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
[email protected] . 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
[email protected].

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. ***