	Background

The National Defense Authorization Act for Fiscal Year 2004 provided  DOD with authority to establish (1) a pay and performance management  system, (2) an appeals process, and (3) a labor relations system—which  together comprise NSPS. The legislation permits significant flexibility for  designing NSPS, allowing for a new framework of rules, regulations, and  processes to govern how defense civilian employees are hired,  compensated, promoted, and disciplined. NSPS Design Process Evolved Into a Phased Approach

DOD’s current process to design NSPS is divided into four stages:  (1) development of options for the personnel system, (2) assessment of the  options and translation into recommended proposals, (3) issuance of  proposed regulations, and (4) a statutory public comment period, a meet  and confer period with employee representatives, and a congressional  notification period. The design process generally reflects the following four  practices. First, DOD and OPM have developed a process to design the new  personnel system that is supported by top leadership in both organizations. Second, from the outset, a set of guiding principles have guided the NSPS  design process. Third, DOD has a dedicated team in place to design and  implement NSPS and manage the transformation process, to include  program managers from DOD components. Fourth, DOD has established a  timeline, albeit ambitious, and implementation goals for implementing its  new personnel system. The design process, however, does not fully reflect  two other key practices. First, DOD developed and implemented a written  communication strategy document, but it is not comprehensive. Second,  while the NSPS design has involved employees through town hall meetings  and other mechanisms, it has not included employee representatives on the  working groups that drafted the design options for the new system. As previously discussed, DOD’s initial process to  design NSPS was unrealistic and inappropriate; however, after a strategic  reassessment, DOD adjusted its approach to reflect a more cautious,  deliberative process that involved top DOD and OPM leadership. In recent hearings on the NSPS  proposed regulations, we testified that DOD’s new personnel management  system will have far-reaching implications for the management of the department and for civil service reform across the federal government. However, if  not properly designed and implemented, NSPS could impede progress  toward a more performance- and results-based system for the federal  government as a whole. Specifically, the strategy does not identify all key internal stakeholders and  their concerns. Experience shows that  failure to adequately consider a wide variety of people and cultural issues  can lead to unsuccessful transformations. A  successful transformation must provide for meaningful involvement by  employees and their representatives to, among other things, gain their  input into and understanding of the changes that are occurring in the  organization. DOD Faces Multiple Challenges in Implementing NSPS

As DOD implements its new personnel management system, it will face  multiple implementation challenges in both the early and later stages of  implementation. The communications strategy must include the  active and visible involvement of a number of key players, including the  Secretary of Defense, and a variety of communication means and  mediums for successful implementation of the system. Involving employees and other stakeholders in implementing the  system. Later Implementation Challenges

Ensuring sustained and committed leadership. DOD may face a future leadership challenge when  the NSPS Senior Executive and the PEO transition out of existence once  NSPS is fully implemented. In addition, evaluating the impact of NSPS will be an ongoing challenge for  DOD. For example,  the written communication strategy document does not identify employee  representatives as a key stakeholder but, instead, characterizes union  leadership as “NSPS’ biggest detractor.” Since the development and  implementation of the written communication strategy document, DOD  notes that specific plans were developed to identify key internal and  external stakeholders and provided key messages and communications  products to inform those groups. Although there are a total of  nine key practices of successful transformations, our evaluation focused  on six key practices: (1) ensure top leadership drives the transformation,  (2) focus on a key set of principles and priorities at the outset of the  transformation, (3) set implementation goals and a timeline to build  momentum and show progress from day one, (4) dedicate an  implementation team to manage the transformation process, (5) establish a  communication strategy to create shared expectations and report related  progress, and (6) involve employees to obtain their ideas and gain their  ownership for the transformation. Post-hearing Questions Related to the Department of Defense’s National  Security Personnel System.
Why GAO Did This Study

The Department of Defense's (DOD) new personnel system--the National Security Personnel System (NSPS)--will have far-reaching implications not just for DOD, but for civil service reform across the federal government. The National Defense Authorization Act for Fiscal Year 2004 gave DOD significant authorities to redesign the rules, regulations, and processes that govern the way that more than 700,000 defense civilian employees are hired, compensated, promoted, and disciplined. In addition, NSPS could serve as a model for governmentwide transformation in human capital management. However, if not properly designed and effectively implemented, it could severely impede progress toward a more performance- and results-based system for the federal government as a whole. This report (1) describes DOD's process to design its new personnel management system, (2) analyzes the extent to which DOD's process reflects key practices for successful transformations, and (3) identifies the most significant challenges DOD faces in implementing NSPS.

What GAO Found

DOD's current process to design its new personnel management system consists of four stages: (1) development of design options, (2) assessment of design options, (3) issuance of proposed regulations, and (4) a statutory public comment period, a meet and confer period with employee representatives, and a congressional notification period. DOD's initial design process was unrealistic and inappropriate. However, after a strategic reassessment, DOD adjusted its approach to reflect a more cautious and deliberative process that involved more stakeholders. DOD's NSPS design process generally reflects four of six selected key practices for successful organizational transformations. First, DOD and OPM have developed a process to design the new personnel system that is supported by top leadership in both organizations. Second, from the outset, a set of guiding principles and key performance parameters have guided the NSPS design process. Third, DOD has a dedicated team in place to design and implement NSPS and manage the transformation process. Fourth, DOD has established a timeline, albeit ambitious, and implementation goals. The design process, however, is lacking in two other practices. First, DOD developed and implemented a written communication strategy document, but the strategy is not comprehensive. It does not identify all key internal stakeholders and their concerns, and does not tailor key messages to specific stakeholder groups. Failure to adequately consider a wide variety of people and cultural issues can lead to unsuccessful transformations. Second, while the process has involved employees through town hall meetings and other mechanisms, it has not included employee representatives on the working groups that drafted the design options. It should be noted that 10 federal labor unions have filed suit alleging that DOD failed to abide by the statutory requirements to include employee representatives in the development of DOD's new labor relations system authorized as part of NSPS. A successful transformation must provide for meaningful involvement by employees and their representatives to gain their input into and understanding of the changes that will occur. DOD will face multiple implementation challenges. For example, in addition to the challenges of continuing to involve employees and other stakeholders and providing adequate resources to implement the system, DOD faces the challenges of ensuring an effective, ongoing two-way communication strategy and evaluating the new system. In recent testimony, GAO stated that DOD's communication strategy must include the active and visible involvement of a number of key players, including the Secretary of Defense, for successful implementation of the system. Moreover, DOD must ensure sustained and committed leadership after the system is fully implemented and the NSPS Senior Executive and the Program Executive Office transition out of existence. To provide sustained leadership attention to a range of business transformation initiatives, like NSPS, GAO recently recommended the creation of a chief management official at DOD.