days is

adequate and would you expand on your statement that a more

comprehensive governmentwide employee performance appraisal

system is needed, including the idea of tutoring an employee who

receives an unacceptable performance rating?

Mr. PRIOLO. As for the 15 or 30 days, I do not have a lot of expertise in that area but I certainly think the more time you have, the

better off you are.

We have limited personnel. We have a lot of controls and we

have got to do our best to develop the folks we have. That is my

responsibility as a manager—to mentor the young folks. We have

started an apprenticeship program, thanks to your support, that

provides us hope for the future, because, frankly, without the

young folks coming in, without the apprenticeship program, we

would lose the expertise of the people that are of retirement age

and not be able to feed that back into the up-and-coming workforce.

I actually left a job as a nuclear engineering manager to move

over into curriculum development because I am a firm believer that

if we do not develop our folks, we will die by attrition. So you give

us the ability to bring people in, which you have, and we will go

develop them so we will have the people in place to do the jobs in

the future. Thank you.

Senator AKAKA. Thank you, Mr. Priolo.

You also said that OPM has delegated substantial personnel authority to agencies over the past 5 years, but in many instances,

32

line managers do not have this authority. Why do line managers

not have this authority and what can be done to change the current situation?

Mr. PRIOLO. What I tend to see, again, in my activity, because

that is what I can refer to, is there seems to be a disconnect from

the policies and the processes and the good ideas that come out of

OPM and the folks at my level that have to execute. Somewhere

in between, the train jumps the track and it just does not get down

to us. Maybe it is just a communication problem. Maybe it is folks

not wanting to change. Maybe it is fear of trying to work outsidethe-box and doing something different. I certainly do not have the

answer, but I do definitely have the frustrations. We sometimes

have to make progress in spite of the system, not in accordance

with the system.

Senator AKAKA. Mr. Shaw.

Mr. SHAW. I think one of the things that is absolutely fascinating

to me is the inability to use the performance appraisal system to

remove non-performing Federal employees. In 1978 when they

changed the law, our first perception as a lawyer, and I am in private practice and we represent hundreds of Federal employees in

performance cases, was that there was going to be a wholesale

slaughter of Federal employees thrown out because the appeals

and the rights of the employees are so narrow in performance

cases, (not in conduct cases but in performance cases).

The 30 to 15 days is fine. It does not really make any difference

because by the time you get to proposing an adverse action in a

performance case, the employee should have been through a performance improvement period and you should have your ducks in

a row.

The problem with the system is not the difficulty of the system,

it is the HR people in the agency and the lawyers in the agency

saying, ‘‘Oh, you cannot do that.’’ There is a requirement in the

statute for a performance improvement plan. OPM extended the

time for the performance improvement plan. This agency not only

required you to go through that performance improvement plan,

but after you got done with that one, you had to start another one.

They literally had two performance improvement plan periods that

you went into, and then by the time they got finished, everybody

had given up, it had lasted so long and the under-performer remains there.

Let me just sum this up into two points. First, managers have

to be trained in how to use the system. We teach a course, my law

firm does, for the Senior Executives Association on how to use the

performance appraisal system to deal with poorly performing employees and for every manager that attends that course, it is mind

boggling. They cannot imagine that they have got this authority,

and the reason they cannot use it is because HR people and lawyers have taken it away from them. And it is not the ones at OPM

or OMB, it is the ones in their agencies, because power is the ability to say, ‘‘No, you cannot do that. We know more than you do.’’

And the second thing is that the agencies do it to themselves.

Most of the problems in dealing with under-performers is not the

OPM regulations, it is not OMB, it is not the law, it is not MSPB,

it is the agencies. They have grown a culture on their own that you

33

have to do five times more than what the law requires you to do

to handle a poor performer, and it is tragic.

The system that is there now, in fact, if anything, gives too much

authority to a Federal manager and we very much feared that

there would be abuses of that. Instead, what has happened is everybody says, oh, we do not want to use that system. It is too complicated. We will use this conduct system. Well, the conduct system

can be tough. I mean, you have really got a high burden of proof.

The performance system, you do not have hardly any burden of

proof, substantial evidence, which is negligible.

Go ahead, sir, and make it 15 days. It does not make any difference. Unless these people are taught how to use the system, it

is never going to work.

Senator AKAKA. Let me ask Mr. Harnage and Ms. Kelley to add

to this discussion, if you wish.

Mr. HARNAGE. Well, I think Mr. Shaw really hit the nail on the

head. It has more to do with the agency culture than anything else

and it is the full employment act for the HR people and the attorneys that work for the agencies. They have simply developed a culture that makes their job more significant, more important, and it

prevents the managers from being able to manage.

I think our biggest problem in performance and in disciplinary

situations is simply that the managers are not adequately trained.

They are not adequately trained on how to handle the situation

and then they are not allowed to handle the situation as they

should and I think we have got to get the HR people out of that

business and allow the managers again to be managers.

One other factor that has played a role into that possibly in the

last few years is a manager is faced with a situation where, if it

is a marginal employee, do I get rid of this individual and totally

do without anybody because I have got an FTE ceiling and I am

going to lose that slot, or do I try to make it do and hopefully this

employee will do better? When you do not have any control over

whether or not you will continue to have that position, managers

will tend to try to hold on as long as they can. At least 20, 30, or

40 percent performance is better than zero. So I think that plays

a very important role in our problem.

Senator AKAKA. Ms. Kelley.

Ms. KELLEY. The issues identified as HR and legal issues, I agree

exist in all agencies, but I have concerns about the discussion concerning under-performers and the performance improvement

period. I would hope that it is very consistently believed that managers have their goal and that their responsibility is to try to turn

around and help an employee who is having performance problems,

not just to jump through the hoops of some stated time frame to

move them out the door.

There surely are employees whose employment will be terminated at the end because they cannot or will not turn around their

performance, cannot improve it. But I believe that managers, most

managers I know, have an interest in trying to figure out how to

turn a marginal employee into a better-than-average and even an

outstanding employee with the right mentoring, with the right information, with the right support, with the right training, and that

takes training for the managers. Managers need to be trained on

34

how to do that, how to know when and what to provide in order

to help an employee to become better than marginal and also, then,

on how to move forward if, in fact, the process requires that the

employee be terminated.

But I would hope that as much energy goes into this process as

it should, I believe, in the private sector, not just in the government, into supporting and trying to turn around performance before an individual is terminated.

Senator AKAKA. I have more questions, but let me yield to Senator Voinovich for his questions.

Senator VOINOVICH. I could not help but smile, as I listened to

you. Mr. Priolo, I am so glad you are here, and that is not to take

anything away from our union leaders here and Mr. Shaw. But I

believe in quality management and empowering the people closest

to the problem, and I think your testimony this morning talks

about the practical problems that you encounter in your agency.

Mr. Shaw, I smiled as you were talking about the performance

evaluation process. I will never forget when I became Mayor of the

City of Cleveland, and a lot of my directors were complaining that

they could not get rid of poor performers. So I talked with the head

of the Civil Service Commission and she said, ‘‘The problem,

Mayor, is they do not know what they are doing and if they would

use the system, they could get rid of poor performers.’’ So I went

back to the directors and said, ‘‘You are going to go to school to find

out just how the system works,’’ and they did that and things improved substantially. We were not trying to run people out. If

somebody has a problem, you try to help them deal with it.

But so much of the problem we have is that people are not getting the training that they need, and I was impressed with Kay

James’ testimony about the fact that they are training 500 people.

They have a massive training program underway in the Federal

Government so people understand just what their responsibilities

are and what they can or cannot do.

I look at the problems that are there and it just seems that for

so long, they have been neglected. You are talking about replacing

people. One of the things that this legislation allows is in the shaping of an agency, we are going to allow the managers to give early

separation or early retirement without eliminating the position, so

that they can fill that position. It is something that it took me 3

years to do in the Defense Department. Today, the Defense Department has this workforce reshaping authority for 9,000 slots, and

they are starting to use it.

I suspect you think that is a good provision?

Mr. PRIOLO. Absolutely.

Senator VOINOVICH. And then the issue is, how do you fund that?

It took me 2 years to get it through to the appropriators to fund

it, and we were only talking about $82 million over 10 years. But

it is so much easier to buy a F–22 or some——

Mr. PRIOLO. Piece of hardware.

Senator VOINOVICH [continuing]. Piece of hardware than it is to

concentrate on the people that you have.

I was just commenting to my staff, we have not had too many

people that have been talking about some of the flexibilities that

we try to provide in this legislation. You are all doing a good job

35

of representing your concerns, but underlying all of this is the need

to have more competitive pay than we have today. And we need to

allocate more resources if we expect to be an operation that can retain people.

Mr. Shaw, 70 percent of the Federal Government’s senior executives receive the same salary due to pay compression we could

have, by 2005, 70 percent of them retiring. They receive a greater

cost of living adjustment on their annuities than the pay increase

they receive by staying in the Federal Government.

Mr. SHAW. They lose a percent and a half a year off their retirement annuity.

Senator VOINOVICH. So those kinds of things just do not make

sense and we need to address those issues. At the same time, understanding the pay, understanding the issue of health care—and

I can understand the issue of health care, although I will say to

you that the private sector today is moving toward increased employee participation than they did before because of the high cost.

In fact, I see that across the country, although I will say this, that

in terms of the Federal contribution to health care benefits, it is

a lot lower than in the private sector and many other agencies. I

know in the State of Ohio, the employee contributes 10 percent,

which is far different than, what is it for Federal employees?

Ms. KELLEY. Twenty-eight percent.

Senator VOINOVICH. Twenty-eight percent. So those are things

that we need to look at.

But that being said, I would really like your opinion on the flexibilities that we have tried to provide in this legislation. Are you

supportive of what we are trying to do with this legislation?

Ms. KELLEY. Other than the specifics that I noted in my testimony, where I would hope there would be more discussion, such as

on the critical pay area, I guess where I always come down on this

issue of flexibility, Senator, is that flexibilities without the resources will not make a difference. I think that unless the agencies

are given the resources and are supported in their use of them, it

is not going to make a difference, and that is my hesitancy in supporting the legislation. I wish it would go further in the area of

Federal pay, addressing pay as one of the largest issues that is affecting recruiting and retention, and then saying, not only do agencies have these flexibilities, but resources will be provided to enable

them to have the staffing they need and to be able to use the flexibilities.

Senator VOINOVICH. I can understand that. I am interested in

the white paper that OPM Director James is going to be coming

out with on compensation.

Mr. Harnage.

Mr. HARNAGE. Well, as I said at the beginning of my testimony,

I really appreciate the changes that you have made to the draft

proposal that eliminated a lot of our objections. Of course, in looking at the draft proposal, there is not a lot in there that we see

that is very favorable for the employees that we represent, but

there is not any harm there either at current, with the exception

of the 15 days. We do not think 15 days shorter in a 6- to 9-month

process makes that much difference, and the problem is not the

36

amount of time the employee has, it is the amount of time on the

other side that is required because of the bureaucracy.

Senator VOINOVICH. Do you agree with Mr. Shaw that a lot of the

people who are supposed to be doing this process do not really

know what they are doing?

Mr. HARNAGE. I will agree with that, yes, I do, and I prefer your

bill as opposed to the Managerial Flexibilities Act, because I think

following that act there ought to be a parentheses that says, ‘‘as

long as you do it the way I say to do it.’’ There is not a lot of flexibility there when you look at the controls and the approval up the

line that it takes and I think that is where you are trying to get

to, is to get it more closely down to the worksite where the manager that is doing the job can be better managers, and we saw that

act as really, even though it talks about flexibility, it was still a

lot of checks and balances and controls at the OPM and OMB level

that I do not think that was going to amount to a lot of flexibility.

Training, I think, is the main thing that will make it work, and

one of our concerns is when we talk about management flexibilities, and we certainly believe that the managers ought to be allowed to manage and they ought to be trained, not any disrespect

to the current managers. It is not their fault. The government has

diverted training funds in other directions and people have not

been able to keep up with current practices.

But one of our concerns is when you say flexibilities, we are not

sure what role does the employee or the employee representative

play in these flexibilities—— Senator VOINOVICH. Mr. Chairman, when I got started with this,

the concept was to change the culture of the Federal workforce. I

came to the Senate with that idea. I tried to do that when I was

mayor and then as governor, and changing the culture has a lot to

do with empowering the people who work in the agencies. And that

is what you are raising here—the issue of flexibility.

The hardest problem we had was to get middle managers, who

had come up in a command and control environment, to give up

some of their power and empower the people working for them to

come up with solutions on how they could do a better job. It was

very difficult.

But I ultimately think, regardless of what we do in legislation,

that if we do not have more of that quality management, that empowerment, the participation of the people that are actually doing

the work, we are not going to see the improvement that all of us

would like to see in the Federal workforce. And I think it also contributes to an environment where people get excited about the job

that they are doing, and if they are excited about their work, then

they stay there. The word gets out around the country that this is

a great place to come to work.

I have had more people tell me they have come to Federal agencies, and after a couple of years, they leave because they do not receive any training, it is not exciting, and what they expected did

not occur. We will be hearing from some panelists tomorrow in

terms of that outreach that we are going to need to change the perception of Federal employment. We can do all we want to publicize

the opportunities in the Federal Government, but there are some

fundamental changes that we have to make if we are really going

37

to have the kind of environment that is going to attract people and

keep them.

On the issue of eliminating the link between senior executive

compensation to Members of Congress get paid, you would support

eliminating that, would you not, Mr. Shaw?

Mr. SHAW. Yes, sir, we would. If I can go down your list, on the

phased retirement Section 204, SEA supports that. We think that

is a great idea. We think it can help managers transition out and

new managers transition in and still have the benefit of the one

who is retiring to work part-time for a period of time and help

them become accustomed to the job.

On requiring OPM to provide approval or disapproval on the

qualification review boards for SESers, we would prefer 25 work

days, Around holiday time, they get people from all the different

Federal agencies, a number of them to serve on a qualifications review board that an SESer’s qualifications have to go before and be

approved, so that could be a little problem. But the 30 days is not

a problem, but 25 work days would be a little bit better.

On the recertification elimination, recertification of the SES system, we support that. We think that it has not added any value

to the current performance appraisal.

Your proposal on training, we think is excellent. It opens up a

lot of opportunities for a lot of people.

And on the annual leave provision, if the agencies say they have

trouble bringing people in from outside because they do not have

any leave when they come in, we do not have any objection to it.

We support it for managers, and if it works for managers, it may

work for some employees in specific situations. But it is good authority and flexibility for agencies to have.

Just one more thing. I want to reassure Ms. Kelley and you that

when we handle performance, under-performer cases, the only way

that we can be successful in keeping a non-performer from being

removed from their position is work with them during the performance improvement period to bring them up to the standards required by the agency. We have been very successful in doing that.

We supplement what training they have. We actually sit down with

them and go over the papers they are preparing and that kind of

stuff, so long as it is not classified, obviously, and we assist them

and are firm and that is how we win cases in our law firm on nonperformers is we help make them performers, and that, in most

cases, is the answer.

Sometimes people just cannot do the job, and that happens and

they have to be removed. But we work first to make sure we help

them meet the requirements of the job and then the whole thing

goes away.

Senator VOINOVICH. That is interesting, because many people

wring their hands and say, well, you cannot get rid of a poor performer. But the fact of the matter is that you can if you know what

you are doing and that person is truly a poor performer.

Mr. SHAW. Right.

Senator VOINOVICH. There are a lot of stereotypes out there

today.

So, again, the provision of eliminating the link between senior

executive pay with the pay of Congress would——

38

Mr. SHAW. What we are proposing, and what both Senator Warner and Congressman Davis’s bill would do—as you know, there

are five levels of the executive schedule and Members of Congress

are tied to level two. What we are proposing is that SES base pay

be raised from the current cap, which is level four, to level three

and that they be able to earn their locality pay on top of that. So,

in effect, depending upon the locality that the employee is in, some

of them could wind up making more than Members of Congress,

but there is still a level between them on their base pay and their

other, but that is going to depend on the locality they are in. In

Los Angeles and Houston, what locality pays the highest, they

could be making a little more than a Member of Congress.

But we are not committed to ritual suicide of trying to break the

tie between Members of Congress and career executives

because—— Senator VOINOVICH. But overall, from a good personnel point of

view, de-linking salaries to artificial barriers is a——

Mr. SHAW. We support that.

Senator VOINOVICH. It is a good public policy.

Mr. SHAW. It is a good public policy, and it is one that, in fact,

has happened in many agencies already. At the Senior Biomedical

Research Service, a number of programs over at HHS, the SESers

there make more. The law enforcement community, the FAA, SEC,

a whole bunch of agencies have broken loose from the pay cap

through necessity. They cannot keep the people that they need and

they cannot get the people that they have to have, and that is

going to be governmentwide soon.

Senator VOINOVICH. Are you familiar at all with the IRS and the

program that they put in place several years ago to bring in outside people who had special expertise that they needed in order to

get the job done?

Mr. SHAW. Yes, sir.

Senator VOINOVICH. This legislation allows that kind of flexibility

in other agencies. There has been a lot of controversy about whether that works or does not work, and it is not intended to respond

to the issue of pay compression that senior executives experience,

but the fact is that there are certain agencies that do need to bring

in people on a short-term basis for mission-critical tasks. I would

be interested in your appraisal of that.

Mr. SHAW. SEA has—it is probably one of the most debated

issues within our board of directors, which are SESers from all different agencies. But we think a limited critical pay program could

be useful in some agencies. We are absolutely opposed to it if it

would result in bringing in people from the private sector and used

to relieve pay compression for a selected few and for the pay compression problem that we have not addressed first. So if our pay

compression problem was dealt with, even though it would not be

a complete solution, then we would be supportive with certain safeguards.

One of the things, though, is that we should be able to allow career executives to compete for those positions because they may be

available in other agencies.

Senator VOINOVICH. Are they not allowed right now?

Mr. SHAW. No.

39

Senator VOINOVICH. They are not?

Mr. SHAW. No. They have to come from outside government now.

They are term appointments for 4-year terms. Career executives

should be allowed to go into those positions. They would have a 4-

year term and they would have to come out of the positions. We

would want career SES employees to be able to go back into the

SES if that is where they had come from.

Senator VOINOVICH. By the way, we got into that when I was

governor. We had people who wanted to move up, but when they

moved from a covered position into one that was not covered, they

could not move back later. So some of them were not willing to

move because they said, ‘‘Well, at the end of that time, I am finished.’’ Mr. SHAW. In the current SES system, if they do that, if they go

into a political appointment, they have fallback rights to the SES.

It is not unusual at all for people who have been given Presidential

appointments or non-career appointments in one administration at

the end of that administration to fall back into the SES as a career

employee, if that is where they came from. But it has to be where

they came from.

The other thing, though, is we think that use of critical pay

should be justified on the basis that the skill that they are seeking

or the experience that they are seeking does not exist in the agency

or in the government. It should be confined to specific skill sets, for

example, in the IT community, that we do not have in the government because of the rapid progression of change, and that may

exist on the outside.

But the use of it to bring someone in to handle public relations

or something else like that is problematic, first, and second, when

we look at the problems in the government, most of the critical

issues, even in the IT community, it is not like these career executives have only been talking to themselves. They have hired and

paid for some of the best consultants in the whole world who sold

them a bill of goods on what they needed to do to get this IT system to work. Maybe they would have been better, having more

knowledge, knowing that they are being sold a bill of goods, but

they certainly are not lacking in the ability to have people come in

and give them advice on particular challenges that they face.

Senator VOINOVICH. We have an example of that in the IRS. You

think, overall, they have used it for the intended purpose, or do you

think that they abused it? How would you rate that on a scale of

one to ten?

Mr. SHAW. The only basis I have got for that is the——

Senator VOINOVICH. One being the best.

Mr. SHAW [continuing]. One study that was done by Tax Notes,

I think they call it, and discussions with two or three executives

at IRS that are very knowledgeable about it. There have been a

number of pluses. There have been a number of failures, some people who left very quickly.

Senator VOINOVICH. Well, the point is that when they bring them

in, they get a 4-year contract but it is not a guaranteed contract.

And if they do not meet the muster or have some bad interpersonal

skills, they have asked them to leave, I think.

Mr. SHAW. Right.

40

Senator VOINOVICH. So the fact that they leave maybe is not a

bad thing, but maybe it shows that the system works. What would

worry me is that you have people sitting there for 4 years that really are not getting the job done and are really causing problems

with the team.

Mr. SHAW. That is why if career executives went into it from

whatever agency they must be able to be removed from that critical

pay job at any time, the same as anybody else.

I guess where we come down is we think OPM has that authority

now, or OMB has it now, that critical pay authority should be delegated to OPM, that agencies should come to OPM, justify that they

need this many critical pay employees for these positions, and then

go out and hire them. We would not have a problem with a system

like that, again, so long as someone was looking at it and saying,

yes, you do not have that skill, go buy it.

Senator VOINOVICH. Basically, it is just using common sense to

shape an agency and get the job done——

Mr. SHAW. Yes, sir.

Senator VOINOVICH [continuing]. The way it ought to be done,

understanding that we need to have more money in those agencies

in order to take advantage of the flexibilities that we would like to

give the agencies.

Senator Akaka, one of the jobs we have is working with the appropriators, and I am going to talk to the administration, also,

about the issue. They put a budget together and in the budget, I

think there should be some reconsideration of how resources are allocated. I mean, we have the issue of homeland security, and so

often when the budgets are put together, the focus is on hardware

and not enough attention is given to human beings.

You win with people, and I will never forget our March 2001

hearing, where former Defense Secretary Jim Schlesinger said,

‘‘fixing the personnel problem is a precondition to repairing everything else in our national security edifice.’’ That is it. And somehow, we have to get people to understand that human element,

that good people really make the difference, and if we have them

at Federal agencies, a lot of these other problems—even national

security problems—might be a lot less prevalent than they are

today.

Mr. SHAW. That is true. I agree.

Senator AKAKA. Thank you for that discussion.

Mr. Harnage, in talking about flexibilities, you point out in your

remarks that these bills offer incentives and bonuses to upper management without focusing on the majority of the Federal workforce.

You note that the human capital crisis is as severe for those in the

skill trades who are paid under the Federal wage system as those

under the general schedule. How can a wider range of Federal

workers be better served by these flexibilities?

Mr. HARNAGE. Well, in the first place, we have to fix both pay

systems, the wage grade pay as well as the GS or the white collar

pay. But our concern with the bonuses is it appears to us to be

more of a band-aid fix where we are providing bonuses because our

pay system is not sufficient. If we fixed the pay system, there

would still be places for bonuses, but it would not be a band-aid

fix, it would really be an incentive to either stay with the governVerDate 11-MAY-2000 09:31 Feb 12, 2003 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 79887.TXT SAFFAIRS PsN: SAFFAIRS
41

ment, come to work with the government, or do a better job. But

a bonus over a 4-year period is looking for a transit employee rather than a career employee, in our opinion, and that was the reason

that we were concerned about the bonuses. We are not so much in

opposition to a bonus. We are saying, but you have got to fix the

pay before the bonus has any significance to the entire workforce,

to fixing the problem.

Last year when there was a change in for the SES, I raised a

little objection to it, but not because of what was done but because

it was a band-aid approach. I think we need to fix everybody’s pay,

and I am certainly in favor of raising the cap, eliminating the cap

on the SES, as well as the cap on Congress. I think it is just a bad

way of doing business.

The pay ought to be based on a formula that decides it from year

to year rather than it having to be voted on every year by Congress. It puts you in an embarrassing situation where you are voting on your own pay. I think you need to find a way out of that

and you will find a way out of the SES, as well. So we are in favor

of raising those caps or eliminating the caps altogether.

Senator AKAKA. Thank you for that.

Mr. Shaw, you and I have talked about pay compression within

the ranks of the senior executives before and I believe your testimony provides a strong case in support of legislation to fix this

problem. In addition, your statement notes that within 5 years, 70

percent of all senior executives will be eligible to retire.

Mr. SHAW. Yes, sir.

Senator AKAKA. I found it interesting that Mr. Priolo recommends in his testimony that there needs to be a program to

mentor new managers. He also suggests the need for a structured

senior executive development program to identify and train potential SES candidates. Both seem like necessary components of any

strategic human capital program. How are prospective SES candidates identified and what arrangements currently exist between

SES and Federal managers to foster promotion?

Mr. SHAW. The SES members that are in our Association do

mentor. They have to be very careful, however. If they are mentoring someone, it might look like you are picking out one or two

people that you are going to help along, then other people are concerned that they are not going to be helped along. That is something that they have to be careful of. One or two agencies have formal mentoring programs. Everyone should.

There are two types of career development programs, executive

development programs in the government today. There is the one

such as the IRS, where the agency, through a very rigorous process, selects a number of managers to go through a 6-month training program and some on-the-job training, (and these selectees

come from both outside and inside government). They look at all

government agencies, and private companies to solicit applicants.

Those who are selected and successfully complete the program are

going to become senior executives and that is an excellent system,

in my judgment, for two reasons.

One, you have gotten all of the requirements out of the way

going into the system so that the people who graduate from the

42

system, know they are going to become executives. You give them

development, etc., as they go along.

The other system is the one that just about every other agency

has, which in our judgment and experience is not a good system.

What it does is they advertise that they are going to have a career

development program or an executive development program. People

apply for it and come into the program. They take just about everybody who is interested, unless they believe the applicants are not

able to make it at all. They run them through the program and

then they send them back to their old jobs and they are called executive development potentials; or something like that. And then

whenever an SES vacancy comes up, they look at those people in

the program, but they also look at people who have never gone

through the program, and in many instances, they select people

who have not gone through that program.

So the people in the program have said, ‘‘What did I waste my

life for, for a year going through this program, and I have got nothing except I feel good and I feel like I accomplished something, but

I am not going to get these jobs, so that does not do anything.’’

That is how most of the agencies’ programs work.

They have been a failure, in my view, other than the candidates

who have gone through them have learned something and been

trained in a variety of skills. But because of that, a lot of people

have given up on the executive development program just because

so many people who have gone through it have not been selected.

So we strongly recommend that there be executive development

programs, and they do as in the IRS, and that is a track all the

way up from GS–13, up that. All know what they have got to do

to qualify for it. They get selected for the training, and it means

they are going to be an executive. That means a lot of things, good

things and bad things. For example, you have got to be mobile, etc.

We would suggest if you are going to set up a program or require

agencies to have a program, that it be a program that when you

complete it, you are going to be selected for an executive position

in the near future.

Senator AKAKA. I thank you very much for your responses. I

have additional questions that I would ask for the record and I

would appreciate your timely responses.

I wish to thank you for being with us this morning, and I feel

we had an extremely engaging discussion. We heard where there

is agreement and where there is disagreement.

One thing is very clear. We should not create new flexibilities

today that will become the constraints of tomorrow. It is the responsibility of us all to work together to ensure that the Federal

Government has the workforce that is needed to carry out government services.

I would like to call on my friend, Senator Voinovich, do you have

any closing remarks or any further questions?

Senator VOINOVICH. No, I have not, except to say I really appreciate your being here today and look forward to continuing to work

for you as we shape this legislation up so that it gets the job done.

Again, I do understand that we need to do some serious work in

some other areas if this is going to be successful.

43

Senator AKAKA. Your responses will be useful to this Subcommittee.

Again, I thank everyone for attending the first day of our 2-day

hearing. I invite you to join us tomorrow morning at 10 a.m. when

we will hear from Dr. Paul Light, Dr. Carolyn Ban, Max Stier, and

Dr. Steven Kelman. We will look forward to that hearing.

I again thank you very much. This hearing is adjourned.

[Whereupon, at 12:09 p.m., the Subcommittee was adjourned.]

(45)

THE FEDERAL WORKFORCE: LEGISLATIVE

PROPOSALS FOR CHANGE

TUESDAY, MARCH 19, 2002

U.S. SENATE,

SUBCOMMITTEE ON INTERNATIONAL SECURITY,

PROLIFERATION, AND FEDERAL SERVICES,

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Subcommittee met, pursuant to notice, at 10:03 a.m., in

room SD–342, Dirksen Senate Office Building, Hon. Daniel K.

Akaka, Chairman of the Subcommittee, presiding.

Present: Senators Akaka and Voinovich.

OPENING STATEMENT OF SENATOR AKAKA

Senator AKAKA. Good morning. This hearing will come to order.

Today is the second day of our hearing on the Federal workforce

and legislative proposals offered by Senator George Voinovich and

Senator Fred Thompson.

For those lucky enough to have been with us yesterday, like Dr.

Ban, you know that we had a stimulating discussion which was enhanced by the diverse views expressed on how we should proceed

with civil service reform.

I am pleased to have with us this morning a panel of distinguished witnesses who have had years of experience working with

the issues we are grappling with today, and I am equally pleased

to be joined by my friend, Senator Voinovich. Again, I thank you

and I had a great hearing yesterday, and you had some great questions yesterday, too.

With about half the Federal workforce eligible for retirement

within a few years, there is no question that we must look toward

new employees. Unless we are able to convince sufficient numbers

of young people to seek careers in public service, our government

will be unable to meet the needs of the American people.

At the same time, we must ensure that the current Federal

workforce has the tools they need to perform their jobs. There must

be adequate resources devoted to training and enhancement of

skills, better utilization of institutional knowledge, and a commitment from the highest levels of government to honor Federal employees for their contributions to our great Nation.

Yesterday’s witnesses differed in their approaches to the problems we face. However, they agreed that the pay gap, lack of funding, performance appraisals, better training for managers, and

outsourcing quotas were issues that must be addressed in order to

46

strengthen the Federal workforce and make Federal service more

attractive.

Because you all have held positions in the Federal Government,

your recommendations are grounded in practice and offer unique

perspectives on how to best recruit, retain, and motivate the Federal workforce.

Every administration comes into office with a specific agenda,

and I am convinced that we must separate policy from politics.

Therefore, I want to know how we can best achieve balanced reform of the civil service system without imposing changes dictated

by political considerations.

Again, we look forward to your statements. I now want to yield

to my good friend and colleague, Senator Voinovich, for his opening

statement.

OPENING STATEMENT OF SENATOR VOINOVICH

Senator VOINOVICH. Thank you, Mr. Chairman. I would like to

thank you again for convening this hearing. I thought yesterday’s

hearing was very worthwhile.

I welcome our witnesses and thank them for being here today.

As I indicated at yesterday’s hearing, the human capital legislation being considered by the Subcommittee is extremely important

to the Nation, and every day we hear more and more examples of

why there is real urgency to get this legislation passed.

I mentioned yesterday that I was at a hearing last week with

FEMA Director Joe Allbaugh and after his presentation on his

agency’s new role in dealing with first responders, I asked him

what was going on in terms of FEMA’s staffing, and he said he is

in panic over it. He said, ‘‘I think we are going to lose 55 to 60 percent of our top people.’’ One of his concerns was that after September 11, many of the people in FEMA—which is a very highpressure operation—indicated that they were going to retire, that

they were looking at life a little differently than they did before

September 11. I suspect we will be seeing more of that in some of

the other agencies, so that adds an additional dimension to the

challenge that we have.

Today I am looking forward to learning our witnesses’ views and

recommendations on the legislation that is before the Subcommittee, S. 1603 and S. 1639, particularly the draft managers’ amendment which we are developing. The focus of these bills is, of

course, management flexibility. While compensation is important— and we certainly got into that yesterday—it is only half the picture.

The other things that we are talking about are also significant, I

think, if we are going to have a competitive total employment package that is going to change the situation.

Our witnesses today bring a wealth of experience in the area of

Federal personnel management, and I want to thank each of you

for taking time out of your very busy schedules to be with us.

Paul Light’s name has been synonymous with civil service reform

for many years; it is great that he is again playing a central role

in the work of the National Commission on Public Service, chaired

by former Federal Reserve Chairman Volcker. I look forward to a

productive relationship with that panel and have read in your testimony what you expect to accomplish with Mr. Volcker.

47

While Max Stier’s organization, the Partnership for Public Service, is fairly new to the Federal scene, Max is not. Having served

in all three branches of the Federal Government throughout his career, he brings a great deal to the table in our ongoing conversation

on reforming the civil service.

I think it is wonderful that the Partnership’s benefactor, Sam

Heyman, has chosen to give back to our Nation by founding this

organization. It has come at absolutely the right time as far as I

am concerned.

Harvard University’s Kennedy School of Government, one of the

premier public affairs institutions in the world, has also taken a

lead role in addressing the human capital crisis. Under the leadership of Dean Joseph Nye and with the assistance of Professors

Steve Kelman and Elaine Kamark, the Kennedy School has convened a series of executive sessions on the future of public service

that are proving valuable in the discussion of how to fix these pervasive governmentwide problems.

These sessions have yielded a wealth of information and provided

many excellent recommendations for improving our legislation, resulting in a number of positive changes of the bill—and Steve, I am

very grateful to you and Dean Nye for your contributions.

I am also pleased that you are here today because as a former

Clinton Administration official, I think you demonstrate that our

work together on this issue is a truly bipartisan effort.

Finally, it is great that Carolyn Ban is on this panel of expert

witnesses. I was so honored last October to address the National

Association of Schools of Public Affairs and Administration, the organization that Dr. Ban leads, and to receive an honorary national

membership in Alpha Alpha, the public affairs and administration

honorary society.

The involvement of our colleges and universities is a critical element in our campaign to attract our Nation’s best and brightest

young people to public service. I recently sent a pair of letters to

the public affairs departments of Ohio’s NASPAA institutions and

to the presidents of all major colleges and universities in the State,

encouraging them to proudly advertise careers in public service as

great opportunities for their students.

I think the future of our Nation depends on the kind of job that

you are going to be doing. We are going to try to straighten this

situation out to make it a lot more attractive, and we have to go

out and take advantage of opportunities to attract these young people who are so important to the future of our country.

Again, Mr. Chairman, I thank you for holding these hearings,

and I really look forward to the witnesses’ testimony today and to

our discussion.

Senator AKAKA. Thank you very much, Senator Voinovich.

Now we will hear from our panelists. I ask that you limit your

oral statements to 5 minutes. When you see the red light come on

in front of you, please try to wrap up. Be assured, however, that

your complete and full statement will be made part of the record.

Our first witness is Dr. Paul Light, and I will refrain from saying

more about each of you, because Senator Voinovich has done a good

job of that.

So Dr. Light, please proceed.

48

1The prepared statement of Mr. Light appears in the Appendix on page 191.

TESTIMONY OF PAUL C. LIGHT,1 SENIOR ADVISOR, NATIONAL

COMMISSION ON THE PUBLIC SERVICE, AND VICE PRESIDENT AND DIRECTOR OF GOVERNMENTAL STUDIES, THE

BROOKINGS INSTITUTION

Mr. LIGHT. I am pleased to be here this morning representing

The Brookings Institution and the Center for Public Service. I am

also a senior advisor to the Second National Commission on the

Public Service which is chaired by Paul Volcker.

We had a meeting of the Volcker Commission last week and discussed specifically the question of the Volcker Commission’s use as

a possible impediment to forward motion on reform. The Commission does not want to play a role here as being anything but supportive of activities in forward motion on improving the public service, be they incremental or comprehensive.

We talked about the issues pending before this Subcommittee

and the full Committee, before Congress and the administration,

and the Volcker Commission wants to be clear that it does not

want the comprehensive to be the enemy of the incremental. I

would just put that on the record in behalf of the Commission. It

does not have a position on any of the legislation pending before

this Subcommittee. We have not had an opportunity to discuss

these issues—we are just getting under way—but the chairman

and the members of the Commission who were at the first meeting

last week were clear that they support all good faith efforts to improve the public service, be they incremental or comprehensive,

and they do not wish to be seen as in any way, shape, or form acting as an obstacle or hoping for a delay in action pending our final

report next October or November/December, whenever we actually

bring this report to completion. We have a term limit on the Commission of about 12 months, and we hope to be done by December.

I would say personally that we have before ourselves on this Subcommittee and in Congress and the administration a pile-up of distress that we see in hearings like the one you held yesterday.

There are a ton of issues to be addressed on public service reform,

from pay to career structuring to the flattening of the hierarchy to

Presidential appointee reform. I personally believe that we ought

to have a moratorium on further outsourcing until the Comptroller

General and his panel complete their work, but we cannot allow

ourselves to fall into the trap of doing reform once every 25 years

and then leaving it to the next generation of legislators to repair

what we did a quarter century ago. If we look at the tide of legislative reform over the past half-century, we have done civil service

reform twice—in 1946 with classification reform; and in 1978 with

the Civil Service Reform Act—and then we have done a little bit

of tinkering around the edges in 1990 with FEPCA and occasionally other legislation. But we have converted the civil service reform issue into a once-ever-25-year affair.

There are three reasons for that. One is a lack of systematic data

that we can use to track and adjust in real time. Senator Voinovich

knows the story very well about the lack of meaningful data within

the agencies on training. We do not know what is being spent, and

49

1The prepared statement of Ms. Ban appears in the Appendix on page 207.

therefore, we cannot track it, therefore, we cannot adjust appropriately.

We have also had a long-term belief that one size fits all as far

as Federal reform goes. We need to struggle a little bit more with

decentralization as an issue, and the Volcker Commission is most

certainly going to do so.

There has also been a search for the perfect reform. Let me tell

you there is no such thing. Whatever reform we try is going to need

to be adjusted; we are going to need to fine-tune; we are going to

find agencies where it does work and agencies where it does not

work. We have got to stop searching for the perfect reform, and we

cannot allow the perfect to be the enemy of the good.

The impact is clear, as I write in my testimony, in the anti-terrorism workforce. We have a terrific workforce in the Departments

of State, Justice, Treasury, and Defense. We have a terrific workforce at FEMA. We have employees who want to do better at INS

and in the Border Patrol and in Customs. The motivation is good.

The recruitment is lousy. The resourcing is shameful. The rewarding is casual, and the trust is declining.

I do not believe the recent reports on INS will do anything but

weaken public support and public confidence in the war on terrorism and public confidence in the battle for homeland security.

What are you to do as a Subcommittee? As I said before, there

are lots of areas for work. The Chairman has his own history on

the human resource issue. We would not find a single private corporation in America that waited 25 years to adjust its human resource policies, especially in a labor market like the one we have

currently. I wish I had a nickel for every time a Federal recruiter

told me last fall that the best thing for the Federal Government

workforce recruitment effort would be furtherance and a deepening

of the recession; that is how we operate in this town.

I believe that practically everything this Subcommittee will do in

terms of legislation pending before it will help. I believe the key is

to get started on reform and to make forward motion as soon as

possible. We need to show the Federal workforce and the labor

market that the Federal Government means business about being

a more effective recruiter. The best way to do that is to start passing legislation. It will not be perfect, but it can be very good.

Thank you very much.

Senator AKAKA. Thank you very much, Dr. Light, for your comments and your advice to all of us.

Senator AKAKA. Our next panelist is Dr. Carolyn Ban. Please

proceed, Dr. Ban.

TESTIMONY OF CAROLYN BAN,1 DEAN, GRADUATE SCHOOL OF

PUBLIC AND INTERNATIONAL AFFAIRS, UNIVERSITY OF

PITTSBURGH, AND PRESIDENT, NATIONAL ASSOCIATION OF

SCHOOLS OF PUBLIC AFFAIRS AND ADMINISTRATION

Ms. BAN. Good morning, Mr. Chairman, and good morning, Senator Voinovich.

I am delighted to be here. As the Senator pointed out, I am the

dean of one of the major schools that is training people for public

50

service. I am also president of NASPAA, the National Association

of Schools of Public Affairs and Administration, which represents

over 250 programs offering degrees in this area. I am a scholar who

has studied the Federal civil service for over 20 years, and I am

very proud to be a former career civil servant.

I am not going to read my written testimony; I appreciate the

Chairman telling us it will be in the record.

I think all of us share a common value here. I think we are all

concerned with reforming our human resources systems with the

goal of improving government capacity, but we may disagree on

some of the specific proposals. I also appreciate very much Senator

Voinovich’s statement because this should not be a partisan issue.

I am very hopeful that we are at a point where meaningful change

is possible. So I applaud you, Senator Voinovich, and all of the Senators who have sponsored this legislation.

I do not think this is the major reform, but it is an incremental

process, and I think most of the reforms in this bill are things that

I support very strongly. I do want to spend my time talking about

the bill itself and some of the provisions within the bill, both those

that I support and those that I have some concerns about, because

I think now is the time that we can perhaps make some adjustments. And I am going to focus my remarks initially on three

areas—on the area of hiring, on the area of training and education,

and on the general issue of dealing with problem performers.

In terms of hiring, I think this bill contains a potential reform

that is a very important and significant one, and that is allowing

agencies to use what is called ‘‘category rating.’’ Category rating in

some other jurisdictions is called ‘‘zone scoring’’ or ‘‘band scoring.’’ Whatever we call it, it is a little bit in academic terms like giving

people an A or an A-minus rather than a 95 versus a 94. Even

when we are using valid selection methods, I think even the folks

who develop the tests and the selection methods would agree that

our methods are not so precise that we can really tell a manager

that somebody who gets a 95 on a selection procedure is going to

be a better employee than somebody who gets a 94.

The way the Rule of Three currently works in the Federal system, if you have 10 people who score a perfect 100 on this selection

procedure, whether it is a written or what is called an ‘‘unassembled examination,’’ the HR office can only give the manager a list

of three people. Now, how do they get down from 10 to 3 when

these people are all equally qualified and have identical scores?

First, they use veterans preference, and I think that is legitimate. Second, if the manager tells the HR office, ‘‘I am interested

in seeing a certain person on the list of people,’’ and there is a tiebreaker, that recommendation by the manager might break the tie.

Absent those, we use a random selection process. They use a

table of random numbers. It is like pulling people’s names out of

a hat. This is not an equitable way to make those kinds of decisions, and there is no reason why the manager should not be allowed, even under the current Rule of Three, to see all of the people who got the top score. But I think that moving to a carefully

drawn category ranking system is a far fairer, more equitable system that gives managers reasonable choices but still upholds a concept of merit.

51

1The prepared statement of Mr. Stier appears in the Appendix on page 215.

I would recommend that you look at State Governments that

have done this as a model. One of them is New York State, which

has moved effectively to band scoring, and the director of the Department of Civil Service there, George Sennet, who is a Pataki appointee, has been very successful not only in doing this but in getting the unions to buy into it. The unions initially opposed it, but

when the system was made a little more carefully drawn, unions

did go along with this. So I think we need to look at how to allay

the concerns of the unions in this area.

The second area is training, and I applaud the reforms that both

require agencies to develop training programs in the areas of training managers and dealing with poor performers; I applaud and

strongly support allowing agencies to pay for people to get a college

education or a graduate degree when it is in the interest of the

agency; and I strongly support the emphasis on training.

My time has run out, but when we have time during the Q and

A, I would like to be able to go back to the issue of dealing with

poor performers.

Senator AKAKA. Thank you very much, Dr. Ban. I now call on

Max Stier. You may proceed with your statement.

TESTIMONY OF MAX STIER,1 PRESIDENT, PARTNERSHIP FOR

PUBLIC SERVICE

Mr. STIER. Thank you, Chairman Akaka and Senator Voinovich.

Thank you for inviting me to testify here today, and thank you,

most importantly, for your leadership on these critical issues.

I appreciate the opportunity to discuss the challenges facing the

Federal workforce, and I will offer the Partnership for Public Service’s perspective on the Federal Human Capital Act and the Managerial Flexibilities Act.

The Partnership was founded just under 1 year ago in response

to the very issues that the Subcommittee is examining today. Skills

gaps created during the downsizing of the nineties are soon to be

exacerbated by a wave of retirements, and at the same time, very

few talented Americans see Federal jobs as good jobs.

All of the government activities that are so vital to us, from protecting our country to regulating our markets, will soon be severely

threatened unless we improve the government’s management of its

most important asset—its people.

I would like to use my time here today to focus on the importance of the Chief Human Capital Officer position that is created

by the Federal Human Capital Act. The Partnership has worked

very closely with congressional staff in developing this proposal,

and we believe it is vitally important not only for the success of the

measures you are considering today, but also for the success of subsequent civil service reforms that this Subcommittee may be asked

to consider in the coming years.

Simply put, the Chief Human Capital Officer proposal is the logical continuation of a long process begun under the first President

Bush to require agencies to manage for results. In 1990, Congress

passed the Chief Financial Officers Act in order to improve the financial management of the Federal Government. The Act required

52

each Federal agency to designate a person to serve as its chief financial officer and to oversee all of the agency’s financial management activities.

Although much remains to be done, the CFO Act has sparked

substantial improvements in government financial management

practices. We have financial standards, we have financial auditing,

and we have reporting on these measures—something that did not

exist previously.

Six years ago, Congress enacted similar provisions with respect

to agency information practices, including the requirement that all

agencies designated a Chief Information Officer. The Government

Performance and Results Act has also required agencies to track

and report on the results they are able to achieve.

These reforms, taken together, have put in place most of the

structures that are needed to manage a high-performing organization with one notable exception, and that is human capital management.

The top corporations in this country uniformly acknowledge the

importance of having a human capital officer in a position of top

responsibility—a position that is equal to other vice presidents responsible for the organization’s performance and success. Each of

the top 10 corporations on the Fortune 100 list has such a position.

I think we need to look to the private sector and learn from the

example that we have there. Jack Welch, the former CEO of GE,

emphasized the importance of human capital management. As he

bluntly put it: ‘‘We spend all our time on people. The day we screw

up the people thing, this company is over.’’ Both the Federal Human Capital Act and the Managerial Flexibilities Act propose to grant agencies new flexibilities and authorities in the hope of improving the government’s ability to recruit

and retain the talent and skills that it desperately needs. I would

urge the Members of this Subcommittee to think of a chief human

capital officer as an indispensable agent of change, acting under

the direction of the political leadership but not being political

themselves within each agency, who will be equipped with the authority and the expertise to ensure that these new tools are deployed efficiently, strategically, and to maximum effect.

In order for the chief human capital officer to play this role, we

believe that the current legislative proposal could be strengthened

even further, and we are eager to work with the Subcommittee to

accomplish this. Our suggestions focus on two areas. First, we must

use competencies to select the right people for these positions—a

point that Comptroller General Walker made. This bill is not simply about putting a new label on positions currently held by HR directors across the government but about transforming the very nature of the job.

Second is to ensure that these officers have a clear mandate to

develop, use, and report to Congress on meaningful measures of

their agencies’ human capital performance, a point that Dr. Light

made earlier.

In our view, the most critical management tool is information. If

you can measure it, it can change. The chief human capital officer

should be required to develop specific groups of metrics that are

aligned by the agency’s strategic plan, with special emphasis on

53

1The prepared statement of Mr. Kelman appears in the Appendix on page 221.

such areas as time to hire, success of recruitment efforts, and employee development. Again, this is akin to the training positions

that are already in the bill.

There are many other positive steps being proposed in these

bills—the category ranking system proposed in the Federal Human

Capital Act, for example, has been proven to be a fair and effective

way of selecting qualified applicants that gives managers better

choices and still preserves the important merit principles of fairness, diversity, and respect for veterans preference, a point which

Dr. Ban made very well. And the Partnership generally supports

the enactment of both sets of legislative proposals with a few caveats which are set out in the written testimony.

Thank you very much. I look forward to further discussion during the question time.

Senator AKAKA. Thank you very much, Mr. Stier. Our last panelist is Dr. Steven Kelman. We look forward to your testimony.

Please proceed.

TESTIMONY OF STEVEN J. KELMAN,1 PROFESSOR OF PUBLIC

MANAGEMENT, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY

Mr. KELMAN. Thank you, Chairman Akaka and Senator

Voinovich. It is a privilege to have the opportunity to come before

you today, and I am here to express my support for the managers’

amendment and for other activities this Subcommittee might initiate to help the Federal Government win the war for talent.

For the last 22 years, I have been a professor of public management at Harvard and have devoted my professional life to working

to improve the management of the Federal Government and to attract young people to public service. So I feel just like Dr. Ban—

I am on the front lines of the war for talent in the Federal Government and trying to attract young people.

As a citizen and as a teacher, I want to suggest that everybody

here honor and applaud both of you, both Chairman Akaka and

Senator Voinovich, for the commitment to the public good, really in

the best tradition of the U.S. Senate, that both of you are demonstrating by your interest in this issue. This is not going to get

headlines; no one is ever going to win an election on this. But this

is the right thing to do. This is statesmanship.

I have been to enough hearings so that I know what I am about

to suggest is very unusual, but I am going to do it anyway, at the

risk of being very unusual. I am going to ask that my fellow panelists and the people in the audience join in a round of applause for

Chairman Akaka and Senator Voinovich for your work in this area.

[Applause.]

I hope that does not take away from my time.

I want to just highlight a few of the features of my testimony.

First, although today’s hearing is not on S. 1800, the Homeland Security Federal Workforce Act, I would like to endorse the provisions

of that bill establishing National Security Fellowships, a National

Security Service Corps, and improvements in student loan repayment.

54

Second, I want to agree with Professor Ban and Max Stier. I believe that one of the most important provisions of this bill is Section 202, which would establish a category ranking system as a replacement for the Rule of Three.

Right now, the criteria that are used to set up the Rule of Three

are for various reasons quite formulaic and bureaucratic, and there

are lots of things that typically, the hiring manager, the person

who actually has to deliver the results from the organization, does

not get to look at—when they choose the top three—for example,

community service, work ethic, things like that. Once the candidates get to the hiring manager, they can look at those things.

So our goal should be to get a larger pool of people into the

hands of the hiring managers so they can start looking at a broader

range of criteria rather than just the formulaic, bureaucratic ones,

and getting the three people who are established by the personnel

folks who do not have a direct interest in the agency actually producing the results in the same way as the hiring manager does. So

I think that is a very important provision of this legislation.

Third, I would urge that the managers’ amendment have an additional provision to amend Title 5, which currently states that hiring and promotion decisions should be based on ‘‘the knowledge,

skills and abilities of candidates,’’ by adding to that list ‘‘the knowledge, skills, abilities, and accomplishments.’’ The current language was written a long time ago at a time

when we did not have the same focus on getting results out of the

government. I saw a recent article in my home town newspaper,

The Boston Globe, on how private sector firms evaluate resumes of

people who are applying for jobs. There are a lot of quotes here,

but the basic point of the article was that what people look at when

looking at resumes is accomplishments. They quote a person as

saying, ‘‘If you just list responsibilities of previous jobs excluding

accomplishments, an employment manager is like to say ‘So what?’ and move on to the next resume.’’ I think Congress can send a real signal that we really care about

a results-oriented Federal workforce by adding the word ‘‘accomplishments’’ to the statute.

Next, I want to briefly talk about things that the Subcommittee

and Congress can do other than legislation to get a Federal workplace that is a workplace oriented toward results and oriented toward our employees, because a lot of the things that you can do

do not have the words ‘‘human capital’’ or ‘‘civil service reform’’ attached to them.

For example, I think there is nothing this Subcommittee can do

more than continue working on the Government Performance and

Results Act as a way of expressing interest in this. Second, we

should not forget the Hippocratic injunction, ‘‘First, do no harm.’’

We have a real habit in this town of doing what I call ‘‘management by scandal,’’ where we create an overly bureaucratized Federal workforce and Federal workplace by focusing on a small number of scandals. We saw it last week in the hearings on the Federal

credit card, where you take a small number of fraud examples, and

that might be used as an excuse to destroy a very valuable program and create a more bureaucratic workplace. So, first, do no

harm.

55

I want to conclude with a message to the Subcommittee from one

of my students, Michael Jung, from Ashland, Kentucky, who is representing the students in our executive sessions at the Kennedy

School. I asked Mike what message I should give to Senator Akaka

and Senator Voinovich, and his message is this: ‘‘Sirs, I take your

deliberations very seriously because there are lots of people in my

generation who are interested in service. But we need to have faith

that the government will value our abilities and challenge us to realize our full potential as professionals.’’ So let us not disappoint Mike. Thank you.

Senator AKAKA. Thank you very much, Dr. Kelman.

We usually do not have panelists who call for applause.

Mr. KELMAN. I know it is unusual, but I am so happy that both

of you are taking an interest in this very important issue, because

no one is every going to win an election on it.

Senator AKAKA. And I want to pass through you to Mike that

there is no question that this government values the abilities of

young people. We depend on them and their accomplishments.

I appreciate your insightful and thoughtful comments, panel. Let

me begin my questions by asking all of you, except Mr. Stier,

whose statement focused on the need for a chief human capital officer, do you believe that the creation of these positions will ensure

that human capital management is given equal priority across the

agencies? What authority would this position need to make the

strongest contribution?

And finally, should this be an appointed position or one filled by

a career employee?

I will start by asking Dr. Light for his comments.

Mr. LIGHT. The first chief financial officer in the Federal Government was actually created in 1988 under the Department of Veterans Affairs Act, which came through the Governmental Affairs

Committee. Senator Glenn at the time was the Chairman, Senator

Roth was ranking. The notion was that a chief financial officer

would create a presumption in favor of greater attention to financial management.

Whether it has done so over the past 10 years is really in the

eye of the beholder, but the notion of creating chief human capital

officers, or CHCOs as they are called now at least in some quarters, creates a presumption in favor of paying greater attention to

human capital issues. That by itself will not do it. The chief financial officers were given substantial authority. The Chief Financial

Officers Act and the 1988 veterans elevation required the chief financial officers to produce financial statements. It also required the

chief financial officers to have those financial statements audited

by the inspectors general or contractors selected by the inspectors

general.

In other words, you had an enforcement mechanism; you had

something for the chief financial officers to do. We hear year after

year that the audit statements are not quite right and that some

of them are not coming in quite right, but they are working on the

issue.

If you create chief human capital officers in government and give

them nothing to do by way of measurement, tracking, auditing, and

so forth, then all of you have done is create a new title. And I think

56

the legislation takes an important first step toward giving them

substantial authority.

I think they have got to be Presidential appointees. That is the

coin of the realm. If you want them to sit at the table with CFOs

and CIOs and chief operating officers, all of whom are political officers, you have got to make them Presidential appointees. Lord help

us, we have not quite fixed the Presidential appointee process. You

have a bill pending here in the Subcommittee that could easily be

attached as part of this legislation to improve the process. But if

they are career officials, they are not going to be invited to the

table. We have to be blunt about it. They have to be Presidential

appointees with the full Senate advice and consent function attached. That is the coin of the realm. And I have made that argument with regard to other officers in the Federal establishment.

Senator AKAKA. Dr. Ban.

Ms. BAN. I do support the proposal to establish chief human capital officers. I do not think that simply creating the position will

ensure that human capital will be given uniform attention, but I

think it will help.

I agree with Dr. Light’s comment; there needs to be some oversight of this function and a clear sense of the difference between

the human capital approach and the more traditional human resources approach.

I just had an extended email exchange with the director of research of the Partnership last week on this very question of whether it should be political or career, and I took the position that Dr.

Light does, that it should be a political appointee, because they will

be given a seat at the table. But I need to at least acknowledge

that there is another side to this. We all know that political appointees come and go, sometimes fairly quickly.

The other side of the argument, the advantage of having a career

person, is that you have a more stable, long-term leadership in this

area.

So I do recognize there are two sides to this question; however,

if forced to come down on one side, I will say that I would prefer

to go with the political appointee.

I think the issue, however, is not just the chief human capital

officer; it is the person who heads the agency—it is the secretary,

it is the director. And when we confirm people in those positions,

I do not think we necessarily emphasize their ability to manage

their organizations. If they understand and value good management, they are going to be more likely to listen to their human capital officer.

Senator AKAKA. Dr. Kelman.

Mr. KELMAN. I think that both establishing a chief human capital officer and also, nobody has talked about a Chief Human Capital Officers’ Council—I think both of them have some real potential advantages.

In terms of the chief human capital officer within the agency, I

would agree with the earlier speakers that getting an increased

level of visibility and attention on these issues, particularly the

strategic value of people, and talented people, in delivering results

to the government, I think is a good thing, and it is a new focus.

57

As Senator Voinovich mentioned, I served in the Clinton Administration, not in this area but in a related area, and I think that

in the Clinton Administration, we did a number of good things in

this area, but I think it is fair to say that the strategic approach

toward human capital management that has come to the fore in

the last few years just really had not come to the fore in the same

way at that point. I think that having the chief human capital officer can help in that regard, assuming that the person either meets

some competencies, as Max Stier suggested in his testimony, so it

is not necessarily just the existing HR person or, worse, ‘‘personnelist,’’ to use the old phrase, from the Federal Government.

I think the Council is important because more and more academic research on how organizations work well suggests that setting up networks of people to share knowledge, share best practices, share information, share approaches, is a very important

thing in getting organizations to perform well.

So I think that having a situation where the different human

capital officers in the different parts of the Federal Government

meet regularly, get to know each other, talk to each other, can be

very valuable.

I do not have a strong view one way or another, frankly, on the

political versus senior career, and I am not sure there needs to be

a one-size-fits-all. Some of the chief information officers in the Federal Government are political, but most of them are actually career.

And one argument for career—and I recognize the arguments on

the other side, but since everybody has come out on the political

size, let me remind you of the argument on the career side—is that

from a career progression point of view for a career civil servant,

the higher the job that she or he can aspire to if they do a good

job in their public service—that is, they start as a GS–5, the more

they can have to look forward to—‘‘Gee, if I really do a good job,

someday, I might be the chief human capital officer of this agency.’’ That is an argument for making it career. I also recognize the

arguments on the other side, and if the Subcommittee would like,

I can talk to my colleagues at the Kennedy School and submit

something additional for the record on this. I think there are arguments on both sides.

Senator AKAKA. Thank you very much, Dr. Kelman.

Let me ask Mr. Stier, briefly, do you care to add anything in response to this question?

Mr. STIER. I think the arguments have been well-presented here.

I think from the Partnership’s perspective, there clearly are arguments on both sides as to whether or not the position should be political or career. We come down on the side of career for the arguments that have been presented already. Dr. Ban suggested, and

I think it is right, that you need continuity from administration to

administration. What we really need here is focus on a set of issues

that are not easy for political leadership to pay much attention to.

So I would say that in the ideal world, you would have a chief

human capital officer who was career and then have a political

leadership in an agency that recognized the importance of the issue

and relied on the career person to do their job and invest in the

people part of the agency. That is the model that I think is the

stronger model.

58

I would say that the more important pieces are to ensure, again,

as Dr. Light suggested, that there really are some substantial functions that officer is playing and there are measurements or metrics

that are included at some point so we have some way of knowing

what is happening inside the agencies and across agencies. I think

that is going to be absolutely critical.

Senator AKAKA. Thank you so much.

Today, some of our witnesses, along with Senator Voinovich and

I, raised pay comparability as a critical issue in solving the recruiting problem. The National Commission on Public Service will examine nine areas of concern in the Federal Government, including

the pay gap between private and public sector jobs for upper management employees.

At yesterday’s hearing, David Walker said there should be a

study to develop more realistic and workable methods and solutions to Federal pay issues. What is the rationale for limiting the

Commission’s review to upper management employees, and do you

personally believe that there should be a governmentwide study of

pay issues similar to the one that was performed prior to the enactment of the Federal Employees Pay Comparability Act?

Mr. LIGHT. Let me respond in two ways. First, the number of

issues that the Commission is considering now is up to 14. It seems

to be an ever-expanding list. We are going to release on Friday of

this week at Brookings a report on pay comparisons, compensation

comparisons, between Presidential appointees and the private sector, and that is going to show an outrageous gap, the question

being how much of a discount or price do you want Presidential appointees to pay to come into government.

We think there is very good statistical evidence of pay compression at the top of the Federal hierarchy. We think there is less good

evidence of pay gaps toward the middle and the bottom, which

would argue for less of a comprehensive approach to compensation

reform and more of a layered approach that might take on the

Presidential appointee, the judges, and others who are trailing the

private sector by significant margins, and try to understand a little

bit better what is happening at the entry and middle level, where

research by the RAND Corporation among others suggests that the

pay gap in position is quite different between the pay gap in person—in other words, that we hire people in positions that are substantially less well-paid than the private sector, but we promote

them rapidly, so that by the end of the second or third year, these

individuals may no longer experience much of a pay gap at all.

I guess what I would say to the Comptroller General is that if

he can do the study quickly, let us get it done, but we cannot afford

a 2- to 3-year analysis here. I believe the Director of OPM is working the pay issue, the compensation issue, and data will be coming

out soon on some of these comparisons.

Senator AKAKA. Thank you very much, Dr. Light.

Dr. Kelman, we appreciate you coming from Cambridge to be

with us today.

Mr. KELMAN. It was snowing yesterday in Cambridge.

Senator AKAKA. The proposals that we are reviewing today are

intended to allow agencies to better recruit and retain the people

they need. Yesterday’s discussion included outsourcing quotas and

59

the negative effect that numerical quotas have on these essential

human resource needs.

Drawing on your tenure at the Office of Federal Procurement

Policy, do you believe that outsourcing quotas are barriers to these

objectives, and how would you convince your students to work for

the government, knowing that some could lose their jobs to a contractor?

Mr. KELMAN. Well, of course, in the private sector as well there

is, if anything, more outsourcing that goes on in private sector to

private sector than goes on in the public sector toward the private

sector. So any person going to work for a Fortune 500 company or

whatever, there is some risk that for reasons of, in the case of the

corporation, good corporate policy or in the case of the government,

good taxpayer policy or good public policy, that some jobs might be

outsourced. Those are things that are just part of the risk that any

young person going into a job faces.

Also, it should be noted that in A–76, if there is a public-private

competition, and if the public side loses the competition, there is

a right of first refusal in A–76 so the public sector workers are

given an opportunity to go and work for the private sector contractor if they choose to. And in fact, in many of these competitions, they do end up going to work for the private sector contractor.

My overall view, Senator, is that we should make decisions on

what jobs are in-house and what jobs are outsourced based on what

is going to produce the best result for the government, for the taxpayer, and for the mission of the agency, and those considerations

end up sometimes favoring doing it in-house and sometimes favor

contracting it out.

I am inclined to be skeptical of trying to piggyback the politics

of outsourcing onto the human capital crisis of the Federal Government. I think that those decisions about outsourcing—outsource or

not outsource—should be made on their own merits based on what

is in the interest of taxpayers, what is in the interest of good government performance, who can do the job better, government employees or contract employees. I am skeptical of trying to piggyback

this onto the human capital crisis, frankly.

Senator AKAKA. Thank you very much, Mr. Kelman.

I now yield to Senator Voinovich for his questions.

Senator VOINOVICH. Dr. Light, in regard to the issue of pay comparability, I would be very interested to see what kind of methodology you would come up with to recommend how we can address

this, because it is not an easy issue. I went through this when I

was Mayor of the City of Cleveland, and it took us a year to look

at all of the comparable positions. We have not looked at the classification system around here since 1949, and it has to be a giant

mess right now. Finding some way to review the system so you do

not get bogged down in years of analysis is very important, and I

think that one of the things that needs to be understood straight

out is that when you get into this issue, you are going to find people who are ‘‘red-circled.’’ I think that in your testimony, you mention that. I think everybody should understand that if you do this

review objectively, you are going to find that there are people who

60

are substantially underpaid, and there are going to be some people

who are overpaid. That is a real challenge.

I had to look at some folks who had been in city government for

years and say, ‘‘You are red-circled,’’ and some of them were very

unhappy about it, and I said, ‘‘The only thing I can say to you is

that for the last several years, you have been paid more than what

you really should have been paid for the job that you are doing.’’

I think there is a tendency to think that everybody is underpaid,

and the fact of the matter is that we are going to find that there

are people in the Federal Government who are overpaid in the positions they have when you compare them with jobs that their

counterparts have in the private sector.

Everybody should understand that when we go into this area.

Another comment I would make is about the issue of the chief

human capital officer, and whether these should be appointed or

civil service positions. We are going to be marking up the Presidential appointments bill this week. But if you look at how slowly

things have operated here in the last year, and you have a new administration trying to figure out where to find competent human

resources people in the private sector who would be willing to come

to work for the Federal Government, the process of finding those

individuals, I think, is going to be very difficult. I think we would

be better off with perhaps having the chief human capital officers

be civil servants. That does not necessarily mean that the new political appointee coming in may be happy with the CHCO, but if

he does not like that individual, he can look around and find someone who meets his requirements. And that even gets to the issue

that David Walker brought up yesterday, that is, the issue of an

agency chief operating officer in the Federal Government to provide

some continuity on management issues from administration to administration.

I have one other point about the appointment process. I mentioned yesterday that Donna Shalala said that when she came in

for her confirmation hearing, nobody ever asked her about what

management experience she had. And we tried to get at that with

this administration, asking questions of the new appointees. We

had a series of questions that David Walker actually put together

that we asked them, and hopefully, that did some good to highlight

the fact that when these people are hired, they ought to have some

experience in the area of management, because they are taking on

some enormous responsibilities. I just wanted to comment on those.

I would like you, Dr. Ban, to explain to us how the categorical

hiring would work in the same example that you gave where you

have 10 people, each of whom has a score of 100. How would it be

different if we had categorical ranking procedure as contrasted

with the Rule of Three? This is an area where we have some concern among our labor unions, and I think the Subcommittee would

like to feel comfortable that if we go forward with this, which has

been the practice at two agencies in the Department of Agriculture.

We have some additional input on it.

Would you explain how that would work?

Ms. BAN. And it has worked well in the Department of Agriculture based on the evaluations that I have seen.

61

As I understand it—and it does work slightly differently in different jurisdictions—depending on the size of the pool of applicants,

you decide what the top tier will be. That might be everybody from

95 to 100 on your selection method. And the manager can look at

all of those people.

Senator VOINOVICH. So in this case, the manager would look at

all 10 of them?

Ms. BAN. In that case, it might be more than just the 10 who got

100. You might also have some people who got 99, 98, 97, depending on where you draw the line, maybe all the way down to 95, and

you might get 30 or 40 people if you had a large applicant pool.

If you have a small applicant pool, you might even want to drop

the bottom line a little bit lower. But all of those people would be

considered roughly equally qualified, and the assumption is that if

you have gotten into that top tier, you have got what it takes in

terms of the technical skills, you have passed that kind of hurdle;

then, the manager gets to look at all of those people, bring them

in for interviews, ask for additional information, and say which one

is the better fit in terms of some of those more intangible qualities

that really make a difference on the job.

I have seen evaluations of category rating in other jurisdictions.

If done right, it does not hurt veterans. In fact, veterans float to

the top, and you have to pick them first if they are in that top category. So I do not think that veterans need to worry. And it does

allow for a bit more diversity, because you can look at a wider

range of candidates and maybe get a little bit more diverse workforce that way.

So I have not seen it abused; I have not seen it used for political

purposes or other kinds of abuse. When it is done well, what I have

seen is managers happy to have a few more people to look at before

they have to make a decision.

Senator VOINOVICH. Would anybody else like to comment about

it?

Mr. KELMAN. Yes, I would. Senators, imagine in your offices if

you were hiring a legislative director, and the rule for hiring an LD

or an AA was that a separate Senate Personnel Office looked at all

the candidates and at how many years of experience they had had

on the Hill, what courses they had taken, and that was basically

what they looked at; and based on that, they came up with a ranking of only three people whom you could consider—they gave that

to you and said, ‘‘Here are the three who have the longest number

of years of experience on the Hill, who have taken the right

courses, whose job description looks good’’—maybe they have been

an LD already or something like that—‘‘and those are the only

three you can look at, and that is it.’’ That is the Rule of Three

that is imposed on Federal managers right now.

I suggest you would never accept that as a way to hire an LD

for your offices. You would like a larger list of people who are all

qualified, whom you can look at and use your judgment about who

is the best fit for the job.

Mr. STIER. If I might, Senator, I would just add very quickly

that, as Dr. Ban suggested, there is data out there that suggests

that in the Federal Government, the system has worked quite well

and that veterans have, if anything, been benefiting from the catVerDate 11-MAY-2000 09:31 Feb 12, 2003 Jkt 000000 PO 00000 Frm 00065 Fmt 6601 Sfmt 6601 79887.TXT SAFFAIRS PsN: SAFFAIRS
62

egory ranking system. The study done by MSPB indicated that for

those veterans who were selected or were considered to be qualified, many more of them were selected under the category ranking

system than were done under the alternatives.

I think that, as has been well presented by Dr. Kelman and Dr.

Ban, it is a system that provides managers with the kind of flexibilities that we would be very supportive of.

On the flip side, I think it is quite important, though, to remember that we need to ensure that government managers are given

the training and support so that they can appropriately make these

decisions, and I think that is again an area that the Federal Government needs to begin focusing on, investing in, ensuring that the

mangers themselves have the tools they need to make these decisions in smart ways.

Senator VOINOVICH. Yesterday the issue of training was raised.

We were talking about performance evaluations and getting rid of

poor performers, and there seemed to be a consensus that with better training and understanding of what the roles are, managers

could do a lot better job. So often, managers are frustrated and say

the system does not work, but they really do not have the training

they need to use the system that currently exists.

We focused on categorical ranking. What other provisions in this

legislation do you think are really key things that will make a difference in terms of maintaining our Federal workforce and attracting others to it? I will open it up for the panel.

Mr. LIGHT. Carolyn, do you want to go ahead? [Laughter.]

Ms. BAN. I would be glad to; it would be my pleasure.

I am very supportive of recruitment, relocation and retention bonuses, and I think that making them more flexible is a very positive move. I am concerned—and this came up yesterday as well—

that absent additional funding, managers are not going to use

them, but I nonetheless think it is very appropriate to broaden

that.

I am supportive of phased retirement. As I was preparing my

testimony, I talked to some senior people in HR offices in the Federal Government who said that would be a really important tool.

Allowing people to do phased retirement would allow them to have

the conversation with people about when they are planning to retire and would allow them to plan for succession planning in a way

that they cannot do. So I think that one has strength.

In the current version of the bill, it simply calls for a study of

phased retirement, and I think that is OK, but we should probably

move quickly to provide that as a tool.

Senator VOINOVICH. Is it more important today than it may have

been in the past because of the crisis that we have in terms of regular and early retirement——

Ms. BAN. Yes.

Senator VOINOVICH [continuing]. That if we do not take advantage of that, we would have this large gap of institutional knowledge that is walking out the door——

Ms. BAN. Exactly.

Senator VOINOVICH [continuing]. And the concept is that because

we find ourselves in this very difficult situation, phasing it out

63

would help with succession planning and be able to execute this

transition in a more logical way.

Ms. BAN. That is very well put, and I see the proposal for phased

retirement as linked to the proposal for training for managers,

managerial succession training.

What we have in many agencies is a senior executive and a top

management group ready to age out and not very many people

standing behind them, ready to move into those positions.

So phased retirement allows the new person moving in to be in

essence mentored by the more senior person before he or she goes

out the door, but at the same time, some management training to

prepare people to move into the ranks is very important.

The other option, of course, is hiring from the outside, and we

have a system that traditionally does not hire very many people at

mid-level management or senior management positions from the

outside.

Senator VOINOVICH. Well, there seems to be some controversy

about the issue—and we have two groups that we are going after—

one, we want to keep as many of our good people as possible, and

two, we want to recruit ‘‘the best and the brightest’’ both in entrylevel jobs and mid-level jobs. But there was some concern about the

provision of the bill that would give individuals coming in at midmanagement levels additional vacation. Do you want to comment

on that?

Ms. BAN. Yes, I do support that. I know that some of the folks

yesterday from the unions were uncomfortable with that, and I do

not think it is a huge issue, but as somebody who did come into

the Federal Government in a mid-level management position, it is

a deterrent to know that you can only have a very small vacation

period. So it is a tool that I think would help government recruit

from the outside. It is not as important, say, as raising the pay cap

on the SES, but it is nonetheless one more tool.

I think the streamlined critical pay authority is again not a huge

tool—it is limited in the number of positions that are covered, but

it is nonetheless an important tool that I support.

Mr. LIGHT. I think there is a general consensus that there is a

lot to admire in this legislation, but that we need to make sure

that there is a will to recruit. Let us say we give tax-exempt status

to loans for Federal employees—the GOFEDS bill, which is a nice

bill—but the tax exemption that you can take on a loan that is not

given is zero. If we cannot get the administration to make basic investments in training and recruitment, if the administration, be it

a Democratic or a Republican administration, focuses on hard

outsourcing targets as they have that disincent and send the message that you would be better off looking at another employer, if

your recruitment, retention and relocation expenses are never

granted, there is no money in the budget to do so without

cannibalizing your training, if you come in at the mid-level and you

are punished for having made the boundary crossing from private

or nonprofit into government by being denied adequate vacation

and benefits, it just does not make sense to make the change.

We have got to send a consistent signal both legislatively and administratively that we want talented people to apply, and that is

part of what this whole reform effort is about.

64

Mr. STIER. Senator, to echo what has been said a bit here, from

the Partnership’s perspective, there clearly are a number of very

positive provisions in this bill. Obviously, it is incremental reform,

and we are looking forward to working with you and with the

Volcker Commission and others to talk about the comprehensive

steps in addressing some of the larger problems like the compensation issues that clearly need to be done.

I think it is important to realize that it is a system and not simply respond to individual problems, and I think that in order to do

that, we do need to be thinking about how these different pieces

play into each other. So on the compensation issues, that clearly

relates to performance management, it relates to the issues about

poor performers and how you reward top performers as well, and

I think we need to be thinking about these things in an integrated

fashion.

The specifics in this bill, however, I think offer some important

steps. The vacation time that you have raised and asked about I

think is a positive step. We have issued a report on mid-career hiring in the government that I think demonstrates how few jobs are

actually filled from the outside. Indeed, barely 50 percent of jobs

are even advertised at the GS–12 and above level to folks outside

the government, and only 13 percent of GS–12 and above jobs are

filled from outside the government.

I do not think that is a situation that is good for the current

workforce, who have expressed unhappiness with the system as it

currently exists, and it is clearly not good for the system as a whole

not to be drawing from as broad a range of talent as exists—— Senator VOINOVICH. In other words, you are saying that for some

of the top jobs, only 13 percent of them are being filled from the

outside.

Mr. STIER. And when you say ‘‘top jobs,’’ I am not talking top

jobs. I am talking about GS–12 and above. That is essentially a

third of the Federal jobs that are available, so approximately half

a million jobs that are in the Federal Government that are GS–12

and above.

I think we need to look at a variety of ways of expanding the

reach that the Federal Government has, not only at the entry level

with young people but with experienced workers. I think, though,

that President Harnage and President Kelley raise some important

points with respect to this issue. I do not see why it should be a

benefit that is offered only to senior management and to SES. We

should be looking to expand the ability of the government to reach

out to needed people and offer the kind of incentives such as vacation time that are going to be market-based, and that may be for

an SES person, it may be for a GS–12 person; it may be for a senior IT person who is not a manager.

I think that really what we need to be looking at is a way of expanding the opportunities that the government has to attract new

talent and to retain existing talent.

Senator VOINOVICH. One of the things that was brought up was

the critical pay authority that I think some of the Senior Executive

folks are concerned about. Are we bringing in high-paid outsiders

to avoid the problem with pay compression? Is that the reason why

we are doing it—that we have to get this talent, and the pay schedVerDate 11-MAY-2000 09:31 Feb 12, 2003 Jkt 000000 PO 00000 Frm 00068 Fmt 6601 Sfmt 6601 79887.TXT SAFFAIRS PsN: SAFFAIRS
65

ule that we have here is not realistic so we have got to bring them

in from the outside at special rates? We tried in the bill to limit

that to not too many individuals. I would like you to comment on

that. Do you think that we have taken a realistic approach to that,

and what do you say to the argument that perhaps this would just

be another excuse for us not to face up to the fact that we need

to do something about the caps on our senior executives’ salaries?

Mr. STIER. Frankly, I think this is in line with the discussion

that we started with, with respect to Paul Light’s comments, and

that is that the incremental change is beneficial, but we cannot

lose sight of the fact that what we are talking about here is a series of problems that have to be addressed in the very near term

and that we need to be looking toward more comprehensive solutions, but in the meanwhile, let us move on what we can.

On the critical pay authority issue, the IRS, despite some problems, has by and large been a successful model that we need to

look to and learn from—but it also teaches us that these things

need to be done in concert and as a plan. Critical pay authority to

the extent it works in the IRS works because it is being done in

conjunction with a lot of other changes to reform the whole system.

Mr. LIGHT. Having looked at the IRS critical pay issue, I think

that to say it was done haphazardly is basically a good characterization.

Critical pay authority is very difficult to do well. I think we

ought to have critical pay authority. I embraced critical pay authority in the Tax Reform Act in 1997–1998. But it creates a new opportunity for the kind of story about dismantling that undermines

public trust, and I think we have got to deal with the pay compression issue.

Why not give critical pay authority for a set period of time in the

hope that by the expiration of critical pay authority, we can get the

pay compression problem solved in the Senior Executive Service?

Senator VOINOVICH. And would you require that any permission

to do that would have to come from OPM?

Mr. LIGHT. If OPM under the current restructuring proposals enhances its ability to respond quickly and considers the agencies its

customers, yes.

Ms. BAN. But critical pay authority is really designed for termlimited appointments, for people who are there for not more than

4 years. So it really is not a way around pay compression for the

majority of people. It is a quick fix for bringing in a few people who

have critical skills that you do not have. It certainly does not address the broader issue of pay compression, which is very serious,

and I think you already know that.

Senator VOINOVICH. Yes. The other thing that is very interesting

on that issue is that there is a concern among both SEA and Kelley

and Harnage that there is a tendency now that any time you need

something done, you farm it out. And their feeling is that some of

these things should be done in-house. This is another way of looking at this, that if you have critical pay, you bring in some key individuals that you need in your organization to provide leadership

and perhaps even training and get it shaped up, and then they

leave, as contrasted with I have a problem, I do not have the

66

money, I do not have the talent, so call some outsource agency to

have them take care of it.

I do not think that some people are looking at it in that respect,

but it could be part of the answer to just moving anything that

they cannot take care of out to a third party.

Mr. LIGHT. The problem being that most of the outsourcing is not

motivated, really, by a desire to find somebody who can come in

quickly; it is motivated right now by the desire to meet an arbitrary target, which you raised yesterday and the Comptroller

raised yesterday.

The outsourcing pressure right now is driven just by a statistical

head-count mentality, and I suspect into 2004 and 2008, we will

hear stories about how many jobs were converted as evidence that

government is somehow smaller.

Senator VOINOVICH. I think that one of the things that was

brought out in one of our hearings was by Ms. Stiles, who is with

the Department of Defense—it was interesting that she clarified

what the administration’s attitude was toward that, and I thought

it was a very fine explanation, and hopefully, OMB Director Daniels and OPM will look at that and maybe soften it up a little bit,

because it really does give the impression that you have just stated, that the emphasis will be on how do we figure out how we can

outsource rather than looking at how do we shape our organization

to get it to respond to the demands that we have and deal with the

transition situation. Outsourcing may be one way of doing that—

it is an option—but it should not be the driving factor so that every

morning they get up and say, ‘‘I have got to figure out how I am

going to outsource ‘x’ percentage of jobs.’’

I think that is really something that this administration can handle, depending on the messages that they are getting out to their

people. But at least on the surface, the appearance is not, I think,

conducive to what we are trying to accomplish.

Thank you, Mr. Chairman.

Senator AKAKA. Thank you very much, Senator Voinovich.

I have a question to ask Mr. Stier, but before I do that, I want

to ask Dr. Light if he has any comments on categorical rating.

Mr. LIGHT. I have none. I have a comment on political appointees

if you are willing to ask the question.

Senator AKAKA. Thank you.

Mr. Stier, the Partnership for Public Service conducted a survey

last year which found strong public satisfaction with the Federal

Government’s response to the events of September 11. However,

your findings reveal that this change in public sentiment may not

necessarily translate into greater interest in the Federal Government. Why is this the case, and how can we turn today’s positive

view of government service into tomorrow’s recruitment strategies?

Mr. STIER. Mr. Chairman, you are absolutely right about the survey results. Essentially, we found that the American people appreciated government workers more but did not want to be them, and

I think that the reasoning is at least twofold. First, as data from

Brookings has indicated, we are still at risk now of seeing that confidence in government go down.

67

There is a window of opportunity that we do need to take advantage of, and in order to do that, we need to do a variety of different

things, including what the Subcommittee is contemplating today.

First, we need to create a situation where the Federal Government is actually reaching out and recruiting. By and large, it is not

so much that the government does a bad job of recruiting—it does

not do any job at all. And indeed, we are engaged in a process right

now of a colleges and universities initiative that Senator Voinovich

has been very supportive of and helpful in, trying to reconnect college campuses with the Federal Government. Today we have over

150 colleges and universities that have signed onto this initiative

in the last 3 or 4 weeks.

So the first thing is in fact to inform the American people about

the opportunities that exist in the Federal Government, because

what the data shows is that people simply do not know what they

can do in the government; they are not aware of the jobs themselves.

Second, we need to reform the hiring process itself. It is one

thing to interest folks in government jobs; it is a separate thing to

get them actually into the government. They need to know how to

get a government job, and the process needs to be transparent, it

needs to be simple, and it needs to be quick, and unfortunately, it

has none of those characteristics today.

Then, finally—and this goes back to Professor Kelman’s point regarding his study—the government jobs need to be supportive of

high performers and innovators. When I talked earlier about this

being a systemic issue and not simply a set of problems, I think

we need to be working on all three levels—the outreach level, the

intake level, and the jobs themselves. I think that if we do those

three things, and we work on that now, we will in fact take advantage of the window that has been opened from changing attitudes

on September 11, and I think we can actually make a very big difference.

Senator AKAKA. Thank you. Dr. Kelman, would you like to comment?

Mr. KELMAN. Yes. I would just like to second what Mr. Stier said

with some examples. First, it is absolutely the case that what most

inhibits our students from going to work for the Federal Government more than anything else is a perception that the government

is too bureaucratic, too hierarchical, too rulebound, and does not

emphasize performance and rules enough. That is why, when I said

‘‘Do no harm’’—some of that pressure that creates bureaucracy in

government and creates too many rules, too many check-offs and

so forth, frankly comes from Congress and comes from this management by scandal kind of approach that gets the headlines and

gets members on the news, but it actually hurts the taxpayer and

hurts good government.

So when I try to persuade my students to go to work for the government, the biggest worry they have is what Mike Jung said. So

I think we need to keep that in mind. Dr. Light has used the words

‘‘Show me the work,’’ and his surveys show that what young people

want out of a job is responsibility, an ability to make a difference,

an ability to be in a results-oriented workplace.

68

Second, on the recruitment side, just to add two anecdotes from

our executive sessions—we hope, by the way, Senator, that you will

be able to join us at the next one. I know that you have not been

able to make it to the last two, but hopefully, you will be able to

come to the next one.

Anyway, at the last one, my student, Mike Jung, is looking for

a job after he graduates in Columbus, Ohio, because his new bride

is a med student there. So he needs to find a job there, and he

wanted to look at the Defense Logistics Agency, which has a big

facility in Columbus. So he checked out their website, and he said

what he was looking for was the website telling me why I would

want to work at the Defense Logistics Agency, and what about this

would make it an interesting job. The website gave him no clue to

that.

He then made a phone call to the Defense Logistics Agency in

Columbus and said, ‘‘I am about to graduate. Tell me why I should

want to come to work for the Defense Logistics Agency.’’

And the person on the other end of the phone, as he put it to

our group of people, treated him like a person to be processed—

started asking him a bunch of questions like, ‘‘Are you a Section

11?’’ and all of this bureaucratese, just to check off some things,

and made no effort to say here is why the Defense Logistics Agency

is an exciting place for a young person to work.

Another example, again from the last executive session—Tom

Tierney, who is the retired CEO of Bain and Company, the consulting organization, said that when he was CEO of the company,

he spent 10 percent of his personal time as CEO interviewing college students and business school students and being on campus,

because he felt that recruiting young people was part of his job description as CEO. I know the Comptroller General, David Walker,

is spending some of his personal time recruiting people to the GAO,

and I think that is one of the reasons why GAO is turning around

and making a difference. He is probably the only person in the

whole Federal Government who is going that route—I think—but

I hope there are others.

We do really need to attack these things comprehensively. Legislation cannot do it all, but for example, on some of these issues

about senior officials caring about recruiting and having recruiting

plans, what kind of workplace you are creating, in my view, that

is the kind of constructive oversight that this Subcommittee and

this Committee should be engaged in—far more constructive than

some of the scandal-mongering.

Senator AKAKA. Dr. Ban, do you wish to add?

Ms. BAN. Yes, if I may add to that briefly—because I think this

brings us back to category rating. It has been difficult for managers

to go out and recruit in the Federal Government, because when

they try to bring those candidates in, they run up against the Rule

of Three.

Category rating will make it easier when managers effectively recruit for them to actually get these outstanding candidates considered and be able to hire them. So I see those two as linked.

Mr. KELMAN. I strongly agree.

69

Senator VOINOVICH. They go out and recruit the candidates, and

then tell them, ‘‘We want you to come to work for us; now apply,

take the test, and we will see you in 6 months.’’ Mr. KELMAN. And we hope you get on the list of three—or what

they do—— Ms. BAN. Exactly.

Mr. KELMAN. They do one of two things, and both of them are

very damaging from the perspective of the Federal Government.

One is they say, ‘‘Apply, and we hope you get on the list of three.’’ The other is they start gaming the system—how can we redo the

position description so you can get on the list of three. And what

are we doing then? What an awful message. The first message a

young person gets from the Federal Government and from his potential employer is ‘‘Here is how I am going to game the system

so I can get you on this bureaucratic list of three.’’ It is the most

destructive, awful message we can give those young people.

Ms. BAN. He is correct.

Senator AKAKA. Let me finally ask Dr. Light if you wish to comment about these questions, but in particular, I would like to go

back to what you said and hear any comments you may have on

political appointees. [Laughter.]

Mr. LIGHT. I would direct the Subcommittee to the Inspector

General Act of 1978 to see whether or not there is embedded in

that statute a way of getting a political appointee to take these jobs

who is presumed to have a commitment to continuity.

We have been through a lot of travail with the inspectors general

over the years. We may be in the midst of a purging of the IGs

even as I speak. But the presumption has always been in favor of

that position which is politically appointed, it is confirmed on a sequential referral so that the authorizing committee does the first

review, and then the Governmental Affairs Committee does the sequential, which gives the Governmental Affairs Committee an opportunity to really weigh in on the issues that the Senator from

Ohio cares about. And the presumption in that statute is for continuity, and generally speaking, it has worked pretty well. That

was my point about the political appointees.

I have been against the proliferation of political layering for the

better part of 20 years, but every once in a while, you see an opportunity where, if you really want these folks to be sitting at the

table, I am not sure how you get them there unless they come

through a process where they have the Senate advice and consent;

I am just not sure about it.

Mr. KELMAN. May I just comment briefly?

Senator AKAKA. Yes, Dr. Kelman.

Mr. KELMAN. One way to get them to the table is—I think—

again through oversight and, during the confirmation process for

Cabinet Secretaries or other political appointees, to emphasize the

importance that you as Congress see in working with your senior

career appointees. We should not give up—I think this is a defeatist attitude of saying there is no way that a senior SES person is

ever going to ‘‘be at the table’’ with political appointees. That is

awful. What about all the other SESers—are we in effect saying to

them, ‘‘You are mere SES, and you are never going to be at the

table?’’

70

I will say that when I served as a political appointee in the Clinton Administration, the senior procurement people in the Federal

Government were all career people. They were at my table every

day, and I very much valued—extraordinarily valued—their input.

Yes, there are some or many political appointees who have this

attitude, but Paul, what are we saying to all the other SESers— ‘‘You are never going to be at the table?’’ We are going to give up

on that?

Mr. LIGHT. I think that what you are seeing here is the difference between an Article 1 person and an Article 2 person. I

think that may be it—that if you bring them through the Senate,

that increases the prestige attached to the position. But I can see

how you could bring a careerist into it. I just feel that the human

resource function has been so denigrated and disparaged over the

past two decades, humiliated and eviscerated, that we need to do

something to bring it up to grade and to say to the people involved

in human capital work ‘‘You are important, your work is important,’’ and the appointments issue is a small thing. The other

pieces of the legislation are certainly much more important than

whether this is career or political.

Senator AKAKA. Thank you very much for your responses. I have

no further questions, although I may have some for the record.

I would like to ask my colleague, Senator Voinovich, do you have

any additional questions?

Senator VOINOVICH. Yes. You have all been following this legislation and the managers’ amendment and so forth. Are there any

other controversial issues that I may have forgotten to bring up in

my questions that you would like to get information on the table

that would be helpful to me and to Senator Akaka?

Ms. BAN. I would like to raise two. We have been talking about

hiring and focusing on category rating. There is also a section in

the bill that talks about noncompetitive hiring, and I am concerned

about that section. It sets forth four criteria for when agencies can

hire noncompetitively. I am concerned about how broad they are.

They are: Severe shortage of candidates, need for expedited hiring,

unique positions with unique hiring, and positions that are historically hard to fill.

I have not seen final language of this section of the bill in the

combined bill, but if we are still committed to a merit system, we

have to look at where we draw the line and how appropriate it is

to be quite this broad in allowing agencies to do noncompetitive

hiring. I do not know a single manager who would not say that his

or her position needs to be filled right now. So I am concerned

about how many positions would not fall under one of these four

categories and whether we need to be a little bit more constrained.

I also want to agree with Ms. Kelley from the NTEU about reducing the notice period for poor performers from 30 days to 15

days. We are under a constitutional requirement of due process. If

you go back to the history of the Civil Service Reform Act and the

original proposals that were being developed before that legislation

was finalized, there were similar proposals to shorten the notice period and simplify the process for firing that fell out of the final legislation because people were not convinced that the courts would

accept this.

71

I think we have a question there about whether we meet our constitutional requirement for due process if we shorten that notice

period. I frankly think that is not where the problem lie in dealing

with poor performers. That is a very trivial change. The big delays

are in how we prepare the case and then, after we take action,

what the appeals process will be.

I think this is one where I would not fight with the unions over

it; I do not think it is worth it.

Senator VOINOVICH. Are there any other comments about any

provisions that you think might be controversial that you would

like to get on the record?

Mr. KELMAN. Just two. One, I would endorse the buyout authority for restructuring without FTEs going down. And we were talking earlier about outsourcing; I think one of the benefits of this

provision is that it more levels the playing field between the government and an outsourcer, because one of the reasons why agencies sometimes outsource is that they feel they do not have enough

flexibility. If they at one time had hired a COBOL programmer,

they are stuck with a COBOL programmer even if nobody is using

COBOL anymore.

Senator VOINOVICH. This is the provision on the early retirement,

that is a good idea.

Mr. KELMAN. Yes, to allow it to be done—to do buyouts for restructuring the agency. That is to say, you can do a buyout because

there are positions or job skills that are no longer needed at the

agency. Under current law, you can get rid of those, but you lose

the FTE, and therefore, the agencies are more skeptical about

doing them.

I would say allow the buyout authority for restructuring without

losing the FTE. That will give agencies more flexibility to change

their skill mixes as demands on them change, and it is one of the

ways of leveling the playing field in terms of outsourcing.

I would also urge—and this is not in the bill, but I urge that it

be added to the bill—a provision to expand the Outstanding Scholars Program authority from the GS–7 to the GS–9 level. That

would basically allow us to use the Outstanding Scholars hiring authority which already exists to hire students who are graduates of

master’s programs and not just undergraduates. Master’s programs

in public administration, public policy, public health, international

affairs are not now covered by Outstanding Scholar, and if you extend it to GS–9, it would allow them to be covered.

Senator VOINOVICH. I just have one other question that I would

like you to respond to, and it does not deal with the bill. There was

a lot of talk about linking pay to performance. I think it was David

Walker who said that 80 percent of Federal employees just get an

automatic pay increase, and that is basically the way that people

are compensated. It occurred to me that, first of all, if you have

meager pay increases which are less than cost-of-living, there really is not any flexibility to do that kind of evaluation. A manager

would just say, ‘‘I have 1 percent,’’ or whatever it is, and it is a

little bit less than cost-of-living, and why bother, because they do

not have any flexibility within that framework. I understand that

if there is a cost-of-living adjustment, everybody gets it right across

the board. The recommended cost-of-living adjustment this year is

72

2.6 percent for civilians. So you start with that, and if that is all

you have, well, there is nothing left to talk about performancebased increases. I do not know how they do it.

My thought would be that perhaps we look at granting a pay increase and then, above that, providing money to an agency so

that—let us say it is 2.6 percent, and we would go to 3.0 percent,

and say that the four-tenths of 1 percent is to be used to be linked

to performance so that there is some money there that could be

used for rewarding top performers or paying for bonuses that agencies do not have the money to pay for now.

I have talked to State Department employees who regularly relied upon bonuses to subsidize their pay because they were locked

into or could not get more money than ‘‘x’’—and then the money

is not there for the bonuses, so they get nothing.

I just wonder what you would think about possibly looking at

something like that to see if it would help stimulate some of this

performance evaluation that should be going on right now that is

not going on because there is no reason to do it.

Mr. STIER. Senator, I would suggest that clearly, there is a great

need for greater investment in the human component of our government, and we need more resources devoted to providing for the

existing workforce and recruiting new talent.

I would also, though, comment that rather than simply increasing a pool of money for potential compensation, we need to also be

looking at the performance appraisal system itself, because it is not

simply the case that we have in place right now a management

system that allows for identifying high performers and therefore

supporting them through additional resources, but clearly in the interim, I think we need to be looking at ways to create a better system and putting in more resources both for compensation as well

as paying for the authorities that currently exist.

Dr. Light’s comment about the loan forgiveness authority is quite

apt. The government has that authority now. Very few agencies are

using it. We have supported a bill that would make it a more effective measure, but the bottom line is there has to be money for the

agencies to actually have in order to be able to make it a useful

authority.

Senator VOINOVICH. Dr. Light.

Mr. LIGHT. You know, there is really no more controversial issue

than pay and performance, and put together, you are talking about

nuclear-quality debate. The current performance appraisal system

as you know is hyperinflated in part because Congress has restricted agencies from using a quota or curve system for allocating

ratings, so everybody is rated above outstanding or above average,

and we are well on the way to a government that is outstanding.

I would not take it on in this particular bill, Senator.

Senator VOINOVICH. No, I am not talking about taking it on in

this bill, but I am talking about looking at the broad picture of how

do we deal with this situation. And I guess even more important

than that is the urgency to the security of the United States of

America to really get at this issue of human capital and the resources that we need to have the ‘‘best and brightest’’ people stay

in government and be attracted to government.

73

Somehow we have to get that message across today. There seems

to be a feeling—and we have had hearings in the Governmental Affairs Committee with Senator Lieberman—that, for example, we

ought to revisit the issue of airport security. The amount of equipment and people that we are going to have to put on the payroll

is just astronomical. If I were Osama bin Laden today and I looked

around the United States and could see what he has wrought, he

would have to be, if he is alive, as happy as anything, because he

really has changed this country in terms of our attitudes. And also,

we are about to spend ourselves into oblivion to try to secure the

homeland.

We have to get across that if we really want to secure the homeland, the No. 1 priority should be investing in human capital. That

is the best way. And I am really worried that we are only going

to invest in new technology and gizmos while neglecting the most

important aspect of this issue, and that is people. We talked about

this yesterday, September 11—there is another committee looking

at why that happened. But my brain tells me that maybe Federal

employees did not have enough people; they had materials in front

of them that people could not read; they did not have people who

spoke Arabic. What a ridiculous thing. After this happened, we

asked for volunteers in the country—can anybody speak Farsi, Arabic? We do not have the people we need. This is incredible, and it

is a reflection on the part of Congress that we have nobody who

lobbies for people. Everybody lobbies for F–22s, for aircraft carriers,

for submarines, and for all kinds of things, but nobody is out there

hustling and promoting people.

It is interesting—and you brought it up—Jack Welch—at GE and

at all of the top companies in this country, the No. 1 issue with

them is people.

Ms. BAN. I want to agree with your general point. The Hart-Rudman Commission made this point long before September 11, that

we could not address the national security challenges in the country without addressing the problems with the civil service system

and with hiring.

However, let me take the unpopular position of arguing against

pay for performance. It sounds great. It is one of those things that

has what we call ‘‘face validity’’—it makes sense that if you pay

people and reward them, they will perform better. However, there

is virtually no research over the past 25 years that supports this

actually making a positive difference. It has more negative effect

on motivation than it has positive effects.

The amounts have been very small, and you would have to budget a lot more than I think you can to give significant rewards that

could make a difference—and it does not work. The bottom line is

that it just has not had the effect we wanted it to. Even though

we think it should, it does not work. So I would not go there.

Senator VOINOVICH. Dr. Ban, with all due respect, when I was

mayor and when I was governor, it worked. And I am talking about

my top people, believe me. First of all, it lets them know that you

care about what they are doing, and you pat some of them on the

back, and others, you kind of give a little bit of a nudge. And one

way that you get their attention is to let them know that, ‘‘This

time around, I am sorry, your performance is not what it should

74

be.’’ It made a big difference, and I was 10 years as mayor and 8

years as governor, and I fought to get that kind of authority when

I was mayor of the city; we did not have it, and I got it.

So I am not saying that it will work straight across the board,

but I can tell you that in top management positions, at least from

my experience, it has made a great deal of difference.

Mr. KELMAN. Senator, if I could come in on this dialogue for a

second, I think definitely the sentiment behind pay for performance, which is let us focus on results in the work place, is a very

good one.

I think it is fair to say that the private sector evidence on pay

for performance in the private sector is much—I do not want to say

it does not work anywhere—but I think Dr. Ban is right that it is

much more mixed than a lot of us would think.

I think that if you are going to design the pay for performance

systems for the middle- and lower-level people, you have to be careful. One of the pieces of evidence is that you probably want to give

team rewards rather than individual rewards, because if you give

too many individual rewards, people fight against each other rather

than collaborating in the workplace.

I guess where I would go—and I will give airline security as an

example—maybe the first places to try to do real pay for performance are those agencies that have good, intelligent goals under the

Government Performance and Results Act of delivering things. For

example, on airport security workers, we could have a performance

goal in there about what percentage of time does the ‘‘mystery

shopper’’ who tries to get in not do it. What I would suggest, taking

your example, is that we have genuine performance goals for those

teams at the airport, and if the team meets the goal, the team

should be rewarded. Again, the sentiment behind this, I am 100

percent in agreement with. It is not as straightforward or easy— Ford Motor Company last year eliminated a pay for performance

system that they had set up 2 or 3 years ago because it led to too

much fighting among individual employees, and they were sabotaging each other so they could be relatively one higher than another. It did not help the organization.

It can work, but it should be, I think, in the first instance limited

to where you have performance goals for the organization under

the Government Performance and Results Act that make sense,

and I would be inclined toward tying it to teams rather than individuals. But under those circumstances, I think we should be experimenting with some of the ideas that you suggest.

Senator VOINOVICH. My response to that is that that fits in with

quality management.

Mr. KELMAN. Absolutely.

Ms. BAN. Yes.

Senator VOINOVICH. One of the things that we did when we implemented our quality management initiative was to reward teams

of individuals. We had a program where if someone came up with

an idea that would save the State money, we would give out checks

to individuals for $5,000. What we ended up doing at the end was

rewarding teams of individuals because of the fact that they had

come up with this idea and made it happen. That meant a lot more

to them, because there was some concern when one individual

75

ended up with a $5,000 or $10,000 check for a good idea, and a lot

of them said, ‘‘Well, gee, he would not have had that if I had not

talked to him,’’ and ‘‘How did you figure that one out?’’ So that is a good point.

Mr. KELMAN. Yes, of course, you had one of the outstanding TQM

programs in the public sector in Ohio, and I think you are absolutely right. One of the principles of TQM is to reward teams, not

individuals; you do not want to have the individuals fighting with

each other.

Mr. STIER. And again, I think the point is to look at performance

management and not necessarily pay for performance, and to look

at it in the broader context.

Ms. BAN. I would agree.

Mr. STIER. And this is something that is not easy but is I think

well worth investing in. One size does not fit all. We already have

examples inside the government where there are mechanisms that

are in place that are rewarding the high performers or productivity—PT&O is an example of that where they have been quite

successful on the trademark side in terms of rewarding attorneys

who produce a certain number of finished applications.

Senator AKAKA. Thank you very much. I wish to thank you all

for being with us today.

Over the past 2 days, we have had extremely engaging and productive discussions. The bills we reviewed are important because

their introduction begins the dialogue on how to find legislative solutions to make sure the government has the right people with the

right skills in the right place at the right time.

Again, I wish to thank all of our witnesses for taking part in this

important hearing. You may be assured that your contributions are

appreciated.

Finally, I want to thank Senator Voinovich. Thank you for being

here with me to participate in this discussion.

Senator Voinovich has brought these bills to fruition. I look forward to working with you to educate our colleagues on the need to

address civil service reform. Thank you again for your commitment

to this goal, Senator.

Again I want to say thank you, and if there are no further

comments——

Senator VOINOVICH. I just want to thank you, Mr. Chairman.

When I had hearings on this in the last couple of years, there was

one individual who was always there, and that was Senator Akaka,

and I was very impressed with that and will never forget it. I really appreciate the fact that he is taking the time to continue this

effort on a bipartisan basis to make a difference for our country.

I thank you, Senator.

Senator AKAKA. Thank you very much, and remember—human

capital.

We stand adjourned.

[Whereupon, at 11:50 a.m., the Subcommittee was adjourned.]

(77)

A P P E N D I X

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

264

265

266

267

268

269

270

271

272

273

274

275

276

277

278

279

280

281

282

283

284

285

286

287

288

289

290

291

292

293

294

295

296

297

298

299

300

301

302

303

304

305

306

Æ