DOD has taken some steps to implement internal safeguards to help ensure that the NSPS performance management system is fair, effective, and credible; however, we believe continued monitoring of safeguards is needed to help ensure that DOD’s actions are effective as implementation proceeds. Specifically, we reported in September 2008 that DOD had taken some steps to (1) involve employees in the system’s design and implementation; (2) link employee objectives and the agency’s strategic goals and mission; (3) train and retrain employees in the system’s operation; (4) provide ongoing performance feedback between supervisors and employees; (5) better link individual pay to performance in an equitable manner; (6) allocate agency resources for the system’s design, implementation, and administration; (7) provide reasonable transparency of the system and its operation; (8) impart meaningful distinctions in individual employee performance; and (9) include predecisional internal safeguards to determine whether rating results are fair, consistent, and equitable. For example, all 12 sites we visited trained employees on NSPS, and the DOD-wide tool used to compose self- assessments links employees’ objectives to the commands’ or agencies’ strategic goals and mission. However, we determined that DOD could immediately improve its implementation of three safeguards. First, DOD’s implementation of NSPS does not provide employees with adequate transparency over their rating results because it does not require commands or pay pools to publish their respective ratings and share distributions to employees. According to DOD, distributing aggregate data to employees is an effective means for providing transparency, and NSPS program officials at all four components’ headquarters told us that publishing overall results is considered a best practice. In addition, 3 of the 12 sites we visited decided not to publish the overall final rating and share distribution results. Without transparency over rating and share distributions, employees may believe they are not being rated fairly, which ultimately can undermine their confidence in the system. To address this finding, we recommended that DOD require overall final rating results to be published. DOD concurred with this recommendation and, in 2008, revised its NSPS regulations and guidance to require commands to publish the final overall rating results. Second, NSPS guidance may discourage rating officials from making meaningful distinctions in employee performance because this guidance emphasized that most employees should be evaluated at “3” (or “valued performer”) on a scale of 1 to 5. According to NSPS implementing issuance, rating results should be based on how well employees complete their job objectives using the performance indicators. Although DOD and most of the installations we visited emphasized that there was not a forced distribution of ratings, some pay pool panel members acknowledged that there was a hesitancy to award employee ratings in categories other than “3.” Unless NSPS is implemented in a manner that encourages meaningful distinctions in employee ratings in accordance with employees’ performance, there will be an unspoken forced distribution of ratings, and employees’ confidence in the system may be undermined. As a result, we recommended that DOD encourage pay pools and supervisors to use all categories of ratings as appropriate. DOD partially concurred with this recommendation, and in April 2009, DOD issued additional guidance prohibiting the forced distribution of ratings under NSPS. Third, DOD does not require a third party to analyze rating results for anomalies prior to finalizing ratings. To address this finding, GAO recommended that DOD require predecisional demographic and other analysis; however, DOD did not concur, stating that a postdecisional analysis is more useful. Specifically, in commenting on our prior report, DOD stated that its postdecisional analysis of final rating results by demographics was sufficient to identify barriers and corrective actions. We are currently assessing DOD’s postdecisional analysis approach as part of our ongoing review of the implementation of NSPS. Although DOD civilian employees under NSPS responded positively regarding some aspects of the NSPS performance management system, DOD does not have an action plan to address the generally negative employee perceptions of NSPS identified in both the department’s Status of Forces Survey of civilian employees and discussion groups we held at 12 select installations. According to our analysis of DOD’s survey from May 2007, NSPS employees expressed slightly more positive attitudes than their DOD colleagues who remain under the General Schedule system about some goals of performance management, such as connecting pay to performance and receiving feedback regularly. For example, an estimated 43 percent of NSPS employees compared to an estimated 25 percent of all other DOD employees said that pay raises depend on how well employees perform their jobs. However, in some instances, DOD’s survey results showed a decline in employee attitudes among employees who have been under NSPS the longest. Employees who were among the first employees converted to NSPS (designated spiral 1.1) were steadily more negative about NSPS from the May 2006 to the May 2007 DOD survey. At the time of the May 2006 administration of the Status of Forces Survey for civilians, spiral 1.1 employees had received training on the system and had begun the conversion process, but had not yet gone through a rating cycle and payout under the new system. As part of this training, employees were exposed to the intent of the new system and the goals of performance management and NSPS, which include annual rewards for high performance and increased feedback on employee performance. As DOD and the components proceeded with implementation of the system, survey results showed a decrease in employees’ optimism about the system’s ability to fulfill its intent and reward employees for performance. The changes in attitude reflected in DOD’s employee survey are slight but indicate a movement in employee perceptions. Most of the movement in responses was negative. Specifically, in response to a question about the impact NSPS will have on personnel practices at DOD, the number of positive responses decreased from an estimated 40 percent of spiral 1.1 employees in May 2006 to an estimated 23 percent in May 2007. Further, when asked how NSPS compared to previous personnel systems, an estimated 44 percent said it was worse in November 2006, compared to an estimated 50 percent in May 2007. Similarly, employee responses to questions about performance management in general were also more negative from May 2006 to May 2007. Specifically, the results of the May 2006 survey estimated that about 67 percent of spiral 1.1 employees agreed that the performance appraisal is a fair reflection of performance, compared to 52 percent in May 2007. Further, the number of spiral 1.1 employees who agreed that the NSPS performance appraisal system improves organizational performance decreased from an estimated 35 percent to 23 percent. Our discussion group meetings gave rise to views consistent with DOD’s survey results. Although the results of our discussion groups are not generalizable to the entire population of DOD civilians, the themes that emerged from our discussions provide valuable insight into civilian employees’ perceptions about the implementation of NSPS and augment DOD’s survey findings. Some civilian employees and supervisors under NSPS seemed optimistic about the intent of the system however, most of the DOD employees and supervisors we spoke with expressed a consistent set of wide-ranging concerns. Specifically, employees noted (1) NSPS’s negative effect on employee motivation and morale, (2) the excessive amount of time and effort required to navigate the performance management process, (3) the potential influence that employees’ and supervisors’ writing skills have on panels’ assessments of employee ratings, (4) the lack of transparency and understanding of the pay pool panel process, and (5) the rapid pace at which the system was implemented, which often resulted in employees feeling unprepared and unable to find answers to their questions. These negative attitudes are not surprising given that organizational transformations often entail fundamental and radical change that requires an adjustment period to gain employee acceptance and trust. To address employee attitudes and acceptance, OPM issued guidance that recommends—and we believe it is a best practice—that agencies use employee survey results to provide feedback to employees and develop and implement an action plan that guides their efforts to address the results of employee assessments. However, according to Program Executive Office officials, DOD has not developed a specific action plan to address critical issues identified by employee perceptions, because the department wants employees to have more time under the system before making changes. Without such a plan, DOD is unable to make changes that address employee perceptions that could result in greater employee acceptance of NSPS. We therefore recommended, in our September 2008 report, that DOD develop and implement a specific action plan to address employee perceptions of NSPS ascertained from DOD’s surveys and employee focus groups. The plan should include actions to mitigate employee concerns about, for example, the potential influence that employees’ and supervisors’ writing skills have on the panels’ assessment of employee ratings or other issues consistently identified by employees or supervisors. DOD partially concurred with our recommendation, noting that it will address areas of weakness identified in its comprehensive, in- progress evaluation of NSPS and that it is institutionalizing a continuous improvement strategy. Since our 2008 review, NSPS officials at DOD have told us that they are working on an action plan; however, to date the department has not provided us a plan for review. DOD’s implementation of a more performance- and results-based personnel system has positioned the agency at the forefront of a significant transition facing the federal government. We recognize that DOD faces many challenges in implementing NSPS, as any organization would in implementing a large-scale organizational change. NSPS is a new program, and organizational change requires time for employees to accept. Continued monitoring of internal safeguards is needed to help ensure that DOD’s actions are effective as implementation proceeds. Moreover, until DOD develops an action plan and takes specific steps to mitigate negative employee perceptions of NSPS, DOD civilian employees will likely continue to question the fairness of their ratings and lack confidence in the system. The degree of ultimate success of NSPS largely depends on the extent to which DOD incorporates internal safeguards and addresses employee perceptions. Moving forward, we hope that the Defense Business Board considers our previous work on NSPS as it assesses how NSPS operates and its underlying policies. This concludes my prepared statement. I would be happy to respond to any questions that you or members of the subcommittee may have at this time. For further information about this statement, please contact Brenda S. Farrell, Director, Defense Capabilities and Management, at (202) 512-3604, or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this statement include Marion Gatling (Assistant Director), Lori Atkinson, Renee Brown, and Lonnie McAllister. The Departmet of Defense (DOD) i the rocess of imlemeting it ew hanapitsystem for managng civilian ernnel—the NtionaSecrit Pernnel System (NSPS). Ke com of NSPSclde comnsatio, classifictio, anerformance managemet. Imlemetio of NSPS cold hve fr-reching imlictions, ot just for DOD, but for civil ervice reform cross the federovermet. A of Feua 2009, abt 20,000 civilian emloee were under NSPS. Based o GAO’s rior work reviewing erformance managemet i the public ector, GAO develoed anitil lit of safeguard tht NSPS hold iclde to ensure it iir, effective, and credile. I 2008, Cngress directed GAO to evuate, mong other things, the etet DOD imlemeted ccounabilit mechan, iclding thoe i U.S.C. ectio 9902()(7) and other iternasafeguard NSPS. While DOD haske ome teps to imlemet iternasafeguard to ensure tht NSPSir, effective, and credile, ite 2008, GAO found tht the imlemetio of three safeguard cold e imroved. Firt, DOD doe ot reqire third part to anaze rting result for anomlie rior to finalizingtings, and thus it doe ot hve rocess to determie whether rtings re dicriminator efore the re finalized. Witho redeciionaanays, emloeeayck cofidece i the firss and crediilit of NSPS. To ddress thi fiding, GAO recommeded tht DOD reqire redeciional demoaphic and other anays; however, DOD did ot cor, ting th tdeciionaanays more usefl. GAO cotinu to elieve thi recommetioas merit. Secod, the rocessck transpare ecause DOD doe ot reqire comman to publih final rting ditributions, though doing o i recognized as ctice by DOD. Withot transpare over rting ditributions, emloeeay ot elieve the re eingted firl. To ddress thi fiding, GAO recommeded tht DOD reqire publictio of overll final rting result. DOD corred with thi recommetio and i 2008 revied it guidance to reqire such publictio. Third, NSPS guidance may dicoage rting offici from mking meanngl ditictions emloee rtings ecause it idicted tht the mjorit of emloee hold e rted t the “” level, o le of 1 to , resulting heitan to rd rtings other cteorie. Uless imlemetio of NSPScoag meanngl ditictions emloee erformance, emloeeay elieve there i an unspoke forced ditributio of rtings, and their cofidece i the system will undermied. To ddress thi fiding, GAO recommeded tht DOD ecoagpay ool ansupervior to usll cteorie of rtings as approrite. DOD partill corred with thi recommetio, but has ot et tke any ctio to imlemet it. Thi temet i based o GAO’s Stemer 2008 reort, which determied (1) the etet to which DOD has imlemeted iternasafeguard to ensure NSPSasir, effective, and credile; and (2) how DOD civilians erceive NSPS and whctions DOD haske to ddress theercetions. For tht reort, GAO anazed relevant docme and emloee surve result; iterviewed approrite offici; and cocted diussio roups t 12 elected inslltions. GAO recommeded ways to etter ddress the safeguard and emloee ercetions. View GAO-09-464T or key components. For more information, contact Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Although DOD emloee under NSPS respded itivel regarding ome aspect of erformance managemet, DOD doe ot hve an ctio an to ddress the erll gative emloee ercetions of NSPS. According to DOD’s surve of civilian emloee, erll emloee under NSPS re itive abome aspect of erformance managemet, such as connecting pay to erformance. However, emloee who hd the mot experiece under NSPS howed gative movemet i their ercetions. For exale, the ercet of NSPS emloee who elieve tht NSPS will hve itive effect o DOD’s ernnel ctice declied from antimted 40 ercet i 2006 to 23 ercet i 2007. Some gative ercetions o emered dring diussio roups tht GAO held. For exale, emloee ansupervior were cocered abt the ecessive mount of time reqired to navigate the rocess. While it i reasnable for DOD to llow emloee ome time to ccet NSPS, ot ddressng ertegative emloee ercetions cold jeopardize emloee cceance ansuccessl imlemetio of NSPS. A result, GAO recommeded tht DOD develo and imlemean ctio an to ddress emloee cocerns abt NSPS. DOD partill corred with GAO’s recommetio, but has ot et develoed an ctio an. GAO i recommeding tht DOD imrove the imlemetio of ome safeguard and develo and imlemean ctio an to ddress emloee cocerns abt NSPS. DOD erll corred with or recommetions, with the ecetio of oe reqiring redeciional review of rtings. To view the full product, including the scope and methodology, click on GAO-08-773. For more information, contact Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Although DOD emloee under NSPS re itive regarding ome aspect of erformance managemet, DOD doe ot hve an ctio an to ddress the erll gative emloee ercetions of NSPS. According to DOD’s surve of civilian emloee, emloee under NSPS re itive abome aspect of erformance managemet, such as connecting pay to erformance. However, emloee who hd the mot experiece under NSPS howed gative movemet i their ercetions. For exale, the ercet of NSPS emloee who elieve tht NSPS will hve itive effect o DOD’s ernnel ctice declied from 40 ercet i 2006 to 23 ercet i 2007. Negative ercetions o emered dring diussio roups tht GAO held. For exale, emloee ansupervior were cocered abt the ecessive mount of time reqired to navigate the rocess. Although the Office of Pernnel Managemet issued guidance recommeding thagcie use emloee surve result to rovide feedback to emloee and imlemean ctio an to guide their effort to ddress emloee assssme, DOD has ot develoed an ctio an to ddress emloee ercetions. While it i reasnable for DOD to llow emloee ome time to ccet NSPS ecause organiztional chang ofte reqire time to djust, it i det to ddress ertegative emloee ercetions. Withosuch an, DOD i unable to mke chang tht cold result i reter emloee cceance of NSPS. Give e-le organiztional change iititive, such as the Departmet of Defens’s (DOD) NtionaSecrit Pernnel System (NSPS), i subsantil commitmet tht will tke to comlete, it i imortant tht DOD anCngress e ket iformed of the fll cot of imlemeting NSPS. Uder the Comtroller Geer’s authorit to coct evuations hi owititive, GAO anazed the etet to which DOD has (1) flltimted totl co associted with the imlemetio of NSPS and (2) expded or oligated fun to degn and imlemet NSPS through fir 2006. GAO iterviewed departmet offici ananazed the NSPS Prom Eective Office’s (PEO), and the milit ervices’ and the Washingto Hedquarter Services’ (herefter referred to as the com) cot etimte and reort of expded and oligated fun. DOD’s Novemer 200timte tht it will cot $18 millio to imlemet NSPS doe ot iclde the fll cot tht the departmet expect to ias result of imlemeting the ew system. Federl financiccounting anrd te tht reliable iformtio the co of federro anctivitie crcil for effective managemet of overmet oertions and recommed tht fll co of ro and their opu rovided to assCngress and eectivekingformed deciions rom rerce and to ensure thro et expected and efficiet result. The fll cot iclde oth thoe co specificll idetifiable to crrt the rom, or direct co, and thoe co thre commo to mltile ro but cannot specificll idetified with any particrom, or idirect co. While the anrd emasize tht fll cot iformtiosstil for managng federro, their ctivitie, and opu, the anrd rovide tht itemay e omitted from cot iformtio if tht omissio wold ot change or iflce the jmet of reasnable er relng the cot iformtio. Based o GAO’s review of docmetio rovided by DOD and diussions with departmet offici, GAO found tht DOD’stimte iclde ome direct co, such as the rt-up and oertio of the NSPS PEO and the develomeand deliver of ew NSPS trng co, but it doe ot iclde other direct co such as the fll sa co of ll civilian and milit ernnel who directl support NSPS ctivitie departmetwide. Before develong ittimte, DOD hot fll defied ll the direct and idirect co eeded to manage the rom. Witho etter etimte, deciioker—withi DOD anCngress—will ot hve comlete iformtio abt whether dequate rerce re eing rovided for imlemeting NSPS. GAO recomme tht DOD defill co eeded to manage NSPS, repare revied etimte of thoe co for imlemeting the system i ccordance with federl financiccounting anrd, and develo comrehensive overht frmework to ensure thll funxpded or oligated to degn and imlemet NSPS re fllapred and reorted. I reviewing drft of thi reort, DOD erll corred with GAO’s recommetions. www.gao.gov/cgi-bin/getrpt?GAO-07-851. The totmount of fun DOD hasxpded or oligated to degn and imlemet NSPSring fi through 2006 cannot e determied ecause DOD has ot eablihed an overht mechanm to ensure tht thee co re fllapred. I May, the NSPS Sior Eective eablihed guidance for trcking and reorting NSPS imlemetio co tht reqire the com to develo mechan to capre thee co and to reort quarterl their co to the NSPS PEO. However, thi guidance doe ot defie the direct and idirect co DOD reqire tht the comapre. DOD’s ervasive financil managemet deficiecieve ee the bas for GAO’s degnatio of thi as hih-rire ce 199. GAO’s review of submitted reort from the com found tht their officiccounting system do ot capre the totl funxpded or oligated to degn and imlemet NSPS. Withoan effective overht mechanm to ensure tht the officiccounting systemapre ll approrite co, DOD anCngress do ot hve viilit over the ctual cot to degn and imlemet NSPS. To view the full product, including the scope and methodology, click on the link above. For more information, contact Derek Stewart at (202) 512-5559 or stewartd@gao.gov. Peole re criticl to any ag transformtio ecause the defian agy’sltre, develo itowledbase, romote innovtio, anre it mot imortanasset. Thus, trteic hanapitl managemet the Departmet of Defense (DOD) can hel it ml, manage, and m the eole ankill eeded to meet it criticl missio. I Novemer 2003, Cngress rovided DOD with gnificant fleilit to degn moderan rerceanagemesystem. O Novemer 1, 200, DOD and the Office of Pernnel Managemet (OPM) joitl released the final regutions DOD’s ew han rerceanagemesystem, kow as the NtionaSecrit Pernnel System (NSPS). GAO elieve tht DOD’s final NSPS regutions coany of the basic ricile thre constet with rove approche to trteic hanapitl managemet. For insance, the final regutions rovide for (1) flele, cotemor, mrket-based anerformance-orieted comnsatio system—such as pay ban anpay for erformance; (2) iving reter riorit to emloee erformance i it retetio deciions connectio with workforce rihtizing and redctions-i-force; and (3) ivolvemet of emloee reretive throughot the imlemetio rocess, such asvingpportunitie to participate i develong the imlemetingssuance. However, fre ctions will determie whether such labor reltions effort will e meanngand credile. Severl moth ago, with the release of the roed regutions, GAO observed thome part of the han rerceanagemesystem red qtions for DOD, OPM, anCngress to consider i the reas of pay anerformance anagemet, dverctions anapp, and labor managemet reltions. GAO o idetified mltile imlemetio chlleng for DOD oce the final regutions for the ew system were issued. Despite theitive aspect of the regutions, GAO has everreas of cocer. Firt, DOD has considerable work hed to defie the imortant detil for imlemeting it system—such as how emloee erformance expecttions will ligned with the departme’s overll missio an and other measure of erformance, and how DOD wold romote conste anrovide erl overht of the erformance managemesystem to ensure it i dmitered i ir, credile, transparet manner. Theand other criticll imortant detiluse defied i counctio with applicable keholder. Secod, the regutions merel llow, rther than reqire, the use of core cometecie tht can hel to rovide conste and clerl communicte to emloee wht ixpected of them. Third, lthough the regutions do rovide for cotinung collabortio with emloee reretive, the do ot idetif rocess for the cotinungvolvemet of idividual emloee the imlemetio of NSPS. Thi tetimony rovide GAO’s overll observtions elected roviions of the final regutions. Going forwrd, GAO elieve tht (1) DOD wold efit from develong comrehensive communictions trtegy, (2) DOD must ensure tht it has the ecessanstittional ifrastrctre i ce to mke effective use of it ew authoritie, (3) chief managemet officer or imilitiosstil to effectivel rovide sused and committed lederhi to the departme’s overll busss transformtio effort, iclding NSPS, and (4) DOD hold develo rocedre and method to iitite imlemetio effort relting to NSPS. www.gao.gov/cgi-bin/getrpt?GAO-06-227T. To view the full product, including the scope and methodology, click on the link above. For more information, contact Derek B. Stewart at (202) 512-5559 or stewartd@gao.gov. While GAO trong supportanapitl reform i the federovermet, how it i doe, whe it i doe, and the bas which it i doe canke ll the differece i whether such effort re successl. DOD’s regutions re especill criticaneed to e imlemeted roerl ecause of their otetil imlictions for relted overmetwide reform. I thi regard, ir view, classifictio, comnsatio, criticl hiring, and workforce retrctring reform hold pusued o overmetwide bas efore anpate from any rod-based labor- managemet or drocess reform. The Departmet of Defens’s (DOD) ew ernnel systemthe NtionaSecrit Pernnel System (NSPS)will hve fr- reching imlictions ot just for DOD, bt for civil ervice reform cross the federovermet. The Ntional Defense Athoriztio Act for Fil Yer 2004 gave DOD gnificanauthoritie to redegn the rle, regutions, anrocess thover the way tht more than 700,000 defense civilian emloee re hired, comnsated, romoted, and dicilied. I dditio, NSPS cold erve as model for overmetwide transformtioanapitl managemet. However, if ot roerl degned and effectivel imlemeted, it cold everel imede roress towrd more erformance- and result-based system for the federovermeas whole. DOD’srrerocess to degn it ew ernnel managemesystem cons of foag: (1) develomet of degntions, (2) assssmet of degntions, (3) issuance of roed regutions, and (4) tor public commeeriod, meet and cofer eriod with emloee reretive, an congressionaotifictio eriod. DOD’sitil degn rocessas unrelitic and inapprorite. However, fter trteic reassssmet, DOD djusted it approch to reflect more cautious and delibertive rocess tht ivolved more keholder. Thi reort (1) decribe DOD’s rocess to degn it ew ernnel managemesystem, (2) anaze the etet to which DOD’s rocess reflect ke ctice for successl transformtions, and (3) idetifie the mognificant chlleng DOD fce imlemeting NSPS. DOD’s NSPS degn rocess erll reflect for of elected ke ctice for successl organiztional transformtions. Firt, DOD and OPM hve develoed rocess to degn the ew ernnel system tht i supported b to lederhi both organiztions. Secod, from the oet, et of guiding ricile and ke erformance pameterve guided the NSPS degn rocess. Third, DOD has dedicted tem i ce to degn and imlemet NSPS and manage the transformtio rocess. Forth, DOD hasblihed timelie, lbeit mbitious, and imlemetio . The degn rocess, however, icking two other ctice. Firt, DOD develoed and imlemeted writte communictio trtegy docmet, bt the trtegy ot comrehensive. It doe ot idetif ll keternakeholder and their cocerns, and doe ot tilor ke messag to specific keholder roups. Filre to dequatel consider wide vriet of eole and cltl issuan led to unsuccessl transformtions. Secod, while the rocessasvolved emloee through towll meetings and other mechan, it has ot iclded emloee reretive the working roups tht drfted the degntions. It hold be oted tht 10 federl lbor unionsve filed suit lleng tht DOD filed to bide b the tor reqireme to iclde emloee reretive the develomet of DOD’s ew lbor reltions system authorized as part of NSPS. A successl transformtiousrovide for meanngl ivolvemet b emloee and their reretive to ga their input ito anunderanding of the chang tht will occr. GAO iking recommetions to imrove the comrehensivess of the NSPS communictio trtegy and to evuate the impact of NSPS. DOD did ot cor with oe recommetio anpartill corred with two other. www.gao.gov/cgi-bin/getrpt?GAO-05-730. To view the full product, including the scope and methodology, click on the link above. For more information, contact Derek B. Stewart at (202) 512-555 or stewartd@gao.gov. DOD will fce mltile imlemetio chlleng. For exale, i dditio to the chlleng of cotinung to ivolve emloee and other keholder anroviding dequate rerce to imlemet the system, DOD fce the chlleng of ensuring an effective, ongoing two-way communictio trtegy and evuating the ew system. I recet tetimony, GAO ted tht DOD’s communictio trtegyust iclde the ctive and viible ivolvemet of number of ke ayer, iclding the Secret of Defense, for successl imlemetio of the system. Moreover, DOD must ensure sused and committed lederhi fter the system ill imlemeted and the NSPS Sior Eective and the Prom Eective Office transitiot of etece. To rovide sused lederhi ttetio to ange of busss transformtioititive, like NSPS, GAO recetl recommeded the cretio of chief managemet officit DOD. The federovermet i eriod of rofound transitio and fce an rray of chlleng and opportunitie to eance erformance, ensure ccounbilit, anitio the natio for the fre. Hih- erforming organiztionsve found tht to successll transform themelve, theust ofteunmell change their cltre o tht the re more result-orieted, customer-focused, and collbortive i nare. To foter such cltre, thee organiztions recognize than effective erformance managemesystem can be trteic tool to drive iternal changanchieve deired result. Pblic ector organiztions both i the Uited Ste anbrod hve imlemeted elected, erll consteet of ke ctice for effective erformance managemet tht collectivel crete cler liage— “lie of ht”—betweedividuaerformance and organiztionasuccess. Thee ke cticeclde the following. 1. Align individual performance expectation with organizational goal. Axplicit lignmet helpsdividua ee the connectio betwee their dil ctivitie and organiztiona. 2. Connect performance expectation to crosscutting goal. Plcing an emas collbortio, iterctio, and temwork cross organiztional bounrie helps trengthe ccounbilit for result. 3. Provide and routinely ue performance information to track organizational prioritie. Idividua userformance iformtio to manage dring the r, idetif erformance gaps, annpoit imrovemet opportunitie. Based o reviousssued reort public ector organiztions’ approche to reiforce idividuaccounbilit for result, GAO idetified ke ctice tht federagciean consider as the develo moder, effective, and credible erformance managemesystem. 4. Require follow-up action to address organizational prioritie. B reqiring and trcking follow-up ctions erformance gaps, organiztions undercore the imortance of holdingdividua ccounble for mking roress their rioritie. 5. Ue competencie to provide a fuller assssment of performance. Cometecie defie the kill ansupporting behvior tht idividua eed to effectivel cotribte to organiztional result. . Link pay to individual and organizational performance. Pay, cetive, and rewrd system tht lik emloee kowlede, kill, and cotribtions to organiztional result re based olid, relible, and transpareerformance managemesystem with dequate safeguard. 7. Make meaningful ditinction in performance. Effective erformance managemesystem trive to rovide candid and constrctive feedbck and the ecessa objective iformtio and docmetio to rewrd to erformer and del with oor erformer. www.gao.gov/cgi-bin/getrpt?GAO-03-488. 8. Involve employee and takeholder to gain ownerhip of performance management tem. Erl and direct ivolvemet helpscrease emloees’ ankeholders’ underanding and owerhi of the system and belief i itirss. To view the full report, including the scope and methodology, click on the link above. For more information, contact J. Christopher Mihm at (202) 512-6806 or mihmj@gao.gov. 9. Maintain continuity during tranition. Because cltl transformtionske time, erformance managemesystem reiforce ccounbilit for change managemeand other organiztiona. Post-Hearing Questions for the Record Related to the Department of Defense’s National Security Personnel System (NSPS). GAO-06-582R. Washington, D.C.: March 24, 2006. Human Capital: Designing and Managing Market-Based and More Performance-Oriented Pay Systems. GAO-05-1048T. Washington, D.C.: September 27, 2005. Questions for the Record Related to the Department of Defense’s National Security Personnel System. GAO-05-771R. Washington, D.C.: June 14, 2005. Questions for the Record Regarding the Department of Defense’s National Security Personnel System. GAO-05-770R. Washington, D.C.: May 31, 2005. Post-hearing Questions Related to the Department of Defense’s National Security Personnel System. GAO-05-641R. Washington, D.C.: April 29, 2005. Human Capital: Selected Agencies’ Statutory Authorities Could Offer Options in Developing a Framework for Governmentwide Reform. GAO-05-398R. Washington, D.C.: April 21, 2005. Human Capital: Preliminary Observations on Proposed Regulations for DOD’s National Security Personnel System. GAO-05-559T. Washington, D.C.: April 14, 2005. Human Capital: Preliminary Observations on Proposed Department of Defense National Security Personnel System Regulations. GAO-05-517T. Washington, D.C.: April 12, 2005. Human Capital: Preliminary Observations on Proposed DOD National Security Personnel System Regulations. GAO-05-432T. Washington, D.C.: March 15, 2005. Human Capital: Principles, Criteria, and Processes for Governmentwide Federal Human Capital Reform. GAO-05-69SP. Washington, D.C.: December 1, 2004. Human Capital: Implementing Pay for Performance at Selected Personnel Demonstration Projects. GAO-04-83. Washington, D.C.: January 23, 2004. Human Capital: Building on DOD’s Reform Efforts to Foster Governmentwide Improvements. GAO-03-851T. Washington, D.C.: June 4, 2003. Human Capital: DOD’s Civilian Personnel Strategic Management and the Proposed National Security Personnel System. GAO-03-493T. Washington, D.C.: May 12, 2003. Defense Transformation: DOD’s Proposed Civilian Personnel System and Governmentwide Human Capital Reform. GAO-03-741T. Washington, D.C.: May 1, 2003. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Summary: DOD is in the process of implementing this human capital system, and according to DOD, about 212,000 civilian employees are currently under the system. On February 11, 2009, however, the House Armed Services Committee and its Subcommittee on Readiness asked DOD to halt conversions of any additional employees to NSPS until the administration and Congress could properly address the future of DOD's personnel management system. On March 16, 2009, DOD and the Office of Personnel Management (OPM) announced an upcoming review of NSPS policies, regulations, and practices. According to DOD, the department has delayed any further transitions of employees into NSPS until at least October 2009--pending the outcome of its review. Furthermore, on May 14, 2009, the Deputy Secretary of Defense asked the Defense Business Board to form what has become this task group to review NSPS to help the department determine, among others things, whether NSPS is operating in a fair, transparent, and effective manner. This statement focuses on the performance management aspect of NSPS specifically (1) the extent to which DOD has implemented internal safeguards to ensure the fairness, effectiveness, and credibility of NSPS and (2) how DOD civilian personnel perceive NSPS and what actions DOD has taken to address these perceptions. It is based on the work we reported on in our September 2008 report, which was conducted in response to a mandate in the National Defense Authorization Act for Fiscal Year 2008. This mandate also directed us to continue examining DOD efforts in these areas for the next 2 years. We currently have ongoing work reviewing the implementation of NSPS for the second year, and we also will perform another review next year. DOD has taken some steps to implement internal safeguards to help ensure that the NSPS performance management system is fair, effective, and credible; however, we believe continued monitoring of safeguards is needed to help ensure that DOD's actions are effective as implementation proceeds. Specifically, we reported in September 2008 that DOD had taken some steps to (1) involve employees in the system's design and implementation; (2) link employee objectives and the agency's strategic goals and mission; (3) train and retrain employees in the system's operation; (4) provide ongoing performance feedback between supervisors and employees; (5) better link individual pay to performance in an equitable manner; (6) allocate agency resources for the system's design, implementation, and administration; (7) provide reasonable transparency of the system and its operation; (8) impart meaningful distinctions in individual employee performance; and (9) include predecisional internal safeguards to determine whether rating results are fair, consistent, and equitable. For example, all 12 sites we visited trained employees on NSPS, and the DOD-wide tool used to compose self-assessments links employees' objectives to the commands' or agencies' strategic goals and mission. However, we determined that DOD could immediately improve its implementation of three safeguards. Although DOD civilian employees under NSPS responded positively regarding some aspects of the NSPS performance management system, DOD does not have an action plan to address the generally negative employee perceptions of NSPS identified in both the department's Status of Forces Survey of civilian employees and discussion groups we held at 12 select installations. According to our analysis of DOD's survey from May 2007, NSPS employees expressed slightly more positive attitudes than their DOD colleagues who remain under the General Schedule system about some goals of performance management, such as connecting pay to performance and receiving feedback regularly. For example, an estimated 43 percent of NSPS employees compared to an estimated 25 percent of all other DOD employees said that pay raises depend on how well employees perform their jobs.