Human Capital: DHS Faces Challenges In Implementing Its New	 
Personnel System (18-JUN-04, GAO-04-790).			 
                                                                 
DHS was provided with significant flexibility to design a modern 
human capital management system. Its proposed system has both	 
precedent-setting implications for the executive branch and	 
farreaching implications on how the department is managed. GAO	 
reported in September 2003 that the effort to design the system  
was collaborative and consistent with positive elements of	 
transformation. In February, March, and April 2004 we provided	 
preliminary observations on the proposed human capital		 
regulations. Congressional requesters asked GAO to describe the  
infrastructure necessary for strategic human capital management  
and to assess the degree to which DHS has that infrastructure in 
place, which includes an analysis of the progress DHS has made in
implementing the recommendations from our September 2003 report. 
DHS generally agreed with the findings of our report and provided
more current information that we incorporated. However, DHS was  
concerned about our use of results from a governmentwide survey  
gathered prior to the formation of the department. We use this	 
data because it is the most current information available on the 
perceptions of employees currently in DHS and helps to illustrate
the challenges facing DHS.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-790 					        
    ACCNO:   A10581						        
  TITLE:     Human Capital: DHS Faces Challenges In Implementing Its  
New Personnel System						 
     DATE:   06/18/2004 
  SUBJECT:   Agency missions					 
	     Human resources utilization			 
	     Performance measures				 
	     Personnel management				 
	     Strategic planning 				 
	     Human capital					 

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GAO-04-790

United States General Accounting Office

                     GAO Report to Congressional Requesters

June 2004

HUMAN CAPITAL

         DHS Faces Challenges In Implementing Its New Personnel System

                                       a

GAO-04-790

Highlights of GAO-04-790, a report to congressional requesters

DHS was provided with significant flexibility to design a modern human
capital management system. Its proposed system has both precedent-setting
implications for the executive branch and farreaching implications on how
the department is managed. GAO reported in September 2003 that the effort
to design the system was collaborative and consistent with positive
elements of transformation. In February, March, and April 2004 we provided
preliminary observations on the proposed human capital regulations.

Congressional requesters asked GAO to describe the infrastructure
necessary for strategic human capital management and to assess the degree
to which DHS has that infrastructure in place, which includes an analysis
of the progress DHS has made in implementing the recommendations from our
September 2003 report.

DHS generally agreed with the findings of our report and provided more
current information that we incorporated. However, DHS was concerned about
our use of results from a governmentwide survey gathered prior to the
formation of the department. We use this data because it is the most
current information available on the perceptions of employees currently in
DHS and helps to illustrate the challenges facing DHS.

June 2004

HUMAN CAPITAL

DHS Faces Challenges in Implementing Its New Personnel System

To date, DHS's actions in designing its human capital management system
and its stated plans for future work on the system are helping to position
the department for successful implementation. Nonetheless, the department
is in the early stages of developing the infrastructure needed for
implementing its new human capital management system.

o  	DHS has begun strategic human capital planning efforts at the
headquarters level since the release of the department's overall strategic
plan and the publication of proposed regulations for its new human capital
management system. Strategic human capital planning efforts can enable DHS
to remain aware of and be prepared for current and future needs as an
organization. However, this will be more difficult because DHS has not yet
been systematic or consistent in gathering relevant data on the successes
or shortcomings of legacy component human capital approaches or current
and future workforce challenges. Efforts are now under way to collect
detailed human capital information and design a centralized information
system so that such data can be gathered and reported at the
departmentwide level.

o  	DHS and Office of Personnel Management leaders have consistently
underscored their personal commitment to the design process. Continued
leadership is necessary to marshal the capabilities required for the
successful implementation of the department's new human capital management
system. Sustained and committed leadership is required on multiple levels:
securing appropriate resources for the design, implementation, and
evaluation of the human capital management system; communicating with
employees and their representatives about the new system and providing
opportunities for feedback; training employees on the details of the new
system; and continuing opportunities for employees and their
representatives to participate in the design and implementation of the
system.

o  	In its proposed regulations, DHS outlines its intention to implement
key safeguards. For example, the DHS performance management system must
comply with the merit system principles and avoid prohibited personnel
practices; provide a means for employee involvement in the design and
implementation of the system; and overall, be fair, credible, and
transparent. The department also plans to align individual performance
management with organizational goals and provide for reasonableness
reviews of performance management decisions through its Performance Review
Boards.

www.gao.gov/cgi-bin/getrpt?GAO-04-790.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at (202)
512-6806 or [email protected].

Contents

Letter                                                                   1 
                                  Results In Brief                          3 
                                     Background                             5 
             DHS Is Beginning Strategic Human Capital Planning Efforts      9 
            Continued Leadership Is Necessary to Marshal the Capabilities 
                       Required for Successful Implementation              12 
                      DHS Proposes Implementing Key Safeguards             18 
                                    Conclusions                            19 
                         Agency Comments and Our Evaluation                20 

Appendixes

Appendix I:

Appendix II:

Appendix III: Appendix IV:

Scope and Methodology 22 Scope 22 Methodology 22

Criteria Used for Evaluation 24 Strategic Human Capital Planning 24 Key
Capabilities for Implementing Human Capital Approaches 25
Institutionalizing Performance Management Safeguards 27

Comments from the Department of Homeland Security 30

GAO Contact and Staff Acknowledgments 32 GAO Contact 32 Acknowledgments 32

Figure Figure 1: The Development of the DHS Human Capital System

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A

United States General Accounting Office Washington, D.C. 20548

June 18, 2004

The Honorable George V. Voinovich

Chairman, Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia

Committee on Governmental Affairs

United States Senate

The Honorable Jo Ann Davis

Chairwoman, Subcommittee on Civil Service and Agency Organization
Committee on Government Reform United States House of Representatives

The creation of the Department of Homeland Security (DHS) is an historic
opportunity for the federal government to fundamentally transform how the
nation will protect itself from terrorism and other threats. DHS is in the
early stages of transforming and integrating a disparate group of agencies
with multiple missions, values, and cultures into a strong and effective
cabinet department. Together with this unique opportunity, however, comes
significant risk to the nation if this transformation is not implemented
successfully. In fact, we designated this implementation and
transformation as high risk in January 2003.1

On February 20, 2004, the Secretary of DHS and the Director of the Office
of Personnel Management (OPM) released proposed regulations for DHS's new
human capital system. Among other things, the proposal establishes a pay
for performance system, a new adverse actions and appeals process, and new
labor relations rules. The regulations provided the broad outline of the
DHS proposed system. As the system evolves, critical issues, such as how
DHS will link individual performance expectations to DHS's mission and
goals, how it will define performance expectations to promote individual
accountability, and how it will continue to incorporate adequate
safeguards to ensure fairness, will need to be addressed. Such detailed
implementation policies and procedures will need to be developed in a
transparent and inclusive manner as the system evolves.

1U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of Homeland Security, GAO-03-102 (Washington, D.C.:
January 2003).

In light of the challenge to establish a modern strategic human capital
management system in the department, you asked that we undertake a series
of engagements to assess and assist DHS in its implementation efforts. As
agreed with your office, this is the third of several studies in which we
examine how DHS begins to implement its new human capital system. Our
first report, issued in September 2003, described the process DHS put in
place to design its human capital system and involve employees and
analyzed the extent to which the process reflected what we found to be
important elements of successful transformations.2 We found that, to date,
the design effort was collaborative and facilitated participation of
employees from all levels of the department. The effort also generally
reflected what we have found to be important elements of effective
transformations. Second, we provided our preliminary observations on
selected major provisions of the proposed human capital regulations in a
testimony and two related items of correspondence providing answers to
post-hearing questions.3 We found that many of the basic principles
underlying the proposed regulations were consistent with proven approaches
to strategic human capital management, and identified parts of the system
that deserved further consideration.

As agreed with your offices, this third study describes the infrastructure
necessary for strategic human capital management and assesses the degree
to which DHS has that infrastructure in place, including progress DHS has
made since our September 2003 report. More details on our scope and
methodology can be found in appendix I and criteria used to evaluate the
department's efforts are summarized in appendix II. We interviewed
officials from DHS headquarters who are involved in designing the new
human capital system. Human resource leaders from the five largest legacy
components within DHS were also interviewed: the Transportation Security
Administration (TSA), Federal Emergency Management Agency (FEMA), the
organizations formerly known as the Immigration and Naturalization Service
(INS) and the U.S. Customs Service (Customs), and

2U.S. General Accounting Office, Human Capital: DHS Personnel System
Design Effort Provides for Collaboration and Employee Participation,
GAO-03-1099 (Washington, D.C.: Sept. 30, 2003).

3U.S. General Accounting Office, Human Capital: Preliminary Observations
on Proposed DHS Human Capital Regulations, GAO-04-479T (Washington, D.C.:
Feb. 25, 2004); Posthearing Questions Related to Proposed Department of
Homeland Security (DHS) Human Capital Regulations, GAO-04-570R
(Washington, D.C.: Mar. 22, 2004); and Additional Posthearing Questions
Related to Proposed Department of Homeland Security (DHS) Human Capital
Regulations, GAO-04-617R (Washington, D.C.: Apr. 30, 2004).

the U.S. Coast Guard. This work was conducted from March 2003 through
March 2004 in Washington, D.C., and in accordance with generally accepted
government auditing standards.

The analysis of DHS's effort to design a strategic human capital
management system can be particularly instructive for future human capital
management and integration initiatives within specific units of DHS. We
have consistently supported the need for government transformation and the
concept of modernizing federal human capital policies, as underscored in
recent testimonies and our January 2003 report that described why
strategic human capital management remains a governmentwide high-risk
area.4 The DHS effort can also prove instructive as other agencies
implement changes to their human capital management systems.

Results In Brief	DHS is in the early stages of developing the
infrastructure needed for implementing its new human capital management
system. At a minimum, this infrastructure includes a strategic human
capital planning process that integrates the agency's human capital
approaches with program goals, desired outcomes, and mission; the
capabilities to effectively develop and implement a new human capital
system; and a modern, effective, and credible performance management
system that includes a set of institutional safeguards, including
reasonable transparency and appropriate accountability mechanisms to
ensure the fair, effective, and credible implementation of the new system.
DHS's infrastructure development efforts include the following:

o 	DHS has begun strategic human capital planning efforts at the
headquarters level since the release of the department's overall strategic
plan and the publication of proposed regulations for its new human capital
management system. In comparison, the five legacy agencies we studied each
engage in strategic human capital planning activities, but their efforts
vary in their level of detail, including the time frames covered by the
plans and the degree to which future skill and

4U.S. General Accounting Office, Human Capital: Building on DOD's Reform
Effort to Foster Governmentwide Improvements, GAO-03-851T (Washington,
D.C.: June 4, 2003); High-Risk Series: Strategic Human Capital Management,
GAO-03-120 (Washington, D.C.: January 2003); and Managing for Results:
Using Strategic Human Capital Management to Drive Transformational Change,
GAO-02-940T (Washington, D.C.: July 15, 2002).

competency needs are identified. DHS has not yet systematically gathered
relevant human capital data at the headquarters level. However, efforts
are now under way to collect detailed human capital information and design
a centralized information system so that such data can be gathered and
reported at the departmentwide level. These strategic human capital
planning efforts can enable DHS to remain aware of and be prepared for
current and future needs as an organization.

o 	DHS and OPM leaders have consistently underscored their personal
commitment to the design process. Sustained and committed leadership is
required on multiple levels: securing appropriate resources for the
design, implementation, and evaluation of the human capital management
system; communicating with employees and their representatives about the
new system and providing opportunities for feedback; training employees on
the details of the new system; and continuing opportunities for employees
and their representatives to participate in the design and implementation
of the system. In light of this challenge, DHS formed three teams to
implement the human capital regulations, each of which are co-led by
professional staff from DHS headquarters and a component agency.

o 	In its proposed regulations, DHS outlines its intention to implement
key safeguards. For example, the DHS performance management system must
comply with the merit system principles and avoid prohibited personnel
practices; provide a means for employee involvement in the design and
implementation of the system; and overall, be fair, credible, and
transparent. The department also plans to align individual performance
management with organizational goals and provide for reasonableness
reviews of performance management decisions through its Performance Review
Boards.

The proposed DHS human capital management system has both significant
precedent-setting implications for the executive branch and far-reaching
implications for how the department is managed. However, how it is done,
when it is done, and the basis on which it is done can make all the
difference in whether such efforts are successful. To date, DHS's actions
in designing its human capital management system and its stated plans for
future work on the system are helping to position the department for
successful implementation.

In commenting on a draft of this report, DHS generally agreed with its
findings. DHS comments provided more current information on implementation
timelines and described further research conducted by the design teams
between April and September 2003, which we have incorporated. In addition,
DHS raised concerns about our use of data from the OPM governmentwide
Federal Human Capital Survey (FHCS) since the survey was administered
before the formation of DHS. Since the administration of the survey, DHS
notes a significant amount of change has been made in the department. We
agree that the department is making progress in designing its human
capital system and outline in this report where the department is making
strides. This report notes that the FHCS was conducted during the same
time frame that the administration proposed legislation to form DHS. FHCS
data are the most current information available on the perceptions of
employees currently employed by DHS and are valuable because of their
illustration of the challenges the department faces. DHS provided
additional technical comments, which were incorporated where appropriate.
Comments from DHS are provided in full in appendix III.

                                   Background

Mission and Organization of DHS

The DHS strategic plan, released on February 23, 2004, includes the
following mission statement: "We will lead the unified national effort to
secure America. We will prevent and deter terrorist attacks and protect
against and respond to threats and hazards to the nation. We will ensure
safe and secure borders, welcome lawful immigrants and visitors, and
promote the free-flow of commerce." The strategic plan further identifies
seven strategic goals: awareness, prevention, protection, response,
recovery, service, and organizational excellence.

DHS is generally organized into four mission-related directorates: Border
and Transportation Security, Emergency Preparedness and Response, Science
and Technology, and Information Analysis and Infrastructure Protection.
These directorates include the following legacy agencies:

o 	The Border and Transportation Security directorate consolidates the
major border security and transportation operations under one roof,
including legacy Customs, parts of the legacy INS, TSA, the Federal Law
Enforcement Training Center, the Federal Protective Service, the Office

for Domestic Preparedness from the Department of Justice (DOJ), and part
of the U.S. Department of Agriculture's Animal and Plant Health Inspection
Service (APHIS). This directorate includes the newly formed Bureau of
Immigration and Customs Enforcement (ICE) and the Bureau of Customs and
Border Protection (CBP).

o 	The Emergency Preparedness and Response (EPR) directorate integrates
domestic disaster preparedness training and government disaster response
and includes FEMA, the Strategic National Stockpile, the National Disaster
Medical System, the Nuclear Incident Response Team, the Domestic Emergency
Support Teams from DOJ, and the National Domestic Preparedness Office from
the Federal Bureau of Investigation (FBI).

o 	The Science and Technology directorate coordinates scientific and
technological advantages for securing the homeland and includes the
Chemical, Biological, Radiological, and Nuclear Countermeasures Programs,
the Environmental Measurements Laboratory, the National Bio-Weapons
Defense Analysis Center, and the Plum Island Animal Disease Center.

o 	The Information Analysis and Infrastructure Protection directorate
accesses and analyzes intelligence, law enforcement data, and other
information involving threats to homeland security and evaluates
vulnerabilities from state and local agencies, the private sector, and
federal agencies such as the Central Intelligence Agency, FBI, and the
National Security Agency. It includes the Critical Infrastructure
Assurance Office, the Federal Computer Incident Response Center, the
National Communications System, the National Infrastructure Protection
Center, and the energy security and assurance program activities of the
Department of Energy.

o 	In addition to the mission directorates, the Management Directorate,
led by the Undersecretary for Management, is responsible for integrating
the activities of the Chief Financial Officer, the Chief Procurement
Officer, the Chief Human Capital Officer, the Chief Information Officer,
and the Chief of Administrative Services.

In addition to the four mission-related directorates, the U.S. Secret
Service and the U.S. Coast Guard remain intact as distinct entities in
DHS. The Bureau of Citizenship and Immigration Services, composed of
legacy INS adjudications and benefits programs, reports to the Deputy
Secretary.

DHS's People 	DHS has just under 158,000 civilian employees.5 Of the
civilian employees, a vast majority transferred from seven organizations:
TSA, INS, Customs, FEMA, the U.S. Coast Guard, the Secret Service, and
APHIS. Of the civilian employees who transferred from these seven
organizations, approximately 90 percent are stationed outside the
Washington, D.C. metropolitan area. These employees hold positions ranging
from inspectors, investigators, police and intelligence to attorneys and
administrative services.

According to OPM, just over 49,000, or just under one-third, of DHS
civilian employees are represented by unions. This includes 16 different
unions divided into 75 separate bargaining units. The 3 unions
representing the largest number of employees are the American Federation
of Government Employees, the National Treasury Employees Union, and the
National Association of Agricultural Employees.

Process Used to Design the The design process of the DHS human capital
management system

Human Capital System	included DHS and OPM employees and union
representatives. Figure 1 describes the development of the DHS human
capital system.

5According to OPM's Central Personnel Data File (CPDF), as of December
2003. This represents the number of DHS federal employees. For more
information on the CPDF, see appendix I.

           Figure 1: The Development of the DHS Human Capital System

                                Labor and         
                                Employee          
                                Relations   Core  
                                Subgroup   Design
                                 Pay and    Team
                               Performance 
                                Subgroup   

                                  Source: GAO.

DHS Is Beginning Strategic Human Capital Planning Efforts

Using the department's strategic plan as a starting point, DHS recently
began drafting a strategic human capital plan and a more detailed
workforce plan for the department. One of the goals of the strategic plan,
organizational excellence, makes it a priority for the agency to value its
people and create a culture that promotes a common identity, innovation,
mutual respect, trust, accountability, and teamwork. To support the
accomplishment of this goal, the department has an objective focused on
ensuring effective recruitment, development, compensation, succession
management, and leadership of a diverse workforce to provide optimal
service at a responsible cost. While the plan broadly states a few
strategies that could be used to achieve this objective, it does not
identify the skills needed, resources required, or timetables associated
with the strategies. Additional programmatic objectives within the
strategic plan will require human capital approaches to ensure they are
realized.

The Director for Human Resources Policy and the Senior Advisor for Human
Resources Policy said that the strategic human capital plan will be
completed later this spring and will include goals for transforming the
human capital management of the department over the next 5 years. These
same officials report that this will be a "living document" and expect
that revisions will be made as they learn more about the human capital
needs across the department.

Below the headquarters level, strategic human capital planning of
different levels of detail is being done in the five legacy components we
studied. These plans vary in terms of the time frame covered by the plan
and the degree to which future skill and competency needs are identified.

o 	In July 2003, FEMA/EPR released a 5-year strategic human capital plan
that identified the challenges it faces, improvement initiatives, and
outcome measures for the initiatives. A timeline and the unit responsible
for implementation are also identified. Part of FEMA's "Model for Success"
articulates the need to identify strategic competencies. The plan states
that FEMA intends to integrate its competency management system with
future workforce planning efforts. According to agency officials, FEMA was
invited to present its Competency Assessment System to the DHS Human
Capital Management Forum and OPM.

o 	Customs/CBP workforce planning efforts are currently short-term and
tactical in nature. The component does not have a consolidated plan

that identifies human capital needs or strategies and the planning horizon
is less than 1 year in duration. Instead, CBP informally sets annual
targets for various human capital activities that are articulated in
various agency meetings and memoranda. Progress towards the targets is
tracked in a biweekly report that includes information such as changes in
staffing levels, retirement eligibilities, and the gender breakdown of the
workforce.

o 	INS/ICE officials reported that they used workforce plans to respond to
Congressional mandates in managing large-scale recruiting and retention
efforts, beginning in 1996. It released a 3-year plan in June 1996 to
manage this growth, placing a priority on deployment, recruiting, hiring,
and training strategies. Since the original release of the plan, it has
been updated annually through individual memoranda and charts reflecting
current human capital data. According to an agency official, the component
is working with a contractor to identify a baseline understanding of
workforce demographics and skills and determine future workforce
requirements.

o 	TSA hired a consultant in September 2003 to conduct a study of screener
staffing levels at the nation's commercial airports in an effort to
right-size and stabilize its screener workforce. Among the tasks the
contractor is to complete are the implementation of a staffing analysis
model to be used as a management tool to determine daily and weekly
staffing levels and the deployment of the model to commercial airports
nationwide.

o 	The Coast Guard has a 5-year strategic human capital plan covering the
period 2001 to 2005 that integrates approaches for managing military,
civilian, and reserve employees. Identified within the plan are current
challenges and desired characteristics for the workforce of the future.
Strategies are adjusted annually and the objectives and approaches are
continuously evaluated for their impact so that midcourse corrections can
be made if necessary, according to an agency official. The Coast Guard
plans to do a major update of its plan once the department's human capital
system is completed.

DHS headquarters has not yet been systematic or consistent in gathering
relevant data on the successes or shortcomings of legacy component human
capital approaches or current and future workforce challenges, despite the
potential usefulness of this information to strategic human capital
planning activities. Efforts are now under way to gather such data.

During the design process, from April through September 2003, the
subgroups that identified options for the human capital system gathered an
extensive amount of research on innovative practices outside of DHS and
basic demographic data on employees in the department. DHS also reported
that it gathered policy documents from legacy components and specifically
noted meeting with TSA, Coast Guard, legacy Customs, and FEMA to
understand their policies and practices. However, at a briefing for DHS
stakeholders in August 2003, DHS and OPM officials said that they did not
evaluate the successes or shortcomings of legacy agency human capital
approaches or current and future workforce challenges, nor had they
analyzed the results from the OPM FHCS.

The department is now beginning to collect more detailed, internal human
capital data, according to one DHS official. With the support of a
contractor, focus groups are planned for this summer so that human capital
challenges can be identified and validated. According to the same
official, the Chief Human Capital Officer is holding monthly meetings to
spotlight the successful practices of components within the department and
disseminate best practices. Moving forward, the department plans to design
a centralized information system so that human capital data can be
gathered and reported at the corporate level.

With this information, the department will be better positioned to conduct
data-driven evaluations of the successes and shortcomings of its new human
capital management system. DHS documents indicate that the department is
committed to an ongoing comprehensive evaluation of the effectiveness of
the human capital system. The department described efforts to identify
human capital metrics and an intent to use employee surveys to gauge
employee satisfaction and needs. We testified that DHS should consider
doing evaluations that are broadly modeled on the evaluation requirements
of the OPM demonstration projects.6 Under the demonstration project
authority, OPM requires agencies to evaluate and periodically report on
results, implementation of the demonstration project, cost and benefits,
impacts on veterans and other equal employment opportunity groups,
adherence to merit system principles, and the extent to which the lessons
from the project can be applied governmentwide. A set of balanced measures
addressing a range of results and customer, employee, and external partner
issues may also prove beneficial. An evaluation such as this would
facilitate congressional

6GAO-04-479T.

oversight; allow for any midcourse corrections; assist DHS in benchmarking
its progress with other efforts; and provide for documenting best
practices and sharing lessons learned with employees; stakeholders; other
federal agencies; and the public. We have reported on key principles for
effective strategic human capital planning and the importance of
datadriven human capital decision making (see app. II).7

Continued Leadership Is Necessary to Marshal the Capabilities Required for
Successful Implementation

DHS and OPM leaders have consistently underscored their personal
commitment to the design process and speak openly in support of it. As we
have reported, this is a very positive start. DHS will need to sustain
this effort to overcome the views reflected in the OPM FHCS,8 administered
prior to the formation of DHS, in which employees now in the department
responded with the following perceptions:

o 	28 percent believe that leaders generate high levels of motivation and
commitment in the workforce, compared to a governmentwide response of 36
percent;9

o 	35 percent hold their leaders in high regard, compared to a
governmentwide response of 43 percent; and

o 	43 percent believe their organization's leaders maintain high standards
of honesty and integrity, compared to a governmentwide response of 47
percent.

7U.S. General Accounting Office, Human Capital: Key Principles for
Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.: Dec.
11, 2003), and A Model of Strategic Human Capital Management, GAO-02-373SP
(Washington, D.C.: Mar. 15, 2002).

8The DHS responses reported by the 2002 OPM FHCS approximate the views of
some, but not all, employees now at DHS. For example, TSA screeners were
not hired at the time of the survey. Also, though APHIS employees were
divided between DHS and the U.S. Department of Agriculture (USDA), the
APHIS respondents included those remaining at USDA. Additionally, the
survey was conducted during the same time frame that the administration
proposed legislation to form DHS; thus, the opinions expressed by the
respondents to the survey were before the formation of DHS. The objective,
scope, and methodology for the 2002 OPM FHCS is described in more detail
in GAO-04-479T.

9In all instances, comparing DHS's results to the OPM FHCS governmentwide
average, DHS results are fewer by a statistically significant amount,
according to analysis presented on OPM's Web site. Statistics are rounded
to the nearest whole number. The governmentwide response includes all
respondents except for those transferred to DHS.

Resources. DHS is recognizing that there are up-front costs to design and
implementation and that its components are starting from different places
regarding the maturity of their human capital management systems. Members
of the Senior Review Advisory Committee agreed during their deliberations
that creating the new human capital management system will require a
substantial investment, and identified this as a core principle for the
design of the system. Additionally, during the DHS focus groups, employees
expressed an interest in increasing the resources available for training
and professional development, and noted the importance of having an
adequate budget for the performance management system in particular.10

The administration recognizes the importance of funding this major reform
effort and has requested, for fiscal year 2005, $102.5 million to fund
training, the development of the performance management and compensation
system, and contractor support, and over $10 million for a performance pay
fund in the first phase of implementation (affecting about 8,000
employees) to recognize those who meet or exceed expectations.11
Approximately $20 million was also requested to fund the development of a
departmental human resources information technology system. While the
investments are important to the ultimate success of DHS's efforts, it is
equally important to recognize that certain costs are one-time in nature
and, therefore, should not be built into the base of DHS's budget for
future years.

Communication. In our September 2003 report, we commended the structured
approach the department developed to communicate with stakeholders on the
human capital system and recommended that the Secretary of DHS ensure that
the message communicated across the department was consistent. Officials
we interviewed in five legacy components of the department agreed that
communication from DHS headquarters on the human capital system has been
consistent. In particular, three noted that the information contained in
the weekly departmental newsletter is helpful. As an example of the
consistency of the communication on the new human capital management
system,

10The objective, scope, and methodology for the DHS focus groups are
described in more detail in GAO-04-479T.

11According to agency officials, the training costs do not include the
time employees are expected to spend in training or the costs associated
with using training resources already in the department.

between December 5, 2003 and February 27, 2004, employees were assured in
five different newsletters that the new human capital system would not
lead to a loss in pay or benefits and four different newsletters reported
that no layoffs would result due to the implementation of the new system.
To ensure the consistency of the message, a Communications Coordination
Team, which includes members from across the department, has been
established to disseminate information and promote a clear understanding
of the new human capital system. This team meets biweekly or weekly and is
co-chaired by the Director of Internal Communications and the Director of
Human Resource Management.

In our September report we also recommended that the department maximize
opportunities for two-way communication and employee involvement through
the completion of the design process and implementation, and noted that
special emphasis should be placed on seeking the feedback and buy-in of
front-line employees in the field. Opportunities for two-way communication
were limited between the conclusion of the town hall meetings in July 2003
and the publishing of the proposed regulations in February 2004. The
primary means for employees to provide feedback was through the Human
Resources Design Team e-mail box. Employees and the general public were
also allowed to participate in the public comment period of the Senior
Review Advisory Committee meetings in October 2003. While the department
continued to consult intermittently with leaders of the three major unions
during this period, one agency official noted that the department does not
have a similar mechanism in place to obtain feedback from nonunionized
employees. One action taken to overcome this challenge was the effort to
notify employees how to comment on the proposed regulations, which was
communicated in six different newsletters between February 13 and March
22, 2004. DHS received over 3,400 comments on its proposed regulations, in
part due to its efforts to encourage employees to submit comments on the
system.

Since the release of the proposed regulations, DHS has provided
information to employees through a variety of formats. For example, a link
to the proposed human capital regulations was placed in a prominent
position on the intranet home page of the department for easy access. On
February 13, 2004, a satellite broadcast outlined the major features of
the human capital management system, reaching approximately 500 DHS
locations around the country. During the broadcast, employees submitted
questions, and those unable to view the broadcast could access it through
the DHS Internet Web site. Additionally, a senior leadership conference

was held, in part, to brief executives on the proposed system. The
department has developed tool kits to provide information to both
executives and line managers about the changes and to provide them with
talking points for discussion with their employees and developed a
quadfold to distribute to line employees containing questions and answers
about the new system. Town hall meetings that were held around the country
to mark the one-year anniversary of the department included discussions
about the proposed human capital system. Finally, between February 13 and
March 22, 2004, the time in which employees could submit comments on the
proposed regulations, the weekly DHS newsletter included answers to
commonly asked questions and details on what would be changed and remain
the same under the proposal.

The success of DHS communication efforts is especially important, given
employee responses to the OPM FHCS:

o 	40 percent report that managers promote communication among different
work units, which is less than the governmentwide response of 51 percent;

o 	65 percent feel they have enough information to do their job well,
which is less than the governmentwide response of 71 percent; and

o 	37 percent are satisfied with the information they receive from
management on what is going on in the organization, which is less than the
governmentwide response of 45 percent.

Training. Members of the Senior Review Advisory Committee identified
training and development as a critical component for implementing the
human capital system. Furthermore, participants in the DHS focus groups
expressed a need for training and professional development opportunities
in a number of areas, including general supervisory capabilities,
assessing employee performance, labor-management relations, and
alternative dispute resolution. The DHS proposal correctly recognizes that
a substantial investment in training is a key aspect of implementing a
performance management system. The need for in-depth and varied training
will continue as the system is implemented, as indicated by results from
the OPM FHCS in which 53 percent of respondents believe supervisors/team
leaders in their work unit encourage their development at work, which is
less than the governmentwide response of 59 percent. Furthermore, 47
percent feel they are given a real opportunity to improve their skills,
which is less than the governmentwide response of 57 percent.

Our recently released guides for agencies to help ensure investments in
training and development are targeted strategically and could prove
helpful to DHS as it develops its training and development programs.12

Employee Participation. The Undersecretary for Management has already
noted her commitment to move forward on implementing the human capital
system in a collaborative way, and reiterated that support in a December
19, 2003 memorandum to DHS employees regarding the human capital system.
Regardless of whether it is a part of collective bargaining, involving
employees in such important decisions as how they are deployed and how
work is assigned is critical to the successful operations of the
department. This is likely to be a significant challenge for the
department in light of employee responses to the OPM FHCS in which 28
percent of DHS employees indicated a feeling of personal empowerment,
which is fewer than the governmentwide response of 40 percent.
Additionally, 44 percent of DHS employees reported satisfaction with their
involvement in decisions that affect their work, compared to 53 percent
governmentwide.

Implementation Teams. DHS formed three implementation teams at the end of
February 2004 to support the design and implementation of the human
capital management system because of the multiple areas that require
management attention. This includes a Training and Communications team; a
Pay, Performance, and Classification team; and a Labor Relations, Adverse
Actions, and Appeals team. According to agency officials, the teams will
initially focus their efforts on data collection and project planning
activities until the department issues interim final regulations for the
human capital management system, at which time the teams will begin to
draft departmental policies to support implementation. Agency officials
reported that, as they move forward, they will pay particular attention to
how their decisions may affect other human capital approaches across the
department.

The mission of the Training and Communications team is to develop
comprehensive communication and training plans, coordinate and manage the
development of training, coordinate the delivery of training, and to
disseminate information related to the design and implementation of the

12U.S. General Accounting Office, Human Capital: A Guide for Assessing
Strategic Training and Development Efforts in the Federal Government,
GAO-04-546G (Washington, D.C.: March 2004); and Human Capital: Selected
Agencies' Experiences and Lessons Learned in Designing Training and
Development Programs, GAO-04-291 (Washington, D.C.: Jan. 30, 2004).

department's human capital system. The co-leads of the team said their
work largely depends on the efforts of the other two implementation teams
and acknowledged the concerns raised by employees on the need for
training, especially for departmental managers. They also said they plan
to rely on the training capacity already in the department. A second goal
is for the team to ensure that communication with employees about the new
human capital management system is coordinated and consistent across
components and to ensure that avenues are available for DHS employees to
communicate ideas to the implementation teams.

The mission of the Pay, Performance, and Classification team is to design
departmental policies, procedures, guidance, implementation instructions,
and evaluation criteria so that components can implement new systems in
the areas of pay, performance management, and classification. The team is
beginning its work by gathering information in these areas from
departmental components and defining the system objectives. Officials
noted this would be a significant challenge because of differences in the
types of data collected, the varied manner in which the data are stored,
and uneven levels of data reliability. As the team develops its proposals,
it plans to use advisory groups to evaluate the efficacy of draft
policies. Particular attention will be paid to ensuring there are adequate
safeguards in the classification, pay, and performance management systems,
according to officials.

The mission of the Labor Relations, Adverse Actions, and Appeals team is
to prepare rules, regulations, policies, procedures, guidance,
implementing instructions, and evaluation criteria for the department to
deploy new systems in these areas. The co-leads noted that they intend to
work collaboratively to design systems that encourage cooperation. These
officials reported that their initial tasks are to explore how to staff
different boards and panels identified in the proposed regulations and
determine how to transition pending cases to the new system. They further
plan to identify elements that require departmental-level guidance,
identify elements where policy variation is appropriate among departmental
components, and collect data on historical levels of grievances and
appeals to forecast the potential workload once the department is
transitioned to the new system.

The composition of the implementation teams sends an important signal.
Each of the three implementation teams is co-led by professional staff
from DHS headquarters and a component agency. As of mid-March 2004,
officials noted the membership of the teams was still evolving, but was

composed mainly of human capital professionals. Agency officials noted
that decisions had not yet been made about the level of involvement of
union officials. These same officials reported that OPM staff would serve
as advisers when needed as opposed to participating on a full-time basis,
and noted an intention to pull together groups of employees to serve as
"sounding boards and challenge groups" throughout the process. Contractors
will be integrated with the teams to provide project management and other
support.

As DHS moves forward, it may find helpful a set of key capabilities that
our work has found to be central to the use of human capital
authorities.13 These practices center on effective planning and targeted
investments, employee training and participation, and accountability and
cultural change (see app. II).

DHS Proposes Implementing Key Safeguards

In its proposed regulations, DHS outlines its intention to implement key
safeguards that we have found essential to implementing performance
management systems in a fair, effective, and credible manner. For example,
the DHS performance management system must comply with the merit system
principles and avoid prohibited personnel practices; provide a means for
employee involvement in the design and implementation of the system; and
overall, be fair, credible, and transparent. The department also plans to
align individual performance management with organizational goals and
provide for reasonableness reviews of performance management decisions
through its Performance Review Boards. Moreover, employees and their union
representatives played a role in shaping the design of the proposed
systems. These safeguards are generally consistent with our work
identifying key practices that leading public sector organizations here
and abroad have used in their performance management systems to link
organizational goals to individual performance and create a "line of
sight" between an individual's activities and organizational results (see
app. II).14

13U.S. General Accounting Office, Human Capital: Effective Use of
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-2
(Washington, D.C.: Dec. 6, 2002).

14U.S. General Accounting Office, Results-Oriented Cultures: Creating a
Clear Linkage between Individual Performance and Organizational Success,
GAO-03-488 (Washington, D.C.: Mar. 14, 2003).

Our February 2004 testimony identified additional steps DHS could take to
build safeguards into its revised performance management system.15 For
example, we suggested that DHS commit to publishing the results of the
performance management process to assure reasonable transparency and
provide appropriate accountability mechanisms in connection with the
results of the performance management process. This can include publishing
overall results of performance management and individual pay decisions
while protecting individual confidentiality and reporting periodically on
internal assessments and employee survey results relating to the
performance management system. Publishing the results in a manner that
protects individual confidentiality can provide employees with the
information they need to better understand the performance management
system.

Conclusions	The proposed DHS human capital management system has both
significant precedent-setting implications for the executive branch and
far-reaching implications on how the department is managed. However, how
it is done, when it is done, and the basis on which it is done can make
all the difference in whether such efforts are successful. To date, DHS's
actions in designing its human capital management system and its stated
plans for future work on the system are positioning the department for
successful implementation. Looking forward, DHS will need to make
continued progress in a number of key areas including the following.

o 	Strategic workforce planning and the gathering of relevant human
capital data --Strategic human capital planning activities can enable the
department to capitalize on the strengths of its workforce and address
challenges in a manner that is clearly linked to achieving DHS's mission
and goals. The potential for human capital planning activities to
positively impact the department, however, depends on its gathering of
valid, reliable data on workforce demographics and the successes and
shortcomings of new approaches at the headquarters level.

o 	Communication and training --As we previously noted, communicating with
employees and their representatives about the new system and providing
opportunities for feedback, placing a special emphasis on reaching out to
line employees in the field, can facilitate gaining

15GAO-04-479T.

employee buy-in to the new human capital management system. Additionally,
the delivery of training on the new system can enable employees to
understand their rights and how the agency will use its authority.

o 	Safeguards --Publishing the results of the performance management
process can provide employees with the information they need to better
understand the performance management system and make the system more
transparent.

Agency Comments and Our Evaluation

In commenting on a draft of this report, DHS generally agreed with its
findings. DHS comments provided more current information on implementation
timelines and described further research conducted by the design teams
between April and September 2003, which we have incorporated. In addition,
DHS raised concerns about our use of data from the OPM governmentwide FHCS
since the survey was administered before the formation of DHS. Since the
administration of the survey, DHS notes a significant amount of change has
been made in the department. We agree that the department is making
progress in designing its human capital system and outline in this report
where the department is making strides. This report notes that the FHCS
was conducted during the same time frame that the administration proposed
legislation to form DHS. FHCS data are the most current information
available on the perceptions of employees currently employed by DHS and
are valuable because of their illustration of the challenges the
department faces. DHS provided additional technical comments, which were
incorporated where appropriate. Comments from DHS are provided in full in
appendix III.

As agreed with your offices, unless you publicly release its contents
earlier, we plan no further distribution of this report until 30 days from
its date. At that time, we will send copies of this report to the Chairman
and Ranking Minority Member, Senate Committee on Governmental Affairs; the
Chairman and Ranking Minority Member, House Committee on Government
Reform; the Chairman and Ranking Minority Member, House Select Committee
on Homeland Security; and other interested congressional parties. We will
also send copies to the Secretary of the Department of Homeland Security
and the Director of the Office of Personnel Management. Copies will be
made available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me on (202)
512-6806. Key contributors to this report are listed in appendix IV.

J. Christopher Mihm Managing Director, Strategic Issues

Appendix I

                             Scope and Methodology

Scope	This work was conducted from March 2003 through March 2004 in
accordance with generally accepted government auditing standards. We
performed our work in the Washington, D.C., metropolitan area in the
headquarters offices of Department of Homeland Security (DHS) and the five
largest legacy components that transferred to the department: The
Transportation Security Administration (TSA), the Federal Emergency
Management Agency (FEMA), the organizations formerly known as the
Immigration and Naturalization Service (INS) and the U.S. Customs Service,
and the U.S. Coast Guard.

Methodology	To address our objective, we examined the workforce planning
efforts of the five largest legacy components that transferred to the
department. Data on workforce planning and capabilities needed for
successful human capital management were supplemented by information
gathered in interviews with officials from DHS headquarters and the five
legacy components. A standard set of questions was used for interviewing
the legacy components. Interviews with the components were conducted
between January and February 2004. Presentations made by DHS and the
Office of Personnel Management (OPM) in August 2003 were evaluated to
understand the level of data analysis conducted during system design. We
were observers at the August 2003 briefing. We also examined the
transcripts and report summarizing the proceedings of the Senior Review
Advisory Committee meetings in October 2003 and relevant issues of the
weekly DHS newsletter. Our findings were analyzed against criteria
articulated in relevant GAO human capital reports.

To be responsive to your particular interest in seeking out and
incorporating employee perspectives on the human capital system, we
gathered information on employee perceptions from a variety of sources and
presented these findings throughout the report. Insights into employee
opinions were gathered from the OPM Federal Human Capital Survey,
administered between May and August 2002, and a DHS report summarizing
findings from the department's focus groups held during the summer of
2003. A description of the objective, scope, methodology, and limitations
of these two studies was detailed in appendix I of Human Capital:
Preliminary Observations on Proposed DHS Human Capital Regulations
(GAO-04-479T).

In the background section of this report, we cite information from OPM's
Central Personnel Data File (CPDF). The CPDF contains personnel data

Appendix I Scope and Methodology

for most employees of the executive branch. The largest executive branch
employee groups not included are in the intelligence agencies (CIA, etc.)
and the Postal Service. Agencies submit data to the CPDF at the end of
each fiscal quarter. We have found the CPDF to be sufficiently reliable
for the purposes of this report.1

1U. S. General Accounting Office, OPM's Central Personnel Data File: Data
Appear Sufficiently Reliable to Meet Most Customer Needs, GAO/GGD-98-199
(Washington, D.C.: Sept. 30, 1998).

Appendix II

                          Criteria Used for Evaluation

The success of DHS's efforts to design and implement its new human capital
system depends, in part, on building and maintaining an institutional
infrastructure to make effective use of its flexibilities. At a minimum,
this infrastructure includes a strategic human capital planning process
that integrates the agency's human capital approaches with program goals,
desired outcomes, and mission; the capabilities to effectively develop and
implement a new human capital system; and a modern, effective, and
credible performance management system that includes a set of
institutional safeguards, including reasonable transparency and
appropriate accountability mechanisms to ensure the fair, effective, and
credible implementation of the new system.

                                Strategic Human
                                Capital Planning

Strategic workforce planning is the first essential element of the
institutional infrastructure that an agency needs to ensure that its human
capital program capitalizes on its workforce's strengths and addresses
related challenges in a manner that is clearly linked to achieving the
agency's mission and goals. Strategic workforce planning addresses two
critical needs: (1) aligning an organization's human capital programs with
its current and emerging mission and programmatic goals and (2) developing
long-term strategies for acquiring, developing, and retaining staff to
achieve programmatic goals.1

At its core, strategic workforce planning, also called human capital
planning, focuses on developing long-term strategies for acquiring,
developing, and retaining an organization's total workforce (including
fulland part-time federal staff and contractors) to meet the needs of the
future. We recently described five principles for strategic workforce
planning.2

o 	Involve top management, employees, and other stakeholders in
developing, communicating, and implementing the strategic workforce plan.

o 	Determine the critical skills and competencies that will be needed to
achieve current and future programmatic results.

1U.S. General Accounting Office. Human Capital: Key Principles for
Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.: Dec.
11, 2003).

2GAO-04-39.

                                  Appendix II
                          Criteria Used for Evaluation

o 	Develop strategies that are tailored to address gaps in the number and
deployment of employees and the alignment of human capital approaches for
enabling and sustaining the contributions of all critical skills and
competencies.

o 	Build the capability needed to address administrative, educational, and
other requirements important to support workforce strategies.

o 	Monitor and evaluate the agency's progress towards its human capital
goals and the contribution that human capital results have made toward
achieving programmatic goals.

Consistent with these principles, we have identified that one of the
critical success factors for strategic human capital planning is
data-driven human capital decision making.3 A fact-based,
performance-oriented approach to human capital management is crucial for
maximizing the value of human capital as well as managing risk.
High-performing organizations use data to determine key performance
objectives and goals that enable them to evaluate the success of their
human capital approaches. Valid and reliable data are critical to
assessing an agency's workforce requirements and heighten an agency's
ability to manage risk by allowing managers to spotlight areas for
attention before crises develop and identify opportunities for enhancing
agency results. Reporting on the results of these evaluations can
facilitate congressional oversight of the system, allow for midcourse
corrections, and serve as a tool for documenting best practices and
sharing lessons learned with employees, stakeholders, other federal
agencies, and the public.

Key Capabilities for Implementing Human Capital Approaches

As DHS moves forward, it may find helpful a key set of capabilities that
our work has found to be central to the use of human capital authorities.4
These practices center on effective planning and targeted investments,
employee participation and training, and accountability and cultural
change.

3U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO02-373SP (Washington, D.C.: Mar. 15, 2002).

4U.S. General Accounting Office, Human Capital: Effective Use of
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-2
(Washington, D.C.: Dec. 6, 2002).

Appendix II
Criteria Used for Evaluation

o  Plan strategically and make targeted investments

o  Obtain agency leadership commitment

o  Determine agency workforce needs using fact-based analysis

o 	Develop strategies that employ appropriate flexibilities to meet
workforce needs

o  Make appropriate funding available

o  Ensure stakeholder input in developing policies and procedures

o  Engage the human capital office

o  Engage agency managers and supervisors

o  Involve employees and unions

o 	Use input to establish clear, documented, and transparent policies and
procedures

o 	Educate managers and employees on the availability and use of
flexibilities

o  Train human capital staff

o 	Educate agency managers and supervisors on existence and use of
flexibilities

o  Inform employees of procedures and rights

o  Streamline and improve administrative processes

o  Ascertain the source of existing requirements

o  Reevaluate administrative approval processes for greater efficiency

o  Replicate proven successes of others

o  Build transparency and accountability into the system

o 	Delegate authority to use flexibilities to appropriate levels within
the agency

o  Hold managers and supervisors directly accountable

o  Apply policies and procedures consistently

o  Change the organizational culture

o 	Ensure involvement of senior human capital managers in key
decision-making processes

o 	Encourage greater acceptance of prudent risk taking and organizational
change

o 	Recognize differences in individual job performance and competencies

                                  Appendix II
                          Criteria Used for Evaluation

Institutionalizing Performance Management Safeguards

We testified last spring that Congress should consider establishing
statutory standards that an agency must have in place before it can
implement a more performance-based pay program and developed an initial
list of possible safeguards to help ensure that pay for performance
systems in the government are fair, effective, and credible.5

o 	Assure that the agency's performance management systems (1) link to the
agency's strategic plan, related goals, and desired outcomes and (2)
result in meaningful distinctions in individual employee performance. This
should include consideration of critical competencies and achievement of
concrete results.

o 	Involve employees, their representatives, and other stakeholders in the
design of the system, including having employees directly involved in
validating any related competencies, as appropriate.

o 	Assure that certain predecisional internal safeguards exist to help
achieve the consistency, equity, nondiscrimination, and nonpoliticization
of the performance management process (e.g., independent reasonableness
reviews by Human Capital Offices and/or Offices of Opportunity and
Inclusiveness or their equivalent in connection with the establishment and
implementation of a performance appraisal system, as well as reviews of
performance rating decisions, pay determinations, and promotion actions
before they are finalized to ensure that they are merit-based; internal
grievance processes to address employee complaints; and pay panels whose
membership is predominately made up of career officials who would consider
the results of the performance appraisal process and other information in
connection with final pay decisions).

o 	Assure reasonable transparency and appropriate accountability
mechanisms in connection with the results of the performance management
process. This can include reporting periodically on internal assessments
and employee survey results relating to the performance management system
and publishing overall results of performance management and individual
pay decisions while protecting

5U.S. General Accounting Office, Defense Transformation: Preliminary
Observations on DOD's Proposed Civilian Personnel Reforms, GAO-03-717T
(Washington, D.C.: Apr. 29, 2003).

Appendix II
Criteria Used for Evaluation

individual confidentiality. Publishing the results in a manner that
protects individual confidentiality can provide employees with the
information they need to better understand the performance management
system.

While incorporating these safeguards into performance management systems,
our work indicates that there is a set of key practices for agencies to
create a clear linkage, or "line of sight," between individual performance
and organizational success.6 These key practices include the following.

1. Align individual performance expectations with organizational goals. An
explicit alignment helps individuals see the connection between their
daily activities and organizational goals.

2. Connect performance expectations to crosscutting goals. Placing an
emphasis on collaboration, interaction, and teamwork across organizational
boundaries helps strengthen accountability for results.

3. Provide and routinely use performance information to track
organizational priorities. Individuals use performance information to
manage during the year, identify performance gaps, and pinpoint
improvement opportunities.

4. Require follow-up actions to address organizational priorities. By
requiring and tracking follow-up actions on performance gaps,
organizations underscore the importance of holding individuals accountable
for making progress on their priorities.

5. Use competencies to provide a fuller assessment of performance.
Competencies define the skills and supporting behaviors that individuals
need to effectively contribute to organizational results.

6. Link pay to individual and organizational performance. Pay, incentive,
and reward systems that link employee knowledge, skills, and contributions
to organizational results are based on valid, reliable, and transparent
performance management systems with adequate safeguards.

6U.S. General Accounting Office, Results-Oriented Cultures: Creating a
Clear Linkage between Individual Performance and Organizational Success,
GAO-03-488 (Washington, D.C.: Mar. 14, 2003).

Appendix II
Criteria Used for Evaluation

7. Make meaningful distinctions in performance. Effective performance
management systems strive to provide candid and constructive feedback and
the necessary objective information and documentation to reward top
performers and deal with poor performers.

8. Involve employees and stakeholders to gain ownership of performance
management systems. Early and direct involvement helps increase employees'
and stakeholders' understanding and ownership of the system and belief in
its fairness.

9. Maintain continuity during transitions. Because cultural
transformations take time, performance management systems reinforce
accountability for change management and other organizational goals.

Appendix III

Comments from the Department of Homeland Security

Appendix III Comments from the Department of Homeland Security

Appendix IV

                     GAO Contact and Staff Acknowledgments

GAO Contact J. Christopher Mihm, (202) 512-6806

Acknowledgments	In addition to the person named above, Ed Stephenson,
Ellen V. Rubin, Tina Smith, Lou V.B. Smith, Masha Pasthhov-Pastein, Karin
Fangman, and Ron La Due Lake made key contributions to this report.

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