Human Capital
Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces Gao ID: GAO-03-2 December 6, 2002An essential element to acquiring, developing, and retaining high-quality federal employees is agencies' effective use of human capital flexibilities. These flexibilities represent the policies and practices that an agency has the authority to implement in managing its workforce. Congressional requesters asked GAO to provide information on agency and union officials' views about the most effective human capital flexibilities, additional flexibilities needed, and whether additional flexibilities could be implemented while also protecting employees' rights. GAO was also asked to identify key practices for effective use of flexibilities. GAO interviewed the human resources directors of the federal government's 24 largest departments and agencies, and representatives of 4 national organizations representing federal employees and managers. GAO further focused its efforts on 7 federal agencies--Department of Air Force, General Services Administration, Internal Revenue Service, International Trade Administration, U.S. Mint, State Department, and Veterans Benefits Administration--interviewing more than 200 managers, supervisors, human resources officials, and union representatives in headquarters and field locations.
Agency and union officials' views on human capital flexibilities. Most effective flexibilities. Existing flexibilities that are most effective in managing the workforce are work-life programs, such as alternative work schedules, child care assistance, and transit subsidies; monetary recruitment and retention incentives, such as recruitment bonuses and retention allowances; special hiring authorities, such as student employment and outstanding scholar programs; and incentive awards for notable job performance and contributions, such as cash and time-off awards. Additional flexibilities needed. Additional flexibilities that would be helpful in managing the workforce include more flexible pay approaches to compensate federal employees, greater flexibility to streamline and improve the federal hiring process, increased flexibility in addressing employees' poor job performance, additional workforce restructuring options, and expanded flexibility in acquiring and retaining temporary employees. Protection of employee rights. Managers, supervisors, and human resources officials generally believed that additional human capital flexibilities could be implemented in their agencies while also protecting employees' rights. Union representatives, however, gave mixed views ranging from the opinion that additional flexibilities could be implemented while still protecting employee rights to concerns that managers would abuse their authority. Key practices for effective use of human capital flexibilities. GAO identified six key practices for the effective use of human capital flexibilities. These practices are (1) planning strategically and making targeted investments, (2) ensuring stakeholder input in developing policies and procedures, (3) educating managers and employees on the availability and use of flexibilities, (4) streamlining administrative processes, (5) building transparency and accountability into the system, and (6) changing the organizational culture. The insufficient and ineffective use of flexibilities can significantly hinder the ability of federal agencies to recruit, hire, retain, and manage their human capital. Congress is currently debating the extent of personnel flexibilities that should be granted to the new Department of Homeland Security. While this decision is important to how the department will operate, how personnel flexibilities are implemented is equally important.
GAO-03-2, Human Capital: Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces
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Report to Congressional Requesters:
December 2002:
Human Capital:
Effective Use of Flexibilities Can Assist Agencies in Managing Their
Workforces:
GAO-03-2:
GAO Highlights:
Human Capital:
Effective Use of Flexibilities Can Assist Agencies in Managing Their
Workforces:
Highlights of GAO-03-2, a report to the Senate Committee on
Governmental
Affairs and to its Subcommittees on International Security,
Proliferation,
and Federal Services and on Oversight of Government Management,
Restructuring,
and the District of Columbia:
Why GAO Did This Study:
An essential element to acquiring, developing, and retaining high-
quality
federal employees is agencies‘ effective use of human capital
flexibilities.
These flexibilities represent the policies and practices that an
agency has
the authority to implement in managing its workforce.
Congressional requesters asked GAO to provide information on
agency and
union officials‘ views about the most effective human capital
flexibilities,
additional flexibilities needed, and whether additional
flexibilities
could be implemented while also protecting employees‘ rights.
GAO was also
asked to identify key practices for effective use of
flexibilities.
GAO interviewed the human resources directors of the federal
government‘s
24 largest departments and agencies, and representatives of
4 national
organizations representing federal employees and managers.
GAO further
focused its efforts on 7 federal agencies”Department of the
Air Force,
General Services Administration, Internal Revenue Service,
International
Trade Administration, U.S. Mint, State Department, and Veterans
Benefits
Administration”interviewing more than 200 managers, supervisors,
human
resources officials, and union representatives in headquarters
and field
locations.
What GAO Found:
Agency and union officials‘ views on human capital
flexibilities.
Most effective flexibilities. Existing flexibilities that are
most
effective in managing the workforce are work-life programs,
such as
alternative work schedules, child care assistance, and transit
subsidies;
monetary recruitment and retention incentives, such as
recruitment
bonuses and retention allowances; special hiring authorities,
such as
student employment and outstanding scholar programs; and
incentive awards
for notable job performance and contributions, such as cash
and time-off
awards.
Additional flexibilities needed. Additional flexibilities
that would be
helpful in managing the workforce include more flexible pay
approaches
to compensate federal employees, greater flexibility to
streamline and
improve the federal hiring process, increased flexibility
in addressing
employees‘ poor job performance, additional workforce
restructuring options,
and expanded flexibility in acquiring and retaining temporary
employees.
Protection of employee rights. Managers, supervisors, and
human resources
officials generally believed that additional human capital
flexibilities
could be implemented in their agencies while also
protecting employees‘
rights. Union representatives, however, gave mixed views
ranging from
the opinion that additional flexibilities could be
implemented while
still protecting employee rights to concerns that managers
would abuse
their authority.
Key practices for effective use of human capital
flexibilities.
GAO identified six key practices for the effective use
of human capital
flexibilities. These practices are (1) planning
strategically and
making targeted investments, (2) ensuring stakeholder
input in developing
policies and procedures, (3) educating managers and
employees on the
availability and use of flexibilities, (4) streamlining
administrative
processes, (5) building transparency and accountability
into the system,
and (6) changing the organizational culture.
The insufficient and ineffective use of flexibilities
can significantly
hinder the ability of federal agencies to recruit, hire,
retain, and
manage their human capital. Congress recently debated
the extent of
personnel flexibilities that should be granted to the new
Department of
Homeland Security. While this decision was important to
how the
department will operate, how personnel flexibilities are
implemented is
equally important.
The full report, including GAO‘s objectives, scope,
methodology, and
analysis is available at www.gao.gov/cgi-bin/getrpt?GAO-03-2.
For
additional information about the report, contact J.
Christopher Mihm at
(202) 512-6806 or by e-mail at mihmj@gao.gov.
Contents:
Letter:
Results in Brief:
Background:
Agency Officials and Union Representatives Cited Most Effective Human
Capital Flexibilities:
Agency Officials and Union Representatives Cited Need for Additional
Human Capital Flexibilities:
Agency Officials Believed That Additional Flexibilities Could Coexist
with Protection of Employee Rights, but Union Representatives Gave
Mixed Views:
Key Practices Can Assist Agencies in Effectively Using Flexibilities:
Conclusions:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Office Personnel Management:
Appendix III: Comments from the Internal Revenue Service:
Appendix IV: Comments from the U.S. Mint:
Appendix V: Comments from the International Trade Administration:
Appendix VI: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Human Capital Flexibilities That Agency Officials and Union
Representatives Cited as Most Effective:
Table 2: Air Force CPMIS Funding Strategy for 3Rs (Fiscal Years 2004
through 2009):
Figures:
Figure 1: Key Practices for Effective Use of Human Capital
Flexibilities:
Figure 2: Background Information on the Seven Selected Agencies with
Examples of Exemptions from Title 5 Personnel Requirements:
Abbreviations:
AFMC: Air Force Materiel Command:
CPDF: Central Personnel Data File:
CPMIS: Civilian Personnel Management Improvement Strategy:
GS: General Schedule:
GSA: General Services Administration:
IRM: Information Resource Management:
IRS: Internal Revenue Service:
ITA: International Trade Administration:
MSPB: Merit Systems Protection Board:
NAPA: National Academy of Public Administration:
OMB: Office of Management and Budget:
OPM: Office of Personnel Management:
PBO: performance-based organization:
PBS: Public Buildings Service:
QSI: quality step increase:
SQA: superior qualifications appointment:
VA: Department of Veterans Affairs:
VBA: Veterans Benefits Administration:
VEOA: Veterans Employment Opportunities Act:
VRA: Veterans Readjustment Appointment:
Letter:
December 6, 2002:
The Honorable Joseph I. Lieberman
Chairman
The Honorable Fred Thompson
Ranking Minority Member
Committee on Governmental Affairs
United States Senate:
The Honorable Daniel K. Akaka
Chairman
The Honorable Thad Cochran
Ranking Minority Member
Subcommittee on International Security,
Proliferation, and Federal Services
Committee on Governmental Affairs
United States Senate:
The Honorable Richard J. Durbin
Chairman
The Honorable George V. Voinovich
Ranking Minority Member
Subcommittee on Oversight of Government
Management, Restructuring, and the
District of Columbia
Committee on Governmental Affairs
United States Senate:
For years, many observers have viewed the federal civil service as
over-regulated and inflexible. At the same time, federal agencies are
experiencing pervasive human capital challenges in acquiring and
developing staffs to meet current and emerging agency needs. These
types of challenges are likely to go unresolved if agencies do not take
steps to ensure that they have sufficient numbers of people in place
with the right skills, tools, and incentives to get the job done right.
To deal with these challenges, agencies need effective human capital
flexibilities to assist them. The recent deliberations over human
capital flexibilities for the new Department of Homeland Security
underscore the importance of ensuring that agencies have the
capabilities needed to effectively achieve their missions and manage
their people.
In broad terms, human capital flexibilities represent the policies and
practices that an agency has the authority to implement in managing its
workforce to accomplish its mission and achieve its goals. These
flexibilities can include actions related to areas such as recruitment,
retention, compensation, position classification, incentive awards and
recognition, training and development, performance management and
appraisals, realignment and reorganization, and work arrangements and
work-life policies. The tailored use of such flexibilities for
acquiring, developing, and retaining talent is an important cornerstone
of our model of strategic human capital management, which we recently
released to assist in transforming agencies so they become more
results-oriented, integrated, and externally focused.[Footnote 1]
In previous reports and testimonies,[Footnote 2] we have emphasized
that in addressing their human capital challenges, federal agencies
should first identify and use the flexibilities already available under
existing laws and regulations and then seek additional flexibilities
only when necessary and based on sound business cases. In this regard,
as agreed with your offices, this report provides information on:
* agency officials‘ and union representatives‘ views on (1) the most
effective flexibilities for managing their workforces, (2) additional
flexibilities that would be the most helpful in managing their
workforces, and (3) whether employee rights could be protected if
additional flexibilities were authorized and implemented within
agencies and:
* key practices that agencies should implement for effective use of
human capital flexibilities, along with specific examples of such
practices from selected agencies.
We were also asked to identify actions that the Office of Personnel
Management (OPM) could take to facilitate the effective use of human
capital flexibilities throughout the federal government. We will be
discussing that issue in a separate report to be issued soon.
To address these issues, we reviewed relevant reports and interviewed
cognizant officials from OPM, the Merit Systems Protection Board
(MSPB), and the National Academy of Public Administration (NAPA). In
addition, we interviewed the human resources directors of the federal
government‘s 24 largest departments and agencies and representatives
from four national organizations representing federal employees and
managers. As agreed, we further focused our review on seven federal
agencies: the Department of the Air Force, General Services
Administration (GSA), Internal Revenue Service (IRS), International
Trade Administration (ITA), U.S. Mint (Mint), Department of State
(State), and Veterans Benefits Administration (VBA). At the
headquarters and various field locations of the seven agencies, we
collected documents on their use of human capital flexibilities and
interviewed over 200 managers and supervisors, human resources
officials, and union representatives. We selected the seven agencies
for various reasons, including their variety of existing human capital
challenges and their range in usage of available human capital
flexibilities. Our agency selection process was not designed to
identify examples that could be considered representative of all the
human capital flexibilities used at the seven agencies reviewed or the
federal government as a whole. We conducted our review in accordance
with generally accepted government auditing standards. (See app. I for
additional information on our objectives, scope, and methodology.):
Results in Brief:
According to the agency officials and union representatives we
interviewed, work-life policies and programs, such as alternative and
flexible work schedules, transit subsidies, child care assistance, and
employee assistance programs, are among the most effective human
capital flexibilities available in federal agencies for managing the
workforce to achieve agency missions and accomplish agency goals. These
flexibilities are effective because they serve as important recruitment
and retention tools as employees weigh the balance between their work
life and leisure time. In addition, agency and union officials
frequently cited the effectiveness of monetary recruitment and
retention incentives, including recruitment and relocation bonuses for
hard-to-fill positions; special hiring authorities, such as student
employment and outstanding scholar programs; and incentive awards to
employees for superior job performance and specific accomplishments,
including cash and time-off awards.
Although agencies‘ first priority should be to improve their human
capital management by using the authorities already available to them,
we identified five categories of additional human capital flexibilities
that agency officials and union representatives cited as most helpful
if authorized for their agencies. These additional authorities include
(1) more flexible pay approaches, (2) greater flexibility to streamline
and improve the federal hiring process, (3) increased flexibility in
addressing employees‘ poor job performance, (4) additional workforce
restructuring options, and (5) expanded flexibility in acquiring and
retaining temporary employees. These suggestions by agency officials
and union representatives provide a starting point for executive branch
decision makers and Congress to consider as they seek to reform federal
human capital policies and practices. Key aspects of these additional
authorities are included in various legislative initiatives under
consideration by Congress. In other cases, however, additional analysis
may be needed to ensure that any new authorities are granted and
implemented consistent with a focus on program results, merit, and
other important federal employment goals.
The agency managers and supervisors and human resources officials we
interviewed generally agreed that additional human capital
flexibilities could be authorized and implemented in their agencies
while also ensuring protection of employees‘ rights. Union
representatives, however, expressed a variety of opinions on the
ability of agencies to protect employee rights. Some believed that
employee rights could be protected with additional managerial
flexibility, while others were concerned that managers would abuse
their authority and agency leaders would not take appropriate
disciplinary action. According to agency and union officials, one of
the most effective ways to ensure protection of employees‘ rights when
implementing these flexibilities is to make certain that supervisors
and employees are fully aware of the available flexibilities, the
procedures to use them, and the associated rights and responsibilities
of both managers and employees when using them. In addition, they
frequently mentioned the importance of securing the assistance and
support of agency human resources officials in implementing and
monitoring the use of flexibilities within the agency.
Based on our interviews with human resources directors from across the
federal government and our previous human capital work, we identified
six key practices that agencies should implement to use human capital
flexibilities effectively. Figure 1 identifies the practices and
provides some examples from the seven federal agencies we reviewed.
Figure 1: Key Practices for Effective Use of Human Capital
Flexibilities:
Plan strategically and make targeted investments. Agencies need to
ensure that the use of flexibilities is part of an overall human
capital strategy clearly linked to the program goals of the
organization. Agencies also need a sound plan for how they will use and
fund the authorities. For example, the Air Force developed a series of
initiatives that use flexibilities to recruit and retain civilian
employees with high technical skills. The initiatives are accompanied
by both funding and legislative strategies designed to promote
succession planning while ensuring the resultant workforce is cost-
effective.
Ensure stakeholder input in developing policies and procedures. Agency
leaders, managers, employees, and employee unions must work together
and in a constructive and cooperative manner to effectively implement
any flexibility in order to reach agreement on the need for change, the
direction and scope that change will take, and how progress will be
assessed. For example, employees at the Mint‘s San Francisco coin-
making plant (with assistance from the local union) were able to vote
on various options for implementing an alternative work schedule for
the facility. :
Educate managers and employees on the availability and use of
flexibilities. Agencies‘ human capital offices need to ensure that they
have effective campaigns not only to inform managers of their personnel
authorities, but also to explain the situations where the use of those
authorities is appropriate. Agencies also need to inform employees
about relevant policies and procedures and about employees‘ rights
related to the use of these authorities. For example, GSA in
Philadelphia educates its supervisors on human capital flexibilities
with its Human Resource Solutions Series training, which includes
topics such as performance management, position classification, and
staffing.
Streamline and improve administrative processes. Agencies should
streamline administrative processes for using flexibilities and review
self-imposed constraints that may be excessively process-oriented. For
example, GSA automated its on-the-spot cash award process to allow
supervisors to initiate these awards by accessing the agency‘s intranet
Web site rather than the previous process of completing a lengthy
justification and sending the form to the personnel office for review.
Build transparency and accountability into the system. Agencies should
delegate authority to use flexibilities to appropriate levels within
the agency. Agencies must also develop clear and transparent guidelines
for using flexibilities and then hold managers and supervisors
accountable for their fair and effective use. For example, IRS
developed guidelines for its managers to determine if a job applicant
qualifies for a recruitment incentive, which helps to ensure fair and
consistent application of such flexibilities. Agencies can also make
public the extent to which the flexibilities are used and the results
of the flexibilities. Finally, agencies‘ use of flexibilities should,
as appropriate, be subject to internal and external evaluations.
Change the organizational culture. Agencies need to address managers‘
and supervisors‘ concerns that employees will view the use of some
flexibilities as unfair. Also, with appropriate accountability
mechanisms in place, agencies can begin to foster an organizational
culture that encourages managers to develop creative approaches and
take appropriate risks. For example, IRS in Oakland hired a consultant
to conduct training for managers that promotes creative thinking,
empowerment for decision making, and prudent risk taking. The training
course is an ongoing process with managers returning each year to
ensure their continued comfort with and use of the principles covered
in the training.
[End of figure]
Source: Interviews with human resources directors and prior GAO work.
Agency and union officials identified several significant reasons why
agencies have not made greater use of the human capital flexibilities
that are available to them. These reported barriers that have hampered
agencies in maximizing their use of available flexibilities included
agencies‘ weak strategic human capital planning and inadequate funding
for using these flexibilities given competing priorities; managers‘ and
supervisors‘ lack of awareness and knowledge of the flexibilities;
managers‘ and supervisors‘ belief that approval processes to use
specific flexibilities are often burdensome and time-consuming; and
managers‘ and supervisors‘ concerns that employees will view the use of
various flexibilities as inherently unfair, particularly given the
common belief that all employees must be treated essentially the same
regardless of job performance and agency needs.
The insufficient and ineffective use of flexibilities can significantly
hinder the ability of federal agencies to recruit, hire, retain, and
manage their human capital. To deal with their human capital
challenges, it is important for agencies to assess and determine which
human capital flexibilities are the most appropriate and effective for
managing their workforces. Congress recently debated the extent of
personnel flexibilities that should be granted to the new Department of
Homeland Security. While this decision was important to how the new
department will operate, how personnel flexibilities are implemented is
equally important. Thus, to ensure more effective use of any human
capital flexibility, it is critical that all agencies (1) plan
strategically and make targeted investments, (2) ensure stakeholder
input in developing policies and procedures, (3) educate managers and
employees on the availability and use of flexibilities, (4) streamline
and improve administrative processes, (5) build transparency and
accountability into their systems, and (6) change their organizational
cultures. By more effectively using flexibilities, agencies would be in
a better position to manage their workforces, assure accountability,
and transform their cultures to address current and emerging demands.
OPM and six of the seven selected agencies provided comments on a draft
of this report. The agencies either generally agreed with the
information presented or did not express an overall opinion about the
report. OPM was pleased that our report acknowledges the need for
greater personnel flexibilities in cases where existing law constrains
OPM in providing policies and programs to assist agencies in
accomplishing their missions. However, OPM commented that authorizing
additional legislative flexibilities to agencies on a case-by-case
basis could create an unfair competitive advantage for certain
agencies. OPM also stressed in its comments that agencies should use
the outstanding scholar hiring program as a supplement to competitive
examining and not use the program as a general approach to circumvent
the standard competitive hiring process. IRS commented that its
recently acquired statutory flexibilities were instrumental to
achieving the agency‘s transformation to a modern, business-like
organization. The Department of Defense (Defense) and GSA suggested
that our report more fully discuss the drawbacks of telecommuting. The
Mint commented that the report provides an objective, balanced review
and assessment of the issues surrounding the implementation of human
capital flexibilities and noted that the report would serve as a useful
tool for policymakers. ITA commented that the report thoroughly and
comprehensively addresses the critical issue of the programs needed to
manage the federal workforce and emphasized the need for the additional
flexibilities mentioned in the report. The Department of Veterans
Affairs (VA) agreed with the information presented in the report and
provided no additional comments. State did not provide comments on this
report. Where appropriate, we made changes to the report to address the
comments we received.
Background:
Federal managers have complained for years about the rigid and
elaborate procedures required for federal personnel administration,
often expressing the need for more flexibility within a system that has
traditionally been based on uniform rules. Reformers have long sought
to decentralize the personnel system and simplify the rules, arguing
that however well the system may have operated in the past, it is no
longer suited to meet the needs of a changing and competitive world. In
1983, for example, NAPA published a report critical of the excessive
constraints on federal managers, including constraints on their human
resources decisions.[Footnote 3] As part of the response to these
criticisms, OPM decentralized and delegated many personnel decisions to
the agencies and has encouraged agencies to use human capital
flexibilities to help tailor their personnel approaches to accomplish
their unique missions. Our strategic human capital model also advocates
that agencies develop a tailored approach to their use of available
flexibilities by taking advantage of those flexibilities that are
appropriate for their particular organizations and their mission
accomplishment.[Footnote 4] Because of this tailoring, the federal
personnel system is becoming more varied, despite its often-cited
characterization as a ’single employer.“:
The trend toward increased flexibility has manifested itself a number
of ways, including the efforts of some agencies to seek congressional
approval to move away from the personnel provisions of Title 5 of the
U.S. Code that have traditionally governed much of the federal
government‘s civil service system.[Footnote 5] As noted by OPM in a
1998 report,[Footnote 6] federal agencies‘ status relative to these
Title 5 personnel requirements can be better understood by thinking of
them on a continuum. On one end of the continuum are federal agencies
that generally must follow Title 5 personnel requirements. These
agencies do not have the authority, for example, to establish their own
pay systems. On the other end of the continuum are federal agencies
that have more flexibility in that they are exempt from many Title 5
personnel requirements. For example, Congress provided the Tennessee
Valley Authority and the Federal Reserve Board with broad authority to
establish their own personnel systems and procedures. The movement in
the direction of greater flexibility, in fact, has gained momentum to
the extent that about half of federal civilian employees are now exempt
from at least some of the personnel-related requirements of Title 5.
In addition to receiving congressional authorizations for exemptions
from the personnel-related requirements of Title 5, other mechanisms
are available to introduce human capital innovations and flexibilities
within federal agencies. OPM has the authority to review and make
changes to its existing regulations and guidance to provide agencies
with additional flexibilities. Additionally, a federal agency can
obtain authority from OPM to waive some existing federal human
resources laws or regulations through a personnel demonstration
project. The goal of these demonstration projects is to encourage
experimentation in human resources management by allowing federal
agencies to propose, develop, test, and evaluate changes to their own
personnel systems. In some cases, Congress has allowed some agencies to
adopt alternatives that have been tested and deemed successful. For
example, more flexible pay approaches that were tested within the
Department of the Navy‘s China Lake (California) demonstration project
in the early 1980s were eventually adopted by other federal agencies,
such as the Department of Commerce‘s National Institute of Standards
and Technology.
Exemptions from Title 5 personnel requirements within our seven
selected agencies help to illustrate the gradations of flexibility.
IRS, for example, represents an agency with broad authority related to
its human capital management. Efforts to reform IRS led to provisions
under the IRS Restructuring and Reform Act of 1998, which gave the
Secretary of the Treasury various pay and hiring flexibilities not
otherwise available under Title 5, such as the authority to establish
new systems for hiring and staffing, compensation, and performance
management. State and ITA are examples of organizations in which some
employees are not subject to Title 5, while the remainder of the
organization is covered. In this case, Foreign Service employees at
State and ITA are outside of Title 5. For the remaining four agencies
we included in our review, the majority of their employees are covered
under the personnel requirements of Title 5, with some limited
exemptions. Air Force, for instance, has made use of flexibilities
under the demonstration project authority and currently participates in
two such demonstration projects, one involving laboratory personnel and
another for the civilian acquisition workforce. In addition, several of
our selected agencies, such as GSA and VBA, received additional
flexibility through legislative authority to offer voluntary separation
incentive payments, commonly known as buyouts, to help restructure
their workforces. Figure 2 provides background information on the seven
agencies along with a summary of some of their related exemptions from
Title 5 personnel requirements.
Figure 2: Background Information on the Seven Selected Agencies with
Examples of Exemptions from Title 5 Personnel Requirements:
Department of the Air Force: The mission of the Air Force, a component
of the Department of Defense, is to defend the United States and
protect its interests through aerospace power. The Air Force employs
over 150,000 civilians in a full range of occupations. Although the
majority of civilians employed by the Air Force are subject to Title 5
requirements, Air Force Research Laboratory employees, for example, are
involved in a demonstration project, which features a contribution-
based compensation system.
General Services Administration: GSA is one of three central management
agencies in the federal government. The agency‘s mission is to support
federal employees wherever they work by, among other things, providing
work space, furniture, equipment, supplies, tools, and travel services.
GSA also oversees telecommuting centers and federal child care centers
and preserves historic buildings. The agency employs approximately
14,000 people, the majority of whom are covered by Title 5. Congress
authorized GSA to offer voluntary separation incentive payments to help
shape its workforce. :
Internal Revenue Service: IRS is a component of the Department of the
Treasury. The agency‘s mission is to provide America‘s taxpayers with
top quality service by helping them understand and meet their tax
responsibilities and by applying the tax law with integrity and
fairness to all. IRS employs approximately 100,000 full-time employees.
Under the IRS Restructuring and Reform Act of 1998, the Secretary of
the Treasury has pay and hiring flexibilities that are not generally
available to Title 5 agencies. Some of these flexibilities are intended
to allow IRS managers more discretion in rewarding good performers and
in making employees accountable for their performance.
International Trade Administration: ITA is the lead unit for trade in
the Department of Commerce. The agency promotes U.S. exports of
manufactured goods, nonagricultural commodities, and services. It also
participates in formulating and implementing U.S. foreign trade and
economic policies and monitors market access and compliance of U.S.
international trade agreements. ITA employs approximately 2,000 full-
time employees. About 300 of these employees are Foreign Service
employees, who are not subject to Title 5.
U.S. Mint: The U.S. Mint is a bureau within the Department of the
Treasury. The primary mission of the agency is to produce an adequate
volume of circulating coinage for the nation to conduct its trade and
commerce. The Mint‘s workforce consists of approximately 2,600
employees with a wide mix of white-collar and blue-collar occupations.
Of these employees, the rates of basic pay for positions within the
police forces of the U.S. Mint are fixed without regard to the pay
provisions of Title 5, except for minimum and maximum rates. :
Department of State: State is the principal agency for advancing and
protecting U.S. interests abroad by conducting U.S. foreign policy, and
supporting and coordinating the activities of all other U.S. government
agencies operating abroad. State has approximately 7,300 civil service
employees and 9,400 Foreign Service employees. :
Veterans Benefits Administration: The mission of VBA--an agency within
the Department of Veterans Affairs--in partnership with the Veterans
Health Administration and the National Cemetery Administration, is to
provide benefits and services to veterans and their families in a
responsive, timely, and compassionate manner in recognition of their
service to the nation. VBA employs approximately 13,000 employees, the
majority of whom are under Title 5. Like GSA, the agency received
special legislative authority to provide voluntary separation incentive
payments to help shape its workforce. :
[End of figure]
Source: Agency Web sites and planning documents.
Even under current Title 5 personnel provisions and their applicable
regulations, efforts to reform and improve the personnel system have
provided many human capital flexibilities for agencies to use. Within
broad parameters, such as adherence to merit system principles[Footnote
7] and employee protection from prohibited personnel
practices,[Footnote 8] these flexibilities offer the agencies effective
ways to accomplish their missions while maintaining the key values of a
centralized system. For example, agencies have many flexibilities
available to help them restructure and realign their workforces.
Moreover, agencies have numerous compensation flexibilities that
authorize them to provide additional direct payments to support their
recruitment, relocation, and retention efforts, although some of them
may require the approval of OPM or the Office of Management and Budget
(OMB).
Agency Officials and Union Representatives Cited Most Effective Human
Capital Flexibilities:
Today, federal agencies are facing many human capital challenges. With
the increasing numbers of employees retiring and the numbers of
employees who will be eligible to retire in the near future, along with
competition from private companies, federal agencies are in a struggle
to recruit and retain highly skilled employees. In response to these
challenges, agencies need to use the various human capital
flexibilities that are available to them in managing their workforces
to achieve agency missions and accomplish goals.
Our discussions with agency officials and union representatives
revealed numerous human capital flexibilities that they deemed
effective in managing their workforces. These flexibilities encompassed
broad areas of personnel-related actions such as recruitment,
retention, compensation, position classification, incentive awards and
recognition, training and development, performance management and
appraisals, realignment and reorganization, and work arrangements and
work-life policies. On the basis of these discussions, we identified
the flexibilities that were the most frequently cited by agency and
union officials as being the most effective for managing their
agencies‘ workforces. These flexibilities include:
* work-life programs, such as alternative work schedules, child care
assistance, and transit subsidies;
* monetary recruitment and retention incentives, including retention
and relocation bonuses and retention allowances;
* special hiring authorities, such as student employment and
outstanding scholar programs; and:
* incentive awards, which range from performance-based cash awards to
time-off awards to symbolic items of nominal value, such as plaques and
T-shirts.
Table 1 provides a summary of these flexibilities and the cited
benefits of implementing them.
Table 1: Human Capital Flexibilities That Agency Officials and Union
Representatives Cited as Most Effective:
Work-life policies and programs:.
Flexibility: Alternative work schedules; Cited benefits of flexibility:
Work-life policies and programs:: * Increase employee morale; * Allow
employees to be more flexible in accomplishing job responsibilities; *
Decrease need for employees to use accumulated leave.
Flexibility: Employee assistance programs; Cited benefits of
flexibility: Work-life policies and programs:: * Assist agencies in
addressing personnel issues that might be affecting agency operations;
* Help employees resolve problems that might be affecting personal
health or job performance.
Flexibility: Child care centers and assistance; Cited benefits of
flexibility: Work-life policies and programs:: * Help recruit skilled
workers and retain valuable employees; * Can aid lower paid employees
with assistance; * Increase productivity among users because centers
often mean more reliable child care and fewer employee absences.
Flexibility: Subsidized transportation; Cited benefits of flexibility:
Work-life policies and programs:: * Reduces congestion in
transportation systems; * Decreases smog in local commuting areas; *
Aids some employees in obtaining reliable transportation by subsidizing
costs.
Flexibility: Telecommuting; Cited benefits of flexibility: Work-life
policies and programs:: * Decreases employee stress and commuting
costs; * Helps to reduce traffic congestion and smog; * Allows
employees to be more productive by decreasing their commuting time.
Monetary recruitment and retention incentives:.
Flexibility: Superior/special qualification appointments; Cited
benefits of flexibility: Work-life policies and programs:: * Allow
agencies more control over entry-level salaries; * Permit agencies to
match the prior salaries of new hires coming from the private sector; *
Allow agencies to more easily hire employees with highly specialized
skills in areas such as information technology and engineering.
Flexibility: Recruitment bonuses; Cited benefits of flexibility: Work-
life policies and programs:: * Assist agencies in recruiting employees
for hard-to-fill positions; * Help agencies to retain employees for
reasonable periods (i.e., written service agreement).
Flexibility: Relocation bonuses; Cited benefits of flexibility: Work-
life policies and programs:: * Assist agencies in relocating employees
for hard-to-fill positions; * Help agencies to retain employees for
reasonable periods (i.e., written service agreement).
Flexibility: Retention allowances; Cited benefits of flexibility: Work-
life policies and programs:: * Assist agencies in retaining employees
who possess unusually high or unique qualifications or who fill
essential needs for the agencies; * Allow agencies to terminate the
incentive payments when no longer needed; * Can be provided on a group
basis to help agencies retain groups or categories of employees.
Special hiring authorities:.
Flexibility: Student educational employment programs (i.e., ’co-op“
programs); Cited benefits of flexibility: Work-life policies and
programs:: * Allow agencies and student employees to test whether the
students would be suitable matches for possible permanent employment; *
Allow agencies to quickly and easily hire needed staff who may be
eligible for permanent positions with the agencies.
Flexibility: Outstanding scholar program; Cited benefits of
flexibility: Work-life policies and programs:: * Allows agencies to
quickly hire high-quality entry-level employees (i.e., college
graduates with superior academic credentials) in certain occupations.
Flexibility: Veteran-related hiring authorities; Cited benefits of
flexibility: Work-life policies and programs:: * Allow agencies to
quickly hire needed talent; * Allow veterans to apply for positions not
generally open to nonfederal employees.
Incentive awards:.
Flexibility: Performance-and accomplishment-based cash awards; Cited
benefits of flexibility: Work-life policies and programs:: * Allow
supervisors to recognize employees‘ outstanding performance or
accomplishment either at the end of performance appraisal periods or at
a specific points in time for special acts or contributions; * Can
provide supervisors with autonomy to offer awards.
Flexibility: Quality step increases; Cited benefits of flexibility:
Work-life policies and programs:: * Allow agencies to provide permanent
pay increases on the basis of outstanding performance as demonstrated
in employees‘ performance appraisals; * Do not require agencies to
conduct an annual review and approval to continue payments, as do
retention allowances.
Flexibility: Time-off awards; Cited benefits of flexibility: Work-life
policies and programs:: * Allow employees to receive awards other than
money; * Allow employees to take time off from work when most
convenient for agencies and employees.
Flexibility: Group incentives (i.e., gainsharing and goalsharing);
Cited benefits of flexibility: Work-life policies and programs:: *
Allow both agencies and employees to benefit from increases in
productivity and decreases in costs; * Allow both agencies and
employees to benefit from the achievement of specified goals that
enhance the success of the organization‘s mission.
Flexibility: Honorary and informal recognition awards; Cited benefits
of flexibility: Work-life policies and programs:: * Give supervisors
maximum flexibility to be creative in how they recognize their
employees.
Source: Agency and union officials interviewed.
[End of table]
Agency and Union Officials Cited Work-Life Programs among the Most
Effective Flexibilities:
Agency officials and union representatives cited work-life programs
among the most effective flexibilities for recruiting, motivating, and
retaining staff. These programs are offered to help employees balance
their work and family lives and include alternative work schedules,
employee assistance programs, child care centers and assistance,
transit subsidies, and telecommuting options. OPM has strongly
supported the use of these family-friendly programs, indicating that
they can help to attract and retain quality employees, boost morale,
and reduce unscheduled leave. Our recent report looking at human
capital challenges at the Securities and Exchange Commission revealed
how agencies can sometimes overlook the effectiveness of these work-
life programs in recruiting, retaining, and motivating staff.[Footnote
9] The following is additional information about the effectiveness of
these work-life flexibilities.
Alternative work schedules. Federal agencies generally have the
authority to determine the hours of work for their employees to ensure
that agencies meet organizational goals. Agencies may establish hours
of work and scheduling flexibilities to replace the traditional
schedules of 8 hours per day and 40 hours per week, such as full-time
and part-time, overtime hours, and flexible work schedules. Scheduling
flexibilities, such as alternative work schedules, were among the
effective flexibilities most cited by agency managers and supervisors,
human resources officials, and union representatives. Although some
supervisors told us that such schedules can be a challenge to manage,
these supervisors stated that this scheduling flexibility increases
employee morale, strongly motivates employees, and allows employees to
be more flexible in accomplishing job responsibilities. For example,
IRS officials told us that the agency has made use of alternative work
schedules since the early 1980s and that this flexibility is attractive
to both current and potential employees. Supervisors at the San
Francisco Mint said that the use of alternative work schedules reduces
the amount of accumulated leave taken because employees can accomplish
personal errands and tasks on their days off. According to human
resources officials in GSA‘s San Francisco region, about 1,300 of the
region‘s 1,500 employees make use of alternative work schedules.
Employee assistance programs. Through these programs, agencies can
provide a range of free, confidential counseling and referral services
to assist employees who may be experiencing personal problems affecting
their job performance or personal health. Agency and union officials
said that these programs can be valuable in helping employees deal with
issues such as work and family pressures. IRS supervisors in
Philadelphia told us, for example, that IRS‘s employee assistance
program offers employees and their family members a way to address both
work-related and nonwork-related issues and that the employees they had
referred to the program had found the services to be quite beneficial.
Officials at Langley Air Force Base told us that both civilian and
military personnel use the agency‘s employee assistance programs, which
were designed to meet the needs of various employee groups.
Child development centers and child care assistance. Many federal
agencies provide on-site or near-site child development centers to help
employees with child care needs. Civilian federal agencies recently
obtained authority through federal statute to use appropriated funds
from salaries and expenses to assist their lower income employees with
the cost of child care.[Footnote 10] Agencies can also assist their
employees with information about other organizations that can help
employees locate quality child care services. At some of the field
locations we visited, agencies provided on-site or near-site child care
for their employees. Agency and union officials said that this
assistance greatly aids employees in focusing on their job
responsibilities by providing more reliable child care, and that
reliable child care often results in fewer employee absences. A
national union representative pointed out that child care subsidies
have allowed agencies to retain employees and save money because they
do not have to train new staff members. According to OPM, there are
approximately 1,000 work-site child care centers sponsored by civilian
and military agencies in the federal government.
Transportation subsidies. In April 2000, an executive order was signed
that required all federal agencies to implement a transportation fringe
benefit program for their employees.[Footnote 11] This transit subsidy
program was designed to encourage federal employees to use mass
transportation for commuting to and from work to reduce traffic
congestion and air pollution. Federal agencies in the national capital
region were required to implement a ’transit pass“ program by providing
eligible employees with subsidies in the form of subway farecards.
Agencies generally have the flexibility to make this program available
to their employees nationwide and can provide employees with transit
passes of up to $100 per month for each employee who uses public or
vanpool transportation. Many supervisors and union representatives we
interviewed said that this transit subsidy is highly valued by
employees. Officials in the San Francisco Bay Area made particular note
of the benefits of using public transportation given the traffic
congestion in the area.
Telecommuting Cited as Beneficial in Certain Cases, but Some Doubted
Its Effectiveness and Stressed the Need for Careful Management:
While many agency managers and supervisors, human resources officials,
and union representatives supported the effectiveness of work-life
programs, our discussions of telecommuting with these officials brought
about strongly mixed opinions. Telecommuting, also referred to as
telework or flexiplace, involves work arrangements that allow an
employee to work away from the traditional work site, either at home or
at another approved location. Often cited potential benefits for
agencies to establish telecommuting programs include improved
recruiting and retention of employees, increased productivity, and a
reduced need for office space. Cited reasons for employees to
participate in such programs include the opportunity to reduce
commuting time; lowered personal costs in areas such as transportation,
parking, food, and wardrobe; and improvement in the quality of work-
life and morale because they are able to balance work and family
demands. An MSPB survey conducted in 2000 found that 47 percent of
federal employees considered telecommuting important to them personally
and that 20 percent had it available to them.[Footnote 12]
Several managers and supervisors we interviewed, however, said that
telecommuting has not been shown to increase employee productivity, and
that it is often complicated to manage an employee who is working ’out
of sight.“ According to these agency officials, in many cases it is
more difficult to judge the quality of the employee‘s work in a
telecommuting environment, while in other cases the quality of the work
can decline if the employee is not mature in using this flexibility. In
addition, with telecommuting, the office often loses some sense of
teamwork and continuity, and sometimes significant logistical obstacles
must be overcome. Further, telecommuting is not practical for all
occupations or situations. Yet, other agency managers and numerous
union representatives said that telecommuting can be an effective
flexibility if used appropriately. Union representatives at GSA in
Philadelphia, for example, said that agency managers should focus on
employee productivity and results rather than the need to simply
observe the employee working. These views mirror those found in our
1997 report reviewing the use of telecommuting (i.e., flexiplace) in
the federal government.[Footnote 13] During that review, agency
officials and union representatives we interviewed cited management
resistance as the largest barrier to implementing flexiplace programs.
Agency officials had informed us that they had had some success in
overcoming management resistance by training supervisors or by exposing
them to telecommuting arrangements. At the request of the Chairman,
Subcommittee on Technology and Procurement Policy, House Committee on
Government Reform, we are undertaking an assessment of federal
telecommuting policies and programs.
Agency and Union Officials Identified Monetary Recruitment and
Retention Incentives as Highly Effective Flexibilities:
Agency and union officials also cited monetary recruitment and
retention incentives as highly effective in managing their agencies‘
workforces. Agencies generally offer these types of monetary incentives
to employees based on employee qualifications, special needs of the
agencies, or difficulties in filling positions. These flexibilities
include the following.
Superior/special qualifications appointments. Using this flexibility,
agencies can set base pay for newly appointed individuals above step 1
of the various grade levels based on the superior qualifications or
highly specialized skills of the candidates or special needs of the
agency. Agency officials said that this flexibility was especially
effective because it allows agencies more control over entry-level
salaries and permits agencies to match the prior salaries of new hires
coming from the private sector. For example, IRS supervisors in Oakland
told us that this hiring flexibility had helped their office in
matching salaries of employees hired from the dot-com industry. GSA
human resources officials in San Francisco said that this appointment
authority had greatly assisted their office in hiring about 30
employees over the last 3 years. Officials from the Mint‘s headquarters
information technology office said this pay incentive had helped in
hiring highly skilled information security personnel at the GS-13 and
GS-14 levels.[Footnote 14]
Recruitment bonuses. A recruitment bonus is a lump-sum payment of up to
25 percent of basic pay that an agency may pay to an employee newly
appointed to a position that would otherwise be difficult to fill. In
return, the employee must sign an agreement to fulfill at least 6
months of service with the agency. A senior human resources manager at
one department, for example, told us that her department had instituted
over 1,000 recruitment bonuses (averaging about $5,000 each) to attract
new hires. She said that the department typically hired new employees
only at the GS-7 level and thus relied on these recruitment bonuses to
augment starting pay, particularly for hard-to-fill scientific and
technical positions.
Relocation bonuses. A relocation bonus is a lump-sum payment of up to
25 percent of basic pay that an agency may pay to a current employee
who must relocate to a position in a different commuting area that
would otherwise be difficult to fill. In return, the employee must sign
a service agreement with the agency. Another senior human resources
manager, for example, told us that his agency uses relocation bonuses
to assist certain employees who are required to move every 3 years to
limit potential conflicts of interest in their sensitive positions. He
said that without the relocation bonus, these employees would often
lose money when they move, resulting in significant morale problems.
Retention allowances. A retention allowance is a continuing (i.e.,
biweekly) payment of up to 25 percent of basic pay that an agency may
pay to help retain an employee. The agency must determine that (1) the
unusually high or unique qualifications of the employee or a special
need of the agency for the employee‘s services makes it essential to
retain the employee and (2) the employee would be likely to leave the
federal government in the absence of a retention allowance. In
addition, an agency may offer retention allowances to a group or
category of employees.[Footnote 15] Agencies must annually review and
certify the allowances, which allows the agencies to terminate the
incentive payments when no longer deemed necessary. One senior human
resources manager told us, for example, that her department often uses
retention allowances to help retain certain specialized employees who
are frequently approached by recruiters from private industry and state
governments.
Agencies Can Use Retention Allowances to Build Employee Competencies:
Although agencies generally use retention allowances to retain highly
qualified employees, State also uses this flexibility to build employee
competencies. In 1998, when planning for its information technology
requirements, State determined that it needed to address the difficulty
of attracting and keeping the highly qualified technical workforce
necessary to carry out its mission of providing support and
coordinating the activities of all U.S. government agencies abroad. As
such, it implemented a technology skills development program to attract
and retain employees with certain technological skills by granting them
retention allowances for obtaining job-related degrees and
certifications. Under the program, State also paid for training courses
leading up to certification but not the examinations to obtain the
credentials.[Footnote 16]
According to State, it has granted over $4 million in total retention
allowances under this skills development program. The number of
information technology employees with degrees or certifications
increased from 133 in 1999 to 583 in 2001. As part of its evaluation of
the skills development program, State surveyed the participants and
supervisors involved in the program. Approximately 61 percent of the
employees who participated in the program (335 out of 547) responded to
the 2001 survey. The 2001 survey showed that 80 percent of the
responding participants agreed that receiving the retention allowance
played a substantial role in their decision to work at the department,
and 90 percent agreed that receiving the allowance played a substantial
role in their decision to remain at the department.
Special Hiring Authorities Were Also Noted to be Particularly Effective
Flexibilities:
Agency and union representatives frequently noted that special hiring
authorities available to federal agencies can also be particularly
effective in assisting agencies to appoint needed employees. These
hiring authorities allow agencies to hire employees without going
through the standard federal hiring process, often resulting, according
to managers, in shorter hiring times, less onerous paperwork, and more
flexibility in selecting the job candidates who managers believe are
most qualified. These special hiring flexibilities include the
following.
Student educational employment program. The student employment program
allows agencies to appoint graduate, undergraduate, vocational,
technical, associate degree, and professional degree seeking students
who are enrolled or have been accepted for enrollment in at least a
part-time schedule at an accredited institution. Some of these student
employees are eligible to receive tuition assistance and, upon
completion of their academic work, may be eligible for conversion to
permanent jobs with the agency. A senior human resources manager at one
department said that the student employment program allows agencies to
develop professional relationships with students while they are still
in school, which makes it easier to hire them when they are looking for
permanent employment. GSA officials said they had hired 110 students
under this program in the last 3 years and noted that the agency has
done well at retaining these employees after they completed their
academic work. Air Force officials told us that given the agency‘s
downsizing environment of the past decade, the Air Force had only
recently reestablished its student employment program but that the
program has been successful in bringing in new employees who, thus far,
tend to stay with the agency.
Outstanding scholar program. The outstanding scholar program
supplements the standard competitive hiring process by allowing
agencies to hire outstanding college graduates[Footnote 17] for certain
entry-level occupations at grades GS-5 and GS-7. Agency officials we
interviewed said that because agencies using the program are not
required to rate and rank candidates for these positions, the hiring
process can be shortened. For example, supervisors at GSA in
Philadelphia told us that outstanding scholar hiring authority is
beneficial because it allows the agency to hire more quickly. Although
these and other agency officials strongly supported the use of this
program, concerns have been raised by some about the degree of
discretion this program provides in allowing agencies to circumvent the
standard competitive hiring process. For example, in a January 2000
report, MSPB noted that the hiring authority under the outstanding
scholar program was originally intended to be used as a short-term
supplemental hiring tool.[Footnote 18] The program was established in
1981 in response to a civil lawsuit challenging the federal
government‘s use of a written test for entry-level professional and
administrative jobs because of that test‘s adverse impact on African-
Americans and Hispanics.[Footnote 19] Although the program is aimed at
addressing underrepresentation of African Americans and Hispanics, the
program has never been restricted to those designated minority groups.
In its report, MSPB recommended that this hiring authority be abolished
and that merit-based hiring be restored to this group of federal jobs.
In its comments on a draft of our report, OPM cautioned that although
some agency officials we interviewed may have viewed this program as
providing broad authority to use noncompetitive hiring procedures,
agencies are to use this program only as a supplement to competitive
examining. OPM stressed that agencies must have an established pattern
of competitive selection into the covered occupations before agencies
can use the program.
Veteran-related hiring authorities. During our review, several agency
and union officials also noted the benefits of two veteran-focused
hiring authorities. Veterans Readjustment Appointment (VRA) authority
allows agencies to noncompetitively appoint eligible veterans to
otherwise competitive positions at any grade level through GS-11 or
equivalent. After the veteran completes 2 years of satisfactory
service, the employing agency must then noncompetitively convert this
VRA appointee to permanent status in the competitive federal service.
Veterans Employment Opportunities Act (VEOA) authority allows agencies
to obtain a wider pool of job applicants by permitting agencies to
accept job applications from eligible veterans for certain positions
that would typically be open only to individuals with competitive
status. Veterans who submit job applications under this VEOA authority
could then be selected for the positions under standard competitive
procedures. Supervisors of wage-grade employees at GSA‘s Philadelphia
region said, for example, that using VRA authority had been effective
in assisting the region in quickly hiring highly qualified veterans.
GSA human resources officials in San Francisco told us that VEOA had
been effective in facilitating the hire of 24 veterans over the last
year.
Incentive Awards Were Also Cited as Effective Flexibilities:
Agency and union officials also frequently mentioned the effectiveness
of granting incentive awards to employees. The intent of the incentive
awards program is to provide appropriate motivation and recognition for
excellence in job performance and contributions to an agency‘s goals.
Incentive awards, which can be either monetary or nonmonetary, include
the following.
* Performance awards are lump-sum cash awards that reward employees for
fully successful or better job performance as defined by formal
performance appraisals. Awards can be up to 10 percent of an employee‘s
basic pay, or up to 20 percent for exceptional job performance.
* Special act or service awards are lump-sum cash awards for specific
accomplishments that contribute to the efficiency, economy, or other
improvement of government operations. Agencies may grant up to $10,000
without external approval, up to $25,000 with OPM approval, and in
excess of $25,000 with Presidential approval.[Footnote 20]
* Quality step increases (QSI) are permanent pay increases for
outstanding performance as shown on formal job performance appraisals.
QSIs are granted by providing employees with faster than normal
progression through the stepped rates of GS.
* Time-off awards are awards that grant employees time off from duty
without charging their annual leave or requiring that they forgo pay.
These awards allow employees to take time off from work when it is most
convenient for both the agencies and the employees.
* Group incentives include cash awards granted to employees based on
(1) increases in productivity or decreases in costs (i.e., gainsharing)
or (2) achievement of specified goals that enhance the success of the
organization‘s mission (i.e., goalsharing). These incentives are
designed to foster teamwork and promote innovation and continuous
improvement.
* Honorary and informal recognition awards are awards such as trophies,
plaques, certificates, and other tangible incentives. These awards give
supervisors maximum flexibility to be creative in how they recognize
employees.
Agency and union officials provided us with numerous examples of their
use of incentive awards as effective flexibilities. For example:
* Officials at GSA said that GSA had used its awards program
effectively to recognize and motivate employees and that the agency had
delegated approval for authorizing awards to appropriate levels within
the agency. GSA‘s fast-track awards program, for example, allows
managers and supervisors to log onto GSA‘s intranet system and complete
the administrative work for the award within minutes.
* At VBA in Philadelphia, supervisors noted that offering movie tickets
and restaurant coupons to employees was a good way to show appreciation
for employees‘ performance and contributions.
* U.S. Mint officials said that they reward and recognize employees
through on-the-spot awards, time-off awards, and gainsharing. At the
Mint in San Francisco, managers mentioned that they have used employee
recognition day to boost morale by providing awards that are of nominal
monetary value but that are symbolically significant, such as T-shirts.
* State‘s Information Resource Management (IRM) Bureau officials said
that their quarterly awards process allows supervisors to recognize and
reward employees in a more timely fashion, rather than waiting until
the annual job performance appraisal process.
* IRS managers in Philadelphia mentioned that the agency provides data
conversion employees with incentive pay tied to quality and production,
noting that this award has helped to motivate these employees to
accomplish their job tasks more quickly and accurately.
Agency Officials and Union Representatives Cited Need for Additional
Human Capital Flexibilities:
We identified five categories of additional flexibilities that agency
officials and union representatives cited most often as being
potentially helpful in managing their workforces if additional
flexibilities were authorized for agencies. Specifically, these
categories include:
* more flexible pay approaches,
* greater flexibility to streamline and improve the federal hiring
process,
* increased flexibility in addressing employees‘ poor job performance,
* additional workforce restructuring options, and:
* expanded flexibility in acquiring and retaining temporary employees.
These suggestions by agency officials and union representatives provide
a starting point for executive branch decision makers and Congress to
consider as they seek to reform federal human capital policies and
practices. Although we have not analyzed the validity of the
suggestions, the categories are consistent with the authorities that we
have established at GAO and have been urging for other federal
agencies. The GAO Personnel Act of 1980 and our 2000 legislation
included some of the proposed additional flexibilities. The most
prominent change in human capital management that we implemented as a
result of the GAO Personnel Act of 1980 was a broadbanded[Footnote 21]
pay-for-performance system that bases employee compensation primarily
on the knowledge, skills, and performance of individual employees. It
provides managers flexibility to assign and use employees in a manner
that is more suitable to multitasking and the full use of staff.
Importantly, careful design and effective implementation is crucial to
obtaining the benefits of broadbanding in an equitable and cost-
effective manner. Also, as a result of the 1980 Act, the Comptroller
General has the authority to hire, on a noncompetitive basis, up to 15
experts and consultants at any level, including senior executives, with
renewable terms up to 3 years each. GAO has used this authority in
selected cases and found it to be valuable in filling critical time-
sensitive positions within the agency.
Our October 2000 legislation gave us additional tools to realign our
workforce in light of mission needs and overall budgetary constraints;
to correct skills imbalances; and to reduce high-grade, managerial, or
supervisory positions without reducing the overall number of employees.
To address any or all of these three situations, we were given
authority to offer voluntary early retirement and voluntary separation
incentive payments to our employees until December 31, 2003. This
legislation also allowed us to create a technical and scientific career
track at a compensation level comparable to senior career executives
and to give greater consideration to performance and employee skills
and knowledge in any reduction-in-force actions.
Aspects of these authorities were also included in the recently enacted
Homeland Security Act of 2002,[Footnote 22] which created the new
Department of Homeland Security. In addition to providing the President
with additional authority to create new policies for managing the
workforce within the new department, the legislation includes
provisions that authorize agencies across the federal government to use
additional personnel flexibilities. For example, agencies will now be
permitted to offer buyouts to their employees without the requirement
to reduce their overall number of employees. This change will provide
agencies the opportunity to more easily restructure their workforces to
correct skills imbalances related to those employees whose jobs have
become obsolete or whose skills are no longer needed. The legislation
also permits agencies to use a more flexible approach in the rating and
ranking of job candidates during the hiring and staffing process. Using
this alternative approach can expand the number of qualified candidates
that a selecting official could choose from when filling a position. In
addition, under the legislation agencies will need to incorporate
workforce planning into their strategic plans and appoint ’chief human
capital officers“ to oversee workforce management.
Additional analysis may be needed to ensure that any new personnel
authorities that are granted and implemented are consistent with a
focus on results, merit, and other important federal employment goals.
As we have noted in previous reports and testimonies,[Footnote 23]
comprehensive legislative reform of the civil service will likely be
necessary to address the federal government‘s human capital challenges;
however, the consensus necessary to make this a reality has yet to be
achieved. Such reform could provide a broader range of federal agencies
with a more standard set of human capital tools and flexibilities to
manage their workforces. Ultimately, in undertaking any civil service
reform, policymakers will likely want to consider the potential needs
of individual agencies along with the governmentwide need to manage
competition between agencies for skilled employees.
Agency Officials Believed That Additional Flexibilities Could Coexist
with Protection of Employee Rights, but Union Representatives Gave
Mixed Views:
Because human capital flexibilities entail greater decentralization and
delegation of human capital authorities and fewer rules, the protection
of employees‘ rights under these conditions can be challenging. The
managers and supervisors and human resources officials we interviewed
generally believed that additional human capital flexibilities could be
authorized and implemented in their agencies while also ensuring
protection of employees‘ rights. Union representatives we interviewed,
on the other hand, had mixed views on the ability of agencies to
protect employee rights with the increased discretion that additional
flexibilities would give to agency managers. Some union representatives
responded positively when asked if agencies could give managers
additional flexibilities while protecting employees‘ rights. Several
union officials, however, said that managers could more easily abuse
their authority when implementing these additional flexibilities and
that agency leaders often do not take appropriate actions in dealing
with abusive managers.
According to the agency and union officials we interviewed, one of the
most effective ways to ensure protection of employees‘ rights when
implementing these flexibilities is making certain that supervisors and
employees are fully aware of the available flexibilities, the
procedures to use them, and the associated rights and responsibilities
of both managers and employees when using them. Clear guidelines for
consistently applying the flexibilities and straightforward
explanations from managers about how and why they made decisions are
essential, according to some of the individuals we interviewed. The
consensus of agency officials, with some union representatives
agreeing, was that putting personnel authority in the hands of agency
managers through human capital flexibilities will not affect employee
protection as long as managers are held directly accountable for their
personnel decisions.
In our previous work, we recognized the importance of involving
employee unions when agencies propose major changes in the work
environment that may be of particular concern to the unions.[Footnote
24] We found that obtaining union cooperation and support through
effective labor-management relations can help achieve consensus on the
planned changes, avoid misunderstandings, and more expeditiously
resolve problems that occur. When agencies and employee unions
maintained an ongoing working relationship in an environment of trust
and openness, agencies and unions were able to work cooperatively even
in the face of significant change. For example, both IRS and the
National Treasury Employees Union officials credited the excellent
working relationship they developed over the last decade for helping
the reorganization of IRS. One IRS official, for example, stated that
it is important to involve the union as a part of the discussions about
flexibilities because the union is sometimes more effective than agency
managers in communicating with employees.
Agency managers and supervisors also cited the importance of securing a
close working relationship with the agency‘s human resources officials
in the protection of employee rights. Officials commented that human
resources officials are often good sources of information about
flexibilities and effective monitors of potential problems involving
their use. According to several supervisors we interviewed, this
assistance and monitoring by human resources officials, along with
managers‘ and union representatives‘ efforts to keep each other honest,
help to ensure that employee protection can coexist with the use of
human capital flexibilities.
Key Practices Can Assist Agencies in Effectively Using Flexibilities:
Based on our interviews with human resources directors across the
federal government and our related human capital work, we identified
six key practices that agencies can implement for effectively using
human capital flexibilities. These practices are (1) planning
strategically and making targeted investments, (2) ensuring stakeholder
input in developing policies and procedures, (3) educating managers and
employees on the availability and use of flexibilities, (4)
streamlining and improving administrative processes, (5) building
transparency and accountability into the system, and (6) changing the
organizational culture.[Footnote 25] We confirmed the importance of
these practices in our discussions with managers and supervisors, human
resources officials, and local union representatives at the seven
agencies we selected for more detailed review. We also identified
relevant examples of the use of these key practices from the seven
agencies. The following is a more detailed discussion of these
practices along with examples we identified.
Planning Strategically and Making Targeted Investments:
With strong commitment on the part of their leadership, federal
agencies need to ensure that the use of human capital flexibilities is
part of an overall human capital strategy clearly linked to the program
goals of the organization. Agencies need to plan for how they will use
and fund these authorities, what results they expect to achieve, and
what methods they will use to evaluate actual results. Our review found
that a significant reason why managers and supervisors had not made
greater and more effective use of existing human capital flexibilities
was agencies‘ weak strategic human capital planning and inadequate
funding for using these flexibilities given competing priorities. Such
a strategic focus would allow for answering critical questions such as
whether current staff and resources are sufficient; whether they are
being allocated in a manner best suited to promote mission
accomplishment; and, ultimately, whether agencies and Congress may wish
to consider a variety of targeted investments or new human capital
flexibilities in the future. The following are elements and examples of
planning strategically and making targeted investments from the seven
agencies we reviewed.
* Obtain agency leadership commitment. Top leadership commitment is
crucial to instilling a common vision across the organization and
creating an environment that is receptive to innovation. In earlier
reports and testimonies, we observed that top leadership plays a
critical role in creating and sustaining high-performance
organizations.[Footnote 26] We also highlight the importance of top
leadership commitment in our recently issued model of strategic human
capital management, in which we note that political leaders and senior
career executives demonstrate this commitment by personally developing
and directing reform, driving continual improvement, and characterizing
the agency‘s mission in reform initiatives.[Footnote 27] At IRS, for
example, Commissioner Rossotti‘s efforts demonstrated a clear case of
leadership‘s commitment to change. As mandated by Congress in the IRS
Restructuring and Reform Act, the Commissioner articulated a new
mission for the agency, together with support for strategic goals that
balance customer service and compliance with tax laws. The Commissioner
led a modernization effort that touched virtually every aspect of IRS,
including implementation of IRS‘s newly authorized personnel system and
the additional human capital flexibilities that accompanied it.
* Determine agency workforce needs using fact-based analysis. Federal
agencies often have not gathered and analyzed the data required to
effectively assess how well their human capital approaches have
supported results. High-performing organizations identify their
current and future human capital needs, including the appropriate
number of employees; the key competencies for mission accomplishment;
and the appropriate deployment of staff across the organization. For
example, in 1998 the Air Force Materiel Command (AFMC), the largest
employer of civilians in the Air Force, began a two-phased workforce
study designed to tailor its human capital to meet future business
needs. AFMC‘s planning efforts, as documented in its April 2000 study
called Sustaining the Sword, involved an assessment of the current and
projected 2005 workforce by workforce mix, skills, skill levels, and
demographics and then a more detailed position-level analysis of
workforce data from AFMC locations. AFMC reported that these data and
the results of its workforce shaping activities led to a more informed
understanding of workforce gaps, for which corrective strategies could
be then developed.
* Develop strategies that employ appropriate flexibilities to meet
workforce needs. After identifying current and future workforce needs,
agencies ought to develop effective strategies that fill the gaps. In
developing these strategies, agencies should assess which human capital
flexibilities might work best given current and future needs. For
example, in 2000 the Mint created a ’human resources flexibilities
team“ to assess the agency‘s current and future use of existing human
capital flexibilities. This initial assessment, as outlined in a
December 2000 report, revealed that the Mint had pursued a number of
key flexibilities but had not done so uniformly across its
organizational, occupational, and grade-level structures. In its
report, the Mint assessed over 80 disparate human capital flexibilities
and developed specific plans to use each of the flexibilities that had
not been used or that required immediate attention for full use.
* Make appropriate funding available. After developing strategies,
agencies need to assess the associated costs of using any human capital
flexibilities as part of these strategies. Such assessments will allow
agencies to better plan for the use of these flexibilities and to
ensure that appropriate funding is available when needed. Air Force,
for example, developed a comprehensive, multiyear funding plan to
implement its Civilian Personnel Management Improvement Strategy
(CPMIS), which comprises 28 separate human capital initiatives grouped
into the areas of accession planning, workforce development, retention/
separation management, and support activities. Under accession
planning, for instance, one initiative calls for the Air Force to
expand its use of the ’3Rs“--recruitment bonuses, relocation bonuses,
and retention allowances--to sustain necessary skills in the civilian
workforce. Beginning in fiscal year 2004, the Air Force projects
offering approximately 1,300 recruitment bonuses annually at an average
cost of $11, 250, approximately 650 relocation bonuses at an average
cost of $10,000, and approximately 650 retention allowances at an
average cost of $9,000. (See table 2.):
Table 2: Air Force CPMIS Funding Strategy for 3Rs (Fiscal Years 2004
through 2009):
Human capital flexibility: Recruitment bonuses (1,300); Proposed
funding by fiscal year (dollars in millions): 2004: $14.6; Proposed
funding by fiscal year (dollars in millions): 2005: $15.5; Proposed
funding by fiscal year (dollars in millions): 2006: $16.4; Proposed
funding by fiscal year (dollars in millions): 2007: $17.3; Proposed
funding by fiscal year (dollars in millions): 2008: $18.3; Proposed
funding by fiscal year (dollars in millions): 2009: $19.3.
Human capital flexibility: Relocation bonuses (650); Proposed funding
by fiscal year (dollars in millions): 2004: 6.5; Proposed funding by
fiscal year (dollars in millions): 2005: 6.7; Proposed funding by
fiscal year (dollars in millions): 2006: 6.8; Proposed funding by
fiscal year (dollars in millions): 2007: 7.0; Proposed funding by
fiscal year (dollars in millions): 2008: 7.2; Proposed funding by
fiscal year (dollars in millions): 2009: 7.4.
Human capital flexibility: Retention allowances (650); Proposed funding
by fiscal year (dollars in millions): 2004: 5.9; Proposed funding by
fiscal year (dollars in millions): 2005: 6.0; Proposed funding by
fiscal year (dollars in millions): 2006: 6.2; Proposed funding by
fiscal year (dollars in millions): 2007: $6.4; Proposed funding by
fiscal year (dollars in millions): 2008: 6.6; Proposed funding by
fiscal year (dollars in millions): 2009: 6.8.
Source: Air Force.
[End of table]
Ensuring Stakeholder Input in Developing Policies and Procedures:
Agency leaders, managers, employees, and employee unions need to work
together to identify and effectively implement human capital
flexibilities. Engaging all of the stakeholders in developing policies
and procedures for the use of flexibilities helps in reaching agreement
on the need for change, the direction and scope that change will take,
and how progress will be assessed. Stakeholder input should also be
used to ensure that the policies surrounding the use of flexibilities
are clear and the procedures to implement them are uncomplicated. The
following are elements and examples from our seven selected agencies on
how they ensured stakeholder input in developing human capital
flexibility policies and procedures.
* Engage the human capital office. Because flexibilities influence the
entire human capital system, human capital professionals are needed to
supply the energy and expertise in helping to develop policies and
procedures on the use of flexibilities. As noted in our model of
strategic human capital management, this assistance requires the
expansion of the role of human capital professionals from largely
paperwork processors to functioning as advisors to and partners with
senior leadership and managers. By transforming from focusing largely
on transactions to more on total customer service, the role of the
human capital office in facilitating the use of flexibilities will
become increasingly important. GSA‘s Philadelphia regional office, for
example, established a Human Resources Council, which is composed of
the human resources director and representatives of various GSA
offices, to discuss human capital policies and practices in the region,
such as alternative work arrangements and incentive awards. In another
example, State‘s IRM Bureau directly involved human capital
professionals in its working group that crafted its skills development
program to provide retention allowances (ranging from 5 to 15 percent)
to certain information technology workers who obtain job-related
degrees and certifications.
* Engage agency managers and supervisors. Soliciting the input of
managers and supervisors on how best to implement human capital
flexibilities is a key component for their successful use. Because
managers and supervisors are virtually certain to be negatively
affected by unclear policies and procedures, their perspectives on how
to make strategic use of flexibilities, while avoiding potential
problems caused by poor implementation, are essential. To address the
potential problems of limited input, for example, 160 frontline
managers from GSA‘s central and regional offices convened in four
sessions in March 2001 to exchange information about effective
workforce-related practices using many of the flexibilities already
available to the agency. This effort resulted in a catalog of ’best
practices“ that their offices had implemented in the areas of
recruiting and orienting employees, engaging existing employees, and
developing leaders.
* Involve employees and unions. As with any significant change in the
workplace, involving employees and unions in decisions to use human
capital flexibilities increases employees‘ understanding and
acceptance of the objectives for implementing change, helps to avoid
misunderstandings, and can assist in more expeditiously resolving
problems that might occur.[Footnote 28] While frontline employees can
help ensure a more operationally oriented perspective on the use of
flexibilities, obtaining union cooperation and support through
effective labor-management relations can help achieve consensus on the
changes accompanying their use. For example, the Mint and VBA made
changes to employee work schedules based on input from employees in
open forums. At a ’town hall“ meeting at the Mint‘s San Francisco coin-
making plant, employees (with assistance from the local union) were
able to vote on various options for implementing an alternative work
schedule for the facility. At a ’listening post“ session at VBA‘s
regional office in Philadelphia, employees offered input to change the
operating hours of the facility‘s phone operations.
* Use input to establish clear, documented, and transparent policies
and procedures. After obtaining sufficient input from key players,
agencies need to develop and implement human capital flexibilities
using clear, documented, and transparent policies and procedures. This
practice is essential to ensuring that they are used fairly and, at the
same time, are not encumbered with so many administrative burdens that
they lose their value as flexibilities. Agencies can take various steps
to ensure that policies and procedures are clear and uncomplicated. For
example, the Mint‘s Office of Chief Financial Officer hired a writer-
editor to assist the agency in writing personnel-related policies and
procedures in ’plain English.“ As an example of developing
uncomplicated policies and procedures, GSA officials provided us with a
merit promotion plan that had been reduced from 75 to 5 pages.
Educating Managers and Employees on Availability and Use of
Flexibilities:
Agencies need to ensure that they have an effective campaign not only
to inform agency managers and employees of their personnel authorities,
but also to explain the situations where the use of those authorities
is appropriate. Our work at the seven agencies showed that the lack of
awareness and knowledge of human capital flexibilities was one of the
most significant reasons why federal managers and supervisors have not
made better use of these flexibilities. In some cases, senior managers
might not know that such flexibilities were already available to their
agencies. In other cases, agency leaders or parent departments might
place restrictions on the use of a flexibility--either strategically or
haphazardly--and then not communicate the source and reasons for such
restrictions to line managers and supervisors within the agency.
Educating managers and employees goes a long way in ensuring effective
use of these flexibilities across the federal government. The following
are elements and examples of how agencies educated managers and
employees on the availability and use of human capital flexibilities.
* Train human capital staff. Traditionally, what has been called the
personnel or human resources function has often been viewed as strictly
a support function involved in administering personnel processes and
ensuring compliance with rules and regulations. As human capital
professionals take a more consultative approach to their jobs, they
will need not only the knowledge of and expertise in the full range of
human capital flexibilities available but also skills on communicating
this information to their clients in the agencies they serve. For
example, GSA held a conference in September 2000 for its human
resources staff members to increase their knowledge of emerging human
capital issues and to better their skills in responding to the needs of
clients throughout the agency. According to a senior human resources
manager at GSA, the conference included a presentation and discussion
of the human capital flexibilities available for use within the agency.
* Educate agency managers and supervisors on existence and use of
flexibilities. Ultimately the flexibilities within the personnel system
are only beneficial if the managers and supervisors who would carry
them out are actually aware of their existence and of the best manner
in which they could be used. Educating managers and supervisors is key
to ensuring that agencies use all of the tools and flexibilities needed
to manage their workforces to accomplish agency missions and achieve
goals. For example, AFMC developed and distributed a Supervisor‘s Guide
to Work Force Planning to educate agency managers and supervisors on
numerous flexibilities available to attract and retain quality
employees. GSA‘s Philadelphia office has educated its supervisors on
human capital flexibilities with its ’Human Resources Solutions Series“
training, which includes topics such as employee leave and work
schedules, options for dealing with performance and conduct problems,
and balancing managerial flexibility and accountability under merit
system principles.
* Inform employees of procedures and rights. In previous work, we have
highlighted the importance of informing employees of personnel-related
policies and procedures and their rights under them.[Footnote 29] This
communication helps in minimizing employee confusion and apprehension
and ensuring that flexibilities are implemented fairly within and
across the organization. Agencies can use a variety of methods to
communicate this information. For example, GSA‘s human resources
manager in Philadelphia said that most updates concerning employee
rights and procedures are communicated via GSA‘s intranet Web site. The
office also distributes an employee newsletter with information about
related personnel policies and procedures.
Streamlining and Improving Administrative Processes:
Agencies also need to streamline and improve administrative processes
for using flexibilities and review self-imposed constraints that may be
excessively process oriented. Indeed, our interviews with agency
managers and supervisors revealed that they viewed burdensome and time-
consuming approval processes as a significant reason why they did not
make better use of available human capital flexibilities. Although
sufficient controls are important to ensure consistency and fairness in
using flexibilities, agency officials should look for instances in
which processes can be reengineered. This reengineering of processes
for using flexibilities can assist the agencies in increasing
efficiencies, decreasing costs, or both. In this effort, agency
managers need to bear in mind that they should first determine
requirements and design processes before developing any information
systems to support the new processes. The following are elements and
examples of how the agencies streamlined and improved administrative
processes.
* Ascertain the source of existing requirements. As we have previously
reported, some of the barriers to effective strategic human capital
management in the federal government do not stem from law or regulation
but are self-imposed by agencies.[Footnote 30] The source of these
barriers can sometimes be a lack of understanding of the prerogatives
that agencies have. For example, the head of State‘s office responsible
for overseas building operations asked OMB in May 2001 for a series of
increased flexibilities to accomplish various personnel management
goals. In its response, OMB noted that the department already had the
authority to implement many of these requested changes. In another
example, personnel policy at the Mint had required that job vacancy
announcements for certain positions be publicly posted for at least 30
calendar days. OPM, however, generally allows agencies the flexibility
to post such announcements for as few as 5 business days.[Footnote 31]
Mint officials told us that the Mint‘s parent agency, the Department of
the Treasury, had initially established this 30-day posting requirement
and that the Mint‘s original policy had been drafted to concur with
Treasury‘s. After Mint officials realized that this 30-day requirement
flowed from its parent department, the Mint was able to work to modify
the policy to require a minimum of only 5 business days for posting
these job announcements.
* Reevaluate administrative approval processes for greater efficiency.
In our interviews at the selected agencies, some managers and
supervisors complained about the lack of time to initiate and implement
the justification and approval processes that agencies have in place to
use existing flexibilities. If senior managers within the agency want
supervisors to use these flexibilities, supervisors must view the
required initiation and approval processes worth their time compared to
the expected benefit to be gained in using the flexibility. In
simplifying processes to provide for greater efficiencies and improved
quality and responsiveness, agencies have often turned to automation of
paper-based personnel processes and procedures. For example, managers
and supervisors at GSA‘s Philadelphia office cited the agency‘s
recently automated processes for granting employees on-the-spot cash
awards (ranging from $50 to $2,000). Previously, agency supervisors
were required to complete lengthy justifications and send these forms
to the personnel office for review. According to the human resources
manager, the perceived burdens of the previous administrative process
led to very few awards being granted. Now, according to GSA managers
and supervisors, by accessing GSA‘s intranet Web site, an agency
supervisor can complete the award initiation process within minutes and
on the next business day receive a certificate to present to the
employee that shows what the award is for and when the employee can
expect the money in his or her paycheck.
* Replicate proven successes of others. When developing processes and
procedures for using flexibilities, agencies can potentially learn
valuable lessons from other agency components or from other
organizations altogether. These lessons learned could be instructive in
developing ways to best implement such flexibilities along with
determining which flexibilities are most effective. For example,
officials at VBA‘s Oakland office informed the agency‘s Philadelphia
office of the success they had in using the student cooperative program
to recruit needed staff members for the office. This special hiring
authority, called the Student Career Experience Program, allows
agencies to appoint students who are enrolled or have been accepted for
enrollment at least part-time at accredited institutions. After
completing their academic requirements, these employees can then be
converted noncompetitively to term or permanent positions within 120
days.
Building Transparency and Accountability into the System:
To ensure effective use of human capital flexibilities, agencies need
to delegate authority to use these flexibilities to appropriate levels
within the agency, and then agency managers and supervisors need to be
held accountable--both for achieving results and for treating employees
fairly. Agency managers and supervisors are more likely to support
changes when they have the necessary authority and flexibility--along
with commensurate accountability and incentives--to advance the
agency‘s goals and improve performance. Indeed, devolving decision-
making authority to program managers in combination with holding them
accountable for results is one of the most powerful incentives for
encouraging results-oriented management. However, achieving a proper
balance between managerial flexibility and adequate controls to ensure
consistency and accountability can be a challenging endeavor. Moreover,
agencies that expect their managers and employees to take greater
responsibility and be held accountable for results must ensure that the
managers and employees have the training and tools they need to fulfill
these expectations. The following are elements and examples from the
agencies we reviewed of how they built transparency and accountability
into their human capital systems.
* Delegate authority to use flexibilities to appropriate levels within
the agency. In a recent report, we found that only about one-third of
agency managers we surveyed from 28 agencies believed that they had, to
a great or very great extent, the authority they needed to help
accomplish agency goals.[Footnote 32] Providing managers and
supervisors with such authority gives those who know the most about an
agency‘s programs the power to make those programs work. This
delegation of authority is equally important when implementing human
capital flexibilities. For example, the Department of the Treasury
delegated authority to IRS and its other bureaus to establish their own
policies on superior qualifications appointments (SQA), a flexibility
that allows agencies to hire individuals at advanced rates of pay based
on the individuals‘ superior qualifications or special needs of the
agencies. To expedite timely approval in hiring situations, IRS in turn
redelegated this approval authority for SQAs to the human resources
officers within each of the agency‘s business units. In another
example, VBA in Philadelphia delegated authority to immediate
supervisors to approve on-the-spot monetary awards for their employees
without review by senior managers. VBA supervisors said that under this
delegated authority they simply complete a short form and present it to
the employee, who can then proceed to the on-site credit union and
receive cash, all within 1 hour.
* Hold managers and supervisors directly accountable. Agencies must
develop clear and transparent guidelines for using flexibilities and
then hold managers and supervisors accountable for their fair and
effective use. Managers need to be held accountable for their
contributions to results and recognized and rewarded for those
contributions. Internal and external parties, such as agency human
resources offices, offices of inspectors general, and OPM, can help to
ensure transparency in the use of flexibilities through appropriate
review and oversight. For example, according to the senior human
resources official at GSA‘s Philadelphia regional office, the human
resources office monitors supervisors‘ granting of employee awards to
ensure that supervisors are effectively using this flexibility. This
list of award amounts and frequencies (without personal identifiers)
can be provided to supervisors within the region so that they know how
their use of such flexibilities compares with that of other regional
supervisors.
* Apply policies and procedures consistently. While recognizing
differences in each individual‘s job performance and competencies,
supervisors need to make concerted efforts to apply policies and
procedures for using flexibilities consistently. Our review at the
seven agencies showed that a significant reason why supervisors have
not made greater use of flexibilities is supervisors‘ fears that some
employees will view the use of various flexibilities as somehow unfair.
The consistent application of policies and procedures helps to lessen
employee fears because decision-making criteria are well defined,
documented, transparent, and applied the same way in similar
situations. For example, after some concerns expressed by newly hired
IRS employees about possible inconsistencies, the agency developed
guidelines for its managers to use in determining if a job applicant
qualifies for a recruitment bonus. According to IRS officials, these
guidelines helped to ensure consistent application of recruitment
bonuses based on the specific backgrounds of new employees.
Changing the Organizational Culture:
Organizational culture represents the underlying assumptions, beliefs,
values, attitudes, and expectations generally shared by an
organization‘s members. Because an organization‘s beliefs and values
affect the behavior of its members, changing the organizational culture
related to outdated personnel-related approaches is crucial to
effectively using human capital flexibilities. Changing this culture is
important particularly in areas related to ensuring the involvement of
senior human capital managers in key decision-making processes and
decreasing managers‘ and supervisors‘ resistance to change. Agencies
also need to address managers‘ and supervisors‘ concerns that employees
will view the use of flexibilities as inherently unfair, and the belief
that all employees must be treated essentially the same regardless of
job performance and agency needs. By addressing such organizational
culture issues, agencies can better assist managers and staffs in
developing creative ways to employ tools and flexibilities to address
human capital challenges. The following are elements and examples from
the seven agencies we reviewed of practices they implemented to change
their organizational cultures.
* Ensure involvement of senior human capital managers in key decision-
making processes. A fundamental reorientation is required to ensure
that human capital leaders take a ’seat at the table“ as full members
of the top management team rather than isolating them to provide after-
the-fact support. By expanding the strategic role of human capital
officials beyond providing traditional personnel administration
services, agencies are in a better position to integrate human capital
considerations when identifying the mission, strategic goals, and core
values of the organization as well as when designing and implementing
policies and procedures. The senior human capital manager at IRS, for
instance, has been heavily involved in the agency‘s recent
restructuring initiative as well as its overall strategic direction.
Recognizing the importance of this strategic role, he also recently
devolved the agency‘s human resources office into three units; two are
strategically focused and the third is transaction focused.
* Encourage greater acceptance of prudent risk taking and
organizational change. Managers and supervisors need to have an
appropriate attitude toward risk taking and proceed with new operations
after carefully analyzing the risks involved and determining how they
may be minimized or mitigated. Managers and supervisors will at times
resist making changes because they would have to work in new and
unfamiliar ways. Although managers and supervisors can initially be
uncomfortable exercising newly delegated authorities, they will often
gain confidence as they better understand their importance and become
more experienced in exercising them. For example, IRS‘s regional office
in Oakland hired a consultant to conduct training for managers that
promotes creative thinking, empowerment for decision making, and
prudent risk taking. The training course is an ongoing process with
managers returning each year to ensure their continued comfort with and
use of principles covered in the training. In another example,
according to a senior human resources official in State, managers in
the department‘s Office of Logistics Management were initially hesitant
to allow the use of alternative work schedules for employees in that
office but finally accepted use of the flexibility when they realized
that it would not drastically affect the office‘s operations.
* Recognize differences in individual job performance and competencies.
In previous work looking at the practices of private sector
organizations regularly cited as leaders in the area of human capital,
common principles of human capital management we identified include the
importance of recognizing differences in employees‘ job performance and
competencies.[Footnote 33] Rather than follow the federal government‘s
traditional approach of compensating federal employees strictly based
on their status at a particular grade level, agencies should look at
using performance management systems, including pay and other
meaningful incentives, to more clearly recognize individual job
performance as well as employee competencies. In an example of
recognizing differences in individual job performance, GSA‘s Public
Buildings Service (PBS) created a performance measurement and incentive
awards system for its regional offices and its employees in its
’Linking Budget to Performance“ initiative. Under this initiative, each
of PBS‘s 11 regional offices strives to achieve preestablished goals
for nine standard performance measures. On the basis of each region‘s
performance, monetary incentives can be provided based on employees‘
contribution to the region‘s accomplishments. Furthermore, an example
of recognizing differences in employee competencies is demonstrated
with State‘s use of retention allowances for employees who obtain job-
related degrees and certifications in the information technology field.
Conclusions:
The insufficient and ineffective use of flexibilities can significantly
hinder the ability of federal agencies to recruit, hire, retain, and
manage their human capital. To deal with their human capital
challenges, it is important for agencies to assess and determine which
human capital flexibilities are the most appropriate and effective for
managing their workforces. On the basis of our review at seven selected
agencies, the most effective flexibilities cited were work-life
policies and programs, monetary recruitment and retention incentives,
special hiring authorities, and employee incentive awards. Our review
at the seven selected agencies also found several categories of
additional flexibilities that agency and union officials cited as being
potentially helpful in managing their workforces. If such additional
flexibilities are desired, agencies should develop business cases to
justify the need for the authority to implement these additional
flexibilities. Although comprehensive civil service reform will likely
be necessary to address the federal government‘s human capital
challenges, agencies need not wait in seeking additional flexibilities
where clear business cases have been established.
The appropriate and effective use of flexibilities is essential to
ensuring that employees‘ rights are protected, agencies adhere to merit
system principles, and employees are shielded from prohibited personnel
practices. To ensure the most effective use of human capital
flexibilities, it is important that agencies (1) plan strategically and
make targeted investments, (2) ensure stakeholder input in developing
policies and procedures, (3) educate managers and employees on the
availability and use of flexibilities, (4) streamline and improve
administrative processes, (5) build transparency and accountability
into their systems, and (6) change their organizational cultures. By
more effectively using flexibilities, agencies would be in a better
position to manage their workforces, assure accountability, and
transform their cultures to address current and emerging demands.
Agency Comments and Our Evaluation:
We provided a draft of this report on September 4, 2002, to the
Director of OPM, the Secretary of Defense, the Commissioner of IRS, the
Director of the U.S. Mint, the Secretary of Veterans Affairs, the
Administrator of GSA, the Under Secretary for International Trade, and
the Secretary of State. OPM, Defense, IRS, the Mint, VA, GSA, and ITA
provided comments on the draft report. These agencies either generally
agreed with the information presented or did not express an overall
opinion about the report. In some cases these agencies provided written
technical comments to clarify specific points regarding the information
presented. Where appropriate, we have made changes to this report to
reflect these technical comments. State did not provide comments on
this report.
The following summarizes significant comments provided by the seven
agencies.
* In her written comments (see app. II), the OPM Director noted that
OPM was pleased that our report acknowledges the need for greater
personnel flexibilities in cases where existing law constrains OPM in
providing policies and programs to assist agencies in accomplishing
their missions. In technical comments, OPM raised concerns, however,
about our position that individual agencies could be authorized
additional legislative flexibilities if they develop sound business
cases that such flexibilities are needed. OPM stated that its
obligation is to review and analyze all agencies‘ requests to use
additional flexibilities or create additional flexibilities to ensure
that they promote the efficiency and effectiveness of the federal
government and do not create an unfair competitive advantage for
selected agencies. In this regard, OPM commented that it supports the
need for a standardized approach to governmentwide flexibilities. As we
noted in this report and in previous reports and testimonies,
comprehensive legislative reform of the civil service will likely be
necessary to address the federal government‘s human capital challenges.
We believe, however, that agencies need not wait in seeking additional
flexibilities where clear business cases have been established for such
flexibilities. It is possible that civil service reform could provide a
broader range of agencies with a more standard set of human capital
tools and flexibilities to manage their workforces. Ultimately, in
addressing civil service reform, policymakers will likely want to
consider the potential needs of individual agencies along with the
governmentwide need to manage competition between agencies for skilled
employees. We added a discussion of this issue to the report in the
section dealing with agency and union officials‘ views on authorizing
additional flexibilities.
* In its technical comments, OPM also emphasized that the outstanding
scholar hiring program can only be used as a supplement to competitive
examining and should not be viewed as an ’alternative“ hiring
authority. OPM expressed concern that we not recommend that agencies
use this program for a purpose other than that for which it was
intended. We noted in the draft report, however, that this program was
intended to serve as a supplemental hiring tool. Our report states that
many agency officials we interviewed viewed this program as effective
because the program allows the agency to hire more quickly given that
the agency does not have to rank and rate candidates as usually
required under the standard competitive hiring process. Although OPM
does not include the outstanding scholar program as an alternative
hiring or staffing option in its Flexibilities Handbook, many of the
agency officials we interviewed viewed this program as an effective
flexibility, and the program meets the definition of human capital
flexibility that we used in this report. Our report, however, does not
recommend that agencies use this program to circumvent the standard
examining process. As with many of the flexibilities available to
agencies, the outstanding scholar program could be used in
inappropriate or inefficient ways. As we note under key factors for
effective use of flexibilities, agencies must build transparency and
accountability into their human capital systems to ensure that managers
and supervisors are held accountable for the fair and effective use of
these flexibilities. In response to OPM‘s concerns on this issue, we
added additional language to the report to emphasize that this program
is to be used as a supplement to competitive hiring and to note OPM‘s
statement that agencies must have an established pattern of competitive
examining into the covered jobs before agencies can use this program.
* Defense‘s comments, provided by E-mail through its Office of
Inspector General, did not express an overall opinion about the report.
However, the comments noted that it appeared we were asserting in the
report that telecommuting had been clearly shown to increase employee
productivity. We noted in the draft report that our discussions with
agency and union officials about telecommuting brought about strongly
mixed views, including its effect on employee productivity and the
challenges of managing such a program. Still, we changed the text to
clarify that some managers and supervisors told us that telecommuting
has not been shown to increase employee productivity and that
telecommuting is not practical for all occupations or situations.
* In written comments (see app. III), the IRS Commissioner stated that
he generally agreed with the list of available human capital
flexibilities that agency and union officials cited as most helpful for
managing their workforces. Nonetheless, he said that these
flexibilities may not be as important in the long run as some of the
more deep-rooted changes to human capital management policies and
practices that agencies like IRS have undertaken recently to improve
their workforces‘ performance and accountability. He noted that IRS‘s
recently acquired statutory flexibilities, such as a broadbanding pay
system and an expedited and flexible hiring process, were instrumental
to achieving the agency‘s transformation to a modern, business-like
organization. He stressed the importance of providing additional
flexibilities to federal agencies so that they can manage their
workforces in a manner comparable to the private sector.
* In written comments (see app. IV), the Mint‘s Director stated that
the report provides an objective, balanced review and assessment of the
issues surrounding the implementation of human capital flexibilities.
She commented that the report would serve as a useful tool that
policymakers could use to guide federal agencies seeking to employ
greater flexibilities to manage their workforces.
* VA provided comments by E-mail through its GAO liaison. VA agreed
with the information presented and had no additional comments on the
draft report.
* GSA‘s comments, provided by E-mail from its Office of Human
Resources, were largely clarifying and technical in nature and did not
express an overall opinion on the report. In a point similar to that
made by Defense, GSA commented that our report should more fully draw
attention to the drawbacks of telecommuting in our discussion of work-
life programs. Again, we added clarifying text indicating that some
managers and supervisors told us that telecommuting has not been shown
to increase employee productivity and that telecommuting is not
practical for all occupations or situations.
* In written comments from ITA (see app. V), the Under Secretary for
International Trade said that the report thoroughly and comprehensively
addresses the critical issue of the programs needed to manage the
federal workforce. In addition, he emphasized the need for the
additional flexibilities mentioned in the report.
We are sending copies of this report to the Chairman and Ranking
Minority Member, House Committee on Government Reform, and its
Subcommittee on Civil Service, Census and Agency Organization, and
other interested congressional parties. We will also send copies to the
Director of OPM, the Secretary of Veterans Affairs, the Secretary of
State, the Secretary of Commerce, the Secretary of the Air Force, the
Secretary of the Treasury, and the Administrator of GSA. 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 have any questions about this report, please contact me or
Edward Stephenson on (202) 512-6806. Key contributors to this report
are listed in appendix VI.
J. Christopher Mihm
Director, Strategic Issues:
Signed by J. Christopher Mihm:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives for this study were to provide information on:
* agency officials‘ and union representatives‘ views on (1) the most
effective flexibilities for managing their workforces, (2) additional
flexibilities that would be the most helpful in managing their
workforces, and (3) whether employee rights could be protected if
additional flexibilities were authorized and implemented within
agencies and:
* key practices that agencies should implement for effective use of
human capital flexibilities, along with specific examples of such
practices from selected agencies.
To respond to the objectives of this report, we conducted this work in
two phases and gathered information from a variety of sources using
several different data collection techniques. During phase one of this
review, which was completed from May to December 2001, we first
interviewed representatives from OPM, the federal government‘s human
resources agency; MSPB, a federal agency that hears and decides civil
service cases, reviews OPM regulations, and conducts studies of the
federal government‘s merit systems; and NAPA, an independent,
nonpartisan, nonprofit, congressionally chartered organization that
assists federal, state, and local governments in improving their
performance. We interviewed representatives of these three
organizations to gather background information on the federal
government‘s experiences with and use of human capital flexibilities
and to obtain suggestions about which federal agencies we should
consider for a more detailed review during phase two of our study. We
also reviewed numerous reports issued by these organizations on
governmentwide human capital issues and the use of various human
capital flexibilities in federal agencies. In addition, we reviewed
previous GAO reports on a broad range of human capital issues.
During phase one of this study, we also gathered information for our
two objectives by conducting semistructured interviews with (1) the
human resources directors of the 24 largest federal departments and
agencies and (2) representatives from 4 national organizations
representing federal employees and managers--National Treasury
Employees Union, American Federation of Government Employees, National
Association of Government Employees, and Senior Executives Association.
To produce a general summary of the human resources directors‘ views,
we first reviewed their responses to the open-ended questions we had
posed to them. Based on our analysis of those responses, we identified
a set of recurring themes and then classified each director‘s responses
in accord with these recurring themes. At least two staff reviewers
collectively coded the responses from each of the 24 interviews and the
coding was verified when entered into a database we created for our
analysis.
During phase two of this study, which was done from January to May
2002, we conducted semistructured interviews with managers and
supervisors, human resources officials, and local union representatives
from seven federal agencies we selected for more detailed review--the
Air Force, GSA, IRS, ITA, the Mint, State, and VBA. We interviewed over
200 officials at these seven agencies. Our interviews with these agency
and union officials focused on their views about the most effective
flexibilities, additional flexibilities needed, and protection of
employee rights. We also asked these officials to confirm and provide
examples of the key practices we had identified on the basis of our
interviews with the human resources directors and our related human
capital work. To produce a general summary of these agency and union
officials‘ views, a staff reviewer coded their responses to our
questions according to the recurring themes we had developed. A
separate reviewer verified the coding when entering the information
into the database we created for our analysis. We sought to obtain
views from a broad and diverse set of officials who would have relevant
knowledge and experience regarding human capital flexibilities. We did
not employ random selection in our choice of individuals to interview;
thus the responses we obtained should not be viewed as a representative
sample of all managers and supervisors, human resources officials, or
local union officials at the seven agencies.
We selected the seven agencies for various reasons, including their
variety of existing human capital challenges and their range in use of
available human capital flexibilities. Specifically, we included Air
Force because the Department of Defense, Air Force‘s parent department,
historically has represented a large percentage of civilian federal
employees and we had previously reported that the Air Force lacked
sufficient acquisition and logistic capabilities. We included GSA
because it had displayed a high use of monetary incentives compared to
other large federal agencies based on our review of data from OPM‘s
Central Personnel Data File (CPDF). IRS was included based on
congressional requesters‘ interest in including an agency with a strong
union presence, and IRS was frequently cited as an agency that had
recently received increased authority to implement a broad range of
human capital flexibilities. ITA was included because the Department of
Commerce, ITA‘s parent department, had shown a high use of monetary
incentives, and we had previously reported that ITA lacked an
experienced staff to monitor and enforce trade agreements. We selected
the Mint because it was originally a candidate to receive performance-
based organization (PBO) status in the late 1990s and it continued to
seek additional human capital flexibilities when it did not receive
this PBO designation.[Footnote 34] We selected State because our review
of CPDF data showed it to be a low user of monetary incentives, and it
had recently established an often-cited skills development program for
its information technology employees. Lastly, we included VBA because
the Department of Veterans Affairs, VBA‘s parent department, continued
to actively seek authority for increased human capital flexibilities,
and we had previously reported that VBA was lacking a sufficient
workforce of skilled claims processors.
For the Air Force, we focused on work at Wright-Patterson Air Force
Base in Dayton, Ohio, and Langley Air Force Base in Hampton, Virginia.
For GSA, IRS, VBA, and the Mint, we focused our work at their field
offices in the Philadelphia and San Francisco metropolitan areas. At
State, we concentrated our work on the IRM Bureau, the Bureau of
Administration, and the Bureau of Overseas Buildings Operations in
Washington, D.C. At ITA, we focused our work primarily on the
headquarters office in Washington, D.C. Our agency selection process
was not designed to identify examples that could be considered
representative of all the human capital flexibilities used at the seven
agencies reviewed or the federal government as a whole.
In addition, we collected and analyzed data from CPDF on the extent of
use of human capital flexibilities, both governmentwide and for the
seven federal agencies we reviewed in more detail. We also collected
and analyzed documents from the seven selected agencies on their
experiences with and use of human capital flexibilities. We did not
attempt to verify the usage data we gathered. We conducted our audit
work in accordance with generally accepted government auditing
standards.
[End of section]
Appendix II: Comments from the Office Personnel Management:
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT:
WASHINGTON, DC 20415-0001:
OFFICE OF THE DIRECTOR:
SEP 23 2002:
Mr. J. Christopher Mihm Director, Strategic Issues General Accounting
Office 441 G Street, NW Washington, DC 20548:
Dear Mr. Mihm:
Thank you for providing the draft General Accounting Office (GAO)
report entitled Human Capital: Effective Use of Flexibilities Can
Assist Agencies in Managing Their Workforces. The Office of Personnel
Management (OPM) has reviewed the draft report and is pleased to offer
the following comments.
OPM has long been committed to the development and use of human capital
flexibilities as a way to assist agencies in meeting their strategic
goals. I am particularly pleased to see GAO issue this report at a time
when agencies are working hard to pursue the President‘s Management
Agenda, which calls for maximum use of human capital flexibilities as a
way for agencies to accomplish their missions. OPM has the lead for
developing criteria to measure agency success on the President‘s Human
Capital Initiative, for providing tools and consultative services to
help agencies succeed, and for evaluating agency progress. Thus, OPM
plays a key leadership role in supporting the Agenda governmentwide as
the managing partner of the Human Capital component of the Agenda, and
we welcome GAO‘s endorsement of the President‘s approach.
Beyond carrying out important human capital management outreach and
assistance activities, we have examined our regulations and guidance to
identify areas where increased flexibility is appropriate and could
support agencies‘ human capital efforts. We have also aggressively
publicized those flexibilities in our day-to-day dealings with agencies
and through publications such as Human Resources Flexibilities and
Authorities in the Federal Government.
We are also delighted the report clearly acknowledges the need for even
greater flexibility in our more fundamental HR systems in those cases
where existing law constrains OPM in providing policies and programs to
help agencies accomplish their missions most effectively. In some
areas, legislative changes will be required to maximize agencies‘
ability to adopt and implement the additional flexibilities needed to
recruit, manage, and retain the best and brightest of America‘s talent
for the public workforce. OPM supports the legislative proposals
forwarded in the President‘s Managerial Flexibility Act to improve
human capital management throughout the Federal Government. Our key
priorities for improving Federal human capital management systems
further are in two of those fundamental areas you report as requiring
more flexibility: compensation and hiring. In addition, we are working
with the Administration in support of Homeland Security legislation
that would broaden and maximize human capital flexibilities and equip
the new Department with the tools to become a world-class organization.
We commend GAO‘s continuing work to recognize effective human capital
management as an integral part of agencies‘ efforts to achieve their
missions. GAO‘s exposure draft, A Model of Strategic Human Capital
Management, provides a well-thought-out model for agency use. As you
know, OPM is working with GAO to incorporate this model into the Human
Capital Assessment and Accountability Framework, which agencies will
use in achieving the goals articulated in the President‘s Management
Agenda.
Our review of the present draft report revealed a few areas where we
could offer technical observations and suggestions on its descriptions
of the available flexibilities to improve their accuracy. Those
comments are enclosed.
OPM appreciates your support as we continue to provide leadership to
identify and promote the use of human capital flexibilities. We look
forward to continuing our work together in this arena. I remain
convinced that effective human capital management is the key to
realizing the President‘s vision of a citizen-centered, results-
oriented, and market-based Government.
Sincerely,
Kay Coles James, Director:
Signed by Kay Coles James:
Enclosure:
[End of section]
Appendix III: Comments from the Internal Revenue Service:
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON, D.C.
20224:
COMMISSIONER:
October 2, 2002:
Mr. J. Christopher Mihm Director, Strategic Issues United States
General Accounting Office Washington, DC 20548:
Dear Mr. Mihm:
I have reviewed your draft report entitled ’Human Capital - Effective
Use of Flexibilities Can Assist Agencies in Managing Their Workforces“.
Your report accurately underscores the importance of Federal agencies‘
use of human capital flexibilities to effectively accomplish their
mission.
I generally agree with the list of human capital flexibilities that
agency officials (including IRS supervisors and managers) and union
representatives cited as most helpful for managing their workforce.
Still, I believe that the identified flexibilities may not be as
important in the long run as some of the more deep-rooted changes to
human capital management policies and practices that agencies like IRS
have undertaken recently to improve their workforce‘s performance and
accountability.
The, IRS Restructuring and Reform Act of 1998 provided IRS a number of
new and expanded flexibilities such as paybanding, streamlined critical
pay authority, expedited and flexible hiring process, redesigned
performance management system, and enhanced recruitment, relocation,
retention and performance incentives. The new flexibilities have
allowed us to improve recruitment quality and timeliness, reshape the
workforce, increase its capacity, strengthen the connection between pay
and performance, and establish a clearer job and mission alignment with
greater accountability from the front-line employee to the most senior
executive. From a human capital standpoint, we have shifted our
organizational culture from a seniority-based to a performance-based
paradigm that emphasizes and rewards high performance and
accountability. Although the full effect of these new practices and
changes will take place over many years, it is evident today that the
IRS has unmistakably become a more efficient, effective, and customer-
oriented organization.
The new statutory flexibilites were clearly instrumental to achieving
our massive transformation (within 26 months) from a 50-year old overly
complex and inefficient organizational structure of districts, service
centers, regions, and a large national operational office to a modern,
business-like organization. This huge effort culminated with no
significant disruption of service to the public and resulted in the
effective placement or voluntary separation of nearly all employees
whose positions were eliminated. Without the broad flexiblilities
available to us, we would not have been as timely and successful in
meeting our statutory mandate to improve and modernize virtually every
aspect of our organizational structure and mission. In particular, the
new flexibilities have enabled IRS to:
*Flatten its organizational structure and realign all 100,000 employees
into a new streamlined one organized around taxpayer groups.
*Decrease the number of management layers by 50 percent in major field
organizations.
*Reduce the number of mid-and top-level managers by over 350, or 20
percent overall.
*Devise a transition strategy that required 2,000 executives and
managers to compete for 1,600 new positions with more rigorous job
requirements.
*Fill over 3,500 new front-line tax administration and customer service
positions in a timely manner with top-notch people.
The IRS has gained immensely by drawing upon the best practices from
the outside since there are many similarities between IRS activities
and those of other private and public sector organizations. We have
selectively recruited external senior executives with lifetime
experience in private-sector organizations to complement our
exceptional corps of Federal executives. This infusion of talent brings
in irreplaceable experience in management to the IRS, particularly in
areas requiring a high level of expertise in systems modernization,
leading large-scale organizational change, and improving our ability to
communicate effectively with our stakeholders.
In view of our extremely positive experience with our statutory
provided human capital flexibilities, I would like to stress how
important it is to continue providing additional flexibilities to the
IRS so it can manage its workforce in a manner comparable to the
private sector. Our experience provides testimony that the availability
of broad authority to tailor human capital management policies and
practices to the organization‘s unique mission and human capital
challenges is critical to bringing accountable, results-oriented
management to the Federal government.
I sincerely appreciate IRS‘s inclusion in this important case study and
to have the opportunity to comment on the results. If you have
questions, please contact Ronald Sanders, Chief Human Resource Officer,
at (202) 283-9200.
Sincerely,
Charles O. Rossotti:
Signed by Charles O. Rossotti:
[End of section]
Appendix IV: Comments from the U.S. Mint:
DEPARTMENT OF THE TREASURY:
UNITED STATES MINT WASHINGTON, D.C. 20220:
DIRECTOR OF THE MINT:
September 19, 2002:
Mr. J. Christopher Mihm Director, Strategic Issues U.S. General
Accounting Office 441 G Street, N.W. Washington, D.C.
Dear Mr. Mihm:
We have reviewed the General Accounting Office‘s (GAO) draft report,
’Human Capital - Effective Use of Flexibilities Can Assist Agencies in
Managing Their Workforces,“ and generally concur with the overall
observations and conclusions, as well as with the specific Mint
references.
The report identifies key practices that agencies should implement for
effective human capital management, such as strategic planning,
ensuring employee input, and educating all employees regarding the use
and availability of flexibilities. Cited benefits of human capital
flexibilities include increased employee morale and productivity as
well as improved agency procedures and controls for hiring hard-to-fill
positions.
The report recognizes the United States Mint‘s efforts towards
implementing effective human capital flexibilities, such as alternative
work schedules, monetary and non-monetary incentive awards, the
creation of a ’human resources flexibilities team,“ actively seeking
employee input, and the revision of personnel-related policies and
procedures, and we are planning for gainsharing. While the Mint has
implemented many of the flexibilities identified within the draft
report, the experiences and successes of other agency practices will
enable us to both enhance and expand our current flexibilities. The
report provides an objective, balanced review and assessment of the
issues surrounding the implementation of human capital flexibilities.
We believe it will serve as a useful tool that policy makers can use to
guide Federal agencies seeking to employ greater flexibilities to
manage their workforces.
I would like to take this opportunity to extend our sincere
appreciation to you and your colleagues in the General Accounting
Office for their comprehensive assessment of this increasingly
significant issue.
Sincerely,
Henrietta Hoisman Fore, Director, United States Mint:
Signed by Henrietta Hoisman Fore:
[End of section]
Appendix V: Comments from the International Trade Administration:
UNITED STATES DEPARTMENT OF COMMERCE The Under Secretary for
International Trade Washington, D.C. 20230:
SEP 27, 2002:
Mr. J. Christopher Mihm Director, Strategic Issues U.S. General
Accounting Office Washington, D.C.20548:
Dear Mr. Mihm:
Thank you for the draft GAO report, ’Human Capital Flexibilities“, and
the opportunity to comment. The report thoroughly and comprehensively
addresses the critical issue of the programs needed to manage the
federal workforce.
We have no comment other than to emphasize the need for the additional
flexibilities mentioned in the report. Human Resources offices are
using available programs to the maximum extent possible, but need
additional flexibilities to provide for effective recruitment, hiring,
retention and management of our workforce.
We thank you for your work in producing this important report.
Sincerely,
Grant D. Aldonas:
Signed by Grant D. Aldonas:
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
J. Christopher Mihm or Edward Stephenson, (202) 512-6806:
Acknowledgments:
In addition to the persons named above, K. Scott Derrick, Charlesetta
Bailey, Tom Beall, Ridge Bowman, Molly K. Gleeson, Judith Kordahl,
Sylvia Shanks, Shelby D. Stephan, Gary Stofko, Mike Volpe, Gregory H.
Wilmoth, and Scott Zuchorski made key contributions to this report.
FOOTNOTES
[1] U.S. General Accounting Office, A Model of Strategic Human Capital
Management, Exposure Draft, GAO-02-373SP (Washington, D.C.: Mar. 15,
2002).
[2] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
01-263 (Washington, D.C.: January 2001); and Human Capital: Meeting the
Governmentwide High-Risk Challenge, GAO-01-357T (Washington, D.C.:
Feb. 1, 2001).
[3] National Academy of Public Administration, Revitalizing Federal
Management: Managers and Their Overburdened Systems (Washington, D.C.:
1983).
[4] GAO-02-373SP.
[5] Title 5 laws (or requirements) refer to those personnel management
laws, procedures, and associated functions generally applicable to
federal employees. Most federal personnel laws governing topics such as
classification, appointment, pay and benefits, and adverse action are
contained in Title 5. Title 5 also contains laws unrelated to federal
personnel issues, such as the Administrative Procedure Act and the
Freedom of Information Act, that are also applicable to federal
agencies.
[6] U.S. Office of Personnel Management, HRM Policies and Practices in
Title 5-Exempt Organizations (Washington, D.C.: August 1998).
[7] Section 2301(b) of Title 5 of the U.S. Code stipulates that federal
personnel management should be implemented consistent with merit system
principles, including recruiting or promoting employees based on merit,
retaining or separating employees based on performance, and protecting
employees from improper influence.
[8] Section 2302(b) of Title 5 of the U.S. Code sets out personnel
actions that may not be taken by any employee who can take, direct
others to take, recommend, or approve any personnel actions; examples
of prohibited personnel actions include discrimination, coercion of
political activity, reprisal against whistleblowers, and nepotism.
[9] U.S. General Accounting Office, Securities and Exchange Commission:
Human Capital Challenges Require Management Attention, GAO-01-947
(Washington, D.C.: Sept. 17, 2001).
[10] Public Law 107-67, Nov. 12, 2001.
[11] Executive Order 13150, signed Apr. 21, 2000.
[12] U.S. Merit Systems Protection Board, Issues of Merit (Washington,
D.C.: December 2000), p. 4.
[13] U.S. General Accounting Office, Federal Workforce: Agencies‘
Policies and Views on Flexiplace in the Federal Government, GAO/GGD-97-
116 (Washington, D.C.: July 3, 1997).
[14] The General Schedule (GS) is the basic classification and
compensation system for white-collar occupations in the federal
government as established by Title 5. Grades represent levels of
difficulty, responsibility, and qualifications that are sufficiently
similar to warrant their inclusion within one range of basic pay. Each
grade includes 10 fixed rates of pay, called steps, through which
employees advance.
[15] Agencies generally have the authority to pay retention allowances
up to 10 percent of basic pay to a group or category of employees. For
group retention allowances in excess of 10 percent (but not more than
25 percent), agencies need to obtain OPM approval.
[16] A provision of the National Defense Authorization Act for 2002
provided agencies with discretionary authority to use appropriated
funds or funds otherwise available to pay for employees‘ expenses to
obtain professional credentials, including the examinations to obtain
such credentials (5 U.S.C. 5757).
[17] To be eligible, graduates must have maintained 3.5 grade point
averages on a 4.0 scale or have graduated in the upper 10 percent of
their graduating classes or major university subdivisions, such as the
School of Business Administration.
[18] U.S. Merit Systems Protection Board, Restoring Merit to Federal
Hiring: Why Two Special Hiring Programs Should Be Ended (Washington,
D.C.: January 2000).
[19] Angel G. Luevano et al., v. Alan Campbell, Director, Office of
Personnel Management, et al., 93 F.R.D. 68 (1981).
[20] The Department of Defense and IRS do not require OPM approval for
awards up to $25,000, but awards over $25,000 must be approved by the
President.
[21] Broadbanding is a personnel classification and pay system that
involves combining separate grade levels into broad pay bands.
[22] Pub. L. No. 107-296, Nov. 25, 2002.
[23] See, for example, GAO-01-263 and GAO-01-357T.
[24] U.S. General Accounting Office, Human Capital: Practices That
Empowered and Involved Employees, GAO-01-1070 (Washington, D.C.: Sept.
24, 2001).
[25] U.S. General Accounting Office, Managing for Results: Building on
the Momentum for Strategic Human Capital Reform, GAO-02-528T
(Washington, D.C.: Mar. 18, 2002).
[26] See the following GAO products: GAO-01-1070; Managing for Results:
Federal Managers‘ Views Show Need for Ensuring Top Leadership Skills,
GAO-01-127 (Washington, D.C.: Oct. 20, 2000); Management Reform: Using
the Results Act and Quality Management to Improve Federal Performance,
GAO/T-GGD-99-151 (Washington, D.C.: July 29, 1999); and Management
Reform: Elements of Successful Improvement Initiatives, GAO/T-GGD-00-
26 (Washington, D.C.: Oct. 15, 1999).
[27] GAO-02-373SP.
[28] GAO-01-1070.
[29] See, for example, the following: U.S. General Accounting Office,
Whistleblower Protection: VA Did Little Until Recently to Inform
Employees About Their Rights, GAO/GGD-00-70 (Washington, D.C.: Apr. 14,
2000), and D.C. Courts: Implementation of Personnel Policies Requires
Further Attention From the Courts‘ Leadership, GAO/GGD-00-75BR
(Washington, D.C.: Apr. 12, 2000).
[30] U.S. General Accounting Office, Transforming the Civil Service:
Building the Workforce of the Future--Results of a GAO-Sponsored
Symposium, GAO/GGD-96-35 (Washington, D.C.: Dec. 20, 1995), and GPRA:
Managerial Accountability and Flexibility Did Not Work As Intended,
GAO/GGD-97-36 (Washington, D.C.: Apr. 10, 1997).
[31] OPM allows agencies to post job announcements for even shorter
periods than 5 business days in situations when inordinately large
numbers of applications from well-qualified candidates are expected.
[32] 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).
[33] U.S. General Accounting Office, Human Capital: Key Principles From
Nine Private Sector Organizations, GAO/GGD-00-28 (Washington, D.C.:
Jan. 31, 2000).
[34] A PBO is a discrete management unit that commits to clear
management objectives, measurable goals, customer service standards,
and specific targets for improved performance. In exchange for these
commitments, the agency may be granted flexibilities to deviate from
some governmentwide requirements, such as certain personnel and
procurement processes.
GAO‘s Mission:
The General Accounting Office, the investigative arm of Congress,
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