Human Capital: OPM Can Better Assist Agencies in Using Personnel Flexibilities
Published: 2003-05-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Congressional requesters asked GAO to provide information on actions that the Office of Personnel Management (OPM) has taken to facilitate the effective use of human capital flexibilities throughout the federal government and what additional actions OPM might take in this regard. These flexibilities represent the policies and practices that an agency has the authority to implement in managing its workforce.
section_title: What GAO Found
paragraphs: OPM Has Taken Several Actions to Assist Agencies: OPM has an important leadership role in identifying, developing, applying, and overseeing human capital flexibilities across the federal government. OPM has taken several actions to assist federal agencies in effectively using the human capital flexibilities that are currently available to agencies. For example, OPM has issued a handbook for agencies that identifies the various flexibilities available to help manage their human capital. Also, OPM has initiated some efforts to assist agencies in identifying additional flexibilities that might be helpful to agencies in managing their workforces. Human Resources Directors Gave Mixed Views on OPM's Role: To yield indications of the progress that OPM has made in its important role related to assisting agencies in the use of human capital flexibilities, GAO surveyed the human resources directors of the federal government's 24 largest departments and agencies in fall of 2001 and again in the fall of 2002. There was little change in the directors' level of satisfaction with OPM's role in assisting agencies in using available flexibilities, which remained mixed. For example, one director said OPM had effectively facilitated the use of work-life flexibilities, but others thought that OPM had placed its own restrictive interpretation on the use of other personnel flexibilities. The level of satisfaction with OPM's role in identifying additional flexibilities was greater in 2002 than in 2001, but still remained below the satisfaction level for assistance with existing flexibilities. Several directors said that OPM had not worked diligently enough in supporting authorization of governmentwide use of new flexibilities that have been sufficiently tested and deemed successful. Additional OPM Actions Could Further Facilitate Use of Flexibilities: Although OPM has recently taken numerous actions, OPM could more fully meet its leadership role to assist agencies in identifying, developing, and applying human capital flexibilities across the federal government. In its ongoing internal review of its existing regulations and guidance, OPM could more directly focus on determining the continued relevance and utility of its regulations and guidance by asking whether they provide the flexibility that agencies need in managing their workforces while also incorporating protections for employees. In addition, OPM can maximize its efforts to make human capital flexibilities and effective practices more widely known to agencies by compiling, analyzing, and sharing information about when, where, and how the broad range of flexibilities are being used, and should be used, to help agencies meet their human capital management needs. OPM also needs to more vigorously identify new flexibilities that would help agencies better manage their human capital and then work to build consensus for the legislative action needed.

section_title: Letter
paragraphs: To deal with the challenges that federal agencies are experiencing in  acquiring and retaining staff to meet current and expected needs, agencies  need effective human capital flexibilities—with appropriate safeguards—to  assist them.  In broad terms, human capital flexibilities represent the  policies and practices that an agency has the authority to implement in  managing its workforce to accomplish its mission and achieve its goals.   These flexibilities can include actions related to recruitment, retention,  compensation, position classification, incentive awards and recognition,  training and development, performance management and appraisals,  realignment and reorganization, and work arrangements and work-life  policies.  The tailored use of such flexibilities for acquiring, developing, and retaining talent is an important cornerstone of our model of strategic  human capital management.
As the federal government’s human capital agency, the Office of Personnel  Management (OPM) has an important leadership role in identifying,  developing, and applying human capital flexibilities across the federal  government.  Given the importance of OPM’s role, you asked us to provide  information on the actions that OPM has taken to facilitate the effective use  of human capital flexibilities throughout the federal government and what  additional actions OPM might take in this regard.  This report is the second  of two reports responding to your request for information on the use of  human capital flexibilities in the federal government.  In December 2002,  we reported on (1) the key practices that agencies should implement for  effective use of human capital flexibilities and (2) agency and union  officials’ views related to the use of human capital flexibilities.  In addition  to the above addressees, both reports were also done at the request of the  Honorable Fred Thompson, former ranking minority member of the Senate  Committee on Governmental Affairs.
To address the issue of OPM’s role in facilitating agencies’ use of human  capital flexibilities, we reviewed relevant reports and interviewed  cognizant officials from OPM, the Merit Systems Protection Board, and the  National Academy of Public Administration (NAPA).  We also interviewed  the individuals serving in the positions of human resources directors for  the federal government’s 24 largest departments and agencies.  We  surveyed these 24 human resources directors in the fall of 2001 and  surveyed the individuals in these positions again in the fall of 2002.  In  addition, we reviewed previous GAO reports on a broad range of human  capital issues.  We conducted our work in accordance with generally  accepted government auditing standards.  (See app. I for additional  information on our objectives, scope, and methodology.)
subsections: section_title: Background
paragraphs: In serving as the federal government’s human capital agency, OPM sees its  role to be the President’s strategic advisor on human capital issues, to  develop tools and provide support to agencies in their human capital  transformation efforts, and to assist in making the federal government a  high-performing workplace.  As such, OPM, in conjunction with the Office  of Management and Budget (OMB), is charged with leading the federal  government’s strategic management of human capital initiative, one of five governmentwide initiatives of the President’s Management Agenda.   In  carrying out this effort, OPM’s strategy is to provide human resources  management leadership and services to all agencies in a manner that  blends and balances flexibility and consistency.  As we noted in our recent  report on OPM’s management challenges, OPM carries out its leadership  role in a decentralized environment where both it and the agencies have  shared responsibilities for addressing the human capital and related  challenges facing the federal government.
OPM’s role in aiding federal agencies represents a considerable challenge  because federal managers have complained for years about the rigid and  elaborate procedures required for federal personnel administration and  have often expressed the need for more flexibility within a system that has  traditionally been based on uniform rules.  Reformers have long sought to  decentralize the personnel system and simplify the rules, arguing that  however well the system may have operated in the past, it is no longer  suited to meet the needs of a changing and competitive world.  In 1983, for  example, NAPA published a report critical of excessive restrictions on  federal managers, including constraints on their human resources  decisions.  In response to these criticisms, OPM has, over time,  decentralized and delegated many personnel decisions to the agencies and  has encouraged agencies to use human capital flexibilities to help tailor  their personnel approaches to accomplish their unique missions.  Our  strategic human capital management model also advocates that agencies  craft a tailored approach to their use of available flexibilities by drawing on  those flexibilities that are appropriate for their particular organizations and  their mission accomplishment.  Because of this tailoring, the federal  personnel system is becoming more varied, notwithstanding its often-cited  characterization as a “single employer.”
The overall trend toward increased flexibility has revealed itself in a  number of ways, including the efforts of some agencies to seek  congressional approval to deviate from the personnel provisions of Title 5  of the U.S. Code that have traditionally governed much of the federal  government’s civil service system.  As observed in a 1998 OPM report,  federal agencies’ status relative to these Title 5 personnel requirements can  be better understood by thinking of them on a continuum.  On one end of  the continuum are federal agencies that generally must follow Title 5  personnel requirements.  These agencies do not have the authority, for  example, to establish their own pay systems.  On the other end of the  continuum are federal agencies that have more flexibility in that they are  exempt from many Title 5 personnel requirements.  For example, the  Congress provided the Tennessee Valley Authority and the Federal Reserve  Board with broad authority to set up their own personnel systems and  procedures.  This trend toward greater flexibility, in fact, has gained  momentum to the extent that about half of federal civilian employees are  now exempt from at least some of the personnel-related requirements of  Title 5.  For example, the Federal Aviation Administration, the Internal  Revenue Service, and the new Department of Homeland Security have  exemption from key Title 5 requirements.
In addition to receiving congressional authorizations for exemptions from  the personnel-related requirements of Title 5, other mechanisms are  available to initiate human capital innovations and flexibilities within  federal agencies.  OPM has the authority to reassess and make changes to  its existing regulations and guidance to supply agencies with additional  flexibilities.  Additionally, a federal agency can obtain authority from OPM  to waive some existing federal human resources laws or regulations  through an OPM-sponsored personnel demonstration project.  The aim of  these demonstration projects is to encourage experimentation in human  resources management by allowing federal agencies to propose, develop,  test, and evaluate changes to their own personnel systems.  In some cases,  Congress has allowed some agencies to implement alternatives that have  been tested and deemed successful.  For example, more flexible pay  approaches that were tested within the Department of the Navy’s China  Lake (California) demonstration project in the early 1980s were eventually  adopted by other federal agencies such as the Department of Commerce’s  National Institute of Standards and Technology.
In December 2002, we reported on agency officials’ and union  representatives’ views regarding various issues related to flexibilities.   According to the agency officials and union representatives we  interviewed, existing flexibilities that are most effective in managing the  workforce are work-life policies and programs, such as alternative and  flexible work schedules, transit subsidies, and child care assistance;  monetary recruitment and retention incentives, such as recruitment  bonuses and retention allowances; special hiring authorities, such as  student employment and outstanding scholar programs; and incentive  awards for notable job performance and contributions, such as cash and  time-off awards.  Agency and union officials also identified five categories  of additional human capital flexibilities as most helpful if authorized for  their agencies: (1) more flexible pay approaches, (2) greater flexibility to  streamline and improve the federal hiring process, (3) increased flexibility  in addressing employees’ poor job performance, (4) additional workforce  restructuring options, and (5) expanded flexibility in acquiring and  retaining temporary employees.  Furthermore, we reported that the agency  managers and supervisors and human resources officials we interviewed  generally agreed that additional human capital flexibilities could be  authorized and implemented in their agencies while also ensuring  protection of employees’ rights.  Union representatives, however,  expressed mixed views on the ability of agencies to protect employee  rights with the authorization and implementation of additional flexibilities.   Specifically, several union representatives said that managers could more  easily abuse their authority when implementing additional flexibilities, and  that agency leaders often do not take appropriate actions in dealing with  abusive managers.
Based on our interviews with human resources directors from across the  federal government and our previous human capital work, we also reported  on six key practices that agencies should implement to use human capital  flexibilities effectively.  Figure 1 identifies these key practices.
Lastly, also in our December 2002 report, we noted that agency and union  officials identified several significant reasons why agencies have not made  greater use of the human capital flexibilities that are available to them.   These reported barriers that have hampered agencies in maximizing their  use of available flexibilities included:  agencies’ weak strategic human  capital planning and inadequate funding for using these flexibilities given  competing priorities; managers’ and supervisors’ lack of awareness and  knowledge of the flexibilities; managers’ and supervisors’ belief that  approval processes to use specific flexibilities are often burdensome and  time-consuming; and managers’ and supervisors’ concerns that employees  will view the use of various flexibilities as inherently unfair, particularly  given the common belief that all employees must be treated essentially the  same regardless of job performance and agency needs.
As noted in our report, the recently enacted Homeland Security Act of 2002  provided agencies with a number of additional flexibilities relating to  governmentwide human capital management.  For example, agencies will  now be permitted to offer buyouts to their employees without the  requirement to reduce their overall number of employees.  The legislation  also permits agencies to use a more flexible approach in the rating and  ranking of job candidates (categorical rating) during the hiring and staffing  process.  The Act also created chief human capital officer (CHCO)  positions for the largest federal departments and agencies, an interagency  CHCO Council, and a requirement that agencies discuss their human  capital approaches in their annual performance plans and reports under the  Government Performance and Results Act.
section_title: OPM Has Taken Several Actions to Assist Agencies in Using Flexibilities
paragraphs: OPM deems that its role related to human capital flexibilities is broader  than merely articulating polices that federal agencies use in managing their  workforces.  OPM sees that it has an important leadership role in  identifying, developing, and applying human capital flexibilities across the  federal government.  As such, OPM has several initiatives underway with  the goal of assisting federal agencies in using available flexibilities and  identifying additional flexibilities that might be beneficial for agencies.
subsections: section_title: OPM Has Initiatives to Assist Agencies in Using Available Flexibilities
paragraphs: One of OPM’s primary functions related to assisting agencies in the use of  human capital flexibilities is to serve as a clearinghouse for information  through a variety of sources, including its Web site.  For example, OPM  prepared and posted on its Web site a handbook on personnel flexibilities  generally available to federal agencies.  This handbook, Human Resources  Flexibilities and Authorities in the Federal Government, describes the  flexibilities that agencies can use to manage their human capital challenges  and provides information about the statutory and regulatory authorities for  the specific flexibilities.  OPM has also established Web-based  clearinghouses of information on best practices in two areas of human  resources management:  employee performance management and  accountability.  OPM said that it has received positive feedback on these  two Web-based clearinghouses and that many of OPM’s customers have  said that the information has been useful to them in researching  information and when redesigning human resources-related programs.
OPM is also developing a Preferred Practices Guide that it said would  highlight efficient and effective hiring practices using existing hiring  flexibilities.  To assist in developing this guide, OPM in July 2002 asked  federal human resources directors to share information with OPM about  their improved results in areas related to hiring by using newly developed  practices, strategies, and methods that could assist other agencies in  addressing similar challenges.  According to OPM, the contents of this Web- based document will likely parallel the steps of the federal hiring process  and encompass areas such as workforce planning, recruitment,  assessment, and retention.  The guide is also expected to include actual  examples of agency hiring practices, such as the Emerging Leaders  Program, a 2-year career development intern program created by the  Department of Health and Human Services, and the Recruitment “Timely  Feedback” Executive Tool, a monthly reporting and accountability system  for gauging progress on recruiting initiatives that was established at the  Social Security Administration.  This Preferred Practices Guide, which  OPM plans to post on its Web site in early 2003, would complement other  ongoing OPM hiring-related efforts to encourage agencies to (1) provide  interested persons with timely and informed responses to questions about  the federal recruiting process, (2) develop clear and understandable job  announcements, and (3) provide job applicants with regular updates on the  status of their applications as significant decisions are reached.
OPM has also issued a report entitled Demonstration Projects and  Alternative Personnel Systems: HR Flexibilities and Lessons Learned,  which contains lessons learned about implementing change to improve  federal human capital management.  According to OPM, these lessons  learned are based on the testing of several personnel flexibilities in a wide  variety of demonstration projects and alternative personnel systems at  federal agencies over the past 20 years.  OPM said that agency officials  from the various projects collaborated with OPM staff in developing the  report.  The lessons learned in OPM’s report are similar to the key practices  that we recently reported on for effectively using human capital  flexibilities.
OPM has also committed the assistance of its various experts to help  agencies with human capital issues and challenges, including use of the  various flexibilities available to agencies.  OPM has established a human  capital team of desk officers who serve as liaisons with agencies and who  are to work closely with the agencies to help them in responding to the  President’s Management Agenda.  For some agencies with less planning  and actions on strategic human capital management, these desk officers  provide coaching and assistance and establish contacts with OPM’s  program office experts.  OPM said that when working with their assigned  agency representatives, the desk officers take full advantage of all available  OPM resources, including clearinghouse information, to help agencies  identify available flexibilities.  For example, OPM said that its desk officer  for the Department of Education fielded an inquiry that led to on-site  assistance in the planning and implementation of a demonstration project  for that department.
OPM has also formed “strike force teams,” created on an ad hoc basis, to  provide expedited service to agencies with critical, time-sensitive human  capital needs.  These strike force teams are to serve a single focal point  through which agencies can get assistance and advice on a wide range of  topics and issues, including the implementation of human capital  flexibilities.  OPM has created strike force teams for several agencies,  including the Department of Housing and Urban Development, the  Department of Justice (DOJ), and the Transportation Security  Administration.  For example, at the request of the Assistant Attorney  General, a strike force team worked with DOJ human resources staff to  develop and present a briefing on human resource flexibilities for DOJ  political appointees.  OPM is also working jointly with the new Department  of Homeland Security to prescribe regulations for the department’s human  resources management system.
OPM also holds conferences, training sessions, and other meetings to share  information with agency officials, including material on the availability of  flexibilities.  For example, OPM conducts an annual conference to provide  federal managers and human resources practitioners with updates and  other information about the federal compensation environment, including  topics such as pay and leave administration, performance management,  position classification, and efforts to improve the compensation tools  available to support agency missions.  As an example of its training  function, OPM, in collaboration with OMB, presented a half day of training  on personnel authorities available to agencies as part of transition training  for new political appointees.  OPM said that it also held one-on-one  meetings with more than 30 agencies to discuss telework, learn about  agency initiatives in this area, and find out how OPM can assist agencies in  expanding telework opportunities.
In addition, OPM has realigned its own organizational structure and  workforce.  OPM’s goal was to create a new, flexible structure that will “de- stovepipe” the agency; enable it to be more responsive to its primary  customers, federal departments and agencies; and allow it to focus on the  agency’s core mission.  For example, OPM has decided to put its various  program development offices under the control of one associate director  and its product and services functions under another associate director to  ensure that it appropriately and efficiently responds to its customers.   Effective implementation of OPM’s latest organizational and workforce  realignment will be crucial to maximizing its performance as the federal  government’s human capital leader, assuring its own and other agencies’  accountability, and ultimately achieving its goals.
section_title: OPM Also Has Some Initiatives to Assist in Identifying Additional Flexibilities
paragraphs: OPM has furthermore initiated some efforts to assist agencies in identifying  additional flexibilities that might be effective in helping the agencies  manage their workforces.  For example, OPM said that it has actively  supported passage of proposed legislation that would enhance human  capital flexibilities and provide more latitude for flexible implementing  regulations.  OPM told us, for example, that it developed and drafted a  significant portion of the proposed Managerial Flexibility Act of 2001, a  bill intended to give federal managers tools and flexibility in areas such as  personnel, budgeting, and property management and disposal.  This  proposed legislation did not pass the 107th Congress, although several  related provisions were included in the recently enacted Homeland  Security Act of 2002.  OPM officials told us that these legislative efforts  should serve as evidence that OPM can and does identify areas where  changes to statute would provide more flexibility to agencies.  Moreover,  one component of the proposed legislation, which was not enacted,  includes streamlining the process for implementing demonstration projects  and creating a mechanism to export tested innovations to other federal  organizations.  OPM believes that to get a better return on investment from  years of demonstration project evaluations, a method should exist—short  of separate legislation—for converting successfully tested alternative  systems and flexibilities to permanent programs and for making them  available to other agencies.
OPM has taken other actions to assist agencies in identifying additional  flexibilities that they could use to manage their workforces.  For example,  in its HR Flexibilities and Lessons Learned report, OPM identified  personnel flexibilities that have been tested and evaluated through  demonstration projects or alternative personnel systems over the last 20  years.  OPM said that during the development of the Managerial Flexibility  Act, the President’s Management Council requested information on existing  flexibilities and that OPM created its report in response to that request in  an effort to catalogue these flexibilities in one document.  OPM said that  some of the flexibilities catalogued in its report have been thoroughly  tested over time in a variety of environments, while others have more  limited agency applicability and thus have more limited data to show their  success.  Some of these flexibilities outlined in the report correspond to the  types of flexibilities that agency and union officials told us could be  beneficial for their agencies, such as broadbanded pay systems, categorical  rating for hiring, and expanded probationary periods for new employees.
OPM recognizes that additional efforts are needed to address key  personnel challenges within the federal workforce, particularly in the areas  of pay and hiring.  In April 2002, OPM released a report that presents the  case for the need for reform of the white-collar federal pay system under  which 1.2 million General Schedule federal employees are paid.  Without  recommending a specific solution, OPM’s report stresses the importance of  developing a contemporary pay system that is more flexible, market- sensitive, and performance-oriented as well as a better tool for improving  strategic human capital management.  Also, OPM said that in the coming  months it will identify additional projects and proposals that will address  systemic problems associated with the hiring process.  These additional  initiatives will include deploying competency-based qualifications,  improving entry-level hiring, and updating and modernizing exam scoring  policy.  According to OPM officials, as it moves forward on these pay and  hiring initiatives, OPM will assess what additional flexibilities and tools  might be needed for agencies as they look for ways to better manage their  workforces.
section_title: Agencies’ Human Resources Directors Gave Mixed Views on OPM’s Role Related to Flexibilities
paragraphs: Although federal agencies have the primary responsibility to maximize  their use of human capital flexibilities, OPM also plays a key role in  facilitating agencies’ use of existing flexibilities as well as identifying new  personnel authorities that agencies might need in managing their  workforces.  The views of agencies’ human resources directors can help to  provide indications of the progress that OPM has made in its important role  related to human capital flexibilities.  We therefore surveyed the human  resources directors for the 24 largest departments and agencies in the  federal government to obtain their views on OPM’s role related to  flexibilities.
subsections: section_title: Directors’ Views Varied on OPM’s Role Related to Using Available Flexibilities
paragraphs: In the surveys we conducted in the fall of 2001 and again in the fall of 2002,  the human resources directors for the largest departments and agencies  gave mixed views on their satisfaction with OPM’s role in assisting their  agencies in using available human capital flexibilities.  Figure 2 depicts the  directors’ responses on this issue for both 2001 and 2002.  In 2002, 7 of the  24 responding directors said that they were satisfied to “little or no” or  “some” extent regarding OPM’s role in assisting their agencies in using  available flexibilities.  Conversely, 7 of the 24 responding directors in 2002  said that they were satisfied to a “great” or “very great” extent with OPM’s  role in assisting their agencies with available flexibilities.  Overall for 2002  on this issue, the average satisfaction level of the human resource directors  was unchanged between 2001 and 2002.  Specifically, for 2002 our survey  showed that for five agencies, the director’s level of satisfaction was  greater than the level of satisfaction for that agency’s human resources  director from the previous year; for five agencies, the directors’ level of  satisfaction was less than the level of satisfaction for that agency’s human  resources director from the previous year.
In our interviews with the human resources directors regarding the issue of  OPM’s role in assisting agencies in the use of available flexibilities, several  of the directors said that OPM communicates well with agencies through e- mails, meetings, workgroups, and its Web site and has taken some action to  disseminate information about existing flexibilities.  One director, for  example, commended OPM for effectively using its Web site to share  information about what flexibilities are generally available to agencies.   Another director praised OPM for the positive actions it had taken with  respect to facilitating work-life programs for federal employees.  However,  directors frequently commented that OPM often puts its own restrictive  interpretation on the use of flexibilities, surrounding them with too many  regulations that can make their use unduly complicated and more difficult;  regulations and guidance on implementing the Federal Career Intern  Program were mentioned frequently in this regard, for example.  Several  directors argued that their agencies should be able to implement human  capital flexibilities in the most flexible fashion, not the most restrictive.
One director expressed the opinion that, although the upper management  of OPM may support using flexibilities, middle management and lower- level staff within the agency seemed resistant to change and sometimes  hampered the efforts of agencies in the use of flexibilities.  This director  wanted to see OPM play a more facilitative and consultative role, working  in concert with agencies.  In addition, directors from several agencies  stated that OPM needs to host additional forums to share experiences on  the use of existing human capital flexibilities, with OPM more fully serving  as a clearinghouse in making flexibilities and effective practices more  widely known to agencies.
section_title: Directors Were Somewhat Less Satisfied with OPM’s Role Related to Identifying Additional Flexibilities
paragraphs: While the human resources directors we surveyed gave mixed views on  their satisfaction with OPM’s role related to available flexibilities, the  directors were less satisfied with OPM’s role in assisting agencies in  identifying additional human capital flexibilities that could be authorized.   However, the directors’ extent of satisfaction on this issue, as measured in  our survey, was greater in 2002 than in 2001.  Figure 3 depicts the directors’  responses on this issue for both 2001 and 2002.  In 2002, 11 of the 24  responding directors said that they were satisfied to “little or no” or “some”  extent regarding OPM’s role in identifying additional flexibilities that could  be authorized for agencies.  Conversely, 6 of the 24 responding directors  said that they were satisfied to a “great” or “very great” extent regarding  OPM’s role in identifying additional flexibilities.  For seven agencies, the  director’s level of satisfaction was greater in 2002 than the level of  satisfaction for that agency’s human resources director from the previous  year; for four agencies, the director’s level of satisfaction was less than the  level of satisfaction for that agency’s human resources director from the  previous year.
One human resources director we interviewed said, for example, that OPM  has done a commendable job of listening to agencies’ concerns about the  need for additional flexibilities, particularly through the Human Resources  Management Council, an interagency organization of federal human  resources directors.  However, several directors said that OPM needs to  play a more active role in identifying flexibilities that agencies might use to  manage their workforces.  Several human resources directors said that  OPM should be doing more to conduct or coordinate personnel  management research on additional flexibilities that might prove effective  for agencies to use in managing their workforces.  Several of these  directors also told us that OPM should work more diligently to support  efforts in authorizing and implementing governmentwide those innovative  human capital practices and flexibilities that have been sufficiently tested  and deemed to be successful, such as those tested in OPM-sponsored  personnel demonstration projects.
According to many of the human resources directors we interviewed, OPM  needs to play a larger role in acting as a change agent to get human capital  legislation passed and implemented.  While recognizing that OPM cannot  promote legislation that is inconsistent with the administration’s views of  the civil service, human resources directors said that OPM should be the  policy leader in the area of human capital and, as the leader, should push  harder for major civil service reform.  In the human resources directors’  opinions, OPM needs to look at personnel reforms in a new, open, and  objective way and develop changes to current laws and regulations to  ensure that agencies can effectively obtain and manage their workforces.   In addition, some directors expressed frustration about the lack of  coordination between OPM and OMB in responding to OMB’s request for  agencies to complete workforce planning and restructuring analyses.   Further, they said that OPM, OMB, and Congress need better  communication and coordination in developing budgets and recognizing  the costs involved in using human capital flexibilities.
section_title: Additional OPM Actions Could Further Facilitate Agencies’ Use of Flexibilities
paragraphs: Assisting federal agencies in using available flexibilities and in identifying  additional flexibilities is an important part of OPM’s overall goal of aiding  agencies in adopting human resources management systems that improve  their ability to build successful, high-performance organizations.  In  testimony before Congress in February of 2001, we suggested two areas in  which OPM could make substantial additional contributions in addressing  the federal government’s human capital challenges.  The first was in  reviewing existing OPM regulations and guidance to determine their  continued relevance and utility by asking whether they provide agencies  with the flexibilities they need while incorporating protections for  employees.  The second area was in making existing human capital  flexibilities and effective practices more widely known to the agencies, and  in taking fullest advantage of OPM’s ability to facilitate information-sharing  and outreach to human capital managers throughout the federal  government.  Although OPM has taken concerted action in some areas to  assist agencies in using flexibilities, OPM has taken limited actions related  to these two areas.  Moreover, OPM could do more to assist agencies in  identifying additional human capital flexibilities that could be authorized  and also be actively working to build consensus to support related  legislation that might be needed. Greater attention to these areas could  allow OPM to more fully fulfill its leadership role to assist agencies in  identifying, developing, and applying human capital flexibilities across the  federal government.  As we noted in the previous testimony, as OPM  continues to move from “rules to tools,” its more valuable contributions in  the future will come less from traditional compliance activities than from  its initiatives as a strategic partner to agencies.
subsections: section_title: OPM’s Review of Regulations Could Provide Opportunity to Give Additional Flexibility to Agencies
paragraphs: Just as agencies need to streamline and improve their own internal  administrative processes to effectively use flexibilities, OPM similarly  needs to ensure that its regulations and guidance provide adequate  flexibility while also recognizing the importance of ensuring fairness and  incorporating employee protections.  As we noted in our December 2002  report, if senior managers within agencies want supervisors to make  effective use of flexibilities, supervisors must view agencies’ internal  processes to use the flexibility worth their time compared to the expected  benefit to be gained in implementing the flexibility.  Similarly, if OPM wants  agencies to make effective use of flexibilities, agencies must view OPM’s  regulatory requirements for using the flexibility worth the expected  benefits that the flexibility would provide.
In comments that it provided in response to our December 2002 report,  OPM said that it is undertaking a review of its regulations and guidance.   According to OPM, the purpose of this regulatory review, which began in  December 2001, is to restate regulations in plainer language wherever  possible to eliminate redundant or obsolete material and to revise  regulations to make them more easily usable by a variety of readers.  OPM  said that because it has focused chiefly on making the regulations as  readable as possible, rather than making substantive changes, the agency  did not anticipate making changes to provide additional flexibility as part  of this effort.  OPM said that its Office of General Counsel, which is leading  the regulatory review, has been carrying it out by working with OPM’s  program offices to establish basic protocols, selecting provisions that  require elimination or redrafting, soliciting drafts from the offices, and then  reviewing and revising these drafts in conjunction with the OPM program  staff.  OPM said that it amends its regulations to provide flexibility, on an  as-needed basis, in the ordinary course of carrying out the OPM Director’s  policies.
In response to our request for examples of regulations that it has redrafted  under this effort, OPM said it was reviewing all of the regulations in chapter  I of Title 5 of the U.S. Code of Federal Regulations but that it was not yet in  a position to supply examples because it had recently begun to submit  some of the redrafted material to OMB for clearance.  Nonetheless, a report  we recently issued included an example of where OPM revised regulations  to, at least in part, provide additional flexibility to agencies.  In the fall of  2000, OPM amended regulations on evaluating the job performance of  senior executives within the federal government.  OPM’s goal in developing  these regulations was to help agencies hold their senior executives  accountable by increasing agency flexibility, focusing on results,  emphasizing accountability, and improving links between pay and  performance.  These changes were to balance the agencies’ desire for  maximum flexibility with the need for a corporate approach that  safeguards merit principles.  OPM’s changes to the regulations included  paring back many of the previous requirements to those in statute to give  agencies more flexibility to tailor their performance management systems  to their unique mission requirements and organizational cultures.  OPM  made these regulatory changes in part because performance management  systems have tended to focus on process over results.
Because providing additional flexibility has not been a fundamental  purpose of its current regulatory review, OPM is not taking advantage of a  crucial opportunity to provide additional flexibility, where appropriate, on  a systematic basis rather than through a piece-meal, ad hoc approach.   Human resources directors we interviewed often said that OPM should  provide agencies with greater delegation to carry out their human capital  programs.  For example, some directors commented that agencies should  be able to waive the annuity offsets for reemployed annuitants without  authority by OPM.  Some directors also told us that OPM should allow agencies to extend the probationary periods for newly hired employees  beyond the standard 1-year period.  Directors also said that OPM’s  guidance for implementing human capital programs could sometimes be  overly restrictive and burdensome.  For example, some directors said that  OPM’s internal approval and evaluation processes for personnel  demonstration projects needed to be streamlined to make the program  more practical.  One director told us, for instance, that her agency had  considered applying as a demonstration project but demurred because  officials at her agency viewed OPM’s requirements as too burdensome.
It is important to note that human resources directors we interviewed also  expressed interest in gaining increased flexibilities that would require  changes in federal statute and thus are outside of OPM’s authority to  change independently.  Directors commented on such areas as decreasing  some of the limitations and parameters of allowable personnel  demonstration projects.  As we noted in recent testimony, OMB and the  Congress have key roles in improving human capital management  governmentwide, including the important responsibility of determining the  scope and appropriateness of additional human capital flexibilities  agencies may seek through legislation.  In recent testimony on using  strategic human capital management to drive transformational change, we  noted the potential benefits of providing additional flexibility in the  government’s personnel systems by suggesting, for example, that the  Congress may wish to explore the benefits of allowing agencies to apply to  OPM on a case-by-case basis (i.e., case exemptions) for authority to  establish more flexible pay systems for certain critical occupations or, even  more broadly, allowing OPM to grant governmentwide authority for all  agencies (i.e., class exemptions) to use more flexible pay systems for their  critical occupations.
section_title: A More Comprehensive Clearinghouse and Increased Information Sharing about Flexibilities Could Better Assist Agencies
paragraphs: In our December 2002 report on human capital flexibilities, we noted that  one of the key factors for effectively using flexibilities is educating agency  managers and employees on the availability of these flexibilities as well as  about the situations where the use of those flexibilities is most appropriate.   Ultimately the flexibilities within the personnel system are only beneficial  if the managers and supervisors who would carry them out are aware of not  only their existence but also the best manner in which they could be used.   With a comprehensive clearinghouse and broad information sharing about  flexibilities, OPM can greatly assist agencies in educating their managers  and supervisors as well as preparing their human capital managers for their  consultative role regarding the best manner in which the full range of  flexibilities should be implemented.  This information would also be  useful to support OPM’s oversight of agencies’ use of personnel  flexibilities.
OPM has not, however, fully maximized its efforts to make human capital  flexibilities and effective practices more widely known to agencies.   Although OPM has made efforts to inform agencies of what flexibilities are  generally available and why their use is important, OPM has yet to take full  advantage of its ability to compile, analyze, and distribute information  about when, where, and how the broad range of flexibilities are being used,  and should be used, to help agencies meet their human capital management  needs.  Human resources directors we interviewed frequently brought up  that OPM needs to take further determined action on this issue.  One  human resources director said, for example, that OPM should be setting  benchmarks and identifying best practices for using flexibilities.  Another  director added that OPM should provide agencies with different scenarios  of how flexibilities can be used.  Another director commented that OPM  needs to develop more educational and training aids to inform agency  officials about these best practices.  Yet another director added that OPM  should evaluate the effectiveness of many different flexibilities and share  the results with other agencies.
OPM officials told us that they do not generally know which federal  agencies have done effective jobs in using specific flexibilities nor which  practices these agencies employed to produce effective results.  OPM could  use its outreach and information-sharing efforts to more thoroughly  identify which federal agencies are specifically using the various  flexibilities in effective ways and reporting on the particular practices that  these agencies are using to implement their flexibilities.  Examination of  information from OPM’s database of federal civilian employees, the Central  Personnel Data File, could help OPM in such analysis, including identifying  possible correlations between an agency’s use of flexibilities and factors  such as employees’ occupations, grade levels, and duty stations.  This  compilation, analysis, and distribution of information could also include  research OPM conducts or sponsors that may shed light on effective  practices for implementing existing flexibilities.
OPM could also use this analysis of agencies’ use of flexibilities in its  oversight role.  OPM’s new Human Capital Assessment and Accountability  Framework provides guidance for agencies to maximize their human  capital management and is being used by OPM to evaluate agencies’  progress.  For example, under one of the framework’s six standards for  success, key questions to consider include the following:  Does the agency use flexible compensation strategies to attract and  retain quality employees who possess mission-critical competencies?
Does the agency provide work/life flexibilities, facilities, services, and  programs to make the agency an attractive place to work?
The information gathered on personnel flexibilities could assist OPM in its  assessment of this standard.  In addition, OPM has the responsibility to not  only review whether agencies are maximizing the use of personnel  flexibilities, but also, along with agencies, ensure that flexibilities are being  used fairly and are consistent with the merit principles and other national  goals and include appropriate safeguards.
section_title: Additional Efforts to Identify New Flexibilities Needed
paragraphs: The human resource directors we interviewed said that OPM could do  more to assist agencies in identifying additional human capital flexibilities  that could be authorized.  The information gathered on agencies’ use of  flexibilities could also be used to gain greater insight into agencies’ needs  related to additional flexibilities that might be helpful for agencies’  management of their human capital.  In our discussions with OPM about its  efforts in assisting agencies with flexibilities, OPM officials told us that it  was not feasible to identify or track all agency requests for additional  flexibilities because such requests are received throughout the  organization and range from casual questions to formal requests for  exceptions or demonstration projects.  Tracking such requests, however,  could assist OPM in gaining a clearer picture of agency concerns and  requests for additional tools and flexibilities as well as more  comprehensively documenting agency needs for the benefit of  policymakers as statutory and regulatory changes are proposed and  considered.  The recently legislated Chief Human Capital Officers Council,  chaired by the OPM Director, could also aid in disseminating information  about effective human capital practices.  We have reported that the use of  the similar interagency councils of chief financial officers and chief  information officers to, among other things, share information about  effective practices, was one of the major positive public management  developments over the past decade.
Once OPM determines that additional flexibilities are needed, it could  actively work to build consensus to support needed legislation.  As noted  earlier, OPM actively supported legislation in the last Congress to authorize  additional flexibilities to agencies.  Specifically, OPM drafted and  supported a significant portion of the proposed Managerial Flexibility Act  of 2001.  OPM could  continue to support such legislation and identify  additional personnel flexibilities that are needed.
section_title: Conclusions
paragraphs: The ineffective use of flexibilities can significantly hinder the ability of  federal agencies to recruit, hire, retain, and manage their human capital.  To  deal with their human capital challenges, it is important for agencies to  assess and determine which human capital flexibilities are the most  appropriate and effective for managing their workforces.  As we previously  reported, to ensure more effective use of human capital flexibilities, it is  important that agencies (1) plan strategically and make targeted  investments, (2) ensure stakeholder input in developing policies and  procedures, (3) educate managers and employees on the availability and  use of flexibilities, (4) streamline and improve administrative processes,  (5) build accountability into their systems, and (6) change their  organizational cultures.  By more effectively using flexibilities, agencies  would be in a better position to manage their workforces, assure  accountability, and transform their cultures to address current and  emerging demands.
OPM provides the necessary link to agencies to accomplish their goals by  making existing human capital flexibilities more widely known and easier  to use and by identifying additional flexibilities that can help agencies  better manage their workforces.  While it has taken some actions to inform  agencies about what flexibilities are generally available and why their use  is important, OPM has significant opportunities to strengthen its role as its  moves forward to assist agencies as an integral part of the administration’s  human capital transformation efforts.  By taking hold of these  opportunities, OPM could more successfully aid agencies with more  comprehensive information about the tools and authorities available to  them for managing their workforce and the most effective ways that these  flexibilities can be implemented.  The new CHCO Council could be an  excellent vehicle to assist in these areas.
section_title: Recommendations for Executive Action
paragraphs: Given the importance of the effective use of flexibilities as a critical part of  improved human capital management within the federal government and  consistent with OPM’s ongoing efforts in this regard, we recommend that  the Director of OPM take the following actions.
Review existing OPM regulations and guidance to determine whether  they provide agencies with needed flexibility while also incorporating  protection for employees.
Work with and through the new Chief Human Capital Officers Council to  more thoroughly research, compile, and analyze information on the  effective and innovative use of human capital flexibilities and more fully  serve as a clearinghouse in sharing and distributing information about  when, where, and how the broad range of flexibilities are being used,  and should be used, to help agencies meet their human capital  management needs.
Continue to identify additional personnel flexibilities needed to better  manage the federal workforce and then develop and build consensus for  needed legislation.
section_title: Agency Comments
paragraphs: OPM commented on a draft of this report and agreed with the conclusions  and recommendations.  OPM pointed out that in future studies that address  OPM leadership issues, in addition to surveying agency human resource  directors, we should also survey agency chief operating officers.  OPM  believed that the chief operating officers have the “best perspective and the  widest array of information about recruitment and retention issues.”  We  agree that such future studies would benefit from the perspectives of chief  operating officers.  OPM’s complete comments are shown in appendix II.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from its  date. At that time, we will send copies to the Chairman, Senate Committee  on Governmental Affairs, and the Chairman and Ranking Minority Member,  House Committee on Government Reform, and other interested  congressional parties.  We will also send copies to the Director of OPM.  We  also will make copies available to others upon request.  In addition, the  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you have any questions about this report, please contact me on (202) 512- 6806.  Key contributors to this report are listed in appendix III.
section_title: Objectives, Scope, and Methodology
paragraphs: This report is the second of two reports responding to a request from the  Senate Committee on Governmental Affairs and two of its subcommittees  regarding the use of human capital flexibilities in managing agency  workforces.  The objectives of our first report, issued in December 2002,  were to provide information on (1) actions that federal agencies can take to  more effectively implement human capital flexibilities and (2) agency and  union officials’ views related to the use of human capital flexibilities.  The  objectives of this report were to provide information on actions that the  Office of Personnel Management (OPM) has taken to facilitate the effective  use of human capital flexibilities throughout the federal government as  well as what additional actions OPM might take in this regard.  Our work in  responding to this request was conducted in two phases.  Phase one of our  work primarily involved surveying and interviewing the human resources  directors from the 24 largest departments and agencies.  Phase two of our  work involved conducting semi-structured interviews with managers and  supervisors, human resources officials, and local union representatives  from seven federal agencies we selected for more detailed review.  This  report was developed primarily from our work during phase one.
To respond to the objectives of this report, we gathered information from a  variety of sources using several different data collection techniques.   During phase one of our work, we interviewed representatives from OPM,  the federal government’s human resources agency; Merit Systems  Protection Board, a federal agency that hears and decides civil service  cases, reviews OPM regulations, and conducts studies of the federal  government’s merit systems; and the National Academy of Public  Administration, an independent, nonpartisan, nonprofit, congressionally  chartered organization that assists federal, state, and local governments in  improving their performance.  We interviewed representatives of these  three organizations to gather background information on the federal  government’s experiences with and use of human capital flexibilities and  OPM’s role in assisting agencies in their use of personnel flexibilities.  We  also reviewed numerous reports issued by these organizations on  governmentwide human capital issues, the use of various human capital  flexibilities in federal agencies, and the role of OPM.  In addition, we  reviewed previous GAO reports on a broad range of human capital issues.
In the fall of 2001, we also gathered information for our objectives by  conducting semistructured interviews with the human resources directors  of the 24 largest federal departments and agencies.  To produce a general  summary of the human resources directors’ views, we first reviewed their  responses to the open-ended questions we had posed to them.  Based on  our analysis of those responses, we identified a set of recurring themes and  then classified each director’s responses in accord with these recurring  themes.  At least two staff reviewers collectively coded the responses from  each of the 24 interviews and the coding was verified when entered into a  database we created for our analysis.  In addition, prior to our interviews  with the 24 human resources directors, each of the 24 officials completed a  survey of seven closed-ended questions dealing with agencies’ use of  human capital flexibilities, OPM’s role related to these flexibilities, and the  federal hiring process.
To update this information, we resurveyed the 24 individuals serving in the  agencies’ human resources director positions in the fall of 2002, asking the  same seven questions.  During the period between the 2001 and 2002  surveys, 16 of the 24 individuals serving in the positions of human  resources directors had changed.  Table 1 shows the questions from these  surveys along with a summary of the answers provided.  For each item,  respondents were to indicate the strength of their perception on a 5-point  scale, from “little or no extent” to “very great extent.”
Our audit work on both phases of our review was done from May 2001  through November 2002.  We conducted our audit work in accordance with  generally accepted government auditing standards.
section_title: Comments from the Office of Personnel Management
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to the persons above, K. Scott Derrick, Charlesetta Bailey, Tom  Beall, Ridge Bowman, Karin Fangman, Molly K. Gleeson, Judith Kordahl,  Shelby D. Stephan, Gary Stofko, Mike Volpe, and Scott Zuchorski made key  contributions to this report.
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