Issues Related to Poor Performers in the Federal Workplace	 
(29-JUN-05, GAO-05-812R).					 
                                                                 
Many factors contribute to an organization's success in 	 
accomplishing its mission, but none more than the effective	 
management and utilization of its greatest asset--its employees. 
A high-performing organization relies on a dynamic workforce with
the requisite talents, multidisciplinary knowledge, and 	 
up-to-date skills to ensure that it is equipped to accomplish its
mission and achieve its goals. An effective performance 	 
management system can help an organization manage the day-to-day 
activities that allow employees to perform at their highest	 
levels by creating a clear linkage--"line of sight"--between	 
individual performance and organizational success. In the current
environment where federal agencies are facing the challenges of  
transforming themselves, some agencies have begun to create	 
results-oriented organizational cultures where unit and 	 
individual performance is linked to organizational goals.	 
Effective performance management systems can help create such	 
cultures by providing objective information to allow managers to 
make meaningful distinctions in performance in order to reward	 
top performers and deal with poor performers. For example, final 
regulations establishing the Department of Homeland Security's	 
(DHS) new human capital system state that DHS supervisors and	 
managers are to be held accountable for making meaningful	 
distinctions among employees based on performance, fostering and 
rewarding excellent performance, and addressing poor performance.
Although poor performance is not defined by statute, title 5 of  
the United States Code characterizes unacceptable performance as 
"performance of an employee which fails to meet established	 
performance standards in one or more critical elements of such	 
employee's position." The DHS and the proposed Department of	 
Defense (DOD) systems deny pay increases to employees with	 
unacceptable performance ratings. The exact number of poor	 
performers in the federal government is unknown; however, it is  
generally agreed that even a small number of poor performers can 
have a negative impact on the work environment. In this regard,  
general agreement exists that poor performance should be	 
addressed earlier rather than later, with the objective of	 
improving the performance. Surveys of supervisors and employees  
have identified a number of impediments to taking action to deal 
with poor performance. Based on a Congressional request for	 
information on issues relating to the management of poor	 
performers in the federal government, our objectives were to: (1)
synthesize and update currently available information related to 
the a) magnitude of the poor performer issue in the federal	 
government; b) tools and approaches available to agencies,	 
including DHS and DOD, for addressing poor performance; and c)	 
impediments identified to dealing with poor performers; and (2)  
present key factors for addressing poor performance, based on	 
past work and leading practices.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-812R					        
    ACCNO:   A28537						        
  TITLE:     Issues Related to Poor Performers in the Federal	      
Workplace							 
     DATE:   06/29/2005 
  SUBJECT:   Agency missions					 
	     Employee incentives				 
	     Employee relations 				 
	     Federal employees					 
	     Human capital					 
	     Human capital management				 
	     Performance appraisal				 
	     Performance management				 
	     Performance measures				 
	     Personnel management				 
	     Surveys						 
	     Accountability					 

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GAO-05-812R

United States Government Accountability Office Washington, DC 20548

June 29, 2005

The Honorable Tom Davis
Chairman
Committee on Government Reform
House of Representatives

The Honorable Jon C. Porter
Chairman
Subcommittee on the Federal Workforce

and Agency Organization
Committee on Government Reform
House of Representatives

Subject: Issues Related to Poor Performers in the Federal Workplace

Many factors contribute to an organization's success in accomplishing its
mission, but none more than the effective management and utilization of
its greatest asset-its employees. A high-performing organization relies on
a dynamic workforce with the requisite talents, multidisciplinary
knowledge, and up-to-date skills to ensure that it is equipped to
accomplish its mission and achieve its goals. An effective performance
management system can help an organization manage the day-to-day
activities that allow employees to perform at their highest levels by
creating a clear linkage-"line of sight"-between individual performance
and organizational success.

In the current environment where federal agencies are facing the
challenges of transforming themselves, some agencies have begun to create
results-oriented organizational cultures where unit and individual
performance is linked to organizational goals. Effective performance
management systems can help create such cultures by providing objective
information to allow managers to make meaningful distinctions in
performance in order to reward top performers and deal with poor
performers. For example, final regulations establishing the Department of
Homeland Security's (DHS) new human capital system state that DHS
supervisors and managers are to be held accountable for making meaningful
distinctions among employees based on performance, fostering and rewarding
excellent performance, and addressing poor performance. Although poor
performance is not defined by statute, title 5 of the United States Code
characterizes unacceptable performance as "performance of an employee
which fails to meet established performance standards

              GAO-05-812R Poor Performers in the Federal Workplace

in one or more critical elements of such employee's position."1 The DHS
and the proposed Department of Defense (DOD) systems deny pay increases to
employees with unacceptable performance ratings.2

The exact number of poor performers in the federal government is unknown;
however, it is generally agreed that even a small number of poor
performers can have a negative impact on the work environment. In this
regard, general agreement exists that poor performance should be addressed
earlier rather than later, with the objective of improving the
performance. Surveys of supervisors and employees have identified a number
of impediments to taking action to deal with poor performance.

Based on your request for information on issues relating to the management
of poor performers in the federal government, our objectives were to:

1) Synthesize and update currently available information related to the

o  magnitude of the poor performer issue in the federal government;

o  	tools and approaches available to agencies, including DHS and DOD, for
addressing poor performance; and

o  impediments identified to dealing with poor performers.

2) 	Present key factors for addressing poor performance, based on past
work and leading practices.

To accomplish these objectives, we reviewed our prior work as well as that
of the Merit Systems Protection Board (MSPB) and the Office of Personnel
Management (OPM); data on performance appraisal ratings from OPM's Central
Personnel Data File (CPDF); and recently issued DHS's final and DOD's
proposed regulations establishing their personnel and performance
management systems. We performed our work from January through March 2005
in accordance with generally accepted government auditing standards.

3

We provided detailed briefings on the results of our work to the
requesters' staffs. The briefing slides are included in the enclosure. The
purpose of this letter is to provide the slides to you along with
additional information, as requested, on authority that federal agencies
have to extend the duration of the probationary period for new employees.

In brief, we reported that studies provide varying indicators of the
magnitude of poor performance in the federal workforce. For example, while
a 1999 OPM survey of supervisors estimated that poor performers
constituted about 3.7 percent of the federal workforce, CPDF data indicate
that of those employees rated in fiscal year 2003, 0.3 percent received an
unacceptable performance rating. In MSPB's 2000 survey, employees
perceived that 14.3 percent of their coworkers were performing

15 U.S.C. S: 4301(3). See also 5 C.F.R. S: 432.103(h). 25 C.F.R. S:
9701.323 and S: 9701.335; proposed 5 C.F.R. S: 9901.323 and S: 9901.334.
3On May 26, 2005, and on June 21, 2005, we briefed the requesters' staffs.

below reasonably expected levels. Some of the variance in the survey
results can be attributed to the populations surveyed and the questions
posed.

Various tools and approaches are available to deal with performance,
including poor performance. We provide several examples, which are not
intended to be representative of all approaches available to agencies.
Foremost, as we have stated, establishing an effective performance
management system is important in providing candid and constructive
feedback to help individuals maximize their performance. Effective use of
probationary periods to rigorously review employee performance is also
important since the probationary period may be viewed as the final
opportunity to evaluate performance before permanent appointment.
Furthermore, some agencies have used other approaches, unrelated to
performance management or probationary employment, to address poor
performance. Such approaches include denying pay increases to employees
with unacceptable performance ratings, streamlining the appeals processes,
and increasing the use of alternative dispute resolution to address
workplace disputes that involve disciplinary or adverse actions.

In response to the question about the authority available to agencies to
extend the probationary period, we note that section 3321 of title 5 of
the United States Code does not contain any specified time periods.
However, the critical feature of dealing with poor performance during the
probationary period is the limitation on appeal rights, and under chapter
75 of title 5, full appeal rights are extended to any employee (including
a probationary employee) who has completed more than 1 year of continuous
service.4 Therefore, any decision to allow agencies to extend probationary
periods beyond 1 year and to include the limitation on appeal rights would
require legislative action. For example, both DHS and DOD, which are
exempt from chapter 75 of title 5, have provided their managers with the
flexibility to go beyond the standard 1-year period of probation. We have
reported that other agencies have been granted the authority to extend the
probationary period. For example, demonstration projects at the Department
of Commerce and the National Institute of Standards and Technology
included probationary periods of up to 3 years

5

for specific occupation groups.

Various studies, reports, and surveys of federal supervisors and employees
we reviewed have identified various impediments to dealing with poor
performance, including issues related to (1) time and complexity of the
processes; (2) lack of training in performance management; and (3)
communication, including the dislike of confrontation. Results of OPM's
2004 Federal Human Capital Survey, published subsequent to the completion
of our audit work, support the view that impediments still exist.6
Responding to the statement: "In my work unit, steps are taken to deal

45 U.S.C. S: 7511 (a)(1)(A). See McCormick v. Department of the Air Force,
307 F.3d 1339 (Fed. Cir.
2002).
5Chapter 47 of title 5 permits agencies to undertake demonstration
projects in order to determine
whether specified changes in personnel management policies or procedures
could result in improved
personnel management. For more information on the demonstration projects,
see Human Capital:
Implementing Pay for Performance at Selected Demonstration Projects,
GAO-04-83 (Washington,
D.C.: Jan. 23, 2004).
6Office of Personnel Management, What Do Federal Employees Say
(Washington, D.C.: May 2005).
The Federal Human Capital Survey is a tool that measures employees'
perceptions of whether, and to
what extent, conditions characterizing successful organizations are
present in their agencies.

with a poor performer who cannot or will not improve," 27 percent of
respondents agreed or strongly agreed, while 41 percent disagreed or
strongly disagreed.7

Looking forward, it will be important to carefully evaluate the
implementation of DHS's and DOD's personnel and performance management
systems to determine their effectiveness and potential application
governmentwide, including the tools and approaches that are aimed at
addressing poor performance. However, this will take time. In the interim,
it will be important to continue to institute performance-based cultures
and provide adequate training and resources on performance management.

                                  _ _ _ _ _ _

We are sending copies of this report to the Director, Office of Personnel
Management; the Chairman, Merit Systems Protection Board; and other
interested parties. Copies will also be made available to others on
request. Should you or your staff have any questions concerning this
report, please contact me on 202-512-9490 or by e-mail at
[email protected]. Marianne Anderson, Karin Fangman, Anthony Fernandez,
Anthony Lofaro, Belva Martin, and Gregory Wilmoth were key contributors to
this report.

George H. Stalcup Director, Strategic Issues

Enclosure

7By comparison, in OPM's first survey in 2002, 25 percent agreed or
strongly agreed that steps were taken to deal with poor performers, while
46 percent disagreed or strongly disagreed.

February 10, 2005

HUMAN CAPITAL

Preliminary Observations on Final Department of Homeland Security Human Capital
                                  Regulations

What GAO Found

GAO believes that the regulations contain many of the basic principles
that are consistent with proven approaches to strategic human capital
management. For example, many elements for a modern compensation
system-such as occupational clusters, pay bands, and pay ranges that take
into account factors such as labor market conditions-are to be
incorporated into DHS's new system. However, these final regulations are
intended to provide an outline and not a detailed, comprehensive
presentation of how the new system will be implemented. Thus, DHS has
considerable work ahead to define the details of the implementation of its
system and understanding these details is important in assessing the
overall system.

The implementation challenges we identified last year are still critical
to the success of the new system. Also, DHS appears to be committed to
continue to involve employees, including unions, throughout the
implementation process. Specifically, according to the regulations,
employee representatives or union officials are to have opportunities to
participate in developing the implementing directives, hold four
membership seats on the Homeland Security Compensation Committee, and help
in the design and review the results of evaluations of the new system.
Further, GAO believes that to help ensure the quality of that involvement,
DHS will need to

Ensure sustained and committed leadership. A Chief Operating Officer/Chief
Management Officer or similar position at DHS would serve to elevate,
integrate, and institutionalize responsibility for this critical endeavor
and help ensure its success by providing the continuing, focused attention
needed to successfully complete the multiyear conversion to the new human
capital system.

Establish an overall communication strategy. According to DHS, its planned
communication strategy for its new human capital system will include
global e-mails, satellite broadcasts, Web pages, and an internal DHS
weekly newsletter. A key implementation step for DHS is to assure an
effective and on-going two-way communication effort that creates shared
expectations among managers, employees, customers, and stakeholders.

While GAO strongly supports human capital reform in the federal
government, 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.
GAO's implementation of its own human capital authorities, such as pay
bands and pay for performance, could help inform other organizations as
they design systems to address their human capital needs. The final
regulations for DHS's new system are especially critical because of the
potential implications for related governmentwide reforms.

United States Government Accountability Office

March 15, 2005

HUMAN CAPITAL

  Preliminary Observations on Proposed DOD National Security Personnel System
                                  Regulations

                                 What GAO Found

Given DOD's massive size and its geographically and culturally diverse
workforce, NSPS represents a huge undertaking for DOD. DOD's initial
process to design NSPS was problematic; however, after a strategic
reassessment, DOD adjusted its approach to reflect a more cautious,
deliberate process that involved more stakeholders, including OPM.

Many of the principles underlying the proposed NSPS regulations are
generally consistent with proven approaches to strategic human capital
management. For instance, the proposed regulations provide for (1)
elements of a flexible and contemporary human resources management
system-such as pay bands and pay for performance; (2) DOD to rightsize its
workforce when implementing reduction-in-force orders by giving greater
priority to employee performance in its retention decisions; and (3)
continuing collaboration with employee representatives. (It should be
noted that 10 federal labor unions have filed suit alleging that DOD
failed to abide by the statutory requirements to include employee
representatives in the development of DOD's new labor relations system
authorized as part of NSPS.)

GAO has three primary areas of concern: the proposed regulations do not
(1) define the details of the implementation of the system, including such
issues as adequate safeguards to help ensure fairness and guard against
abuse; (2) require, as GAO believes they should, the use of core
competencies to communicate to employees what is expected of them on the
job; and (3) identify a process for the continuing involvement of
employees in the planning, development, and implementation of NSPS.

Going forward, GAO believes that (1) the development of the position of
Deputy Secretary of Defense for Management, who would act as DOD's Chief
Management Officer, is essential to elevate, integrate, and
institutionalize responsibility for the success of DOD's overall business
transformation efforts, including its new human resources management
system; (2) DOD would benefit if it develops a comprehensive
communications strategy that provides for ongoing, meaningful two-way
communication that creates shared expectations among employees, employee
representatives, and stakeholders; and (3) DOD must ensure that it has the
institutional infrastructure in place to make effective use of its new
authorities before they are operationalized.

GAO strongly supports the concept of modernizing federal human capital
policies, including providing reasonable flexibility. There is general
recognition that the federal government needs a framework to guide human
capital reform. Such a framework would consist of a set of values,
principles, processes, and safeguards that would provide consistency
across the federal government but be adaptable to agencies' diverse
missions, cultures, and workforces.

(450425) 34

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