[Senate Hearing 106-547]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 106-547
 
               MANAGING HUMAN CAPITAL IN THE 21ST CENTURY

=======================================================================


                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
        RESTRUCTURING AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION


                               __________

                             MARCH 9, 2000

                               __________

      Printed for the use of the Committee on Governmental Affairs




                    U.S. GOVERNMENT PRINTING OFFICE
64-552 cc                   WASHINGTON : 2000
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402





                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Darla D. Cassell, Administrive Clerk

                                 ------                                

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND 
                        THE DISTRICT OF COLUMBIA

                  GEORGE V. VOINOVICH, Ohio, Chairman
WILLIAM V. ROTH, Jr., Delaware       RICHARD J. DURBIN, Illinois
JUDD GREGG, New Hampshire            ROBERT G. TORRICELLI, New Jersey
                  Kristine I. Simmons, Staff Director
   Marianne Clifford Upton, Minority Staff Director and Chief Counsel
                     Julie L. Vincent, Chief Clerk





                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     3
    Senator Durbin...............................................    18

                               WITNESSES
                        Thursday, March 9, 2000

David M. Walker, Comptroller General of the United States, 
  General Accounting Office......................................     4
Janice R. Lachance, Director, Office of Personnel Management.....     8

                     Alphabetical List of Witnesses

Lachance, Janice R.:
    Testimony....................................................     4
    Prepared statement...........................................    49
Walker, David M.:
    Testimony....................................................     8
    Prepared statement...........................................    27

                                Appendix

Deidre A. Lee, Acting Deputy Director for Management, Office of 
  Management and Budget, prepared statement......................    71
Questions and responses from Mr. Walker to Senator Voinovich.....    74
Questions and responses from Ms. Lachance to Senator Voinovich...    77





               MANAGING HUMAN CAPITAL IN THE 21ST CENTURY

                              ----------                              


                        THURSDAY, MARCH 9, 2000

                                     U.S. Senate,  
Oversight of Government Management, Restructuring, and the 
                         District of Columbia Subcommittee,
                        of the Committee on Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Durbin, and Akaka.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Good morning. The hearing will come to 
order. I want to thank all of you for coming.
    Today, the Subcommittee on Oversight of Government 
Management holds a hearing entitled, ``Managing Human Capital 
in the 21st Century.'' We will examine whether the Federal 
Government is positioning itself to address the human capital 
challenges of this decade. This hearing underscores the 
importance of my larger agenda of empowering Federal employees 
and changing the culture of the Federal workforce.
    I think attention to our workforce, what I refer to as the 
``A team,'' is one of the most valuable uses of this 
Subcommittee's time. We simply cannot have the efficient, 
effective, and streamlined government we all seek if we do not 
take care of our people.
    In his recent book, The New Public Service, respected 
government analyst Paul Light of the Brookings Institute states 
that, ``The Federal Government's current hiring system for 
recruiting talent top to bottom overwhelms at almost every task 
it undertakes. It is slow in the hiring, almost useless in the 
firing, overly permissive in the promoting, out of touch with 
actual performance in the rewarding, and penurious in 
training.'' That is a pretty strong statement.
    He goes on to say that the government should declare a 
human capital crisis, and I think that is what we do have, a 
human capital crisis, and that it is a crisis of staggering 
importance and one that merits immediate action among 
legislators and executives alike.
    I think Mr. Light says it well, and I want everyone to know 
that the Subcommittee is responding to the human capital crisis 
he identifies. The Subcommittee intends to fully address the 
situation over at least the next 2 to 3 years because that is 
what it will take to start to make a real difference in the 
lives of Federal workers.
    The General Accounting Office, Congress' nonpartisan 
auditing agency, observes in its 1999 draft strategic plan 
that, ``While financial management, information management, and 
contracting and performance management have all been the 
subject of major reform legislation in the 1990's, no consensus 
has emerged on the fundamental structure or policy changes that 
may be needed to address the agency's management of their human 
capital.''
    The report goes on to say that human capital management 
requires a well-grounded analysis that continually links are 
agencies' human capital policies and practices through its 
missions and strategies, but that many agencies fail to make 
this linkage. The predictable result is that agencies are 
lacking the right people with the proper skills.
    As part of the 2001 budget, which was submitted to Congress 
just over a month ago, the Office of Management and Budget 
placed human capital challenges on its list of priority 
management objectives to be implemented by the Office of 
Personnel Management. Although many have said, ``It's about 
time.'' I believe it is a shame that it came in the last year 
of the administration. I would have hoped that it would have 
come sooner, because I know how long it takes to get things 
done. I know from my own experience in Ohio, it took us about 7 
years to fully implement the strategies to deal with our human 
capital challenges.
    Among its objectives, the Office of Personnel Management 
``will work with agencies to ensure labor-management 
initiatives to empower executives, line managers, and 
especially employees to improve customer service get mission 
results.'' I have to tell you, this sounds exactly like what we 
implemented in Ohio with Quality Services Through Partnership. 
The end goal of QSTP is to turn government into a high-
performance workplace that focuses on external and internal 
customers, and it makes it possible by turning improvement into 
a daily undertaking that involves all of the employees.
    I believe it is one of the most important initiatives I 
started when I was Governor of Ohio. I can tell you that many 
people, as I met them over the years, told me how our 
empowerment agenda got them excited about their job for the 
first time in years. Many of them said that the process that we 
used changed their lives. People wanted to come to work because 
they knew their knowledge and opinions mattered. QSTP 
reenergized the State workforce and the taxpayers are reaping 
the benefits.
    I believe that this kind of change is possible on the 
Federal level with leadership and commitment from the top, and 
there are several agencies that have recently been brought to 
my attention where it is going on. Although the range of human 
capital challenges before the government will be described in 
detail by the Comptroller General and the Director of OPM, I 
would like to briefly mention some aspects which I believe must 
be aggressively addressed.
    One, the government must attract people with the right 
skills, which will increasingly mean information technology 
skills, to provide services in the information age. We just had 
a hearing in the Environment and Public Works Committee with 
the Nuclear Regulatory Commission, and they are recognizing the 
importance of training and that they need to integrate it into 
their total operations.
    Two, how to attract people to government service in an era 
of tremendous economic prosperity and low unemployment. It is 
tough to get good people today.
    Three, the government must position itself to hire new 
workers as the baby boomers who entered government service in 
the 1960's and 1970's retire in the hundreds of thousands 
during the coming decade.
    Four, how can we ensure that Federal workforce downsizing 
is managed strategically to ensure that our need for 
experienced, skilled employees is not compromised and the 
government's ability to provide quality service is maintained 
and even advanced. For example, I suspect in some instances the 
employees most likely to take buy-outs are those the Federal 
Government can least afford to lose.
    Five, the government must provide its employees with 
incentives and training which will maximize their talent.
    And six, how does the government leverage partnerships with 
unionized Federal employees address these and other human 
capital challenges? I think this sixth issue is one that will 
make the most difference.
    The bottom line is that Congress and the administration, 
managers and employees, must work together if we are to meet 
the human capital challenges of the 21st Century, and I hope we 
can start today.
    I see that Senator Akaka is here. Senator, do you have an 
opening statement that you would like to make.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman. I want to 
commend you for holding this hearing. Your deep interest in 
managing human capital in the 21st Century certainly shows you 
are looking ahead on this.
    As the Ranking Minority Member of the Subcommittee on 
International Security, Proliferation, and Federal Services, I 
am pleased to participate with you, Mr. Chairman, in today's 
hearing and appreciate the recognition that you and the 
Subcommittee have made and recognition that our jurisdictions 
appropriately overlap. I commend my colleague's interest in 
reviewing how the Federal Government manages its varied 
resources--especially its most critical resource--the Federal 
employee.
    Today's hearing on managing the Federal workforce in the 
new millennium provides the Comptroller General and the 
Director of the Office of Personnel Management with an 
opportunity to broaden our knowledge of the issues surrounding 
human resource management in the 21st Century. I am well aware 
of Mr. Walker's commitment in this area, and I hope to learn 
from Director Lachance her views on the subject, as well.
    Over the past 2 decades, there have been dramatic changes 
in the way personnel and related activities have evolved. 
Technological advances, shifting demographics, and renewed 
efforts by Congress and the Executive Branch to ensure an 
efficient and effective government have contributed to these 
changes.
    Throughout the 1990's, legislation enacted by the Committee 
on Governmental Affairs has affected how the Federal Government 
manages its programs and assets, including its workforce.
    The Government Performance and Results Act, which requires 
Federal agencies to develop strategic plans, performance 
measures, annual performance plans, and performance reporting, 
has transformed the way agencies do business.
    I am hopeful that as we continue down the road of achieving 
results through improving management and performance, that 
employees be actively involved in these initiatives. It should 
be obvious that without employee involvement, improvement 
efforts instituted solely by statute or management will never 
have a lasting effect and stand little chance of becoming a 
part of an agency's culture.
    These are exciting times for the Federal Government, and I 
am pleased that there are fresh views on how to improve 
management and performance within the Federal Government. 
However, there is much work to be done, and I look forward to 
hearing from today's witnesses, and again, I thank you, Mr. 
Chairman.
    Senator Voinovich. Thank you, Senator Akaka.
    We have a custom in this Subcommittee that we swear in the 
witnesses. I would ask our witnesses to stand and raise your 
right hands. Do you swear the testimony you are about to give 
before this Subcommittee to be the truth, the whole truth, and 
nothing but the truth?
    Ms. Lachance. I do.
    Mr. Walker. I do.
    Senator Voinovich. Let it be noted in the record that the 
witnesses answered in the affirmative.
    I would remind you that your entire statement, of course, 
will be entered in the record. Normally, we request that oral 
statements be limited to 5 minutes, but as there are only two 
of you here today and in the interest of having as informative 
a hearing as possible, I would invite you to take some 
additional time if you think that is necessary.
    Mr. Walker, we are glad to have you here with us today and 
I appreciate all of the time that you have spent with me. I am 
looking forward to working with you in the next several years 
to see if we cannot make a difference. I am anxious to hear 
your testimony this morning.

  TESTIMONY OF DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF THE 
            UNITED STATES, GENERAL ACCOUNTING OFFICE

    Mr. Walker. Thank you, Mr. Chairman and Senator Akaka. I 
appreciate both of you being here for what arguably is one of 
the most important issues that needs to be addressed in order 
to maximize the performance and assure the accountability of 
the Federal Government, that is, active management and 
appreciation of our most valuable asset, our people.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 27.
---------------------------------------------------------------------------
    Mr. Chairman, I know that you, in particular, are uniquely 
positioned to address this, because having been Mayor of 
Cleveland, Governor of Ohio, and having been very actively 
involved in performance management at both the State and local 
level, that obviously gives you a wealth of experience to draw 
upon. I know based upon our prior meetings that the performance 
management area is one of your two highest priorities, and I 
know, Senator Akaka, that you care deeply about this, as well, 
and I commend both of you for being here.
    Human capital management or people management is really the 
missing link in our attempts to achieve a high performance, 
results-oriented government for the 21st Century. There are 
three key enablers in order to maximize the performance and 
assure the accountability of any enterprise, whether it be in 
government, the private sector, or a not-for-profit entity. 
These enablers are process, technology, and people. People is 
clearly the most important of the three. In fact, people will 
be the key to attaining and maintaining competitive advantage 
in the 21st Century for any type of enterprise.
    The Congress has addressed process and technology over the 
last 10 years or so through a variety of acts. In conjunction 
with process, the Government Performance and Results Act (GPRA) 
and the CFO Act are two examples. In the area of technology, 
the Clinger-Cohen Act and the Paperwork Reduction Act represent 
two examples. There has not been major legislative reform in 
the area of human capital, and frankly, while there is general 
agreement that this is an area that needs to be looked at, a 
consensus has not yet emerged as to what the proper approach 
should be and it will take time for us to get there.
    Eventually, the needed reform will occur in order to 
provide more flexibility while providing protection for workers 
and better positioning the government to be able to get its job 
done in the future, especially to be able to consider skills 
and competencies in making human capital decisions.
    But it is important that we not wait for legislation. There 
is much that can and should and, in fact, must be done within 
the context of current law and administratively by various 
parties. There is no time to waste. The Federal workforce is 
aging. The baby boomers who possess very valuable skills, 
experience, and knowledge are drawing near retirement. Job 
markets are increasingly competitive. Federal agencies are 
increasingly requiring more technical skills and a knowledge-
based workforce that are very much in demand. Many agencies 
have been downsized over the last 10 years, and while they are 
smaller, in many cases, the results are significant skills 
gaps. Many agencies are out of shape, and they have got major 
succession planning challenges on the horizon.
    Clearly, the Federal workforce, like all employers, needs 
to also deal with the need to look for a greater mix of full-
time, part-time, and temporary workers. They need to look at 
flex time. They also need to look at job remoting and a number 
of other possibilities in order to be able to attract and 
retain a motivated and skilled workforce.
    There are serious concerns that are emerging with regard to 
potential flight of knowledge from the Federal workforce 
because of retirement eligibility. There are serious 
shortcomings in a number of aspects of the human capital 
management systems of the Federal Government, in particular, 
the performance appraisal system as well as the linkage to 
performance awards. These need reengineering and in some cases 
reinvention in order to make them meaningful to both management 
and to the employees and in order to provide timely, accurate, 
useful, and constructive feedback to employees based upon 
clearly-defined standards. Effective performance appraisals 
tell employees where they are strong, and where they need 
additional emphasis. They also help you recognize and reward 
contributors, assure that you can help everybody, and enable 
you to deal with non-performers in a reasonably timely manner.
    Mr. Chairman and Senator Akaka, candidly, change management 
and cultural transformation are major parts of this effort. GAO 
is the third Federal agency that I have headed, and I have also 
headed some private sector entities. As you know, my immediate 
position prior to becoming Comptroller General was as a partner 
and Global Managing Director for the Human Capital Services 
practice of Arthur Andersen, so this is an area that I have got 
a fair amount of experience and interest in.
    In general, I find that many governmental organizations 
tend to be more hierarchial, more process oriented, more siloed 
or stovepiped, and more inwardly focused than they need to be 
for the 21st Century. We need to try to help effect a 
transformation, a cultural transformation, which will take 
years to try to move government toward being more partnerial, 
which means more empowerment, but more accountability. It means 
a more results-oriented style of management, focused on 
outcomes rather than outputs, more integrated, meaning that 
there is more working together in teams across borders, across 
boundaries, across departments and agencies, and frankly, 
across Congressional committees, and more externally focused in 
order to get the job done. Clearly, there needs to be greater 
linkage between human capital planning and strategic planning, 
and performance management is clearly an important element of 
this.
    There are several key points that I would like to make. 
First, Federal employees should not be viewed as a cost to be 
minimized. They should be viewed as an asset to be appreciated. 
And like all assets, we should try to take steps to maximize 
the value but manage the risk.
    In addition, we have conducted a study of leading private 
sector organizations on their human capital practices and we 
have identified a number of best practices to consider. I 
commend to you this report, issued in January of this year, 
that summarizes those practices.
    Individual Federal agencies, as well as OPM and OMB, have a 
major role to play in taking the necessary steps to get us to 
where we need to be, and quite frankly, Congress has a major 
role to play in getting us to where we need to be, because 
ultimately, it is going to take the combined efforts of agency 
leadership, of OMB, of OPM, of the Congress, and of GAO and 
other accountability organizations to help us see the way 
forward and to make progress.
    The first step is self-assessment and we published late 
last year a self-assessment guide in the human capital area. 
This guide is designed to help agency heads help themselves, 
and to assess where they are and where they need to go in the 
critical area of people management.
    Much remains to be done at the executive level by the 
central management agencies, OMB and OPM. However, we are 
encouraged in certain regards. First, OMB has recently 
announced in the President's fiscal year 2001 budget that the 
human capital area is a Priority Management Objective. It is 
getting higher visibility. It is getting more attention. 
However, it is going to take sustained attention over a number 
of years in order to get the job done.
    OPM is creating a methodology and accompanying web-based 
tools in order to try to help agencies in their workforce 
planning efforts. These, too, are encouraging developments, but 
we need more and it is going to take a number of years and it 
is going to take sustained attention from the very top over a 
considerable number of years, both within the Executive and the 
Legislative Branch, in order to get this done.
    We at GAO are trying to lead by example. We have conducted 
our own self-assessment. We have done extensive due diligence 
on ourselves and trying to make sure that we take all the 
actions that we can within the context of current law to make 
people a priority in order to deal with our size, shape, 
succession planning, and skills challenges. I am confident 
that, in time, we will be able to meet that challenge.
    Last, but not least, Mr. Chairman, let me reemphasize that 
I think it is extremely important that Congress stay engaged in 
this matter. I think it is very important that Congress be 
committed and be concerned about this area. It is an emerging 
crisis, there is no question about it. And, in fact, based upon 
work that we are doing, I would not be surprised if the human 
capital area were deemed to be a high-risk area in January 
2001. We are still doing the work. We have got some preliminary 
results. And quite frankly, some of those results are 
surprising.
    Agencies such as NASA, and even some agencies that are 
viewed to be extremely well-managed agencies, such as the 
Social Security Administration, which has won a number of 
awards, have major problems right below the surface, major 
problems with regard to succession planning, major problems 
with regard to skills in balances, and other major challenges 
in this area.
    So I think it is going to take sustained attention and 
commitment as occasions arise, whether it be oversight 
hearings, whether it be appropriations hearings, whether it be 
the confirmation process for leadership, or whether it to be 
when agencies come up to the Hill and ask for exemptions from 
Title V. Agencies should be asked to come up with a business 
case, and to make sure that they have done what they can do 
within the context of current law, before they start asking for 
exemptions from Title V.
    So again, I thank you both and I look forward to hearing 
Ms. Lachance's comments and look forward to being able to 
entertain any questions you may have. Thank you.
    Senator Voinovich. Thank you.
    Ms. Lachance, we are glad to have you with us this morning.

    TESTIMONY OF JANICE R. LACHANCE,\1\ DIRECTOR, OFFICE OF 
                      PERSONNEL MANAGEMENT

    Ms. Lachance. Thank you, sir. It is wonderful to be here 
and I am very grateful for the opportunity to testify. Senator 
Akaka, thank you, too, for your attention to this issue.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Lachance appears in the Appendix 
on page 49.
---------------------------------------------------------------------------
    I know, Mr. Chairman, this is a very important issue for 
you, and as you said, you have been a leader in this effort, 
both as a big city mayor and as a governor, and I think you 
probably have many lessons to teach us and we are looking 
forward to working with you.
    I am pleased to have this opportunity to discuss the 
administration's plans to strategically and fully align the 
Federal workforce to support agency goals. It is good to see so 
many people discussing what we at OPM hold as a core belief, 
that the government's human resources, our people, are our most 
valuable asset. We must engage in the war for talent. That is, 
secure, develop, empower, and retain the talented people we 
need to accomplish our mission for the American people.
    This is the foundation for OPM's strategic vision of human 
resources management. That strategic view is driven by dramatic 
change in two areas. The first is the way work itself has 
changed, particularly through the impact of the information 
revolution. Human resources systems that were designed for the 
stable bureaucracies of the 1950's and 1960's simply have to 
change to cope with the reality that we must all adapt or be 
pushed aside.
    The second area of dramatic change in the shift from 
process to results and from merely following the rules to 
serving our customers. Agencies must be prepared to fully 
integrate human resources management with their mission 
critical initiatives. I believe this integration embraces the 
current emphasis on human capital.
    I describe this effort simply as getting the right people 
with the right skills in the right jobs at the right time, and 
in the Federal Government, we must always add, and in the right 
way. This ensures that we honor the merit system principles, 
veterans' preference, and other important public policy and 
law.
    For decades now, getting the right people at the right time 
meant doing our work according to Hoyle. Nowadays, it means 
doing our work in ways that contribute to achieving results and 
that difference has truly transformed human resources 
management.
    When the President included strategic human resources 
management as a priority management objective in the fiscal 
year 2001 budget, he sent an important signal that people are 
our most important asset. This objective includes three 
critical actions.
    First, OPM will help agencies strategically assess their 
human resources to ensure a quality workforce for the 21st 
Century. To do this, we will give agencies a workforce planning 
model that will help managers determine the kinds of talent 
they will need in the future.
    Second, we will support all Federal employees as they 
strive to improve customer service and get mission results. 
They will be empowered. In our unionized environment, labor-
management partnerships are an essential vehicle for genuine 
empowerment, and that is why President Clinton recently 
reaffirmed his commitment to partnership. We have seen over the 
last 6 years that partnerships have cut costs, enhanced 
productivity, and improved the delivery of service to the 
American people. However, without continuous learning and an 
investment in training and development, empowerment is truly 
just an empty phrase. Up-to-date knowledge, skills, and 
abilities are critical for both organizational performance and 
individual employee success.
    Finally, employee empowerment can only succeed when 
employees can balance their work and family needs. The evidence 
is in and it is clear--these programs foster greater 
productivity and higher worker morale.
    As the third major action to meet the priority management 
objective, OPM will ensure that agencies have the tools to 
attract, manage, and retain the talented employees they need 
and we will encourage agencies to make better use of existing 
flexibilities to fit their specialized situations.
    OPM has introduced a number of changes and flexibilities in 
the last 6 years. For example, we delegated to agencies the 
authority to assess applicants in order to bring the hiring 
decision and the recruitment action closer to the managers who 
must deliver the results. We also decentralized performance 
management, again, to allow agencies to design programs that 
work best for them.
    But more change is needed. Today, most candidates for 
Federal jobs are assessed against a rigid set of qualification 
standards with narrowly defined skills. This system simply does 
not measure the wider and more flexible range of skills that 
are important to today's organizations. So OPM is designing a 
new system that will allow agencies to assess candidates 
against a broad range of job competencies.
    We also hear from managers and job applicants alike that it 
takes the government far too long to hire employees. In the 
very near future, we will propose new hiring tools to bring the 
government's hiring practices in line with the realities of 
today's job market. In addition, OPM will continue to speed 
selection and hiring decisions by using technology OPM 
pioneered--the use of touch screens, phone applications, and 
now the Internet.
    Have these technological advances helped? They absolutely 
have. The Census Bureau, just as one example, has been able to 
reduce the time required to hire computer specialists and 
statisticians from 6 months to as little as 3 days.
    Of course, effective human resources alignment must also 
consider the compensation systems that help the government 
compete for talent in a tight labor market as we have now. We 
are currently looking at the entire structure of our 
compensation systems to see how they must change to support the 
government's mission today and well into the future. In the 
meantime, to give agencies more immediate assistance, we are 
working on a proposal that would enhance recruitment, 
relocation, and retention incentives.
    Employee performance management offers another opportunity 
for aligning human resources management with agency goals by 
linking what employees do in their day-to-day work to the 
achievement of organizational results, customer satisfaction, 
and employee feedback. These are the balanced measures cited in 
the President's budget for fiscal year 2001.
    Now, despite our hard work and our innovative plans, if we 
do not manage our people well and with compassion, our programs 
will fail. So we are working on a series of initiatives to 
ensure that the government selects and develops exceptional 
executives with the leadership expertise needed to meet the 
challenges of our new century. While it is the job of line 
managers and executives to deploy people to achieve an agency's 
goals, human resources professionals also play a crucial role 
as their expert advisors. At OPM, we are committed to helping 
agencies build a strategically focused human resources 
workforce.
    In conclusion, Mr. Chairman, it should be clear that the 
Federal Government's most valuable asset is truly the talented 
and diverse women and men who work every day to make a 
difference in the lives of the American people they serve. 
Without attracting, managing, and retaining the right people in 
the right jobs with the right skills, no organization can 
perform its mission.
    That concludes my prepared remarks, sir, and I have 
submitted a statement for the record, but I will be pleased to 
answer any questions you may have at this time.
    Senator Voinovich. Thanks very much.
    I read the report, ``Human Capital: Key Principles from the 
Nine Private Sector Organizations,'' and about 40 percent of 
them had to do with quality management and the rest of them had 
to do with some other things. This was a report on successful 
private sector businesses. Do you, Ms. Lachance, have any kind 
of tools to ascertain whether or not a department is really 
doing a good job in terms of human capital?
    Ms. Lachance. We use a number of ways to evaluate how an 
agency performs. We are so pleased to have received the input 
from GAO. We think it is very helpful. It has been presented to 
the President's management council and we will be moving 
forward to utilize the very important tool that General Walker 
has put together for us.
    But in addition, we have a very important function at OPM 
which is to provide oversight to the entire Federal Government 
on human resources management. We have changed our focus on 
that oversight function. It is no longer punitive. It is not a 
``gotcha'' game. It is not about finding mistakes and getting 
people in trouble. It is a productive dialogue that we enter 
into periodically with every major Federal agency and work with 
them to make sure that they are maximizing their human 
resources functions.
    In addition, we have spent a considerable amount of time on 
a couple of other initiatives. First of all, we believe that it 
is key to have human resources strategically involved and 
aligned with the entire mission and performance of the agency. 
So we have actually developed a pyramid that is based on 
effective human resources practices and an efficient human 
resources profession and function at an agency, and then 
finally at the very top, the place where it all comes together, 
to make sure that everything is based on inert principles and 
that the human resources strategy is aligned with an agency's 
mission.
    We have also, Mr. Chairman, done a significant study on the 
state of the human resources profession in the Federal 
Government and we have found there are skills lacking, that the 
human resources profession has suffered from being considered a 
support function in an agency. We are hoping to elevate the 
entire profession, advise agencies on the kind of training and 
skills that the human resources professionals need and urge 
every agency to have their human resources professionals at the 
table when they are developing their strategic plans and goals 
for the next several years.
    Senator Voinovich. I would be interested in the methodology 
that your folks use when they go over an agency to determine 
whether or not they have the ingredients that are necessary to 
be successful from the human capital point of view----
    Ms. Lachance. I will be happy to provide them.
    Senator Voinovich. One of the GAO reports I reviewed said 
that you have to bring your human resources people right into 
the management and tie that in with a strategic plan for the 
business. You recognize that that needs to be done?
    Ms. Lachance. Absolutely, and I will be happy to provide 
for the record the kind of evaluation that we conduct when we 
go on-site and work with you on that.
    Mr. Walker. Mr. Chairman, could I mention something?
    Senator Voinovich. Certainly.
    Mr. Walker. As a follow-up, I think it is very important 
that we take a constructive engagement approach to this 
important issue, and that is what we are trying to do at GAO. 
For example, these two documents are not ``gotcha'' documents, 
they are ``help you'' documents. They are tools that people can 
use to help themselves address these issues, information of 
help them to assess where they stand as compared to other 
leading organizations.
    Clearly, we at GAO are part of the Legislative Branch and 
clearly we are going to have evaluative responsibility, and 
clearly we are going to need to assess which agencies are doing 
well and which ones are not, but we do not just want to focus 
on that. We also want to focus on trying to help people get to 
where they need to be in order to generate the results that we 
all want.
    Senator Voinovich. How long has that been out, that self-
assessment?
    Mr. Walker. The self-assessment guide has been out since 
September 1999. Our best practice guide was issued in January 
of this year.
    Senator Voinovich. Ms. Lachance, do you know if any of your 
directors have read that self-assessment guide?
    Ms. Lachance. Everyone in my agency has, and I know that it 
has received some government-wide attention. We were fortunate 
enough to have General Walker come to the President's 
Management Council, which as you know is made up of the 
government's chief operating officers from every major 
department, and I think that was a good exchange. We have spent 
a lot of time discussing the checklist and I know it is being 
taken seriously across the entire administration.
    Senator Voinovich. I would be interested in, again, what 
their response to it is and whether or not they think it is 
worth while for them to follow through. It is very interesting. 
I wrote a note down here that I am going to do an assessment of 
my own organization.
    Mr. Walker. Mr. Chairman, I think that is an important 
point. We have used this to assess ourselves, and I think one 
of the things that I believe very strongly in is that we have 
got to practice what we preach.
    Senator Voinovich. I think, Senator Akaka, you have 
somewhere to go and would like to ask some questions this 
morning, so we would like to hear from you.
    Senator Akaka. Thank you very much, Mr. Chairman. I have an 
unexpected scheduling conflict, so I thank you for yielding to 
me.
    Mr. Walker and Director Lachance, I want to thank you for 
your testimony. I will be submitting, Mr. Chairman, other 
questions,\1\ but let me ask this one. Mr. Walker, you 
mentioned the quality management tools noted in the blue 
pamphlet, which emphasis results. Are there tools in place to 
ensure that measurements used to assess the performance of the 
Federal Government and its regular workforce are adequate for 
the Federal contract workforce?
---------------------------------------------------------------------------
    \1\ The questions and responses from Mr. Walker and Ms. Lachance 
appears in the Appendix on pages 74 and 77 respectively.
---------------------------------------------------------------------------
    Mr. Walker. I think more needs to be done in this area, 
Senator. Part of this relates to the Government Performance and 
Results Act. Obviously, as part of the Government Performance 
and Results Act, in addition to the strategic planning 
exercise, there is supposed to be an effort to come up with 
performance measures, performance measures that are not just 
focused on outputs but also outcomes. Some agencies are doing 
better than others in trying to come up with ones that are 
relevant and understandable to the Congress and to the public.
    I think once that is done, then these measures have to be 
linked to the performance management system for evaluating your 
people at all levels, both individually and as teams, to make 
sure that they are linked with the measures that you are trying 
to promote for the organization as a whole. So I think we have 
got more work to do in that area.
    Senator Akaka. Is there any indication of any agencies 
using these tools?
    Mr. Walker. Yes. Actually, we have had quite a bit of 
interest in the self-assessment guide. As Director Lachance 
mentioned, I had the opportunity to go and meet the President's 
Management Council. There was a significant amount of interest 
in this topic. There has been a lot of interest, frankly, even 
beyond the government in this topic.
    I find that when I go out and visit on the front lines with 
agency leadership, I find that the human capital challenge 
resonates. I remember being at NASA, at the Johnson Space 
Flight Center. They were there to brief me on the space station 
and on also the new technology to replace the shuttle, yet when 
I talked to them about human capital, a great deal of motion 
came out because they face so many challenges in this area and 
they felt that it has been so sorely needed to place more time 
and attention on this area.
    So yes, we are getting a lot of attention and we are 
hopeful.
    Senator Akaka. Thank you very much. Thank you, Mr. 
Chairman, for giving me this opportunity.
    Senator Voinovich. You are welcome.
    Senator Voinovich. There is a lot of talk today in some of 
the agencies like NASA and other agencies that need new skilled 
workers, particularly in the area of technology. There is some 
consideration being given to legislation which would allow for 
early retirements of individuals. For example, last year, we 
tried to get legislation to deal with the challenging problems 
that we have at Wright-Patterson Air Force Base in their 
research center. We were not able to get it through because it 
was felt that you should not just select one agency or facility 
to do that.
    I would like to know where your agency stands on 
legislation that would make it possible, across the board, to 
allow agencies to start looking at authorizing early retirement 
to make room so that they can bring in some new folks that they 
really need. In some instances with older workers--I found this 
in State Government--where you had early retirement and you 
lost them, you wondered whether you would be able to replace 
them, you saved some money and brought in new people, but you 
just sometimes wonder how much you benefitted from it. But 
overall, my experience has been that it has been good.
    But we do have Federal agencies today that really need to 
bring in some new people and are unable to do it and need this 
kind of flexibility. I am just wondering whether or not the 
Office of Personnel Management would support legislation of 
that sort.
    Ms. Lachance. Well, as a matter of fact, Mr. Chairman, the 
President's budget actually urges Congress to enact early-out 
authority and buy-out authority to use as a workforce shaping 
tool, not just as a tool to downsize, which I think is an 
important distinction. In the past, we had used those two 
authorities to shrink our workforce. Now, I think we have to 
get a little bit more sophisticated and realize that we have 
skills imbalances, that we need perhaps different kinds of 
competencies as we enter the 21st Century. So we would be 
thrilled to work with you on something like that.
    You rightfully noted, and I would like to confess at this 
point, I do have a concern about flexibilities for just one 
particular agency unless that agency can make a case that it is 
so different from all the others that it should not apply to 
the entire government. I just do not want to create a 
government of haves and have nots and have some agencies with a 
lot of flexibility and ability to really meet their mission, 
while other maybe less popular agencies or the ones that do not 
have perhaps as compelling a mission as someplace like NASA 
would still be struggling under some of the older rules and 
restrictions. So I would be thrilled to work with you on that 
kind of legislation.
    Senator Voinovich. Yes, Mr. Walker?
    Mr. Walker. Mr. Chairman, I think this is critically 
important. You put your finger on a very important issue. In 
the past, to the extent that early-out authority or buyout 
authority has been granted, as Director Lachance said, 
generally, you had to give up the slots, and therefore you did 
not really gain that much from it.
    We have a lot of agencies that are out of shape, that face 
major succession planning challenges, that have not hired for 
years, that need to reinvigorate their organizations, that need 
to be able to attract certain skills, and to be able to gain 
reasonable flexibility while, with appropriate protections and 
safeguards, to be able to use that to realign or reshape the 
organization.
    One other thing, Mr. Chairman, that you touched on earlier: 
You talked about how difficult it is to be able to attract 
people now, given the current economy, and the compensation 
differentials have grown greater over the years between the 
private sector and the Federal workforce. But in addition to 
that, the debt loads that many individuals have as they come 
out of college are much greater than they used to be, and in 
cases of agencies like GAO and NASA, where most employees have 
masters or doctorates, the debt loads that they have are 
considerable.
    I think one of the things that we need to think about is if 
the Defense Department can end up giving incentives for debt 
relief for selected hires, why cannot certain civilian agencies 
be able to do that, too, especially in conjunction with 
realignment, reinvigoration, and the need to acquire certain 
critical skills. I think it is something we need to think 
seriously about, which, frankly, could be very helpful and 
could be done on a tax-favored basis that might help reduce our 
competitive disadvantage.
    Ms. Lachance. If you do not mind, Mr. Chairman, we do have 
some thoughts on that very issue and would love to hear your 
views and work with you on developing that kind of proposal.
    Senator Voinovich. The average Federal employee is 45 years 
old. In 10 years, he will be eligible for retirement. Nine-
hundred-twenty-three-thousand Federal employees, more than 
half, are between 45 and 69 years of age. Five-hundred-and-
seventy-five-thousand Federal employees are between 50 and 69, 
meaning that over 30 percent of the workforce is either 
eligible for retirement or will be within the next 5 years.
    It seems to me that there are aspects of this that really 
need to be thought out in terms of long-range planning and we 
ought to get on it ASAP. One aspect of it is that many Federal 
employees are going to be retiring and how do you replace them. 
Another issue is, in highly technical job areas, how do we 
compete with the private sector? How do you attract the people 
that you want so that you have the workforce that you need?
    The other is an immediate problem, and that is the issue of 
how do you provide for early retirement for those that would 
like to leave the service, save that slot, and then bring new 
folks into the organization. From what I understand, the Office 
of Management and Budget has taken the position that they do 
not want to get into this because of the fiscal impact of the 
early retirements, they are concerned that it is going to cost 
the Federal Government too much money to do this.
    The point I am making is, is anybody sitting down and 
really looking at all aspects of this to determine where we are 
going? We are going to have a new president next year and that 
president is going to be faced with some tremendous challenges. 
The job right now is to identify those challenges that need to 
be addressed so that they do not get lost in the shuffle when 
the new administration comes in, because you know and I know 
that it takes a while for that transition to occur, even if, 
say, Vice President Gore is elected.
    Even in that case, you are going to have a lot of change. 
People are moving, coming in, and so on, and somewhere, this 
has got to be elevated in terms of a real crisis that needs to 
be addressed. I would be interested, are you doing anything in 
that area, either one of you?
    Mr. Walker. Well, first, I can tell you what we are doing, 
Senator. We are doing work right now on retirement eligibility 
for the Senior Executive Service to try to get a handle on 
that. We are also doing work on critical occupations. We are 
asking the major departments and agencies to identify what they 
deem to be their critical occupations and where they stand with 
regard to their needs versus what they have on board. 
Obviously, we are trying to increase the visibility of the 
issue and encourage greater action both in the Executive and 
the Legislative Branch.
    I do think that if we end up putting this on our high-risk 
list, and it is early yet, we have not made that final 
judgment, but I think there is a good possibility that will be 
the case, that historically has gotten some attention. That has 
gotten some attention both in the Executive Branch as well as 
the Legislative Branch, although we need to make sure that we 
have the appropriate support for it. But I do not have a whole 
lot of doubts that we can do that.
    Ms. Lachance. And Mr. Chairman, if I could, I want to 
assure you that OPM is, in fact, performing the role that you 
outlined here. We are thinking strategically about this problem 
on a holistic and comprehensive level. We may be slicing it up 
in terms of finding solutions, but our thinking, our approach 
to the issue is extremely comprehensive and I think you will be 
pleased with the results of our work.
    I think there is an important point to make, as well. The 
statistics that you cited, I think really transcend the 
traditional political calendar that we are all used to 
operating with here in Washington, DC. This is an election 
year, but I think that everyone now realizes, everyone in 
leadership positions across the Executive Branch understands 
that these numbers are real, that they are catching up to us, 
and that they have to act.
    We have a number of initiatives on the way that are going 
to, we believe, help the agencies do a good job at it. Sort of 
the centerpiece of that effort is our workforce succession 
model, which is going to be an e-enabled, web-based effort to 
provide agencies with an unprecedented amount of data and 
access to statistics than they have ever had before. They are 
going to have the ability, Mr. Chairman, to compare their own 
situation in their agency with not only the government-wide 
numbers but also private sector numbers from BLS and from the 
Census Bureau, and also to assess what kind of talent is 
available in the educational pipeline.
    So we are hoping this is going to help people shape their 
thinking on these issues. In addition, it is going to allow 
them to run some ``what if '' scenarios so that they do not 
have to start down the road, take on a lot of risk, invest a 
lot of resources into a particular strategy and then find it is 
not working. We are hoping this tool will help them do that, 
and we are hoping to have that ready as soon as possible. It is 
one of our major priorities.
    But even beyond that, we are taking a complete look at the 
compensation systems. We have an entire unit dedicated entirely 
to that effort, and that is not only looking at pay but also 
benefits to make sure that we keep up with the private sector 
in that area, as well.
    So we are looking at that. We have an entire effort on the 
Senior Executive Service. We have come up with a leadership 
pipeline that provides training for people, virtually at the 
GS-11 or GS-12 level, once they have been identified as 
potential leaders, all the way up through when they get into 
the Senior Executive Service, and we are not stopping there 
because, obviously, once you get into the SES, you still have 
to keep learning.
    So we have established a learning center which is going to 
focus on training opportunities for the SES and also encourage 
mobility, which we believe is a key factor in people keeping up 
their skills and learning different ways and approaches to 
getting results for the American people.
    I am also pleased to chair, Mr. Chairman, the President's 
Task Force on Federal Training Technology to assist in Federal 
employee training, where we are looking at some innovative 
approaches using technology, including some pilot programs on 
individual learning accounts where each employee can have a 
voice in their training at the Federal worksite.
    So we are very excited about the potential of all of those 
tools and we think that it is going to be a strategic, 
comprehensive approach to this very important crisis that we 
are facing.
    Senator Voinovich. Well, I do not mean to be critical, but 
it is late in the game, and from a practical point of view, if 
I were in your shoes right now, I would be putting together 
transition manuals, and I hope the Federal Government does 
that. In Ohio, I know we were already well underway with 
transition manuals for the next administration, prepared for 
whoever.
    But the fact is that somebody ought to be really 
concentrating on human capital at the agencies. There is a GAO 
self-assessment guide, and somebody should be identifying the 
human capital problems and prioritizing the areas that have to 
be immediately addressed when the new administration takes 
office.
    Second, the Federal Government has not done a job 
classification since 1978. If you talk to the presidents of the 
respective unions, as I have, they think it is terrible. Now, 
job classification is tough. Part of the problem is that the 
current classification system is not flexible enough, people 
are in the wrong classification, and it is out of whack. I 
think that the next administration better come in and start 
looking at this issue, because maybe it is one of the reasons 
why we are not as competitive as we should be.
    One of the things around here that gets me is that there 
are periods of time when you do certain things. You can get 
started with some new initiatives this year, but the next 
administration is going to come in and they are going to have 
their own ideas. I am just going to say this to you. If you 
really want to make a contribution to this area, I think for 
the remainder of the year, you should conduct a government-wide 
appraisal of human capital. You will find that you have got 
some wins and you have got some losses, and it would show that 
you care about these agencies.
    You could then give this appraisal to the next 
administration and say, hey, you had better start paying 
attention to this. I mean, the issue of training, it is 
terrible. Just talk to your union presidents. The training is 
not there. The training budgets have been reduced in many 
areas. The incentive program, where is it? Quality management, 
again, not there but for a few agencies.
    So those are some of the things that ought to be looked at, 
and the other thing is the issue of, and I will yield 
momentarily because Senator Durbin is here and I am sure he 
would like to make a statement or ask some questions, but how 
do you, from an administrative point of view, make sure that 
human capital does not fall to the bottom like it always does, 
and that goes for this administration and for administrations 
in the past.
    The problem is that when the new secretaries and assistant 
secretaries come in, they spend most of their time worrying 
about their budgets, have very little time to do anything else, 
and management just gets shoved to the side. You have to have 
some mechanism, either in the Office of Management and Budget 
or elsewhere, and you might just want to think about it with 
your colleagues, where would we put this issue to make sure 
that when the next administration comes in, this gets the 
attention that it really needs. We probably need it now more 
than ever before in light of some of these statistics.
    Ms. Lachance. If I could, Mr. Chairman, the fact is that we 
are a very small agency and we did not start these efforts this 
year, in the last month or even since General Walker gave us 
some of his tools and his thinking on it. The fact is that we 
have been thinking this way for several years now and we could 
not be at the point we are at with some of these tools and some 
of the thinking that has already gone into this subject if we 
had not started in 1993 essentially redesigning ourselves, 
first of all, as an agency so we could serve as a model 
employer, and then looking to the rest of the government as to 
how we could be most helpful to them in the challenges they are 
facing.
    But I also would like to maybe disagree with you on one 
small point. I do not think we have a year to concede to this 
problem. I think that this is a critical issue. These numbers 
are catching up with us. Every day, they are getting worse. 
Every day, the Federal Government ages. Every day, more Federal 
employees are eligible for retirement.
    I am going to keep working for the rest of this year on 
this and I think that in these next several months, we can make 
a lot of progress in these efforts. I would love to join with 
you on this effort. I agree that the transition is important. I 
am going to focus on that, as well. But I also think that we 
can also get a lot done between now and January on the PMO, on 
some of the things that have been identified in there, on 
increasing partnership, labor-management, on getting our 
workforce succession planning tool in shape and ready to go for 
people to use no matter who is President, in using, as General 
Walker has said, the flexibilities that are already on the 
books. So I am going to keep working on it.
    Senator Voinovich. Well, I would not want you to put aside 
the pressing problems that you have. You have to run your 
agency. I am just saying, you have X-amount of time, you have 
X-resources, and you have to decide where can you put in your 
resources to get the most return on their investment. That is 
all I am suggesting.
    Senator Durbin, would you like to make a statement this 
morning?

              OPENING STATEMENT OF SENATOR DURBIN

    Senator Durbin. Thank you, Mr. Chairman, and thank you for 
this Subcommittee hearing to focus our attention on the Federal 
Government and to really determine what we should be doing to 
manage, empower, and value its greatest assets, its workforce 
of 1.8 million dedicated men and women. I appreciate your 
commitment to work on this issue and I have a complete opening 
statement which I would like to make part of the record at this 
point and in the interest of time, just ask a few questions.
    [The prepared statement of Senator Durbin follows:]

                  PREPARED STATEMENT OF SENATOR DURBIN
    Thank you, Mr. Chairman, for scheduling this morning's Subcommittee 
hearing to focus our attention on how the Federal government is--or 
should be--managing, empowering, and valuing its greatest asset--the 
1.8 million dedicated men and women who serve the public as Federal 
employees. I appreciate your interest and work on this issue.
    As you have pointed out, the Federal Government faces a host of 
serious demographic and fiscal challenges in ensuring a vital workforce 
for the next few decades. The reality of today's marketplace is that 
there is strong competition for talent, and the public sector must 
vigorously compete with the private sector for human resources with 
increasingly complex skills.
    The advent of new technologies that we may not have fathomed even a 
year ago, creative ways of organizing work, alternative means of 
delivering public services, and an increasing reliance on a temporary 
workforce have redefined the nature of public work. However, the 
structure and systems for acquiring and developing human capital have 
not necessarily kept pace.
    I look forward to hearing the insights and guidance of our 
distinguished witnesses, Mr. Walker and Ms. Lachance, who have been 
asked to share their perspectives about what Federal agencies should be 
doing to ensure that our greatest asset--today's and tomorrow's Federal 
service--is equipped with the flexibility, vitality, and focus to 
deliver top-notch services to the American public.

    Senator Durbin. First, an observation. Ms. Lachance refers 
to this war for talent in her statement. I run into this, I am 
sure that Senator Voinovich does, as well. Just to give you an 
illustration, within the last 6 weeks, the major law firms in 
the City of Chicago have decided that in order to attract the 
best law school graduates to come to work for them, they have 
to offer $130,000 a year because otherwise they are going to 
lose them to dot-coms and you name it. They do not have a 
chance.
    At the same time, and this was a source of great 
celebration at a lot of the favorite watering holes of Chicago, 
all the first and second-year employees in their firms got 
$42,000-a-year increases, so they were out celebrating for 
quite a bit.
    Well, what does that mean? Well, congratulations if you 
happen to be at the top of your class at Harvard or University 
of Illinois or Chicago or whatever it happens to be and you 
happen to go to one of those law firms. But let me tell you how 
it also plays out. When I put an ad in the paper and say I 
would like to see which lawyers would be interested in becoming 
Federal District Court judges in the Chicagoland area, the 
Northern district area, with tens of thousands of lawyers, I 
had 12 applications. The job pays $139,500. I think that is 
roughly what we are paid, the same level. It has stature. It 
has a great pension system. It has all of the above. But surely 
it is not keeping up with the real marketplace.
    I sense that in many respects in attracting the talented 
people that we need in so many areas of the Federal Government, 
we are running into the same thing. If we are not going to be 
salary competitive, we are going to find ourselves attracting 
some good people prepared to sacrifice for public service, but 
not even catching the attention of a lot of others who have a 
great deal of talent but are not prepared to make a fantastic 
economic sacrifice to serve our government. Is that your 
impression, General Walker?
    Mr. Walker. It is a major problem, Senator, and I think we 
have to recognize several things. First, why do people come 
into government? That is one of the questions that I have asked 
all our employees through a survey. Why did you come to work 
for government? And in many cases, they came because they want 
to make a difference, because of the balance of work and 
family, because of the challenge of the work, and because of 
the rewards of public service. Clearly, money was not one of 
the reasons they came to government.
    On the other hand, what we are finding is that it is a new 
ballgame now because the people we surveyed at GAO were hired 
10 years ago, 15 years ago, 20 years ago or more, because we 
had hiring freezes for 5 or 6 years in the 1990's. The kind of 
people that are coming out of college now and the kind of 
opportunities they have, it is a whole different ballgame.
    I think we need to look at it from a variety of 
perspectives. One, there are only certain people that are going 
to be interested in working in the government to begin with, 
and we have got to identify those. But second, we need to also 
be able to say, what can we do to enhance our hiring 
opportunities? I mentioned earlier in the hearing that a lot of 
people that we hire and other agencies hire have master's 
degrees or Ph.D.s and they are highly sought after. Not only is 
the compensation differential a problem, but the debt burden is 
a problem.
    One of the things we ought to be thinking about is whether 
or not we can give some debt relief. The DOD does it. Why can 
we not do that for critical occupations in the civilian 
workforce, and we could do it on a tax-favored basis and that 
might help to shift the equation here and attract more people.
    Further, why can we not look at our compensation structures 
and start compensating more for skills and performance than for 
more tenure? I think it is something we need to think about 
doing. Now, we obviously have to be careful about it. We need 
to make sure that we have got protections, that it is not 
discriminatory and things of that nature. But I think we need 
to fundamentally step back and reassess our approach, not just 
for the new people that we are trying to get but for the people 
we already have.
    I am on the front lines on this. I am going to Florida A&M 
next month. I am going to Cal-Berkeley. I went to the 
University of Texas and I am trying to attract promising new 
talent. So I think we need to step back and ask ourselves some 
of these questions. We are going to have to do some things 
differently, I think, if we are going to compete in the future.
    Senator Durbin. I think the image of government service 
when I was graduating from college was the following: It does 
not pay as well. You are going to be in a lot of offices with 
battleship grey desks and filing cabinets. But you have job 
security and a lot of holidays and a great pension when it is 
all over. That was kind of the package. Take your pick. What is 
your view on life? Maybe that is an oversimplification, but 
that was an image that a lot of my fellow students shared.
    I do not know if that is an image that can sell the product 
today. I think a lot of people are willing to take a little 
more risk in their life if the reward is there, and if we do 
not build that into government service, as you suggest, we are 
going to lose some of these creative people who might just 
otherwise be willing to make that economic sacrifice.
    Mr. Walker. I think the other consideration we have, 
Senator, is that job security is not what it used to be. When 
you look at all the downsizing that has occurred in this last 
decade, one thing we have to keep in mind is it is not only the 
entry-level people that have been affected. One of the things I 
think we have to recognize is that there are a lot of early 
retirees who have a lot of skills and who want to do something 
for their country. We ought to be taking advantage of these 
skilled people. We ought to be going after them to try to see 
if we can get them in to make a contribution to their country, 
as well.
    Senator Durbin. Ms. Lachance and General Walker, have you 
taken a look at this college debt forgiveness? We do have 
college debt forgiveness. Ironically, Mr. Chairman, we have 
college debt forgiveness for those who want to be prosecutors 
but we do not have college debt forgiveness for those who want 
to be defense attorneys. It tells you something, does it not?
    But let me ask you, could you give me, or do you know a 
breakout of the areas where we have college debt forgiveness in 
our law?
    Mr. Walker. I do not know it off the top of my head. 
Director Lachance may. It is an area that she mentioned that 
they are looking at.
    Ms. Lachance. Senator, we are actually working on this very 
issue. The legal authority is there. There is obviously a 
budget implication, a very serious one, and so we are working 
with other agencies to develop regulations to implement this on 
a broader basis than where they are utilizing it now.
    But I know one of the places, I was a keynote speaker at 
the Army JAG school down in Charlottesville and they just got 
the authority and they had a lot of interest in talking to me 
about how to apply it and what kind of service contracts and 
requirements they should have for it.
    So it exists. I think we could do it and we are working on 
it, and so hopefully we can come up with a way to do it that is 
equitable and fair and that gets at this recruitment issue.
    Senator Durbin. If the Chairman is interested, I will 
certainly follow his lead, but I would like to get into this.
    Ms. Lachance. Right.
    Senator Durbin. I would like to figure out where the debt 
forgiveness programs are and whether we can identify critical 
areas of need in Federal employment where we can create 
incentives for people to consider public service.
    When you went to the major corporations and looked for the 
best practices, I would assume that many of those corporations 
had spent some money in developing their concepts, in other 
words, went beyond the theoretical in reading the books and 
writing it down and probably engaged focus groups, a lot of 
interviews, tried to cull from the prospective applicants to 
their corporations what they were looking for, then went to 
their employees who stayed on and did a good job and said, what 
does it take to keep you here? Why did you stay and why did you 
not leave? Have we done anything comparable when it comes to 
Federal public service?
    Mr. Walker. I cannot comment for the Executive Branch. I 
can say that we are doing those things at GAO. One of the 
things that we have done is to survey all of our employees. We 
got an 87 percent response rate, which is incredibly high. 
Eighty percent of the persons provided supplemental written 
narratives, of which I read every one, 678 pages. We had a 
number of focus groups. We have a number of other outreach 
efforts under way in order to try to find out from people what 
they like, what they are concerned about, why did they come 
here, why did they leave, and so I think that is critically 
important.
    I think another thing that you mentioned, Mr. Chairman, 
which is relevant here, too, is investments. Sometimes you have 
to make targeted investments in order to be able to get to 
where you need to be. One of the things that suffered in the 
1990's was training budgets which in many cases were absolutely 
slashed. Training is an investment in the future, and I think 
we need to do some reinvestment there.
    Ms. Lachance. Senator, if I could, we have done a number of 
studies on some of these issues, and not only talked to Federal 
employees and surveyed Federal employees through our 
organizational assessment survey and through the National 
Partnership for Reinventing Government's employee survey, but 
we have also talked with some of the colleges and universities, 
conducted focus groups with students who were thinking about 
what kind of career to have, and we have found a number of 
things.
    The compensation issue is always going to be a problem and 
it is always going to be one where we cannot compete, or 
probably cannot compete, barring any dramatic change. But what 
we are finding is that the people with the skills we need are 
looking for a more total picture, a more comprehensive picture 
of a work environment than just pay. They are looking for 
family-friendly policies, the ability to balance their work 
life and their home life. They are looking for training. They 
want somebody to make a commitment to them and help them with 
continuous learning because they recognize, probably better 
than those of us who are a little older, that the world of work 
is constantly changing and you constantly have to update your 
skills.
    They want to be in an environment where their contribution 
is recognized, and that is another key area that we are looking 
at in our overhaul of the compensation system. How do you 
recognize top performers? I think in the Federal Government, we 
do ourselves a disservice by focusing very often on poor 
performers. The fact is that there are a number of outstanding 
performers and we have to find a way to distinguish them beyond 
even what is available now, which are some very significant 
bonuses and opportunities for bonuses and Presidential rank 
awards, but there has got to be more and there has got to be a 
more comprehensive approach to that.
    So we are finding that it is a much bigger picture than 
just the paycheck and we are trying to adapt that as we look to 
the kind of people we are trying to attract.
    We are also getting away, and I mentioned this in my 
testimony, getting away from the strict skills-based approach 
to hiring. You know, we used to hire an accountant, for 
example, by saying you had to have 24 hours of accounting 
courses in college. That does not tell me or any other manager 
how that person is going to perform in the job. What we have to 
do is move to competencies, get beyond the very strict 
technical skills, move to someone's ability, for example, to 
work in a team, someone's ability to learn and relearn and 
adjust to change. That is the environment we are faced with and 
that is what we are going to be able to measure in the very 
near future and base our hiring decisions on those 
competencies.
    Senator Durbin. I want to make an observation here and I 
want to exempt the Chairman from my observation because he is 
relatively new on the scene here. But I think one of your 
single biggest problems is the U.S. Congress when it gets right 
down to the bottom line, the businesses that you have talked to 
sit down at the highest levels and develop a team concept and 
say, now let us execute it and we are going to try to prove to 
the shareholders it was the right decision.
    Just about the time you have developed your team concept, 
you have to come up with an appropriations bill and then you 
have to go through the GAO studies and then you have to go 
through all of the scrutiny and oversight which is part of our 
governmental system, and if it ends up looking like a skeleton 
of the original concept, it probably is after everybody has had 
a crack at it.
    I have seen over the years, and just in most recent memory 
in the last 6 or 8 years, a shameless scapegoating of Federal 
employees on Capitol Hill. This concept of an army of clerks, 
costs to be cut, some of the things that you have noted here 
was repeated over and over and reached its extreme when we had 
a government shutdown and a lot of people said, who will ever 
notice? If we closed it down, who will ever notice? Mr. 
Limbaugh notwithstanding, people did notice, and that may have 
been a turnaround moment in our history. I hope it was.
    But it just strikes me that if we are going to ask you to 
attract the best and brightest and keep them, we have to really 
grow up, too, in our attitude toward the Federal workforce. We 
have cut back dramatically in size over the last 6 or 7 years, 
putting more burdens on those that remain and creating 
uncertainty, I am sure, in their minds about their futures. We 
have not invested in training, which you have noted to be one 
of the major elements that needs to be encouraged if good 
people are going to come and stay. And we have not given you 
the flexibility to manage many areas where you needed to. We 
pushed our oversight to an extreme.
    Let us just for a moment focus on the whole question of 
contracting out and privatization. I can recall a conversation 
in the Appropriations Committee where there was a suggestion 
about privatizing a function of a Federal agency and I said, I 
just want to put an amendment that says we should not do this 
unless we are going to save money, and the people said, no, you 
do not understand. We want to privatize. Saving money is not 
the goal. We want to privatize. And when that mindset is 
running rampant on Capitol Hill, no one is safe because you are 
not really judging anybody by performance or cost to taxpayers. 
You are just bound and determined to reduce the number of FTEs 
at any cost, and frankly, we have sacrificed that in the 
process.
    So I think we in Congress bear a major part of the burden, 
I guess the blame, for where we are today with Federal 
employees. I think we could change it, but it is going to take 
some visionary thinking to realize that if we do not, some of 
the predictions about losing some of the best people are going 
to come true and then we will have to answer to the country for 
it.
    Senator Voinovich. Senator Durbin, I would like to say to 
you that I agree with what you have said here. I want you to 
know, and I am going to say this publicly, I am sticking with 
this for the next 2 to 3 years. I am not going to let up on 
this. We are going to have hearings on training. We are going 
to have hearings on incentives. We are going to have hearings 
on quality. We are going to get into all of these issues and 
raise their profile.
    We have to talk about the shadow government that is out 
there, the result of privatization. You have reduced Federal 
workers and hired the private sector and there is little or no 
oversight of the individuals. It is just a kind of a game 
because everybody wants to show at the end that we have fewer 
employees, but, in fact, we do not have fewer employees in most 
instances, except in the military.
    It is going to take people like you and me to stand up and 
say, these agencies have to have the people and the wherewithal 
and they have to be competitive if the government is going to 
provide decent services.
    We were talking earlier about the issue of early 
retirement. We have a real personnel problem at the labs at 
Wright Patterson Air Force Base. They have to hire some new 
people. The Air Force requested the authority to offer early 
reitrement to some individuals that would then free up some 
slots and some money so that they could bring in new people. 
The proposal was turned down because it was agency specific. We 
are looking at maybe doing this more uniformly across the 
Federal Government.
    There is the issue of, which you just mentioned, college 
education. I just got a note from staff that said that agencies 
already have the authority to provide debt relief to employees. 
It is not exercised often because of high cost. Now, this 
legislation I mentioned which allows for early retirement, OMB 
is concerned about it because of the high retirement costs when 
these people leave early. The government is going to have to 
pay retirement annuities out sooner. And then they have these 
new folks coming in and it is going to affect their budgets.
    But if it is the logical thing to do in order for them to 
get the people, then they should be doing it and we should 
welcome that. The people are the most important part of this 
government.
    Senator Durbin. I agree, and that means just changing our 
mindset. I applaud the Chairman for his leadership.
    Mr. Walker, did you want to make an observation?
    Mr. Walker. Senator, yesterday, I gave a speech before the 
Council for Excellence in Government and it was about how to 
improve government performance and enhance public trust in 
government. A number of the comments you made were echoed in my 
remarks. I think the Congress is going to have to do some 
things differently in order to achieve those objectives, as 
well. I am encouraged that the Chairman has made a commitment 
to keep at this for several years. I know you and other 
Senators will be part of that process.
    Regarding contracting out, I think there is a linkage, 
quite frankly, to some of the challenges we face in human 
capital, because what we find is that all too frequently, 
people spend a lot of time and effort determining what and to 
whom are they going to contract out, but then they do not have 
adequate skills internally to manage contractors' cost and 
quality. The contractor is on auto-pilot and therefore we get 
in trouble.
    So these issues are inherently linked in many different 
ways. I have heard everybody say, and I think rightfully, that 
people are our most valuable asset and that we face some 
serious challenges and they are known challenges. I think we 
need the flexibility. I think we need additional visibility and 
support. And we may need some targeted resources to try to help 
us get to where we need to be.
    Senator Voinovich. Thank you.
    I just have a couple of anecdotes. When I came in as Mayor 
of Cleveland, we established an operations improvement task 
force. I had the private sector come in and they spent almost a 
year going out into agencies, and actually not telling them 
what to do but just getting their ideas on how they could 
improve things. The city had farmed out data processing to a 
firm and the private sector people said, you are so far behind 
in systems, it is unbelievable. Well, the company that we had 
hired wanted so much money to develop new systems that it did 
not happen. The private sector advised us to get rid of them 
and bring people in-house, and that is exactly what we did. It 
took a couple of years and we got back on track and we are 
competitive again.
    When I was a county assessor, they had farmed all the 
appraisal work out to a private firm. We did not have the 
people in-house to do our annual maintenance work nor did we 
have the people in-house to tell me whether or not these 
private sector people were ripping us off or not.
    I think that there is too much of this, where you just hire 
somebody from the outside, and before you know it, you are 
stripped down of the talent that you need in your agency to 
make intelligent decisions.
    We want to thank you for coming here this morning and I 
look forward to continuing these hearings and working with both 
of you to see if we can make some progress on this very, very 
important issue. Thank you very much.
    Ms. Lachance. Thank you, sir.
    Mr. Walker. Thank you.
    Senator Voinovich. I would like to insert into the record a 
statement from Deidre Lee, the Acting Deputy Director for 
Management at the Office of Management and Budget.\1\
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    \1\ The prepared statement of Ms. Lee appears in the Appendix on 
page 71.
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    The Subcommittee is adjourned.
    [Whereupon, at 11:25 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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