Human Capital Management: FAA's Reform Effort Requires a More	 
Strategic Approach (03-FEB-03, GAO-03-156).			 
                                                                 
In 1996, the Federal Aviation Administration (FAA) undertook a	 
human capital reform effort under one of the most flexible human 
capital management environments in the federal government,	 
including broad exemptions from title 5 laws governing federal	 
civilian personnel management. GAO was asked (1) to examine the  
changes FAA initiated in its reform effort, including whether	 
they required an exemption from title 5 and their implementation 
status; (2) determine the effects of the reform effort according 
to available data and the views of FAA officials, managers, and  
employees; and (3) assess the extent to which FAA's reform effort
incorporated elements that are important to effective human	 
capital management.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-156 					        
    ACCNO:   A06000						        
  TITLE:     Human Capital Management: FAA's Reform Effort Requires a 
More Strategic Approach 					 
     DATE:   02/03/2003 
  SUBJECT:   Labor force					 
	     Human resources utilization			 
	     Personnel management				 
	     Strategic planning 				 
	     Best practices					 

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GAO-03-156

                                       A

Appendi x VI

GAO Contacts and Staff Acknowledgments GAO Contacts Gerald L. Dillingham,
Ph. D. (202) 512- 3650 Christopher A. Keisling (404) 679- 1917 Staff

In addition to those individuals named above, William Doherty, Michele
Acknowledgments

Fejfar, David Hooper, Jason Schwartz, E. Jerry Seigler, Margaret Skiba,
Tina Smith, Alwynne Wilbur, and Kristy Williams made key contributions to
this report.

(540006)

Report to Congressional Requesters

February 2003 HUMAN CAPITAL MANAGEMENT FAA*s Reform Effort Requires a More
Strategic Approach

GAO- 03- 156

Letter 1 Results in Brief 3 Background 6 FAA Initiated Personnel Changes
in Three Broad Areas, Some of Which Required Exemptions from Title 5 9

Key Elements of Personnel Reform Have Not Yet Been Fully Implemented 17
FAA Had Little Data on Reform*s Effects, and Views of FAA Officials

Often Differed from Views of Managers and Employees We Interviewed 24 FAA
Has Not Fully Incorporated Elements Needed for Effective

Human Capital Management 35 Conclusions 44 Recommendations 45 Agency
Comments and Our Evaluation 46

Appendixes

Appendix I: Scope and Methodology 49

Appendix II: Structured Interview Form and Selected Results 51

Appendix III: Elements for Effective Human Capital Management 61

Appendix IV: Core Compensation Pay Bands and Grade Conversion for 2002 64

Appendix V: FAA Human Resource Management Office*s Balanced Scorecard
Performance Measures 66

Appendix VI: GAO Contacts and Staff Acknowledgments 68 GAO Contacts 68
Staff Acknowledgments 68

Tables Table 1: Overview of Human Resource Management Office*s Balanced
Scorecard Performance Measures 39 Table 2: Chronology of Internal and
External Evaluations of FAA*s

Personnel Reform 41 Figures Figure 1: Implementation Status of Selected
Initiatives within the

Three Areas of FAA*s Personnel Reform That Did or Did Not Require an
Exemption from Title 5 4

Figure 2: Selected FAA Human Capital Reform Initiatives and Their Need for
an Exemption from Title 5 10 Figure 3: Career Level Pay Bands for Job
Categories under Core

Compensation 12 Figure 4: Implementation Status of Selected FAA Personnel
Reform Initiatives 18

Figure 5: Compensation Systems Applicable to FAA*s Workforce 20 Figure 6:
Compensation of Air Traffic Controllers in Field Facilities

and Regional and Headquarters Offices, 2002 26 Figure 7: Number of FAA
Employees Represented by Unions,

1991- 2001 28 Figure 8: Inspector General*s Comments on the Effects of

Personnel Reform on Hiring Times 29 Figure 9: Funding Alternatives Used
for Managers* PCS

Promotional Moves between Field Facilities, Fiscal Years 1999- 2001 31
Figure 10: Number of Formal EEO Complaints by Year 34 Figure 11: FAA
Employees* Views on the Model Work Environment 35

Figure 12: Volpe Center*s Views on Importance of Linkage 40 Figure 13:
Study*s Views on FAA*s Implementation of Personnel

Reform 43 Figure 14: Inspector General*s Views on FAA*s Implementation of

Personnel Reform 43 Figure 15: Consultant*s Views on FAA*s Implementation
of Personnel

Reform 44 Figure 16: Eight Critical Success Factors Corresponding with the

Four High- Risk Human Capital Challenges That Can Help Agencies Manage
Human Capital Strategically 62 Figure 17: Six Key Practices for Effective
Use of Human Capital

Flexibilities 63

Abbreviations

CFR Code of Federal Regulations EEO Equal Employment Opportunity FAA
Federal Aviation Administration FAACMA FAA Conference Managers Association
FLRA Federal Labor Relations Authority GFT Guaranteed Fair Treatment GS
General Schedule NAPA National Academy of Public Administration NATCA
National Air Traffic Controllers Association OMB Office of Management and
Budget OPM Office of Personnel Management PCS Permanent Change of Station

This is a work of the U. S. Government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. It may contain
copyrighted graphics, images or other materials. Permission from the
copyright holder may be necessary should you wish to reproduce copyrighted
materials separately from GAO*s product.

Letter

February 3, 2003 The Honorable John L. Mica Chairman, Subcommittee on
Aviation Committee on Transportation and

Infrastructure House of Representatives

The Honorable Thomas M. Davis III Chairman, Committee on Government

Reform House of Representatives

The Honorable David Weldon, M. D. House of Representatives

The Federal Aviation Administration (FAA) is managing its personnel under
one of the most flexible human capital management environments in the
federal government. This is a result of 1995 legislation that granted the
agency broad exemptions from laws governing federal civilian personnel
management found in title 5 of the United States Code. Congress provided
these flexibilities in response to FAA*s position that the inflexibility
of federal personnel systems was one of the most important constraints to
the agency*s ability to be responsive to the airline industry*s needs and
to increase productivity in air traffic control operations. In 1996, FAA
announced a sweeping reform of its personnel management system. As we have
reported, 1 major change initiatives generally require a minimum of 5 to 7
years to provide meaningful and lasting results, and so FAA*s
implementation of personnel reform should now be approaching a point where
such results might be discernable. As some other federal agencies, such as
the National Aeronautics and Space Administration, have requested similar
human capital flexibilities, and others, such as the Transportation
Security Administration, are now operating under similar exemptions from
title 5 requirements, FAA*s experiences in implementing its flexibilities
could provide valuable information to Congress in considering whether to
grant the use of such flexibilities at other agencies and in overseeing
their use.

1 U. S. General Accounting Office, Managing for Results: Using Strategic
Human Capital Management to Drive Transformational Change, GAO- 02- 940T
(Washington, D. C.: July 15, 2002).

You asked us to review the status of FAA*s personnel reform. As agreed, we
answered the following questions:  What changes did FAA initiate after
being granted broad flexibilities in

1995 and to what extent did these changes require exemptions from title 5?

 What is the status of the implementation of FAA*s human capital reform
initiatives, and what factors have affected the pace and extent of
implementation?

 What are the effects of FAA*s human capital reform initiatives according
to data collected by FAA and the views of FAA human resource and labor
management officials, managers and employees, and unions?

 To what extent has FAA*s reform effort incorporated elements that are
important to effective human capital management in the federal government?

To answer these questions, we reviewed personnel management requirements
in title 5 and the changes FAA made to its personnel management system as
a part of the agency*s reform effort. We collected and analyzed internal
and external evaluations of different aspects of FAA*s personnel reform
and the available data on the results of reform. We discussed reform with
agency managers and human resource management officials and union
representatives and conducted 176 structured

interviews of randomly selected managers and employees in 27 field
facilities nationwide, 6 of FAA*s 9 regional offices, and FAA
headquarters. Because of limitations inherent in the relatively small
sample size, we did not generalize the views and opinions of those
randomly interviewed to all FAA employees. To augment the views and
opinions collected from the structured interviews, we obtained and
analyzed the data available on the

results of the various initiatives provided by FAA*s Office of the
Assistant Administrator for Human Resource Management and the lines of
business 2 and obtained the views of FAA senior managers in the five lines
of business

and representatives of employee associations. Finally, we considered FAA*s
reform effort in light of elements of strategic human capital management

2 FAA is composed of five separate organizations or lines of business: Air
Traffic Services, Research and Acquisitions, Regulation and Certification,
Airports, and Commercial Space Transportation.

that we developed in 2002 and assessments of human capital management
efforts and agencies* use of personnel flexibilities that we

have performed at other agencies. 3 Appendix I contains a more detailed
description of the scope and methodology of our work. A copy of our
structured interview questions with selected employee responses is
provided in appendix II. We conducted our work from November 2001 to
October 2002 in accordance with generally accepted government auditing

standards. Results in Brief In its human capital reform effort, FAA
initiated changes in three broad

areas* compensation and performance management, workforce management, and
labor and employee relations* some of which required exemptions from title
5. In the area of compensation and performance management, FAA introduced
two initiatives* a new, more flexible pay system in which compensation
levels are set within broad ranges, called pay bands, and a new
performance management system intended to improve employees* performance
through more frequent feedback with no summary rating. Both new systems
required an exemption from title 5. In

the area of workforce management, FAA undertook initiatives in workforce
planning (the process by which an organization plans and manages the size,
capabilities, diversity, and deployment of its workforce), hiring,
training, and relocation of employees. While the planning and training
initiatives generally did not require exemptions from title 5, other
workforce management initiatives did require exemptions. In particular,
exemption from title 5 requirements allowed FAA to establish its own
competitive hiring process and bypass centralized government hiring system
requirements. Finally, initiatives in the area of labor and employee
relations included the establishment of new groups to represent unions and
employees and a new policy initiative to promote diversity and an open
work environment. Neither initiative required exemption from title 5,
which continues to govern FAA*s labor relations.

While FAA has fully implemented some or all initiatives in each of the
three broad areas of the reform effort it began in 1996, some key
initiatives have 3 U. S. General Accounting Office, A Model of Strategic
Human Capital Management, GAO- 02-

373SP (Washington, D. C., March 15, 2002); U. S. General Accounting
Office, Human Capital: Effective Use of Flexibilities Can Assist Agencies
in Managing Their Workforces, GAO- 03- 02 (Washington, D. C.: Dec. 6,
2002).

not yet been fully implemented, and the pace and extent of implementation
have been affected by several factors. In the area of compensation and
performance management, FAA*s new compensation system has not yet been
implemented for about one- quarter of the agency*s workforce whose unions
have not reached a new pay agreement with FAA. FAA*s new performance
management system had been implemented for about 20 percent of the total
workforce (15 percent nonunion employees and 5 percent union employees) at
the time of our review. In the area of workforce management, FAA
implemented most initiatives in 1996 by allowing managers in the lines of
business immediate use of new agencywide flexibilities for hiring and
training employees. While FAA established similar agencywide policies for
developing workforce plans for staff, this initiative has not been fully
implemented. In the area of labor and employee relations, FAA implemented
initiatives establishing new partnership forums for union and nonunion
employees and a new model work environment program. While we did not
determine all of the factors that may have affected the pace and extent of
implementation, FAA*s need to implement initiatives among a workforce with
a wide range of skills and workplace environments and to negotiate changes
with 48 bargaining units within FAA*s nine unions were among factors that
affected the pace and extent of reform implementation. Figure 1 shows
selected initiatives in each of the three areas of reform, along with
whether they required exemptions from title 5 and their implementation
status.

Figure 1: Implementation Status of Selected Initiatives within the Three
Areas of FAA*s Personnel Reform That Did or Did Not Require an Exemption
from Title 5

FAA had little data with which to assess the effects of its reform effort.
While FAA human capital officials cited positive effects of FAA*s human
capital reform effort, the views of managers and employees and union
representatives were generally less positive. In the area of compensation
and performance management, FAA had not systematically collected or

analyzed data to support human resource management officials* view that
compensation changes had increased the agency*s ability to attract and
retain employees. At the same time, many FAA managers and employees we
interviewed were critical of the new compensation system. Nearly twothirds
(110 out of 176) of those we interviewed disagreed or strongly disagreed
that the new pay system is fair to all employees. We were able to find
evidence of specific concerns regarding unfairness in disparities in pay
for air traffic controllers. In addition, according to representatives of
FAA*s Office of Labor Relations and employee unions, a general sense of
unfairness over pay among some FAA employees outside of air traffic
services has led to increased unionization among FAA employees. The number
of employees in unions, as a percentage of the workforce, increased from
63 percent in 1995 to almost 80 percent in 2001. In the area of workforce
management, human resource management officials provided

limited data collected only for air marshals to support their view that
external hiring times had decreased from an average of 6 months to as
little as 6 weeks. In contrast, only 12 of the 46 managers we interviewed
said that the speed of hiring has improved. Finally, FAA labor management
officials

cited a limited amount of data that indicated that the number of
grievances filed at the national level by employees represented by unions
had increased as evidence that new employee- union forums had not improved
labor management relations. The managers and employees we interviewed had
mixed views on the impact of labor and employee relations reform
initiatives.

FAA*s lack of empirical data on the effects of its human capital
initiatives is one indication that it has not fully incorporated elements
that we and others have identified as important to effective human capital
management into its reform effort. These elements include data collection
and analysis, performance goals and measures, and linkage of reform goals
to program goals. Systems to gather and analyze relevant data provide a
basis against which performance goals and measures can be applied. FAA
human resource management officials said that the agency should have spent
more time to develop baseline data and performance measures before
implementing the broad range of reforms but that establishing these
elements was a complex and difficult task. They said FAA was under
significant pressure to rapidly implement reforms and that one impact of

FAA*s incremental approach to implementing the reforms was that baseline
measures tended to change as more people were brought under the reformed
systems. FAA has also not gone far enough in establishing linkage between
reform goals and overall program goals of the organization, another
element we have identified as important to effective human capital
management. We found that the lack of these elements has been pointed out
repeatedly in evaluations of FAA*s human capital reform effort, but FAA
has not developed specific steps and time frames by which these elements
will be established and used for evaluation. Incorporation of these
elements could also help FAA build accountability into its human capital
management approach.

This report makes recommendations designed to enable FAA to develop a more
strategic approach to its reform effort. By building these elements into
its approach, FAA will be better able to evaluate the effects of its

reform initiatives, use the evaluations as a basis for any strategic
improvements to its human capital management approach, and hold agency
leadership accountable for the results of its human capital

management efforts. Doing so would also enable the agency to share its
results with other federal agencies and Congress. In commenting on the
draft of this report, the Department of Transportation and FAA generally
agreed with the report*s recommendations. They emphasized the complexity
of the reform effort and said they have been making significant progress
in developing needed elements for measuring the effectiveness of the new
programs.

Background The FAA*s mission is to provide a safe and efficient national
aerospace system. FAA*s key aviation functions include regulating
compliance with

civil aviation safety standards and air commerce, operating the national
air traffic management system, and assisting in the development of
airports. The achievement of FAA*s mission is dependent in large part on
the skills and expertise of its workforce. FAA consists of nearly 50,000
people, organized into 5 lines of business and several staff offices. Its
workforce

provides aviation services including air traffic control, maintenance of
air traffic control equipment, and certification of aircraft, airline
operations and pilots. FAA*s human resource management office is
responsible for managing agencywide implementation of personnel reform and
providing policy and guidance to regional human resource management
divisions that manage the implementation of personnel reform within their
areas of responsibility.

In September 1993, the National Performance Review concluded that federal
budget, procurement, and personnel rules prevented FAA from reacting
quickly to the needs of the air traffic control system for new and

more efficient equipment and flexibilities for attracting and hiring
staff. In May 1994, building on these concerns, Congress directed the
Secretary of Transportation to undertake a study of management,
regulatory, and

legislative reforms that would enable FAA to provide better air traffic
control services without changing FAA*s basic organizational structure.
The resulting FAA report to Congress, issued in August 1995, 4 concluded
that the most effective internal reform would be to exempt FAA from most
federal personnel rules and procedures. 5

In reporting on FAA*s request for these exemptions in October 1995, we
concluded that, if the Congress decided to provide FAA with new personnel
authority, the agency could be used to test changes before they were
applied governmentwide. 6 At that time, we emphasized the importance of
establishing goals prior to the application of the new authority, noting
that

an evaluation of FAA*s efforts after some experience had been obtained
would be important for determining the success of the effort and its
governmentwide applicability.

On November 15, 1995, Congress, in making appropriations for the
Department of Transportation, directed the FAA Administrator to develop
and implement a new personnel management system. 7 The law exempted FAA
from most provisions of title 5 of the United States Code and other

federal personnel laws. 8 The law required that FAA*s new personnel
management system address the unique demands of the agency*s 4 Federal
Aviation Administration, Background Paper: Personnel Management Reform for

the Federal Aviation Administration (Washington, D. C.: August 1995). 5
Unless explicitly exempted by law, all federal agencies must follow
federal personnel rules and regulations under title 5 U. S. C., including
rules governing how agencies (1) pay and

reward employees; (2) hire, train, and transfer personnel; and (3) conduct
labor and employee affairs.

6 U. S. General Accounting Office, Exempting FAA From Procurement and
Personnel Rules,

GAO/ RCED- 96- 27R (Washington, D. C.: Oct. 27, 1995). 7 P. L. 104- 50,
Fiscal Year 1996 Department of Transportation Appropriations Act.

8 Congress did not exempt FAA from provisions of title 5 pertaining to
veterans* preference; antidiscrimination; federal retirement, unemployment
and insurance coverage; and limitations on the right to strike.

workforce, and, at a minimum, provide greater flexibility in the
compensation, hiring, training and location of personnel. Subsequent
legislation 9 reinstated title 5 requirements related to labor- management
relations, and the Federal Aviation Reauthorization Act of 1996 placed
additional requirements on FAA by requiring that any changes made to

FAA*s personnel management system be negotiated with the agency*s unions.
Accordingly, compensation levels became subject to negotiations with
employee unions. On April 1, 1996, FAA introduced its new personnel
management system.

In January 2001, we designated strategic human capital management as a
governmentwide high- risk area. 10 As our January 2001 High- Risk Series
and Performance and Accountability Series reports make clear, serious
human capital shortfalls are eroding the ability of many agencies, and
threatening the ability of others, to economically, efficiently, and
effectively perform their missions. 11 In 2002, our studies of human
capital management in the federal government identified a variety of
elements* critical success factors and practices for effective
implementation of flexibilities* that are important for consideration of
federal human capital management efforts. For example, systems to gather
and analyze data, performance goals and measures, linkage between human
capital management goals and program goals of the organization, and
accountability are among the elements that we have identified as essential
for effective strategic human capital management. Appendix III provides an
overview of our March 2002 model for strategic human capital management 12
and key practices for federal agencies* effective use of human capital
flexibilities we identified in December 2002. 13 Many of these elements
relate directly to weaknesses we have identified in

our recent reviews of FAA. For example, in July 2001, we reported that a 9
P. L. 104- 122, Further Continuing Appropriations, Fiscal Year 1996, March
29, 1996. 10 U. S. General Accounting Office, High- Risk Series: An
Update, GAO- 01- 263 (Washington, D. C.: January 2001).

11 U. S. General Accounting Office, Performance and Accountability Series*
Major Management Challenges and Program Risks: A Governmentwide
Perspective, GAO- 01- 241 (Washington, D. C.: January 2001).

12 GAO- 02- 373SP. 13 GAO- 03- 02.

lack of performance measurement, evaluation, and rewards hindered the
effectiveness of rulemaking reforms. 14 In October 2001, we reported that
the overall effectiveness of FAA*s training for air traffic controllers
was uncertain and that FAA had not measured productivity gains from
changes in controllers* duties. 15 We reported in June 2002 on FAA*s
difficulties in acquiring and developing staff to meet agency needs
through air traffic control workforce planning. 16 Most recently, we
reported in October 2002 on the inability of air traffic control
management to determine the impact of new relocation policies because of a
lack of baseline data. 17 FAA Initiated

Once exempted from most provisions of title 5, FAA initiated a broad set
of Personnel Changes in

personnel changes. For the purposes of this report, we grouped them into
the areas of compensation and performance management, workforce Three
Broad Areas,

management, and labor and employee relations. Figure 2 shows some of Some
of Which

the major initiatives in each area, as well as whether they required
Required Exemptions

exemptions from title 5 personnel rules. from Title 5

14 U. S. General Accounting Office, Aviation Rulemaking: Further Reform Is
Needed to Address Long- standing Problems, GAO- 01- 821 (Washington, D.
C.: July 9, 2001). 15 U. S. General Accounting Office, Air Traffic
Control: FAA Enhanced the Controller- InCharge Program, but More
Comprehensive Evaluation Is Needed, GAO- 02- 55 (Washington, D. C.: Oct.
31, 2001).

16 U. S. General Accounting Office, Air Traffic Control: FAA Needs to
Better Prepare for Impending Wave of Controller Attrition, GAO- 02- 591
(Washington, D. C.: June 14, 2002).

17 U. S. General Accounting Office, Air Traffic Control: Impact of Revised
Personnel Relocation Policies Is Uncertain, GAO- 03- 141 (Washington, D.
C.: Oct. 31, 2002).

Figure 2: Selected FAA Human Capital Reform Initiatives and Their Need for
an Exemption from Title 5

a FAA is not exempt from title 5 requirements governing labor- management
relations.

New Compensation and FAA required exemption from title 5 rules in order to
implement its new, Performance Management

broadbanded pay structure. Before obtaining that exemption, FAA paid its
Systems Required Title 5

employees according to the General Schedule (GS) pay system mandated by
title 5. 18 In its 1995 report to Congress, FAA stated that the GS pay
Exemption

system* which rewarded employees for their length of service, rather than
for their competencies, skills, or accomplishments* resulted in multiple
levels of supervisors at the same grade level and pay range, an inability
to grant pay increases until statutorily mandated time or experience
requirements were satisfied, and the administrative burden of
administering about 35 special GS pay rates that were exceptions to
regular pay ranges. The Office of Personnel Management (OPM) echoed these
concerns in an April 2002 report. 19 OPM concluded that the GS system*s
narrow pay ranges, time- based pay progression rules and across- the-
board

delivery of annual increases was not effective in promoting
performancebased pay. 18 The GS pay system, as defined in title 5 U. S. C.
5332, consists of 15 grades and 10 steps

within each grade* each grade representing a salary range and each step
indicating the level of pay an employee receives in that salary range.
Over time, an employee*s pay increases as the employee progresses through
the steps within the grade or is promoted. An agency must determine that
an employee*s performance is at least acceptable (i. e., *fully
successful*) before the employee is granted the within grade step
increase.

19 Office of Personnel Management, A Fresh Start for Federal Pay: The Case
for Modernization (Washington D. C.: April 2002).

Once exempted from these provisions of title 5, FAA replaced the
traditional grade and step pay system with a broadbanded pay structure
that provides for a wider range of pay and greater managerial flexibility
to attract, retain, and reward employees. The new pay band system includes
plans tailored to specific employee segments: a core compensation plan for
the majority of nonunion employees and negotiated versions of the core
compensation pay plan for employees represented by unions; a unique pay
plan for air traffic controllers and air traffic managers; and an
executive pay plan for nonpolitical executives, managers, and some senior
professionals.

To illustrate the pay band system, under core compensation, the GS 15-
grade pay schedule and step pay increases were replaced with a system in
which employees are placed in a pay band under nine job categories
including a specialized category that comprises eight specialized
occupations. Each career category contains two to five pay bands. Each

pay band represents a minimum and a maximum range of pay. For example, the
base pay for a band *D* clerical support employee is at least $23,600 but
no more than $35,400. Figure 3 shows the distribution of pay

bands for career level job categories under core compensation. (For a more
detailed comparison of the GS system and core compensation plan, see app.
IV.)

Figure 3: Career Level Pay Bands for Job Categories under Core
Compensation

Note: Additional pay bands apply to management levels for all of the job
categories with the exception of students.

In its 1995 report to Congress, FAA reported that the federal performance
management system under title 5 limited the ability of agency managers to
reward their best employees. After being exempted from this system, FAA
incorporated performance management elements into the new compensation
system to encourage results- oriented behavior and to recognize and reward
performing employees via permanent annual salary increases. For example,
under its core compensation plan, all employees are eligible for a
permanent pay increase, called an organizational success increase, based
on the Administrator*s assessment of the extent to which the entire agency
has achieved its annual agency goals. In addition, notably

high- performing individuals may receive an additional permanent pay
increase, called a superior contribution increase, based on supervisory

recommendation. 20 FAA has criteria for awarding superior contribution
increases. These criteria include collaboration, customer service and
impact on organizational success. Additional criteria may be used by some
lines of business and staff offices because of their unique needs. FAA is
not

required to grant cost of living allowances or locality pay increases but
elected to continue providing these pay adjustments, which are generally
applicable to the federal pay system. 21

FAA*s 1995 report to Congress also stated that the federal performance
management system limited the ability of agency managers to deal with
unacceptable performance. FAA*s legislative exemption from title 5 22
enabled the agency to establish its new performance management system.

According to human resource management officials, this system focuses on
human capital development by helping to make individual employees aware of
their roles and responsibilities in helping the agency achieve its program
goals and provides ongoing feedback and written evaluations to improve
individual employee performance. The new performance management system
incorporates a variety of feedback approaches in addition to traditional
supervisor- to- employee feedback, including

performance plans that discuss managers* and employees* agreements
regarding job expectations and feedback from the employee to the
supervisor. At the end of the performance evaluation cycle, employees
receive a narrative performance summary instead of a year- end rating that
defines employees* performance in specific categories. 23 The performance
summary reflects an assessment of achievements based on outcomes and
expectations, while professional competencies such as collaboration and
customer service are elements of the new compensation system. As a

result, the performance management system is not directly linked to pay
for performance elements of FAA*s new compensation system. While FAA*s
program documentation described union involvement and the use of 20 Under
core compensation, employees that do not meet minimum requirements do not

receive either of the permanent pay increases. 21 Cost of living
allowances are base pay differentials paid to employees working in
locations outside the contiguous United States that have substantially
different local economies.

Federal pay rules provide locality pay for approximately 30 metropolitan
areas and one area covering the *rest of the United States.* 22 5 U. S. C.
4302( b) and 5 C. F. R. 430.201. 23 Title 5 requires the development and
submission of a summary rating; since FAA*s new system does not include a
summary rating, the agency*s exemption from title 5 enabled FAA management
to adopt the new system.

employee focus groups in the development of the system, FAA did not
systematically validate the final version of the performance management
system with all employees before beginning implementation in 2002. Human
resource officials said they planned to validate the new system by

obtaining employee input through an employee attitude survey in 2003 and
through continuing negotiations with employee unions and that these would
allow for continuing refinements.

Some Workforce Some of FAA*s workforce management reform initiatives
required

Management Initiatives exemption from title 5 while others did not. For
example, FAA*s workforce

Required Exemption from planning initiative did not require an exemption
from title 5. On the other Title 5 hand, changes in procedures governing
hiring and locating staff, as well as

some training initiatives, such as fee- for- service training programs,
did require exemptions from title 5.

In requesting exemption from title 5 requirements governing hiring and
locating staff in 1995, FAA cited inefficiencies of working through OPM to
hire and geographically place qualified staff at key facilities or to
reassign employees in response to changing needs. According to an FAA
staffing task force, the agency had lost highly qualified candidates
because

managers could not fill jobs in a timely manner. FAA estimated that it
took an average of 6- 8 months to bring a new hire onboard from outside
the federal service using OPM as a hiring source and that it took, on
average, 60 days to permanently fill a position internally. FAA also
considered OPM allocations for executive positions excessively rigid, as
any increases to the allocation provided had to be supported by the
Department of Transportation and approved by OPM. 24 Moreover, FAA stated
that the

temporary internal movement process (from one FAA location to another),
also governed by OPM regulation, was equally inflexible because it limited
the duration of temporary assignments, and imposed onerous processing
requirements. The movement process required paperwork to be processed

every 120 days and could require up to seven separate personnel actions
for a 2- year temporary assignment.

FAA*s 1995 request for flexibilities in the area of training was based on
perceived redundancies and inefficiencies in its training programs.
According to an FAA personnel reform training task force report in 1996,

24 5 U. S. C. 3392, 3393.

centralized agency training programs required by title 5 25 provided
standard training that did not always address specific business needs. FAA
also requested exemption from title 5 in order to have flexibility to
provide unfunded or partially funded moves of employees to locations where
they and their skills are most needed. According to FAA Air Traffic
Services and human resource management officials, FAA historically
interpreted title 5 rules as a requirement to fully reimburse all
Permanent Change of Station (PCS) moves since the agency considered all
such moves to be in the interest of the federal government.

After Congress provided FAA with its new flexibilities, FAA developed a
new framework for workforce planning to guide executive, occupational, and
managerial/ supervisory workforce planning. This did not require an
exemption from title 5. With regard to hiring, FAA used its exemption from
title 5 to establish hiring policies that allow FAA to hire applicants
directly from outside the government and from other federal agencies
without

going through OPM. To do so, FAA established three hiring approaches: (1)
using centralized registers, (2) announcing vacancies, and (3) authorizing
on- the- spot hiring. 26 According to FAA human resource management
officials, the agency also used its exemption from title 5 to streamline
staffing by decreasing the number of appointment types from 14 to 2
(temporary and permanent) and hiring authorities from approximately 500 to
1. 27 FAA also established a flexible system for adjusting the number of
executive positions in response to shifting agency priorities. This new
system allows the Administrator to establish new executive positions and
reassign and select the top management team.

In the area of training, FAA (1) delegated responsibility for managing
training funds and programs to its lines of business, (2) allowed users to
select training from multiple providers, (3) created fee- for- service
training

25 5 U. S. C. 4107. 26 FAA uses on- the- spot hiring for specific
occupations designated as hard- to- fill (such as engineers at certain
levels) and for special appointing authorities such as outstanding scholar
and welfare- to- work.

27 According to the Accompanying Report to the National Performance
Review, HRM01: Create a Flexible and Responsive Hiring System Office of
the Vice President, (Washington, D. C.: 1993): the federal hiring *system
is overly constrained by statute and regulation; over 300 appointing
authorities provide little useful management information and require
interpretation by personnel specialists.*

programs, and (4) provided broader authority to fund degree programs for
employees. The latter two initiatives required exemptions from title 5. 28

Another area of workforce management for which FAA used its exemption from
title 5 requirements was relocating employees. 29 As part of its reform,
FAA delegated the authority to determine eligibility for and amount of
benefits to each line of business and provided three PCS funding options:
(1) full PCS reimbursement, (2) fixed relocation payments, 30 and (3)
unfunded moves. As before reform, if the move is in the interest of the
government, FAA will fully reimburse the individual for costs associated
with the move. 31 Under the new PCS rules, if FAA determines that it will
derive some benefit from a move, even though the move is not in the

interest of the government, the agency may offer a fixed relocation
payment of up to $25, 000. If a move is not in the interest of the
government and FAA does not determine that it will derive some benefit
from the move, there is no basis for offering PCS funding. However, as a
result of FAA*s personnel reform, employees may choose to make unfunded
moves at their own expense for personal reasons, to gain experience needed
for professional advancement, or for promotion.

Most Labor and Employee FAA was ultimately not exempted from title 5
requirements governing Relations Initiatives Did Not

labor- management relations. As part of its overall reform effort, it
Require Exemptions

undertook several initiatives in the area of labor relations that did not
require exemption from title 5. For example, FAA and its unions
established a new forum* the National Labor Management Partnership
Council* for union representatives and senior management to exchange
information and ideas. To improve overall employee relations, FAA also
established a new forum for nonunion employees to facilitate
communications between employees and FAA management that also did 28 While
FAA was granted an exemption from title 5 training requirements by
Congress, the

President also has the authority to exempt federal agencies from title 5
training requirements (5 U. S. C. 4102( b)).

29 5 U. S. C. 5724 and 5724a. 30 For a more detailed discussion of FAA*s
use of PCS benefits, see GAO- 03- 141. 31 Under title 5 rules, federal
agencies may elect to pay for the expenses of transportation of immediate
family and of household goods and personal effects to and from the
assignment location for a PCS move when it is in the interest of the
federal government.

not require an exemption from title 5. 32 Similarly, in consultation with
union and nonunion employee groups, FAA developed a new policy promoting a
Model Work Environment to create and maintain an effective working
environment for its employees by managing diversity and practicing equal

employment opportunity and affirmative action. In addition, on July 1,
1998, FAA established an Accountability Board to standardize procedures to
insure management's uniform and effective handling of sexual harassment
allegations and related misconduct of a sexual nature. In July 2000, the
scope of the Board was expanded to include harassment and other misconduct
that creates or may create an intimidating, hostile or offensive work
environment based on race, color, religion, gender, sexual orientation,
national origin, age and disability. The establishment of the Board did
not require exemption from title 5. FAA required exemption from title 5 to
establish the Guaranteed Fair

Treatment Program, an alternative dispute resolution method in which a
three- person review panel adjudicates employee grievances. FAA intended
the new program to be the only method by which employees not covered by a
union agreement could seek administrative reviews of grievances and

to replace the traditional approach under title 5 rules involving the
Merit Systems Protection Board. 33 (As discussed later, FAA was later
required by Congress to reinstate the traditional title 5 process and now
offers employees the choice of the two processes for resolving disputes.)

Key Elements of While FAA has completed many of the initiatives that
required changes to

Personnel Reform policy and procedures, it has not yet completed
implementation of some of

the more complex elements of the personnel reform it began in 1996, Have
Not Yet Been

specifically compensation and performance management systems and Fully
Implemented workforce planning initiatives (see fig. 4). FAA officials
said that the diversity of skills and duties of FAA*s workforce as well as
negotiations with unions that represented a large number of employees has
slowed somewhat the pace and extent of implementation of compensation and
performance management initiatives.

32 5 C. F. R. 251. 33 OPM has recognized the need to reduce costly and
time- consuming formal complaints and grievances and encourages federal
agencies to resolve disputes at the lowest possible level through a
variety of alternative dispute resolution methods (60 Federal Register
47039, September 11, 1995).

Figure 4: Implementation Status of Selected FAA Personnel Reform
Initiatives

According to the Assistant Administrator for Human Resource Management,
FAA*s implementation strategy was to establish a broad policy framework
and then focus incrementally on individual elements of

reform to eventually achieve full implementation. Between April 1996 and
October 1998, for certain workforce management and labor and employee
relations initiatives, FAA defined the new flexibilities available through
agencywide *corporate* policies and then empowered the individual lines of
business to adapt and make use of the new tools as appropriate. According
to human resource management officials, these initiatives

helped FAA *jump- start* its reform effort, while other reform
initiatives, such as compensation, required varying incremental degrees of
development because of the diverse characteristics of FAA*s workforce.
Human resource management officials said other initiatives, such as
workforce planning, were considered to be of a lower priority in terms of
implementation.

Most Employees Are Paid As of September 30, 2002, FAA had fully
implemented its broadbanded

Under New Compensation compensation plans, including the performance
incentive increases, for

Systems, but about three- quarters of the agency*s workforce. About 8,000
nonunion Implementation of the New

employees are paid under the core compensation plan, all senior executives
(about 180) are paid under the executive compensation plan, Performance
Management

and about another 9,000 employees represented by three of FAA*s nine 34
System Has Been Limited unions are paid under negotiated versions of the
core compensation plan. Because the performance incentive elements of the
new system were not

incorporated until late 2001, fiscal year 2002 will be the first year in
which all employees under core compensation experience a full cycle with
all the elements of its reformed compensation system fully in place. 35 In
addition, more than 19, 000 air traffic controllers are paid according to
a specialized, negotiated pay plan that includes pay banding 36 and
superior contribution increases. The remainder of FAA*s workforce (about
13,000), 37 most notably those union employees whose union has not reached
a new agreement with FAA, continues to be compensated under the
traditional GS grade and step

system under title 5 rules, as shown in figure 5. 34 Nine different unions
represent various employee segments at FAA. Bargaining units within each
union represent a specific employee segment based on profession or
technical area. For example, NATCA has a bargaining unit called NATCA- AT
for air traffic controllers, as well as five separate bargaining units
collectively known as NATCA- AF, which represents engineers and architects
that manage the maintenance of equipment at air traffic control facilities
and perform other air traffic- related operations. In total, there are 48
different bargaining units at FAA.

35 The research and acquisition organization and the office of the chief
information officer participated in a pilot of the complete Core
Compensation Plan, which included assessment and payout under the
organizational and individual performance- based pay elements.

36 Air traffic control pay bands are based on the amount of air traffic
and complexity of airspace controlled by its field facilities, rather than
solely on the roles and responsibilities of the air traffic control
position description.

37 In addition, approximately 330 FAA employees are paid under a
prevailing rate, locality- based system similar to that applicable to
federal blue- collar employees.

Figure 5: Compensation Systems Applicable to FAA*s Workforce

Note: *Other* includes the wage grade plan for employees paid by the hour.

The implementation of FAA*s new performance management system has not yet
been completed for most FAA employees. In 1995, prior to its reform effort
and in response to new performance management regulations issued by OPM,
38 FAA decided to establish a separate way of managing performance. At
this time, it uncoupled its performance management system from its
compensation system, based performance appraisals on a two- tiered
evaluation (* meets expectations* or *does not meet expectations*) of
employees* performance against performance standards, provided for year-
end summary ratings, and established supplemental criteria (such as making
a significant contribution to the efficiency, economy, or improvement of
government operations) to use as a basis for merit pay. In 1999, as part
of its reform effort, FAA began development of a new performance
management system. This new system consists of a narrative evaluation of
employees* performance against performance standards combined with
feedback and coaching. The new performance

38 Office of Personnel Management, Deregulation of Performance Management
and Incentive Awards: Final Rule, 5 C. F. R. 430 et al., 60 Federal
Register 43936, August 23, 1995.

management system does not provide for a year- end summary rating or a
basis for merit pay. Instead, the new compensation system includes
criteria that are separate and distinct from the performance management
system

(such as collaboration, customer service, and impact on organizational
success) for awarding merit- based pay raises, which are called superior
contribution increases. FAA implemented this new performance management
system on October 1, 2001, for the Office of Human Resource Management,
the Office of Regions and Center Operations, and the Regulation and
Certification line of business. Since October 2001, additional staff in a
variety of FAA organizations have been placed under the new performance
management system, bringing the total under the system to about 20 percent
of FAA*s total workforce. As with the compensation system, the new
performance management system must be included in the negotiated
agreements with FAA*s employee unions.

While Most Workforce FAA implemented most workforce management initiatives
in 1996 by

Management Initiatives defining the flexibilities available through
agencywide *corporate*

policies 39 and empowering the individual lines of business to adapt and
Have Been Completed,

make use of the new tools as appropriate for their staff. The individual
lines Workforce Planning Is in

of business adapted agencywide policies detailing the flexibilities
available Progress for hiring, training, and relocating employees by
issuing parallel policies to

guide their respective workforces and address any applications unique to
their staff. While FAA established similar agencywide corporate policies
and guidance for developing workforce plans for three staff levels*
executive, managerial and supervisory, and occupational* this initiative
is still under way. 40 FAA began its executive workforce planning in
November 2000. Development of Individual Development Plans for executives*
the final element of the executive workforce planning effort* was
originally scheduled to be finalized in August 2001 but was still under
way at the time of our review. FAA has not yet initiated its managerial
and supervisory workforce planning effort. This effort is set to begin in
fiscal

39 Agencywide policies governing travel were published in 1998. 40
Workforce planning is the process by which an organization plans and
manages the size, capabilities, diversity, and deployment of its
workforce. It should include developing strategies for integrating hiring,
recruiting, training, and other human capital activities in a manner that
meets the agency*s long- term objectives to ensure that appropriately
skilled employees are available when and where they are needed to meet an
agency*s mission. Workforce plans should include the collection of valid
and reliable data on such indicators as distribution of employee skills,
retention rates, and retirement eligibility by occupation and
organizational unit.

year 2003. FAA*s occupational workforce planning, which was originally
scheduled to be completed in September of 2001, was still under way at the
time of our review. Human resource management officials said that four of
the five lines of business* Airports, Air Traffic Services, Regulation and
Certification, and Research and Acquisitions* had completed their

occupational workforce plans, and the remaining line of business*
Commercial Space Transportation* was still developing a plan. Labor and
Employee

FAA announced a series of agencywide policies governing labor and
Relations Initiatives Have

employee relations in 1996 that established the National Labor Been
Implemented

Management Partnership Council, the National Employees Forum, the
Guaranteed Fair Treatment Program, and a policy promoting a Model Work
Environment. FAA required less time to develop and implement these changes
because comparable labor and employee representative groups were already
in place prior to the reform effort and FAA had existing appeal processes
and workplace improvement policies that served as a basis for the
Guaranteed Fair Treatment Program and Model Work

Environment. Characteristics of FAA*s

The variety of skills and areas of technical expertise represented in
FAA*s Workforce and the Need to

workforce has affected the implementation of the agency*s new Negotiate
Changes Have

compensation plan. For example, the agency has a unique pay plan for air
Affected the Pace and

traffic controllers in the field based on the complexity of the facility,
while FAA*s new core compensation plan is based on the duties and Extent
of Reform

responsibilities of 16 different types of positions (ranging from students
to Implementation

pilots to physicians). The schedule for implementing changes in
compensation and performance management has been dictated, in part, by the
timing of negotiations with employee unions and the ability of FAA and its
unions to reach agreement on the new systems. For example, because FAA*s
contract with the National Air Traffic Controllers Association (NATCA),
the organization representing FAA*s largest group of unionized employees,
had expired, management had to negotiate a new agreement in 1998 before it
had completed development of its new core compensation pay plan. While the
air traffic pay plan, like the core compensation plan, is intended to
include annual pay increases based on individuals* performance, these
performance- based increases have not been implemented as intended due to
an unresolved dispute between NATCA and FAA management over the details of
implementation. As a result, the air traffic pay plan distributed annual
performance- based

incentive pay equally among all union members for fiscal years 1999, 2000,
and 2001, unlike the core compensation plan developed for the rest of the
agency in which only higher performing individuals may receive
performance- based incentive pay. At the time of our review, FAA and the

air traffic controllers union had not yet determined how fiscal year 2002
and future years* incentive pay increases would be allotted.

According to human resource management officials, the new core
compensation has not been negotiated for union employees that represent
about 30 percent of FAA*s total workforce, and the need to negotiate the
incorporation of compensation and performance management initiatives into
union contracts has increased the length of time needed to negotiate some
contracts. For example, before 1996, FAA and the Professional Airways
System Specialists union took from 3 to 14 months to negotiate an
agreement, but the negotiation time more than doubled to 29 months for the
latest agreement. FAA and the National Association of Air Traffic
Specialists have been attempting to negotiate a new contract since 1997,
and the parties had not yet reached agreement at the time of our review.
Labor relations officials attributed increases in negotiation times to the
expanded scope of contract negotiations, which now includes negotiating
compensation that historically was not negotiated. The performance
management system has also not yet been implemented for most of the
unionized segments of the agency*s workforce. According to FAA officials,
2,324 union employees in FAA*s Office of Regions and Center Operations and
Office of Public Affairs, representing only about 5 percent of FAA*s total
workforce represented by unions, were under the new system at the time of
our review.

FAA Had Little Data on FAA had little or no data on the effects of many of
the reform initiatives.

Human resource management officials cited positive effects of the reform
Reform*s Effects, and

initiatives in the areas of compensation 41 and workforce management,
Views of FAA Officials while in the area of labor and employee relations,
labor management

Often Differed from officials provided a limited amount of data suggesting
that labor relations

Views of Managers and had not improved. Managers and employees with whom
we spoke in our

interview effort generally cited less positive views on the effects of
reform Employees We initiatives. Interviewed

FAA Lacked Data on Effects FAA had not systematically collected or
analyzed data to determine

of Compensation Changes; whether the new compensation system had achieved
its objective of

Officials Said Compensation increasing the agency*s ability to attract and
retain employees. Human

Changes Increased resource management officials said the new compensation
system had

Flexibility, While Managers achieved this objective. They said the
initiative had made the agency more competitive in hiring because FAA can
now offer higher starting salaries

and Employees Perceived within the wider- range of pay afforded by the pay
bands. In addition, air

Inequities in the New Pay traffic officials we spoke with said that the
air traffic control pay plan has

System made it easier to staff hard- to- fill positions at busier air
traffic facilities.

They noted, however, that they did not have a definition for hard- to-
fill positions and had not tracked the extent to which positions they
might consider hard to fill had been filled more or less quickly since the
new pay plan was instituted.

In contrast, many FAA managers and employees we interviewed were critical
of the new compensation system. Nearly two- thirds of those responding to
our structured interview (110 of 176) disagreed or strongly disagreed that
the new pay system is fair to all employees. 42 While we did not attempt
to evaluate the concerns raised during interviews, we did find some
evidence that helps explain these perceptions of unfairness. For

example, concerns about air traffic controller pay disparities are
supported 41 Because 2001 was the first year of implementation for the new
performance management system, we did not obtain views on its effects. 42
In our interview, we did not specifically ask whether managers* and
employees* perception of the fairness of the new compensation system was
based on its treatment of protected categories such as sex or race, but no
interviewees mentioned this issue in their elaboration

of their views.

by a Department of Transportation Inspector General report. This report
found that FAA*s initial implementation of the new compensation system led
to inequities in pay between air traffic managers, supervisors, and
specialists in field facilities, who are covered by the air traffic pay
plan that FAA negotiated with NATCA in October 1998, and a much smaller
group of air traffic managers and supervisors in regional and headquarters
locations, who (together with other FAA managers and employees) are
covered by the new core compensation plan. Because of differences between
the two

plans, managers and employees transferring from regional and headquarters
locations to field facilities were not eligible for the same pay increases
as those who were already assigned to field facilities in October 1998.

To address this situation, FAA issued new guidance in July 2001 that
established consistent rules for setting pay when employees move within
and among the various pay systems in FAA, including movements between
field positions and positions in regional offices and headquarters. Even
so, perceptions of unfairness persist. According to the President of the
FAA

Conference Manager*s Association (FAACMA), the new guidance created the
perception among some managers and employees of a financial disincentive
for air traffic controllers to move from field facilities to regional
offices or headquarters to gain supervisory and managerial experience.
Further, the FAACMA President, as well as some controllers with whom we
spoke, stated that such a move would result in a significant loss of pay*
generally about $10,000 to $20,000. *Because of pay discrepancies,* one
regional air traffic manager said, *we can*t get highly paid employees to
move over to management positions.* Human resource management officials
said that, while some field employees who move to positions in regional
offices or headquarters would see a pay reduction of $10,000 or $20, 000,
not all such moves would result in such a pay reduction.

According to our review of FAA*s July 29, 2001, guidance, an unfair
disparity in pay between air traffic controllers would be created only
when managers and employees were paid above or below established pay
bands. At our request, FAA analyzed the salaries of its air traffic
control staff and determined that 327, or fewer than 2 percent, of about
20,000 controllers

(including supervisors, managers, and employees) were paid above current
pay band maximums. (FAA*s analysis did not identify any staff being paid
below established pay band minimums for their positions.)

When we compared the distribution of 2002 base pay for all air traffic
controllers in field facilities and in regional and headquarters
facilities, we

found that the regional and headquarters controllers are generally paid
less under core compensation than the field controllers are paid under the
air traffic pay plan. As shown in figure 6, the percentage of controllers
paid between $100,000 and $130,000 is smaller in the regions and in
headquarters than in the field. This is consistent with FAA*s goal of

providing higher levels of pay to controllers in an operational
environment. In addition, the percentage of controllers paid between
$60,000 and $80,000 is greater in the regions and in headquarters than in
the field.

Figure 6: Compensation of Air Traffic Controllers in Field Facilities and
Regional and Headquarters Offices, 2002

According to human resource management officials, the pay rates of many
field employees and supervisors can be accommodated within the pay ranges
of regional office and headquarters management positions, as shown above.
Thus, they said that pay discrepancies should not affect the ability to
entice field employees to move into management positions. However, it is
understandable that some air traffic managers and controllers perceive a
financial disincentive for moving from the field to a regional office or
headquarters because, although the range of pay under

both systems is comparable, the number of higher paid positions is greater
in the field than in the regional offices or headquarters. To the extent
that these perceptions persist, FAA may find it more difficult to place
its most experienced air traffic managers in regional offices and
headquarters. However, this disparity is consistent with FAA*s goal of
basing pay on the

operational environment and is explicitly stated in FAA*s July 2001 pay
plan for air traffic managers and controllers. A general perception of
unfairness regarding FAA*s new compensation system has led to increased
unionization among FAA employees outside of the air traffic services line
of business as well as within it, according to both internal and external
sources. FAA human resource officials said that considerable unionization
began before such systems as core compensation were implemented and that
most concerns cited during unionization efforts were of uncertainty and
loss of guarantees, not of unfairness. However, the introduction of the
pay system corresponded with an acceleration in the increase in employees
seeking union representation after FAA began its reform effort. For
example, employees represented by unions (as a percentage of FAA*s total
workforce) increased from 63 percent prior to the reform in 1995 to 66
percent in 1998 and to 79 percent

by 2001. FAA labor relations officials and FAA spokespersons for new
unions at FAA told us that a perceived inequity regarding pay was the
prime reason new unions were formed. A 1999 study by the National Academy
of Public Administration (NAPA) also found that real and perceived
inequities in levels of pay were *major contributors to the view among a
growing number of [FAA] employees that you must belong to a union to get
your fair share.* 43 A more recent FAA study in 2001 likewise acknowledged
that the new pay system *may be one possible explanation* for the increase
in unionization. 44 Between 1998* when FAA began testing and implementing
its new pay system* and 2001, the number of employees choosing
representation by unions increased nearly 20 percent (from about 32,800 to
more than 38,800 employees). Figure 7 shows the number of FAA employees
represented by unions from 1991 through 2001.

43 Personnel Reform in the Federal Aviation Administration, National
Academy of Public Administration, August 1999. 44 Phase II Evaluation: A
Snapshot of Core Compensation Plan Implementation in FAA,

Assistant Administrator for Human Resource Management Evaluation Staff,
FAA, September 2001.

Figure 7: Number of FAA Employees Represented by Unions, 1991- 2001

Because FAA had not completed a full appraisal cycle for staff under its
new performance management system at the time of our review, FAA had
little data, and we were not able to obtain the views of managers and
employees on the effects of the new system. We noted that FAA*s
performance management approach does not use a multi- tiered rating system
to rate performance. We have previously raised concerns that such
approaches may not provide enough meaningful information and

dispersion in ratings to recognize and reward top performers, help
everyone attain their maximum potential, and deal with poor performers.
According to human resource management officials, the compensation

system provides a means of recognizing and rewarding top performers
through separate assessments not directly linked to performance
assessments under the performance management system.

The measurable element related to performance management is the number of
employees that receive superior contribution increases under FAA*s new
compensation system. About 20 percent of employees are to receive the
highest superior contribution increases (1.8 percent addition to base pay)
and 45 percent are to receive the next highest level of superior
contribution increases (0.6 percent increase in base pay).

Human Resource Whereas human resource management officials provided some
limited data

Management Officials Had to support their views that reform initiatives
had improved the agency*s Limited Data to Support

flexibility in hiring and relocating employees, the managers we spoke with
Their Views that Workforce

were less likely to see positive results. According to human resource
management officials, FAA*s use of the new hiring flexibilities, though
Management Initiatives Had restricted by hiring freezes, has reduced
external hiring times from an Increased Flexibility, While average of 6
months to as little as 6 weeks. They said the examples they Some FAA
Managers Were provided for air marshal hiring were intended to provide an
illustration that

Less Positive the policies allow positions to be filled quickly, even in
the case of large

recruitment efforts. However, the Department of Transportation*s Office of
Inspector General, when reviewing FAA*s personnel reform in 1998,
questioned FAA*s ability to support this assertion in the absence of data.
45 (See fig. 8.)

Figure 8: Inspector General*s Comments on the Effects of Personnel Reform
on Hiring Times

Throughout our review, we asked FAA officials from both the human resource
management office and lines of business for any documentation or data to
support the reduction in hiring times and they were unable to provide any
such data. At the close of our review, however, human resource management
officials cited some limited data resulting from the Federal Air Marshal
Program. According to FAA human resource management officials, the program
following the terrorists* attacks on September 11, 2001, was one of the
largest recruitment efforts ever undertaken by FAA. (FAA received and
processed more than 200,000 applications.) According to FAA officials, it
would not have been possible to fill the air marshal positions in the
numbers and time frames required without the flexibilities available under
FAA*s personnel system. They provided data reflecting a sample of
approximately 1,000 candidates for the

45 Department of Transportation, Office of Inspector General, Personnel
Reform: Recent Actions Represent Progress But Further Effort Is Needed To
Achieve Comprehensive Change, Sept. 30, 1998.

air marshal positions. Of those candidates hired, about 30 percent (140)
were hired and placed within 6 weeks. In total, 70 percent (333) were
hired and placed within 8 weeks. 46

In contrast to the positive views of human resource management officials,
FAA managers had less positive views on the effects of hiring reforms,
while employees, who are less involved in the hiring process, had mixed
views. Among the 46 managers we interviewed, only about a third (15)
agreed or strongly agreed that the initiatives have improved the ability
of their line of business or staff office to fill job vacancies.
Furthermore, only 12 of the 46 managers believed the speed of hiring has
improved. These opinions, while not necessarily representative of all FAA
managers today, are similar to the views expressed by FAA managers in
1998. 47 According to

a survey FAA conducted then, 34 percent of managers responding said that
FAA*s streamlined staffing procedures had made it easier to fill vacancies
in their organization, and 32 percent said the speed of hiring had
improved.

Human resource management officials also said that new policies governing
the relocation of employees had given managers more flexibility in
relocating employees and employees more flexibility in making career
decisions. Under these new policies, FAA may provide fixed relocation
payments as well as full funding for PCS moves, and it allows unfunded

moves, which were not allowed under FAA's prior policy. Figure 9 shows
that the majority of moves between field offices for managers from fiscal
year 1999 through 2001 (the only years and type of moves for which data
were available) were unfunded.

46 GAO is conducting a separate review of the hiring and recruitment
program for federal air marshals. 47 FAA Personnel Reform: Implementation
Status Report, prepared for FAA by the Human

Resources Research Organization, January 1998.

Figure 9: Funding Alternatives Used for Managers* PCS Promotional Moves
between Field Facilities, Fiscal Years 1999- 2001

In contrast to the positive views of FAA human resource management
officials, FAACMA representatives raised concerns about the impact of the
new policies in the air traffic services line of business, suggesting that
they might have unintended consequences, including a reduction in the
number of qualified applicants, a reduction in the diversity of potential
applicant pools and subsequent discrimination in filling positions, and a
negative impact on employee morale if fluctuations in the annual funding
for relocation payments led to disparities in the payments for comparable
moves over time. 48 Air traffic officials said they were still reviewing
these concerns and planned to comment in the near future. 49 48 FAACMA,
Legislative Briefing Book, 107th Congress- Second Session, March 2002.

49 For more information about FAA*s new PCS policies and FAACMA*s
concerns, see GAO- 03- 141.

FAA Had Some Data Although FAA*s Office of Labor Relations did not have
historical,

Suggesting Mixed Effects of agencywide data to quantify an increase in
grievances, FAA labor

management officials said the number of grievances 50 filed at the
national Labor and Employee

level by employees represented by unions had increased and this increase
Relations Initiatives, While

was a sign that the initiatives had not achieved the reform objective of
Officials, Managers, and

establishing a collaborative labor- management relations environment that
Employees Held a Variety of

would minimize the traditional adversarial relationship. They said that
the Views number of grievances filed began to increase following personnel
reform

changes the agency had made. For example, they noted that in 1999, the
core compensation plan was implemented and grievances increased. However,
human resource officials said that grievances by union employees could not
have pertained to implementation of the compensation pilot because the
pilot test only applied to nonunion employees, not to union employees. The
Office of Labor Relations

implemented a new system for tracking grievance data in October 2001 and
began systematically collecting information on the sources (such as
headquarters, regions, and unions) and subject (such as compensation, use
of leave, and discipline) of grievances filed across the agency.

While limited data suggested that FAA*s introduction of an alternative
dispute resolution program for employees not represented by unions did
reduce the processing times for resolving appeals, employees* reactions to
the new system suggest that many employees did not see this initiative as
an improvement. FAA introduced its internal alternative dispute resolution
approach* the Guaranteed Fair Treatment Program* in April 1996 in an
effort to streamline the appeals process. This approach met with
resistance from employees and led Congress, in 2000, to reinstate the
traditional title 5 process that uses the Merit Systems Protection Board.
51 As a result, FAA

now offers employees the choice of using either the guaranteed fair
treatment program or the traditional title 5 process. The only data human
resource officials were able to provide on appeals dated back to fiscal
year 1997. Although these data are old, they indicated that for fiscal
year 1997, appeals went through the guaranteed fair treatment process more
quickly (5 to 7 months) than through the Protection Board process (10
months). Even so, the Deputy Assistant Administrator for Labor Relations
said that employees, who have been able to choose between the two
processes, have

50 Grievances are concerns expressed by an employee or the union about a
condition of employment or an allegation that a contract has not been
properly interpreted and applied. 51 P. L. 106- 181, sec. 307.

generally not chosen to use the guaranteed fair treatment process. He said
that one reason employees have not used the guaranteed fair treatment
process is because its potential benefits, such as the employee*s right to
help select the arbitrator, have not been effectively communicated to
them. In addition, according to the Deputy Assistant Administrator, both
FAA managers and union leaders have complained about having to pay the
cost of the arbitrator, while employees have complained about having to
pay their own legal fees for attorneys regardless of the outcome of the
appeal. FAA reimburses an employee*s legal fees if the employee wins his/
her

appeal when using the Protection Board's process. Most FAA managers and
employees we interviewed said that labor and employee relations had
changed in the last 5 years. For example, 130 of the 176 managers and
employees we interviewed agreed or strongly agreed

that labor- management relations had changed in the last 5 years. Of those
130, 75 said that labor- management relations had declined. Similarly, 130
of the 176 managers and employees we interviewed said employee morale had
changed in the last 5 years, and of those 130, 99 said that employee
morale

had declined. While employees* perceptions regarding the changes in labor
and employee relations cannot be linked directly to FAA*s personnel
reform, some employees cited specific reform initiatives, such as
compensation and the Model Work Environment established to improve
employee relations, when discussing the decline of labor- management
relations and morale.

Union representatives for three of FAA*s nine unions said that a complaint
filed against FAA by the Federal Labor Relations Authority (FLRA) in March
2001 had reduced collaboration between labor and management.

FLRA charged FAA with bargaining in bad faith because it had refused to
sign an agreement negotiated with the American Federation of State, County
and Municipal Employees, a union that represents employees at FAA
headquarters. FAA management did not sign the agreement and submitted it
instead to the Office of Management and Budget (OMB) for review. OMB
subsequently disapproved some portions of the contract. Following an
investigation of the circumstances, FLRA directed FAA management and the
union to sign and implement the contract. However, in September 2002, an
administrative law judge recommended that FLRA

dismiss the union's complaint, finding that FAA clearly gave notice to the
union of the OMB approval condition and that the union agreed to that
condition.

In the area of employee relations, FAA provided us with some data that may
support the views of FAA officials that the Model Work Environment has had
a positive effect. A recent decline in the number of equal employment
opportunity (EEO) complaints may, to an unknown extent, reflect the
effects of FAA*s Model Work Environment. These complaints are concerns
expressed by employees about legally prohibited discrimination on the
basis of race, color, religion, sex, national origin, age, or handicap.

An analysis by FAA*s Office of Civil Rights of data it had collected on
the number and types of formal EEO complaints showed that while such
complaints increased in the years immediately following the implementation
of the Model Work Environment in 1996, they began to decline 3 years
later. As figure 10 shows, the number of EEO complaints

increased from 412 in 1996 to 635 in 1998 and then declined to 485 in
2001.

Figure 10: Number of Formal EEO Complaints by Year

Note: The most frequently filed complaints between 1997 and 2001 were for
promotion/ nonselection and nonsexual harassment, followed by complaints
about terms or conditions of employment, assignment of duties, and
training.

About three- quarters of the FAA managers and employees we interviewed
(134 of 176) agreed or strongly agreed that they understood the goals of
the Model Work Environment. These goals include reflecting diversity and
eliminating discrimination and harassment in the workplace, which are
common causes of equal employment opportunity complaints. While some
employees cited positive effects of the program, other employees were

skeptical of its impact. Figure 11 illustrates FAA employees* divergent
views on the Model Work Environment.

Figure 11: FAA Employees* Views on the Model Work Environment

Note: Quotations are from an FAA employee in headquarters and an air
traffic employee in a regional office, respectively.

Even though the decrease in the number of EEO complaints cannot be
directly linked to the Model Work Environment initiative, the availability
of data and analysis on EEO complaints could provide one objective basis
for FAA to discuss the effects and assess the efficacy of this policy and
address the concerns of those employees who view its impact less
positively.

FAA Has Not Fully FAA*s lack of empirical data on the reform effort*s
effects is one indication Incorporated Elements

that it has not fully incorporated elements that we and others have
identified as important to effective human capital management into its
Needed for Effective

reform effort. Systems to gather and analyze relevant data provide a basis
Human Capital

against which performance goals and measures can be applied. FAA human
Management

resource management officials said that the agency should have spent more
time to develop baseline data and performance measures before implementing
the broad range of reforms but that establishing these elements was a
complex and difficult task. They said FAA was under significant pressure
to rapidly implement reforms and that one impact of FAA*s incremental
approach to implementing the reforms was that baseline measures tended to
change as more people were brought under the

reformed systems. FAA also has not gone far enough in establishing linkage
between reform goals and program goals of the organization, another
element we have identified as important to effective human capital
management. We found that the lack of these elements has been pointed out
repeatedly in evaluations of FAA*s human capital reform effort, but FAA
has not developed specific steps and time frames by which these elements
will be established and used for evaluation. Incorporation of these
elements could also help FAA build accountability into its human capital
management.

FAA*s Human Capital The lack of baseline and comparative data for analysis
and the lack of Reform Effort Lacks

performance goals and measures has made it difficult to objectively Needed
Data Collection and

evaluate the effects or success of FAA*s reform effort. Systems to gather
Analysis, Performance

and analyze relevant data provide a basis against which performance goals
and measures can be applied. FAA human resource management officials Goals
and Measures, and

agreed that the agency should have spent more time to develop baseline
Linkage of Reform Goals to

data and performance measures before implementing the broad range of
Program Goals of the reforms but said that establishing measures and goals
and reaching

Organization consensus on their use was a complex and difficult task with
which all

federal agencies struggle. They said the agency was under significant
pressure to rapidly implement reforms, and that one impact of FAA*s
incremental approach to implementing the reforms was that baseline
measures tended to change as more people were brought under the reformed
systems. Human resource management officials also said that, while FAA has
not

systematically collected data and analyzed results to identify the
benefits of all of the reform initiatives, the Office of Human Resource
Management has taken a number of steps since 1998 to increase evaluation
and measurement of some human resource management activities and outputs.
Actions they cited (in addition to the previously discussed evaluations of
compensation implementation) included meeting with consultants, human
resource managers and intergovernmental groups and providing briefings to
FAA management. While we were in the final stages of our review, they
prepared, in response to our request, an informal report 52 that described

the type of measures they were planning to, or had recently begun to apply
as part of a *Balanced Scorecard* approach 53 to assessing human resource
management activities. The measures in the scorecard approach are based on
existing sources of data* customer surveys conducted by the Department of
Transportation and FAA employee attitude surveys* as well as new data
related to the hiring process, such as the *Time to Fill* (a vacancy)
questionnaire, results from employment selection feedback

questionnaires, a survey for new recruits and, since December 1999, a
separation survey for employees leaving the agency. Human resource

52 Office of the Assistant Administrator for Human Resources Management,
*An Informal Discussion of the FAA*s Human Resource Management Balanced
Scorecard* August 21, 2002.

53 A scorecard approach is a framework for measuring and managing
performance also used by OMB and OPM to track how well departments and
agencies are executing management initiatives.

officials said they had been *strategically refining* the employee
attitude survey since 1995 to address key human capital issues, such as
clarity of performance expectations and workforce planning.

Our work on strategic human capital management in the federal government
has found that many federal agencies have difficulties in defining goals
and measures and developing and using performance information to evaluate
the effectiveness of human capital management efforts but that high-
performing organizations do so. In cases where evaluations show that
sufficient progress is not being made, highperforming organizations use
data to identify opportunities for improvement. Similarly, the National
Association of Public Administration (NAPA) has reported the need for
performance data, goals, and evaluation

to determine progress, make midcourse corrections, and assign
accountability for achieving the desired outcomes in federal human capital
management efforts. 54 NAPA reported that, in the absence of such
systematic evaluation information, the human capital management process

will be driven by anecdotal information that may, or may not, reflect the
condition of human capital management in the organization.

Elements we have identified 55 as facilitating the success of improvement
initiatives include establishing

 clear goals and objectives for the improvement initiative,  concrete
management improvement steps that will be taken,  key milestones that
will be used to track the implementation status, and  cost and
performance data that will be used to gauge overall progress. In addition
to the lack of performance data, the performance goals and measures for
personnel reform in FAA*s human resource management and strategic mission
plans are qualitative and do not consistently lend

themselves to measurement or assessment, as they are not specific, 54
National Academy of Public Administration, Implementing Real Change in
Human Resources Management: The Case for Transforming Public- Sector Human
Resources Management, July 2000.

55 U. S. General Accounting Office, Management Reform: Elements of
Successful Improvement Initiatives, GAO/ T- GGD- 00- 26 (Washington, D.
C.: Oct. 15, 1999).

measurable, and time- based. For example, the goal related to reform in
FAA*s 1999 human resource management strategic plan is to *ensure that FAA
has the right people doing the right work at the right time at the right
cost* and has the following measures associated with it:

 increased flexibility to pay competitive salaries;  increased ability
to attract and retain high performers;  increased managerial flexibility
to assign, locate, and manage the

performance of employees more effectively; and  decreased hire cycle
time. This goal and its associated measures do not lend themselves to
specific, quantitative, and time- based evaluation. For example, while
*decrease hire cycle time* implies that hire cycle time will be measured
as part of evaluating the achievement of this goal, it does not establish
a quantitative basis for assessment or specify a period of assessment. A
more specific, quantitative, and time- based measure might be to *decrease
median or

average hire cycle time by September 2003 by X percent (from median or
average cycle time for fiscal year 2002) for Y percent of all new hires.*

We reported on FAA*s weaknesses in developing and using performance
information in our report on the results of governmentwide surveys of
performance management issues in May 2001. 56 In that report, we found
that FAA managers we surveyed reported they did not consistently use
performance measures or data and that FAA was worse than the rest of the
federal government on multiple aspects of performance measurement and the
use of performance information. For example, we found that the agency was
statistically significantly lower than the rest of the government in the
percentage of managers who reported that they had outcome, customer
service, or quality performance measures; and in the percentage of
managers who reported that they used performance information to set
program priorities, allocate resources, adopt new approaches, or
coordinate program efforts.

56 U. S. General Accounting Office, Managing For Results: Federal
Managers* Views on Key Management Issues Vary Widely Across Agencies, GAO-
01- 592, (Washington, D. C. May 25, 2001).

At the time of our review, human resource management officials were still
in the process of developing baseline data, performance goals and measures
and were still working to identify potential linkages between its human
capital management reforms and program goals of the organization. The
types of data and measures proposed by human resource management officials
are comparable to those that have been historically suggested* many of
them since FAA initiated development of its personnel reform in 1995* and
their implementation is an important effort. However, the balanced
scorecard measurement approach proposed by human resource management
officials focuses primarily on the work environment and processes within
the Office of Human Resource Management and the hiring

process rather than on the many other human capital management reform
initiatives being implemented across the agency. According to FAA human
resource management officials, the office had been working for more than a
year to expand the scope of the scorecard to incorporate measures with
wider implications for all of FAA in response to discussions with human
resource managers and based on information from FAA customers and
employees. Table 1 provides an overview of the balanced scorecard measures
proposed by the human resource management office, highlighting those that
focus on the activities and output of the Office of Human Resource
Management. An expanded overview of these performance measures that
includes areas of measurement and proposed data sources is provided in
appendix V. Table 1: Overview of Human Resource Management Office*s
Balanced Scorecard

Performance Measures Measurement perspectives Performance measures

Customer Human Resource Human Resource

Human Resource Management Office

Management Office Management Office service excellence

consultation and innovation and expertise valued

leadership Performance Human Resource

Efficient use Of Human Improved practices

Management Office Resource Management

within Lines of results meet goals Office resources

Business Internal

Consistent human Effective labor

Attract and retain processes resourcemanagement

management high caliber

policy interpretation relationships

employees Human Resource

Empowered Human Satisfied Human

Rewarding Human Management

Resource Resource Management

Resource Office employee

Management Office Office employees

Management Office employees

work environment

(Continued From Previous Page)

Measurement perspectives Performance measures

Learning and Capitalize on Human

Increase Human Leverage Human growth Resource

Resource Management Resource Management Office

Office capacity to Management Office talent

improve data/ information Source: FAA. Note: Shaded areas indicate
measures focused internally on the Office of Human Resource Management.

Clearly linking an agency*s overall human capital management strategy to
its program goals is another element we have identified as key to
effective human capital management. In a 1997 review of FAA*s personnel
reform, the Volpe National Transportation Systems Center highlighted this
issue of linkage, as shown in figure 12. 57

Figure 12: Volpe Center*s Views on Importance of Linkage

While FAA has taken some steps to link its human capital reform
initiatives to its program goals, these steps do not go far enough to help
the agency measure the reform*s success. Specifically, FAA incorporated
various aspects of personnel reform into its 1999 strategic human resource
management plan, 58 which stated that performance measurement was to focus
on attaining organization goals but did not establish the measures with
which to do so. Similarly, FAA*s 2001 strategic plan, prepared under the
Government Results and Performance Act, includes a goal for the agency to
*fundamentally change the way it operates by implementing personnel
reform* but does not explicitly link this goal for personnel

reform to organizational program goals of aviation safety and system
efficiency. Human resource management officials said that organizational
and individual incentive goals established under the compensation system

57 Volpe National Transportation Center, FAA Personnel Reform Evaluability
Assessment,

April 1997. 58 Federal Aviation Administration, Human Resources Strategic
Plan 1999- 2002, April 1999.

explicitly linked individual performance to agency goals including safety
and system efficiency and that the standards for performance under FAA*s
new performance management system directly reflect agency and
organizational programmatic goals. Nonetheless, linkage between FAA*s
personnel reform goals and the agency*s programmatic goals continues to be
weakened by a lack of specific, quantitative, and time- based measures and
goals.

FAA*s lack of relevant data, analysis, and performance goals and measures
has been repeatedly articulated since 1995 by other internal and external
reviews of the reform effort. While these reviews have called for FAA to
incorporate these elements into its reform effort, and several recent
studies have also highlighted the issue of linkage, FAA has not
established and carried out a plan with specific steps and time frames for
doing so. A chronology of these studies is provided in table 2.

Table 2: Chronology of Internal and External Evaluations of FAA*s
Personnel Reform Date Evaluation Result

October 1995 Exempting FAA From Procurement and In reporting on FAA*s
request for legislative flexibilities, GAO emphasized

Personnel Rules, U. S. General the importance of establishing goals prior
to the application of the new

Accounting Office authority, noting that an evaluation of FAA*s efforts
after some experience

had been obtained would be important for determining the success of the
effort and its governmentwide applicability. December 1995 Best Practices
in HRM: Briefing to FAA

An evaluation briefing prepared for FAA*s personnel reform task forces
Personnel Reform Task Forces, FAA identified measurement of human resource
practices and processes as an essential element for creating a strategic
context for personnel reform. March 1996 Proposed Personnel Reform
Evaluation

This report identified evaluation measures for FAA*s personnel reform and
Strategy, FAA strategies for engaging stakeholders in measuring the
results of reform initiatives. April 1997 FAA Personnel Reform
Evaluability

The Center conducted an assessment to evaluate potential performance

Assessment, Volpe National indicators for measuring the effectiveness of
reform efforts and concluded

Transportation Systems Center that reform principles were not stated in
terms of tangible outcomes that

could be easily measurable and there was no clear sense of priority among
them. September 1997 The FAA Human Resource Management

This study linked the reform initiatives with proposed indicators of
reform System Evaluation Plan: Interim Report,

implementation, and potential intermediate and final outcomes to
facilitate Human Resources Research

program evaluation. Organization

January 1998 FAA Personnel Reform: Implementation

This report identified a lack of baseline set of data and concluded *there

Status Report, Human Resources has been no effort to establish systematic
measurement systems over the

Research Organization remaining course of personnel reform implementation.
Without baseline

data and the ability to measure current status it is difficult to assess
whether or not objectives are being met.*

(Continued From Previous Page)

Date Evaluation Result

September 1998 Personnel Reform: Recent Actions

This report concluded that FAA had not identified the specific results it

Represent Progress But Further Effort Is

expects to achieve from these programs or established outcome goals and

Needed to Achieve Comprehensive measures to accurately demonstrate that
its personnel reform initiatives

Change, Department of Transportation were effective in resolving the
original problems that led to reform. Office of Inspector General

September 1998 The FAA Personnel Reform Evaluation

This report presented a general framework for evaluation of personnel

Plan, Human Resources Research reform initiatives and concluded, ** it is
critical for the agency to develop Organization

and implement evaluation and measurement systems to assess the results and
success of these large- scale HRM [human resource management] change
efforts.*

April 1999 FAA Manager Satisfaction with This study recommended that FAA
develop a strategy for personnel reform Personnel Reform Implementation
and

to identify long- term objectives and outcomes, address how reforms would

HR Customer Service, Human support accomplishment of mission goals, assess
the current status of

Resources Research Organization implementation, develop performance
measures, and develop a

comprehensive schedule for implementing reform initiatives. July 1999
Personnel Reform Evaluation Database:

This report provides a framework for the development of a database to

Baseline Report, FAA evaluate personnel reform measures. August 1999
Personnel Reform in the Federal

The Academy concluded that the lack of baseline data and specific

Aviation Administration: Three Year

measures to assess the effectiveness of personnel reform and establish a

Status Report, National Academy of basis for continuous improvement was a
major issue for FAA that *must be

Public Administration resolved if personnel reform is to achieve its full
potential.*

November 1999 A Communication Strategy for Improved This report provides a
framework for encouraging the evaluation and

HRM Evaluation and Measurement, FAA measurement of human resource
management programs and services and cultivating, understanding, and using
evaluation tools, data, reports and recommendations to improve the quality
of human resources products and services.

January 2002 Human Resource Performance

This briefing recommends expanding the focus of the Office of Human

Measures for the FAA, Booz- Allen Resource Management*s balanced scorecard
to additional measures

Hamilton dealing with attracting and retaining a talented workforce, as
well as linking

the outputs/ outcomes of human resource initiatives to the agency*s
mission goals.

September 2002 Federal Aviation Administration: Five

This most recent study of the agency*s progress in personnel reform found
Year Review of Personnel Reform and

that the reform effort had suffered from a shortage of baseline data and

Strategies for the Future, Deloitte & metrics to measure the impact of
various initiatives on agency operation

Touche, LLP and strategic objectives. Accordingly, the report recommended
that the

Office of Human Resource Management expand the collection of hard data and
the use of objective metrics to evaluate the effectiveness of personnel
reform initiatives. Source: GAO.

Several of these studies also attributed problems related to a lack of
ownership for the reform effort or a lack of accountability for
implementation or results. For example, in 1999, the National Academy of

Public Administration identified the lack of ownership for personnel
reform as a challenge that must be resolved. 59 (See fig. 13.)

Figure 13: Study*s Views on FAA*s Implementation of Personnel Reform

As shown in figure 14, a 1998 departmental review found that FAA had not
clearly established accountability for implementation of the reform
initiatives. 60

Figure 14: Inspector General*s Views on FAA*s Implementation of Personnel
Reform

According to the most recent assessment of the status of FAA*s personnel
reform, published by a consultant in September 2002 and shown in figure
15, a lack of ownership and inconsistent support for personnel reform by
FAA*s executive management team has impaired reform implementation
efforts. 61

59 National Academy of Public Administration, Personnel Reform in the
Federal Aviation Administration: Three Year Status Report, August 1999. 60
Department of Transportation, Office of Inspector General, Personnel
Reform: Recent Actions Represent Progress But Further Effort Is Needed To
Achieve Comprehensive

Change, Sept. 30, 1998. 61 Deloitte & Touche, LLP, Federal Aviation
Administration: Five- Year Review of Personnel Reform and Strategies for
the Future, (McLean, VA., Sept. 2002.) p. 6.

Figure 15: Consultant*s Views on FAA*s Implementation of Personnel Reform

Our work on effective human capital management at federal agencies has
found that building accountability into an agency*s human capital approach
is important to the effective use of human capital flexibilities.
Furthermore, we have found that in high performing organizations, managers
are held accountable for achieving strategic goals, and clearly defined
performance expectations are in place to hold employees and teams at all
levels accountable. Establishing systems for gathering performance data
and incorporating specific, time- based performance measures and goals
that are linked to the agency*s program goals into the reform effort would
improve the agency*s ability to set more meaningful strategic goals for
its human capital reform effort and more clearly defined performance
expectations for its human capital management. Together, this would help
the agency build accountability into the reform effort and its overall
human capital management approach.

Conclusions Congress granted FAA flexibilities in its human capital
management so that the agency could more effectively manage its workforce
and achieve its

mission. Yet, more than 7 years after the agency received broad exemptions
from laws governing federal civilian personnel management, it is not clear
whether and to what extent these flexibilities have helped FAA to do so.
It is clear that FAA has faced significant challenges in implementing its
human capital reform initiatives and evaluating the success of its effort.
Challenges, including implementing reform initiatives throughout its
workforce with a wide range of skills and negotiating agreements with
employee unions, reflect difficulties that may be faced by other federal
agencies that seek to implement human capital management flexibilities.

FAA is not able to determine the effectiveness of its human capital reform
initiatives because it has not incorporated key elements of effective
human capital management into its effort thus far. While FAA has
established preliminary linkages between its reform goals and the agency*s
program

goals, the lack of explicit linkage will make it difficult to assess the
effects of the reform initiatives on the program goals of the organization
even after data, measurable goals, and performance measures for human
capital management efforts are established. FAA has acknowledged the
importance of establishing these elements. It has repeatedly said that it
is working to collect and analyze data and develop performance goals and
measures, but it has not completed these critical tasks, nor has it
established specific steps and time frames by which it will do so. As FAA
moves forward, a more strategic approach to its reform effort would allow
it to better evaluate the effects of its reform initiatives, use the
evaluations as a basis for any strategic improvements to its human capital
management approach, and hold agency leadership accountable for the
results of its human capital management efforts. Doing so would also
enable the agency to share its results with other federal agencies and
Congress.

Recommendations In order to acquire the information needed to make more
informed strategic human capital decisions and better ensure that FAA*s
personnel

reforms achieve their intended results in a timely fashion, we recommend
that the Secretary of Transportation direct the FAA Administrator to 
develop empirical data and establish specific, measurable, time- based
goals and performance measures related to these goals; and use them to

evaluate the effects of the reforms on the agency*s human capital
management, programs, and mission so that the agency can make any needed
improvements. Developing these evaluation tools is particularly urgent for
those initiatives, such as FAA*s new compensation system for air traffic
employees, for which possible negative effects have been raised by
employees; and FAA*s new performance management system.

 define and describe explicit linkages between human capital management
reform initiatives and program goals of the organization.  establish time
frames by which data will be collected and analyzed and

by which goals, performance measures, and explicit linkage will be
established and used to evaluate the success of the reform initiatives and
hold agency leadership accountable for the results of its human capital
management efforts.

Agency Comments and We provided a draft of this report to the Department
of Transportation for

Our Evaluation its review and met with Department of Transportation
officials, including

FAA's Assistant Administrator for Human Resource Management, to obtain
their comments. The department officials generally agreed with the
report's recommendations and indicated that the findings presented in the
audit report would be useful as FAA moves forward with its human capital
reforms. They also noted issues in three areas.

First, these officials emphasized that implementing a new human capital
system within an existing workforce presented FAA with a significant
challenge, given the size of FAA's workforce, the large unionized
population, and the variety of occupations and functions within the
agency. Second, while these officials agreed that establishing more
definitive

measures and baseline data, as identified in our recommendations, are
important in determining the effectiveness of the new human capital
programs, they stated that they have been making significant progress in
developing those measures.

Third, in responding to our concern that FAA is not able to determine the
effectiveness of its human capital reform initiatives because it has not
incorporated key elements of effective human capital management into its
effort, these officials told us that FAA used the results of its pilot
testing and phased implementation approach to modify systems to ensure
effectiveness before full implementation and that subsequent assessments
were conducted to determine whether the programs were accomplishing the
intended goals. They said that FAA already has substantial information

to indicate that its new programs and initiatives are on the right track
and should be effective in meeting the reform effort*s intent. As
examples, they referred to reviews by NAPA and the consulting firm
Deloitte & Touche, which they said had characterized FAA*s human capital
reforms as *stateof- the- art.* The officials stated that FAA*s design
process had been characterized in the NAPA review as yielding high-
quality policies, and

FAA*s reform effort had been characterized in the NAPA review as heading
in the right direction and as *a change management issue that is
unparalleled in the federal sector.* They further stated that Deloitte &
Touche*s review had found that the guiding principles and objectives of
FAA*s personnel reform were sound, and that some programs have already
been largely successful, such as streamlined recruitment and staffing
processes. Notwithstanding the characterizations in these assessments,

both NAPA and Deloitte & Touche raised concerns about issues we found in
our review, particularly FAA*s lack of baseline data and specific

performance measures to assess the effectiveness of its reform effort and
establish a basis for continuous improvement.

Department officials also said that FAA*s new human capital system is
consistent with the President*s Management Agenda and the Administration*s
Human Capital Plan, and that other federal officials have touted the types
of programs FAA developed and implemented as the wave of the future for
the rest of the federal government. FAA emphasized that its agency is
unique among federal agencies in implementing a performance- based and
market- based pay system applicable to both nonunion and union employees,
which clearly links annual pay

adjustments to key agency programs and to individual employee performance
and contributions. We agree that other federal agencies considering human
capital reform may find FAA*s programs and experiences useful to consider,
as FAA was granted human capital

flexibilities in 1995 and has been working since to implement its human
capital reform effort. In fact, we feel that this increases the importance
of FAA*s efforts to effectively evaluate its reform. However, based on our
prior work on human capital management, we found in our review that FAA*s
efforts to link its human capital reform initiatives to its program goals
do not go far enough to help the agency measure the reform*s success and
that

linkage between FAA*s personnel reform goals and the agency*s programmatic
goals continues to be weakened by a lack of specific, quantitative, and
time- based measures and goals. FAA also provided technical
clarifications, which we included in the report where appropriate. We are
sending copies of this report to the Administrator, Federal Aviation
Administration. We also will make copies available to others upon request.
In addition, the report will be available at no charge on the GAO Web site
at

http:// www. gao. gov.

If you or your staff have any questions about this report, please call me
at (202) 512- 3650. Key contacts and major contributors to this report are
listed in appendix VII.

Gerald L. Dillingham, Ph. D. Director, Physical Infrastructure Issues

Appendi Appendi xes x I

Scope and Methodology To determine the human capital changes that FAA
initiated after being granted broad flexibilities in 1995 and the extent
to which these reform initiatives required exemptions from title 5, we
reviewed federal personnel management requirements under title 5, agency
documents identifying personnel reform initiatives, and reports by OPM on
personnel

management flexibilities already available under title 5. We also
discussed the changes with officials from FAA*s Office of the Assistant
Administrator for Human Resource Management and OPM. To determine the
status of implementation of FAA*s personnel reform and factors that have
affected reform implementation, we collected and analyzed internal and
external evaluations* including those conducted by the Department of
Transportation*s Office of Inspector General and NAPA* of different
aspects of FAA*s personnel reform and the available data on the results.
We also discussed the status of, and barriers to, implementation of
personnel reform initiatives with FAA human resource management officials
and representatives from the lines of business.

To determine the views of FAA managers and employees on the effects of
FAA*s personnel reform initiatives we conducted a series of structured
interviews with 176 randomly selected FAA managers and employees. Our
structured interview included questions about how the agency manages its
employees, compensation and performance management, and labor and employee
relations. We discussed the design of these questions with officials from
FAA and with representatives from FAA*s five largest unions* the National
Air Traffic Controllers Association (about 19,500 members), the
Professional Airways Systems Specialists (about 11,600 members), the
National Association of Air Traffic Specialists (about 2,300 members), the
American Federation of State, County and Municipal Employees (about 2,000
members), and the American Federation of Government Employees (about 1,500
members). We then pre- tested the structured interview with managers and
employees in FAA*s Southern Region and made appropriate revisions.

To maximize our chances of obtaining the views of managers and employees
across the different segments of FAA*s workforce, we applied a judgmental
stratification to our random sample (therefore, it may not be
representative of the actual composition of FAA*s workforce): 25 percent
managers, and 75 percent employees; and 60 percent Air Traffic Services/
air traffic control staff, 40 percent from the rest of FAA. In addition,
for non- headquarters respondents, we selected 70 percent of our

respondents from field facilities and 30 percent from regional offices.
Our

respondents were randomly selected from electronic lists of names provided
by FAA.

We conducted our structured interviews at FAA headquarters in Washington,
D. C.; FAA*s Mike Monroney Aeronautical Center in Oklahoma City, Oklahoma;
and field facilities and regional offices in six of FAA*s nine geographic
regions, including offices in the immediate vicinity of Anchorage, Alaska;
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Los Angeles,
California; and New York City, New York. Field facilities we visited
included air traffic control towers, en route centers, automated flight
service stations, terminal radar approach control centers, airports
district

offices, and flight standards district offices. A total of 176 FAA staff
participated in our survey throughout the months of May, June, July, and
August 2002. The information obtained through this survey pertains to only
these 176 respondents and cannot be generalized to any other population.
However, because we selected interview respondents at random, we have

increased the chances of capturing the breadth of opinions across the
agency. A copy of our structured interview and the summary results for our
close- ended questions is provided in appendix II. To augment the views
and opinions collected from the structured interviews, we also obtained
the views of FAA senior managers or representatives of all five lines of
business and representatives of employees* associations.

To determine the extent to which FAA management and employees* views were
supported by data, we examined the results from FAA*s employee attitude
surveys conducted between 1997 and 2000, as well as other internal surveys
of executives, managers, and supervisors related to various aspects of
FAA*s personnel reform effort. In addition, we collected available data
from FAA*s Office of Human Resource Management and Office of Civil Rights.

To determine how FAA*s experiences compared with our findings from our
human capital management work at other agencies, we reviewed our human
capital management audit work that focused on federal agencies* efforts to
implement improvement initiatives and human capital

flexibilities, as well as work conducted by other organizations involved
in assessing federal agencies* reform efforts including OPM and NAPA, and
we compared our findings on FAA*s experiences with these findings. We
conducted our work in accordance with generally accepted government
auditing standards from November 2001 through October 2002.

Structured Interview Form and Selected

Appendi x II

Results STRUCTURED INTERVIEW FORM AND SELECTED RESULTS

ATC (A)/ Non- ATC (NA): ________ Regional Office (RO)/ Field Office (FO):
________ Manager or Supervisor (MS)/ Employee (E): ________ Location (AT,
AN, CH, DA, NY, LA)/ ID Number:________

Thank you for meeting with us today. We work with the General Accounting
Office in Washington DC and we*ve been asked by Congress to see how the
personnel reforms at FAA are going. One of the ways we*re doing that is by
asking FAA employees like you to tell us about how the personnel reforms
here are affecting you, your ability to perform your work, and your unit*s
ability to achieve its mission- in both good and bad ways. We*re going to
several different regions and talking to many employees- we selected your
name at random and appreciate your willingness to talk to us. I will be
asking you a series of questions, some you can answer from a range of
standard responses like strongly agree to strongly disagree, and others
will give you an opportunity to provide a little bit more specific
information. ____ will be taking notes to be sure that we capture all you
have to say. Your responses are confidential- we won*t report your name
with anything you say here and we*ll report our results as a summary of
what everyone tells us. The entire interview should take about 30 minutes.
Do you have any questions before we begin?

(Personnel reform includes: hiring, training, compensation, performance
management, labor and employee relations, among others.)

1. To start with, how knowledgeable are you about FAA s personnel reform
efforts? Which reform( s) do you know most about? Least about?

Section A

The first set of questions I ll ask deal with how FAA manages its
workforce. For the next question and others throughout the survey, I d
like you to use this scale for your answer- please tell me if you strongly
agree ( SA) , agree ( A) , disagree ( D) or strongly disagree ( SD) .

2. I receive the training I need to do my job effectively. Circle
response: SA A D SD NA/ Don t know

_ _ _ _

Strongly Agree

Disagree Strongly

NA/ Don t Agree

N N

Disagree Know

N N

N Total42933083

Managers 11 29 5 0 1 Employees 31 64 25 8 2

ATC20481342 Non- ATC 22 45 17 4 1

Field Office 27 51 14 3 2 Regional

15 42 16 5 1 Office

3. Could you give me more detail about that ? How has the fact that the
lines of business are responsible for funding and managing training
affected the amount and/ or quality of training you ve received?

4. What, if any, training do you need that your line of business ( or
staff office) has not provided?

5. Using the scale again: The ability of my line of business ( or staff
office) to efficiently and effectively fill job vacancies has improved in
the last 5 years.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total1235554727 Managers 3 12 18 10 3 Employees923373724

ATC71526318 Non- ATC 5 20 29 16 19

Field Office922222915 Regional

313331812 Office

6. Has the speed of hiring improved? How? { Pause for response} Has the
quality of candidates improved? How?

Section B

The next set of questions I ll ask deal with the new pay and performance
management systems including the new pay bands and pay- for- performance
system, as well as, the meets/ does not meet standards performance rating
system implemented in 1996.

. 7. Using the scale again: I am better off under the new pay band system
than under

the grade and step pay system. Circle response: SA A D SD NA/ Don t know

_ _ _ _ Strongly

Agree Disagree Strongly NA/ Don t

Agree Disagree

Know Total4045283231

Managers 7 18 9 7 5 Employees 33 27 19 25 26

ATC362091210 Non- ATC 4 25 19 20 21

Field Office 38 18 10 13 18 Regional

227181913 Office

8. Using the scale again: I think the new pay system is fair to all
employees. Circle response: SA A D SD NA/ Don t know

_ _ _ _ Strongly

Agree Disagree Strongly NA/ Don t

Agree Disagree

Know Total1637585213

Managers 0 7 18 20 1 Employees 16 30 40 32 12

ATC152124234 Non- ATC 1 16 34 29 9

Field Office 16 23 26 21 11 Regional

01432312 Office

9. What do you like about the new pay system? Is there anything you don t
like about the new pay system?

10. Using the scale again: Separating cash awards from performance
appraisals has made the appraisal process more fair.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total1446492344 Managers 4 16 12 7 7 Employees 10 30 37 16 37

ATC102325821 Non- ATC 4 23 24 15 23

Field Office 10 24 23 11 29 Regional

422261215 Office

11. Using the scale again: The way my most recent formal performance
appraisal was handled gave me useful information for improving my
performance.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total1656573314 Managers 3 15 21 6 1 Employees 13 41 36 27 13

ATC82831173 Non- ATC 8 28 26 16 11

Field Office 10 28 30 19 10 Regional

62827144 Office

12. Using the scale again: Awards and recognition more appropriately
reflect employees performance today than 5 years ago.

. Circle response: SA A D SD NA/ Don t know

_ _ _ _ Strongly

Agree Disagree Strongly NA/ Don t

Agree Disagree

Know Total1440712823

Managers 3 14 19 7 3 Employees 11 26 52 21 20

ATC92629167 Non- ATC 5 14 42 12 16

Field Office927301714 Regional

51341119 Office

13. Using the scale again: FAA s process for promotion better targets
qualified people now than it did 5 years ago.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total 0 34 65 43 34 Managers 0 13 15 12 6 Employees021503128

ATC013352514 Non- ATC 0 21 30 18 20

Field Office018292822 Regional

016361512 Office

14. To what extent have managers and supervisors become more ( or less)
accountable for achieving agency goals in the last 5 years?

Section C

The next set of questions I ll ask deal with labor relations and employee
relations. 15. Using the scale again: FAA s employee unions have had a
positive impact on

implementing personnel reform in the agency. Circle response: SA A D SD
NA/ Don t know

_ _ _ _ Strongly

Agree Disagree Strongly NA/ Don t

Agree Disagree

Know Total3155502515

Managers 4 9 15 14 4 Employees 27 46 35 11 11

ATC23301996 Non- ATC 8 25 31 16 9

Field Office 25 34 19 8 11 Regional

62131174 Office

16. Do you think labor- management relations have changed in the last 5
years? ( As applicable) How? What specifically has driven this change?

17. Do you think employee morale has changed in the last 5 years? ( As
applicable) How? What specifically has driven this change?

18. Using the scale again: FAA employees had sufficient opportunities to
provide input for personnel reform policies and initiatives before they
were finalized and implemented.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total 9 52 44 36 35 Managers 2 13 16 12 3 Employees739282432

ATC623202216 Non- ATC 3 29 24 14 19

Field O ffice631201723 Regional

321241912 Office

19. Using the scale again: I understand the goals of the Model Work
Environment. Circle response: SA A D SD NA/ Don t know

_ _ _ _ Strongly

Agree Disagree Strongly NA/ Don t

Agree Disagree

Know Total 34 100 30 4 8

Managers 19 23 3 1 0 Employees 15 77 27 3 8

ATC19501323 Non- ATC 15 50 17 2 5

Field Office 17 57 17 1 5 Regional

17 43 13 3 3 Office

20. Please describe the effect Model Work Environment has had ( if any) on
employee morale.

21. Using the scale again: I have received sufficient and timely
information on personnel reform changes that affect my job.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total 10 101 41 17 7 Managers 2 25 16 3 0 Employees87625147

ATC5452296 Non- ATC 5 56 19 8 1

Field Office 6 57 19 11 4 Regional

4442263 Office

22. What personnel reforms have been particularly well communicated? Which
method( s) of communication work( s) best or would work best? Worst?

Section D

The last set of questions deal with the overall result of personnel
reforms at FAA. 23. Using the scale again: Personnel reform has made FAA a
better place to work. Circle response: SA A D SD NA/ Don t know

_ _ _ _ Strongly

Agree Disagree Strongly NA/ Don t

Agree Disagree

Know Total1160583215

Managers 3 12 23 7 1 Employees848352514

ATC73327137 Non- ATC 4 27 31 19 8

Field O ffice838271311 Regional

32231194 Office

24. Using the scale again: Personnel reform will make FAA a better place
to work.

Circle response: SA A D SD NA/ Don t know _ _ _ _

Strongly Agree Disagree Strongly

NA/ Don t Agree

Disagree Know

Total1484342519 Managers 6 26 7 5 2 Employees858272017

ATC840191010 Non- ATC 6 44 15 15 9

Field O ffice851141311 Regional

63320128 Office

25. What are the 3 most positive outcomes of FAA s personnel reform
efforts? 26. What are the 3 most negative outcomes of FAA s personnel
reform efforts? 27. What kinds of comments have you heard about the
personnel reforms we ve been

discussing today from your co- workers? 28. Do you have any suggestions
for improving FAA s implementation of personnel

reform? Okay, although we won t be using your name with this information,
I would like to ask just a couple of questions about your position here.

29. How long have you worked at FAA? _ _ _ _ _ . Median Mean Standard

Deviation Total 16.0 16.4 9.6

Managers 20.0 20.7 9.2 Employees 15.0 14.9 9.4

ATC 19.0 18.2 8.1 Non- ATC 14.0 14.7 10.7

Field Office 17.0 15.7 8.8 Regional Office 15.0 17.3 10.6

30. Are you a bargaining unit employee? Circle response: Yes No

Yes No Total 111 65

Managers 5 41 Employees 106 24

ATC 57 30 Non- ATC 54 35

Field Office 74 23 Regional

37 42 Office

( If the answer is yes) Which one? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ % of
Total

AFGE AFSCME NAGE NAATS NATCA PAACE PASS Don t Population

Know Total 1 22 1 3 55 2 20 7

Managers 0 2 1 0 0 0 2 0 Employees 1 20 0 3 55 2 18 7

ATC 041147031 Non- ATC 1 18 0 2 8 2 17 6

Field 1012452176

Office Regional

0220110031 Office

Thank you very much for answering my questions today. We really appreciate
your time, and the feedback we get from you will help FAA and Congress
make future decisions about personnel reform.

Elements for Effective Human Capital

Appendi x III

Management In March 2002, we issued a model for strategic human capital
management that incorporates lessons learned in our reviews of other
agencies* human capital management practices, as well as our own
experiences. 62 The model identifies eight critical success factors and
highlights some of the steps agencies can take to make progress in
managing human capital

strategically. These eight factors, shown in figure 16, are organized in
pairs to correspond with the four governmentwide high- risk human capital
challenges that our work has shown are undermining agency effectiveness.

62 U. S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO- 02- 373SP (Washington, D. C.: March 15, 2002).

Figure 16: Eight Critical Success Factors Corresponding with the Four
High- Risk Human Capital Challenges That Can Help Agencies Manage Human
Capital Strategically In November 2002, we issued a report that identified
six key practices for

federal agencies* effective use of human capital flexibilities that
incorporate the concepts and critical factors of our model. 63 Based on
our

interviews with human resource management directors from across the
federal government, we identified the following key practices that
agencies should implement to use human capital flexibilities effectively,
as shown in Figure 17.

Figure 17: Six Key Practices for Effective Use of Human Capital
Flexibilities

63 U. S. General Accounting Office, Human Capital: Effective Use of
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO- 03-
02, (Washington, D. C.: Nov. 2002).

Core Compensation Pay Bands and Grade

Appendi x IV Conversion for 2002

Notes: Does not include locality pay. Blank cells indicate no old grade
equivalent to new pay band for manager levels.

FAA Human Resource Management Office*s

Appendi x V

Balanced Scorecard Performance Measures Performance measures Measurement

Areas of measurement perspectives

(proposed data sources)

Customer Human Resource Management Human Resource Management Office Human
Resource Management Office

Office service excellence consultation and expertise valued

innovation and leadership Customer perceptions regarding Customer
perceptions regarding

Customer perceptions regarding personnel reform human resource management
human resource management office

Human resource management office office service quality and consultation &
staff expertise

& line of business human capital timeliness

(employee surveys)

management efforts (employee surveys)

(employee surveys)

Performance Human Resource Management Efficient use of Human Resource
Improved practices within Lines of

Office results meet goals Management Office resources

Business Percentage of human resource Human resource management office
Knowledge transfer management office projects

spending Improved line of business processes completed on time

(budget & accounting data)

& practices Human resource management office Meet unique needs

(human resources office

labor distribution

reporting system)

(cost accounting system) (employee surveys)

Internal Consistent human resource

Effective Labor- Management Attract and retain high caliber

processes management policy interpretation Relationships

employees Consolidation in bargaining units

Timeliness of Partnership Council meeting

automated/ nonautomated selections (Personnel management

attendance Percentage of voluntary & involuntary

evaluations, human resource

attrition

management office policy training

(data on grievances and evaluations)

unauthorized labor practices) (Selecting official interview data)

Human Empowered Human Resource Satisfied Human Resource Office

Rewarding Human Resource Resource Management Office employees Management
employees

Management Office work environment Management

Human Resource Management Human Resource Management Office Office employee

Human Resource Management Office employee perceptions of job employee
perceptions regarding Office employee perceptions of

satisfaction and perceptions communication empowerment regarding
commitment to service

Performance rewarded (employee surveys)

(employee surveys) (employee surveys)

Learning and Capitalize on Human Resource

Increase Human Resource Leverage Human Resource growth Management
Management

Management Office data/ information Office talent Office capacity to
improve

Availability and quality of data Identify and close skill gaps

Increase in professional credentials (human resource management

(skills/ training assessment for

(skills/ training assessment for office information system audit)

human resources office) Human Resource Management Timeliness and
responsiveness to Implement Human Resource

Office) internal Human Resource Management Office workforce

Percentage of personnel, Management Office requests planning compensation,
and benefits funding

(employee survey) (human resource management

spent on training office reporting system)

(budget & accounting data) Source: FAA.

                                       A

Note: Shaded areas indicate measures focused internally on the Office of
Human Resource Management.

a

GAO United States General Accounting Office

In 1996, FAA initiated human capital reform initiatives in three broad
areas, some of which required exemption from title 5, and some of which
have been fully implemented. FAA has not yet completed implementation of
some key initiatives. For example, FAA*s new compensation system remains
unimplemented for about one- quarter of the agency*s workforce* those
staff whose unions have not reached agreements with FAA. FAA*s need to
implement initiatives among a workforce with a wide range of skills and to
negotiate changes with multiple unions were among factors that affected
the pace and extent of reform implementation.

Selected Initiatives within the Three Areas of FAA*s Reform, Including
Whether an Exemption from Title 5 Was Required and Implementation Status
FAA had little data with which to assess the effects of its reform effort.

While FAA human capital officials cited positive effects of FAA*s reform
effort, the views of managers and employees GAO interviewed were generally
less positive.

FAA*s lack of empirical data on the effects of its human capital
initiatives is one indication that it has not fully incorporated elements
that are important to effective human capital management into its overall
reform effort. These elements include data collection and analysis,
performance goals and measures, and linkage of reform goals to program
goals. FAA human resource management officials said that the agency should
have spent more time to develop baseline data and performance measures
before implementing the broad range of reforms but that establishing these
elements was a complex and difficult task. FAA has also not gone far
enough in establishing linkage between reform goals and overall program
goals of the organization. GAO found that the lack of these elements has
been pointed out repeatedly in evaluations of FAA*s human capital reform
effort, but FAA has not developed specific steps and time frames by which
these elements will be established and used for evaluation. Incorporation
of these elements could also help FAA build accountability into its human
capital management approach.

HUMAN CAPITAL MANAGEMENT

FAA*s Reform Effort Requires a More Strategic Approach

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 156. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Gerald Dillingham, Ph. D., at (202) 512- 2834 or

dillinghamg@ gao. gov. Highlights of GAO- 03- 156, a report to the

Chairman, Subcommittee on Aviation, House Committee on Transportation and
Infrastructure; Chairman, House Committee on Government Reform; and
another requester February 2003

In 1996, the Federal Aviation Administration (FAA) undertook a human
capital reform effort under one of the most flexible human capital
management environments in the federal government, including broad
exemptions from title 5 laws governing federal civilian personnel
management. GAO was asked (1) to examine the

changes FAA initiated in its reform effort, including whether they
required an exemption from title 5

and their implementation status; (2) determine the effects of the reform
effort according to available data and the views of FAA officials,
managers, and employees; and (3) assess the extent to which FAA*s reform
effort incorporated elements that are important to effective human capital

management. This report makes recommendations to enable FAA to develop a
more strategic approach to its reform effort. By building elements that
are important to effective human capital

management into its approach, FAA will be better able to evaluate the
effects of its initiatives, use the evaluations as a basis for any
strategic improvements, and hold agency leadership accountable. FAA will
also be better able to

share its results with other federal agencies and Congress.

The Department of Transportation and FAA officials generally agreed with
our recommendations.

Page i GAO- 03- 156 Human Capital Management

Contents

Contents

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Appendix I

Appendix I Scope and Methodology

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Appendix II

Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix II Structured Interview Form and Selected Results

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Appendix III

Appendix III Elements for Effective Human Capital Management

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Appendix III Elements for Effective Human Capital Management

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Appendix IV

Appendix IV Core Compensation Pay Bands and Grade Conversion for 2002

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Appendix V

Appendix V FAA Human Resource Management Office*s Balanced Scorecard
Performance Measures

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Appendix VI

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