Human Capital Management: FAA's Reform Effort Requires a More Strategic Approach
Published: 2003-02-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 1996, the Federal Aviation Administration (FAA) undertook a human capital reform effort under one of the most flexible human capital management environments in the federal government, including broad exemptions from title 5 laws governing federal civilian personnel management. GAO was asked (1) to examine the changes FAA initiated in its reform effort, including whether they required an exemption from title 5 and their implementation status; (2) determine the effects of the reform effort according to available data and the views of FAA officials, managers, and employees; and (3) assess the extent to which FAA's reform effort incorporated elements that are important to effective human capital management.
section_title: What GAO Found
paragraphs: In 1996, FAA initiated human capital reform initiatives in three broad areas, some of which required exemption from title 5, and some of which have been fully implemented. FAA has not yet completed implementation of some key initiatives. For example, FAA's new compensation system remains unimplemented for about one-quarter of the agency's workforce--those staff whose unions have not reached agreements with FAA. FAA's need to implement initiatives among a workforce with a wide range of skills and to negotiate changes with multiple unions were among factors that affected the pace and extent of reform implementation. FAA had little data with which to assess the effects of its reform effort. While FAA human capital officials cited positive effects of FAA's reform effort, the views of managers and employees GAO interviewed were generally less positive. FAA's lack of empirical data on the effects of its human capital initiatives is one indication that it has not fully incorporated elements that are important to effective human capital management into its overall reform effort. These elements include data collection and analysis, performance goals and measures, and linkage of reform goals to program goals. FAA human resource management officials said that the agency should have spent more time to develop baseline data and performance measures before implementing the broad range of reforms but that establishing these elements was a complex and difficult task. FAA has also not gone far enough to establish linkage between reform goals and overall program goals of the organization. GAO found that the lack of these elements has been pointed out repeatedly in evaluations of FAA's human capital reform effort, but FAA has not developed specific steps and time frames by which these elements will be established and used for evaluation. Incorporation of these elements could also help FAA build accountability into its human capital management.

section_title: Letter
paragraphs: The Federal Aviation Administration (FAA) is managing its personnel under  one of the most flexible human capital management environments in the  federal government. This is a result of 1995 legislation that granted the  agency broad exemptions from laws governing federal civilian personnel  management found in title 5 of the United States Code. Congress provided  these flexibilities in response to FAA’s position that the inflexibility of  federal personnel systems was one of the most important constraints to the  agency’s ability to be responsive to the airline industry’s needs and to  increase productivity in air traffic control operations. In 1996, FAA  announced a sweeping reform of its personnel management system. As we  have reported, major change initiatives generally require a minimum of 5  to 7 years to provide meaningful and lasting results, and so FAA’s  implementation of personnel reform should now be approaching a point  where such results might be discernable. As some other federal agencies,  such as the National Aeronautics and Space Administration, have  requested similar human capital flexibilities, and others, such as the  Transportation Security Administration, are now operating under similar  exemptions from title 5 requirements, FAA’s experiences in implementing  its flexibilities could provide valuable information to Congress in  considering whether to grant the use of such flexibilities at other agencies  and in overseeing their use.
You asked us to review the status of FAA’s personnel reform. As agreed, we  answered the following questions:   What changes did FAA initiate after being granted broad flexibilities in  1995 and to what extent did these changes require exemptions from  title 5?
What is the status of the implementation of FAA’s human capital reform  initiatives, and what factors have affected the pace and extent of  implementation?
What are the effects of FAA’s human capital reform initiatives according  to data collected by FAA and the views of FAA human resource and  labor management officials, managers and employees, and unions?
To what extent has FAA’s reform effort incorporated elements that are  important to effective human capital management in the federal  government?
To answer these questions, we reviewed personnel management  requirements in title 5 and the changes FAA made to its personnel  management system as a part of the agency’s reform effort. We collected  and analyzed internal and external evaluations of different aspects of FAA’s  personnel reform and the available data on the results of reform. We  discussed reform with agency managers and human resource management  officials and union representatives and conducted 176 structured  interviews of randomly selected managers and employees in 27 field  facilities nationwide, 6 of FAA’s 9 regional offices, and FAA headquarters.  Because of limitations inherent in the relatively small sample size, we did  not generalize the views and opinions of those randomly interviewed to all  FAA employees. To augment the views and opinions collected from the  structured interviews, we obtained and analyzed the data available on the  results of the various initiatives provided by FAA’s Office of the Assistant  Administrator for Human Resource Management and the lines of business  and obtained the views of FAA senior managers in the five lines of business  and representatives of employee associations. Finally, we considered FAA’s  reform effort in light of elements of strategic human capital management  that we developed in 2002 and assessments of human capital management  efforts and agencies’ use of personnel flexibilities that we  have performed at other agencies. Appendix I contains a more detailed  description of the scope and methodology of our work. A copy of our  structured interview questions with selected employee responses is  provided in appendix II. We conducted our work from November 2001 to  October 2002 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: The FAA’s mission is to provide a safe and efficient national aerospace  system. FAA’s key aviation functions include regulating compliance with  civil aviation safety standards and air commerce, operating the national air  traffic management system, and assisting in the development of airports.  The achievement of FAA’s mission is dependent in large part on the skills  and expertise of its workforce. FAA consists of nearly 50,000 people,  organized into 5 lines of business and several staff offices. Its workforce  provides aviation services including air traffic control, maintenance of air  traffic control equipment, and certification of aircraft, airline operations  and pilots. FAA’s human resource management office is responsible for  managing agencywide implementation of personnel reform and providing  policy and guidance to regional human resource management divisions that  manage the implementation of personnel reform within their areas of  responsibility.
In September 1993, the National Performance Review concluded that  federal budget, procurement, and personnel rules prevented FAA from  reacting quickly to the needs of the air traffic control system for new and  more efficient equipment and flexibilities for attracting and hiring staff. In  May 1994, building on these concerns, Congress directed the Secretary of  Transportation to undertake a study of management, regulatory, and  legislative reforms that would enable FAA to provide better air traffic  control services without changing FAA’s basic organizational structure. The  resulting FAA report to Congress, issued in August 1995, concluded that  the most effective internal reform would be to exempt FAA from most  federal personnel rules and procedures.
In reporting on FAA’s request for these exemptions in October 1995, we  concluded that, if the Congress decided to provide FAA with new personnel  authority, the agency could be used to test changes before they were  applied governmentwide. At that time, we emphasized the importance of  establishing goals prior to the application of the new authority, noting that  an evaluation of FAA’s efforts after some experience had been obtained  would be important for determining the success of the effort and its  governmentwide applicability.
On November 15, 1995, Congress, in making appropriations for the  Department of Transportation, directed the FAA Administrator to develop  and implement a new personnel management system. The law exempted  FAA from most provisions of title 5 of the United States Code and other  federal personnel laws.   The law required that FAA’s new personnel  management system address the unique demands of the agency’s  workforce, and, at a minimum, provide greater flexibility in the  compensation, hiring, training and location of personnel. Subsequent  legislation reinstated title 5 requirements related to labor-management  relations, and the Federal Aviation Reauthorization Act of 1996 placed  additional requirements on FAA by requiring that any changes made to  FAA’s personnel management system be negotiated with the agency’s  unions. Accordingly, compensation levels became subject to negotiations  with employee unions. On April 1, 1996, FAA introduced its new personnel  management system.
In January 2001, we designated strategic human capital management as a  governmentwide high-risk area.As our January 2001 High-Risk Series and  Performance and Accountability Series reports make clear, serious human  capital shortfalls are eroding the ability of many agencies, and threatening  the ability of others, to economically, efficiently, and effectively perform  their missions. In 2002, our studies of human capital management in the  federal government identified a variety of elements—critical success  factors and practices for effective implementation of flexibilities—that are  important for consideration of federal human capital management efforts.  For example, systems to gather and analyze data, performance goals and  measures, linkage between human capital management goals and program  goals of the organization, and accountability are among the elements that  we have identified as essential for effective strategic human capital  management. Appendix III provides an overview of our March 2002 model  for strategic human capital management and key practices for federal  agencies’ effective use of human capital flexibilities we identified in  December 2002.
Many of these elements relate directly to weaknesses we have identified in  our recent reviews of FAA. For example, in July 2001, we reported that a  lack of performance measurement, evaluation, and rewards hindered the  effectiveness of rulemaking reforms. In October 2001, we reported that  the overall effectiveness of FAA’s training for air traffic controllers was  uncertain and that FAA had not measured productivity gains from changes  in controllers’ duties. We reported in June 2002 on FAA’s difficulties in  acquiring and developing staff to meet agency needs through air traffic  control workforce planning. Most recently, we reported in October 2002  on the inability of air traffic control management to determine the impact  of new relocation policies because of a lack of baseline data.
section_title: FAA Initiated Personnel Changes in Three Broad Areas, Some of Which Required Exemptions from Title 5
paragraphs: Once exempted from most provisions of title 5, FAA initiated a broad set of  personnel changes. For the purposes of this report, we grouped them into  the areas of compensation and performance management, workforce  management, and labor and employee relations. Figure 2 shows some of  the major initiatives in each area, as well as whether they required  exemptions from title 5 personnel rules.
subsections: section_title: New Compensation and Performance Management Systems Required Title 5 Exemption
paragraphs: FAA required exemption from title 5 rules in order to implement its new,  broadbanded pay structure. Before obtaining that exemption, FAA paid its  employees according to the General Schedule (GS) pay system mandated  by title 5. In its 1995 report to Congress, FAA stated that the GS pay  system—which rewarded employees for their length of service, rather than  for their competencies, skills, or accomplishments—resulted in multiple  levels of supervisors at the same grade level and pay range, an inability to  grant pay increases until statutorily mandated time or experience  requirements were satisfied, and the administrative burden of  administering about 35 special GS pay rates that were exceptions to regular  pay ranges. The Office of Personnel Management (OPM) echoed these  concerns in an April 2002 report. OPM concluded that the GS system’s  narrow pay ranges, time-based pay progression rules and across-the-board  delivery of annual increases was not effective in promoting performance- based pay.
Once exempted from these provisions of title 5, FAA replaced the  traditional grade and step pay system with a broadbanded pay structure  that provides for a wider range of pay and greater managerial flexibility to  attract, retain, and reward employees. The new pay band system includes  plans tailored to specific employee segments: a core compensation plan for  the majority of nonunion employees and negotiated versions of the core  compensation pay plan for employees represented by unions; a unique pay  plan for air traffic controllers and air traffic managers; and an executive  pay plan for nonpolitical executives, managers, and some senior  professionals.
To illustrate the pay band system, under core compensation, the GS 15- grade pay schedule and step pay increases were replaced with a system in  which employees are placed in a pay band under nine job categories  including a specialized category that comprises eight specialized  occupations. Each career category contains two to five pay bands. Each  pay band represents a minimum and a maximum range of pay. For  example, the base pay for a band “D” clerical support employee is at least  $23,600 but no more than $35,400. Figure 3 shows the distribution of pay  bands for career level job categories under core compensation. (For a more  detailed comparison of the GS system and core compensation plan, see  app. IV.)
In its 1995 report to Congress, FAA reported that the federal performance  management system under title 5 limited the ability of agency managers to  reward their best employees. After being exempted from this system, FAA  incorporated performance management elements into the new  compensation system to encourage results-oriented behavior and to  recognize and reward performing employees via permanent annual salary  increases. For example, under its core compensation plan, all employees  are eligible for a permanent pay increase, called an organizational success  increase, based on the Administrator’s assessment of the extent to which  the entire agency has achieved its annual agency goals. In addition, notably  high-performing individuals may receive an additional permanent pay  increase, called a superior contribution increase, based on supervisory  recommendation. FAA has criteria for awarding superior contribution  increases. These criteria include collaboration, customer service and  impact on organizational success. Additional criteria may be used by some  lines of business and staff offices because of their unique needs. FAA is not  required to grant cost of living allowances or locality pay increases but  elected to continue providing these pay adjustments, which are generally  applicable to the federal pay system.
FAA’s 1995 report to Congress also stated that the federal performance  management system limited the ability of agency managers to deal with  unacceptable performance. FAA’s legislative exemption from title 5  enabled the agency to establish its new performance management system.  According to human resource management officials, this system focuses on  human capital development by helping to make individual employees  aware of their roles and responsibilities in helping the agency achieve its  program goals and provides ongoing feedback and written evaluations to  improve individual employee performance. The new performance  management system incorporates a variety of feedback approaches in  addition to traditional supervisor-to-employee feedback, including  performance plans that discuss managers’ and employees’ agreements  regarding job expectations and feedback from the employee to the  supervisor. At the end of the performance evaluation cycle, employees  receive a narrative performance summary instead of a year-end rating that  defines employees’ performance in specific categories. The performance  summary reflects an assessment of achievements based on outcomes and  expectations, while professional competencies such as collaboration and  customer service are elements of the new compensation system. As a  result, the performance management system is not directly linked to pay  for performance elements of FAA’s new compensation system. While FAA’s  program documentation described union involvement and the use of  employee focus groups in the development of the system, FAA did not  systematically validate the final version of the performance management  system with all employees before beginning implementation in 2002.  Human resource officials said they planned to validate the new system by  obtaining employee input through an employee attitude survey in 2003 and  through continuing negotiations with employee unions and that these  would allow for continuing refinements.
section_title: Some Workforce Management Initiatives Required Exemption from Title 5
paragraphs: Some of FAA’s workforce management reform initiatives required  exemption from title 5 while others did not. For example, FAA’s workforce  planning initiative did not require an exemption from title 5. On the other  hand, changes in procedures governing hiring and locating staff, as well as  some training initiatives, such as fee-for-service training programs, did  require exemptions from title 5.
In requesting exemption from title 5 requirements governing hiring and  locating staff in 1995, FAA cited inefficiencies of working through OPM to  hire and geographically place qualified staff at key facilities or to reassign  employees in response to changing needs. According to an FAA staffing  task force, the agency had lost highly qualified candidates because  managers could not fill jobs in a timely manner. FAA estimated that it took  an average of 6-8 months to bring a new hire onboard from outside the  federal service using OPM as a hiring source and that it took, on average, 60  days to permanently fill a position internally. FAA also considered OPM  allocations for executive positions excessively rigid, as any increases to the  allocation provided had to be supported by the Department of  Transportation and approved by OPM. Moreover, FAA stated that the  temporary internal movement process (from one FAA location to another),  also governed by OPM regulation, was equally inflexible because it limited  the duration of temporary assignments, and imposed onerous processing  requirements. The movement process required paperwork to be processed  every 120 days and could require up to seven separate personnel actions for  a 2-year temporary assignment.
FAA’s 1995 request for flexibilities in the area of training was based on  perceived redundancies and inefficiencies in its training programs.  According to an FAA personnel reform training task force report in 1996,  centralized agency training programs required by title 5 provided standard  training that did not always address specific business needs. FAA also  requested exemption from title 5 in order to have flexibility to provide  unfunded or partially funded moves of employees to locations where they  and their skills are most needed. According to FAA Air Traffic Services and  human resource management officials, FAA historically interpreted title 5  rules as a requirement to fully reimburse all Permanent Change of Station  (PCS) moves since the agency considered all such moves to be in the  interest of the federal government.
After Congress provided FAA with its new flexibilities, FAA developed a  new framework for workforce planning to guide executive, occupational,  and managerial/supervisory workforce planning. This did not require an  exemption from title 5. With regard to hiring, FAA used its exemption from  title 5 to establish hiring policies that allow FAA to hire applicants directly  from outside the government and from other federal agencies without  going through OPM. To do so, FAA established three hiring approaches: (1)  using centralized registers, (2) announcing vacancies, and (3) authorizing  on-the-spot hiring. According to FAA human resource management  officials, the agency also used its exemption from title 5 to streamline  staffing by decreasing the number of appointment types from 14 to 2  (temporary and permanent) and hiring authorities from approximately 500  to 1. FAA also established a flexible system for adjusting the number of  executive positions in response to shifting agency priorities. This new  system allows the Administrator to establish new executive positions and  reassign and select the top management team.
In the area of training, FAA (1) delegated responsibility for managing  training funds and programs to its lines of business, (2) allowed users to  select training from multiple providers, (3) created fee-for-service training  programs, and (4) provided broader authority to fund degree programs for  employees. The latter two initiatives required exemptions from title 5.
Another area of workforce management for which FAA used its exemption  from title 5 requirements was relocating employees. As part of its reform,  FAA delegated the authority to determine eligibility for and amount of  benefits to each line of business and provided three PCS funding options:  (1) full PCS reimbursement, (2) fixed relocation payments, and (3)  unfunded moves. As before reform, if the move is in the interest of the  government, FAA will fully reimburse the individual for costs associated  with the move. Under the new PCS rules, if FAA determines that it will  derive some benefit from a move, even though the move is not in the  interest of the government, the agency may offer a fixed relocation  payment of up to $25,000. If a move is not in the interest of the government  and FAA does not determine that it will derive some benefit from the move,  there is no basis for offering PCS funding. However, as a result of FAA’s  personnel reform, employees may choose to make unfunded moves at their  own expense for personal reasons, to gain experience needed for  professional advancement, or for promotion.
section_title: Most Labor and Employee Relations Initiatives Did Not Require Exemptions
paragraphs: FAA was ultimately not exempted from title 5 requirements governing  labor-management relations. As part of its overall reform effort, it  undertook several initiatives in the area of labor relations that did not  require exemption from title 5. For example, FAA and its unions  established a new forum—the National Labor Management Partnership  Council—for union representatives and senior management to exchange  information and ideas. To improve overall employee relations, FAA also  established a new forum for nonunion employees to facilitate  communications between employees and FAA management that also did  not require an exemption from title 5. Similarly, in consultation with union  and nonunion employee groups, FAA developed a new policy promoting a  Model Work Environment to create and maintain an effective working  environment for its employees by managing diversity and practicing equal  employment opportunity and affirmative action. In addition, on July 1,  1998, FAA established an Accountability Board to standardize procedures  to insure management's uniform and effective handling of sexual  harassment allegations and related misconduct of a sexual nature. In July  2000, the scope of the Board was expanded to include harassment and  other misconduct that creates or may create an intimidating, hostile or  offensive work environment based on race, color, religion, gender, sexual  orientation, national origin, age and disability. The establishment of the  Board did not require exemption from title 5.
FAA required exemption from title 5 to establish the Guaranteed Fair  Treatment Program, an alternative dispute resolution method in which a  three-person review panel adjudicates employee grievances. FAA intended  the new program to be the only method by which employees not covered  by a union agreement could seek administrative reviews of grievances and  to replace the traditional approach under title 5 rules involving the Merit  Systems Protection Board. (As discussed later, FAA was later required by  Congress to reinstate the traditional title 5 process and now offers  employees the choice of the two processes for resolving disputes.)
section_title: Key Elements of Personnel Reform Have Not Yet Been Fully Implemented
paragraphs: While FAA has completed many of the initiatives that required changes to  policy and procedures, it has not yet completed implementation of some of  the more complex elements of the personnel reform it began in 1996,  specifically compensation and performance management systems and  workforce planning initiatives (see fig. 4). FAA officials said that the  diversity of skills and duties of FAA’s workforce as well as negotiations  with unions that represented a large number of employees has slowed  somewhat the pace and extent of implementation of compensation and  performance management initiatives.
According to the Assistant Administrator for Human Resource  Management, FAA’s implementation strategy was to establish a broad  policy framework and then focus incrementally on individual elements of  reform to eventually achieve full implementation. Between April 1996 and  October 1998, for certain workforce management and labor and employee  relations initiatives, FAA defined the new flexibilities available through  agencywide “corporate” policies and then empowered the individual lines  of business to adapt and make use of the new tools as appropriate.  According to human resource management officials, these initiatives  helped FAA “jump-start” its reform effort, while other reform initiatives,  such as compensation, required varying incremental degrees of  development because of the diverse characteristics of FAA’s workforce.  Human resource management officials said other initiatives, such as  workforce planning, were considered to be of a lower priority in terms of  implementation.
subsections: section_title: Most Employees Are Paid Under New Compensation Systems, but Implementation of the New Performance Management System Has Been Limited
paragraphs: As of September 30, 2002, FAA had fully implemented its broadbanded  compensation plans, including the performance incentive increases, for  about three-quarters of the agency’s workforce. About 8,000 nonunion  employees are paid under the core compensation plan, all senior  executives (about 180) are paid under the executive compensation plan,  and about another 9,000 employees represented by three of FAA’s nine  unions are paid under negotiated versions of the core compensation plan.  Because the performance incentive elements of the new system were not  incorporated until late 2001, fiscal year 2002 will be the first year in which  all employees under core compensation experience a full cycle with all the  elements of its reformed compensation system fully in place. In addition,  more than 19,000 air traffic controllers are paid according to a specialized,  negotiated pay plan that includes pay banding and superior contribution  increases. The remainder of FAA’s workforce (about 13,000), most notably  those union employees whose union has not reached a new agreement with  FAA, continues to be compensated under the traditional GS grade and step  system under title 5 rules, as shown in figure 5.
The implementation of FAA’s new performance management system has  not yet been completed for most FAA employees. In 1995, prior to its  reform effort and in response to new performance management regulations  issued by OPM, FAA decided to establish a separate way of managing  performance. At this time, it uncoupled its performance management  system from its compensation system, based performance appraisals on a  two-tiered evaluation (“meets expectations” or “does not meet  expectations”) of employees’ performance against performance standards,  provided for year-end summary ratings, and established supplemental  criteria (such as making a significant contribution to the efficiency,  economy, or improvement of government operations) to use as a basis for  merit pay. In 1999, as part of its reform effort, FAA began development of a  new performance management system. This new system consists of a  narrative evaluation of employees’ performance against performance  standards combined with feedback and coaching. The new performance  management system does not provide for a year-end summary rating or a  basis for merit pay. Instead, the new compensation system includes criteria  that are separate and distinct from the performance management system  (such as collaboration, customer service, and impact on organizational  success) for awarding merit-based pay raises, which are called superior  contribution increases. FAA implemented this new performance  management system on October 1, 2001, for the Office of Human Resource  Management, the Office of Regions and Center Operations, and the  Regulation and Certification line of business. Since October 2001,  additional staff in a variety of FAA organizations have been placed under  the new performance management system, bringing the total under the  system to about 20 percent of FAA’s total workforce. As with the  compensation system, the new performance management system must be  included in the negotiated agreements with FAA’s employee unions.
section_title: While Most Workforce Management Initiatives Have Been Completed, Workforce Planning Is in Progress
paragraphs: FAA implemented most workforce management initiatives in 1996 by  defining the flexibilities available through agencywide “corporate”  policies and empowering the individual lines of business to adapt and  make use of the new tools as appropriate for their staff. The individual lines  of business adapted agencywide policies detailing the flexibilities available  for hiring, training, and relocating employees by issuing parallel policies to  guide their respective workforces and address any applications unique to  their staff. While FAA established similar agencywide corporate policies  and guidance for developing workforce plans for three staff levels— executive, managerial and supervisory, and occupational—this initiative is  still under way.   FAA began its executive workforce planning in  November 2000. Development of Individual Development Plans for  executives—the final element of the executive workforce planning effort— was originally scheduled to be finalized in August 2001 but was still under  way at the time of our review. FAA has not yet initiated its managerial and  supervisory workforce planning effort. This effort is set to begin in fiscal  year 2003. FAA’s occupational workforce planning, which was originally  scheduled to be completed in September of 2001, was still under way at the  time of our review. Human resource management officials said that four of  the five lines of business—Airports, Air Traffic Services, Regulation and  Certification, and Research and Acquisitions—had completed their  occupational workforce plans, and the remaining line of business— Commercial Space Transportation—was still developing a plan.
section_title: Labor and Employee Relations Initiatives Have Been Implemented
paragraphs: FAA announced a series of agencywide policies governing labor and  employee relations in 1996 that established the National Labor  Management Partnership Council, the National Employees Forum, the  Guaranteed Fair Treatment Program, and a policy promoting a Model Work  Environment. FAA required less time to develop and implement these  changes because comparable labor and employee representative groups  were already in place prior to the reform effort and FAA had existing  appeal processes and workplace improvement policies that served as a  basis for the Guaranteed Fair Treatment Program and Model Work  Environment.
section_title: Characteristics of FAA’s Workforce and the Need to Negotiate Changes Have Affected the Pace and Extent of Reform Implementation
paragraphs: The variety of skills and areas of technical expertise represented in FAA’s  workforce has affected the implementation of the agency’s new  compensation plan. For example, the agency has a unique pay plan for air  traffic controllers in the field based on the complexity of the facility, while  FAA’s new core compensation plan is based on the duties and  responsibilities of 16 different types of positions (ranging from students to  pilots to physicians).
The schedule for implementing changes in compensation and performance  management has been dictated, in part, by the timing of negotiations with  employee unions and the ability of FAA and its unions to reach agreement  on the new systems. For example, because FAA’s contract with the National  Air Traffic Controllers Association (NATCA), the organization representing  FAA’s largest group of unionized employees, had expired, management had  to negotiate a new agreement in 1998 before it had completed development  of its new core compensation pay plan. While the air traffic pay plan, like  the core compensation plan, is intended to include annual pay increases  based on individuals’ performance, these performance-based increases  have not been implemented as intended due to an unresolved dispute  between NATCA and FAA management over the details of implementation.  As a result, the air traffic pay plan distributed annual performance-based  incentive pay equally among all union members for fiscal years 1999, 2000,  and 2001, unlike the core compensation plan developed for the rest of the  agency in which only higher performing individuals may receive  performance-based incentive pay. At the time of our review, FAA and the  air traffic controllers union had not yet determined how fiscal year 2002  and future years’ incentive pay increases would be allotted.
According to human resource management officials, the new core  compensation has not been negotiated for union employees that represent  about 30 percent of FAA’s total workforce, and the need to negotiate the  incorporation of compensation and performance management initiatives  into union contracts has increased the length of time needed to negotiate  some contracts. For example, before 1996, FAA and the Professional  Airways System Specialists union took from 3 to 14 months to negotiate an  agreement, but the negotiation time more than doubled to 29 months for  the latest agreement. FAA and the National Association of Air Traffic  Specialists have been attempting to negotiate a new contract since 1997,  and the parties had not yet reached agreement at the time of our review.  Labor relations officials attributed increases in negotiation times to the  expanded scope of contract negotiations, which now includes negotiating  compensation that historically was not negotiated. The performance  management system has also not yet been implemented for most of the  unionized segments of the agency’s workforce. According to FAA officials,  2,324 union employees in FAA’s Office of Regions and Center Operations  and Office of Public Affairs, representing only about 5 percent of FAA’s  total workforce represented by unions, were under the new system at the  time of our review.
section_title: FAA Had Little Data on Reform’s Effects, and Views of FAA Officials Often Differed from Views of Managers and Employees We Interviewed
paragraphs: FAA had little or no data on the effects of many of the reform initiatives.  Human resource management officials cited positive effects of the reform  initiatives in the areas of compensation and workforce management,  while in the area of labor and employee relations, labor management  officials provided a limited amount of data suggesting that labor relations  had not improved. Managers and employees with whom we spoke in our  interview effort generally cited less positive views on the effects of reform  initiatives.
subsections: section_title: FAA Lacked Data on Effects of Compensation Changes; Officials Said Compensation Changes Increased Flexibility, While Managers and Employees Perceived Inequities in the New Pay System
paragraphs: FAA had not systematically collected or analyzed data to determine  whether the new compensation system had achieved its objective of  increasing the agency’s ability to attract and retain employees. Human  resource management officials said the new compensation system had  achieved this objective. They said the initiative had made the agency more  competitive in hiring because FAA can now offer higher starting salaries  within the wider-range of pay afforded by the pay bands. In addition, air  traffic officials we spoke with said that the air traffic control pay plan has  made it easier to staff hard-to-fill positions at busier air traffic facilities.  They noted, however, that they did not have a definition for hard-to-fill  positions and had not tracked the extent to which positions they might  consider hard to fill had been filled more or less quickly since the new pay  plan was instituted.
In contrast, many FAA managers and employees we interviewed were  critical of the new compensation system. Nearly two-thirds of those  responding to our structured interview (110 of 176) disagreed or strongly  disagreed that the new pay system is fair to all employees. While we did  not attempt to evaluate the concerns raised during interviews, we did find  some evidence that helps explain these perceptions of unfairness. For  example, concerns about air traffic controller pay disparities are supported  by a Department of Transportation Inspector General report. This report  found that FAA’s initial implementation of the new compensation system  led to inequities in pay between air traffic managers, supervisors, and  specialists in field facilities, who are covered by the air traffic pay plan that  FAA negotiated with NATCA in October 1998, and a much smaller group of  air traffic managers and supervisors in regional and headquarters locations,  who (together with other FAA managers and employees) are covered by  the new core compensation plan. Because of differences between the two  plans, managers and employees transferring from regional and  headquarters locations to field facilities were not eligible for the same pay  increases as those who were already assigned to field facilities in October  1998.
To address this situation, FAA issued new guidance in July 2001 that  established consistent rules for setting pay when employees move within  and among the various pay systems in FAA, including movements between  field positions and positions in regional offices and headquarters. Even so,  perceptions of unfairness persist. According to the President of the FAA  Conference Manager’s Association (FAACMA), the new guidance created  the perception among some managers and employees of a financial  disincentive for air traffic controllers to move from field facilities to  regional offices or headquarters to gain supervisory and managerial  experience. Further, the FAACMA President, as well as some controllers  with whom we spoke, stated that such a move would result in a significant  loss of pay—generally about $10,000 to $20,000. “Because of pay  discrepancies,” one regional air traffic manager said, “we can’t get highly  paid employees to move over to management positions.” Human resource  management officials said that, while some field employees who move to  positions in regional offices or headquarters would see a pay reduction of  $10,000 or $20,000, not all such moves would result in such a pay reduction.
According to our review of FAA’s July 29, 2001, guidance, an unfair  disparity in pay between air traffic controllers would be created only when  managers and employees were paid above or below established pay bands.  At our request, FAA analyzed the salaries of its air traffic control staff and  determined that 327, or fewer than 2 percent, of about 20,000 controllers  (including supervisors, managers, and employees) were paid above current  pay band maximums. (FAA’s analysis did not identify any staff being paid  below established pay band minimums for their positions.)
When we compared the distribution of 2002 base pay for all air traffic  controllers in field facilities and in regional and headquarters facilities, we  found that the regional and headquarters controllers are generally paid less  under core compensation than the field controllers are paid under the air  traffic pay plan. As shown in figure 6, the percentage of controllers paid  between $100,000 and $130,000 is smaller in the regions and in  headquarters than in the field. This is consistent with FAA’s goal of  providing higher levels of pay to controllers in an operational environment.  In addition, the percentage of controllers paid between $60,000 and $80,000  is greater in the regions and in headquarters than in the field.
According to human resource management officials, the pay rates of many  field employees and supervisors can be accommodated within the pay  ranges of regional office and headquarters management positions, as  shown above. Thus, they said that pay discrepancies should not affect the  ability to entice field employees to move into management positions.  However, it is understandable that some air traffic managers and  controllers perceive a financial disincentive for moving from the field to a  regional office or headquarters because, although the range of pay under  both systems is comparable, the number of higher paid positions is greater  in the field than in the regional offices or headquarters. To the extent that  these perceptions persist, FAA may find it more difficult to place its most  experienced air traffic managers in regional offices and headquarters.  However, this disparity is consistent with FAA’s goal of basing pay on the  operational environment and is explicitly stated in FAA’s July 2001 pay plan  for air traffic managers and controllers.
A general perception of unfairness regarding FAA’s new compensation  system has led to increased unionization among FAA employees outside of  the air traffic services line of business as well as within it, according to  both internal and external sources. FAA human resource officials said that  considerable unionization began before such systems as core  compensation were implemented and that most concerns cited during  unionization efforts were of uncertainty and loss of guarantees, not of  unfairness. However, the introduction of the pay system corresponded with  an acceleration in the increase in employees seeking union representation  after FAA began its reform effort. For example, employees represented by  unions (as a percentage of FAA’s total workforce) increased from 63  percent prior to the reform in 1995 to 66 percent in 1998 and to 79 percent  by 2001. FAA labor relations officials and FAA spokespersons for new  unions at FAA told us that a perceived inequity regarding pay was the prime  reason new unions were formed. A 1999 study by the National Academy of  Public Administration (NAPA) also found that real and perceived inequities  in levels of pay were “major contributors to the view among a growing  number of  employees that you must belong to a union to get your fair  share.” A more recent FAA study in 2001 likewise acknowledged that the  new pay system “may be one possible explanation” for the increase in  unionization.    Between 1998—when FAA began testing and  implementing its new pay system—and 2001, the number of employees  choosing representation by unions increased nearly 20 percent (from about  32,800 to more than 38,800 employees). Figure 7 shows the number of FAA  employees represented by unions from 1991 through 2001.
Because FAA had not completed a full appraisal cycle for staff under its  new performance management system at the time of our review, FAA had  little data, and we were not able to obtain the views of managers and  employees on the effects of the new system. We noted that FAA’s  performance management approach does not use a multi-tiered rating  system to rate performance. We have previously raised concerns that such  approaches may not provide enough meaningful information and  dispersion in ratings to recognize and reward top performers, help  everyone attain their maximum potential, and deal with poor performers.  According to human resource management officials, the compensation  system provides a means of recognizing and rewarding top performers  through separate assessments not directly linked to performance  assessments under the performance management system.
The measurable element related to performance management is the  number of employees that receive superior contribution increases under  FAA’s new compensation system. About 20 percent of employees are to  receive the highest superior contribution increases (1.8 percent addition to  base pay) and 45 percent are to receive the next highest level of superior  contribution increases (0.6 percent increase in base pay).
section_title: Human Resource Management Officials Had Limited Data to Support Their Views that Workforce Management Initiatives Had Increased Flexibility, While Some FAA Managers Were Less Positive
paragraphs: Whereas human resource management officials provided some limited data  to support their views that reform initiatives had improved the agency’s  flexibility in hiring and relocating employees, the managers we spoke with  were less likely to see positive results. According to human resource  management officials, FAA’s use of the new hiring flexibilities, though  restricted by hiring freezes, has reduced external hiring times from an  average of 6 months to as little as 6 weeks. They said the examples they  provided for air marshal hiring were intended to provide an illustration that  the policies allow positions to be filled quickly, even in the case of large  recruitment efforts. However, the Department of Transportation’s Office of  Inspector General, when reviewing FAA’s personnel reform in 1998,  questioned FAA’s ability to support this assertion in the absence of data.  (See fig. 8.)
Throughout our review, we asked FAA officials from both the human  resource management office and lines of business for any documentation  or data to support the reduction in hiring times and they were unable to  provide any such data. At the close of our review, however, human  resource management officials cited some limited data resulting from the  Federal Air Marshal Program. According to FAA human resource  management officials, the program following the terrorists’ attacks on  September 11, 2001, was one of the largest recruitment efforts ever  undertaken by FAA. (FAA received and processed more than 200,000  applications.) According to FAA officials, it would not have been possible  to fill the air marshal positions in the numbers and time frames required  without the flexibilities available under FAA’s personnel system. They  provided data reflecting a sample of approximately 1,000 candidates for the  air marshal positions. Of those candidates hired, about 30 percent (140)  were hired and placed within 6 weeks. In total, 70 percent (333) were hired  and placed within 8 weeks.
In contrast to the positive views of human resource management officials,  FAA managers had less positive views on the effects of hiring reforms,  while employees, who are less involved in the hiring process, had mixed  views. Among the 46 managers we interviewed, only about a third (15)  agreed or strongly agreed that the initiatives have improved the ability of  their line of business or staff office to fill job vacancies. Furthermore, only  12 of the 46 managers believed the speed of hiring has improved. These  opinions, while not necessarily representative of all FAA managers today,  are similar to the views expressed by FAA managers in 1998. According to  a survey FAA conducted then, 34 percent of managers responding said that  FAA’s streamlined staffing procedures had made it easier to fill vacancies in  their organization, and 32 percent said the speed of hiring had improved.
Human resource management officials also said that new policies  governing the relocation of employees had given managers more flexibility  in relocating employees and employees more flexibility in making career  decisions. Under these new policies, FAA may provide fixed relocation  payments as well as full funding for PCS moves, and it allows unfunded  moves, which were not allowed under FAA's prior policy. Figure 9 shows  that the majority of moves between field offices for managers from fiscal  year 1999 through 2001 (the only years and type of moves for which data  were available) were unfunded.
In contrast to the positive views of FAA human resource management  officials, FAACMA representatives raised concerns about the impact of the  new policies in the air traffic services line of business, suggesting that they  might have unintended consequences, including a reduction in the number  of qualified applicants, a reduction in the diversity of potential applicant  pools and subsequent discrimination in filling positions, and a negative  impact on employee morale if fluctuations in the annual funding for  relocation payments led to disparities in the payments for comparable  moves over time. Air traffic officials said they were still reviewing these  concerns and planned to comment in the near future.
section_title: FAA Had Some Data Suggesting Mixed Effects of Labor and Employee Relations Initiatives, While Officials, Managers, and Employees Held a Variety of Views
paragraphs: Although FAA’s Office of Labor Relations did not have historical,  agencywide data to quantify an increase in grievances, FAA labor  management officials said the number of grievances filed at the national  level by employees represented by unions had increased and this increase  was a sign that the initiatives had not achieved the reform objective of  establishing a collaborative labor-management relations environment that  would minimize the traditional adversarial relationship. They said that the  number of grievances filed began to increase following personnel reform  changes the agency had made. For example, they noted that in 1999, the  core compensation plan was implemented and grievances increased.  However, human resource officials said that grievances by union  employees could not have pertained to implementation of the  compensation pilot because the pilot test only applied to nonunion  employees, not to union employees. The Office of Labor Relations  implemented a new system for tracking grievance data in October 2001 and  began systematically collecting information on the sources (such as  headquarters, regions, and unions) and subject (such as compensation, use  of leave, and discipline) of grievances filed across the agency.
While limited data suggested that FAA’s introduction of an alternative  dispute resolution program for employees not represented by unions did  reduce the processing times for resolving appeals, employees’ reactions to  the new system suggest that many employees did not see this initiative as  an improvement. FAA introduced its internal alternative dispute resolution  approach—the Guaranteed Fair Treatment Program—in April 1996 in an  effort to streamline the appeals process. This approach met with resistance  from employees and led Congress, in 2000, to reinstate the traditional title 5  process that uses the Merit Systems Protection Board. As a result, FAA  now offers employees the choice of using either the guaranteed fair  treatment program or the traditional title 5 process. The only data human  resource officials were able to provide on appeals dated back to fiscal year  1997. Although these data are old, they indicated that for fiscal year 1997,  appeals went through the guaranteed fair treatment process more quickly  (5 to 7 months) than through the Protection Board process (10 months).  Even so, the Deputy Assistant Administrator for Labor Relations said that  employees, who have been able to choose between the two processes, have  generally not chosen to use the guaranteed fair treatment process. He said  that one reason employees have not used the guaranteed fair treatment  process is because its potential benefits, such as the employee’s right to  help select the arbitrator, have not been effectively communicated to them.  In addition, according to the Deputy Assistant Administrator, both FAA  managers and union leaders have complained about having to pay the cost  of the arbitrator, while employees have complained about having to pay  their own legal fees for attorneys regardless of the outcome of the appeal.    FAA reimburses an employee’s legal fees if the employee wins his/her  appeal when using the Protection Board's process.
Most FAA managers and employees we interviewed said that labor and  employee relations had changed in the last 5 years. For example, 130 of the  176 managers and employees we interviewed agreed or strongly agreed  that labor-management relations had changed in the last 5 years. Of those  130, 75 said that labor-management relations had declined. Similarly, 130 of  the 176 managers and employees we interviewed said employee morale had  changed in the last 5 years, and of those 130, 99 said that employee morale  had declined. While employees’ perceptions regarding the changes in labor  and employee relations cannot be linked directly to FAA’s personnel  reform, some employees cited specific reform initiatives, such as  compensation and the Model Work Environment established to improve  employee relations, when discussing the decline of labor-management  relations and morale.
Union representatives for three of FAA’s nine unions said that a complaint  filed against FAA by the Federal Labor Relations Authority (FLRA) in  March 2001 had reduced collaboration between labor and management.  FLRA charged FAA with bargaining in bad faith because it had refused to  sign an agreement negotiated with the American Federation of State,  County and Municipal Employees, a union that represents employees at  FAA headquarters. FAA management did not sign the agreement and  submitted it instead to the Office of Management and Budget (OMB) for  review. OMB subsequently disapproved some portions of the contract.  Following an investigation of the circumstances, FLRA directed FAA  management and the union to sign and implement the contract. However,  in September 2002, an administrative law judge recommended that FLRA  dismiss the union's complaint, finding that FAA clearly gave notice to the  union of the OMB approval condition and that the union agreed to that  condition.
In the area of employee relations, FAA provided us with some data that  may support the views of FAA officials that the Model Work Environment  has had a positive effect. A recent decline in the number of equal  employment opportunity (EEO) complaints may, to an unknown extent,  reflect the effects of FAA’s Model Work Environment. These complaints are  concerns expressed by employees about legally prohibited discrimination  on the basis of race, color, religion, sex, national origin, age, or handicap.  An analysis by FAA’s Office of Civil Rights of data it had collected on the  number and types of formal EEO complaints showed that while such  complaints increased in the years immediately following the  implementation of the Model Work Environment in 1996, they began to  decline 3 years later. As figure 10 shows, the number of EEO complaints  increased from 412 in 1996 to 635 in 1998 and then declined to 485 in 2001.
About three-quarters of the FAA managers and employees we interviewed  (134 of 176) agreed or strongly agreed that they understood the goals of the  Model Work Environment. These goals include reflecting diversity and  eliminating discrimination and harassment in the workplace, which are  common causes of equal employment opportunity complaints. While some  employees cited positive effects of the program, other employees were  skeptical of its impact. Figure 11 illustrates FAA employees’ divergent  views on the Model Work Environment.
Even though the decrease in the number of EEO complaints cannot be  directly linked to the Model Work Environment initiative, the availability of  data and analysis on EEO complaints could provide one objective basis for  FAA to discuss the effects and assess the efficacy of this policy and address  the concerns of those employees who view its impact less positively.
section_title: FAA Has Not Fully Incorporated Elements Needed for Effective Human Capital Management
paragraphs: FAA’s lack of empirical data on the reform effort’s effects is one indication  that it has not fully incorporated elements that we and others have  identified as important to effective human capital management into its  reform effort. Systems to gather and analyze relevant data provide a basis  against which performance goals and measures can be applied. FAA human  resource management officials said that the agency should have spent  more time to develop baseline data and performance measures before  implementing the broad range of reforms but that establishing these  elements was a complex and difficult task. They said FAA was under  significant pressure to rapidly implement reforms and that one impact of  FAA’s incremental approach to implementing the reforms was that baseline  measures tended to change as more people were brought under the  reformed systems. FAA also has not gone far enough in establishing linkage  between reform goals and program goals of the organization, another  element we have identified as important to effective human capital  management. We found that the lack of these elements has been pointed  out repeatedly in evaluations of FAA’s human capital reform effort, but FAA  has not developed specific steps and time frames by which these elements  will be established and used for evaluation. Incorporation of these  elements could also help FAA build accountability into its human capital  management.
subsections: section_title: FAA’s Human Capital Reform Effort Lacks Needed Data Collection and Analysis, Performance Goals and Measures, and Linkage of Reform Goals to Program Goals of the Organization
paragraphs: The lack of baseline and comparative data for analysis and the lack of  performance goals and measures has made it difficult to objectively  evaluate the effects or success of FAA’s reform effort. Systems to gather  and analyze relevant data provide a basis against which performance goals  and measures can be applied. FAA human resource management officials  agreed that the agency should have spent more time to develop baseline  data and performance measures before implementing the broad range of  reforms but said that establishing measures and goals and reaching  consensus on their use was a complex and difficult task with which all  federal agencies struggle. They said the agency was under significant  pressure to rapidly implement reforms, and that one impact of FAA’s  incremental approach to implementing the reforms was that baseline  measures tended to change as more people were brought under the  reformed systems.
Human resource management officials also said that, while FAA has not  systematically collected data and analyzed results to identify the benefits of  all of the reform initiatives, the Office of Human Resource Management has  taken a number of steps since 1998 to increase evaluation and  measurement of some human resource management activities and outputs.  Actions they cited (in addition to the previously discussed evaluations of  compensation implementation) included meeting with consultants, human  resource managers and intergovernmental groups and providing briefings  to FAA management. While we were in the final stages of our review, they  prepared, in response to our request, an informal report that described  the type of measures they were planning to, or had recently begun to apply  as part of a “Balanced Scorecard” approach to assessing human resource  management activities. The measures in the scorecard approach are based  on existing sources of data—customer surveys conducted by the  Department of Transportation and FAA employee attitude surveys—as well  as new data related to the hiring process, such as the “Time to Fill” (a  vacancy) questionnaire, results from employment selection feedback  questionnaires, a survey for new recruits and, since December 1999, a  separation survey for employees leaving the agency.   Human resource  officials said they had been “strategically refining” the employee attitude  survey since 1995 to address key human capital issues, such as clarity of  performance expectations and workforce planning.
Our work on strategic human capital management in the federal  government has found that many federal agencies have difficulties in  defining goals and measures and developing and using performance  information to evaluate the effectiveness of human capital management  efforts but that high-performing organizations do so. In cases where  evaluations show that sufficient progress is not being made, high- performing organizations use data to identify opportunities for  improvement. Similarly, the National Association of Public Administration  (NAPA) has reported the need for performance data, goals, and evaluation  to determine progress, make midcourse corrections, and assign  accountability for achieving the desired outcomes in federal human capital  management efforts. NAPA reported that, in the absence of such  systematic evaluation information, the human capital management process  will be driven by anecdotal information that may, or may not, reflect the  condition of human capital management in the organization.
Elements we have identified as facilitating the success of improvement  initiatives include establishing  clear goals and objectives for the improvement initiative,   concrete management improvement steps that will be taken,   key milestones that will be used to track the implementation status, and   cost and performance data that will be used to gauge overall progress.
In addition to the lack of performance data, the performance goals and  measures for personnel reform in FAA’s human resource management and  strategic mission plans are qualitative and do not consistently lend  themselves to measurement or assessment, as they are not specific,  measurable, and time-based. For example, the goal related to reform in  FAA’s 1999 human resource management strategic plan is to “ensure that  FAA has the right people doing the right work at the right time at the right  cost” and has the following measures associated with it:  increased flexibility to pay competitive salaries;   increased ability to attract and retain high performers;   increased managerial flexibility to assign, locate, and manage the  performance of employees more effectively; and  decreased hire cycle time.
This goal and its associated measures do not lend themselves to specific,  quantitative, and time-based evaluation. For example, while “decrease hire  cycle time” implies that hire cycle time will be measured as part of  evaluating the achievement of this goal, it does not establish a quantitative  basis for assessment or specify a period of assessment. A more specific,  quantitative, and time-based measure might be to “decrease median or  average hire cycle time by September 2003 by X percent (from median or  average cycle time for fiscal year 2002) for Y percent of all new hires.”
We reported on FAA’s weaknesses in developing and using performance  information in our report on the results of governmentwide surveys of  performance management issues in May 2001. In that report, we found  that FAA managers we surveyed reported they did not consistently use  performance measures or data and that FAA was worse than the rest of the  federal government on multiple aspects of performance measurement and  the use of performance information. For example, we found that the  agency was statistically significantly lower than the rest of the government  in the percentage of managers who reported that they had outcome,  customer service, or quality performance measures; and in the percentage  of managers who reported that they used performance information to set  program priorities, allocate resources, adopt new approaches, or  coordinate program efforts.
At the time of our review, human resource management officials were still  in the process of developing baseline data, performance goals and  measures and were still working to identify potential linkages between its  human capital management reforms and program goals of the organization.  The types of data and measures proposed by human resource management  officials are comparable to those that have been historically suggested— many of them since FAA initiated development of its personnel reform in  1995—and their implementation is an important effort. However, the  balanced scorecard measurement approach proposed by human resource  management officials focuses primarily on the work environment and  processes within the Office of Human Resource Management and the hiring  process rather than on the many other human capital management reform  initiatives being implemented across the agency. According to FAA human  resource management officials, the office had been working for more than  a year to expand the scope of the scorecard to incorporate measures with  wider implications for all of FAA in response to discussions with human  resource managers and based on information from FAA customers and  employees. Table 1 provides an overview of the balanced scorecard  measures proposed by the human resource management office,  highlighting those that focus on the activities and output of the Office of  Human Resource Management. An expanded overview of these  performance measures that includes areas of measurement and proposed  data sources is provided in appendix V.
Clearly linking an agency’s overall human capital management strategy to  its program goals is another element we have identified as key to effective  human capital management. In a 1997 review of FAA’s personnel reform,  the Volpe National Transportation Systems Center highlighted this issue of  linkage, as shown in figure 12.
While FAA has taken some steps to link its human capital reform initiatives  to its program goals, these steps do not go far enough to help the agency  measure the reform’s success. Specifically, FAA incorporated various  aspects of personnel reform into its 1999 strategic human resource  management plan, which stated that performance measurement was to  focus on attaining organization goals but did not establish the measures  with which to do so. Similarly, FAA’s 2001 strategic plan, prepared under  the Government Results and Performance Act, includes a goal for the  agency to “fundamentally change the way it operates by implementing  personnel reform” but does not explicitly link this goal for personnel  reform to organizational program goals of aviation safety and system  efficiency. Human resource management officials said that organizational  and individual incentive goals established under the compensation system  explicitly linked individual performance to agency goals including safety  and system efficiency and that the standards for performance under FAA’s  new performance management system directly reflect agency and  organizational programmatic goals. Nonetheless, linkage between FAA’s  personnel reform goals and the agency’s programmatic goals continues to  be weakened by a lack of specific, quantitative, and time-based measures  and goals.
FAA’s lack of relevant data, analysis, and performance goals and measures  has been repeatedly articulated since 1995 by other internal and external  reviews of the reform effort. While these reviews have called for FAA to  incorporate these elements into its reform effort, and several recent studies  have also highlighted the issue of linkage, FAA has not established and  carried out a plan with specific steps and time frames for doing so. A  chronology of these studies is provided in table 2.
Several of these studies also attributed problems related to a lack of  ownership for the reform effort or a lack of accountability for  implementation or results. For example, in 1999, the National Academy of  Public Administration identified the lack of ownership for personnel  reform as a challenge that must be resolved. (See fig. 13.)
As shown in figure 14, a 1998 departmental review found that FAA had not  clearly established accountability for implementation of the reform  initiatives.
According to the most recent assessment of the status of FAA’s personnel  reform, published by a consultant in September 2002 and shown in figure  15, a lack of ownership and inconsistent support for personnel reform by  FAA’s executive management team has impaired reform implementation  efforts.
Our work on effective human capital management at federal agencies has  found that building accountability into an agency’s human capital approach  is important to the effective use of human capital flexibilities. Furthermore,  we have found that in high performing organizations, managers are held  accountable for achieving strategic goals, and clearly defined performance  expectations are in place to hold employees and teams at all levels  accountable. Establishing systems for gathering performance data and    incorporating specific, time-based performance measures and goals that  are linked to the agency’s program goals into the reform effort would  improve the agency’s ability to set more meaningful strategic goals for its  human capital reform effort and more clearly defined performance  expectations for its human capital management. Together, this would help  the agency build accountability into the reform effort and its overall human  capital management approach.
section_title: Conclusions
paragraphs: Congress granted FAA flexibilities in its human capital management so that  the agency could more effectively manage its workforce and achieve its  mission. Yet, more than 7 years after the agency received broad exemptions  from laws governing federal civilian personnel management, it is not clear  whether and to what extent these flexibilities have helped FAA to do so. It  is clear that FAA has faced significant challenges in implementing its  human capital reform initiatives and evaluating the success of its effort.  Challenges, including implementing reform initiatives throughout its  workforce with a wide range of skills and negotiating agreements with  employee unions, reflect difficulties that may be faced by other federal  agencies that seek to implement human capital management flexibilities.
FAA is not able to determine the effectiveness of its human capital reform  initiatives because it has not incorporated key elements of effective human  capital management into its effort thus far. While FAA has established  preliminary linkages between its reform goals and the agency’s program  goals, the lack of explicit linkage will make it difficult to assess the effects  of the reform initiatives on the program goals of the organization even after  data, measurable goals, and performance measures for human capital  management efforts are established. FAA has acknowledged the  importance of establishing these elements. It has repeatedly said that it is  working to collect and analyze data and develop performance goals and  measures, but it has not completed these critical tasks, nor has it  established specific steps and time frames by which it will do so. As FAA  moves forward, a more strategic approach to its reform effort would allow  it to better evaluate the effects of its reform initiatives, use the evaluations  as a basis for any strategic improvements to its human capital management  approach, and hold agency leadership accountable for the results of its  human capital management efforts. Doing so would also enable the agency  to share its results with other federal agencies and Congress.
section_title: Recommendations
paragraphs: In order to acquire the information needed to make more informed  strategic human capital decisions and better ensure that FAA’s personnel  reforms achieve their intended results in a timely fashion, we recommend  that the Secretary of Transportation direct the FAA Administrator to   develop empirical data and establish specific, measurable, time-based  goals and performance measures related to these goals; and use them to  evaluate the effects of the reforms on the agency’s human capital  management, programs, and mission so that the agency can make any  needed improvements. Developing these evaluation tools is particularly  urgent for those initiatives, such as FAA’s new compensation system for  air traffic employees, for which possible negative effects have been  raised by employees; and FAA’s new performance management system.  define and describe explicit linkages between human capital  management reform initiatives and program goals of the organization.   establish time frames by which data will be collected and analyzed and  by which goals, performance measures, and explicit linkage will be  established and used to evaluate the success of the reform initiatives  and hold agency leadership accountable for the results of its human  capital management efforts.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Department of Transportation for  its review and met with Department of Transportation officials, including  FAA's Assistant Administrator for Human Resource Management, to obtain  their comments. The department officials generally agreed with the  report's recommendations and indicated that the findings presented in the  audit report would be useful as FAA moves forward with its human capital  reforms. They also noted issues in three areas.
First, these officials emphasized that implementing a new human capital  system within an existing workforce presented FAA with a significant  challenge, given the size of FAA's workforce, the large unionized  population, and the variety of occupations and functions within the agency.    Second, while these officials agreed that establishing more definitive  measures and baseline data, as identified in our recommendations, are  important in determining the effectiveness of the new human capital  programs, they stated that they have been making significant progress in  developing those measures.
Third, in responding to our concern that FAA is not able to determine the  effectiveness of its human capital reform initiatives because it has not  incorporated key elements of effective human capital management into its  effort, these officials told us that FAA used the results of its pilot testing  and phased implementation approach to modify systems to ensure  effectiveness before full implementation and that subsequent assessments  were conducted to determine whether the programs were accomplishing  the intended goals.   They said that FAA already has substantial information  to indicate that its new programs and initiatives are on the right track and  should be effective in meeting the reform effort’s intent. As examples, they  referred to reviews by NAPA and the consulting firm Deloitte & Touche,  which they said had characterized FAA’s human capital reforms as “state- of-the-art.” The officials stated that FAA’s design process had been  characterized in the NAPA review as yielding high-quality policies, and  FAA’s reform effort had been characterized in the NAPA review as heading  in the right direction and as “a change management issue that is  unparalleled in the federal sector.” They further stated that Deloitte &  Touche’s review had found that the guiding principles and objectives of  FAA’s personnel reform were sound, and that some programs have already  been largely successful, such as streamlined recruitment and staffing  processes. Notwithstanding the characterizations in these assessments,  both NAPA and Deloitte & Touche raised concerns about issues we found  in our review, particularly FAA’s lack of baseline data and specific  performance measures to assess the effectiveness of its reform effort and  establish a basis for continuous improvement.
Department officials also said that FAA’s new human capital system is  consistent with the President’s Management Agenda and the  Administration’s Human Capital Plan, and that other federal officials have  touted the types of programs FAA developed and implemented as the wave  of the future for the rest of the federal government. FAA emphasized that  its agency is unique among federal agencies in implementing a  performance-based and market-based pay system applicable to both  nonunion and union employees, which clearly links annual pay  adjustments to key agency programs and to individual employee  performance and contributions. We agree that other federal agencies  considering human capital reform may find FAA’s programs and  experiences useful to consider, as FAA was granted human capital  flexibilities in 1995 and has been working since to implement its human  capital reform effort. In fact, we feel that this increases the importance of  FAA’s efforts to effectively evaluate its reform. However, based on our prior  work on human capital management, we found in our review that FAA’s  efforts to link its human capital reform initiatives to its program goals do  not go far enough to help the agency measure the reform’s success and that  linkage between FAA’s personnel reform goals and the agency’s  programmatic goals continues to be weakened by a lack of specific,  quantitative, and time-based measures and goals.
FAA also provided technical clarifications, which we included in the report  where appropriate.
We are sending copies of this report to the Administrator, Federal Aviation  Administration. We also will make copies available to others upon request.  In addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please call me at  (202) 512-3650. Key contacts and major contributors to this report are  listed in appendix VII.
section_title: Scope and Methodology
paragraphs: To determine the human capital changes that FAA initiated after being  granted broad flexibilities in 1995 and the extent to which these reform  initiatives required exemptions from title 5, we reviewed federal personnel  management requirements under title 5, agency documents identifying  personnel reform initiatives, and reports by OPM on personnel  management flexibilities already available under title 5. We also discussed  the changes with officials from FAA’s Office of the Assistant Administrator  for Human Resource Management and OPM.
To determine the status of implementation of FAA’s personnel reform and  factors that have affected reform implementation, we collected and  analyzed internal and external evaluations—including those conducted by  the Department of Transportation’s Office of Inspector General and  NAPA—of different aspects of FAA’s personnel reform and the available  data on the results. We also discussed the status of, and barriers to,  implementation of personnel reform initiatives with FAA human resource  management officials and representatives from the lines of business.
To determine the views of FAA managers and employees on the effects of  FAA’s personnel reform initiatives we conducted a series of structured  interviews with 176 randomly selected FAA managers and employees. Our  structured interview included questions about how the agency manages its  employees, compensation and performance management, and labor and  employee relations. We discussed the design of these questions with  officials from FAA and with representatives from FAA’s five largest  unions—the National Air Traffic Controllers Association (about 19,500  members), the Professional Airways Systems Specialists (about 11,600  members), the National Association of Air Traffic Specialists (about 2,300  members), the American Federation of State, County and Municipal  Employees (about 2,000 members), and the American Federation of  Government Employees (about 1,500 members). We then pre-tested the  structured interview with managers and employees in FAA’s Southern  Region and made appropriate revisions.
To maximize our chances of obtaining the views of managers and  employees across the different segments of FAA’s workforce, we applied a  judgmental stratification to our random sample (therefore, it may not be  representative of the actual composition of FAA’s workforce): 25 percent  managers, and 75 percent employees; and 60 percent Air Traffic  Services/air traffic control staff, 40 percent from the rest of FAA. In  addition, for non-headquarters respondents, we selected 70 percent of our  respondents from field facilities and 30 percent from regional offices. Our  respondents were randomly selected from electronic lists of names  provided by FAA.
We conducted our structured interviews at FAA headquarters in  Washington, D.C.; FAA’s Mike Monroney Aeronautical Center in Oklahoma  City, Oklahoma; and field facilities and regional offices in six of FAA’s nine  geographic regions, including offices in the immediate vicinity of  Anchorage, Alaska; Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Los  Angeles, California; and New York City, New York. Field facilities we visited  included air traffic control towers, en route centers, automated flight  service stations, terminal radar approach control centers, airports district  offices, and flight standards district offices. A total of 176 FAA staff  participated in our survey throughout the months of May, June, July, and  August 2002. The information obtained through this survey pertains to only  these 176 respondents and cannot be generalized to any other population.  However, because we selected interview respondents at random, we have  increased the chances of capturing the breadth of opinions across the  agency. A copy of our structured interview and the summary results for our  close-ended questions is provided in appendix II. To augment the views and  opinions collected from the structured interviews, we also obtained the  views of FAA senior managers or representatives of all five lines of  business and representatives of employees’ associations.
To determine the extent to which FAA management and employees’ views  were supported by data, we examined the results from FAA’s employee  attitude surveys conducted between 1997 and 2000, as well as other  internal surveys of executives, managers, and supervisors related to  various aspects of FAA’s personnel reform effort. In addition, we collected  available data from FAA’s Office of Human Resource Management and  Office of Civil Rights.
To determine how FAA’s experiences compared with our findings from our  human capital management work at other agencies, we reviewed our  human capital management audit work that focused on federal agencies’  efforts to implement improvement initiatives and human capital  flexibilities, as well as work conducted by other organizations involved in  assessing federal agencies’ reform efforts including OPM and NAPA, and  we compared our findings on FAA’s experiences with these findings.
We conducted our work in accordance with generally accepted government  auditing standards from November 2001 through October 2002.
section_title: Structured Interview Form and Selected Results
paragraphs: STRUCTURED INTERVIEW FORM AND SELECTED RESULTS ATC (A)/Non-ATC (NA): ________           Regional Office (RO)/Field Office (FO): ________ Manager or Supervisor (MS)/Employee (E): ________ Location (AT, AN, CH, DA, NY, LA)/ID Number:________ Thank you for meeting with us today.  We work with the General Accounting Office in Washington DC and we’ve been asked by Congress to see how the personnel reforms at FAA are going.  One of the ways we’re doing that is by asking FAA employees like you to tell us about how the personnel reforms here are affecting you, your ability to perform your work, and your unit’s ability to achieve its mission- in both good and bad ways.
We’re going to several different regions and talking to many employees- we selected your name at random and appreciate your willingness to talk to us.  I will be asking you a series of questions, some you can answer from a range of standard responses like strongly agree to strongly disagree, and others will give you an opportunity to provide a little bit more specific information.  ____ will be taking notes to be sure that we capture all you have to say.  Your responses are confidential- we won’t report your name with anything you say here and we’ll report our results as a summary of what everyone tells us.  The entire interview should take about 30 minutes.  Do you have any questions before we begin? (Personnel reform includes: hiring, training, compensation, performance management, labor and employee relations, among others.)
1. To start with, how knowledgeable are you about FAA’s personnel reform efforts?
Which reform(s) do you know most about? Least about?
The first set of questions I’ll ask deal with how FAA manages its workforce.  For the next question and others throughout the survey, I’d like you to use this scale for your answer- please tell me if you strongly agree (SA), agree (A), disagree (D) or strongly disagree (SD). 2. I receive the training I need to do my job effectively. ____ 3. Could you give me more detail about that? How has the fact that the lines of business are responsible for funding and managing training affected the amount and/or quality of training you’ve received? 4. What, if any, training do you need that your line of business (or staff office) has not provided? 5. Using the scale again:  The ability of my line of business (or staff office) to efficiently and effectively fill job vacancies has improved in the last 5 years.
Office 6. Has the speed of hiring improved? How? {Pause for response} Has the quality of candidates improved?  How?
The next set of questions I’ll ask deal with the new pay and performance management systems including the new pay bands and pay-for-performance system, as well as, the “meets/does not meet standards” performance rating system implemented in 1996. 7. Using the scale again:  I am better off under the new pay band system than under the grade and step pay system. 8. Using the scale again:  I think the new pay system is fair to all employees.
Non-ATC 9. What do you like about the new pay system? Is there anything you don’t like about the new pay system? 10. Using the scale again:  Separating cash awards from performance appraisals has made the appraisal process more fair. 11. Using the scale again:  The way my most recent formal performance appraisal was handled gave me useful information for improving my performance.
Non-ATC 12. Using the scale again:  Awards and recognition more appropriately reflect employees’ performance today than 5 years ago. 13. Using the scale again:  FAA’s process for promotion better targets qualified people now than it did 5 years ago.
Non-ATC 14. To what extent have managers and supervisors become more (or less) accountable for achieving agency goals in the last 5 years?
The next set of questions I’ll ask deal with labor relations and employee relations. 15. Using the scale again:  FAA’s employee unions have had a positive impact on implementing personnel reform in the agency. 16. Do you think labor-management relations have changed in the last 5 years? (As applicable) How?  What specifically has driven this change? 17. Do you think employee morale has changed in the last 5 years? (As applicable) How?
What specifically has driven this change? 18. Using the scale again:  FAA employees had sufficient opportunities to provide input for personnel reform policies and initiatives before they were finalized and implemented. ____ 19. Using the scale again:  I understand the goals of the Model Work Environment. 20. Please describe the effect Model Work Environment has had (if any) on employee morale. 21. Using the scale again:  I have received sufficient and timely information on personnel reform changes that affect my job. ____ 22. What personnel reforms have been particularly well communicated?  Which method(s) of communication work(s) best or would work best? Worst?
The last set of questions deal with the overall result of personnel reforms at FAA. 23. Using the scale again:  Personnel reform has made FAA a better place to work. 24. Using the scale again:  Personnel reform will make FAA a better place to work. 25. What are the 3 most positive outcomes of FAA’s personnel reform efforts? 26. What are the 3 most negative outcomes of FAA’s personnel reform efforts? 27. What kinds of comments have you heard about the personnel reforms we’ve been discussing today from your co-workers? 28. Do you have any suggestions for improving FAA’s implementation of personnel reform?
Okay, although we won’t be using your name with this information, I would like to ask just a couple of questions about your position here. 29. How long have you worked at FAA?
AFGE AFSCME NAGE NAATS NATCA PAACE PASS Thank you very much for answering my questions today.  We really appreciate your time, and the feedback we get from you will help FAA and Congress make future decisions about personnel reform.
section_title: Elements for Effective Human Capital Management
paragraphs: In March 2002, we issued a model for strategic human capital management  that incorporates lessons learned in our reviews of other agencies’ human  capital management practices, as well as our own experiences.  The  model identifies eight critical success factors and highlights some of the  steps agencies can take to make progress in managing human capital  strategically.  These eight factors, shown in figure 16, are organized in pairs  to correspond with the four governmentwide high-risk human capital  challenges that our work has shown are undermining agency effectiveness.
In November 2002, we issued a report that identified six key practices for  federal agencies’ effective use of human capital flexibilities that  incorporate the concepts and critical factors of our model.  Based on our  interviews with human resource management directors from across the  federal government, we identified the following key practices that agencies  should implement to use human capital flexibilities effectively, as shown in  Figure 17.
section_title: Core Compensation Pay Bands and Grade Conversion for 2002
paragraphs: Blank cells indicate no old grade equivalent to new pay band for manager levels.
section_title: FAA Human Resource Management Office’s Balanced Scorecard Performance Measures
paragraphs: (proposed data sources)
Customer perceptions regarding  human resource management office  consultation & staff expertise (employee surveys)
Customer perceptions regarding  personnel reform   Human resource management office  & line of business human capital  management efforts (employee surveys)
Human resource management office  spending  (budget & accounting data)
Knowledge transfer  Improved line of business processes  & practices Meet unique needs  (human resources office  reporting system)
Human resource management office  labor distribution  (cost accounting system) (employee surveys)
Consolidation in bargaining units  Partnership Council meeting  attendance (Personnel management  evaluations, human resource  management office policy training  evaluations)
Timeliness of  automated/nonautomated selections Percentage of voluntary & involuntary  attrition  (data on grievances and  unauthorized labor practices) (Selecting official interview data)
Human Resource Management Office  employee perceptions regarding  communication  Performance rewarded  (employee surveys) (employee surveys)
Identify and close skill gaps  (skills/training assessment for  human resources office) (skills/training assessment for  Human Resource Management  Office) (human resource management  office information system audit)
Timeliness and responsiveness to  internal Human Resource  Management Office requests (employee survey) (human resource management  office reporting system)
Percentage of personnel,  compensation, and benefits funding  spent on training (budget & accounting data)
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to those individuals named above, William Doherty, Michele  Fejfar, David Hooper, Jason Schwartz, E. Jerry Seigler, Margaret Skiba,  Tina Smith, Alwynne Wilbur, and Kristy Williams made key contributions to  this report.
section_title: GAO’s Mission
paragraphs: The General Accounting Office, the investigative arm of Congress, exists to  support Congress in meeting its constitutional responsibilities and to help improve  the performance and accountability of the federal government for the American  people. GAO examines the use of public funds; evaluates federal programs and  policies; and provides analyses, recommendations, and other assistance to help  Congress make informed oversight, policy, and funding decisions. GAO’s  commitment to good government is reflected in its core values of accountability,  integrity, and reliability.
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subsections: section_title: Order by Mail or Phone
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Public Affairs