Effective Management of Strategic Resources

Introduction
The FDIC recognizes that it must effectively manage a number of critical strategic resources in order to successfully carry out its mission and realize the annual performance goals set forth for its three major programs. Strategic resource management facilitates the Corporation’s mission-critical activities and helps minimize risk to the DIF, while simultaneously aligning and deploying the Corporation’s resources to the areas where they are most needed. An overview of planned 2009 initiatives to enhance the Corporation’s management of its key strategic resources follows.

Human Capital Management

The FDIC’s most important resource is the “intellectual capital” that its employees bring to bear on the accomplishment of its mission. For that reason, the FDIC strives to attract, develop and retain a highly skilled, diverse and results-oriented workforce and to be regarded as a “best place to work,” especially among employers whose workforces consist primarily of financial professionals. Because as much as 40 percent of the FDIC’s current workforce is projected to retire over the next 10 years, the FDIC will have a unique opportunity to re-shape its permanent workforce to provide effective regulatory oversight to meet the challenges that are emerging in the increasingly complex U.S. financial system of the early 21st century. The current dislocations in the financial markets have forced the FDIC to reconsider its permanent workforce configuration and to build a cadre of temporary and term employees to deal with the crisis at hand. In 2009, the FDIC will pursue a number of human capital initiatives to build its workforce of the future as well as address its immediate needs.

Strategic Workforce Planning and Readiness
When the FDIC resumed hiring of new entry-level employees in 2005, it adopted a fundamentally different strategy for staffing its core mission occupations in the post-downsizing era. This new strategy emphasized the development of a more mobile and flexible workforce that was cross-trained in the Corporation’s key mission functions and could be re-deployed rapidly to address new workload priorities in response to unexpected external events or changing conditions in the banking industry and the broader economy. These principles were the foundation for the Corporate Employee Program (CEP), which has become the primary vehicle for filling new entry-level positions in the FDIC’s core bank examiner occupation and in the resolution and receivership management function.

During the first phase of the CEP training program, participants are provided with basic exposure to each of the FDIC’s key business processes: deposit insurance, risk-management examinations, consumer protection/compliance examinations, and resolutions/receivership management. After the completion of the rotational phase of the program, participants are assigned to a specific commissioning track. Upon successful completion of this multi-year training program, employees will have earned a commission in their primary area of specialization and a competency certification in one specialty outside of that primary area. Internal certification programs have been developed for deposit insurance claims, consumer compliance examinations, Bank Secrecy Act compliance examinations, and franchise and asset marketing. Approximately 440 financial institution specialists (over 20 percent of the current examiner workforce) were participating in the CEP training program at the end of 2008, and that number is expected to increase to approximately 650 (about one-third of the examiner workforce) by the end of 2009.

As part of its workforce planning for the long term, the Corporation has also emphasized the addition of advanced technical skills to its workforce through both increased mid-career hiring, the development of advanced internal training curricula (discussed below), and support for numerous other professional certification programs. The primary focus of outside, mid-career hiring has been on mid-career risk management and compliance examiners who are able to have a more immediate impact on the FDIC’s current examination workload; Ph.D. economists and others with advanced quantitative and risk modeling skills that are needed to assess risk in large insured institutions; consumer protection researchers and specialists; and attorneys with regulatory enforcement, consumer protection, and litigation backgrounds (new, entry-level attorneys are hired through the Corporation’s Honors Attorney Program, which provides rotational experiences within the FDIC’s Legal Division that are similar to those in the CEP).

In order to ensure readiness in light of the current turmoil in financial markets and parts of the banking industry, the Corporation has temporarily re-employed a number of retired risk management and compliance examiners to assist with the increasing examination workload as well as the growing workload associated with coaching the large number of trainees in the CEP. The Corporation has also temporarily re-employed retired resolutions and receivership specialists and attorneys to ensure that the FDIC can successfully address the current institution failure workload.

In late 2008, the FDIC Board of Directors approved a temporary increase in staff of over 1,000 non-permanent employees and the opening of a temporary West Coast Satellite Office (WCSO) for resolving failed financial institutions and managing the resulting receiverships. The WCSO will be staffed almost entirely with resolutions and receiverships specialists and attorneys on two- to four-year term appointments (with contractor assistance) to handle the anticipated increase in bank closing activities over the next three to four years. The rest of the temporary staff planned for 2009 will consist mainly of approximately 450 loan review specialists and compliance analysts to assist with the increased examination workload. The hiring of non-permanent appointments will allow the FDIC staff to return to normal size once the crisis is over without the disruptions that reductions in permanent staff would cause.

Succession Management
The FDIC faces additional challenges as many of its long-term, highly skilled employees move into retirement. To help address these succession management issues, the FDIC will pursue a number of initiatives that are designed to retain, where possible, the skills and knowledge of its current employees for a longer time period while equipping a new generation of employees to assume the responsibilities of departing employees.

To address these projections, FDIC leadership developed several multi-year programs to assess current and potential leadership strength, identify skill shortages, and shape measures to close whatever gaps are identified:

• Knowledge Management Program Strategic Plan. In 2008, FDIC drafted a multi-year knowledge management strategic plan focused on a broad spectrum of knowledge management needs and possible approaches. In 2009, FDIC leadership will review and refine the draft plan and discuss initial implementation options.

• Corporate Executive Development Program. To ensure that there are corporate managers who are prepared to advance to executive-level positions as they become vacant, the Corporation implemented a pilot Corporate Executive Development Program at the beginning of 2008. The program provides for 18 months of intensive classroom and on-the-job training to high-potential supervisors and senior technical specialists. Participants will graduate from the program in 2009.

• Talent Review Program. The FDIC intends to extend the talent review process begun in 2006 with its executive-level employees to corporate managers and senior technical professionals in the near future. Under this program, the Corporation’s senior leadership conducts a comprehensive review of specific individual positions, identifying those which are the most likely to become vacant within a three- to five-year period; assessing strategic options for filling those positions if they become vacant, including the availability of potential successors within the current FDIC workforce; and identifying development gaps for those possible successors.

• Retention of Experienced Employees. In 2009, the Corporation plans to evaluate various options for retaining some of its most experienced employees beyond their anticipated retirement dates, where their skills and experience are deemed critical, to facilitate an orderly transfer of knowledge to new employees .

Employee Engagement
Over the past several years, the FDIC and the U.S. Office of Personnel Management (OPM) have conducted annual employee surveys. These surveys have consistently identified major areas of strength as well as important opportunities for improvement in employee engagement and satisfaction. These surveys have consistently demonstrated that FDIC employees enjoy their work, believe it is important, and get a sense of personal accomplishment from it. They also have a good understanding of the Corporation’s mission and strategic direction and know how their work fits into the FDIC’s goals and priorities.

Employees are also highly satisfied with their pay and benefits (highest rated among federal agencies in the 2006 OPM survey), the FDIC’s family-friendly culture (highest rated among federal agencies), work-life balance programs, their physical work environments, and the training, technological and other resources that are provided to them by the FDIC.

However, the surveys also revealed significant opportunities for improvement in internal communications, employee empowerment, leadership and trust. Accordingly, the FDIC began a multi-year initiative in 2008 to fundamentally remake its organizational culture to address these issues. Through the use of cross-organizational teams and a steering committee, the FDIC engaged employees in a process of identifying and implementing changes to improve communications, enhance employee engagement and involvement, and improve leadership behaviors and competencies. The 2008 employee survey results showed marked improvement in each of these areas while maintaining or slightly improving on past areas of strength.

The Corporation also worked with its employee union in 2008 to develop a new pay-for-performance system that is more transparent to employees and is perceived by employees to be fairer than the former system. The new performance management/pay-for-performance system will be implemented in 2009.

Employee Learning and Growth
The FDIC promotes the continuous learning and development of its employees and provides resources to employees for training through the pilot Professional Learning Accounts (PLA) Program. The pilot has been extended into 2009 and will continue to provide time and funds for employees to pursue training they have selected in collaboration with their supervisors.

The FDIC has also developed several training programs to equip employees with advanced technical skills. Many of these programs are in direct support of the FDIC ’s increased workload related to the financial crisis:

• In 2008, the FDIC designed and executed large bank failure tabletop and simulation exercises to further its readiness to address such events. These exercises helped further prepare the agency for the economic stresses which occurred in the second half of 2008 and are ongoing in 2009. In 2009, the Corporation will continue with its development of various advanced large bank training programs to expand and ensure the continuing availability of the technical skills required to insure, examine and, if necessary, resolve the failure of large or complex insured financial institutions.

• In 2008, the Corporation began implementation of the resolutions and receiverships commissioning programs. The first trainees were assigned to this program in late 2008, and additional staff will be assigned to it in 2009.

• The FDIC will continue to provide leadership development program offerings for executives, managers and supervisors to prepare the FDIC’s current and future leaders to meet the Corporation’s ever-growing challenges. These programs provide a solid foundation of talent to address succession management needs and promote workforce flexibility.

In 2008, the FDIC established a new Dallas Learning Center (DLC) as an integral part of its operations. The DLC is responsible for the design and delivery of relevant, quality training for newly-hired employees performing resolutions and receivership management duties in both the Dallas Regional Office and the WCSO. In 2009, the DLC will continue to provide learning in support of the FDIC’s changing workload needs and will begin work on the creation of a training facility that will provide simulated learning opportunities to ensure the FDIC’s readiness to handle future bank examination and failure tasks.

The Corporation will also launch a new learning management system, FDICLearn, in 2009. This system will provide new support tools for managers and easy access to on-line courses for employees. In addition, the FDIC will use all of its learning programs in 2009 as opportunities to strengthen its organizational culture, build key competencies, and promote the importance of its corporate values.

Financial Resources Management
The FDIC’s operational expenses are largely paid from the investment earnings on the DIF and the assessments paid by insured financial institutions. The Corporation takes very seriously its fiduciary responsibilities to use these funds in an efficient and cost-effective manner to meet its mission responsibilities. To that end, the Corporation engages annually in a rigorous planning and budget formulation process to ensure that budgeted resources reflect and are properly aligned with workload projections and designated corporate priorities.

The FDIC’s 2009 Corporate Operating Budget totals $2.24 billion. This increase of more than $1 billion over 2008 spending is needed to adequately respond to current turmoil in the banking industry and maintain stability in the banking system. The increase is largely attributable to continuing work associated with recent bank failures and the provision of contingency funding for the possible continuation of an elevated number of bank failures in 2009.

Responsiveness to Business Needs
During 2009, support for bank resolutions is expected to continue to be an extremely high priority, eclipsing any other resource commitment, if necessary, to meet statutory requirements and business goals. Implementation of the TLGP will also continue to be a priority into 2009.

Although specific initiatives have not yet been identified, programs or program changes are expected that will require substantial IT support during 2009. As time and resources permit, the FDIC will continue to execute the IT strategic plan with the expectation that any new system project starts will be deferred until higher priority work has been adequately addressed or the current economic and industry workload drivers begin to subside.

Enhanced Corporate Privacy Program
The FDIC is committed to protecting the security of sensitive information that it receives from financial institutions and individuals. The Corporate Privacy Program requires mandatory privacy training for all FDIC employees and contractors to ensure that they are aware of the requirements for safeguarding sensitive information and know where to obtain privacy-related reference material. The expansion of the FDIC workforce will increase the workload associated with this mandatory training in 2009. The Corporation will continue in 2009 to enhance IT security and privacy programs to address new and evolving risks by improving controls over sensitive data, increase privacy considerations into the decision-making process of all FDIC divisions, offices, and lines of business, implement methodology to effectively evaluate the associated privacy and security risks of third-party vendors servicing FDIC, and increase privacy considerations into the decision-making process of all FDIC divisions, offices, and lines of business.

Enhanced Information Security Program
The FDIC’s information security program seeks to proactively assure the integrity, confidentiality, and availability of corporate information by requiring an ongoing commitment by employees throughout the organization. In 2009, the FDIC will focus on ensuring that the Corporation is in compliance with all laws and directives regarding security, such as Office of Management and Budget Circular A-130, the Federal Information Security Management Act, the E-Government Act, and guidance from the National Institute of Standards and Technology. In addition, 2009 initiatives will include the continuation of penetration testing to identify and eliminate external vulnerabilities, and completion of the three-year certification and accreditation reviews.

Enterprise Risk Management
As an integral part of its stewardship of the DIF, the FDIC maintains a comprehensive risk management and internal control program, which is designed to promote continuous improvements in efficiency, effectiveness, control, and risk-focusing of internal operations throughout the Corporation. The Office of Enterprise Risk Management (OERM) oversees this program by providing guidance and assistance to all divisions and offices on issues such as internal controls, system security, privacy, operational effectiveness and efficiency, post-project reviews, and audit follow-up. During 2009, OERM will continue its efforts on those initiatives and will focus on key corporate issues, including continuing work on TLGP, issues relating to contract oversight management, anticipated increases in bank failures, and the Corporation’s core business functions.