Human Capital: DHS Faces Challenges In Implementing Its New Personnel System
Published: 2004-06-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: DHS was provided with significant flexibility to design a modern human capital management system. Its proposed system has both precedent-setting implications for the executive branch and farreaching implications on how the department is managed. GAO reported in September 2003 that the effort to design the system was collaborative and consistent with positive elements of transformation. In February, March, and April 2004 we provided preliminary observations on the proposed human capital regulations. Congressional requesters asked GAO to describe the infrastructure necessary for strategic human capital management and to assess the degree to which DHS has that infrastructure in place, which includes an analysis of the progress DHS has made in implementing the recommendations from our September 2003 report. DHS generally agreed with the findings of our report and provided more current information that we incorporated. However, DHS was concerned about our use of results from a governmentwide survey gathered prior to the formation of the department. We use this data because it is the most current information available on the perceptions of employees currently in DHS and helps to illustrate the challenges facing DHS.
section_title: What GAO Found
paragraphs: To date, DHS's actions in designing its human capital management system and its stated plans for future work on the system are helping to position the department for successful implementation. Nonetheless, the department is in the early stages of developing the infrastructure needed for implementing its new human capital management system. DHS has begun strategic human capital planning efforts at the headquarters level since the release of the department's overall strategic plan and the publication of proposed regulations for its new human capital management system. Strategic human capital planning efforts can enable DHS to remain aware of and be prepared for current and future needs as an organization. However, this will be more difficult because DHS has not yet been systematic or consistent in gathering relevant data on the successes or shortcomings of legacy component human capital approaches or current and future workforce challenges. Efforts are now under way to collect detailed human capital information and design a centralized information system so that such data can be gathered and reported at the departmentwide level. DHS and Office of Personnel Management leaders have consistently underscored their personal commitment to the design process. Continued leadership is necessary to marshal the capabilities required for the successful implementation of the department's new human capital management system. Sustained and committed leadership is required on multiple levels: securing appropriate resources for the design, implementation, and evaluation of the human capital management system; communicating with employees and their representatives about the new system and providing opportunities for feedback; training employees on the details of the new system; and continuing opportunities for employees and their representatives to participate in the design and implementation of the system. In its proposed regulations, DHS outlines its intention to implement key safeguards. For example, the DHS performance management system must comply with the merit system principles and avoid prohibited personnel practices; provide a means for employee involvement in the design and implementation of the system; and overall, be fair, credible, and transparent. The department also plans to align individual performance management with organizational goals and provide for reasonableness reviews of performance management decisions through its Performance Review Boards.

section_title: Letter
paragraphs: The creation of the Department of Homeland Security (DHS) is an historic  opportunity for the federal government to fundamentally transform how  the nation will protect itself from terrorism and other threats.  DHS is in the  early stages of transforming and integrating a disparate group of agencies  with multiple missions, values, and cultures into a strong and effective  cabinet department.  Together with this unique opportunity, however,  comes significant risk to the nation if this transformation is not  implemented successfully.  In fact, we designated this implementation and  transformation as high risk in January 2003.
On February 20, 2004, the Secretary of DHS and the Director of the Office  of Personnel Management (OPM) released proposed regulations for DHS’s  new human capital system.  Among other things, the proposal establishes a  pay for performance system, a new adverse actions and appeals process,  and new labor relations rules.  The regulations provided the broad outline  of the DHS proposed system.  As the system evolves, critical issues, such as  how DHS will link individual performance expectations to DHS’s mission  and goals, how it will define performance expectations to promote  individual accountability, and how it will continue to incorporate adequate  safeguards to ensure fairness, will need to be addressed. Such detailed  implementation policies and procedures will need to be developed in a  transparent and inclusive manner as the system evolves.
In light of the challenge to establish a modern strategic human capital  management system in the department, you asked that we undertake a  series of engagements to assess and assist DHS in its implementation  efforts.  As agreed with your office, this is the third of several studies in  which we examine how DHS begins to implement its new human capital  system.  Our first report, issued in September 2003, described the process  DHS put in place to design its human capital system and involve employees  and analyzed the extent to which the process reflected what we found to be  important elements of successful transformations.  We found that, to date,  the design effort was collaborative and facilitated participation of  employees from all levels of the department.  The effort also generally  reflected what we have found to be important elements of effective  transformations.  Second, we provided our preliminary observations on  selected major provisions of the proposed human capital regulations in a  testimony and two related items of correspondence providing answers to  post-hearing questions.  We found that many of the basic principles  underlying the proposed regulations were consistent with proven  approaches to strategic human capital management, and identified parts of  the system that deserved further consideration.
As agreed with your offices, this third study describes the infrastructure  necessary for strategic human capital management and assesses the degree  to which DHS has that infrastructure in place, including progress DHS has  made since our September 2003 report.  More details on our scope and  methodology can be found in appendix I and criteria used to evaluate the  department’s efforts are summarized in appendix II.  We interviewed  officials from DHS headquarters who are involved in designing the new  human capital system.  Human resource leaders from the five largest legacy  components within DHS were also interviewed: the Transportation  Security Administration (TSA), Federal Emergency Management Agency  (FEMA), the organizations formerly known as the Immigration and  Naturalization Service (INS) and the U.S. Customs Service (Customs), and  the U.S. Coast Guard.  This work was conducted from March 2003 through  March 2004 in Washington, D.C., and in accordance with generally accepted  government auditing standards.
The analysis of DHS’s effort to design a strategic human capital  management system can be particularly instructive for future human  capital management and integration initiatives within specific units of DHS.  We have consistently supported the need for government transformation  and the concept of modernizing federal human capital policies, as  underscored in recent testimonies and our January 2003 report that  described why strategic human capital management remains a  governmentwide high-risk area.  The DHS effort can also prove instructive  as other agencies implement changes to their human capital management  systems.
subsections: section_title: Background
subsections: section_title: Mission and Organization of DHS
paragraphs: The DHS strategic plan, released on February 23, 2004, includes the  following mission statement: “We will lead the unified national effort to  secure America.  We will prevent and deter terrorist attacks and protect  against and respond to threats and hazards to the nation.  We will ensure  safe and secure borders, welcome lawful immigrants and visitors, and  promote the free-flow of commerce.”  The strategic plan further identifies  seven strategic goals: awareness, prevention, protection, response,  recovery, service, and organizational excellence.
DHS is generally organized into four mission-related directorates: Border  and Transportation Security, Emergency Preparedness and Response,  Science and Technology, and Information Analysis and Infrastructure  Protection.  These directorates include the following legacy agencies:  The Border and Transportation Security directorate consolidates the  major border security and transportation operations under one roof,  including legacy Customs, parts of the legacy INS, TSA, the Federal Law  Enforcement Training Center, the Federal Protective Service, the Office  for Domestic Preparedness from the Department of Justice (DOJ), and  part of the U.S. Department of Agriculture’s Animal and Plant Health  Inspection Service (APHIS).  This directorate includes the newly formed  Bureau of Immigration and Customs Enforcement (ICE) and the Bureau  of Customs and Border Protection (CBP).
The Emergency Preparedness and Response (EPR) directorate  integrates domestic disaster preparedness training and government  disaster response and includes FEMA, the Strategic National Stockpile,  the National Disaster Medical System, the Nuclear Incident Response  Team, the Domestic Emergency Support Teams from DOJ, and the  National Domestic Preparedness Office from the Federal Bureau of  Investigation (FBI).
The Science and Technology directorate coordinates scientific and  technological advantages for securing the homeland and includes the  Chemical, Biological, Radiological, and Nuclear Countermeasures  Programs, the Environmental Measurements Laboratory, the National  Bio-Weapons Defense Analysis Center, and the Plum Island Animal  Disease Center.
The Information Analysis and Infrastructure Protection directorate  accesses and analyzes intelligence, law enforcement data, and other  information involving threats to homeland security and evaluates  vulnerabilities from state and local agencies, the private sector, and  federal agencies such as the Central Intelligence Agency, FBI, and the  National Security Agency.  It includes the Critical Infrastructure  Assurance Office, the Federal Computer Incident Response Center, the  National Communications System, the National Infrastructure  Protection Center, and the energy security and assurance program  activities of the Department of Energy.
In addition to the mission directorates, the Management Directorate, led  by the Undersecretary for Management, is responsible for integrating  the activities of the Chief Financial Officer, the Chief Procurement  Officer, the Chief Human Capital Officer, the Chief Information Officer,  and the Chief of Administrative Services.
In addition to the four mission-related directorates, the U.S. Secret Service  and the U.S. Coast Guard remain intact as distinct entities in DHS.  The  Bureau of Citizenship and Immigration Services, composed of legacy INS  adjudications and benefits programs, reports to the Deputy Secretary.
section_title: DHS’s People
paragraphs: DHS has just under 158,000 civilian employees.  Of the civilian employees,  a vast majority transferred from seven organizations: TSA, INS, Customs,  FEMA, the U.S. Coast Guard, the Secret Service, and APHIS.  Of the civilian  employees who transferred from these seven organizations, approximately  90 percent are stationed outside the Washington, D.C. metropolitan area.   These employees hold positions ranging from inspectors, investigators,  police and intelligence to attorneys and administrative services.
According to OPM, just over 49,000, or just under one-third, of DHS civilian  employees are represented by unions.  This includes 16 different unions  divided into 75 separate bargaining units.  The 3 unions representing the  largest number of employees are the American Federation of Government  Employees, the National Treasury Employees Union, and the National  Association of Agricultural Employees.
section_title: Process Used to Design the Human Capital System
paragraphs: The design process of the DHS human capital management system  included DHS and OPM employees and union representatives.  Figure 1  describes the development of the DHS human capital system.
section_title: DHS Is Beginning Strategic Human Capital Planning Efforts
paragraphs: Using the department’s strategic plan as a starting point, DHS recently  began drafting a strategic human capital plan and a more detailed  workforce plan for the department.  One of the goals of the strategic plan,  organizational excellence, makes it a priority for the agency to value its  people and create a culture that promotes a common identity, innovation,  mutual respect, trust, accountability, and teamwork.  To support the  accomplishment of this goal, the department has an objective focused on  ensuring effective recruitment, development, compensation, succession  management, and leadership of a diverse workforce to provide optimal  service at a responsible cost.  While the plan broadly states a few strategies  that could be used to achieve this objective, it does not identify the skills  needed, resources required, or timetables associated with the strategies.   Additional programmatic objectives within the strategic plan will require  human capital approaches to ensure they are realized.
The Director for Human Resources Policy and the Senior Advisor for  Human Resources Policy said that the strategic human capital plan will be  completed later this spring and will include goals for transforming the  human capital management of the department over the next 5 years.  These  same officials report that this will be a “living document” and expect that  revisions will be made as they learn more about the human capital needs  across the department.
Below the headquarters level, strategic human capital planning of different  levels of detail is being done in the five legacy components we studied.   These plans vary in terms of the time frame covered by the plan and the  degree to which future skill and competency needs are identified.
In July 2003, FEMA/EPR released a 5-year strategic human capital plan  that identified the challenges it faces, improvement initiatives, and  outcome measures for the initiatives.  A timeline and the unit  responsible for implementation are also identified.  Part of FEMA’s  “Model for Success” articulates the need to identify strategic  competencies.  The plan states that FEMA intends to integrate its  competency management system with future workforce planning  efforts.  According to agency officials, FEMA was invited to present its  Competency Assessment System to the DHS Human Capital  Management Forum and OPM.
Customs/CBP workforce planning efforts are currently short-term and  tactical in nature.  The component does not have a consolidated plan  that identifies human capital needs or strategies and the planning  horizon is less than 1 year in duration.  Instead, CBP informally sets  annual targets for various human capital activities that are articulated in  various agency meetings and memoranda.  Progress towards the targets  is tracked in a biweekly report that includes information such as  changes in staffing levels, retirement eligibilities, and the gender  breakdown of the workforce.
INS/ICE officials reported that they used workforce plans to respond to  Congressional mandates in managing large-scale recruiting and  retention efforts, beginning in 1996.  It released a 3-year plan in June  1996 to manage this growth, placing a priority on deployment,  recruiting, hiring, and training strategies.  Since the original release of  the plan, it has been updated annually through individual memoranda  and charts reflecting current human capital data.  According to an  agency official, the component is working with a contractor to identify a  baseline understanding of workforce demographics and skills and  determine future workforce requirements.
TSA hired a consultant in September 2003 to conduct a study of  screener staffing levels at the nation’s commercial airports in an effort  to right-size and stabilize its screener workforce.  Among the tasks the  contractor is to complete are the implementation of a staffing analysis  model to be used as a management tool to determine daily and weekly  staffing levels and the deployment of the model to commercial airports  nationwide.
The Coast Guard has a 5-year strategic human capital plan covering the  period 2001 to 2005 that integrates approaches for managing military,  civilian, and reserve employees.  Identified within the plan are current  challenges and desired characteristics for the workforce of the future.   Strategies are adjusted annually and the objectives and approaches are  continuously evaluated for their impact so that midcourse corrections  can be made if necessary, according to an agency official.  The Coast  Guard plans to do a major update of its plan once the department’s  human capital system is completed.
DHS headquarters has not yet been systematic or consistent in gathering  relevant data on the successes or shortcomings of legacy component  human capital approaches or current and future workforce challenges,  despite the potential usefulness of this information to strategic human  capital planning activities.  Efforts are now under way to gather such data.
During the design process, from April through September 2003, the  subgroups that identified options for the human capital system gathered an  extensive amount of research on innovative practices outside of DHS and  basic demographic data on employees in the department.  DHS also  reported that it gathered policy documents from legacy components and  specifically noted meeting with TSA, Coast Guard, legacy Customs, and  FEMA to understand their policies and practices.  However, at a briefing for  DHS stakeholders in August 2003, DHS and OPM officials said that they did  not evaluate the successes or shortcomings of legacy agency human capital  approaches or current and future workforce challenges, nor had they  analyzed the results from the OPM FHCS.
The department is now beginning to collect more detailed, internal human  capital data, according to one DHS official.  With the support of a  contractor, focus groups are planned for this summer so that human capital  challenges can be identified and validated.  According to the same official,  the Chief Human Capital Officer is holding monthly meetings to spotlight  the successful practices of components within the department and  disseminate best practices.  Moving forward, the department plans to  design a centralized information system so that human capital data can be  gathered and reported at the corporate level.
With this information, the department will be better positioned to conduct  data-driven evaluations of the successes and shortcomings of its new  human capital management system.  DHS documents indicate that the  department is committed to an ongoing comprehensive evaluation of the  effectiveness of the human capital system.  The department described  efforts to identify human capital metrics and an intent to use employee  surveys to gauge employee satisfaction and needs.  We testified that DHS  should consider doing evaluations that are broadly modeled on the  evaluation requirements of the OPM demonstration projects.  Under the  demonstration project authority, OPM requires agencies to evaluate and  periodically report on results, implementation of the demonstration  project, cost and benefits, impacts on veterans and other equal  employment opportunity groups, adherence to merit system principles, and  the extent to which the lessons from the project can be applied  governmentwide.  A set of balanced measures addressing a range of results  and customer, employee, and external partner issues may also prove  beneficial.  An evaluation such as this would facilitate congressional  oversight; allow for any midcourse corrections; assist DHS in  benchmarking its progress with other efforts; and provide for documenting  best practices and sharing lessons learned with employees; stakeholders;  other federal agencies; and the public.  We have reported on key principles  for effective strategic human capital planning and the importance of data- driven human capital decision making (see app. II).
section_title: Continued Leadership Is Necessary to Marshal the Capabilities Required for Successful Implementation
paragraphs: DHS and OPM leaders have consistently underscored their personal  commitment to the design process and speak openly in support of it.  As we  have reported, this is a very positive start.  DHS will need to sustain this  effort to overcome the views reflected in the OPM FHCS, administered  prior to the formation of DHS, in which employees now in the department  responded with the following perceptions:  28 percent believe that leaders generate high levels of motivation and  commitment in the workforce, compared to a governmentwide  response of 36 percent; 35 percent hold their leaders in high regard, compared to a  governmentwide response of 43 percent; and  43 percent believe their organization’s leaders maintain high  standards of honesty and integrity, compared to a governmentwide  response of 47 percent.
Resources.  DHS is recognizing that there are up-front costs to design and  implementation and that its components are starting from different places  regarding the maturity of their human capital management systems.   Members of the Senior Review Advisory Committee agreed during their  deliberations that creating the new human capital management system will  require a substantial investment, and identified this as a core principle for  the design of the system.  Additionally, during the DHS focus groups,  employees expressed an interest in increasing the resources available for  training and professional development, and noted the importance of having  an adequate budget for the performance management system in  particular.
The administration recognizes the importance of funding this major reform  effort and has requested, for fiscal year 2005, $102.5 million to fund  training, the development of the performance management and  compensation system, and contractor support, and over $10 million for a  performance pay fund in the first phase of implementation (affecting about  8,000 employees) to recognize those who meet or exceed expectations.   Approximately $20 million was also requested to fund the development of a  departmental human resources information technology system.  While the  investments are important to the ultimate success of DHS’s efforts, it is  equally important to recognize that certain costs are one-time in nature  and, therefore, should not be built into the base of DHS’s budget for future  years.
Communication.  In our September 2003 report, we commended the  structured approach the department developed to communicate with  stakeholders on the human capital system and recommended that the  Secretary of DHS ensure that the message communicated across the  department was consistent.  Officials we interviewed in five legacy  components of the department agreed that communication from DHS  headquarters on the human capital system has been consistent.  In  particular, three noted that the information contained in the weekly  departmental newsletter is helpful.  As an example of the consistency of  the communication on the new human capital management system,  between December 5, 2003 and February 27, 2004, employees were assured  in five different newsletters that the new human capital system would not  lead to a loss in pay or benefits and four different newsletters reported that  no layoffs would result due to the implementation of the new system.  To  ensure the consistency of the message, a Communications Coordination  Team, which includes members from across the department, has been  established to disseminate information and promote a clear understanding  of the new human capital system.  This team meets biweekly or weekly   and is co-chaired by the Director of Internal Communications and the  Director of Human Resource Management.
In our September report we also recommended that the department  maximize opportunities for two-way communication and employee  involvement through the completion of the design process and  implementation, and noted that special emphasis should be placed on  seeking the feedback and buy-in of front-line employees in the field.   Opportunities for two-way communication were limited between the  conclusion of the town hall meetings in July 2003 and the publishing of the  proposed regulations in February 2004.  The primary means for employees  to provide feedback was through the Human Resources Design Team  e-mail box.  Employees and the general public were also allowed to  participate in the public comment period of the Senior Review Advisory  Committee meetings in October 2003.  While the department continued to  consult intermittently with leaders of the three major unions during this  period, one agency official noted that the department does not have a  similar mechanism in place to obtain feedback from nonunionized  employees.  One action taken to overcome this challenge was the effort to  notify employees how to comment on the proposed regulations, which was  communicated in six different newsletters between February 13 and March  22, 2004.  DHS received over 3,400 comments on its proposed regulations,  in part due to its efforts to encourage employees to submit comments on  the system.
Since the release of the proposed regulations, DHS has provided  information to employees through a variety of formats.  For example, a link  to the proposed human capital regulations was placed in a prominent  position on the intranet home page of the department for easy access.  On  February 13, 2004, a satellite broadcast outlined the major features of the  human capital management system, reaching approximately 500 DHS  locations around the country.  During the broadcast, employees submitted  questions, and those unable to view the broadcast could access it through  the DHS Internet Web site.  Additionally, a senior leadership conference  was held, in part, to brief executives on the proposed system.  The  department has developed tool kits to provide information to both  executives and line managers about the changes and to provide them with  talking points for discussion with their employees and developed a quad- fold to distribute to line employees containing questions and answers about  the new system.  Town hall meetings that were held around the country to  mark the one-year anniversary of the department included discussions  about the proposed human capital system.  Finally, between February 13  and March 22, 2004, the time in which employees could submit comments  on the proposed regulations, the weekly DHS newsletter included answers  to commonly asked questions and details on what would be changed and  remain the same under the proposal.
The success of DHS communication efforts is especially important, given  employee responses to the OPM FHCS:  40 percent report that managers promote communication among  different work units, which is less than the governmentwide response of  51 percent;  65 percent feel they have enough information to do their job well, which  is less than the governmentwide response of 71 percent; and  37 percent are satisfied with the information they receive from  management on what is going on in the organization, which is less than  the governmentwide response of 45 percent.
Training.  Members of the Senior Review Advisory Committee identified  training and development as a critical component for implementing the  human capital system.  Furthermore, participants in the DHS focus groups  expressed a need for training and professional development opportunities  in a number of areas, including general supervisory capabilities, assessing  employee performance, labor-management relations, and alternative  dispute resolution.  The DHS proposal correctly recognizes that a  substantial investment in training is a key aspect of implementing a  performance management system.  The need for in-depth and varied  training will continue as the system is implemented, as indicated by results  from the OPM FHCS in which 53 percent of respondents believe  supervisors/team leaders in their work unit encourage their development at  work, which is less than the governmentwide response of 59 percent.   Furthermore, 47 percent feel they are given a real opportunity to improve  their skills, which is less than the governmentwide response of 57 percent.
Our recently released guides for agencies to help ensure investments in  training and development are targeted strategically and could prove helpful  to DHS as it develops its training and development programs.
Employee Participation.  The Undersecretary for Management has  already noted her commitment to move forward on implementing the  human capital system in a collaborative way, and reiterated that support in  a December 19, 2003 memorandum to DHS employees regarding the human  capital system.  Regardless of whether it is a part of collective bargaining,  involving employees in such important decisions as how they are deployed  and how work is assigned is critical to the successful operations of the  department.  This is likely to be a significant challenge for the department  in light of employee responses to the OPM FHCS in which 28 percent of  DHS employees indicated a feeling of personal empowerment, which is  fewer than the governmentwide response of 40 percent.  Additionally, 44  percent of DHS employees reported satisfaction with their involvement in  decisions that affect their work, compared to 53 percent governmentwide.
Implementation Teams.  DHS formed three implementation teams at the  end of February 2004 to support the design and implementation of the  human capital management system because of the multiple areas that  require management attention.  This includes a Training and  Communications team; a Pay, Performance, and Classification team; and a  Labor Relations, Adverse Actions, and Appeals team.  According to agency  officials, the teams will initially focus their efforts on data collection and  project planning activities until the department issues interim final  regulations for the human capital management system, at which time the  teams will begin to draft departmental policies to support implementation.   Agency officials reported that, as they move forward, they will pay  particular attention to how their decisions may affect other human capital  approaches across the department.
The mission of the Training and Communications team is to develop  comprehensive communication and training plans, coordinate and manage  the development of training, coordinate the delivery of training, and to  disseminate information related to the design and implementation of the  department’s human capital system.  The co-leads of the team said their  work largely depends on the efforts of the other two implementation teams  and acknowledged the concerns raised by employees on the need for  training, especially for departmental managers.  They also said they plan to  rely on the training capacity already in the department.  A second goal is for  the team to ensure that communication with employees about the new  human capital management system is coordinated and consistent across  components and to ensure that avenues are available for DHS employees to  communicate ideas to the implementation teams.
The mission of the Pay, Performance, and Classification team is to design  departmental policies, procedures, guidance, implementation instructions,  and evaluation criteria so that components can implement new systems in  the areas of pay, performance management, and classification.  The team is  beginning its work by gathering information in these areas from  departmental components and defining the system objectives.  Officials  noted this would be a significant challenge because of differences in the  types of data collected, the varied manner in which the data are stored, and  uneven levels of data reliability.  As the team develops its proposals, it  plans to use advisory groups to evaluate the efficacy of draft policies.   Particular attention will be paid to ensuring there are adequate safeguards  in the classification, pay, and performance management systems, according  to officials.
The mission of the Labor Relations, Adverse Actions, and Appeals team is  to prepare rules, regulations, policies, procedures, guidance, implementing  instructions, and evaluation criteria for the department to deploy new  systems in these areas.  The co-leads noted that they intend to work  collaboratively to design systems that encourage cooperation.  These  officials reported that their initial tasks are to explore how to staff different  boards and panels identified in the proposed regulations and determine  how to transition pending cases to the new system.  They further plan to  identify elements that require departmental-level guidance, identify  elements where policy variation is appropriate among departmental  components, and collect data on historical levels of grievances and appeals  to forecast the potential workload once the department is transitioned to  the new system.
The composition of the implementation teams sends an important signal.   Each of the three implementation teams is co-led by professional staff from  DHS headquarters and a component agency.  As of mid-March 2004,  officials noted the membership of the teams was still evolving, but was  composed mainly of human capital professionals.  Agency officials noted  that decisions had not yet been made about the level of involvement of  union officials.  These same officials reported that OPM staff would serve  as advisers when needed as opposed to participating on a full-time basis,  and noted an intention to pull together groups of employees to serve as  “sounding boards and challenge groups” throughout the process.   Contractors will be integrated with the teams to provide project  management and other support.
As DHS moves forward, it may find helpful a set of key capabilities that our  work has found to be central to the use of human capital authorities.   These practices center on effective planning and targeted investments,  employee training and participation, and accountability and cultural  change (see app. II).
section_title: DHS Proposes Implementing Key Safeguards
paragraphs: In its proposed regulations, DHS outlines its intention to implement key  safeguards that we have found essential to implementing performance  management systems in a fair, effective, and credible manner.  For  example, the DHS performance management system must comply with the  merit system principles and avoid prohibited personnel practices; provide a  means for employee involvement in the design and implementation of the  system; and overall, be fair, credible, and transparent.  The department also  plans to align individual performance management with organizational  goals and provide for reasonableness reviews of performance management  decisions through its Performance Review Boards. Moreover, employees  and their union representatives played a role in shaping the design of the  proposed systems. These safeguards are generally consistent with our  work identifying key practices that leading public sector organizations here  and abroad have used in their performance management systems to link  organizational goals to individual performance and create a “line of sight”  between an individual’s activities and organizational results (see app. II).
Our February 2004 testimony identified additional steps DHS could take to  build safeguards into its revised performance management system.  For  example, we suggested that DHS commit to publishing the results of the  performance management process to assure reasonable transparency and  provide appropriate accountability mechanisms in connection with the  results of the performance management process.  This can include  publishing overall results of performance management and individual pay  decisions while protecting individual confidentiality and reporting  periodically on internal assessments and employee survey results relating  to the performance management system. Publishing the results in a manner  that protects individual confidentiality can provide employees with the  information they need to better understand the performance management  system.
section_title: Conclusions
paragraphs: The proposed DHS human capital management system has both significant  precedent-setting implications for the executive branch and far-reaching  implications on how the department is managed.  However, how it is done,  when it is done, and the basis on which it is done can make all the  difference in whether such efforts are successful.  To date, DHS’s actions in  designing its human capital management system and its stated plans for  future work on the system are positioning the department for successful  implementation. Looking forward, DHS will need to make continued  progress in a number of key areas including the following.
Strategic workforce planning and the gathering of relevant human  capital data -- Strategic human capital planning activities can enable the  department to capitalize on the strengths of its workforce and address  challenges in a manner that is clearly linked to achieving DHS’s mission  and goals.  The potential for human capital planning activities to  positively impact the department, however, depends on its gathering of  valid, reliable data on workforce demographics and the successes and  shortcomings of new approaches at the headquarters level.
Communication and training -- As we previously noted, communicating  with employees and their representatives about the new system and  providing opportunities for feedback, placing a special emphasis on  reaching out to line employees in the field, can facilitate gaining  employee buy-in to the new human capital management system.  Additionally, the delivery of training on the new system can enable  employees to understand their rights and how the agency will use its  authority.
Safeguards -- Publishing the results of the performance management  process can provide employees with the information they need to better  understand the performance management system and make the system  more transparent.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, DHS generally agreed with its  findings.  DHS comments provided more current information on  implementation timelines and described further research conducted by the  design teams between April and September 2003, which we have  incorporated.  In addition, DHS raised concerns about our use of data from  the OPM governmentwide FHCS since the survey was administered before  the formation of DHS.  Since the administration of the survey, DHS notes a  significant amount of change has been made in the department.  We agree  that the department is making progress in designing its human capital  system and outline in this report where the department is making strides.   This report notes that the FHCS was conducted during the same time frame  that the administration proposed legislation to form DHS.  FHCS data are  the most current information available on the perceptions of employees  currently employed by DHS and are valuable because of their illustration of  the challenges the department faces.  DHS provided additional technical  comments, which were incorporated where appropriate.  Comments from  DHS are provided in full in appendix III.
As agreed with your offices, unless you publicly release its contents earlier,  we plan no further distribution of this report until 30 days from its date.  At  that time, we will send copies of this report to the Chairman and Ranking  Minority Member, Senate Committee on Governmental Affairs; the  Chairman and Ranking Minority Member, House Committee on  Government Reform; the Chairman and Ranking Minority Member, House  Select Committee on Homeland Security; and other interested  congressional parties.  We will also send copies to the Secretary of the  Department of Homeland Security and the Director of the Office of  Personnel Management.  Copies will be made available at no charge on the  GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me on   (202) 512-6806.  Key contributors to this report are listed in appendix IV.
section_title: Scope and Methodology
subsections: section_title: Scope
paragraphs: This work was conducted from March 2003 through March 2004 in  accordance with generally accepted government auditing standards.  We  performed our work in the Washington, D.C., metropolitan area in the  headquarters offices of Department of Homeland Security (DHS) and the  five largest legacy components that transferred to the department: The  Transportation Security Administration (TSA), the Federal Emergency  Management Agency (FEMA), the organizations formerly known as the  Immigration and Naturalization Service (INS) and the U.S. Customs  Service, and the U.S. Coast Guard.
section_title: Methodology
paragraphs: To address our objective, we examined the workforce planning efforts of  the five largest legacy components that transferred to the department.   Data on workforce planning and capabilities needed for successful human  capital management were supplemented by information gathered in  interviews with officials from DHS headquarters and the five legacy  components.  A standard set of questions was used for interviewing the  legacy components.  Interviews with the components were conducted  between January and February 2004.  Presentations made by DHS and the  Office of Personnel Management (OPM) in August 2003 were evaluated to  understand the level of data analysis conducted during system design.  We  were observers at the August 2003 briefing.   We also examined the  transcripts and report summarizing the proceedings of the Senior Review  Advisory Committee meetings in October 2003 and relevant issues of the  weekly DHS newsletter.  Our findings were analyzed against criteria  articulated in relevant GAO human capital reports.
To be responsive to your particular interest in seeking out and  incorporating employee perspectives on the human capital system, we  gathered information on employee perceptions from a variety of sources  and presented these findings throughout the report.  Insights into employee  opinions were gathered from the OPM Federal Human Capital Survey,  administered between May and August 2002, and a DHS report  summarizing findings from the department’s focus groups held during the  summer of 2003.  A description of the objective, scope, methodology, and  limitations of these two studies was detailed in appendix I of Human  Capital: Preliminary Observations on Proposed DHS Human Capital  Regulations (GAO-04-479T).
In the background section of this report, we cite information from OPM’s  Central Personnel Data File (CPDF).  The CPDF contains personnel data  for most employees of the executive branch.  The largest executive branch  employee groups not included are in the intelligence agencies (CIA, etc.)  and the Postal Service.  Agencies submit data to the CPDF at the end of  each fiscal quarter.  We have found the CPDF to be sufficiently reliable for  the purposes of this report.
section_title: Criteria Used for Evaluation
paragraphs: The success of DHS’s efforts to design and implement its new human  capital system depends, in part, on building and maintaining an  institutional infrastructure to make effective use of its flexibilities.  At a  minimum, this infrastructure includes a strategic human capital planning  process that integrates the agency’s human capital approaches with  program goals, desired outcomes, and mission; the capabilities to  effectively develop and implement a new human capital system; and a  modern, effective, and credible performance management system that  includes a set of institutional safeguards, including reasonable  transparency and appropriate accountability mechanisms to ensure the  fair, effective, and credible implementation of the new system.
subsections: section_title: Strategic Human Capital Planning
paragraphs: Strategic workforce planning is the first essential element of the  institutional infrastructure that an agency needs to ensure that its human  capital program capitalizes on its workforce’s strengths and addresses  related challenges in a manner that is clearly linked to achieving the  agency’s mission and goals.  Strategic workforce planning addresses two  critical needs: (1) aligning an organization’s human capital programs with  its current and emerging mission and programmatic goals and (2)  developing long-term strategies for acquiring, developing, and retaining  staff to achieve programmatic goals.
At its core, strategic workforce planning, also called human capital  planning, focuses on developing long-term strategies for acquiring,  developing, and retaining an organization’s total workforce (including full-  and part-time federal staff and contractors) to meet the needs of the future.   We recently described five principles for strategic workforce planning.
Involve top management, employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan.
Determine the critical skills and competencies that will be needed to  achieve current and future programmatic results.
Develop strategies that are tailored to address gaps in the number and  deployment of employees and the alignment of human capital  approaches for enabling and sustaining the contributions of all critical  skills and competencies.
Build the capability needed to address administrative, educational, and  other requirements important to support workforce strategies.
Monitor and evaluate the agency’s progress towards its human capital  goals and the contribution that human capital results have made toward  achieving programmatic goals.
Consistent with these principles, we have identified that one of the critical  success factors for strategic human capital planning is data-driven human  capital decision making.  A fact-based, performance-oriented approach to  human capital management is crucial for maximizing the value of human  capital as well as managing risk.  High-performing organizations use data to  determine key performance objectives and goals that enable them to  evaluate the success of their human capital approaches.  Valid and reliable  data are critical to assessing an agency’s workforce requirements and  heighten an agency’s ability to manage risk by allowing managers to  spotlight areas for attention before crises develop and identify  opportunities for enhancing agency results.  Reporting on the results of  these evaluations can facilitate congressional oversight of the system,  allow for midcourse corrections, and serve as a tool for documenting best  practices and sharing lessons learned with employees, stakeholders, other  federal agencies, and the public.
section_title: Key Capabilities for Implementing Human Capital Approaches
paragraphs: As DHS moves forward, it may find helpful a key set of capabilities that our  work has found to be central to the use of human capital authorities.   These practices center on effective planning and targeted investments,  employee participation and training, and accountability and cultural  change.
section_title: Institutionalizing Performance Management Safeguards
paragraphs: We testified last spring that Congress should consider establishing  statutory standards that an agency must have in place before it can  implement a more performance-based pay program and developed an  initial list of possible safeguards to help ensure that pay for performance  systems in the government are fair, effective, and credible.
Assure that the agency’s performance management systems (1) link to  the agency’s strategic plan, related goals, and desired outcomes and   (2) result in meaningful distinctions in individual employee  performance. This should include consideration of critical  competencies and achievement of concrete results.
Involve employees, their representatives, and other stakeholders in the  design of the system, including having employees directly involved in  validating any related competencies, as appropriate.
Assure that certain predecisional internal safeguards exist to help  achieve the consistency, equity, nondiscrimination, and  nonpoliticization of the performance management process (e.g.,  independent reasonableness reviews by Human Capital Offices and/or  Offices of Opportunity and Inclusiveness or their equivalent in  connection with the establishment and implementation of a  performance appraisal system, as well as reviews of performance rating  decisions, pay determinations, and promotion actions before they are  finalized to ensure that they are merit-based; internal grievance  processes to address employee complaints; and pay panels whose  membership is predominately made up of career officials who would  consider the results of the performance appraisal process and other  information in connection with final pay decisions).
Assure reasonable transparency and appropriate accountability  mechanisms in connection with the results of the performance  management process.  This can include reporting periodically on  internal assessments and employee survey results relating to the  performance management system and publishing overall results of  performance management and individual pay decisions while protecting  individual confidentiality.  Publishing the results in a manner that  protects individual confidentiality can provide employees with the  information they need to better understand the performance  management system.
While incorporating these safeguards into performance management  systems, our work indicates that there is a set of key practices for agencies  to create a clear linkage, or “line of sight,” between individual performance  and organizational success.  These key practices include the following.  1. Align individual performance expectations with organizational  goals. An explicit alignment helps individuals see the connection between  their daily activities and organizational goals. 2. Connect performance expectations to crosscutting goals. Placing  an emphasis on collaboration, interaction, and teamwork across  organizational boundaries helps strengthen accountability for results. 3. Provide and routinely use performance information to track  organizational priorities. Individuals use performance information to  manage during the year, identify performance gaps, and pinpoint  improvement opportunities. 4. Require follow-up actions to address organizational priorities. By  requiring and tracking follow-up actions on performance gaps,  organizations underscore the importance of holding individuals  accountable for making progress on their priorities. 5. Use competencies to provide a fuller assessment of performance.   Competencies define the skills and supporting behaviors that individuals  need to effectively contribute to organizational results. 6. Link pay to individual and organizational performance. Pay,  incentive, and reward systems that link employee knowledge, skills, and  contributions to organizational results are based on valid, reliable, and  transparent performance management systems with adequate safeguards. 7. Make meaningful distinctions in performance. Effective  performance management systems strive to provide candid and  constructive feedback and the necessary objective information and  documentation to reward top performers and deal with poor performers. 8. Involve employees and stakeholders to gain ownership of  performance management systems. Early and direct involvement helps  increase employees’ and stakeholders’ understanding and ownership of the  system and belief in its fairness.  9. Maintain continuity during transitions. Because cultural  transformations take time, performance management systems reinforce  accountability for change management and other organizational goals.
section_title: Comments from the Department of Homeland Security
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the person named above, Ed Stephenson, Ellen V. Rubin, Tina  Smith, Lou V.B. Smith, Masha Pasthhov-Pastein, Karin Fangman, and Ron  La Due Lake made key contributions to this report.
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subsections: section_title: Order by Mail or Phone
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