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entitled 'Human Capital Management: FAA's Reform Effort Requires a More 
Strategic Approach' which was released on February 03, 2003.



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Report to Congressional Requesters:



February 2003:



Human Capital Management:



FAA’s Reform Effort Requires a More Strategic Approach:



GAO-03-156:



Contents:



Letter:



Results in Brief:



Background:



FAA Initiated Personnel Changes in Three Broad Areas, Some of Which 

Required Exemptions from Title 5:



Key Elements of Personnel Reform Have Not Yet Been Fully Implemented:



FAA Had Little Data on Reform’s Effects, and Views of FAA Officials 

Often Differed from Views of Managers and Employees We Interviewed:



FAA Has Not Fully Incorporated Elements Needed for Effective Human 

Capital Management:



Conclusions:



Recommendations:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Scope and Methodology:



Appendix II: Structured Interview Form and Selected Results:



Appendix III: Elements for Effective Human Capital Management:



Appendix IV: Core Compensation Pay Bands and Grade Conversion for 2002:



Appendix V: FAA Human Resource Management Office’s Balanced Scorecard 

Performance Measures:



Appendix VI: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Staff Acknowledgments:



Tables Tables:



Table 1: Overview of Human Resource Management Office’s Balanced 

Scorecard Performance Measures:



Table 2: Chronology of Internal and External Evaluations of FAA’s 

Personnel Reform:



Figures Figures:



Figure 1: Implementation Status of Selected Initiatives within the 
Three 

Areas of FAA’s Personnel Reform That Did or Did Not Require an 

Exemption from Title 5:



Figure 2: Selected FAA Human Capital Reform Initiatives and Their Need 

for an Exemption from Title 5:



Figure 3: Career Level Pay Bands for Job Categories under Core 

Compensation:



Figure 4: Implementation Status of Selected FAA Personnel Reform 

Initiatives:



Figure 5: Compensation Systems Applicable to FAA’s Workforce:



Figure 6: Compensation of Air Traffic Controllers in Field Facilities 

and Regional and Headquarters Offices, 2002:



Figure 7: Number of FAA Employees Represented by Unions, 1991-2001:



Figure 8: Inspector General’s Comments on the Effects of Personnel 

Reform on Hiring Times:



Figure 9: Funding Alternatives Used for Managers’ PCS Promotional Moves 

between Field Facilities, Fiscal Years 1999-2001:



Figure 10: Number of Formal EEO Complaints by Year:



Figure 11: FAA Employees’ Views on the Model Work Environment:



Figure 12: Volpe Center’s Views on Importance of Linkage:



Figure 13: Study’s Views on FAA’s Implementation of Personnel Reform:



Figure 14: Inspector General’s Views on FAA’s Implementation of 

Personnel Reform:



Figure 15: Consultant’s Views on FAA’s Implementation of Personnel 

Reform:



Figure 16: Eight Critical Success Factors Corresponding with the Four 

High-Risk Human Capital Challenges That Can Help Agencies Manage Human 

Capital Strategically:



Figure 17: Six Key Practices for Effective Use of Human Capital 

Flexibilities:



Abbreviations Abbreviations :



CFR: Code of Federal Regulations:



EEO: Equal Employment Opportunity:



FAA: Federal Aviation Administration:



FAACMA: FAA Conference Managers Association:



FLRA: Federal Labor Relations Authority:



GFT: Guaranteed Fair Treatment:



GS: General Schedule:



NAPA: National Academy of Public Administration:



NATCA: National Air Traffic Controllers Association:



OMB: Office of Management and Budget:



OPM: Office of Personnel Management:



PCS: Permanent Change of Station:



February 3, 2003:



The Honorable John L. Mica

Chairman, Subcommittee on Aviation

Committee on Transportation and 

 Infrastructure

House of Representatives:



The Honorable Thomas M. Davis III

Chairman, Committee on Government

 Reform

House of Representatives:



The Honorable David Weldon, M.D.

House of Representatives:



The Federal Aviation Administration (FAA) is managing its personnel 

under one of the most flexible human capital management environments in 

the federal government. This is a result of 1995 legislation that 

granted the agency broad exemptions from laws governing federal 

civilian personnel management found in title 5 of the United States 

Code. Congress provided these flexibilities in response to FAA’s 

position that the inflexibility of federal personnel systems was one of 

the most important constraints to the agency’s ability to be responsive 

to the airline industry’s needs and to increase productivity in air 

traffic control operations. In 1996, FAA announced a sweeping reform of 

its personnel management system. As we have reported,[Footnote 1] major 

change initiatives generally require a minimum of 5 to 7 years to 

provide meaningful and lasting results, and so FAA’s implementation of 

personnel reform should now be approaching a point where such results 

might be discernable. As some other federal agencies, such as the 

National Aeronautics and Space Administration, have requested similar 

human capital flexibilities, and others, such as the Transportation 

Security Administration, are now operating under similar exemptions 

from title 5 requirements, FAA’s experiences in implementing its 

flexibilities could provide valuable information to Congress in 

considering whether to grant the use of such flexibilities at other 

agencies and in overseeing their use.



You asked us to review the status of FAA’s personnel reform. As agreed, 

we answered the following questions:



* What changes did FAA initiate after being granted broad flexibilities 

in 1995 and to what extent did these changes require exemptions from 

title 5?



* What is the status of the implementation of FAA’s human capital 

reform initiatives, and what factors have affected the pace and extent 

of implementation?



* What are the effects of FAA’s human capital reform initiatives 

according to data collected by FAA and the views of FAA human resource 

and labor management officials, managers and employees, and unions?



* To what extent has FAA’s reform effort incorporated elements that are 

important to effective human capital management in the federal 

government?



To answer these questions, we reviewed personnel management 

requirements in title 5 and the changes FAA made to its personnel 

management system as a part of the agency’s reform effort. We collected 

and analyzed internal and external evaluations of different aspects of 

FAA’s personnel reform and the available data on the results of reform. 

We discussed reform with agency managers and human resource management 

officials and union representatives and conducted 176 structured 

interviews of randomly selected managers and employees in 27 field 

facilities nationwide, 6 of FAA’s 9 regional offices, and FAA 

headquarters. Because of limitations inherent in the relatively small 

sample size, we did not generalize the views and opinions of those 

randomly interviewed to all FAA employees. To augment the views and 

opinions collected from the structured interviews, we obtained and 

analyzed the data available on the results of the various initiatives 

provided by FAA’s Office of the Assistant Administrator for Human 

Resource Management and the lines of business[Footnote 2] and obtained 

the views of FAA senior managers in the five lines of business and 

representatives of employee associations. Finally, we considered FAA’s 

reform effort in light of elements of strategic human capital 

management that we developed in 2002 and assessments of human capital 

management efforts and agencies’ use of personnel flexibilities that 

we have performed at other agencies.[Footnote 3] Appendix I contains a 

more detailed description of the scope and methodology of our work. A 

copy of our structured interview questions with selected employee 

responses is provided in appendix II. We conducted our work from 

November 2001 to October 2002 in accordance with generally accepted 

government auditing standards.



Results in Brief:



In its human capital reform effort, FAA initiated changes in three 

broad areas--compensation and performance management, workforce 

management, and labor and employee relations--some of which required 

exemptions from title 5. In the area of compensation and performance 

management, FAA introduced two initiatives--a new, more flexible pay 

system in which compensation levels are set within broad ranges, called 

pay bands, and a new performance management system intended to improve 

employees’ performance through more frequent feedback with no summary 

rating. Both new systems required an exemption from title 5. In the 

area of workforce management, FAA undertook initiatives in workforce 

planning (the process by which an organization plans and manages the 

size, capabilities, diversity, and deployment of its workforce), 

hiring, training, and relocation of employees. While the planning and 

training initiatives generally did not require exemptions from title 5, 

other workforce management initiatives did require exemptions. In 

particular, exemption from title 5 requirements allowed FAA to 

establish its own competitive hiring process and bypass centralized 

government hiring system requirements. Finally, initiatives in the area 

of labor and employee relations included the establishment of new 

groups to represent unions and employees and a new policy initiative to 

promote diversity and an open work environment. Neither initiative 

required exemption from title 5, which continues to govern FAA’s labor 

relations.



While FAA has fully implemented some or all initiatives in each of the 

three broad areas of the reform effort it began in 1996, some key 

initiatives have not yet been fully implemented, and the pace and 

extent of implementation have been affected by several factors. In the 

area of compensation and performance management, FAA’s new compensation 

system has not yet been implemented for about one-quarter of the 

agency’s workforce whose unions have not reached a new pay agreement 

with FAA. FAA’s new performance management system had been implemented 

for about 20 percent of the total workforce (15 percent nonunion 

employees and 5 percent union employees) at the time of our review. In 

the area of workforce management, FAA implemented most initiatives in 

1996 by allowing managers in the lines of business immediate use of new 

agencywide flexibilities for hiring and training employees. While FAA 

established similar agencywide policies for developing workforce plans 

for staff, this initiative has not been fully implemented. In the area 

of labor and employee relations, FAA implemented initiatives 

establishing new partnership forums for union and nonunion employees 

and a new model work environment program. While we did not determine 

all of the factors that may have affected the pace and extent of 

implementation, FAA’s need to implement initiatives among a workforce 

with a wide range of skills and workplace environments and to negotiate 

changes with 48 bargaining units within FAA’s nine unions were among 

factors that affected the pace and extent of reform implementation. 

Figure 1 shows selected initiatives in each of the three areas of 

reform, along with whether they required exemptions from title 5 and 

their implementation status.



Figure 1: Implementation Status of Selected Initiatives within the 

Three Areas of FAA’s Personnel Reform That Did or Did Not Require an 

Exemption from Title 5:



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FAA had little data with which to assess the effects of its reform 

effort. While FAA human capital officials cited positive effects of 

FAA’s human capital reform effort, the views of managers and employees 

and union representatives were generally less positive. In the area of 

compensation and performance management, FAA had not systematically 

collected or analyzed data to support human resource management 

officials’ view that compensation changes had increased the agency’s 

ability to attract and retain employees. At the same time, many FAA 

managers and employees we interviewed were critical of the new 

compensation system. Nearly two-thirds (110 out of 176) of those we 

interviewed disagreed or strongly disagreed that the new pay system is 

fair to all employees. We were able to find evidence of specific 

concerns regarding unfairness in disparities in pay for air traffic 

controllers. In addition, according to representatives of FAA’s Office 

of Labor Relations and employee unions, a general sense of unfairness 

over pay among some FAA employees outside of air traffic services has 

led to increased unionization among FAA employees. The number of 

employees in unions, as a percentage of the workforce, increased from 

63 percent in 1995 to almost 80 percent in 2001. In the area of 

workforce management, human resource management officials provided 

limited data collected only for air marshals to support their view that 

external hiring times had decreased from an average of 6 months to as 

little as 6 weeks. In contrast, only 12 of the 46 managers we 

interviewed said that the speed of hiring has improved. Finally, FAA 

labor management officials cited a limited amount of data that 

indicated that the number of grievances filed at the national level by 

employees represented by unions had increased as evidence that new 

employee-union forums had not improved labor management relations. The 

managers and employees we interviewed had mixed views on the impact of 

labor and employee relations reform initiatives.



FAA’s lack of empirical data on the effects of its human capital 

initiatives is one indication that it has not fully incorporated 

elements that we and others have identified as important to effective 

human capital management into its reform effort. These elements include 

data collection and analysis, performance goals and measures, and 

linkage of reform goals to program goals. Systems to gather and analyze 

relevant data provide a basis against which performance goals and 

measures can be applied. FAA human resource management officials said 

that the agency should have spent more time to develop baseline data 

and performance measures before implementing the broad range of reforms 

but that establishing these elements was a complex and difficult task. 

They said FAA was under significant pressure to rapidly implement 

reforms and that one impact of FAA’s incremental approach to 

implementing the reforms was that baseline measures tended to change as 

more people were brought under the reformed systems. FAA has also not 

gone far enough in establishing linkage between reform goals and 

overall program goals of the organization, another element we have 

identified as important to effective human capital management. We found 

that the lack of these elements has been pointed out repeatedly in 

evaluations of FAA’s human capital reform effort, but FAA has not 

developed specific steps and time frames by which these elements will 

be established and used for evaluation. Incorporation of these elements 

could also help FAA build accountability into its human capital 

management approach.



This report makes recommendations designed to enable FAA to develop a 

more strategic approach to its reform effort. By building these 

elements into its approach, FAA will be better able to evaluate the 

effects of its reform initiatives, use the evaluations as a basis for 

any strategic improvements to its human capital management approach, 

and hold agency leadership accountable for the results of its human 

capital management efforts. Doing so would also enable the agency to 

share its results with other federal agencies and Congress. In 

commenting on the draft of this report, the Department of 

Transportation and FAA generally agreed with the report’s 

recommendations. They emphasized the complexity of the reform effort 

and said they have been making significant progress in developing 

needed elements for measuring the effectiveness of the new programs.



Background:



The FAA’s mission is to provide a safe and efficient national aerospace 

system. FAA’s key aviation functions include regulating compliance with 

civil aviation safety standards and air commerce, operating the 

national air traffic management system, and assisting in the 

development of airports. The achievement of FAA’s mission is dependent 

in large part on the skills and expertise of its workforce. FAA 

consists of nearly 50,000 people, organized into 5 lines of business 

and several staff offices. Its workforce provides aviation services 

including air traffic control, maintenance of air traffic control 

equipment, and certification of aircraft, airline operations and 

pilots. FAA’s human resource management office is responsible for 

managing agencywide implementation of personnel reform and providing 

policy and guidance to regional human resource management divisions 

that manage the implementation of personnel reform within their areas 

of responsibility.



In September 1993, the National Performance Review concluded that 

federal budget, procurement, and personnel rules prevented FAA from 

reacting quickly to the needs of the air traffic control system for new 

and more efficient equipment and flexibilities for attracting and 

hiring staff. In May 1994, building on these concerns, Congress 

directed the Secretary of Transportation to undertake a study of 

management, regulatory, and legislative reforms that would enable FAA 

to provide better air traffic control services without changing FAA’s 

basic organizational structure. The resulting FAA report to Congress, 

issued in August 1995,[Footnote 4] concluded that the most effective 

internal reform would be to exempt FAA from most federal personnel 

rules and procedures.[Footnote 5]



In reporting on FAA’s request for these exemptions in October 1995, we 

concluded that, if the Congress decided to provide FAA with new 

personnel authority, the agency could be used to test changes before 

they were applied governmentwide.[Footnote 6] At that time, we 

emphasized the importance of establishing goals prior to the 

application of the new authority, noting that an evaluation of FAA’s 

efforts after some experience had been obtained would be important for 

determining the success of the effort and its governmentwide 

applicability.



On November 15, 1995, Congress, in making appropriations for the 

Department of Transportation, directed the FAA Administrator to develop 

and implement a new personnel management system.[Footnote 7] The law 

exempted FAA from most provisions of title 5 of the United States Code 

and other federal personnel laws.[Footnote 8] The law required that 

FAA’s new personnel management system address the unique demands of the 

agency’s workforce, and, at a minimum, provide greater flexibility in 

the compensation, hiring, training and location of personnel. 

Subsequent legislation[Footnote 9] reinstated title 5 requirements 

related to labor-management relations, and the Federal Aviation 

Reauthorization Act of 1996 placed additional requirements on FAA by 

requiring that any changes made to FAA’s personnel management system be 

negotiated with the agency’s unions. Accordingly, compensation levels 

became subject to negotiations with employee unions. On April 1, 1996, 

FAA introduced its new personnel management system.



In January 2001, we designated strategic human capital management as a 

governmentwide high-risk area.[Footnote 10]As our January 2001 High-

Risk Series and Performance and Accountability Series reports make 

clear, serious human capital shortfalls are eroding the ability of many 

agencies, and threatening the ability of others, to economically, 

efficiently, and effectively perform their missions.[Footnote 11] In 

2002, our studies of human capital management in the federal government 

identified a variety of elements--critical success factors and 

practices for effective implementation of flexibilities--that are 

important for consideration of federal human capital management 

efforts. For example, systems to gather and analyze data, performance 

goals and measures, linkage between human capital management goals and 

program goals of the organization, and accountability are among the 

elements that we have identified as essential for effective strategic 

human capital management. Appendix III provides an overview of our 

March 2002 model for strategic human capital management[Footnote 12] 

and key practices for federal agencies’ effective use of human capital 

flexibilities we identified in December 2002.[Footnote 13]



Many of these elements relate directly to weaknesses we have identified 

in our recent reviews of FAA. For example, in July 2001, we reported 

that a lack of performance measurement, evaluation, and rewards 

hindered the effectiveness of rulemaking reforms.[Footnote 14] In 

October 2001, we reported that the overall effectiveness of FAA’s 

training for air traffic controllers was uncertain and that FAA had not 

measured productivity gains from changes in controllers’ 

duties.[Footnote 15] We reported in June 2002 on FAA’s difficulties in 

acquiring and developing staff to meet agency needs through air traffic 

control workforce planning.[Footnote 16] Most recently, we reported in 

October 2002 on the inability of air traffic control management to 

determine the impact of new relocation policies because of a lack of 

baseline data.[Footnote 17]



FAA Initiated Personnel Changes in Three Broad Areas, Some of Which 

Required Exemptions from Title 5:



Once exempted from most provisions of title 5, FAA initiated a broad 

set of personnel changes. For the purposes of this report, we grouped 

them into the areas of compensation and performance management, 

workforce management, and labor and employee relations. Figure 2 shows 

some of the major initiatives in each area, as well as whether they 

required exemptions from title 5 personnel rules.



Figure 2: Selected FAA Human Capital Reform Initiatives and Their Need 

for an Exemption from Title 5:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



[A] FAA is not exempt from title 5 requirements governing labor-

management relations.



New Compensation and Performance Management Systems Required Title 5 

Exemption:



FAA required exemption from title 5 rules in order to implement its 

new, broadbanded pay structure. Before obtaining that exemption, FAA 

paid its employees according to the General Schedule (GS) pay system 

mandated by title 5.[Footnote 18] In its 1995 report to Congress, FAA 

stated that the GS pay system--which rewarded employees for their 

length of service, rather than for their competencies, skills, or 

accomplishments--resulted in multiple levels of supervisors at the same 

grade level and pay range, an inability to grant pay increases until 

statutorily mandated time or experience requirements were satisfied, 

and the administrative burden of administering about 35 special GS pay 

rates that were exceptions to regular pay ranges. The Office of 

Personnel Management (OPM) echoed these concerns in an April 2002 

report.[Footnote 19] OPM concluded that the GS system’s narrow pay 

ranges, time-based pay progression rules and across-the-board delivery 

of annual increases was not effective in promoting performance-based 

pay.



Once exempted from these provisions of title 5, FAA replaced the 

traditional grade and step pay system with a broadbanded pay structure 

that provides for a wider range of pay and greater managerial 

flexibility to attract, retain, and reward employees. The new pay band 

system includes plans tailored to specific employee segments: a core 

compensation plan for the majority of nonunion employees and negotiated 

versions of the core compensation pay plan for employees represented by 

unions; a unique pay plan for air traffic controllers and air traffic 

managers; and an executive pay plan for nonpolitical executives, 

managers, and some senior professionals.



To illustrate the pay band system, under core compensation, the GS 15-

grade pay schedule and step pay increases were replaced with a system 

in which employees are placed in a pay band under nine job categories 

including a specialized category that comprises eight specialized 

occupations. Each career category contains two to five pay bands. Each 

pay band represents a minimum and a maximum range of pay. For example, 

the base pay for a band “D” clerical support employee is at least 

$23,600 but no more than $35,400. Figure 3 shows the distribution of 

pay bands for career level job categories under core compensation. (For 

a more detailed comparison of the GS system and core compensation plan, 

see app. IV.):



Figure 3: Career Level Pay Bands for Job Categories under Core 

Compensation:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



Note: Additional pay bands apply to management levels for all of the 

job categories with the exception of students.



In its 1995 report to Congress, FAA reported that the federal 

performance management system under title 5 limited the ability of 

agency managers to reward their best employees. After being exempted 

from this system, FAA incorporated performance management elements into 

the new compensation system to encourage results-oriented behavior and 

to recognize and reward performing employees via permanent annual 

salary increases. For example, under its core compensation plan, all 

employees are eligible for a permanent pay increase, called an 

organizational success increase, based on the Administrator’s 

assessment of the extent to which the entire agency has achieved its 

annual agency goals. In addition, notably high-performing individuals 

may receive an additional permanent pay increase, called a superior 

contribution increase, based on supervisory recommendation.

[Footnote 20] FAA has criteria for awarding superior contribution 

increases. These criteria include collaboration, customer service and 

impact on organizational success. Additional criteria may be used by 

some lines of business and staff offices because of their unique needs. 

FAA is not required to grant cost of living allowances or locality pay 

increases but elected to continue providing these pay adjustments, 

which are generally applicable to the federal pay system.[Footnote 21]



FAA’s 1995 report to Congress also stated that the federal performance 

management system limited the ability of agency managers to deal with 

unacceptable performance. FAA’s legislative exemption from title 

5[Footnote 22] enabled the agency to establish its new performance 

management system. According to human resource management officials, 

this system focuses on human capital development by helping to make 

individual employees aware of their roles and responsibilities in 

helping the agency achieve its program goals and provides ongoing 

feedback and written evaluations to improve individual employee 

performance. The new performance management system incorporates a 

variety of feedback approaches in addition to traditional supervisor-

to-employee feedback, including performance plans that discuss 

managers’ and employees’ agreements regarding job expectations and 

feedback from the employee to the supervisor. At the end of the 

performance evaluation cycle, employees receive a narrative performance 

summary instead of a year-end rating that defines employees’ 

performance in specific categories.[Footnote 23] The performance 

summary reflects an assessment of achievements based on outcomes and 

expectations, while professional competencies such as collaboration and 

customer service are elements of the new compensation system. As a 

result, the performance management system is not directly linked to pay 

for performance elements of FAA’s new compensation system. While FAA’s 

program documentation described union involvement and the use of 

employee focus groups in the development of the system, FAA did not 

systematically validate the final version of the performance management 

system with all employees before beginning implementation in 2002. 

Human resource officials said they planned to validate the new system 

by obtaining employee input through an employee attitude survey in 2003 

and through continuing negotiations with employee unions and that these 

would allow for continuing refinements.



Some Workforce Management Initiatives Required Exemption from Title 5:



Some of FAA’s workforce management reform initiatives required 

exemption from title 5 while others did not. For example, FAA’s 

workforce planning initiative did not require an exemption from title 

5. On the other hand, changes in procedures governing hiring and 

locating staff, as well as some training initiatives, such as fee-for-

service training programs, did require exemptions from title 5.



In requesting exemption from title 5 requirements governing hiring and 

locating staff in 1995, FAA cited inefficiencies of working through OPM 

to hire and geographically place qualified staff at key facilities or 

to reassign employees in response to changing needs. According to an 

FAA staffing task force, the agency had lost highly qualified 

candidates because managers could not fill jobs in a timely manner. FAA 

estimated that it took an average of 6-8 months to bring a new hire 

onboard from outside the federal service using OPM as a hiring source 

and that it took, on average, 60 days to permanently fill a position 

internally. FAA also considered OPM allocations for executive positions 

excessively rigid, as any increases to the allocation provided had to 

be supported by the Department of Transportation and approved by 

OPM.[Footnote 24] Moreover, FAA stated that the temporary internal 

movement process (from one FAA location to another), also governed by 

OPM regulation, was equally inflexible because it limited the duration 

of temporary assignments, and imposed onerous processing requirements. 

The movement process required paperwork to be processed every 120 days 

and could require up to seven separate personnel actions for a 2-year 

temporary assignment.



FAA’s 1995 request for flexibilities in the area of training was based 

on perceived redundancies and inefficiencies in its training programs. 

According to an FAA personnel reform training task force report in 

1996, centralized agency training programs required by title 5[Footnote 

25] provided standard training that did not always address specific 

business needs. FAA also requested exemption from title 5 in order to 

have flexibility to provide unfunded or partially funded moves of 

employees to locations where they and their skills are most needed. 

According to FAA Air Traffic Services and human resource management 

officials, FAA historically interpreted title 5 rules as a requirement 

to fully reimburse all Permanent Change of Station (PCS) moves since 

the agency considered all such moves to be in the interest of the 

federal government.



After Congress provided FAA with its new flexibilities, FAA developed a 

new framework for workforce planning to guide executive, occupational, 

and managerial/supervisory workforce planning. This did not require an 

exemption from title 5. With regard to hiring, FAA used its exemption 

from title 5 to establish hiring policies that allow FAA to hire 

applicants directly from outside the government and from other federal 

agencies without going through OPM. To do so, FAA established three 

hiring approaches: (1) using centralized registers, (2) announcing 

vacancies, and (3) authorizing on-the-spot hiring.[Footnote 26] 

According to FAA human resource management officials, the agency also 

used its exemption from title 5 to streamline staffing by decreasing 

the number of appointment types from 14 to 2 (temporary and permanent) 

and hiring authorities from approximately 500 to 1.[Footnote 27] FAA 

also established a flexible system for adjusting the number of 

executive positions in response to shifting agency priorities. This new 

system allows the Administrator to establish new executive positions 

and reassign and select the top management team.



In the area of training, FAA (1) delegated responsibility for managing 

training funds and programs to its lines of business, (2) allowed users 

to select training from multiple providers, (3) created fee-for-service 

training programs, and (4) provided broader authority to fund degree 

programs for employees. The latter two initiatives required exemptions 

from title 5.[Footnote 28]



Another area of workforce management for which FAA used its exemption 

from title 5 requirements was relocating employees.[Footnote 29] As 

part of its reform, FAA delegated the authority to determine 

eligibility for and amount of benefits to each line of business and 

provided three PCS funding options: (1) full PCS reimbursement, (2) 

fixed relocation payments,[Footnote 30] and (3) unfunded moves. As 

before reform, if the move is in the interest of the government, FAA 

will fully reimburse the individual for costs associated with the 

move.[Footnote 31] Under the new PCS rules, if FAA determines that it 

will derive some benefit from a move, even though the move is not in 

the interest of the government, the agency may offer a fixed relocation 

payment of up to $25,000. If a move is not in the interest of the 

government and FAA does not determine that it will derive some benefit 

from the move, there is no basis for offering PCS funding. However, as 

a result of FAA’s personnel reform, employees may choose to make 

unfunded moves at their own expense for personal reasons, to gain 

experience needed for professional advancement, or for promotion.



Most Labor and Employee Relations Initiatives Did Not Require 

Exemptions:



FAA was ultimately not exempted from title 5 requirements governing 

labor-management relations. As part of its overall reform effort, it 

undertook several initiatives in the area of labor relations that did 

not require exemption from title 5. For example, FAA and its unions 

established a new forum--the National Labor Management Partnership 

Council--for union representatives and senior management to exchange 

information and ideas. To improve overall employee relations, FAA also 

established a new forum for nonunion employees to facilitate 

communications between employees and FAA management that also did:



not require an exemption from title 5.[Footnote 32] Similarly, in 

consultation with union and nonunion employee groups, FAA developed a 

new policy promoting a Model Work Environment to create and maintain an 

effective working environment for its employees by managing diversity 

and practicing equal employment opportunity and affirmative action. In 

addition, on July 1, 1998, FAA established an Accountability Board to 

standardize procedures to insure management’s uniform and effective 

handling of sexual harassment allegations and related misconduct of a 

sexual nature. In July 2000, the scope of the Board was expanded to 

include harassment and other misconduct that creates or may create an 

intimidating, hostile or offensive work environment based on race, 

color, religion, gender, sexual orientation, national origin, age and 

disability. The establishment of the Board did not require exemption 

from title 5.



FAA required exemption from title 5 to establish the Guaranteed Fair 

Treatment Program, an alternative dispute resolution method in which a 

three-person review panel adjudicates employee grievances. FAA intended 

the new program to be the only method by which employees not covered by 

a union agreement could seek administrative reviews of grievances and 

to replace the traditional approach under title 5 rules involving the 

Merit Systems Protection Board.[Footnote 33] (As discussed later, FAA 

was later required by Congress to reinstate the traditional title 5 

process and now offers employees the choice of the two processes for 

resolving disputes.):



Key Elements of Personnel Reform Have Not Yet Been Fully Implemented:



While FAA has completed many of the initiatives that required changes 

to policy and procedures, it has not yet completed implementation of 

some of the more complex elements of the personnel reform it began in 

1996, specifically compensation and performance management systems and 

workforce planning initiatives (see fig. 4). FAA officials said that 

the diversity of skills and duties of FAA’s workforce as well as 

negotiations with unions that represented a large number of employees 

has slowed somewhat the pace and extent of implementation of 

compensation and performance management initiatives.



Figure 4: Implementation Status of Selected FAA Personnel Reform 

Initiatives:



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[End of figure] - graphic text:



According to the Assistant Administrator for Human Resource Management, 

FAA’s implementation strategy was to establish a broad policy framework 

and then focus incrementally on individual elements of reform to 

eventually achieve full implementation. Between April 1996 and October 

1998, for certain workforce management and labor and employee relations 

initiatives, FAA defined the new flexibilities available through 

agencywide “corporate” policies and then empowered the individual lines 

of business to adapt and make use of the new tools as appropriate. 

According to human resource management officials, these initiatives 

helped FAA “jump-start” its reform effort, while other reform 

initiatives, such as compensation, required varying incremental degrees 

of development because of the diverse characteristics of FAA’s 

workforce. Human resource management officials said other initiatives, 

such as workforce planning, were considered to be of a lower priority 

in terms of implementation.



Most Employees Are Paid Under New Compensation Systems, but 

Implementation of the New Performance Management System Has Been 

Limited:



As of September 30, 2002, FAA had fully implemented its broadbanded 

compensation plans, including the performance incentive increases, for 

about three-quarters of the agency’s workforce. About 8,000 nonunion 

employees are paid under the core compensation plan, all senior 

executives (about 180) are paid under the executive compensation plan, 

and about another 9,000 employees represented by three of FAA’s 

nine[Footnote 34] unions are paid under negotiated versions of the core 

compensation plan. Because the performance incentive elements of the 

new system were not incorporated until late 2001, fiscal year 2002 will 

be the first year in which all employees under core compensation 

experience a full cycle with all the elements of its reformed 

compensation system fully in place.[Footnote 35] In addition, more than 

19,000 air traffic controllers are paid according to a specialized, 

negotiated pay plan that includes pay banding[Footnote 36] and superior 

contribution increases. The remainder of FAA’s workforce (about 

13,000),[Footnote 37] most notably those union employees whose union 

has not reached a new agreement with FAA, continues to be compensated 

under the traditional GS grade and step system under title 5 rules, as 

shown in figure 5.



Figure 5: Compensation Systems Applicable to FAA’s Workforce:



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Note: “Other” includes the wage grade plan for employees paid by the 

hour.



The implementation of FAA’s new performance management system has not 

yet been completed for most FAA employees. In 1995, prior to its reform 

effort and in response to new performance management regulations issued 

by OPM,[Footnote 38] FAA decided to establish a separate way of 

managing performance. At this time, it uncoupled its performance 

management system from its compensation system, based performance 

appraisals on a two-tiered evaluation (“meets expectations” or “does 

not meet expectations”) of employees’ performance against performance 

standards, provided for year-end summary ratings, and established 

supplemental criteria (such as making a significant contribution to the 

efficiency, economy, or improvement of government operations) to use as 

a basis for merit pay. In 1999, as part of its reform effort, FAA began 

development of a new performance management system. This new system 

consists of a narrative evaluation of employees’ performance against 

performance standards combined with feedback and coaching. The new 

performance management system does not provide for a year-end summary 

rating or a basis for merit pay. Instead, the new compensation system 

includes criteria that are separate and distinct from the performance 

management system (such as collaboration, customer service, and impact 

on organizational success) for awarding merit-based pay raises, which 

are called superior contribution increases. FAA implemented this new 

performance management system on October 1, 2001, for the Office of 

Human Resource Management, the Office of Regions and Center Operations, 

and the Regulation and Certification line of business. Since October 

2001, additional staff in a variety of FAA organizations have been 

placed under the new performance management system, bringing the total 

under the system to about 20 percent of FAA’s total workforce. As with 

the compensation system, the new performance management system must be 

included in the negotiated agreements with FAA’s employee unions.



While Most Workforce Management Initiatives Have Been Completed, 

Workforce Planning Is in Progress:



FAA implemented most workforce management initiatives in 1996 by 

defining the flexibilities available through agencywide “corporate” 

policies[Footnote 39] and empowering the individual lines of business 

to adapt and make use of the new tools as appropriate for their staff. 

The individual lines of business adapted agencywide policies detailing 

the flexibilities available for hiring, training, and relocating 

employees by issuing parallel policies to guide their respective 

workforces and address any applications unique to their staff. While 

FAA established similar agencywide corporate policies and guidance for 

developing workforce plans for three staff levels--executive, 

managerial and supervisory, and occupational--this initiative is still 

under way.[Footnote 40] FAA began its executive workforce planning in 

November 2000. Development of Individual Development Plans for 

executives--the final element of the executive workforce planning 

effort--was originally scheduled to be finalized in August 2001 but was 

still under way at the time of our review. FAA has not yet initiated 

its managerial and supervisory workforce planning effort. This effort 

is set to begin in fiscal year 2003. FAA’s occupational workforce 

planning, which was originally scheduled to be completed in September 

of 2001, was still under way at the time of our review. Human resource 

management officials said that four of the five lines of business--

Airports, Air Traffic Services, Regulation and Certification, and 

Research and Acquisitions--had completed their occupational workforce 

plans, and the remaining line of business--Commercial Space 

Transportation--was still developing a plan.



Labor and Employee Relations Initiatives Have Been Implemented:



FAA announced a series of agencywide policies governing labor and 

employee relations in 1996 that established the National Labor 

Management Partnership Council, the National Employees Forum, the 

Guaranteed Fair Treatment Program, and a policy promoting a Model Work 

Environment. FAA required less time to develop and implement these 

changes because comparable labor and employee representative groups 

were already in place prior to the reform effort and FAA had existing 

appeal processes and workplace improvement policies that served as a 

basis for the Guaranteed Fair Treatment Program and Model Work 

Environment.



Characteristics of FAA’s Workforce and the Need to Negotiate Changes 

Have Affected the Pace and Extent of Reform Implementation:



The variety of skills and areas of technical expertise represented in 

FAA’s workforce has affected the implementation of the agency’s new 

compensation plan. For example, the agency has a unique pay plan for 

air traffic controllers in the field based on the complexity of the 

facility, while FAA’s new core compensation plan is based on the duties 

and responsibilities of 16 different types of positions (ranging from 

students to pilots to physicians).



The schedule for implementing changes in compensation and performance 

management has been dictated, in part, by the timing of negotiations 

with employee unions and the ability of FAA and its unions to reach 

agreement on the new systems. For example, because FAA’s contract with 

the National Air Traffic Controllers Association (NATCA), the 

organization representing FAA’s largest group of unionized employees, 

had expired, management had to negotiate a new agreement in 1998 before 

it had completed development of its new core compensation pay plan. 

While the air traffic pay plan, like the core compensation plan, is 

intended to include annual pay increases based on individuals’ 

performance, these performance-based increases have not been 

implemented as intended due to an unresolved dispute between NATCA and 

FAA management over the details of implementation. As a result, the air 

traffic pay plan distributed annual performance-based incentive pay 

equally among all union members for fiscal years 1999, 2000, and 2001, 

unlike the core compensation plan developed for the rest of the agency 

in which only higher performing individuals may receive performance-

based incentive pay. At the time of our review, FAA and the air traffic 

controllers union had not yet determined how fiscal year 2002 and 

future years’ incentive pay increases would be allotted.



According to human resource management officials, the new core 

compensation has not been negotiated for union employees that represent 

about 30 percent of FAA’s total workforce, and the need to negotiate 

the incorporation of compensation and performance management 

initiatives into union contracts has increased the length of time 

needed to negotiate some contracts. For example, before 1996, FAA and 

the Professional Airways System Specialists union took from 3 to 14 

months to negotiate an agreement, but the negotiation time more than 

doubled to 29 months for the latest agreement. FAA and the National 

Association of Air Traffic Specialists have been attempting to 

negotiate a new contract since 1997, and the parties had not yet 

reached agreement at the time of our review. Labor relations officials 

attributed increases in negotiation times to the expanded scope of 

contract negotiations, which now includes negotiating compensation that 

historically was not negotiated. The performance management system has 

also not yet been implemented for most of the unionized segments of the 

agency’s workforce. According to FAA officials, 2,324 union employees 

in FAA’s Office of Regions and Center Operations and Office of Public 

Affairs, representing only about 5 percent of FAA’s total workforce 

represented by unions, were under the new system at the time of our 

review.



FAA Had Little Data on Reform’s Effects, and Views of FAA Officials 

Often Differed from Views of Managers and Employees We Interviewed:



FAA had little or no data on the effects of many of the reform 

initiatives. Human resource management officials cited positive effects 

of the reform initiatives in the areas of compensation[Footnote 41] and 

workforce management, while in the area of labor and employee 

relations, labor management officials provided a limited amount of data 

suggesting that labor relations had not improved. Managers and 

employees with whom we spoke in our interview effort generally cited 

less positive views on the effects of reform initiatives.



FAA Lacked Data on Effects of Compensation Changes; Officials Said 

Compensation Changes Increased Flexibility, While Managers and 

Employees Perceived Inequities in the New Pay System:



FAA had not systematically collected or analyzed data to determine 

whether the new compensation system had achieved its objective of 

increasing the agency’s ability to attract and retain employees. Human 

resource management officials said the new compensation system had 

achieved this objective. They said the initiative had made the agency 

more competitive in hiring because FAA can now offer higher starting 

salaries within the wider-range of pay afforded by the pay bands. In 

addition, air traffic officials we spoke with said that the air traffic 

control pay plan has made it easier to staff hard-to-fill positions at 

busier air traffic facilities. They noted, however, that they did not 

have a definition for hard-to-fill positions and had not tracked the 

extent to which positions they might consider hard to fill had been 

filled more or less quickly since the new pay plan was instituted.



In contrast, many FAA managers and employees we interviewed were 

critical of the new compensation system. Nearly two-thirds of those 

responding to our structured interview (110 of 176) disagreed or 

strongly disagreed that the new pay system is fair to all 

employees.[Footnote 42] While we did not attempt to evaluate the 

concerns raised during interviews, we did find some evidence that helps 

explain these perceptions of unfairness. For example, concerns about 

air traffic controller pay disparities are supported by a Department of 

Transportation Inspector General report. This report found that FAA’s 

initial implementation of the new compensation system led to inequities 

in pay between air traffic managers, supervisors, and specialists in 

field facilities, who are covered by the air traffic pay plan that FAA 

negotiated with NATCA in October 1998, and a much smaller group of air 

traffic managers and supervisors in regional and headquarters 

locations, who (together with other FAA managers and employees) are 

covered by the new core compensation plan. Because of differences 

between the two plans, managers and employees transferring from 

regional and headquarters locations to field facilities were not 

eligible for the same pay increases as those who were already assigned 

to field facilities in October 1998.



To address this situation, FAA issued new guidance in July 2001 that 

established consistent rules for setting pay when employees move within 

and among the various pay systems in FAA, including movements between 

field positions and positions in regional offices and headquarters. 

Even so, perceptions of unfairness persist. According to the President 

of the FAA Conference Manager’s Association (FAACMA), the new guidance 

created the perception among some managers and employees of a financial 

disincentive for air traffic controllers to move from field facilities 

to regional offices or headquarters to gain supervisory and managerial 

experience. Further, the FAACMA President, as well as some controllers 

with whom we spoke, stated that such a move would result in a 

significant loss of pay--generally about $10,000 to $20,000. “Because 

of pay discrepancies,” one regional air traffic manager said, “we can’t 

get highly paid employees to move over to management positions.” Human 

resource management officials said that, while some field employees who 

move to positions in regional offices or headquarters would see a pay 

reduction of $10,000 or $20,000, not all such moves would result in 

such a pay reduction.



According to our review of FAA’s July 29, 2001, guidance, an unfair 

disparity in pay between air traffic controllers would be created only 

when managers and employees were paid above or below established pay 

bands. At our request, FAA analyzed the salaries of its air traffic 

control staff and determined that 327, or fewer than 2 percent, of 

about 20,000 controllers (including supervisors, managers, and 

employees) were paid above current pay band maximums. (FAA’s analysis 

did not identify any staff being paid below established pay band 

minimums for their positions.):



When we compared the distribution of 2002 base pay for all air traffic 

controllers in field facilities and in regional and headquarters 

facilities, we found that the regional and headquarters controllers are 

generally paid less under core compensation than the field controllers 

are paid under the air traffic pay plan. As shown in figure 6, the 

percentage of controllers paid between $100,000 and $130,000 is smaller 

in the regions and in headquarters than in the field. This is 

consistent with FAA’s goal of providing higher levels of pay to 

controllers in an operational environment. In addition, the percentage 

of controllers paid between $60,000 and $80,000 is greater in the 

regions and in headquarters than in the field.



Figure 6: Compensation of Air Traffic Controllers in Field Facilities 

and Regional and Headquarters Offices, 2002:



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According to human resource management officials, the pay rates of many 

field employees and supervisors can be accommodated within the pay 

ranges of regional office and headquarters management positions, as 

shown above. Thus, they said that pay discrepancies should not affect 

the ability to entice field employees to move into management 

positions. However, it is understandable that some air traffic managers 

and controllers perceive a financial disincentive for moving from the 

field to a regional office or headquarters because, although the range 

of pay under both systems is comparable, the number of higher paid 

positions is greater in the field than in the regional offices or 

headquarters. To the extent that these perceptions persist, FAA may 

find it more difficult to place its most experienced air traffic 

managers in regional offices and headquarters. However, this disparity 

is consistent with FAA’s goal of basing pay on the operational 

environment and is explicitly stated in FAA’s July 2001 pay plan for 

air traffic managers and controllers.



A general perception of unfairness regarding FAA’s new compensation 

system has led to increased unionization among FAA employees outside of 

the air traffic services line of business as well as within it, 

according to both internal and external sources. FAA human resource 

officials said that considerable unionization began before such systems 

as core compensation were implemented and that most concerns cited 

during unionization efforts were of uncertainty and loss of guarantees, 

not of unfairness. However, the introduction of the pay system 

corresponded with an acceleration in the increase in employees seeking 

union representation after FAA began its reform effort. For example, 

employees represented by unions (as a percentage of FAA’s total 

workforce) increased from 63 percent prior to the reform in 1995 to 66 

percent in 1998 and to 79 percent by 2001. FAA labor relations 

officials and FAA spokespersons for new unions at FAA told us that a 

perceived inequity regarding pay was the prime reason new unions were 

formed. A 1999 study by the National Academy of Public Administration 

(NAPA) also found that real and perceived inequities in levels of pay 

were “major contributors to the view among a growing number of [FAA] 

employees that you must belong to a union to get your fair 

share.”[Footnote 43] A more recent FAA study in 2001 likewise 

acknowledged that the new pay system “may be one possible explanation” 

for the increase in unionization.[Footnote 44] Between 1998--when FAA 

began testing and implementing its new pay system--and 2001, the number 

of employees choosing representation by unions increased nearly 20 

percent (from about 32,800 to more than 38,800 employees). Figure 7 

shows the number of FAA employees represented by unions from 1991 

through 2001.



Figure 7: Number of FAA Employees Represented by Unions, 1991-2001:



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Because FAA had not completed a full appraisal cycle for staff under 

its new performance management system at the time of our review, FAA 

had little data, and we were not able to obtain the views of managers 

and employees on the effects of the new system. We noted that FAA’s 

performance management approach does not use a multi-tiered rating 

system to rate performance. We have previously raised concerns that 

such approaches may not provide enough meaningful information and 

dispersion in ratings to recognize and reward top performers, help 

everyone attain their maximum potential, and deal with poor performers. 

According to human resource management officials, the compensation 

system provides a means of recognizing and rewarding top performers 

through separate assessments not directly linked to performance 

assessments under the performance management system.



The measurable element related to performance management is the number 

of employees that receive superior contribution increases under FAA’s 

new compensation system. About 20 percent of employees are to receive 

the highest superior contribution increases (1.8 percent addition to 

base pay) and 45 percent are to receive the next highest level of 

superior contribution increases (0.6 percent increase in base pay).



Human Resource Management Officials Had Limited Data to Support Their 

Views that Workforce Management Initiatives Had Increased Flexibility, 

While Some FAA Managers Were Less Positive:



Whereas human resource management officials provided some limited data 

to support their views that reform initiatives had improved the 

agency’s flexibility in hiring and relocating employees, the managers 

we spoke with were less likely to see positive results. According to 

human resource management officials, FAA’s use of the new hiring 

flexibilities, though restricted by hiring freezes, has reduced 

external hiring times from an average of 6 months to as little as 6 

weeks. They said the examples they provided for air marshal hiring were 

intended to provide an illustration that the policies allow positions 

to be filled quickly, even in the case of large recruitment efforts. 

However, the Department of Transportation’s Office of Inspector 

General, when reviewing FAA’s personnel reform in 1998, questioned 

FAA’s ability to support this assertion in the absence of 

data.[Footnote 45] (See fig. 8.):



Figure 8: Inspector General’s Comments on the Effects of Personnel 

Reform on Hiring Times:



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Throughout our review, we asked FAA officials from both the human 

resource management office and lines of business for any documentation 

or data to support the reduction in hiring times and they were unable 

to provide any such data. At the close of our review, however, human 

resource management officials cited some limited data resulting from 

the Federal Air Marshal Program. According to FAA human resource 

management officials, the program following the terrorists’ attacks on 

September 11, 2001, was one of the largest recruitment efforts ever 

undertaken by FAA. (FAA received and processed more than 200,000 

applications.) According to FAA officials, it would not have been 

possible to fill the air marshal positions in the numbers and time 

frames required without the flexibilities available under FAA’s 

personnel system. They provided data reflecting a sample of 

approximately 1,000 candidates for the air marshal positions. Of those 

candidates hired, about 30 percent (140) were hired and placed within 6 

weeks. In total, 70 percent (333) were hired and placed within 8 

weeks.[Footnote 46]



In contrast to the positive views of human resource management 

officials, FAA managers had less positive views on the effects of 

hiring reforms, while employees, who are less involved in the hiring 

process, had mixed views. Among the 46 managers we interviewed, only 

about a third (15) agreed or strongly agreed that the initiatives have 

improved the ability of their line of business or staff office to fill 

job vacancies. Furthermore, only 12 of the 46 managers believed the 

speed of hiring has improved. These opinions, while not necessarily 

representative of all FAA managers today, are similar to the views 

expressed by FAA managers in 1998.[Footnote 47] According to a survey 

FAA conducted then, 34 percent of managers responding said that FAA’s 

streamlined staffing procedures had made it easier to fill vacancies in 

their organization, and 32 percent said the speed of hiring had 

improved.



Human resource management officials also said that new policies 

governing the relocation of employees had given managers more 

flexibility in relocating employees and employees more flexibility in 

making career decisions. Under these new policies, FAA may provide 

fixed relocation payments as well as full funding for PCS moves, and it 

allows unfunded moves, which were not allowed under FAA’s prior policy. 

Figure 9 shows that the majority of moves between field offices for 

managers from fiscal year 1999 through 2001 (the only years and type of 

moves for which data were available) were unfunded.



Figure 9: Funding Alternatives Used for Managers’ PCS Promotional Moves 

between Field Facilities, Fiscal Years 1999-2001:



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In contrast to the positive views of FAA human resource management 

officials, FAACMA representatives raised concerns about the impact of 

the new policies in the air traffic services line of business, 

suggesting that they might have unintended consequences, including a 

reduction in the number of qualified applicants, a reduction in the 

diversity of potential applicant pools and subsequent discrimination in 

filling positions, and a negative impact on employee morale if 

fluctuations in the annual funding for relocation payments led to 

disparities in the payments for comparable moves over time.[Footnote 

48] Air traffic officials said they were still reviewing these concerns 

and planned to comment in the near future.[Footnote 49]



FAA Had Some Data Suggesting Mixed Effects of Labor and Employee 

Relations Initiatives, While Officials, Managers, and Employees Held a 

Variety of Views:



Although FAA’s Office of Labor Relations did not have historical, 

agencywide data to quantify an increase in grievances, FAA labor 

management officials said the number of grievances[Footnote 50] filed 

at the national level by employees represented by unions had increased 

and this increase was a sign that the initiatives had not achieved the 

reform objective of establishing a collaborative labor-management 

relations environment that would minimize the traditional adversarial 

relationship. They said that the number of grievances filed began to 

increase following personnel reform changes the agency had made. For 

example, they noted that in 1999, the core compensation plan was 

implemented and grievances increased. However, human resource officials 

said that grievances by union employees could not have pertained to 

implementation of the compensation pilot because the pilot test only 

applied to nonunion employees, not to union employees. The Office of 

Labor Relations implemented a new system for tracking grievance data in 

October 2001 and began systematically collecting information on the 

sources (such as headquarters, regions, and unions) and subject (such 

as compensation, use of leave, and discipline) of grievances filed 

across the agency.



While limited data suggested that FAA’s introduction of an alternative 

dispute resolution program for employees not represented by unions did 

reduce the processing times for resolving appeals, employees’ reactions 

to the new system suggest that many employees did not see this 

initiative as an improvement. FAA introduced its internal alternative 

dispute resolution approach--the Guaranteed Fair Treatment Program--in 

April 1996 in an effort to streamline the appeals process. This 

approach met with resistance from employees and led Congress, in 2000, 

to reinstate the traditional title 5 process that uses the Merit 

Systems Protection Board.[Footnote 51] As a result, FAA now offers 

employees the choice of using either the guaranteed fair treatment 

program or the traditional title 5 process. The only data human 

resource officials were able to provide on appeals dated back to fiscal 

year 1997. Although these data are old, they indicated that for fiscal 

year 1997, appeals went through the guaranteed fair treatment process 

more quickly (5 to 7 months) than through the Protection Board process 

(10 months). Even so, the Deputy Assistant Administrator for Labor 

Relations said that employees, who have been able to choose between the 

two processes, have generally not chosen to use the guaranteed fair 

treatment process. He said that one reason employees have not used the 

guaranteed fair treatment process is because its potential benefits, 

such as the employee’s right to help select the arbitrator, have not 

been effectively communicated to them. In addition, according to the 

Deputy Assistant Administrator, both FAA managers and union leaders 

have complained about having to pay the cost of the arbitrator, while 

employees have complained about having to pay their own legal fees for 

attorneys regardless of the outcome of the appeal. FAA reimburses an 

employee’s legal fees if the employee wins his/her appeal when using 

the Protection Board’s process.



Most FAA managers and employees we interviewed said that labor and 

employee relations had changed in the last 5 years. For example, 130 of 

the 176 managers and employees we interviewed agreed or strongly agreed 

that labor-management relations had changed in the last 5 years. Of 

those 130, 75 said that labor-management relations had declined. 

Similarly, 130 of the 176 managers and employees we interviewed said 

employee morale had changed in the last 5 years, and of those 130, 99 

said that employee morale had declined. While employees’ perceptions 

regarding the changes in labor and employee relations cannot be linked 

directly to FAA’s personnel reform, some employees cited specific 

reform initiatives, such as compensation and the Model Work Environment 

established to improve employee relations, when discussing the decline 

of labor-management relations and morale.



Union representatives for three of FAA’s nine unions said that a 

complaint filed against FAA by the Federal Labor Relations Authority 

(FLRA) in March 2001 had reduced collaboration between labor and 

management. FLRA charged FAA with bargaining in bad faith because it 

had refused to sign an agreement negotiated with the American 

Federation of State, County and Municipal Employees, a union that 

represents employees at FAA headquarters. FAA management did not sign 

the agreement and submitted it instead to the Office of Management and 

Budget (OMB) for review. OMB subsequently disapproved some portions of 

the contract. Following an investigation of the circumstances, FLRA 

directed FAA management and the union to sign and implement the 

contract. However, in September 2002, an administrative law judge 

recommended that FLRA dismiss the union’s complaint, finding that FAA 

clearly gave notice to the union of the OMB approval condition and that 

the union agreed to that condition.



In the area of employee relations, FAA provided us with some data that 

may support the views of FAA officials that the Model Work Environment 

has had a positive effect. A recent decline in the number of equal 

employment opportunity (EEO) complaints may, to an unknown extent, 

reflect the effects of FAA’s Model Work Environment. These complaints 

are concerns expressed by employees about legally prohibited 

discrimination on the basis of race, color, religion, sex, national 

origin, age, or handicap. An analysis by FAA’s Office of Civil Rights 

of data it had collected on the number and types of formal EEO 

complaints showed that while such complaints increased in the years 

immediately following the implementation of the Model Work Environment 

in 1996, they began to decline 3 years later. As figure 10 shows, the 

number of EEO complaints increased from 412 in 1996 to 635 in 1998 and 

then declined to 485 in 2001.



Figure 10: Number of Formal EEO Complaints by Year:



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[End of figure] - graphic text:



Note: The most frequently filed complaints between 1997 and 2001 were 

for promotion/nonselection and nonsexual harassment, followed by 

complaints about terms or conditions of employment, assignment of 

duties, and training.



About three-quarters of the FAA managers and employees we interviewed 

(134 of 176) agreed or strongly agreed that they understood the goals 

of the Model Work Environment. These goals include reflecting diversity 

and eliminating discrimination and harassment in the workplace, which 

are common causes of equal employment opportunity complaints. While 

some employees cited positive effects of the program, other employees 

were skeptical of its impact. Figure 11 illustrates FAA employees’ 

divergent views on the Model Work Environment.



Figure 11: FAA Employees’ Views on the Model Work Environment:



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[End of figure] - graphic text:



Note: Quotations are from an FAA employee in headquarters and an air 

traffic employee in a regional office, respectively.



Even though the decrease in the number of EEO complaints cannot be 

directly linked to the Model Work Environment initiative, the 

availability of data and analysis on EEO complaints could provide one 

objective basis for FAA to discuss the effects and assess the efficacy 

of this policy and address the concerns of those employees who view its 

impact less positively.



FAA Has Not Fully Incorporated Elements Needed for Effective Human 

Capital Management:



FAA’s lack of empirical data on the reform effort’s effects is one 

indication that it has not fully incorporated elements that we and 

others have identified as important to effective human capital 

management into its reform effort. Systems to gather and analyze 

relevant data provide a basis against which performance goals and 

measures can be applied. FAA human resource management officials said 

that the agency should have spent more time to develop baseline data 

and performance measures before implementing the broad range of reforms 

but that establishing these elements was a complex and difficult task. 

They said FAA was under significant pressure to rapidly implement 

reforms and that one impact of FAA’s incremental approach to 

implementing the reforms was that baseline measures tended to change as 

more people were brought under the reformed systems. FAA also has not 

gone far enough in establishing linkage between reform goals and 

program goals of the organization, another element we have identified 

as important to effective human capital management. We found that the 

lack of these elements has been pointed out repeatedly in evaluations 

of FAA’s human capital reform effort, but FAA has not developed 

specific steps and time frames by which these elements will be 

established and used for evaluation. Incorporation of these elements 

could also help FAA build accountability into its human capital 

management.



FAA’s Human Capital Reform Effort Lacks Needed Data Collection and 

Analysis, Performance Goals and Measures, and Linkage of Reform Goals 

to Program Goals of the Organization:



The lack of baseline and comparative data for analysis and the lack of 

performance goals and measures has made it difficult to objectively 

evaluate the effects or success of FAA’s reform effort. Systems to 

gather and analyze relevant data provide a basis against which 

performance goals and measures can be applied. FAA human resource 

management officials agreed that the agency should have spent more time 

to develop baseline data and performance measures before implementing 

the broad range of reforms but said that establishing measures and 

goals and reaching consensus on their use was a complex and difficult 

task with which all federal agencies struggle. They said the agency was 

under significant pressure to rapidly implement reforms, and that one 

impact of FAA’s incremental approach to implementing the reforms was 

that baseline measures tended to change as more people were brought 

under the reformed systems.



Human resource management officials also said that, while FAA has not 

systematically collected data and analyzed results to identify the 

benefits of all of the reform initiatives, the Office of Human Resource 

Management has taken a number of steps since 1998 to increase 

evaluation and measurement of some human resource management activities 

and outputs. Actions they cited (in addition to the previously 

discussed evaluations of compensation implementation) included meeting 

with consultants, human resource managers and intergovernmental groups 

and providing briefings to FAA management. While we were in the final 

stages of our review, they prepared, in response to our request, an 

informal report[Footnote 52] that described the type of measures they 

were planning to, or had recently begun to apply as part of a “Balanced 

Scorecard” approach[Footnote 53] to assessing human resource management 

activities. The measures in the scorecard approach are based on 

existing sources of data--customer surveys conducted by the Department 

of Transportation and FAA employee attitude surveys--as well as new 

data related to the hiring process, such as the “Time to Fill” (a 

vacancy) questionnaire, results from employment selection feedback 

questionnaires, a survey for new recruits and, since December 1999, a 

separation survey for employees leaving the agency. Human resource 

officials said they had been “strategically refining” the employee 

attitude survey since 1995 to address key human capital issues, such as 

clarity of performance expectations and workforce planning.



Our work on strategic human capital management in the federal 

government has found that many federal agencies have difficulties in 

defining goals and measures and developing and using performance 

information to evaluate the effectiveness of human capital management 

efforts but that high-performing organizations do so. In cases where 

evaluations show that sufficient progress is not being made, high-

performing organizations use data to identify opportunities for 

improvement. Similarly, the National Association of Public 

Administration (NAPA) has reported the need for performance data, 

goals, and evaluation to determine progress, make midcourse 

corrections, and assign accountability for achieving the desired 

outcomes in federal human capital management efforts.[Footnote 54] NAPA 

reported that, in the absence of such systematic evaluation 

information, the human capital management process will be driven by 

anecdotal information that may, or may not, reflect the condition of 

human capital management in the organization.



Elements we have identified[Footnote 55] as facilitating the success of 

improvement initiatives include establishing:



* clear goals and objectives for the improvement initiative,



* concrete management improvement steps that will be taken,



* key milestones that will be used to track the implementation status, 

and:



* cost and performance data that will be used to gauge overall 

progress.



In addition to the lack of performance data, the performance goals and 

measures for personnel reform in FAA’s human resource management and 

strategic mission plans are qualitative and do not consistently lend 

themselves to measurement or assessment, as they are not specific, 

measurable, and time-based. For example, the goal related to reform in 

FAA’s 1999 human resource management strategic plan is to “ensure that 

FAA has the right people doing the right work at the right time at the 

right cost” and has the following measures associated with it:



* increased flexibility to pay competitive salaries;



* increased ability to attract and retain high performers;



* increased managerial flexibility to assign, locate, and manage the 

performance of employees more effectively; and:



* decreased hire cycle time.



This goal and its associated measures do not lend themselves to 

specific, quantitative, and time-based evaluation. For example, while 

“decrease hire cycle time” implies that hire cycle time will be 

measured as part of evaluating the achievement of this goal, it does 

not establish a quantitative basis for assessment or specify a period 

of assessment. A more specific, quantitative, and time-based measure 

might be to “decrease median or average hire cycle time by September 

2003 by X percent (from median or average cycle time for fiscal year 

2002) for Y percent of all new hires.”:



We reported on FAA’s weaknesses in developing and using performance 

information in our report on the results of governmentwide surveys of 

performance management issues in May 2001.[Footnote 56] In that report, 

we found that FAA managers we surveyed reported they did not 

consistently use performance measures or data and that FAA was worse 

than the rest of the federal government on multiple aspects of 

performance measurement and the use of performance information. For 

example, we found that the agency was statistically significantly lower 

than the rest of the government in the percentage of managers who 

reported that they had outcome, customer service, or quality 

performance measures; and in the percentage of managers who reported 

that they used performance information to set program priorities, 

allocate resources, adopt new approaches, or coordinate program 

efforts.



At the time of our review, human resource management officials were 

still in the process of developing baseline data, performance goals and 

measures and were still working to identify potential linkages between 

its human capital management reforms and program goals of the 

organization. The types of data and measures proposed by human resource 

management officials are comparable to those that have been 

historically suggested--many of them since FAA initiated development of 

its personnel reform in 1995--and their implementation is an important 

effort. However, the balanced scorecard measurement approach proposed 

by human resource management officials focuses primarily on the work 

environment and processes within the Office of Human Resource 

Management and the hiring process rather than on the many other human 

capital management reform initiatives being implemented across the 

agency. According to FAA human resource management officials, the 

office had been working for more than a year to expand the scope of the 

scorecard to incorporate measures with wider implications for all of 

FAA in response to discussions with human resource managers and based 

on information from FAA customers and employees. Table 1 provides an 

overview of the balanced scorecard measures proposed by the human 

resource management office, highlighting those that focus on the 

activities and output of the Office of Human Resource Management. An 

expanded overview of these performance measures that includes areas of 

measurement and proposed data sources is provided in appendix V.



Table 1: Overview of Human Resource Management Office’s Balanced 

Scorecard Performance Measures:



Measurement perspectives: Customer; Performance measures: Human 

Resource Management Office service excellence; Performance measures: 

Human Resource Management Office consultation and expertise valued; 

Performance measures: Human Resource Management Office innovation and 

leadership.



Measurement perspectives: Performance; Performance measures: Human 

Resource Management Office results meet goals; Performance measures: 

Efficient use Of Human Resource Management Office resources; 

Performance measures: Improved practices within Lines of Business.



Measurement perspectives: Internal processes; Performance measures: 

Consistent human resource management policy interpretation; 

Performance measures: Effective labor-management relationships; 

Performance measures: Attract and retain high caliber employees.



Measurement perspectives: Human Resource Management Office employee; 

Performance measures: Empowered Human Resource Management Office 

employees; Performance measures: Satisfied Human Resource Management 

Office employees; Performance measures: Rewarding Human Resource 

Management Office work environment.



Measurement perspectives: Learning and growth; Performance measures: 

Capitalize on Human Resource Management Office talent; Performance 

measures: Increase Human Resource Management Office capacity to 

improve; Performance measures: Leverage Human Resource Management 

Office data/information.



[End of table]



Source: FAA.



Note: Shaded areas indicate measures focused internally on the Office 

of Human Resource Management.



Clearly linking an agency’s overall human capital management strategy 

to its program goals is another element we have identified as key to 

effective human capital management. In a 1997 review of FAA’s personnel 

reform, the Volpe National Transportation Systems Center highlighted 

this issue of linkage, as shown in figure 12.[Footnote 57]



Figure 12: Volpe Center’s Views on Importance of Linkage:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



While FAA has taken some steps to link its human capital reform 

initiatives to its program goals, these steps do not go far enough to 

help the agency measure the reform’s success. Specifically, FAA 

incorporated various aspects of personnel reform into its 1999 

strategic human resource management plan,[Footnote 58] which stated 

that performance measurement was to focus on attaining organization 

goals but did not establish the measures with which to do so. 

Similarly, FAA’s 2001 strategic plan, prepared under the Government 

Results and Performance Act, includes a goal for the agency to 

“fundamentally change the way it operates by implementing personnel 

reform” but does not explicitly link this goal for personnel reform to 

organizational program goals of aviation safety and system efficiency. 

Human resource management officials said that organizational and 

individual incentive goals established under the compensation system 

explicitly linked individual performance to agency goals including 

safety and system efficiency and that the standards for performance 

under FAA’s new performance management system directly reflect agency 

and organizational programmatic goals. Nonetheless, linkage between 

FAA’s personnel reform goals and the agency’s programmatic goals 

continues to be weakened by a lack of specific, quantitative, and time-

based measures and goals.



FAA’s lack of relevant data, analysis, and performance goals and 

measures has been repeatedly articulated since 1995 by other internal 

and external reviews of the reform effort. While these reviews have 

called for FAA to incorporate these elements into its reform effort, 

and several recent studies have also highlighted the issue of linkage, 

FAA has not established and carried out a plan with specific steps and 

time frames for doing so. A chronology of these studies is provided in 

table 2.



Table 2: Chronology of Internal and External Evaluations of FAA’s 

Personnel Reform:



Date: October 1995; Evaluation: Exempting FAA From Procurement and 

Personnel Rules, U.S. General Accounting Office; Result: In reporting 

on FAA’s request for legislative flexibilities, GAO emphasized the 

importance of establishing goals prior to the application of the new 

authority, noting that an evaluation of FAA’s efforts after some 

experience had been obtained would be important for determining the 

success of the effort and its governmentwide applicability..



Date: December 1995; Evaluation: Best Practices in HRM: Briefing to FAA 

Personnel Reform Task Forces, FAA; Result: An evaluation briefing 

prepared for FAA’s personnel reform task forces identified measurement 

of human resource practices and processes as an essential element for 

creating a strategic context for personnel reform..



Date: March 1996; Evaluation: Proposed Personnel Reform Evaluation 

Strategy, FAA; Result: This report identified evaluation measures for 

FAA’s personnel reform and strategies for engaging stakeholders in 

measuring the results of reform initiatives..



Date: April 1997; Evaluation: FAA Personnel Reform Evaluability 

Assessment, Volpe National Transportation Systems Center; Result: The 

Center conducted an assessment to evaluate potential performance 

indicators for measuring the effectiveness of reform efforts and 

concluded that reform principles were not stated in terms of tangible 

outcomes that could be easily measurable and there was no clear sense 

of priority among them..



Date: September 1997; Evaluation: The FAA Human Resource Management 

System Evaluation Plan: Interim Report, Human Resources Research 

Organization; Result: This study linked the reform initiatives with 

proposed indicators of reform implementation, and potential 

intermediate and final outcomes to facilitate program evaluation..



Date: January 1998; Evaluation: FAA Personnel Reform: Implementation 

Status Report, Human Resources Research Organization; Result: This 

report identified a lack of baseline set of data and concluded “there 

has been no effort to establish systematic measurement systems over the 

remaining course of personnel reform implementation. Without baseline 

data and the ability to measure current status it is difficult to 

assess whether or not objectives are being met.”.



Date: September 1998; Evaluation: Personnel Reform: Recent Actions 

Represent Progress But Further Effort Is Needed to Achieve 

Comprehensive Change, Department of Transportation Office of Inspector 

General; Result: This report concluded that FAA had not identified the 

specific results it expects to achieve from these programs or 

established outcome goals and measures to accurately demonstrate that 

its personnel reform initiatives were effective in resolving the 

original problems that led to reform..



Date: September 1998; Evaluation: The FAA Personnel Reform Evaluation 

Plan, Human Resources Research Organization; Result: This report 

presented a general framework for evaluation of personnel reform 

initiatives and concluded, “…it is critical for the agency to develop 

and implement evaluation and measurement systems to assess the results 

and success of these large-scale HRM [human resource management] change 

efforts.”.



Date: April 1999; Evaluation: FAA Manager Satisfaction with Personnel 

Reform Implementation and HR Customer Service, Human Resources Research 

Organization; Result: This study recommended that FAA develop a 

strategy for personnel reform to identify long-term objectives and 

outcomes, address how reforms would support accomplishment of mission 

goals, assess the current status of implementation, develop performance 

measures, and develop a comprehensive schedule for implementing reform 

initiatives..



Date: July 1999; Evaluation: Personnel Reform Evaluation Database: 

Baseline Report, FAA; Result: This report provides a framework for the 

development of a database to evaluate personnel reform measures..



Date: August 1999; Evaluation: Personnel Reform in the Federal Aviation 

Administration: Three Year Status Report, National Academy of Public 

Administration; Result: The Academy concluded that the lack of baseline 

data and specific measures to assess the effectiveness of personnel 

reform and establish a basis for continuous improvement was a major 

issue for FAA that “must be resolved if personnel reform is to achieve 

its full potential.”.



Date: November 1999; Evaluation: A Communication Strategy for Improved 

HRM Evaluation and Measurement, FAA; Result: This report provides a 

framework for encouraging the evaluation and measurement of human 

resource management programs and services and cultivating, 

understanding, and using evaluation tools, data, reports and 

recommendations to improve the quality of human resources products and 

services..



Date: January 2002; Evaluation: Human Resource Performance Measures for 

the FAA, Booz-Allen-Hamilton; Result: This briefing recommends 

expanding the focus of the Office of Human Resource Management’s 

balanced scorecard to additional measures dealing with attracting and 

retaining a talented workforce, as well as linking the outputs/outcomes 

of human resource initiatives to the agency’s mission goals..



Date: September 2002; Evaluation: Federal Aviation Administration: 

Five-Year Review of Personnel Reform and Strategies for the Future, 

Deloitte & Touche, LLP; Result: This most recent study of the agency’s 

progress in personnel reform found that the reform effort had suffered 

from a shortage of baseline data and metrics to measure the impact of 

various initiatives on agency operation and strategic objectives. 

Accordingly, the report recommended that the Office of Human Resource 

Management expand the collection of hard data and the use of objective 

metrics to evaluate the effectiveness of personnel reform initiatives..



[End of table]



Source: GAO.



Several of these studies also attributed problems related to a lack of 

ownership for the reform effort or a lack of accountability for 

implementation or results. For example, in 1999, the National Academy 

of:



:



Public Administration identified the lack of ownership for personnel 

reform as a challenge that must be resolved.[Footnote 59] (See fig. 

13.):



Figure 13: Study’s Views on FAA’s Implementation of Personnel Reform:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



As shown in figure 14, a 1998 departmental review found that FAA had 

not clearly established accountability for implementation of the reform 

initiatives.[Footnote 60]



Figure 14: Inspector General’s Views on FAA’s Implementation of 

Personnel Reform:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



According to the most recent assessment of the status of FAA’s 

personnel reform, published by a consultant in September 2002 and shown 

in figure 15, a lack of ownership and inconsistent support for 

personnel reform by FAA’s executive management team has impaired reform 

implementation efforts.[Footnote 61]



Figure 15: Consultant’s Views on FAA’s Implementation of Personnel 

Reform:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



Our work on effective human capital management at federal agencies has 

found that building accountability into an agency’s human capital 

approach is important to the effective use of human capital 

flexibilities. Furthermore, we have found that in high performing 

organizations, managers are held accountable for achieving strategic 

goals, and clearly defined performance expectations are in place to 

hold employees and teams at all levels accountable. Establishing 

systems for gathering performance data and incorporating specific, 

time-based performance measures and goals that are linked to the 

agency’s program goals into the reform effort would improve the 

agency’s ability to set more meaningful strategic goals for its human 

capital reform effort and more clearly defined performance expectations 

for its human capital management. Together, this would help the agency 

build accountability into the reform effort and its overall human 

capital management approach.



Conclusions:



Congress granted FAA flexibilities in its human capital management so 

that the agency could more effectively manage its workforce and achieve 

its mission. Yet, more than 7 years after the agency received broad 

exemptions from laws governing federal civilian personnel management, 

it is not clear whether and to what extent these flexibilities have 

helped FAA to do so. It is clear that FAA has faced significant 

challenges in implementing its human capital reform initiatives and 

evaluating the success of its effort. Challenges, including 

implementing reform initiatives throughout its workforce with a wide 

range of skills and negotiating agreements with employee unions, 

reflect difficulties that may be faced by other federal agencies that 

seek to implement human capital management flexibilities.



FAA is not able to determine the effectiveness of its human capital 

reform initiatives because it has not incorporated key elements of 

effective human capital management into its effort thus far. While FAA 

has established preliminary linkages between its reform goals and the 

agency’s program goals, the lack of explicit linkage will make it 

difficult to assess the effects of the reform initiatives on the 

program goals of the organization even after data, measurable goals, 

and performance measures for human capital management efforts are 

established. FAA has acknowledged the importance of establishing these 

elements. It has repeatedly said that it is working to collect and 

analyze data and develop performance goals and measures, but it has not 

completed these critical tasks, nor has it established specific steps 

and time frames by which it will do so. As FAA moves forward, a more 

strategic approach to its reform effort would allow it to better 

evaluate the effects of its reform initiatives, use the evaluations as 

a basis for any strategic improvements to its human capital management 

approach, and hold agency leadership accountable for the results of its 

human capital management efforts. Doing so would also enable the agency 

to share its results with other federal agencies and Congress.



Recommendations:



In order to acquire the information needed to make more informed 

strategic human capital decisions and better ensure that FAA’s 

personnel reforms achieve their intended results in a timely fashion, 

we recommend that the Secretary of Transportation direct the FAA 

Administrator to:



* develop empirical data and establish specific, measurable, time-based 

goals and performance measures related to these goals; and use them to 

evaluate the effects of the reforms on the agency’s human capital 

management, programs, and mission so that the agency can make any 

needed improvements. Developing these evaluation tools is particularly 

urgent for those initiatives, such as FAA’s new compensation system for 

air traffic employees, for which possible negative effects have been 

raised by employees; and FAA’s new performance management system.



* define and describe explicit linkages between human capital 

management reform initiatives and program goals of the organization.



* establish time frames by which data will be collected and analyzed 

and by which goals, performance measures, and explicit linkage will be 

established and used to evaluate the success of the reform initiatives 

and hold agency leadership accountable for the results of its human 

capital management efforts.



Agency Comments and Our Evaluation:



We provided a draft of this report to the Department of Transportation 

for its review and met with Department of Transportation officials, 

including FAA’s Assistant Administrator for Human Resource Management, 

to obtain their comments. The department officials generally agreed 

with the report’s recommendations and indicated that the findings 

presented in the audit report would be useful as FAA moves forward with 

its human capital reforms. They also noted issues in three areas.



First, these officials emphasized that implementing a new human capital 

system within an existing workforce presented FAA with a significant 

challenge, given the size of FAA’s workforce, the large unionized 

population, and the variety of occupations and functions within the 

agency. Second, while these officials agreed that establishing more 

definitive measures and baseline data, as identified in our 

recommendations, are important in determining the effectiveness of the 

new human capital programs, they stated that they have been making 

significant progress in developing those measures.



Third, in responding to our concern that FAA is not able to determine 

the effectiveness of its human capital reform initiatives because it 

has not incorporated key elements of effective human capital management 

into its effort, these officials told us that FAA used the results of 

its pilot testing and phased implementation approach to modify systems 

to ensure effectiveness before full implementation and that subsequent 

assessments were conducted to determine whether the programs were 

accomplishing the intended goals. They said that FAA already has 

substantial information to indicate that its new programs and 

initiatives are on the right track and should be effective in meeting 

the reform effort’s intent. As examples, they referred to reviews by 

NAPA and the consulting firm Deloitte & Touche, which they said had 

characterized FAA’s human capital reforms as “state-of-the-art.” The 

officials stated that FAA’s design process had been characterized in 

the NAPA review as yielding high-quality policies, and FAA’s reform 

effort had been characterized in the NAPA review as heading in the 

right direction and as “a change management issue that is unparalleled 

in the federal sector.” They further stated that Deloitte & Touche’s 

review had found that the guiding principles and objectives of FAA’s 

personnel reform were sound, and that some programs have already been 

largely successful, such as streamlined recruitment and staffing 

processes. Notwithstanding the characterizations in these assessments, 

both NAPA and Deloitte & Touche raised concerns about issues we found 

in our review, particularly FAA’s lack of baseline data and specific 

performance measures to assess the effectiveness of its reform effort 

and establish a basis for continuous improvement.



Department officials also said that FAA’s new human capital system is 

consistent with the President’s Management Agenda and the 

Administration’s Human Capital Plan, and that other federal officials 

have touted the types of programs FAA developed and implemented as the 

wave of the future for the rest of the federal government. FAA 

emphasized that its agency is unique among federal agencies in 

implementing a performance-based and market-based pay system applicable 

to both nonunion and union employees, which clearly links annual pay 

adjustments to key agency programs and to individual employee 

performance and contributions. We agree that other federal agencies 

considering human capital reform may find FAA’s programs and 

experiences useful to consider, as FAA was granted human capital 

flexibilities in 1995 and has been working since to implement its human 

capital reform effort. In fact, we feel that this increases the 

importance of FAA’s efforts to effectively evaluate its reform. 

However, based on our prior work on human capital management, we found 

in our review that FAA’s efforts to link its human capital reform 

initiatives to its program goals do not go far enough to help the 

agency measure the reform’s success and that linkage between FAA’s 

personnel reform goals and the agency’s programmatic goals continues to 

be weakened by a lack of specific, quantitative, and time-based 

measures and goals.



FAA also provided technical clarifications, which we included in the 

report where appropriate.



We are sending copies of this report to the Administrator, Federal 

Aviation Administration. We also will make copies available to others 

upon request. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov.



If you or your staff have any questions about this report, please call 

me at (202) 512-3650. Key contacts and major contributors to this 

report are listed in appendix VII.



Signed by Gerald L. Dillingham:



Gerald L. Dillingham, Ph.D.

Director, Physical Infrastructure Issues:



[End of section]



Appendixes:



Appendix I: Scope and Methodology:



To determine the human capital changes that FAA initiated after being 

granted broad flexibilities in 1995 and the extent to which these 

reform initiatives required exemptions from title 5, we reviewed 

federal personnel management requirements under title 5, agency 

documents identifying personnel reform initiatives, and reports by OPM 

on personnel management flexibilities already available under title 5. 

We also discussed the changes with officials from FAA’s Office of the 

Assistant Administrator for Human Resource Management and OPM.



To determine the status of implementation of FAA’s personnel reform and 

factors that have affected reform implementation, we collected and 

analyzed internal and external evaluations--including those conducted 

by the Department of Transportation’s Office of Inspector General and 

NAPA--of different aspects of FAA’s personnel reform and the available 

data on the results. We also discussed the status of, and barriers to, 

implementation of personnel reform initiatives with FAA human resource 

management officials and representatives from the lines of business.



To determine the views of FAA managers and employees on the effects of 

FAA’s personnel reform initiatives we conducted a series of structured 

interviews with 176 randomly selected FAA managers and employees. Our 

structured interview included questions about how the agency manages 

its employees, compensation and performance management, and labor and 

employee relations. We discussed the design of these questions with 

officials from FAA and with representatives from FAA’s five largest 

unions--the National Air Traffic Controllers Association (about 19,500 

members), the Professional Airways Systems Specialists (about 11,600 

members), the National Association of Air Traffic Specialists (about 

2,300 members), the American Federation of State, County and Municipal 

Employees (about 2,000 members), and the American Federation of 

Government Employees (about 1,500 members). We then pre-tested the 

structured interview with managers and employees in FAA’s Southern 

Region and made appropriate revisions.



To maximize our chances of obtaining the views of managers and 

employees across the different segments of FAA’s workforce, we applied 

a judgmental stratification to our random sample (therefore, it may not 

be representative of the actual composition of FAA’s workforce): 25 

percent managers, and 75 percent employees; and 60 percent Air Traffic 

Services/air traffic control staff, 40 percent from the rest of FAA. In 

addition, for non-headquarters respondents, we selected 70 percent of 

our respondents from field facilities and 30 percent from regional 

offices. Our respondents were randomly selected from electronic lists 

of names provided by FAA.



We conducted our structured interviews at FAA headquarters in 

Washington, D.C.; FAA’s Mike Monroney Aeronautical Center in Oklahoma 

City, Oklahoma; and field facilities and regional offices in six of 

FAA’s nine geographic regions, including offices in the immediate 

vicinity of Anchorage, Alaska; Atlanta, Georgia; Chicago, Illinois; 

Dallas, Texas; Los Angeles, California; and New York City, New York. 

Field facilities we visited included air traffic control towers, en 

route centers, automated flight service stations, terminal radar 

approach control centers, airports district offices, and flight 

standards district offices. A total of 176 FAA staff participated in 

our survey throughout the months of May, June, July, and August 2002. 

The information obtained through this survey pertains to only these 176 

respondents and cannot be generalized to any other population. However, 

because we selected interview respondents at random, we have increased 

the chances of capturing the breadth of opinions across the agency. A 

copy of our structured interview and the summary results for our close-

ended questions is provided in appendix II. To augment the views and 

opinions collected from the structured interviews, we also obtained the 

views of FAA senior managers or representatives of all five lines of 

business and representatives of employees’ associations.



To determine the extent to which FAA management and employees’ views 

were supported by data, we examined the results from FAA’s employee 

attitude surveys conducted between 1997 and 2000, as well as other 

internal surveys of executives, managers, and supervisors related to 

various aspects of FAA’s personnel reform effort. In addition, we 

collected available data from FAA’s Office of Human Resource Management 

and Office of Civil Rights.



To determine how FAA’s experiences compared with our findings from our 

human capital management work at other agencies, we reviewed our human 

capital management audit work that focused on federal agencies’ efforts 

to implement improvement initiatives and human capital flexibilities, 

as well as work conducted by other organizations involved in assessing 

federal agencies’ reform efforts including OPM and NAPA, and we 

compared our findings on FAA’s experiences with these findings.



We conducted our work in accordance with generally accepted government 

auditing standards from November 2001 through October 2002.



[End of section]



Appendix II: Structured Interview Form and Selected Results:



[See PDF for image]



[End of figure]



Appendix III: Elements for Effective Human Capital Management:



In March 2002, we issued a model for strategic human capital management 

that incorporates lessons learned in our reviews of other agencies’ 

human capital management practices, as well as our own 

experiences.[Footnote 62] The model identifies eight critical success 

factors and highlights some of the steps agencies can take to make 

progress in managing human capital strategically. These eight factors, 

shown in figure 16, are organized in pairs to correspond with the four 

governmentwide high-risk human capital challenges that our work has 

shown are undermining agency effectiveness.



Figure 16: Eight Critical Success Factors Corresponding with the Four 

High-Risk Human Capital Challenges That Can Help Agencies Manage Human 

Capital Strategically:



[See PDF for image]



[End of figure]



In November 2002, we issued a report that identified six key practices 

for federal agencies’ effective use of human capital flexibilities that 

incorporate the concepts and critical factors of our model.[Footnote 

63] Based on our interviews with human resource management directors 

from across the federal government, we identified the following key 

practices that agencies should implement to use human capital 

flexibilities effectively, as shown in Figure 17.



Figure 17: Six Key Practices for Effective Use of Human Capital 

Flexibilities:



[See PDF for image]



[End of figure]



[End of section]



Appendix IV: Core Compensation Pay Bands and Grade Conversion for 2002:



[See PDF for image] - graphic text:



[End of figure] - graphic text:



Note: Does not include locality pay.



Note: Blank cells indicate no old grade equivalent to new pay band for 

manager levels.



[End of section]



Appendix V: FAA Human Resource Management Office’s Balanced Scorecard 

Performance Measures:



Measurement perspectives: Customer; Performance measures:  Areas of 

measurement: (proposed data sources): Human Resource Management Office 

service excellence; ; Customer perceptions regarding human resource 

management office service quality and timeliness; (employee surveys); 

Performance measures: Human Resource Management Office consultation and 

expertise valued; ; Customer perceptions regarding human resource 

management office consultation & staff expertise; (employee surveys); 

Performance measures: Human Resource Management Office innovation and 

leadership; Customer perceptions regarding personnel reform; Human 

resource management office & line of business human capital management 

efforts; (employee surveys).



Measurement perspectives: Performance; Performance measures:  Areas of 

measurement: (proposed data sources): Human Resource Management Office 

results meet goals; ; Percentage of human resource management office 

projects completed on time; ; (human resources office reporting 

system); Performance measures: Efficient use of Human Resource 

Management Office resources; ; Human resource management office 

spending; (budget & accounting data); Human resource management office 

labor distribution; (cost accounting system); Performance measures: 

Improved practices within Lines of Business; ; Knowledge transfer; 

Improved line of business processes & practices; Meet unique needs; ; 

(employee surveys).



Measurement perspectives: Internal processes; Performance measures: 

 Areas of measurement: (proposed data sources): Consistent human 

resource management policy interpretation; ; ; ; (Personnel management 

evaluations, human resource management office policy training 

evaluations); Performance measures: Effective Labor-Management 

Relationships; ; Consolidation in bargaining units; Partnership Council 

meeting attendance; ; (data on grievances and unauthorized labor 

practices); Performance measures: Attract and retain high caliber 

employees; ; Timeliness of automated/nonautomated selections; 

Percentage of voluntary & involuntary attrition; ; (Selecting official 

interview data).



Measurement perspectives: Human Resource Management Office employee; 

Performance measures:  Areas of measurement: (proposed data sources): 

Empowered Human Resource Management Office employees; ; Human Resource 

Management Office employee perceptions of empowerment; ; (employee 

surveys); Performance measures: Satisfied Human Resource Office 

Management employees; Human Resource Management Office employee 

perceptions of job satisfaction and perceptions regarding commitment to 

service; ; (employee surveys); Performance measures: Rewarding Human 

Resource Management Office work environment; Human Resource Management 

Office employee perceptions regarding communication; Performance 

rewarded; ; (employee surveys).



Measurement perspectives: Learning and growth; Performance measures: 

 Areas of measurement: (proposed data sources): Capitalize on Human 

Resource Management; Office talent; Identify and close skill gaps; 

(skills/training assessment for human resources office); Implement 

Human Resource Management Office workforce planning; (human resource 

management office reporting system); Performance measures: Increase 

Human Resource Management; Office capacity to improve; Increase in 

professional credentials; (skills/training assessment for Human 

Resource Management Office); Percentage of personnel, compensation, and 

benefits funding spent on training; (budget & accounting data); 

Performance measures: Leverage Human Resource Management Office data/

information; Availability and quality of data; (human resource 

management office information system audit); Timeliness and 

responsiveness to internal Human Resource Management Office requests; 

(employee survey).



[End of table]



Source: FAA.



Note: Shaded areas indicate measures focused internally on the Office 

of Human Resource Management.



[End of section]



Appendix VI: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Gerald L. Dillingham, Ph.D. (202) 512-3650

Christopher A. Keisling (404) 679-1917:



Staff Acknowledgments:



In addition to those individuals named above, William Doherty, Michele 

Fejfar, David Hooper, Jason Schwartz, E. Jerry Seigler, Margaret Skiba, 

Tina Smith, Alwynne Wilbur, and Kristy Williams made key contributions 

to this report.



FOOTNOTES



[1] U.S. General Accounting Office, Managing for Results: Using 

Strategic Human Capital Management to Drive Transformational Change, 

GAO-02-940T (Washington, D.C.: July 15, 2002).



[2] FAA is composed of five separate organizations or lines of 

business: Air Traffic Services, Research and Acquisitions, Regulation 

and Certification, Airports, and Commercial Space Transportation.



[3] U.S. General Accounting Office, A Model of Strategic Human Capital 

Management, GAO-02-373SP (Washington, D.C., March 15, 2002); U.S. 

General Accounting Office, Human Capital: Effective Use of 

Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-

02 (Washington, D.C.: Dec. 6, 2002).



[4] Federal Aviation Administration, Background Paper: Personnel 

Management Reform for the Federal Aviation Administration (Washington, 

D.C.: August 1995).



[5] Unless explicitly exempted by law, all federal agencies must follow 

federal personnel rules and regulations under title 5 U.S.C., including 

rules governing how agencies (1) pay and reward employees; (2) hire, 

train, and transfer personnel; and (3) conduct labor and employee 

affairs. 



[6] U.S. General Accounting Office, Exempting FAA From Procurement and 

Personnel Rules, GAO/RCED-96-27R (Washington, D.C.: Oct. 27, 1995).



[7] P. L. 104-50, Fiscal Year 1996 Department of Transportation 

Appropriations Act.



[8] Congress did not exempt FAA from provisions of title 5 pertaining 

to veterans’ preference; antidiscrimination; federal retirement, 

unemployment and insurance coverage; and limitations on the right to 

strike.



[9] P. L. 104-122, Further Continuing Appropriations, Fiscal Year 1996, 

March 29, 1996.



[10] U.S. General Accounting Office, High-Risk Series: An Update, GAO-

01-263 (Washington, D.C.: January 2001).



[11] U.S. General Accounting Office, Performance and Accountability 

Series--Major Management Challenges and Program Risks: A Governmentwide 

Perspective, GAO-01-241 (Washington, D.C.: January 2001).



[12] GAO-02-373SP.



[13] GAO-03-02.



[14] U.S. General Accounting Office, Aviation Rulemaking: Further 

Reform Is Needed to Address Long-standing Problems, GAO-01-821 

(Washington, D.C.: July 9, 2001). 



[15] U.S. General Accounting Office, Air Traffic Control: FAA Enhanced 

the Controller-In-Charge Program, but More Comprehensive Evaluation Is 

Needed, GAO-02-55 (Washington, D.C.: Oct. 31, 2001).



[16] U.S. General Accounting Office, Air Traffic Control: FAA Needs to 

Better Prepare for Impending Wave of Controller Attrition, GAO-02-591 

(Washington, D.C.: June 14, 2002).



[17] U.S. General Accounting Office, Air Traffic Control: Impact of 

Revised Personnel Relocation Policies Is Uncertain, GAO-03-141 

(Washington, D.C.: Oct. 31, 2002).



[18] The GS pay system, as defined in title 5 U.S.C. 5332, consists of 

15 grades and 10 steps within each grade--each grade representing a 

salary range and each step indicating the level of pay an employee 

receives in that salary range. Over time, an employee’s pay increases 

as the employee progresses through the steps within the grade or is 

promoted. An agency must determine that an employee’s performance is at 

least acceptable (i.e., “fully successful”) before the employee is 

granted the within grade step increase. 



[19] Office of Personnel Management, A Fresh Start for Federal Pay: The 

Case for Modernization (Washington D.C.: April 2002).



[20] Under core compensation, employees that do not meet minimum 

requirements do not receive either of the permanent pay increases.



[21] Cost of living allowances are base pay differentials paid to 

employees working in locations outside the contiguous United States 

that have substantially different local economies. Federal pay rules 

provide locality pay for approximately 30 metropolitan areas and one 

area covering the “rest of the United States.”



[22] 5 U.S.C. 4302(b) and 5 C.F.R. 430.201.



[23] Title 5 requires the development and submission of a summary 

rating; since FAA’s new system does not include a summary rating, the 

agency’s exemption from title 5 enabled FAA management to adopt the new 

system.



[24] 5 U.S.C. 3392, 3393.



[25] 5 U.S.C. 4107.



[26] FAA uses on-the-spot hiring for specific occupations designated as 

hard-to-fill (such as engineers at certain levels) and for special 

appointing authorities such as outstanding scholar and welfare-to-work. 





[27] According to the Accompanying Report to the National Performance 

Review, HRM01: Create a Flexible and Responsive Hiring System Office of 

the Vice President, (Washington, D.C.: 1993): the federal hiring 

“system is overly constrained by statute and regulation; over 300 

appointing authorities provide little useful management information and 

require interpretation by personnel specialists.” 



[28] While FAA was granted an exemption from title 5 training 

requirements by Congress, the President also has the authority to 

exempt federal agencies from title 5 training requirements (5 U.S.C. 

4102(b)).



[29] 5 U.S.C. 5724 and 5724a.



[30] For a more detailed discussion of FAA’s use of PCS benefits, see 

GAO-03-141.



[31] Under title 5 rules, federal agencies may elect to pay for the 

expenses of transportation of immediate family and of household goods 

and personal effects to and from the assignment location for a PCS move 

when it is in the interest of the federal government.



[32] 5 C.F.R. 251.



[33] OPM has recognized the need to reduce costly and time-consuming 

formal complaints and grievances and encourages federal agencies to 

resolve disputes at the lowest possible level through a variety of 

alternative dispute resolution methods (60 Federal Register 47039, 

September 11, 1995).



[34] Nine different unions represent various employee segments at FAA. 

Bargaining units within each union represent a specific employee 

segment based on profession or technical area. For example, NATCA has a 

bargaining unit called NATCA-AT for air traffic controllers, as well as 

five separate bargaining units collectively known as NATCA-AF, which 

represents engineers and architects that manage the maintenance of 

equipment at air traffic control facilities and perform other air 

traffic-related operations. In total, there are 48 different bargaining 

units at FAA.



[35] The research and acquisition organization and the office of the 

chief information officer participated in a pilot of the complete Core 

Compensation Plan, which included assessment and payout under the 

organizational and individual performance-based pay elements.



[36] Air traffic control pay bands are based on the amount of air 

traffic and complexity of airspace controlled by its field facilities, 

rather than solely on the roles and responsibilities of the air traffic 

control position description. 



[37] In addition, approximately 330 FAA employees are paid under a 

prevailing rate, locality-based system similar to that applicable to 

federal blue-collar employees. 



[38] Office of Personnel Management, Deregulation of Performance 

Management and Incentive Awards: Final Rule, 5 C.F.R. 430 et al., 60 

Federal Register 43936, August 23, 1995.



[39] Agencywide policies governing travel were published in 1998.



[40] Workforce planning is the process by which an organization plans 

and manages the size, capabilities, diversity, and deployment of its 

workforce. It should include developing strategies for integrating 

hiring, recruiting, training, and other human capital activities in a 

manner that meets the agency’s long-term objectives to ensure that 

appropriately skilled employees are available when and where they are 

needed to meet an agency’s mission. Workforce plans should include the 

collection of valid and reliable data on such indicators as 

distribution of employee skills, retention rates, and retirement 

eligibility by occupation and organizational unit. 



[41] Because 2001 was the first year of implementation for the new 

performance management system, we did not obtain views on its effects.



[42] In our interview, we did not specifically ask whether managers’ 

and employees’ perception of the fairness of the new compensation 

system was based on its treatment of protected categories such as sex 

or race, but no interviewees mentioned this issue in their elaboration 

of their views.



[43] Personnel Reform in the Federal Aviation Administration, National 

Academy of Public Administration, August 1999.



[44] Phase II Evaluation: A Snapshot of Core Compensation Plan 

Implementation in FAA, Assistant Administrator for Human Resource 

Management Evaluation Staff, FAA, September 2001.



[45] Department of Transportation, Office of Inspector General, 

Personnel Reform: Recent Actions Represent Progress But Further Effort 

Is Needed To Achieve Comprehensive Change, Sept. 30, 1998.



[46] GAO is conducting a separate review of the hiring and recruitment 

program for federal air marshals. 



[47] FAA Personnel Reform: Implementation Status Report, prepared for 

FAA by the Human Resources Research Organization, January 1998.



[48] FAACMA, Legislative Briefing Book, 107th Congress-Second Session, 

March 2002.



[49] For more information about FAA’s new PCS policies and FAACMA’s 

concerns, see GAO-03-141.



[50] Grievances are concerns expressed by an employee or the union 

about a condition of employment or an allegation that a contract has 

not been properly interpreted and applied. 



[51] P.L. 106-181, sec. 307.



[52] Office of the Assistant Administrator for Human Resources 

Management, “An Informal Discussion of the FAA’s Human Resource 

Management Balanced Scorecard” August 21, 2002.



[53] A scorecard approach is a framework for measuring and managing 

performance also used by OMB and OPM to track how well departments and 

agencies are executing management initiatives.



[54] National Academy of Public Administration, Implementing Real 

Change in Human Resources Management: The Case for Transforming Public-

Sector Human Resources Management, July 2000.



[55] U.S. General Accounting Office, Management Reform: Elements of 

Successful Improvement Initiatives, GAO/T-GGD-00-26 (Washington, D.C.: 

Oct. 15, 1999).



[56] U.S. General Accounting Office, Managing For Results: Federal 

Managers’ Views on Key Management Issues Vary Widely Across Agencies, 

GAO-01-592, (Washington, D.C. May 25, 2001). 



[57] Volpe National Transportation Center, FAA Personnel Reform 

Evaluability Assessment, April 1997.



[58] Federal Aviation Administration, Human Resources Strategic Plan 

1999-2002, April 1999.



[59] National Academy of Public Administration, Personnel Reform in the 

Federal Aviation Administration: Three Year Status Report, August 1999.



[60] Department of Transportation, Office of Inspector General, 

Personnel Reform: Recent Actions Represent Progress But Further Effort 

Is Needed To Achieve Comprehensive Change, Sept. 30, 1998.



[61] Deloitte & Touche, LLP, Federal Aviation Administration: Five-Year 

Review of Personnel Reform and Strategies for the Future, (McLean, VA., 

Sept. 2002.) p. 6.



[62] U.S. General Accounting Office, A Model of Strategic Human Capital 

Management, GAO-02-373SP (Washington, D.C.: March 15, 2002).



[63] U.S. General Accounting Office, Human Capital: Effective Use of 

Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-

02, (Washington, D.C.: Nov. 2002).



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