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.