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U.S. Government Accountability Office and the National Commission on 
the Public Service Implementation Initiative: 

Forum: 

Human Capital: Principles, Criteria, and Processes for Governmentwide 
Federal Human Capital Reform: 

December 2004: 

GAO-05-69SP: 

GAO Highlights:

Highlights of GAO-05-69SP

Why GAO Convened This Forum:

There is widespread agreement that the federal government faces a range 
of challenges in the 21st century that it must confront to enhance 
performance, ensure accountability, and position the nation for the 
future. Federal agencies will need the most effective human capital 
systems to address these challenges and succeed in their transformation 
efforts during a period of likely sustained budget constraints. 

More progress in addressing human capital challenges was made in the 
last 3 years than in the last 20, and significant changes in how the 
federal workforce is managed are underway. 

On April 14, 2004, GAO and the National Commission on the Public 
Service Implementation Initiative hosted a forum with selected 
executive branch officials, key stakeholders, and other experts to 
help advance the discussion concerning how governmentwide human 
capital reform should proceed.

What Participants Said:

Forum participants discussed (1) Should there be a governmentwide 
framework for human capital reform? and (2) If yes, what should a 
governmentwide framework include? 

There was widespread recognition that a “one size fits all” approach to 
human capital management is not appropriate for the challenges and 
demands government faces. However, there was equally broad agreement 
that there should be a governmentwide framework to guide human capital 
reform built on a set of beliefs that entail fundamental principles and 
boundaries that include criteria and processes that establish the 
checks and limitations when agencies seek and implement their 
authorities. While there were divergent views among the participants, 
there was general agreement that the following served as a starting 
point for further discussion in developing a governmentwide framework 
to advance needed human capital reform.

Principles:  
* Merit principles that balance organizational mission, goals, and 
performance objectives with individual rights and responsibilities;
* Ability to organize, bargain collectively, and participate through 
labor organizations;
* Certain prohibited personnel practices;
* Guaranteed due process that is fair, fast, and final.

Criteria: 
* Demonstrated business case or readiness for use of targeted 
authorities;
* An integrated approach to results-oriented strategic planning and 
human capital planning and management;
* Adequate resources for planning, implementation, training, and 
evaluation;
* A modern, effective, credible, and integrated performance management 
system that includes adequate safeguards to ensure equity and prevent 
discrimination.

Processes: 
* Prescribing regulations in consultation or jointly with the Office 
of Personnel Management;
* Establishing appeals processes in consultation with the Merit 
Systems Protection Board;
* Involving employees and stakeholders in the design and implementation 
of new human capital systems;
* Phasing in implementation of new human capital systems;
* Committing to transparency, reporting, and evaluation;
* Establishing a communications strategy;
* Assuring adequate training;

www.gao.gov/cgi-bin/getrpt?GAO-05-69SP

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 mihmj@gao.gov.

[End of section]

December 1, 2004:

Subject: Highlights of a GAO and National Commission on the Public 
Service Implementation Initiative Forum on Human Capital: Principles, 
Criteria, and Processes for Governmentwide Federal Human Capital 
Reform:

There is widespread agreement that the federal government faces a range 
of challenges in the 21st century that it must confront to enhance 
performance, ensure accountability, and position the nation for the 
future. Federal agencies will need the most effective human capital 
systems to address these challenges and succeed in their transformation 
efforts during a period of likely sustained budget constraints.

The National Commission on the Public Service has reported that the 
federal government is neither organized nor staffed nor adequately 
prepared to meet the challenges of the 21ST century.[Footnote 1] To 
address these challenges, the National Commission made recommendations 
in three key areas. They are: (1) Organization: reorganize the federal 
government by mission to improve its capacity for coherent design and 
efficient implementation of public policy and reauthorize presidential 
reorganization authority to get this process started; (2) Leadership: 
reform the entry process for top leaders and undertake the long-term 
development of a highly skilled federal management corps; and (3) 
Operations: improve federal workforce recruitment and retention and 
adopt new personnel management principles to ensure much higher levels 
of government performance.

Strategic human capital management must be the centerpiece of the 
federal government's overall transformation effort. To that end, more 
progress in addressing human capital challenges was made in the last 3 
years than in the last 20, and significant changes in how the federal 
workforce is managed are underway. For example, Congress provided 
agencies specific hiring authorities so that they can better compete 
for talented people in a highly competitive job market. In addition, 
the U.S. Government Accountability Office (GAO), National Aeronautics 
and Space Administration, the Department of Defense, and the Department 
of Homeland Security recently received authorities intended to help 
them manage their human capital strategically to achieve results. These 
recent actions have significant, precedent-setting implications for the 
rest of government. They represent both progress and opportunities, but 
also raise legitimate concerns. We are fast approaching the point where 
"standard governmentwide" human capital policies and processes are 
neither standard nor governmentwide. Human capital reform should avoid 
further fragmentation within the civil service, ensure reasonable 
consistency within the overall civilian workforce, and help maintain a 
reasonably level playing field among federal agencies when competing 
for talent. Further, human capital reform should maintain key merit 
principles and appropriate safeguards against discrimination and other 
prohibited personnel practices.

To help advance the discussion concerning how human capital reform 
should proceed, GAO and the National Commission on the Public Service 
Implementation Initiative co-hosted a forum on April 14, 2004 to 
discuss:

* Should there be a governmentwide framework for human capital reform?

* If yes, what should a governmentwide framework include?

The forum neither sought nor achieved consensus on all of the issues 
identified in the discussion. Nevertheless, there was widespread 
recognition among the forum participants that a "one size fits all" 
approach to human capital management is not appropriate given the range 
of the challenges and demands government faces. However, there was 
equally broad agreement that there should be a governmentwide framework 
to guide human capital reform built on a set of beliefs and boundaries. 
Beliefs entail the fundamental principles that should govern all 
approaches to human capital reform and should not be altered or waived 
by agencies seeking human capital authorities. Boundaries include the 
criteria and processes that establish the checks and limitations when 
agencies seek and implement human capital authorities. Further, a 
governmentwide framework should balance the desire for consistency 
across the federal government with the desire for flexibility so that 
individual agencies can tailor human capital systems to best meet their 
needs.

While there were divergent views among the participants, there was 
general agreement that the following principles, criteria, and 
processes served as a starting point for further discussion in 
developing a governmentwide framework to advance needed human capital 
reform as shown in figure 1.

Figure 1: Principles, Criteria, and Processes:

[See PDF for image]- graphic text

Principles that the government should retain in a framework for reform 
because of their inherent, enduring qualities:

* Merit principles that balance organizational mission, goals, and 
performance objectives with individual rights and responsibilities;
* Ability to organize, bargain collectively, and participate through 
labor organizations;
* Certain prohibited personnel practices; 
* Guaranteed due process that is fair, fast, and final.

Criteria that agencies should have in place as they plan for and manage 
their new human capital authorities:

* Demonstrated business case or readiness for use of targeted 
authorities;
* An integrated approach to results-oriented strategic planning and 
human capital planning and management;
* Adequate resources for planning, implementation, training, and 
evaluation;
* A modern, effective, credible, and integrated performance management 
system that includes adequate safeguards to help ensure equity and 
prevent discrimination;

Processes that agencies should follow as they implement new human 
capital authorities:

* Prescribing regulations in consultation or jointly with the Office of 
Personnel Management (OPM);
* Establishing appeals processes in consultation with the Merit Systems 
Protection Board (MSPB);
* Involving employees and stakeholders in the design and implementation 
of new human capital systems;
* Phasing in implementation of new human capital systems;
* Committing to transparency, reporting, and evaluation;
* Establishing a communications strategy;
* Assuring adequate training;

Source: GAO.

[End of table]

At the forum, the Director of OPM released a draft of OPM's Guiding 
Principles for Civil Service Transformation that should be very helpful 
in advancing and deepening the discussion of governmentwide civil 
service reform.[Footnote 2] The Director invited forum participants and 
others to comment on the draft paper.

Attendees at the forum represented a cross section of senior leaders 
from the executive branch with responsibilities for human capital 
management, congressional staff from committees with jurisdiction over 
governmentwide human capital policy, employee representatives, and 
academics and other stakeholders who are involved in or have knowledge 
of current federal human capital reform efforts. As agreed with the 
participants, the purpose of the discussion was to engage in an open, 
nonattribution-based dialogue. Appendix I of this letter summarizes the 
collective discussion and does not necessarily represent the views of 
any individual participant, including GAO or the Implementation 
Initiative. Appendix II lists the forum attendees and observers.

We wish to thank all of the participants in the forum for taking the 
time to share their knowledge and to provide their insights and 
perspectives on the important matters this document discusses. As the 
momentum accelerates for human capital reform, GAO looks forward to 
working with others, such as the National Academy of Public 
Administration and the National Commission on the Public Service 
Implementation Initiative, which offered to serve as a convener for 
further discussion on this and other important issues of mutual 
interest and concern.[Footnote 3]

Signed by: 

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

Paul A. Volcker: 
Chairman, 
National Commission on the Public Service: 

[End of section]

Appendixes:

[End of section]

Appendix I: Human Capital Reform: Highlights of Forum Discussion:

Recent actions in human capital reform have significant, precedent-
setting implications for the rest of government. They represent 
progress and opportunities, but also legitimate concerns. We are fast 
approaching the point where "standard governmentwide" human capital 
policies and processes are neither standard nor governmentwide. The 
forum's overall purpose was to discuss:

1. Should there be a governmentwide framework for human capital reform?

2. If yes, what should a governmentwide framework include?

Should There Be a Governmentwide Framework for Human Capital Reform?

While there was widespread recognition among the forum participants 
that a "one size fits all" approach to human capital management is not 
appropriate for the challenges and demands government faces, there was 
equally broad agreement that there should be a governmentwide framework 
to guide human capital reform built on a set of beliefs and boundaries. 
Beliefs entail the fundamental principles that should govern all 
approaches to human capital reform and should not be altered or waived 
by agencies seeking human capital authorities. Boundaries include the 
criteria and processes that establish the checks and limitations when 
agencies obtain and implement human capital authorities. Further, a 
governmentwide framework should balance the need for consistency across 
the federal government with the desire for flexibility so that 
individual agencies can tailor human capital systems to best meet their 
needs.

Striking this balance would not be easy to achieve, but is necessary to 
maintain a governmentwide system that is responsive enough to adapt to 
agencies' diverse missions, cultures, and work forces. The Office of 
Personnel Management's (OPM) draft Guiding Principles for Civil Service 
Transformation states that in modernizing the federal civil service 
system, "finding the right balance between flexibility and uniformity 
will be our greatest challenge."[Footnote 4] Recent human capital 
initiatives have begun to define that balance. For example, when 
Congress granted human capital authorities for the Department of 
Homeland Security (DHS) and the Department of Defense (DOD), Congress 
required both DHS and DOD to adhere to the merit system principles, 
avoid prohibited personnel practices, and retain the right for 
employees to organize and bargain collectively. On the other hand, DHS 
and DOD have flexibility in how they design and implement their 
classification, pay, performance, appeals, and labor-relations systems 
to meet their organizational priorities, structures, and cultures.

Participants cited several reasons why having a governmentwide human 
capital framework would be both desirable and appropriate. First, broad 
consistency across federal agencies is critical to ensure that each 
federal employee has certain safeguards and protections regardless of 
where he or she works. For example, OPM's draft Guiding Principles 
acknowledges that federal employees might be better served by a single 
set of procedures in areas such as due process and labor relations. 
Further, other participants concurred that too much variation in each 
agency could be problematic for organizations that are responsible for 
adjudicating appeals and grievances, such as the Merit Systems 
Protection Board (MSPB) and the Equal Employment Opportunity Commission 
(EEOC). In formal proceedings, it could be difficult to rule that an 
individual's action would be sanctioned in one agency but not in 
another agency.

Second, a governmentwide framework would allow for some central 
coordination that could help minimize any adverse impact that single 
agencies' authorities might have on other agencies. Many agreed that a 
strong role for OPM would be necessary and appropriate. For example, in 
the proposed regulations for developing its human capital system, DHS 
is to coordinate with OPM when DHS establishes its occupational 
clusters and pay bands and their minimum and maximum rates of pay, as 
well as when it sets nationwide and locality-based pay adjustments each 
year. The proposed regulations also provide OPM the authority to 
intervene in, and if necessary to veto, the use of an authority when 
the potential exists to adversely affect others across government. For 
example, it was suggested that mobility across agencies could be 
adversely affected by differing agency compensation systems.

Other participants added that a governmentwide framework would help to 
avoid further fragmentation and maintain a level playing field among 
federal agencies in competing for talent. For example, it was suggested 
that in light of current global threats, agencies with security-related 
missions may have already received human capital authorities to help 
them better respond to their missions, and thus a framework could help 
other agencies receive similar authorities so they could better meet 
theirs. Similarly, GAO has testified that it is preferable to employ a 
governmentwide approach to grant certain authorities that have broad-
based application (e.g., broadbanding, pay for performance, part-time 
employment, reemployment annuities) and have serious potential 
implications for the civil service system.[Footnote 5]

Finally, within a governmentwide framework, agencies collectively could 
leverage their size and take advantage of certain economies of scale. 
OPM's draft Guiding Principles recognizes the federal government's 
immense buying power as a single employer. OPM's draft noted that the 
actuarial cost of seceding from federal government programs, such as 
benefit programs for health care delivery, retirement, and life 
insurance, would be high. Specifically, under the Federal Employees 
Health Benefits Program, the federal workforce as a whole has been able 
to maintain benefits for enrollees, reduce costs to both the taxpayer 
and the employee, and mitigate financial risks. According to OPM, the 
same large scale may be able to benefit agencies' human resources 
information systems that share a common set of functional requirements.

On the other hand, participants stressed that a governmentwide 
framework should be flexible, agile, and responsive enough to adapt to 
any circumstance given agencies' diverse missions. To that end, many 
participants agreed that implementing a variety of human capital 
systems within a framework would be acceptable and in the long term, 
the most effective approach for agencies to deploy a workforce to help 
achieve their intended results. In determining what a governmentwide 
framework should consist of, one participant said that the approaches 
taken by leading global corporations could provide some insights. These 
corporations first determine if there is a strategic reason to retain a 
function at the corporate level, and if not, they devolve that function 
to their lower levels. In the context of the federal government, this 
means determining what must be done consistently across the government 
and leaving everything else to individual agencies' authorities. With 
any governmentwide framework, several participants cautioned that it 
would be necessary to guard against having the framework become a 
straight jacket that discourages innovation rather than being an 
enabler for agencies to identify and manage needed authorities.

What Should a Governmentwide Framework for Human Capital Reform 
Include?

Most participants agreed that a framework to guide human capital reform 
efforts should consist of modern principles that should be prescribed 
governmentwide, criteria that should be required for agencies to use 
new human capital authorities, and processes that should be prescribed 
governmentwide for agencies to implement new authorities. To start the 
discussion, GAO and the Implementation Initiative suggested, in advance 
of the forum, a set of principles, criteria, and processes based on 
congressional and executive branch decision making and prior work. 
While there were divergent views among the participants, there was 
general agreement that the following principles, criteria, and 
processes served as a starting point for further discussion in 
developing a governmentwide framework to advance needed human capital 
reform.

Modern Principles that Should Be Prescribed Governmentwide:

The participants agreed that there should be principles that the 
government should retain in a governmentwide framework for reform 
because of their inherent, enduring qualities. Participants observed 
that incorporating such principles in statute should be limited to 
those that have stood the test of time.

Merit principles that balance organizational mission, goals, and 
performance objectives with individual rights and responsibilities. All 
participants agreed that a set of merit principles should be a part of 
a governmentwide framework to guide human capital reform efforts. 
Generally, the merit system principles assure that federal employees 
are hired, promoted, paid, and discharged only on the basis of merit. 
Congress has not waived or altered the current merit system in recent 
laws granting federal agencies human capital authorities and both DOD 
and DHS are to adhere to the merit system principles. In addition, 
OPM's draft Guiding Principles states that merit principles must remain 
intact as the government moves forward with modernizing the civil 
service system.

Nevertheless, it was observed that there remain opportunities to update 
the current merit system principles to reflect the increased focus on 
missions, goals, and results as envisioned under the Government 
Performance and Results Act. While these updated merit principles would 
still protect employee interests, they would also take into account the 
organizational needs of federal agencies and the special roles and 
needs of federal employees as public servants. For example, the current 
principles do not address an organizational context, such as a shared 
vision or cooperation, except for the public service at large. In this 
regard, an updated principle would be for managers, employees, and 
their representatives to work together to balance management 
responsibilities and employee interests to effectively and efficiently 
achieve high performance of the organization's mission and goals. Also, 
updated merit principles would be designed to support and create 
excellence. Specifically, recruitment would be drawn from highly 
qualified rather than qualified individuals and job security would be 
extended to those whose performance contributes to organizational goals 
rather than those whose performance is adequate.

On the other hand, it was also observed that performance, even at the 
highest level, should not be the sole basis for job security even 
though additional weight should be given to performance as a factor in 
a reduction in force. Concern was also expressed that the timing of any 
re-examination of the merit principles is important and that such an 
undertaking could possibly influence DHS's and DOD's implementation of 
their human capital authorities since adherence to the principles is 
mandated.

Generally participants felt that as agencies receive more authority to 
establish their own human capital systems, it is especially important 
to engender trust among federal employees by prescribing the adherence 
to merit principles. It was suggested that governmentwide, 
organizations such as OPM, MSPB, EEOC, and the Office of Special 
Counsel, could provide sufficient counterweight when agencies develop 
and implement their own systems to ensure that merit principles are 
enforced when agencies receive new human capital authorities.

The National Academy of Public Administration and the National 
Commission on the Public Service Implementation Initiative have offered 
to serve as conveners for further discussions on this and other related 
issues.

Ability to organize, bargain collectively, and participate through 
labor organizations. Generally, participants agreed that the ability to 
organize, bargain collectively, and participate in labor organizations 
is an important principle to be retained in a governmentwide framework. 
Congress has already incorporated this provision in recent human 
capital legislation. Both DOD and DHS are to retain the right for 
employees to organize, bargain collectively, and participate through 
labor organizations of their own choosing, subject to the provisions of 
the new laws.

It was suggested that unions must be both willing and able to actively 
collaborate and coordinate with management if unions are to be 
effective representatives of their members and real participants in 
human capital reform. One participant noted that although some people 
believe collective bargaining slows down the process of reform, there 
are examples of effective labor-management relationships. For example, 
because the Internal Revenue Service (IRS) is exempt from certain Title 
5 provisions, Congress mandated IRS to involve employees to gain 
ownership for the new policies. In response, GAO reported that IRS and 
the National Treasury Employees Union entered into an agreement that 
was designed to ensure that employees are adequately represented and 
informed of proposed new policies and have input into the 
proposals.[Footnote 6]

Nevertheless, there might be opportunities for improvement in labor 
relations. OPM's draft Guiding Principles paper states that a 
governmentwide framework should continue to guarantee employees' rights 
to join unions and bargain collectively. However, a single set of 
streamlined and simplified procedures for labor relations and 
collective bargaining may be the best way to modernize labor relations, 
rather than by using an agency-by-agency approach. Similarly, the 
National Commission on the Public Service agrees that employees' rights 
to organize, bargain collectively, and participate through labor 
organizations should be retained as a principle of human capital 
reform.[Footnote 7] Nevertheless, a new level of labor-management 
discourse is necessary if the government is to achieve real reform, and 
engaged and mutually respectful labor relations should be a high 
federal priority.

One participant suggested it would be useful to craft guidance on how 
to design and implement revised collective bargaining procedures and 
manage conflicts to achieve results. Further, DOD's human capital 
reform legislation may be the starting point for such guidance. DOD is 
to provide employee representatives and management the opportunity to 
have meaningful discussions concerning the development of the new 
system. In addition, DOD is to give employee representatives at least 
30 calendar days (unless extraordinary circumstances require earlier 
action) to review and make recommendations on the proposal for the 
system and give any recommendations received full and fair 
consideration, among other criteria. The legislation also includes a 6-
year time limit, after which the labor-relations provisions in Title 5 
will apply, unless the authority is extended.

Certain prohibited personnel practices. Generally, participants agreed 
that certain personnel practices, such as reprisal for whistle blowing, 
and violation of veterans' preference requirements, should be 
explicitly prohibited and included as a governmentwide principle. Some 
participants felt that such a principle has negative overtones and 
implies that without an explicit prohibition, there would be management 
abuse. Others acknowledged that an explicit principle was a necessary 
safeguard in the public sector where the workforce takes an oath rather 
than signs a contract and expectations are greater for transparency and 
accountability. However, ultimately it depends on management to enforce 
this principle in the spirit that was intended.

Guaranteed due process that is fair, fast, and final. Participants also 
agreed that guaranteed due process is an important principle in a 
governmentwide framework. Congress required both DHS and DOD to ensure 
employees are afforded the protections of due process in their proposed 
human capital systems.

Nevertheless, it has been observed that as the federal human capital 
system is reformed, the current approach to due process should 
similarly be reexamined. For example, the National Commission on the 
Public Service Implementation Initiative and the National Academy of 
Public Administration recently sponsored a forum on the federal appeals 
system in response to the ongoing debate about the new systems for DHS 
and DOD. Forum attendees reached a consensus that any federal employee 
appeals systems should be fair, fast, and final; preserve the core 
rights of employees and the general public interest; and consider 
protecting the agency's mission.[Footnote 8]

In addition, OPM's draft Guiding Principles notes that due process for 
federal workers for any action that threatens their employment is a 
principle that may be best protected by a single set of adverse action 
procedures for both misconduct and poor performance for all agencies, 
as well as a single independent adjudicating agency. Similarly, the 
National Commission on the Public Service found that there are multiple 
agencies involved in handling employee appeals that form a tangled 
scheme with varying procedures and case law. Lastly, GAO has reported 
that the complex system to protect employees' rights to due process is 
inefficient, expensive, and time-consuming.[Footnote 9]

Criteria That Should Be Required for Agencies To Use New Human Capital 
Authorities:

The participants generally agreed that some criteria should be required 
for agencies to use new human capital authorities. However, there was 
some discussion about whether agencies should have these criteria 
designed or in place before an agency could implement its authorities. 
Some participants maintained that agencies should have broad human 
capital authorities when there is not a compelling reason for 
centralization and consistency across government. In other words, 
centralization or the absence of authority should require a business 
case, not the other way around. However, others felt that requiring 
some of these criteria to be in place before authorities are granted, 
as opposed to when authorities are implemented, could have the 
unintended consequence of discouraging human capital reform.

Demonstrated business case or readiness for use of targeted 
authorities. Several participants observed that requiring agencies to 
present a business case for any requested authority would be a positive 
step towards the integration of human capital policies and programs 
with strategic planning. Other participants, however, felt that 
requiring a business case could have the unintended consequence of 
discouraging human capital reform. Instead, a readiness assessment 
could suffice to receive the authority, with the clear understanding 
that certain elements would have to be in place to go ahead with its 
implementation. Those who held this view believed that the better 
course is to authorize broad agency flexibilities but ensure that they 
are exercised responsibly.

High performing organizations determine agency workforce needs using 
fact-based analysis. They identify their current and future human 
capital needs, including the appropriate number of employees; the key 
competencies for mission accomplishment; and the appropriate deployment 
of staff across the organization. GAO has reported that federal 
agencies often have not gathered and analyzed the data required to 
effectively assess how well their human capital approaches have 
supported results.[Footnote 10]

Congress has recognized the importance of granting authorities to 
agencies based on demonstrated needs. The authorities given to the 
National Aeronautics and Space Administration (NASA) are intended to 
enable NASA to compete successfully with the private sector to attract 
and retain a world-class workforce and to reshape and redeploy its 
workforce more effectively to support the mission. In advance of 
exercising any of the new authorities, NASA is to submit a workforce 
plan, approved by OPM, 90 days before NASA implements its human capital 
authorities. The workforce plan is to describe the critical needs and 
how the new authorities would address those needs.

Some participants suggested that a governmentwide approach, rather than 
the more piecemeal approach of agencies developing unique plans, would 
be more effective and efficient in the long term. OPM or the Office of 
Management and Budget (OMB) could develop a business case for 
governmentwide change that would be applicable to all agencies. One 
participant felt that, in effect, a governmentwide business case has in 
fact been made since the DOD and DHS legislations have already 
demonstrated the need and recognition for change.

Some participants questioned the government's willingness and ability 
to take risk as agencies' leadership implement human capital reforms in 
their organizations. For example, a participant noted that he was 
particularly concerned about the findings from a Brookings Institution 
report that showed there is not a high willingness to accept risk and 
change in the government.[Footnote 11] The report found that 55 percent 
of federal employees surveyed reported that their organization 
encourages them to take risks, 9 percent lower than the private-sector 
employees surveyed.

GAO has found that to effectively implement human capital authorities, 
managers and supervisors need to have an appropriate attitude toward 
risk taking and proceed with new operations after carefully analyzing 
the risks involved and determining how they may be minimized or 
mitigated.[Footnote 12] The insufficient and ineffective use of 
authorities can significantly hinder the ability of federal agencies to 
recruit, hire, retain, and manage their human capital. Also, with 
appropriate accountability mechanisms in place, agencies can begin to 
foster an organizational culture that encourages managers to develop 
creative approaches and take appropriate risks.

Integrated approach to results-oriented strategic planning and human 
capital planning and management. Participants generally agreed that 
agencies need to link their strategic and human capital planning and 
management in order to achieve the desired outcomes with the team, 
unit, and individual performance management systems. It was noted that 
while many agencies do not currently have the infrastructure to do 
this, this infrastructure is essential to effectively address future 
demands.

Effective organizations integrate their strategies for accomplishing 
their mission and programmatic goals with human capital 
approaches.[Footnote 13] The effectiveness of this integration is 
judged by how well it helps achieve organizational goals. To this end, 
Congress has already begun to require this integrated approach in 
recent human capital legislation. Congress explicitly required DOD to 
link its new performance management system with the agency's strategic 
plan. Additionally, we reported DHS has begun strategic human capital 
planning.[Footnote 14] For example, one of the department's strategic 
goals, organizational excellence, has an objective focused on ensuring 
effective recruitment, development, compensation, succession 
management and leadership of a diverse workforce to provide optimal 
service at a responsible cost.

GAO also stated that any additional human capital authorities should be 
implemented only when an agency has the institutional infrastructure in 
place. This infrastructure includes, among other things, a human 
capital planning process that integrates the agency's human capital 
policies, strategies, and programs with its program goals, mission and 
desired outcomes. For example, GAO has reported that leading 
organizations use succession planning and management as a strategic 
tool that focuses on their current and future needs and identifies and 
develops high-potential staff with the aim of filling leadership and 
other key roles in order to meet their missions over the long 
term.[Footnote 15]

Adequate resources for planning, implementation, training, and 
evaluation. There was widespread agreement among the participants that 
making human capital reform most effective would require that agencies 
have adequate resources to ensure sufficient planning, implementation, 
training, and evaluation. Experience has shown that additional 
resources are necessary. OPM has reported that the increased costs of 
implementing alternative personnel systems should be acknowledged and 
budgeted for up front. Similarly, GAO reported that selected OPM 
personnel demonstration projects experienced increased costs 
associated with implementing alternative personnel systems related to 
salaries, training, and automation and data systems.[Footnote 16]

Recent human capital reforms recognize the need for adequate resources 
for their implementation. Congress required DOD to ensure adequate 
resources are allocated for the design, implementation, and 
administration of its new performance management system. DHS also 
recognized that significant resources would be needed to design and 
implement a new human capital system. In its proposed regulations, DHS 
estimates the overall costs associated with implementing its new human 
capital system will be approximately $130 million over a 4-year period.

Many participants pointed out that while sufficient resources are the 
key to effectively implementing new pay systems, budget constraints are 
a given in the public service. For example, one participant noted that 
in the current environment, pay for performance is more like pay by 
budget because the budget drives pay, not performance. Some felt that 
Congress often authorizes pay raises for federal employees but does not 
then provide additional resources to agencies to make the required pay 
adjustments. To make up the difference, agencies must find resources 
from other areas in their budgets. On the other hand, it was observed 
that Congress authorized these pay raises in response to budget 
proposals that did not provide parity between civilian and uniformed 
services personnel.

A modern, effective, credible, and integrated performance management 
system that includes adequate safeguards to help ensure equity and 
prevent discrimination. Participants generally agreed that performance 
management systems with some safeguards are needed. Effective 
performance management systems strive to (1) provide candid and 
constructive feedback to help individuals maximize their contribution 
and potential in understanding and realizing the goals and objectives 
of the organization, (2) seek to provide management with the objective 
and fact-based information it needs to reward top performers, and (3) 
provide the necessary information and documentation to deal with poor 
performers.

Congress and the administration have recognized the necessity of 
effective performance management systems in recent human capital reform 
initiatives. Congress established a new performance-based pay system 
for members of the Senior Executive Service that is designed to provide 
a clear and direct linkage between performance and pay. An agency can 
seek approval from OPM to raise the pay for its senior executives if 
OPM certifies, and OMB concurs that the agency's performance management 
system, as designed and applied, makes meaningful distinctions based on 
relative performance.

In addition, DOD's human capital legislation requires its new human 
capital system to have a fair, credible, and transparent performance 
appraisal system that includes effective safeguards to ensure that the 
management of the system is fair and equitable and based on employee 
performance. The new system also is to have a process for ensuring 
ongoing performance feedback and dialogue between supervisors, 
managers, and employees throughout the appraisal period.

Under the proposed regulations, the DHS performance management system 
must, among other things, align individual performance expectations 
with the mission, strategic goals, or a range of other objectives of 
the department or of the DHS components. Also, the DHS performance 
management system is intended to promote individual accountability by 
communicating performance expectations as well as holding employees 
responsible for accomplishing them and holding supervisors and managers 
responsible for effectively managing the performance of employees under 
their supervision. GAO testified that the proposal takes another 
valuable step towards modern performance management.[Footnote 17]

GAO has testified that, before additional human capital authorities are 
implemented, an agency should have to demonstrate that it has a modern, 
effective, credible, and as appropriate, validated performance 
management system in place with adequate safeguards, including 
reasonable transparency and appropriate accountability mechanisms, to 
ensure fairness and prevent politicalization and abuse of 
employees.[Footnote 18] In addition, GAO has identified a set of 
practices that collectively can help agencies develop effective 
performance management systems.[Footnote 19]

Processes That Should Be Prescribed Governmentwide for Agencies to 
Implement New Authorities:

There was widespread agreement that, as a starting point, the following 
processes are critical to future human capital reform efforts. While 
some participants questioned whether it was necessary to prescribe some 
of these processes in legislation, there was recognition that 
addressing these processes sets a general expectation that every step 
should be taken to ensure the most efficient and effective 
implementation of agencies' human capital authorities.

Prescribing regulations in consultation or jointly with OPM and 
Establishing appeals processes in consultation with MSPB. The 
participants generally agreed that involving OPM and MSPB was necessary 
for future human capital reform efforts. However, OPM felt that 
agencies' jointly prescribing regulations rather than only consulting 
with OPM would help to ensure that civil service principles are 
preserved when broad authorities are under consideration. Both DOD and 
DHS are required to develop regulations jointly with OPM for their new 
human capital systems and to consult with MSPB when developing new 
appellate procedures. It was observed that involving OPM and MSPB 
offers opportunities to ensure that flexibilities are used in a manner 
that places the public's interest paramount.

In its draft Guiding Principles, OPM asserts that implementation of 
modernized human capital systems must be managed by OPM to avoid any 
adverse impact on other agencies. For example, OPM notes that agency 
coordination with OPM is necessary in areas such as in setting minimum 
and maximum rates of pay and establishing nationwide and locality-based 
pay adjustments to ensure that cross-agency effects are taken into 
account and if necessary, mitigated.

On the other hand, it was also observed that OPM might need the people 
resources to help manage the implementation of modernized human capital 
systems across government. For example, GAO reported that there are 
opportunities for OPM to strengthen its current organizational 
transformation efforts as it shifts its role from less of a rule maker 
and enforcer to more of a strategic partner in leading and supporting 
agencies' human capital management systems.[Footnote 20]

Involving employees and stakeholders in the design and implementation 
of new human capital systems. The participants agreed that actively 
engaging employees and stakeholders in designing new human capital 
systems was an important process. GAO has reported that a successful 
organizational transformation must involve employees and their 
representatives from the beginning to gain their ownership for the 
changes that are occurring in the organization. Employee involvement 
strengthens the transformation process by including frontline 
perspectives and experiences.[Footnote 21] To involve employees, 
agencies can:

* use employee teams to assist in implementing changes;

* involve employees in planning and sharing performance information to 
help employees understand what the organization is trying to accomplish 
and how it is progressing in that direction, facilitate the development 
of organizational goals and objectives that incorporate insights about 
operations from a front-line perspective, and increase employees' 
understanding and acceptance of organizational goals and objectives; 
and:

* incorporate employee feedback into new policies and procedures.

DOD's human capital legislation requires DOD to include a means for 
ensuring employee involvement in the design and implementation of its 
new human capital system. Similarly, DHS's legislation requires 
employee involvement in the design of its new human capital systems. 
GAO reported that during the course of the design process DHS has 
recognized the importance of employee involvement and has been 
involving multiple organizational components and its three major 
employee unions in designing the new human capital system.[Footnote 22]

Phasing in implementation of new human capital systems. There was 
general understanding among the participants on why a phased approach 
to implementing major management reforms was both appropriate and 
judicious. A phased implementation approach recognizes that different 
components of agencies will often have different levels of readiness 
and different capabilities to implement new authorities. Moreover, a 
phased approach allows for learning so that appropriate adjustments and 
midcourse corrections can be made before new policies and procedures 
are fully implemented organizationwide.

Congress has also recognized the need for phasing in new human capital 
systems. DOD is to implement its new system for up to 300,000 employees 
and cannot expand it until the Secretary determines that the department 
has in place a performance management system that meets the criteria 
specified in the law. Similarly, according to its proposed regulations, 
DHS plans to implement its job evaluation, pay, and performance 
management system in phases to allow time for final design, training, 
and careful implementation.

Committing to transparency, reporting, and evaluation. The participants 
agreed that transparency, reporting, and evaluation are critical 
processes in ongoing human capital reform efforts. High-performing 
organizations continually review and revise their human capital 
management systems based on data-driven lessons learned and changing 
needs in the environment. It was observed that the public deserves to 
be told how well the government is doing to improve the quality of its 
civil service as measured against objective standards linked to 
promised results.

The benefits of ongoing evaluation and knowledge sharing are gaining 
wider acceptance. Congress required the interagency Chief Human Capital 
Officers Council to include an evaluation of the formulation and 
implementation of agency performance management systems in its annual 
report to Congress. In addition, DHS's proposed regulations indicate 
that it is committed to an ongoing comprehensive evaluation of the 
effectiveness of the human capital system, including the establishment 
of human capital metrics and the use of employee surveys.

One participant observed that there has not been enough evaluation and 
sharing of lessons learned from existing alternative human capital 
systems. For example, the participant noted that lessons learned from 
the Federal Aviation Administration (FAA) could be shared more broadly 
across the government. In 1996, the FAA received broad exemptions from 
Title 5 laws governing federal civilian personnel management, which at 
the time was regarded as one of the most flexible human capital efforts 
in the federal government. While GAO reported that FAA had not fully 
incorporated elements that are important to effective human capital 
management, FAA's experiences are valuable nonetheless.[Footnote 23]

Along these lines, GAO has reported that agencies seeking human capital 
reform should consider doing evaluations that are broadly modeled on 
the evaluation requirements of the OPM demonstration projects.[Footnote 
24] Under the demonstration project authority, agencies must evaluate 
and periodically report on results, implementation of the demonstration 
project, cost and benefits, impacts on veterans and other equal 
employment opportunity groups, adherence to merit system principles, 
and the extent to which the lessons from the project can be applied 
governmentwide. A set of balanced measures addressing a range of 
results, customer, employee, and external partner issues may also prove 
beneficial. Such an evaluation could facilitate congressional 
oversight; allow for any midcourse corrections; assist the agencies in 
benchmarking its progress with other efforts; and provide for 
documenting best practices and sharing lessons learned with employees, 
stakeholders, other federal agencies, and the public.

Establishing a communications strategy. While the participants agreed 
that a communications strategy is an important process in the 
implementation of any major change management initiative, such as new 
human capital authorities, some questioned whether it is necessary to 
write it into legislation for human capital reform. Other participants 
observed that it should not be taken for granted that such a strategy 
would necessarily happen, and for that reason, making a communication 
strategy an explicit requirement in legislation would make it more 
likely to occur.

GAO has found that creating an effective, on-going communications 
strategy is essential to implementing a transformation.[Footnote 25] 
The organization undergoing a transformation must develop a 
comprehensive communications strategy that reaches out to employees, 
customers, and stakeholders and seeks to genuinely engage them in the 
transformation process.

Assuring adequate training. The participants agreed that training for 
employees at all levels was critical to the success of any human 
capital reform. High performing organizations understand the value of 
training. Several participants suggested that the success of DHS's and 
DOD's human capital reform efforts hinged on the type and quality of 
the training managers and employees received. However, although 
training was recognized as important, some participants questioned 
whether it is necessary to prescribe training in legislation.

While DHS's human capital legislation does not require it to provide 
training on its new human capital system, DHS recognizes in its 
proposed regulations that a substantial investment in training is a key 
aspect of implementing a performance management system. DOD's human 
capital legislation requires the department to provide adequate 
training and retraining for supervisors, managers, and employees in the 
implementation and operation of the performance management system.

To ensure that adequate funding is set aside for training for human 
capital reform efforts, one participant suggested developing a formula 
to designate a fixed amount of training dollars for federal employees 
so that training is not cut when agency budgets are constrained. Along 
these lines, under the Human Capital Performance Fund that Congress 
established, agencies are to use up to 10 percent of their 
appropriations to train supervisors, managers, and others on using 
performance management systems to make meaningful distinctions in 
performance. However, Congress has not fully funded the Performance 
Fund.

GAO found that organizations implementing personnel demonstration 
projects provided extensive training before and during implementation 
of their new human capital systems as well as throughout the first 5 or 
more years of the project.[Footnote 26] GAO has reported that training 
and developing new and current staff to fill new roles and work in 
different ways will play a crucial part in the federal government's 
endeavors to meet its transformation challenges.[Footnote 27] Ways that 
employees learn and achieve results will also continue to transform how 
agencies do business and engage employees in further innovation and 
improvements.

Next Steps in Human Capital Reform:

Among the next steps in human capital reform, there was general 
recognition for 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. The momentum is accelerating to 
make strategic human capital management the centerpiece of the federal 
government's overall management transformation effort. Agencies such as 
DOD and DHS have received broad human capital authorities. It is likely 
that other departments and agencies will soon seek their own human 
capital authority. There is a need to guide these future reform efforts 
constructively and determine if there should be governmentwide change 
or continue to change human capital policies agency by agency. Further, 
if there is governmentwide change, the amount of authority afforded to 
agencies must be determined.

Also, the anticipated future roles of Congress, OPM, and other 
stakeholders should be articulated as human capital reforms proceed. 
Congress could provide continued oversight of governmentwide human 
capital reform. It was generally recognized that such oversight is 
critical in ensuring that OPM has a role in the design and 
implementation of new human capital systems. OPM could provide a 
governmentwide perspective to human capital reform, for example, by 
collaborating in the design and development of new human capital 
systems and in identifying and mitigating any adverse impact of reform 
efforts on other agencies. GAO could continue assisting Congress in 
analyzing and supporting efforts to improve the human capital 
infrastructure key to successful transformation of the government. The 
Implementation Initiative and other key stakeholders can continue to 
advance human capital reform through conversations, such as the one 
that took place at this forum.

[End of section]

Appendix II: Forum Attendees:

Moderators:

David M. Walker, Comptroller General of the United States, 
U.S. Government Accountability Office. 

Paul A. Volcker, Chairman, 
National Commission on the Public Service. 

Participants: 

Carol A. Bonosaro, President, 
Senior Executives Association. 

Charles Bowsher, Former Comptroller General of the United States and 
Member of the National Commission on the Public Service. 

Dr. David S. Chu, Under Secretary of Defense (Personnel and Readiness), 
Office of the Secretary of Defense,
U.S. Department of Defense. 

Claudia A. Cross, Chief Human Capital Officer/Director, 
Office of Human Resources Management,
U.S. Department of Energy. 

Brian DeWyngaert, Executive Assistant to the President, 
American Federation of Government Employees, AFL-CIO. 

Maureen Gilman, Director of Legislation, 
The National Treasury Employees Union. 

Janet Hale, Under Secretary for Management, 
U.S. Department of Homeland Security. 

Sallyanne Harper, Chief Administrative Officer/Chief Financial 
Officer, 
U.S. Government Accountability Office. 

Jesse Hoskins, Chief Human Capital Officer, 
U.S. Government Accountability Office. 

Patricia Ingraham, Distinguished Professor, 
The Maxwell School of Citizenship and Public Affairs,
Syracuse University. 

Kay Coles James, Director, 
U.S. Office of Personnel Management. 

Clay Johnson III, Deputy Director for Management, 
U.S. Office of Management and Budget. 

C. Morgan Kinghorn, President, 
National Academy of Public Administration. 

Nancy Kingsbury, Managing Director, 
Applied Research and Methods,
U.S. Government Accountability Office. 

Rosslyn Kleeman, Distinguished Executive in Residence, 
The George Washington University. 

Gail T. Lovelace, Chief People Officer, 
U.S. General Services Administration. 

Neil A. G. McPhie, Acting Chairman, 
U.S. Merit Systems Protection Board. 

J. Christopher Mihm, Managing Director, 
Strategic Issues,
U.S. Government Accountability Office. 

Steve Nelson, Director, 
Office of Policy and Evaluation,
U.S. Merit Systems Protection Board. 

Vicki Novak, Assistant Administrator for Human Resources, 
National Aeronautics and Space Administration. 

Bernard Rosen, Emeritus Distinguished Adjunct Professor in Residence, 
American University. 

Ron Sanders, Associate Director, 
Division for Strategic Human Resources Policy,
U.S. Office of Personnel Management. 

Joanne Simms, Deputy Assistant Attorney General for Human Resources 
and Administration / Chief Human Capital Officer, 
Justice Management Division,
U.S. Department of Justice. 

Hannah Sistare, Executive Director, 
National Commission on the Public Service Implementation Initiative. 

Pete Smith, President, 
Private Sector Council. 

Max Stier, President and CEO, 
Partnership for Public Service. 

Michael B. Styles, National President, 
Federal Managers Association. 

Robert N. Tobias, Professor, 
American University. 

Mitchel B. Wallerstein, Dean, 
The Maxwell School of Citizenship and Public Affairs,
Syracuse University. 

Congressional Observers: 

Mason Alinger, Professional Staff Member, 
House Government Reform Committee,
U.S. House of Representatives. 

Nanci Langley, Democratic Deputy Staff Director, 
Subcommittee on Financial Management, the Budget, and International 
Security,
Senate Governmental Affairs Committee,
U.S. Senate. 

Chris Lu, Deputy Chief Counsel – Minority, 
House Government Reform Committee,
U.S. House of Representatives. 

Andrew Richardson, Staff Director, 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia,
Senate Governmental Affairs Committee,
U.S. Senate. 

Tania A. Shand, Professional Staff Member, 
House Government Reform Committee,
U.S. House of Representatives. 

Jennifer Tyree, Counsel, 
Subcommittee on Financial Management, the Budget, and International 
Security,
Senate Governmental Affairs Committee,
U.S. Senate. 

Marianne Clifford
Upton, Minority Staff Director and Chief Counsel, 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia,
Senate Governmental Affairs Committee,
U.S. Senate. 

Other Observers: 

William Atkinson, Former Chief of Staff, 
U.S. Merit Systems Protection Board. 

Paul Conway, Chief of Staff to the Director, 
U.S. Office of Personnel Management. 

Stephanie Diamond, 
Former Human Resources Program Manager, 
Office of Human Resources Management,
U.S. Department of Energy. 

Rita R. Franklin, 
Deputy Director, Office of Human Resources Management, 
U.S. Department of Energy. 

Thomas Richards, Government Affairs Representative, 
Federal Managers Association. 

Debra Tomchek, Director for Human Resources, 
Justice Management Division,
U.S. Department of Justice. 

Didier Trinh, Executive Director, 
Federal Managers Association. 

Tracey Watkins, Senior Advisor to Acting Chairman, 
U.S. Merit Systems Protection Board. 

(450326):

FOOTNOTES

[1] The National Commission on the Public Service, Urgent Business for 
America: Revitalizing the Federal Government for the 21ST Century 
(Washington, D.C.: January 2003). 

[2] U.S. Office of Personnel Management, OPM's Guiding Principles for 
Civil Service Transformation (Washington, D.C.: Apr. 14, 2004) can be 
accessed at http://www.opm.gov/Strategic_Management_of_Human_Capital/
documents/merit/

[3] See The National Commission on the Public Service Implementation 
Initiative and The National Academy of Public Administration, A 
Governmentwide Framework for Federal Personnel Reform: A Proposal 
(Washington, D.C.: November 2004).

[4] U.S. Office of Personnel Management, OPM's Guiding Principles for 
Civil Service Transformation (Washington, D.C.: Apr. 14, 2004).

[5] GAO, Human Capital: Building on DOD's Reform Effort to Foster 
Governmentwide Improvements, GAO-03-851T (Washington, D.C.: June 4, 
2003).

[6] GAO, Human Capital: Practices That Empowered and Involved 
Employees, GAO-01-1070 (Washington, D.C.: Sept. 14, 2001).

[7] The National Commission on the Public Service, Urgent Business for 
America: Revitalizing the Federal Government for the 21ST Century 
(Washington, D.C.: January 2003).

[8] National Commission on the Public Service Implementation Initiative 
and National Academy of Public Administration, Conversations on Public 
Service: Forum on the Federal Appeals System: Items of Consensus 
(February 2004).

[9] GAO, Federal Employee Redress: A System in Need of Reform, GAO/T-
GGD-96-110 (Washington, D.C.: Apr. 23, 1996).

[10] GAO, Human Capital: Effective Use of Flexibilities Can Assist 
Agencies in Managing Their Workforces, GAO-03-2 (Washington, D.C.: Dec. 
6, 2002).

[11] The Brookings Institution, The Troubled State of the Federal 
Public Service (Washington, D.C.: June 27, 2002).

[12] GAO-03-2.

[13] GAO, A Model of Strategic Human Capital Management, GAO-02-373SP 
(Washington, D.C.: Mar. 15, 2002).

[14] GAO, Human Capital: DHS Faces Challenges In Implementing Its New 
Personnel System, GAO-04-790 (Washington, D.C.: June 18, 2004).

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

[16] GAO, Human Capital: Implementing Pay for Performance at Selected 
Personnel Demonstration Projects, GAO-04-83 (Washington, D.C.: Jan. 23, 
2004).

[17] GAO, Human Capital: Preliminary Observations on Proposed DHS Human 
Capital Regulations, GAO-04-479T (Washington, D.C.: Feb. 25, 2004).

[18] GAO, Defense Transformation: Preliminary Observations on DOD's 
Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, D.C.: 
Apr. 29, 2003).

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

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

[21] GAO, Results-Oriented Cultures: Implementation Steps to Assist 
Mergers and Organizational Transformations, GAO-03-669 (Washington, 
D.C.: July 2, 2003). 

[22] GAO, Human Capital: DHS Personnel System Design Effort Provides 
for Collaboration and Employee Participation, GAO-03-1099 (Washington, 
D.C.: Sept. 30, 2003).

[23] GAO, Human Capital Management: FAA's Reform Effort Requires a More 
Strategic Approach, GAO-03-156 (Washington, D.C.: Feb. 3, 2003).

[24] GAO-03-717T and GAO-04-479T.

[25] GAO-03-669.

[26] GAO-04-83.

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

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