    Managing for Results: Human Capital Management Discussions in
    Fiscal Year 2001 Performance Plans (24-APR-01, GAO-01-236).

    The Government Performance and Results Act calls for agencies to
    address human capital in the context of performance-based
    management and specifically requires that annual performance
    plans describe how agencies will use their human capital to
    support the accomplishment of their goals and objectives.
    Designing, implementing, and maintaining a strategic human
    capital management focus are critical to maximizing the
    performance and ensuring the accountability of the federal
    government for the benefit of the American people. GAO found that
    the ways in which federal agencies discussed human capital
    challenges in their fiscal year 2001 performance plans reflected
    different levels of attention to the critical human capital
    challenges agencies face. When viewed collectively, GAO found
    that there is a need to increase the breadth, depth, and
    specificity of many related human capital goals and strategies.
    The plans' discussions of human capital should continue to show
    progress in moving away from form to substance, or from simply
    describing human capital challenges to detailing the what, why,
    how, and when of the strategies to address those challenges. The
    discussions should also demonstrate a better link between human
    capital management and the agencies' strategic and programmatic
    planning to maximize performance and ensure the best resource
    allocation. Overall, with the increasing attention to human
    capital, the fiscal year 2001 plans showed that substantial
    opportunities exist for goals and strategies as they focus on a
    more systematic, in-depth, and continuous effort to evaluate and
    improve their human capital management. Agencies will need to
    follow up through effective implementation and assessment to
    determine whether their plans lead to improvements in human
    capital management and programmatic outcomes.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-01-236
        ACCNO:   A00856
      TITLE:     Managing for Results: Human Capital Management
                 Discussions in Fiscal Year 2001 Performance Plans
         DATE:   04/24/2001
      SUBJECT:   Federal employees
    	     Personnel management
    	     Personnel recruiting
    	     Performance measures
    	     Human resources training

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Testimony.                                               **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-01-236

    Report to Congressional Committees

    United States General Accounting Office

    GAO

    April 2001 MANAGING FOR RESULTS

    Human Capital Management Discussions in Fiscal Year 2001 Performance Plans

    GAO- 01- 236

    Page 1 GAO- 01- 236 Human Capital Discussions in Performance Plans

    April 24, 2001 The Honorable Fred Thompson, Chairman Committee on
    Governmental Affairs United States Senate

    The Honorable George V. Voinovich, Chairman The Honorable Richard J. Durbin,
    Ranking Member Subcommittee on Oversight of Government Management,
    Restructuring and the District of Columbia Committee on Governmental Affairs
    United States Senate

    The Honorable Daniel K. Akaka, Ranking Member Subcommittee on International
    Security, Proliferation, and Federal Services Committee on Governmental
    Affairs United States Senate

    The Honorable Dan Burton, Chairman Committee on Government Reform House of
    Representatives

    After a decade of government downsizing and curtailed investment, it is
    becoming increasingly clear that today?s human capital (people) strategies
    are not appropriately constituted to adequately meet current and emerging
    needs of the government and its citizens in the most efficient, effective,
    and economical manner possible. Attention to strategic human capital
    management is important because building agency employees? skills,
    knowledge, and individual performance must be a cornerstone of any serious
    effort to maximize the performance and ensure the accountability of the
    federal government.

    Because strategic human capital management is a pervasive challenge across
    the federal government, we recently identified it as a governmentwide high-
    risk area. 1 Specifically, our work has shown that the systematic
    integration of human capital planning and program planning

    1 High- Risk Series: An Update (GAO- 01- 263, Jan. 2001).

    United States General Accounting Office Washington, DC 20548

    Page 2 GAO- 01- 236 Human Capital Discussions in Performance Plans

    has not been adequately and uniformly addressed across the federal
    government. 2 Further, our Performance and Accountability Series reports
    have indicated that federal agencies are experiencing critical strategic
    human capital challenges. 3 (See fig. 1).

    Figure 1: Strategic Human Capital Challenges

    Source: GAO analysis.

    Addressing these challenges will require a cultural transformation
    throughout the federal government that recognizes the dynamics associated
    with a transition to a knowledge- based economy. The vast majority of the
    needed improvements in human capital management could be achieved if federal
    agencies took a comprehensive review of the size, shape, and skills of their
    human capital profile and adopted a more strategic and performance- based
    approach to managing their workforces. This would require agency leaders to
    establish a baseline of their human capital profile; build a business case
    for future human capital requirements; and then make targeted investments as
    part of the agency strategy to attract, develop, and retain the talent
    necessary to meet its mission and goals. Further, agency leaders need to
    build employees? skills, knowledge, and performance; empower employees and
    provide them with the tools to do their best; and implement the modern
    performance

    2 Managing for Results: Opportunities for Continued Improvements in
    Agencies? Performance Plans (GAO/ GGD/ AIMD- 99- 215, July 20, 1999); and
    Managing for Results: An Agenda To Improve the Usefulness of Agencies?
    Annual Performance Plans (GAO/ GGD/ AIMD- 98- 228, Sept. 8, 1998). 3
    Performance and Accountability Series: Major Management Challenges and
    Program Risks: A Governmentwide Perspective (GAO- 01- 241, Jan. 2001). In
    addition, see the accompanying 21 reports on specific agencies, numbered
    GAO- 01- 242 through GAO- 01- 262.

    Page 3 GAO- 01- 236 Human Capital Discussions in Performance Plans

    management and incentives systems needed to foster individual accountability
    and focus on achieving agency missions and goals. Agency leaders also need
    to apply the tools and flexibilities already available under existing laws
    and regulations to make substantial progress in managing their human
    capital.

    To help agency leaders begin a more systematic, in- depth, and continuous
    effort to evaluate and improve their agencies? human capital, we issued a
    human capital self- assessment framework, which identifies a number of human
    capital elements and underlying values that are common to highperforming
    organizations. 4 We also identified common principles that underlay the
    human capital strategies and practices of the private sector for federal
    agencies to consider as they work to improve their own human capital
    management. 5 Some of these principles are to hire, develop, and sustain
    leaders according to leadership characteristics identified as essential to
    achieving specific missions and goals; hire, develop, and retain employees
    according to competencies; and use performance management systems, including
    pay and other meaningful incentives, to link performance to results.

    As part of the Government Performance and Results Act (GPRA) annual
    performance planning requirements, agencies are to establish resultsoriented
    performance goals and describe the strategies and resources- including human
    capital- needed to accomplish those goals. Given the established GPRA
    requirements and the pervasive challenge the federal government faces in
    strategic human capital management, we prepared this report at our own
    initiative to provide a descriptive analysis of how, if at all, the 24
    agencies covered by the Chief Financial Officers (CFO) Act addressed human
    capital in their performance plans for fiscal year 2001, under which
    agencies are currently operating. Because of your interest and the critical
    importance of strategic human capital planning, employee empowerment, and
    performance management, we are addressing this report to you.

    4 Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/ OCG-
    00- 14G, Sept. 2000). 5 Human Capital: Key Principles From Nine Private
    Sector Organizations (GAO/ GGD- 00- 28, Jan. 31, 2000).

    Page 4 GAO- 01- 236 Human Capital Discussions in Performance Plans

    We found that each agency discussed human capital to at least a limited
    extent in its fiscal year 2001 performance plan and covered a variety of
    activities. (See fig. 2). We provide examples in this report that illustrate
    these activities.

    Figure 2: Summary of Human Capital Activities Discussed in Annual
    Performance Plans for Fiscal Year 2001

    Source: GAO analysis of annual performance plans.

    Overall, agencies? plans reflected different levels of attention to human
    capital, ranging from merely identifying human capital challenges to putting
    forward solutions to address those challenges, such as by defining actual
    plans, committing resources, and assigning accountability. For example, some
    agencies identified the unique human capital challenges they confront within
    their broad operating environment, but they did not include specific
    strategies or goals for resolving those challenges. In other cases, agencies
    set specific annual performance goals to address a human capital challenge
    or articulated human capital strategies that are being used. Results in
    Brief

    Page 5 GAO- 01- 236 Human Capital Discussions in Performance Plans

    When viewed collectively, we found that there is a need to increase the
    breadth, depth, and specificity of many related human capital goals and
    strategies and to better link them to the agencies? strategic and
    programmatic planning. For example, very few of the agencies? plans
    addressed

     succession planning to ensure reasonable continuity of leadership;

     performance agreements to align leaders? performance expectations with the
    agency?s mission and goals;

     competitive compensation systems to help the agency attract, motivate,
    retain, and reward the people it needs;

     workforce deployment to support the agency?s goals and strategies;

     performance management systems, including pay and other meaningful
    incentives, to link performance to results;

     alignment of performance expectations with competencies to steer the
    workforce towards effectively pursuing the agency?s goals and strategies;
    and

     employee and labor relations to ground a mutual effort on the strategies
    to achieve the agency?s goals and to resolve problems and conflicts fairly
    and effectively.

    As our self- assessment guide makes apparent, agencies must address a range
    of interrelated elements to ensure that their human capital approaches
    effectively support mission accomplishment. 6 Agencies will need to follow
    up through effective implementation and assessment to determine whether
    their plans lead to improvements in human capital management and
    programmatic outcomes. The human capital discussions in the fiscal year 2001
    plans, therefore, can serve as a starting point from which to gauge progress
    in subsequent efforts and plans. We plan to continue our review of human
    capital discussions in agencies? fiscal year 2002 performance plans. In
    commenting on a draft of this report, the Acting Director, Office of
    Personnel Management (OPM), generally agreed with the contents of this
    report and said that it would make a useful contribution to agencies?
    strategic human capital management. The Office of Management and Budget
    (OMB) staff provided technical suggestions, which we have incorporated where
    appropriate.

    6 GAO/ OCG- 00- 14G, Sept. 2000.

    Page 6 GAO- 01- 236 Human Capital Discussions in Performance Plans

    GPRA calls for agencies to address human capital in the context of
    performance- based management and specifically requires that annual
    performance plans describe how agencies will use their human capital to
    support the accomplishment of their goals and objectives. In addition, OMB?s
    fiscal year 2001 guidance for agencies? annual performance plans (OMB
    Circular No. A- 11, Part 2) states that agencies? annual plans may include
    agencywide goals for internal agency functions and operations, such as
    employee skills and training, workforce diversity, retention, downsizing,
    and streamlining. Building on the fiscal year 2001 guidance, the fiscal year
    2002 guidance notes the increased emphasis on the use of workforce planning
    and other specific strategies that align human capital with the fulfillment
    of an agency?s mission. The fiscal year 2002 guidance specifies for the
    first time that agencies should include performance goals covering human
    capital management areas, such as recruitment, retention, skill development
    and training, and appraisals linked to program performance.

    We have noted that the more useful annual performance plans discuss, or
    refer to a separate plan, the human capital needs- in terms of knowledge,
    skills, and abilities- necessary for achieving goals and the workforce
    planning methods by which these needs were determined. 7 Also, the more
    useful plans describe how strategies- in such areas as recruitment and
    hiring, retention and separation, training and career development, employee
    incentives, and accountability systems- meet workforce needs and support the
    achievement of goals.

    Addressing the federal government?s human capital challenges is a
    responsibility shared by many parties. We have noted that OPM and OMB have
    substantial roles to play in fostering a more results- oriented approach to
    strategic human capital management across the government. 8 OPM has begun
    stressing to agencies the importance of integrating strategic human capital
    management with agency planning. OPM has also rolled out a workforce
    planning model, with associated research tools, and has launched a Web site
    to facilitate information- sharing about workforce planning issues. In
    addition, OPM has published A Handbook for Measuring Employee Performance:
    Aligning Employee Performance Plans

    7 Agency Performance Plans: Examples of Practices That Can Improve
    Usefulness to Decisionmakers (GAO/ GGD/ AIMD- 99- 69, Feb. 26, 1999). 8
    Human Capital: Meeting the Governmentwide High- Risk Challenge (GAO- 01-
    357T, Feb. 1, 2001). Background

    Page 7 GAO- 01- 236 Human Capital Discussions in Performance Plans

    with Organizational Goals. Recently, OPM revised the Senior Executive
    Service performance management regulations so that a balanced scorecard of
    customer satisfaction, employee perspectives, and organizational results is
    to be used by agencies to evaluate executives? performance.

    OPM?s sustained commitment and attention will be critical to making a real
    difference in the way federal agencies manage human capital. It is likely
    that OPM will continue moving from ?rules to tools,? and that its most
    valuable contributions in the future will come less from traditional
    compliance and approval activities than from its initiatives for assisting
    agencies as a strategic partner. For example, we have noted that OPM could
    make a substantial contribution by continuing to review, streamline, and
    simplify OPM regulations and guidance to determine their continued relevance
    and utility. Related to this, we also have noted that OPM could make human
    capital flexibilities and best practices more widely known to agencies by
    communicating ?how to? success stories and taking full advantage of its
    ability to facilitate information- sharing and outreach to human capital
    managers throughout the federal government.

    While OMB had played a limited role in strategic human capital management,
    recent actions show OMB?s growing interest and potential importance in
    working with agencies to ensure that they have the human capital
    capabilities needed to achieve their strategic goals and missions. First,
    the President?s fiscal year 2001 budget gave new prominence to human capital
    management by making the alignment of federal human capital to support
    agency goals a Priority Management Objective. Another positive step is the
    increased attention to strategic human capital issues in OMB?s Circular No.
    A- 11, Part 2, guidance to agencies on preparing the fiscal year 2002
    performance plans.

    Most recently, in another important and positive step, the President?s
    fiscal year 2002 budget notes that the current civil service system does not
    do all it should to reward achievement or encourage excellence and limits
    the ability of agencies to compete successfully for highly skilled senior
    talent. The budget states that the administration will seek legislation to
    provide program managers new and expanded workforce restructuring tools.
    According to the budget, these actions, combined with improved
    accountability through better linkage of program performance with budget
    decisionmaking and other reforms, will make the federal government more
    responsive and effective.

    Page 8 GAO- 01- 236 Human Capital Discussions in Performance Plans

    OMB is perfectly positioned to assume greater leadership over governmentwide
    strategic human capital issues. First, given its central role in the budget
    process and responsibility for overall leadership over executive branch
    management improvement, OMB has the ability to leverage the cabinet
    secretaries and deputy secretaries to help ensure that their agencies view
    strategic human capital management as critically important in their overall
    strategic planning, performance management, and budgeting efforts. Second,
    OMB has the ability through resource allocations to help ensure that
    agencies give greater attention to the linkages between agency missions and
    the human capital needed to pursue them.

    To meet our objective, we reviewed the fiscal year 2001 performance plans
    that the 24 CFO agencies submitted to Congress. In addition, we reviewed our
    individual reports on agencies? fiscal year 2001 performance plans; GPRA
    requirements for agencies? performance plans; guidelines contained in OMB?s
    Circular No. A- 11, Part 2; and our guidance, reports, and testimonies
    discussing strategic human capital management. 9 We selected examples based
    on our guides to assist agencies and Congress with effectively implementing
    GPRA, specifically our guides to improving the usefulness of agency
    performance plans. 10

    We did our work from September 2000 to March 2001 in Washington, D. C., in
    accordance with generally accepted government auditing standards. We
    requested comments on a draft of this report from the Director of OMB and
    the Acting Director of OPM, and we asked officials in each of the agencies
    profiled to verify the accuracy of the information presented from their
    respective fiscal year 2001 performance plans. We incorporated their
    comments where applicable. We did not independently verify the accuracy of
    the information contained in the agencies? fiscal year 2001 performance
    plans.

    9 GAO/ OCG- 00- 14G, Sept. 2000; Human Capital: Managing Human Capital in
    the 21st Century (GAO/ T- GGD- 00- 77, Mar. 9, 2000); and GAO/ GGD- 00- 28,
    Jan. 31, 2000. 10 GAO/ GGD/ AIMD- 99- 69, Feb. 26, 1999; The Results Act: An
    Evaluator?s Guide to Assessing Agency Annual Performance Plans (GAO/ GGD-
    10. 1. 20, April 1998); and Agencies? Annual Performance Plans Under the
    Results Act: An Assessment Guide to Facilitate Congressional Decisionmaking
    (GAO/ GGD/ AIMD- 10. 1. 18, Feb. 1998). Scope and

    Methodology

    Page 9 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Agencies? fiscal year 2001 performance plans covered a variety of human
    capital activities, as illustrated by the following examples.

    1. Recruit and Retain Employees on the Basis of Current and Projected Needs.
    A high- performing organization identifies the best strategies for filling
    its talent needs through recruiting and hiring and follows up with
    appropriate investments to develop and retain the best possible workforce.

    Agencies? performance plans reflected different levels of attention to
    employee recruitment and retention. As part of a discussion of challenges
    confronting the agency, the U. S. Mint?s fiscal year 2001 plan notes that a
    key issue facing the agency is its ability to attract and retain employees
    with the skills needed to perform the agency?s unique mission. The Mint
    explains that it is difficult for the agency to successfully compete for and
    retain employees with skills more commonly found in the private
    manufacturing and marketing sectors as well as in information technology.
    The Mint notes that it is exploring ways to increase the attractiveness of
    employment, such as rewarding and evaluating employees in accordance with
    its strategic plan goals and objectives, although the plan does not provide
    any performance goals or measures directly associated with the Mint?s human
    capital challenges or initiatives.

    Going beyond describing challenges facing the agency, the Department of
    Justice set a goal to ?strengthen human resource recruitment and retention
    efforts, providing for a workforce that is well- trained and diverse.?
    Specifically, Justice states that on the basis of an assessment of
    recruitment and retention issues, the Immigration and Naturalization Service
    (INS) needs to recruit and retain qualified Border Patrol agents.
    Consequently, INS set a fiscal year 2001 target to increase its deployment
    of border patrol agents to 9,807 from the level of 7,982 achieved in fiscal
    year 1998. (See fig. 3.) As part of its human capital strategy to increase
    the number of these agents on board, the plan states that INS will train
    over 200 border patrol agents as recruiters, establish a toll- free job
    information hotline, and consider recruitment bonuses. Consistent with GPRA
    requirements for annual performance plans, INS also describes its procedures
    to validate and verify its data on the number of agents on board. Human
    Capital

    Activities Discussed in Annual Performance Plans for Fiscal Year 2001

    Page 10 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Figure 3: INS? Data Related to Border Patrol Agents

    Source: U. S. Department of Justice, Fiscal Year 2001 Summary Performance
    Plan.

    Our work has found that the Department of Defense (DOD) faces an especially
    significant challenge in retaining the hundreds of thousands of new recruits
    it enlists each year. 11 DOD set a performance goal to ?recruit,

    retain, and develop personnel to maintain a highly skilled and motivated
    force capable of meeting tomorrow?s challenges? and states it will use four
    measures- enlisted recruiting, recruit quality benchmarks, active retention
    rates, and reserve attrition rates- to demonstrate its progress in meeting
    this goal. Specifically, for its enlisted recruiting measure, DOD set a
    fiscal year 2001 target of 205,248 for new active force personnel and notes
    that this target allows for discharges, promotions, and anticipated
    retirements to maintain statutorily defined military end- strengths. DOD
    reports that in fiscal year 1999 it recruited 186,600 personnel and had not
    met its target of 194,500. According to its plan, DOD intends to improve the
    results of its recruiting efforts by expanding advertising, increasing the
    number of recruiters, and providing enhanced enlistment bonuses.

    11 Human Capital: Major Human Capital Challenges at the Departments of
    Defense and State (GAO- 01- 565T, Mar. 29, 2001); Major Management
    Challenges and Program Risks: Departments of Defense, State, and Veterans
    Affairs (GAO- 01- 492T, Mar. 7, 2001); and Major Management Challenges and
    Program Risks: Department of Defense (GAO- 01- 244, Jan. 2001).

    Page 11 GAO- 01- 236 Human Capital Discussions in Performance Plans

    2. Hire a Diverse Workforce. A high- performing organization maintains an
    environment characterized by inclusiveness that reflects a variety of styles
    and personal backgrounds and is responsive to the needs of diverse groups of
    employees.

    Agencies present different approaches in their performance plans to address
    diversity. For example, the National Science Foundation focuses on the total
    number of hires to science and engineering positions from underrepresented
    groups. The Department of the Interior plans to increase the general
    diversity of its workforce rather than the growth rate of specific groups
    and set a goal to increase the diverse representation of its total workforce
    by at least 3.1 percent for fiscal year 2001 from an unspecified fiscal year
    1997 level. Interior states that more detailed supporting documents are
    being developed.

    The Department of Housing and Urban Development (HUD), on the other hand,
    set a goal to continue to improve its workforce diversity by increasing the
    percentage of specific underrepresented groups, including Hispanics, women,
    and women and minority managers, by 0.3 percentage points. For example, HUD
    intends to focus on increasing the share of Hispanics to 7.4 percent of
    employees in fiscal year 2001, based on estimated achievement of 7. 1
    percent representation in fiscal year 2000. Hiring a diverse workforce can
    be one aspect of ensuring that HUD has the appropriate mix of staff with the
    proper skills to carry out its missions. HUD?s human capital has been an
    area of focus under our high- risk program since 1994. 12

    3. Identify Skills and Training Needs and Provide Development Opportunities.
    A high- performing organization makes appropriate investments in education,
    training, and other developmental opportunities to help its employees build
    the competencies needed to achieve the organization?s mission.

    Some agencies describe in their fiscal year 2001 performance plans their
    efforts to identify the skills and training needs of employees. For example,
    the Federal Technology Service (FTS), a major component of the General
    Services Administration (GSA), describes its strategy to identify core
    competencies for each profession, create individual development plans, and
    provide employees with state- of- the- art technology and tools to help

    12 GAO- 01- 263, Jan. 2001.

    Page 12 GAO- 01- 236 Human Capital Discussions in Performance Plans

    improve overall performance. Although it did not provide details, FTS also
    plans to increase its investment in employee training by providing employees
    with an individual training budget of 1 percent of salaries- in addition to
    the normal 4 percent training allocation- which is intended to allow
    employees to have a direct role in their own development. To measure
    progress towards its performance goal to provide increased opportunities for
    employee development and respond to employee needs, FTS used a survey that
    GSA administered to over 13,000 employees on FTS? quality culture and
    organizational climate. The survey used a 7- point response scale and
    included 87 questions covering 15 categories, such as learning and
    development, communication, and teamwork. To measure its performance, FTS
    uses a composite indicator that combines the responses across all the
    questions. However, the GSA plan does not discuss the validity of the
    composite indicator as a measure of performance or its usefulness to GSA in
    pinpointing improvement opportunities.

    A few fiscal year 2001 performance plans describe agencies? strategies to
    focus attention and resources on employee development. For example, the
    Environmental Protection Agency (EPA) plan states that the agency faces a
    future of formidable programmatic challenges, accelerating change, and
    competition in recruiting people with the skills needed to effectively carry
    out its mission. To address these concerns, EPA recognizes that it needs to
    make a continual investment in developing its workforce. EPA reported that
    it conducted a workforce assessment that identifies critical skills needed
    through 2020. Although the plan does not provide details on the needed
    skills, it describes several training programs based on this workforce
    assessment. These programs include (1) the New Skills/ New Options, which
    will equip support staff with needed skills to assume vital roles in EPA;
    (2) the Mid- level Development Program, which will provide crosscutting
    skills and competencies to mid- level employees to enable them to be
    successful in a more dynamic and interdependent workplace; (3) the
    Leadership Development Program, which will develop supervisors, managers,
    and executives who will foster continued professional development; and (4)
    the EPA Intern Program, which will recruit a cadre of diverse employees. We
    recently reported that one of EPA?s performance and accountability
    challenges is to place greater emphasis on developing a comprehensive human
    capital approach. 13

    13 Major Management Challenges and Program Risks: Environmental Protection
    Agency (GAO- 01- 257, Jan. 2001).

    Page 13 GAO- 01- 236 Human Capital Discussions in Performance Plans

    The Department of Education surveyed its managers on their staffs? knowledge
    and skills for carrying out Education?s mission. Education then set a goal
    for fiscal year 2001 that 70 percent of its managers, from a fiscal year
    1998 baseline of 58 percent, agree that staff possess adequate knowledge and
    skills. (See fig. 4.) Education?s strategy for achieving its goal is to
    introduce a broad range of new training and development programs in a
    variety of formats, such as customized training for teams; and to continue
    to provide development opportunities for its employees, such as university
    course offerings, programs sponsored by the U. S. Department of Agriculture
    (USDA) Graduate School, and the on- line Learning Network. Consistent with
    the practices that we have reported that can make performance plans more
    useful, Education describes its data source to measure this goal, validation
    procedures, and data limitations. 14

    Figure 4: Education?s Data Related to Staff Knowledge and Skills

    Source: U. S. Department of Education, Vol. 1, Department- wide Objectives:
    1999 Performance Reports and 2001 Plans.

    4. Link Executive Performance to Organizational Goals. A highperforming
    organization aligns performance expectations for its leaders with
    organizational goals to enhance accountability for performance.

    We recently reported on the emerging benefits from selected agencies? use of
    performance agreements with their senior political and career

    14 GAO/ GGD/ AIMD- 99- 69, Feb. 26, 1999.

    Page 14 GAO- 01- 236 Human Capital Discussions in Performance Plans

    executives as one approach to defining accountability for specific goals,
    monitoring progress during the year, and then contributing to performance
    evaluations. 15 Two agencies discussed in that report- the Department of
    Transportation (DOT) and the Department of Veterans Affairs? (VA) Veterans
    Health Administration (VHA)- discuss in their fiscal year 2001 performance
    plans their continued use of performance agreements. For example, DOT states
    that it is cascading the performance agreement goals between the Secretary
    and administrators or departmental officers to all Senior Executive Service
    members within the framework of its performance evaluation system. VHA?s
    implementation of individual performance agreements is negotiated between
    the Under Secretary for Health and all senior executives in VHA. These
    agreements contain quantifiable performance targets and other organizational
    priorities to which executives are held accountable for achieving.

    In addition to a discussion on performance agreements, VA cites in its plan
    other activities under way to enhance accountability for performance. For
    example, the Veterans Benefits Administration (VBA) integrated a balanced
    scorecard of performance measures into its executive appraisal system on
    such areas as service delivery, customer service, and employee satisfaction.
    VBA has established an automated Balanced Scorecard that is available to all
    employees via VA?s Intranet and reports results at both the operational and
    strategic levels. VA also notes in its fiscal year 2001 performance plan
    that the National Cemetery Administration developed and is using consistent
    performance standards for all cemetery directors that are linked to its
    strategic goals. These performance standards address the areas of customer
    service and stewardship of VA?s national cemeteries, employee development,
    and cemetery operations.

    5. Attend to Work Environment. A high- performing organization provides
    employees appropriate technology to perform their work and a safe
    environment to help elicit their best performance.

    As indicated in their performance plans, some agencies are trying to create
    work environments that support employee performance. For example, in USDA?s
    fiscal year 2001 performance plan, the National Agricultural Statistics
    Service (NASS) links the work environment- and particularly the availability
    of information technology- to improved performance.

    15 Managing for Results: Emerging Benefits From Selected Agencies? Use of
    Performance Agreements (GAO- 01- 115, Oct. 30, 2000).

    Page 15 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Specifically, NASS set a target in fiscal year 2001 that 90 percent of
    employees ?strongly agree? or ?agree? that the work environment is not an
    impediment to doing their jobs well. The plan reports that in both fiscal
    years 1998 and 1999, 80 percent of employees ?strongly agree? or ?agree?

    that the work environment was not an impediment; the target for fiscal year
    2000 was 85 percent. To accomplish this goal, NASS plans to implement new
    systems, such as a local area network, video conferencing, and document
    archiving and retrieval systems. According to the plan, NASS will use
    periodic organizational climate surveys to track employees? ratings of their
    work environment.

    The Social Security Administration (SSA) set a strategic objective ?to

    provide a physical environment that promotes the health and well being of
    employees.? As one of its performance measures, the agency will use a survey
    to measure the percentage of employees reporting that they are satisfied
    with the level of security in their facilities. SSA set a goal for fiscal
    year 2001 that 75 percent of employees are satisfied with security in their
    facilities, compared to 64 percent in fiscal year 1998. (See fig. 5.) To
    achieve this objective, SSA states in its plan that it will continue to
    enhance ongoing programs for assessing and addressing security requirements
    and for identifying and resolving health and safety problems in the
    workplace.

    Page 16 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Figure 5: SSA?s Strategic Objective Related to Physical Environment

    Source: Social Security, Performance Plan for Fiscal Year 2001, Revised
    Final Performance Plan for Fiscal Year 2000.

    Page 17 GAO- 01- 236 Human Capital Discussions in Performance Plans

    6. Establish an Employee- Friendly Workplace. A high- performing
    organization provides work- life programs and services that improve an
    employee?s ability to balance work and family obligations and enhance job
    satisfaction.

    Some agency performance plans discuss how they intend to improve the
    workplace through expanded work- life services. For example, the Department
    of Labor states that it will continue to offer referral services for
    employees in the work- life areas of childcare, elder care, and adoptive
    services. Also, the plan states that services will include a toll- free ?1-
    800? telephone counseling service and the use of the Internet as an
    additional feature to access referral resources. In addition, Labor will
    review internal practices and procedures to improve worker accommodations,
    among other things.

    To improve job satisfaction and the quality of work life, the Indian Health
    Services (IHS) of the Department of Health and Human Services set a
    performance measure to improve its overall Human Resource Management Index
    (HRMI) score to at least 95 points in fiscal year 2001 from a baseline of 93
    points in fiscal years 1998 and 1999. The HRMI employee survey measures 14
    different work- related issues, such as management culture and employee
    morale, and is used to determine if the agency?s human resource program is
    meeting employee and management expectations. According to its plan, IHS
    expects to raise the HRMI score by at least one point each year. The IHS
    plan notes that the HRMI has been in use at the Department since 1991 and is
    designed to be a valid measure of management practices that are important to
    organizational performance. The IHS plan also notes that the agency is
    taking several actions to improve its HRMI score, but IHS does not detail
    how the actions will help it achieve the one- point improvement goal and,
    ultimately, organizational performance.

    7. Choose an Appropriate Organizational Structure. A highperforming
    organization recognizes the importance of choosing a structure that supports
    the organization?s mission and takes into account its present and future
    needs.

    The transition to a knowledge- based government will increasingly prompt
    federal agencies to adopt flat, flexible, and team- oriented organizational
    structures. For example, the Department of Health and Human Service?s
    Administration for Children and Families (ACF) states in its fiscal year
    2001 performance plan that it intends to reduce bureaucratic levels and rely
    more on teams in an effort to support its strategic goal to build a

    Page 18 GAO- 01- 236 Human Capital Discussions in Performance Plans

    results- oriented organization. Specifically, ACF set a goal to increase
    manager- to- staff ratio from 1: 4.6 in fiscal year 1993 to 1: 9 in fiscal
    year 2001. ACF reports that the fiscal year 1999 target was not attained and
    lowered its fiscal year 2000 target because of staff separations and severe
    outside hiring limitations. ACF provides trend data from fiscal year 1995
    and cites personnel data as the data source.

    8. Streamline, Simplify, and Expedite Personnel Operations. A high-
    performing organization tailors its personnel operations to quickly bring
    needed talent on board and to make progress in the ?war

    for talent? in a competitive, knowledge- based economy. Some agency
    performance plans describe their efforts to make their human capital
    processes more efficient. According to OPM?s fiscal year 2001 performance
    plan, its Office of Human Resources and Equal Employment Opportunity
    (OHREEO) works as a business partner with OPM managers to assist them in
    maximizing the use of the agency?s human resources toward accomplishing
    OPM?s goal to recruit, develop, and maintain a highly skilled and diverse
    workforce. In support of this goal, OHREEO plans to streamline and automate
    staffing processes and, specifically, to reduce all recruitment and hiring
    cycle times to an average of 48 days in fiscal year 2001 from a baseline
    average of 58 days in fiscal year 1999. The plan notes that the data on
    cycle time are retrieved from various documents that track the dates when
    (1) OHREEO receives the Request for Personnel Action, (2) the vacancy
    announcement opens, and (3) the selection list is sent to the selecting
    official.

    The Department of Commerce describes ?Commerce Opportunities OnLine? (COOL)
    as an automated, Web- based vacancy announcement, application, and referral
    system. This system is intended to broaden Commerce?s distribution of
    vacancy announcements to anyone who has access to the Web, reduce the time
    to disseminate announcements to applicants, and provide applicants an on-
    line avenue for submission of their applications. COOL also is to benefit
    Commerce managers by permitting on- line issuance of referral lists of
    eligible candidates to the selecting official, facilitating e- mail
    communication between the selecting official and applicant, and allowing the
    selecting official to automatically notify the Human Resource Office when he
    or she has completed the selection process.

    Page 19 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Designing, implementing, and maintaining a strategic human capital
    management focus are critical to maximizing the performance and ensuring the
    accountability of the federal government for the benefit of the American
    people. We found that the ways in which agencies discussed human capital
    challenges in their fiscal year 2001 performance plans reflected different
    levels of attention to the critical human capital challenges agencies face.
    When viewed collectively, we found that there is a need to increase the
    breadth, depth, and specificity of many related human capital goals and
    strategies. The plans? discussions of human capital should continue to show
    progress in moving away from form to substance, or from simply describing
    human capital challenges to detailing the what, why, how, and when of the
    strategies to address those challenges. The discussions should also
    demonstrate a better link between human capital management and the agencies?
    strategic and programmatic planning to maximize performance and ensure the
    best resource allocation. Overall, with the increasing attention to human
    capital, the fiscal year 2001 plans showed that substantial opportunities
    exist for improvements, and we expect that agencies will continue to refine
    their goals and strategies as they focus on a more systematic, in- depth,
    and continuous effort to evaluate and improve their human capital
    management. Agencies will need to follow up through effective implementation
    and assessment to determine whether their plans lead to improvements in
    human capital management and programmatic outcomes.

    We provided a draft of this report to the Director of OMB and the Acting
    Director of OPM on January 23, 2001, for their review and comment. We
    subsequently shared with the Director of OMB and the Acting Director of OPM
    portions of the draft that we updated to reflect our testimonies on human
    capital and the President?s fiscal year 2002 budget. 16 The Director of OMB
    did not provide written comments; however, OMB staff provided technical
    suggestions, which we have incorporated where appropriate.

    OPM?s Acting Director provided written comments in his February 9, 2001,
    letter, which is included in appendix I. In that letter, he stated that this
    report would make a useful contribution to the ongoing agency implementation
    of GPRA and to the increased attention to the federal government?s strategic
    human capital management. He also provided

    16 GAO- 01- 565T, Mar. 29, 2001; GAO- 01- 492T, Mar. 7, 2001; and GAO- 01-
    357T, Feb. 1, 2001. Concluding

    Observation Agency Comments and Our Evaluation

    Page 20 GAO- 01- 236 Human Capital Discussions in Performance Plans

    several suggestions that OPM believes would make the report even more
    useful.

    OPM suggested, and we have included in the report, a reference to its 1999
    publication A Handbook for Measuring Employee Performance: Aligning Employee
    Performance Plans with Organizational Goals as another tool to help agencies
    in their efforts.

    OPM stated that the draft report ?leaves an impression that agencies have
    not taken any previous actions to include human resources management actions
    in their strategic and annual planning? and did not acknowledge other
    examples of human capital activities under way. As the draft report noted,
    the scope of this review focused on human capital activities discussed in
    agencies? performance plans for fiscal year 2001. Therefore, we did not
    consider prior performance or strategic plans, or other human capital
    activities in the analysis for this report.

    OPM suggested that we be clear that the report does not include all
    instances of human capital planning that we found in the fiscal year 2001
    performance plans. We did not intend to imply that the report describes each
    reference to human capital issues in agencies? annual performance plans.
    Rather, as stated in the draft, we selected examples based on our guides to
    assist agencies and Congress with effectively implementing GPRA,
    specifically our guides on improving the usefulness of agency performance
    plans.

    Finally, OPM suggested that it would be helpful to emphasize that managing
    the effective tactical use of several existing flexibilities is its own
    challenge, particularly in view of the limited resources, and agencies would
    do well to develop coordinated approaches to their use. This point is beyond
    the objective and scope of our review and, therefore, not included in our
    discussion.

    We are sending copies of this report to Senator Joseph Lieberman, Ranking
    Member of the Senate Committee on Governmental Affairs; Senator Thad
    Cochran, Chairman of the Senate Governmental Affairs? Subcommittee on
    International Security, Proliferation, and Federal Services; Representative
    Henry Waxman, Ranking Minority Member of the House Committee on Government
    Reform; the Honorable Mitchell E. Daniels, Jr., Director of OMB; Steven R.
    Cohen, Acting Director of OPM; and other interested parties. We will also
    make this report available to others upon request.

    Page 21 GAO- 01- 236 Human Capital Discussions in Performance Plans

    If you have any questions about this report, please contact me or Lisa
    Shames on (202) 512- 6806. Key contributors to this report were Dottie Self
    and Janice Lichty.

    J. Christopher Mihm Director, Strategic Issues

    Appendix I: Comments From the Office of Personnel Management

    Page 22 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Appendix I: Comments From the Office of Personnel Management

    Appendix I: Comments From the Office of Personnel Management

    Page 23 GAO- 01- 236 Human Capital Discussions in Performance Plans

    Appendix I: Comments From the Office of Personnel Management

    Page 24 GAO- 01- 236 Human Capital Discussions in Performance Plans (410608)

    The first copy of each GAO report is free. Additional copies of reports are
    $2 each. A check or money order should be made out to the Superintendent of
    Documents. VISA and MasterCard credit cards are also accepted.

    Orders for 100 or more copies to be mailed to a single address are
    discounted 25 percent.

    Orders by mail:

    U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

    Orders by visiting:

    Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
    20013

    Orders by phone:

    (202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

    Each day, GAO issues a list of newly available reports and testimony. To
    receive facsimile copies of the daily list or any list from the past 30
    days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
    will provide information on how to obtain these lists.

    Orders by Internet

    For information on how to access GAO reports on the Internet, send an email
    message with ?info? in the body to:

    Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
    gao. gov

    Contact one:

     Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

     E- mail: fraudnet@ gao. gov

     1- 800- 424- 5454 (automated answering system) Ordering Information

    To Report Fraud, Waste, and Abuse in Federal Programs
    *** End of document ***