Testimony

Before the Subcommittee on Technology and

Procurement Policy

Committee on Government Reform, U.S. House of

Representatives

United States General Accounting Office

GAO

For Release on Delivery

Expected at 2:00 EDT

Thursday, October 4, 2001 HUMAN CAPITAL

Attracting and Retaining a

High-Quality Information

Technology Workforce

Statement of David L. McClure

Director, Information Technology Management Issues

GAO-02-113T
Human Capital: Attracting and Retaining a

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Workforce

Page 1 GAO-02-113T

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to discuss with you this afternoon the federal

government’s strategic management challenges in the area of human

capital, particularly regarding the information technology workforce. Few

management tasks facing federal agencies are more critical to their ability

to serve the nation than attracting, retaining, and motivating people. As

our society has transitioned from the industrial age to the knowledge age,

organizations have come to recognize people as their most critical assets.

Because people create knowledge and put it to practical use, the success

or failure of federal agencies, like that of other organizations, depends on

having the right number of people with the right mix of knowledge and

skills. This is especially true in the information technology (IT) area,

where widespread shortfalls in human capital have contributed to

shortfalls in agency and program performance.

In previous testimony, we have presented our recommended three-stage

approach to human capital reform.1

 First, in the near term, agencies can

improve their human capital management by taking advantage of the

authorities already available to them under current laws and regulations.

Second, the Administration and the Congress should consider legislation

to allow agencies more flexibility and give them new tools to attract,

retain, and motivate employees—both overall and in critical occupations

such as those in IT. Third, all interested parties should work together to

determine further, possibly more comprehensive human capital reforms.

In my remarks today, I will

• discuss why we view strategic human capital management as an area of

high risk, particularly in light of expected long-term demand for a skilled

IT workforce;

• summarize the progress of agencies in addressing IT human capital needs;

• describe the consistency between suggestions we have raised in prior

testimonies and those provided in a recent report on federal IT human

 1 Human Capital: Taking Steps to Meet Current and Emerging Human Capital Challenges

(GAO-01-965T, July 2001).
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capital needs issued by the National Academy of Public Administration;2

and

• highlight some important challenges that must be addressed in moving IT

human capital reform from proposals to implementation.

We at GAO use the term human capital because (unlike traditional terms

such as personnel and human resource management) it focuses on two

principles that are critical in a modern, results-oriented management

environment:

• First, people are assets whose value can be enhanced through investment.

As the value of people increases, so does the performance capacity of the

organization and therefore its value to clients and other stakeholders. As

with any investment, the goal is to maximize value while managing risk.

• Second, an organization’s human capital approaches must be aligned to

support the mission, vision for the future, core values, goals and

objectives, and strategies by which the organization has defined its

direction and its expectations for itself and its people. An organization’s

human capital policies and practices should be designed and implemented

to achieve these goals, and assessed accordingly.

In January 2001, we added strategic human capital management to our list

of federal programs and operations identified as high risk.3

 However, we

stress that federal employees are not the problem; rather, the problem is a

long-standing lack of effective leadership and management, along with the

lack of a strategic approach to marshaling, managing, and maintaining the

human capital needed for government to discharge its responsibilities and

deliver on its promises. As the federal government struggles with the

impact of more than a decade of government downsizing and curtailed

investments in people, it is increasingly clear that today’s federal human

 2 The Transforming Power of Information Technology: Making the Federal Government an

Employer of Choice for IT Employees (National Academy of Public Administration, Aug.

2001).

3 High-Risk Series: An Update (GAO-01-263, Jan. 2001). In addition, see Human Capital:

Meeting the Governmentwide High-Risk Challenge (GAO-01-357T, Feb. 2001).

Background

Strategic Human Capital

Management Is an Area of

High Risk
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capital strategies are not appropriate to meet the needs of the nation’s

government and its citizens.

As agencies wrestle with human capital management, they face a

significant challenge in the information management and technology

areas. The rapid pace of technological change in these areas is reflected in

the investments in information technologies made both in the United

States as a whole and by the federal government. By 2004, information

technology investments are expected to account for more than 40 percent

of all capital investment in the United States. The federal government’s IT

investment is conservatively estimated in fiscal year 2002 to be $44

billion—an increase in federal IT spending of 8.6 percent from fiscal year

2000.4

This substantial investment should provide opportunities for increasing

productivity and decreasing costs. For example, the public sector is

increasingly turning to the Internet to conduct paperless acquisitions,

provide interactive electronic services to the public, and tailor or

personalize information. As we testified in July, there are over 1,300

electronic government initiatives throughout the federal government,

covering a wide range of activities involving interaction with citizens,

business, other governments, and government employees.5

 In addition, the

Government Paperwork Elimination Act (GPEA) of 1998 requires that by

October 21, 2003, federal agencies provide the public (when practicable)

the option of submitting, maintaining, and disclosing required information

electronically. We have found that agencies plan to provide an electronic

option for 3,048 eligible activities by the GPEA deadline.6

Despite a decrease in projected demand over the last year, the overall

estimated demand for IT workers remains high. Notwithstanding the

recent economic slowdown, employers from every sector, including the

federal government, are still finding it difficult to meet their needs for

highly skilled IT workers. The Bureau of Labor Statistics projects that the

demand for computer systems analysts, engineers, and scientists will

 4

 Published data from agency Exhibit 53s (as required by OMB Circular A-11), ClingerCohen Act Report on Federal Information Technology (IT) Investments (Apr. 9, 2001).

5

 Electronic Government: Challenges Must Be Addressed With Effective Leadership and

Management (GAO-01-959T, July 2001).

6 Electronic Government: Better Information Needed on Agencies’ Implementation of the

Government Paperwork Elimination Act (GAO-01-1100, Sep. 2001).

Rapid Changes in

Information Technology

Require a Skilled and WellManaged Workforce

Demand for Skilled IT

Workers Remains

Substantial
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almost double between 1998 and 2008, and the demand for computer

programmers will increase by 30 percent during the same time period. 7

In April 2001, the Information Technology Association of America (ITAA)

released a study on the size of the private-sector IT workforce, the demand

for qualified workers, and the gap between the supply and demand.8

Among the study’s findings were the following:

• Information technology employment directly accounts for approximately

7 percent of the nation’s total workforce. Over 10.4 million people in the

United States are IT workers, an increase of 4 percent over the 10 million

reported for last year.

• Overall estimated demand for IT workers is down from last year’s forecast

(by 44 percent), partially because of the slowdown in the high-tech sector

and the economy in general. However, the demand for IT workers remains

high, as employers attempt to fill over 900,000 new IT jobs in 2001. Hiring

managers reported an anticipated shortfall of 425,000 IT workers in 2001

because of a lack of applicants with the requisite technical and

nontechnical skills.

The ITAA also reported that despite softening in overall demand, skills in

technical support, database development/administration, programming/

software engineering, web development/administration, and network

design/administration remain most in demand by IT and non-IT companies

alike. These positions represent nearly 86 percent of the demand for IT

workers expected in 2001. The study further notes that the demand for

enterprise systems professionals and network designers and

administrators is expected to increase by 62 and 13 percent, respectively,

over the 2000 forecast.

 7 “The 1998–2008 Job Outlook in Brief,” Occupational Outlook Quarterly (Bureau of Labor

Statistics, Spring 2000).

8 When Can You Start? Building Better Information Technology Skills and Careers

(Information Technology Association of America, Apr. 2001).
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For the IT workforce in particular, agencies are beginning to take action

by initiating strategies and plans to attract, retain, and/or train skilled

workers. Nevertheless, much remains to be done, as agencies generally

lack comprehensive strategies for IT human capital management.

To date, we have issued several products on IT human capital

management, including studies of practices at four agencies: the Small

Business Administration, the United States Coast Guard, the Social

Security Administration, and the Centers for Medicare and Medicaid

Services.9

 These evaluations focused on agency practices needed to

maintain and enhance the capabilities of IT staff. These practices fall in

four key areas:

• Requirements—assessing the knowledge and skills needed to effectively

perform IT operations to support agency mission and goals

• Inventory—determining the knowledge and skills of current IT staff so

that gaps in needed capabilities can be identified

• Workforce strategies and plans—developing strategies and

implementing plans for hiring, training, and professional development to

fill the gap between requirements and current staffing

• Progress evaluation—evaluating progress made in improving IT human

capital capability, and using the results of these evaluations to

continuously improve the organization’s human capital strategies

In July, we reported that agencies’ progress in addressing IT human capital

strategies had been sluggish.10 Specifically, we stated that although

agencies were initiating strategies and plans to attract, retain, and/or train

a skilled IT workforce, key issues in each of the four areas mentioned

above were not being effectively addressed.

 9

Information Technology Management: SBA Needs to Establish Policies and Procedures for

Key IT Processes (GAO/AIMD-00-170, May 2000); Information Technology Management:

Coast Guard Practices Can Be Improved (GAO-01-190, Dec. 2000); Information Technology

Management: Social Security Administration Practices Can Be Improved (GAO-01-961, Aug.

2001); and Medicare: Information Systems Modernization Needs Stronger Management and

Support (GAO-01-824, Sep. 2001).

10 Human Capital: Building the Information Technology Workforce to Achieve Results

(GAO-01-1007T, July 2001).

Agencies Are Making

Limited Progress in

Addressing IT Human

Capital Issues
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In the area of requirements, several of the agencies we reviewed had

begun evaluating their short and longer term IT needs. However, none of

them had completed these efforts. For instance, we found that the Small

Business Administration did not have any policies or procedures to

identify requirements for IT skills. Also, although the U.S. Coast Guard had

conducted an assessment of the knowledge and skills needed by its IT

officers and enlisted personnel, it had not done so for its civilian

workforce.

Although an IT inventory identifying the knowledge and skills of current

staff is essential to uncovering gaps between current staff and

requirements, our work to date has revealed that none of the reviewed

agencies had a complete knowledge and skills inventory. For example, the

U.S. Coast Guard and the Small Business Administration maintained a

limited amount of information on IT knowledge and skills, and the Social

Security Administration lacked an IT-specific knowledge and skills

inventory.

In addition to establishing requirements and creating an inventory, an

agency needs to develop a workforce plan that is linked to its strategic and

program planning efforts. The workforce plan should identify its current

and future human capital needs, including the size of the workforce, its

deployment across the organization, and the knowledge, skills, and

abilities needed for the agency to pursue its shared vision. The workforce

planning strategy should specifically outline the steps and processes that

an agency should follow when hiring, training, and professionally

developing staff to fill the gap between requirements and current staffing.

Among the four agencies we reviewed, none had developed

comprehensive IT-specific workforce strategies or plans. For example,

although the Social Security Administration did have a broad workforce

transition plan that includes actions to improve its processes (for

projecting workforce needs, for recruiting, and for training and developing

employees), these actions were not specific to IT staff.

Finally, meaningful progress evaluation systems are necessary to

determine whether agency human capital efforts are effective and to

ensure that the results of these evaluations are used to make

improvements. While agencies we reviewed did track various human

capital efforts, such as progress in filling IT positions, none of the agencies

had fully analyzed or reported on the effectiveness of their workforce

strategies and plans.
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Shortcomings in IT human capital management have serious ramifications.

Without complete assessments of requirements, agencies will lack

assurance that they have identified the number of staff and the specific

knowledge and skills needed or that they have developed strategies to fill

these needs. Also, without an inventory of knowledge and skills, agencies

will not have assurance that they are optimizing the use of their current IT

workforce, nor will they have data on the extent of skill gaps. This

information is necessary for developing effective workforce strategies and

plans. If they cannot analyze and document the effectiveness of workforce

strategies and plans, senior decisionmakers will lack assurance that they

are effectively addressing knowledge and skill gaps.

Judging from trends, the shortage of qualified IT professionals is likely to

lead to greater reliance on contracted workers, so that agencies can

supplement their existing workforces with external expertise. Indeed,

from fiscal year 1990 to 2000, federal spending on contracted IT services

increased from $3.7 billion to about $13.4 billion.

Relying on contracting to fill workforce gaps is not a panacea. We have

previously reported that some procurements of services are not being

done efficiently, putting taxpayer dollars at risk.11 In particular, agencies

were not clearly defining their requirements, fully considering alternative

solutions, performing vigorous price analyses, or adequately overseeing

contractor performance. Also, agencies appear to be at risk of not having

enough of the right people with the right skills to manage service

procurements. Following a decade of downsizing and curtailed

investments in human capital, federal agencies currently face skills,

knowledge, and experience imbalances that, without corrective action,

will worsen, especially in light of the numbers of federal workers

becoming eligible to retire in the coming years. Consequently, a key

question we face in the federal government is whether we have today, or

will have tomorrow, the ability to acquire and manage the procurement of

the increasingly sophisticated services that the government needs.

As we recently testified,12 past efforts at workforce reduction were not

always oriented toward shaping the makeup of the force. For example, the

 11 Contract Management: Trends and Challenges in Acquiring Services (GAO-01-753T, May

2001).

12 Human Capital: Major Human Capital Challenges at the Departments of Defense and

State (GAO-01-565T, Mar. 2001).

Agency Reliance on

Contracted IT Services

Requires Improved

Oversight Capabilities
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Department of Defense (DOD) found that its workforce reductions had led

to a serious shortfall in the acquisition workforce. To improve the

efficiency of contracting operations—and in part to help offset the effects

of this shortfall—the department instituted streamlined acquisition

procedures. However, the DOD Inspector General reported that the

efficiency gains from the streamlined procedures had not kept pace with

acquisition workforce reductions. The Inspector General reported that

while the workforce had been reduced by half, DOD’s contracting

workload had increased by about 12 percent13 and that senior personnel at

14 acquisition organizations believed that workforce reductions had led to

such problems as less contractor oversight.

Unless these reductions in the acquisition workforce are addressed, they

could undermine the government’s ability to efficiently acquire contract

services, including IT services.

The challenges facing the government in maintaining a high-quality IT

workforce are long-standing and widely recognized. As far back as 1994,

our study of leading organizations revealed that strengthening the skills of

IT professionals is a critical aspect of strategic information management.14

Specifically, leading organizations identify existing IT skills and needed

future skills, as well as determining the right skill mix. Accordingly, we

suggested that executives should systematically identify IT skill gaps and

targets and integrate skill requirements into performance evaluations. In

our more recent study of public and private sector efforts to build effective

Chief Information Officer (CIO) organizations,15 we found that leading

organizations develop IT human capital strategies to assess their skill

bases and recruit and retain staff who can effectively implement

information technology to meet business needs.

The federal CIO Council has been actively studying issues related to IT

human capital, focusing on the government’s ability to attract, retain, and

train a qualified workforce. To examine the magnitude of federal IT human

 13 DOD Acquisition Workforce Reduction Trends and Impacts (Office of the Inspector

General, Department of Defense, Feb. 29, 2000).

14 Executive Guide: Improving Mission Performance Through Strategic Information

Management and Technology (GAO/AIMD-94-115, May 1994).

15 Maximizing the Success of Chief Information Officers: Learning from Leading

Organizations (GAO-01-376G, Feb. 2001).

Recommendations

Regarding IT Human

Capital Have Been

Consistent
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capital challenges and suggest possible solutions, the CIO Council asked

the National Academy of Public Administration (NAPA) to study IT

compensation strategies and to make recommendations on how the

government can best compete for IT talent.16

NAPA’s resulting study noted a number of problems inherent in the federal

government’s human resource management system. These problems

included a pay gap with the private sector and a compensation system that

is overly focused on internal equity. The study commented that current

pay disparities with the private sector, overly narrow pay ranges, and the

inadequacy of special pay rates hinder the government’s ability to compete

for IT workers. Regarding compensation, the study noted that the current

system is closely aligned with internal equity by law, regulation, and

practice, with little real attention paid to external equity and contribution

equity.17 According to the study, private sector organizations typically

consider and establish a strategic balance among internal, external, and

contribution equity in determining pay rates and reward structures.

NAPA’s study also includes an evaluation of two alternative compensation

models. The first of these makes limited changes to the current General

Schedule (GS) system, such as eliminating steps and combining some

grades. The second is a market-based model that introduces more

comprehensive reforms, including increased emphasis on performance

and competencies. NAPA’s study concluded that the second model

embodies the best approach to human capital reform. NAPA’s

recommendations are shown in table 1.

 16 The Transforming Power of Information Technology: Making the Federal Government an

Employer of Choice for IT Employees (National Academy of Public Administration, Aug.

2001).

17 In an internal equity system, pay is determined by the relative value of each job within an

organization. External equity is based on a comparison with similar jobs throughout the

labor market. Contribution equity is based on an employee’s performance and contribution

relative to other employees.
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Table 1: NAPA Recommendations

NAPA recommendation Description

Establish a market-based, payfor-performance compensation

system.

This compensation approach would establish broad

pay ranges, tie base pay to market rates, and link

increases in pay to competencies and results to attract

and retain IT talent.

Allow for flexibility in the

treatment of individuals and

occupations.

The new compensation system would ensure that

managers have the flexibility to pay individual workers

for their respective skills and competencies as well as

their contributions to the organization.

Improve recruiting and hiring

processes.

The new compensation system for IT professionals

needs to be linked to faster, enhanced recruitment and

hiring processes.

Balance the three dimensions

of equity.

A new federal IT compensation system would provide

a better balance among internal equity (that is, equity

among government jobs), external equity (between

jobs in the government and in other sectors), and

contribution equity (among individual employees).

Offer competitive benefits. The new system would offer a more competitive

benefits package for senior technical employees as

well as executives.

Promote work/life balance

programs.

Federal managers and human resources specialists

must actively market work/life benefits and programs

so that potential IT workers are aware of them.

Encourage management

ownership.

Managers must (1) actively participate in the design

and implementation of agency-specific features of the

new system, (2) be rewarded for effectively

implementing and managing the system, and (3) be

held accountable for not carrying out their

management responsibilities.

Support technical currency and

continuous learning.

Agency management should design and support

developmental activities such as formalized training,

on-the-job training, computer-assisted learning, selfinstructional guides, coaching, and other approaches.

Build in reliability, clarity, and

transparency.

Agency budgets and management decisions must

support full implementation of the new system. The

new system must be reliable, meaning that it

consistently conforms with policies so that the same

set of circumstances always leads to a fair decision

and result.
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Although we have not analyzed all aspects of these recommendations,

many of them are consistent with suggestions we have made in prior

testimonies,18 as well as with the practices that we have instituted in our

own internal human capital management. For example, we have suggested

that government pay systems should be based on performance and

contributions rather than on longevity. Similarly, in our own human capital

management at GAO, we have implemented pay for performance and are

developing a competency-based evaluation system. We have also

suggested that government employers use more flexible approaches to

setting pay; in our own human capital management system, we have

instituted broad pay bands for mission staff. More examples are given in

table 2, which compares the NAPA recommendations with related

suggestions we have made in previous work and practices we have

adopted within GAO.

Table 2: Comparison of NAPA Recommendations with GAO Suggestions and Current Practices

NAPA GAO suggestions/practices

recommendations GAO suggestions GAO’s own practices

Establish a marketbased, pay-forperformance

compensation system.

• Provide authority to establish Senior Level

positions.

• Address pay compression between the

maximum and lower SES pay levels, perhaps

by delinking federal executive compensation

from congressional pay, or by raising the cap

on executive performance bonuses.a

• Established Senior Level positions to meet certain

scientific, technical, and professional needs.

• Established pay for performance system.

• Developing a competency model/competency-based

appraisal system.

• Offering pay bonuses to attract and retain workers

for hard-to-fill positions, such as IT positions

requiring specific technical skill sets.

Allow for flexibility in the

treatment of individuals

and occupations.

• Provide more flexible pay approaches.

• Revise Reduction in Force (RIF) rules.a

• Provide authority to offer voluntary early

retirement.a

• Provide authority to offer voluntary separation

incentives.a

• Pursue phased retirement approaches,

whereby federal employees with needed

skills could change from full-time to part-time

employment and receive a portion of their

federal pension while still earning pension

credits.a

• Using broadbanding system for mission staff.

• Revised Reduction in Force (RIF) rules.

• Have authority to offer voluntary early retirement.

• Have authority to offer voluntary separation

incentives.

 18 Human Capital: Taking Steps to Meet Current and Emerging Human Capital Challenges

(GAO-01-965T, July 2001); Human Capital: Managing Human Capital in the 21st Century

(GAO/T-GGD-00-77, Mar. 2000); Human Capital: Meeting the Governmentwide High-Risk

Challenge (GAO-01-357T, Feb. 2001); Human Capital: Building the Information Technology

Workforce to Achieve Results (GAO-01-1007T, July 2001).
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NAPA GAO suggestions/practices

recommendations GAO suggestions GAO’s own practices

Improve recruiting and

hiring processes.

• Improve the federal hiring system.

• Authorize agencies to use appropriated funds

for selective recruiting, recognition, and team

building activities.a

• Provide more hiring flexibility in such fields as

information technology, where there is severe

competition with other sectors for talent.

• Use enabling technology to improve hiring

processes.

• Using a 25-percent pay differential (equal to the

OPM pay differential for executive branch IT hires) to

bring aboard entry-level IT staff.

• Using noncompetitive hiring authority (e.g.,

internship program, critical skills program).

• Enhancing our Applicant Tracking System and

exploring Web-based recruitment services to

advertise vacancies, receive and process

applications, and support recruitment targeted for

specific skills.

Balance the three

dimensions of equity.

Offer competitive

benefits.

• Provide flexible “cafeteria” benefits such as

those available to many private sector

workers under Section 125 of the Internal

Revenue Service Code.a

• Allow employees who travel on government

business to keep their “frequent flyer” miles.a

• Institute phased retirement, allowing federal

employees with needed skills to change from

full-time to part-time employment and receive

a portion of their federal pension while still

earning pension credits.a

• Implemented recognition and awards program.

• Pay commuting subsidies (pending).

• Establish college loan repayment fund (pending).

Promote work/life

balance programs.

• Implemented Flexitime and Flexiplace.

• Established business casual dress.

• Established a day-care facility.

• Established a fitness center.

Encourage

management

ownership.

• Improve employee accountability.

• Establish performance management systems

that assess and reward employee

performance in light of organizational goals

and values.

• Establishing a competency-based appraisal system

that underscores agency goals and values, which

are linked to the agency strategic plan.

Support technical

currency and

continuous learning.

• Enhance career development and training,

and promote continuous learning.

• Authorize agencies to use appropriated funds

to pay for selected professional certifications,

licensing, and professional association costs.a

• Establish fellowships with the private sector,

particularly in critical occupations.a

• Making use of contractor resources in the IT area to

supplement both the numbers and skills of

government employees.

• Transitioning from traditional classroom training to an

approach that balances classroom training with

online training delivered at the desktop, as well as

other learning experiences.

Build in reliability,

clarity, and

transparency.

• Perform workforce and succession planning.

• Create mission and vision statements.

• Develop strategic planning and performance

measurement processes.

• Align human capital policies and practices

with organizational missions and core values.

• Use teams, including “just-in-time” and

“virtual” teams.

Implemented the following:

• Human capital self-assessment checklist

• Human capital profile/planning

• Employee feedback survey and suggestion program

• Employee Advisory Council

• Enhanced employee communications/participation

• Skill/knowledge inventory

• Employee preference survey a Legislative action is required to permit this practice.
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As noted in table 2, we have identified and made use of a variety of tools

and flexibilities to address our human capital challenges; some of these

were made available to us through the GAO Personnel Act of 1980 and

some through legislation passed by the Congress in 2000, but most are

available to all federal agencies. Figure 1 shows those flexibilities that

were made available to us through legislation.

Figure 1: Legislative Flexibilities Used to Address GAO’s Human Capital Challenges

Broadbanding system for mission staff

Noncompetitive hiring authority (e.g., internship, critical skills programs)

Special pay rates

Positions at Senior Level for technical staff

Targeted early outs and buyout authority

Revised Reduction in Force (RIF) rules

Regarding our own IT and other technical staff, we have taken a number

of steps to address our workforce needs, including the following:

• Using a 25-percent pay differential (equal to the OPM pay differential for

executive branch IT hires) to bring aboard entry-level technical staff for

our IT team.

• Offering pay bonuses in attracting and retaining workers for hard-to-fill

positions, such as IT positions requiring specific technical skills.

• Making wide use of contractor resources in the IT area to supplement both

the numbers and skills of government employees. Currently, about 60

percent of the staff supporting GAO internal IT operations and initiatives

are contractor staff. Given staffing constraints and market conditions, we

have found this arrangement to work very well. We focus our training of

in-house staff on project management, contract management, and

technical training to ensure sound project management and oversight of

the contractors. Using contractor resources has given us the ability to

quickly bring on staff with the IT skills needed to carry out new

projects/initiatives.

• Using the authority that the Congress provided in our 2000 legislation to

create Senior Level positions to meet certain scientific, technical, and

professional needs and to extend to those positions the rights and benefits

of SES employees. One of the areas targeted was IT. We recently

established four new Senior Level technical IT positions and provided
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other specialists—such as our Chief Statistician and Chief Accountant—

with new titles and SES-equivalent benefits.

We believe that three of the authorities provided in our 2000 legislation

may be appropriate to other agencies and are worth congressional

consideration at this time. Authority to offer voluntary early retirement

and voluntary separation incentives could give agencies additional

flexibilities with which to realign their workforces, correct skills

imbalances, and reduce high-grade, managerial, or supervisory positions

without reducing their overall number of employees. Further, the authority

to establish Senior Level positions could help agencies become more

competitive in the job market, particularly in critical scientific, technical,

or professional areas, such as IT.

Implementing reforms in human capital management will present

significant challenges. Among most difficult will be (1) the sustained

commitment demanded from the executive and legislative branch leaders,

including agencies, the Office of Management and Budget (OMB), the

Office of Personnel Management (OPM), and Congress, and (2) the

cultural transformation that will be required by a new approach to human

capital management.

In its report on IT human capital, NAPA also recognizes the importance of

these two factors. The report identifies a number of steps that would be

required for implementation of a new system (see figure 2). Among these,

NAPA includes the need to promote leadership by identifying champions

for the new system within agencies. Further, NAPA acknowledges in its

discussion that implementing its recommendations will challenge the

existing culture of many agencies, and it recommends change management

and training efforts for both managers and employees.

Figure 2: NAPA’s Suggested Actions for Implementation of its Recommendations

Identify champions for the new system in the political and career leadership of each

agency.

Translate the report recommendations into legislative and programmatic action items.

Translate the legislative and programmatic decisions into detailed agency-by-agency

action items.

Develop communications and education strategies.

Develop a detailed plan to carry out these strategies.

Provide sufficient funding for both the system and the implementation activities.

Reform

Implementation Faces

Challenges
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 15 GAO-02-113T

We agree that the steps that NAPA describes are essential elements for an

effective implementation strategy. We have, for example, identified six

elements that our work suggests are particularly important in

implementing and sustaining management improvements that actually

resolve the problems they address.19 These elements are (1) a

demonstrated leadership commitment and accountability for change;

(2) the integration of management improvement initiatives into

programmatic decisionmaking; (3) thoughtful and rigorous planning to

guide decisions, particularly to address human capital and information

technology issues; (4) employee involvement to elicit ideas and build

commitment and accountability; (5) transforming organizational culture

and aligning organizations to streamline operations and clarify

accountability; and (6) strong and continuing congressional involvement.

I would like to particularly highlight leadership and transforming

organizational culture, two of the key elements in implementing such

reforms.

The sustained commitment of leaders within the executive and legislative

branches is essential to the success of any implementation. The key

players in the human capital area—agency leaders, OPM, OMB, and the

Congress—all need to be actively involved in leading and creating change.

As we have previously testified, the key change for agency leaders who

hope to improve their agencies’ human capital management is to focus on

people as a strategic asset.20 To create a workforce that shares the

agency’s vision and is aware of the contribution that each employee can

make toward achieving it, the agency’s senior leaders must convey this

vision clearly and consistently throughout the organization by their words

and deeds and the example they set. Political appointees and career

managers may bring differing values to the team, but they must work at

building mutual understanding and trust and at committing themselves to

a shared set of goals for their agency. An essential step in achieving these

goals is to create an effective workforce. Senior leadership need to ensure

that their agencies are determining their current and future workforce

needs, assessing how their current and anticipated future workforce

 19 Management Reform: Elements of Successful Improvement Initiatives (GAO/T-GGD-00-

26, Oct. 1999).

20 Human Capital: Meeting the Governmentwide High-Risk Challenge (GAO-01-357T, Feb.

2001).

Implementation Will

Require Sustained,

Committed Leadership

Agency Leaders Need to Focus

on Human Capital
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 16 GAO-02-113T

compares with these needs, and developing effective strategies to fill the

gaps.

A useful tool for assessing overall human capital management is GAO’s

human capital framework, which identifies a number of human capital

elements and underlying values that are common to high-performing

organizations.21 As our framework makes apparent, agencies must address

a range of interrelated elements to ensure that their human capital

approaches effectively support mission accomplishment. Although no

single recipe exists for successful human capital management, highperforming organizations recognize that all human capital policies,

practices, and investments must be designed, implemented, and assessed

by the standard of how well they support the organization’s vision of what

it is and where it wants to go.

We have previously reported on the crucial roles that OPM and OMB play

in human capital management.22 OPM’s responsibility is to work with

agencies to create systems to effectively recruit, develop, manage, and

retain a high-quality and diverse workforce, and to regulate these systems.

In this capacity, OPM has been emphasizing to agencies the importance of

integrating strategic human capital management into agency planning.23

Among other things, OPM has brought attention to the need to integrate

human capital professionals into agencies’ planning processes.24 OPM has

also taken three steps to alleviate specific IT human capital challenges: it

has established special salary rates for IT professionals (as well as

scientists and engineers), it has issued a new classification standard for IT

specialist positions, and it has piloted a new approach to establishing and

assessing qualifications for IT work. OPM has also been focusing more

attention on developing tools to help agencies. For example, it is

developing a workforce planning model, with associated research tools,

 21 Human Capital: A Self-Assessment Checklist for Agency Leaders (GAO/OCG-00-14G, Sep.

2000).

22 Human Capital: Meeting the Governmentwide High-Risk Challenge (GAO-01-357T, Feb.

2001).

23 See OPM’s Strategic Human Resources Management: Aligning With the Mission (U.S.

Office of Personnel Management, Sep. 1999).

24 See The HR Workforce: Meeting the Challenge of Change (U.S. Office of Personnel

Management, Jan. 2000). See also A Call to Action: A Coalition on the Future of the Federal

Human Resource Management Profession (Federal Section of the International Personnel

Management Association, Sep. 2000).

OPM and OMB Must Be

Leaders in Human Capital

Management
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 17 GAO-02-113T

and has launched a Web site on workforce planning issues to facilitate

information sharing. Further, OPM recently revised the SES performance

management regulations so that in evaluating executive performance,

agencies will use a balanced scorecard of customer satisfaction, employee

perspectives, and organizational results.

In prior testimony, we have pointed out that OPM could make substantial

additional contributions by taking advantage of its ability to facilitate

information-sharing on best practices among human capital managers

throughout the federal government.25 In short, OPM should continue to

move from “rules to tools”; its most valuable contributions will come less

from traditional compliance activities than from its initiatives as a

strategic partner to the agencies.

Like OPM, OMB has increased its efforts to promote strategic human

capital management. OMB’s role in setting governmentwide management

priorities and defining resource allocations is critical to encouraging

agencies to integrate strategic human capital management into their core

business processes. In this role, OMB recently released the FY2002

President’s Management Agenda, which provides the President’s strategy

for improving the management and performance of the federal

government.26 The report identifies strategic management of human capital

as an area for governmentwide improvement. In line with suggestions we

have made, OMB is expecting agencies to take full advantage of existing

authorities to better acquire and develop a high quality IT workforce.

OMB also wants agencies to redistribute staff to front-line service delivery

and reduce the number of organizational layers as they make better use of

IT systems capabilities and knowledge sharing. Also, OMB’s Circular No.

A-11 guidance on preparing annual performance plans states that agencies’

fiscal year 2002 annual performance plans should set goals in such areas

as recruitment, retention, training, appraisals linked to program

performance, workforce diversity, streamlining, and family-friendly

programs.

What is now required is the sustained and forceful leadership to make the

promise of these initiatives a reality. Important areas for attention include

 25 Human Capital: Meeting the Governmentwide High-Risk Challenge (GAO-01-357T, Feb.

2001).

26 President’s Management Agenda for Fiscal Year 2002 (Office of Management and Budget,

August 2001).
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 18 GAO-02-113T

benchmarking and best practices efforts within the executive branch and

greater attention during resource allocation to the links between agency

missions and the human capital needed to pursue them.

We have previously noted that leadership on the part of Congress will be

critical if governmentwide improvements in strategic human capital

management are to occur.27 To raise the visibility of the human capital

issue and move toward a consensus on legislative reforms, both parties in

both houses of Congress must stress commitment to people as an urgent

federal management concern. Among the most encouraging developments

in this regard have been the efforts of this Subcommittee to draw attention

to human capital issues.

Congress has opportunities available through its confirmation, oversight

and appropriations, and legislative roles to ensure that agencies recognize

their responsibilities and have the needed tools to manage their people for

results. For example, Congress can draw wider attention to the critical

role of human capital in the confirmation process, during which the Senate

can make clear its commitment to sound federal management and explore

what prospective nominees plan to do to ensure that their agencies

recognize and enhance the value of their people.28

As part of the oversight and appropriations processes, Congress can

examine whether agencies are effectively managing their human capital

programs. It can also encourage more agencies to use the flexibilities

available to them under current law and to reexamine their approaches to

strategic human capital management in the context of their individual

missions, goals, and other organizational needs.

Further, Congress can play a defining role in determining the scope and

appropriateness of additional human capital flexibilities that agencies may

seek through legislation. When agencies request legislative exceptions

from current civil service constraints, Congress can require that they make

a sound business case based on rational and fact-based analyses of their

 27 Human Capital: Meeting the Governmentwide High-Risk Challenge (GAO-01-357T, Feb.

2001).

28 Toward this end, we have developed a set of questions for political appointees that the

Senate may use during the confirmation process. See Confirmation of Political Appointees:

Eliciting Nominees’ Views on Leadership and Management Issues (GAO/GGD-00-174, Aug.

2000).

Congressional Leadership Will

Be Critical to Improving

Human Capital

Governmentwide
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 19 GAO-02-113T

needs, the constraints under which they presently operate, and the

flexibilities available to them. For example, before we submitted human

capital legislative proposals for GAO last year, we made sure not only to

identify in our own minds the human capital flexibilities that we needed,

but also to give Congress a clear indication of our needs, our rationale, and

the steps we were taking to maximize benefits and manage risks.

Ultimately, Congress may wish to consider comprehensive legislative

reform in the human capital area to give agencies the tools and reasonable

flexibilities they need to manage effectively while retaining appropriate

safeguards. As part of this effort, Congress may also wish to consider the

extent to which traditional “civil service” approaches—structures,

oversight mechanisms, rules and regulations, and direction-setting—make

sense for a government that is largely a knowledge-based enterprise that

has adopted and is now implementing modern performance management

principles.

Another critical challenge for implementing any reform is addressing

needed changes in prevailing organizational cultures. As we have noted in

previous testimony, a cultural transformation will be key for a successful

transition to a new approach to human capital management.29 A culture of

hierarchical management approaches will need to yield to one of

partnerial approaches; process-oriented ways of doing business will need

to yield to results-oriented ones; and organization “silos” will need to

become integrated. Although government organizations have often proven

to be slow to make these kinds of cultural changes, agencies that expect to

make the best use of their human capital will need to create a culture that

strongly emphasizes performance and supports employees in

accomplishing their missions. Such a culture will include appropriate

performance measures and rewards and a focus on continuous learning

and knowledge management.

Organizational performance problems are often linked to organizational

culture. For example, a “siloed” culture at the Federal Aviation

Administration was one of several underlying causes of acquisition

problems in the agency’s multibillion-dollar modernization program, which

has experienced cost overruns, schedule delays, and significant

 29 Human Capital: Meeting the Governmentwide High-Risk Challenge (GAO-01-357T, Feb.

2001).

Organizational Cultures

Will Require Change
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 20 GAO-02-113T

performance shortfalls.30 Cultural issues have also been linked to longstanding security problems at Department of Energy weapons

laboratories, and to intractable waste, fraud, abuse, and mismanagement

problems in the Social Security Administration’s high-risk Supplemental

Security Income program.31 Overcoming such problems requires

overcoming the barriers that result from an entrenched organizational

culture.

Implementing new approaches to human capital management will require

agency leaders and managers to steer their organizational cultures in a

new direction. A number of tools and strategies are available for this

purpose, including modern performance management and incentive

approaches—directed at either individuals or teams—to help empower

and motivate staff, reward high performance, and ensure accountability.

(For example, our study on the use of executive performance agreements

found that despite variations among agencies reflecting differing agency

goals and priorities, such agreements produce a consistent range of

benefits, including strengthening alignment of goals with daily operations

and fostering collaboration across organizational boundaries.32) Since the

1995 revision of the federal government’s performance appraisal and

rewards policies, agencies have more flexibility than previously to develop

and (with OPM approval) implement performance appraisal systems to

meet their specific goals and needs. Such flexibility is important as

agencies try to establish a “line of sight” between individual employees

and agency goals and objectives. The effort required is not trivial: agencies

we have studied have struggled to link employee performance

expectations to agency goals.33 Further, many agencies have reported that

they do not know whether their incentive programs are effectively

motivating their employees.34 These problems underscore the need for

 30 Major Management Challenges and Program Risks: Department of Transportation (GAO01-253, Jan. 2001).

31 Major Management Challenges and Program Risks: Social Security Administration (GAO01-261, Jan. 2001).

32 Managing for Results: Emerging Benefits From Selected Agencies’ Use of Performance

Agreements (GAO-01-115, Oct. 2000).

33 Managing for Results: Using GPRA to Assist Oversight and Decisionmaking (GAO-01-

872T, June 2001).

34 Human Capital: Using Incentives to Motivate and Reward High Performance (GAO/TGGD-00-118, May 2000).
Human Capital: Attracting and Retaining a

High-Quality Information Technology

Workforce

Page 21 GAO-02-113T

innovation and flexibility in human capital management, as well as

continual efforts to capture data not only on employee performance, but

also on the effectiveness of agencies’ efforts at human capital

management.

In summary, Mr. Chairman, designing, implementing, and maintaining

effective human capital strategies for all federal workers, but particularly

for the IT workforce, will be critical to achieving the goals of maximizing

the performance and ensuring the accountability of the federal

government. In a performance management environment where federal

agencies are held accountable for delivering improvements in program

performance, the “people dimension” is of paramount importance.

Overcoming human capital management challenges will determine how

successfully the federal government can build, prepare, and manage its

workforce.

Mr. Chairman, this concludes my statement. I would be pleased to respond

to any questions that you or other members of the Subcommittee may

have at this time.

For further information regarding this testimony, please contact me at

(202) 512-6240 or by email at mcclured@gao.gov. Individuals making key

contributions to this testimony included Barbara Collier and Margaret

Davis.

Contacts and

Acknowledgements

(310427)

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