## April 12, 2004

# 

# [INSPECTION MEMORANDUM]{.underline}

**To:** Phillip Maestri, Director

Management Improvement Team

**From:** Cathy H. Lewis

Assistant Inspector General

Evaluation, Inspection, and Management Services

**Subject:** **Completion of Blueprint for Management Excellence Action
Item Number 221 (ED/OIG I13D0020)**

This memorandum provides the results of our inspection of one Action
Plan item from the Department of Education's (Department's) Blueprint
for Management Excellence. The EIMS group is examining several Action
Plan items related to Human Capital. Our objective is two-fold: 1) were
the items completed as described; and, 2) as completed, does the action
taken help the Department towards its stated Blueprint objective. In
this report, we examined action item number 221, implementation of a
leadership and succession-planning model.

## Background

GAO placed strategic management of human capital as a government-wide
high-risk area in 2001. One of the four human capital challenges
identified by GAO was leadership and continuity planning. The importance
of the strategic management of human capital is reflected in the
President's Management Agenda (PMA), and the PMA, referencing the GAO
report, cites the need for, among other activities, human resources
planning to address upcoming retirements, as well as greater attention
to recruiting and retaining a highly qualified workforce. This PMA
objective is reflected in the Department's own Strategic Plan goal
number 6.2.

MIT item number 221, implementation of a leadership and
succession-planning model was designated by the Department as
"completed" on March 31, 2003. According to the MIT, the designation of
"completed" means the MIT obtained documentation from the action owner
to demonstrate that the action was finalized.

The action required for this item was to:

> **"Implement the leadership and succession-planning model by the end
> of the 2002-2003 rating cycle."**

The comments field for this item states, "Succession-planning model was
redefined through the competitive sourcing initiative. One-ED business
case analyses analyze roles and responsibilities for business functions.
This information is being used for success (*sic)* planning."

According to the MIT, the products that were the basis for the
"completed" designation are the four Business Case Analysis studies done
by the Office of Post Secondary Education (OPE), Office of the Chief
Financial Officer (OCFO), Office of the General Counsel (OGC), and the
Office for Civil Rights (OCR). The other Department offices that
participated in Phase One of One-ED were identified for competition
under the One-ED plan and, therefore, were not required to complete a
leadership and succession plan.

## Objective 1: Was the item completed as described? 

*The four One-ED business cases do not adequately address succession
planning.*

Finding 1: Leadership and succession planning received little or no
discussion in the four Business Case Analysis studies relied upon to
close this action item. The OCR study simply states that a succession
plan is being developed outside of the One-ED process. The OGC Business
Case Analysis also does not create a leadership or succession plan, but
merely states that any attorney present could perform the task of any
more senior attorney who might leave. Based on our interviews with
One-ED team members from these offices, we confirmed that the teams did
not focus on leadership and succession planning in the development of
their business cases.

Leadership and succession planning typically includes a range of issues,
including modernization of the workforce, improving workforce
performance, investing in employee training and development, increasing
performance and maintaining accountability. None of the plans address
these areas. In addition, none of the studies offered a "roadmap" for
how the primary office plans to prepare for the departure of key
management personnel by fostering a cadre of properly trained
subordinates, nor was there any information on how the primary office
was prepared to handle the issue of knowledge management. A plan to
ensure the continuity of knowledge assets that are vulnerable to the
departure of key management positions was recognized by GAO as an
element of a comprehensive succession plan.

Each of the four Business Case Analysis studies focused only on one
portion of the total mission of each of the offices and none of the
Business Case Analysis studies considered the entire spectrum of duties
for which the primary office was responsible. For example, the OCFO
Business Case Analysis examined its role in the internal audit/post
audit process; however, OCFO has many other functions, none of which
were reviewed. The OCFO Business Case Analysis included only five FTE
from the primary office. OCFO has approximately 291 FTE; therefore, 286
FTE were not considered as part of this analysis.

A recent General Accounting Office (GAO) study[^1] cited planning and
management initiatives currently being used by agencies in several
countries that the GAO believes adequately prepare them for the future.
These agencies:

-   Link succession planning to strategic planning.

-   Identify talent early in their careers or with critical skills from
    multiple organizational levels.

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-   Emphasize developmental assignments in addition to formal training.

-   Address specific human capital challenges, such as diversity,
    leadership

> capacity and retention.

None of these type of actions was observed in the One-ED related
documentation provided to us.

Objective 2: As completed, does the action taken help the Department
towards its stated Blueprint objective (to improve the strategic
management of the Department's human capital)?

Finding 2: While OMB accepted the One-ED report as the Department's
Human Capital Plan, the One-ED strategic investment process, as
implemented to date, will not yield a comprehensive, consistent
strategic approach to workforce planning, including leadership and
succession planning. The process results in a stove-piped analysis of a
limited number of the Department's business functions. The Department
has eighteen primary offices; however, only the four primary offices
mentioned above were instructed by the MIT to complete a leadership and
succession plan. The other offices that participated in Phase 1 did not
address leadership or succession planning at all. To the extent that
these issues were addressed, in no business case was there a leadership
and succession plan that would enable management to respond to workforce
attrition and future requirements and ensure a well-trained staff able
to deliver quality services within their component let alone throughout
the Department.

In reviewing other agencies' efforts, such as the Internal Revenue
Service (IRS) Leadership and Planning model, we found that leadership
and succession planning is well suited for an agency-wide effort.
However, in the One-ED approach, each primary office appears to be left
to define its own leadership and succession plan. This has resulted in
the offices reviewed creating widely different (if any) plans, none of
which adequately address leadership and succession planning.

A recent GAO report[^2] suggests that leading organizations go beyond a
succession planning approach that focuses on simply replacing
individuals to engage in broad, integrated succession planning and
management efforts that focus on strengthening both current and future
organizational capacity. As part of this broad approach, these
organizations identify, develop and select successors who are the right
people, with the right skills, at the right time for leadership and
other key positions.

Further, the GAO stated that it is important for federal agencies to
focus not just on

the present but also on future trends and challenges. Succession
planning and management can help an organization become what it needs to
be, rather than simply to recreate the existing organization.

The four businesses cases relied upon to respond to this action step did
not produce leadership or succession planning models. Even if the
discussion of these issues had been more fully developed within their
business cases, given the limited scope and the nature of the One-ED
process, they would still have not moved the Department toward a
comprehensive strategic approach to leadership or succession planning.

Recommendations

1.  The MIT should revisit the designation of action item number 221 as
    "completed."

2.  The Department should rethink its use of One-ED to address
    leadership and succession planning. Even if rewritten, because of
    the problems identified, the current structure of the business cases
    would never be able to comply with the criteria for viable
    leadership and succession plans recommended in the best practices
    and GAO recommendations cited.

3.  The EMT should create Department-wide goals and objectives for
    leadership and succession planning as part of a comprehensive
    Department-wide human capital plan that would then be implemented by
    *all* offices.

# [Department Response]{.underline}

We provided OM with a draft report. We inserted applicable portions of
the Department's comments after each recommendation and included them in
their entirety as an attachment.

The Department response also mentioned "other ED activities." We agree
with the Department, our report did not mention the "larger set of
strategic human capital management activities underway at ED." Our
report was focused strictly on the topic of leadership and succession
planning. We found no indication of succession planning in the Business
Case Analysis, which was used to communicate this initiative.

Recommendation 1:

The MIT should revisit the designation of action item number 221 as
"completed."

## Department Comments

The MIT disagreed with our recommendation, stating that the item was
completed because "a plan was in place and the process underway."
According to the MIT, while information on leadership and succession
planning was generally not included in the One-ED business cases, as
indicated in their closure justification, it was included in the "as-is"
baseline analysis performed by each team and was revisited later in the
process by the teams implementing re-engineered solutions. According to
the MIT, this document included an assessment of retirement eligibility
dates and assessed the entities' potential risk from individuals leaving
the organization and the loss of their institutional knowledge. They
also noted that "roles, responsibilities, knowledge and skills" were
revisited during part 2 of Phase I which began later in 2003 and that
this information and approaches to dealing with skill gaps will be
included in the business cases prepared in Phase II. According to the
MIT, when it updates the current Blueprint "\[a\]ction items necessary
to meet the new PMA scorecard requirement, including leadership
development, will be developed as part of this process."

## OIG Response

This action item was closed on March 31, 2003, based upon the business
cases prepared by OPE, OCFO, OGC and OCR. As discussed in our report,
and as the MIT acknowledges, information of leadership and succession
planning is not generally included in these documents. To the extent
that retirement and knowledge flight risks were assessed as part of the
"as-is" baseline documents prepared by the teams, the information is
insufficient to address the action item. Each of the four teams looked
at only part, and sometimes a very small part, of the business functions
performed by that component, so the scope of any information needed for
the development of a leadership and succession plan is similarly
limited. Further, a leadership and succession plan is more than an
assessment of retirement and knowledge flight risk, or the
identification or roles, responsibilities and skills which will occur
during the reengineering implementation process or even approaches to
addressing skill gaps which apparently will be included in Phase II
business cases. Assessment of future skill needs, a systematic approach
to knowledge management, a strategy to address skill needs and funding
to support implementation of such a plan, how to address recruitment,
hiring and retention issues and a multi-year plan to nurture and develop
leadership skills are essential elements of an effective plan. We have
not modified our recommendation.

Recommendation 2:

The Department should rethink its use of One-ED to address leadership
and succession planning. Even if rewritten, because of the problems
identified, the current structure of the business cases would never be
able to comply with the criteria for viable leadership and succession
plans recommended in the best practices and GAO recommendations cited.

Department Comments:

The MIT agreed that it will "review the use of One-ED process to address
leadership and succession planning as part of the continuous improvement
of that process." The MIT also, however, commented that there are other
strategic human capital management activities underway at ED, that the
Department's larger plan for strategic management of human capital is
generally consistent with the strategies suggested by GAO and other
agencies" and that the Department will be developing "a plan for
establishing a leadership succession pool," and will continue to
implement a recruitment plan process that "will address the need by all
offices, in a Department-wide strategy."

**OIG Response**:

Other activities being undertaken by the Department were beyond the
scope of our inspection activity; however, we have had the opportunity
to review several other MIT action items, classified as "completed,"
that are related to the strategic management of human capital. As a
result of these inspection activities, apart from our concerns about
leadership and succession planning, we identified the lack of a
comprehensive, Department-wide workforce plan, restructuring analysis,
estimate of impact of workforce restructuring on improving program
performance or analysis of how to improve citizen access. We also
identified significant concerns about the Department's efforts to
provide additional recruitment tools for managers. The proposed
leadership succession pool plan is apparently still under development
and cannot be assessed at this time; however, absent a comprehensive
strategic approach by the Department to human capital planning, rather
than the periodic introduction of additional human capital activities,
it is unlikely that the Department ever will be able to develop an
effective human capital plan.

We have not modified our recommendation.

Recommendation 3:

The EMT should create Department-wide goals and objectives for
leadership and succession planning as part of a comprehensive
Department-wide human capital plan that would then be implemented by
*all* offices.

**Department Comments:**

According to the MIT, "future plans for leadership and succession
planning will be discussed by the EMT."

OIG Response:

We have not modified our recommendation.

We appreciate the cooperation shown by your staff during our inspection.

January 8, 2004

To: Cathy H. Lewis

Assistant Inspector General

Evaluation, Inspection and Management Services

From: Phillip Maestri, Director

Management Improvement Team

Subject: Draft Inspection Memorandum (December 3, 2003)

Review of MIT Action Item Number 221 (ED/OIG I13D0020)

"Implement a leadership and succession planning model"

 

Thank you for the opportunity to review and comment on a draft version
of this inspection memorandum.

# 

# [Comments on Background and Findings]{.underline}

***One-ED:*** In this draft memo, OIG describes some limitations that ED
encountered by using the One-ED process as a leadership and
succession-planning tool; however, One-ED produces more relevant
information than is described in the draft memo. There is information in
the "As-Is Baseline" analysis and the "To Be" recommendations documents
that is not repeated in the Business Cases regarding human capital
analysis and planning.

OM describes the relationship between One-ED and human capital planning
as follows:

The One-ED process looked at the current state of the workforce involved
in the business process under review, and analyzed it from a risk
perspective -- risk of loss due to retirement and risk of knowledge
flight (see paragraph below). The One-ED teams also identified the roles
and responsibilities (key work elements, decisions and deliverables)
associated with key positions in the process, as well as those within
the proposed re-engineered solution. The teams that were directed to
implementation by the EMT further explored the roles and
responsibilities of key positions in the re-engineered solution.

The Phase I One-ED teams, in their "As-Is Baseline" analysis, performed
a process risk analysis that included the risk level for managers'
retirement using a risk criteria model that was applied to all of the
retirement eligibility dates for process owners/managers, and for all of
their potential successors. The model/analysis generated an overall risk
level for managers' retirement by looking at the eligibility dates for
the managers and the eligibility dates for all of their potential
successors. A high rating was applied to those managers/successors with
retirement eligibility within next 2 years, a medium rating if
retirement eligibility greater than 2 years but less than 5 years and a
low risk rating if retirement eligibility greater than 5 years. Also,
knowledge flight/process continuity was addressed to define the
potential risk associated with an individual leaving the organization
and the subsequent loss of their institutional knowledge defined as
"knowledge flight risk." The model considers the amount of time a person
spends on a process activity and the grade level (level of experience)
of the person.

The information contained in the "As-Is Baseline" analysis documentation
was not generally repeated in the "Business Case Analysis"
documentation. Although the teams generally identified roles and
responsibilities associated with the key positions in the processes
reviewed in Part 1 of Phase I of One-ED (business case), they revisited
the roles, responsibilities, knowledge and skills during Part 2 of Phase
I (implementation of reengineered solutions).

In Phase II, the teams are incorporating the workforce data in the
business case, drawing from the "As-Is Baseline" analysis and the
"To-Be" vision. Included in the business case is the identification of
the "key" positions and staff names critical to meeting the objective of
the process, their retirement eligibility, and the potential successors
for the key positions. The teams are identifying skills needs by drawing
from the "As-Is Baseline" analysis and comparing to the skills
identified for the key positions in the "To-Be" vision. They will
address approaches to deal with the skills gaps.

***Other ED activities:*** The draft memo does not mention the larger
set of strategic human capital management activities underway at ED. We
agree ED's strategic human capital management approach should take into
consideration information such as that OIG quotes from GAO and other
agencies. The FY 2004 Blueprint contains 15 action items that work
together to promote the strategic management of human capital in the
Department. ED's human capital management activities continue to evolve
as expectations from OPM and OMB are refined, clarified, and changed.
The Department's larger plan for the strategic management of human
capital is generally consistent with the strategies suggested by GAO and
other agencies. Most importantly, as of December 2003, the Department
has committed to OMB, as part of the President Management Agenda
Scorecard, to "develop a plan for establishing a leadership succession
pool."

[Response to recommendations]{.underline}

[Recommendation 1]{.underline}: Revisit the designation of Action as
"completed." The MIT designation of this item as "completed" was
consistent with the rules the MIT followed for closing action items. At
the time the item was designated complete, a plan was in place and the
process underway. The MIT will update the current Blueprint at the
beginning of the year to reflect current PMA, OMB and OPM requirements.
Action items necessary to meet the new PMA scorecard requirement,
including leadership development, will be developed as part of this
process.

[Recommendation 2]{.underline}: Rethink the use of One-ED for leadership
and succession planning. OM will review the use of One-ED process to
address leadership and succession planning as part of the continuous
improvement of that process. In the interim, One-ED will not be the only
leadership and succession planning activity underway. The plan to
"establish a leadership succession pool" and continued implementation of
the Recruitment Plan process will address the need by all offices, in a
Department-wide strategy.

[Recommendation 3]{.underline}: EMT should create Department-wide goals
and objectives for leadership and succession planning. Future plans for
leadership and succession planning will be discussed by the EMT.

[^1]: GAO-04-127T, testimony before the Subcommittee on Civil Service
    and Agency Organization, Committee on Government Reform, House of
    representatives.

[^2]: Ibid.