Federal Quality Management: Strategies for Involving Employees (Letter
Report, 04/18/95, GAO/GGD-95-79).

GAO reviewed quality management (QM) implementation at federal agencies,
focusing on the human resource management (HRM) approaches used by 10
federal agencies recognized for their QM efforts.

GAO found that: (1) the agencies have spent significantly more money on
employee training and have used in-house training for at least part of
their training efforts; (2) in-house training has resulted in reduced
costs, customized programs, and credibility with employees; (3)
increased and more direct communication between managers and employees
has improved the flow of ideas, information sharing, and coordination
and cooperation between agency units; (4) the 10 agencies have developed
teamwork approaches to address cross-functional issues; (5) some
agencies are developing self-managed teams to carry out certain tasks;
(6) the 10 agencies have empowered their employees to be actively
involved in improving their work processes, widening their
responsibilities, and contributing ideas to improve services; and (7)
all agency personnel surveyed stress the importance of top management
support and participation for QM implementation to succeed.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-95-79
     TITLE:  Federal Quality Management: Strategies for Involving 
             Employees
      DATE:  04/18/95
   SUBJECT:  Total quality management
             Agency missions
             Surveys
             Labor-management relations
             Human resources utilization
             Human resources training
             Productivity
             Personnel management
             Cost control
             Interagency relations
IDENTIFIER:  TQM
             IRS Survey Feedback Action
             IRS Computer Assisted Pipeline Review
             National Productivity Plan
             IRS Productivity Gain-Sharing Award Program
             IRS If I Were Director Program
             
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Cover
================================================================ COVER


Report to the Director, Office of Personnel Management

April 1995

FEDERAL QUALITY MANAGEMENT:  -
STRATEGIES FOR INVOLVING EMPLOYEES

GAO/GGD-95-79

Quality Management


Abbreviations
=============================================================== ABBREV

  ASD - Aeronautical Systems Division
  CAPRS - Computer Assisted Pipeline Review System
  CSC - Cincinnati Service Center
  FQI - Federal Quality Institute
  HRM - human resource management
  IRS - Internal Revenue Service
  JQC - Joint Quality Council
  JQIP - Joint Quality Improvement
  OPM - Office of Personnel Management
  OSC - Ogden Service Center
  QASS - Quality Analysis and Support Staff
  QIP - quality improvement team
  QM - Quality Management
  SFA - Survey Feedback Action

Letter
=============================================================== LETTER


B-249779

April 18, 1995

The Honorable James B.  King
Director, Office of Personnel
 Management

Dear Mr.  King: 

Quality Management (QM)--a management approach that emphasizes
improving product quality while decreasing production costs by
increasing the efficiency of work processes--has gained significant
popularity in the federal government.  Approximately 68 percent of
the 2,200 federal organizations responding to our June 1992 survey on
QM reported that they were in various phases of QM implementation. 
However, the same survey indicated that actual employee involvement
was limited; on average, only 13 percent of employees at these
organizations were actively involved in such QM-related activities as
facilitation, councils, teams, and teaching.\1 Survey respondents
identified problems related to human resource management (HRM) as
being among the major barriers to implementing QM-- which, if it is
to be successful, requires employee participation. 

This report describes the HRM approaches used to implement QM by 10
federal organizations that have won governmental awards for the
advanced level of their quality initiatives.  We believe that the
results of this examination should be useful to the Office of
Personnel Management (OPM) as the agency with primary responsibility
for assisting federal agencies with QM through its Federal Quality
Institute (FQI). 


--------------------
\1 Quality Management:  Survey of Federal Organizations
(GAO/GGD-93-9BR, Oct.  1, 1992). 


   RESULTS
------------------------------------------------------------ Letter :1

We learned through our visits to award-winning organizations and
discussions with their top managers that the process of changing to a
quality management organization was driven by the synergism that
results from using the four HRM strategies outlined below.  By using
these strategies, which overlap and support one another, the
organizations we visited reported increased levels of employee
involvement in quality improvement activities.  The four strategies
are: 


      TRAINING
---------------------------------------------------------- Letter :1.1

As part of their efforts to implement QM, the 10 organizations spent
significantly more money on training than they had before they moved
to a QM environment.  In addition, 5 of the 10 organizations had data
to show that they spent over 2.5 percent of their payroll dollars on
training, compared to the governmentwide average of 0.75 percent
reported by the 1989 Volcker Commission on Public Service.  Seven of
the 10 organizations we visited used a "cascading" approach to
provide training, whereby each level of the organization was
responsible for training the level below it on the organizational
chart.  All 10 organizations used in-house trainers at least part of
the time.  As benefits of this in-house approach, the officials we
spoke to generally mentioned one or more of the "3 Cs", i.e., cost
(this approach is cheaper than paying consultants to do all of the
training); customization (unlike the more generic approach of most
consultants, in-house training can be tailored to the organization's
specific mission, goals, and needs); and credibility (top managers
told us that having managers do the training sends the message to
employees that top management is committed to the QM principles and
tools that are being taught). 


      COMMUNICATIONS
---------------------------------------------------------- Letter :1.2

Direct and regular face-to-face contact between top managers and
workers on the shop floor was a hallmark of the broadened and
deepened communications approach, according to officials at most of
the organizations.  At the Naval Aviation Depot in Cherry Point, NC,
officials told us that the decision to increase contact between
management and employees stemmed from the former's realization that a
huge untapped knowledge base existed at the floor level--the
workforce--and that the people who perform the work often have the
best ideas on how to make improvements.  At some organizations,
interaction between management and employees took the form of "town
meetings" at which both groups could openly discuss issues focusing
on quality and productivity.  At some other organizations, top
managers made informal visits to work areas to solicit ideas on
improving processes from employees.  In addition to this "bottom-up"
approach, the 10 organizations also worked to open dialogues between
different functional areas (i.e., horizontal communication) as a
means of identifying problems and improving processes.  They did this
by (1) establishing cross-functional teams to look at problems that
cut across functional lines and (2) using "internal customer surveys"
that helped to increase functional areas' awareness of how they could
serve their internal customers more effectively and efficiently. 


      TEAMS
---------------------------------------------------------- Letter :1.3

The 10 organizations we visited focused on developing teamwork.  All
organizations started with problem-solving teams created to address a
single issue and eventually expanded to include cross-functional
teams.  Currently, four organizations have developed self-managed
teams, which are formed along process lines and assume managerial
responsibilities once assigned only to supervisors.  For example,
self-managed teams at the Naval Aviation Depot in Cherry Point were
responsible for checking incoming work, distributing work among
employees, and ordering supplies.  Two other organizations are moving
towards developing self-managed teams. 


      EMPOWERMENT
---------------------------------------------------------- Letter :1.4

All 10 organizations empowered their employees to take active steps
to identify and improve processes that hindered product quality or
customer service.  At one installation, empowerment took the form of
employees stopping work without consulting a manager when they
encountered problems and taking the necessary steps to identify and
correct the problem.  At other installations, empowerment took the
form of employees widening the scope of their work responsibilities,
largely through the use of the team concept discussed previously.  At
the Internal Revenue Service's Ogden, Utah, Service Center, for
example, employees in the unit responsible for handling--but not
responding to--correspondence from taxpayers and tax practitioners
formed a team that recommended that employees be empowered to deal
directly with customers.  Now, employees answer and sign
correspondence using a new letter format they developed.  They also
have the authority to expand upon the information provided in the
letters when they are contacted by taxpayers.  They also do needed
follow-up work on taxpayer cases.  This new "customer-friendly"
approach was a direct result of employee input and has received
positive feedback from both taxpayers and tax practitioners. 

Finally, individuals at all levels of the 10 quality
organizations--from the shop floor to top management--stressed the
critical importance of their top managers' involvement in the QM
implementation process.  These individuals emphasized that QM would
likely not have succeeded without the active participation and
support of their top managers in using the four HRM strategies.  A
graphic example of top management commitment was provided at the
Naval Aviation Depot in Cherry Point, where top management empowered
artisans to stamp their work to indicate that it was ready to use
without undergoing a detailed inspection.  When the first aircraft
was completed under the artisan certification concept, the facility's
commanding officer simply asked the artisans if the aircraft was
ready and whether they were confident that the traditional inspection
process was unnecessary.  When they answered yes, the commander
appeared in his flight suit and personally flew the test flight. 

For a detailed discussion of the four strategies, see appendix I. 


   OBJECTIVE, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :2

The objective of this assignment was to identify the HRM approaches
used to implement QM at federal organizations that have been
recognized for their QM efforts. 

To develop our methodology, we interviewed experts on QM, conducted a
comprehensive review of QM literature, and reviewed prior GAO work
that addressed QM issues.  As a result of this effort, we selected 10
organizations, both civilian and within the Department of Defense,
that (1) had won governmental awards recognizing them for quality and
(2) had either identified themselves in our earlier survey as
achieving results and institutionalizing QM or had been recommended
by experts.  These organizations are listed in the detailed
description of our scope and methodology in appendix II. 

To identify the HRM approaches used by these organizations, we (1)
reviewed documents provided by the organizations, such as quality
award applications and the results of employee and customer surveys;
and (2) interviewed more than 300 managers and employees, including
union officials, about their organizations' HRM approaches to
implementing QM and the lessons they learned during their efforts to
adopt QM. 

We did our field work between September 1993 and August 1994 in
accordance with generally accepted government auditing standards. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :3

We met with QM officers and other responsible management officials
from the National Technical Information Service, Department of
Commerce; Aviation Supply Office, Department of the Navy; Veterans
Affairs Regional Office and Insurance Center, Department of Veterans
Affairs; Naval Air Warfare Center, Aircraft Division, Department of
the Navy; Aeronautical Systems Division, Department of the Air Force;
and the Cincinnati and Ogden Service Centers, Internal Revenue
Service, on July 6, 1994, to discuss a draft of this report.  Those
officials generally agreed with the thrust of our message regarding
use of the four human resource approaches.  They did not identify any
significant problems with the report message as we had outlined it. 
They agreed that we had identified human resource approaches common
to all of their organizations.  The officials also emphasized that
implementing QM required a strong commitment from top leadership and
the importance of empowering employees.  Wherever possible, we
included the information they provided in the report. 

Subsequently, the quality coordinators from the three organizations
that did not attend the July 6, 1994, conference (Arnold Engineering
Development Center, Defense Contract Management District, and the
Naval Aviation Depot) reviewed and agreed with the key findings of
this report. 


---------------------------------------------------------- Letter :3.1

We are sending copies of this report to the Chairman, Senate
Governmental Affairs Committee; the Chairman, House Governmental
Reform and Oversight Committee; and the Project Director, National
Performance Review.  Copies also will be made available to other
interested parties on request. 

If you have any questions, please call me on 202-512-5074.  The major
contributors to this report are listed in appendix III. 

Sincerely yours,

Timothy P.  Bowling
Associate Director
Federal Human Resource Management
 Issues


THE HRM APPROACHES USED TO
IMPLEMENT QM IN AWARD- WINNING
ORGANIZATIONS
=========================================================== Appendix I

Although no 2 of the QM programs we looked at were exactly the same,
all 10 of the award-winning organizations embraced the same 4 general
HRM strategies to involve their employees more effectively in the
effort to improve quality and better meet customer needs.  These
strategies were: 

implementing a comprehensive program to train employees in QM
concepts, problem-solving techniques, and other skills they will need
to meet the organization's strategic plan for the future;

increasing communication within the organization;

promoting, supporting, and rewarding teamwork; and

empowering employees by involving them in efforts to satisfy customer
needs and share in managing work processes. 

Within each of the four strategies, we identified several approaches
used by the organizations to implement their HRM strategies.  The
majority of the organizations we visited said they used most of these
approaches; some used all of them. 

The HRM strategies the organizations used to implement QM overlapped
and supported each other.  We discovered through our visits to
quality organizations and discussions with employees at all levels
that the process of changing to a quality culture was driven by the
synergism that resulted from using the four HRM strategies
concurrently.  In doing so, these organizations increased the levels
of employee involvement in quality improvement activities. 

In our 1992 survey, the seven responding award-winning organizations
reported that about 34 percent of their employees were involved in QM
activities.\1 In 1994, all 10 award-winners reported about 50 percent
employee involvement on average. 

We also learned that top managers provided more than tacit approval
of these strategies--they were actively involved in their
implementation and visibly committed to making them a success. 
Repeatedly during our visits, employees, managers, and union
officials spoke of their top managers as the driving forces behind
their QM initiatives. 


--------------------
\1 In our 1992 survey, organizations that had been implementing QM
for the same length of time as the 10 award-winning organizations we
selected for this report reported 22-percent involvement on average. 


   PROVIDE TRAINING
--------------------------------------------------------- Appendix I:1

The top managers at the quality organizations we visited were often
instrumental in introducing, and subsequently championing, QM at
their organizations.  They learned about QM through their reading,
attendance at QM seminars, or visits to organizations that had
implemented QM.  We heard many stories of how a top manager, upon
returning from a major learning experience, enthusiastically went
about introducing QM to the workforce.  The top managers personally
directed their organizations' initial QM efforts through existing
structures (e.g., human resource development offices) or newly
created structures (e.g., quality coordinators' offices) to provide
training to employees in QM concepts and tools and to upgrade their
skills. 

Since they started implementing QM, at least five of the
organizations we visited have spent more time and money, as a percent
of payroll, on employee training than other federal government
agencies.  Although the others could not provide detailed training
costs, their emphasis on training, on both QM and other skills, was a
top priority.  According to the 1989 report of the National
Commission on the Public Service (the Volcker Commission), the
government spent approximately 0.75 percent of its payroll dollars
for civilian training.  Although we were unable to obtain comparable
cost data for all of the organizations we visited, five organizations
reported that they spent at least 2.5 percent of their payroll
dollars on training (QM and other). 

The approaches used by quality organizations to provide training
included the following: 

Management established a comprehensive quality training program.  The
10 organizations we visited established comprehensive training
programs designed to introduce the entire workforce to basic QM tools
and concepts.  At the organizations we visited, this training
generally lasted anywhere from 2 hours to 2 days, and in some cases
the training lasted longer.  In addition to introductory training,
the organizations provided training on internal customer/vendor
relationships, analytic trouble shooting, statistical process
control, project team facilitator training, and other QM-related
issues.  Following initial training, most conducted self-assessments
that enabled them to identify--and correct--shortcomings in the
initial training.  Finally, the organizations often included training
to teach employees those skills the organization will require in the
future. 

Management developed in-house QM training capabilities.  Faced with
the high cost of using consultants--and concerned that the training
offered by outsiders was too generic--the organizations we visited
generally established a training branch or quality office to provide
QM training using managers and in-house instructors and developed
training materials tailored to their specific missions, goals, and
needs.  Seven of the 10 organizations used a cascading training
approach, whereby each level of the organization was responsible for
training the level below it on the organizational chart.  Top and
middle managers were generally required to attend additional training
courses to help them assume their new roles as "coaches." The
organizations we visited found that the use of in-house teachers and
materials lent credibility to the QM program; officials said having
managers do the training sent a clear message to the workforce that
management was both familiar with and committed to making QM a
success. 


      THE "3 CS" OF IN-HOUSE
      TRAINING
------------------------------------------------------- Appendix I:1.1

When asked to provide a rationale for developing in-house training
capabilities rather than exclusively using consultants, the officials
we spoke to generally cited one or more of the "3 Cs": 

Cost:  Effectively implementing QM entails training many employees
over a long period of time.  Officials at many installations told us
they opted for in-house training because of the greater cost of
relying on consultants to conduct long-term training. 

Customization:  Officials at some of the installations felt that the
training offered by consultants was too generic.  In-house training
materials can be tailored to meet an organization's specific mission,
goals, and needs. 

Credibility:  Officials explained that in their view, the use of
in-house training added credibility to an installation's QM program. 
Having managers do the training sent a message to employees that
management was both familiar with and committed to the QM principles
and tools that were being taught. 


------------------------------------------------------- Appendix I:1.2

Management integrated quality training into the corporate HRM
development strategy.  The organizations we visited integrated their
teaching of quality tools and concepts into their overall strategies
for upgrading employees' skills.  This served to underscore the
importance placed on quality training by the organization.  Methods
the organizations used included skills assessments/inventories,
individual development plans, a "template" approach to training (see
case study 1), and cooperative arrangements with local schools to
provide training resulting in academic degrees and/or certification. 

Management provided continuing training.  The organizations we
visited followed up their initial quality training efforts by
providing additional quality and related courses on a just-in-time
basis, which emphasizes narrowing the time between the teaching of a
new skill and its use in the workplace, thus reinforcing training and
increasing its effectiveness. 

We believe the training strategy used by the 10 quality organizations
we visited supported the other HRM strategies used to implement QM. 
QM training emphasized the importance of increased communication
between managers and employees and among employees across functional
lines.  Training in QM also helped to foster a teamwork culture by
teaching employees to work together effectively as they use
team-oriented tools, such as brainstorming, and by teaching them
about the need to improve processes to better serve internal
customers.  Finally, training supported employee empowerment.  At the
organizations we visited, training included teaching middle managers
and employees about empowerment.  Organizations conducted joint
management/employee training classes where empowerment was discussed,
and they were developing empowerment training classes. 


      CASE STUDY 1:  PROVIDING
      TRAINING
------------------------------------------------------- Appendix I:1.3

Declaring that Quality Management "does not occur without an
investment," the Aeronautical Systems Division (ASD) at
Wright-Patterson Air Force Base near Dayton, Ohio, began its own QM
effort by investing heavily in the people who must drive any quality
improvement effort:  its employees.  As of 1992, ASD had spent more
than $4 million in QM training during the previous 3 years, and about
13,000 employees had received training. 

Determined that "alternatives to expensive contractor training should
be considered," ASD opted to use in-house instructors to train its
workforce.  An ASD quality official acknowledged that ASD used
several alternative training approaches before settling on the
in-house approach.  The base's medical center cascaded training. 
Otherwise, a dedicated training staff conducted training. 

According to an instructor-developer at Wright-Patterson's Page Manor
campus--which serves as the focal point for HRM training at the
base--ASD's in-house approach offers several advantages over the use
of contractors.  Courses can be customized to fit particular
occupations, and in-house training is also less expensive.  However,
development of an in-house course can sometimes take a year or
longer.  He said that under such circumstances it might sometimes
make sense to use an outside contractor while the in-house course is
being developed.  Although the contractor's course may contain
subject matter that is not specifically relevant, it would provide a
core of useful information for trainees. 

All employees were required to complete a 2-day QM awareness course
offered at the Page Manor campus.  Executives and managers at the
base also attended workshops designed to show them how to promptly
apply the principles and skills learned in the QM courses. 

ASD has continued to rely on in-house resources to provide QM
training.  ASD's Total Quality Office includes a group of
facilitators who act as coaches, advisors, teachers, and champions of
the process of continuous improvement.  As teachers, they instruct
employees in such subjects as developing and implementing key
metrics/key indicators and effective team building.  As advisors,
they do such things as coaching leadership on how to act as
facilitators.  Additionally, the facilitators conduct customer
surveys. 

ASD has added a "quality overlay" to its training templates, which
are customized training curriculums that (1) define the knowledge,
skills, and abilities needed to perform particular occupations; and
(2) incorporate all of the training courses needed to gain the
skills.  Use of the quality overlay ensures that all workers receive
a solid grounding in quality tools and concepts.  Furthermore, the
templates link individuals' training to the corporate strategic plan. 

ASD developed its training templates in the early 1990s in response
to two serious accidents involving B-52 and B-1B aircraft.  According
to one ASD official, top management recognized a "broken process that
needed fixing" after an investigation identified poor training as a
contributing factor in the accidents.  According to an ASD official,
the effectiveness of the templates derives in part from their
development by individuals "who actually do the work in an
occupation."

According to managers, the use of training templates offers several
advantages over the base's previous training approach.  One noted
that the template approach ensures a quicker buy-in from employees
and supervisors, who recognize that the courses offered are necessary
to helping them perform their jobs.  Another noted that under the
base's previous training approach, "employees and supervisors thumbed
through training catalogues, and then picked out courses, and
provided justifications for their selections." The courses chosen
were often not linked to any overall training plan; they represented
items on a `wish list' rather than requirements that were needed to
perform a specific job. 

Officials told us that training requests often lacked credibility,
and in the eyes of management the entire concept of training became
suspect.  With training templates, however, the need to offer a
specific course can be easily justified, and management has responded
by increasing funding for employee training.  For example, in 1994
the Page Manor campus sought and obtained an additional $800,000 in
employee training funds.  While acknowledging that other factors may
have contributed to the increase, an ASD official told us that the
templates allowed officials requesting training funds to justify and
document training needs in a way that external officials could see
and understand.  According to this official, training requests are
approved and have a credibility they did not have before. 

ASD uses the just-in-time training philosophy:  providing training to
problem-solving team members or others just before they need to use
it, thus ensuring that the skills learned are quickly put to use and
training is reinforced.  Specifically, ASD's Page Manor campus offers
a 16- to 32-hour just-in-time course for teams chartered to improve a
specific process or product cycle, with training being tailored to
meet the team's specific needs.  The training combines lectures with
tasks geared to the process or product cycle that the team has been
formed to improve.  ASD facilitators also play a key role in
reinforcing training by teaching refresher courses. 


   INCREASE COMMUNICATION
--------------------------------------------------------- Appendix I:2

QM stresses the need to revolutionize the way people communicate
within an organization.  In traditional organizations, communication
is hierarchical; information is communicated from top to bottom, from
management to employees.  In the organizations we visited, officials
told us that new channels of communication had been opened and
existing channels broadened to make possible the increased exchange
of information from managers to newly empowered employees, from
employees to management, and between different functional departments
(i.e., internal customers).  Additionally, employees were provided
with business information that had normally been communicated only to
managers.  The approaches quality organizations used to increase
communication included the following: 

Top management developed and encouraged multidirectional
communication to promote QM and support increased communication among
employees.  The 10 organizations we visited strengthened bottom-up
communication, which stresses the importance of soliciting the
expertise and knowledge of workers "on the floor" through, for
example, suggestion programs, "town meetings," or managers' informal
visits to work areas ("management by walking around").  An official
at the Naval Aviation Depot in Cherry Point, NC, told us that the
decision to increase employee-management interaction stemmed from
management's realization that "a huge untapped knowledge base exists
at the floor level--the workforce.  The people who perform the work
often have the best ideas on how to make improvements." Another
example of bottom-up communication was the employee survey, which
several installations had begun to use to (1) increase functional
areas' awareness of how they could better serve their internal
customers and (2) assess the progress of QM.  Typically, the first
survey established a baseline for internal conditions, while later
surveys allowed management to monitor improvements.  Management then
communicated the survey results to employees, thus closing the
information loop. 

Management also sought to increase horizontal communication, which
stresses the opening of dialogues between different functional units,
many of which, although they are in "customer/provider"
relationships, traditionally have not communicated well with one
another. 

Management increased the amount of business information available to
employees.  All of the organizations we visited viewed this approach
as an important step towards employee empowerment.  The organizations
increased the flow of business information to their employees to
enable them to assume their new roles as problem solvers and
decisionmakers.  Various installations provided customer data
directly to their employees or displayed performance data in work
areas.  This emphasis on providing business information to employees
was extended to internal customers as well.  In some organizations,
different functional areas routinely exchanged performance and
problem-related information, thus giving the areas the means to
improve service to their internal customers. 

The communications strategies used by the organizations we visited
supported their other HRM strategies.  In their experience, officials
at these organizations said that teamwork was enhanced by information
sharing, which helped employees in the entire organization understand
the need to work together to produce their products and services. 
Further, because employees had greater control over work processes
and increased decisionmaking, they needed more business/process
information made available to them to base decisions on; thus,
enhanced communication was a prerequisite of empowerment.  Increased
information flow between management and employees was also a critical
prerequisite for building the trust needed to promote employee
empowerment. 


      CASE STUDY 2:  INCREASING
      COMMUNICATION
------------------------------------------------------- Appendix I:2.1

At the Internal Revenue Service's (IRS) Cincinnati Service Center
(CSC), a major focus of the quality effort has been on improving
communication between all levels and departments of the organization. 
For example, top management has worked hard to increase "bottom-up"
communications, i.e., communications from employees to management. 
Such communications have a two-fold purpose; they help to empower
employees as well as increase the amount of information available to
top management.  The center director told us that "to get around
resistance to change, we talk a lot."

For example, the center's former director began to hold "town
meetings" designed to put top management into a position to elicit
feedback and respond to a large audience of "internal customers"
(i.e., center employees).  One manager told us about "employees
feeling more free to speak out at `town meetings' on a range of
different issues." The former director also "managed by walking
around" and held regular informal brown bag lunches during which he
would share information with anyone who wanted to talk to him about
the business of the center. 

The current director has continued and expanded these practices.  For
example, he comes to talk to the night shift.  In addition, he
contributes a column to the employee newsletter in which he responds
to employees' questions and concerns.  He also plans to establish a
Director's Bulletin Board in each branch on which IRS business
information can be posted. 

Another method of bottom-up communication is the Survey Feedback
Action (SFA) initiated by IRS headquarters and tabulated by outside
consultants.  The SFA provides managers with feedback based on their
subordinates' perceptions of how well they communicate, share
information about job management practices, and provide customer
service.  Managers and their employees meet to discuss the results of
this survey; facilitators are also available for these meetings. 
According to CSC's Chief of Quality Analysis and Support Staff
(QASS), such meetings support and encourage honest two-way
communication. 

At CSC, efforts to improve horizonal communications between different
divisions actually predate QM, having been initiated over a decade
ago.  According to CSC personnel, however, QM implementation has
complemented and furthered the center's efforts to increase
horizontal communications. 

Communications efforts continue on a regular basis.  During filing
season, two Processing Division branches hold weekly cross-functional
meetings to ensure that tax examiners who code and edit information
on tax returns for data entry are performing to quality standards. 
When transcribed data from tax returns showed high error rates, for
example, first-line managers formed a cross-functional quality team
to determine the cause.  The team then alerted managers to take
corrective actions ranging from increasing on-the-job training to
closer monitoring. 

Diagonal communication, i.e., bypassing the chain of command to
communicate directly across functional lines with employees, also
predates the center's QM effort and is complemented by QM.  Center
employees are encouraged not to worry about the chain of command and
to talk directly to whoever can help them to correct a specific
problem.  This approach was especially encouraged after 1985, when
returns were processed very slowly because of computer problems and
some returns were discarded by IRS employees under pressure to meet
production schedules. 

IRS management officials said they learned a very important
QM-related lesson from this experience:  employees have to be given a
broader perspective on their own work.  Officials learned that it is
not enough to tell a worker only what he or she needs to know to do a
particular job.  Employees also need to know how what they do affects
the entire process and know the importance of looking for ways to
improve the process. 

CSC officials told us they planned to increase communication between
internal customers through the establishment of a formal process of
expectations-setting by internal providers and customers.  Under the
process, all managers will be required to identify and meet with
internal customers to set written expectations.  Customer
satisfaction will then be measured to gauge the effectiveness of each
area.  This information will be published in the center newsletter
and posted on the center's Quality Bulletin Boards. 

CSC also provides its employees with business information.  According
to the center's QASS Chief, information is posted in several CSC work
areas.  Some areas use control charts, others use graphs.  Within the
Receipt and Control Branch, for example, information on the amount of
dollar deposits and the length of time required from receipt of
monies until deposit is posted and shared with employees. 

According to officials, employees are also provided with reports
generated by the Computer Assisted Pipeline Review System (CAPRS). 
These reports--which use data provided by employees who process tax
returns--identify the kinds of problems that tax filers encounter in
filling out their returns.  The CAPRS reports are discussed by groups
of employees who are empowered to take whatever actions are necessary
to solve these problems.  Although these employees are not members of
formal problem-solving teams, they can recommend that such a team be
established. 

IRS guidelines for future quality implementation efforts within IRS
call for increasing employee involvement through information sharing. 
Managers will be expected to provide employees with data about how
well they are performing their parts of the process.  For example,
the guidelines say employees should be involved in determining
process and performance measurements and in gathering and analyzing
data.  Employees must know the process measurements being used and
have access to data regarding process performance. 


   PROMOTE TEAM CULTURE
--------------------------------------------------------- Appendix I:3

The organizations we visited emphasized that adopting a team culture
was central to their successful implementation of QM.  We found these
organizations used two types of teams:  problem-solving teams, which
are formed to recommend ways to improve specific processes; and
self-directed teams and natural work groups, which are formed along
process lines and empowered to make process improvements with only
limited managerial oversight as well as to make many of the
day-to-day decisions formerly made by supervisors. 

The approaches the 10 quality organizations used to promote team
culture included the following: 

Management emphasized the teamwork concept through awards and
recognition programs.  The perception that personnel regulations
restricted the formation and recognition of teams was one of the
major barriers to QM cited by organizations in our 1992 survey. 
Managers at the organizations we visited told us they initially
perceived the regulatory requirement to appraise individual
performance as also prohibiting appraising (and recognizing) group
performance.  However, they learned that they were able to work
within existing personnel regulations to reward and recognize team
contributions to quality.  Focusing rewards solely on individual
contributions to the collective effort leads to the suboptimal use of
the organization's human resources.  Group awards, on the other hand,
acknowledge that work is done by groups and that group cooperation
and performance should be recognized.  Some organizations underscored
their commitment to the team concept by earmarking a portion of their
annual award monies for group accomplishments; giving mementos and
keepsakes to team members; or simply recognizing team contributions
to quality in awards ceremonies, newsletters, bulletin boards, or, in
one case, over the public address system.  One facility signalled its
commitment to the team concept by establishing a facilitywide
productivity gain-sharing program (see case study 3). 

Management dedicated resources to train and support teams.  The
organizations we visited stressed that it is not enough to simply
form teams; it is also necessary to support them.  Many set aside
meeting rooms solely for teams; one organization built two meeting
rooms--or Quality Rooms, as they were called--and stocked them with
quality-related posters and information, electronic blackboards, and
other office automation equipment.  The organizations also provided
various levels of team-specific training and just-in-time training as
a means of supporting QM teams and increasing their effectiveness. 

The teamwork strategy used by quality organizations supported their
other HRM strategies.  Through implementation of their teamwork
strategies, organizations increased communication within and across
functional lines by encouraging teams to talk directly with internal
customers and units that affected their work processes.  Teams also
empowered employees, giving them a greater say in how work was done. 


      CASE STUDY 3:  PROMOTING
      TEAM CULTURE
------------------------------------------------------- Appendix I:3.1

The Naval Aviation Depot at Cherry Point, NC, is an example of an
award-winning quality organization that uses a wide variety of
approaches to implement its teamwork strategy. 

Team recognition and rewards, as tools to motivate a change to a team
culture, take two forms at Cherry Point.  One form is the use of
depotwide awards.  For example, the depot instituted the first
activitywide productivity gain-sharing program in the federal
government.\2 (Other installations have since begun similar
programs.) The program provides monetary rewards to all qualified
civilian employees when the depot exceeds the productivity levels
based on improvement over a historical baseline.  To ensure that
employees understand the team concept and how their efforts translate
into awards, the depot provided training to all employees on
gain-sharing. 

Similarly, the depot's total line item that was budgeted for quality
step increases and achievement awards is shared equally by all
civilian employees whose performance under the performance appraisal
review system is deemed satisfactory. 

In a letter to Cherry Point employees announcing the 1993 depotwide
award of $150 per person, management lauded employees for their
efforts to save money through energy conservation, recycling,
reduction of hazardous waste, and meeting the Clean Air Act's
standards.  Union officials told us that they were very supportive of
the depotwide awards; they stated that the awards enhanced employees'
feelings of being appreciated by management, even when the total
dollar amount being shared was small. 

The second form of team rewards is for individual groups within the
depot.  According to the Incentive Awards Administrator, since
adopting QM Cherry Point has been attempting to stress team efforts
through performance awards.  Special Achievement Awards are given on
a group basis.  These include "On-the-Spot" awards, which give
management a way to provide immediate reinforcement for exceptional
performance, as well as "Time-Off" awards.  In September 1993, for
example, the depot awarded Time-Off awards to the eight-person team
that assisted in the removal and subsequent reinstallation of two
large motors and a generator at the depot.  The job was done right
the first time and completed ahead of schedule.  Team members were
each awarded 8 hours of leave in recognition of their long hours and
teamwork.  The administrator pointed out that an examination of
personnel regulations showed that they do not bar team recognition. 

Training to support teams is provided by the depot's Quality Office,
which provides just-in-time training to members of newly chartered
problem-solving teams and other resources, such as facilitators, to
support team activities. 

As support to both problem-solving teams and self-managed teams, the
Quality Office teaches the statistical tools required to examine and
track process performance.  According to the Chief of the Quality
Management Group, all employees will receive training in statistical
process tools. 

The depot chartered self-managed teams in March 1991 as a way to move
decision-making to the lower levels.  The self-managed teams are
organized around a work process and are involved, on a routine basis,
in decisionmaking, goal-setting, scheduling, planning, and
problem-solving.  Cherry Point officials told us that in addition to
facilitating employee empowerment, the use of self-managed teams also
reduces layers of supervision and consolidates functions--both of
which are key goals of the depot's downsizing strategy. 

For example, the depot's "Plating Excellence for Product Performance"
effort utilizes self-managed teams formed along process lines and
empowered to make decisions formerly made by first-line supervisors. 
Such decisions include checking incoming work, distributing work
among employees, and ordering supplies.  While visiting the plating
area, we saw an employee stop to measure a part being worked on and
record it on a nearby check sheet.  He explained that the data were
used to track the quality process.  He said that he was personally
responsible for entering the data into a computer program that
created statistical process control charts, which enabled the
self-managed team to operate with lower levels of outside inspection. 

According to depot officials, this team approach has led to increased
employee pride in and ownership of the process, significant quality
improvements, increases in productivity, reductions in overtime, and
improved customer relations. 

Finally, Cherry Point actively encourages participation on teams. 
Its chief means of encouraging employees to join teams is its team
recognition and rewards system, which provides incentives to
collective efforts, such as the plating project described earlier. 


--------------------
\2 Productivity gain-sharing is an incentive award directly linked to
group productivity above a previously established work measurement
baseline. 


   ENCOURAGE EMPLOYEE EMPOWERMENT
--------------------------------------------------------- Appendix I:4

The top managers, employees, and union officials at the 10 quality
organizations we visited agreed that employees should be empowered to
provide better customer service.  In general, employee empowerment
emphasizes the importance of giving employees both the ability and
the responsibility to take active steps to identify problems in the
working environment that affect quality or customer service and to
deal effectively with them. 

The approaches quality organizations used to encourage and support
employee empowerment included the following: 

Management established organizational structures that supported
empowerment.  The organizations we visited created interlocking QM
structures to facilitate quality implementation and involve every
level of the organization.  Generally, these structures were topped
by a Quality Council chaired by the top manager and made up of
managers from the next level down, who in turn chaired Quality
Councils at their level made up of managers from the next level down. 
This interlocking structure extended down through the organization so
that managers at every level were "plugged-in." This structure
provided the mechanism through which problem-solving teams were
empowered.  The councils chartered, directed, and supported
problem-solving teams and provided the resources to implement their
recommendations. 

Top managers modeled behavior supportive of empowering employees.  At
the organizations we visited, top managers modeled the participatory
management style they wanted other managers throughout the
organization to duplicate.  This included soliciting employees' input
on improving operations (e.g., through sponsoring employee suggestion
programs, conducting brainstorming sessions with employees, managing
by walking around) and encouraging middle managers to discuss
operational issues with their employees on a frequent basis. 

Teams were used to empower employees.  The organizations we visited
used teams as the basic building block for empowering their workers. 
They started by establishing problem-solving teams--which are
short-term in nature and formed to address a single issue--as the
principal means of employee empowerment.  Although such teams can
recommend work process improvements, they cannot implement them
without management approval.  As both employees and managers gained
confidence in employees' abilities to identify problems and develop
solutions, some organizations increased their empowerment by
establishing natural work groups and self-managed teams.  These
longer term function-based teams were empowered by management to make
both (1) ongoing changes to improve work processes without first
seeking the approval of a supervisor and (2) supervisory level
decisions on work planning and staff utilization. 

Local union representatives were involved in the QM process.  Some of
the organizations we visited included union representatives on
Quality Councils and as co-teachers of quality classes.  At some
organizations, union involvement took the form of formal cooperative
partnership arrangements that empowered union representatives to work
as full partners alongside management to implement QM.  Managers and
union representatives told us that these joint QM efforts to improve
training, communication, and teamwork increased cooperation and trust
between management and labor.  Officials in QM organizations that
have fostered cooperative relationships with their unions believe
that their close union ties will facilitate the transition to the
formal labor-management partnerships mandated by President Clinton's
Executive Order 12871. 


      CASE STUDY 4:  ENCOURAGING
      EMPLOYEE EMPOWERMENT
------------------------------------------------------- Appendix I:4.1

At the IRS Ogden Service Center (OSC), employees, union officials,
and management agreed; when they initiated QM, employee empowerment
was nil.  They told us that when the center began to implement QM in
1986 and 1987, empowering employees was not part of the culture at
OSC.  Indeed, some managers believed that empowering employees would
adversely affect the processing of tax returns.  However, during 1990
OSC's error rate (a measure of quality) on data entry of a Form 1040
was the lowest in the nation. 

Although the individuals we interviewed described the change as slow
and not yet to the level of some private sector organizations,
employee empowerment at OSC is now such that some employees have the
authority to independently stop ("red button") a process when they
see major problems.  Through the red button team process, management
of OSC's Electronic Filing Staff empowered its employees to stop work
on any project and start a problem resolution team (red button team)
if they felt that a problem merited attention.  The team identifies a
solution, proposes it to management, and management either approves
or disapproves it with an explanation. 

The Electronic Filing Staff's red button team activities have
resulted in improved service to internal customers.  For example, a
red button team recommended a change in procedures that enabled the
staff to respond more quickly to taxpayer data requests from other
IRS units. 

The benefits of this change, as reported by Ogden managers and
employees, included not only more trust and less acrimonious labor
relations, but also reports from internal and external customers of
better and more timely service. 

OSC has tried to ensure that employees understand what empowerment
means at the center and to support it with professional staff to help
employees develop and move to an empowering culture.  One top manager
said that the improvement in employees feeling like they are
empowered is to a large degree a result of the center's development
of a statement that spells out the center's position on empowerment. 

He further noted that Ogden's QM structure of joint
employee/management councils and subcouncils was established with the
specific purpose of increasing employee involvement.  Under the
council structure at Ogden, a request to initiate a Joint Quality
Improvement (JQIP) team to address an identified problem is sent to
the division subcouncil.  If the subcouncil determines that the
problem warrants the establishment of a team, it sends a nomination
form to the Joint Quality Council (JQC).  If the JQC approves the
nomination, it sends a letter of interest spelling out the subject
area skills and expertise team members will need to address the
problem back to the branch that made the request.  Employee
volunteers are then screened by the division subcouncil on the basis
of their qualifications and available slots on the team.  Selected
volunteers receive 7 days of team training, and branch managers agree
to give team members the time they will need to participate on the
team. 

The division subcouncil champions the team.  It writes a basic
charter for the team to follow, but otherwise the team is not
directed.  The JQC and subcouncil support the team by providing it
with the resources (e.g., facilitation and technical support), space,
and time it needs to do its work, requiring only a quarterly status
report.  The JQC, through the center director, also supports those
recommended changes that require approval by IRS headquarters.  The
center director has himself written to analysts at IRS headquarters
in support of team recommendations. 

Top management has backed efforts to move to a more empowering
culture by modeling the types of behavior expected of both lower
level managers and employees.  Ogden's director described his
practice of holding town meetings with all employees as not only
providing employees a channel of direct communication with him, but
also demonstrating to lower level managers that this is the type of
openness expected of them.  He explained that he also conducts staff
meetings in a manner that encourages participation from those
managers who report to him, and he sets expectations for them to do
the same in their staff meetings.  According to other managers, some
branch managers are now holding similar town meetings.  The director
has also sought to promote employee involvement through the "If I
were Director" program, in which any employee can suggest any change
or improvement.  We saw the simple one-page forms for making these
suggestions at numerous locations in the center we visited. 

The director said he reads all suggestions and each month selects the
one he considers the best.  The suggester is recognized by a ceremony
that includes having his or her picture taken for the center
newsletter while seated in the director's chair. 

JQIP teams, according to one top manager, demonstrate the empowerment
culture that Ogden is developing because they are made up of
volunteers and can look at anything.  Further, as he noted, team
members are not just told they are empowered, they are trained on how
to work independently as a team. 

According to Ogden's director, one example of the empowerment
engendered by teams is illustrated in the branch responsible for
handling a large volume of incoming correspondence from taxpayers and
tax practitioners.  The tax examiners in the branch were responsible
for providing input used in answering the correspondence, but they
never saw the final products, which the center's director described
as "a mess." The center established a quality improvement (QIP) team
to examine correspondence problems.  The team ultimately recommended
that employees be empowered to answer correspondence and deal
directly with customers. 

The team developed a new letter system that includes a more
professional letter format.  Under the new system, tax examiners also
have the authority to sign the letters so the taxpayer can contact
individual unit employees directly.  Employees also have the
authority to expand upon the information when contacted by taxpayers
and to do needed follow-up on taxpayer cases.  The director said he
has received positive feedback on this approach from both taxpayers
and tax practitioners. 

Using the team concept for empowerment is now going beyond QIP teams
as Ogden has established natural work groups and empowered them to
partially self-manage their operations.  In this setting, as the
manager said, she does not direct the group but rather "guides" it. 
Biweekly meetings are held with other groups to consider operating
issues and map their work processes as a part of efforts to improve
operations. 

Daily operating decisions are made by the group manager with input
from the group.  Groups have also played a part in choosing the
leader/manager.  For example, in one group, the employees within the
group interviewed all the candidates for the job and made a
recommendation to the Branch Chief, who made the final decision.  The
person the group recommended got the job.  An underpinning of Ogden's
empowerment efforts has been the involvement of the local Chapter of
the National Treasury Employees Union.  The union has full voting
membership on all quality management councils.  In particular, the
union is represented on the director's overall management council and
at the director's staff meetings.  Thus, the union is involved in
developing policy for the center.  Not only does this ensure that
employees' concerns are represented in all major decisionmaking
forums, but employees also have another channel of communication for
obtaining information about major changes.  For example, the union
has been involved with management in trying to assess the effects of
the new Tax Modernization System--particularly the effects of any
possible reorganization and redeployment of employees. 

To illustrate the change in a less significant, albeit important,
policy, the center director noted that while employees wished to have
coffee and other drinks at their workplaces, center policy prohibited
beverages because of the danger to taxpayer records.  With input from
employees, the union worked in partnership with management to change
the policy.  Employees can now have drinks at their workplaces.  Tax
records are still protected because employees use specially designed
nonspill mugs. 

As a result of President Clinton's Executive Order 12871, dated
October 1, 1993, (Labor-Management Partnerships), OSC is replacing
its quality council structure with a labor/management partnership
council made up of three service center executives and three union
representatives who will be responsible for overseeing QM
implementation and QIP teams. 

The benefits of empowering employees, as described by center managers
and employees, often took the form of improved service to customers,
both internal and external.  In addition to the better services
provided by the correspondence group to taxpayers and tax
practitioners mentioned above, the Electronic Filing Staff has
reduced delays in providing taxpayer information needed by other IRS
units for court actions as well as improved its own efficiency
through designs that improved computer screen utilization. 


OBJECTIVE, SCOPE, AND METHODOLOGY
========================================================== Appendix II

This report is a follow-on to a survey report (Quality Management: 
Survey of Federal Organizations (GAO/GGD 93-9BR, Oct.  1, 1992)). 
That survey's objective was to determine the status of Total Quality
Management implementation in the federal government.  In that report
we determined that although there were many Quality Management (QM)
initiatives underway in the federal government, the level of employee
involvement was limited.  We also found that the top barriers to
successful implementation were generally HRM-related. 

Our objective in this report was to identify the HRM approaches used
to implement QM at 10 federal organizations recognized for their QM
efforts.  These award-winning organizations were: 

Aeronautical Systems Division, Department of the Air Force,
Wright-Patterson AFB, OH. 

Arnold Engineering Development Center, Department of the Air Force,
Arnold AFB, TN. 

Aviation Supply Office, Department of the Navy, Philadelphia, PA. 

Cincinnati Service Center, Internal Revenue Service, Covington, KY. 

Defense Contract Management District, Northeast, Defense Logistics
Agency, Boston, MA. 

National Technical Information Service, Department of Commerce,
Springfield, VA. 

Naval Air Warfare Center, Aircraft Division, Department of the Navy,
Lakehurst, NJ. 

Naval Aviation Depot, Marine Corps Air Station, Department of the
Navy, Cherry Point, NC. 

Ogden Service Center, Internal Revenue Service, Ogden, UT. 

Veterans Affairs Regional Office and Insurance Center, Department of
Veterans Affairs, Philadelphia, PA. 

We judgmentally selected the 10 organizations used in our report on
the basis of the following criteria:  (1) they were among the 284 out
of about 2,200 organizations responding to our earlier survey that
identified themselves as achieving high levels of QM-related results
and/or institutionalizing QM or were identified by experts in the
field; (2) they reported higher than average employee participation
rates in quality improvement activities; and (3) they had won
governmental awards recognizing them as quality organizations, such
as the Federal Quality Institute's Quality Improvement Prototype
Award, the President's Award for Quality, or other departmental
quality awards.  To help us make our final selections, we reviewed
written documents on organizations' quality awards and interviewed
federal officials who work in the quality management area to get
their advice.  Further, we selected organizations to ensure
civilian/military and geographical diversity.  Finally, we selected
the four organizations used in our case studies because we believed
that they presented the clearest illustrations of each of the four
approaches. 

To develop our methodology, we reviewed QM literature and prior work
that discussed approaches used by organizations to implement QM. 
This research helped us identify HRM issues we considered in doing
our work and developing a structured interview instrument.  To
identify the human resource approaches used by the 10 organizations
we (1) reviewed documents provided by the organizations, e.g.,
quality award applications as well as available documents that
supported the documents, such as the results of employee and customer
surveys; and (2) used structured interviews to question more than 300
managers and employees, including union officials, to determine the
HRM barriers they encountered, the improvement in internal conditions
they realized, and how their organizations' HRM strategies evolved. 

We also examined the effect of QM on internal conditions at the 10
organizations.  To do this, we (1) interviewed top managers and
employees, including union officials, about the effect of QM
implementation on the internal environment of their organizations;
and (2) asked QM officials in the organizations to answer another
copy of the questionnaire survey we sent them in 1992 to measure the
current perceived beneficial effects of QM on the internal conditions
in their organizations. 

After we completed our field work, we invited quality coordinators
from the 10 organizations to participate in a "close out" conference
in Washington to discuss our preliminary findings.  The quality
coordinators from 7 of the 10 organizations (National Technical
Information Service, Aeronautical Systems Division, Aviation Supply
Office, Veterans Affairs Regional Office and Insurance Center, Naval
Air Warfare Center, and IRS' Cincinnati and Ogden Service Centers)
attended this conference on July 6, 1994, and they provided valuable
feedback on our work.  Subsequently, the quality coordinators from
the three organizations that did not send representatives to the
close out conference (Arnold Engineering Development Center, Defense
Contract Management District, and the Naval Aviation Depot) reviewed
and agreed with our key findings. 

We did our field work between September 1993 and August 1994 in
accordance with generally accepted government auditing standards. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

GENERAL GOVERNMENT DIVISION, WASHINGTON, D.C. 

John Leitch, Assistant Director
Dom Nieves, Evaluator-in-Charge
Gerard Burke, Evaluator
Michael Little, Communications Analyst

DENVER REGIONAL OFFICE

Michael Gorin, Evaluator