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United States Government Accountability Office: 

Transformation Challenges: 

The Honorable David M. Walker: 
Comptroller General of the United States: 

SES Performance Management Forum, 
Defense Acquisition University, 
Fort Belvoir, VA: 

August 26, 2005: 

The Case for Change: 

Government is on a "burning platform," and the status quo way of doing 
business is unacceptable for a variety of reasons, including: 

* Past fiscal trends and significant long-range challenges Rising 
public expectations for demonstrable results and enhanced 
responsiveness; 

* Selected trends and challenges having no boundaries Additional 
resource demands due to the war against terrorism; 

* and additional homeland security needs; 

* Government performance/accountability and high risk challenges, 
including the lack of effective human capital strategies: 

GAO’s High-Risk List: 2005: 

Addressing Challenges in Broad-based Transformations: 

High-Risk Areas: Protecting the Federal Government's Information 
Systems and the Nation's Critical Infrastructures; 
Year Designated High Risk: 1997. 

High-Risk Areas: Strategic Human Capital Management[A]; 
Year Designated High Risk: 2001. 

High-Risk Areas: U.S. Postal Service Transformation Efforts and Long-
Term Outlook[A]; 
Year Designated High Risk: 2001. 

High-Risk Areas: Managing Federal Real Property[A]; 
Year Designated High Risk: 2003. 

High-Risk Areas: Implementing and Transforming the Department of 
Homeland Security; 
Year Designated High Risk: 2003. 

High-Risk Areas: Establishing Appropriate and Effective Information-
Sharing Mechanisms to Improve Homeland Security; 
Year Designated High Risk: 2005. 

High-Risk Areas: DOD Approach to Business Transformation[A]; 
Year Designated High Risk: 2005. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Supply 
Chain Management (formerly Inventory Management); 
Year Designated High Risk: 1990. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Weapon 
Systems Acquisition; 
Year Designated High Risk: 1990. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Business Systems Modernization; 
Year Designated High Risk: 1995. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Financial Management; 
Year Designated High Risk: 1995. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Support Infrastructure Management; 
Year Designated High Risk: 1997. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Personnel Security Clearance Program; 
Year Designated High Risk: 2005. 

Managing Federal Contracting More Effectively: 

High-Risk Areas: DOE Contract Management; 
Year Designated High Risk: 1990. 

High-Risk Areas: NASA Contract Management; 
Year Designated High Risk: 1990. 

High-Risk Areas: DOD Contract Management; 
Year Designated High Risk: 1992. 

Management of Interagency Contracting; 
Year Designated High Risk: 2005. 

Assessing the Efficiency and Effectiveness of Tax Law Administration: 

High-Risk Areas: Enforcement of Tax Laws[A,B]; 
Year Designated High Risk: 1990. 

High-Risk Areas: IRS Business Systems Modernization[C]; 
Year Designated High Risk: 1995. 

Modernizing and Safeguarding Insurance and Benefit Programs: 

High-Risk Areas: Medicare Program[A]; 
Year Designated High Risk: 1990. 

High-Risk Areas: HUD Single-Family Mortgage Insurance and Rental 
Housing Assistance Programs; 
Year Designated High Risk: 1994. 

High-Risk Areas: Medicaid Program[A]; 
Year Designated High Risk: 2003. 

High-Risk Areas: Modernizing Federal Disability Programs[A]; 
Year Designated High Risk: 2003. 

High-Risk Areas: Pension Benefit Guaranty Corporation Single-Employer 
Insurance Program[A]; 
Year Designated High Risk: 2003. 

Other: 

High-Risk Areas: FAA Air Traffic Control Modernization; 
Year Designated High Risk: 1995. 

[A] Legislation is likely to be necessary, as a supplement to actions 
by the executive branch, in order to effectively address this high-risk 
area. 

[B] Two high-risk areas-Collection of Unpaid Taxes and Earned Income 
Credit Noncompliance-have been consolidated to make this area. 

[C] The IRS Financial Management high-risk area has been incorporated 
into this high-risk area. 

[End of table]

21st Century Challenges Report: 

* Issued February 16, 2005; 

* Based on GAO's work for the Congress; 

* Provides background, framework, and questions to assist in 
reexamining the base; 

* Covers entitlements & other mandatory spending, discretionary 
spending, and tax policies and programs: 

Twelve Reexamination Areas: 

MISSION AREAS: 

* Defense; 
* International Affairs; 
* Education & Employment; 
* Natural Resources, Energy & Environment; 
* Financial Regulation & Housing; 
* Retirement & Disability; 
* Health Care; 
* Science & Technology; 
* Homeland Security; 
* Transportation. 

CROSSCUTTING AREAS: 

* Improving Governance; 
* Reexamining the Tax System: 

Themes: 

* Changing Security Threats; 

* Increasing Global Interdependence; 

* Demographic Shifts-Aging Population; 

* Promoting Growth in a Knowledge-Based Economy; 

* Governance Challenges: 

Generic Reexamination Criteria and Sample Questions: 

Relevance of purpose and the federal role: 

Why did the federal government initiate this program and what was the 
government trying to accomplish?

Have there been significant changes in the country or the world that 
relate to the reason for initiating it?

Measuring success: 

Are there outcome-based measures? If not, why?

If there are outcome-based measures, how successful is it based on 
these measures?

Targeting benefits: 

Is it well targeted to those with the greatest needs and the least 
capacity to meet those needs?

Affordability and cost effectiveness: 

Is it using the most cost-effective or net beneficial approaches when 
compared to other tools and program designs?

Best practices: 

Is the responsible entity employing prevailing best practices to 
discharge its responsibilities and achieve its mission?

Illustrative 21st Century Questions: 

How should the historical allocation of resources across services and 
programs be changed to reflect the results of a forward-looking 
comprehensive threat/risk assessment as part of DOD's capabilities- 
based approach to determining defense needs?

Given the growing encumbrance of pay and benefit costs, especially 
health care, within DOD's budget, how might DOD's recruitment, 
retention, and compensation strategies (including benefit programs) be 
reexamined and revised to ensure that DOD maintains a total military 
and civilian workforce with the mix of skills needed to execute the 
national security strategy while using resources in a more targeted, 
evidence-based, and cost-effective manner?

What criteria should be used to target federal funding for homeland 
security in order to maximize results and mitigate risk within 
available resource levels?

Does DOD need to create a senior management position responsible and 
accountable for taking a strategic, integrated, and sustained approach 
to managing the day-to-day business operations of the department?

Transformation: 

Webster's definition: 

An act, process, or instance of change in structure appearance, or 
character. 

A conversion, revolution, makeover, alteration, or renovation. 

The Objective of Transformation: 

To create a more positive future by maximizing value and mitigating 
risk within current and expected resource levels: 

Four Key Transformation Dimensions: 

Key Actions: To make prudent budget & long-term fiscal decisions; 
Primary Responsibility: The President and the Congress; 
Secondary Responsibility: Agency leadership (both political and 
career). 

Key Actions: To enable key transformation efforts while providing 
protection from abuse of authority; 
Primary Responsibility: The Congress and the President; 
Secondary Responsibility: Agency leadership (both political and 
career). 

Key Actions: To lead key transformation efforts with existing 
authorities and within existing resource levels; 
Primary Responsibility: Agency leadership (both political and career); 
Secondary Responsibility: OMB and other selected government-wide 
agencies. 

Key Actions: To evaluate reform efforts and conduct continuous 
improvement initiatives; 
Primary Responsibility: Agency leadership (both political and career); 
Secondary Responsibility: Congress, OMB and selected government-wide 
agencies. 

[End of table] 

Transformation Has Different Dimensions: 

DOD; 
DHS; 
U.S. Postal Service; 
IRS; 
DOE; 
NASA. 

Information Sharing; 
Human Capital Strategy; 
Financial Management; 
Information Technology; 
Sourcing Strategy; 
Disability Programs; 
Real Property Management. 

Note: All of the above are on GAO's High Risk List to one extent or the 
other. 

Key Transformation Elements: 

Planning; 
People; 
Process; 
Partnerships; 
Technology; 
Environment. 

The most important of the five is PEOPLE -- an agency's human capital. 

Transformation: A New Model for Government Organizations: 

Government organizations will need to: 

* Become less hierarchical, process-oriented, stovepiped, and inwardly 
focused. 

* Become more partnership-based, results-oriented, integrated, and 
externally focused. 

* Achieve a better balance between results, customer, and employee 
focus. 

* Work better with other governmental organizations, non-governmental 
organizations, and the private sector, both domestically and 
internationally, to achieve results. 

* Focus on maximizing value, managing risk and enhancing responsiveness 
within current and expected resource levels. 

Keys to Making Change Happen: 

Commitment and sustained leadership. 

Demonstrated need for change (i.e., burning platform). 

Start at the top and with the new people (transformation takes 7+ 
years). 

Process matters (e.g., employee involvement) -- Don't fight a two-front 
war. 

15-percent rule. 

Identifiable and measurable progress over time. 

Communication, communication, communication. 

Figure out what's right versus what's popular. 

Patience, persistence, perseverance to pain before you prevail. 

Several other actions needed: 

* Strategic Plan; 
* Core values; 
* Organizational alignment; 
* Recruiting, development, and succession planning strategies; 
* Modernizing and integrating institutional, unit and individualized 
performance measurement and reward systems; 
* Employee empowerment and effective communications. 

Selected GAO-Related Activities: 

Speeches and Outreach Efforts. 

CG Forums. 

High Risk Update Report. 

21st Century Challenges Report. 

Various Congressional Consultation and Assistance Efforts. 

Public Education Assistance. 

Constructive engagement efforts (e.g., best practices guides, self 
assessment tools, benchmarking statistics). 

Leading by example. 

GAO: Leading by Example (Change, Performance, and Human Capital 
Management): 

Mission and vision clarification; 
Core values: accountability, integrity, reliability; 
Strategic planning; 
Organizational realignment; 
Definitions of success; 
Multi-tasking and matrix management; 
Procurement, contracting, and acquisition; 
Human capital; 
Information technology; 
Knowledge management; 
Financial management; 
Client service/external agency relations and protocols; 
Enhanced products and services; 
Constructive engagement with agencies; 
Partnering with other accountability and “good government” 
organizations. 

What Is DOD Transformation?

Creating the future of warfare and protecting our national security 
while improving how the department, including all of its various 
component parts, does business in order to support and sustain our 
position as the world's preeminent military power within current and 
expected resource limits. 

Selected Cultural Challenges At DOD: 

* Past vs. future (e.g., threats); 

* Today vs. tomorrow (e.g., budgets); 

* Too many silos and layers; 

* Get the money and spend the money (e.g., use it or lose it); 

* Plug-and-pray approach to weapons acquisitions; 

* Me vs. we (e.g., services); 

* Approve vs. inform (e.g .,deployments). 

The Way Forward: Selected Potential DOD Related Actions: 

Revise the current approach to developing national military strategy 
(e.g., order, integration); 

Take a longer range approach to program planning and budget integration 
(e.g., life cycles, opportunity costs); 

Employ a total force management approach to planning and execution 
(e.g., military, civilian, contractors); 

Revise the process for developing and communicating key changes (e.g., 
DOD transformation, NSPS legislative proposal); 

Reduce the number of layers, silos and footprints; 

Strengthen emphasis on horizontal and external activities (e.g., 
partnerships); 

Differentiate between war fighting and business systems development, 
implementation and maintenance (e.g., resource control, project 
approval); 

Make it okay to pull the plug or reduce quantities of weapon systems 
when the facts and circumstances warrant it; 

Recognize the difference between approving and informing; 

Create a Chief Management Officer to drive the business transformation 
process: 

Get the design and implementation of the NSPS right, including 
modernizing and integrating the DOD, Service, domain, unit and 
individual performance measurement and reward systems: 

Employ a more targeted and market based approach to compensation and 
other key human capital strategies: 

Streamline yet strengthen current commercial contracts (e.g., 
incentives, transparency and accountability mechanisms): 

Provide for longer tours of duty in connection with key acquisitions 
and operations positions (e.g., responsibility and accountability): 

Focus on achieving real success in connection with financial management 
efforts (e.g., systems, controls, information, compliance and 
opinions): 

Employ a more reasonable and material approach to business information 
system efforts and financial audit initiatives: 

Defense Acquisitions: The Next Steps: 

Rationalize needs versus wants (e.g., platforms and systems) across as 
well as within the various services and DOD units; 

Be more disciplined in defining and sticking to realistic requirements; 

Move to clearer and more performance-based contracting approaches; 

Use commercial best practices in design, development, and production 
decision-making (i.e., actual and planned); 

Establish more continuity in key positions (e.g., program executive 
positions); 

Provide adequate staffing for contractor oversight (e.g., high quality 
and performance; 

GAO's Strategic Plan: 

[See PDF for image] - graphic text: 

Serving the Congress and the Nation: GAO's Strategic Plan Framework: 

Mission: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

Themes: 

* Long-term Fiscal Imbalance; 
* National Security; 
* Global interdependence; 
* Changing Economy; 
* Demographics; 
* Science and Technology; 
* Quality of Life; 
* Governance; 

Goals and Objectives: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People related to: 

* Health care needs and financing; 
* Education and protection of children; 
* Work opportunities and worker protection; 
* Retirement income security; 
* Effective system of justice; 
* Viable communities; 
* Natural resources use and environmental protection; 
* Physical infrastructure; 

Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving: 

* Emerging threats; 
* Military capabilities and readiness; 
* Advancement of U.S. interests; 
* Global market forces; 

Help Transform the Federal Government's Role and How It Does Business 
to Meet 21st Century Challenges by assessing: 

* Roles in achieving federal objectives; 
* Government transformation; 
* Key management challenges and program risks; 
* Fiscal position and financing of the government; 

Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization in the areas of: 

* Client and customer service; 
* Strategic leadership; 
* Institutional knowledge and experience; 
* Process improvement; 
* Employer of choice; 

Core Values: 

* Accountability; 
* Integrity; 
* Reliability; 

Source: GAO. 

GAO Strategic Plan 2004-2009. 

Selected Success Measures: 

* Results; 

* Clients/customers; 

* People; 

* Partnerships; 

Annual Performance Measures (1998 and 2004): 

Performance measure: Financial benefits (billions); 
FY 1998 (Actual): $19.70; 
FY 2004 (Actual): $44. 

Performance measure: Other benefits; 
FY 1998 (Actual): 537; 
FY 2004 (Actual): 1197. 

Performance measure: Past recommendations implemented; 
FY 1998 (Actual): 69%; 
FY 2004 (Actual): 83%. 

Performance measure: Return on investment (ROI); 
FY 1998 (Actual): 58:1; 
FY 2004 (Actual): 95:1. 

Performance measure: Financial benefits per employee (millions); 
FY 1998 (Actual): $6.10; 
FY 2004 (Actual): $13.70. 

Performance measure: Timeliness; 
FY 1998 (Actual): 93%; 
FY 2004 (Actual): 97%. 

[End of table]

Client Feedback Fiscal Years 2002-05: 

FY 2002; 
Percent favorable: 92%; 
Response rate: 46%. 

FY 2003; 
Percent favorable: 96%; 
Response rate: 31%. 

FY 2004; 
Percent favorable: 97%; 
Response rate: 34%. 

FY 2005 (5/13); 
Percent favorable: 98%; 
Response rate: 30%. 

[End of figure] 

GAO Benchmarking Results for 2004: 

GAO exceeded the latest private sector and Office of Personnel 
Management (OPM) benchmark measures in the following four questions, as 
shown below. 

Personal Experiences: I am given a real opportunity to improve my 
skills in my organization; 
Private Industry 2004: 62%; 
OPM 2004: 63%; 
GAO 2004: 70%. 

Personal Experiences: My job makes good use of my skills and abilities; 
Private Industry 2004: 74%; 
OPM 2004: 67%; 
GAO 2004: 71%. 

Personal Experiences: My work gives me a feeling of personal 
accomplishment; 
Private Industry 2004: 75%; 
OPM 2004: 71%; 
GAO 2004: 79%. 

Personal Experiences: Considering everything, how satisfied are you 
with your job?; 
Private Industry 2004: 71%; 
OPM 2004: 68%; 
GAO 2004: 76%. 

Source: Federal Human Capital Survey 2004 analysis. 

[End of table] 

Key GAO Partnerships: 

INTOSAI; 
National Audit Forum; 
Good Government Organizations; 
Professional Associations; 
GAO Advisory Groups; 
Others; 

[End of figure] 

Federal Human Capital Reform: 

People are critical to successful transformation; 

However, the existing federal personnel system is outmoded and a 
barrier to transformation needed to address 21st Century challenges; 

GAO placed strategic human capital management on the high risk list in 
2001 to focus attention on needed reforms; 

More progress on reform has been achieved in the last 5 years than in 
the previous 20: 

* Legislative reforms; 
* President's Management Agenda; 
* Individual agencies' efforts. 

Tailored flexibilities have been granted to a number of agencies: DHS, 
DOD, NASA, GAO, etc. 

GAO is sharing its knowledge and experience to help inform other 
agencies in their efforts and to avoid pitfalls. 

How GAO Has Addressed Its Human Capital Challenges: 

Administrative: 

* HQ realignment & field office restructuring; 
* Self-assessment checklist; 
* Human capital profile; 
* Workforce & succession planning; 
* Employee feedback survey & suggestion program; 
* Employee Advisory Council; 
* Enhanced employee communications & participation; 
* Skills & knowledge inventory; 
* Employee preference survey; 
* Frequent flyer miles; 
* Student loan repayment; 
* Recruitment & college relations; 
* Phased retirement initiative; 
* Training/development; 
* Recognition & rewards; 
* Business casual dress & business cards; 
* Enabling technologies; 
* Opportunity/inclusiveness; 
* Mentor/buddy programs; 
* Commuting subsidy; 
* Competency-based employee appraisal system; 
* Human Capital Officer; 
* Office of Opportunity & Inclusiveness; 
* Flextime and telework; 
* Total compensation communications; 
* Classification and compensation review; 
* Human Capital Strategic Plan; 

Legislation Addressing GAO's Human Capital Challenges: 

Past: 

* Broad-banding system for mission staff; 
* Expedited hiring authority (e.g., internship program) Special pay 
rates; 
* Senior level for technical staff; 
* Targeted early out and buyout authority (3 years); 
* Revised RIF rules. 

Recent: 

* Targeted early out and buyout authority (permanent); 
* Annual pay adjustment rates; 
* Pay retention provisions; 
* Relocation benefits; 
* Increased annual leave for upper level employees; 
* Executive exchange program. 
* Re-designation of "General Accounting Office" to "Government 
Accountability Office."

GAO Elements of Reform: 

Modern, Effective, Credible, and Validated Performance Management 
System: 

* Focuses on core competencies; 
* Helps to communicate employee performance expectations; 
* Creates a "line of sight" linking institutional team/unit and 
individual performance; 
* Makes meaningful distinctions in employee performance; 
* Provides for competency-based results automatically and relative peer 
group standing on request. 

Modern Classification and Compensation System: 

* Uses pay bands; 
* Is market-based; 
* Is performance-oriented. 

Safeguards, transparency, and accountability built in: 

* Provisions for employee participation; 
* Pre-and post-implementation consultation and communications strategy 
incorporated; 
* Internal pre-decisional revenues and reasonable post-decisional 
transparency; 
* Avenues for adverse action appeals, both internally and externally. 

Competency-Based Performance Appraisal: 

Objective of new system are to provide a: 

* Clear link to our strategic plan, professional standards, protocols 
and core values; 
* Fair, honest, accurate and non-discriminatory assessment of 
performance based on standards that are valid, properly applied, and 
transparent to employees; 
* A sound basis for enhancing the performance capacity of all staff, 
rewarding high-performing staff, and dealing with "below expected" 
performers. 

Competency Model: 

Achieving Results; 
Maintaining Client and Customer Focus; 
Developing People; 
Thinking Critically; 
Collaborating with Others; 
Presenting Information Orally; 
Presenting Information in Writing; 
Leading Others. 

Relevant Areas: 

Succession Planning; 
Promotions; 
Recruitment; 
Work Assignments; 
Performance Management; 
Pay Decisions; 
Career Planning; 
Training. 

[End of figure] 

Analyst/Specialist Appraisal Scores (1984-2004): 

Year: 1984; 
Ratings = 4.7 and above: 7; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 3.84. 

Year: 1985; 
Ratings = 4.7 and above: 7; 
Ratings = 5.0: 1; 
Average Rating (5-point scale): 3.90. 

Year: 1986; 
Ratings = 4.7 and above: 9; 
Ratings = 5.0: 1; 
Average Rating (5-point scale): 3.98. 

Year: 1987; 
Ratings = 4.7 and above: 10; 
Ratings = 5.0: 1; 
Average Rating (5-point scale): 4.02. 

Year: 1988; 
Ratings = 4.7 and above: 11; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.07. 

Year: 1989; 
Ratings = 4.7 and above: 19; 
Ratings = 5.0: 3; 
Average Rating (5-point scale): 4.14. 

Year: 1990; 
Ratings = 4.7 and above: 19; 
Ratings = 5.0: 3; 
Average Rating (5-point scale): 4.26. 

Year: 1991; 
Ratings = 4.7 and above: 24; 
Ratings = 5.0: 4; 
Average Rating (5-point scale): 4.33. 

Year: 1992; 
Ratings = 4.7 and above: 31; 
Ratings = 5.0: 6; 
Average Rating (5-point scale): 4.39. 

Year: 1993; 
Ratings = 4.7 and above: 36; 
Ratings = 5.0: 7; 
Average Rating (5-point scale): 4.46. 

Year: 1994; 
Ratings = 4.7 and above: 41; 
Ratings = 5.0: 10; 
Average Rating (5-point scale): 4.54. 

Year: 1995; 
Ratings = 4.7 and above: 43; 
Ratings = 5.0: 12; 
Average Rating (5-point scale): 4.59. 

Year: 1996; 
Ratings = 4.7 and above: 50; 
Ratings = 5.0: 16; 
Average Rating (5-point scale): 4.61. 

Year: 1997; 
Ratings = 4.7 and above: 51; 
Ratings = 5.0: 16; 
Average Rating (5-point scale): 4.63. 

Year: 1998; 
Ratings = 4.7 and above: 50; 
Ratings = 5.0: 18; 
Average Rating (5-point scale): 4.62. 

Year: 1999; 
Ratings = 4.7 and above: 11; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.16. 

Year: 2000; 
Ratings = 4.7 and above: 12; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.18. 

Year: 2001; 
Ratings = 4.7 and above: 17; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.26. 

Year: 2002; 
Average Rating (5-point scale): 2.19. 

Year: 2003; 
Average Rating (5-point scale): 2.30. 

Year: 2004; 
Average Rating (5-point scale): 2.34. 

Note: GAO's new competency-based performance management system was 
implemented in January 2002. There were no individual appraisal 
averages as high as 4.7 in FY02, FY03, or FY04. 

[End of figure] 

People Measures: Staff Development (Percent of staff responding 
favorably): 

Total; 
FY03: Percent of staff responding favorably: 71%; 
FY04: Percent of staff responding favorably: 72%; 
FY05: Percent of staff responding favorably: 75%. 

Question: My job made good use of my skills and abilities; 
FY03: Percent of staff responding favorably: 71%; 
FY04: Percent of staff responding favorably: 72%; 
FY05: Percent of staff responding favorably: 75%. 

Question: GAO provided me with opportunities to do challenging work; 
FY03: Percent of staff responding favorably: 69%; 
FY04: Percent of staff responding favorably: 70%; 
FY05: Percent of staff responding favorably: 73%. 

Question: In general, I was used effectively; 
FY03: Percent of staff responding favorably: 73%; 
FY04: Percent of staff responding favorably: 74%; 
FY05: Percent of staff responding favorably: 78%. 

[End of table]

People Measures: Organizational Climate (Percent of staff responding 
favorably): 

Total; 
FY03: Percent of staff responding favorably: 71%; 
FY04: Percent of staff responding favorably: 74%; 
FY05: Percent of staff responding favorably: 76%. 

Question: A spirit of cooperation and teamwork exists in my work
FY03: Percent of staff responding favorably: 73%; 
FY04: Percent of staff responding favorably: 78%; 
FY05: Percent of staff responding favorably: 79%. 

Question: I am treated fairly and with respect; 
FY03: Percent of staff responding favorably: 74%; 
FY04: Percent of staff responding favorably: 77%; 
FY05: Percent of staff responding favorably: 80%. 

Question: My morale is good; 
FY03: Percent of staff responding favorably: 67%; 
FY04: Percent of staff responding favorably: 69%; 
FY05: Percent of staff responding favorably: 71%. 

Question: Sufficient effort is made to get the opinions and thinking of 
people; 
FY03: Percent of staff responding favorably: 67%; 
FY04: Percent of staff responding favorably: 74%; 
FY05: Percent of staff responding favorably: 76%. 

Question: Overall I am satisfied with my job at GAO; 
FY03: Percent of staff responding favorably: 74%; 
FY04: Percent of staff responding favorably: 74%; 
FY05: Percent of staff responding favorably: 75%. 

[End of table] 

People Measures: Leadership (Percent of staff responding favorably): 

Total; 
FY03: Percent of staff responding favorably: 78%; 
FY04: Percent of staff responding favorably: 79%; 
FY05: Percent of staff responding favorably: 80%. 

Question: Gave me the opportunity to do what I do best; 
FY03: Percent of staff responding favorably: 79%; 
FY04: Percent of staff responding favorably: 79%; 
FY05: Percent of staff responding favorably: 81%. 

Question: Treated me fairly; 
FY03: Percent of staff responding favorably: 86%; 
FY04: Percent of staff responding favorably: 87%; 
FY05: Percent of staff responding favorably: 89%. 

Question: Acted with honesty and integrity toward me; 
FY03: Percent of staff responding favorably: 85%; 
FY04: Percent of staff responding favorably: 86%; 
FY05: Percent of staff responding favorably: 88%: 

Question: Gave me the sense my work is valued; 
FY03: Percent of staff responding favorably: 75%; 
FY04: Percent of staff responding favorably: 77%; 
FY05: Percent of staff responding favorably: 78%. 

Question: Ensured a clear link between my performance and recognition 
of it; 
FY03: Percent of staff responding favorably: 69%; 
FY04: Percent of staff responding favorably: 72%; 
FY05: Percent of staff responding favorably: 73%. 

Question: Provide meaningful incentives for high performance; 
FY03: Percent of staff responding favorably: 57%; 
FY04: Percent of staff responding favorably: 58%; 
FY05: Percent of staff responding favorably: 59%. 

Question: Implemented change effectively; 
FY03: Percent of staff responding favorably: 74%; 
FY04: Percent of staff responding favorably: 75%; 
FY05: Percent of staff responding favorably: 77%. 

Question: Dealt effectively with EEO and discrimination issues; 
FY03: Percent of staff responding favorably: 92%; 
FY04: Percent of staff responding favorably: 92%; 
FY05: Percent of staff responding favorably: 92%. 

Question: Demonstrated GAO's core values; 
FY03: Percent of staff responding favorably: 86%; 
FY04: Percent of staff responding favorably: 88%; 
FY05: Percent of staff responding favorably: 89%. 

Question: Made decisions in a timely manner; 
FY03: Percent of staff responding favorably: 76%; 
FY04: Percent of staff responding favorably: 77%; 
FY05: Percent of staff responding favorably: 77%. 

[End of table] 

Classification and Compensation System: Key Guiding Principles: 

* Enable GAO to attract and retain top talent; 

* Result in equal pay for work of equal value over time; 

* Be reflective of the roles and responsibilities that we expect GAO 
staff to perform; 

* Be reasonable; competitive; performance-oriented; and based on 
skills, knowledge, and role; 

* Be affordable and sustainable based on current and expected resources 
levels; 

* Be in conformity with applicable statutory limits; 

* Try to assure a reasonable consistency in ratings and related 
compensation results within and between teams. 

Pay Philosophy: Performance-Oriented and Market-Based: 

Historically: 

* Pay ranges followed the GS schedule; 

* Everyone could advance to the pay cap irrespective of their 
performance not a matter of if, but when. 

New Approach: 

* Pay ranges set to be competitive with the labor markets in which GAO 
competes for talent; 

* Everyone can advance to the pay cap but they must have performance in 
excess of a certain level to advance beyond a certain point of the pay 
range (e.g., 75th percentile); 

* Pay ranges may overlap in upper part of band pay range to adequately 
reward expertise, leadership, and performance. 

Classification and Compensation Review (CCR) Approach--Best Practices: 

Hired an experienced and top quality firm Watson Wyatt; 

Followed an industry best practices process and methodology: 

* Early involvement of Career Stream Focal Points (including Employee 
Advisory Council representatives) to provide: 

- Knowledge and expertise on job content; 
- Insight regarding attraction and retention issues including turnover, 
recruitment sources, and mid-career hiring; 
- Hands-on review and confirmation of GAO job matches and 18 selected 
published survey sources. 

Multiple authoritative surveys used for determining competitive 
compensation data; 

Widely recognized local labor market data index used for local market 
categories; 

Extensive involvement throughout the study by the Executive Committee 
to: 

* Provide strategic guidance and input; 
* Confirm and approve job matches from selected published survey 
sources after consideration of recommendations from Career Stream Focal 
Points and Watson Wyatt. 

Proposed Compensation Ranges: Analysts: 

Washington DC Market-Based Compensation Ranges: 

Reference Range: 1; 
Expected Pay Range: Minimum: $45,000; 
Expected Pay Range: Competitive Pay: $59,000; 
Above Expected Pay Range: 75th Percentile: $68,000; 
Above Expected Pay Range: Pay Range Maximum: $74,000. 

Reference Range: 2a; 
Expected Pay Range: Minimum: $60,000; 
Expected Pay Range: Competitive Pay: $80,000; 
Above Expected Pay Range: 75th Percentile: $92,000; 
Above Expected Pay Range: Pay Range Maximum: $99,000. 

Reference Range: 2b; 
Expected Pay Range: Minimum: $75,000; 
Expected Pay Range: Competitive Pay: $100,000; 
Above Expected Pay Range: 75th Percentile: $115,000; 
Above Expected Pay Range: Pay Range Maximum: $125,000. 

Reference Range: 3; 
Expected Pay Range: Minimum: $86,000; 
Expected Pay Range: Competitive Pay: $114,000; 
Above Expected Pay Range: 75th Percentile: $131,000; 
Above Expected Pay Range: Pay Range Maximum: $135,500[Note 1]. 

[1] The maximum pay shown for Reference Range 3 is estimated. It will 
be adjusted to its final level when OPM determines the amount of the 
2005 locality increase for Washington, DC. 

[End of table] 

Other Agencies' Elements of Reform: 

DHS and DOD reforms: 

* Intend to include many of these same elements of a flexible and 
contemporary human capital management system: 

- Pay bands for more flexible classification, staffing, and 
compensation approaches; 
- More market based and performance oriented pay system; 
- Modern performance management systems. 

* But many details still to be defined, and the agencies face multiple 
challenges: 

- Revisions to labor-management relations have been controversial; 
- Need to provide sustained and committed leadership, dedicated 
resources, pre-implementation training, and a post-implementation 
program evaluation strategy; 
- Need to assure that the necessary support infrastructure is in place 
before allowing agencies to implement certain authorities (e.g., 
performance-based pay); 
- Need to conduct appropriate studies over time (e.g., market-based 
compensation ranges). 

Going Forward: 

Reforms to date recognize that one-size-fits-all approach is not 
appropriate to each agency's demands, challenges, and missions. 
However, a reasonable degree of consistency across the government is 
still desirable (e.g., principles, values, and safeguards); 

Need to move forward with reform, but how it is done, when it is done, 
and on what basis it is done can make all the difference; 

Future reforms should incorporate a phased approach, where agencies are 
authorized to implement reform only after they have shown they have the 
infrastructure in place and the resources to be successful (i.e., show-
me approach); 

As part of this approach, agencies must be able to make effective use 
of new authorities and have critical infrastructure in place: 

* Strategic human capital planning process linked to the agency's 
overall strategic plan; 
* Modern, effective, credible, integrated, and validated performance 
management system; 
* Adequate internal and external safeguards (e.g., reviews, appeal 
processes); 
* Adequate resources for training and evaluation; 

In the short term, reforms should, at a minimum, include select and 
targeted new authorities: 

* Allowing agency heads to make a limited number of term appointments 
awarded noncompetitively; 
* No guaranteed pay increases for persons who do not perform at an 
acceptable level; 
* Rightsizing and restructuring authorities that can place additional 
emphasis on factors such as knowledge, skills, and performance; 

Broader reforms should be guided by a framework consisting of a common 
set of: 

* Principles (e.g., merit principles); 
* Criteria (e.g., demonstrated business case); 
* Processes (e.g., preconditions, including adequate infrastructure in 
place); 

GAO continues to work with key clients and stakeholders on future of 
reform: 

* Forum on government-wide framework; 
* Testimony on DHS and DOD human capital designs; 
* Symposium on modern compensation systems; 
* Sharing our experience in implementing our reforms; 
* Ongoing dialogue with the Congress, OMB, OPM, and various agencies, 
professional groups, unions, and others. 

Three Key Ingredients Needed for These Challenging and Changing Times: 

* Courage; 

* Integrity; 

* Innovation. 

[End of slide presentation] 

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