DTIC ADA411559: Ensuring Successful Personnel Management in the Department of Homeland Security

11 Pages·0.18 MB·English

by  Defense Technical Information Center

Issue Paper
R
National Security Research Division
Ensuring Successful Personnel Management
in the Department of Homeland Security
Beth J. Asch
SUMMARY contains some, but not all, of these characteristics. One of the
main ways the civil service system deviates from the ideal sys-
Notwithstanding the debate in recent months between the Bush
tem is that its processes can be excessively cumbersome and
administration and members of Congress about how personnel
rigid. Furthermore, federal managers do not extensively use
should be managed in the Department of Homeland Security
available tools, such as bonuses, that promote flexibility in the
(DHS), the secretary of the new department will be faced with
management of personnel. However, available evidence also sug-
the challenge of implementing and further improving the
gests that existing civil service flexibility-related tools, if used,
human resources (HR) system agreed upon by the President
can be highly effective. In particular, retention allowances, buy-
and Congress. This challenge will be made more complex by the
outs, and early retirement incentives can induce federal workers
need to integrate federal employees who previously worked in
to change their retention, separation, and retirement decisions.
other federal organizations and the need to reshape the skill mix
of these employees to suit the new mission being given to the
Measured in terms of such outcomes as the recruitment, reten-
DHS. It will also be made more complex by the need to recruit
tion, promotion, and pay of high-quality personnel, the civil ser-
a large number of new workers to replace the wave of retire-
vice system has had a degree of success. However, the fact that
ments projected to occur over the next decade and that cannot
some outcomes are better among higher-quality employees does
be handled by outsourcing positions.
not mean that enough higher-quality employees are being
recruited and retained. Until recently, most federal civil service
To provide input to help meet the challenge, this paper draws
organizations lacked workforce plans, and thus had no explicit
from management and economics studies to identify the charac-
requirement for high-quality workers. Consequently, there has
teristics that make the HR system in any organization effective.
been no benchmark by which to determine whether the supply of
It presents evidence on where the civil service system falls short
such workers meets the requirement.
in terms of these characteristics, how these shortcomings have
affected personnel outcomes in the past, and past efforts to
In response to concerns about shortcomings in the civil service
improve the civil service system. It concludes with suggestions
system, some organizations, such as the Central Intelligence
for steps that could be taken by policymakers to bolster person-
Agency, have obtained a waiver from the civil service rules
nel management in the DHS.
and developed their own HR systems. To the extent that the
Successful personnel management requires flexible compensa- new DHS secretary might pursue such a waiver, evidence con-
tion and personnel management tools that provide performance cerning the success of past efforts by other organizations is
incentives for both workers and managers, recruitment and important. However, little evidence is available on the relative
retention incentives for talented personnel, managerial discre- success of these alternative systems, and the little that exists
tion and accountability, the assurance of adequate resources to is inconclusive. Some evidence suggests that pay levels, reten-
implement these policies, transparency and oversight, stability, tion rates, and staffing processes differ in organizations using
and limited financial risk to workers. The civil service system alternative systems relative to those that have not waived
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have substantial latitude to express provocative views without doing full justice to other perspectives. The views and conclusions
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© Copyright RAND 2002.
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Report Date Report Type Dates Covered (from... to)
000002002 N/A -
Title and Subtitle Contract Number
Ensuring Successful Personnel Management in the Department
of Homeland Security Grant Number
Program Element Number
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Task Number
Work Unit Number
Performing Organization Name(s) and Address(es) Performing Organization Report Number
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Supplementary Notes
Abstract
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Report Classification Classification of this page
unclassified unclassified
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unclassified UU
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10
current rules; other evidence suggests little difference in the articulated and incorporated in the design of any new
personnel outcomes. system especially since the vast majority of the roughly
170,000 employees of the new department will be civil
The military is an example of a federal organization that has
servants transferred from existing agencies throughout
been able to develop a successful HR system. Like the DHS,
the federal government. These agencies include the
the military is a large governmental organization that employs
Federal Bureau of Investigation, the Immigration
individuals with diverse skills in multiple locations and that
and Naturalization Service, and the Department of
seeks to accomplish diverse objectives. The military has one-
Transportation. To ensure that the department’s HR
size-fits-all pay tables, yet virtually all observers would agree
system is effective, the secretary will need to identify the
that the military’s compensation system has proven over time
characteristics required to most effectively meet DHS
to be remarkably successful in attracting and retaining high-
missions, to understand where the current federal civil
quality personnel. Considerable flexibility is provided through
service system has fallen short in terms of these character-
the wide variety of special and incentive pays embedded in the
istics, and to lay out the steps required in the near and
military’s compensation system. The military system also
long term.
incorporates predictability and performance incentives. This is
not to suggest that the civil service should adopt the military
This paper provides some of this information. It first
system or that the military system is perfect but rather that the
draws from the management and economics literature to
military system provides a useful case study of how to develop
identify the characteristics that any HR system needs to
an effective system.
be effective in supporting organizational goals. It then
Policymakers can take steps to bolster personnel management in discusses the available evidence on the performance of
the DHS. One way to improve the HR system is to ensure that the civil service system, including whether it embodies
the new organization makes greater use of existing policies that these characteristics, its effect on personnel outcomes,
provide personnel management flexibility. For these policies to and the success of past efforts to strengthen it. The paper
have their maximum effect, the barriers to their use—such as discusses future trends that will challenge the ability of
inadequate funding and overly cumbersome administrative the DHS to attract and retain personnel. Finally, the
procedures—must be addressed. And although it is essential, paper suggests steps that might be taken in the near and
expanded use of the flexibility-related policies alone is unlikely long term to bolster personnel management in the DHS.
to lead to a system that has all the characteristics that define
success, especially given the stresses looming on the horizon.
These policies will not address possible problems such as either SUCCESSFUL PERSONNEL MANAGEMENT
excessive or insufficient oversight, hiring inadequacies, and REQUIRES SIX CHARACTERISTICS
poorly conceived management and employee performance incen-
Achieving an effective HR system in any organization
tives.
presents complex problems that go beyond the single
Ultimately, what is needed is a well-defined plan that includes issue of flexibility in personnel management, which has
all of the characteristics for successful personnel management. been a focal point of the recent debate. Other characteris-
If it is decided that an entirely new HR system must be devel- tics in the HR system are also important.
oped, the plan would specify the details. If the current civil
service system is mostly retained, the plan should specify how Among these characteristics is whether the authorities,
to address those areas in which the system falls short. resources, and incentives are in place to help managers
achieve their organization’s goals. Although management
However, the development of such a plan is no small task and
experts and economists do not have an explicit list of cri-
will involve considerable effort. The DHS secretary should seek
teria that make a system successful, the factors that are
input from experts who are familiar with the federal civil service
usually identified in studies of organizational manage-
system but who are not closely tied to that system currently,
ment can be grouped into a list of six characteristics or
and who are familiar both with the characteristics of an effective
criteria (Milgrom and Roberts, 1992; Tirole, 2000).
HR system and with how those characteristics apply in the con-
text of a governmental organization. Finally, policymakers 1. The HR system offers flexible personnel and compensation
must be prepared to invest in monitoring and analytical activi- tools or policies that efficiently promote the organization’s
ties to ensure that the system is meeting all of its objectives and missions. Compensation and personnel policies pro-
to aggressively address any shortcomings that are identified. vide incentives to attract, retain, motivate, and even-
tually separate personnel. These policies are suffi-
Now that Congress and the administration are moving ciently flexible to allow managers to respond to
ahead with the DHS, the new secretary must focus on different markets and to adapt quickly to changing
building and improving the department’s HR system. circumstances. The more uncertain or variable the
Lessons from the current civil service system must be environment, the more flexibility that is required.
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2. Managers have discretion over how the personnel and It classifies jobs, sets compensation, and establishes proce-
compensation tools are used. Managers are able to set dures for hiring, promotion, firing, and retirement.
pay, to hire, to assign, to retain, to reward, and to However, some HR elements—for example, resourcing
separate personnel, and to allocate resources. A gen- and personnel outcome monitoring—are defined by how
eral principle in the management literature is that agencies implement the system. Understanding the char-
authority to make decisions is given to the managers acteristics of the civil service system and its current imple-
and workers who have the information and incen- mentation can provide the DHS secretary with a starting
tives to act on that authority. point for identifying where future changes for the DHS
3. Managers have the incentive to use the personnel and com- might be useful.
pensation policies in a way that supports the organiza-
As implemented, the civil service system emphasizes the
tion’s mission. Unused tools or tools that are used
fifth and sixth characteristics: It is transparent, subject to
incorrectly or ineffectually are not beneficial.
extensive oversight, and its policies regarding compensa-
Compensation and personnel policies for managers
tion and staffing are highly stable and seem fairly applied.
must provide incentives for the effective employment
It also has the first characteristic, to the extent that the sys-
of the HR tools. These incentives must be linked to a
tem includes tools that promote flexibility in personnel
system that monitors managers’ performance and
management. However, the available evidence suggests
holds them accountable for measured outcomes.
that it lacks the second, third, and fourth characteristics.
4. Resources are available to implement and monitor those Managers often lack the resources that would let them
policies. Unfunded tools—for example, authority to take advantage of the HR tools built into the system, and
pay bonuses without funding—are not beneficial they seem to have relatively little discretion over setting
either. Resources must also be devoted to gathering pay or hiring and firing decisions. The evidence also sug-
data and analyzing the outcomes that result from gests that managers rarely use the flexibility-related tools
these policies on an ongoing basis. Such data and that are available to them.
analysis inform policymaking and promote trans-
parency.
Some Aspects of the Civil Service System Are Rigid
5. Policies are transparent and appropriately linked to the and Cumbersome
organization’s goals, and their implementation is subject
Civil service compensation, classification, promotion, and
to both internal and external oversight. The policies are
staffing policies in the federal civil service are well defined
transparent to prevent the incidence and costs of
in Title 5 of the U.S. Code. The published pay tables and
opportunistic behavior and fraud among managers.
the detailed processes for defining jobs promote clarity,
Fraud and nepotism are more likely to occur when
openness, and predictability. However, such rules can
managers have more discretion. Therefore, HR
also produce a rigid system that embeds overly bureau-
systems that are more flexible and provide more
cratic processes.
managerial discretion also have an additional
amount of oversight. Statistics and anecdotal evidence show that civil service
6. Policies are stable and limit the financial and career risks recruiting and firing processes have, indeed, become cum-
that workers face. Workers who are exposed to greater bersome at best and dysfunctional at worst, and that the
uncertainty and unpredictability in their pay and civil service pay system is rigid and unresponsive to per-
opportunity relative to other employment options formance differences and external market conditions.
receive higher overall compensation, on average, to Problems with pay, advancement, and training during the
compensate for that risk. Otherwise, worker morale 1980s were discussed in the 1990 Volcker Commission
and recruiting/retention will be diminished. report (Volcker, 1990). More recently, the U.S. Office of
Personnel Management (OPM), the organization that over-
Each of these characteristics deserves attention when
sees federal workforce policy, reported that more than
developing or evaluating the merits of an HR system.
75 percent of the increase in annual federal pay bears no
Although organizations may give more weight to some
relationship to individual achievement or competence
characteristics than to others, it is clear from management
(James, 2002). A 2001 survey conducted by the Brookings
studies that systems with only a few of these characteris-
Institution found that most federal employees called the
tics but not others will not be fully effective.
hiring process slow and confusing, one-quarter called it
unfair, and more than two-thirds said the federal govern-
INSIGHTS FROM RESEARCH REGARDING THE CIVIL
ment was not good at disciplining bad performance (Light,
SERVICE SYSTEM
2001). Stories abound of the long delays, often lasting
The civil service system contains most, but not all, of the months, in recruiting new personnel and the inability of
elements understood to be part of an effective HR system. personnel managers to fire poor performers. The Director
3

early retirement option was estimated to more than dou- is unclear if the better retention and pay among higher-
ble the rates of separation and retirement from the civil quality employees is sufficiently high, given the DoD’s
service among those who would be eligible for that bene- requirement for such workers.
fit. The buyout was estimated to increase separations and
A related study (Gibbs, 2001) examined the personnel
retirements by about 30 to 40 percent, depending on age.
outcomes of scientists and engineers who work in labora-
Again, the estimated effects are sizable.
tories in the DoD, a group that has many individuals with
The available evidence also indicates that civil service advanced degrees. The study found that the financial
personnel quit rates have responded strongly to pay gains associated with greater skills and responsibility, as
changes in the past. A 1990 study (Black, Moffitt, and measured by the difference in pay across grades, remained
Warner, 1990) found that a 10 percent change in civil ser- about the same from 1982 to 1996. In marked contrast, in
vice pay would change civil service quit rates by 9.3 per- the private sector the pay differential for the greater skill
cent among technical workers and by 4.3 percent among and responsibility among engineers rose over that same
administrative workers. time period. This difference between the wage structure
of federal and private-sector workers was also docu-
mented by Katz and Kreuger (1991) using data on all fed-
By Some Metrics, the Civil Service System Seems
to Work eral workers. Nonetheless, Gibbs found little evidence
that the DoD suffered a decline in the quality of the work-
One way to assess how well an HR system serves to force being studied. Furthermore, the quality and perfor-
attract and retain high-quality personnel and to meet other mance of new hires to that workforce, relative to earlier
strategic HR goals is to examine personnel outcomes. groups of new hires, and the quality and performance of
Measured by such outcomes as the recruitment, retention, employees who were retained, relative to those who had
promotion, and pay of high-quality personnel, the civil left, remained stable.
service system has had a degree of success. What little
evidence is available, primarily relating to DoD employ- Similar results were found in an earlier study of defense
ees, suggests that the system has not produced undesir- workers. A 1990 DoD study of the quality of civilian
able personnel outcomes, despite its rigidities. workers who had quit the DoD found no evidence that
higher-quality employees, as measured by their SAT
The evidence from DoD’s experience is generally positive.
scores, were more likely to leave the DoD than other civil-
A 2001 DoD-sponsored RAND study of the pay, promo-
ian employees (U.S. Department of Defense, 1990). Earlier
tion, and retention of GS civil service workers in the DoD
studies of all federal workers, not just those in the DoD,
found that personnel managers are using the civil service
also indicate that the system generates some desirable out-
system in such a way as to produce generally desirable
comes. A 1980 study of federal pay levels (Borjas, 1980)
outcomes (Asch, 2001). For example, the analysis found
found substantial wage differentials across agencies in the
that higher-quality personnel, measured by supervisor rat-
federal government despite the so-called rigid pay table.
ing and education level, are generally paid more and pro-
A 1995 study comparing federal and private-sector hiring
moted faster in the DoD, holding constant employment
in the 1980s found that the federal government was just as
factors such as occupation, grade, years of service, loca-
able to attract high-quality entrants as the private sector
tion, and function, and demographic factors such as gen-
(Crewson, 1995). Personnel quality was measured in
der and age. The study found considerable variation in
terms of aptitude test scores.
the pay and promotion patterns of personnel in different
occupations in the DoD, suggesting that managers are What factors have afforded these favorable civil service
able to use the common pay table to achieve different pay personnel outcomes? A list of possible explanations
outcomes in different occupations. includes the following:
The study also found that higher-quality defense workers, • Federal pay historically has been on par with private-
in terms of supervisor performance ratings, also had better sector pay. Official measures of the so-called “pay
retention, holding other factors constant. The one area of gap” show that federal pay grew more slowly than
concern regarded employees with the most advanced private-sector pay from the mid-1970s to the mid-
degrees, such as master’s or doctorate degrees. They were 1990s, for similar jobs (Congressional Budget Office,
paid more, all else being equal, including occupation. But, 1997). However, another approach is to compare
the study also found that those employees tended to be individuals with similar “human capital” such as
promoted somewhat more slowly than those with only age, education, and occupation. Early studies using
bachelor’s degrees and in some cases had poorer retention, the human capital approach found that the pay of
holding all else equal, including entry grade and occupa- federal workers actually exceeded that of private-
tion. An important caveat to the study’s findings is that it sector workers with similar characteristics, broadly
5
defined (Smith, 1976; Gyourko and Tracy, 1988; service rules defined by Title 5 of the U.S. Code, and have,
Krueger, 1988). More recent comparisons that use therefore, had the opportunity to develop their own HR
more detailed information about individuals’ human systems. The organizations include the U.S. Postal Service,
capital characteristics find that federal employees the Central Intelligence Agency, the Library of Congress,
are neither overpaid nor underpaid relative to simi- the Federal Reserve Board, the Federal Aviation
lar private-sector workers (Moulton, 1990; Administration, and other federal agencies. About half of
Congressional Budget Office, 1997). federal employees are in these exempt organizations (U.S.
Office of Personnel Management, 1998a).
• High-quality and skilled civil service employees may enter
and stay in federal employment because of the nature of
If the secretary of the DHS chooses to develop a new per-
their work and the desire to serve the public. Such atti-
sonnel system for DHS, evidence on the success of past
tudes would make their behavior relatively insensi-
efforts by other organizations will be important in those
tive to financial incentives.
deliberations. The little evidence that is available indicates
• Strong incentives to stay in the civil service until retire- that civil service waivers have had mixed results in terms
ment eligibility is reached are embedded in both the Civil of producing better personnel outcomes or even substan-
Service Retirement System (CSRS) and the Federal tially better personnel processes.
Employees Retirement System (FERS). Those who
leave before they are eligible to retire under either In a 1998 OPM study of the personnel practices and poli-
retirement system incur a large financial loss in the cies in organizations that are partially or fully exempt
value of their expected retirement benefits (Asch and from Title 5, the OPM noted the following:
Warner, 1999). The pull of the retirement system is
We started the study with the working hypothesis that
greater for higher-quality workers, if they are paid
there would be substantial differences in the HRM
more and promoted faster over their careers than
[Human Resource Management] systems of non-
for lesser-quality workers, because the value of the
Title 5 organizations compared with Title 5 agencies.
expected retirement benefit increases with one’s pay.
In general, we found that the actual systems differ-
Additionally, higher-paid workers covered by FERS
ences are important but more limited than anticipated
are more likely to contribute to its Thrift Savings
[emphasis added] (U.S. Office of Personnel
Plan. Therefore, higher-quality workers may be less
Management, 1998a).
likely to leave the civil service than lower-quality
workers because they are paid more than lower-
The study found few differences in the recruitment,
quality workers and both FERS and CSRS have a
hiring, and promotion practices of exempt organizations
stronger effect for them. This is the argument made
that supposedly had more flexibility than those that were
by Ippolito (1987).
not exempt. A notable exception was the absence of pref-
However, the fact that some outcomes are better among erential employment and hiring practices for veterans and
higher-quality employees does not mean that enough the so-called “rule of three” in hiring that gives preference
higher-quality employees are being recruited and to the top three eligible candidates certified by the OPM.
retained. Until recently, most federal civil service organi- Although exempt organizations had the ability to hire
zations lacked workforce plans, so they did not have an people on the spot, even without announcing a vacancy,
explicitly stated requirement for high-quality workers. the study found that such flexibility was limited by con-
Consequently, there is no benchmark by which to com- cerns about merit, collective bargaining agreements, and
pare whether the supply of high-quality workers meets other constraints. The study also found that the exempt
the requirement. The better retention of high-quality organizations continued to incorporate the merit system
workers found in past research may or may not be suffi- principle or other merit-based organizational values.
cient relative to the requirement for such workers.
The study found differences in the classification and com-
pensation systems used by exempt and non-exempt orga-
Evidence Is Mixed on the Success of Civil Service
nizations. Several exempt organizations developed their
Waiver Experiments
own classification systems and pay systems that included
Concerns about the shortcomings in the civil service sys-
pay-for-performance, broad-banded pay grades, and other
tem are not new. Although the establishment of a DHS
forms of variable pay. Whether these systems produce
has highlighted those concerns, problems with the system
improved outcomes in terms of worker morale, recruiting
have been a topic of discussion among observers,
and retention of high-quality personnel, and better perfor-
researchers, and policymakers for some time.
mance is still an open question. On the other hand, one
In response to these concerns, several federal organiza- notable finding was that five of the 37 exempt organiza-
tions have been able to waive, either partially or fully, civil tions studied by OPM continued to follow Title 5 for per-
6
sonnel classification and compensation because it was the way personnel are managed. To ensure the success of
easier than establishing their own system. the all-volunteer force, President Nixon established the
President’s Commission on an All-Volunteer Force, com-
Evaluations of experimental pay systems developed to
monly known as the Gates Commission, to study the
introduce greater flexibility in personnel management
issue. The Gates Commission report paved the way for
show mixed effects on personnel outcomes. The Gibbs
the abolition of the draft in 1973. The military compensa-
(2001) study of DoD laboratory scientists and engineers
tion system has been studied since then by other commis-
found no evidence that these other pay plans provided
sions including the Defense Manpower Commission
greater flexibility in personnel management. It measured
in 1976 and the President’s Commission on Military
the same outcomes for employees who were under the
Compensation in 1978. In addition, the military studies
traditional civil service GS pay system as for those who
its personnel management policies and compensation on
participated in two experimental pay systems. The first
an ongoing basis, including a Quadrennial Review of
experimental system was implemented in a demonstration
Military Compensation. The DoD devotes significant
project conducted at the Naval Air Warfare Center in
resources and data-gathering effort to analyze and evalu-
China Lake, California, and the second was the
ate its personnel policies. These assessments generally
Performance Management Recognition System. This latter
focus on recruiting and retention. As a result, tools and
plan was used in the late 1980s and early 1990s, covered
policies have been successfully developed, tested, fine-
all GS-13 to GS-15 workers throughout the civil service,
tuned, and implemented.
and altered how within-grade pay increases were deter-
mined.
Like the civil service, the military has one-size-fits-all pay
In contrast, evidence provided by the OPM suggests that tables, which have been in place since the 1940s. Yet, vir-
waiving Title 5 requirements has resulted in improved tually all observers would agree that the military’s com-
personnel outcomes in some of the demonstration proj- pensation system has proven over time to be remarkably
ects, including those that cover scientists and engineers in successful in attracting and retaining high-quality soldiers,
the DoD. For example, OPM found that starting pay was sailors, airmen, and marines to the armed services. This
higher, pay raises were larger for more highly rated fact is even more remarkable when one considers the dra-
employees, and turnover of workers with better ratings matic changes that have occurred in the military and the
was lower for federal employees at China Lake relative to environment in which the military has operated since the
a control laboratory that was not a demonstration project end of World War II.
(U.S. Office of Personnel Management, 1988, 1991).
Considerable flexibility is provided through the wide vari-
Similar results have been found for the National Institute
ety of special and incentive pays embedded in the mili-
of Standards demonstration project (Rosenthal et al.,
tary’s compensation system. These policies enable the ser-
1991).
vices to respond to changes in the external environment
The Military Provides a Good Example of What Can Be and internal requirements, to the unusual and hazardous
Done and How to Get There duties performed by members of the armed forces, and to
the hazardous locations in which they serve (Asch, Hosek,
The military is an example of a federal organization that
and Martin, 2002). The military also devotes significant
has been able to develop a successful HR system. Like the
resources to fund these special pays and incentives,
proposed DHS, the military is a large governmental orga-
although the payment amounts are dwarfed by the cost of
nization employing individuals with diverse skills in mul-
basic pay and the retirement accrual charge. Personnel
tiple locations and seeks to accomplish diverse objectives.
managers have the incentive and authority to use and tar-
The military system is by and large successful (although
get flexibility-related management tools to achieve recruit-
not perfect) for a number of reasons. It is transparent and
ing and retention goals. As a consequence, the military
fairly applied, it allows for flexibility without undue insta-
uses these flexibility-related policies far more extensively
bility, it demands accountability, it provides performance
than the civil service does.
incentives, it devotes resources to adequately fund its
policies, and it performs regular analyses to assess the
In addition, the military compensation system incorpo-
effects of those policies (Asch and Warner, 1994). The
rates predictability because of its adherence to uniform
DHS should consider the DoD experience in establishing
pay tables and its systems of allowances and special and
a process for developing and improving its HR system,
incentive pays. Although military bonuses and other spe-
whether or not it retains the civil service structure.
cial and incentive pays account for most of the variation in
When the all-volunteer military force was created in the military pay among service members, on average these
early 1970s, the DoD was faced with a monumental chal- pays represent only 10 to 15 percent of the total cash com-
lenge, which was similar in some respects to that faced by pensation. Thus, a relatively small portion of total average
the DHS today. Both involve abrupt, large-scale change in cash compensation for active duty members is subject to
7
uncertainty. Furthermore, some of the variation in mili- have retired. That is, because so many employees will
tary pay that is due to bonuses and special and incentive be leaving, the demand for new workers by the fed-
pays is predictable because the circumstances that give eral government, including the DHS, will grow, even
rise to those payments, such as sea duty, are themselves if the overall staffing requirements remain the same.
largely predictable. There is reason to expect that many of the hires will
need to be well-educated. While outsourcing may be
The military’s HR system embeds important performance
able to fill some of these requirements, additional in-
incentives for military personnel, including personnel
house federal employees will be needed to supervise
managers. The incentives not only induce effort but also
outsourced activities and to conduct other inherent
induce high-quality performers to enter the military, to
governmental functions that cannot be outsourced.
stay in it, and to seek advancement to higher-ranked posi-
tions. The incentives are inherent in the military’s promo- • This hiring will take place in a highly competitive environ-
tion system (Buddin et al., 1992). The military personnel ment, if the trends of the past 20 years continue. The fed-
system also encompasses incentives for those in supervi- eral government will be competing against both the
sory positions to identify and, in some cases, separate poor private sector and state and local governments for
performers. Because poor performance can result in death workers. The competition for new workers is likely to
or injury to members of the military, and unit comman- be particularly fierce because the entire U.S. popula-
ders are often held accountable for sub-par unit perfor- tion is aging. If the civil service (including the DHS)
mance, a clear incentive exists to cull those who do not wants to replace retiring workers with junior or mid-
make the grade. career workers with at least some college, as will like-
ly be the case, it may need to alter its compensation,
This discussion is not intended to suggest that the civil
hiring, and career management practices to ensure
service should adopt the military’s HR systems. Civilian
that it can compete effectively for college-educated
service differs in critical ways from military service.
individuals in the labor market in the future. For
Nonetheless, the military system provides a useful case
example, pay must remain competitive with the dra-
study of how to develop an effective system.
matically rising pay for those with post-secondary
education relative to those with no post-secondary
PERSONNEL CHALLENGES FACING THE DHS education (Mishel, Bernstein, and Schmitt, 1999).
A major shift is occurring in the demographics of the civil • Mergers such as the one necessary to create the DHS are
service. According to Congressional Budget Office (2001) notoriously painful. The department will require the
statistics, about half of the federal workforce was over age merging of organizations currently in various parts
40 in 1985. That figure grew to about 75 percent in 2000. of the federal government. These “sending” organi-
In part, the aging of the federal workforce reflects the zations have pay and personnel practices and “corpo-
aging of the “baby-boom” generation in the U.S. popula- rate cultures” that differ from one another and from
tion overall. These trends will no doubt affect personnel whatever is adopted in the DHS. Some personnel
staffing in the proposed DHS as well. will come from organizations that were fully or par-
tially exempt from the Title 5 rules. Consequently,
As a result of these demographic changes, the civil service,
individuals performing similar tasks in the new
including the DHS, will be at risk of losing a large part of
department may have quite different pay depending
its workforce over the next decade. According to the
on whether their originating organization was
President’s Management Agenda (U.S. Office of the
exempt from Title 5. The DHS secretary must be
President, 2001), 71 percent of the government’s current
sensitive to such integration issues.
workforce will be eligible for either regular or early
retirement by 2010 and 40 percent of those workers are
TOWARD SUCCESSFUL PERSONNEL MANAGEMENT
expected to retire. Because of these trends, the General
Accounting Office designated “human capital” as a Make greater use of existing policies that provide per-
government-wide high-risk area (General Accounting sonnel management flexibility. Given the large number
Office, 2001a). of retirements that are imminent in the organizations that
will constitute the DHS, and the dual challenges of inte-
There are reasons to believe that the civil service system
grating workforces that previously worked in other fed-
and the DHS specifically will be highly stressed in
eral organizations under various personnel management
the future from a personnel standpoint. Consider the
schemes and of shaping their skill and experience mix to
following:
best meet the new department’s mission, the DHS secre-
• The DHS will require an extensive hiring campaign to tary should be given the authority and resources to use
obtain personnel with new skills and to replace those who flexibility-related policies extensively. For these policies
8
to have their maximum effect, the barriers to their use— Retirement System and the Civil Service Retirement System, MR-986-
such as inadequate funding and overly cumbersome OSD, Santa Monica, Calif.: RAND, 1999.
administrative procedures—must be addressed.
Asch, Beth J., Steven Haider, and Julie Zissimopolous, The Effects
Although essential, expanded use of flexibility-related of Workforce Shaping Tools on CSRS Retirements: The Case of the
Department of Defense, AB-656-RC, Santa Monica, Calif.: RAND,
policies alone is unlikely to lead to a system that has all
2002a.
the characteristics that define success, especially given
the stresses looming on the horizon. These policies will Asch, Beth J., Steven Haider, and Julie Zissimopolous, The
not address such possible problems as either excessive or Retirement Behavior of Federal Civil Service Workers, Michigan
insufficient oversight, hiring inadequacies, and poorly Retirement Research Center, RAND, 2002b.
conceived management and employee performance
Asch, Beth J., James R. Hosek, and Craig W. Martin, A Look at
incentives. Additional steps will be needed. Cash Compensation for Active Duty Military Personnel, MR-1492-
OSD, Santa Monica, Calif.: RAND, 2002.
Seek objective expertise, take time to develop a plan,
and invest continually to improve the system. In part Black, Matthew, Robert Moffitt, and John Warner, “The
what is needed is strong leadership by the secretary and Dynamics of Job Separation: The Case of Federal Employees,”
a willingness to identify and reform inappropriate pro- Journal of Applied Econometrics, Vol. 5, pp. 245–266, 1990.
cesses. However, what is also needed is the development
Borjas, George, Wage Policy in the Federal Bureaucracy, American
of a well-defined and well-conceived plan for ensuring
Enterprise Institute for Public Policy Research, Washington,
effective personnel management. If it is decided that an D.C., 1980.
entirely new HR system must be developed, the plan
Buddin, Richard J., Daniel S. Levy, Janet M. Hanley, and Donald
should specify such details as how many job series and
Mark Waldman, Promotion Tempo and Enlisted Retention, R-4135-
pay tables to establish. It should also specify the tools to
FMP, Santa Monica, Calif.: RAND, 1992.
be used to attract, retain, and relocate personnel, to moti-
vate and reward good performance, and to separate poor Congressional Budget Office, “Changes in Federal Civilian
performers from the workforce. On the other hand, if the Employment: An Update,” A CBO Paper, Washington, D.C.,
May 2001.
civil service system is mostly retained, the plan should
provide details on how to address those areas where it Congressional Budget Office, “Comparing Federal Salaries with
falls short. Those in the Private Sector,” CBO Memorandum, Washington,
D.C., July 1997.
Development of such a plan is no small task and will
involve considerable effort. Although the challenges are Crewson, Phillip, “A Comparative Analysis of Public and Private
different from those posed by the establishment of the all- Sector Entrant Quality,” American Journal of Political Science, Vol.
volunteer force, they are no less profound. Thus, policy- 39, No. 3, 1995.
makers would be wise to follow a similar path. That is, General Accounting Office, “Performance Management:
the DHS should seek expert input from individuals who Aligning Employee Performance with Agency Goals at Six
are familiar with the federal civil service system but are Results Act Pilots,” GAO/GGD-98-162, Washington, D.C.,
not closely tied to that system currently, and who are September 1998.
familiar with the characteristics of an effective HR system
General Accounting Office, “Managing in the New Millennium:
and how those characteristics apply in the context of a
Shaping a More Efficient and Effective Government for the 21st
governmental organization. Century,” GAO/T-OCG-00-9, Washington, D.C., March 2000.
Finally, policymakers must be prepared to invest in moni- General Accounting Office, “High-Risk Series: An Update,”
toring and analytical activities to ensure that the system is GAO-01-263, Washington, D.C., January 2001a.
meeting all of its objectives and to aggressively address
General Accounting Office, “Human Capital: Major Human
any shortcomings that are identified.
Capital Challenges at the Departments of Defense and State,”
GAO-01-565T, Washington, D.C., March 2001b.
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