[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                 THE STATUS OF FEDERAL PERSONNEL REFORM

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                    POSTAL SERVICE, AND THE DISTRICT
                              OF COLUMBIA

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 8, 2007

                               __________

                           Serial No. 110-12

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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                               index.html
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             COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California               TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York             DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania      CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York         JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      DARRELL E. ISSA, California
BRIAN HIGGINS, New York              KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky            LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of   VIRGINIA FOXX, North Carolina
    Columbia                         BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota            BILL SALI, Idaho
JIM COOPER, Tennessee                ------ ------
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
                  David Marin, Minority Staff Director

Subcommittee on Federal Workforce, Postal Service, and the District of 
                                Columbia

                        DANNY K. DAVIS, Illinois
ELEANOR HOLMES NORTON, District of   KENNY MARCHANT, Texas
    Columbia                         JOHN M. McHUGH, New York
JOHN P. SARBANES, Maryland           JOHN L. MICA, Florida
ELIJAH E. CUMMINGS, Maryland         DARRELL E. ISSA, California
DENNIS J. KUCINICH, Ohio, Chairman   ------ ------
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
                      Tania Shand, Staff Director







                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 8, 2007....................................     1
Statement of:
    Tobias, Robert, director, public sector executive programs, 
      director, ISPPI, School of Public Affairs, American 
      University, Washington, DC; Curtis Copeland, Specialist in 
      American National Government, Congressional Research 
      Service, Library of Congress, Washington, DC; Charles 
      Tiefer, professor of law, University of Baltimore, School 
      of Law, Baltimore, MD; Joseph Swerdzewski, president, 
      Joseph Swerdzewski & Associates, Hampton Cove, AL; Hannah 
      Sistare, vice president for academy affairs, director, 
      human resources management consortium, National Academy of 
      Public Administration, Washington, DC; and Kevin Simpson, 
      executive vice president, general counsel, Partnership for 
      Public Service, Washington, DC.............................    33
        Copeland, Curtis.........................................    52
        Simpson, Kevin...........................................   101
        Sistare, Hannah..........................................    88
        Swerdzewski, Joseph......................................    80
        Tiefer, Charles..........................................    65
        Tobias, Robert...........................................    33
Letters, statements, etc., submitted for the record by:
    Copeland, Curtis, Specialist in American National Government, 
      Congressional Research Service, Library of Congress, 
      Washington, DC, prepared statement of......................    54
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   130
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, prepared statements of Mr. Pferrer and 
      Ms. Kelley.................................................     3
    Marchant, Hon. Kenny, a Representative in Congress from the 
      State of Texas, prepared statement of......................    29
    Simpson, Kevin, executive vice president, general counsel, 
      Partnership for Public Service, Washington, DC, prepared 
      statement of...............................................   103
    Sistare, Hannah, vice president for academy affairs, 
      director, human resources management consortium, National 
      Academy of Public Administration, Washington, DC, prepared 
      statement of...............................................    90
    Swerdzewski, Joseph, president, Joseph Swerdzewski & 
      Associates, Hampton Cove, AL, prepared statement of........    82
    Tiefer, Charles, professor of law, University of Baltimore, 
      School of Law, Baltimore, MD, prepared statement of........    67
    Tobias, Robert, director, public sector executive programs, 
      director, ISPPI, School of Public Affairs, American 
      University, Washington, DC, prepared statement of..........    36


                 THE STATUS OF FEDERAL PERSONNEL REFORM

                              ----------                              


                        THURSDAY, MARCH 8, 2007

                  House of Representatives,
Subcommittee on Federal Workforce, Postal Service, 
                      and the District of Columbia,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3:05 p.m. in 
room 2154, Rayburn House Office Building, Hon. Danny K. Davis 
(chairman of the subcommittee) presiding.
    Present: Representatives Davis of Illinois, Norton, 
Sarbanes, Lynch, and Marchant.
    Staff present: Tania Shand, staff director; Caleb 
Gilchrist, professional staff member; Cecelia Morton, clerk; 
LaKeshia Myers, editor/staff assistant; Mason Alinger and Alex 
Cooper, minority professional staff members.
    Mr. Davis of Illinois. The subcommittee will come to order.
    Let me apologize to all of you for having to wait. This has 
been one of those days where we have transacted a tremendous 
amount of business and everybody has had some pretty heavy 
schedules, and ours got caught in the midst of a legislative 
schedule that wouldn't wait. But we just finished votes, and 
that means that we certainly won't be disturbed between now and 
the time that we end. Let me thank you for your patience and 
thank you for participating.
    The hearing will come to order. Welcome Ranking Member 
Marchant, members of the subcommittee, hearing witnesses, and 
all of those in attendance. I welcome you to the first Federal 
Workforce, Postal Service, and District of Columbia 
Subcommittee hearing of the 110th Congress.
    Hearing no objection, the Chair, ranking member, and 
subcommittee members will each have 5 minutes to make opening 
statements if they so desire, and all Members will have 3 days 
to submit statements for the record.
    I look forward to working with all of the members of the 
subcommittee in a bipartisan fashion to move forward with the 
subcommittee's agenda. That agenda includes addressing bread 
and butter Civil Service issues such as benefits, compensation, 
public/private competitions, and labor/management relations. 
The subcommittee is going to conduct aggressive postal 
oversight and monitor the implementation of the Postal 
Accountability and Enhancement Act of 2006, and it is going to 
protect and advance home rule for the District of Columbia.
    This hearing is the first in a series of hearings that will 
be held on Federal personnel reform. Today, we will hear from 
human resource stakeholders whose testimony will lay the 
foundation for agency-specific personnel reform hearings.
    At this point, I would like to ask unanimous consent that 
the testimony of Jeffrey Pferrer, a Stanford University 
professor, and Colleen Kelley, national president of NTEU's 
statement will be submitted for the record.
    Hearing none, so it will be.
    [The prepared statements of Mr. Pferrer and Ms. Kelley 
follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Davis of Illinois. If the Federal Government is going 
to tinker with the employee protections of 1.8 million people 
and how they earn a living and are represented in the 
workforce, it should be evidence based. It should not be based 
on anecdotes, theories, or ideology.
    For example, some argue that Federal airport baggage 
screeners at the Transportation Security Administration should 
not be allowed to unionize because it would hinder TSA's 
ability to fight terrorism. There is no evidence that Federal 
employees who have been allowed to join unions since 1978 have 
hampered our ability to fight terrorism. However, there is 
plenty of evidence that management, particularly officials at 
the highest levels of our Government, have made decisions that 
undermine our ability to fight terrorism.
    Over the years we have heard testimony from numerous 
witnesses, some who will be testifying again today, that the 
keys to successful personnel reform are significant funding to 
train managers and employees on new systems, collaboration with 
and buy-in from employees, and that the new systems be fair, 
equitable, credible, and transparent.
    In reality, the evidence that we have to date indicates 
that in most cases employees have not bought into these 
systems, funding for these systems have been cut, and the 
systems do not appear to be fair or transparent, much less 
credible. Today's witnesses will help us to better understand 
and evaluate how these new personnel systems are being 
implemented and how we can move forward to ensure that we have 
a balanced and effective Federal personnel system.
    Now I would like to yield to the ranking member, Mr. 
Marchant, 5 minutes for an opening statement.
    Mr. Marchant. Thank you, Mr. Davis. It is an honor to serve 
on this subcommittee with you and be the ranking member. Thank 
you for convening this hearing today. I look forward to working 
with you over the coming days on many different issues faced in 
the Subcommittee on Federal Workforce, Postal Service, and the 
District of Columbia.
    Today's hearing will examine efforts in recent years to 
reform the decades-old Civil Service system at a handful of 
Federal agencies, specifically the Department of Defense, the 
Department of Homeland Security, the Transportation Security 
Administration, and the Government Accountability Office. 
Congress authorized all four of these agencies to overhaul 
their personnel systems in recent years. Today's hearing will 
give us an opportunity to evaluate the progress that has been 
made to date.
    In addition, Congress has also authorized reforms to the 
personnel systems at the National Aeronautics and Space 
Administration, Securities and Exchange Commission, and the 
Internal Revenue Service, and the Federal Aviation 
Administration. The efforts at these agencies will presumably 
be the focus of future hearings.
    Mr. Chairman, in conducting your first oversight hearing 
today, I applaud you for gathering a panel of experts that will 
provide the subcommittee with the analytical, dispassionate 
perspective on the efforts to date to reform the existing Civil 
Service system and to make recommendations as to where we might 
be able to help from here. I believe that this panel will help 
lay the foundation for subsequent hearings on the reform of all 
the other individual agencies.
    As a newly appointed Ranking Member of the subcommittee, I 
look forward to learning from the witnesses before us today and 
become better educated on the issues facing the Federal 
workforce in the 21st century.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Kenny Marchant follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     
    Mr. Davis of Illinois. Thank you very much, Mr. Marchant.
    Now we will go to opening statements by Members. Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman. I believe these people 
have suffered enough waiting for the work on the floor to be 
concluded. Mr. Chairman, I will submit my statement for the 
record, if it would be allowed, and I would like to get a 
chance to hear from this distinguished panel.
    I want to thank the panel for helping the subcommittee with 
its work.
    I yield back.
    Mr. Davis of Illinois. And it shall, indeed, be entered 
into the record.
    Ms. Norton.
    Ms. Norton. I thank you very much, Mr. Chairman, and I 
particularly thank you for having an early hearing on the 
status of the Federal workforce. You and I have sat through a 
number of years where, in amazement, we have seen the workforce 
going under unusual change, to put it politely, but I do 
believe that anyone who cares about the efficiency and the 
realm of the Federal workforce would want this hearing held 
now, given what I think most Members will agree is a major 
repair job of some kind that needs to be done.
    What began as an attempt by the administration at reform 
has, by any standard, left the Federal workforce in disarray. 
Courts have thrown out the attempt at a personnel system, and 
not only thrown it out, but done so with quite caustic 
criticism. The GAO, which touted itself as the pay for 
performance model and the pioneer in use of other management 
strengthening techniques, has reaped the whirlwind with an 
organizing effort apparently underway at the GAO that, if I may 
say so, with responses or reported responses from the GAO 
which, like much of the administration's reform, looks like it 
imitates some of the worst of the private sector in opposing 
organizing efforts. That's something that I would ask 
subcommittee to look into specifically.
    The administration after 9/11 seems to have taken the need 
to organize new agencies like TSA to be brought into the 
Federal system in order to rigorize it with other Federal 
workers, and then proceeded to take virtually all of the Civil 
Service and personnel system safeguards out of the TSA system.
    We use the 9/11 to look at the Department of Homeland 
Security, which we just created, and the DOD, and essentially 
take away Civil Service protections, bargaining rights. In 
effect, we use the major agencies where most of the Federal 
workforce is to collapse the usual safeguards and hope that we 
can get to what was left and it would simply come tumbling down 
alongside it.
    The fatal mistake, Mr. Chairman, if I may say so is not in 
reform, particularly after 9/11. It seems to me that was a 
perfect opportunity to step back and look at what must be done 
in an entirely new period in American life. It was the failure 
of the administration to do its homework, to ask first the 
basic question: why do we have such a system? Why do we have a 
section that builds in rights, for example, in the workplace? 
We have limited collective bargaining, nothing like what is 
found in the workplace. Why do we have rights in the first 
place? Once we analyze that, we go from there.
    It's not just the size of the workforce. It has a lot to do 
with the history of corruption, but above all it has to do with 
the fact that it is a public or Federal workforce and what the 
administration has never understood, that due process 
protections of the Constitution apply to public employees. You 
can't get around that. Since you can't get around it, you have 
to find a way to do your reform consistent within it. If you 
don't, the course will take care of the rest, particularly if 
the protections, collective bargaining protections, are taken 
away at the same time.
    Mr. Chairman, in the post-9/11 period we have been more 
dependent on our Civil Service workforce than at any time in 
our history. They are now doing things not only to make 
Government run in the usual fashion, but to protect the 
homeland, itself. It was just the wrong time to send the system 
in spiral by trying all kinds of things that each and every 
year it was clear were not only not working, but producing an 
overall system far worse than the one that was in place and far 
less efficient.
    We have done major damage to the Civil Service system by 
taking actions of every variety. I admire your boldness. I do 
not admire your task and mission in attempting to repair what 
is left while keeping reform of some kind ongoing.
    I thank you, Mr. Chairman.
    Mr. Davis of Illinois. Thank you very much, Ms. Norton.
    Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    It is remarkable that the Federal workforce is able to get 
up every morning and come to work under the conditions that 
have existed in recent years. One sadly comes to the conclusion 
that there is an agenda underway--and this administration is 
taking the lead on it--to discredit the Civil Service, and in 
the process discredit the notion of good government.
    I have been amazed in just the short time I have been here 
at the number of hearings we have had that have focused in on 
practices that undermine our civil servants. For starters, cuts 
to resources that the Federal workforce needs to do its job 
properly; second, the outsourcing of governmental functions to 
private contractors who then are not managed properly, because, 
again, the oversight is not put there and there is lax 
accountability; and then, third, in the name of ``reform,'' 
proposals for personnel systems within the Civil Service that 
really undermine collective bargaining rights and other rights 
and opportunities that our Federal employees deserve.
    Then, of course, when agencies under-perform because of all 
those pressures that are being brought to bear on the 
workforce, the administration turns around and says, see, 
government doesn't work, and then cuts it again so it becomes 
this kind of potential death spiral for all those folks that 
are trying to do the right thing and improve the image of 
Government, as they should.
    So I thank you for conducting the hearing. I think it is 
ironic that in the name of Homeland Security the administration 
has sought to cut a lot of corners and limit or escape the 
obligation from enforcing the rights of the Federal workforce, 
because I certainly know that if I go to the airport I want 
that screener to have high morale, to feel proud of what they 
do and good about what they do, to have a sense of dignity and 
a sense of productivity, because they are going to do their job 
much better and much more effectively, and that is going to 
protect our security much more than anything else would do.
    So, again, thank you for conducting the hearing and looking 
at issues that really can improve morale, productivity, and the 
overall good government that we are trying to provide to the 
taxpayers.
    Mr. Davis of Illinois. Thank you very much, Mr. Sarbanes.
    Now the subcommittee will hear testimony from the witnesses 
before us today.
    I would first like to introduce the witnesses, beginning 
with Mr. Robert Tobias, who is a distinguished adjunct 
professor in residence at American University. Mr. Tobias 
teaches courses in public management, leadership, alternate 
dispute resolution, and managing labor/management relations. He 
served on the Human Resource Management System Senior Review 
Advisory Committee, which was charged with reviewing the work 
of the Department of Homeland Security, Office of Personnel 
Management Design Human Resources Team, and provided options to 
DHS and OPM's agency heads.
    Next, we have Dr. Curtis Copeland. He is currently a 
specialist in American Government at the Congressional Research 
Service [CRS], within the U.S. Library of Congress in 
Washington, DC. His specific area of research expertise is 
Federal rulemaking and regulatory policy. He is also head of 
the Executive and Judiciary Section with the CRS Government and 
Finance Division.
    Next, we have Professor Charles Tiefer. He is a professor 
of law at the University of Baltimore School of Law. Prior to 
joining the University of Baltimore's faculty in 1995, he 
served as Solicitor and Deputy General Counsel of the U.S. 
House of Representatives for 11 years. He is a quoted expert on 
Federal Government and constitutional law.
    Next, we have Mr. Joseph Swerdzewski. He is president of 
Joseph Swerdzewski and Associates, a human resources consultant 
and training firm. The firm is involved in helping Federal 
agencies with human resources reform initiatives and 
development of improved performance management systems. He 
served two terms from 1993 to 2001 as the General Counsel of 
the Federal Labor Relations Authority, where he was responsible 
for the investigation and prosecution of unfair labor practice 
violations.
    Next, we have Ms. Hannah Sistare, who is vice president for 
academy affairs at the National Academy of Public 
Administration. She works with the Academy's 600 distinguished 
fellows in their efforts to enhance government at all levels. 
She also directs the Academy's Human Resources Management 
Consortium and manages the National Commission on the Public 
Service Volcker Commission Implementation Initiative at the 
Academy.
    Finally, Mr. Kevin Simpson is the executive vice president 
and general counsel of the Partnership for Public Service. The 
Partnership is a nonpartisan, non-profit organization dedicated 
to revitalizing public service through a campaign of 
educational efforts, policy research, public/private 
partnerships, and legislative advocacy.
    I want to thank each one of you for coming and being with 
us this afternoon. It is the committee's policy that all 
witnesses be sworn in, and so if you would please rise and 
raise your right hands.
    [Witnesses sworn.]
    Mr. Davis of Illinois. The record will show that each 
witness answered in the affirmative.
    Thank you very much.
    Your entire statements will be included in the record. Of 
course, the green light, as you have done this before, you know 
that the green light indicates that you have 5 minutes in which 
to summarize your statement. The yellow light means your time 
is running down and you have 1 minute remaining to complete 
your statement. And the red light means that your time has 
expired. Of course, at the end of the day all kinds of things 
can happen.
    Let me again thank you all for coming.
    Mr. Tobias, would you begin?

STATEMENTS OF ROBERT TOBIAS, DIRECTOR, PUBLIC SECTOR EXECUTIVE 
 PROGRAMS, DIRECTOR, ISPPI, SCHOOL OF PUBLIC AFFAIRS, AMERICAN 
  UNIVERSITY, WASHINGTON, DC; CURTIS COPELAND, SPECIALIST IN 
 AMERICAN NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE, 
LIBRARY OF CONGRESS, WASHINGTON, DC; CHARLES TIEFER, PROFESSOR 
OF LAW, UNIVERSITY OF BALTIMORE, SCHOOL OF LAW, BALTIMORE, MD; 
JOSEPH SWERDZEWSKI, PRESIDENT, JOSEPH SWERDZEWSKI & ASSOCIATES, 
 HAMPTON COVE, AL; HANNAH SISTARE, VICE PRESIDENT FOR ACADEMY 
   AFFAIRS, DIRECTOR, HUMAN RESOURCES MANAGEMENT CONSORTIUM, 
NATIONAL ACADEMY OF PUBLIC ADMINISTRATION, WASHINGTON, DC; AND 
   KEVIN SIMPSON, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL, 
         PARTNERSHIP FOR PUBLIC SERVICE, WASHINGTON, DC

                   STATEMENT OF ROBERT TOBIAS

    Mr. Tobias. Chairman Davis, Ranking Member Marchant, 
distinguished members of the subcommittee, I would like to 
thank you for this opportunity to testify on the subject of 
personnel reform in the Federal Government.
    Congress gave the Secretaries of Defense and Homeland 
Security the authority to design and implement broad personnel 
reforms in their departments. My remarks will focus on pay for 
performance and labor/management relations.
    Creating a pay for performance system that actually 
increases, that actually has the impact of increasing agency 
outputs and outcomes requires a two-step process. First is the 
creation of a performance management system that enables 
supervisors to more objectively discern the difference in 
performance based on outputs and outcomes, rather than applying 
the more subjective works hard standard. Next, once the 
discernment is completed, the reward attached to the outcomes 
must be sufficient to motivate behavior that increases 
individual and ultimately overall organizational performance.
    Now, these steps have to be sequential. It is not possible 
to build a successful pay for performance system onto an 
unsuccessful performance management system. Until a credible 
performance management system is in place, employees will 
continue to perceive bonuses and awards as arbitrary. Even if 
substantial sums of money were made available, the money would 
not increase performance if the performance management system 
is faulty.
    Now, I think that it is imperative that we establish a 
culture of performance where supervisors are able to credibly 
discern differences in employee outputs and outcomes. We don't 
need legislation to accomplish the creation of a performance 
management system, but we do need recognition that achieving 
such a system requires a collaborative, long-term, disciplined 
effort by Presidents, political appointees, SES executives, 
union leaders, and employees.
    Both the promise of success and the cost of failure are 
large. I reference an article in my prepared statement where 
the author has concluded as virtually undisputed that goal 
setting does increase performance at all levels--individual, 
group, and organization.
    Specific and challenging goals are associated with higher 
levels of performance, more so than either no goals or general 
``do your best'' goals.
    Now, the authors also point out that goal setting in the 
public sector is much more difficult than the private sector. 
Output and outcome goals are difficult to define for employees, 
managers, and the public, yet, if successful, goal setting 
increases employee engagement, individual and organizational 
performance, and taxpayer satisfaction. It is an outcome worthy 
of pursuit. Creating a performance management system, however, 
is very difficult. First, agencies have to define what 
organizational output and outcome means, and they have been 
struggling to achieve this since 1993 with the passage of the 
Government Performance and Results Act. Agencies have made 
progress, but there is a long way to go.
    Second, a plan must be created for translating the output 
agency goals into individual goals that are linked to 
organizational goals.
    Third, supervisors must spend time talking and listening to 
those they manage, coaching, evaluating performance, and 
monitoring organizational goal achievement. For most managers 
in the Federal Government, this is a very difficult challenge.
    Currently, supervisors generally evaluate an employee's 
performance on whether the employee works hard. If an employee 
works hard, he or she is likely to be rated highly. Under a 
performance management system, the standard would be ``achieves 
results.'' This would entail a change from a subjective 
evaluation of performance to a significantly increased focus on 
the achievement of objective performance results.
    Long-term supervisory employee relationships have been 
built on a works hard set of expectations. Those relationships 
would have to evolve to accommodate another set of 
expectations. Supervisors would have to be trained to expect 
results and evaluate employees' work accordingly, and employees 
will want and expect support. It doesn't happen. Achieving this 
requires more than training on process. It requires a real 
focus on changing culture in an organization.
    Supervisors are rated in the Federal Government for what 
they do, as opposed to how well they manage. But if we want 
increased organizational performance, that has to change. 
Employees have to be included as part of this effort, and they 
are not today. Employees have to learn. Managers have to learn. 
There has to be an exchange of what they do, how they do it, 
and how what they do are linked to organizational goals. Union 
leaders have to be involved in order to make this work. Union 
leaders have to be involved in creating a performance 
management system, and they haven't been effectively involved. 
If they are involved, there are fewer impact and implementation 
negotiations, there are fewer adversarial relationships, and 
faster implementation.
    I also suggest that in order to be successful we need 
support from Presidents and the Congress. If importance on 
increasing performance were measured by the rhetoric of 
Presidents, performance would be important. If it were measured 
in terms of how much time Presidents spend on this effort, I 
think we would see that Presidents spend time on public policy 
creation, not public policy implementation.
    If we want public policy implementation to be effective, if 
we want performance increases, there has to be a focus on 
public policy implementation starting at the top. Without 
Presidents spending time, political appointees won't spend time 
because there is only risk and no reward. Political appointees 
are evaluated not on the basis of how well they implement 
public policy, but rather on the public policy that they 
create.
    So it seems to me that the President has to change his 
behavior before political appointees will change their 
behavior, before the Senior Executive Service will change their 
behavior, but I believe it is important that we find a way, 
working collaboratively, to define, design, and implement a 
performance management system that challenges employees to 
achieve agency mission by working better.
    I think that if we look at the pay for performance system 
and evaluate its success, all we need to do is look at the 
surveys recently completed by the Senior Executive Association 
where the performance system----
    Mr. Davis of Illinois. I'm going to ask you to summarize.
    Mr. Tobias. Am I over? I'm sorry.
    Mr. Davis of Illinois. Yes. Wrap up. And, if I could just 
say to the other witnesses, we don't personally have any 
difficulty in terms of listening. The ranking member has 
another appointment that he is going to have to try to keep, 
and so I would like to ask that the witnesses would stick to 
the 5-minute rule----
    Mr. Tobias. I apologize.
    Mr. Davis of Virginia [continuing]. So that he can hear 
each one of the witnesses before he has to go, and have an 
opportunity for questions. But thank you very much, Mr. Tobias.
    [The prepared statement of Mr. Tobias follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Davis of Illinois. We will proceed to Mr. Copeland.

                  STATEMENT OF CURTIS COPELAND

    Mr. Copeland. Thank you very much, Mr. Chairman and members 
of the subcommittee. I am here to discuss several issues that 
CRS was asked to address related to the implementation of the 
GAO Human Capital Reform Act of 2004.
    The first such issue is whether the Comptroller General 
told Congress and GAO employees during consideration of the 
legislation that all employees who received a meets expectation 
performance evaluation would receive annual adjustments to 
their base pay. The record indicates that the Comptroller 
General gave such assurances on several occasions. For example, 
at a July 16, 2003, hearing held by the predecessor to this 
subcommittee, the record indicates the Comptroller General said 
GAO had agreed to ``guarantee annual across-the-board purchase 
power protection and to address locality pay considerations to 
all employees rated as performing at a satisfactory level or 
above, absent extraordinary economic circumstances or severe 
budgetary constraints.''
    He reiterated this concept several other times during his 
written testimony, and he confirmed that assurance when 
answering questions from Representative Chris Van Hollen during 
the hearing.
    Minority views in the House committee report on the GAO 
Reform Act state the Comptroller General has ``assured GAO 
employees that anyone performing satisfactory work will receive 
at least a cost of living adjustment.''
    During a September 16, 2003, hearing before the Senate 
Committee on Governmental Affairs the record indicates the 
Comptroller General told Senator Thomas Carper, ``For the 97-
plus percent of our employees who are performing at an 
acceptable level or better, we will protect them against 
inflation, at a minimum.''
    The Senate Committee on Governmental Affairs report on the 
GAO Reform Act states the committee had ``received a commitment 
from the Comptroller General that, absent extraordinary 
circumstances or serious budgetary constraints, employees or 
officers who perform at a satisfactory level will receive an 
annual base pay adjustment designed to protect their purchasing 
power.''
    The next issue CRS was asked to address was whether all GAO 
employees with meets expectations ratings had received these 
annual adjustments. The short answer is no. According to GAO, 
308 of 1,829 GAO analysts and specialists, about 17 percent, 
did not receive the 2.6 percent permanent pay increase that 
other GAO employees received in January 2006. These 308 
employees all had meets expectations ratings or better. Most of 
these employees were at the second of GAO's three-banded pay 
system, roughly GS-13 and 14 employees, but some employees at 
all three levels were affected.
    In March 2006, the House Appropriations Committee asked GAO 
to explain the difference between its statements in 2003 and 
its actions in 2006. GAO responded by saying the Comptroller 
General's statements in 2003 were ``accurate at the time,'' but 
that subsequent events had altered his views on this issue.
    The most significant of these events was a market pay study 
by the Watson Wyatt consulting firm indicating that many GAO 
employees were already paid more than what should be the 
maximum pay for their positions.
    Another question CRS was asked to address was whether the 
Watson Wyatt study was correct that many GAO employees are, in 
fact, overpaid. The only way to make such a determination is to 
understand how the Watson Wyatt study was conducted. 
Specifically, what organizations were compared to GAO and what 
occupations were compared to GAO analysts. GAO has declined to 
provide this kind of detailed information to CRS, and it is not 
included in other sources, including its annual report to 
Congress on the GAO Reform Act. Therefore, we are unable to 
offer any observations about whether GAO employees are, in 
fact, overpaid.
    Finally, CRS was asked to describe the financial 
implications of the Comptroller General's decisions to deny pay 
increases to certain GAO employees. Forecasting these kinds of 
financial implications is difficult and depends on a variety of 
factors; however, using what we believe to be reasonable 
assumptions, it appears the financial implications may be 
significant. As detailed in my written statement, by the year 
2010 a GAO band 2A employee making $110,000 a year in 2005 made 
far more than $10,000 a year behind a comparable non-GAO 
Federal employee. Such a differential would also have a 
significant impact on GAO employees' pension. Assuming 
retirement at 2010 and receiving a pension for 20 years 
thereafter, a GAO employee could lose a cumulative total of 
base pay and pension of nearly $120,000.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to answer any questions.
    [The prepared statement of Mr. Copeland follows:]
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    Mr. Davis of Illinois. Thank you very much.
    We will go to Professor Tiefer.

                  STATEMENT OF CHARLES TIEFER

    Mr. Tiefer. I applaud your holding hearings on this vital 
and controversial topic, and I appreciate the opportunity to 
testify.
    I am a professor of procurement law. I am the author of the 
book ``Government Contract Law.''
    Pay for performance not only just hasn't succeeded. One set 
of numbers from TSA illustrate what it has done to morale. Of 
TSA screeners, 82 percent, 17,000 who returned forms, 82 
percent disagreed with the proposition high-performing 
employees are promoted; 86 percent disagreed with the 
proposition pay raises depend on how well employees perform 
their jobs. There is no confidence in the system.
    But worse than that, it is not simply that it is not a 
success; it has channeled scarce personnel resources, the 
money, the training, the attention from the top level away from 
where they really could be used and really are needed.
    I testified last May at a hearing about Department of 
Homeland Security, where you have a stark example. They have an 
impending shortage of people who can deal with IT, information 
technology, and procurement, and they should be devoting these 
personnel resources to training these people, recruiting them, 
retaining them. What happened? Because they diverted the 
resources over to this thing, this personnel system, look at 
what happened with FEMA after Hurricane Katrina. An agency 
which used to handle very competently disasters brought in a 
disastrous performance, itself. What it was doing personnel-
wise was attending to the wrong things.
    An even more serious concern from the legal perspective is 
the other radical elements besides pay for performance in the 
personnel reform of this administration. Suppressing collective 
bargaining, suppressing ruling out arbitration, doing away with 
appeal rights, these are core elements in NSPS in the 
Department of Defense and in what was attempted in Max HR for 
the Department of Homeland Security. They are the heart of 
labor representation.
    Now, some mistakenly believe that the administration's 
efforts in that regard are just going to sort of run out of 
steam on their own because of lack of appropriations to carry 
them out and because of adverse legal decisions. As Delegate 
Norton's opening statement pointed out, courts have thrown out 
in their rulings aspects of these personnel systems. But I have 
to note that the key decision in this regard, which is a 
decision by the Department of Defense, by Judge Sullivan of 
this District, is on appeal. It was heard by a panel in 
December. This is a panel that has on it Judge Cavanaugh, 
formerly White House Associate Counsel, and so it is considered 
not impossible that he will rule and that the panel will rule 
for the White House in this regard.
    Now, the House voted in July 2006, to withhold funding of 
the radical parts of NSPS, the ones I just ticked off, not the 
pay system, just the radical parts--the suppression of labor 
representation that Judge Sullivan had held illegal. That vote 
did not become the law, but, especially if there is an 
appellate ruling that overturned Judge Sullivan's decision, 
that issue will be back front and center for this Congress and 
hearings by this subcommittee will be absolutely crucial. This 
is the forum. This is the place where that issue will be 
debated.
    So much has changed since 2003, and it was a close decision 
even then to give the authority that was given, that it is hard 
to imagine the administration would be given a blank check to 
go ahead.
    Another somewhat technical issue I want to mention, as far 
as we named the big systems. The big systems where personnel 
reform is taking place were all named earlier by Ranking 
Minority Member Marchant, who had the number. But there is one 
specialized one, and that passed last September. The Director 
of National Intelligence, John Negroponte, set in motion a pay 
banding system for the 16 agencies of the intelligence 
community that are under his supervision, which amount to about 
50,000 civilians. DNI says it is going to be asking the 
Congress for what it calls ``gap filling legislative 
authority'' because it doesn't have complete legislative 
authority to do this. Its charter doesn't give it that.
    Well, this subcommittee needs, as it is doing oversight 
over these personnel reforms, to get its views on this subject, 
so that when the DNI--Director of National Intelligence--tells 
the intelligence committees on their annual bill that it is 
just gap filling, that they will get someone who knows about 
personnel issues who says no, it is more controversial than 
that.
    That completes my testimony.
    [The prepared statement of Mr. Tiefer follows:]
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    Mr. Davis of Illinois. Thank you very much. Of course, we 
will have opportunities during the question and answer period 
to dab deeper and further into these issues.
    Mr. Swerdzewski.

                STATEMENT OF JOSEPH SWERDZEWSKI

    Mr. Swerdzewski. Thank you, Chairman Davis, Ranking Member 
Marchant, for the opportunity to speak to you today and 
testify. Thank you for holding this hearing.
    My firm has been actively involved in assisting unions and 
management with the implementation of NSPS. We have assisted in 
understanding how the collective bargaining system will work 
under SPS and assisting agencies with training their managers 
on how performance management will work and the classification 
and compensation systems. My summary remarks address two areas 
which I think are of significant concern.
    As you are aware and as the previous speaker noted, the 
labor relations system, which is a crucial aspect of NSPS, is 
currently subject to a Federal district court injunction. The 
Federal district court in Washington, DC, has determined that 
the labor relations system created by DOD does not meet the 
requirements Congress established in the NSPS statute for 
collective bargaining. The case, as mentioned, is current on 
appeal to a three-member panel of the D.C. circuit.
    The outcome of the litigation at this time is uncertain. 
The case before the D.C. circuit concerning the implementation 
of the new personnel system at the Department of Homeland 
Security was recently decided in favor of Federal unions. The 
D.C. circuit found that the regulations DHS issued on labor 
relations, which are strikingly similar to the labor relations 
regulations of NSPS, violate the union's right to engage in 
collective bargaining.
    The NSPS system was designed, premised on there being 
little or no collective bargaining over any aspects of the new 
personnel system. It was based on immediately terminating 
provisions of collective bargaining agreements, which it found 
were in conflict with NSPS, and implementing the NSPS 
requirements without bargaining. This approach avoided 
bargaining with approximately 1,800 bargaining units in DOD.
    While this was the approach chosen by DOD, there were 
numerous other alternative ways to implement NSPS, such as 
using ability to bargain at the national level with heads of 
DOD unions, rather than with each individual union.
    As a result of DOD deciding to begin implementation for 
non-bargaining unit employees, which is happening as we speak, 
DOD could find itself with a bifurcated personnel system 
dependent on the decision of the D.C. circuit. Should the D.C. 
circuit decision be similar to the decision of DHS, DOD would 
have to determine whether redesign of the system would be 
necessary to accommodate the impact of collective bargaining. 
This would be a costly undertaking and time consuming.
    Another option would be to bargain over NSPS under the 
current title five labor relations statute, once again 
incurring significant cost and delay for new potential 
litigation.
    However, should DOD be successful in the current 
litigation, they would be faced with implementing the new 
system for a large number of employees and then having its NSPS 
labor relation system subject to the NSPS labor relation sunset 
provision in 2009. With the significant overhang of the entire 
labor relations controversy in DOD is that the labor relations 
system, itself, may be sunset in 2009, with little time in 
between the time that a successful decision for a DOD would be 
implemented and new collective bargaining taking place.
    DOD is faced with a difficult decision. If it was to 
determine to proceed with implementation of NSPS with the 
outcome of the litigation uncertain, it may end up with a dual 
personnel system with attendant cost and inefficiency. A dual 
system increases the cost of personal administration and can 
have significant impact on the morale of employees. It may lead 
to inevitable comparisons of which employees are doing better 
under which system.
    The second area of concern is tying a new performance 
management system to pay for performance before the performance 
system has matured. Every performance management system has 
implementation problems and kinks as it is first implemented. 
Some of these problems take a number of years to be worked out.
    Performance management under NSPS is of significant new 
importance. It is just not an evaluation of performance, but it 
determines an employee's pay, bonus, and, most importantly, 
particularly in the area of rack and potential RIFS, retention 
and RIF, it significantly changes the aspect of how an employee 
is treated in RIF, and also leads to potential for non-
competitive promotion.
    The new system has significant strengths; however, it will 
take a period of time for employees and supervisors to be 
comfortable with its use and impact. To prevent the possibility 
of significant frustration with a new system and costs 
associated with disruption cause, using a step-by-step approach 
implementing pay for performance would appear to be more cost 
effective.
    Thank you for the opportunity of testifying today.
    [The prepared statement of Mr. Swerdzewski follows:]
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    Mr. Davis of Illinois. Thank you. Thank you very much.
    We will proceed to Ms. Sistare.

                  STATEMENT OF HANNAH SISTARE

    Ms. Sistare. Chairman Davis, Ranking Member Marchant, 
members of the subcommittee, thank you for inviting me to 
testify on the operation of pay for performance systems in the 
Federal Government and recommendations for moving forward. My 
comments today represent my own views and those of a number of 
Academy fellows with extensive experience in this field.
    I appeared before this subcommittee in 2003 to discuss 
performance and pay recommendations of the National Commission 
on the Public Service, chaired by Paul A. Volcker. The Volcker 
Commission was concerned that Federal personnel systems were 
not designed to establish and measure progress toward 
performance objectives and that the quality of performance was 
too often ignored. Today, performance based management systems 
are being implemented at agencies across the Government.
    The experts predicted from the beginning that the design 
and implementation of these systems would take time, focused 
effort, and committed resources. This proved particularly true 
in the two huge departments Congress provided with new 
authority to institute such systems. The very size and 
complexity of Defense and Homeland Security has served to slow 
the process, and, as others have commented, there have been 
other intervening factors.
    Despite these difficulties with these agencies, there is 
evidence that the Federal workforce and its leadership are more 
attuned to performance than in the past. As the Volcker 
Commission and many others have concluded, this change in the 
culture and operations of government is necessary for it to 
serve the public and the Nation in the 21st century.
    The Academy has assisted several Federal agencies by 
conducting readiness reviews for the implementation of 
performance management and performance based pay systems. These 
include the FBI, the Navy, and the Federal Judiciary. Notably, 
the Academy and the agencies that it has worked with have found 
that such independent outside review is very helpful in 
identifying problem areas that need to be addressed.
    Based on a review of its own studies and those by others, 
the Academy has produced a report on recommended actions for 
Federal agencies working to adopt pay for performance systems. 
We have provided copies of this report for the subcommittee's 
use. I will note a few findings which we feel have particular 
applicability for the successful implementation of pay for 
performance in the Federal Government today.
    The first set of factors have to do with readiness. First, 
top leadership that is committed and capable of leading 
organizational change; preparation of first line supervisors 
for their critical role; clearly defined organizational goals 
and objectives; necessary reporting systems and infrastructure; 
sufficient human and financial resources; and an established 
policy and legal framework, including a clear definition of 
employees who are covered and how the program policies will 
affect them.
    Factors contributing importantly to effective design and 
implementation are: top leadership support and expectations for 
the system, which is reinforced by managers and supervisors; a 
clear and persuasive statement as to why the new system is 
needed, and its anticipated benefits, particularly how it will 
contribute to employees' ability to better accomplish their 
work; a well-established, credible, valid performance 
management system; open communications and program transparency 
between and among all levels of the organization; a commitment 
to test the system components and refine them as needed; and a 
willingness to utilize independent reviewers to assess key 
steps in program design and implementation.
    Some of these factors were identified early on in the 
Federal Government's pay for performance initiatives. Some have 
gained clarity as systems have been implemented. All have been 
validated by experience. They can serve as useful benchmarks 
for examining pay for performance programs and development and 
implementation.
    In studying the track record in pay for performance in the 
Federal Government and its future, we believe there are some 
preconditions to future success. First, leadership commitment 
to the system--I have mentioned leadership three times now; 
commitment throughout the organization to the system; and 
recognition and understanding of its importance in achieving 
program goals; time for rehearsal, review, redesign, and 
retrying, all of which will build participant buy-in and trust; 
and consensus among policymakers and the Executive as to the 
overall design, implementation, cost, and financing of pay for 
performance systems and a commitment to support that consensus 
over a number of years.
    That concludes my prepared remarks. I hope my comments and 
this report will be of use to this subcommittee.
    [The prepared statement of Ms. Sistare follows:]
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    Mr. Davis of Illinois. Thank you very much. I am certain 
that they shall.
    We will proceed to Mr. Simpson.

                   STATEMENT OF KEVIN SIMPSON

    Mr. Simpson. Thank you very much, Chairman Davis and 
Ranking Member Marchant.
    I represent the Partnership for Public Service. We are a 
nonpartisan, non-profit organization. We are dedicated to 
revitalizing the Federal Civil Service by inspiring a new 
generation to serve our country and transforming the way the 
Federal Government works.
    I think the biggest contributions that we can make to this 
conversation are to convey, first of all, a sense of urgency 
about the need for reform; two, a historical context for the 
different flexibilities and innovations that are represented by 
the two most currently prominent reform efforts at DOD and DHS; 
and, three, the importance to this committee and to agencies of 
import focusing on matrix during the course of implementing 
these new innovations.
    First, the question of urgency. It is our long-held view at 
the Partnership that modernizing current personnel systems is 
essential. Many personnel systems are still based on a general 
schedule of pay and position classifications that was first 
implemented in 1949. The result is that the Federal 
Government's current system for recruiting talent, top to 
bottom, under-performs on almost every task it has. It is slow 
in the hiring, it is insular in the promoting, it is out of 
touch with actual performance and the rewarding, and it is 
stingy with the training.
    When young Americans are asked to picture themselves in 
public service careers, they imagine being caught in stifling 
bureaucracies where seniority and not performance rules. 
Perhaps most alarmingly, large numbers of employees, including 
many senior executives carrying a vast amount of institutional 
knowledge are soon going to be retiring. The Federal Government 
will have to be much more aggressive than it has in the past to 
attract new talent at all levels, and the American people are 
increasingly concerned that government is often unable to 
execute its assigned roles in a competent manner.
    We strongly believe that the path to renewed vigor and 
competence requires continued innovation of the Federal 
Government's personnel system. The stakes are high and the 
status quo is unacceptable.
    The next question is what shape should the reforms take, 
and that is where an awareness of the historical context of 
these reforms becomes important. The new personnel systems we 
are talking about now at DOD and DHS did not develop in a 
vacuum. Many elements of those new systems were drawn from 
preexisting demonstration programs, and those programs have 
yielded measurable improvements in hiring and retention and 
employee engagement. Other elements, unfortunately, are brand 
new and essentially untested, including those in labor 
relations and employee appeals.
    Now, over time many Federal agencies have made the case for 
HR reforms, and, as Chairman Davis noted in his opening 
statement, DOD and DHS are simply the latest and the largest. 
My written testimony offers some detail about the progress that 
they have made, but I would like to offer three over-arching 
observations about that track record.
    First, past demonstration projects offer an assurance to 
employees and supervisors that reforms like recruitment 
flexibilities and pay banding and revamped performance 
management systems can work, but the converse is also true. The 
farther we step away from those proven models, as in the 
proposed labor/management sections of the NSPS, which would 
have no real precedent in the various demonstration projects, 
the more difficult it is to draw on those past experiences to 
ensure successful implementation.
    Second, change can take time. Even successful demonstration 
projects initially engendered employee resistance. That is only 
natural. People don't like change. Over time, however, if the 
system is being successfully implemented, you should see 
reduced levels of resistance. For example, the pay banded pay 
for performance demonstration project at the Navy's China Lake 
Naval Weapons Center was initially favored by only 29 percent 
of employees, but by 1998 that number had grown to 71 percent. 
Significant organizational change can frequently take 5 to 7 
years to accomplish.
    Third, as Congress weighs how to proceed with these 
personnel reforms, it will be important to find agreement on 
what we hope to achieve through these reforms and then 
regularly measure our progress toward these goals. Choose your 
key matrix and stick with them.
    In that regard I would commend to your attention work that 
the Partnership has done in the form of the best places to work 
rankings, which build off of OPM's Federal Human Capital Survey 
to provide consistent measures over time of relative levels of 
employee engagements, as well as several other workplace 
environment characteristics, such as the quality of leadership 
that has been mentioned quite a bit by the other panelists 
here, and support for diversity.
    More broadly, we recommend special attention to the areas 
of recruitment, retention, the existence and extent of skills 
gap, the ability of performance management system to make 
meaningful distinctions, and leadership.
    That concludes my testimony. I look forward to answering 
your questions.
    [The prepared statement of Mr. Simpson follows:]
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    Mr. Davis of Illinois. Thank you all so very much. I will 
begin the questioning process.
    Mr. Simpson, you indicated a sense of urgency relative to 
the need for reform. Should we not be as urgent as you 
indicate? What do you see happening, or what would be the 
consequences of a lack of that urgency?
    Mr. Simpson. I think our fear is that we see a continued 
deterioration of the ability of government to perform its core 
functions in a competent and accountable way. Every 
organization depends on its workforce to get its job done, and 
I think there is a growing consensus that the quality of your 
workforce influences the ability of the organization to achieve 
its stated goals. I think what we fear is that the ability of 
government to perform in the way the American taxpayer expects 
continues to decline if we don't continue to innovate on these 
systems.
    Mr. Davis of Illinois. You stated in your written statement 
that GAO has shared some of its annual employee survey results 
with the Partnership in order to be included in your best 
places to work in the Federal Government rankings. Since the 
Partnership did not conduct the survey, itself, how 
knowledgeable are you as to how GAO conducted the survey and 
whether or not the results were validated?
    Mr. Simpson. We had several discussions with GAO and we 
were satisfied that the manner in which GAO implemented the 
survey to their employees was comparable to the way in which 
the OPM administers the FHCS across government, that employees 
were free to fill out the survey and respond in ways that they 
thought appropriate. In fact, the GAO, relative to many other 
Federal agencies, still registers at a very high level of 
employee engagement. They are a very professional, dedicated, 
talented workforce.
    Mr. Davis of Illinois. Were there questions in the survey 
specifically about pay increases and the band two split?
    Mr. Simpson. The only questions that we used were those 
that we could compare to the questions administered in the 
Federal Human Capital Survey. I know that there are questions 
about satisfaction with pay, which we incorporated into our 
index, but I'm sure that there are probably very specific 
questions unique to OPM which we did not incorporate into our 
analysis.
    Mr. Davis of Illinois. Then how comparable would you say 
that the GAO study is to other Federal agency studies that you 
have reviewed or come into contact with?
    Mr. Simpson. The GAO provided us enough data points with 
respect to overall employee engagement--and really this is just 
a matter of essentially four key questions trying to gauge what 
your overall satisfaction is with government--to allow us to 
include them in our overall rankings. That's all that was 
necessary for us to incorporate them into the best places to 
work product. Beyond that I can't really speak in a very 
knowledgeable way to exactly how well the GAO does or does not 
track the rest of the Federal Human Capital Survey.
    Mr. Davis of Illinois. Thank you very much.
    Ms. Sistare, in your written testimony you stated that, 
despite the difficulties DOD and DHS are experiencing in 
implementing their new personnel systems, that there is 
evidence that much productive work has been done and that the 
Federal workforce and its leadership are increasingly more 
performance attuned. Specifically, what productive work has 
been done by DOD and DHS in regards to its personnel system?
    Ms. Sistare. Well, regarding those two agencies, I would 
say that the initial work they have done, and redone in some 
cases where they found they had problems, has started to lay 
the basis for a performance management system. I distinguish 
that from performance based pay in that I think if a 
performance management system is established appropriately, you 
are 80 percent of the way there.
    Now, my particular comment related more to the work that 
the Academy has done in looking at work that has been done at 
other agencies, the early work that was done in setting up 
demonstration projects, work that has been done, for instance, 
at FAA where they had trouble at first but have now gotten more 
on track. One of my colleagues is working with the IRS and has 
found that many of the components for performance management 
are in place. There still is a need to pull it all together.
    So my comment was not so much referring to DHS and DOD, 
where they have had significant problems, but elsewhere in 
government where this kind of effort is ongoing.
    Mr. Davis of Illinois. Thank you very much.
    I would now yield to the ranking member, Mr. Marchant, for 
his first round of questions.
    Mr. Marchant. Thank you, Mr. Chairman.
    I think on the first round I only have one question, and 
then ask for a response from each of the panelists.
    What would you have this committee do to correct these 
situations? We have been in a period of change now for almost a 
decade, it looks like. There doesn't seem to be a lot of 
happiness and joy with the system. So we have a committee, we 
have a new majority, we have kind of an opportunity now, so 
what would you have this committee do? Would you have them 
withdraw the congressional authorization to proceed with this 
whole concept?
    Would you just drop the whole idea, go back to the way 
things were before? Would you abbreviate the goals? Would you 
shorten the timeframe for implementation? Would you file new 
bills? Would you file legislation that gave specific guidance 
and direction to how anything would be implemented?
    It seems like there has been a lot of study about the 
subject and how it has not worked. From my background and 
perspective, I think the most important work this committee can 
do, Mr. Chairman, would be to come up with an idea, a better 
idea of how to move forward.
    I would like to have your response. We will just go in the 
same order as the original witnesses, if you don't mind.
    Mr. Tobias. I think, Congressman Marchant, that the real 
focus of attention needs to be on performance management, not 
pay for performance; defining goals, creating evaluation 
systems, and supporting the change in the culture to a more 
results oriented situation in agencies. I believe that if 
employees see how their work is linked to agency mission, that 
you will get a significant increase in employee engagement and 
productivity in agencies across the Government.
    I think what has happened in DOD and DHS is that the focus 
has been on the second step in the process, pay, and not enough 
focus on the first step, a performance management system. So 
what we have is people getting pay when there is no real 
distinctions that are made on a credible basis of performance, 
so people get very angry about that.
    Until you have a performance management system in place, 
you can't have a pay for performance system. And, with respect 
to what Congress can do about that, I think it goes in a couple 
of ways. One, I think Congress, most committees, have not 
really cared much about performance and what agencies achieve 
or don't achieve or whether the goals are outcome or works hard 
goals. I think Congress is very concerned when the executive 
branch makes a huge blunder, as it often does, but on a day-to-
day basis or on a week-to-week or month-to-month basis there's 
not much attention on the kind of performance goals that 
agencies create.
    So I would urge more focus of attention on the kind of 
performance objectives that agencies create and whether or not 
they achieve them. Do they create outcome performance goals and 
do they achieve them? That would give the political appointees, 
the Senior Executive Service reason for doing the hard work 
necessary to create a performance management system.
    Mr. Copeland. Mr. Congressman, I am with CRS. CRS doesn't 
take positions on legislation or make recommendations, so I 
will pass and leave it to my other panel members.
    Mr. Tiefer. Too tempting for me. I can't resist that way. I 
think you could act on two different sets of things. One is 
that, as to the parts of the personnel systems that impact 
collective bargaining, arbitration, and appeal rights, the 
labor representation provisions, you should de-authorize those. 
You should simply codify the decision of the D.C. circuit panel 
in the Chertoff case that did so for the Department of Homeland 
Security and not wait for or not care what happens with other.
    And then, as for pay for performance, I think that you 
should report conditions such as the availability of sufficient 
money for ample pay raises and say without these conditions 
being fulfilled, without enough training, without the measures 
that people are talking about here, and so forth, it can't be 
ruled out.
    Mr. Swerdzewski. I would simply look at the same question 
that Mr. Tobias talked about, which is the performance 
management system, which to me is the key to the entire reform 
effort. The concept is you are trying to improve performance. 
Unfortunately, when you immediately link pay to a brand new 
system it looks more like cost containment to employees than 
improving performance, and that's a significant issue. It is a 
concern to managers, not just a concern to employees, 
themselves.
    Taking a new system such as performance management, having 
dealt in the trenches with people trying to work with a new 
system in SPS, they understand the value of linking 
organizational goals to achievement. That's a significant 
strength of the new NSPS system, linking those goals, making 
sure that people are actually getting results, not just simply 
performing duties.
    The problem with the system, however, is that it is very 
difficult to take a one-size-fits-all system relating to 
800,000 employees and say it is going to work perfectly the 
first time out. It is a very complex system to begin with, and 
it is very difficult for an employee to understand how 
something which is going to apply across the board to everyone 
is going to apply to them, linking that directly to their pay, 
and particularly more so than just their pay but to their 
status in RIF, which really is a very significant issue to many 
employees because of the ups and downs of what happens in DOD.
    A step-by-step approach where Congress first authorizes a 
new performance management system similar to the one 
authorized, which is linking goals to achievement, and then 
reviewing and giving the agency an opportunity to show the 
results of that system and then linking it to pay, if that is 
an appropriate process.
    Ms. Sistare. I definitely agree. Focus on performance 
management and getting it right first. Also, I would suggest 
that employees know more, not less, about how the system is 
going to affect them and they have a chance to participate in 
the development of those standards. I think some of the early 
regulations left a lot for later manipulation. But maybe most 
important is that Congress and the executive branch and all 
concerned parties reach consensus on where we are going to go 
next and a commitment to understanding what resources that 
takes and a commitment to provide them.
    Mr. Simpson. I would like to associate myself with the 
comments of the other members of the panel in terms of the 
importance of putting performance management first, and I would 
add that I think an appropriate thing to do would be to require 
agencies to obtain some kind of outside certification that can 
be provided by OPM or GAO or even NAPA that their system, in 
fact, does meaningfully differentiate between levels of 
performance, because I think we all agree that is the 
predicate. Once that is in place, then you increase 
dramatically the likelihood that your attempts to then link pay 
to performance are going to succeed.
    I also believe that Congress should probably revisit the 
labor management and adverse appeal provisions of the NSPS, 
because I think that they stand in the way in a very 
fundamental way of the kind of employee buy-in and engagement 
and communication between supervisors and employees that are 
going to be necessary for the systems to succeed.
    Mr. Marchant. Thank you, Mr. Chairman.
    I would just have one followup question. Are you aware of 
any major corporate or public entity that has gone into a 
performance based management that did not have the element of 
the additional pay that was mixed with it, that was successful 
that did not have the element of additional pay involved in it, 
where it was performance based but there was no reward for the 
performance?
    Mr. Tobias. In the article that I cited in my testimony the 
authors review about 2,600 situations where a combination of 
elements were examined. There are a subset of where only 
performance management was included. I don't recall exactly 
which, but the answer is yes.
    Mr. Simpson. If I could offer one additional response, I 
also believe--and I would like to offer specifics in a 
supplemental submission to the subcommittee--that you can have 
a successful and there have been examples of successful 
performance management systems without adding additional pay or 
adding additional resources. You take the resources you have 
and then improve the way in which you are distributing them 
across your existing employees.
    It also might not always be pay. Sometimes it is reward, 
recognition. So long as those recognition and other intangible 
rewards flow from a credible determination by a manager that 
this person has performed better than this person, or this team 
has performed better than this team, that is all you need for a 
strong performance management system.
    Mr. Marchant. Thank you, Mr. Chairman.
    Mr. Davis of Illinois. Thank you very much.
    Mr. Lynch is recognized for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman. Again, thank you and 
the ranking member for holding this hearing.
    I would like to ask the panel--and, again, thank you for 
your willingness to help this committee with its work. The 
National Treasury Employees Union National President Colleen 
Kelley has raised a number of, I think, valid concerns about 
the whole pay for performance protocol, and just recognizing 
that the challenges we have, with the massive impending 
retirements from the Federal system is really at a critical 
level right now. We would be hard pressed to replace these 
experienced, high-performing, very well-trained employees, and, 
as well, we are having tremendous turnover at DHS, you know, 
the baggage screeners, we have just got big turnover with new 
employees. I think the system is bordering on crisis.
    Since it is really the organizations we want to work, we 
want these--in other words, the airport is not safer just 
because one employee is doing their job. They need to all work 
as a cohesive team. Same with all the departments and DHS, as 
well as Treasury.
    It just seems to me that it is counter-intuitive to think 
that by rewarding one employee here and there and denying pay 
to other employees here and there in a system that may be 
working or may not be working, it doesn't achieve our goals. As 
a former iron worker, as someone who actually, you know, has a 
little bit of experience working in a union environment, it 
seems to me that would be a disincentive.
    As a worker, to me that would appear as just being 
favoritism, because there is no system here. There is no 
objective system here for when the extra pay is to be rewarded 
and to whom. So it will appear, from a worker standpoint, as 
just being arbitrary. I think it would be disastrous to morale 
in the workplace. That's what I am hearing. That is what I am 
hearing from the employees at DHS.
    I know that the National Treasury Employees Union has 
pointed out that there was a study conducted--I believe it was 
the Hayes Study that they referred to--that they did a senior 
manager pay band evaluation on this system for the IRS in 2004. 
Here are some of the results: one, 76 percent of the covered 
employees felt the system had a negative impact or no impact on 
their motivation to perform their best.
    Now, 63 percent said it had a negative or no impact on 
their overall performance of senior managers. This is a quote 
from the study: ``only one in four senior managers agreed that 
the senior management pay band evaluation is a fair system for 
rewarding job performance or that ratings are handled under the 
system.'' Last, increased organizational performance is not 
attributed to this senior management pay band evaluation.
    I think it is about leadership and about getting teams to 
work together. You have positive peer pressure, you have 
leadership, and that's what leads these organizations to 
perform to our expectations. I just am a little bit frustrated 
in talking with the employees because they are disheartened and 
there's very poor morale.
    One of the systems that has gone through the A-76 process 
and has sort of adopted this model is the system that is in 
existence right now over at Walter Reed. It went from a system 
of all Federal employees that were doing a tremendous job, 
world class institution, they went in and did an A-76, all the 
Federal employees left. Big exodus. They put in a bunch of 
employees who were not qualified, that were judged by the 
patients over there and the people who are our constituents as 
being inadequately trained, and it has just been a disaster 
over there.
    I hope that, first of all, I would like to hear the 
thoughts of the panel, rather than just going on, about the 
idea of working as a team unit and as an organization to 
achieve the goal. It is no good if I am a team leader and I am 
getting a good evaluation and all my employees get lousy 
evaluations and don't do their jobs. Why the heck should I get 
a performance bonus? I'm not doing my job because the people 
who work for me are not doing their job.
    And right now, I don't know, I was going to say this sounds 
good on paper. It doesn't even sound good on paper. I'm very 
discouraged by it and I think there has to be a better way to 
get our act together here and get the most out of our 
employees. We can start by treating them with a little bit of 
dignity and get them to work together.
    I will just yield. Try to do your best to respond. Thank 
you.
    Mr. Tobias. Well, I think the issue of whether there should 
be individual or group awards is a really critical question. I 
think that is part of how you design the performance management 
system. Is it you against you? Or is it you two working toward 
a common goal? Getting that right, as you suggest, is an 
important element, and it hasn't been achieved.
    I think the statistics that you cite point out the risk of 
going forward before you are ready. If the goal is to increase 
productivity and the result is to decrease productivity, then 
you have had just the opposite result, and I think that shows 
up in the statistics you cite.
    Mr. Swerdzewski. One thing that has always struck me about 
pay for performance is that it assumes that the most 
significant factor that influences an employee's performance in 
the Federal sector is pay, which is basically a private sector 
model. Pay is what you look for. Pay is what increases your 
esteem in the organization. I think part of it is saying that 
pay is the most significant thing that an employee looks for in 
the Federal sector, I think that's probably inaccurate.
    Many Federal employees did not come for pay, because many 
Federal employees would have made a lot of money in the private 
sector, not in the Federal sector. I think that's part of the 
concept of marrying the Federal employees' public service, 
which is not based on pay, which is based on avocation, which 
is based on something they want to do with being paid a living 
wage and being paid a valid wage. It's different than what the 
private sector is. The private sector does not necessarily have 
the same mission or the same confidence in that mission that 
the Federal employees do.
    Mr. Lynch. I couldn't agree with you more. I think, in 
closing--and I want to yield back--when you look at many of the 
jobs that are performed by Federal employees, you know, I just 
think of September 11th and the days thereafter. I was elected 
on September 11th. You know, we had 465 fire fighters who all 
went up the stairs and public employees, all union employees, 
by the way, covered by a collective bargaining agreement, 
heroes every one of them. All those firefighters went up, did 
their jobs.
    And in the days after that when we had the anthrax attacks 
here in Washington the postal employees, in great risk to 
themselves--you know, we were nervous at the time that the 
mails would stop, that commerce would stop. It was the postal 
employees who went to work, knowing that there was anthrax in 
some of those packages at Brentwood and elsewhere, those loyal 
postal employees went to work, not because of their pay scale 
but because they believed very much in the work they were doing 
and they are as patriotic as anyone.
    So I agree with what you are saying, that it is an 
avocation. It really is. There is a lot more self satisfaction 
and self fulfillment that goes into a lot of these jobs, 
although pay is definitely important. I want to say that. But I 
think this model misses a lot of that. I think we have to just 
take another look.
    I agree with the assessment that we have to make sure we 
have this right before we implement it. Thank you.
    I am sorry for going on, Mr. Chairman.
    Mr. Davis of Illinois. I think we are trying to get as much 
information, and I always think that passion helps to bring it 
out.
    Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman.
    I have a question first for Mr. Copeland. On page 10 of 
your testimony you indicated that, though you got some 
framework, some general sense of so-called Wyatt study--and 
here I am quoting--you were not told which companies, 
government units, or other organizations were included or which 
occupations in those organizations were used in the study and 
how they were matched to the GAO occupations. Could a study be 
validated without this information?
    Mr. Copeland. Ms. Norton, I don't believe so. I think in 
order to validate a pay study you have to know basically what 
went into it. You have to know what occupations were compared 
to a GAO analyst. You would have to know what organizations 
were compared to GAO. Without that information, I think you 
would be at a loss to know whether or not the study, itself, 
was valid.
    Ms. Norton. Well, I must say I am surprised, to say the 
least, that GAO, whose job it is to pull such information out 
of others, would have declined to give that information about 
itself, particularly since it has literally preened before this 
committee about how successful its own efforts have been. I 
note that for the record.
    But let me tell you where I began. I began with the notion 
that this system has been in place for a very long time, so it 
stands to reason that if you favor a fair system, as I do, then 
the burden is on you to, in fact, change it, as opposed to 
leaving it to people who would essentially see it go to do so.
    So you start out with I named some of the major assumptions 
I believed were at the root of a system that otherwise would 
seem quite mysterious. One was to avoid favoritism. Another was 
to avoid corruption. Remember, a lot of these have to do not 
with efficiencies but with what to avoid. A third was simply to 
manage a large number of employees, you know, almost 2 million.
    There are other values, other reasons, but you ask anybody 
who knows anything about the system in the broad, I think there 
would be agreement on that. Therefore, if the GAO does not want 
to be transparent about its study, then it seems to me they are 
stopped right at the gate right then.
    The whole notion of not getting information back, 
information at least says to employees that they are basing 
this on something that has been validated. Then they have to go 
from there if they have other problems with it.
    Second, just let me say that I also start from the notion 
that if you have had a system in place for decades and you want 
to wean people away from it, you had better think about how 
that is done, especially if the perception is that you are 
asking them to give up something that they had before. It may 
seem quite intangible. It may be something like pay, which is 
the most tangible.
    My own experience in the private sector, the fact is that I 
served on the board of three Fortune 500 companies. One was 
unionized, the other was not. I know for the record that one of 
the processes--sorry, that's the wrong word for it--one thing 
that the private sector does to keep unions out is to try to 
equalize the pay and benefits. So, to the extent that there is 
a perceived or actual reduction in any, and you are trying to 
reform a system, you are not even at the gate, much less out of 
the gate. How do you draw people to a new system?
    I think most in the private sector are results oriented, 
not process oriented. I am the first to agree that there are 
major differences and we can't imitate that sector entirely, 
but in its results orientation it is important to note that one 
of the things they would to is to make sure employees didn't 
think they were losing something. So there is something about 
beginning with pay. Some of you have testified about this. 
Right out of the gate you say hey, by the way, some of you are 
going to lose, and then you expect the whole workforce to 
salute.
    Mr. Simpson, on page 6 of your testimony, ``changes that 
have occurred in the aforementioned agencies have been a mixed 
record, to be sure, especially in terms of employee 
acceptance.'' I appreciate that you have gone through, in your 
testimony, those agencies. ``We note, however, that a number of 
the Federal agencies that have been allowed to operate under 
alternative personnel systems, such as SEC and NASA, and GAO--
'' better watch out whether or not you can continue to use that 
one--``have consistently been rated by their employees as among 
the top rated, best places to work.''
    Now, given the agencies--SEC, NASA, GAO--I ask you whether 
you regard the employees of those agencies as typical of the 
Federal workforce.
    Mr. Simpson. In some ways they are atypical, in that their 
level of technical expertise and educational achievement is 
very, very high. Overall, for the whole Federal workforce, that 
is a progression that has been happening for some time, as the 
Government has moved from a largely clerical workforce to a 
more educated, more accomplished set of workers. But I take 
your point that, to some extent, smaller agencies with more 
focused missions, have an easier time of cultivating high 
levels of employee engagement.
    Ms. Norton. So if you wanted to convince Federal employees, 
unionized or not, that the movement of this system is going to 
be fair, couldn't your demonstration programs more clearly 
mirror the average worker, particularly since the others are 
apparently being asked or are going to be asked to accept the 
very same system that is used for these top tier workers?
    Mr. Simpson. I'm sorry, I didn't catch that.
    Ms. Norton. I'm asking whether these demonstration projects 
should be geared to the average employee if the average 
employee in time will be asked to live under the same processes 
that have been used for the top tier.
    Mr. Simpson. If I understand your question correctly, 
Congresswoman, I do think that is a fair thing to ask of the 
people who may be subjected to those demonstration project 
processes, with the caveats that we have talked about already, 
that there should be assurances that managers know how to 
differentiate in terms of performance and that there is buy-in 
from the employees about the ways in which their performance is 
going to be measured and what it is that the organization is 
trying to accomplish. Does that answer your question?
    Ms. Norton. Well, of course. I think you have answered my 
question. I think you have answered it honestly. If we are 
talking about typical employees, you are not going to get them 
to think they ought to go for pay for performance when you 
tested it with master scientists, SEC employees, who, under 
Federal law, because they compete with one another and they 
don't want them stealing one another, we have been very clear 
must, of course, meet market rates, and that means these people 
are being very highly paid.
    Again, one has to ask who is the Federal employee, and 
perhaps get a composite. I appreciate your demonstration 
examples. I am trying here to learn how to get the Federal 
employee to buy in. I am very disturbed that the opposite has 
occurred. And GAO, which is unionized, I mean, what do you have 
to do to teach employees? And GAO wasn't unionized, and now 
gets a union, or attempts to get a union as a result here, does 
seem to me that that was not the result that this 
administration desired. It has to be learned from. I don't want 
to keep the union out, but I would like the union to come in in 
the usual way.
    Normally, the Federal workforce has not been unionized 
because there has been some radical transformation forced upon 
them.
    You and your agencies, I was curious. You named the FAA. 
That's an agency that is under my jurisdiction in another 
committee. You said for a time they seem to be the--and I 
realize they are even more different--seem to be the 
negotiation of higher wages for employees. Then you say the 
lesson learned here is that some guidance from the Congress and 
clear expectations are beneficial in reform efforts.
    What have you referenced? What should Congress have done 
there? Because FAA were, in fact, bargaining for wages.
    Mr. Simpson. You know, I am actually not familiar enough 
with the situation at FAA to offer you an intelligent comment 
on that particular piece of the testimony.
    Ms. Norton. Well, I appreciate that. Let me tell you what I 
think you suggest here, at least in large. When employees 
accept a new system--and the ranking member, it seems to me, 
was getting to this question when he asked about whether or not 
there had been pay increases of any kind. I believe that was 
the word. But his implication certainly was whether or not 
people thought they were losing anything or gaining anything.
    My question to you, or for that matter, to others, is 
whether or not, when you are trying to accomplish a, let us 
say, very significant change in the system, whether you should 
assume that there is going to have to be--forgive my use of 
this term--some version of a quid pro quo. Yes, what you had 
here you are losing, but you are not losing in the long run, 
and here is why. I wonder if any of you sitting at that table 
would accept changes that did not assure you that, for what was 
taken from you, something perhaps entirely different but 
comparable enough would come forward so that it was worth the 
change and it was worth your going along with it without 
protest.
    I am essentially asking whether you think, in the history 
of humankind, there are people who want to give up something 
without recognizing that they are getting something in return, 
or whether you think that efficiency for the Government, 9/11, 
changes that we require should be enough for the average 
Federal employee to say, OK, you say change, we give up. We 
won't sue. We won't unionize. We understand what your needs are 
and we will do what you say. Is that not counter-intuitive?
    Mr. Simpson. My sense is, Congresswoman Norton, that it 
helps if you can convey to a workforce that the implementation 
of a new personnel system is never going to result in a 
reduction of the current set of benefits and pay that they 
have. I think workforces can be persuaded to give up a 
certainty of a certain set level of benefits in exchange for a 
less certain set of benefits if they are convinced that those 
less certain set of benefits could be distributed in a way that 
is credible, that tracks actual performance.
    Ms. Norton. And so, Mr. Simpson, you would say, for 
example, that at GAO they should at least have been assured 
that the Wyatt study was validated enough to make that 
assurance, wouldn't you, given what you just said?
    Mr. Simpson. Yes.
    Ms. Norton. And if you were sitting at the GAO and you had 
met what appeared to have been the standards set by the 
leadership, but the study hadn't been viewed by any outside 
expert, could you possibly accept the changes that the GAO was 
asking you to put into place?
    Mr. Simpson. I think that goes to the attitudes that the 
GAO employees have toward the ways in which GAO employees can 
move up and flourish. Do they believe that their supervisors 
are credible in the way in which they are distributing what 
rewards are available to them to give?
    Ms. Norton. Does anyone else have an answer to that 
question? I know some of the questions I am asking now are what 
can only be called intuitive human actions and reactions. 
Really, I'm trying to stay away from how much training you 
need, how good managers have to be, what the steps have to be. 
I am trying to step back and look at the whole system and say 
it is after 9/11, haven't changed the system in three or four 
decades, go. How do I go at it? The first thing I look at is 
what is the average person going to respond to.
    Mr. Tobias. Well, I think you are on to something, and what 
were the changes that were implemented? Narrowing the scope of 
bargaining so as to exclude unions and employees from the 
process, the implementation of, as you suggest, a pay for 
performance system where people gave up and got little when 
this was supposed to stimulate them or incentivize them to 
perform more. And I think, in answer to your first question, 
what does somebody get from participating in an effective 
performance in a system where there is effective performance 
management.
    The answer is it leverages why people come into the Federal 
Government. If I come to the Federal Government and I come to 
the SEC or I come to NASA, I come to HHS, or I come any place 
else with the idea that I am going to make a difference and 
that my work will make a difference in how the agency does its 
work, and I have performance goals that are linked to that 
difference, I will perform better, I will be more engaged, I 
will be more satisfied. That has nothing to do with pay. It has 
only to do with setting targets that are clearly linked to my 
interests in why I came to the agency in the first place.
    Mr. Copeland. With regard to GAO, clearly the GAO employees 
were very concerned about the changes that were being proposed 
by the GAO Human Capital Reform Act. The Comptroller General 
mentioned those concerns in his testimony before this 
subcommittee 3\1/2\ years ago and before the Senate. In fact, 
the GAO Employee Advisory Council said that the GAO employees 
were very concerned about the changes. But the Comptroller 
General repeatedly assured them that if they met performance 
expectations they would get a cost of living increase, and the 
fact that 308 employees at GAO did not get that, despite those 
assurances, I think is the source of a lot of the concerns and 
some of the activities that you mentioned.
    Ms. Norton. Mr. Chairman, I do want to say that I think 
that is a poison pill. I'm talking about a poison pill for 
doing this anywhere else in the workforce now. If you take the 
GAO, which is generally accepting these changes, and then you 
have what appears to be a breaking of the word of top 
management, even though they may slice it differently, that 
appearance is going to kill any acceptance for the rest of the 
workplace employees, especially those at a lower level, which 
are most of them.
    Finally, Mr. Chairman, may I say we are not even following 
our own best practices, which are do as much centrally as 
possible. Do as much quid pro quo or appearance of quid pro quo 
as possible. I take the buy-outs during the Clinton 
administration, the huge downsizing of the Federal workforce. 
Buy-outs are now going to be far more punitive, and so they are 
being fought.
    But essentially the Federal Government said here's some 
money--I don't know, it was $25,000 or something they were 
talking about. Anyway, we need all of them back now. But they 
said, essentially, to those of you who are near retirement, 
here's $25,000. We have invested a lot of skills in you, so 
these employees knew that they could go into the workforce, and 
a lot of them were Baby Boomers, continue to earn, and then 
centrally thousands upon thousands left. Not a peep. You didn't 
hear the unions, you didn't hear studies, you didn't hear GAO 
reports, because there was a sensible way, not all this fancy 
stuff, just looking to how human beings have to be treated in 
order to get them to lead.
    Now we, of course, had other ways to thin the workforce. We 
chose that way. It worked. I note again for the record, Mr. 
Chairman, I think we need to do a hearing on forced buy-outs 
such as occurred in the Library of Congress, other agencies.
    Finally, let me just cite perhaps the ultimate example of a 
sector in terrible trouble, perhaps the worst trouble of all, 
and that's the manufacturing sector and the automobile 
industry, in particular. Look at GM just floating downward. You 
can give it all the reasons you want to. You can blame it on 
the union, you can blame it on the cars, you can blame it on 
the global economy. But GM, there are ways for an employer who 
has collective bargaining to quickly get rid of these 
employees. One is to just shut the place down.
    It is interesting how GM is proceeding. It, too, is 
proceeding on a quid pro quo basis. Its health care is the 
problem. People are giving up and recognize they are giving up 
some of the best health care in the planet in order to accept 
certain kinds of buy-outs. I cite examples from our own 
workforce and our own experience, I cite examples from perhaps 
the worst of the private experience to say I think we have been 
playing around the edges of how people deal with human 
experience and get people to want the same thing that their 
adversary wants.
    I think, Mr. Chairman, it may be too late, particularly 
with the GAO experience. That will reverberate throughout the 
Federal workforce like a wildfire, so whatever you are able to 
do, Mr. Chairman, in repair work, I think at least for a long 
time is only going to be repair work. I thank you for trying, 
and especially by beginning with this hearing this afternoon.
    Mr. Davis of Illinois. Thank you very much.
    Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    I wanted to see if you could validate a way that I am 
trying to look at this and analyze it. We talked a lot about 
the performance management system and whether the system, 
itself, that is being implemented at DOD and DHS and so forth 
is well structured and whether it makes sense, and so forth, 
and we have talked about whether you have to sort of nail down 
the performance management side of it first, in terms of people 
understanding clearly what they are trying to achieve, and then 
maybe the pay portion of it can come later. Those are all 
important things.
    My colleague also addressed this issue of quid pro quo, 
that people aren't going to buy into any system that they are 
transitioning to unless they feel like they are getting 
something, but that is really just one side of the equation. 
The other side of the equation is the conditions under which 
you implement any new system. In other words, even if the 
system, itself, was the best system in the world--and you have 
talked, Mr. Simpson, about how it could take 5 to 7 years to 
transition any workforce to change a culture from where it has 
been to where it needs to be.
    So even if the system, itself, is the best kind of system 
it can be, the next question is: is the environment into which 
you are placing it one that facilitates the transition or does 
not facilitate it. That is what I am particularly interested 
in, because my sense is that the conditions that the workforce 
is in now are ones that all contribute to resistance.
    You are going into an environment where collective 
bargaining rights are being challenged, where personnel are 
working under difficult conditions where you don't have enough 
personnel to handle the job, where they are subject to these 
outsourcing, which destroys morale, etc. So is that a fair 
point?
    In other words, for those of you who have studied what 
makes a transition in a performance evaluation system work 
best, isn't it highly relevant the conditions into which you 
are putting the system and you are making the transition?
    Mr. Simpson. Congressman Sarbanes, I think you are on to 
something. I think you are on to something, as Mr. Tobias would 
say. It is particularly with respect to two points.
    You know, challenges to collective bargaining are really 
very corrosive to employee trust and the ability of employees 
to communicate in a very effective way with supervisors inside 
of that agency, and it strikes me that I think that is a very 
hostile condition in which to try to implement the kind of 
really more vigorous dialog that is necessary to implement any 
kind of pay for performance system.
    Pay for performance is a good goal, not just because it 
puts more pay in the hands of people who are performing well, 
but it obligates all of the parties to pay attention to what it 
is that the organization is trying to accomplish. It has a 
salutary effect of focusing them on what it is that is good 
performance, what is exemplary performance.
    The question of resources is also incredibly important, as 
I have tried to note in my opening remarks. Very frequently 
resources are lacking with respect to particularly training and 
development of the next generation of leaders in the Federal 
Government, and those things are frequently being overlooked in 
the Federal space and I think that when you are facing a 
challenge as large as DHS they shouldn't be, and that actually 
this subcommittee and Congress as a whole has a very important 
role to play in trying to make sure that those kinds of needs 
are adequately resourced.
    Mr. Tobias. I agree totally, Congressman Sarbanes, and I 
would put it this way: everything you have described increases 
the risk that the effort will fail, and so if the issues that 
you identify are not tended to, if they are not focused on, if 
they are not addressed and satisfactorily resolved, it will 
make it very difficult if not impossible to do the steps that 
we have been describing today.
    Mr. Sarbanes. Right, and that doesn't have to be about 
politics or ideology; it could simply be saying when you 
implement reform, particularly reform to an evaluation system, 
it is important, if you want it to work, to make sure that the 
conditions that people are working under are positive 
conditions or it is not going to work as a matter of structure. 
Forget about whether you believe in unions or you don't believe 
in unions, whatever. You want that workforce to feel like 
somebody respects them, is paying attention to them, is giving 
them the resources they need, etc., because it is tough enough 
to implement a system like this and make the transition, even 
if all those conditions are the best they can be--and, of 
course, they are not the best they can be.
    So Mr. Chairman, along the lines of what the ranking member 
said, I would hope that recommendations that come forward from 
you and others as to what we can do with respect to improving 
this transition would not only address the system, itself, as 
we have done, but there would be a second set of 
recommendations that says the conditions, the environment in 
which a change like this is going to happen well has to be 
improved and supported and enhanced in the following ways or we 
can predict now that it is not going to work.
    I yield back.
    Mr. Davis of Illinois. Thank you very much.
    I have a few additional questions, if the panel doesn't 
mind.
    Dr. Copeland, let me ask you, last fall, in response to a 
request that I made, you researched the GAO Human Capital 
Reform Act, and are you aware of any statements made by the 
Comptroller General or the GAO prior to the passage of the 
Reform Act in July 2004, indicating that a market-based pay 
study might prevent GAO employees with meets expectations 
performance ratings from receiving the annual pay adjustment?
    Mr. Copeland. Mr. Chairman, I am not aware of any such 
statements. The statements prior to the enactment of the 
legislation centered--the caveat that was offered in relation 
to the failure to provide these annual pay adjustments was 
whether there would be, in the Comptroller General's words, 
extraordinary economic conditions or severe budgetary 
constraints. No mention was made, to my knowledge, of market 
pay studies as a possible intervening variable.
    Mr. Davis of Illinois. You indicated in your testimony that 
GAO would not discuss the details of how the Watson Wyatt Study 
was prepared. Did you come across any information that would 
indicate that Watson Wyatt would allow GAO or other clients to 
pre-select the organization occupations to which pay 
comparisons would be made?
    Mr. Copeland. I did. One of Watson Wyatt's brochures refers 
to a product line known as peer pay reports, which they say--I 
will just read briefly from it. It says, ``Peer pay reports are 
custom compensation reports that include the responses of 
companies from our data base that you decide are relevant for 
your information needs.'' Their Web site goes on to describe 
these peer pay reports as allowing the client to review 
demographics and determine the best fit for your sample, and 
then you pick the final list of companies to be included in 
your peer pay report. It goes on to say that if the on-screen 
report does not yield the data that you want, you may repeat 
the steps until the appropriate sample has been identified.
    I would caveat this by saying I do not know that GAO used 
these peer pay reports. I do not know the extent to which GAO 
pre-selected these companies. I just offer that as an 
observation that is a product line that Watson Wyatt does 
offer.
    Mr. Davis of Illinois. Let me ask you, in the course of 
your research did CRS ask to meet with GAO to obtain 
information on the implementation of its new pay system. And, 
if so, did you meet with GAO? And, if not, why not?
    Mr. Copeland. We did ask to meet with GAO. We scheduled a 
meeting. The meeting was canceled the day before the meeting 
was to occur. GAO indicated they would respond to our questions 
only in writing.
    Mr. Davis of Illinois. Did you send questions to GAO in 
advance of the proposed meetings? And did GAO answer all of the 
questions? If not, which ones did GAO not answer and why?
    Mr. Copeland. We did submit questions. They answered most 
of the questions, but not all. The questions that they didn't 
answer centered on issues related to the statutory authority 
under which the Comptroller General decided that these 308 
employees should not receive an annual increase. The other 
questions that they did not answer focused on the Watson Wyatt 
Survey, itself. The one document, in particular, that we asked 
to receive that was referenced in another document, a 2004 
document, they indicated was deliberative in nature and 
therefore they would not provide it.
    Mr. Davis of Illinois. Let me ask if each one of you would 
respond. Perhaps this will be our last question. Would it be 
accurate to surmise that pay for performance is a very 
difficult system to actually design and implement, and that, if 
it is going to be used, there are still a great many kinks that 
need to be worked out of the system. I mean, those kinds have 
to be dealt with in an open, honest kind of way from my 
assessment. Would you just respond, and perhaps we will begin 
with you, Mr. Tobias, and go right through and perhaps would 
end our hearing.
    Mr. Tobias. I think a critical value in any effective pay 
for performance system is transparency, not 90 percent, not 95 
percent, but 100 percent transparency. You can't have a 
credible pay for performance system without 100 percent 
transparency. I think that goes without saying. And I think it 
is also true that there is no agency--not DOD, not DHS or 
anywhere else in the Federal Government--who has a performance 
management system in place today that would be the basis for a 
fair, credible pay for performance system. They don't have it.
    So it seems to me that it is premature to be implementing 
pay for performance when we don't have a performance management 
system in place. I believe that is why DHS 2 weeks ago backed 
away from implementing a pay for performance system. They 
recognized that they have not gotten the performance management 
system right, so they are not going forward with pay for 
performance. Not so in DOD.
    Until you get it right, until you get the first step right, 
you should not be taking the second step.
    Mr. Copeland. The difficulty that you mentioned in 
implementing a pay for performance system is evidenced by the 
fact that 26 years ago now I was working at GAO, and the second 
job that I worked on at GAO was looking at the implementation 
of merit pay for GS-13s to 15s. The end result of that review 
was that you really have to get the performance management 
system right first before you implement merit pay, so the 
comments made today are very reminiscent of 25 years ago.
    Mr. Tiefer. Mr. Chairman, I happen to agree with Mr. Tobias 
completely. The example he picked is not a small example, it is 
a giant example; namely, that the Department of Homeland 
Security backed away 2 weeks ago because of, as you say, to put 
it mildly, that it is very difficult to design and it has a lot 
of kinks.
    To read from the Washington Post story at that time by 
Steve Barr, the reason that it had to be lost momentum, the DHS 
system, the personnel system for that Department, was because 
of overly ambitious goals, adverse court rulings, and budget 
cuts. One would imagine that one can't quite understand why the 
Department of Defense is moving forward. It just must assume 
that it has a budget flow that isn't limited the way DHS is. 
Otherwise, it would see reality also.
    Mr. Swerdzewski. Working with Federal employees for many 
years and having asked this very simple question--what's the 
worst part of your performance management system, whatever the 
system is--the worst part universally they seem to answer is: 
my supervisor never talks to me, never tells me what my 
performance is.
    An essential part of performance management is the 
interaction between supervisors and their employees. Those 
employees are concerned that they want to know where their 
performance is. That issue, which is the interpersonal 
relationship, is not really addressed by any of the pay for 
performance systems, any of the performance management systems. 
It is the intangible which is the glue, which is the teamwork, 
which was mentioned by one of the Congressmen, that keeps 
people working successfully, is this relationship. When we have 
pay for performance, which includes significant levels of 
review and performance ratings that go well above the level of 
the individual's supervisor, we have undermined that confidence 
and we have undermined that support.
    These issues have to be resolved. Employees need to 
understand that they can trust this system before the 
supervisor who never talks to them has significant sway over 
their future with the Federal Government.
    Ms. Sistare. Well, as I posit that, by definition a 
successful performance management system includes those 
conversations, and until people are able to have them they are 
not going to have a successful system. But those successful 
conversations, when they take place, can drive individual 
productivity and performance and Government's meeting its 
missions.
    Mr. Simpson. I don't think there is any doubt that 
effective leadership is important in terms of getting the 
greatest productivity out of an organization. Leaders can also 
use pay for performance systems to aid and abet their own 
leadership abilities and their ability to engage and cultivate 
engagement among their staff. Clearly, their transparency and 
their credibility are important factors in their ability to 
effectively use pay for performance systems. I think there have 
been records of achievement and benefits achieved through pay 
for performance systems in the demonstration projects that we 
referenced in our written remarks.
    Mr. Davis of Illinois. Well, let me thank each one of you 
for not only your contribution but also for your patience and 
your willingness to perhaps readjust and to be here longer than 
we had anticipated. Of course, sometimes schedules are such 
that there isn't much that you can, in fact, do about it. But 
we want to thank you also because you have contributed 
significantly to the very first hearing of this subcommittee 
during this session of the Congress. We think that it sort of 
sets precedent for what is yet to come, so we look forward to 
continuing to interact with all of you in a very meaningful 
way.
    Again, I want to thank you for having come, and we 
appreciate your participation.
    This hearing is now adjourned, and without objection it 
stands adjourned.
    [Whereupon, at 5:10 p.m. the subcommittee was adjourned.]
    [The prepared statement of Hon. Elijah E. Cummings and 
additional information submitted for the hearing record 
follow:]
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