Human Capital
Building on the Current Momentum to Transform the Federal Government Gao ID: GAO-04-976T July 20, 2004The federal government is in a period of profound transition, forcing agencies to transform their cultures to enhance performance, ensure accountability, and position the nation for the future. Strategic human capital management is at the center of this government transformation. Federal agencies will need the most effective human capital systems to succeed in their transformation efforts. At the request of the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia, Senate Committee on Governmental Affairs, this statement summarizes GAO's findings to date on agencies' use of human capital flexibilities, provides an overview of the most relevant human capital management developments, and discusses GAO's recently enacted human capital flexibilities.
While more progress in addressing human capital challenges has been made in the last few years than in the last 20 years, much more needs to be done to ensure that agencies' cultures are results oriented, customer focused, and collaborative in nature. For example, an essential element in acquiring, developing, and retaining high-quality federal employees is agencies' effective use of flexibilities. Congress provided governmentwide hiring flexibilities--category rating and direct hire--but agencies appear to be making limited use of them. The agencies and the Office of Personnel Management can use the Chief Human Capital Officers Council as a vehicle to help address crosscutting human capital challenges, such as hiring. The following efforts to foster a strategic approach to human capital management are under way. Conducting Strategic Workforce Planning: In the wake of extensive downsizing during the early 1990s, agencies are experiencing significant challenges to deploying the right skills, in the right places, at the right time. Succession planning and management is particularly important given the demographic realities and transformation challenges agencies face. Strengthening Federal Employee Training and Development: Officials at selected agencies emphasized that they are transitioning to more formal and comprehensive planning approaches to assess skill and competency requirements and identify related training and development needs--primarily as part of broader efforts to incorporate workforce planning into ongoing strategic planning and the budgeting process. Implementing Pay for Performance: Emphasizing performance-based pay is critical at all levels of government. GAO strongly supports the need to expand pay for performance in the federal government. Recently, Congress has sought to modernize senior executive performance management systems. However, data show that more work is needed to make meaningful distinctions based on relative performance. In addition, the experiences of several personnel demonstration projects show that linking pay to performance is very much a work in progress. Creating Strategic Human Capital Offices: Congress has recognized the need for human capital offices that contribute to achieving missions and goals. Some agencies are shifting the focus of their human capital offices from primarily compliance to consulting activities for line managers. Agencies are also using alternative service delivery--the use of other than internal staff to provide a service or to deliver a product--to free staff to focus on core activities. GAO's recently enacted flexibilities collectively are designed to help attract, retain, motivate, and reward a top quality and high-performing workforce. GAO has begun to implement some of these flexibilities, such as the voluntary early retirement authority.
GAO-04-976T, Human Capital: Building on the Current Momentum to Transform the Federal Government
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Testimony:
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia, Committee on Governmental
Affairs, U.S. Senate:
For Release on Delivery Expected at 9:00 a.m. EDT Tuesday, July 20,
2004:
HUMAN CAPITAL:
Building on the Current Momentum to Transform the Federal Government:
Statement of J. Christopher Mihm:
Managing Director:
Strategic Issues:
GAO-04-976T:
GAO Highlights:
Highlights of GAO-04-976T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia, Committee on Governmental Affairs, U.S. Senate:
Why GAO Did This Study:
The federal government is in a period of profound transition, forcing
agencies to transform their cultures to enhance performance, ensure
accountability, and position the nation for the future. Strategic
human capital management is the centerpiece of this government
transformation. Federal agencies will need the most effective human
capital systems to succeed in their transformation efforts.
At the request of the subcommittee, this statement summarizes GAO‘s
findings to date on agencies‘ use of human capital flexibilities,
provides an overview of the most relevant human capital management
efforts, and discusses GAO‘s recently enacted human capital
flexibilities.
What GAO Found:
While more progress in addressing human capital challenges has been
made in the last few years than in the last 20 years, much more needs
to be done to ensure that agencies‘ cultures are results oriented,
customer focused, and collaborative in nature. For example, an
essential element in acquiring, developing, and retaining high-quality
federal employees is agencies‘ effective use of flexibilities.
Congress provided governmentwide hiring flexibilities”category rating
and direct hire”but agencies appear to be making limited use of them.
The agencies and the Office of Personnel Management can use the Chief
Human Capital Officers Council as a vehicle to help address
crosscutting human capital challenges, such as hiring.
The following efforts to foster a strategic approach to human capital
management are under way.
* Conducting Strategic Workforce Planning: In the wake of extensive
downsizing during the early 1990s, agencies are experiencing
significant challenges to deploying the right skills, in the right
places, at the right time. Succession planning and management is
particularly important given the demographic realities and
transformation challenges agencies face.
* Strengthening Federal Employee Training and Development: Officials at
selected agencies emphasized that they are transitioning to more formal
and comprehensive planning approaches to assess skill and competency
requirements and identify related training and development
needs”primarily as part of broader efforts to incorporate workforce
planning into ongoing strategic planning and the budgeting process.
* Implementing Pay for Performance: Emphasizing performance-based pay
is critical at all levels of government. GAO strongly supports the
need to expand pay for performance in the federal government.
Recently, Congress has sought to modernize senior executive performance
management systems. However, data show that more work is needed to
make meaningful distinctions based on relative performance. In
addition, the experiences of several personnel demonstration projects
show that linking pay to performance is very much a work in progress.
* Creating Strategic Human Capital Offices: Congress has recognized the
need for human capital offices that contribute to achieving missions
and goals. Some agencies are shifting the focus of their human capital
offices from primarily compliance to consulting activities for line
managers. Agencies are also using alternative service delivery”the use
of other than internal staff to provide a service or to deliver a
product”to free staff to focus on core activities.
GAO‘s has begun to implement some of its recently enacted flexibilities
that are collectively designed to help attract, retain, motivate, and
reward a top quality and high-performing workforce.
www.gao.gov/cgi-bin/getrpt?GAO-04-976T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at
(202) 512-6806 or mihmj@gao.gov.
[End of section]
Chairman Voinovich, Senator Durbin, and Members of the Subcommittee:
I am pleased to be here today to discuss the progress to date in
addressing the federal government's pressing human capital challenges.
As you know, the federal government is in a period of profound
transition, which is forcing agencies to transform their cultures to
enhance performance, ensure accountability, and position the nation for
the future. Strategic human capital management is the centerpiece of
government transformation.
Chairman Voinovich, in your December 2000 report to the President, you
ask "Will the federal government invest the resources necessary to
compete for talent in today's information workplace and become a world-
class provider of services?"[Footnote 1] You continue "Successfully
addressing the human capital crisis—will not come about quickly nor
easily. No single piece of legislation or executive order can
accomplish these goals. For this effort to be successful, it must be
embraced by Congress, career managers, and the employees who are on the
front lines— Without the sustained support of all of the stakeholders,
this effort will fall short."
Since then, and under the leadership of this subcommittee and others in
Congress, more progress in addressing human capital challenges has been
made than in the last 20 years. For example, Congress provided
governmentwide human capital flexibilities, such as direct hire
authority, the ability to use category rating in the hiring of
applicants instead of the "rule of three," and the creation of chief
human capital officer (CHCO) positions and a CHCO Council. In addition,
individual agencies--most recently, GAO, and earlier, the National
Aeronautical and Space Administration (NASA) and the Departments of
Defense (DOD) and Homeland Security (DHS)--received flexibilities
intended to help them manage their human capital strategically to
achieve results. These are important and positive developments.
Nevertheless, much more needs to be done to ensure that agencies'
cultures are results oriented, customer focused, and collaborative in
nature. At your request, my testimony today will (1) summarize our
findings to date on agencies' use of human capital flexibilities, (2)
provide an overview of the most relevant human capital management
efforts, and (3) discuss GAO's recently enacted human capital
flexibilities. My comments are based on previously issued GAO reports
that were developed in accordance with generally accepted government
auditing standards.
Agencies Must Build the Capability to Make Effective Use of Human
Capital Flexibilities:
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. The insufficient and ineffective use of flexibilities can
significantly hinder the ability of federal agencies to recruit, hire,
retain, and manage their human capital. In December 2002, we reported
that agencies were often not maximizing their use of the human capital
flexibilities already available to them and we identified key practices
that agencies can implement to effectively use such flexibilities, as
shown in figure 1.[Footnote 2]
Figure 1: Key Practices for Effective Use of Human Capital
Flexibilities:
[See PDF for image]
[End of figure]
We reported that agencies must take greater responsibility for
maximizing the efficiency and effectiveness of their individual hiring
processes within the current statutory and regulatory framework that
Congress and the Office of Personnel Management (OPM) have provided.
Specifically, in regard to the federal hiring process, we recommended
that OPM take additional actions to assist agencies in strengthening
that process.[Footnote 3] We subsequently reported that although
Congress, OPM, and agencies have all undertaken efforts to help improve
the federal hiring: process, agencies appeared to be making limited use
of the new hiring flexibilities provided by Congress in 2002--category
rating and direct hire.[Footnote 4] In our survey of CHCO Council
members, the most frequently cited barriers that they said prevented or
hindered their agencies from using or making greater use of these
hiring flexibilities included:
* the lack of OPM guidance for using the flexibilities,
* the lack of agency policies and procedures for using the
flexibilities,
* the lack of flexibility in OPM rules and regulations, and:
* concern about possible inconsistencies in the implementation of the
flexibilities within the department or agency:
Since the survey, OPM has taken a number of important actions to assist
agencies in their use of hiring flexibilities. For example, OPM issued
final regulations on the use of category rating and direct-hire
authority, providing some clarification in response to various comments
it had received in interim regulation. Also, OPM conducted a training
symposium to provide federal agencies with further instruction and
information on ways to improve the quality and speed of the hiring
process.
To address the federal government's crosscutting strategic human
capital challenges, such as the hiring process, we have testified that
an effective and strategic CHCO Council is vital.[Footnote 5] As stated
in its charter, the Council's purposes include (1) advising OPM, the
Office of Management and Budget (OMB), and agency leaders on human
capital strategies and policies, as well as on the assessment of human
capital management in federal agencies; (2) informing and coordinating
the activities of its member agencies on such matters as modernization
of human resources systems; and (3) providing leadership in identifying
and addressing the needs of the government's human capital community.
We have reported that interagency councils, such as the Chief Financial
Officers' and Chief Information Officers' councils, have emerged as
important leadership strategies in both developing policies that are
sensitive to implementation concerns and gaining consensus and
consistent follow-through within the executive branch.[Footnote 6] The
CHCO Council can fulfill an equally important role. It has established
subcommittees to address and recommend changes for key areas identified
by the Council's leadership as critical to the success of strategic
human capital management. The subcommittees are examining their areas
and developing recommendations for review by the executive committee
and, subsequently, the Council. We understand that three subcommittees-
-hiring process, leadership development and succession planning, and
employee conduct and poor performers--have submitted their first
reports for review by the executive committee. However, these reports
had not been released as of July 13, 2004.
Efforts to Foster a Strategic Approach to Human Capital Management Are
Under Way:
A little over a year ago, in a joint hearing before your subcommittee
and that of Chairwoman Davis, we testified that federal human capital
strategies are not yet appropriately constituted to meet current and
emerging challenges or to drive the needed transformation across the
federal government.[Footnote 7] The basic problem has been the long-
standing lack of a consistent strategic approach to marshaling,
managing, and maintaining the human capital needed to maximize
government performance and assure its accountability. At your request
and others in Congress, we have undertaken a large body of work since
then on relevant human capital management efforts that are under way.
Our summary of the major themes emerging from that work follow.
Conducting Strategic Workforce Planning:
In the wake of extensive downsizing during the early 1990s, done
largely without sufficient consideration of the strategic consequences,
agencies are experiencing significant challenges to deploying the right
skills, in the right places, at the right time. Agencies are also
facing a growing number of employees who are eligible for retirement
and are finding it difficult to fill certain mission-critical jobs, a
situation that could significantly drain agencies' institutional
knowledge.
Strategic workforce planning addresses two critical needs: (1) aligning
an organization's human capital program with its current and emerging
mission and programmatic goals and (2) developing long-term strategies
for acquiring, developing, and retaining staff to achieve programmatic
goals.[Footnote 8] Existing strategic workforce planning tools and
models and our own work suggest that there are certain principles that
such a process should address irrespective of the specific agency
context in which planning is done, as shown in figure 2.
Figure 2: Principles of the Strategic Workforce Planning Process:
* Involve top management, employees, and other stakeholders in
developing, communicating, and implementing the strategic workforce
plan.
* Determine the critical skills and competencies that will be needed to
achieve current and future programmatic results.
* Develop strategies that are tailored to address gaps in number,
deployment, and alignment of human capital approaches for enabling and
sustaining the contributions of all critical skills and competencies.
* Build the capability needed to address administrative, educational,
and other requirements important to support workforce strategies.
* Monitor and evaluate the agency's progress toward its human capital
goals and the contribution that human capital results have made toward
achieving programmatic goals.
Source: GAO.
[End of figure]
For example, the achievement of DOD's mission is dependent in large
part on the skills and expertise of its civilian workforce. We recently
reported that DOD's future strategic workforce plans may not result in
workforces that possess the critical skills and competencies
needed.[Footnote 9] Among other things, DOD and the components do not
know what competencies their staff need to do their work now and in the
future and what type of recruitment, retention, and training and
professional development workforce strategies should be developed and
implemented to meet future organizational goals. It is questionable
whether DOD's implementation of its new personnel reforms will result
in the maximum effectiveness and value because DOD has not developed
comprehensive strategic workforce plans that identify future civilian
workforce needs.
Moving beyond a "replacement" approach, which focuses on identifying
particular individuals as possible successors for specific top-ranking
positions, succession planning and management are particularly
important given the demographic realities and transformation challenges
agencies face. Leading organizations engage in broad, integrated
succession planning and management efforts that focus on strengthening
both current and future organizational capacity. As part of this
approach, these organizations identify, develop, and select successors
who are the right people, with the rights skills, at the right time for
leadership and other key positions. We identified specific succession
planning and management practices that agencies in Australia, Canada,
New Zealand, and the United Kingdom are implementing that reflect this
broader focus on building organizational capacity (see fig.
3).[Footnote 10]
Figure 3: Selected Practices Used by Agencies in Other Countries to
Manage Succession:
* Receive active support of top leadership.
* Link to strategic planning.
* Identify talent from multiple organizational levels, early in
careers, or with critical skills.
* Emphasize developmental assignments in addition to formal training.
* Address specific human capital challenges, such as diversity,
leadership capacity, and retention.
* Facilitate broader transformation efforts.
Source: GAO.
[End of figure]
At your request and the request of Chairwoman Davis, we are now
evaluating selected federal agencies' succession planning and
management efforts. As part of that engagement, we plan to examine how
they are implementing these key practices.
Strengthening Federal Employee Training and Development:
As they continue to build their fundamental management capabilities,
federal agencies will need to invest resources, including time and
money, to ensure that their employees have the information, skills, and
competencies they need to work effectively in a rapidly changing and
complex environment. This includes investments in training and
developing employees as part of an agency's overall effort to achieve
cost-effective and timely results. To this end, we have developed a
framework that federal agencies can use to ensure that their training
and development investments are targeted strategically and are not
wasted on efforts that are irrelevant, duplicative, or
ineffective.[Footnote 11] This framework consists of a set of
principles and key questions that can help agencies assess their
training and development efforts and make it easier to determine what,
where, and how improvements may be implemented.
We also recently reviewed selected agencies' experiences and lessons in
key aspects of designing training and development programs.[Footnote
12] The officials emphasized that their agencies are transitioning to
more formal and comprehensive planning approaches to assess skill and
competency requirements and identify related training and development
needs--primarily as part of broader efforts to incorporate workforce
planning into ongoing strategic planning and budgeting processes
focused on achieving results.
To develop strategies and solutions for training needs, the selected
agencies considered a mixture of delivery mechanisms, as well as
potential sources for training and development opportunities. However,
projecting costs and benefits of proposed training and development
programs presented challenges for them. The agencies usually developed
broad information on anticipated benefits and expected costs of
potential investments, although often without tying benefits to
specific performance improvements or considering all costs. For
example, one of the lessons learned was to establish mechanisms to
avoid duplication or inconsistencies. Education Service
Representatives in each regional Veterans Health Administration
network, for example, coordinate training and development programs with
headquarters--sharing information about successful practices and
identifying areas where coordination is needed.
Implementing Pay for Performance:
There is a growing understanding that the federal government needs to
fundamentally rethink its current approach to pay and to better link
pay to individual and organizational performance. As you are aware, GAO
strongly supports the need to expand pay for performance in the federal
government. Nevertheless, how it is done, when it is done, and the
basis on which it is done, can make all the difference in whether such
efforts are successful. High-performing organizations continuously
review and revise their performance management systems to achieve
results, accelerate change, and facilitate two-way communication
throughout the year so that discussions about individual and
organizational performance are integrated and ongoing.
Modernizing Senior Executive Performance Management:
Senior executives need to lead the way to transform their agencies'
cultures to be more results oriented, customer focused, and
collaborative in nature. Performance management systems that are valid,
reliable, and transparent with reasonable safeguards can help manage
and direct this process. We previously reported that more progress is
needed in explicitly linking senior executives' performance
expectations to contributing to the achievement of results-oriented
organizational goals, fostering the necessary collaboration both within
and across organizational boundaries to achieve results, and
demonstrating a commitment to lead and facilitate change.[Footnote 13]
Recently, Congress and the administration have sought to modernize
senior executive performance management systems by establishing a new
performance-based pay system for the Senior Executive Service (SES)
that is designed to provide a clear and direct linkage between SES
performance and pay.[Footnote 14] With the new system, an agency can
raise the pay cap for its senior executives if OPM certifies and OMB
concurs that the agency's performance management system, as designed
and applied, makes meaningful distinctions based on relative
performance. However, data suggest that more work is needed in making
such distinctions. Agencies rated about 75 percent of senior executives
at the highest levels their systems permitted, and approximately 49
percent of senior executives received bonuses in fiscal year 2002, the
most current year for which data are available.
We recently assessed how well the Departments of Education and Health
and Human Services (HHS) and NASA are creating linkages between senior
executive performance and their organizations' success.[Footnote 15]
Overall, we concluded that Education, HHS, and NASA have undertaken
important and valuable efforts, but these agencies need to continue to
make substantial progress in using their senior executive performance
management systems to strengthen the linkage between senior executive
performance and organizational success.
For example, senior executives' perceptions at Education, HHS, and NASA
indicate that these three agencies have opportunities to use their
career senior executive performance management systems more
strategically to strengthen that link. Specifically, based on our
survey of career senior executives, we found that generally less than
half of the senior executives at Education, HHS, and NASA believe that
their agencies are fully using their performance management systems as
a tool to manage the organization or to achieve organizational goals.
In addition, generally less than half of the senior executives at
Education, HHS, and NASA felt that their agencies are fully using their
performance management systems to achieve such systems' three key
objectives. Effective performance management systems (1) strive to
provide candid and constructive feedback to help individuals maximize
their contribution and potential in understanding and realizing the
goals and objectives of the organization, (2) seek to provide
management with the objective and fact-based information it needs to
reward top performers, and (3) provide the necessary information and
documentation to deal with poor performers.
Information on Education's, HHS's, and NASA's experiences and knowledge
should provide valuable insights to other agencies as they seek to use
senior executive performance management as a strategic tool to drive
internal change and achieve external results. Overall, we recommended
that the Secretaries of Education and HHS and the Administrator of NASA
continue to build their career senior executive performance management
systems along the key practices we previously identified for effective
performance management.[Footnote 16] NASA concurred with all the
recommendations and plans to implement the recommendations in its next
SES appraisal cycle. While HHS did not provide formal comments on the
report, an HHS official told us that they intend to incorporate our
recommendations into future revisions to its system in response to
OPM's new SES pay system. Education described specific actions it plans
to take to revise its SES system, which are generally consistent with
our recommendations.
Implementing Pay for Performance at Personnel Demonstration Projects:
Several federal agencies have experimented with new pay for performance
systems through OPM's personnel demonstration projects. We reported on
the approaches selected demonstration projects have taken in designing
and implementing their pay for performance systems.[Footnote 17]
Overall, these demonstration projects show an understanding that
linking pay to performance is very much a work in progress at the
federal level. Their approaches follow.
* Using competencies to evaluate employee performance. We found that
high-performing organizations use validated core competencies as a key
part of evaluating individual contributions to organizational results.
Several demonstration projects use core competencies for all positions
across the organization to evaluate performance, while some
demonstration projects use competencies based primarily on the
individual position.
* Translating employee performance ratings into pay increases and
awards. We have also recognized that high-performing organizations
traditionally seek to create pay, incentive, and reward systems that
clearly link employee knowledge, skills, and contributions to
organizational results. Some demonstration projects establish
predetermined pay increases, awards, or both depending on a given
performance rating, while others delegated the flexibility to
individual pay pools to determine how ratings would translate into pay
increases, awards, or both. The demonstration projects made some
distinctions among employees' performance.
* Considering current salary in making performance-based pay decisions.
Several of the demonstration projects consider an employee's current
salary when making pay increase and award decisions. With this
approach, there is an attempt to better match an employee's
compensation and his or her contribution to the organization.
Therefore, two employees with comparable contributions could receive
different performance pay increases and awards depending on their
current salaries.
* Managing costs of the pay for performance system. The major cost
drivers of implementing pay for performance systems at demonstration
projects were salaries, training, and automation and data systems,
according to project officials. In making their pay decisions, some of
the demonstration projects use funding sources such as the annual
general pay increase and locality pay adjustment. For example, to
manage salary costs, some of the demonstration projects consider fiscal
conditions and the labor market when determining how much to budget for
pay increases, manage movement through the pay band, and provide a mix
of one-time awards and permanent pay increases.
* Providing information to employees about the results of performance
appraisal and pay decisions. To ensure fairness and guard against
abuse, performance-based pay systems should have adequate safeguards.
One such safeguard is to ensure reasonable transparency and appropriate
accountability mechanisms in connection with the results of the
performance management process. Several of the demonstration projects
accomplish this by publishing information for employees, such as the
average performance rating, performance pay increase, and award.
We observed that additional work is needed to strengthen efforts to
ensure that the demonstration projects' performance management systems
are tools to help them manage on a day-to-day basis. In particular,
there are opportunities to use organizationwide competencies to
evaluate employee performance that reinforce behaviors and actions that
support the organization's mission, translate employee performance so
that managers can make meaningful distinctions between top and poor
performers with objective and fact-based information, and provide
information to employees about the results of the performance
appraisals and pay decisions to ensure that reasonable transparency and
appropriate accountability mechanisms are in place.
Creating Strategic Human Capital Offices:
In creating the CHCO, Congress has underscored the critical role
leadership must play in human capital management. If people are the
federal government's most important asset to drive its performance and
key to its transformation, they must have leadership and support.
Agencies are increasingly recognizing how human capital activities
contribute to achieving mission and goals as they integrate their human
capital strategies with their organizational mission, visions, core
values, goals, and objectives.
Selected agencies are seeking to shift the focus of their human capital
offices from primarily compliance activities to consulting activities.
They are taking several key actions to make this shift.[Footnote 18]
* Agency leaders included human capital leaders in key agency strategic
planning and decision making and, as a result, the agencies engaged the
human capital organization as a strategic partner in achieving desired
outcomes relating to the agency's mission.
* Human capital leaders took actions to transform the agencies' human
capital organizations by establishing clear strategic visions,
restructuring their organizations, and improving the use of technology
to free organizational resources. These leaders also promoted a
transition to a larger strategic role for human capital professionals
with their focus being more on consulting rather than compliance
activities. The human capital profession is in transition from valuing
narrowly focused specialists to requiring generalists, who have all the
skills necessary to play an active role in helping to determine the
overall strategic direction of the organization.
* Jointly, agency leaders and human capital leaders are having human
capital professionals and agency line managers share the accountability
for successfully integrating human capital considerations into agency
strategic planning and decision making.
At the same time, human capital offices are understanding that they
need to think broadly about how specific services are delivered. Human
capital offices have traditionally used alternative service delivery
(ASD)--the use of other than internal staff to provide a service or to
deliver a product--as a way to reduce costs for transaction-based
services. We reported that, according to agency officials, a primary
driver for using ASD included taking advantage of the economies of
scale that specialized providers can offer.[Footnote 19] For instance,
OPM's e-payroll initiative is designed to eventually collapse the
operations of 22 executive branch payroll systems into 2 systems. By
using consolidated ASD providers for their payroll services, federal
agencies should realize cost savings from lower operational costs,
eliminated duplicative systems investments, and simplified payroll
processing.
Our report described how selected agencies were using ASD for the full
range of their human capital activities, including advisory services
and strategy and policy support activities as well as transaction-based
services. Conceptually, agency officials agreed that human capital
activities that did not require an intimate knowledge of the agency,
oversight, or decision-making authority could be considered for ASD,
although in practice they showed differences in their choices of ASD
activities. Frequently cited reasons for using ASD were to free staff
to focus on core activities where the human capital office can add
strategic value and to respond to reductions in human capital staffing.
In addition, using ASD for sporadic activities allows agencies to
contract for the services only when needed. For example, the U.S. Fish
and Wildlife Service used ASD for its classification appeals and
studies, equal employment opportunity and administrative
investigations, and mediations. Also, agency officials noted that
gaining access to expertise and being able to respond quickly to
changing environments were primary reasons for using ASD for human
capital policy formulation and support activities, such as workforce
planning and organizational assessment. A private sector contractor,
for example, helped the U.S. Department of Agriculture develop the
design for a corporate leadership development program to prepare upper-
level managers for future leadership roles. One of the rationales for
relying on a contractor was that the contractor had the research edge
on best practices gleaned from completing needs assessments with other
organizations.
We recommended that OPM provide comprehensive information about how
agencies can use ASD for their human capital activities and that the
CHCO Council could be an excellent vehicle to assist in this area.
Given its potential benefits, it appears that the use of ASD will
increase among federal agencies. By sharing experiences and lessons
learned, agencies may be better prepared to use ASD to help them meet
their human capital challenges.
Next Steps in Federal Human Capital Reform:
The broad human capital authorities that Congress provided to DHS when
it created the agency and to DOD were clearly important to helping
these agencies meet current needs and prepare for the future.
Nonetheless, these and related recent actions have significant,
precedent-setting implications for the rest of government. We are fast
approaching the point where "standard governmentwide" human capital
policies and processes are neither standard nor governmentwide. We
believe that human capital reform should avoid further fragmentation
within the civil service, ensure reasonable consistency within the
overall civilian workforce, and help maintain a reasonably level
playing field among federal agencies in competing for talent. Moving
forward, GAO believes it would be both prudent and preferable to employ
a governmentwide approach to address the need for human capital
authorities that have broad-based application and serious implications
for the civil service system. Employing this approach is not intended
to delay any individual agency's efforts, but rather to accelerate
needed human capital reform throughout the federal government in a
manner that ensures reasonable consistency within the overall civilian
workforce. In short, the important changes under way at individual
agencies naturally are suggesting that broader, more systematic civil
service reform should be seriously considered.
To help advance the discussion concerning how human capital reform
should proceed, GAO and the National Commission on the Public Service
Implementation Initiative cohosted a forum to discuss whether there
should be a framework for human capital reform, and if yes, what
principles, criteria, and processes should be included in that
framework. We will issue a summary of that forum in the coming weeks.
However, the discussion was centered on three areas: 1) principles that
the government should retain in a framework for reform because of their
inherent, enduring qualities; 2) criteria that agencies should have in
place as they plan and manage their new human capital authorities; and
3) processes that agencies should follow as they implement new human
capital flexibilities.
In addition, the Chairman of the Committee on Governmental Affairs has
asked us to help craft a statutory framework of human capital
authorities and flexibilities that would help Congress as it considers
agency-specific requests for human capital reforms. We look forward to
continuing to assist Congress as it considers these important and
difficult questions.
GAO's Human Capital Reform Act of 2004 Is Intended to Help Ensure a
High-performing Workforce:
GAO exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and ensure the
accountability of the federal government for the benefit of the
American people. We deeply appreciate the support and assistance we
have received from this subcommittee and others in Congress in
providing us with the tools and authorities we need to support
Congress.
Unlike many executive branch agencies, which have either recently
received or are just requesting new broad-based human capital tools and
flexibilities, GAO has had certain human capital tools and
flexibilities for over two decades. GAO's recently enacted Human
Capital Reform Act of 2004 (Human Capital II), which, as you know, was
recently signed by the President, combines diverse initiatives that,
collectively, should further GAO's ability to enhance our performance;
assure our accountability; and help ensure that we can attract, retain,
motivate, and reward a top-quality and high-performing workforce
currently and in future years.[Footnote 20] These initiatives should
also have the benefit of helping guide other agencies in their human
capital transformation efforts.
Specifically, Human Capital II allows for the following additional
human capital tools and flexibilities:
* make permanent GAO's 3-year authority to offer voluntary early
retirement and voluntary separation incentive payments;
* allow the Comptroller General to adjust the rates of basic pay of GAO
on a separate basis from the annual adjustments authorized for
employees of the executive branch;
* permit GAO to set the pay of an employee demoted as a result of
workforce restructuring or reclassification at his or her current rate
with no automatic annual increase to basic pay until his or her salary
is less than the maximum rate for the new position;
* provide authority in appropriate circumstances to reimburse employees
for some relocation expenses when that transfer does not meet current
legal requirements for entitlement to reimbursement but still benefits
GAO;
* provide authority to put key officers and employees with less than 3
years of federal experience in the 6-hour leave category;
* authorize an executive exchange program with private sector
organizations working in areas of mutual concern to further the
institutional interest of the GAO or Congress, including for the
purpose of providing training; and:
* change GAO's legal name from the "General Accounting Office" to the
"Government Accountability Office."
The Comptroller General and other GAO Executive Committee members
engaged in a broad range of outreach and consultation activities with
GAO staff on the Human Capital II legislation as it was being
developed.[Footnote 21] For example, the Comptroller General held two
televised chats to inform GAO staff about the proposal. He also
discussed the proposal with all staff including managing directors and
the Employee Advisory Council on multiple occasions. He held a number
of listening sessions with staff and incorporated feedback from these
sessions into the proposal for Human Capital II. A link from the GAO
internal home page was established that allowed employees to review a
series of questions and answers, explanatory charts, and statements to
Congress regarding the legislation.
We have already begun to implement some of the flexibilities we
received. For example, we posted and requested employee comments on the
order that establishes the interim regulations on GAO's voluntary early
retirement authority that are in effect immediately. GAO believes that
careful use of voluntary early retirement has been an important tool in
incrementally improving the agency's overall human capital profile.
Each separation has freed resources for other uses, enabling GAO to
fill an entry-level position or to fill a position that will reduce a
skill gap or address other succession concerns.
In addition, our name has changed to the "Government Accountability
Office." At the same time, the well-known acronym "GAO" will be
maintained. Although currently less than 15 percent of agency resources
are devoted to traditional financial auditing and accounting
activities, members of the public, the press, as well as Congress in
the past incorrectly assumed that GAO was solely a financial auditing
organization. In addition, the former name confused many potential job
applicants, who assumed that GAO was only interested in hiring
accountants. We believe that the new name will help attract applicants
and address certain "expectation gaps" that exist outside of GAO.
GAO is studying the implementation of the pay adjustment provision that
would allow GAO to determine the amount of the current annual across-
the-board pay adjustments that take into account differences in
locality. GAO will, absent extraordinary economic conditions or serious
budgetary constraints, provide all GAO staff whose performance is at a
satisfactory level both across-the-board and, as appropriate,
performance-based annual pay adjustments. GAO will also be able to
develop and apply its own methodology for annual across-the-board pay
adjustments that take into account differences in locality, which would
be more representative of the nature, skills, and composition of GAO's
workforce and will incorporate consideration of market-based salary
data. GAO has recently let a contract to help inform our decision
making on compensation. As in the past, GAO will continue to solicit
input from employees and incorporate their views as appropriate as part
of this process.
We believe that it is vitally important to GAO's future that we
continue modernizing and updating our human capital policies and system
in light of the changing environment and anticipated challenges ahead.
We believe that the GAO Human Capital Reform Act is well reasoned with
adequate safeguards for GAO employees. Given our human capital
infrastructure and our unique role in leading by example in major
management areas, including human capital management, the federal
government will benefit from GAO's experience with pay for performance
systems.
Chairman Voinovich and Members of the subcommittee, this concludes my
prepared statement. I would be pleased to answer any questions you may
have.
Contacts and Acknowledgments:
For further information regarding this statement, please contact J.
Christopher Mihm, Managing Director, Strategic Issues, on (202) 512-
6806 or at [Hyperlink, mihmj@gao.gov] or Eileen Larence, Acting
Director, Strategic Issues, on (202) 512-6806 or at [Hyperlink,
larencee@gao.gov]. Individuals making key contributions to this
statement included Mallory Barg, Michelle Bracy, K. Scott Derrick,
William Doherty, Clifton G. Douglas Jr., Judith Kordahl, Janice
Latimer, Trina Lewis, and Lisa Shames.
(450343):
FOOTNOTES
[1] Senator George V. Voinovich, Report to the President: The Crisis in
Human Capital, Subcommittee on Oversight of Government Management,
Restructuring, and the District of Columbia of the Committee on
Governmental Affairs, United States Senate (Washington, D.C: December
2000).
[2] U.S. General Accounting Office, Human Capital: Effective Use of
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-
2 (Washington, D.C: Dec. 6, 2002).
[3] U.S. General Accounting Office, Human Capital: Opportunities to
Improve Executive Agencies' Hiring Processes, GAO-03-450 (Washington,
D.C: May 30, 2003).
[4] U.S. Government Accountability Office, Human Capital: Increasing
Agencies' Use of New Hiring Flexibilities, GAO-04-959T (Washington,
D.C: July 13, 2004); Human Capital: Additional Collaboration Between
OPM and Agencies Is Key to Improved Federal Hiring, GAO-04-797
(Washington, D.C: June 7, 2004); and Human Capital: Status of Efforts
to Improve Federal Hiring, GAO-04-796T (Washington, D.C: June 7,
2004).
[5] U.S. General Accounting Office, Human Capital: Observations on
Agencies' Implementation of the Chief Human Capital Officers Act, GAO-
04-800T (Washington, D.C: May 18, 2004).
[6] U.S. General Accounting Office, Government Management: Observations
on OMB's Management Leadership Efforts, GAO/T-GGD/AIMD-99-65
(Washington, D.C: Feb. 4, 1999).
[7] U.S. General Accounting Office, Human Capital: Building on the
Current Momentum to Address High-Risk Issues, GAO-03-637T (Washington,
D.C: Apr. 8, 2003).
[8] U.S. General Accounting Office, Human Capital: Key Principles for
Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C:
Dec. 11, 2003).
[9] U.S. General Accounting Office, DOD Civilian Personnel:
Comprehensive Strategic Workforce Plans Needed, GAO-04-753
(Washington, D.C: June 30, 2004).
[10] U.S. General Accounting Office, Human Capital: Insights for U.S.
Agencies from Other Countries' Succession Planning and Management
Initiatives, GAO-03-914 (Washington, D.C: Sept. 15, 2003).
[11] U.S. General Accounting Office, Human Capital: A Guide for
Assessing Strategic Training and Development Efforts in the Federal
Government, GAO-04-546G (Washington, D.C: March 2004).
[12] U.S. General Accounting Office, Human Capital: Selected Agencies'
Experiences and Lessons Learned in Designing Training and Development
Programs, GAO-04-291 (Washington, D.C: Jan. 30, 2004).
[13] U.S. General Accounting Office, Results-Oriented Cultures: Using
Balanced Expectations to Manage Senior Executive Performance, GAO-02-
966 (Washington, D.C: Sept. 27, 2002).
[14] See section 1322 of Public Law 107-296, November 25, 2002, and
section 1125 of Public Law 108-136, November 24, 2003.
[15] U.S. General Accounting Office, Human Capital: Senior Executive
Performance Management Can Be Significantly Strengthened to Achieve
Results, GAO-04-614 (Washington, D.C: May 26, 2004).
[16] For information on these key practices, see U.S. General
Accounting Office, Results-Oriented Cultures: Creating a Clear Linkage
between Individual Performance and Organizational Success, GAO-03-488
(Washington, D.C: Mar. 14, 2003).
[17] U.S. General Accounting Office, Human Capital: Implementing Pay
for Performance at Selected Personnel Demonstration Projects, GAO-04-83
(Washington, DC: Jan. 23, 2004).
[18] U.S. General Accounting Office, Human Capital: Selected Agency
Actions to Integrate Human Capital Approaches to Attain Mission
Results, GAO-03-446 (Washington, D.C: Apr. 11, 2003).
[19] U.S. General Accounting Office, Human Capital: Selected Agencies'
Use of Alternative Service Delivery Options for Human Capital
Activities, GAO-04-679 (Washington, D.C: June 25, 2004).
[20] For more information, see Public Law 108-271, July 7, 2004, and
U.S. General Accounting Office, GAO: Additional Human Capital
Flexibilities Are Needed, GAO-03-1024T (Washington, D.C: July 16,
2003).
[21] See, for example, U.S. General Accounting Office, GAO's Proposed
Human Capital Legislation: View of the Employee Advisory Council, GAO-
03-1020T (Washington, D.C: July 16, 2003).
