Human Capital: DHS Personnel System Design Effort Provides for Collaboration and Employee Participation
Published: 2003-09-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The success of the transformation and implementation of the Department of Homeland Security (DHS) is based largely on the degree to which human capital management issues are addressed. Recognizing this, the legislation creating DHS provided it with significant flexibility to design a modern human capital management system. Congressional requesters asked GAO to describe the process DHS has in place to design its human capital system and involve employees, and analyze the extent to which this process reflects elements of successful transformations.
section_title: What GAO Found
paragraphs: The effort to design a human capital management system for DHS generally reflects important elements of effective transformations. (1) Leadership: One of the strengths of the effort to transform the culture of organizations going into DHS has been the on-going commitment of both DHS and Office of Personnel Management (OPM) leaders to stimulate and support the effort to design a human capital system. (2) Strategic Goals: DHS is currently developing a strategic plan. Although DHS human resource leaders are included on the strategic planning team, it will not be complete until the end of September 2003. Consequently, DHS will need to ensure that the development of the human capital policy options is integrated with the accomplishment of DHS programmatic goals as defined in the forthcoming strategic plan. Such integration is important to ensure that the human capital system enables the department to acquire, develop, and retain the core competencies necessary for DHS to accomplish its programmatic goals. (3) Key Principles: The DHS Secretary and OPM Director outlined four principles to serve as a critical framework for the human capital system. These principles appropriately identify the need to support the mission and employees of the department, protect basic civil service principles, and hold employees accountable for performance. (4) Timeline: Agency officials established an ambitious 9- to 10-month timeline for completing the design process, aiming to issue final regulations in early 2004. Some DHS stakeholders we interviewed expressed concerns about the compressed schedule. Officials leading the design effort report the aggressive schedule is necessary to relieve employee anxiety and maximize the time available for implementation. (5) Design Team: The design team includes staff from multiple organizational units within DHS, OPM, and the three major unions. (6) Communication: DHS recently finalized a communication plan that provides a structured and planned approach to communicate with DHS stakeholders regarding the human capital system. Moving forward, DHS will need to provide adequate opportunities for feedback once the options are released. (7) Employee Involvement: Employees are provided multiple opportunities to be included in the design process, including participation in the Core Design Team, the Town Hall meetings, the field team, the focus groups, and an e-mail mailbox for employee comments. Experience has shown that in making major changes in the cultures of organizations, how it is done, when it is done, and the basis on which it is done can make all the difference in whether it is ultimately successful. The analysis of DHS's effort to design a human capital system can be particularly instructive in light of legislative requests for agency-specific human capital flexibilities at the Department of Defense and the National Aeronautics and Space Administration.

section_title: Letter
paragraphs: The creation of the Department of Homeland Security (DHS) represents an  historic moment for the federal government to fundamentally transform  how the nation will protect itself from terrorism.  DHS now has an  opportunity—and a responsibility—to transform and integrate a disparate  group of agencies with multiple missions, values, and cultures into a strong  and effective cabinet department.  Together with this unique opportunity,  however, also comes significant risk to the nation that could occur if this  transformation is not implemented successfully.  In fact, we designated this  implementation and transformation as high risk in January 2003.
We convened a forum in September 2002 to identify useful practices and  lessons learned from major public and private transformations that DHS  and other federal agencies could use to inform transformation efforts.While no two mergers or transformation efforts are exactly alike and the  “best” approach depends on a variety of factors specific to each context,  there was general agreement on a number of key practices.  These  practices include:  1.	 Ensure top leadership drives the transformation.  Leadership  must set the direction, pace, and tone and provide a clear, consistent  rationale that brings everyone together behind a single mission.  2.	 Establish a coherent mission and integrated strategic goals to  guide the transformation.  Together, these define the culture and  serve as a vehicle for employees to unite and rally around.  3.	 Focus on a key set of principles and priorities at the outset of  the transformation.  A clear set of principles and priorities serves as a  framework to help the organization create a new culture and drive  employee behaviors.  4.	 Set implementation goals and a timeline to build momentum and  show progress from day one.  Goals and a timeline are essential  because the transformation could take years to complete.  5.	 Dedicate an implementation team to manage the transformation  process.  A strong and stable team is important to ensure that the  transformation receives the needed attention to be sustained and  successful.  6.	 Use the performance management system to define  responsibility and assure accountability for change. A “line of  sight” shows how team, unit, and individual performance can  contribute to overall organizational results.  7.	 Establish a communication strategy to create shared  expectations and report related progress.  The strategy must reach  out to employees, customers, and stakeholders and engage them in a  two-way exchange.  8.	 Involve employees to obtain their ideas and gain their  ownership for the transformation.  Employee involvement  strengthens the process and allows them to share their experiences and  shape policies.  9.	 Build a world-class organization.  Building on a vision of improved  performance, the organization adopts the most efficient, effective, and  economical personnel, system, and process changes and continually  seeks to implement best practices.
Building on the forum, we recently identified specific implementation steps  for these key practices. (See app. I).  Many mergers do not live up to their  potential.  Research suggests that the failure to adequately address a wide  variety of people and cultural issues is at the heart of unsuccessful mergers  and transformations. Therefore, strategic human capital management  must be at the center of a successful transformation effort.  The legislation  creating DHS provided it with significant flexibility to design a modern  human capital management system. Specifically, the department may  deviate from requirements contained in Title 5 of the United States Code  relating to performance appraisals, classification, pay rates and systems,and adverse actions and appeals.  However, the department may not  deviate from other Title 5 provisions including the merit system principles,  prohibited personnel practices, equal employment opportunity, civil  service examination and selection, and pay administration.In addition, for  hiring employees, the department may take advantage of the  governmentwide personnel reform measures contained in the Homeland  Security Act of 2002, including using a category rating system when  evaluating applicants for employment and selecting qualified applicants for  positions using direct hiring procedures. Regulations for the DHS human  capital system are to be prescribed jointly by the Secretary of DHS and the  Director of the Office of Personnel Management (OPM).  The legislation  also noted that it is the sense of the Congress that employees be involved in  the creation of the new human capital system.
In light of the challenge to transform the organizations joining the  department and establish a modern human capital management system,  you asked that we undertake a series of human capital engagements to  assist DHS in its implementation efforts.  As agreed with your office, this is  one of several reports we will issue that will track how DHS begins to make  use of its new human capital authorities.  Specifically, this report  (1) describes the process DHS has in place to design its human capital  system and involve employees and (2) analyzes the extent to which this  process reflects what we have found to be important elements of  successful transformations.
To address our objectives, we reviewed documents relevant to DHS’s  transformation and personnel system design effort and applicable laws and  regulations.  These included the April 2003 Human Resources Systems  Design Team Resource Book, the weekly DHS newsletter, OPM data on  DHS employees and unions, the June 2003 Communications Plan, and  others.  We interviewed officials from DHS and OPM headquarters who are  involved in the effort to design the new human capital system.  Human  resource leaders from the five largest components within DHS were also  interviewed – the Transportation Security Administration (TSA), Federal  Emergency Management Agency (FEMA), the organizations formerly  known as the Immigration and Naturalization Service (INS) and the U.S.  Customs Service, and the U.S. Coast Guard – to learn their impressions of  the design process.  Interviews with officials from the three largest  employee unions at DHS – the American Federation of Government  Employees (AFGE), the National Treasury Employees Union (NTEU), and  the National Association of Agricultural Employees (NAAE) – provided  additional insights.  We then analyzed the information gathered in light of  seven of the nine transformation practices.  Practice 6 was excluded from  the analysis because the effort to design a human capital system includes  the development of a performance management system and Practice 9 was  excluded because developing an effective human capital system is one of  many efforts required to become a world-class organization.  We conducted  our work in accordance with generally accepted government auditing  standards between March and September 2003.
The description and analysis of DHS’s effort to design a strategic human  capital management system can be particularly instructive in light of  legislation that requests additional authority for human capital  management at the Department of Defense (DOD) and the National  Aeronautics and Space Administration (NASA).  We have consistently  supported the need for government transformation and the concept of  modernizing federal human capital policies, as underscored in recent  testimonies and our January 2003 report which described why we find that  strategic human capital management remains a governmentwide high-risk  area. This effort can also prove instructive for future human capital  management and reorganization efforts within specific units of DHS as the  new department is implemented and transformed over time into a cohesive  organization.
Importantly, while the design process used to develop the human capital  system is significant, effective implementation of the system is similarly  crucial to effective human capital management in the new department.  In  short, a successful design effort is essential to, but does not guarantee,  effective implementation.
subsections: section_title: Background
paragraphs: The creation of DHS represents enormous leadership challenges,  encompassing opportunities in multiple management areas.  Sustained and  inspired political and career leadership will be essential to successfully  implementing the transformation of DHS.  Success will also largely depend  on its ability to attract and retain the right people; set the appropriate  priorities for the department; and build effective partnerships with the  appropriate public, private, and not-for-profit sector entities.
subsections: section_title: Mission and Organization of DHS
paragraphs: In establishing the new department, the Congress articulated a seven-point  mission for DHS:
Prevent terrorist attacks within the United States.
Reduce the vulnerability of the United States to terrorism.
Minimize the damage and assist in the recovery from terrorist attacks.
Carry out all functions of entities transferred to the department,  including by acting as a focal point regarding natural and man-made  crises and emergency planning.
Ensure that the functions of the agencies within the department that are  not directly related to securing the homeland are not diminished or  neglected.
Ensure that the overall economic security of the United States is not  diminished by efforts aimed at securing the homeland.
Monitor connections between illegal drug trafficking and terrorism,  coordinate efforts to sever such connections, and otherwise contribute  to efforts to interdict illegal drug trafficking.
DHS is generally organized into four mission-related directorates: Border  and Transportation Security, Emergency Preparedness and Response,  Science and Technology, and Information Analysis and Infrastructure  Protection.
The Border and Transportation Security directorate consolidates the  major border security and transportation operations under one roof,  including the U.S. Customs Service, parts of the Immigration and  Naturalization Service (INS), the Transportation Security  Administration (TSA), the Federal Law Enforcement Training Center  (FLETC), The Federal Protective Service, the Office for Domestic  Preparedness from the Department of Justice (DOJ), and part of the  Animal and Plant Health Inspection Service (APHIS).
The Emergency Preparedness and Response directorate integrates  domestic disaster preparedness training and government disaster  response and includes the Federal Emergency Management Agency  (FEMA), the Strategic National Stockpile and the National Disaster  Medical System, the Nuclear Incident Response Team, the Domestic  Emergency Support Teams from DOJ, and the National Domestic  Preparedness Office from the Federal Bureau of Investigation (FBI).
The Science and Technology directorate coordinates scientific and  technological advantages when securing the homeland and will include  CBRN Countermeasures Programs, the Environmental Measurements  Laboratory, the National Bio-Weapons Defense Analysis Center, and the  Plum Island Animal Disease Center.
The Information Analysis and Infrastructure Protection directorate  accesses and analyzes intelligence, law enforcement data, and other  information involving threats to homeland security and evaluating  vulnerabilities from state and local agencies, the private sector, and  federal agencies such as the Central Intelligence Agency (CIA), FBI, and  the National Security Agency (NSA).  It includes the Critical  Infrastructure Assurance Office, the Federal Computer Incident  Response Center, the National Communications System, the National  Infrastructure Protection Center, and the energy security and assurance  program activities of the Department of Energy.
In addition to the four mission-related directorates, the U.S. Secret Service  and the U.S. Coast Guard remain intact as distinct entities in DHS; INS  adjudications and benefits programs report directly to the Deputy  Secretary as the Bureau of Citizenship and Immigration Services; and the  Management Directorate is responsible for budget, human capital, and  other general management issues.
section_title: DHS’s People
paragraphs: DHS has approximately 155,000 civilian positions and 54,000 military  positions in the U.S. Coast Guard, for a total of just over 209,000. (See  table 1.)  Of the civilian employees, a vast majority transferred from seven  organizations: TSA, INS, Customs, FEMA, the U.S. Coast Guard, the U.S.  Secret Service, and APHIS.  Of the civilian employees who transferred from  these seven organizations, approximately 90 percent are stationed outside  the Washington, D.C. metropolitan area.  DHS employees work in over 300  metropolitan statistical areas.
These employees serve in positions ranging from inspectors, investigators,  police, and intelligence to attorneys and administrative services.  DHS  employees are compensated under multiple pay and benefits systems, are  hired using varied authorities, and undergo performance appraisals with  different rating scales and factors.
According to OPM, just over 49,000, or just under one-third, of DHS civilian  employees are represented by unions.  This includes 16 different unions  divided into 75 separate bargaining units.  The 3 unions representing the  largest number of employees are AFGE, NTEU, and NAAE.  AFGE  represents almost 33,000 employees who were transferred from INS, the  U.S. Coast Guard, FEMA, and others.  NTEU represents over 12,000  employees who were transferred largely from Customs.  NAAE represents  just over 2,000 employees who were transferred from APHIS.
section_title: Design Process Provides for Collaboration
paragraphs: DHS’s and OPM’s effort to design a new human capital system is  collaborative and facilitates participation of employees from all levels of  the department.  The process is divided into three stages:  research,  outreach, and drafting of initial personnel system options; review of the  options; and development of proposed regulations.  First, the Core Design  Team conducted research on human capital approaches, communicated  with and gathered feedback from employees, and developed options.  Second, the Senior Review Advisory Committee will review these options  and forward its recommendations to the DHS Secretary and OPM Director.  Third, the Secretary and Director will then propose draft regulations for the  human capital system, engage in the statutory collaboration period, and  issue final regulations by early 2004.  The stages include employees from  DHS and OPM, as well as representatives from the department’s three  largest unions.  This process is described in further detail in appendix II.
As figure 2 shows, the Core Design Team, the first stage of the design  process, is responsible for research, outreach, and drafting initial options  for the personnel system.  This group is led by an equal number of DHS and  OPM executives.  Members of the Core Design Team, which includes  employees from headquarters, the field, and unions, are full-time  participants who work on one of two subgroups: (1) pay and performance  or (2) labor and employee relations—reflecting the areas of Title 5 from  which DHS may deviate. The work of the Core Design Team is to result in  a broad range of options for the Senior Review Advisory Committee by late  September 2003.
The second stage of the design process is made of the Senior Review  Advisory Committee.  The committee’s members include top executives  from DHS, OPM, and the three major unions and they are advised by a team  of external human capital experts.  The committee is provided less than a  month to review the system options and forward its iteration for the  Secretary and Director to consider. The committee’s time frame for  completing this task is October 2003. During the committee’s public  deliberations, they may choose to eliminate, create, and/or prioritize the  options, or may recommend implementation strategies.
Once the Secretary and Director receive the list of options from the Senior  Review Advisory Committee, they may edit, remove, or develop  alternatives to the proposed options as the third stage of the design  process.  They expect to announce the proposed regulations in November  2003, which will trigger the statutory collaboration process so final  regulations can be issued in early 2004.  As called for in the legislation,  employee representatives have 30 calendar days to comment and make  recommendations.  The Secretary and Director are then to follow the  provisions of the statutory reconciliation process for no less than 30 days.
section_title: DHS and OPM Leadership Stimulates and Supports the Human Capital Transformation
paragraphs: DHS and OPM leaders have consistently underscored their personal  commitment to the design process and speak openly in support of it.  When  the DHS legislation was under consideration, we testified that the single  most important element of successful reorganizations is the sustained  commitment of top leaders. In our report that describes the key practices  for successful mergers and transformations, we note that top leadership  that is clearly and personally involved provides stability and an identifiable  source for employees to rally around during tumultuous times.  The role of  top leaders is also to ensure that transformation efforts stay on course by  setting priorities, focusing on critical issues, and demonstrating a  commitment to change.
DHS and OPM leaders are fulfilling these critical roles.  For example, the  DHS Under Secretary for Management and OPM’s Senior Advisor for  Homeland Security cochair the Senior Review Advisory Committee.  Other  committee members are officials in key leadership positions at both OPM  and DHS and the presidents of the three major unions.
Senior officials from DHS, OPM, and DHS’s three largest unions are directly  involved in the workings of the Core Design Team.  Top leaders of DHS and  OPM addressed employees at the Town Hall meetings, expressing their  support for the transformation, and solicited feedback from those  employees.  Specific examples include the Under Secretary for  Management writing to DHS employees in April and May 2003 to express  her support of the design process and participating in a Town Hall meeting.  Additionally, the Under Secretary for Border and Transportation Security  participated in several Town Hall meetings to express his on-going support  of the design process and to respond to questions from DHS employees.  The Under Secretary for Emergency Preparedness and Response and the  Commandant of the U.S. Coast Guard also participated in Town Hall  meetings.  At these meetings, union leaders have stood next to the agency  leadership to express their support for the process, according to agency  officials.  Similarly, OPM’s Associate Director for Strategic Human  Resources Policy and OPM’s Senior Advisor for Homeland Security also  addressed DHS employees at Town Hall meetings, and responded to their  questions.
section_title: DHS Personnel System will Need To Be Integrated with Mission and Program Goals
paragraphs: DHS will need to ensure that the development of the human capital policy  options by the Core Design Team is integrated with the accomplishment of  DHS programmatic goals as defined in the forthcoming strategic plan.  Agency officials indicate that it is their intention that the personnel system  design will be consistent with the strategic plan.  We have reported, and the  President’s Management Agenda reiterates, that leading organizations  develop their workforce approaches as part of a strategic human capital  plan as strategies for accomplishing their mission and programmatic goals.  In light of this, we previously stated that the success of the DHS  transformation requires the department to link its human capital strategy  with its homeland security strategy.
DHS is currently developing a strategic plan.  This effort began in mid-June  and is expected to be completed by the end of September 2003 – a target set  by the Office of Management and Budget (OMB).  As explained previously,  the Core Design Team began its work in late April 2003 and expected to  report its proposed options in late September 2003.  According to a DHS  official leading the strategic planning effort, human capital officials are  engaged in drafting the strategic plan.  DHS human capital officials  confirmed that they have reviewed drafts of the strategic plan.
Moving forward, it is critical that the Senior Review Advisory Committee,  the Secretary, and the Director make the link between the new human  capital system and the accomplishment of DHS’s goals as outlined in the  DHS strategic plan.  Once a strategic plan is in place, DHS can then develop  a strategic human capital plan that, in part, identifies core competencies for  staff as a tool for attracting, developing, and rewarding contributions to  mission accomplishment.  For example, these competencies will be critical  to creating a performance management system – a key task of the Core  Design Team - that aligns daily operations with organizational goals and  creates a “line of sight” and shows how team, unit, and individual  performance can contribute to organizational results.  We recommended  that DHS, in conjunction with OPM and OMB, create an effective  performance management system in December 2002.Furthermore, if  DHS decides to design and implement a pay-for-performance system, a set  of strategic goals and validated competencies will be required so that DHS  can identify the outcomes and results that employees are to be rewarded  for accomplishing.
section_title: Process Steered by Guiding Principles
paragraphs: The Secretary and Director outlined four principles to serve as a  framework for the Core Design Team during their first meeting in April:
The system has to support both the mission and the people charged with  implementing the mission.
Design Team members must leave preconceived notions at the door.  They have an opportunity and responsibility to create a 21st century  personnel system that is fair, performance based, and flexible.
DHS must preserve and protect basic civil service principles.
DHS must hold people at all levels accountable for performance.  The  agency will link individual performance to organizational goals, with the  ability to identify and reward exceptional service and deal with chronic  poor performance.  DHS can be a department that stands as a model of  excellence.
These principles can serve as core values for human capital management at  DHS – values that define the attributes that are intrinsically important to  what the new organization does and how it will do it.  Furthermore, they  represent the institutional beliefs and boundaries that are essential to  building a new culture for the organization.  Finally, they appropriately  identify the need to support the mission and employees of the department,  protect basic civil service principles, and hold employees accountable for  performance.
On July 25, 2003, the Core Design Team presented a set of five principles to  the Senior Review Advisory Committee as a guide for developing the  options to be presented in late September.  These principles were drafted  by the Core Design Team and reviewed by the field team, using the original  four principles proposed by the Secretary and Director as a guide.  The five  principles are to ensure that the options developed are (1) mission  centered, (2) performance focused, (3) contemporary and excellent,  (4) generate respect and trust, and (5) based on merit system principles  and fairness.
Consistent with the principles outlined by the Secretary and Director and  those presented to the Senior Review Advisory Committee, our interviews  with the human resource leaders in the five largest DHS components  identified two areas that they would like the new human capital system to  address: the new DHS personnel system should provide for competitive,  performance-based pay and should give managers the ability to quickly hire  the right people with the skills the agency needs.  First, individuals we  interviewed hoped that the new system would address their concerns  about the disparities in pay rates across DHS and expressed an interest in  implementing performance-based pay, linked to the accomplishment of  DHS’s mission, such that employees are more accountable.Two indicated  that they would like the Core Design Team to propose legislation to address  the differences in premium pay that currently exist.  Second, and beyond  the immediate task of the Core Design Team, there was an overwhelming  interest in simplifying the hiring process.Officials in one component  expressed their discontent with the amount of time between when a  position is announced and when it is actually filled.  One executive  expressed an interest in more flexibility in hiring because the perception is  that the current hiring process is only understandable to those already in  the federal government.
section_title: Ambitious Timeline Established
paragraphs: DHS and OPM established a 9- to 10-month timeline for completing the  design process with the expectation that the final regulations will be issued  in early 2004.  Agency officials have publicized this timeline at Town Hall  meetings across the country.  Our reports on the successful practices of  mergers and transformations have noted that the establishment of a  timeline with specific milestones allows stakeholders to track the  organization’s progress towards its goals.  Publicizing the timeline and  meeting its milestones can illustrate building momentum and demonstrate  that real progress is being made.
The design process officially began in early April 2003 when the Core  Design Team convened for a 2-week leadership conference to learn about  the various human capital management systems within the component  agencies as well as those in other federal agencies and private firms.  The  Core Design Team began its research full time in late April.  This team is  expected to present its broad range of options to the Senior Review  Advisory Committee in late September 2003.  The Senior Review Advisory  Committee is allotted less than a month to develop its set of options in  October 2003.  The Secretary and Director will then select the options that  will be submitted as officially proposed regulations available for comment.  They expect to announce the proposed regulations in November 2003,  which will trigger the statutory collaboration process so final regulations  can be issued in early 2004.
Although the establishment of a clear timeline is positive, a majority of  DHS stakeholders we interviewed expressed concerns about its  compressed schedule. There is some understanding that the timeline  reflects an effort to take into account the final regulations in preparing the  fiscal year 2005 budget that is submitted to the Congress in early 2004.  However, a number of human resource directors said the “self-imposed,  short” timeline would pose significant challenges for the Design Team.  One  director commented that the timeline was “ambitious” considering the  amount of information that needs to be collected and analyzed.  Most  directors agreed that the lack of sufficient time to perform these tasks  could prevent the Design Team from completing its work or cause it to  propose options that had not been thoroughly researched.  Furthermore,  another stakeholder suggested that the timeline appears to allocate too  much time to the development of options and not enough time to the  consideration of which options to adopt.  On the other hand, DHS and OPM  leaders of the design effort agree that the timeline is aggressive, but said  that a shorter time frame will serve to minimize employee anxiety.  In  addition, they said a tight design time frame is needed to provide adequate  time for implementation, evaluation, and modification within the 5-year  statutory window available for establishing the new system.
While it is appropriate to develop and integrate the human capital systems  within the department in a quick and seamless manner so that the  department can begin to function as a cohesive entity, moving too quickly  or prematurely can significantly raise the risk of doing it wrong.  Having an  ambitious timeline is reasonable only insofar as it does not impact the  quality of the human capital system that is created.
section_title: Design Participants Represent a Mix of DHS and OPM Employees
paragraphs: Overall, the members of the Core Design Team represent multiple  organizational components and the three major unions.  The composition  of the team is important because of the visual sign it communicates  regarding which components are dominant and subordinate or whether the  new organization is a “merger of equals.”  It also helps employees see that  they are being represented and that their views are being considered in the  decision-making process.
The 48 participants of the Core Design Team include personnel experts  from OPM, DHS and its component agencies, line employees and managers  from DHS headquarters and field offices; and professional staff from the  three major unions. Specifically, the Core Design Team is composed of 24  DHS employees, 16 employees from OPM, and 8 professional staff from the  unions. This includes 27 staff members, 5 supervisors, 12 managers, and 3  executives. Additionally, just over 60 percent of the members consider  themselves human capital professionals, and about two-thirds have  experience outside headquarters. (See figs. 3 and 4.)  The majority of  human resource officials we interviewed consider themselves to be  adequately represented on the Core Design Team.  Other characteristics of  the team members are described in appendix III.
According to DHS officials, DHS-specific slots on the Core Design Team  were filled by individuals chosen by agency executives after determining  the number of seats to be allocated to the different agency components.  In  selecting team members, officials sought representation from across the  organizational components of the department, individuals with field  experience, and individuals with some expertise in human resources  management.  Race, gender, and occupational diversity were other factors  considered when selecting participants. Additionally, NAAE selected one  DHS employee to participate on the team and AFGE and NTEU each  selected four professional staff members to participate.
section_title: Communications Plan Recently Completed
paragraphs: DHS recently completed a noteworthy communications strategy that  provides a structured and planned approach to communicate with DHS  stakeholders regarding the human capital system.  The objectives of the  plan are to: raise awareness, disseminate information, and promote a clear  understanding of the new human capital system; manage stakeholder  expectations and address their concerns; and provide opportunities for a  two-way dialogue.  We have recently reported that organizations  undergoing a transformation should establish a communication strategy  that ensures a consistent message is delivered and seeks to genuinely  involve stakeholders in the process.
The communications plan, completed in June 2003, represents an  important and substantive effort and contains four broad pieces that are  consistent with the key practices we have identified as important to  successful communication during transformations.  First, the plan  identifies internal and external stakeholders, the concerns of each  stakeholder group, and the specific communication channels to be used to  communicate to that stakeholder group.  Second, the plan articulates the  key messages to be delivered to each stakeholder group. Third, an action  plan identifies the communication channel to be used, the timeline for its  use, and the DHS and OPM staff responsible for implementation.  Finally,  the plan identifies the feedback mechanisms to be used to ensure there is a  two-way dialogue.
Moving forward, DHS faces some challenges in successfully implementing  its communications plan.  First, in addition to the key messages articulated  in the plan, DHS will need to provide information to clarify areas of  confusion that were identified during our interviews.  These include: the roles OPM, DHS, and the Senior Review Advisory Committee have in  the process; the factors that will influence the Secretary and Director’s final  decisions on which options to propose; the role of the contractor in the design process; the likelihood of the Core Design Team drafting legislative proposals for  areas DHS does not have authority to change (i.e., premium pay and  hiring); the possibility of there being multiple personnel systems instead of one; the implementation process.
A second challenge will be to ensure that preexisting communication  channels within each departmental component deliver a message that is  consistent in tone and content with the central communication strategy.  We learned from three of the five components we interviewed that they use  additional vehicles for providing and receiving information from  employees.  It may be appropriate to coordinate the messages sent to  employees through these additional vehicles to minimize the perception  that certain groups of employees are getting the “real” story.
Building on the current effort, DHS will need to provide adequate  opportunities for feedback once the options are released, including  providing an adequate level of detail on how the new system will impact  employees.  The feedback mechanisms identified in the communications  plan focus on gathering employee feedback prior to the options being  released.  For example, two of the three feedback mechanisms outlined in  the communications plan will be completed before the system options are  publicized.  DHS also needs to ensure effective communication to  employees and stakeholders after the options are released.  For example,  DHS should consider describing to employees how the comments collected  during the Town Hall meetings and focus groups informed the design  process.  Furthermore, once options are selected, DHS will be faced with  communicating how the changes will impact specific jobs, rights and  protections, and daily responsibilities.  DHS may find it necessary to  further tailor and customize the details of the new human capital system to  meet the specific needs of employees.
section_title: Design Process Provides for Employee Involvement
paragraphs: Employee perspectives on the design of the DHS human capital system are  sought through many mechanisms, including the Core Design Team with its  members from multiple DHS components, Town Hall meetings, focus  groups, the field team, and an e-mail mailbox for employee comments.  This reflects the Congress’ desire that employees be allowed to participate  in a meaningful way in the creation of the new human capital system.  Involving employees in planning helps to develop agency goals and  objectives that incorporate insights about operations from a front-line  perspective.  It can also serve to increase employees’ understanding and  acceptance of organizational goals and improve motivation and morale.
The design process attempts to include employees by creating multiple  opportunities for employees to provide feedback.  While activity updates  were provided in the DHS weekly newsletter and an e-mail mailbox for  employees to submit their suggestions and comments was used, multiple  Town Hall meetings and focus groups conducted between the end of May  and the beginning of July 2003 were held in ten cities across the United  States. According to DHS and OPM officials, these cities were chosen to  ensure adequate representation of major DHS components and geographic  diversity.  The goal of the events was to promote two-way communication  between management and employees and to gather employee perspectives  on the personnel practices that exist in their agency and any proposed  changes they would like to see.  Each meeting hosted up to 200 DHS  employees from the surrounding cities.
At a typical Town Hall meeting, there was a general question and answer  segment in which local employees had the opportunity to ask questions  about the new system and express their overall concerns about DHS.  If  participants’ questions could not be addressed during the meeting due to  time constraints, they could write their questions on note cards and give  them to cognizant DHS and OPM officials in attendance.  After the meeting,  the Core Design Team held a series of six focus group sessions in each city  to obtain their input and suggestions for the new human resource system.  In most cities, five of the six sessions were devoted to hear employees’  views while the remaining session heard the views of supervisors and  managers.  Participants in the focus groups included both Town Hall  meeting attendees and those who were not able to attend the Town Hall  session.
The degree to which the information gathered in these sessions was used to  inform the design process is not yet evident.  On one hand, the Town Hall  meetings and focus groups gathered suggestions and concerns from large  numbers of employees from multiple organizational components in  geographically diverse locations.  However, once options for the human  capital system are proposed it will be particularly important that  employees have adequate opportunities to make a worthwhile  contribution.
In addition to the Town Hall meetings and focus groups, a field team made  of 32 front-line DHS managers and staff, some of whom were selected by  the major unions, was formed.  During the design process, the field team  provided insights about the department’s human capital challenges from a  front-line perspective.  These insights were gathered during the three  meetings of the group -- the field team was convened during the first week  of the 2-week April leadership conference, 2 days in July to react to the  subgroups’ research, and for 2 days again in mid-September to react to the  draft personnel system options before their submission to the Senior  Review Advisory Committee in late September.
According to documents drafted before the April leadership conference,  provided by AFGE and NAAE, it was originally expected that the field team  would review the work of the Core Design Team on a “regular basis” and  then be used to “test the options against workplace realities.”  One  stakeholder added that it was his initial impression that the field team  would serve as an “extension of the Core Design Team,” empowered to  provide input throughout the entire design process.  However, over time,  the expected role of the field team evolved to that of a recurring focus  group that had no formal decision-making role in the design process.  Likewise, as the role for the field team evolved, so did its membership –  additional nonunionized DHS employees were added to the team.  One  DHS official acknowledged that the field team has not had a great deal of  involvement in the process, and that the expected role of the team changed  over time.  Officials in NTEU, AFGE, and NAAE additionally confirmed that  the role of the field team changed over time.  One union president  described the diminished role as a “missed opportunity.”  This official  added that the lack of involvement and minimal communication with the  Core Design Team has made it difficult for the field team to make a  worthwhile contribution.
section_title: Conclusions
paragraphs: DHS and OPM have developed a process to design the new personnel  system that is stimulated and supported by top leadership in both  organizations and is generally inclusive, both in terms of the membership  of the Core Design Team and multiple opportunities to provide input.  The  process is also guided by core principles and an ambitious timeline.  Our  research shows that these key attributes are indispensable to successful  transformations.  This design process provides a model for DHS to  consider as it makes other important decisions about the implementation  and transformation of the department.
Building on this progress, DHS will need to ensure that the development of  the human capital policy options by the Core Design Team is integrated  with the accomplishment of DHS programmatic goals as defined in the  forthcoming strategic plan.  Such a linkage can ensure that the new human  capital approaches support and facilitate the accomplishment of DHS’s  goals and objectives – a fundamental principle of the human capital idea.  It  will also assist the Core Design Team in identifying human capital  programs that support the DHS mission, including the development of a  performance management system which creates a “line of sight” that shows  how team, unit, and individual performance can contribute to overall  organizational goals.
Additionally, DHS has acknowledged that work lies ahead for implementing  better, more effective ways to communicate with and receive feedback  from its employees.  The development of the communications plan is an  important and positive step.  As DHS implements this plan it will need to  provide information on areas of confusion that were identified during our  interviews, including clarifying the role of DHS versus OPM in the system  development.  DHS will also need to ensure that a consistent message is  communicated across DHS components.  Finally, effective communication,  characterized by a two-way dialogue, will be central to engaging employees  in the remainder of the design process and ensuring it is transparent.  Ultimately, an effective two-way communication strategy can ease  implementation efforts.  Once options for the human capital system are  proposed it will be particularly important that employees have adequate  opportunities to make a worthwhile contribution.  Substantial involvement  of field staff in the development and implementation of the new human  capital system is essential given that over 90 percent of DHS civilian  employees are in the field.  Continued employee involvement will help to  strengthen employee buy-in to the new human capital system.  It is  important to consider and use the solicited employee feedback to make any  appropriate changes once this feedback is received.
section_title: Recommendations for Executive Action
paragraphs: DHS has developed an effective process to begin the formation of its new  human capital system.  Moving forward, it is critical that the new human  capital system be linked to the DHS strategic plan and that DHS continue to  communicate with and involve its employees.  Accordingly, we are  recommending that once the strategic plan is completed the Secretary of  DHS and the Director of OPM ensure that the options selected for the new  human capital system support and facilitate the accomplishment of the  department’s strategic goals and objectives, as identified in the new  strategic plan.  In addition, we recommend that the Secretary of DHS  clarify the role of the participants in the design effort and other areas of  confusion identified by stakeholders during our interviews.  Furthermore,  consistent with the DHS communications plan, we recommend the  Secretary ensure the message communicated across DHS components is  consistent, and maximize opportunities for two-way communication and  employee involvement through the completion of the design process, the  release of the system options, and implementation, with special emphasis  placed on seeking the feedback and buy-in of front-line employees in the  field.
section_title: Agency Comments and Our Evaluation
paragraphs: OPM provided written comments on a draft of this report, which are  printed in appendix IV.  DHS provided technical comments by e-mail.
DHS and OPM generally agreed with the contents of the report.  However,  both DHS and OPM expressed a concern that we misunderstood the role of  the field team in the design process. Each described the role of the field  team as more limited than our original understanding.  While gathering  additional information from DHS, NTEU, AFGE, and NAAE to clarify the  role and activities of the field team, we learned that its role evolved over  the course of the design effort, that it had no decision-making role in the  design process, and that it was used as a recurring focus group.  Accordingly, we changed the draft to reflect the field team’s current role.  DHS and OPM also provided a number of technical suggestions that have  been incorporated where appropriate.
We are sending copies of this report to the Chairman and Ranking Minority  Member, Senate Committee on Governmental Affairs; the Chairman and  Ranking Minority Member, House Committee on Government Reform; the  Chairman and Ranking Minority Member, House Select Committee on  Homeland Security; and other interested congressional parties.  We will  also send copies to the Secretary of the Department of Homeland Security  and the Director of the Office of Personnel Management.  Copies will be  made available at no charge on the GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me or Ed  Stephenson on (202) 512-6806.  Key contributors to this report are listed in  appendix V.
section_title: Practices and Implementation Steps for Mergers and Transformation
paragraphs: Implementing large-scale change management initiatives, such as mergers  and organizational transformations, is not a simple endeavor and requires  the concentrated efforts of both leadership and employees to realize  intended synergies and to accomplish new organizational goals.  At the  center of any serious change management initiative are people—people  define the organization’s culture, drive its performance, and embody its  knowledge base.  Experience shows that failure to adequately address—  and often even consider—a wide variety of people and cultural issues is at  the heart of unsuccessful mergers and transformations.  Recognizing the  “people” element in these initiatives and implementing strategies to help  individuals maximize their full potential in the new organization, while  simultaneously managing the risk of reduced productivity and  effectiveness that often occurs as a result of the changes, is the key to a  successful merger and transformation.  Thus, mergers and transformations  that incorporate strategic human capital management approaches will help  to sustain agency efforts and improve the efficiency, effectiveness, and  accountability of the federal government.
GAO convened a forum on September 24, 2002, to identify and discuss  useful practices and lessons learned from major private and public sector  organizational mergers, acquisitions, and transformations.  This was done  to help federal agencies implement successful cultural transformations,  including DHS.  The invited participants were a cross section of leaders  who have had experience managing large-scale organizational mergers,  acquisitions, and transformations, as well as academics and others who  have studied these efforts.  We reported the key practices participants  identified that can serve as the basis for subsequent consideration as  federal agencies seek to transform their cultures in response to governance  challenges.  Since convening the forum, our additional work has identified  specific implementation steps for these practices. (See fig. 5.)
section_title: Design Process
paragraphs: The process for creating a DHS human capital management system, jointly  developed by DHS and OPM, calls for a design team made up of DHS and  OPM employees and union representatives.  The process is divided into  three stages:  research, outreach, and drafting of initial personnel system  options; review of the options; and development of proposed regulations.  Early 2004 is the expected date for the issuance of the personnel system’s  final regulations.
subsections: section_title: Core Design Team Is to Draft Options for the Personnel System
paragraphs: As the first stage of the design process, the Core Design Team engaged in  efforts that serve as the basis for the work of the other two components.  The 48 team participants included personnel experts from OPM, DHS, and  its component agencies; line employees and managers from DHS  headquarters and field offices; and professional staff from the three major  unions. Members were assigned to one of two subgroups focusing on  (1) pay and performance or (2) labor and employee relations.  The  management consulting firm Booz Allen Hamilton assisted the teams in  their efforts.
subsections: section_title: Pay and Performance and Labor and Employee Relations Subgroups
paragraphs: Each subgroup had two coleaders, one from OPM and one from DHS, to  guide them.  The subgroups performed their duties both collectively and  separately.  They convened jointly when there were common issues to  discuss or to listen to presentations on human capital systems.  For  example, the teams heard presentations on the performance management  and performance-based pay system at Internal Revenue Service (IRS); the  human capital management systems at FBI and NSA; and the performance  management, pay banding, and employee appeals process used at GAO.
The pay and performance subgroup focused its work on the three chapters  of Title 5 covering performance appraisal, classification, and pay rates and  systems.  According to the subgroup’s leaders, they identified 25  researchable areas and assigned small teams to explore each.  Subgroup  members were assigned to work on multiple teams.  Research areas  included the structure of pay ranges, methods for categorizing types of  work, and different appraisal and rating methods, for example.  When  asked about the initial findings of their research, the leaders of the pay and  performance subgroup indicated they identified many pay systems to  consider and evaluate.
The labor and employee relations subgroup focused on the three chapters  of Title 5 covering labor-management relations, adverse actions, and  appeals, to narrow its research.  To gain a better understanding of these  issues, the group invited agencies such as the Merit Systems Protection  Board and the Federal Labor Relations Authority to make presentations.  Areas that were researched included different levels of employee, union,  and management rights; negotiation models; and how the success of labor  relations programs, adverse action systems, and appeals systems is  evaluated, for example.  According to the subgroup leaders, they also  researched both leading and failed practices in their subject areas.  The  group created interview guides to collect information in a consistent  format.  When asked about the initial findings of the research, the subgroup  reported difficulty in identifying innovative labor relations models that can  be applied to the federal system.
section_title: Contractor Assistance
paragraphs: To help facilitate its efforts in the design of the personnel system, DHS  contracted with management-consulting firm Booz Allen Hamilton to  provide support in project management, research, writing, staff support,  and communications/publicity.  In addition, it was responsible for planning  the Town Hall meetings and facilitating the focus groups.  According to the  subgroup leaders, the contractor was expected to help design the format  for the option papers but would not likely be involved in drafting the  substance of the options.
section_title: Senior Review Advisory Committee Is to Develop Final Set of Options
paragraphs: The Senior Review Advisory Committee, the second stage of the design  process, will receive the broad set of options from the Core Design Team.  From this set of options the committee is expected to develop its final list  of options for the Secretary and Director to consider.Committee  members are permitted to eliminate, create, or prioritize the options.  In  communicating its list of options to the Secretary and Director, it may  present the strengths and weaknesses of each.  This committee could  potentially make recommendations related to implementation strategies.
Meetings of the Senior Review Advisory Committee will be governed by the  Federal Advisory Committee Act, which requires meetings to be open to  the public.
The Under Secretary for Management at DHS and the OPM Senior Advisor  for Homeland Security cochair the Senior Review Advisory Committee.  Committee members are officials in key leadership positions at both OPM  and DHS.  OPM representatives include the Senior Advisor for Homeland  Security, the Associate Director for Strategic Human Resources Policy, the  Associate Director for Human Capital Leadership and Merit System  Accountability, and the Senior Policy Advisor to the Director and Chief  Human Capital Officer.  DHS representatives include the Commissioner of  Customs and Border Protection, the Director of TSA, Director of the U.S.  Secret Service, Director of the Bureau of Citizenship and Immigration  Services, and the Director of Administration.  Union representatives are the  presidents from AFGE, NTEU, and NAAE.  External experts with particular  knowledge and experience in human capital management will serve as  advisors.
section_title: DHS Secretary and OPM Director Are to Propose Regulations for the Personnel System
paragraphs: The Secretary of DHS and the OPM Director make up the final stage of the  design process.  Once they receive the list of options from the Senior  Review Advisory Committee, they may edit, remove, or develop  alternatives to the proposed options.  The Secretary and the Director will  then issue proposed personnel rules for the department.  As called for in  the DHS legislation, individuals affected by the proposed rules have 30  calendar days to comment and make recommendations.  The Secretary and  Director are then to follow the provisions of the statutory reconciliation  process for no less than 30 days.
section_title: Characteristics of Core Design Team Members
paragraphs: Characteristics of the 48 members of the Core Design Team are described  in further detail in tables 2 through 6 below.  The tables summarize data for  those members on board as of July 11, 2003.  Since that date, membership  of the Core Design Team has changed.
section_title: Comments from the Office of Personnel Management
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to the persons named above, Ellen V. Rubin, Tina Smith, Eric  Mader, and Lou V.B. Smith made key contributions to this report.
section_title: GAO’s Mission
paragraphs: The General Accounting Office, the audit, evaluation and 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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section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Public Affairs