United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Financial 

Services and General Government, 

Committee on Appropriations, House of 

Representatives

HUMAN CAPITAL 

Federal Workforce 

Challenges in the 21st 

Century 

Statement of J. Christopher Mihm 

Managing Director, Strategic Issues 

For Release on Delivery

Expected at 10:00 a.m. EDT 

Tuesday, March 6, 2007 

 

GAO-07-556T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 6, 2007

HUMAN CAPITAL

Federal Workforce Challenges in the 21st 

Highlights of GAO-07-556T, a testimony Century 

before the Subcommittee on Financial 

Services and General Government, 

Committee on Appropriations, House of 

Representatives 

The federal government is facing

new and more complex challenges

in the 21st century because of longterm fiscal constraints, changing

demographics, evolving 

governance models, and other 

factors. Strategic human capital 

management, which remains on 

GAO’s high-risk list, must be the

centerpiece of any serious change

management and transformation

effort to meet these challenges. 

However, federal agencies do not

consistently have the modern, 

effective, economical, and efficient 

human capital programs, policies, 

and procedures needed to succeed

in their transformation efforts. In

addition, the Office of Personnel 

Management (OPM) must have the 

capacity to successfully guide 

human capital transformations. 

This testimony, based on a large

body of GAO work over many 

years, focuses on strategic human 

capital management challenges

that many federal agencies 

continue to face.

What GAO Recommends

This testimony underscores 

recommendations made to OPM in

January 2007 to improve its 

capacity for future reforms. OPM 

has said it has made progress 

toward achieving its operational 

and strategic goals. In addition, this

testimony serves as a guide to 

Congress as it scrutinizes agencies’ 

transformation plans, capabilities, 

and measurable results to make

informed funding decisions during 

a period of likely sustained budget 

constraints. 

Federal agencies continue to face strategic human capital challenges in: 

Leadership: Top leadership in agencies across the federal government must 

provide committed and inspired attention needed to address human capital 

and related organizational transformation issues. However, slightly less than 

half of respondents to the 2006 Federal Human Capital Survey reported a 

high level of respect for senior leaders while only 38 percent agreed or 

strongly agreed that leaders in their organizations generate high levels of 

motivation and commitment in the workforce. 

Strategic Human Capital Planning: Strategic human capital planning that 

is integrated with broader organizational strategic planning is critical to 

ensuring agencies have the talent they need for future challenges, especially 

as the federal government faces a retirement wave. Too often, agencies do 

not have the components of strategic human capital planning needed to 

address their current and emerging human capital challenges. 

Acquiring, Developing, and Retaining Talent: Faced with a workforce

that is becoming more retirement eligible and finding gaps in talent, agencies 

need to strengthen their efforts and use of available flexibilities to acquire, 

develop, motivate, and retain talent. Agencies are not uniformly using 

available flexibilities to recruit and hire top talent and to address the current 

and emerging demographic challenges facing the government. 

Results-Oriented Organizational Culture: Leading organizations create a

clear linkage—“line of sight”—between individual performance and 

organizational success and, thus, transform their cultures to be more resultsoriented, customer-focused, and collaborative. However, in many cases, the 

federal government does not have these linkages and has not transformed 

how it classifies, compensates, develops, and motivates its employees to 

achieve maximum results within available resources and existing authorities. 

Agencies are facing strategic human capital challenges in a period of likely

sustained budget constraints. Budget constraints will require agencies to 

plan their transformations more strategically, prioritize their needs, evaluate

results, allocate their resources more carefully, and react to workforce 

challenges more expeditiously in order to achieve their missions 

economically, efficiently, and effectively. 

OPM will continue to play a key role in fostering and guiding strategic 

human capital management improvements in the executive branch and in 

helping agencies meet transformation challenges. Although making 

commendable efforts in transforming itself to more a consultant, toolmaker, 

and strategic partner in leading and supporting agencies’ human capital 

management systems, OPM has itself faced challenges in its capacity to 

assist, guide, and certify agencies’ readiness to implement reforms. 

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

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact J. Christopher 

Mihm at (202) 512-6806 or mihmj@gao.gov. 
Chairman Serrano and Members of the Subcommittee: 

Thank you for the opportunity to be here today to discuss challenges in

the management of today’s federal workforce. Driven by long-term fiscal 

constraints, changing demographics, evolving governance models, and 

other factors, the federal government is facing new and more complex 

challenges in the 21st century and federal agencies must transform their 

organizations to meet these challenges. Strategic human capital 

management must be the centerpiece of any serious change management 

strategy. In 2001, we identified human capital management as a 

governmentwide high-risk area because federal agencies lacked a strategic 

approach to human capital management that integrated human capital

efforts with their missions and program goals.1

 Although progress has been

made, the area remains on our most recent high-risk list because there is 

still the need for a governmentwide framework to advance human capital 

reform. This framework is essential to avoid further fragmentation within 

the civil service, ensure management flexibility as appropriate, allow a 

reasonable degree of consistency, provide adequate safeguards, and 

maintain a level playing field among agencies competing for talent.2

Federal agencies do not always have the right people in the right jobs at 

the right time to meet the challenges they face. Today and in the near term, 

the federal government is facing a retirement wave and with it the loss of 

leadership and institutional knowledge at all levels. Agencies not only face 

a fiercely competitive market for talent but hiring is also affected by 

uncompetitive salaries in some critical occupations and lengthy hiring 

processes. Federal employees also operate in a culture where there is 

often not a clear line of sight between individual effort and organization 

results. Of particular concern, federal agencies do not consistently have 

the modern, effective, economical, and efficient human capital programs, 

policies, and procedures they need to succeed in their transformation 

efforts. As the government’s human capital leader, the Office of Personnel 

Management (OPM) has a key role in helping executive branch agencies 

build the needed infrastructure to support their transformation efforts. At 

the request of the Chairman and Ranking Minority Member of the Senate 

Committee on Homeland Security and Governmental Affairs and the 

Chairman and Ranking Minority Member of the Subcommittee on 

Oversight of Government Management, the Federal Workforce, and the 

 1

GAO, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: January 2001). 

2

GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007). 

Page 1 GAO-07-556T 
District of Columbia, Senate Committee on Homeland Security and 

Governmental Affairs, we are undertaking a body of work examining 

OPM’s internal capacity to lead and implement governmentwide human 

capital reform. 

My remarks today, based on a large body of GAO work over many years, 

will focus on the strategic human capital management challenges that 

agencies continue to face in four key areas: 

• Leadership: Top leadership in the agencies must provide the committed 

and inspired attention needed to address human capital and related 

organization transformation issues. In addition, OPM, as the government’s 

human capital leader, must have the internal capacity to lead agencies’ 

efforts.

• Strategic Human Capital Planning: Agencies’ human capital planning 

efforts need to be fully integrated with mission and critical program goals. 

Too often, agencies do not have the components of strategic human 

capital planning needed to address their current and emerging challenges. 

• Acquiring, Developing, and Retaining Talent: Augmented efforts are 

needed to improve recruiting, hiring, professional development, and 

retention strategies to ensure that agencies have the needed talent. 

Agencies need to ensure that they are using flexibilities available to them 

to recruit and hire top talent and to address the current and emerging 

demographic challenges facing the government. 

• Results-Oriented Organizational Cultures: Organizational cultures 

need to promote high performance and accountability and empower and

include employees in setting and accomplishing programmatic goals. In 

many cases, the federal government has not transformed how it classifies, 

compensates, develops, and motivates its employees to achieve maximum 

results within available resources and existing authorities. Congress has 

recently taken important steps in this direction by providing the 

Departments of Defense (DOD) and Homeland Security (DHS) with 

authorities intended to help them manage their people more strategically.

Agencies not only face these challenges in moving forward but do so 

during a period of likely sustained budget constraints. However, budget 

constraints should not be viewed as an insurmountable obstacle to needed

human capital reform. Rather, tighter budgets will require agencies to plan 

their transformations more strategically, prioritize their needs, evaluate 

results, allocate their resources more carefully, and react to workforce 

challenges more expeditiously in order to achieve their missions 

economically, efficiently, and effectively. Although human capital reforms 

often require an investment of budgetary resources, many of these costs 

Page 2 GAO-07-556T 
are one-time in nature that can pay future dividends through more efficient 

agency operations. In the current fiscal environment, Congress will need 

to scrutinize agencies’ transformation plans, capabilities, and measurable 

results to make informed funding decisions. 

Leadership in agencies across the federal government is essential to 

providing the accountable, committed, consistent, and sustained attention

needed to address human capital and related organization transformation

issues. Leaders must not only embrace reform, they must integrate the 

human capital function into their agencies’ core planning and business 

activities. Senior executive leadership is especially key today as the 

federal government faces significant reform challenges. OPM’s 2006 

Federal Human Capital Survey (FHCS) results showed that the 

government needs to establish a more effective leadership corps.3

 For 

example, slightly less than half of employees responding to the survey 

reported a high level of respect for their senior leaders or are satisfied 

with the information they receive from management on what is going on in

the organization. Similarly, only 38 percent of respondents agreed or 

strongly agreed with the statement that leaders in their organization 

generate high levels of motivation and commitment in the workforce. This

represents little change from the 2004 survey when 37 percent of 

respondents had positive responses to this question. However, a majority 

of respondents, 58 percent, agreed or strongly agreed that managers 

communicate the goals and priorities of the organization. This level of

response is essentially the same as the 2004 survey when 59 percent of 

respondents provided a positive response to this item. 

OPM plays a key role in fostering and guiding improvements in all areas of 

strategic human capital management in the executive branch. As part of its 

key leadership role, OPM can assist—and as appropriate, require—the 

building of the infrastructures within agencies needed to successfully 

implement and sustain human capital reforms and related initiatives. OPM 

can do this in part by encouraging continuous improvement and providing 

appropriate assistance to support agencies’ efforts. For example, OPM has 

exerted human capital leadership through its Human Capital Scorecard of

Sustained Leadership 

Is Essential to 

Successful 

Transformations 

 3

Office of Personnel Management, 2006 Federal Human Capital Survey: Results from the

2006 Federal Human Capital Survey (Washington, D.C.: Jan. 17, 2007). The survey 

involved a sample of full-time, permanent employees from agencies making up 97 percent

of the executive branch workforce, with the results generalizable to the population covered

by the survey. 

Page 3 GAO-07-556T 
the President’s Management Agenda to assist agencies in improving 

strategic management of their human capital. Also, OPM has developed 

the governmentwide FHCS to assist agencies and OPM in better 

understanding specific and governmentwide agency workforce 

management conditions and practices in the areas of leadership, 

performance culture, and talent. Most recently, OPM began a television 

campaign to promote federal employment and has undertaken a greater 

focus on succession planning to respond to the forthcoming federal 

retirement wave. 

However, in leading governmentwide human capital reform, OPM has 

itself faced challenges in its capacity to assist, guide, and certify agencies’ 

readiness to implement reforms. We recently reported that OPM has made 

commendable efforts in transforming itself from less a rulemaker, 

enforcer, and independent agent to more a consultant, toolmaker and 

strategic partner in leading and supporting executive agencies’ human 

capital management systems.4

 We also reported on OPM’s leadership of 

transformation efforts. Using the new senior executive performance-based 

pay system and other recent human capital reform initiatives as a model 

for understanding OPM’s capacity to lead and implement future human 

capital reforms, we identified seven key lessons learned, which are 

(1) ensure internal OPM capacity to lead and implement reform, (2) ensure 

that executive branch agencies’ infrastructures support reform, 

(3) collaborate with the Chief Human Capital Officer (CHCO) council, 

(4) develop clear and timely guidance, (5) share best practices, (6) solicit 

and incorporate feedback, and (7) track progress to ensure accountability. 

In addition to the lessons learned that can be applied to future human 

capital reforms, we recommended, among other things, that OPM 

(1) improve its capacity for future reforms by reexamining its own 

agencywide skills and (2) address issues specific to senior executive pay 

systems, such as sharing best practices and tracking progress towards 

goals. OPM has said that it has made progress toward achieving its 

operational and strategic goals.5

Equally important is OPM’s leadership in federal workforce diversity and 

oversight of merit system principles. In our review of how OPM and the 

 4

GAO, Office of Personnel Management: Key Lessons Learned to Date for Strengthening

Capacity to Lead and Implement Human Capital Reforms, GAO-07-90 (Washington, D.C.: 

Jan. 19, 2007). 

5

GAO-07-90. 

Page 4 GAO-07-556T 
Equal Employment Opportunity Commission (EEOC) carry out their 

mutually shared responsibilities for helping to assure a fair, inclusive, and 

nondiscriminatory federal workplace, we found limited coordination 

between the two agencies in policy and oversight matters.6

 The lack of a 

strategic partnership between the two agencies and an insufficient 

understanding of their mutual roles, authority, and responsibilities can 

result in a lost opportunity to realize consistency, efficiency, and public 

value in federal equal employment opportunity and workplace diversity 

human capital management practices. We recommended that OPM and 

EEOC regularly coordinate in carrying out their responsibilities under the 

equal employment opportunity policy framework and seek opportunities 

for streamlining like reporting requirements. Both agencies acknowledged 

that their collaborative efforts could be strengthened but took exception

to the recommendation to streamline requirements. We continue to believe 

in the value of more collaboration. As of August of last year, the two 

agencies had begun discussions on ways to increase coordination. 

Strategic human capital planning is the centerpiece of federal agencies’ 

efforts to transform their organizations to meet the governance challenges

of the 21st century. Generally, strategic workforce planning addresses two 

critical needs: (1) aligning an organization’s human capital program with 

its current and emerging mission and programmatic goals and (2) 

developing long-term strategies for acquiring, developing, motivating, and 

retaining staff to achieve programmatic goals. The long-term fiscal outlook

and challenges to governance in the 21st century are prompting 

fundamental reexaminations of what government does, how it does it, and 

who does it. Strategic human capital planning that is integrated with 

broader organizational strategic planning is critical to ensuring agencies 

have the talent they need for future challenges. 

An agency’s strategic human capital plan should address the demographic 

trends that the agency faces with its workforce, especially pending 

retirements. In 2006, OPM reported that approximately 60 percent of the 

government’s 1.6 million white-collar employees and 90 percent of about 

6,000 federal executives will be eligible for retirement over the next 10 

years. We have found that leading organizations go beyond a succession 

Strategic Human 

Capital Planning Is 

Critical to Agencies’ 

Transformation 

 6

GAO, Equal Employment Opportunity: Improved Coordination Needed between EEOC 

and OPM in Leading Federal Workplace EEO, GAO-06-214 (Washington, D.C.: June 16,

2006). 

Page 5 GAO-07-556T 
planning approach that focuses on simply replacing individuals and engage 

in broad, integrated succession planning and management efforts that 

focus on strengthening both current and future organizational capacity to

obtain or develop the knowledge, skills, and abilities they need to meet 

their missions.7

 For example, about one third of the Nuclear Regulatory 

Commission’s (NRC) workforce with mission-critical skills will be eligible 

to retire by 2010.

8

 At the same time, NRC’s workforce needs to expand 

because NRC expects to receive applications for new nuclear power 

reactors beginning in October 2007. Although there is room for further 

improvement, we found that NRC’s human capital planning framework is 

generally aligned with its strategic goals and coherently identifies the 

activities needed to achieve a diverse, skilled workforce and an 

infrastructure that fully supports the agency’s mission and goals. The 

agency’s framework included using its human capital authorities, 

developing a critical skills and gaps inventory tool, and using targets and 

measures to monitor the composition of its hires and separations. NRC has 

been effective in recruiting, developing, and retaining a critically skilled 

workforce, though it is unclear if this trend will continue in the next few 

years. 

We also have reported in recent years on a number of human capital issues 

that have hampered the Department of State’s ability to carry out U.S. 

foreign policy priorities and objectives, particularly at posts central to the 

war on terror.9

 For example, the department initiated a number of efforts 

to improve its foreign language capabilities. However, it has not 

systematically evaluated the effectiveness of these efforts, and it continues 

to experience difficulties filling its language-designated positions with 

language proficient staff. We reported that these gaps in language 

proficiency can adversely affect the department’s ability to communicate 

with foreign audiences and execute critical duties.

Another example of the government’s strategic human capital planning 

challenges involves its acquisition workforce. The government 

increasingly relies on contractors for roles and missions previously 

 7

GAO, Human Capital: Succession Planning and Management Is Critical Driver of 

Organizational Transformation, GAO-04-127T (Washington, D.C.: Oct. 1, 2003). 

8

GAO, Human Capital: Retirements and Anticipated New Reactor Applications Will 

Challenge NRC’s Workforce, GAO-07-105 (Washington, D.C.: Jan. 17, 2007).

9

GAO, Department of State: Staffing and Foreign Language Shortfalls Persist Despite

Initiatives to Address Gaps, GAO-06-894 (Washington, D.C.: Aug. 4, 2006).

Page 6 GAO-07-556T 
performed by government employees. Acquisition of products and services 

from contractors consumes about a quarter of discretionary spending 

governmentwide and is a key function in many federal agencies. We 

reported in 2003 that because of a more sophisticated business 

environment, most acquisition professionals would need to acquire a new 

set of skills focusing on business management.10 In a forum hosted by the 

Comptroller General in July 2006, acquisition experts reported that agency 

leaders have not recognized or elevated the importance of the acquisition 

profession within their organizations, and a strategic approach has not 

been taken across government or within agencies to focus on workforce 

challenges, such as creating a positive image essential to successfully 

recruit and retain a new generation of talented acquisition professionals.11

Faced with a workforce that is becoming more retirement-eligible and

finding gaps in talent because of changes in the knowledge, skills, and 

competencies in occupations needed to meet their missions, agencies need 

to strengthen their efforts and use of available flexibilities to acquire, 

develop, motivate, and retain talent.

A chronic complaint about the federal hiring process is its lengthy 

procedures, which puts the federal government at a competitive 

disadvantage. In recent years, Congress, OPM, and agencies have taken 

significant steps to streamline the hiring process. For example, Congress 

has provided agencies with flexibilities such as the use of categorical 

rating and exemptions from the pay and classification restrictions of the 

General Schedule. OPM’s efforts included improvements to the USAJOBS 

Web site as well as other measures, such as job fairs and television 

commercials, to make the public more aware of the work federal 

employees do. OPM has also established a model 45-day hiring program—

the time-to-hire period from the date a vacancy announcement closes to 

the date a job offer is extended. In addition, OPM has developed a Hiring 

Tool Kit on its website to help agencies improve their hiring processes. 

Moreover, OPM assists agencies on the use of student employment 

program flexibilities, which can expedite the hiring process and lead to 

noncompetitive conversion to permanent employment. Our work, 

Acquiring, 

Developing, and 

Retaining Talent

Remains a Federal 

Workforce Challenge 

 10GAO, Acquisition Workforce: Status of Agency Efforts to Address Future Needs, 

GAO-03-55 (Washington, D.C.: Jan. 17, 2003).

11GAO, Highlights of a GAO Forum: Federal Acquisition Challenges and Opportunities 

in the 21st Century, GAO-07-45SP (Washington, D.C.: Oct. 6, 2006). 

Page 7 GAO-07-556T 
however, has found that agencies’ use of the tools and flexibilities that 

Congress has provided has been uneven.12 OPM has made some progress in 

assessing how agencies are using their hiring flexibilities and authorities. 

For example, in January of this year, we reported that OPM began working

with a contractor in 2005 to review hiring flexibilities and authorities to 

determine which ones are used and not used, who is using them, and when 

and how they are being used.13 As a result of its work with the contractor, 

OPM plans to survey eight CHCO Council agencies to evaluate the use and 

effectiveness of hiring authorities and flexibilities and use the results to 

improve policies in these areas. This is a positive step on OPM’s part as we 

continue to believe that more needs to be done to provide information to 

help agencies meet these human capital needs. 

Developing and maintaining workforces that reflect all segments of society 

and our nation’s diversity is a key part of agencies’ recruitment challenge.

For example, the National Aeronautics and Space Administration (NASA) 

said it must compete with the private sector for the pool of Hispanics 

qualified for aerospace engineering positions, which is often attracted by 

more-lucrative employment opportunities in the private sector in more 

preferable locations.14 To address the situation, part of NASA’s strategy in 

recruiting Hispanics focuses on increasing educational attainment, 

beginning in kindergarten and continuing into college and graduate school, 

with the goal of attracting students into the NASA workforce and 

aerospace community. NASA centers sponsor, and its employees 

participate in, mentoring, tutoring, and other programs to encourage 

Hispanic and other students to pursue careers in science, engineering,

technology, and math. NASA also developed a scholarship program 

designed to stimulate a continued interest in science, technology, 

engineering, and mathematics. Another example is the U.S. Air Force 

“Grow Your Own” aircraft maintenance program at three of its Texas 

bases. In partnership with vocational-technical schools, the program 

includes both on-the-job training and classroom education to provide a 

pool of trained candidates, including Hispanics, to replace retiring federal 

civilian aircraft maintenance workers. 

 12GAO, Human Capital: Increasing Agencies’ Use of New Hiring Flexibilities, 

GAO-04-959T (Washington, D.C.: July 13, 2004). 

13GAO-07-90. 

14GAO, The Federal Workforce: Additional Insights Could Enhance Agency Efforts Related

to Hispanic Representation, GAO-06-832 (Washington, D.C.: Aug. 17, 2006).

Page 8 GAO-07-556T 
In addition to hiring, agencies need to have effective training and 

development programs to address gaps in the skills and competencies that

they identified in their workforces. We have issued guidance that 

introduces a framework, consisting of a set of principles and key questions 

that federal agencies can use to ensure that their training and development 

investments are targeted strategically and are not wasted on efforts that 

are irrelevant, duplicative, or ineffective.15 Training and developing new 

and current staff to fill new and different roles will play a crucial part in 

the federal government’s endeavors to meet its transformation challenges. 

Of some concern, however, is the 2006 FHCS, which showed about half, or

54 percent, of respondents were very satisfied or satisfied with the training 

they receive on their current jobs, little change from the 2004 survey, 

which showed 55 percent had positive responses to this question. 

High-performing organizations have found that to successfully transform 

themselves they must often fundamentally change their cultures so that 

they are more results-oriented, customer-focused, and collaborative in 

nature. An effective performance management system is critical to 

achieving this vital cultural transformation. Effective performance 

management systems are not merely used for once- or twice-yearly 

individual expectation setting and rating processes, but are tools to help 

the organization manage on a day-to-day basis. These systems are used to

achieve results, accelerate change, and facilitate two-way communication 

throughout the year so that discussions about individual and

organizational performance are integrated and ongoing. Moreover, leading 

public sector organizations both in the United States and abroad create a 

clear linkage—line of sight—between individual performance and 

organizational success and, thus, transform their cultures to be more 

results-oriented, customer-focused, and collaborative in nature.16

The government’s senior executives need to lead the way in transforming

their agencies’ cultures. Credible performance management systems that 

align individual, team, and unit performance with organizational results 

can help manage and direct this process. The performance-based pay 

system that Congress established in November 2003 for members of the 

Results-Oriented 

Organizational 

Culture Is Key to 

High-Performing 

Agencies 

 15GAO, Human Capital: A Guide for Assessing Strategic Training and Development

Efforts in the Federal Government, GAO-04-546G (Washington, D.C.: Mar. 1, 2004). 

16GAO, Results-Oriented Cultures: Creating a Clear Linkage between Individual

Performance and Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003).

Page 9 GAO-07-556T 
senior executive service (SES) seeks to provide a clear and direct linkage

between performance and pay for the government’s senior executives and 

is an important step toward governmentwide transformation.17 Under this 

performance based pay system, senior executives no longer receive annual 

across-the-board pay increases or locality-pay adjustments. Executive

branch agencies are to now base pay adjustments for senior executives on

individual performance and contributions to agency performance through 

an evaluation of their skills, qualifications, or competencies as well their 

current responsibilities.18

Just as it has for senior executives, the federal government needs to 

fundamentally rethink its current approach to paying nonexecutive 

employees by better linking their pay to individual and organizational 

performance. Today’s jobs in knowledge-based organizations require a 

much broader array of tasks that may cross the narrow and rigid 

boundaries of job classifications of the General Schedule system. Since 

being exempted from the General Schedule system, DOD and DHS have 

been moving toward occupational clusters and pay bands that better 

define occupations and facilitate movement toward performance 

management systems that create a line of sight between performance and 

organizational results, make meaningful differences in performance, and 

appropriately reward those who perform at the highest levels. 

The results of the 2006 FHCS underscore the need for serious attention to

the way federal employees are assessed and compensated. About a third,

or 34 percent, of the respondents strongly agreed or agreed with the 

statement that promotions in their work units are based on merit. When 

respondents were asked if pay raises in their work units depend on how 

well employees perform their jobs, only 22 percent responded positively. 

These responses are consistent with past survey results. Further, 

somewhat less than a third of the survey respondents had a positive 

response to the question about whether their leadership and management 

recognized differences in performance in a meaningful way. Highperforming organizations have found that actively involving employees 

and key stakeholders, such as unions and other employee associations, 

helps gain ownership of new performance management systems and 

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

18GAO, Human Capital: Aligning Senior Executives’ Performance with Organizational 

Results Is an Important Step Toward Governmentwide Transformation, GAO-06-1125T 

(Washington, D.C.: Sept. 26, 2006). 

Page 10 GAO-07-556T 
improves employees’ confidence and belief in the fairness of the systems. 

In addition, adequate safeguards need to be built into the performance 

management system to ensure fairness and to guard against abuse. Using 

safeguards, such as having an independent entity conduct reasonableness 

reviews of performance management decisions can help allay concerns 

and build a fair, credible, and transparent system. 

In summary, Mr. Chairman, we need to continue to move forward with 

appropriate human capital reforms. But how reform is done, when it is 

done, and the basis on which it is done can make all the difference in 

whether such efforts are successful. Before implementing significant 

human capital reforms, especially reforms that make stronger links 

between employee pay and performance, executive branch agencies 

should follow a phased approach that meets a “show me” test. That is, 

each agency should be authorized to implement reform only after it has 

shown that it has met certain conditions, including having the institutional 

infrastructure to effectively and fairly implement any new authorities. 

Mr. Chairman and Members of the Subcommittee, this completes my 

prepared statement. I would be pleased to respond to any questions you or 

others may have at this time. 

For further information regarding this statement, please contact 

J. Christopher Mihm, Managing Director, Strategic Issues, at (202) 512-

6806, or mihmj@gao.gov. Individuals making key contributions to this 

testimony include Anthony P. Lofaro, Assistant Director; Ami J. Ballenger;

Thomas M. Beall; Crystal M. Bernard; William Doherty; Karin K. Fangman; 

and Anthony R. Patterson. 

Contact and 

Acknowledgments 

Page 11 GAO-07-556T (450568) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER