Securities and Exchange Commission: Some Progress Made on
Strategic Human Capital Management (10-JAN-06, GAO-06-86).
Corporate failures and accounting scandals led to changes in
legislation governing U.S. securities markets, which resulted in
increased workload demands on the Securities and Exchange
Commission (SEC). As a result, Congress provided SEC with
substantial budgetary increases to obtain more resources to help
fulfill the agency's mission. GAO was asked to review SEC's
strategic workforce planning efforts to efficiently and
effectively utilize its resources. This report discusses (1) the
progress SEC has made toward developing a strategic human capital
plan and (2) whether SEC uses effective strategic workforce
planning principles for acquiring, developing, and retaining
staff.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-86
ACCNO: A44498
TITLE: Securities and Exchange Commission: Some Progress Made on
Strategic Human Capital Management
DATE: 01/10/2006
SUBJECT: Agency missions
Human capital
Human capital management
Human capital planning
Internal controls
Performance appraisal
Performance measures
Staff utilization
Strategic planning
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** 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-06-86
* Report to the Subcommittee on Government Management, Finance, and
Accountability, Committee on Government Reform, House of
Representatives
* January 2006
* SECURITIES AND EXCHANGE COMMISSION
* Some Progress Made on Strategic Human Capital Management
* Contents
* Background
* SEC Staff and Organization
* SEC Human Capital Management and Challenges
* Strategic Human Capital Management and Workforce Planning
* Results in Brief
* SEC Has Made Progress on Strategic Human Capital Initiatives and
Is Developing a Strategic Human Capital Plan
* SEC Has Developed More Formalized Process for Strategic
Human Capital Management
* SEC Is Developing a Strategic Human Capital Plan
* Components of SEC Workforce Planning Efforts Are Consistent with
Established Principles, but Some Efforts Could Be Improved
* Principle 1: SEC Has Engaged Top Management and Expanded the
Role of Certain External Stakeholders
* SEC Has a Formalized Process for Its Top Leadership and
Executives to Establish and Implement Human Capital
Strategies
* SEC Has Been Seeking Guidance from Certain External
Stakeholders and Resources
* SEC Has Communicated Its Strategic Workforce
Initiatives Agencywide but Has Not Fully Sought
Feedback from Employees during the Development of New
Human Capital Initiatives
* Principle 2: SEC Has Been Taking Steps to Track and Identify
Critical Skills and Competencies; However, It Currently
Lacks a Formal Process for Identifying and Linking These
Skills to Strategic Goals
* SEC Has Made Efforts to Identify Staff Deficiencies but
Does Not Maintain Information on Skills Possessed by
Its Employees
* SEC Is Taking Steps to Determine What Critical Skills
and Competencies It Needs but Has Not Linked Them to
Strategic Goals
* SEC Is Making Efforts to Reshape Its Workforce to
Increase Its Efficiency and Effectiveness through
Re-engineering Work Processes
* Principle 3: SEC Has Developed Some Human Capital Strategies
to Address Gaps, but It Is Too Early to Assess Results
* SEC Is Building More Comprehensive Human Capital
Strategies to Recruit and Retain Employees and Address
Skill Gaps
* SEC Has Various Methods in Place to Measure the Success
of Its Human Capital Approach, but Many of These
Assessments Are Not Yet Complete
* Principle 4: SEC Is Addressing Administrative, Educational,
and Other Requirements Important to Supporting Workforce
Strategies
* SEC Requires Some Training for Supervisors and New
Employees on Flexibilities
* SEC Has Improved Administrative Processes That Support
the Use of Some Flexibilities
* SEC Has Processes to Promote Transparency and
Accountability in the Use of Flexibilities
* Principle 5: SEC Is Developing Additional Human Capital
Measures and a Formal Process by Which to Link the
Achievement of Its Human Capital and Strategic Goals
* Observations
* Agency Comments and Our Evaluation
* Scope and Methodology
* Comments from the Securities and Exchange Commission
* GAO Contact and Staff Acknowledgments
Report to the Subcommittee on Government Management, Finance, and
Accountability, Committee on Government Reform, House of Representatives
January 2006
SECURITIES AND EXCHANGE COMMISSION
Some Progress Made on Strategic Human Capital Management
Contents
Figures
January 10, 2006Letter
The Honorable Todd Russell Platts Chairman The Honorable Edolphus Towns
Ranking Minority Member Subcommittee on Government Management, Finance,
and Accountability Committee on Government Reform House of Representatives
Over the past several years, in the wake of corporate failures and
accounting scandals, changes in legislation governing U.S. securities
markets have resulted in increased demands on the Securities and Exchange
Commission's (SEC) regulatory capacity. Through the Sarbanes-Oxley Act of
2002 (Sarbanes-Oxley), Congress augmented SEC's responsibilities but also
authorized a substantial budget increase for the agency to better address
workload challenges. In fiscal year 2003, SEC received $716 million, or a
39 percent increase over its previous year's budget authority, and has
used much of it to fund more than 842 new staff positions. In addition,
SEC used a portion of the fiscal year 2003 appropriations to fund its new
pay parity authority, which allowed the agency to pay staff commensurate
with other federal financial regulators. In fiscal year 2004, SEC received
a 13 percent increase over its previous year's budget authority. These
increases offered SEC a unique opportunity to obtain the resources and
expertise necessary to meet its mission, but the transformation will
require a rigorous effort to recruit, hire, and retain the right staff
with the right expertise to fulfill agency mission and strategic goals.
In formalizing its strategic direction, on July 9, 2004, SEC approved its
2004-2009 strategic plan, which identifies the vision, mission, values,
and goals shaping the agency's activities during the next 5 years. The
fourth goal of the strategic plan outlines SEC's commitment to maximize
the use of SEC resources. It further states that in an effort to attract,
hire, and retain the right staff with the expertise necessary to carry out
its mission, the agency plans to use a variety of human capital strategies
that will complement the agency's other ongoing activities. To respond to
your request to review SEC's strategic workforce planning, our report
discusses the following: (1) the progress SEC has made toward developing a
strategic human capital plan and (2) whether SEC uses effective strategic
workforce planning practices for acquiring, developing, and retaining
staff.
To address the first objective, we collected information and data from
representatives of SEC's Offices of the Chairman and Executive Director,
SEC's Office of Human Resources (OHR), and key divisions and offices on
the agency's recent workforce planning activities. To gain insights on
SEC's progress in this area, we also reviewed SEC's strategic plan, budget
requests, and other relevant documents, and GAO reports. To address the
second objective, we compared SEC's workforce planning activities with
five key principles for effective strategic workforce planning, which we
developed based on our review of studies by leading workforce planning
organizations and interviews with officials from the Office of Personnel
Management (OPM) and the National Academy of Public Administration.1 We
identified related tasks for each principle (described in our prior work)
to provide more specific examples of how each principle may be implemented
and we determined whether SEC was undertaking these or similar tasks. In
addition, we interviewed representatives from the Office of Management and
Budget (OMB) and OPM to discuss SEC's activities and best practices in
strategic workforce planning in the federal government. This report
primarily focuses on strategic workforce planning efforts under the former
Chairman, whose resignation was effective June 30, 2005. We conducted our
work in Washington, D.C., from April 2005 through November 2005 in
accordance with generally accepted government auditing standards. Appendix
I provides additional information on our scope and methodology.
Background
SEC was created by Congress in 1934 primarily to protect investors;
maintain fair, honest, and efficient securities markets; and facilitate
capital formation. SEC's oversight responsibilities include rule making,
surveilling the markets, interpreting laws and regulations, reviewing
corporate filings, conducting inspections and examinations, and
determining compliance with federal securities laws. In addition, SEC
monitors and regulates a variety of key market participants, which as of
July 2004 included more than 7,200 broker-dealers, 900 transfer agents,
almost 500 municipal and
government securities dealers, and self-regulatory organizations (SRO).2
However, as we have reported previously, SEC has faced resource and
management challenges that affected its ability to achieve its mission.
The following sections include a discussion of SEC's organizational
structure and its human capital challenges, as well as a discussion of
principles for human capital management and planning.
SEC Staff and Organization
As of August 2005, SEC had approximately 3,800 staff working in four
divisions and 21 offices in Washington, D.C., and 11 regional and district
offices. Approximately 41 percent of staff were attorneys, 25 percent were
accountants or financial analysts, and 6 percent were investigators or
examiners. The remaining 28 percent were other professional, technical,
administrative, and clerical staff. Figure 1 depicts SEC's organizational
structure, including the Chairman's office and the agency's key divisions
and offices.
Figure 1: Structure of SEC (Divisions and Offices)
The Managing Executive for Operations and Management, who works in the
Office of the Chairman, is responsible for overseeing all efforts to
enhance agency productivity, retain qualified staff, and manage agency
resources. In coordination with the Office of the Executive Director, the
Managing Executive for Operations and Management has primary
responsibility for OHR, which develops, implements, and evaluates SEC's
programs for human resource and personnel management.
SEC Human Capital Management and Challenges
Over the past years, we have produced several reports relevant to human
capital and workforce planning issues at SEC. In 2001, we recommended that
the Chairman of SEC include a strategy for succession planning and develop
a comprehensive, coordinated workforce planning effort as part of the
agency's annual performance plan.3 In March 2002, we found that SEC had
not reviewed its staffing and resource needs independent of the budget
process and that SEC generally developed its annual budget request based
on the previous year's appropriation, not on what the agency actually
needed to fulfill its mission.4 We also commented that SEC was making its
staffing allocation decisions without the benefit of a strategic plan. We
recommended that SEC broaden its strategic planning process to determine
its regulatory priorities and the resources needed to fulfill its mission,
including identifying the staff skills needed to do so.
In July 2004, we found that although SEC received more flexible pay and
hiring authority, it continued to face challenges filling critical
vacancies, such as for accountants.5 Furthermore, we reported that
although SEC's allocation of its newly authorized positions was generally
consistent with Sarbanes-Oxley directions, these decisions were made
without the benefit of an updated strategic plan that outlined the
agency's priorities-a tool that could be used to help ensure that SEC was
deploying its resources to maximize organizational effectiveness. Later,
in November 2004, we reported the results of a GAO survey of human capital
issues at SEC to benchmark employee views following the implementation of
pay parity and several work-life programs.6 We found that the significant
improvement in employee satisfaction with compensation and work-life
programs could be attributed to SEC's recent implementation of pay parity
and an increased focus on the use of flexible work schedules and telework
programs since 2001.
In May 2005, we audited SEC's financial statements for fiscal year 2004
and found that SEC's preparation of its financial statements was manually
intensive and consumed significant staff resources.7 To address the
weaknesses found in the audit, SEC stated that it would increase the
number of financial reporting staff. Finally, in August 2005, as a result
of our review of SEC's facilities project management and related budget
planning, we recommended that SEC complete the hiring of new positions in
the Office of Administrative Services and the Office of Financial
Management.
Strategic Human Capital Management and Workforce Planning
Studies by several organizations, including GAO, have shown that
successful organizations in both the public and private sectors use
strategic management approaches to prepare their workforces to meet
present and future mission requirements. For example, preparing a
strategic human capital plan encourages agency managers and stakeholders
to systematically consider what is to be done, how it will be done, and
how to gauge progress and results. Federal agencies have used varying
frameworks for developing and presenting their strategic human capital
plans.8 More recently, various agencies have begun using OPM's Human
Capital Assessment and Accountability Framework (HCAAF) as the basis for
preparing such plans. HCAAF, which OPM developed in conjunction with OMB
and us, outlines six standards for success, key questions to consider, and
suggested performance indicators for measuring progress and results. These
six standards for success and related definitions are as follows:
o Strategic alignment. The organization's human capital strategy is
aligned with mission, goals, and organizational objectives and integrated
into its strategic plans, performance plans, and budgets.
o Workforce planning and deployment. The organization is strategically
utilizing staff in order to achieve mission goals in the most efficient
ways.
o Leadership and knowledge management. The organization's leaders and
managers effectively manage people, ensure continuity of leadership, and
sustain a learning environment that drives continuous improvement in
performance.
o Results-oriented performance culture. The organization has a diverse,
results-oriented, high-performance workforce, and a performance management
system that effectively differentiates between high and low performance
and links individual, team, or unit performance to organizational goals
and desired results.
o Talent management. The organization makes progress toward closing gaps
or making up deficiencies in most mission-critical skills, knowledge, and
competencies.
o Accountability. The organization's human capital decisions are guided by
a data-driven, results-oriented planning and accountability system.
Strategic workforce planning, an integral part of human capital management
and the strategic workforce plan, involves systematic assessments of
current and future human capital needs and the development of long-term
strategies to fill the gaps between an agency's current and future
workforce requirements. Agency approaches to such planning can vary with
each agency's particular needs and mission; however, our previous work
suggests that irrespective of the context in which workforce planning is
done, such a process should incorporate five key principles: (1) involve
management and employees, (2) analyze workforce gaps, (3) employ workforce
strategies to fill the gaps, (4) build the capabilities needed to support
workforce strategies, and (5) evaluate and revise strategies. Figure 2
provides a fuller description of each of the five principles.
Figure 2: GAO's Five Key Principles for Effective Strategic Workforce
Planning
Note: 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 in areas
such as recruitment, retention, compensation, incentive awards, training
and development, performance management, work arrangements, and work-life
policies.
Results in Brief
SEC has made progress on a number of human capital initiatives and is in
the process of developing a strategic human capital plan. In 2003, SEC
completed a comprehensive workforce and work-flow review of the agency,
subsequent to which it split its Office of Administrative and Personnel
Management into the Office of Administrative Services and OHR. This change
allowed SEC to separate and thereby increase its attention to its
administrative and personnel functions, as well as hire an associate
executive director of OHR to focus on assessing, developing, and
implementing human resources programs. In addition, in April 2005, SEC
created a more structured human capital council by expanding the role of
the Executive Resources Board (ERB), now called the Human Capital Review
Board (HCRB). In contrast to the ERB, the HCRB follows a more formalized
and regular process for reviewing and approving all human capital
decisions. Senior management from SEC's major divisions and offices, the
Chairman's office, the Executive Director, and OHR compose the HCRB and
regularly meet to discuss staffing allocations and alignment of their
human capital resources and strategies to achieve strategic planning
goals. Finally, as of November 2005, SEC was in the process of creating
its first strategic human capital plan, which according to OHR officials,
will be based on OPM's HCAAF. However, SEC has not set a completion date.
Overall, many of SEC's efforts related to workforce planning have been
consistent with our five key principles for effective strategic workforce
planning; however, some of these efforts were still being developed or
could be improved. We found the following:
o SEC has been making a concerted effort to include various stakeholders
in the strategic workforce planning process, as noted in our first
principle. For instance, OHR has been working with some internal and
external stakeholders as it develops its strategic human capital plan.
However, SEC may also benefit from conducting outreach with congressional
stakeholders and the securities industry. In addition, not all SEC
employees will be given the opportunity to provide feedback during the
development of the plan, but may be more involved in related initiatives.
Additional employee input, which SEC plans to obtain in the future, could
provide SEC with more information to determine whether workforce planning
efforts are understood and supported by staff.
o Although SEC has been taking steps to identify needed critical skills
and competencies, as outlined in our second principle, SEC could benefit
from a formal process for identifying existing skills among staff and
linking them to SEC's strategic goals. Specifically, although managers can
determine knowledge and abilities possessed or needed within their
divisions, SEC has not systematically collected and maintained information
on employees' current skills and competencies across the agency. As a
result, SEC may incorrectly estimate workforce needs and skill gaps,
information that helps agencies determine appropriate human capital
strategies.
o As related in our third principle, SEC has been developing and using
human capital strategies to address workforce needs and skill gaps, but
some of these strategies have not been in place long enough to assess
results. For example, SEC recognized that the agency would benefit from
the knowledge and skills possessed by individuals with business degrees.
Therefore, in addition to a Summer Honors Business Program that was
implemented in 2001 to attract future master of business administration
(MBA) graduates, OHR in September 2005 implemented a 2-year program where
MBA graduates rotate through various SEC divisions as associates before
being permanently placed in a division. However, it is too soon to assess
the overall effectiveness of the 2-year MBA program.
o SEC is developing or changing many of the administrative, educational,
and other requirements to support workforce strategies that are discussed
in our fourth principle. In particular, SEC has provided some training on
human capital flexibilities, considered potential improvements to the
administration of these programs, and has procedures in place to promote
transparency and accountability in its administration of these programs.
o SEC is developing additional human capital measures and a more formal
process by which to link the achievement of its human capital and
strategic goals, the importance of which are underscored in our fifth
principle. Currently, SEC informally links its human capital and strategic
goals during HCRB meetings. A formal linkage could help SEC to better
evaluate how effectively human capital strategies are fulfilling strategic
goals.
This report includes no recommendations because many of SEC's human
capital initiatives, including the strategic human capital plan, are
currently under development. However, we made observations based on our
audit work that highlight areas warranting management attention or
possible enhancements in SEC's current strategic workforce planning
efforts. In commenting on a draft of this report, SEC agreed with our
findings and stated that the areas of concern cited in our report would be
addressed once SEC's strategic human capital planning process is fully
implemented. SEC's written comments are reprinted in appendix II and
discussed near the end of this report.
SEC Has Made Progress on Strategic Human Capital Initiatives and Is
Developing a Strategic Human Capital Plan
SEC has shown progress on a number of strategic human capital management
initiatives that could help strengthen SEC's efforts in workforce planning
and is developing its strategic human capital plan. These initiatives
include splitting its Office of Administrative and Personnel Management
into the Office of Administrative Services and OHR in order to improve
efficiency and effectiveness in both and creating a more structured and
institutionalized human capital council by expanding the role of the ERB,
now called the HCRB. Furthermore, SEC is in the process of creating its
first strategic human capital plan. According to SEC, this plan is to be
based on OPM's HCAAF.
SEC Has Developed More Formalized Process for Strategic Human Capital
Management
In 2003, after the passage of Sarbanes-Oxley, SEC undertook an extensive
workforce and work-flow review, and the ERB became the vehicle through
which SEC leadership met to align its programmatic goals and new
responsibilities with its human capital approaches and existing and new
resources. The ERB-composed of senior division managers, the Managing
Executive for Operations, and the head of OHR (after the creation of that
office)-met monthly and on an ad hoc basis to deal with special issues,
and produced recommendations for the Chairman's approval. The 2003
workforce and work-flow review process required division and office
directors to present justifications for resource requests to the ERB for
the board's approval. One outcome of the 2003 review was the decision to
split SEC's Office of Administrative and Personnel Management into two
offices-the Office of Administrative Services and OHR. According to OHR,
the separation of the office's administrative and personnel functions was
made to improve efficiency and effectiveness in these functions, which was
necessitated by the agency's growth of approximately 1,000 individuals
after the implementation of Sarbanes-Oxley. In addition, the split created
an opportunity for SEC to hire an Associate Executive Director for OHR,
who is tasked with assessing, developing, and implementing human resources
programs.
Following the creation of OHR, SEC broadened the role of the ERB-renamed
the HCRB in April 2005-to include a senior executive review of all human
capital issues. SEC staff said that the HCRB has a standing 2- to 3-hour
biweekly meeting and is composed of (1) directors from the major divisions
and offices-Divisions of Corporation Finance; Investment Management;
Market Regulation; Enforcement; and the Office of Compliance, Inspections,
and Examinations (OCIE); (2) a designee representing the interests of the
field offices; (3) the Executive Director (who serves as Chair); (4) a
representative from the Chairman's office; and (5) the Associate Executive
Director of OHR. According to SEC, although smaller offices do not
regularly participate in the HCRB, the Executive Director is responsible
for representing the interests of these offices. In addition, these
offices make presentations to the HCRB on an as-needed basis.
The HCRB approves all human capital decisions, including staffing
allocations. Specifically, staffing allocations and current structures for
each division and office can now only be amended with the approval of the
HCRB. According to SEC officials, HCRB's staffing decisions are made on a
consensus rather than formal voting basis. SEC staff also said that
although the commission does not directly participate in the agency's
human capital planning process, a representative from the Chairman's
office attends HCRB meetings. Furthermore, while the HCRB has the ability
to approve staffing requests, larger allocations of staff slots and staff
reorganizations are subject to final review and approval by the Chairman.
Representatives from SEC's key divisions and offices said they felt that
the migration from the ERB to the HCRB was much more than a name change.
Specifically, the HCRB has a greater focus on SEC's strategic needs.
Management staff from several SEC divisions attributed this change to the
hiring of the new Associate Executive Director of OHR, who was formerly
employed at OPM and who, they felt, is aware of what OPM and OMB expect
from agencies in their strategic planning and human capital management
processes. One division staff representative added that whereas they felt
that the ERB met more "sporadically" and many did not feel compelled to
gain board approval of staffing allocations, the HCRB now meets regularly
and has more "rigor and structure."
SEC Is Developing a Strategic Human Capital Plan
SEC has been developing its human capital plan to address its strategic
planning goal of maximizing the use of agency resources. Specifically, OHR
officials told us that the plan will address how SEC will implement and
align its human capital strategies to achieve agency mission, goals, and
outcomes. OHR officials also told us that they are in the process of
developing a human capital plan based on OPM's HCAAF (previously discussed
in the report), which identifies six standards for success: (1) strategic
alignment, (2) workforce planning and deployment, (3) leadership and
knowledge management, (4) results-oriented performance culture, (5) talent
management, and (6) accountability. A major component of the human capital
plan, according to OHR officials, will be a strategy map and balanced
scorecard to delineate and determine whether its strategies and action
plans are meeting each of HCAAF's six standards. A strategy map defines
the strategic objectives and associated initiatives that support the
organization's vision and mission. A balanced scorecard is a management
system that provides metrics and feedback about agency actions.9 The
actual scorecard uses indicators to measure the relative success of each
initiative. Following this approach, SEC plans to use some indicators
suggested by HCAAF to measure the success of each of the initiatives. OHR
officials told us that the balanced scorecard will also focus on OHR's
internal operations and the agency human capital outcomes for which it
will be accountable. In early November 2005, OHR officials provided us
with a draft strategy map and possible draft objectives and indicators for
how OHR is planning to achieve SEC's strategic planning goal of maximizing
the efficient and effective delivery of human resource services.
OHR has hired a contractor to help implement the balanced scorecard
approach and plans to involve a number of internal stakeholders in
developing the human capital plan, including the Executive Director, the
HCRB, and a cross section of division and office managers. According to
OHR officials, the contractor will interview branch chiefs and assistant
directors within OHR to discuss how to apply the balanced scorecard to
SEC, and will also interview managers from the divisions, but does not
plan to obtain input from employees below the supervisory level. As of
November 2005, OHR officials, working with the contractor, have identified
a list of human capital initiatives and indicators to measure the success
of these initiatives. OHR officials said that the next step is to
communicate with division staff to determine the appropriate targets for
these indicators. Once the development work is complete, the Executive
Director will approve a presentation of the human capital plan to the
HCRB. After receiving HCRB's approval, OHR will disseminate the human
capital plan throughout the agency. We discuss stakeholder involvement in
developing the human capital plan and SEC's communication strategy in
greater detail later in the report.
Once the strategic human capital plan is implemented, SEC officials intend
to update the plan quarterly and annually. The process will begin with an
evaluation of the results of the balanced scorecard measures. OHR
management said that the quarterly assessments of the plan will focus on
SEC's ability to implement initiatives and demonstrate results in both
leading and lagging indicators. OHR officials said that the office plans
to conduct the quarterly review and present results to the Executive
Director and then to the HCRB. OHR also stated that it plans to conduct an
annual review to ensure that the human capital plan remains linked to the
agency's strategic plan and to correct any gaps between the plan's human
capital initiatives and the ability to meet the agency's strategic goals.
In addition to data used in the quarterly reviews, annual reviews are to
include input from the HCRB and use performance management data and
employee focus groups to determine gaps.
Although the anticipated human capital plan should allow SEC to more
consistently plan for its staffing needs and adjust staffing or program
priorities, it does not appear to formally link resource needs to the
budgeting process. As we have previously reported, the absence of this
linkage results in reactive rather than proactive activities and planning
that tends to be tactical rather than strategic. According to OHR,
divisions and offices are not currently required to provide OHR with
annual resource allocation information such as number of planned
promotions because SEC's divisions and offices do not have staff with the
expertise to do strategic human capital planning. Although OHR can provide
some minimal assistance to the divisions on long-term workforce planning
and linking these efforts to the budget, OHR recognizes the benefit to
increasing such assistance and plans to improve its capacity to provide
this guidance.
Components of SEC Workforce Planning Efforts Are Consistent with
Established Principles, but Some Efforts Could Be Improved
We found that many of SEC's efforts related to workforce planning were
consistent with our five key principles for effective strategic workforce
planning; however, some of these efforts are still being developed or
could be improved. Figure 3 summarizes how SEC had incorporated GAO's key
principles into its strategic workforce planning.
Figure 3: Summary of SEC Actions As They Relate to the Five Key Principles
of Effective Strategic Workforce Planning
Principle 1: SEC Has Engaged Top Management and Expanded the Role of
Certain External Stakeholders
In surveying SEC activities related to our first workforce planning
principle, we found that the creation of the HCRB expanded the role of top
management in strategic workforce decision making at SEC. As previously
discussed, HCRB meetings create a forum for regular dialogue between OHR,
key executives, and division leaders, and the HCRB now reviews and
approves all human capital decisions. Moreover, during the ongoing
development of its strategic human capital plan and other strategies, OHR
officials said that it has also sought the assistance and guidance of
various external stakeholders. In particular, SEC staff have been meeting
regularly with OPM and using several of OPM's key tools to assist the
development of its strategic human capital plan. According to OHR
officials, they have researched best practices in government, academia,
and the private sector. However, SEC may have missed opportunities to
conduct outreach with congressional stakeholders and the securities
industry. In addition, SEC has not fully sought employee feedback during
the development of human capital initiatives and, specifically, during the
development of the strategic human capital plan.
SEC Has a Formalized Process for Its Top Leadership and Executives to
Establish and Implement Human Capital Strategies
In our prior work, we have found that top management clearly and
personally involved in workforce planning can provide the organizational
vision that is important in times of change and generate cooperation
within the agency to ensure that planning strategies are thoroughly
implemented and sustained. Specifically, we have found that a key action
in integrating human capital approaches with strategies for achieving
programmatic results is the establishment of an entity, such as a human
capital council, that is held accountable for linking human capital
management and obtaining strategic goals.10 As demonstrated by their new
responsibilities and participation in the HCRB, SEC's key executives and
top management have been actively engaged in SEC's workforce planning
efforts. As discussed previously, biweekly HCRB meetings are chaired by
the Executive Director. This gathering of top leadership and executives
helps determine and respond to current and changing workforce needs at
SEC. For example, division managers we interviewed said that during HCRB
meetings, senior managers representing SEC's major divisions and offices
make consensus-based determinations of staffing decisions at the agency.
In addition, the HCRB is to have a role in the development of the
strategic human capital plan. For example, OHR officials said it has
presented status reports to the HCRB on the development of the human
capital plan. According to OHR officials, once the plan's proposed
indicators and related targets are developed, some HCRB representatives
will review and approve them for inclusion in the plan. Although a
completion date for the plan has not been established, OHR officials said
that HCRB will continue to work with OHR to make revisions and approve the
strategic human capital plan.
SEC Has Been Seeking Guidance from Certain External Stakeholders and
Resources
In prior work, we found that agencies should engage various stakeholders
to identify ways to streamline processes, improve human capital
strategies, and help the agency recognize and deal with the potential
impact that the organization's culture can have on the implementation of
such improvements. Further, involvement of key congressional and other
stakeholders during the strategic planning process also helps ensure that
workforce planning efforts are clearly linked to the agency's mission and
long-term goals.
In developing its strategic human capital plan, SEC has been using various
methods to obtain the assistance and viewpoints of external resources.
According to OHR officials, staff researched and identified a number of
best practice studies from government, academia, and the private sector.
For instance, OHR said that it is working with a private human capital
consulting company to obtain information on best practices for integrating
human capital functions at SEC. The human capital functions SEC plans to
integrate are (1) selection (hiring), (2) performance management, (3)
training, and (4) succession planning. These functions will be linked by a
common competency platform-meaning all four functions will be linked to
agencywide skills and competencies, which SEC is currently in the process
of identifying. As part of the integrated human capital functions
initiative, officials said SEC is planning to (1) implement the
performance management system within OHR by the end of 2005 and then
throughout the agency, (2) begin integrating performance management with
its hiring or "selection" system in May 2006, (3) offer training that
develops employee competencies used for selection and performance
management, and (4) use performance management, selection, and training to
help institute succession planning. OHR plans to completely implement
these integrated functions by May 2007.
SEC also plans to use written guidance developed by other government
agencies, including OMB, OPM, and us. Specifically, OHR plans to
incorporate measures outlined in HCAAF-and developed by OPM in conjunction
with OMB and us-into the balanced scorecard being developed for SEC. OHR
officials said that the office has consulted with OPM staff and hired a
specialist from OPM to help implement its new human capital strategies,
including the development of SEC University-one of the agency's new
initiatives that focuses on staff training. Furthermore, according to OHR
officials, SEC formally and informally communicates with other financial
regulators through networking events like the Small Agency Council, and
also regularly receives operational information and survey data from other
regulators, including compensation and benefit comparisons, labor
relations discussions, and recruiting strategies.11
Although SEC has collected useful information and perspectives from
various external parties, SEC has not met with congressional and industry
stakeholders during the development of its strategic human capital plan.
OHR officials said that SEC had not met with congressional staff to obtain
their input on human capital planning at SEC and did not indicate any
plans to do so since SEC has communicated human capital issues to Congress
through congressional hearings and during the budget process. In addition,
OHR officials told us they have collected best practice data from the
private sector through a consulting firm, but they did not state that SEC
has had discussion with industry stakeholders on how the evolving
securities market may affect SEC's resource needs.
SEC Has Communicated Its Strategic Workforce Initiatives Agencywide but
Has Not Fully Sought Feedback from Employees during the Development of New
Human Capital Initiatives
We have found that an effective communication strategy will create shared
expectations, promote transparency, and report progress. In general,
communication about the goals, approach, and results of strategic
workforce planning is most effective when done early and clearly.
Effective strategies also allow for a variety of two-way communication and
are not limited to top-down dissemination. Efforts that address key
organizational issues, like strategic workforce planning, are most likely
to succeed if, at their outset, agencies' top program and human capital
leaders set the overall direction, pace, tone, and goals of the effort,
and involve employees and other stakeholders in establishing a
communication strategy that creates shared expectations for the outcome of
the process.
SEC communicates relevant information on human capital issues to its
employees not only through SEC's intranet and e-mail sent to
administrative contacts within divisions and offices, but also through
other forums such as staff meetings. In some cases, issues are
communicated top-down from executives to managers and supervisors, and
sometimes from managers and supervisors to nonmanagerial employees. For
example, OHR officials said that the presentation of SEC's new human
capital plan is to be authorized by the Executive Director and then
approved by the HCRB. Following HCRB approval, other top-level executives
(those who are not on the HCRB), managers, and supervisors are to
participate in group meetings to discuss the plan. Finally, OHR officials
said that all SEC employees are to receive electronic presentations of the
plan from OHR but will not have the opportunity to provide feedback prior
to the approval of the plan. In general, informal methods of communicating
human capital issues include performance discussions that occur during the
employee evaluation process and impromptu communications between staff and
liaisons from OHR assigned to each division.
Overall, division officials said that OHR has been sensitive about the
need to communicate about human capital issues, programs, and policies.
However, one division manager noted that written agency communications
sometimes assume that the reader has adequate knowledge of policies and
procedures. For example, while SEC provides comprehensive new employee
orientation training, such training could be enhanced by providing more
basic information on federal government employment. This additional
training may help ensure that when there are changes or new training
opportunities, employees have a better understanding of the context in
which changes occur. Another division manager said that OHR should e-mail
employees directly regarding training opportunities instead of delegating
this responsibility to the division's OHR liaison.
Although OHR has communicated with SEC staff on some human capital
matters, it has not sought feedback from all employees in the development
of SEC's strategic human capital plan. Without such feedback, it is
difficult to determine employees' awareness of issues and fully determine
the effectiveness of such human capital approaches. As previously
discussed, participation in the development of this plan will not take
place below the supervisory level. Nevertheless, OHR has indicated that it
plans to use some employees to help with the development of some of its
integrated human capital functions, such as performance management.
Furthermore, OHR officials said it plans to seek feedback from employees
and to use focus groups to evaluate the success of its strategic human
capital plan.
Principle 2: SEC Has Been Taking Steps to Track and Identify Critical
Skills and Competencies; However, It Currently Lacks a Formal Process for
Identifying and Linking These Skills to Strategic Goals
SEC has been developing tools to measure needed skills and training for
its employees, but currently relies on management's informal knowledge of
the skills and competencies possessed and needed within agency divisions.
OHR has started interviewing division management to identify agencywide
and position-specific competencies. As previously discussed, SEC also has
begun to integrate its human capital functions with agencywide skills and
competencies. Despite these efforts to identify and minimize gaps in
workforce skills, SEC currently lacks a formal process to link critical
skills and competencies to the goals and objectives outlined in its
strategic plan. As a result, SEC may incorrectly estimate workforce gaps,
information that helps agencies determine appropriate human capital
strategies.
SEC Has Made Efforts to Identify Staff Deficiencies but Does Not Maintain
Information on Skills Possessed by Its Employees
Our prior work suggests that maintaining information on the critical
skills and competencies that an organization's staff possess is especially
important as the environment in which federal agencies operate changes.
Shifts in priorities, advances in technology, budget constraints, and
other factors all affect what sort of staff agencies will need to fulfill
their missions. For SEC, such information is particularly useful for
determining and addressing gaps in critical workforce skills or staff and
making efficient resource allocations, because SEC must respond to
changing regulatory conditions requiring its attention. For example, after
the Energy Policy Act of 2005 (P.L. 109-58) repealed the Public Utility
Holding Company Act of 1935 (PUHCA), the statute under which SEC is
responsible for regulating public utility holding companies, SEC had to
assess the skills of the 24 employees assigned to work in the Office of
Public Utility Regulation (OPUR) to determine where they might be
reassigned.12
Although SEC managers indicated that they were aware of the current
knowledge, skills, and abilities of staff in their divisions, OHR
officials stated that the agency does not currently maintain any formal
inventory of the staff's skills and competencies. Documentation of staff
experience and skills may help management and OHR more effectively
identify hiring strategies and training and developmental opportunities
for current staff that would help eliminate skills gaps. In the OPUR case,
OHR officials said it has been somewhat difficult to identify the skills
of employees in this office. Nevertheless, during our interviews with
divisions, senior staff indicated that, in general, they have informal
knowledge, mainly through experience, of the skills and competencies of
supervised staff. Also, division management said that it draws upon staff
knowledge when hiring; in particular, this occurs when divisions work with
OHR to write position descriptions.
Despite lacking documentation of current skills, SEC has made efforts to
identify deficiencies in staff skills. For example, OHR officials
indicated that its office has interviewed directors and deputy directors
at the agency to identify where knowledge and skills could be improved at
the agency. The interviewees identified areas needing improvement, and
branch chiefs ranked them in order of importance: (1) research and
analysis; (2) knowledge of SEC process, rules, and regulations; (3)
decision making; (4) writing; (5) oral communication; (6) information
technology knowledge and skills; (7) management/supervisory skills; and
(8) institutional knowledge. In another instance, in July 2004, OCIE
completed a survey of examiners with higher degrees (e.g., MBA) to
determine what skills were possessed and needed in the office. Further,
division staff said they contact OHR when they need to identify persons
with special skills and abilities. Division staff explained that OHR helps
locate staff to complete work requiring special resources. Division staff
interviewed generally agreed that these liaisons have proved to be an
adequate resource for locating specialized skills and abilities on an
as-needed basis.
Although SEC currently does not document and centrally compile skills
possessed by employees, OHR plans to use the skills and competencies
needed for SEC positions as the basis for integrating the four human
capital functions of selection (hiring), performance management, training,
and succession planning. Furthermore, SEC plans to identify competencies
that will be needed agencywide as well as for specific occupations. With
the aid of a private contractor, OHR plans to conduct a competency-based
job analysis for each occupation at SEC. OHR expects that, in consultation
with its contractor, it will determine two or three competencies that may
be applied agencywide, while other technical competencies will pertain to
specific positions at the agency. According to OHR officials, the core
competencies will be linked to broader agencywide strategic goals, and
job-specific competencies may be linked to programmatic goals listed in
the strategic plan. Eventually, all SEC employees will be evaluated
through a competency-based performance management system. As part of its
wider strategic human capital planning efforts, OHR is in the process of
linking all of its human capital functions. These functions will be linked
to the critical skills and competencies identified by the agency and
provide information that can be used in all personnel-related functions.
For instance, skills gaps identified by the performance management system
may be remedied by hiring or training initiatives.
SEC Is Taking Steps to Determine What Critical Skills and Competencies It
Needs but Has Not Linked Them to Strategic Goals
In our prior agencywide work, we have found that the scope of agencies'
efforts to identify the skills and competencies needed for their future
workforces varies considerably, depending on the environment and
responsibilities of a particular agency. The most important consideration
is that the skills and competencies identified are clearly linked to the
agency's mission and long-term goals, as developed with stakeholders
during the strategic planning process.
SEC has already taken some steps to identify the type of knowledge and
skills that would be beneficial. As discussed previously, OHR interviewed
division directors and deputy directors to identify areas where staff
knowledge and skills could be improved. According to OHR officials, these
interviews also led to the conclusion that management should (1) create a
career development plan, (2) develop an individualized training
curriculum, (3) mitigate or prevent loss of institutional knowledge, and
(4) promote knowledge transfer among its employees to strategically
address its future workforce needs. In addition, SEC has been conducting
the triennial needs assessment required by OPM. SEC has completed the
first two phases of the assessment, which gathered information from
executives and supervisors at the agency. According to officials, the
assessment results will form the basis for questions to ask subject matter
experts. Following interviews with subject matter experts, SEC anticipates
that it will distribute a survey to all employees asking them to identify
the skills needed to perform their jobs. The results of this assessment
are to be used by OHR to determine if SEC's existing training programs
should be refocused and to identify additional courses or programs that
should be developed.
Although SEC has completed its 2004-2009 strategic plan, OHR officials
stated that goals and objectives outlined in the plan have not been linked
to specific skills or competencies. While the strategic plan lists
potential performance indicators, they are not directly linked to
particular critical skills or competencies. As it develops its integrated
human capital functions and determines workforce gaps, SEC plans to link
the critical skills and competencies it identifies to the strategic plan.
According to OHR officials, this linkage will occur eventually as
competencies are determined.
SEC Is Making Efforts to Reshape Its Workforce to Increase Its Efficiency
and Effectiveness through Re-engineering Work Processes
When estimating the number of employees needed with specific skills and
competencies, we found, based on prior work, it is also important to
consider opportunities for reshaping the workforce by re-engineering
current work processes or sharing work among offices and divisions within
an agency. This is particularly important to SEC as it responds to changes
in legislation affecting its responsibilities and substantial growth in
the size of its workforce. Re-engineering processes have been particularly
helpful as SEC considers more strategically how to use employees to
perform a wider variety of functions at the agency, or seeks persons with
differing skills to perform certain functions. According to OHR officials,
the office is trying to improve employee versatility at the agency and is
currently developing a "versatility index" to measure how well employees
may perform a variety of tasks at the agency.
Changes in the structure and responsibilities of SEC have contributed to
some changes in workforce processes. SEC executives said that in an effort
to more proactively regulate the securities industry, they are taking
initiatives to identify emerging risks in securities markets and are
working on creating more coordination among divisions. For example, the
recently created Office of Risk Assessment (ORA) works with various
divisions and offices to develop methodologies to address identified risk.
ORA consults with risk-assessment committees that consist of staff from
various divisions. Committees currently exist for the following areas: (1)
full disclosure, (2) investment management and regulation, and (3) SEC
infrastructure. ORA also uses software in coordination with divisions to
identify how emerging risks have affected SEC's workload and
responsibilities. However, according to SEC management, ORA is not
directly involved in workforce planning efforts at the agency.
Various divisions have also modified work processes to respond to changing
responsibilities and workload and identified skill gaps. For example,
SEC's Enforcement staff attorneys were responsible for collecting
disgorgement, as well as investigating potential violations of securities
law.13 Partly in response to the new Fair Fund provision under
Sarbanes-Oxley, the Division of Enforcement hired attorneys dedicated to
collections, as well as case management specialists, to assist with
maximizing collections and addressing competing priorities and the growing
workload of the Enforcement attorneys. Enforcement also stated that it is
working with technology staff to improve systems, so that collection
information is tracked in one system rather than captured in multiple
systems. Furthermore, the Division of Investment Management is now
conducting integrated disclosure reviews and participates in
cross-divisional task forces, such as the Investor Education and Soft
Dollar task forces, to leverage skills across divisions.14 In addition, as
a result of using a risk-based approach to more proactively identify and
address compliance risks, OCIE recently gained the approval of the HCRB to
create 20 additional staff positions, to be filled by individuals with
data analysis skills to collect surveillance data. SEC is also now
responsible for overseeing investment firms that want to become a
consolidated supervised entity (CSE).15 Because such oversight requires a
combination of specialized technical and auditing skills currently not
found within the agency, OCIE recently created a new unit to oversee CSEs.
Principle 3: SEC Has Developed Some Human Capital Strategies to Address
Gaps, but It Is Too Early to Assess Results
SEC is using a variety of methods to address skill gaps and improve
employee benefits and work life. For example, SEC uses its student loan
repayment (SLR) program and teleworking opportunities to attract and
retain employees. In addition, SEC is linking its human capital functions
and focusing on developing skills and competencies to use for hiring,
performance management, training, and succession planning. SEC also has
been developing SEC University to expand employee training opportunities
and minimize critical skills gaps. Recently, OHR has used hiring and
retention data, focus groups, and surveys to assess the use of many of
SEC's work-life programs. However, because many of the human capital
strategies have only recently been implemented, it is too soon to assess
the effectiveness of these strategies.
SEC Is Building More Comprehensive Human Capital Strategies to Recruit and
Retain Employees and Address Skill Gaps
In our prior work, we have found that much of the authority that allows
agencies to tailor human capital strategies to their needs is already
available under current laws and regulations. Therefore, in setting goals
for their human capital programs and developing tailored workforce
planning strategies to achieve these goals, agencies should identify and
use all appropriate administrative authorities to build and maintain an
effective workforce for the future.
As mentioned earlier, SEC has been developing integrated human capital
functions to better recruit and retain the right staff with the right
expertise to help achieve its strategic goals and objectives. SEC
indicated that selection, or hiring, is a critical tool to meet its
changing needs, particularly following the increase in SEC's
responsibilities under Sarbanes-Oxley. SEC made several changes to its
hiring process to fill accountant positions within Corporation Finance,
which had been a challenging task for the agency partly due to the
slowness of the hiring process and the reluctance of some candidates to
relocate to Washington, D.C. First, SEC retained an executive recruiting
firm to carry out some of the recruitment. Second, to expedite the hiring
process, OHR introduced an automated hiring system to accelerate the
review of applications by automatically disseminating information on job
candidates to Corporation Finance. Third, to accommodate qualified
applicants who might not want to relocate to SEC headquarters, Corporation
Finance instituted a "virtual workforce" pilot where several of its
employees can work from an alternate site and physically report to an SEC
location on a limited basis. OHR staff indicated that the pilot phase of
the program would be useful in helping managers learn how to manage
off-site employees. However, it is unclear to what extent the program will
be expanded, or whether it will be continued. Finally, OHR said that
category rating will be introduced to the agency during 2006.16
In addition to exploring ways to improve the hiring processes, SEC also
has tried to more strategically allocate skills and experience when
creating or filling existing vacancies. For example, recognizing the need
for more administrative support for its collection program, the Division
of Enforcement recently filled a number of positions with paralegals and
administrative personnel instead of attorneys. SEC also recognized that as
an agency, it would benefit from the knowledge and skills possessed by
individuals with business degrees. Therefore, as mentioned earlier, SEC
developed a Summer Honors Business Program in 2001 to attract future MBA
graduates to SEC. In September 2005, OHR implemented a 2-year program
where MBA graduates rotate through various SEC divisions as associates
before being permanently placed in a division.
To increase employee retention, SEC has increased the use of its SLR
program and telework arrangements. SEC began using the SLR program in the
last half of fiscal year 2003 and reported making 384 student loan
repayments totaling approximately $3.3 million in fiscal year 2004. This
is an increase from fiscal year 2003, in which 257 employees received
payments.17 To receive loan repayment, enrollees agree to work for an
additional 3 years at SEC. According to SEC officials, few employees leave
before the 3-year employment agreement terminates. SEC is also expanding
the use of telework arrangements for its employees, with approximately 20
percent of its workforce now participating in the program. As of August
2005, SEC reported having 813 approved teleworking employees, an increase
from March 2005, when it had 648 employees approved for telework. SEC also
found that strategic use of recruitment and retention bonuses for
employees with qualifications critical to SEC's mission has been an
effective way to achieve its hiring goals and an efficient use of funding.
In addition, SEC has been expanding its training programs to eliminate
gaps and maximize employee contributions. Training efforts at SEC
previously focused on specific division and office needs, and division
managers told us they have training units within their divisions. With the
development of SEC University, OHR hopes to bring about a cultural change
within the agency and encourage cross-divisional and agencywide training.
Although OHR plans to consolidate various training programs at SEC through
the university, some divisions indicated that they found in-house training
on technical issues performed by division staff critical to meeting agency
goals and felt such training should remain outside the main training
center at SEC. To date, OHR has taken no action to discontinue training
offered within divisions. In September 2005, SEC placed a new position
announcement to hire a person from within SEC who would be devoted
exclusively to directing SEC University. OHR officials expect this
position to be filled by the end of November 2005. As part of the current
SEC University plan, OHR is assessing employee training interests and
relevancy to programmatic functions, and is exploring establishing
training partnerships with government, public and private entities, and
five or six law and business schools. According to OHR, SEC University
also plans to provide supervisory training and help the agency maintain
quality leadership, which will be particularly important because 14
percent of SEC managers will be eligible to retire by the end of 2005.
In addition to developing a curriculum for SEC University, OHR is also
working to automate and centralize employees' training and skills
information. OHR has proposed that SEC develop a learning management
system to centrally track employees' work experiences and training, as
well as provide a forum to share work experiences among employees.18 OHR
has produced a project plan outlining the business needs for the learning
management system, including key deliverable dates for implementation and
cost estimates.
SEC Has Various Methods in Place to Measure the Success of Its Human
Capital Approach, but Many of These Assessments Are Not Yet Complete
Our previous agencywide work suggests that agencies could benefit by
assessing key aspects of their human capital approach to identify possible
obstacles and opportunities that may occur in meeting critical workforce
needs. Specifically, an agency can use HCAAF to create indicators to
measure the effectiveness of human capital approaches.
According to OHR officials, the office has used various methods to assess
recruitment, retention, and work-life issues at SEC, including (1) focus
group research, (2) employee satisfaction surveys on human capital
flexibilities, and (3) entrance and exit interviews. OHR has conducted
focus groups of employees on recruitment effectiveness, as well as
retention and job satisfaction. According to OHR officials, it has used
the findings from its research studies and OPM's Federal Human Capital
Survey in developing SEC's strategic human capital plan.19 For example,
focus group results showed that SEC employees were most concerned about
being recognized for good performance and agency procedures for dealing
with poor performance. Consequently, OHR determined that performance
management and training needed to be enhanced. OHR also determined that
SEC needed to integrate the four human capital functions of selection
(hiring), performance management, training, and succession planning.
Specifically, OHR plans to enhance its performance management by using
individual development plans for employees that include more comprehensive
and targeted training and development opportunities.
As indicated above, SEC is using results from various surveys and informal
assessments to improve human capital management. However, many of its
human capital strategies are new or under development, and it is too soon
to gauge their effectiveness. As part of developing and implementing its
human capital plan, SEC plans to use a balanced scorecard to more
comprehensively assess the effectiveness of its human capital strategies
and workforce planning efforts. As of November 2005, OHR has worked with a
contractor to develop a list of indicators that SEC could use to measure
the progress the agency has made on its human capital strategies.
Principle 4: SEC Is Addressing Administrative, Educational, and Other
Requirements Important to Supporting Workforce Strategies
Overall, SEC has been addressing many of the administrative, educational,
and other requirements to support human capital programs and workforce
strategies, including (1) educating managers and employees on the use of
flexibilities, (2) streamlining and improving administrative processes,
and (3) building transparency and accountability into its human capital
system. To this end, SEC requires some training for supervisors and new
employees on the use of human capital flexibilities. OHR told us that it
informally reviews its administrative processes and has been working to
improve the administration of some human capital flexibilities. In
addition, we found that SEC has promoted transparency and accountability
in the use of these flexibilities.
SEC Requires Some Training for Supervisors and New Employees on
Flexibilities
As discussed in prior GAO work, managers and supervisors can be much more
effective in using human capital strategies that involve flexibilities if
they are properly trained to identify when they can be used and how they
can be administered. In addition, to avoid confusion and
misunderstandings, it is also important to educate employees about how the
agency uses human capital flexibilities and what rights employees have
under policies and procedures related to human capital.
According to OHR officials, supervisors are usually required to attend
training on policies and practices related to newly implemented human
capital programs. For example, SEC has focused on strengthening its
telework program. In the spring of 2005, the agency hired a consultant to
develop and deliver a comprehensive training program designed to better
equip supervisors to manage remote workers. SEC management said that while
the training was not mandatory, supervisors were strongly encouraged to
participate. In addition, management from several divisions confirmed that
all of their supervisors and managers had been briefed on available human
capital flexibilities at SEC, especially alternative work schedules and
telework.
SEC also has disseminated information on human capital programs to new and
current employees. New employees receive such information at a required
orientation session. OHR officials told us that current employees can
receive information concerning human capital flexibilities through
administrative notices, technical training, daily consultation with OHR
staff, and postings of human capital information on the agency's intranet.
SEC has also been finalizing an SEC employee handbook that provides
information on human capital flexibilities.
SEC Has Improved Administrative Processes That Support the Use of Some
Flexibilities
As suggested in our prior work, it is important that agency officials look
for instances in which administrative processes can be re-engineered to
more effectively administer flexibilities. OHR officials told us that
while they do not conduct a formal evaluation of the effectiveness of
existing administrative processes, they do solicit feedback from divisions
and agencies and adjust processes to meet their needs. For example, to
expedite the hiring process for a division that had a substantial number
of positions to fill, SEC delegated authority to grant recruitment bonuses
to the division's director, allowing the division to more quickly and
readily recruit highly desirable candidates. In another example, OHR
officials told us they plan to develop and implement recommendations based
on SEC managers' suggestions provided in our 2005 study of SLR programs
implemented by various federal agencies.20 Specifically, we recommended
that SEC build on current efforts to measure the impact of the repayment
program by determining now what indicators SEC will use to track program
success, what baseline SEC will use to measure resulting program changes,
what data SEC needs to collect, and whether SEC could use periodic surveys
to track employee attitudes about the program.
Additionally, OHR officials said that their office has surveyed managers
and employees to gauge the ease of administering policies and procedures.
Similarly, OHR has asked employees hired using flexibilities (such as
recruitment bonuses) and employees who participate in the telework and
student loan repayment programs for suggestions to improve administrative
processes. According to OHR officials, OHR plans to continue to refine
collection and analysis of this information as the office develops and
implements the balanced scorecard.
SEC Has Processes to Promote Transparency and Accountability in the Use of
Flexibilities
In our prior agencywide work, we found that clear guidelines for using
specific flexibilities and holding managers and supervisors accountable
for their fair and effective use are essential for successfully
implementing workforce strategies. SEC has some processes in place to
promote transparency and accountability in the use of flexibilities.
According to SEC management, key stakeholders-OHR staff, Employee-Labor
Relations (ELR) specialists, managers, and senior management
officials-have assisted in developing guidelines for using flexibilities.
In addition, OHR officials told us that the National Treasury Employees
Union, the labor organization that represents SEC employees, is involved
in all matters affecting employees in the union.21
In using human capital flexibilities, SEC generally requires employees to
prepare and submit a written request that must then receive managerial
approval and, in some cases, input from ELR as well as OHR. To help ensure
accountability in the use of flexibilities, employees' requests go through
more than one level for approval or disapproval. For example, to telework,
employees first submit a written request to their immediate supervisor,
who then forwards it to a second-level supervisor for final approval or
disapproval. If the request is denied, the second-level supervisor must
document why. If there is a "close call" in approving or denying a
telework request, ELR or OHR staff may be consulted. SEC officials told us
that ELR usually gets involved when a request is denied. According to SEC
officials, the agency requires written justification for denials of
employee application for most types of flexibilities, not just telework.
Outside agencies also play a role in ensuring accountability in SEC's use
of human capital policies, programs, and options. SEC's use of
flexibilities is subject to review by OPM, OMB, the Merit Systems
Protection Board, Congress, and us. Specifically, OPM monitors SEC's use
of direct hire authority, as well as student loan repayment. Moreover,
according to SEC, unionized employees can file a grievance under the
provisions of the collective bargaining agreement, and there is an
administrative grievance process in place for nonunionized employees.
Principle 5: SEC Is Developing Additional Human Capital Measures and a
Formal Process by Which to Link the Achievement of Its Human Capital and
Strategic Goals
Our prior agencywide work found that agencies should develop appropriate
performance measures to link human capital measures with strategic goals.
Performance measures, appropriately designed, can be used to gauge success
and evaluate the contribution of human capital activities toward achieving
programmatic goals. SEC management said that SEC has informally monitored
the agency's progress toward achieving some human capital goals using a
few performance measures. SEC mainly has monitored hiring, attrition, and
retention rates. These indicators, along with other indicators compiled by
the divisions and offices to measure performance related to programmatic
goals, compose SEC's management "dashboards." The "dashboards" are
indicators compiled monthly by the Executive Director's office and are
designed to present regular snapshots of the divisions' and offices'
progress in meeting budget, staffing, and performance objectives. One
division official said that the turnover rates and measures of
supervisors' tenure included in the dashboards were particularly useful.
Division managers said they consulted with OHR when the human capital
indicators identified potential issues. For example, a division manager we
interviewed noted that one human capital measure indicated few women in
the division were applying for branch chief jobs, and the division has
been working with OHR to determine the reasons why.
Although SEC uses some human capital indicators, OHR officials
acknowledged that they needed to develop additional measures because their
current indicators capture output measures for overall human capital
strategies, such as turnover, but do not directly link to specific human
capital initiatives. OHR officials explained that the balanced scorecard,
discussed earlier, will link human capital initiatives to outcomes.
Identifying performance measures and discussing how the agency will use
them to evaluate the human capital strategies-before it starts to
implement the strategies-can help agency officials think through the
scope, timing, and possible barriers to evaluating the workforce plan.
However, as we have found in prior work, developing meaningful
outcome-oriented performance measures for both human capital and
programmatic goals, and collecting performance data to measure achievement
of these goals are major challenges for many federal agencies.
Further, one SEC division official said it was particularly difficult to
develop performance measures in areas dealing with the enforcement of laws
and regulations. For example, in 2002 we reported that SEC strategic and
annual performance plans did not clearly indicate the priority that
disgorgement collections should receive in relation to SEC's other goals
and did not include collection-related performance measures.22 In our 2005
report, we found that SEC needed to make further progress in establishing
performance measures to better track the effectiveness of its collection
efforts, and track both receivers' fees and the amounts distributed to
harmed investors.23
Finally, SEC said that evaluations of the linkage between human capital
and strategic goals currently take place informally during various
meetings, including HCRB meetings, and the results of these evaluations
are addressed through periodic adjustments made to deal with short-term
problems. More specifically, SEC management said that HCRB members used
the management "dashboards" to help make staffing decisions, but noted
that the dashboards were not tightly linked to the HCRB process. However,
OHR anticipates that the implementation of the balanced scorecard and its
indicators will strengthen and formalize the linkage between human capital
activities and strategic goals.
Observations
With the enhancements being made to its human capital management, SEC has
begun to use a planning and management approach that ensures ongoing
attention to human capital issues. SEC has been making changes to ensure
management focuses not only on traditional personnel functions, but also
on the broader issues of human capital management. Further, senior
managers are beginning to focus on strategic issues in decision making. In
particular, SEC has undertaken a number of initiatives that demonstrate
its commitment to human capital planning. When enacted, these initiatives
should begin to help address the agency's human capital challenges, some
of which are long-standing and cannot be quickly or easily overcome, such
as succession planning. To ensure the success of SEC's strategic goals, it
is critical that SEC complete its human capital initiatives-in particular,
its strategic human capital plan. A well-documented plan is an essential
tool that can serve as a guide for SEC in workforce management and direct
an effective, ongoing communications strategy that genuinely engages
employees and other stakeholders in the creation and administration of
human capital programs.
Based on our discussions with OHR, SEC is in the process of creating a
human capital plan. SEC's finalized human capital plan is to include many
of the best practices outlined in our five principles for workforce
planning. While we are encouraged by SEC's progress, three areas may
warrant management attention as SEC continues to develop its human capital
plan: conducting outreach with congressional stakeholders and the
securities industry on strategic workforce planning, obtaining employee
feedback on human capital strategies before they are implemented, and
taking steps to better identify, understand, and document existing skills
among staff. Obtaining feedback from congressional stakeholders and the
securities industry could enhance SEC's ability to gain feedback from
these important groups. Further, employee input prior to implementation
may increase SEC's ability to determine whether its human capital
strategies are understood and supported by the staff. In addition, by
formally identifying and documenting existing skills among staff, SEC may
more accurately estimate workforce needs and skill gaps, which is
information that helps agencies determine appropriate human capital
strategies. Finally, we want to stress the importance of ensuring that the
plan formally links human capital activities with the goals in SEC's
strategic plan. This linkage will help SEC to use its workforce to
increase the agency's operational effectiveness and responsiveness.
Agency Comments and Our Evaluation
SEC, in written comments on a draft of this report that are reprinted in
appendix II, stated that it agreed with our findings. SEC commented that
its strategic human capital plan will soon be completed and that it will
provide the long-term infrastructure to ensure that the progress SEC has
made in human capital initiatives are institutionalized. SEC stated that
its strategic human capital plan will include a rigorous strategic
planning system that, once implemented, will address our concerns
regarding the alignment of SEC's human capital and strategic goals. SEC
also commented that the work being done on integrating its human capital
systems will more formally capture SEC's institutional knowledge, which
was another concern cited in the report.
As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time we will provide copies to the Chairman and
Ranking Minority Member of the House Committee on Government Reform; the
Chairman and Ranking Minority Member of the House Committee on Financial
Services; the Chairman and Ranking Minority Member of the Senate Committee
on Homeland Security and Governmental Affairs; and the Chairman and
Ranking Minority Member of the Senate Committee on Banking, Housing and
Urban Affairs. We will also send copies to the Chairman of the SEC and
other interested parties, and we will make copies available to others upon
request. In addition, the report will be available at no charge on the GAO
Web site at h ttp://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-8678 or w [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. GAO staff who made major contributions to this
report are listed in appendix III.
Orice M. Williams Director, Financial Markets and Community Investment
Scope and Methodology Appendix I
In order to describe the progress the Securities and Exchange Commission
(SEC) made in developing a strategic human capital plan, we gathered and
analyzed data from a variety of sources. We reviewed GAO's recent prior
work on human capital issues at SEC. We also obtained information on SEC's
operations and strategic planning efforts, recent budget requests, human
capital plans and strategies, workforce data, milestones and timelines,
and performance measures. To collect data not identified through prior
work, we contacted and conducted interviews with SEC, the Office of
Management and Budget (OMB), and Office of Personnel Management (OPM) to
obtain relevant information.
To evaluate how SEC was developing its long-term strategies for acquiring,
developing, and retaining staff to achieve the agency's mission, we used
the key principles for effective strategic workforce planning developed in
Human Capital: Key Principles for Effective Strategic Workforce Planning
as our criteria for identifying workforce planning practices that SEC
planned or had under way.1 Using these five principles, we also identified
related tasks associated with each principle to provide more specific
examples of how each principle might be implemented.
Additionally, we met with SEC, OPM, and OMB to discuss and collect
information on the agency's former and current practices and future plans
to address human capital issues. After these initial meetings, we held
follow-up meetings with SEC's Office of Human Resources and other key
offices and divisions to gather relevant information.
We conducted our work in Washington, D.C., from April 2005 through
November 2005 in accordance with generally accepted government auditing
standards.
Comments from the Securities and Exchange Commission Appendix II
GAO Contact and Staff Acknowledgments Appendix III
Orice M. Williams, (202) 512-8678 or [email protected]
In addition to the contact named above, Karen Tremba, Assistant Director;
Allison Abrams; Marianne Anderson; William R. Chatlos; Kenneth Scott
Derrick; Marc Molino; and Barbara Roesmann made key contributions to this
report.
(250234)
www.gao.gov/cgi-bin/getrpt? GAO-06-86 .
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Orice M. Williams at (202) 512-8678 or
[email protected].
Highlights of GAO-06-86 , a report to the Subcommittee on Government
Management, Finance, and Accountability, Committee on Government Reform,
House of Representatives
January 2006
SECURITIES AND EXCHANGE COMMISSION
Some Progress Made on Strategic Human Capital Management
Corporate failures and accounting scandals led to changes in legislation
governing U.S. securities markets, which resulted in increased workload
demands on the Securities and Exchange Commission (SEC). As a result,
Congress provided SEC with substantial budgetary increases to obtain more
resources to help fulfill the agency's mission. GAO was asked to review
SEC's strategic workforce planning efforts to efficiently and effectively
utilize its resources. This report discusses (1) the progress SEC has made
toward developing a strategic human capital plan and (2) whether SEC uses
effective strategic workforce planning principles for acquiring,
developing, and retaining staff.
What GAO Recommends
GAO is not making recommendations because many of SEC's human capital
initiatives, including the strategic human capital plan, are currently
under development. However, GAO makes observations based on our audit work
that highlight areas warranting management attention, such as conducting
outreach with congressional stakeholders and the securities industry,
obtaining employee feedback on human capital strategies before they are
implemented, and taking steps to document existing skills among staff. SEC
agreed with these findings and observations.
SEC has taken steps to implement a number of strategic human capital
management initiatives, including developing its strategic human capital
plan. In 2004, SEC split its Office of Administrative and Personnel
Management into the Office of Administrative Services and the Office of
Human Resources (OHR), allowing the agency to separate its administrative
and personnel functions and hire an associate executive director to focus
on assessing, developing, and implementing human capital programs. In
April 2005, SEC created a more structured human capital council by
expanding the role of the Executive Resources Board (ERB), now called the
Human Capital Review Board (HCRB). The HCRB includes senior management
from all major divisions and offices, the Chairman's office, the Executive
Director, and OHR and follows a more formalized and regular process for
reviewing and approving human capital decisions. According to SEC, as of
November 2005, the agency was in the process of creating its first
strategic human capital plan, which will be based on the Office of
Personnel Management's Human Capital Assessment and Accountability
Framework, but it has not set a completion date.
GAO also found that many of SEC's efforts related to workforce planning to
date have been consistent with five key principles for effective strategic
workforce planning; however, some of these efforts were still being
developed or could be improved. Specifically,
o SEC has involved top management and a variety of stakeholders
during the development of its strategic human capital plan, but
only some employees will have the opportunity to provide feedback
before the plan is finalized;
o SEC has been taking steps to identify needed critical skills
and competencies, but it lacks a formal process for identifying
existing skills among staff and linking them to SEC's strategic
goals;
o SEC has been using human capital strategies to address
workforce needs and skill gaps, but some of these strategies have
not been in place long enough to assess results;
o SEC is developing or changing many of the administrative,
educational, and other requirements to support workforce
strategies, particularly pertaining to the use of human capital
flexibilities; and
o SEC is developing additional human capital indicators and a
more formal process by which to measure the achievement of its
human capital goals. However, SEC currently does not formally
evaluate the effectiveness of its human capital strategies in
fulfilling SEC's strategic goals.
*** End of document. ***