Joint Financial Management Improvement Program

Highlights from the Human Capital Forum

September 26, 2002

## Overview

The federal government is facing human capital issues similar to the ones faced in the private sector—issues such as changing human capital competencies and retaining and motivating quality employees in an environment of continuous change. The government would benefit from advice from experts in the private sector as it formulates its vision and direction for financial management human capital. The Joint Financial Management Improvement Program (JFMIP) partnered with the Private Sector Council (PSC) in organizing a forum on September 26, 2002, sponsored by the JFMIP Steering Committee and Chief Financial Officers’ Council.  The forum’s overall objective was to engage a dialogue with the private sector in best practices related to financial management human capital.

Introductions and opening comments were provided by Karen Cleary Alderman, Executive Director of JFMIP. Jeffrey Steinhoff, Chair of the JFMIP Steering Committee, followed with an overview of the human capital issues faced by the federal government. Following Mr. Steinhoff’s remarks, a panel of representatives from the Private Sector Council provided a robust, interactive discussion on human capital issues. 

## Private Sector Council Perspective

A.W. “Pete” Smith, President and CEO of the Private Sector Council, moderated the panel discussion. Mr. Smith began the discussion by providing insights on how the role of the PSC has evolved since its start. The mission of the PSC is to improve the efficiency, productivity, and management of the federal government through a cooperative sharing of knowledge between the public and private sectors.

Following Mr. Smith’s opening statements, four advisors to the PSC presented brief overviews of the human capital challenges faced by their respective organizations.

Cathy Demeda, Senior Human Resources Advisor at RBC Financial, provided background on this Canadian financial institution. Ms. Demeda then described some of the challenges they have faced: “professionalizing” finance; developing leaders; determining and focusing on behavioral competencies of value to the organization; workforce planning with changing demographics.

Michael G. Kramer, Director of Finance at The Boeing Company, provided background on his company, their approach in dealing with human capital issues and financial system technology. Their approach includes considering finance to be business partners with managers, the importance placed on lifelong training and continuous learning. Due to mergers with other companies over the years, they have dealt with issues in integrating companies and systems.

Kevin Schick, Vice President and Controller at Con-way Transportation, provided background on his company and discussed some recent successes in using technology and process improvement to increase transactional capacity and shorten the timeframes for the monthly close. Another successful program was to codify a company mission statement that reflects the organization’s values.

G. Thomas Welsh, Assistant Treasurer at PPG Industries, Inc., provided background on his organization and discussed the transformation of their finance function to smaller more highly professional organization that provides analysis and business advice.  The potential for outsourcing of transactions is being continually evaluated.  Their workforce has evolved from transaction-based to analytical competencies. Challenges included employee development, diversity and mobility.

Following the overviews provided by the PSC representatives, the attendees participated in an interactive discussion on financial management human capital issues. Highlights of the discussion are presented in the sections that follow.

## Setting Financial Management human capital vision and direction

Forum participants discussed the following issues and strategies related to setting the human capital vision and direction:

· Private sector corporate financial management functions have become increasingly professional, streamlined, standardized, consolidated, and automated, with some organizations outsourcing low value transaction processing functions to third parties such as banks. The critical value of the financial management organization has transitioned to providing analysis and business advice to line organizations. Financial management functions have reduced in headcount and cost; however, individual financial management employees have become more highly skilled and compensated.  

· In this model, financial management employees must be well rounded gaining broad competencies and perspective through rotational assignments in multiple key functions and organizations. Rotational development must be managed in an environment of decreasing employee acceptance of frequent geographic relocations in some companies.

· Critical competencies include technical knowledge and behavioral competencies.

· Technical competencies may be identified through relevant degrees or certifications such as MBAs or CPAs, or through selected processes and business experiences, as well as other experience that demonstrates capacity and passion for financial analysis.  Business acumen can be as valuable as technical training and education.

· Behavioral competencies—such as drive to succeed, integrity, teamwork and team leadership, willingness to develop others, innovation/shapes the future, creative thinking, and ability to deal with risk and ambiguity—are just as important as technical competency. 

· Attracting and retaining personnel with desired technical and behavioral competencies requires organizations to articulate what those needs are in a way that prospective employees will act on them. Prospective employees consider positions based on their assessment of “fit” and developmental opportunities (e.g., the position enhances future options by making employee more marketable). 

· Organizations (finance and others) should identify competencies that are consistent with organizational goals and values.  

· Evaluate key, high performers in the organization to identify what competencies to seek in future employees. 

· Assess current competencies in the organization and how they may need to change to meet the organization’s strategic vision.

· Examining competencies can help to drive change in the organization. Refocusing staff and hiring new staff to meet unmet competencies can help an organization reach its strategic objectives.

· The human resources (HR) organization should act as business partner with line managers. In the private sector, the HR organization typically provides the “givens” (e.g., sets policy), helps with problems; and analyzes and provides information to line managers. HR organizations can help develop tools such as interview techniques to identify critical behavioral competencies. The role of the HR organization in government should evolve consistent with that in the private sector.

## innovation

Forum participants discussed the following issues and strategies related to supporting innovation:

· Top leadership must establish the tone and set expectations for performance. This includes examining and adapting financial processes that incorporate best practices, and engaging stakeholders throughout the process improvement analysis.

· Leaders must set goals and establish an environment that fosters innovation and measure performance against agreed upon goals.

## changing human capital competencies as systems move from transaction based to decision support analysis

Forum participants discussed the following issues and strategies related to changing human capital competencies as systems move from transaction based to decision support analysis:

· Federal financial management is in transition. Attracting and retaining high-quality analysts in the absence of quality financial processes and systems is problematic. Workforce transition will have to occur in tandem with system and process transition. Assigning highly skilled employees to work low quality processes promotes turnover.

· Transforming the existing transaction processing staff into analytical roles requiring high level technical and behavior competencies is difficult. Leadership must communicate expectations clearly, increase standards, and measure performance against those standards. Employees not willing or able to make the transition will self select out.  

· Top leadership must communicate the change strategies continuously. Communication must be open and honest, and the message must be clear, consistent, and timely. There is no such thing as over-communicating.

## Recruiting quality employees

Forum participants discussed the following issues and strategies related to recruiting quality employees:

· Candidates entering the workforce consider these key factors when being recruited: 1) how the organization fits with their personal culture and lifestyle, 2) what development opportunities the organization provides, and 3) career aspirations.

· Today’s entering workforce looks for flexible work arrangements.  The quality of work life is a high priority, as are organizational leadership and management styles and commitment to development and continuous learning.

· In recruiting, emphasize the value of the experience and the transferable skills that are obtained in the proposed position.

· Base hiring decisions on both behavioral and technical competencies.

· Federal agencies do not take advantage of flexibilities offered in the existing personnel system. HR should promote these flexibilities to prospective financial managers.

· Effectively marketing the government organization’s mission could enhance recruiting.  If government promoted its higher purpose of public service and challenging work to prospective employees it could have a marketing advantage over the private sector. Adopt marketing techniques commonly used in the private sector, such as videos and brochures, to emphasize key assets (e.g. public service) to attract quality candidates.

· Government should communicate employment opportunities using positive language. Postings on the USAJOBS website with numerous restrictions and negative statements, such as “Promotion Opportunity--None”, turn off potential candidates. The government should objectively compare their websites with those in the private sector and adopt more positive communication strategies.

· Government must streamline and accelerate hiring processes to compete with the private sector for high quality candidates. Lengthy HR procedures are perceived as a hindrance to recruiting quality employees. Private sector HR organization may pre-screen candidates, but they do so on a very timely basis.

## Motivating employees in an environment of continuous change

Forum participants discussed the following issues and strategies related to motivating employees in an environment of continuous change:

· Rotational opportunities provide employees with a broader base of experience.  Mobility across program units and finance functions is invaluable to the organization and is attractive to the employee.   

· Financial management organizations need literate, numerate, and articulate employees. Setting high standards and measuring performance against those standards is key to achieving desired competency mix.

· Training and development opportunities motivate quality employees. Linking training plans to defined future promotion opportunities provides incentive for employees.

## Retaining quality employees and sustaining quality performance

Forum participants discussed the following issues and strategies related to retaining quality employees and sustaining quality performance:

· Government financial managers must raise the bar of performance. Managers must clearly communicate expectations and measure the employee’s performance against those expectations.

· Financial management leadership must embrace employee development as a core value and reinforce it throughout the organization. Rotational assignments, career development and planning, and financial support for both job-related and non-job-related training are ways to attract and retain quality employees.

· Use coaching and mentoring to further the development of staff.

· The private sector often uses succession planning to retain and develop quality employees. Succession planning can serve as a framework for linking training and developmental plans to future organizational needs. Succession planning can also be used to meet other organizational objectives, such as diversity.

· Achieving diversity at the senior executive level is a challenge both in government and in the private sector. Diversity needs to start at the entry level, but can be supplemented at the mid-career and senior levels by recruiting from outside the organization. Recruiting efforts should showcase organizational role models to communicate that prospective candidates can succeed in this organization.

## Use of outsourcing for non-core functions—human capital considerations

Forum participants discussed the following issues and strategies related to human capital considerations in the use of outsourcing for non-core functions:

· Outsourcing transaction processing allows the financial management organization to focus on decision support analysis and working as a business partner to other parts of the organization. 

· Consolidate functions into a shared service environments and focus on process improvement before attempting to outsource. Then, if the resources in-house cannot perform a non-core function as efficiently and effectively as an outside entity, consider outsourcing the function.

· The private sector has had mixed success in outsourcing finance functions. Outsourcing transaction processes can reduce costs and headcount; however, those left in the organization may have trouble adapting to their new roles as relationship managers.

Attachment 1. Forum Participants

Attachment 2. Questions for the Private Sector Council

1. How has your industry strategically managed the financial management workforce given the major changes in technology and service delivery standards?

2. What have been the major trends impacting human resources in your industry with a specific focus on financial management areas?

3. The federal government is facing a human capital crisis with an aging workforce and a majority of the workforce eligible to retire within the next 5-10 years. Is the private sector facing a similar issue and trend? If so, how is it being addressed?

4. There have been major changes in financial management expectations and business practices, and rapid changes in supporting tools and technologies. How has this affected the private sector and what has been done to human capital management and business process restructuring in response?

5. It is believed that the federal financial management workforce must transition from transaction processing to strategic planning and decision support, which will require more analytical skills. How has the private sector transformed its workforce to do this, and are there any best practices and lessons learned? Was this done through training and professional development of the existing workforce in the organization, or were new employees recruited?

6. What processes or systems have been consolidated or integrated in the private sector (accounting, bill payment, etc.) and have these resulted in workforce reductions or increased workforce flexibility? What other effects of expanded use of technology (just in time inventory, customer self-service, etc.) have there been on the financial management workforce? Did your organization contract out accounting and other financial operations due to human capital limitations?

7. Is the private sector concerned with attrition in the financial management workforce and, if so, what steps are being taken to address the challenges?

8. Motivating and engaging employees is one area of emphasis suggested for responding to the current human capital issues. What efforts in this area have emerged as particularly successful in the private sector?  

DRAFT— MACROBUTTON NoMacro [Click **here** and type report #)] —11/1/028Highlights PSC Forum -Final

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