    Office of Personnel Management: OPM Is Taking Steps to Strengthen
    Its Internal Capacity for Leading Human Capital Reform
    (27-JUN-06, GAO-06-861T).

    General recognition exists of a need to continue to develop a
    governmentwide framework for human capital reform to enhance
    performance, ensure accountability and position the nation for
    the future. Potential governmentwide human capital reform and
    likely requirements that the Office of Personnel Management (OPM)
    assist, guide, and ultimately certify agencies' readiness to
    implement reforms, raise important questions about OPM's capacity
    to successfully fulfill its central role. This testimony
    addresses management challenges that could affect OPM's ability
    to lead governmentwide human capital reform efforts. To assess
    these challenges, GAO analyzed OPM's 2002 and 2004 Federal Human
    Capital Survey (FHCS) results, data from its 2005 follow-up focus
    group discussions, OPM's May 2006 action plans to address
    employee concerns, and OPM's associate directors' fiscal year
    2006 executive performance contracts. GAO also conducted
    interviews with OPM senior officials and Chief Human Capital
    Officers (CHCO) and human resource directors from CHCO Council
    agencies. In commenting on a draft of this statement, the OPM
    Director said that OPM has addressed many of the challenges
    highlighted from the 2004 FHCS and achieved many meaningful and
    important results. GAO agrees and believes OPM should continue to
    build upon its progress to date.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-06-861T
        ACCNO:   A56001
      TITLE:     Office of Personnel Management: OPM Is Taking Steps to
    Strengthen Its Internal Capacity for Leading Human Capital Reform
         DATE:   06/27/2006
      SUBJECT:   Agency missions
    	     Human capital
    	     Human capital management
    	     Internal controls
    	     Performance management
    	     Performance measures
    	     Staff utilization
    	     Strategic planning
    	     Surveys
    	     2002 Federal Human Capital Survey
    	     2004 Federal Human Capital Survey

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    GAO-06-861T

         * Leadership
         * Talent and Resources
              * OPM Has Engaged in Workforce and Succession Planning, but Di
         * Customer Focus, Communication, and Collaboration
              * OPM's HCO Structure Is Viewed as a Barrier to Meeting Custom
              * OPM Needs to Take Full Advantage of Opportunities to Collabo
              * OPM's Strategic and Operational Plan Includes a Number of Ef
         * Performance Culture and Accountability
              * OPM Can Build upon Strong Accountability to Address Employee
         * Concluding Remarks
         * Contact and Acknowledgments
         * Appendix I
              * Federal Human Capital Survey, Focus Groups, and Action Plans
                   * Order by Mail or Phone
                   * Order by Mail or Phone

    United States Government Accountability Office

    GAO

    For Release on Delivery Expected at 10:00 a.m. EDT

    Tuesday, June 27, 2006

    OFFICE OF PERSONNEL MANAGEMENT

    OPM Is Taking Steps to Strengthen Its Internal Capacity for Leading Human
    Capital Reform

    Statement of David M. Walker Comptroller General of the United States

    GAO-06-861T

    Chairman Voinovich, Senator Akaka, and Members of the Subcommittee:

    I appreciate the opportunity to be here today to discuss the capacity of
    the U.S. Office of Personnel Management (OPM) to lead and implement
    governmentwide human capital reform. Potential governmentwide human
    capital reform, and likely requirements that OPM assist, guide, and
    ultimately certify agencies' readiness to implement reforms, raise
    important questions about its capacity to successfully fulfill its central
    role. Director Springer and her leadership team clearly recognize that
    strategic human capital management is a pervasive challenge facing
    agencies across the federal government, and overcoming this challenge will
    require vigorous and sustained leadership from multiple parties-OPM as
    well as other key human capital players, such as the President; the Office
    of Management and Budget (OMB); Congress; and department and agency
    leaders. Since designating strategic human capital management as a
    high-risk area in January 2001,1 our work and the work of others continue
    to show that agencies need and want greater leadership from OPM in helping
    them to address their human capital challenges.

    As we have noted in our 21st Century Challenges report, people are
    critical to any agency's successful transformation.2 Transformations have
    enormous implications for the federal government's "people" policies and
    procedures, as well as cultures of government organizations. Strategic
    human capital management is at the centerpiece of this transformation and
    last fall I testified that OPM should play a key leadership and oversight
    role in helping individual agencies work towards overcoming a broad range
    of human capital challenges.3

    I have testified previously that a governmentwide framework for advancing
    human capital reform is needed to avoid further fragmentation within the
    civil service, ensure management flexibility as appropriate, allow a
    reasonable degree of consistency, provide adequate safeguards within the
    overall civilian workforce, and help maintain a level playing field among
    federal agencies competing for talent. Within the human capital community,
    there is general recognition of a need to continue to develop a
    governmentwide framework for human capital reform that Congress and the
    administration can implement to enhance performance, ensure
    accountability, and position the nation for the future.4 Nevertheless, how
    it is done, when it is done, and on what basis it is done can make all the
    difference.

    1GAO, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: January
    2001).

    2GAO, 21st Century Challenges: Reexamining the Base of the Federal
    Government, GAO-05-325SP (Washington, D.C.: Mar. 4, 2005).

    3GAO, Human Capital: Preliminary Observations on the Administration's
    Draft Proposed "Working for America Act," GAO-06-142T (Washington, D.C.:
    Oct. 5, 2005).

    I know from my conversations with Director Springer that she agrees that
    OPM needs to continue and even augment the internal transformation effort
    underway, and she is putting in place a concerted effort to make that
    happen. In 2003, we reported that OPM was undergoing its own
    transformation-from less of a rulemaker, enforcer, and independent agent
    to more of a consultant, toolmaker, and strategic partner in leading and
    supporting executive agencies' human capital management systems.5 At that
    time, OPM had taken a number of important steps and had several
    initiatives underway or planned to improve its overall mission and
    management performance. For example, OPM has exerted greater human capital
    leadership through its Human Capital Scorecard of the President's
    Management Agenda to assist agencies in improving strategic management of
    their human capital. OPM also developed the governmentwide Federal Human
    Capital Survey (FHCS) to assist agencies and OPM in better understanding
    specific and governmentwide agency workforce management conditions and
    practices in the areas of leadership, performance culture, and talent.
    Most recently, Director Springer announced OPM's television campaign to
    promote federal employment and has undertaken a greater focus on
    succession planning to respond to the forthcoming federal retirement wave
    and undertaken steps to further reduce the length of time for the federal
    hiring process.

    Under Director Springer's leadership this past year, OPM has continued to
    transform itself by undertaking a number of internal management
    initiatives to build a results-oriented culture. The results of OPM's 2004
    FHCS showed that OPM employees expressed a number of concerns regarding
    perceptions of agency leadership; talent and resources; customer focus,
    communication and collaboration; and performance culture and
    accountability. The FHCS was administered before Director Springer began
    her term. Also, according to OPM, about half of the senior leadership
    started after the survey was administered. However, we used these results,
    among other things, to assess some of the issues that could impede OPM's
    capacity to lead federal human capital reform. I call attention to some of
    these relevant questions throughout my testimony. We found that OPM is
    taking actions to address these concerns in a number of areas. For
    example, in fall 2005, OPM conducted a series of employee focus groups in
    response to its FHCS results to further understand specific issues
    underlying the decline and identify actions it could take to help improve
    the overall agency work environment. In May 2006, OPM issued a series of
    federal human capital action plans to address employee concerns raised
    during those focus group discussions. In addition, in March of this year,
    OPM issued its Strategic and Operational Plan, 2006-2010, and identified a
    number of activities that OPM plans to implement to improve employee
    satisfaction.

    4GAO, Human Capital: Principles, Criteria, and Processes for
    Governmentwide Federal Human Capital Reform, GAO-05-69SP (Washington,
    D.C.: Dec. 1, 2004).

    5GAO, Major Management Challenges and Program Risks, Office of Personnel
    Management, GAO-03-115 , (Washington, D.C.: January 2003).

    As you know, the Senate Committee on Homeland Security and Governmental
    Affairs and your Oversight of Government Management, the Federal
    Workforce, and the District of Columbia  Subcommittee requested that we
    conduct a review of OPM to identify management challenges that could
    affect its ability to lead human capital reform efforts. In March 2006, we
    briefed your staff on our preliminary observations. My remarks today are
    based on that briefing. Our forthcoming report will provide additional
    information and recommendations to OPM on opportunities to improve its
    internal management capacity. We analyzed OPM's 2006-2010 Strategic and
    Operational Plan to identify activities related to internal
    transformation. We analyzed OPM's associate directors' fiscal year 2006
    Senior Executive Service (SES) performance contracts to identify alignment
    of strategic goals and individual executive performance. We also reviewed
    OPM's most currently available workforce and succession plans to examine
    issues related to talent and resources. We analyzed OPM's 2002 and 2004
    FHCS agency results, the most recently available data that OPM is using to
    identify employee concerns. In addition, we reviewed OPM's analysis of its
    2004 FHCS results. (For more information regarding the methodology related
    to OPM's administration of the FHCS and our analysis of OPM's survey
    results, see app. I). We also reviewed the results from a series of
    employee focus groups conducted by OPM in fall 2005 to follow up on its
    agency 2004 FHCS results, as well as analyzed OPM's May 2006 action plans
    to address issues raised by the 2004 FHCS and employee focus groups.

    We interviewed OPM's five associate directors and other senior-level staff
    to obtain their views of agency management. We interviewed 21 of the 23
    members of the Chief Human Capital Officers Council and their
    corresponding agency human resource (HR) directors to gain a customer
    perspective of OPM's products and services and their views of OPM
    management challenges. Finally, we reviewed our ongoing work and previous
    recommendations to OPM on a range of issues related to human capital and
    other management challenges.  We conducted our work from June 2005 to June
    2006 in accordance with generally accepted government auditing standards.

    We provided a draft of this statement to Director Springer for her
    comment. The Director expressed concern that the basis for GAO's
    observations relied heavily on outdated information, specifically from the
    results of the FHCS administered in 2004. She noted that in many
    instances, OPM has addressed the challenges highlighted from the 2004 FHCS
    and achieved many meaningful and important results. We wish to point out
    that OPM has also relied heavily on the results of the 2004 FHCS and
    conducted focus groups in fall 2005 to understand the factors contributing
    to employees' responses on selected items on the 2004 FHCS and to obtain
    employees' ideas for addressing top priority improvement areas. Further,
    OPM used the results from 2004 FHCS and 2005 focus group discussions-the
    most recent data available-and this information was used to form the basis
    for its recently released (May 2006) action plans to address these issues.

    Today, I would like to highlight that OPM has made commendable efforts
    towards transforming itself to being a more effective leader of
    governmentwide human capital reform. OPM's recently issued "Strategic and
    Operational Plan" is a significant accomplishment. While the plan's
    strength is in its definition of clear, tangible goals and deliverables,
    it is not clear if the plan adheres to the goals for a strategic plan as
    contained in the Government Performance and Results Act of 1993.6 We will
    analyze compliance of the plan with GPRA and present the results of our
    analysis in our forthcoming report. We will examine the extent to which
    the plan's operational steps are consistently linked to a larger strategic
    vision and set of clearly articulated outcomes. Importantly, in the
    future, OPM should revisit its organizational structure to ensure it is
    aligned with the goals and objectives in its plan and make any necessary
    changes. Doing so will help OPM to improve economy, efficiency,
    effectiveness, and responsiveness while enhancing flexibility and
    improving accountability. My statement today addresses how OPM can build
    upon the progress it has made with its strategic and operational plan by
    addressing challenges that remain in four key areas:

    6 The Government Performance and Results Act of 1993 (GPRA) requires
    federal agencies to focus on achieving results and to provide objective,
    performance-based information intended to improve congressional and agency
    decision-making by providing comprehensive and reliable information on the
    extent to which federal programs are fulfilling their statutory intent.

    Leadership. OPM 2004 employee survey responses and the more recent OPM
    employee focus group discussions suggest that information from OPM top
    leadership does not cascade effectively throughout the organization.
    Survey and focus group data also suggest that many employees do not feel
    their senior leaders generate a high level of motivation and commitment in
    the workforce. Agreement with leaders' ability to generate motivation and
    commitment were lowest in the Human Capital Leadership and Merit System
    Accountability (HCLMSA) division, one of OPM's key divisions-a unit
    responsible for partnering with agencies and vital to successful human
    capital reform efforts.

    Talent and resources. In an effort to align talent and resources to
    support its reform role, OPM has made progress in its assessment of
    current workforce needs and developing leadership succession plans.
    However, if OPM is to lead governmentwide human capital reform it should
    identify the skills and competencies of the new OPM, determine any skill
    and competency gaps, and develop specific steps to fill such gaps.

    Customer focus, communication, and collaboration. Agency views, survey
    results, and our previous work show that OPM can improve its customer
    service and communication with agencies. Our recent work shows that
    guidance to agencies is not always clear and timely, the human capital
    officer structure is often a barrier to efficient customer response, and
    there are greater opportunities to dialogue and collaborate with Chief
    Human Capital Officers (CHCO) and human resource directors. Communication
    and collaboration are key aspects of OPM's ability to support agency
    efforts at human capital reform and establish a consistent reform message.
    OPM has recognized these shortcomings and has identified improvement
    actions to address some of them. However, more can be done such as
    strategically using the partnerships it has available to it, like the CHCO
    Council and others, as well as developing a culture of collaboration,
    information sharing, and working with customers to understand what they
    will need from the agency.

    Performance culture and accountability. OPM has made progress in creating
    a "line of sight" or alignment and accountability across leader
    expectations and organizational goals. Performance expectations of senior
    leaders are clearly aligned with the goals of OPM's strategic and
    operational plan. Success in achieving reform objectives will rest, in
    part, on OPM's ability to align performance and consistently support
    mission accomplishment for all employees of the organization.

                                       Leadership

    The OPM 2004 FHCS results and OPM's 2005 follow-up focus group discussions
    suggest that information is not cascading effectively from top leadership
    throughout the organization. Further, according to the summary reports of
    OPM's follow-up focus group discussions, overall communication was
    selected by employees as one of the most important areas to address. Some
    focus group participants said that managers and employees were unaware of
    what is going on in the organization due to a lack of internal and
    cross-divisional communication. Focus group participants also described
    not knowing where the agency is heading and not having a clear
    understanding of how their activities aligned with the overall vision and
    mission of the agency.

    As figure 1 shows, fewer employees below the SES level at OPM as well as
    the rest of government reported being satisfied with the information they
    receive. Further there were significantly fewer employees at OPM,
    especially in the GS-1 to GS-12 range, reporting "satisfaction with the
    information they receive from management on what's going on in the
    organization" when compared with the rest of the government. On the other
    hand, significantly more SES employees at OPM indicated satisfaction with
    the "information they were receiving from management" than SES employees
    at all the other government agencies participating in the 2004 FHCS.

    Figure 1: Employee Responses to Selected 2004 Federal Human Capital Survey
    Questions Related to Leadership

                                                     Percentage of employees with
                                                     favorable/positive responses
    Question                                      Overall GS-1-12 GS-13-15 SES
    How satisfied are you with the
    information you receive from       OPM             40      37       45  87
    management on what's going on in   Rest of
    your organization?                 government      46      45       49  57
    Managers promote communication
    among different work units (for    OPM             47      44       51  93
    example, about projects, goals,    Rest of
    needed resources).                 government      52      51       57  70
    Overall, how good a job do you     OPM             68      66       71  89
    feel is being done by your         Rest of
    immediate supervisor/team leader?  government      65      65       69  80
                                          OPM             43      45       37  84
    I have a high level of respect for Rest of
    my organization's senior leaders.  government      49      50       49  66
    How satisfied are you with the     OPM             33      34       31  76
    policies and practices of your     Rest of
    senior leaders?                    government      40      40       41  57
    ln my organization, leaders        OPM             33      34       29  81
    generate high levels of motivation Rest of
    and commitment in the workforce.   government      37      38       37  58

    Source: GAO analysis.

    A similar gap between OPM SES and GS-level employees, as well as for their
    relative counterparts from the rest of government, is evident when
    employees were asked if they agreed that "managers promote communication
    among different work units."

    OPM employees also expressed concerns regarding their views of senior
    leaders. As shown in figure 1, roughly two-thirds of OPM employees, as
    well as employees in the rest of government, indicated that their
    immediate supervisors or team leaders are doing a good or very good job.
    Employee perceptions of senior level leadership were not as positive,
    however. When survey respondents were asked if they agreed with the
    statement "I have a high level of respect for my organization's senior
    leaders," nearly twice as many OPM SES employees agreed with this
    statement as compared with OPM GS-level employees. Survey respondents were
    also asked if they were "satisfied with the policies and practices of your
    senior leaders" and OPM SES employees also agreed with this statement more
    than twice the level of OPM GS-level employees. For both items, the
    percent of OPM GS-level respondents agreeing with these statements tends
    to be lower than for their counterparts in the rest of government. A
    similar pattern of OPM SES and OPM GS-level response can be seen in Figure
    1 for the percent of employees agreeing with the statement "leaders
    generate high levels of motivation and commitment in the workforce." OPM's
    analysis of responses to this question by its divisions and offices show
    that the Human Capital Leadership and Merit System Accountability (HCLMSA)
    division had the lowest positive and largest negative response of any
    division at about 28 percent and 51 percent respectively. This issue of
    leaders generating motivation and commitment was selected by all six of
    the HCLMSA focus groups as one of the most important issues that OPM needs
    to address. Because the HCLMSA division is OPM's frontline organization
    that partners with agencies to achieve human capital success by providing
    oversight and leadership to agencies, it will play a key role in OPM
    initiatives to implement human capital reform-so it will need effective
    leadership to guide its transformation.

    OPM is clearly aware of the most critical issues for its agency leaders to
    address, such as the lack of overall and cross-divisional communication,
    issues related to employee views of senior management, and obtaining
    employee input to individual work plans linked to the agency strategic
    plan. Based on OPM's May 2006 action plans, the agency is planning to
    improve communication through such means as "visits to OPM field
    locations, brown bag lunches with the Director, an email box where
    employees can make suggestions on more efficient and effective ways of
    doing business, Web Casts, and employee meetings." According to the May
    11, 2006 memo from OPM's CHCO to Director Springer, OPM has released
    several messages to employees regarding steps that it will be taking to
    improve communications agencywide and to address each of the specific
    critical issues within individual organizations of the agency. OPM
    officials told us that many of these actions have already occurred, such
    as senior executives visiting field locations. To improve its
    cross-divisional communication, OPM has developed and posted a functional
    organization directory on its internal website, which it has accomplished
    almost a month ahead of schedule. To address employee concerns regarding
    views of senior leaders, OPM is establishing a process in all divisions to
    solicit employee input on various initiatives and setting aside "open
    door" time for employees to speak with their managers. Furthermore, OPM
    has created an action plan to help employees better understand how their
    work fits into the overall mission of the agency by providing a mechanism
    to increase employee input to work plans related to its strategic plan.

    As I have testified on many occasions, in recent years GAO has learned a
    great deal about the challenges and opportunities that characterize
    organizational transformation. Several such lessons are of particular
    relevance to today's discussion. For example, GAO has recognized that
    soliciting and acting on internal feedback such as that obtained through
    employee surveys, provides a key source of information on how well an
    organization is developing, supporting, using and leading staff, as well
    as how internal operations are functioning and meeting employee needs as
    they carry out their mission. OPM's practices in this area are based in
    part on GAO's experience and include efforts to gain insight into employee
    perceptions of leadership and explicit follow-up activities to address
    identified concerns. OPM's planned actions are important steps in the
    right direction. Moving forward, as OPM implements its action plans to
    address issues of communication and motivation, it is important that it
    frequently communicate with employees on the progress of each of its
    planned actions and how these changes will affect them. OPM should also
    communicate any challenges or delays faced in its planned actions as soon
    as possible and the reasons why any changes to plans might be made. The
    2006 FHCS deployed just last month, will provide an initial indication of
    the extent to which the new initiatives are responding to employee
    concerns.

                                  Talent and Resources

    A high-performance organization needs a dynamic, results-oriented
    workforce with the requisite talents, multidisciplinary knowledge, and
    up-to-date skills to ensure that it is equipped to accomplish its mission
    and achieve its goals. We have reported that acquiring and retaining a
    workforce with the appropriate knowledge and skills demands that agencies
    improve their recruiting, hiring, development, and retention approaches so
    that they can compete for and retain talented people.7 Similar to other
    agencies, OPM faces challenges in recruiting and retaining a high-quality,
    diverse workforce and these challenges could limit OPM's capacity to
    accomplish its current mission, which includes in part leading other
    agencies in addressing their own recruitment and retention challenges.
    Further, if OPM is to lead governmentwide human capital reform and
    transition from less of a rulemaker, enforcer, and independent agent to
    more of a consultant, toolmaker, and strategic partner, it should identify
    the skills and competencies of the new OPM, determine any skill and
    competency gap, and develop specific steps to fill that gap.

    7GAO, High-Risk Series: Strategic Human Capital Management, GA0-03-120
    (Washington D.C.: January 2003).

    The FHCS shows that OPM employees identified several issues related to its
    current workforce:

               o  Workforce skills. Some OPM employees were concerned about a
               lack of skills among OPM's current workforce. Our analysis of the
               2004 FHCS shows that 67 percent of OPM employees agreed that "the
               workforce has the job relevant knowledge and skills necessary to
               accomplish organizational goals" compared with 74 percent of
               employees from the rest of government. Among OPM's divisions,
               HCLMSA had the lowest rate of agreement and highest rate of
               disagreement with the above statement at, respectively, 25 percent
               and 59 percent. This division provides leadership to agencies in
               their human capital transformation efforts. If HCLMSA lacks the
               knowledge and skills necessary to accomplish OPM's current
               organizational goals, the division may have difficulty managing
               the additional responsibilities of leading and implementing future
               governmentwide human capital reform.

               Agencies are also concerned with OPM's current workforce capacity.
               We spoke with agency CHCOs, HR directors, and their staffs about
               OPM's current capacity, and they expressed concern about whether
               OPM has the technical expertise needed to provide timely and
               accurate human capital guidance and advice. For example, agency
               officials said that the perceived lack of federal human resource
               expertise among some OPM Human Capital Officers (HCO) makes it
               difficult for them to assist agencies when communicating policy
               questions to appropriate OPM employees. For example, an HR
               director told us that their agency contacted the responsible HCO
               about the Outstanding Scholars Program and did not get a response
               from OPM for two to three weeks. When OPM finally responded, they
               said each agency was deciding how to administer the program.8 In
               the end, the agency's General Counsel Office had to contact
               another agency to learn how they administered the program.

               Many CHCOs and human resource directors told us they believed that
               OPM's expertise has declined over the last decade, while noting
               that OPM is facing many of the same personnel issues as all
               federal agencies regarding the loss of federal human capital
               talent and institutional knowledge.

               OPM's ability to lead and oversee human capital management policy
               changes that result from potential human capital reform
               legislation could be affected by its internal capacity and ability
               to maintain an effective leadership team, as well as, an effective
               workforce. CHCOs and human resource directors expressed concern
               about the loss of OPM employees with technical expertise that will
               be needed to effectively assist agencies with future human capital
               efforts. One CHCO believed OPM's capacity is dependent upon a few
               key employees, in particular in the area of innovative pay and
               compensation approaches, adding that the potential loss of these
               employees could create a tipping point that severely damages OPM's
               capacity. Moreover, agencies believed that the Departments of
               Defense (DOD) and Homeland Security human capital reform efforts
               severely taxed OPM technical resources, specifically pay and
               compensation employees.

               Building the skills and knowledge of its workforce provides OPM
               with an opportunity to streamline decision making to appropriate
               organization levels. The FHCS includes one question on employee
               empowerment. The 40 percent of OPM employees who had a "feeling of
               personal empowerment with respect to work processes" was close to
               the response of 43 percent from the rest of government. Although
               these results do not differ markedly from those in the rest of
               government, this item was selected by a majority of participants
               in the focus groups as one of the most important issues that OPM
               needs to address. Some participants said decision making is too
               centralized at the top without delegating authority to managers,
               supervisors, and employees. Taken together, these survey and focus
               group results suggest that the majority of OPM employees do not
               feel empowered to accomplish their tasks. Having delegated
               authorities gives employees the opportunity to look at customer
               needs in an integrated way and effectively respond to those needs
               and can also benefit agency operations by streamlining processes.
               Furthermore, such delegation to frontline employees gives managers
               greater opportunities to concentrate on systematic, cross-cutting,
               problems or policy-level issues. In April 2006, OPM began taking
               steps to delegate more authority to lower-level employees, and
               Associate Directors are now currently reviewing redelegations
               within their organizations.

               o  Recruiting. Similar to most federal agencies, OPM may have
               difficulty recruiting new talent. For example, 47 percent of OPM
               employees who perform supervisory functions agreed with the
               statement that their "work unit is able to recruit people with the
               right skills," which is similar to the 45 percent of supervisors
               from the rest of government. The OPM CHCO told us that HR
               specialist positions are difficult to fill now. The work of HR
               specialists ranges across policy development, consultation and
               agency outreach, and operational recruitment and staffing
               activities. This is noteworthy because we identified HR specialist
               as a mission-critical occupation among the 24 Chief Financial
               Officer Act agencies in our 2001 report. 9 HR specialist was also
               listed as a mission-critical occupation in OPM's 2003 human
               capital plan.

               Mr. Chairman, as you know, longstanding concerns exist regarding
               DOD's personnel security clearance program. In fact, we declared
               DOD's program a high-risk area in January 2005. We testified last
               month before this subcommittee on concerns that slow the process
               of personnel clearances.10 OPM continues to experience problems
               with its investigative workforce, a problem we first identified in
               February 2004 when we found that OPM and DOD together needed
               approximately 3,800 additional full-time-equivalent investigators
               to reach their goal of 8,000. Although OPM reports that it has
               reached its goal, it still faces performance problems due to the
               inexperience of its domestic investigative workforce. While OPM
               reports that it is making progress in hiring and training new
               investigators, the agency notes it will take a couple of years for
               the investigative workforce to reach desired performance levels.

               o  Training. OPM employees cited strengths as well as concerns
               with employee development and training, as well as not feeling
               empowered to accomplish their tasks. As we have reported, agencies
               must develop talent through education, training, and opportunities
               for growth, such as delegating authorities to the lowest
               appropriate level.11 In the 2004 FHCS, 62 percent of OPM employees
               agreed that "supervisors/team leaders in [their] work unit support
               employee development" which is close to the agreement level of
               employees from the rest of government at 65 percent. OPM employees
               were not as close to the employees in the rest of government in
               agreeing that "I receive the training I need to perform my job."
               Fifty-three percent of OPM employees agreed with this statement as
               compared with 60 percent of employees from the rest of government.
               In the follow-up employee focus groups, some participants selected
               this item as one of the most important issues for OPM to address.
               Some focus group participants said OPM's culture does not support
               training and employees do not have time to attend training
               classes. Further, an OPM executive told us that it can be a
               struggle to convince managers that people should attend training.
               Some focus group participants also said that managers are not
               given sufficient and timely training budgets. OPM officials
               believe that limited funding for training is an issue at OPM, and
               added that OPM is also working to provide managers with more
               timely training budgets. In 2003, we reported that OPM was using
               rotational assignments, special projects, and details to broaden
               the skills of employees.12 OPM officials also told us the agency
               is taking steps to address training concerns by offering more
               online training courses. In 2004, 57 percent of employees agreed
               with the statement that they have electronic access to learning
               and training programs readily available at their desk. Although
               still below the 71 percent agreement level for the rest of
               government, this was an 8 percentage point increase from the 49
               percent of employees who agreed with this statement on the 2002
               FHCS. OPM can build upon its current training initiatives, such as
               online courses and rotational assignments, to leverage the
               available training resources.
               o  Critical resources. OPM employees have indicated concerns
               regarding the availability of critical resources. Although
               responses from OPM employees overall are similar to employees from
               the rest of government, we noted one group of OPM employees whose
               responses are not as close to their counterparts in the rest of
               government. Among all OPM employees, 51 percent agreed with the
               statement that they have "sufficient resources (for example,
               people, materials, budget) to get my job done" as did 49 percent
               of employees from the rest of government. For employees performing
               supervisory functions, however, the agreement rate was 35 percent
               at OPM and 42 percent for the rest of government. Participants in
               the follow-up focus groups selected this item as one of the most
               important issues OPM needs to address to make the agency a better
               place to work. Focus group participants said the lack of
               administrative staff and essential equipment causes specialized
               employees to waste time performing administrative functions. This
               suggests that OPM needs to take additional steps to ensure that it
               has aligned its available resources with its mission needs.

    8 The Outstanding Scholars Program is a special hiring authority for GS-5
    and GS-7 positions that allows agencies to appoint college graduates with
    high grade point averages or class standing. The use of the authority is
    currently being litigated before the Merit Systems Protection Board.

    9GAO, Federal Employee Retirements: Expected Increases Over the Next 5
    Years Illustrates Need for Workforce Planning, GAO-01-509 (Washington,
    D.C.: Apr. 27, 2001).

    10GAO, DOD Personnel Clearances: New Concerns Slow Processing of
    Clearances for Industry Personnel, GAO-06-748T (Washington, D.C.: May 17,
    2006).

    11GAO, Human Capital: A Self-Assessment Checklist for Agency Leaders,
    GAO/OCG-00-14G (Washington, D.C.: September 2000); GAO, Human Capital:
    Practices That Empowered and Involved Employees, GAO-01-1070 (Washington,
    D.C.: Sep. 14, 2001).

    12 GAO-03-115 .

    OPM Has Engaged in Workforce and Succession Planning, but Different Workforce
    Skills May Be Needed to Meet Future Needs

    OPM's workforce and succession planning efforts may be sufficient for
    maintaining the organization's current capacity, but OPM may need more
    collaborative workforce skills to lead and implement human capital reform.
    We have reported that strategic workforce planning addresses two critical
    needs: (1) aligning an organization's human capital program with its
    current and emerging mission and programmatic goals, and (2) developing
    long-term strategies for acquiring, developing, and retaining staff to
    achieve programmatic goals. 13

    Almost half (about 46 percent) of OPM's workforce will be eligible to
    retire as of September 30, 2010, as compared with 33 percent
    governmentwide, according to information in the Central Personnel Data
    File (CPDF). Further, about two-thirds (66 percent) of the OPM SES
    employees will be eligible to retire at the same time-about the same as
    the governmentwide eligibility of 68 percent. We have reported that
    without careful planning, SES separations pose the threat of an eventual
    loss in institutional knowledge, expertise, and leadership continuity.14
    In light of the impending retirements among its SES workforce, OPM has
    engaged in succession planning to ensure that it has the leadership talent
    in place to effectively manage OPM's transformation, as well as ensure
    that the workforce skill mix is appropriate to meet its future challenges
    and transition to more of a strategic consultant role. This effort is
    important because leading organizations engage in broad, integrated
    succession planning efforts that focus on strengthening both current and
    future organizational capacity. OPM officials told us that the agency has
    identified 142 key leadership positions within the SES and GS-15 grade
    levels that are classified for succession planning in the near future.
    Currently, OPM's succession planning efforts are only focused on SES and
    GS-15 positions. I understand that OPM is now planning to expand the scope
    of its succession management program to include all supervisory,
    managerial, and executive positions throughout the agency-approximately
    240 additional positions. I would encourage them to undertake this broader
    succession planning effort, given the importance of maintaining, and in
    many cases augmenting, critical skills throughout the organization, as
    well as the consideration of the future skills it may need to achieve its
    own transformation to lead the executive branch's overall human capital
    reform effort.

    13GAO, Human Capital: Key Principles for Effective Strategic Workforce
    Planning, GAO-04-39 (Washington, D.C.: Dec.11, 2003).

    As I noted earlier, in 2003, we reported that OPM's overarching challenge
    today is to lead agencies in shaping their human capital management
    systems while also undergoing its own transformation. Given its
    governmentwide leadership responsibilities, it is particularly important
    that OPM seeks to "lead by example" with its own human capital practices.
    Leading organizations go beyond simply backfilling vacancies, and instead
    focus on strengthening both current and future organizational capacity.
    Thus, it is critical that OPM assesses its mission-critical workforce
    skills relative to the human capital reform competencies and needs of the
    future. OPM officials said they will be issuing the agency's updated
    strategic human capital plan later this summer to include such items as
    its human capital focus, workforce plan, leadership and knowledge
    management, workforce analysis, and performance goals, among other things.
    Director Springer has noted that she envisioned the OPM of the future as
    having a greater emphasis on collaboration and consulting capabilities.
    Given the greater emphasis on collaboration and consulting skills, I
    believe that OPM's forthcoming strategic human capital plan should include
    thoughtful strategies for how the agency plans to recruit, train, develop,
    incentivize, and reward employees with this important skill set.

    14GAO, Human Capital: Insights for U.S. Agencies from Other Countries'
    Succession Planning and Management Initiatives, GAO-03-914 (Washington,
    D.C.: Sep. 15, 2003).

                    Customer Focus, Communication, and Collaboration

    During a transformation, we have reported that a communication strategy is
    especially crucial in the public sector where policy making and program
    management demand transparency and a full range of stakeholders and
    interested parties are concerned not only with what results are to be
    achieved, but also which processes are to be used to achieve those
    results.15 Our work on high-performing organizations and successful
    transformations has shown that communication with customers and
    stakeholders should be a top priority and is central to forming the
    partnerships needed to develop and implement an organization's
    transformation strategies. Specifically, an appropriate customer
    communication strategy would include consistency of message and encourage
    two-way communication.

    A majority of CHCOs and human resource (HR) directors told us that OPM
    could improve the clarity, consistency, and timeliness of its guidance to
    agencies. Several agency officials commented that OPM conveyed a "we'll
    know it, when we see it" method of communicating expectations. This method
    of communicating expectations and lack of clear and timely communications
    and guidance was clearly illustrated as agencies conveyed their
    experiences with the SES performance management system certification
    process. In November 2003, Congress authorized a new performance-based pay
    system for members of the SES. Under this authority, SES members are to no
    longer receive automatic annual across-the-board or locality pay
    adjustments with the new pay system. Agencies are to base pay adjustments
    for SES members on individual performance and contributions to the
    agency's performance by considering such things as the unique skills,
    qualifications, or competencies of the individual and their significance
    to the agency's mission and performance, as well as the individual's
    current responsibilities. Congress also authorized agencies to raise the
    maximum rate of pay for senior executives if their SES performance
    appraisal system is certified by OPM and OMB as making meaningful
    distinctions in relative performance.

    15GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons
    Learned for a Department of Homeland Security and Other Federal Agencies,
    GAO-03-293SP (Washington, D.C.: Nov. 14, 2002).

    We asked agency CHCOs and HR directors to provide us with their
    experiences with OPM's administration of the SES pay-for-performance
    process to identify parallel successes and challenges that OPM could face
    in a certification role for the implementation of human capital reforms.
    We heard a number of concerns from agencies regarding OPM's ability to
    communicate expectations, guidance, and deadlines to agencies in a clear
    and consistent manner. For example, one official said, while OPM tries to
    point agencies in the right direction, it will not give agencies discrete
    requirements. This leads to uncertainty about what agencies must and
    should demonstrate to OPM. Some CHCOs and HR directors also told us that,
    in some cases, OPM changed expectations and requirements midstream with
    little notice or explanation.

    The late issuance of certification submission guidance to agencies was
    especially problematic for agencies and they appeared to have responded to
    this circumstance in two different ways. Because OPM did not issue
    guidance for calendar year 2006 submissions until January 5, 2006, some
    agencies were unable to deliver their submissions to OPM before the
    beginning of the calendar year. Further, OPM clarified this guidance in a
    January 30, 2006, memorandum to agencies, telling agencies that SES
    performance appraisal systems would not be certified for calendar year
    2006 if the performance plans did not hold executives accountable for
    achieving measurable business outcomes. As a result, agencies had to
    revise their submissions, where necessary, to meet OPM's additional
    requirements. Some agencies indicated that OPM's late issuance of guidance
    also creates an uneven playing field among agencies, as those that choose
    to wait until OPM issues guidance before applying for certification are
    unable to give their SES members higher pay, while their counterparts who
    did not wait for OPM's guidance, could get certified sooner. Some human
    resource directors we spoke with expressed concern that OPM is not certain
    about their expectations of agencies' submissions and said they would like
    more clarity from OPM on the certification process. For example, one
    agency director of executive resources said agencies ended up relying on
    each other rather than OPM during the 2004 SES certification process. They
    said OPM provided agencies with mixed messages on what would be required
    for SES certification. One human resource director requested that, at the
    very least, agencies should be given the certification process guidelines
    before the end of the calendar year, so they can plan adequately. OPM
    officials we spoke with about this agreed that they need to be able to
    provide clear and consistent guidance to agencies and said they are
    working to improve this. Further, they said their evaluation of agencies'
    submissions is evolving as their understanding of the SES certification
    criteria is increasing.

    In the past, we have reported concerns with OPM's communications
    pertaining to their leadership in implementing governmentwide human
    capital initiatives and have recommended ways in which OPM could improve
    its guidance to federal agencies. For example, in 2003 we reported that an
    initial lack of clarity in telework guidance for federal agencies from OPM
    led to misleading data being reported on agencies' telework programs.16 As
    one of the lead agencies, along with the General Service Administration
    (GSA), for the federal government's telework initiative, OPM issued
    telework guidance to agencies in 2001 that did not define a statement that
    was included in their guidance that told agencies that eligible employees
    who wanted to participate in telework must be allowed that opportunity. As
    a result, we found that agencies interpreted this statement differently
    and subsequently reported incomparable data to OPM. After discussing this
    issue with OPM officials, OPM reacted promptly by issuing new telework
    guidelines within weeks that addressed our initial concerns. We concluded
    that the steps taken by OPM in response to our findings showed a ready
    willingness to address issues that were hindering implementation of this
    important human capital initiative. We also recommended to OPM and GSA
    that they should use their lead roles in the federal telework initiative
    to identify where more information and additional guidance, guidelines,
    and technical support could assist agencies in their implementation of
    telework.

    In May 2006, we reported that communications problems between OPM and DOD
    may be limiting governmentwide efforts to improve the personnel security
    clearance-an area of high-risk concern that I noted earlier.17 For
    example, DOD officials asserted-and OPM disagreed-that OPM had not
    officially shared its investigator's handbook with DOD until recently. DOD
    adjudicators had raised concerns that without knowing what was required
    for an investigation by the investigator's handbook, they could not fully
    understand how investigations were conducted and effectively use the
    investigative reports that form the basis for their adjudicative
    decisions. OPM indicated that it is revising the investigator's handbook
    and is obtaining comments from DOD and other customers.

    16GAO, Human Capital: Further Guidance, Assistance, and Coordination Can
    Improve Federal Telework Efforts, GAO-03-679 (Washington, D.C.: Jul. 18,
    2003).

    17 GAO-06-748T .

    More recently, our review of oversight of Equal Employment Opportunity
    (EEO) related requirements and guidance, found little evidence of OPM
    coordination with Equal Employment Opportunity Commission (EEOC) because
    an insufficient understanding of their mutual roles, authority, and
    responsibilities resulting in lost opportunity to realize consistency,
    efficiency, and public value in federal EEO and workplace diversity human
    capital management practice.18 Further, a majority of human capital and
    EEO officials responding to a survey we did for that review, reported that
    OPM's feedback on their agencies' programs and the guidance they received
    from OPM was not useful.

    Helping to achieve EEO and workplace diversity is another area where
    opportunities exist for OPM to increase its coordination and collaboration
    with EEOC. Over 80 percent of the respondents to our survey of federal
    human capital and EEO officials said that more coordination between OPM
    and EEOC would benefit their agency, adding that the lack of such
    coordination resulted in added requirements on them and detracted from the
    efficiency of their won work. Moreover, in 2005, OMB recommended to OPM
    that it develop a regular/formal working relationship with EEOC with
    respect to those programs where it shares oversight responsibility with
    EEOC in order to improve overall government efficiency.

    As changes in governmentwide human capital initiatives begin to address
    the changing needs of the 21st century federal workforce, it will be
    especially critical that OPM develops clear and timely guidance for
    agencies that can be consistently and easily implemented.

    OPM's HCO Structure Is Viewed as a Barrier to Meeting Customer Needs

    CHCOs and human resource directors informed us that, while OPM's HCO
    structure is good in theory, it is often a barrier to obtaining timely
    technical guidance. Within the HCMLSA division, OPM assigns one HCO as the
    main point of contact to each agency of the President's Management Council
    and one to each cluster of small agencies. HCOs act as liaisons and
    consultants communicating with an agency's human capital leadership. CHCOs
    and human resource directors commented that their HCO has become an
    advocate for their agencies and has been helpful for troubleshooting and
    resolving issues that did not require detailed technical assistance.
    However, problems arose for many agencies when technical questions and
    issues had to be communicated via their HCO to the policy experts at OPM.
    For example, one human resource officer told us they asked their HCO if
    they could talk directly to OPM experts on Voluntary Separation Incentive
    Pack and Voluntary Early Retirement Authority, but the HCO insisted on
    relaying the information to the agency. The agency official said their HCO
    was relatively new, so there were numerous policy nuances that were lost
    during this process.

    18GAO, Equal Employment Opportunity: Improved Coordination Needed between
    EEOC and OPM in Leading Federal Workplace EEO, GAO-06-214 (Washington,
    D.C.: Jun. 16, 2006).

    One CHCO stated that, while the HCOs at OPM have provided one-stop
    shopping for agencies, having the HCO as the only point of contact can be
    restrictive. Several human resource directors conveyed instances where
    technical nuances of a particular issue, such as the Voluntary Early
    Retirement Authority, were lost in the translation between the HCOs and
    policy experts at OPM, as the HCO often did not have federal HR experience
    or expertise. As one official described it, while the HCO is helpful, time
    and context are lost in having to go through the HCO to obtain technical
    assistance. Human resource directors expressed a desire to communicate
    directly with OPM's policy experts for technical guidance and some use
    their personal contacts at OPM for technical guidance and assistance
    instead of going through their HCO.

    Human resources directors also said that they sometimes received mixed
    messages on the SES certification process from OPM, and it appeared that
    answers would change depending on with whom an official was working. From
    their perspective, agencies thought that OPM did not effectively
    communicate among its internal divisions and that OPM could greatly
    improve its customer service by clarifying its internal structure and
    making it more customer-oriented. Human resource directors commented about
    the lack of a formal mechanism, such as a survey instrument, to provide
    feedback to OPM on their guidance and assistance to agencies. We asked an
    executive within the HCLMSA division about this and were told that while
    OPM does not have a formal feedback mechanism, they talk to agencies all
    the time, so OPM does not feel that a formal mechanism is needed.

    Employee responses to FHCS questions relating to OPM's customer focus show
    employees are also concerned about the service OPM provides to agencies.
    OPM's results for the two FHCS questions relating to customer focus show a
    decline from 2002 to 2004 in its employee's satisfaction with OPM's focus
    on customer needs. In 2002, 66 percent of OPM employees agreed that
    "products and services in their work unit are improved based on
    customer/public input." However in 2004, 53 percent of OPM employees
    agreed with the same statement, a 13 percentage point decline. A similar
    decline occurred in response to a FHCS question concerning performance
    rewards. In 2002, 51 percent of OPM employees agreed that "employees are
    rewarded for providing high quality products and services to customers,"
    whereas in 2004, 35 percent of OPM employees agreed with the same
    statement, a decline of 16 percentage points.

    While the employee focus group discussions did not directly address
    customer focus, some participants raised concerns during their discussions
    that could affect OPM's client focus. Focus group participants from HCLMSA
    said OPM provides poor service to external customers due to unnecessary
    delays and a lack of communication. They said the HCO structure makes it
    difficult to connect customers with OPM employees who can provide them
    with accurate information and advice. The HCO structure was introduced in
    2003, therefore it could have contributed to the decline in positive
    responses to the customer focus questions in the 2004 FHCS.

    In an OPM briefing to GAO, officials described OPM's structure in support
    of strategic human capital management, and part of that structure includes
    "targeting capability to implement strategic management of human capital
    on an agency-by-agency basis" through its HCLSMA division. According to
    OPM documents, each agency center in HCLMSA has staff to provide human
    resources technical assistance to agencies. OPM has a number of goals and
    activities in its Strategic and Operational Plan intended to improve its
    customer service and focus on customer needs. For example, OPM plans to
    develop performance standards for OPM common services by July 2006, and
    implement them by October 2006.

    As OPM works to address its customer issues, it should consider other ways
    to more quickly respond to inquires from agencies for specific technical
    expertise. In addition, OPM should develop a customer feedback survey to
    identify issues related to timeliness, customer needs, satisfaction, and
    take action accordingly.

    OPM Needs to Take Full Advantage of Opportunities to Collaborate and Facilitate
    Information Sharing with the CHCO Council and Agency Human Resource Directors

    Our prior work has found that high-performing organizations strengthen
    accountability for achieving crosscutting goals by placing greater
    emphasis on collaboration, interaction, and teamwork, both within and
    across organizational boundaries, to achieve results that often transcend
    specific organizational boundaries. In addition, we have found that
    high-performing organizations strategically use partnerships and that
    federal agencies must effectively manage and influence relationships with
    organizations outside of their direct control. An effective strategy for
    partnerships includes establishing knowledge-sharing networks to share
    information and best practices.

    To collaborate and share information, CHCOs said that OPM could make
    better use of the CHCO Council. Human resource directors said that OPM
    could facilitate more communities of practice at the implementation level
    among them. We have reported often on the need to collaborate and share
    information as a way to improve agency human capital approaches,
    processes, and systems. Specifically, we have made several recommendations
    to OPM to work more closely with the CHCO Council to (1) share information
    on the effective use of retirement flexibilities, (2) act as a
    clearinghouse of information for the innovative use of alternative service
    delivery for human capital services, and (3) more fully serve as a
    clearinghouse in sharing and distributing information about when, where,
    and how the broad range of human capital flexibilities are being used to
    help agencies meet their human capital management needs.19 Further, we
    have recommended that OPM, in conjunction with the CHCO Council, help
    facilitate the coordination and sharing of leading practices related to
    efficient administration of the student loan repayment program by
    conducting additional forums, sponsoring training sessions, or using other
    methods.20 For example, our work on the federal hiring process identified
    areas where OPM could target its efforts.21 OPM has since taken a number
    of actions to help agencies improve their hiring processes. With respect
    to improving agency hiring processes and use of human capital
    flexibilities, we reported that the CHCO Council should be a key vehicle
    for this needed collaboration. For example, OPM, working through the CHCO
    Council, can serve as a facilitator in the collection and exchange of
    information about agencies' effective practices and successful approaches
    to improved hiring.22 To address the federal government's crosscutting
    strategic human capital challenges, we have testified that an effective
    and strategic CHCO Council is vital. We have also reported that using
    interagency councils, such as the Chief Financial Officers' and Chief
    Information Officers' Councils, has emerged as important leadership
    strategy in both developing policies that are sensitive to information
    concerns and gaining consensus and consistent follow-through within the
    executive branch.23

    19GAO, Human Capital: Agencies Are Using Buyouts and Early Outs with
    Increasing Frequency to Help Reshape Their Workforces, GAO-06-324
    (Washington, D.C.: Mar. 31, 2006); GAO, Human Capital: Selected Agencies'
    Use of Alternative Service Delivery Options for Human Capital Activities,
    GAO-04-679 (Washington, D.C.: Jun. 25, 2004);  GAO,  Human Capital: OPM
    Can Better Assist Agencies in Using Personnel Flexibilities, GAO-03-428
    (Washington, D.C.: May 9, 2003).

    20GAO, Federal Student Loan Repayment Program: OPM Could Build on Its
    Efforts to Help Agencies Administer the Program and Measure Results,
    GAO-05-762 (Washington D.C.: Jul. 22, 2005).

    21GAO, Human Capital: Opportunities to Improve Executive Agencies' Hiring
    Processes, GAO-03-450 (Washington, D.C.: May 30, 2003).

    Agency officials overwhelmingly reinforced a need for OPM to do more to
    collaborate and facilitate information sharing with the CHCO Council and
    HR directors. A former department-level CHCO described the CHCO Council as
    "a lost opportunity with little opportunity for dialogue." Another CHCO
    stated that the Council has rarely been used to debate new human capital
    policies and has been excluded from major policy debates. Although, some
    CHCOs and HR directors pointed to OPM's successful collaborative efforts
    through the CHCO Council, such as its assistance to agencies in the
    aftermath of Hurricane Katrina, they told us that OPM misses opportunities
    to more effectively partner with agencies. While some human resource
    directors believed the CHCO Council did provide a means of sharing
    information, which is especially useful for the CHCOs who lack human
    resources backgrounds, several officials described ways in which OPM could
    more effectively use the Council.

    A majority of human resource directors we met with told us they would like
    to see OPM facilitate the sharing of information and best practices among
    HR professionals, as well as CHCOs. Some officials said that OPM
    frequently communicates with agencies via fax and e-mail, but does not
    bring agencies together as often to share information. Some CHCOs said
    they would like to see the CHCO Council interact more with other
    governmentwide interagency councils. Also, most HR directors, as well as,
    several CHCOs, responded positively to more involvement of agency HR
    directors on the CHCO Council. Director Springer said that membership on
    the CHCO Council has been expanded to include a deputy CHCO position. The
    inclusion of deputies is an important step toward building a collegial
    environment for sharing best practices.

    22GAO, Human Capital: Additional Collaboration Between OPM and Agencies Is
    Key to Improved Federal Hiring, GAO-04-797 (Washington, D.C.: Jun. 7,
    2004).

    23GAO, Human Capital: Building on the Current Momentum to Transform the
    Federal Government, GAO-04-976T (Washington, D.C.: Jul. 20, 2004).

    Several agency officials used the SES performance management system
    certification process to illustrate what they considered a missed
    opportunity for OPM to facilitate agency sharing of information and best
    practices, particularly during the certification application submission
    process. However, an OPM official told us that it does not provide
    agencies with examples of "best practice" certification submissions
    because OPM does not want to convey to agencies that there is only one
    "right" way to become certified. While OPM is certainly correct about no
    one right way, several agencies nevertheless indicated having difficulty
    understanding OPM's expectations for agency certification submissions. In
    response, one CHCO took the initiative to use one of the CHCO Academy24
    meetings to engender information sharing among agencies with the
    application process.

    Collaboration and information sharing will be critical as human capital
    reforms begin to take hold across government. If OPM is to successfully
    lead reform, it will need to strategically use the partnerships it has
    available to it, such as the CHCO Council and others, as well as develop a
    culture of collaboration, information sharing, and working with customers
    to understand what they will need from the agency.

    OPM's Strategic and Operational Plan Includes a Number of Efforts Intended to
    Improve Its Customer Focus

    It is clear from the OPM Strategic and Operational Plan, 2006-2010 that
    issues of customer satisfaction and timeliness in the provision of OPM
    common services is an important and compelling customer need. OPM
    management has indicated that operational goals and activities are
    organized as steps in its internal activities or processes to better
    support external products and services for its customers and stakeholders.
    For instance, OPM intends to develop and implement a new common services
    methodology, to employ performance standards for measuring the delivery of
    common services to customers, and to operate under a fully implemented set
    of internal delegated authorities and protocols by the end of fiscal year
    2006. OPM management has pointed out that these activities are also
    presented in a timeline tracking sheet that is used to make "real time"
    changes through continual update of accomplishments. It is OPM's intent to
    then inform customers of the agency's success in meeting the stated
    customer goals found in the plan within two weeks of each success, thereby
    establishing a means of transparency and accountability. OPM officials
    told us that to date, the agency is meeting this intent.

    24The CHCO Academy was established as a forum for Council members only, to
    discuss human resources issues, learn from one another in an informal
    setting, and share best practices in the strategic management of human
    capital. Academy sessions are scheduled throughout the year on the third
    Thursday of the month at the Office of Personnel Management.

    Successful organizations establish a communication strategy that allows
    for the creation of common expectations and reports on related progress.
    Activities intended to provide for better means of communication and
    collaboration are also clearly found in the OPM plan. As noted earlier,
    OPM is taking steps to improve its internal communication by recently
    developing and posting a functional organization directory on its internal
    website. OPM also plans to redesign its public website to improve
    communication and customer focus by the close of fiscal year 2006. The OPM
    plan further states, as a strategic objective, that OPM "will have
    constructive and productive relationships with external stakeholders,"
    such as Congress, veterans, unions, media and employee advocacy groups.

    To better meet external client needs, OPM has an ongoing key related
    effort to modernize its retirement systems program. Through this program,
    OPM expects to reengineer the various processes that provide services to
    retirement program participants that include about 5 million federal
    employees and annuitants. One of OPM's objectives is to standardize
    applications for coverage and eligibility determinations and benefits
    calculations, making them specific to customer needs and accessible to
    federal agencies and program participants. OPM's Strategic and Operational
    Plan contains operational goals related to this modernization effort. We
    believe that such a modernization effort is clearly needed. At the same
    time, as we have noted in our prior work, OPM has lacked needed processes
    for developing and managing requirements and related risks, while
    providing sound information to investment decision makers in order to
    effectively complete modernization of this program.25 We made
    recommendations to OPM regarding establishment of management processes
    needed for effective oversight of the program. OPM agreed that the
    processes we identified were essential and noted it is taking steps to
    address our recommendations to strengthen these processes.

    25GAO, Office of Personnel Management: Retirement Systems Modernization
    Program Faces Numerous Challenges, GAO-05-237 (Washington, D.C.: Feb. 28,
    2005).

                         Performance Culture and Accountability

    Leading organizations have recognized that a critical success factor in
    fostering a results-oriented culture is an effective performance
    management system that creates a "line of sight" showing how unit and
    individual performance can contribute to overall organizational goals and
    helping them understand the connection between their daily activities and
    the organization's success.26 Effective performance management systems

    can drive organizational transformation by encouraging individuals to
    focus on their roles and responsibilities to help achieve organizational
    outcomes. Our analysis shows that OPM's executive performance management
    system aligns the performance expectations of OPM's top leaders with the
    organization's goals. OPM sets forth the organization's goals in its
    2006-2010, Strategic and Operational Plan and directly connects these
    goals to the performance expectations of top leaders using performance
    contracts. Clearly defined organizational goals are the first step toward
    developing an effective performance management system.

    OPM uses performance contracts to link organizational goals to performance
    expectations for senior leaders and holds them accountable for achieving
    results. As we have reported, high performing organizations understand
    that they need senior leaders who are held accountable for results, drive
    continuous improvement, and stimulate and support efforts to integrate
    human capital approaches with organizational goals and related
    transformation issues.27 These organizations can show how the products and
    services they deliver contribute to results by aligning performance
    expectations of top leadership with organizational goals and then
    cascading those expectations down to lower levels. We assessed how well
    OPM is creating linkages between executive performance and organizational
    success by reviewing the performance contracts (Fiscal Year 2006 Executive
    Performance Agreements) of the five associate directors of OPM's major
    divisions. We evaluated these performance contracts by applying selected
    key practices we have previously identified for effective performance
    management. 28 We chose these practices because they are especially
    relevant to OPM's current strategic management efforts. These practices,
    collectively with others we have identified in prior work, create a "line
    of sight" showing how unit and individual performance can contribute to
    overall organizational goals.

    26GAO, Results-Oriented Cultures: Using Balanced Expectations to Manage
    Senior Executive Performance, GAO-02-966 (Washington, D.C.: Sep. 27,
    2002).

    27GAO, Human Capital: Senior Executive Performance Management Can Be
    Significantly Strengthened to Achieve Results, GAO-04-614 (Washington,
    D.C.: May 2004).

    We found that OPM has implemented several key practices to develop an
    effective performance management system for its senior executives:

               o  Align individual performance expectations with organizational
               goals. An explicit alignment of daily activities with broader
               results is one of the defining features of effective performance
               management systems in high-performing organizations. OPM executive
               performance contracts explicitly link individual performance
               commitments with organizational goals. Executives are evaluated on
               their success toward achieving goals that are drawn directly from
               the OPM Strategic and Operational Plan. Measures of these
               achievements account for 75 percent of executives' annual
               performance ratings. For example, one associate director's
               performance contract includes a commitment to achieve OPM's
               operational goal of having "80 percent of initial clearance
               investigations completed within 90 days."
               o  Connect performance expectations to crosscutting goals.
               High-performing organizations use their performance management
               systems to strengthen accountability for results, specifically by
               placing greater emphasis on collaboration to achieve results.
               OPM's executive performance contracts achieve this objective by
               making executives accountable for OPM-wide goals. In addition to
               specific divisional goals, each executive performance contract
               includes a common set of "corporate commitments" that transcend
               specific organizational boundaries and that executives must work
               together to achieve. These commitments are directly linked to the
               OPM Strategic and Operational Plan. For example, each executive
               contract includes a commitment to "Implement an employee
               recognition program at OPM by July 1, 2006."
               o  Provide and routinely use performance information to track
               organizational priorities. High-performing organizations provide
               objective performance information to executives to show progress
               in achieving organizational results and other priorities.29 OPM is
               taking a tactical approach to implementing its Strategic and
               Operational Plan. Activities supporting the strategic objectives
               are listed on an "Operational Timeline" or tracking sheet that OPM
               uses, and "real time" changes are made through continual updates
               of accomplishments. According to Director Springer, each OPM
               division has a tracking sheet for the specific goals for which
               they are accountable. She told us that OPM leadership meets
               monthly to review the timeline and to determine if goals have been
               met or what progress OPM is making toward achieving their
               objectives.
               o  Require follow-up actions to address organizational priorities.
               High-performing organizations require individuals to take
               follow-up actions based on the performance information available
               to them. OPM's performance contracts include commitments for
               executives to respond to results from the FHCS. Each associate
               director is committed to "Implement [an] action plan to ensure OPM
               is rated in the top 50% of agencies surveyed in the 2006 FHCS and
               the top five agencies in the 2008 FHCS." To achieve this goal,
               each associate director developed a FHCS action plan for their
               division to address employee concerns identified in the 2004 FHCS
               and the follow-up focus group discussions.
               o  Use competencies to provide a fuller assessment of performance.
               High-performing organizations use competencies, which define the
               skills and supporting behaviors that individuals need to
               effectively contribute to organizational results. Each OPM
               executive performance contract includes core competency
               requirements for effective executive leadership, which account for
               25 percent of annual performance ratings. For example, executives
               are responsible for building "trust and cooperative working
               relationships both within and outside the organization."

    28GAO, Results-Oriented Cultures: Creating a Clear Linkage between
    Individual Performance and Organizational Success, GAO-03-488 ,
    (Washington, D.C.: Mar. 14, 2003).

    OPM's executive performance contracts incorporate these key practices of
    performance management, and the agency must build on this progress and
    ensure that its SES performance management system is used to drive
    organizational performance.

    29 GAO-04-614 .

    OPM Can Build upon Strong Accountability to Address Employee Concerns with its
    Performance Culture

    OPM can build on its strong system of executive accountability to address
    employee concerns with its overall performance culture, as well as support
    its internal transformation. OPM has plans to implement new performance
    elements and standards for all OPM employees to support the new agency
    Strategic and Operational Plan. As we have reported, high-performing
    organizations use their performance management systems to strengthen
    accountability for results.30 In the 2004 FHCS, the percent of OPM
    employees who agreed that "I am held accountable for achieving results"
    was 81 percent; essentially the same as the 80 percent of employees in the
    rest of the government agreeing with this statement. OPM employees'
    positive view of "being held accountable for achieving results" can be
    used to help address employee concerns regarding its performance culture.
    For example, a significant decrease occurred between OPM's 2002 and 2004
    FHCS results on a question that measures employee perceptions of
    management's focus on organizational goals. The percentage of OPM
    employees who agreed that "managers review and evaluate the organization's
    progress toward meeting its goals and objectives," declined by 17
    percentage points from 2002 (69 percent) to 2004 (52 percent). This
    question was only discussed in a few of the focus groups, so it is unclear
    why fewer employees agreed with this statement in 2004. Although limited,
    these discussions suggest that some employees do not feel their
    performance appraisal is a fair reflection of their performance due to
    inadequate goals and performance standards, and a lack of alignment
    between employee goals and OPM's mission.

    OPM plans to address these employee performance concerns to ensure there
    is a clear linkage between the OPM Strategic Operational Plan,
    Division/Office Plans, and individual employee-level work plans. By July
    2006, OPM plans to implement new performance elements and standards for
    all employees that support the OPM Strategic and Operational Plan. Already
    underway, is an OPM beta site (the HCLMSA division) to test its
    performance management system to link pay to performance. OPM officials
    informed us that as of June 1, 2006, all HCLMSA employees are now working
    under new performance plans, consistent with the OPM beta site
    requirements.

    To maximize the effectiveness of a performance management system, high
    performing organizations recognize that they must conduct frequent
    training for staff members at all levels of the organization.31 OPM plans
    to develop and implement a core curriculum for supervisory training to
    ensure all managers and supervisors are trained in performance management.
    Also, OPM is developing a proposal to enhance the relationships between
    the human resources function and managers to assist them in dealing with
    their human resource issues. If effectively implemented, these actions
    should address many of the concerns raised by focus group participants.

    30 GAO-03-488 .

                                   Concluding Remarks

    OPM faces many challenges as it seeks to achieve its organizational
    transformation and become a high-performing organization. To meet its
    current and future challenge to lead human capital across government,
    Director Springer has shown leadership commitment to its transformation by
    initiating a number of action plans to address employee concerns. While
    the steps taken by OPM demonstrate progress in achieving its
    transformation, it must continue on this path by closely monitoring and
    communicating with its employees and customers, expanding its workforce
    and succession planning efforts, and continuing to improve its performance
    culture and accountability for results. As I have testified on many
    occasions, in recent years GAO has learned a great deal about the
    challenges and opportunities that characterize organizational
    transformation. From both our own experiences and from reviewing others'
    efforts, I look forward to working closely with Director Springer and
    assisting Congress as it moves toward the implementation of governmentwide
    human capital reform.

    Chairman Voinovich, Senator Akaka, and Members of the subcommittee, this
    completes my prepared statement. I would be pleased to respond to any
    questions that you may have.

    31 GAO-03-488 .

                              Contact and Acknowledgments

    For further information regarding this statement, please contact Brenda S.
    Farrell, Acting Director, Strategic Issues, at (202) 512-6806 or
    farrellb@gao.gov . Individuals making key contributions to this statement
    include Julie Atkins, Thomas Beall, Carole Cimitile, William Colvin, S.
    Mike Davis, Charlene Johnson, Trina Lewis, and Katherine H. Walker.

    Appendix I

              Federal Human Capital Survey, Focus Groups, and Action Plans

    We used the Federal Human Capital Survey (FHCS) and summaries of the
    Office of Personnel Management (OPM) focus groups to assess employee views
    of OPM's organizational capacity. OPM conducted the FHCS during fall 2004.
    The survey sample included 276,000 employees and was designed to be
    representative of the federal workforce. OPM had 1,539 respondents to the
    survey. The survey included 88 items that measured federal employee
    perceptions about how effectively agencies are managing their workforces.
    For more information about the 2004 FHCS survey see
    http://www.fhcs2004.opm.gov/ . We reviewed OPM's analysis of its 2004 FHCS
    results and conducted our own analyses of survey results using 2002 and
    2004 FHCS datasets provided to us by OPM. On the basis of our examination
    of the data and discussions with OPM officials concerning survey design,
    administration and processing, we determined that the data were
    sufficiently reliable for the purpose of our review.

    In fall 2005, OPM contracted with Human Technology, Inc. to conduct focus
    groups to understand factors contributing to employees' responses on
    selected items from the 2004 FHCS and to obtain employees' ideas for
    addressing top priority improvement areas. Employees were randomly
    selected to participate in 33 focus groups with participants from all
    major divisions, headquarters and the field, employees and supervisors,
    and major OPM installations. The participants in each focus group decided
    which topics to discuss by voting for the FHCS questions that "are most
    important for OPM to address in order to make the agency a better place to
    work." Questions were divided into three categories: leadership,
    performance culture, and other dimensions. Participants voted for three
    questions in each category and the questions that received the most votes
    were discussed by the group. We analyzed summaries of these focus groups
    and used the participant comments to illustrate employee perspectives. We
    also analyzed recently issued action plans developed by OPM to address
    issues identified in the focus groups. These action plans were approved by
    OPM's Director in May 2006 and they list specific actions OPM and each
    internal division will take along with suggested due dates for completion.

    (450503)

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    www.gao.gov/cgi-bin/getrpt? GAO-06-861T .

    To view the full product, including the scope

    and methodology, click on the link above.

    For more information, contact Brenda S. Farrell at (202) 512-6806 or
    farrellb@gao.gov.

    Highlights of GAO-06-861T , a 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

    June 27, 2006

    OFFICE OF PERSONNEL MANAGEMENT

    OPM Is Taking Steps to Strengthen Its Internal Capacity for Leading Human
    Capital Reform

    General recognition exists of a need to continue to develop a
    governmentwide framework for human capital reform to enhance performance,
    ensure accountability and position the nation for the future. Potential
    governmentwide human capital reform and likely requirements that the
    Office of Personnel Management (OPM) assist, guide, and ultimately certify
    agencies' readiness to implement reforms, raise important questions about
    OPM's capacity to successfully fulfill its central role.

    This testimony addresses management challenges that could affect OPM's
    ability to lead governmentwide human capital reform efforts. To assess
    these challenges, GAO analyzed OPM's 2002 and 2004 Federal Human Capital
    Survey (FHCS) results, data from its 2005 follow-up focus group
    discussions, OPM's May 2006 action plans to address employee concerns, and
    OPM's associate directors' fiscal year 2006 executive performance
    contracts. GAO also conducted interviews with OPM senior officials and
    Chief Human Capital Officers (CHCO) and human resource directors from CHCO
    Council agencies.

    In commenting on a draft of this statement, the OPM Director said that OPM
    has addressed many of the challenges highlighted from the 2004 FHCS and
    achieved many meaningful and important results. GAO agrees and believes
    OPM should continue to build upon its progress to date.

    OPM has made commendable efforts towards transforming itself to being a
    more effective leader of governmentwide human capital reform. It can build
    upon that progress by addressing challenges that remain in the following
    areas:

    Leadership. OPM Federal Human Capital Survey responses and the fall 2005
    follow-up focus group discussions suggests that information from OPM
    leadership does not cascade effectively throughout the organization and
    that many employees do not feel senior leaders generate a high level of
    motivation and commitment in the workforce. Agreement with leaders ability
    was lowest in one of OPM's key divisions-a unit vital to successful human
    capital reform. OPM is working to address employee concerns and improve
    perceptions of senior leaders.

    Talent and resources. To align talent and resources to support its reform
    role, OPM has made progress in assessing current workforce needs and
    developing leadership succession plans. However, OPM's workforce planning
    has not sufficiently identified future skills and competencies that may be
    necessary to fulfill its role in human capital reform.

    Customer focus, communication, and collaboration. OPM can improve its
    customer service to agencies and create more opportunities for dialogue.
    According to key officials in executive agencies, OPM guidance to agencies
    is not always clear and timely, OPM's human capital officer structure is
    often a barrier to efficient customer response, and greater opportunities
    exist to collaborate with agency leaders. OPM recognizes these
    shortcomings and has identified improvement actions to address. However,
    more can be done such as strategically using partnerships it has available
    to it, like the CHCO Council.

    Performance culture and accountability. OPM has made progress in creating
    a "line of sight" or alignment and accountability across Senior Executive
    Service (SES) expectations and organizational goals. It needs to build on
    this progress and effectively implement new performance standards for all
    employees to support the recently issued agency strategic and operational
    plan and ensure all employees receive the necessary training.

    To meet OPM's current and future challenge to lead governmentwide human
    capital reform, Director Springer has shown leadership commitment to OPM's
    transformation by initiating a number of action plans to address employee
    concerns. While the steps taken by OPM demonstrate progress in achieving
    its transformation, it must continue on this path by closely monitoring
    and communicating with its employees and customers, expanding its
    workforce and succession planning efforts, and continuing to create a
    "line of sight" throughout the organization.
    *** End of document. ***