Mr. Chairman and Members of the Subcommittee:

Thank you for inviting me to testify today on the subject of the management of human capital in the twenty-first century. Your experience, Mr. Chairman, as a big-city mayor and as governor gives you a unique perspective on the challenges facing us in the executive branch. I am pleased to have this opportunity to discuss the administration's plans to align Federal human resources to support agency goals.

As director of the Office of Personnel Management for the Federal Government, I am pleased that so many people are now discussing what we at OPM have held as a core belief, that the government's human resources our people are our most valuable asset. I am convinced that, like the private sector, we must engage in the "war for talent." We must secure, develop, empower, and retain the talented people we need to accomplish our mission for the American people. This is the foundation for our strategic approach to human resources management.

That strategic approach is being driven by the changes that have taken place in government. How we lead this change will mean the difference between success and failure for the Federal Government.

These changes have been particularly dramatic in two areas. The first is the way work itself has changed, particularly through the impact of the information revolution. The Federal workforce is no longer the army of clerks we deployed fifty years ago. Now policy and program officials need commando squads of information technology professionals with cutting-edge skills. At OPM, we have been working hard to anticipate the specific nature of work and the workforce needed for the 21st century. Human resources systems that were designed for the stable bureaucracies of the 1950's and 60's simply had to change so that agencies and their employees could cope effectively with the reality that we must all "adapt or be pushed aside."

The second area of dramatic change for the government is what some call the "shift to results." Implementation of the government performance and results act and the Clinton/Gore administration's successful focus on customer service have entered the bloodstream of agencies throughout government. Managers and employees are looking at their work differently. The focus has shifted from process to results and from following the rules to serving customers.

This results shift has real implications for human resources management systems and practices, which must be adapted to align with agencies' strategic and performance plans. This includes the systems and practices for how skills are valued, how learning needs are determined and met, and how performance is measured and recognized.

As agencies accept the fundamental premise that our people are our most valuable assets, they must be prepared to fully integrate human resources management into the fabric of their mission-critical activities. That is the alignment we seek.

Strategic HRM Alignment

At OPM, we have been emphasizing this integration as we lead the human resources community in a shift toward strategic human resources management alignment, which I believe embraces the current emphasis on human capital.

The vision for managing human capital that we pursue could be described most simply as "getting the right people with the right skills in the right jobs at the right time."

And in the Federal Government, we must always take care to add "and in the right way" to ensure that the Federal civil service is managed in accordance with the merit system principles. That merit system, as well as veterans preference principles and the other employment laws that operate throughout our economy, support important national policies that transcend any given agency's mission or goals.

Having said that, I must quickly acknowledge that those agency missions and goals have become the drivers of our human resources programs and practices. That is the real revolution we have witnessed in Federal human resources management. For decades, personnel administration was like much of the rest of government mired in and absorbed with rules and procedures.

In that era, getting the right people at the right time meant doing our work "according to Hoyle," where processes were ends in themselves. Nowadays it means doing our work "in ways that contribute to achieving results," and that difference has truly transformed human resources management.

That transformation is aimed at helping agencies achieve two related human resources objectives.

The first general objective is investing in talent. We must have effective workforce planning models and techniques to figure out what kinds of employees will be valuable for achieving specific results. Having set out such plans, we must find and recruit such employees, and we must use the latest assessment approaches to select the applicants with the best talents to meet agency needs.

We must also continue to add value to the workforce that is already on board and find ways to promote the potential of our employees by making them more knowledgeable, more adaptable, and better able to meet changing needs. Part of every employee's job will be to keep learning about the ever-changing work to be performed. The Clinton/Gore administration realizes this and has made a lifelong learning a priority for the Federal workforce. Continual learning and development are the keys here, with a focus on adding the skills and competencies that will improve results.

We have a second general objective for our strategic human resources management alignment, namely engaging our employees in achieving mission results. The "right people" in this instance are committed people with a shared vision. We must align and direct our employees' talents their energy and their skills toward clearly understood organizational goals. We do this through effective performance management and rewards systems that are flexible enough to adapt to the government's varied missions, work technologies, and labor markets.

Building and sustaining employee commitment also requires leadership and empowerment and respect for diverse employee needs. The manager's role is changing to being more of a leader, a coach, and a teacher, rather than a taskmaster assigning work and making judgments. This new leadership means promoting partnership and empowering front-line workers to give them a greater say in problem solving and workplace improvements, and it means accommodating and valuing the diversity of the workforce, for example, by helping employees meet their dependent care needs or offering flexible work hours to support volunteering in the community.

We know a lot about the organizations that are best able to retain the most talented employees, and the evidence is unequivocal. They communicate and reinforce clear, engaging customer service goals by using effective, performance planning and recognition programs tailored to their specific missions and workforces. They offer excellent leadership by skilled managers and empower employees by promoting partnership and innovation. And they help employees balance their work and family obligations by providing flexible work arrangements.

These two objectives for strategic human resources management investing in talent and engaging employee commitment have shaped the actions we are undertaking to align Federal human resources management systems to support agency goals. These systems are still based to some extent in processes and procedures, but now we work hard to ensure that those systems are flexible, efficient and effective for meeting agencies' human resources needs, and we create new strategies and systems when they are needed. Even more important, agencies are defining their needs through results-driven analyses and assessments so that their human resources can indeed be aligned with agency goals.

Priority Management Objective #9

I was pleased when the President included strategic human resources management as a priority management objective in the Fiscal Year 2001 budget. This is an important signal to the public and to government leaders that people are our most important asset. We worked closely with the Office of Management and Budget to develop this objective, and look forward to their continuing support as we proceed with implementation.

This objective includes three critical actions directed toward meeting the general human resources management objectives that I just described. These are:

1. we will help agencies strategically assess their human resources to ensure a quality workforce for the 21st Century;
2. we will support not only executives and line managers, but, indeed, all employees, as they strive to improve customer service and get mission results; and
3. we will ensure that agencies have the tools to attract, manage, and retain the talented employees they need, and we will encourage agencies to make better use of existing flexibilities to fit specialized situations

To provide a more concrete sense of our direction, I will address each of these items in more detail.

Workforce Planning

We know that agencies need tools to assess their long-term human resources needs, and OPM will provide agencies the right tools for the job.

This year we will design a workforce planning model that will enable managers to analyze the current workforce and, using a variety of "what if" scenarios, determine what kind of workforce will be needed in the future. The model will use both government-wide and agency-specific workforce data to help agencies identify occupational needs, skills gaps, recruiting sources, inconsistencies in diversity, and succession issues. Agencies will also be able to rely on the data to anticipate new trends in attrition and retirement and predict both shortages and growth in key occupations. Workforce modeling will help agencies close the gap between the workforce they have today and the one they will need in the future.

This is only one way that OPM is helping to align human resource systems with agency goals. We also have taken numerous steps to empower executives, line managers and front-line workers so they can improve customer service and get results.

Labor-Management Partnerships

In a unionized environment like the Federal Government, labor-management partnerships are an essential vehicle for genuine worker empowerment.

When this administration first came to Washington, unions and management were often at each other's throats, litigation was rampant, and common sense was in short supply. Study after study concluded that labor relations in the government were unproductive, ineffective, and a steady source of frustration for both unions and management.

We knew we had to do better. We listened carefully to business leaders and CEO's who said that real change in organizations has to come from the bottom up, not just the top down. And we learned from people like you, Mr. chairman, innovative state and local government leaders who understood that genuine partnerships between labor-management do not just make good labor relations policy, but are good for government, good for taxpayers, and good for the bottom-line.

And that is why, in 1993, President Clinton signed Executive Order 12871, and called for the creation of labor-management partnership councils throughout the Executive Branch. We believed then and continue to believe today that real gains can be made when labor and management work with each other as partners.

And that's just what we've seen over the past six years. Partnerships between labor and management have cut costs, enhanced productivity, and improved the delivery of service to the American people at agencies like the Social Security Administration, the Department of Veterans Affairs, the IRS, and the Customs Service.

But for all the success we've had, we know that partnerships are not thriving everywhere. We can do more to build on the success we've had and spread partnerships more widely across the government.

To help in this effort, the President signed a memorandum last October reaffirming both executive order 12871 and this administration's commitment to labor-management partnership. The President called on Federal agencies to work with their unions on a plan to help them build and sustain real labor-management partnerships. He also asked agencies to evaluate the progress they are making towards the development of successful partnerships and to report their results to OMB by April 14th of this year.

As OPM director, I am privileged to chair the President's national partnership council. In just a few months the council expects results from the most comprehensive study to date of Federal sector labor management partnerships. We are looking at eight Federal agencies and studying the connections between partnerships and bottom-line improvements in agency performance and the strategies and tactics that can make real improvements a reality.

This project is very important. It will provide in-depth and concrete information on what makes labor-management partnerships tick in a variety of workplace settings. We expect to learn important new lessons about how Federal agencies can create good working partnerships, and we should find a number of "best practices" that can inspire and motivate others.

We will share this information with the Federal community and pass on the lessons learned as we advise agencies on how they can improve their labor-management relations. We also plan to develop self-evaluation tools and an assessment model that agencies can use to measure their own progress in partnership and measure the impact that partnership is having on agency mission.

Learning Environment

OPM recognizes that without continuous learning and a real investment in training and development, worker "empowerment" is an empty phrase. Each day brings fresh examples of how a better trained workforce correlates with reduced costs, improved service, and increased customer and employee satisfaction. Up-to-date knowledge, skills, and abilities are critical for both organizational performance and individual employee success.

That is why we are providing leadership and assistance to agencies to help develop the Federal workforce and continually build workforce competencies.

We are currently developing a resource guide called strategically planning training that will help agencies create a set of goals and performance measures to link training to the accomplishment of agency goals.

And as the chair of the President's new training technology task force, I am pleased to report that OPM is working hard on initiatives to implement the President's January 1999 Executive Order entitled "using technology to improve training opportunities for Federal Government employees."

We have already begun a pilot project to help promote continuous learning using something called "individual learning accounts." Under this innovative approach to life-long learning, agencies will set aside money or hours (or both) into an account that an employee can use for learning and development related his or her official duties. 12 agencies are conducting 16 learning account pilots covering several thousand employees. Some pilots target specific work groups (such as Welfare-to-Work) while others cover a program's entire workforce. These innovative pilot programs begin later this month.

Work and Family Programs

Employee empowerment will only succeed when employees can strike an appropriate balance between their work and family needs.

To help employees reach that difficult balance, we will continue to support agencies in their implementation of a variety of family-friendly policies and programs, including telecommuting, alternative work schedules, job sharing, elder and child care resources, and family-friendly leave.

Programs like these invariably foster greater productivity and higher morale. OPM also offers a comprehensive website on Federal work/life initiatives and a secure site for Federal agency work/life coordinators.

Agencies that have strategically assessed their workforce and empowered employees to deliver results still must have the right tools to attract, manage, and retain the workforce they need.

OPM has introduced a number of changes and flexibilities in the past six years. For example, we delegated to agencies the authority to assess applicants, in order to bring hiring decisions and recruitment actions closer to the managers who must deliver results. We also decentralized performance management, again to allow agencies to design programs that work best for them. But more change is needed.

Hiring Flexibilities

Today, most candidates for Federal jobs are assessed against a rigid set of qualification standards with narrowly defined skills. This system simply does not measure the wider and more flexible range of skills that are important to organizations today. To address this long-standing problem, we are designing a new system that will allow agencies to assess candidates against a broad range of job competencies. The shift from narrow job standards to broad competencies will help agencies select employees who can grow and adapt as work requirements shift and jobs are redesigned. We used this approach to assessment last year in a pilot project for accountant positions. Over the next two years we will expand the approach to jobs in information technology, administrative support, and human resources.

One of the most common complaints we hear from managers and job applicants alike is that it takes the government far too long to hire employees. The prospect of weeks or even months passing before a hiring decision can be made is especially troubling in today's environment, where the competition for high-quality candidates is intense and skilled workers are in a hot sellers market.

In the near future, we will submit legislation that would amend title 5 and bring the government's hiring practices in line with the realities of today's job market. These changes will provide Federal agencies with new hiring tools to adapt to changing organizational needs and make it easier to hire and develop a high quality and diverse workforce.

In addition to the systemic changes that we will propose, OPM will continue to stay on the cutting edge of technology that can help speed selection and hiring decisions. OPM pioneered the use of touch screen technology and employment information kiosks. Early on we recognized the promise of the internet and developed a one-stop web-based employment information system called "USAJOBS" which serves more than fourteen million job seekers and over 2000 agency users each year. We've also made it much easier for applicants to use the phone and the internet to submit resumes and applications for a wide range of Federal jobs.

Have these technological advances helped? Absolutely. The Census Bureau has been able to reduce the time required to hire computer specialists and statisticians from six months to as little as three days using a web-based desktop applicant referral process that OPM helped design and operate. We will make a similar version of this system available for government-wide use later this year.

Compensation Systems Review

Of course, effective human resources alignment entails much more than effective hiring. Another key issue is the way compensation systems help attract and retain the best talent. As we continue our efforts to help the government compete for talent in a tight labor market, it is important to remember that our compensation systems rest on a 50-year old foundation. Even though we have made a number of improvements over the years, our systems still reflect fundamental assumptions about organizations and people that bear little relation to the world we know.

We are currently looking at the entire structure of our compensation systems to see how they must change in order to support the government's mission today and in the future.

In the meantime, we will give agencies more flexibility to meet the challenges of attracting, managing, and retaining the workforce they need. In keeping with this commitment, we are preparing a legislative proposal that would enhance recruitment, relocation, and retention incentives.

Performance Management

Since "deregulating" employee performance management in 1995, we have continually highlighted the many flexibilities agencies now have to tailor appraisal and recognition programs to their unique and changing needs. Employee performance management offers a prime opportunity to link what employees do in their day-to-day work to achievement of organizational results, customer satisfaction, and employee feedback, the balanced measures cited in the President's budget for FY 2001.

We will continue to provide a full range of guidance on how agencies can use all the components of performance management -- setting performance expectations, monitoring how well work is being done, providing employees developmental opportunities, rating performance, and recognizing excellence in performance --to support achievement of these balanced results.

We will also continue to assist agencies in developing expertise in using performance management flexibilities. We already have a widely-used web page containing all of our performance management publications. To enhance the usefulness of this tool, we will soon establish an information clearinghouse that will include information submitted by our customer agencies about their own experiences, best practices, and "lessons learned" in the various components of performance management.

Executive Leadership

Despite our hard work and our innovative plans, if we don't manage our people well and with compassion, our programs will not succeed and the American people will not get the services they pay for. The key is leaders with the ability to design and implement strategies that maximize employee potential and foster high ethical standards.

Human Resources Professionals

While it is the job of line managers and executives to deploy people to achieve an agency's goals and objectives, human resource professionals play a critical role in this process as their expert advisors and consultants. Human resources professionals represent the front line of customer service to Federal employees and managers, as well as to citizens seeking employment opportunities with their government.

Therefore, we at OPM have reaffirmed our commitment to strong human resource leadership within Federal agencies. We are committed to helping agencies build a strategically-focused human resources workforce with the skills and capabilities needed to meet their future challenges. For example, we will create a website for human resources professionals so they have access to the very latest information and guidance, and we will help agencies leverage scarce resources by sharing training programs across the government.

As I noted earlier, the Federal Government's most valuable asset is the talented and diverse men and women who work every day to make a difference in the lives of the American people they serve.

Without attracting and retaining the right people in the right jobs, with the right skills and training, no organization can perform its mission.

That concludes my prepared remarks. I would be pleased to answer any questions you may have.