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. 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. 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. 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. 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. 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.