Human Capital: Federal Workforce Challenges in the 21st Century  
(06-MAR-07, GAO-07-556T).					 
                                                                 
The federal government is facing new and more complex challenges 
in the 21st century because of long-term fiscal constraints,	 
changing demographics, evolving governance models, and other	 
factors. Strategic human capital management, which remains on	 
GAO's high-risk list, must be the centerpiece of any serious	 
change management and transformation effort to meet these	 
challenges. However, federal agencies do not consistently have	 
the modern, effective, economical, and efficient human capital	 
programs, policies, and procedures needed to succeed in their	 
transformation efforts. In addition, the Office of Personnel	 
Management (OPM) must have the capacity to successfully guide	 
human capital transformations. This testimony, based on a large  
body of GAO work over many years, focuses on strategic human	 
capital management challenges that many federal agencies continue
to face.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-556T					        
    ACCNO:   A66484						        
  TITLE:     Human Capital: Federal Workforce Challenges in the 21st  
Century 							 
     DATE:   03/06/2007 
  SUBJECT:   Agency missions					 
	     Employee retention 				 
	     Employees						 
	     Federal agency reorganization			 
	     Hiring policies					 
	     Human capital					 
	     Human capital management				 
	     Human capital planning				 
	     Performance management				 
	     Policy evaluation					 
	     Retirement 					 
	     Staff utilization					 
	     Strategic planning 				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-07-556T

   

     * [1]Sustained Leadership Is Essential to Successful Transformati
     * [2]Strategic Human Capital Planning Is Critical to Agencies' Tr
     * [3]Acquiring, Developing, and Retaining Talent Remains a Federa
     * [4]Results-Oriented Organizational Culture Is Key to High-Perfo
     * [5]Contact and Acknowledgments

          * [6]Order by Mail or Phone

Testimony

Before the Subcommittee on Financial Services and General Government,
Committee on Appropriations, House of Representatives

United States Government Accountability Office

GAO

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

Tuesday, March 6, 2007

HUMAN CAPITAL

Federal Workforce Challenges in the 21st Century

Statement of J. Christopher Mihm
Managing Director, Strategic Issues

GAO-07-556T

Chairman Serrano and Members of the Subcommittee:

Thank you for the opportunity to be here today to discuss challenges in
the management of today's federal workforce. Driven by long-term fiscal
constraints, changing demographics, evolving governance models, and other
factors, the federal government is facing new and more complex challenges
in the 21st century and federal agencies must transform their
organizations to meet these challenges. Strategic human capital management
must be the centerpiece of any serious change management strategy. In
2001, we identified human capital management as a governmentwide high-risk
area because federal agencies lacked a strategic approach to human capital
management that integrated human capital efforts with their missions and
program goals.^1 Although progress has been made, the area remains on our
most recent high-risk list because there is still the need for a
governmentwide framework to advance human capital reform. This framework
is essential to avoid further fragmentation within the civil service,
ensure management flexibility as appropriate, allow a reasonable degree of
consistency, provide adequate safeguards, and maintain a level playing
field among agencies competing for talent.^2

Federal agencies do not always have the right people in the right jobs at
the right time to meet the challenges they face. Today and in the near
term, the federal government is facing a retirement wave and with it the
loss of leadership and institutional knowledge at all levels. Agencies not
only face a fiercely competitive market for talent but hiring is also
affected by uncompetitive salaries in some critical occupations and
lengthy hiring processes. Federal employees also operate in a culture
where there is often not a clear line of sight between individual effort
and organization results. Of particular concern, federal agencies do not
consistently have the modern, effective, economical, and efficient human
capital programs, policies, and procedures they need to succeed in their
transformation efforts. As the government's human capital leader, the
Office of Personnel Management (OPM) has a key role in helping executive
branch agencies build the needed infrastructure to support their
transformation efforts. At the request of the Chairman and Ranking
Minority Member of the Senate Committee on Homeland Security and
Governmental Affairs and the Chairman and Ranking Minority Member of the
Subcommittee on Oversight of Government Management, the Federal Workforce,
and the District of Columbia, Senate Committee on Homeland Security and
Governmental Affairs, we are undertaking a body of work examining OPM's
internal capacity to lead and implement governmentwide human capital
reform.

^1GAO, High-Risk Series: An Update, [7]GAO-01-263 (Washington, D.C.:
January 2001).

^2GAO, High-Risk Series: An Update, [8]GAO-07-310 (Washington, D.C.:
January 2007).

My remarks today, based on a large body of GAO work over many years, will
focus on the strategic human capital management challenges that agencies
continue to face in four key areas:

           o Leadership: Top leadership in the agencies must provide the
           committed and inspired attention needed to address human capital
           and related organization transformation issues. In addition, OPM,
           as the government's human capital leader, must have the internal
           capacity to lead agencies' efforts. 
           o Strategic Human Capital Planning: Agencies' human capital
           planning efforts need to be fully integrated with mission and
           critical program goals. Too often, agencies do not have the
           components of strategic human capital planning needed to address
           their current and emerging challenges.
           o Acquiring, Developing, and Retaining Talent: Augmented efforts
           are needed to improve recruiting, hiring, professional
           development, and retention strategies to ensure that agencies have
           the needed talent. Agencies need to ensure that they are using
           flexibilities available to them to recruit and hire top talent and
           to address the current and emerging demographic challenges facing
           the government.
           o Results-Oriented Organizational Cultures: Organizational
           cultures need to promote high performance and accountability and
           empower and include employees in setting and accomplishing
           programmatic goals. In many cases, the federal government has not
           transformed how it classifies, compensates, develops, and
           motivates its employees to achieve maximum results within
           available resources and existing authorities. Congress has
           recently taken important steps in this direction by providing the
           Departments of Defense (DOD) and Homeland Security (DHS) with
           authorities intended to help them manage their people more
           strategically.

           Agencies not only face these challenges in moving forward but do
           so during a period of likely sustained budget constraints.
           However, budget constraints should not be viewed as an
           insurmountable obstacle to needed human capital reform. Rather,
           tighter budgets will require agencies to plan their
           transformations more strategically, prioritize their needs,
           evaluate results, allocate their resources more carefully, and
           react to workforce challenges more expeditiously in order to
           achieve their missions economically, efficiently, and effectively.
           Although human capital reforms often require an investment of
           budgetary resources, many of these costs are one-time in nature
           that can pay future dividends through more efficient agency
           operations. In the current fiscal environment, Congress will need
           to scrutinize agencies' transformation plans, capabilities, and
           measurable results to make informed funding decisions.
			  
			  Sustained Leadership Is Essential to Successful Transformations

           Leadership in agencies across the federal government is essential
           to providing the accountable, committed, consistent, and sustained
           attention needed to address human capital and related organization
           transformation issues. Leaders must not only embrace reform, they
           must integrate the human capital function into their agencies'
           core planning and business activities. Senior executive leadership
           is especially key today as the federal government faces
           significant reform challenges. OPM's 2006 Federal Human Capital
           Survey (FHCS) results showed that the government needs to
           establish a more effective leadership corps.^3 For example,
           slightly less than half of employees responding to the survey
           reported a high level of respect for their senior leaders or are
           satisfied with the information they receive from management on
           what is going on in the organization. Similarly, only 38 percent
           of respondents agreed or strongly agreed with the statement that
           leaders in their organization generate high levels of motivation
           and commitment in the workforce. This represents little change
           from the 2004 survey when 37 percent of respondents had positive
           responses to this question. However, a majority of respondents, 58
           percent, agreed or strongly agreed that managers communicate the
           goals and priorities of the organization. This level of response
           is essentially the same as the 2004 survey when 59 percent of
           respondents provided a positive response to this item.

           OPM plays a key role in fostering and guiding improvements in all
           areas of strategic human capital management in the executive
           branch. As part of its key leadership role, OPM can assist--and as
           appropriate, require--the building of the infrastructures within
           agencies needed to successfully implement and sustain human
           capital reforms and related initiatives. OPM can do this in part
           by encouraging continuous improvement and providing appropriate
           assistance to support agencies' efforts. For example, OPM has
           exerted 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. Also,
           OPM has developed the governmentwide 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, OPM
           began a television campaign to promote federal employment and has
           undertaken a greater focus on succession planning to respond to
           the forthcoming federal retirement wave.

           However, in leading governmentwide human capital reform, OPM has
           itself faced challenges in its capacity to assist, guide, and
           certify agencies' readiness to implement reforms. We recently
           reported that OPM has made commendable efforts in transforming
           itself from less a rulemaker, enforcer, and independent agent to
           more a consultant, toolmaker and strategic partner in leading and
           supporting executive agencies' human capital management systems.^4
           We also reported on OPM's leadership of transformation efforts.
           Using the new senior executive performance-based pay system and
           other recent human capital reform initiatives as a model for
           understanding OPM's capacity to lead and implement future human
           capital reforms, we identified seven key lessons learned, which
           are (1) ensure internal OPM capacity to lead and implement reform,
           (2) ensure that executive branch agencies' infrastructures support
           reform, (3) collaborate with the Chief Human Capital Officer
           (CHCO) council, (4) develop clear and timely guidance, (5) share
           best practices, (6) solicit and incorporate feedback, and (7)
           track progress to ensure accountability. In addition to the
           lessons learned that can be applied to future human capital
           reforms, we recommended, among other things, that OPM (1) improve
           its capacity for future reforms by reexamining its own agencywide
           skills and (2) address issues specific to senior executive pay
           systems, such as sharing best practices and tracking progress
           towards goals. OPM has said that it has made progress toward
           achieving its operational and strategic goals.^5

           Equally important is OPM's leadership in federal workforce
           diversity and oversight of merit system principles. In our review
           of how OPM and the Equal Employment Opportunity Commission (EEOC)
           carry out their mutually shared responsibilities for helping to
           assure a fair, inclusive, and nondiscriminatory federal workplace,
           we found limited coordination between the two agencies in policy
           and oversight matters.^6 The lack of a strategic partnership
           between the two agencies and an insufficient understanding of
           their mutual roles, authority, and responsibilities can result in
           a lost opportunity to realize consistency, efficiency, and public
           value in federal equal employment opportunity and workplace
           diversity human capital management practices. We recommended that
           OPM and EEOC regularly coordinate in carrying out their
           responsibilities under the equal employment opportunity policy
           framework and seek opportunities for streamlining like reporting
           requirements. Both agencies acknowledged that their collaborative
           efforts could be strengthened but took exception to the
           recommendation to streamline requirements. We continue to believe
           in the value of more collaboration. As of August of last year, the
           two agencies had begun discussions on ways to increase
           coordination.
			  
			  Strategic Human Capital Planning Is Critical to Agenciesï¿½
			  Transformation

           Strategic human capital planning is the centerpiece of federal
           agencies' efforts to transform their organizations to meet the
           governance challenges of the 21st century. Generally, 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, motivating, and retaining
           staff to achieve programmatic goals. The long-term fiscal outlook
           and challenges to governance in the 21st century are prompting
           fundamental reexaminations of what government does, how it does
           it, and who does it. Strategic human capital planning that is
           integrated with broader organizational strategic planning is
           critical to ensuring agencies have the talent they need for future
           challenges.

           An agency's strategic human capital plan should address the
           demographic trends that the agency faces with its workforce,
           especially pending retirements. In 2006, OPM reported that
           approximately 60 percent of the government's 1.6 million
           white-collar employees and 90 percent of about 6,000 federal
           executives will be eligible for retirement over the next 10 years.
           We have found that leading organizations go beyond a succession
           planning approach that focuses on simply replacing individuals and
           engage in broad, integrated succession planning and management
           efforts that focus on strengthening both current and future
           organizational capacity to obtain or develop the knowledge,
           skills, and abilities they need to meet their missions.^7 For
           example, about one third of the Nuclear Regulatory Commission's
           (NRC) workforce with mission-critical skills will be eligible to
           retire by 2010.^8 At the same time, NRC's workforce needs to
           expand because NRC expects to receive applications for new nuclear
           power reactors beginning in October 2007. Although there is room
           for further improvement, we found that NRC's human capital
           planning framework is generally aligned with its strategic goals
           and coherently identifies the activities needed to achieve a
           diverse, skilled workforce and an infrastructure that fully
           supports the agency's mission and goals. The agency's framework
           included using its human capital authorities, developing a
           critical skills and gaps inventory tool, and using targets and
           measures to monitor the composition of its hires and separations.
           NRC has been effective in recruiting, developing, and retaining a
           critically skilled workforce, though it is unclear if this trend
           will continue in the next few years.

           We also have reported in recent years on a number of human capital
           issues that have hampered the Department of State's ability to
           carry out U.S. foreign policy priorities and objectives,
           particularly at posts central to the war on terror.^9 For example,
           the department initiated a number of efforts to improve its
           foreign language capabilities. However, it has not systematically
           evaluated the effectiveness of these efforts, and it continues to
           experience difficulties filling its language-designated positions
           with language proficient staff. We reported that these gaps in
           language proficiency can adversely affect the department's ability
           to communicate with foreign audiences and execute critical duties.

           Another example of the government's strategic human capital
           planning challenges involves its acquisition workforce. The
           government increasingly relies on contractors for roles and
           missions previously performed by government employees. Acquisition
           of products and services from contractors consumes about a quarter
           of discretionary spending governmentwide and is a key function in
           many federal agencies. We reported in 2003 that because of a more
           sophisticated business environment, most acquisition professionals
           would need to acquire a new set of skills focusing on business
           management.^10 In a forum hosted by the Comptroller General in
           July 2006, acquisition experts reported that agency leaders have
           not recognized or elevated the importance of the acquisition
           profession within their organizations, and a strategic approach
           has not been taken across government or within agencies to focus
           on workforce challenges, such as creating a positive image
           essential to successfully recruit and retain a new generation of
           talented acquisition professionals.^11
			  
			  Acquiring, Developing, and Retaining Talent Remains a Federal
			  Workforce Challenge

           Faced with a workforce that is becoming more retirement-eligible
           and finding gaps in talent because of changes in the knowledge,
           skills, and competencies in occupations needed to meet their
           missions, agencies need to strengthen their efforts and use of
           available flexibilities to acquire, develop, motivate, and retain
           talent.

           A chronic complaint about the federal hiring process is its
           lengthy procedures, which puts the federal government at a
           competitive disadvantage. In recent years, Congress, OPM, and
           agencies have taken significant steps to streamline the hiring
           process. For example, Congress has provided agencies with
           flexibilities such as the use of categorical rating and exemptions
           from the pay and classification restrictions of the General
           Schedule. OPM's efforts included improvements to the USAJOBS Web
           site as well as other measures, such as job fairs and television
           commercials, to make the public more aware of the work federal
           employees do. OPM has also established a model 45-day hiring
           program--the time-to-hire period from the date a vacancy
           announcement closes to the date a job offer is extended. In
           addition, OPM has developed a Hiring Tool Kit on its website to
           help agencies improve their hiring processes. Moreover, OPM
           assists agencies on the use of student employment program
           flexibilities, which can expedite the hiring process and lead to
           noncompetitive conversion to permanent employment. Our work,
           however, has found that agencies' use of the tools and
           flexibilities that Congress has provided has been uneven.^12 OPM
           has made some progress in assessing how agencies are using their
           hiring flexibilities and authorities. For example, in January of
           this year, we reported that OPM began working with a contractor in
           2005 to review hiring flexibilities and authorities to determine
           which ones are used and not used, who is using them, and when and
           how they are being used.^13 As a result of its work with the
           contractor, OPM plans to survey eight CHCO Council agencies to
           evaluate the use and effectiveness of hiring authorities and
           flexibilities and use the results to improve policies in these
           areas. This is a positive step on OPM's part as we continue to
           believe that more needs to be done to provide information to help
           agencies meet these human capital needs.

           Developing and maintaining workforces that reflect all segments of
           society and our nation's diversity is a key part of agencies'
           recruitment challenge. For example, the National Aeronautics and
           Space Administration (NASA) said it must compete with the private
           sector for the pool of Hispanics qualified for aerospace
           engineering positions, which is often attracted by more-lucrative
           employment opportunities in the private sector in more preferable
           locations.^14 To address the situation, part of NASA's strategy in
           recruiting Hispanics focuses on increasing educational attainment,
           beginning in kindergarten and continuing into college and graduate
           school, with the goal of attracting students into the NASA
           workforce and aerospace community. NASA centers sponsor, and its
           employees participate in, mentoring, tutoring, and other programs
           to encourage Hispanic and other students to pursue careers in
           science, engineering, technology, and math. NASA also developed a
           scholarship program designed to stimulate a continued interest in
           science, technology, engineering, and mathematics. Another example
           is the U.S. Air Force "Grow Your Own" aircraft maintenance program
           at three of its Texas bases. In partnership with
           vocational-technical schools, the program includes both on-the-job
           training and classroom education to provide a pool of trained
           candidates, including Hispanics, to replace retiring federal
           civilian aircraft maintenance workers.

           In addition to hiring, agencies need to have effective training
           and development programs to address gaps in the skills and
           competencies that they identified in their workforces. We have
           issued guidance that introduces a framework, consisting of a set
           of principles and key questions that federal agencies can use to
           ensure that their training and development investments are
           targeted strategically and are not wasted on efforts that are
           irrelevant, duplicative, or ineffective.^15 Training and
           developing new and current staff to fill new and different roles
           will play a crucial part in the federal government's endeavors to
           meet its transformation challenges. Of some concern, however, is
           the 2006 FHCS, which showed about half, or 54 percent, of
           respondents were very satisfied or satisfied with the training
           they receive on their current jobs, little change from the 2004
           survey, which showed 55 percent had positive responses to this
           question.
			  
			  Results-Oriented Organizational Culture Is Key to High-Performing
			  Agencies

           High-performing organizations have found that to successfully
           transform themselves they must often fundamentally change their
           cultures so that they are more results-oriented, customer-focused,
           and collaborative in nature. An effective performance management
           system is critical to achieving this vital cultural
           transformation. Effective performance management systems are not
           merely used for once- or twice-yearly individual expectation
           setting and rating processes, but are tools to help the
           organization manage on a day-to-day basis. These systems are used
           to achieve results, accelerate change, and facilitate two-way
           communication throughout the year so that discussions about
           individual and organizational performance are integrated and
           ongoing. Moreover, leading public sector organizations both in the
           United States and abroad create a clear linkage--line of
           sight--between individual performance and organizational success
           and, thus, transform their cultures to be more results-oriented,
           customer-focused, and collaborative in nature.^16

           The government's senior executives need to lead the way in
           transforming their agencies' cultures. Credible performance
           management systems that align individual, team, and unit
           performance with organizational results can help manage and direct
           this process. The performance-based pay system that Congress
           established in November 2003 for members of the senior executive
           service (SES) seeks to provide a clear and direct linkage between
           performance and pay for the government's senior executives and is
           an important step toward governmentwide transformation.^17 Under
           this performance based pay system, senior executives no longer
           receive annual across-the-board pay increases or locality-pay
           adjustments. Executive branch agencies are to now base pay
           adjustments for senior executives on individual performance and
           contributions to agency performance through an evaluation of their
           skills, qualifications, or competencies as well their current
           responsibilities.^18

           Just as it has for senior executives, the federal government needs
           to fundamentally rethink its current approach to paying
           nonexecutive employees by better linking their pay to individual
           and organizational performance. Today's jobs in knowledge-based
           organizations require a much broader array of tasks that may cross
           the narrow and rigid boundaries of job classifications of the
           General Schedule system. Since being exempted from the General
           Schedule system, DOD and DHS have been moving toward occupational
           clusters and pay bands that better define occupations and
           facilitate movement toward performance management systems that
           create a line of sight between performance and organizational
           results, make meaningful differences in performance, and
           appropriately reward those who perform at the highest levels.

           The results of the 2006 FHCS underscore the need for serious
           attention to the way federal employees are assessed and
           compensated. About a third, or 34 percent, of the respondents
           strongly agreed or agreed with the statement that promotions in
           their work units are based on merit. When respondents were asked
           if pay raises in their work units depend on how well employees
           perform their jobs, only 22 percent responded positively. These
           responses are consistent with past survey results. Further,
           somewhat less than a third of the survey respondents had a
           positive response to the question about whether their leadership
           and management recognized differences in performance in a
           meaningful way. High-performing organizations have found that
           actively involving employees and key stakeholders, such as unions
           and other employee associations, helps gain ownership of new
           performance management systems and improves employees' confidence
           and belief in the fairness of the systems. In addition, adequate
           safeguards need to be built into the performance management system
           to ensure fairness and to guard against abuse. Using safeguards,
           such as having an independent entity conduct reasonableness
           reviews of performance management decisions can help allay
           concerns and build a fair, credible, and transparent system.

           In summary, Mr. Chairman, we need to continue to move forward with
           appropriate human capital reforms. But how reform is done, when it
           is done, and the basis on which it is done can make all the
           difference in whether such efforts are successful. Before
           implementing significant human capital reforms, especially reforms
           that make stronger links between employee pay and performance,
           executive branch agencies should follow a phased approach that
           meets a "show me" test. That is, each agency should be authorized
           to implement reform only after it has shown that it has met
           certain conditions, including having the institutional
           infrastructure to effectively and fairly implement any new
           authorities.

           Mr. Chairman and Members of the Subcommittee, this completes my
           prepared statement. I would be pleased to respond to any questions
           you or others may have at this time.
			  
			  Contact and Acknowledgments

           For further information regarding this statement, please contact
           J. Christopher Mihm, Managing Director, Strategic Issues, at (202)
           512-6806, or [email protected]. Individuals making key contributions
           to this testimony include Anthony P. Lofaro, Assistant Director;
           Ami J. Ballenger; Thomas M. Beall; Crystal M. Bernard; William
           Doherty; Karin K. Fangman; and Anthony R. Patterson.

^3Office of Personnel Management, 2006 Federal Human Capital Survey:
Results from the 2006 Federal Human Capital Survey (Washington, D.C.: Jan.
17, 2007). The survey involved a sample of full-time, permanent employees
from agencies making up 97 percent of the executive branch workforce, with
the results generalizable to the population covered by the survey.

^4GAO, Office of Personnel Management: Key Lessons Learned to Date for
Strengthening Capacity to Lead and Implement Human Capital Reforms,
[15]GAO-07-90 (Washington, D.C.: Jan. 19, 2007).

^5 [16]GAO-07-90 .

^6GAO, Equal Employment Opportunity: Improved Coordination Needed between
EEOC and OPM in Leading Federal Workplace EEO, [17]GAO-06-214 (Washington,
D.C.: June 16, 2006).

^7GAO, Human Capital: Succession Planning and Management Is Critical
Driver of Organizational Transformation, [18]GAO-04-127T (Washington,
D.C.: Oct. 1, 2003).

^8GAO, Human Capital: Retirements and Anticipated New Reactor Applications
Will Challenge NRC's Workforce, [19]GAO-07-105 (Washington, D.C.: Jan. 17,
2007).

^9GAO, Department of State: Staffing and Foreign Language Shortfalls
Persist Despite Initiatives to Address Gaps, [20]GAO-06-894 (Washington,
D.C.: Aug. 4, 2006).

^10GAO, Acquisition Workforce: Status of Agency Efforts to Address Future
Needs, [21]GAO-03-55 (Washington, D.C.: Jan. 17, 2003).

^11GAO, Highlights of a GAO Forum: Federal Acquisition Challenges and
Opportunities in the 21st Century, [22]GAO-07-45SP (Washington, D.C.: Oct.
6, 2006).

^12GAO, Human Capital: Increasing Agencies' Use of New Hiring
Flexibilities, [23]GAO-04-959T (Washington, D.C.: July 13, 2004).

^13 [24]GAO-07-90 .

^14GAO, The Federal Workforce: Additional Insights Could Enhance Agency
Efforts Related to Hispanic Representation, [25]GAO-06-832 (Washington,
D.C.: Aug. 17, 2006).

^15GAO, Human Capital: A Guide for Assessing Strategic Training and
Development Efforts in the Federal Government, [26]GAO-04-546G
(Washington, D.C.: Mar. 1, 2004).

^16GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, [27]GAO-03-488
(Washington, D.C.: Mar. 14, 2003).

^17Pub. L. No. 108-136, S 1125, 117 Stat. 1392, 1638 (Nov. 24, 2003).

^18GAO, Human Capital: Aligning Senior Executives' Performance with
Organizational Results Is an Important Step Toward Governmentwide
Transformation, [28]GAO-06-1125T (Washington, D.C.: Sept. 26, 2006).
			  
			  GAOï¿½s Mission

           The Government Accountability Office, the audit, evaluation and
           investigative arm of Congress, exists to support Congress in
           meeting its constitutional responsibilities and to help improve
           the performance and accountability of the federal government for
           the American people. GAO examines the use of public funds;
           evaluates federal programs and policies; and provides analyses,
           recommendations, and other assistance to help Congress make
           informed oversight, policy, and funding decisions. GAO's
           commitment to good government is reflected in its core values of
           accountability, integrity, and reliability.
			  
			  Obtaining Copies of GAO Reports and Testimony

           The fastest and easiest way to obtain copies of GAO documents at
           no cost is through GAO's Web site ( www.gao.gov ). Each
           weekday, GAO posts newly released reports, testimony, and
           correspondence on its Web site. To have GAO e-mail you a list of
           newly posted products every afternoon, go to www.gao.gov and
           select "Subscribe to Updates."
			  
			  Order by Mail or Phone

           The first copy of each printed report is free. Additional copies
           are $2 each. A check or money order should be made out to the
           Superintendent of Documents. GAO also accepts VISA and Mastercard.
           Orders for 100 or more copies mailed to a single address are
           discounted 25 percent. Orders should be sent to:

           U.S. Government Accountability Office 441 G Street NW, Room LM
           Washington, D.C. 20548

           To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax:
           (202) 512-6061
			  
			  To Report Fraud, Waste, and Abuse in Federal Programs

           Contact:

           Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail:
           [email protected] Automated answering system: (800) 424-5454 or
           (202) 512-7470
			  
			  Congressional Relations

           Gloria Jarmon, Managing Director, [email protected] (202)
           512-4400 U.S. Government Accountability Office, 441 G Street NW,
           Room 7125 Washington, D.C. 20548
			  
			  Public Affairs

           Paul Anderson, Managing Director, [email protected] (202)
           512-4800 U.S. Government Accountability Office, 441 G Street NW,
           Room 7149 Washington, D.C. 20548

(450568)

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

www.gao.gov/cgi-bin/getrpt?GAO-07-556T .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact J. Christopher Mihm at (202) 512-6806 or
[email protected].

Highlights of [30]GAO-07-556T , a testimony before the Subcommittee on
Financial Services and General Government, Committee on Appropriations,
House of Representatives

March 6, 2007

HUMAN CAPITAL

Federal Workforce Challenges in the 21st Century

The federal government is facing new and more complex challenges in the
21st century because of long-term fiscal constraints, changing
demographics, evolving governance models, and other factors. Strategic
human capital management, which remains on GAO's high-risk list, must be
the centerpiece of any serious change management and transformation effort
to meet these challenges. However, federal agencies do not consistently
have the modern, effective, economical, and efficient human capital
programs, policies, and procedures needed to succeed in their
transformation efforts. In addition, the Office of Personnel Management
(OPM) must have the capacity to successfully guide human capital
transformations. This testimony, based on a large body of GAO work over
many years, focuses on strategic human capital management challenges that
many federal agencies continue to face.

[31]What GAO Recommends

This testimony underscores recommendations made to OPM in January 2007 to
improve its capacity for future reforms. OPM has said it has made progress
toward achieving its operational and strategic goals. In addition, this
testimony serves as a guide to Congress as it scrutinizes agencies'
transformation plans, capabilities, and measurable results to make
informed funding decisions during a period of likely sustained budget
constraints.

Federal agencies continue to face strategic human capital challenges in:

Leadership: Top leadership in agencies across the federal government must
provide committed and inspired attention needed to address human capital
and related organizational transformation issues. However, slightly less
than half of respondents to the 2006 Federal Human Capital Survey reported
a high level of respect for senior leaders while only 38 percent agreed or
strongly agreed that leaders in their organizations generate high levels
of motivation and commitment in the workforce.

Strategic Human Capital Planning: Strategic human capital planning that is
integrated with broader organizational strategic planning is critical to
ensuring agencies have the talent they need for future challenges,
especially as the federal government faces a retirement wave. Too often,
agencies do not have the components of strategic human capital planning
needed to address their current and emerging human capital challenges.

Acquiring, Developing, and Retaining Talent: Faced with a workforce that
is becoming more retirement eligible and finding gaps in talent, agencies
need to strengthen their efforts and use of available flexibilities to
acquire, develop, motivate, and retain talent. Agencies are not uniformly
using available flexibilities to recruit and hire top talent and to
address the current and emerging demographic challenges facing the
government.

Results-Oriented Organizational Culture: Leading organizations create a
clear linkage--"line of sight"--between individual performance and
organizational success and, thus, transform their cultures to be more
results-oriented, customer-focused, and collaborative. However, in many
cases, the federal government does not have these linkages and has not
transformed how it classifies, compensates, develops, and motivates its
employees to achieve maximum results within available resources and
existing authorities.

Agencies are facing strategic human capital challenges in a period of
likely sustained budget constraints. Budget constraints will require
agencies to plan their transformations more strategically, prioritize
their needs, evaluate results, allocate their resources more carefully,
and react to workforce challenges more expeditiously in order to achieve
their missions economically, efficiently, and effectively.

OPM will continue to play a key role in fostering and guiding strategic
human capital management improvements in the executive branch and in
helping agencies meet transformation challenges. Although making
commendable efforts in transforming itself to more a consultant,
toolmaker, and strategic partner in leading and supporting agencies' human
capital management systems, OPM has itself faced challenges in its
capacity to assist, guide, and certify agencies' readiness to implement
reforms.

References

Visible links
7. http://www.gao.gov/cgi-bin/getrpt?GAO-01-263
8. http://www.gao.gov/cgi-bin/getrpt?GAO-07-310
  15. http://www.gao.gov/cgi-bin/getrpt?GAO-07-90
  16. http://www.gao.gov/cgi-bin/getrpt?GAO-07-90
  17. http://www.gao.gov/cgi-bin/getrpt?GAO-06-214
  18. http://www.gao.gov/cgi-bin/getrpt?GAO-04-127T
  19. http://www.gao.gov/cgi-bin/getrpt?GAO-07-105
  20. http://www.gao.gov/cgi-bin/getrpt?GAO-06-894
  21. http://www.gao.gov/cgi-bin/getrpt?GAO-03-55
  22. http://www.gao.gov/cgi-bin/getrpt?GAO-07-45SP
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-04-959T
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-07-90
  25. http://www.gao.gov/cgi-bin/getrpt?GAO-06-832
  26. http://www.gao.gov/cgi-bin/getrpt?GAO-04-546G
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-03-488
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1125T
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-07-556T
*** End of document. ***