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[Senate Hearing 107-65]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 107-65

           HIGH RISK: HUMAN CAPITAL IN THE FEDERAL GOVERNMENT

=======================================================================

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
        RESTRUCTURING AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 1, 2001

                               __________

      Printed for the use of the Committee on Governmental Affairs

                   U.S. GOVERNMENT PRINTING OFFICE
70-977                     WASHINGTON : 2001

_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
           JOSEPH I. LIEBERMAN, Connecticut, Ranking Democrat
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
JUDD GREGG, New Hampshire            THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              JEAN CARNAHAN, Missouri
             Hannah S. Sistare, Staff Director and Counsel
     Joyce A. Rechtschaffen, Democratic Staff Director and Counsel
                     Darla D. Cassell, Chief Clerk

                                 ------                                

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND 
                        THE DISTRICT OF COLUMBIA

                  GEORGE V. VOINOVICH, Ohio, Chairman
             RICHARD J. DURBIN, Illinois, Ranking Democrat
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
SUSAN M. COLLINS, Maine              ROBERT G. TORRICELLI, New Jersey
PETE V. DOMENICI, New Mexico         THOMAS R. CARPER, Delaware
THAD COCHRAN, Mississippi            JEAN CARNAHAN, Missouri
                  Kristine I. Simmons, Staff Director
   Marianne Clifford Upton, Minority Staff Director and Chief Counsel
                     Julie L. Vincent, Chief Clerk

                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Durbin...............................................     4
    Senator Akaka................................................     6

                                WITNESS
                       Thursday, February 1, 2001

Hon. David M. Walker, Comptroller General of the United States 
  and Chief Executive Officer, U.S. General Accounting Office, 
  Washington, DC:
    Testimony....................................................     7
    Prepared statement with attachments..........................    27

 
           HIGH RISK: HUMAN CAPITAL IN THE FEDERAL GOVERNMENT

                              ----------                              

                       THURSDAY, FEBRUARY 1, 2001

                                     U.S. Senate,  
       Oversight of Government Management, Restructuring,  
                 and the District of Columbia Subcommittee,
                        of the Committee on Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:30 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Durbin, and Akaka.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The hearing will come to order.
    First, I would say that I am expecting some more of my 
colleagues. I was able to get out of the prayer breakfast a 
little bit sooner than some of them, so I suspect they will be 
coming along in the next couple of minutes.
    I would like to thank you all for coming today. This is the 
first hearing in the 107th Congress of the Subcommittee on 
Oversight of Government Management. Today we will examine the 
decision of the U.S. General Accounting Office to designate 
strategic human capital management across the entire government 
as high risk. To help in that examination, our sole witness 
today is the Hon. David M. Walker, the Comptroller General of 
the United States and the Chief Executive Officer of the U.S. 
General Accounting Office.
    Comptroller General, we are very happy to have you with us 
today, and again I want to express publicly the wonderful 
cooperation that I have received from you during the last 
couple of years. It is heartening to me to know that your 
recently released ``2001 GAO High-Risk Report'' states that, 
``After a decade of government downsizing and curtailed 
investments in human capital, it is becoming increasingly clear 
that today's Federal human capital strategies are not 
appropriately constituted to adequately meet current and 
emerging needs of government and its citizens in the most 
effective, efficient, and economical manner possible. Strategic 
human capital management is a pervasive challenge in the 
Federal Government.'' I agree.
    As anyone who has been following the activities of this 
Subcommittee knows, we have been focusing on the unmet needs of 
the Federal workforce for some time. During the 106th Congress, 
one of the top priorities of the Subcommittee was to raise the 
profile of human capital issues, and I am proud of our record 
in that regard. From July 1999 through May 2000, the 
Subcommittee held six hearings that examined various aspects of 
human capital management. We requested four reports from GAO 
addressing various aspects of the human capital issue, and I 
sponsored and cosponsored important civil service legislation 
that has become law.
    The culmination of the Subcommittee's review was to release 
this past December a report entitled, ``Report to the 
President: The Crisis in Human Capital.'' The findings of the 
Subcommittee leave little doubt that the Federal Government is 
in dire need of a unified strategy to rebuild the civil service 
in light of the demographic and performance challenges it 
confronts. The report includes recommendations for reforming 
human capital management before it reaches critical mass, and I 
think that in some departments we have already reached that. I 
have shared the report with the new administration.
    I must say it is fortuitous that 7 weeks after we issued 
this report stating that there is a crisis, GAO designated 
human capital as high risk. I hope that the work of the 
Governmental Affairs Committee, the General Accounting Office, 
and numerous well-respected think tanks such as The Brookings 
Institution, the National Academy of Public Administration, and 
the Council for Excellence in Government, has settled the 
question that we do have a crisis in human capital. The 
question now is: How are we going to resolve it?
    Mr. Walker, I would like to commend you for sounding the 
alarm over the human capital crisis. We have both been ringing 
the bell over the human capital crisis for the last 2 years, 
and I would like to ring the bell right now. [Rings bell.] Is 
anybody listening?
    There is an old song entitled, ``If I had a Hammer.'' Some 
of the young people here will not remember it. But the fact is 
that we have to get people's attention, and I wish more of my 
colleagues were here this morning. We have to have a wakeup 
call.
    Some of you may wonder why I am so interested in this 
subject. For 18 years, as a mayor and a governor, I lobbied and 
interfaced with the Federal Government. I am the only person in 
the history of this country who has been president of the 
National League of Cities and chairman of the National 
Governors Association. I worked with administrations year in 
and year out, and my observations were that new administrations 
came in and appointed their secretaries, many of whom were 
appointed because of geographic or other reasons; and then, 
there were assistant secretaries and deputy secretaries and so 
on and so forth. Then, they all got on a plane and went around 
the country giving speeches. And the ``A'' team, the people who 
were supposed to get the job done, were basically ignored.
    One thing that I decided to do and one reason why I came to 
the U.S. Senate was to see if we could not do something about 
changing the culture of the workforce of the Federal 
Government. We are here today--and the chickens have come home 
to roost. We have a lot of people who are ready to retire and 
will be retiring, and I am hoping that this administration 
``gets'' it and understands how important the ``A'' team is.
    One rumor that I have heard is that there is some talk 
about eliminating existing Executive orders that deals with 
labor-management partnerships. I have to tell you something: 
Labor-management partnerships are very important if we are 
going to do something about the human capital crisis.
    When I was Governor of Ohio, we initiated a quality 
management program, and we could not have done it without 
cooperation from our unions. We did not call it quality 
management; we called it ``quality services through 
partnership.'' And it was amazing what happened to that 
workforce because of the fact that we started working together, 
created teams, and started to solve problems by committing 
ourselves to continuous improvement.
    So the years of inattention to sound human resource 
management within the Federal Government have taken their toll. 
As I have said on numerous occasions, and it bears repeating 
right now, the average Federal employee is 46 years old. By 
2005, 34 percent of Federal employees will be eligible for 
regular retirement, and 20 percent more will be eligible for 
early retirement. Taken together, that is more than half the 
Federal workforce. Now, I do not expect them all to retire at 
once, but it is a serious problem.
    It is amazing, when I have had people come in, prior to 
confirmation, Senator Durbin and I talk to them. Joe Albaugh, 
who is going to be the new director of FEMA, came in, and I 
asked him if he had looked at his workforce and its 
vulnerability in terms of retirement. And he said, ``I did not 
even know it was a problem.''
    I asked, how many people do you have? He said 2,600. I said 
you are running FEMA, and you are going to have storms and 
tornadoes and floods, and you are going to have to respond. He 
is taking over after James Lee Witt, who I think is probably 
the best director that President Clinton had.
    So there is a potential for exodus. Now, some people say, 
``So what?'' I do hear that. I give speeches, and they say it 
is good to see that we are going to get rid of our Federal 
employees. I am hearing that too often and right now, from some 
people in parts of the administration. Well, you do not have to 
worry about it. We are going to get rid of people. They are 
going to go out the door.
    A nursing shortage could adversely affect the Department of 
Veterans Affairs' efforts to improve patient safety in VA 
facilities and put veterans at risk. The stories about the VA 
and sub-par treatment are notorious.
    But do you want to know something? That is not only a 
problem at the VA; it is a problem throughout the country. We 
need more nurses. And how is the Federal Government going to 
compete if it does not have the tools to bring more nurses on 
board?
    At the Social Security Administration, increasing demand 
for services, imminent retirement of a large part of its 
workforce, changing consumer expectations, and mixed success in 
past technology investments will challenge the agency's ability 
to meet its service delivery demands, which include faster and 
more accurate benefit claims determinations and increased 
emphasis on returning the disabled to work.
    At the Department of Energy, headquarters and field staff 
lack contract management skills to oversee large projects such 
as the cleanup of radioactive and hazardous waste sites.
    I met with the commissioners from the Nuclear Regulatory 
Commission the other day. Six times more people on their 
payroll are over 60 than under 30. They all have Ph.D.'s and 
master's degrees, and the Commissioners are worried about 
losing experienced personnel. How are they going to do their 
work?
    So this is something that we really need to be concerned 
about. In over 30 years, as an elected public servant, I have 
come to learn that the individuals who administer the programs 
and services on which the public depends are the government's 
greatest resource. However, building a world-class civil 
service is not an end in and of itself. The ultimate and most 
important goal is to improve Federal Government programs and 
the delivery of services to the American people, to work harder 
and smarter and do more with less. This can be accomplished 
most effectively by making wise investments in the employees 
who run the programs and know how to make them work.
    It is my hope that the activities of the Subcommittee will 
invite an exchange of ideas and begin a process that will 
dramatically improve the management of human capital in the 
Federal Government.
    I look forward to working on a bipartisan basis with my 
Subcommittee colleagues, the Bush Administration, other Members 
of the Senate and House, as well as the Federal employees 
unions--and I want to make it clear that they are very much a 
part of this. We cannot get this job done without the 
cooperation of our unions, and we have tried to stay in touch 
with them. Public policy think tanks are also important, as 
well as other interested parties.
    I am very pleased with the cooperation that the 
Subcommittee has received, and I look forward to continuing to 
work with everyone.
    The Subcommittee will hold hearings on solutions in the 
near future. The human capital crisis creates an opportunity 
for Congress and the administration to reshape the Federal 
workforce in the 21st Century. It is time for us to roll up our 
sleeves and get to work.
    I am pleased that the Ranking Minority Member of the 
Subcommittee is here with us, Senator Durbin; and Senator 
Akaka, welcome. I was explaining that you were on your way back 
from the prayer breakfast. We are glad to have both of you here 
with us.
    I would now like to call on Senator Durbin for an opening 
statement.

              OPENING STATEMENT OF SENATOR DURBIN

    Senator Durbin. Thank you very much, Senator Voinovich, and 
thank you for this hearing, which is a continuation of an issue 
which we have looked at before, and we should continue to look 
at.
    I think the Chairman has adequately described the scope of 
the problem in terms of the shortfall in Federal civil servants 
who will be available in years to come. It is truly a troubling 
phenomenon when we consider the major responsibilities which we 
entrust to these Federal agencies. We want to make certain that 
we have men and women who are capable and dedicated in those 
positions.
    I am happy that the Comptroller General, David Walker, has 
joined us today to give us his observations.
    I would just like to say in very general terms that I think 
our strong economy is part of the problem in that a lot of job 
opportunities, usually paying more, have become available. 
Perhaps the slowing down, downturn, however you want to 
characterize it, will change that. I hope that that is not the 
tradeoff, that if we want a strong Federal workforce, we have 
to pray that the private sector is not that appealing. I think 
that is a false exchange and one that we should reject. I think 
we can have both a strong economy and a strong public 
workforce, and that is something we ought to focus on in 
creating incentives for people to consider Federal public 
service.
    A year or two ago, the Democrats met and invited a 
gentleman from the Federal Communications Commission to come in 
and talk about some of the things they are facing. The 
interesting thing was that he was a man in his sixties who had 
retired from teaching at a university and was very bright and 
really gave us some insight into some of the more technical 
aspects of Federal oversight of the telecommunications 
industry, which you can imagine is just changing by the day. 
But he quickly added that he did not have the workforce to 
sustain this kind of surveillance and oversight.
    Think about that for a second--where we expect the Federal 
Government to be there as the final arbiter and protector for 
families and businesses across America in so many different 
aspects, and whether we can attract people with the technical 
expertise and dedication to do the job. And he said, quite 
frankly, we cannot. Under the present circumstances in the area 
of information technology and communications, there are just so 
many more appealing opportunities outside government, it is so 
difficult to bring people in.
    There are two additional things that I would like to 
comment on. It was not that long ago that the great Rush 
Limbaugh and others gloried in the closing down of the Federal 
Government, suggesting that the American people would never 
notice. That kind of trash talk from radio personalities 
diminishing the responsibility and role of Federal agencies and 
the people who work there takes its toll on the folks who have 
dedicated their lives to doing the right thing for our country 
by being part of Federal public service.
    The fact is we closed down the government, and people did 
notice. A lot of things happened that we did not want to happen 
across America, and we learned our lesson after a few weeks.
    But think about that steady drumbeat. We put up with enough 
as politicians, but if somebody hears every single day how 
worthless they are, and it becomes a mantra across America, how 
appealing is that job in the long haul?
    The other thing is that we have a responsibility when it 
comes to these agencies in the way we budget them. If we do not 
give them the resources so they can make adequate planning for 
their future so they know that the job they are involved in 
today is of value and has some long-term benefit, then, 
frankly, it is no surprise that many people look for greener 
pastures and a more satisfying work experience.
    So I thank you for this hearing. I think you are addressing 
a very serious problem, and I think it is one that we can make 
some suggestions to the new administration and perhaps really 
improve the situation.
    One last point if I could. A president of a university in 
Chicago came to see me a week or two ago, and we were talking 
about the shortfall in teachers--I know the Chairman mentioned 
the shortfall in nurses, and that is a national problem. The 
shortfall in teachers is the same. I said it is just alarming 
to me that we have so many teachers who will be retiring so 
soon, and he said you have to look at the individual teacher. 
He said a lot of these teachers are burned out, have no 
interest in this anymore, and do not want to learn what they 
have to learn to be effective; it is time for them to retire. 
But a lot of them who are just great are going to be leaving, 
too. So when we talk about retirements, there are some people 
who need to relax and look at a different side of life, but 
there are also some very valuable people whom we want to keep 
in public service, who make a contribution that cannot be 
replicated by a new employee.
    Thanks, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Durbin.
    That is interesting, because at the NRC, they have a lot of 
people who are working now who could retire, and they stay 
because they are dedicated and know that they are making a 
contribution; but they could decide to leave, and much 
institutional knowledge would be gone. So it is a real problem.
    Senator Akaka, please.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman.
    I am very pleased to be here with you, Chairman Voinovich, 
and my colleague and Ranking Member, Senator Durbin, as we 
continue our discussion on the challenges facing the Federal 
Government in managing its personnel resources.
    Our government operates with machines and with computers, 
but the greatest asset of government is our human resources, 
and that is what we are talking about today. Placing human 
resource management on the GAO high-risk list will focus 
attention on ensuring a viable and effective workforce.
    Chairman Voinovich is to be commended for his diligence and 
commitment to this issue. I know that you are interested in 
pursuing legislative solutions, and I look forward to working 
with you, Mr. Chairman, and with the Ranking Member in this 
endeavor.
    As we renew these hearings on government management, we 
should remember that we are referring to people, individuals 
who have devoted their lives to public service as Federal 
employees. I believe that all of us here today agree that the 
Federal Government needs dedicated and qualified employees.
    The question is how does the Federal Government best manage 
and retain current employees, attract new personnel, and 
provide competitive compensation to all. Proposals recommended 
and actions taken should be done in a fair and equitable 
manner.
    I will work with the new administration to foster the 
relationship between effective workforce management and 
organizational success, a point stressed in GAO's January 
update.
    The leadership demonstrated by this Subcommittee over the 
past decade to ensure an efficient and effective Federal 
Government is well known. However, strategic plans for 
performance measures and annual performance reports will have 
little meaning until Federal agencies are given adequate 
budgets to utilize programs that will help attract, retain, and 
train employees.
    Tools and personnel flexibilities allowed under current law 
are under utilized because agencies lack the money to carry 
them out. The public's perception of the Federal Government 
comes from the top. In this time of unprecedented budget 
surpluses, I call on the administration and my colleagues in 
Congress as well to provide agencies with the funds needed to 
carry out the people's business.
    Mr. Chairman, I look forward to hearing from Mr. Walker, 
and I thank you for holding this hearing today.
    Thank you very much.
    Senator Voinovich. Thank you very much, Senator Akaka, for 
your opening statement. I think that the last portion of it was 
very apropos, that there are tools available today in the 
Federal Government to keep individuals on board, to provide 
training, and to do some other things, but the budgets in the 
past have not reflected the amount of money that they need. I 
hope that this administration recognizes that fact and 
understands that if they are going to have a competitive 
workforce, they are going to have to provide the dollars to 
make it competitive.
    Senator Voinovich. Mr. Walker, we have a custom of swearing 
in our witnesses, so if you would stand, please, and raise your 
right hand.
    Do you swear to tell the truth, the whole truth and nothing 
but the truth, so help you, God?
    Mr. Walker. I do.
    Senator Voinovich. Thank you.
    Please proceed.

 TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF 
  THE UNITED STATES AND CHIEF EXECUTIVE OFFICER, U.S. GENERAL 
               ACCOUNTING OFFICE, WASHINGTON, DC

    Mr. Walker. Thank you, Chairman Voinovich, Ranking Member 
Durbin, and Senator Akaka.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 27.
---------------------------------------------------------------------------
    I appreciate your collective continued interest in this 
very important topic. Like you, I wish that we had more 
participating in this endeavor. It is going to take more than 
four of us in order to get the job done in this area--but I 
think people might be amazed at how much the four of us, 
working collectively together, can get done in this area.
    I have a very extensive statement that I have submitted for 
the record, and I would like to hit the highlights if I could, 
and at the end, I will cover some summary material with these 
two boards that we were able to bring today.
    Again, thank you for this opportunity to discuss the 
urgency of the need to improve the way the Federal Government 
manages its most valuable asset--its human capital, or its 
people.
    As we all know, many Federal employees have made the choice 
to choose country over self and to maximize their self-worth 
rather than their net worth. I think that we have to recognize 
that the Federal Government represents about 20 percent of the 
overall economy in the United States, and it has significant 
implications on every American's life as well as significant 
implications around the world, being the only superpower on 
earth with unparalled military, economic, and political 
capabilities.
    Given that fact, we need to have the best and the brightest 
working for the Federal Government, doing the people's 
business, looking out for the greater good to the extent that 
we are going to maximize the performance and assure the 
accountability of the Federal Government for the benefit of all 
Americans.
    An organization's people, its human capital, are its most 
critical asset in managing for results. However, the Federal 
Government has all too often acted as if Federal employees were 
costs to be cut rather than assets to be valued. After a decade 
of government downsizing and curtailed investments in human 
capital, it is becoming increasingly clear that today's Federal 
human capital strategies are not appropriately constituted to 
meet the current and emerging needs of the Federal Government 
and the Nation's citizens.
    I would like to touch on two key points today. First, 
strategic human capital management is a pervasive challenge in 
the Federal Government. At many agencies, human capital issues 
have contributed to serious programmatic problems and risks, 
and in most cases, these risks are increasing rather than 
decreasing.
    Second, addressing the Federal Government's human capital 
challenges is a responsibility that must be shared by a variety 
of parties, including agency leaders, OMB, OPM, the Congress, 
and a variety of other parties in the not-for-profit as well as 
the for-profit sector, which I will touch on at the end.
    To help focus on this critically important issue, we 
recently added strategic human capital management to the list 
of Federal programs and operations we identified as being high 
risk. We determined that the Federal Government's current 
approach to strategic human capital management met all three of 
the criteria that we had adopted for identifying governmentwide 
high-risk areas. First, strategic human capital management 
challenges are evident at multiple agencies--and in fact I 
would say most agencies.
    Second, these challenges affect a significant portion of 
the government's total budget or other resources. And third, 
these challenges constitute a deficiency that should be 
monitored and addressed through individual agency actions as 
well as through OMB and OPM initiatives, legislative action, 
and congressional oversight.
    The leadership provided by this Subcommittee and the Senate 
Committee on Governmental Affairs has been especially helpful 
and important in focusing attention on this area and our 
related challenges. Working together on a bipartisan basis, I 
think, lays a foundation for eventual human capital reforms, 
both administratively and legislatively. And I might note that 
I have a copy here of the report of this Subcommittee with me. 
I believe it is an outstanding document. I think it is a 
foundation for progress, a good building block to move from in 
seeing the way forward in this area.
    Widespread inattentiveness to strategic human capital 
management has created a governmentwide risk, one that is 
fundamental to the Federal Government's ability to effectively 
serve the American people, both now and in the future.
    The landmark Federal management reforms of the 1990's 
addressed most but not all of the essential elements of modern 
performance management. Unfortunately, they did not address the 
most critical element of modern performance management, and 
that is the people dimension.
    There are three key enablers that are necessary to maximize 
any organization's potential, whether it be in the for-profit 
sector, the not-for-profit sector, or the government--people, 
process, and technology--and people are by far the most 
important element.
    Mr. Chairman, we believe that Congress will eventually want 
to address human capital legislative reforms similar to those 
discussed in your report--reforms in such key areas as 
improving the Federal hiring system, providing more flexible 
pay approaches, enhancing career development and training, and 
improving employee accountability.
    However, we also believe that Federal agency leaders cannot 
afford to wait for these kinds of legislative reforms to 
arrive. Their first priority must be to provide the leadership 
and to take the steps that they can within current law to 
improve their human capital management using authorities that 
already exist. In many cases, we believe that a vast majority 
of what needs to be done in this area can be done within the 
context of current law. In the end, we will need legislative 
reforms and comprehensive reforms, and we should work to 
achieve a consensus on those necessary reforms. But in the 
interim, it is absolutely essential that all of the key players 
do everything they can within the context of current law to use 
all the flexibilities available under current law, and very 
few, if any, agencies are doing that at the present point in 
time.
    Again, our view is that the vast majority of needed 
improvements can be achieved if agencies take a more strategic 
and performance-based approach to managing their workforces--
for example, by performing effective workforce planning, 
developing performance goals and measures to meet these 
challenges, and by linking employee performance to results and 
to their overall strategic plan.
    What is needed is leadership, vision, commitment, 
persistence, and accountability. This is a multi-year effort.
    Now that strategic human capital management has been added 
to the list of high-risk areas, it is logical to ask what is it 
going to take to get off the list. The answer is twofold. 
First, the key players in the human capital area--agency 
leaders, OMB, OPM, the Congress, and human capital 
professionals throughout the government--need to play their 
part in effectuating meaningful and lasting change. Just as 
modern performance management principles have been brought to 
the Federal financial management, information technology 
management, and strategic planning performance management 
areas, they must also be brought to the human capital 
management area.
    Second, we need to see measurable and sustainable 
improvements in the economy, efficiency, and effectiveness with 
which the government as a whole and individual agencies manage 
their workforces to achieve their missions and goals, and in 
ways that are fundamentally linked to their strategic planning 
under GPRA, and that also need to be linked to their resource 
allocations and their budgetary requests.
    Although Federal human capital management is a high-risk 
area, Federal employees are not the problem; rather, the 
problem is the lack of a consistent strategic approach to 
marshalling, managing, and maintaining the human capital needed 
to ensure that we are maximizing the government's performance 
and assuring its accountability.
    The Federal Government's approach to people management 
includes a range of outmoded attitudes, policies, and practices 
that warrant serious and sustained attention. To view Federal 
employees as a cost to be cut rather than an asset to be valued 
would be taking a narrow and shortsighted view, one that is 
obsolete and must be changed.
    In many government entities, the transition to modern 
performance management, and along with it, to strategic human 
capital management, will require a cultural transformation. 
Hierarchical management approaches will need to yield to 
partnerial approaches. Process-oriented ways of doing business 
will need to yield to results-oriented ones. And silohed or 
stovepiped organizations will need to become integrated 
organizations if they expect to make the most of the knowledge, 
skills, and abilities of their people. And they will need to 
look externally and to partner more across government, Federal, 
State, and local governments, internationally, as well as the 
private sector and not-for-profit sector to get the job done in 
these changing times.
    Agencies that expect to make the best use of their people 
will need to establish a strong performance-oriented culture 
including appropriate performance measures and rewards, and to 
focus on continuous learning and knowledge management that 
supports employees and helps them to maximize their potential 
and to achieve their organizational mission.
    Many Federal agencies lack organizational cultures that 
promote high performance and assure accountability. In fact, 
the results of our calendar 2000 survey of Federal managers 
indicated that in some key areas, agencies may be losing ground 
in their efforts to change their more performance-oriented 
culture that focuses on results and outcomes rather than 
outputs and processes.
    Agency leaders and managers have a number of strategies 
available to them to help them steer their cultures to support 
agency goals. These include modern performance management 
incentive approaches directed at either individual employees, 
teams, or both to help empower and motivate staff, reward high 
performance, and assure accountability.
    Mr. Chairman, I would now like to turn to the two boards, 
because I think they help to demonstrate an important point. 
Then, I will summarize and would be happy to answer any 
questions that you may have.
    First, the board on my right is intended to demonstrate 
that in order to effectively address the human capital 
challenge, it is a shared responsibility. It goes from the 
President throughout the Executive Branch; it includes the 
Legislative Branch; it includes the private sector, the not-
for-profit sector, as well as the media. Let me hit a few 
highlights.
    The President sets the tone. The President must recognize 
that in order for the Federal Government to maximize its 
performance and assure its accountability, it has to have 
modern and effective human capital/people strategies; that 
people are the ones who get the job done; and that in order to 
move to more performance management-based approaches and 
results-based approaches, we have got to deal with our people 
challenges, both administratively and eventually legislatively 
as well.
    He needs to promote public service. It is extremely 
important to recognize that while a lot of things can be done 
in the private sector more efficiently, effectively, and 
economically, there are some things that you can never have the 
private sector do. The private sector cannot be entrusted with 
watching out for the greater good. Public workers have a duty 
of loyalty to the greater good, to serve the collective best 
interest of all, not the narrow interests of a few. And while 
there are certain things that can and should be done by the 
private sector, there are certain core governmental functions 
that must be done by government employees, that are compensated 
reasonably and that we can have, not only for today but for 
tomorrow, in order to get the job done.
    OMB, for example, needs to provide more leadership from a 
strategic perspective, to link strategic human capital 
management planning with overall strategic planning, to link 
resource allocations with what is needed in order to perform 
agency missions, to coordinate at the secretary and deputy 
secretary level the important aspects of human capital 
management in moving toward a more results-oriented government 
that maximizes performance and assures accountability.
    The ``M'' in OMB must be capitalized, and the human capital 
dimension from a strategic standpoint must be an integral 
element of the management area.
    OPM must lead with regard to planning and review and update 
of existing policies and practices. It is important to review 
existing guidance in light of changed conditions. Where can 
they be streamlined; where can they be simplified; where can 
more flexibility be provided while assuring adequate 
protections to prevent abuse? This is critically important. 
They should provide more tools rather than rules. They can end 
up providing methodologies, best practices, and other types of 
things to help others understand what you can do in the context 
of current law and what has worked, and share those successes, 
if you will.
    I am pleased to say that they have been doing more in that 
area lately, and I think that that is great, but much more 
needs to be done. Departments and agencies, secretaries, deputy 
secretaries need to be focused on these issues. Realistically, 
it is going to be the deputy secretary who normally would be 
the chief operating officer. This is a key element of achieving 
mission. They need to be focused on this area and held 
accountable in this area.
    The Congress needs to consider human capital issues in 
conjunction with confirmations of key appointees, in 
conjunction with oversight of departments, agencies, and key 
programs, as well as whatever legislation might be appropriate 
in this area.
    The GAO will continue to share our experiences, to help 
others help themselves, as we have been with our best practice 
guides and our self-assessment guides and sharing the 
experiences that we have, because we are trying to become a 
model agency. And just because we do it a certain way does not 
mean it is the only way to do it, but we do have some 
experiences that we are willing to share and have been sharing 
with others to help them help themselves.
    We will review what others do, and we will make 
recommendations as appropriate as to the way forward.
    The private sector can partner with government. I am 
pleased to say that I met with Pete Smith, of the Private 
Sector Council, and they are very interested in trying to do 
more in this area, to try to share knowledge and experience 
between the private and public sectors, to try to create 
relationships, buddy systems, and so on, for senior executives 
in the private sector to be able to consult with their 
counterparts in the public sector, because the fact of the 
matter is it is in everybody's interest, including the private 
sector's interest, to have a government that functions in a way 
that maximizes performance and assures accountability.
    Foundations can partner and can do research in this area. 
The academic community obviously can do more to try to help 
identify and encourage individuals who are interested in public 
service in various ways. And the media must do more in the area 
of investigating and reporting on the critical challenges that 
we have in this area.
    With regard to the context of current law, it is important 
to note that while legislation ultimately will be needed, there 
is a lot that can and should be done in the context of current 
law.
    The first thing that agencies should probably do--which is 
not on here, but I will mention it--is a self-assessment. They 
need to assess where they are and where they stand. Our self-
assessment guide is being used by a number of agencies, 
including NASA, Social Security, and a variety of others, 
toward that end. They need to engage in workforce planning, to 
look at the profile of their agency, what are the projections 
as to what it is going to look like 3 years, 5 years, 10 years 
from now, and what are the challenges that relate thereto.
    They need to engage in succession planning. Just because 
people are eligible to retire does not mean they are going to 
immediately, but eventually, they will. There is a lot of 
skill, a lot of knowledge, a lot of institutional memory that 
will go out the door. That, coupled with the fact that many 
departments and agencies had hiring freezes for a number of 
years in the 1990's, resulted in a double whammy, whereby a 
significant percentage of the Federal workforce is going to be 
exiting, and yet we have not had that many people coming into 
the pipeline to be able to position us for the future.
    We have to revise and reinvigorate recruiting and college 
relations efforts. We have to update our training programs and 
invest in our people. Let us face it--government needs to be a 
knowledge-based and learning organization. We will never be 
able to pay people in the government what they could 
potentially earn in the private sector, but we can offer them 
other things that the private sector cannot. We can offer them 
the ability to make a difference in people's lives. We can 
offer them challenging work. We can offer them a learning 
environment where they are learning on a continuing basis. We 
can offer them a better balance between work and family. We can 
offer them somewhat enhanced job security. We need to recognize 
that. We need to sell what we have to sell, and we also need to 
address some of the areas where we are not as competitive or 
have taken shortsighted actions in the past years.
    We need to obviously strive for diversity, because one of 
the great strengths of our country is diversity. It is one 
reason why we are really a microcosm of the world. But in the 
end, while we need to take affirmative steps to achieve and 
maintain diversity, we also need to make decisions based on 
skills, knowledge, and performance.
    We really need to focus on our outdated performance 
appraisal and reward system. Mr. Chairman, one area where I 
think there has to be much more focus is the performance 
appraisal systems in the Federal Government, which for the most 
part are broken--they are fundamentally broken. They do not 
provide meaningful information to individuals or to management. 
Performance appraisal systems must provide meaningful 
information to help everybody, that helps to recognize and 
reward top performers and helps to deal with nonperformers. For 
the most part, the systems in the government do not get the job 
done. They need to be competency-based. They need to focus on 
skills, knowledge, and performance. They need to address those 
fundamental elements. And if you do not have a modern and 
effective performance appraisal system, you do not have much.
    Employer-labor relations--we need to have constructive 
versus confrontational approaches. There are many ways to get 
there, but we have got to have constructive approaches to 
engage with each other.
    We need to tap the knowledge of our employees. There is 
tremendous knowledge on the part of these employees. We need to 
have employee suggestion programs; we need to understand what 
their preferences are from the standpoint of their assignments. 
People generally have a lot of ideas on how to improve economy, 
efficiency, and effectiveness; we need to tap their ideas, and 
we also need to understand what their preferences are so we can 
match them to the agencies' needs when possible. They are 
probably going to do their best if we have them in a slot that 
is aligned with their skills and knowledge and their interests.
    We need to be more competitive in compensation, especially 
in certain critical occupations and at the executive level.
    We need to take advantage of flextime to help balance work 
and family. We also need to consider flexi-place to the extent 
that it is appropriate, although I will tell you, Mr. Chairman, 
that I do not think that flexi-place is for everybody. Flexi-
place has to be determined based upon what the person's job and 
function is and also what their personal attributes and 
interests are. Some jobs and functions can facilitate flexi-
place, and some individuals can handle that, and many cannot. 
So I think we have to be very careful when we set targets so we 
make sure that we are setting those targets based on an 
informed basis, recognizing what I think Senator Durbin said, 
that there may be some people that it works for and some for 
whom it does not. You talked about retirement--there are some 
who might be ready to retire, and there might be a mutual 
benefit; but there are some who are not, and we still need 
them.
    In that regard, as one example that I have in my testimony, 
we need to look at innovative approaches like how can we allow 
people and encourage people to retreat into retirement. Right 
now, our systems and our policies in the government are such 
that you pretty much have to make an all-or-nothing decision--
you are either going to work full-time, or you are going to 
retire. We need to have more part-time employment. We need to 
have more job-sharing. We need to look at our pension laws, 
just as the private sector is doing, to figure out how we can 
allow people to maybe go from full-time work to part-time work 
and possibly draw on part of their pension, so they can 
maintain their standard of living.
    We need to be creative to find out what we can do to manage 
succession and manage the migration of people outside the 
government.
    The bottom line is this, Mr. Chairman. Federal employees 
represent an asset that needs to be valued, not a cost that 
needs to be cut. I am not saying there are not opportunities 
for streamlining in some areas of the government--there are--
but they need to be based on considered analysis. We need to be 
careful not to just have arbitrary numbers that we come up with 
that we are managing toward, and we need to make sure we do the 
kind of due diligence and the kind of planning to make sure 
that the right decisions and actions are being taken.
    This is a high-risk area, and the risk is increasing. The 
good news is that, I think, it is now on the radar screen, and 
I believe that by working collectively, with all of these 
players doing their part, we can make a lot of progress quickly 
in trying to help manage this. But it is going to take years to 
effectively deal with the challenge that has built up over a 
decade or more.
    This area is the missing link in results-oriented 
government, in maximizing performance and assuring 
accountability, both administratively and legislatively. In the 
end, we will need legislative reforms, but we have got to do 
what we can in the context of current law, and we need to move 
toward consensus on what those reforms ought to be. They should 
provide more management flexibility, but adequate protections 
to prevent employee abuse.
    Mr. Chairman, I really do appreciate your interest and 
efforts, those of Senator Durbin and Senator Akaka. I know that 
you are all sincere about this, I know that you are dedicated, 
and I look forward to working with you in the future to try to 
help manage this risk and address this challenge.
    Thank you.
    Senator Voinovich. Thank you, Mr. Walker.
    Senator Durbin will preside for about 5 minutes.
    Senator Durbin [presiding]. Thank you, Mr. Chairman.
    Mr. Walker, I want to ask you about your methodology in 
coming to your conclusions. Did you discuss some of these 
concerns with the actual employees themselves, and did you have 
any surveys or focus groups of people who were already in 
Federal public service, those who have left and those who are 
contemplating retirement?
    Mr. Walker. Senator Durbin, we have done a lot of work in 
this area, and we are doing more and more as time goes on. We 
have done work at individual agencies; we have also done work 
in the past where we have looked at things like, for example, 
succession planning, what are some of the challenges the 
government has with regard to retirement trends and eligibility 
for retirement. We have also done some work on surveying 
segments of the employee population. We have surveyed, for 
example, Federal executives, SES members, in a variety of 
areas. We have also surveyed some cases of military personnel 
with regard to why are they leaving the service. So we have 
done a lot of work in this area. We have not surveyed every 
agency.
    Senator Durbin. I understand. That is a big undertaking, 
and I would not expect that. But it would seem to me that that 
would be a great starting place. I go back to the conversation 
I had with the president of the university about teachers. I 
asked what brings a person to teaching. He said, by and large, 
a great teacher. They had an experience at some point in their 
lives, and they said this great teacher changed my life, and I 
would like to change someone else's.
    I am wondering what the motivation is for Federal public 
service or if there is one. It may be elusive. Maybe it is not 
that simple. I went on to ask him how important is money to a 
person who takes up teaching. He said that initially it is 
almost unimportant; they are really focused on doing something 
with their lives that has meaning to them. But, he said, I will 
tell you something we found out--after 3 years, we lose 30 
percent of these new teachers. Guess why? They get married. 
They start thinking of the world a little differently, about 
what it takes to sustain and raise a family.
    I am wondering if we have done anything along these lines 
to sort out the motivation to move toward Federal service, what 
really brings a person to it, what are the sources--and I 
imagine each agency might come at this a little differently. 
Where do you find people with an interest in the issues of the 
Department of Agriculture? Do they just come at random and 
learn them, or do they come from specific areas where we might 
be mining for resources in the future? And what does it take to 
convert a person from a casual employee to a committed and 
career employee? What are the things they look for? Could it be 
that after a few years, when they are thinking about families, 
child care all of a sudden becomes a major concern and that if 
we decided to focus resources on child care as part of public 
employment, part of Federal employment, a lot of people would 
make that commitment beyond the first few years and say this is 
worth staying for another 4 or 5 years, because I have a 
resource here at my disposal that I might not have if I branch 
out and try to find a new job?
    Mr. Walker. Let me respond. First, I think we need to do 
more survey work governmentwide, and obviously, I think that is 
something that OPM can do, and they have done some of that in 
the past. I think that individual departments and agencies need 
to do work in this area, too, because every government 
department and agency and every program is not the same; the 
type of people you have, the skills and knowledge, and the 
recruting sources will be different.
    Let me tell you, for example, what we have done at GAO. We 
make extensive use of surveys. For example, about a year ago, 
we did an agency-wide survey of every GAO employee, and we 
asked them a range of questions--why are you working here, what 
do you like, what are you concerned about--a whole range of 
issues. We do surveys of all new hires. We do surveys of 
retirees. We do surveys of other segments of the population and 
ask questions like why did you come here; how long do you plan 
to stay here; what will be the critical factors that will be 
determinant of whether or not you are going to stay and how 
long you are going to stay; why did you leave?
    Senator Durbin. What are the critical factors that you hear 
coming back to you?
    Mr. Walker. What I hear from GAO, as an example, the reason 
why people come to work for GAO is: One, the work--we have very 
challenging work; second, to be able to make a difference; the 
third reason is the people; the fourth reason is being able to 
achieve a better balance between work and family. Those are the 
reasons why people come to GAO.
    If you talk about compensation, we can be reasonably 
competitive at the entry level, depending upon what type of 
graduate we are talking about. If we are talking about, for 
example, a master's in public administration, which a lot of 
our people have, we can be competitive. For an accounting 
degree, we can be competitive. But for certain other degrees--
law degree, a Ph.D. in economics, a master's in information 
technology--we have a problem.
    So what we try to do is to sell what we have to sell; we 
try to understand, once people are on board, what will help to 
keep them on board, and we try to gear our programs and 
policies toward those areas where we think we are going to get 
the biggest return on investment.
    One example at GAO is that we found if we can keep people 
for 3 years, they are likely to stay a lot more years. So we 
are going to try to gear our tuition reimbursement efforts and 
a lot of other things toward trying to keep people for at least 
3 years.
    Senator Durbin. And we are going to help you with that, 
because we know the authority is there. We went into this, and 
something that I have focused on is student loan forgiveness--
what the Federal Government can do to say to someone we may not 
offer you the greatest salary, but guess what--we are going to 
help you pay back your student loan. So they come in and say 
this makes sense--I would take the money from another job and 
put it back into that student loan anyway, so I can understand 
how I can calculate this out to my benefit, ultimately.
    But of course, we have to provide the money to the 
agencies, we have to appropriate the money for this to happen. 
It is a great concept, but if they do not have the money for it 
to happen, they will not attract these great people.
    Mr. Walker. Let me touch on that, Senator, because you are 
exactly right. For example, there are two issues. First, do you 
have the authority to do it--and up until recently, agencies 
did not have the authority. Congress gave the authority, and 
OPM issued regulations--and they are going to have to reissue 
them because they were not as up-to-date as they needed to be 
as to scope and as to flexibility, and they are in the process 
of doing that--but then, you have to have the money.
    What I have found in that regard--because I do recruiting 
myself at some major universities to try to promote public 
service and interest people in working for the government in 
general and GAO in particular--is that a lot of the students 
face a double whammy. What do I mean by that? Not only do they 
not make as much money in government, but they have all this 
debt. And even if they want to work in government--if that is 
where their heart is, in public policy schools--they may not be 
able to because of the double whammy of not making as much 
money and being burdened with all this debt and having to pay 
it off.
    So I think the use of tuition reimbursement is a very 
valuable tool, but you are right that you have to have the 
resources.
    Senator Durbin. How do we find that out? I am wondering if 
we have to look at the budget request from the administration, 
which we will receive very shortly, I wonder how many of them 
will even include this as a line item. Agencies which you have 
already identified as having critical needs in terms of 
retaining and attracting new people--I am just curious as to 
how many of them are considering this as a viable option to 
include it in their budget requests, and I will make a point of 
looking for that, being on the Appropriations Committee. I 
think that if we hear from them that they have a shortfall, 
whether it is the FCC or some other agency, and they think that 
if they have student loan forgiveness, they can start to bring 
in some very talented people, that makes sense, and I think we 
want to pursue that if we can.
    Mr. Walker. Well, I have to be careful how far I go, 
because I know that once you submit your budget, it is the 
property of the Congress. I will tell you that it is a line 
item in our budget.
    Senator Durbin. Good. May I ask you another question about 
health insurance for Federal employees. Some numbers that the 
staff here have put together suggest that the Federal 
employees' health plan, which frankly, I think in many respects 
may be one of the best in the world, certainly in the United 
States, that gives so many options to individuals, those of us 
covered by it, in terms of picking the right coverage for our 
families--I am also told that in terms of the contribution from 
employees that the Federal employees are making a substantially 
larger contribution for their health insurance than people in 
the private sector. Have you looked into that?
    Mr. Walker. I do not recall if we looked into it lately, 
Senator. I will check and get back to you. I will tell you 
this, that I think one of the things we have to be careful of 
is that in addition to looking at individual elements like 
that, for example, health benefits--and I think it is important 
to look at that--one of the things that we also have to do when 
we look into those areas is to look at the overall package, 
because there are going to be some areas where we do better, 
and there are going to be some areas where we do not do as 
well. The key from a portfolio standpoint is how do we do in 
the aggregate.
    Senator Durbin. Exactly. Let me ask your folks to please 
take a look at the Year 2000 Survey of Public and Private 
Employer Health Benefits by the Kaiser Family Foundation. This 
is what they found--and again, the benefit package is critical 
here--but assuming for a second that they are comparable, 
listen to the difference. The average monthly employee share 
for health care is $28 for single coverage in the private 
sector. According to OPM, the average monthly Federal employee 
share of cost for health insurance is $131--a phenomenal 
difference. The figures for family coverage are just as 
dramatic. The average employee in the private sector pays $138 
a month; the average Federal employee pays $300 a month.
    So I would appreciate it if you would take a look at that, 
because when we talk about compensation and benefits, if we can 
raise the salary, it is one thing, but if the cost of the 
benefits goes up dramatically and takes away that increase, 
then the person will say I do not have the purchasing power 
even though my salary looks a little better.
    I hope you can take a look at that as one of those aspects.
    Thank you very much, Mr. Walker.
    Mr. Walker. Thank you, Senator.
    Senator Durbin. Senator Akaka, please.
    Senator Akaka. Thank you very much, Senator Durbin.
    I listened carefully to your testimony, Mr. Walker, and I 
looked with great interest at the charts that you have 
provided. I am glad to hear what you think about human capital 
and what it means to our government.
    You pointed out that we--and when I say ``we,'' I mean the 
government--do not address the people dimension enough, which 
you feel is very important in managing the workforce. You 
pointed out that there were four issues--leadership, vision, 
commitment, and persistence.
    And you note, a Federal agency's first priority must be to 
provide leadership and take administrative steps using 
authorities already available under existing law. Agencies have 
the authority to recruit employees through the use of 
commercial recruiting firms and employment services. Agencies 
may provide recruiting or relocation bonuses to help, offer 
student loan repayment, and give retention allowances to 
employees.
    However, we keep coming back to whether or not the level of 
agency appropriations is adequate. How do agencies weigh 
workforce needs with their annual budgetary requests, and to 
what extent should OMB work with agencies to develop strategic 
human resource goals?
    Mr. Walker. First, I think that not enough attention has 
historically been paid to look at this from a strategic 
perspective, and OMB really has not been a player at all in the 
area of human capital. I think that they need to be a player, 
but obviously, OPM is going to be involved on a day-to-day 
basis and in a much more extensive manner.
    OMB needs to be involved from the standpoint of how do you 
end up coordinating at the secretary and deputy secretary 
level; how do you link this to overall strategic planning; how 
do you link this to resource allocation?
    Senator Akaka, I think that, first, there will be 
additional money needed to deal with some of these issues. 
There is no question about that. At the same time, I also 
believe that we should not merely assume over the longer term 
that we need to keep everything we have and add on top of it. 
One thing that people must do that most have not done is take a 
hard look at what is their mission, what are they trying to 
accomplish, how many people do they need to get that done, what 
kind of skills and knowledge do they need to have in order to 
do that.
    So we need to look at not just the issue of whether you 
need to be investing more in training, whether you need to have 
more money for tuition reimbursement, but we also need to be 
taking steps over a period of time to realign and restructure 
the workforce, because in the end, in some circumstances, the 
answer may be that you do not have as many people, but they are 
higher-skilled, compensated better, and compensated more for 
performance.
    So I think that, yes, we will need more money, but we need 
to engage in that fundamental reassessment and workforce 
strategic planning, which will take a number of years in order 
to get to where we need to be.
    Senator Akaka. I am glad to hear that as you look at 
mission statements, core values, goals and strategies, these 
intentions should be integrated with their human capital 
strategies so that goals may be met, as you point out here.
    My question, then, is has GAO done an assessment of short-, 
mid-, and long-term future needs for government employees in 
specific fields, such as contract specialists, secretaries, and 
even park rangers?
    Mr. Walker. We have done some work in that area, but we 
have not yet done a lot of work in that area. We did enough to 
satisfy ourselves as to the scope and magnitude of the 
challenge to make it a high-risk area governmentwide. We have 
done some work, for example, at the Forest Service, we have 
done work at the acquisition workforce at DOD, we have done 
some work at NASA, and we are familiar with some of the things 
going on at SSA.
    But frankly, I think this is an example of where OPM needs 
to be actively involved. We are in the Legislative Branch, and 
the Executive Branch needs to be taking the lead in dealing 
with these issues. We are happy to be helpful, and we are happy 
to do the work that Congress asks us to do, but it is important 
that we not be the ones who are doing work that should 
otherwise be done by OMB or OPM.
    Senator Akaka. As we try to meet the challenges and define 
the problems, do you believe that there is a lack of 
recognition on the part of Federal agencies that workforce 
problems are serious enough to warrant adding it to the high-
risk list, and if so, why?
    Mr. Walker. I can tell you that I have not had one agency 
disagree with our decision to put this on the high-risk list. 
Obviously, I have only had interactions with a few. I have had 
a number of them agree that it is time that we focus more time 
and attention on this.
    There are some people who express concern, agencies that 
may have direct responsibilities, that say, look, we are doing 
more in this area now--and I think that has to be acknowledged. 
For example, OPM is doing more in this area, and they have done 
some things to help in the last year or so. But this is such a 
serious and pervasive problem that we felt compelled to 
designate it high risk, primarily because it met our criteria 
and because of the pervasiveness and the serious nature of it.
    The problem, Senator Akaka, from my perspective--let us 
take what happened in the nineties. In some cases, people 
celebrated--and whether they should have or not is a different 
question--the fact that the Federal workforce declined 
significantly in the nineties. But the question is at what 
price? In many cases, what ended up happening was that those 
reductions-in-force were not well-thought-out; they were not 
part of an overall workforce realignment or workforce planning 
strategy. In addition to that, in many cases, people quit 
hiring. People eliminated performance rewards. They cut back on 
training. They cut back on enabling technology. You might be 
able to do that for a year; you cannot do it for multiple 
years, because what happens is that you mortgage the future, 
and you undercut your capacity to perform in the future.
    So that is what has happened, and it is going to take us a 
number of years to get to where we need to be--and hopefully, 
making this high risk will attract light; with light comes 
heat, and with heat comes action. That is what we need.
    Senator Akaka. Thank you for your responses.
    Mr. Chairman, I have other questions, but I thank you.
    Senator Voinovich. Thank you, Senator Akaka.
    Mr. Walker, have you had a chance to look at any of the 
transition documents that the Clinton Administration turned 
over to the Bush Administration?
    Mr. Walker. I have not. I obviously have read what has been 
in the press, and I did have an extensive meeting with OMB 
Director Daniels, who was very interested in the work that we 
had done in this area and, at least at that preliminary 
meeting. He felt that OMB needed to be doing a lot more in the 
management area and felt that this was a serious issue that 
needed to be addressed. So I was encouraged by that, but it is 
early in the ball game.
    Senator Voinovich. It would seem to me that when the baton 
was handed over to the new administration, one thing that you 
would want to do--it is the kind of thing that we prepared in 
our transition documents in Ohio--is acknowledge that we have 
some problems here, to give the new administration a heads-up. 
I would be interested to know--and maybe the Subcommittee could 
find out--whether some of those things were in those transition 
documents.
    Mr. Walker. For the record, Mr. Chairman, I do not know if 
they are, but we wanted to make sure that we did what we could 
within our span of control to make sure it was on the radar 
screen. And we did two things there: One, obviously, we put it 
on the high-risk list, which is justified for the reasons that 
I articulated, I believe; but second, on our website, which is 
www.gao.gov, we have a separate section which is dedicated to 
Congressional and Presidential transition issues and summarizes 
electronically for every major department and agency and a 
number of functions governmentwide the work that we have done 
and what we see as the major challenges. That, frankly, is an 
extremely vuluable tool not just for the new administration but 
for the Congress as well that I would encourage your staff to 
become familiar with.
    Senator Voinovich. We should try to see if we can get our 
hands on some of those transition documents to see how they 
have been put together. I know that OPM made a real effort in 
the last year and a half to move into this area, and they may 
have communicated that to the agencies and asked them to do it.
    Mr. Walker. I spoke with Janice Lachance on numerous 
occasions, and I would like to acknowledge for the record that 
I think OPM has done a lot more in the last year or year and a 
half in this area. There is no question about that. But there 
is so much more that needs to be done--and frankly, they cannot 
do it all. As this board demonstrates, they have an important 
role to play, but they are a piece of the overall pie. 
Leadership starts at the top and involves both the Executive 
Branch and the Legislative Branch as well as various other 
parties.
    Senator Voinovich. I noticed you said that the deputy 
secretary is the chief administrative officer, and that is a 
key position in Federal agencies.
    Mr. Walker. It is. From a practical standpoint, I think the 
secretary is going to be focused on policy issues, the 
secretary is going to be focused on external affairs. Somebody 
at a very high level has to be focused on getting things done, 
and not only getting the job done today, but preparing for 
tomorrow. If it is not the deputy secretary, it needs to be 
somebody right at that level, because they have to have access 
to the secretary. They have to have the secretary's support. It 
is not something that you can expect to get done in middle 
management; it starts at the top.
    Senator Voinovich. I will present your work to the chairmen 
of the authorizing committees before which the nominees from 
the departments will be coming, with questions on those 
agencies' high risk areas. Senator Durbin, I am sharing that 
information with the ranking members also, because I think that 
part of the problem here is that we are not tough enough on 
management issues in some of these confirmation hearings. You 
cannot do too much about the secretaries--you honor the 
President's choice--and I know they are going to have 
difficulty getting people, but it seems to me that we have an 
obligation to make sure that the people they are bringing into 
those top jobs know something about management, the problems 
that exist, and have some experience in dealing with them. I 
have observed in the 2 years that I have been in the Senate 
that so many of the things that we are talking about should 
actually be done in the agencies themselves. We should not even 
be bothered with these things; they should be doing them as 
part of their everyday work.
    So I think that we can try to make sure that the appointees 
in this administration are aware of the problems.
    You have talked to Mr. Daniels, and I have talked to Mr. 
Daniels, and I have heard very little about the human capital 
crisis. We have heard about tax reductions and on-budget 
surpluses and so on, and that is usually the main thing that 
OMB concentrates on.
    I would like to ask you how would you organize this thing 
from the top on down to make sure that human capital is 
addressed?
    Mr. Walker. I think the key player at OMB, taking OMB as an 
example, is probably the Deputy Director for Management. 
Clearly, for the Director, Mitch Daniels, it has to be on his 
radar screen, he has to be aware of it and focused on it, 
because one thing that has to happen here is that there has to 
be a better linkage between resource decisions on the budget 
side and strategic planning, including the human capital 
aspect, which is on the management side.
    So the DDM is going to be critically important. The DDM is 
not going to be able to do it alone, because the DDM has 
responsibility for financial management, information 
technology, the regulatory process, so they are going to have 
to have some other resources--not necessarily a lot, but high-
quality resources there.
    I think that if you end up leveraging those resources 
through interagency councils--the past administration had 
something called the President's Management Council, which was 
really the deputies, the chief operating officers, who focused 
on key issues--that is a good idea; having one in the human 
capital area, making sure that we have people who are strategic 
players in those jobs would be a good thing to do.
    My personal view is that OMB needs to be working with the 
various departments and agencies, and primarily it is going to 
be the deputy secretaries and below who are focused on it. OMB 
is going to be driving the effort to maximize performance and 
assure accountability within the context of what the government 
currently is, and I do not think they have been a very active 
player in this area in the past. Hopefully, that will change.
    Senator Voinovich. If you were in Mitch Daniels' shoes 
right now, and you were aware of the fact that you had a human 
capital crisis, and you were going to do something short-term 
to try to jump-start the situation, what would you do?
    Mr. Walker. I think one of the first things that I would 
do, in addition to getting some additional resources and having 
some focus on it in OMB, is to piggyback on the current budget 
process they already have. Every year, you have to do a budget. 
Every year, agencies are presenting information to OMB about 
what their challenges are, what they are going to accomplish, 
and what resources they need in order to be able to accomplish 
their objectives. You could probably do more by piggybacking on 
that process to identify what some of the issues are and how 
they plan to address some of those issues while you are trying 
to staff up and figure out what your longer-term strategy is. 
At least that gets the issue on the radar screen.
    Senator Voinovich. Well, I understand the budget that they 
are dealing with is the one that was submitted to them by the 
Clinton Administration, and now they are going over that budget 
themselves. So your suggestion might be as part of the review 
of that budget to ask the new secretaries and their teams to 
evaluate the human capital situation in their agencies, to look 
at the tools that they have available to them, as Senator 
Durbin said, that they have not been utilizing because the 
budget has not been there, and to then try to fold that into 
their budget request to Congress.
    Mr. Walker. I think the other thing that could happen is 
that OPM could engage in a much more fundamental review of 
their existing guidance and where there are opportunities to 
streamline and simplify, and to provide more flexibility for 
management clarity while incorporating adequate protections for 
employees. In addition, OPM can do more in the area of 
educating people as to what they can do within the context of 
current law and pointing to success stories where people have 
been able to accomplish a lot within the context of current 
law. They have started to do some things in that area; I think 
more would be good.
    Senator Voinovich. That is what worries me, that they will 
try to use these flexibilities, we will not pass a sufficiant 
budget, they will not have the resources to use the tools that 
they have, and we have lost a year.
    You have OPM, you have the Office of Management and Budget. 
Do you think that this thing can work the way it is organized? 
I have found in my experience that if you have good people, and 
they work together in clusters, most of the time, you can get 
things done. But do you think the organizational structure that 
we have is an impediment to dealing with this problem?
    In other words, we have had years and years and years of 
neglect, and so often in an organization, sometimes the reason 
why that happens is because it is laid out the wrong way, and 
if you had had it organized in a different way, perhaps it 
would not have taken place. Would you comment on the current 
organization and whether you think it is adequate, or do you 
think it would be better if we came up with a different 
organization that might give this issue the priority that it 
has not been getting?
    Mr. Walker. I do not think that the current approach has 
worked, and that is one reason why we have this designated as 
high risk.
    As I said, I do not think that OMB has done enough in the 
``M'' area, in general, and the human capital area, in 
particular. I do not think, quite frankly, that the departments 
and agencies have really been adequately focused on this, the 
top leadership, especially the political leadership, in part 
because they have a shorter horizon, and because they have a 
number of other things that they are trying to accomplish 
within the period of time that they are going to be there.
    I think one of the things that we need to do is not only 
recognize that there is a problem, but we have to put a 
structure and a mechanism in place that recognizes that it is 
going to take a number of years to deal with this, so 
therefore, it is getting the attention and support of the top 
political leadership, but it is also making sure that we have 
some structure that will still be able to survive the 
transition when there are changes in secretaries, deputy 
secretaries, Presidents, or whatever, because this is a 
multiyear effort.
    Senator Voinovich. Well, one thing that has happened in my 
State is that we adopted total quality management--we call it 
quality service through partnership--involving the unions, and 
the success that we had with it is almost a guarantee that it 
will continue, because people realize how this thing works and 
how good it makes them feel. But it took training for 8 to 9 
years to really do it right. In some of these areas, it is 
going to take a long time for it to become part of the 
tradition and fabric of the government.
    Mr. Walker. Ultimately, you have to make it a priority, you 
have to designate responsibility, and you have to incorporate 
appropriate accountability mechanisms. And it is not one single 
player, as this demonstrates. A lot of players have to be 
involved in this area in order for us to get to where we need 
to be.
    I totally agree--you have to involve not only employees but 
employee organizations, and failure to do that is a 
prescription for failure.
    Senator Voinovich. As I mentioned to you, one of the things 
that I am concerned about is that there is talk--and I do not 
know if Senator Durbin knows this--about eliminating an 
Executive order regarding labor-management partnerships, which 
I think are fundamental to any opportunity to move forward in 
some of the areas that we are talking about, because if labor 
and management are not working on it together, it will not 
happen; I know that from my past experience.
    I think the other thing that would probably help would be 
if the President himself talked about employees being assets to 
be valued and not costs to be cut. As Senator Durbin said, I 
think there is an attitude on the part of some people that 
people who work in government are not as good as people who 
work in the private sector. You are only as good as your team. 
I think it is really important that it starts from the top, 
that the leader says this is an important issue and gets the 
message out to government employees that they are important, 
and recognizes that some of the incentives have not been there 
and that the government has done a lousy job of providing 
training money so they can upgrade their skills and that 
government can be an exciting place to work.
    I just returned from a 2-day seminar on public health in 
Florida, and I was speaking with some of the people from the 
John F. Kennedy School of Government at Harvard University. 
They asked me to come and talk there, because the impression 
that many of their students have is that the Federal Government 
is not a very exciting place to work anymore. I think it was 
Paul Light who did a study that showed that we have had a great 
diminishment of people who are interested in coming to work for 
the Federal Government.
    So this has to be, I think, a cause celebre if we are going 
to have a government that works. I keep talking to my private 
sector friends and indicating to them that if all of these 
regulatory agencies do not have the competent people they need 
to get the job done, it will negatively impact on our economy. 
Some people do not seem to understand how important that is.
    Mr. Walker. I think that you are exactly right, Senator, 
and that is why I say that the private sector has a stake in 
this, too. Here is the way I look at it. The people that we are 
talking about end up being directly responsible for doing 
whatever the Federal Government does with $1.9 trillion. As a 
taxpayer and a citizen, I sure hope that we have bright, 
competent, and dedicated public servants doing that work, not 
only for the impact that it has on our domestic economy, but 
for the impact that it has on the world.
    At the JFK School, for example, and many other public 
policy schools, one thing they are finding is that over half of 
their graduates are not going into government, and a higher 
number are going into consulting firms. Well, you can make a 
difference by working on government projects with consulting 
firms, but it is fundamentally different. It is the fundamental 
difference between being an advisor and being on the front 
line.
    But we have to be able to help reinstill interest in public 
service. We have to recognize the importance of it, and we have 
to appreciate the value that is provided by people who do a 
good job in this area, because we have enough barriers and 
obstacles already to deal with.
    Senator Voinovich. Right. But it is interesting that some 
of the very things we are talking about, many other private 
organizations in this country are experiencing, not as severely 
as we are, but they have their problems attracting people, too, 
and that means that our job is that much more difficult because 
we are so far behind in some of these areas where we need to be 
competitive.
    Mr. Walker. Many private sector organizations, quite 
frankly, have not treated their people as an asset, either, but 
they are recognizing, because they are in a competitive 
business and a market-based economy, that they have to. We are 
currently in a knowledge-based economy, and what is the source 
of all knowledge--people. The sooner we realize that, the 
better off we will be.
    Senator Voinovich. Senator Durbin, do you have any other 
questions?
    Senator Durbin. No, Mr. Chairman.
    Senator Voinovich. Mr. Walker, we thank you very much for 
coming today, and we look forward to working with you, and 
hopefully, 2 years from now, we can look back and say we made a 
dent in this. Thank you.
    Mr. Walker. Thank you very much.
    Senator Voinovich. The Subcommittee is adjourned.
    [Whereupon, at 11:52 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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