SEC’s Organizational Culture Hinders Agency’s Ability to Effectively Fulfill Its Mission

Based on our analysis of the views of many SEC employees, our  previously issued reports on SEC, and recent studies from SEC and third  parties, we have determined that the agency’s organizational culture is  not constructive and could hinder its ability to effectively fulfill its mission. Within constructive cultures, employees also  exhibit a stronger commitment to mission focus, accountability,  coordination, and adaptability. In describing the agency’s culture, many  current and four former SEC employees talked about low levels of  employee morale, employees’ distrust of management, and the  compartmentalized, hierarchical, and risk-averse nature of the  organization. Improving Personnel Management Is Critical for SEC’s Effectiveness

SEC has not consistently or fully implemented practices for effective  personnel management practices. SEC has taken some steps to address aspects of these  deficiencies or limitations, but most of the agency’s efforts are in the early  stages and could be enhanced. SEC Lacks Comprehensive Plans to Help Ensure Its Workforce Has the Necessary Skills

SEC has not yet developed a comprehensive workforce plan. Key principles for effective workforce planning from our past work also  has shown that it is important for agencies to ensure that their strategic  workforce planning efforts (1) involve top management, staff, and other  stakeholders; (2) identify the critical skills and competencies that will be  needed to achieve current and future programmatic results, including  evaluation of gaps; (3) develop strategies that are tailored to address  skills gaps; (4) build the internal capability needed to address  administrative, training, and other requirements important to support  workforce planning strategies; and (5) include plans to monitor and  evaluate the agency’s progress toward meeting its human capital goals. While SEC has taken steps towards identifying and addressing its  workforce competency gaps, these efforts have not reflected all of the  elements of effective workforce planning and strategies articulated in  OPM guidance. Without comprehensive workforce  and succession plans, SEC will be limited in its ability to make well- informed decisions about how to best meet agency needs today and into  the future. Implementation of SEC’s Performance Management System Could Be Improved

The design of SEC’s performance management system reflects some  characteristics of an effective system but could be improved. SEC staff expressed many concerns about the implementation  of the performance management system. Furthermore, we could not identify  additional SEC efforts to obtain staff input on other aspects of its  performance management system, such as the performance appraisal  process. For  example, as noted earlier in this report, SEC’s IG has reported on how  this lack of communication and collaboration may have contributed to  past enforcement failures. SEC Has Not Developed a System to Monitor and Evaluate Its Personnel Management Activities

SEC has not developed an accountability system to monitor and evaluate  its personnel management programs and systems (such as its workforce  and succession planning functions and performance appraisal system). Until a system is put into  place, SEC may be missing opportunities to take a more comprehensive  approach to improving its personnel management. Moreover, without the  information such a system generates, it will be difficult for SEC to identify  systemic problems related to its personnel management or to correct  them. Successfully transforming organizational culture requires an effective  personnel management system. Because these are long-standing concerns, sustained leadership to  improve communication and collaboration within SEC is important and  exploring and implementing leading communication and collaboration  practices could better position SEC to address these issues. SEC has started work to develop an accountability system. To help enhance the credibility of its performance management system,  the Chairman of SEC should direct the COO and OHR to  create mechanisms to monitor how supervisors use the performance  management system to recognize and reward performance, provide  meaningful feedback to staff, and effectively address poor  performance; for example, by requiring ongoing feedback discussions  with higher-level supervisors; and  conduct periodic validations (with staff input) of the performance  management system and make changes, as appropriate, based on  these validations. Appendix I: Objectives, Scope, and Methodology

This report examines (1) what is known about the Securities and  Exchange Commission’s (SEC) organizational culture and (2) SEC’s  personnel management challenges and its efforts to address these  challenges. We also interviewed SEC’s Inspector  General officials, four former SEC employees, SEC union leaders and  members, two management consultants who previously worked with  SEC, representatives from two industry trade groups, and two academics  with knowledge of SEC personnel management issues to obtain their  views on the agency’s organizational culture, personnel management  challenges, and what, if anything, SEC can do to address these  challenges. Section 962 of the Dodd- Frank Act mandated GAO to evaluate: (A) the effectiveness of supervisors in using the  skills, talents, and motivation of the employees of the Commission to achieve the goals of  the Commission; (B) the criteria for promoting employees of the Commission to  supervisory positions; (C) the fairness of the application of the promotion criteria to the  decisions of the Commission; (D) the competence of the professional staff of the  Commission; (E) the efficiency of communication between the units of the Commission  regarding the work of the Commission (including communication between divisions and  between subunits of a division) and the efforts by the Commission to promote such  communication; (F) the turnover within subunits of the Commission, including the  consideration of supervisors whose subordinates have an unusually high rate of turnover;  (G) whether there are excessive numbers of low-level, mid-level, or senior-level  managers; (H) any initiatives of the Commission that increase the competence of the staff  of the Commission; and (I) the actions taken by the Commission regarding employees of  the Commission who have failed to perform their duties and circumstances under which  the Commission has issued to employees a notice of termination.
Why GAO Did This Study

Personnel management is important to the mission of federal agencies. Several high-profile enforcement failures have raised concerns about SECs personnel management. Section 962 of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandates GAO to report on SEC's personnel management. This report examines (1) SECs organizational culture and (2) its personnel management challenges and efforts to address these challenges.
GAO assessed SECs personnel management systems against OPM guidance and other criteria related to workforce planning and performance management (which includes appraisals and feedback); reviewed relevant reports; surveyed SEC employees and senior management (with 78 and 74 percent response rates, respectively) to gather their views on SECs organizational culture and personnel management practices; and spoke with former employees, the SEC Inspector General, representatives of the employees union, financial industry associations, consulting firms, and academics.

What GAO Found

Based on analysis of views from Securities and Exchange Commission (SEC) employees and previous studies from GAO, SEC, and third parties, GAO determined that SECs organizational culture is not constructive and could hinder its ability to effectively fulfill its mission. Organizations with constructive cultures are more effective and employees also exhibit a stronger commitment to mission focus. In describing SECs culture, many current and former SEC employees cited low morale, distrust of management, and the compartmentalized, hierarchical, and risk-averse nature of the organization. According to an Office of Personnel Management (OPM) survey of federal employees, SEC currently ranks 19th
SEC has not consistently or fully implemented effective personnel management. SEC has taken some steps, but most of its efforts were in the early stages and could be enhanced. GAO identified four key areas where continued improvement is needed: of 22 similarly sized federal agencies based on employee satisfaction and commitment. GAOs past work on managing for results indicates that an effective personnel management system will be critical for transforming SECs organizational culture.
Workforce planning. SEC has not yet developed a comprehensive workforce plan, including how it identifies its future leaders. Although SEC has taken some steps, such as identifying competency gaps and conducting leadership training, these efforts do not reflect all elements of effective workforce planning outlined in OPM guidance. OPM guidance calls on agencies to develop and implement plans to identify workforce needs and develop future leaders. Without fully implementing such practices, SEC will not be able to make well-informed decisions on how to best meet current and future agency needs.
Performance management. SECs implementation of its performance management system could be improved. SEC staff expressed many concerns about the system, such as an unclear link between their performance and ratings. SEC provided training to supervisors on how to use the system and obtained staff input on aspects of the system. However, SEC has not fully validated the system with its staff. Also, SEC does not have mechanisms in place to monitor supervisors use of the system. By not validating all aspects of the system and establishing mechanisms to hold supervisors accountable for appropriately using it, SEC is missing opportunities to enhance the credibility and effectiveness of its performance management system.
Communication and collaboration. SEC has made efforts to improve communication and collaboration (such as creating new subunits to facilitate joint work), but has not yet fully addressed barriers. Moreover, these efforts have not yet addressed all of the problems that the Inspector General found contributed to past enforcement failures. GAO has reported on leading practices that SEC could explore, including sustained management attention. Improving communication and collaboration within SEC is critical to its effectiveness.
Personnel management assessment. SEC has not implemented an accountability system to monitor and evaluate its personnel management. According to OPM guidance, such a system helps agencies assess whether personnel policies are effective. SEC officials explained that efforts were under way to develop a system. Until such an accountability system is implemented, it will be difficult for SEC to make necessary improvements and help ensure that its personnel management policies and programs align with its mission.

What GAO Recommends

GAO makes seven recommendations to improve SECs personnel management, including developing comprehensive workforce plans, implementing mechanisms to monitor how supervisors use the performance management system, conducting periodic validations of the system, exploring collaboration practices of leading organizations, and regularly assessing these efforts. SEC agreed with GAOs recommendations.