Human Capital: Agencies Need Leadership and the Supporting
Infrastructure to Take Advantage of New Flexibilities (21-APR-05,
GAO-05-616T).
Strategic human capital is the centerpiece of agencies' efforts
to transform into high-performing organizations poised to meet
the challenges of the 21st Century. Congress, recognizing that
the federal human capital management systems designed in the past
are outmoded, has provided agencies with exemptions from the old
rules and new flexibilities to more strategically manage their
workforce. Congress has already granted statutory exemptions and
new authorities affecting more than 1.2 million civilian federal
employees. The momentum is building to continue to reform the
policies, processes, and systems that govern federal human
capital management. Congress is interested in taking stock of how
agencies have implemented the new flexibilities they have been
granted, especially as it considers the future steps to be taken
to achieve human capital reform. At the request of Congress, this
statement provides an update of GAO's work on the progress
agencies have made in implementing these flexibilities to better
accomplish their missions and achieve their goals. In addition,
it provides information on GAO's experiences with human capital
reform and also highlights a set of consistent principles,
criteria, and processes that can help to guide future reforms,
whether they are new flexibilities granted to individual agencies
or applied governmentwide.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-616T
ACCNO: A22097
TITLE: Human Capital: Agencies Need Leadership and the
Supporting Infrastructure to Take Advantage of New Flexibilities
DATE: 04/21/2005
SUBJECT: Accountability
Agency missions
Federal employees
Human capital
Human capital management
Human capital planning
Performance management
Performance measures
Personnel management
Productivity in government
Staff utilization
Strategic planning
******************************************************************
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GAO-05-616T
United States Government Accountability Office
GAO Testimony
Before the Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia, Committee on Homeland Security
and Governmental Affairs, U.S. Senate
For Release on Delivery Expected at 10:30 a.m. EDT April 21, 2005
HUMAN CAPITAL
Agencies Need Leadership and the Supporting Infrastructure to Take Advantage of
New Flexibilities
Statement of Eileen Larence, Director Strategic Issues
a
GAO-05-616T
[IMG]
April 21, 2005
HUMAN CAPITAL
Agencies Need Leadership and the Supporting Infrastructure to Take Advantage of
New Flexibilities
What GAO Found
To take full advantage of the flexibilities provided, agencies need
leaders committed to taking a more strategic approach to managing their
people in order to improve mission results, and must have the necessary
infrastructure in place to make effective use of the flexibilities. This
infrastructure includes a human capital planning process that integrates
human capital policies, strategies, and programs with its program goals,
mission, and desired outcomes; the capabilities to effectively develop and
implement a new human capital system; and importantly, the existence of a
modern, effective, and credible performance management system that
includes adequate safeguards to help ensure consistency. GAO's work shows
that, to date, agencies are using the flexibilities to varying degrees but
continue to face barriers. In the future, agencies should have to
demonstrate they have the required infrastructure and safeguards in place
before using any new human capital authorities.
o Accountable Leadership: Effective performance management systems first
align leadership's performance expectations, appraisal systems, and
compensation programs with organizational goals and results, then cascade
this approach through all levels in the organization. Accordingly,
agencies now have authority to increase senior executive pay levels, but
only if they have an effective performance management system-one that
links individual and organizational results and makes meaningful
distinctions in performance. Recent data show, however, that agencies face
a challenge in meeting the criteria for qualifying for the new executive
pay flexibilities. GAO also continues to see opportunities for Chief Human
Capital Officers and their Council to help agencies better implement
various flexibilities and share best practices, while providing strategic
leadership for reform.
o Strategic human capital planning: Identifying current and future
workforce gaps and ways to use flexibilities to fill them would help
agencies remain competitive and achieve their missions. Some agencies do
not have all the components of a strategic human capital planning process
in place to help them resolve workforce challenges. GAO identified five
key principles that could help guide and inform agencies' efforts to build
this process.
o Capabilities to use new tools: Agencies have not used some of the
flexibilities designed to help them recruit and hire top talent as much as
possible because of a lack of policy and guidance, among other things. OPM
has since reported taking a number of initiatives to better educate
agencies on the tools and encourage their use.
Agencies need to continue implementing new tools, evaluating their impact,
and making adjustments. Congress' interest in monitoring agency progress
is a critical ingredient to the success of these reforms.
United States Government Accountability Office
Chairman Voinovich and Members of the Subcommittee:
I am pleased to be here today to discuss our work on agencies' use of
recently enacted human capital flexibilities to help address workforce
challenges. In broad terms, human capital flexibilities represent the
policies and practices that an agency has the authority to implement in
managing its workforce to accomplish its mission and achieve its goals.
The tailored use of such flexibilities for acquiring, developing, and
retaining talent is an important cornerstone of GAO's model of strategic
human capital management. The subcommittee's interest in taking stock of
where agencies are in using the flexibilities provided to them is critical
and timely.
As we have consistently testified, and as the subcommittee has
consistently recognized, an agency's human capital is its most important
catalyst for transforming to meet the new challenges of the 21st century.
We have also recognized that the federal human capital systems designed in
the past are outmoded and, in some cases, barriers to an agency's
transformation. Consequently, over the past few years, Congress has
granted certain agencies exemptions from these old rules, as well as new
flexibilities to recruit, hire, develop, manage, retain, and compensate
the people with the knowledge, skills, and abilities that agencies need to
accomplish their critical missions and compete with the private sector for
top talent. This is especially important as the nation faces long-term
fiscal challenges, and therefore, agencies are likely to have resource
constraints in the future.
We have also learned, however, that to benefit from these reforms,
agencies should have the appropriate institutional infrastructure and
safeguards in place to make effective use of these new authorities.
Agencies need leaders who are committed to taking a more strategic
approach to managing their human capital assets. These leaders provide the
organizational vision important in times of change, use the flexibilities
available to them in a targeted and responsible manner, and ensure that
human capital strategies are well-planned, thoroughly implemented, and
sustained over time. Agencies also need a supporting infrastructure that
includes a human capital planning process that integrates human capital
policies, strategies, and programs with its program goals, mission, and
desired outcomes; the capabilities to effectively develop and implement a
new human capital system; and, importantly, the existence of a modern,
effective, and credible performance management system that includes
adequate safeguards to help ensure consistency.
There continues to be widespread interest in reforming the policies,
processes, and systems that govern federal human capital management. In
ongoing work for Senator Susan Collins, we are cataloguing the wide array
of statutory exemptions and new authorities that Congress has already
granted to a select group of agencies, affecting more than 1.2 million
civilian employees. Moving forward, Congress may continue to grant
flexibilities to individual agencies or on a governmentwide basis. It will
be important to ensure that agencies first have a business case for using
the flexibilities, as well as the necessary infrastructure and safeguards
in place to use them effectively and in a non abusive manner. In addition,
there is general recognition that the government needs a framework to
guide further reforms. GAO, working with its external partners, has
proposed a common framework built around a fundamental set of principles,
criteria, and processes. This could help to enhance the government's
performance, ensure agency accountability, and provide for a relatively
level playing field across agencies as they implement new authorities.
Today, I would like to highlight some of our recent work on the progress
that agencies have made in implementing the flexibilities granted them,
and that reinforces the actions Congress and agencies are taking or need
to take to (1) provide the strategic leadership, (2) establish the
necessary infrastructure for reforms, (3) better use the new flexibilities
provided, and (4) position the government for future reform.
Accountable Leadership Can Serve As a Model for Effective Human Capital
Management throughout the Agencies
High-performing organizations understand that they must have senior
leaders who are held accountable for results, drive continuous
improvement, and take a strategic approach to targeting available human
capital tools and flexibilities that will help them achieve their
organizational goals. Leaders who model effective performance management
can help to institutionalize it throughout their agencies. As you know, we
have advocated, and you have reinforced, that the federal government needs
to fundamentally rethink its approach to performance management, better
linking individual, unit, and organizational performance and rewarding
individuals according to their relative performance and contributions.
Effective performance management systems first align leadership's
performance expectations, appraisals, and pay with organizational goals
and results achieved, then cascade this approach through all levels in the
organization. In October 2000, the Office of Personnel Management (OPM)
revised its Senior Executive Service (SES) regulations to require agencies
to implement performance management systems that meet these criteria.
More recently, Congress provided that agencies that have successfully
implemented effective performance management systems for their senior
executives can increase the compensation of their higher-performing senior
executives beginning in January 2004. To qualify for this flexibility, OPM
must certify, and the Office of Management and Budget (OMB) must concur,
that the agency's performance management system meets specified
certification criteria, including demonstrating that its performance
management system aligns individual performance expectations with the
mission and goals of the organization and its appraisal system as designed
and applied makes meaningful distinctions in performance. To receive full
2-year certification, an agency must provide documentation that its senior
executive performance management system meets all nine of the criteria.
Otherwise, agencies can meet four of nine criteria and demonstrate that
their system in design meets the remaining certification criteria to
receive one-year provisional certification and use the higher pay rates.
Agencies with one-year provisional certification must reapply annually,
but agencies with full certification must reapply every 2 years. In
addition, SES members are no longer to receive annual across-the-board or
locality pay adjustments but to receive pay and bonus increases based on
contribution, skills, competencies, and other factors. The system also
replaces the six SES pay levels with a single, open-range pay band.
Currently, two agencies have received full certification-the General
Services Administration and the Pension Benefit Guaranty Corporation (for
its senior-level /scientific or professional positions). The Departments
of Agriculture, Commerce (for its senior-level/scientific or professional
positions), Education, Health and Human Services (HHS), Homeland Security
(DHS), and Labor, as well as the National Aeronautics and Space
Administration (NASA), and the Office of Government Ethics have received
provisional certification for calendar year 2005.
Some Agencies May Face a The criteria that OPM has developed to assess
agencies' performance Challenge in Meeting management systems are
consistent with our research wherein we Criteria for Qualifying for
identified a set of key practices for effective performance management:1
the New Executive Pay o aligning individual performance expectations
with organizational goals,Flexibilities
1GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, GAO-03-488 (Washington,
D.C.: Mar. 14, 2003).
o connecting performance expectations to crosscutting goals,
o providing and routinely using performance information to track
organizational priorities,
o requiring follow-up actions to address organizational priorities,
o using competencies to provide a fuller assessment of performance,
o linking pay to individual and organizational performance,
o making meaningful distinctions in performance,
o involving employees and stakeholders to gain ownership of performance
management systems, and
o maintaining continuity during transitions.
In anticipation that senior executive performance management and pay
systems were to be modernized, Chairman Voinovich, at your and former
House Government Reform Civil Service Subcommittee Chairwoman Jo Ann
Davis' request, we used these practices as a guide to review how well
selected agencies were creating linkages between senior executive
performance and their organizations' success.2 You recognized that
information on these agencies' experiences and knowledge could provide
valuable insights to other agencies as they seek to use senior executive
performance management as a tool to drive internal change and achieve
external results. Last year, we reported that the agencies were
implementing some of these practices, such as aligning individual and
organizational goals. However, we also noted that their systems were
inconsistent with other practices, such as making meaningful distinctions
in performance. This is also the case governmentwide. For example, OPM
data show that about 75 percent of executives received the highest
performance ratings possible for fiscal year 2003 (the most current data
available).
OPM will need to carefully monitor the implementation of the agencies'
performance management systems, especially those that have provisional
2GAO, Human Capital: Senior Executive Performance Management Can Be
Significantly Strengthened to Achieve Results, GAO-04-614 (Washington,
D.C.: May 26, 2004).
certification, to ensure that agencies are driving organizational
performance by making meaningful distinctions in executive performance
ratings and appropriately paying their senior executives at the higher
level. A number of executive agencies will be challenged in the short term
to provide the necessary performance data on their senior executives in
order to receive full certification or maintain their certification.
Agencies must provide 2 years of performance rating and bonus data showing
that meaningful distinctions in SES performance were made to qualify. The
recent data on SES ratings suggest that some agencies' data will not
comply. In addition, several agencies' provisional certifications for
calendar year 2004 expired and have not yet been renewed. The Acting
Director of OPM noted in a March 2005 memorandum to agency heads that the
SES performance results for fiscal year 2003 do not reflect the
requirements of the new SES performance-based pay system and that OPM is
analyzing the results of the 2004 rating cycle to determine the degree to
which agencies have met the requirements. Depending on the outcome, some
agencies may lose their certification, and others may not qualify for this
new flexibility. The key, of course, is not just determining whether
distinctions are made in ratings, but whether those distinctions are
meaningful. That is, the distinctions should reflect real differences in
individual executives' contributions to results.
The Chief Human Capital Officers Have the Potential to More Strategically
Implement Flexibilities and Leverage Best Practices among Agencies
The success agencies have in implementing new human capital flexibilities
will depend in large measure on their agency leadership, the existence of
high quality Chief Human Capital Officers (CHCOs), and a strategic and
effective CHCO Council. The Homeland Security Act of 2002 established the
roles and responsibilities for the CHCO position and the Council.3 We have
reported that similar interagency councils, such as those of the Chief
Financial Officers' (CFO) and Chief Information Officers', have emerged as
important leadership strategies in both developing policies that are
sensitive to implementation concerns and gaining consensus and consistent
follow-through within the executive branch.4 The CHCO Council can fulfill
an equally important role.
3Pub. L. No. 107-297, S: S: 1301-3 (Nov. 25, 2002).
4GAO, Government Management: Observations on OMB's Management Leadership
Efforts, GAO/T-GGD/AIMD-99-65 (Washington, D.C.: Feb. 4, 1999).
As stated in its charter, the Council's purposes include (1) advising OPM,
OMB, and agency leaders on human capital strategies and policies, as well
as on the assessment of human capital management in federal agencies; (2)
informing and coordinating the activities of its member agencies on such
matters as the modernization of human resources systems; and (3) providing
leadership in identifying and addressing the needs of the government's
human capital community.
To help fulfill this role, the Council has created subcommittees to
address and recommend changes for key areas identified by the Council's
leadership as critical to the success of strategic human capital
management, including the hiring process and performance management, as
well as leadership development and succession planning. To date, the
Council has continued to define its agenda and priorities and to establish
itself. For example, the former OPM Director reported that the Council's
CHCO Academy was already proving to be a productive forum for discussing
human resources issues among small groups of CHCOs. The Council
established the Academy as a forum for Council members to discuss federal
human resource issues, learn from one another in an informal setting, and
share best practices in the strategic management of human capital. The
Academy has considered topics such as (1) current workforce flexibilities
and associated regulations, (2) human resources competitive sourcing, and
(3) compensation reform. The subcommittees are also making some progress.
For example, the leadership and succession planning subcommittee has made
recommendations in a briefing to the full Council to set up a rotation
program for senior executives among different agencies, among other
things.
It is critical for the CHCO Council to leverage its progress to achieve
significant accomplishments and facilitate lasting change. As just one
illustration of the importance of their leadership and coordination roles,
OPM agreed with our May 2003 recommendation to work with and through the
Council to (1) more thoroughly research, compile, and analyze information
on the effective and innovative use of human capital flexibilities and (2)
more fully serve as a clearinghouse in sharing and distributing
information about when, where, and how the broad range of flexibilities
are being used, and should be used, to help agencies meet their human
capital management needs.5 Our ongoing work assessing select
5GAO, Human Capital: OPM Can Better Assist Agencies in Using Personnel
Flexibilities, GAO-03-428 (Washington, D.C.: May 9, 2003)
agencies' succession planning, as well as their use of recruitment and
retention tools, suggests that agencies continue to need an avenue for
sharing ideas and best practices and the Council could provide that venue.
We also observed that more strategically, the Council could focus on
several other key crosscutting areas, such as
o developing the capabilities required for the successful implementation
of human capital reform,
o promoting strategic human capital planning, and
o transforming the human capital office and its processes to more fully
contribute to key agency decisions.
For example, selected agencies are seeking to shift the focus of their
human capital offices from primarily compliance activities to consulting
activities. They are including human capital leaders in key agency
strategic planning and decision making. In addition, their human capital
leaders took actions to transform the agencies' human capital
organizations by establishing clear strategic visions, restructuring their
organizations, and improving the use of technology to free organizational
resources. As a result, the agencies engaged the human capital
organization as a strategic partner in achieving desired outcomes relating
to the agencies' mission.
To continue this shift to a more strategic role, human capital offices are
also understanding that they need to think broadly about how specific
services are delivered. Human capital offices have traditionally used
alternative service delivery (ASD)-the use of other than internal staff to
provide a service or to deliver a product-as a way to reduce costs for
transaction-based services, such as payroll administration. Going forward,
human capital offices are seeking to use this approach for more strategic
functions, such as workforce planning. We continue to see a role for OPM
to provide comprehensive information about how agencies can use ASD for
their human capital activities and that the CHCO Council could be an
excellent vehicle to assist in this area.
Strategic Human Capital Planning Can Help Agencies Take Advantage of Human
Capital Flexibilities but Remains a Continuing Challenge
An essential element in the institutional infrastructure that agencies
need for their human capital management is a human capital planning
process that ensures that an agency will capitalize on its workforce's
strengths and target the use of its flexibilities. Strategic human capital
planning addresses two critical needs: (1) aligning an organization's
human capital program with its current and emerging mission and
programmatic goals and (2) developing long-term strategies for using
available flexibilities to acquire, develop, and retain staff to achieve
those goals.
While there has been increased attention to such planning, strategic human
capital management has remained on GAO's high-risk list because federal
human capital strategies are still not appropriately constituted to meet
current and emerging challenges or drive the transformations necessary for
agencies to meet these challenges. We have continued to report
opportunities for various agencies to improve the state of their human
capital planning. For example, we reported in March that the Space Shuttle
Program within NASA has made limited progress toward developing a detailed
long-term strategy for transitioning its space shuttle workforce once the
shuttle is retired.6 Last year, we similarly reported that a major
challenge the Department of Defense (DOD) and most of its components face
in their efforts to develop and implement strategic workforce plans is
their need for information on current competencies and those that will
likely be needed in the future.7
While agencies' approaches to workforce planning will vary, GAO identified
five key principles that this planning should consistently address:
o Involve top management, employees, and other stakeholders in
developing, communicating, and implementing the strategic workforce plan.
o Determine the critical skills and competencies that will be needed to
achieve current and future programmatic results.
6GAO, Space Shuttle: Actions Needed to Better Position NASA to Sustain Its
Workforce through Retirement, GAO-05-230 (Washington, D.C.: March 9,
2005).
7GAO, DOD Civilian Personnel: Comprehensive Strategic Workforce Plans
Needed, GAO04-753 (Washington, D.C.: June 30, 2004).
o Develop strategies that are tailored to address gaps in the number,
deployment, and alignment of human capital approaches for enabling and
sustaining the contributions of all critical skills and competencies.
o Build the capability needed to address administrative, educational, and
other requirements important to support workforce planning strategies.
o Monitor and evaluate the agency's progress toward its human capital
goals and the contribution that human capital results have made toward
achieving programmatic results.
Figure 1 illustrates a model strategic human capital planning process that
can help to inform agencies' efforts to define their workforces of the
future.
Figure 1: Strategic Workforce Planning Process
Source: GAO.
Strategic Approach to Succession Planning and Training Is Also Critical
A key piece of an agency's strategic human capital plan should also
acknowledge the demographic trends that the agency faces with its
workforce, especially pending retirements, and include succession
strategies and training and development programs to ensure that it will
have the knowledge, skills, and abilities it needs to meet its mission.
Leading agencies go beyond a succession planning approach that focuses on
simply replacing individuals and engage in broad, integrated succession
planning and management efforts that focus on strengthening both current
and future organizational capacity. Senator Voinovich, at your and former
Chairwoman Davis' request, we reviewed how agencies in four countries are
adopting a more strategic approach to managing the succession of their
senior executives and other public sector employees with critical skills.8
Subsequently, you asked us to follow up with a review of how selected
federal agencies are implementing succession planning and management
efforts, as well as the practices we observed in other countries. We plan
to report to you on the results of our research in the coming weeks.
Once agencies have used their succession planning to identify workforce
gaps, one strategy they can use to fill these gaps is to implement
welldesigned training and development programs. Training and developing
new and current staff to fill new roles and work in different ways will
transform how agencies do business and engage employees in further
innovation and improvements. In addition, we have reported that educating
managers and employees goes a long way in ensuring the effective use of
flexibilities, and completion of a training plan can acknowledge the costs
of implementation and provide that they be budgeted up front. In this
context, we published a guide in March 2004 for assessing training and
development efforts in the federal government.9 As part of the guide, we
identified the four broad, interrelated components of the training and
development process: (1) planning/front-end analysis, (2)
design/development, (3) implementation, and (4) evaluation. Agencies can
use this guide to assess and revise their own programs.
It will be critical for DHS and DOD, as they continue to design and
implement a totally new human capital system in their agencies, to take
8GAO, Human Capital: Insights for U.S. Agencies from Other Countries'
Succession Planning and Management Initiatives, GAO-03-914 (Washington,
D.C.: Sept. 15, 2003).
9GAO, Human Capital: A Guide for Assessing Strategic Training and
Development Efforts in the Federal Government, GAO-04-546G (Washington,
D.C.: March 2004).
such a strategic approach to their training and development programs. This
will help to ensure that (1) managers and employers are prepared to
succeed in implementing the changes, (2) the agencies efficiently use
their limited training and development funds, and (3) the agencies achieve
their intended results.
Evaluation Provides Agencies with Feedback on How Well Their Strategies
Are Working
We previously noted that a critical component of an agency's strategic
human capital approach is establishing goals prior to the application of
new flexibilities so that agencies can then collect baseline data and
establish performance measures to support the evaluation of these
initiatives.10 Developing meaningful outcome-oriented performance goals
and collecting performance data to measure the achievement of these goals
presents a major challenge for many federal agencies. It will be
especially important for DHS and DOD to carefully plan up front for the
evaluation of their new human capital systems, especially since they could
have significant implications for the rest of the federal government. We
have identified the following elements as facilitating this process:
o establishing clear goals and objectives for the initiative or
flexibility being implemented,
o designing concrete management improvement steps,
o setting key milestones to track the implementation status, and
o collecting cost and performance data to gauge overall progress.11
In addition to facilitating success, effective evaluations would
facilitate congressional oversight; allow for any midcourse corrections;
assist agencies in benchmarking progress with other efforts; and provide
for documenting best practices and sharing lessons learned with employees,
stakeholders, other federal agencies, and the public.
10GAO, Human Capital Management: FAA's Reform Effort Needs a More
Strategic Approach, GAO-03-156 (Washington, D.C.: Feb. 3, 2003).
11GAO, Management Reform: Elements of Successful Improvement Initiatives,
GAO/T-GGD-00-26 (Washington, D.C.: Oct. 15, 1999).
Agencies Are Taking As we introduced in testimony to you last year, from
our previous
interviews with human resources directors from across the federalAdvantage
of New government and our previous human capital work, we have reported on
six Flexibilities to Varying key practices that agencies should implement
to use human capital Degrees but Face Some flexibilities effectively.
Figure 2 identifies these key practices.
Barriers
Figure 2: Key Practices for Effective Use of Human Capital Flexibilities
Plan strategically and make 0M Obtain agency leadership commitment
targeted investments 0M Determine agency workforce needs using
fact-based analysis 0M Develop strategies that employ appropriate
flexibilities to meet workforce needs 0M Make appropriate funding
available
Ensure stakeholder input in 0M Engage the human capital office developing
policies and 0M Engage agency managers and supervisors procedures 0M
Involve employees and unions
0M Use input to establish clear, documented, and transparent policies and
procedures
Educate managers and employees 0M Train human capital staff
on the availability and use of 0M Educate agency managers and supervisors
on existence and use of flexibilities
flexibilities 0M Inform employees of procedures and rights
Streamline and improve 0M Ascertain the source of existing requirements
administrative processes 0M Reevaluate administrative approval processes
for greater efficiency 0M Replicate proven successes of others
Build transparency and accountability 0M Delegate authority to use
flexibilities to appropriate levels within the agency into the system 0M
Hold managers and supervisors directly accountable
0M Apply policies and procedures consistently
Change the organizational 0M Ensure involvement of senior human capital
managers in key decision-making processes culture 0M Encourage greater
acceptance of prudent risk taking and organizational change
0M Recognize differences in individual job performance and competencies
Source: GAO.
The overall effort to improve the federal hiring process is a notable
example highlighting the importance of effectively using flexibilities.
Agencies complained that they were losing good talent because the hiring
process was too long and cumbersome. Congress, OPM, and agencies have all
undertaken efforts to help improve the process. However, in a survey
we conducted last year, CHCO Council members reported that their agencies
were making limited use of new hiring flexibilities that Congress had
provided agencies: category rating and direct-hire authority. Category
rating is an alternative rating and selection procedure that can provide
agency managers with a larger pool of qualified job candidates from which
to select rather than have to use numerical ranking and the rule of
three,12 while also protecting veterans' preference. Direct-hire authority
allows agencies to appoint candidates directly to positions where OPM
determines there is a severe shortage of candidates or a critical hiring
need, rather than numerically rating and ranking applicants. Agencies
cited a number of barriers to using these flexibilities, including a lack
of policy and guidance on these tools.
Consistent with our findings and recommended actions, OPM has since
reported a wide range of efforts it has undertaken, including some in
partnership with key external stakeholders, to assist agencies in using
the new hiring authorities, including a number of important initiatives
that took place after we surveyed CHCO Council members. For example, OPM
has hosted training symposia on both tools. OPM has taken these actions
with the goal of helping to ensure that agencies are aware of the hiring
flexibilities available to them as well as assisting agencies in taking
full advantage of these available flexibilities.
I also wanted to highlight ongoing work that addresses several other human
capital flexibilities that Congress has provided. First, Congress has
authorized agencies to repay, at their discretion, their employees'
student loans as a means to recruit and retain a talented workforce. We
have work under way to review agencies' use of the program. In addition,
the Homeland Security Act of 2002 provides governmentwide authority for
offering voluntary separation incentive payments, commonly referred to as
buyouts, and voluntary early retirement, or early outs, for the purpose of
workforce reshaping. We also have work under way to identify the extent to
which agencies are implementing these tools. We plan to report on the
results of our research later this year.
GAO's Experiences with GAO exists to support Congress in meeting its
constitutional Human Capital Reform responsibilities and to help improve
the performance and ensure the
125 U.S.C. S: 3318(a)
accountability of the federal government for the benefit of the American
people. We deeply appreciate the support and assistance we have received
from this subcommittee and others in Congress in providing us with the
tools and authorities we need to support Congress. We believe that it is
vitally important to GAO's future that the agency continue modernizing and
updating our human capital policies and system in light of the changing
environment and anticipated challenges ahead. We believe that the GAO
Human Capital Reform Act is well reasoned with adequate safeguards for GAO
employees. As you know, GAO has had certain human capital tools and
flexibilities for over two decades. GAO's more recent Human Capital Reform
Act of 2004 (Human Capital II) combines diverse initiatives that,
collectively, should further GAO's ability to enhance the agency's our
performance and attract, retain, motivate, and reward a high-performing
workforce now and in the future.13
Specifically, Human Capital II allows for a number of additional human
capital tools and flexibilities, including
o making permanent GAO's three-year authority to offer voluntary early
retirement and voluntary separation incentive payments;
o allowing the Comptroller General to adjust the rates of basic pay of
GAO employees on a separate basis from the annual adjustments authorized
for employees of the executive branch;
o providing authority to reimburse employees for certain relocation
expenses and to award certain employees with additional annual leave
benefits; and
o authorizing an executive exchange program with private sector
organizations to further the institutional interest of GAO or Congress,
including for the purpose of providing training.
Consistent with GAO's long-standing practice, the new human capital
flexibilities are being implemented in continuing consultation with GAO's
employees and executives. GAO's regulations for offering voluntary early
retirement were issued on November 15, 2004. The Comptroller General may
authorize early retirements for applicants on the basis of the
13For more information, see Pub. L. No. (108-271), July 7, 2004, and GAO,
GAO: Additional Human Capital Flexibilities Are Needed, GAO-03-1024T
(Washington, D.C.: July 16, 2003).
institutional needs of GAO, subject to certain statutory limits. GAO
believes that its careful use of these flexibilities will continue to be
an important tool in incrementally improving the agency's overall human
capital profile, freeing resources for other uses, and enabling GAO to
reduce a skill gap or address other succession concerns.
GAO has also begun to implement the flexibility on adjusting the rates of
basic pay for GAO employees. GAO is implementing a compensation system
that places greater emphasis on job performance while, at a minimum,
protecting the purchasing power of employees who are performing acceptably
and ensuring that they are paid within competitive compensation ranges.
With the help of an international human capital consulting firm, GAO
developed new market-based compensation pay ranges for analysts,
attorneys, and specialists that are already in the first phase of
implementation. With the new market-based pay system, employee
compensation will now consider current salary and allocate individual
performance-based compensation amounts between a merit increase (i.e.,
salary increase) and a performance bonus (i.e., cash). GAO is in the early
stages of conducting a similar study of market-based pay for the remainder
of GAO's workforce who began the transition to performancebased
compensation in 2004 with the introduction of pay banding and a new
competency-based performance appraisal system.
Draft regulations implementing the Executive Exchange Program were
provided to employees for comment on January 31, 2005. The comment period
closed on March 4, 2005 and review and analysis of the comments is in
process. We anticipate issuing final regulations on or before June 1,
2005, and are concurrently working on the operational implementation of
the program.
A Consistent Set of Principles, Criteria, and Processes Can Help Guide Future
Reforms
In the future, agencies most likely will continue to request some of the
flexibilities and reforms granted to agencies such as GAO, DOD, and DHS,
as they strive to become higher-performing and results-based
organizations. In response, Congress may continue to grant individual
reforms or design a set of more comprehensive governmentwide reforms or a
combination of these approaches. To qualify for these reforms, agencies
should be able to demonstrate that they have the necessary infrastructure
in place before they are authorized to implement significant human capital
flexibilities and authorities. In anticipation of future reforms, and to
help advance the discussion concerning how human capital reform should
proceed, GAO and the National Commission on the Public
Service Implementation Initiative hosted a forum on whether there should
be a governmentwide framework for human capital reform and, if so, what
this framework should include.14 While there were divergent views among
the forum participants, there was general agreement on a set of
principles, criteria, and processes that would serve as a starting point
for further discussion in developing a governmentwide framework, as shown
in Figure 3.
14 GAO and the National Commission on the Public Service Implementation
Initiative, Highlights of a Forum: Human Capital: Principles, Criteria,
and Processes for Governmentwide Federal Human Capital Reform, GAO-05-69SP
(Washington, D.C.: Dec. 1, 2004).
Figure 3: Principles, Criteria, and Processes
Principles that the government should retain in a framework for reform
because of their inherent, enduring qualities:
o Merit principles that balance organizational mission, goals, and
performance objectives with individual rights and responsibilities
o Ability to organize, bargain collectively, and participate through
labor organizations
o Certain prohibited personnel practices
o Guaranteed due process that is fair, fast, and final
Criteria that agencies should have in place as they plan for and manage
their new human capital authorities:
o Demonstrated business case or readiness for use of targeted authorities
o An integrated approach to results-oriented strategic planning and human
capital planning and management
o Adequate resources for planning, implementation, training, and
evaluation
o A modern, effective, credible, and integrated performance management
system that includes adequate safeguards to help ensure equity and prevent
discrimination
Processes that agencies should follow as they implement new human capital
authorities:
o Prescribing regulations in consultation or jointly with the Office of
Personnel Management (OPM)
o Establishing appeals processes in consultation with the Merit Systems
Protection Board (MSPB)
o Involving employees and stakeholders in the design and implementation
of new human capital systems
o Phasing in implementation of new human capital systems
o Committing to transparency, reporting, and evaluation
o Establishing a communications strategy
o Assuring adequate training
Source: GAO.
Conclusions Strategic human capital management is the centerpiece of the
federal government's overall management transformation effort. A number of
stakeholders have a key role in this process. Congress has provided
agencies, including DOD and DHS, with broad human capital authorities to
help them with their transformations. Agencies are taking advantage of
these provided flexibilities but continue to face some barriers. OPM and
the CHCO Council can continue to assist agencies in navigating these
flexibilities, as well as take a more coordinated and strategic view of
federal human capital management policies, processes, and systems.
Agencies will need to continue implementing these tools, evaluating the
results achieved, and adjusting implementation, especially if they are to
use their resources most wisely in a fiscally constrained environment. The
Subcommittee's and Congress' interest in monitoring agencies' progress
with these new human capital tools and willingness to adjust and support
them are a critical ingredient to success. Furthermore, agencies
requesting additional flexibilities should be able to first demonstrate a
need and then that they have the infrastructure and capabilities to use
these flexibilities effectively. Finally, in granting these, or more
comprehensive governmentwide reforms, we have offered Congress a
framework, a set of consistent principles, criteria, and processes to
consider as it designs the federal human capital system for the 21st
century.
Chairman Voinovich and Members of the subcommittee, this concludes my
prepared statement. I would be pleased to answer any questions you may
have.
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