Human Capital: Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces
Published: 2002-12-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: An essential element to acquiring, developing, and retaining high-quality federal employees is agencies' effective use of human capital flexibilities. These flexibilities represent the policies and practices that an agency has the authority to implement in managing its workforce. Congressional requesters asked GAO to provide information on agency and union officials' views about the most effective human capital flexibilities, additional flexibilities needed, and whether additional flexibilities could be implemented while also protecting employees' rights. GAO was also asked to identify key practices for effective use of flexibilities. GAO interviewed the human resources directors of the federal government's 24 largest departments and agencies, and representatives of 4 national organizations representing federal employees and managers. GAO further focused its efforts on 7 federal agencies--Department of Air Force, General Services Administration, Internal Revenue Service, International Trade Administration, U.S. Mint, State Department, and Veterans Benefits Administration--interviewing more than 200 managers, supervisors, human resources officials, and union representatives in headquarters and field locations.
section_title: What GAO Found
paragraphs: Agency and union officials' views on human capital flexibilities. Most effective flexibilities. Existing flexibilities that are most effective in managing the workforce are work-life programs, such as alternative work schedules, child care assistance, and transit subsidies; 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. Additional flexibilities needed. Additional flexibilities that would be helpful in managing the workforce include more flexible pay approaches to compensate federal employees, greater flexibility to streamline and improve the federal hiring process, increased flexibility in addressing employees' poor job performance, additional workforce restructuring options, and expanded flexibility in acquiring and retaining temporary employees. Protection of employee rights. Managers, supervisors, and human resources officials generally believed that additional human capital flexibilities could be implemented in their agencies while also protecting employees' rights. Union representatives, however, gave mixed views ranging from the opinion that additional flexibilities could be implemented while still protecting employee rights to concerns that managers would abuse their authority. Key practices for effective use of human capital flexibilities. GAO identified six key practices for the effective use of human capital flexibilities. These practices are (1) planning strategically and making targeted investments, (2) ensuring stakeholder input in developing policies and procedures, (3) educating managers and employees on the availability and use of flexibilities, (4) streamlining administrative processes, (5) building transparency and accountability into the system, and (6) changing the organizational culture. The insufficient and ineffective use of flexibilities can significantly hinder the ability of federal agencies to recruit, hire, retain, and manage their human capital. Congress is currently debating the extent of personnel flexibilities that should be granted to the new Department of Homeland Security. While this decision is important to how the department will operate, how personnel flexibilities are implemented is equally important.

section_title: Letter
paragraphs: For years, many observers have viewed the federal civil service as over- regulated and inflexible.  At the same time, federal agencies are  experiencing pervasive human capital challenges in acquiring and  developing staffs to meet current and emerging agency needs.  These types  of challenges are likely to go unresolved if agencies do not take steps to  ensure that they have sufficient numbers of people in place with the right  skills, tools, and incentives to get the job done right.  To deal with these  challenges, agencies need effective human capital flexibilities to assist  them.  The recent deliberations over human capital flexibilities for the new  Department of Homeland Security underscore the importance of ensuring  that agencies have the capabilities needed to effectively achieve their  missions and manage their people.
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 areas such as 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, which we recently released to  assist in transforming agencies so they become more results-oriented,  integrated, and externally focused.
In previous reports and testimonies, we have emphasized that in  addressing their human capital challenges, federal agencies should first  identify and use the flexibilities already available under existing laws and  regulations and then seek additional flexibilities only when necessary and  based on sound business cases.  In this regard, as agreed with your offices,  this report provides information on agency officials’ and union representatives’ views on (1) the most  effective flexibilities for managing their workforces, (2) additional  flexibilities that would be the most helpful in managing their  workforces, and (3) whether employee rights could be protected if  additional flexibilities were authorized and implemented within  agencies and  key practices that agencies should implement for effective use of human  capital flexibilities, along with specific examples of such practices from  selected agencies.
We were also asked to identify actions that the Office of Personnel  Management (OPM) could take to facilitate the effective use of human  capital flexibilities throughout the federal government.  We will be  discussing that issue in a separate report to be issued soon.
To address these issues, we reviewed relevant reports and interviewed  cognizant officials from OPM, the Merit Systems Protection Board (MSPB),  and the National Academy of Public Administration (NAPA).  In addition,  we interviewed the human resources directors of the federal government’s  24 largest departments and agencies and representatives from four national  organizations representing federal employees and managers.  As agreed,  we further focused our review on seven federal agencies:  the Department  of the Air Force, General Services Administration (GSA), Internal Revenue  Service (IRS), International Trade Administration (ITA), U.S. Mint (Mint),  Department of State (State), and Veterans Benefits Administration (VBA).   At the headquarters and various field locations of the seven agencies, we  collected documents on their use of human capital flexibilities and  interviewed over 200 managers and supervisors, human resources officials,  and union representatives.  We selected the seven agencies for various  reasons, including their variety of existing human capital challenges and  their range in usage of available human capital flexibilities.  Our agency  selection process was not designed to identify examples that could be  considered representative of all the human capital flexibilities used at the  seven agencies reviewed or the federal government as a whole. We  conducted our review 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: Federal managers have complained for years about the rigid and elaborate  procedures required for federal personnel administration, often expressing  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 the excessive constraints on federal  managers, including constraints on their human resources decisions.  As  part of the response to these criticisms, OPM 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 model also  advocates that agencies develop a tailored approach to their use of  available flexibilities by taking advantage of 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, despite its often-cited characterization as a “single  employer.”
The trend toward increased flexibility has manifested itself a number of  ways, including the efforts of some agencies to seek congressional  approval to move away 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 noted by OPM in a 1998 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, Congress provided the  Tennessee Valley Authority and the Federal Reserve Board with broad  authority to establish their own personnel systems and procedures.  The  movement in the direction of 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.
In addition to receiving congressional authorizations for exemptions from  the personnel-related requirements of Title 5, other mechanisms are  available to introduce human capital innovations and flexibilities within  federal agencies.  OPM has the authority to review and make changes to its  existing regulations and guidance to provide agencies with additional  flexibilities.  Additionally, a federal agency can obtain authority from OPM  to waive some existing federal human resources laws or regulations  through a personnel demonstration project.  The goal 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 adopt 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.
Exemptions from Title 5 personnel requirements within our seven selected  agencies help to illustrate the gradations of flexibility.  IRS, for example,  represents an agency with broad authority related to its human capital  management.  Efforts to reform IRS led to provisions under the IRS  Restructuring and Reform Act of 1998, which gave the Secretary of the  Treasury various pay and hiring flexibilities not otherwise available under  Title 5, such as the authority to establish new systems for hiring and  staffing, compensation, and performance management.  State and ITA are  examples of organizations in which some employees are not subject to  Title 5, while the remainder of the organization is covered.  In this case,  Foreign Service employees at State and ITA are outside of Title 5.  For the  remaining four agencies we included in our review, the majority of their  employees are covered under the personnel requirements of Title 5, with  some limited exemptions.  Air Force, for instance, has made use of  flexibilities under the demonstration project authority and currently  participates in two such demonstration projects, one involving laboratory  personnel and another for the civilian acquisition workforce.  In addition,  several of our selected agencies, such as GSA and VBA, received additional  flexibility through legislative authority to offer voluntary separation  incentive payments, commonly known as buyouts, to help restructure their  workforces.  Figure 2 provides background information on the seven  agencies along with a summary of some of their related exemptions from  Title 5 personnel requirements.
Even under current Title 5 personnel provisions and their applicable  regulations, efforts to reform and improve the personnel system have  provided many human capital flexibilities for agencies to use.  Within broad  parameters, such as adherence to merit system principles and employee  protection from prohibited personnel practices, these flexibilities offer the  agencies effective ways to accomplish their missions while maintaining the  key values of a centralized system.  For example, agencies have many  flexibilities available to help them restructure and realign their workforces.   Moreover, agencies have numerous compensation flexibilities that  authorize them to provide additional direct payments to support their  recruitment, relocation, and retention efforts, although some of them may  require the approval of OPM or the Office of Management and Budget  (OMB).
section_title: Agency Officials and Union Representatives Cited Most Effective Human Capital Flexibilities
paragraphs: Today, federal agencies are facing many human capital challenges.  With  the increasing numbers of employees retiring and the numbers of  employees who will be eligible to retire in the near future, along with  competition from private companies, federal agencies are in a struggle to  recruit and retain highly skilled employees.  In response to these  challenges, agencies need to use the various human capital flexibilities that  are available to them in managing their workforces to achieve agency  missions and accomplish goals.
Our discussions with agency officials and union representatives revealed  numerous human capital flexibilities that they deemed effective in  managing their workforces.  These flexibilities encompassed broad areas  of personnel-related actions such as 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.  On the  basis of these discussions, we identified the flexibilities that were the most  frequently cited by agency and union officials as being the most effective  for managing their agencies’ workforces.  These flexibilities include  work-life programs, such as alternative work schedules, child care  assistance, and transit subsidies;  monetary recruitment and retention incentives, including retention and  relocation bonuses and retention allowances;  special hiring authorities, such as student employment and outstanding   incentive awards, which range from performance-based cash awards to  time-off awards to symbolic items of nominal value, such as plaques and  T-shirts.
Table 1 provides a summary of these flexibilities and the cited benefits of  implementing them.
subsections: section_title: Agency and Union Officials Cited Work-Life Programs among the Most Effective Flexibilities
paragraphs: Agency officials and union representatives cited work-life programs among  the most effective flexibilities for recruiting, motivating, and retaining staff.   These programs are offered to help employees balance their work and  family lives and include alternative work schedules, employee assistance  programs, child care centers and assistance, transit subsidies, and  telecommuting options.  OPM has strongly supported the use of these  family-friendly programs, indicating that they can help to attract and retain  quality employees, boost morale, and reduce unscheduled leave.   Our  recent report looking at human capital challenges at the Securities and  Exchange Commission revealed how agencies can sometimes overlook the  effectiveness of these work-life programs in recruiting, retaining, and  motivating staff.  The following is additional information about the  effectiveness of these work-life flexibilities.
Alternative work schedules.  Federal agencies generally have the authority  to determine the hours of work for their employees to ensure that agencies  meet organizational goals.  Agencies may establish hours of work and  scheduling flexibilities to replace the traditional schedules of 8 hours per  day and 40 hours per week, such as full-time and part-time, overtime hours,  and flexible work schedules.  Scheduling flexibilities, such as alternative  work schedules, were among the effective flexibilities most cited by agency  managers and supervisors, human resources officials, and union  representatives.  Although some supervisors told us that such schedules  can be a challenge to manage, these supervisors stated that this scheduling  flexibility increases employee morale, strongly motivates employees, and  allows employees to be more flexible in accomplishing job responsibilities.   For example, IRS officials told us that the agency has made use of  alternative work schedules since the early 1980s and that this flexibility is  attractive to both current and potential employees.  Supervisors at the San  Francisco Mint said that the use of alternative work schedules reduces the  amount of accumulated leave taken because employees can accomplish  personal errands and tasks on their days off.  According to human  resources officials in GSA’s San Francisco region, about 1,300 of the  region’s 1,500 employees make use of alternative work schedules.
Employee assistance programs.  Through these programs, agencies can  provide a range of free, confidential counseling and referral services to  assist employees who may be experiencing personal problems affecting  their job performance or personal health.  Agency and union officials said  that these programs can be valuable in helping employees deal with issues  such as work and family pressures.  IRS supervisors in Philadelphia told us,  for example, that IRS’s employee assistance program offers employees and  their family members a way to address both work-related and nonwork- related issues and that the employees they had referred to the program had  found the services to be quite beneficial.  Officials at Langley Air Force  Base told us that both civilian and military personnel use the agency’s  employee assistance programs, which were designed to meet the needs of  various employee groups.
Child development centers and child care assistance.  Many federal  agencies provide on-site or near-site child development centers to help  employees with child care needs.  Civilian federal agencies recently  obtained authority through federal statute to use appropriated funds from  salaries and expenses to assist their lower income employees with the cost  of child care.  Agencies can also assist their employees with information  about other organizations that can help employees locate quality child care  services.  At some of the field locations we visited, agencies provided on- site or near-site child care for their employees.  Agency and union officials  said that this assistance greatly aids employees in focusing on their job  responsibilities by providing more reliable child care, and that reliable  child care often results in fewer employee absences.  A national union  representative pointed out that child care subsidies have allowed agencies  to retain employees and save money because they do not have to train new  staff members.  According to OPM, there are approximately 1,000 work-site  child care centers sponsored by civilian and military agencies in the federal  government.
Transportation subsidies.  In April 2000, an executive order was signed that  required all federal agencies to implement a transportation fringe benefit  program for their employees.  This transit subsidy program was designed  to encourage federal employees to use mass transportation for commuting  to and from work to reduce traffic congestion and air pollution.  Federal  agencies in the national capital region were required to implement a  “transit pass” program by providing eligible employees with subsidies in  the form of subway farecards.  Agencies generally have the flexibility to  make this program available to their employees nationwide and can  provide employees with transit passes of up to $100 per month for each  employee who uses public or vanpool transportation.  Many supervisors  and union representatives we interviewed said that this transit subsidy is  highly valued by employees.  Officials in the San Francisco Bay Area made  particular note of the benefits of using public transportation given the  traffic congestion in the area.
subsections: section_title: Telecommuting Cited as Beneficial in Certain Cases, but Some Doubted Its Effectiveness and Stressed the Need for Careful Management
paragraphs: While many agency managers and supervisors, human resources officials,  and union representatives supported the effectiveness of work-life  programs, our discussions of telecommuting with these officials brought  about strongly mixed opinions.  Telecommuting, also referred to as  telework or flexiplace, involves work arrangements that allow an employee  to work away from the traditional work site, either at home or at another  approved location.  Often cited potential benefits for agencies to establish  telecommuting programs include improved recruiting and retention of  employees, increased productivity, and a reduced need for office space.   Cited reasons for employees to participate in such programs include the  opportunity to reduce commuting time; lowered personal costs in areas  such as transportation, parking, food, and wardrobe; and improvement in  the quality of work-life and morale because they are able to balance work  and family demands.  An MSPB survey conducted in 2000 found that 47  percent of federal employees considered telecommuting important to them  personally and that 20 percent had it available to them.
Several managers and supervisors we interviewed, however, said that  telecommuting has not been shown to increase employee productivity, and  that it is often complicated to manage an employee who is working “out of  sight.”  According to these agency officials, in many cases it is more  difficult to judge the quality of the employee’s work in a telecommuting  environment, while in other cases the quality of the work can decline if the  employee is not mature in using this flexibility.  In addition, with  telecommuting, the office often loses some sense of teamwork and  continuity, and sometimes significant logistical obstacles must be  overcome.  Further, telecommuting is not practical for all occupations or  situations.  Yet, other agency managers and numerous union  representatives said that telecommuting can be an effective flexibility if  used appropriately.  Union representatives at GSA in Philadelphia, for  example, said that agency managers should focus on employee  productivity and results rather than the need to simply observe the  employee working.  These views mirror those found in our 1997 report  reviewing the use of telecommuting (i.e., flexiplace) in the federal  government.  During that review, agency officials and union  representatives we interviewed cited management resistance as the largest  barrier to implementing flexiplace programs.  Agency officials had  informed us that they had had some success in overcoming management  resistance by training supervisors or by exposing them to telecommuting  arrangements.  At the request of the Chairman, Subcommittee on  Technology and Procurement Policy, House Committee on Government  Reform, we are undertaking an assessment of federal telecommuting  policies and programs.
section_title: Agency and Union Officials Identified Monetary Recruitment and Retention Incentives as Highly Effective Flexibilities
paragraphs: Agency and union officials also cited monetary recruitment and retention  incentives as highly effective in managing their agencies’ workforces.   Agencies generally offer these types of monetary incentives to employees  based on employee qualifications, special needs of the agencies, or  difficulties in filling positions.  These flexibilities include the following.
Superior/special qualifications appointments.  Using this flexibility,  agencies can set base pay for newly appointed individuals above step 1 of  the various grade levels based on the superior qualifications or highly  specialized skills of the candidates or special needs of the agency.  Agency  officials said that this flexibility was especially effective because it allows  agencies more control over entry-level salaries and permits agencies to  match the prior salaries of new hires coming from the private sector.  For  example, IRS supervisors in Oakland told us that this hiring flexibility had  helped their office in matching salaries of employees hired from the dot- com industry.  GSA human resources officials in San Francisco said that  this appointment authority had greatly assisted their office in hiring about  30 employees over the last 3 years.  Officials from the Mint’s headquarters  information technology office said this pay incentive had helped in hiring  highly skilled information security personnel at the GS-13 and GS-14  levels.
Recruitment bonuses.  A recruitment bonus is a lump-sum payment of up to  25 percent of basic pay that an agency may pay to an employee newly  appointed to a position that would otherwise be difficult to fill.  In return,  the employee must sign an agreement to fulfill at least 6 months of service  with the agency.  A senior human resources manager at one department, for  example, told us that her department had instituted over 1,000 recruitment  bonuses (averaging about $5,000 each) to attract new hires.  She said that  the department typically hired new employees only at the GS-7 level and  thus relied on these recruitment bonuses to augment starting pay,  particularly for hard-to-fill scientific and technical positions.
Relocation bonuses.  A relocation bonus is a lump-sum payment of up to 25  percent of basic pay that an agency may pay to a current employee who  must relocate to a position in a different commuting area that would  otherwise be difficult to fill.  In return, the employee must sign a service  agreement with the agency.  Another senior human resources manager, for  example, told us that his agency uses relocation bonuses to assist certain  employees who are required to move every 3 years to limit potential  conflicts of interest in their sensitive positions.  He said that without the  relocation bonus, these employees would often lose money when they  move, resulting in significant morale problems.
Retention allowances.  A retention allowance is a continuing (i.e.,  biweekly) payment of up to 25 percent of basic pay that an agency may pay  to help retain an employee.  The agency must determine that (1) the  unusually high or unique qualifications of the employee or a special need of  the agency for the employee’s services makes it essential to retain the  employee and (2) the employee would be likely to leave the federal  government in the absence of a retention allowance.  In addition, an agency  may offer retention allowances to a group or category of employees.   Agencies must annually review and certify the allowances, which allows  the agencies to terminate the incentive payments when no longer deemed  necessary.  One senior human resources manager told us, for example, that  her department often uses retention allowances to help retain certain  specialized employees who are frequently approached by recruiters from  private industry and state governments.
subsections: section_title: Agencies Can Use Retention Allowances to Build Employee Competencies
paragraphs: Although agencies generally use retention allowances to retain highly  qualified employees, State also uses this flexibility to build employee  competencies.  In 1998, when planning for its information technology  requirements, State determined that it needed to address the difficulty of  attracting and keeping the highly qualified technical workforce necessary  to carry out its mission of providing support and coordinating the activities  of all U.S. government agencies abroad.  As such, it implemented a  technology skills development program to attract and retain employees  with certain technological skills by granting them retention allowances for  obtaining job-related degrees and certifications.  Under the program, State  also paid for training courses leading up to certification but not the  examinations to obtain the credentials.
According to State, it has granted over $4 million in total retention  allowances under this skills development program.  The number of  information technology employees with degrees or certifications increased  from 133 in 1999 to 583 in 2001.  As part of its evaluation of the skills  development program, State surveyed the participants and supervisors  involved in the program.  Approximately 61 percent of the employees who  participated in the program (335 out of 547) responded to the 2001 survey.   The 2001 survey showed that 80 percent of the responding participants  agreed that receiving the retention allowance played a substantial role in  their decision to work at the department, and 90 percent agreed that  receiving the allowance played a substantial role in their decision to remain  at the department.
section_title: Special Hiring Authorities Were Also Noted to be Particularly Effective Flexibilities
paragraphs: Agency and union representatives frequently noted that special hiring  authorities available to federal agencies can also be particularly effective in  assisting agencies to appoint needed employees.  These hiring authorities  allow agencies to hire employees without going through the standard  federal hiring process, often resulting, according to managers, in shorter  hiring times, less onerous paperwork, and more flexibility in selecting the  job candidates who managers believe are most qualified.  These special  hiring flexibilities include the following.
Student educational employment program.  The student employment  program allows agencies to appoint graduate, undergraduate, vocational,  technical, associate degree, and professional degree seeking students who  are enrolled or have been accepted for enrollment in at least a part-time  schedule at an accredited institution.  Some of these student employees are  eligible to receive tuition assistance and, upon completion of their  academic work, may be eligible for conversion to permanent jobs with the  agency.  A senior human resources manager at one department said that  the student employment program allows agencies to develop professional  relationships with students while they are still in school, which makes it  easier to hire them when they are looking for permanent employment.  GSA  officials said they had hired 110 students under this program in the last 3  years and noted that the agency has done well at retaining these employees  after they completed their academic work.  Air Force officials told us that  given the agency’s downsizing environment of the past decade, the Air  Force had only recently reestablished its student employment program but  that the program has been successful in bringing in new employees who,  thus far, tend to stay with the agency.
Outstanding scholar program.  The outstanding scholar program  supplements the standard competitive hiring process by allowing agencies  to hire outstanding college graduates for certain entry-level occupations  at grades GS-5 and GS-7.  Agency officials we interviewed said that because  agencies using the program are not required to rate and rank candidates for  these positions, the hiring process can be shortened.  For example,  supervisors at GSA in Philadelphia told us that outstanding scholar hiring  authority is beneficial because it allows the agency to hire more quickly.   Although these and other agency officials strongly supported the use of this  program, concerns have been raised by some about the degree of  discretion this program provides in allowing agencies to circumvent the  standard competitive hiring process.  For example, in a January 2000  report, MSPB noted that the hiring authority under the outstanding scholar  program was originally intended to be used as a short-term supplemental  hiring tool.  The program was established in 1981 in response to a civil  lawsuit challenging the federal government’s use of a written test for entry- level professional and administrative jobs because of that test’s adverse  impact on African-Americans and Hispanics.  Although the program is  aimed at addressing underrepresentation of African Americans and  Hispanics, the program has never been restricted to those designated  minority groups.  In its report, MSPB recommended that this hiring  authority be abolished and that merit-based hiring be restored to this group  of federal jobs.  In its comments on a draft of our report, OPM cautioned  that although some agency officials we interviewed may have viewed this  program as providing broad authority to use noncompetitive hiring  procedures, agencies are to use this program only as a supplement to  competitive examining.  OPM stressed that agencies must have an  established pattern of competitive selection into the covered occupations  before agencies can use the program.
Veteran-related hiring authorities.  During our review, several agency and  union officials also noted the benefits of two veteran-focused hiring  authorities.  Veterans Readjustment Appointment (VRA) authority allows  agencies to noncompetitively appoint eligible veterans to otherwise  competitive positions at any grade level through GS-11 or equivalent.  After  the veteran completes 2 years of satisfactory service, the employing agency  must then noncompetitively convert this VRA appointee to permanent  status in the competitive federal service.  Veterans Employment  Opportunities Act (VEOA) authority allows agencies to obtain a wider pool  of job applicants by permitting agencies to accept job applications from  eligible veterans for certain positions that would typically be open only to  individuals with competitive status.  Veterans who submit job applications  under this VEOA authority could then be selected for the positions under  standard competitive procedures.  Supervisors of wage-grade employees at  GSA’s Philadelphia region said, for example, that using VRA authority had  been effective in assisting the region in quickly hiring highly qualified  veterans.  GSA human resources officials in San Francisco told us that  VEOA had been effective in facilitating the hire of 24 veterans over the last  year.
section_title: Incentive Awards Were Also Cited as Effective Flexibilities
paragraphs: Agency and union officials also frequently mentioned the effectiveness of  granting incentive awards to employees.  The intent of the incentive awards  program is to provide appropriate motivation and recognition for  excellence in job performance and contributions to an agency’s goals.   Incentive awards, which can be either monetary or nonmonetary, include  the following.
Performance awards are lump-sum cash awards that reward employees  for fully successful or better job performance as defined by formal  performance appraisals.  Awards can be up to 10 percent of an  employee’s basic pay, or up to 20 percent for exceptional job  performance.
Special act or service awards are lump-sum cash awards for specific  accomplishments that contribute to the efficiency, economy, or other  improvement of government operations.  Agencies may grant up to  $10,000 without external approval, up to $25,000 with OPM approval,  and in excess of $25,000 with Presidential approval.
Quality step increases (QSI) are permanent pay increases for  outstanding performance as shown on formal job performance  appraisals.  QSIs are granted by providing employees with faster than  normal progression through the stepped rates of GS.
Time-off awards are awards that grant employees time off from duty  without charging their annual leave or requiring that they forgo pay.   These awards allow employees to take time off from work when it is  most convenient for both the agencies and the employees.
Group incentives include cash awards granted to employees based on  (1) increases in productivity or decreases in costs (i.e., gainsharing) or  (2) achievement of specified goals that enhance the success of the  organization’s mission (i.e., goalsharing).  These incentives are designed  to foster teamwork and promote innovation and continuous  improvement.
Honorary and informal recognition awards are awards such as trophies,  plaques, certificates, and other tangible incentives.  These awards give  supervisors maximum flexibility to be creative in how they recognize  employees.
Agency and union officials provided us with numerous examples of their  use of incentive awards as effective flexibilities.  For example:  Officials at GSA said that GSA had used its awards program effectively  to recognize and motivate employees and that the agency had delegated  approval for authorizing awards to appropriate levels within the agency.   GSA’s fast-track awards program, for example, allows managers and  supervisors to log onto GSA’s intranet system and complete the  administrative work for the award within minutes.
At VBA in Philadelphia, supervisors noted that offering movie tickets  and restaurant coupons to employees was a good way to show  appreciation for employees’ performance and contributions.
U.S. Mint officials said that they reward and recognize employees  through on-the-spot awards, time-off awards, and gainsharing.  At the  Mint in San Francisco, managers mentioned that they have used  employee recognition day to boost morale by providing awards that are  of nominal monetary value but that are symbolically significant, such as  T-shirts.
State’s Information Resource Management (IRM) Bureau officials said  that their quarterly awards process allows supervisors to recognize and  reward employees in a more timely fashion, rather than waiting until the  annual job performance appraisal process.
IRS managers in Philadelphia mentioned that the agency provides data  conversion employees with incentive pay tied to quality and production,  noting that this award has helped to motivate these employees to  accomplish their job tasks more quickly and accurately.
section_title: Agency Officials and Union Representatives Cited Need for Additional Human Capital Flexibilities
paragraphs: We identified five categories of additional flexibilities that agency officials  and union representatives cited most often as being potentially helpful in  managing their workforces if additional flexibilities were authorized for  agencies.  Specifically, these categories include  more flexible pay approaches,  greater flexibility to streamline and improve the federal hiring process,  increased flexibility in addressing employees’ poor job performance,  additional workforce restructuring options, and   expanded flexibility in acquiring and retaining temporary employees.
These suggestions by agency officials and union representatives provide a  starting point for executive branch decision makers and Congress to  consider as they seek to reform federal human capital policies and  practices.  Although we have not analyzed the validity of the suggestions,  the categories are consistent with the authorities that we have established  at GAO and have been urging for other federal agencies.  The GAO  Personnel Act of 1980 and our 2000 legislation included some of the  proposed additional flexibilities.  The most prominent change in human  capital management that we implemented as a result of the GAO Personnel  Act of 1980 was a broadbanded pay-for-performance system that bases  employee compensation primarily on the knowledge, skills, and  performance of individual employees.  It provides managers flexibility to  assign and use employees in a manner that is more suitable to multitasking  and the full use of staff.   Importantly, careful design and effective  implementation is crucial to obtaining the benefits of broadbanding in an  equitable and cost-effective manner.  Also, as a result of the 1980 Act, the  Comptroller General has the authority to hire, on a noncompetitive basis,  up to 15 experts and consultants at any level, including senior executives,  with renewable terms up to 3 years each.  GAO has used this authority in  selected cases and found it to be valuable in filling critical time-sensitive  positions within the agency.
Our October 2000 legislation gave us additional tools to realign our  workforce in light of mission needs and overall budgetary constraints; to  correct skills imbalances; and to reduce high-grade, managerial, or  supervisory positions without reducing the overall number of employees.   To address any or all of these three situations, we were given authority to  offer voluntary early retirement and voluntary separation incentive  payments to our employees until December 31, 2003.  This legislation also  allowed us to create a technical and scientific career track at a  compensation level comparable to senior career executives and to give  greater consideration to performance and employee skills and knowledge  in any reduction-in-force actions.
Aspects of these authorities were also included in the recently enacted  Homeland Security Act of 2002, which created the new Department of  Homeland Security.  In addition to providing the President with additional  authority to create new policies for managing the workforce within the new  department, the legislation includes provisions that authorize agencies  across the federal government to use additional personnel flexibilities.  For  example, agencies will now be permitted to offer buyouts to their  employees without the requirement to reduce their overall number of  employees.  This change will provide agencies the opportunity to more  easily restructure their workforces to correct skills imbalances related to  those employees whose jobs have become obsolete or whose skills are no  longer needed.  The legislation also permits agencies to use a more flexible  approach in the rating and ranking of job candidates during the hiring and  staffing process.  Using this alternative approach can expand the number of  qualified candidates that a selecting official could choose from when filling  a position.  In addition, under the legislation agencies will need to  incorporate workforce planning into their strategic plans and appoint  “chief human capital officers” to oversee workforce management.
Additional analysis may be needed to ensure that any new personnel  authorities that are granted and implemented are consistent with a focus  on results, merit, and other important federal employment goals.  As we  have noted in previous reports and testimonies, comprehensive legislative  reform of the civil service will likely be necessary to address the federal  government’s human capital challenges; however, the consensus necessary  to make this a reality has yet to be achieved.  Such reform could provide a  broader range of federal agencies with a more standard set of human  capital tools and flexibilities to manage their workforces.  Ultimately, in  undertaking any civil service reform, policymakers will likely want to  consider the potential needs of individual agencies along with the  governmentwide need to manage competition between agencies for skilled  employees.
section_title: Agency Officials Believed That Additional Flexibilities Could Coexist with Protection of Employee Rights, but Union Representatives Gave Mixed Views
paragraphs: Because human capital flexibilities entail greater decentralization and  delegation of human capital authorities and fewer rules, the protection of  employees’ rights under these conditions can be challenging.  The  managers and supervisors and human resources officials we interviewed  generally believed that additional human capital flexibilities could be  authorized and implemented in their agencies while also ensuring  protection of employees’ rights.  Union representatives we interviewed, on  the other hand, had mixed views on the ability of agencies to protect  employee rights with the increased discretion that additional flexibilities  would give to agency managers.  Some union representatives responded  positively when asked if agencies could give managers additional  flexibilities while protecting employees’ rights.  Several union officials,  however, said that managers could more easily abuse their authority when  implementing these additional flexibilities and that agency leaders often do  not take appropriate actions in dealing with abusive managers.
According to the agency and union officials we interviewed, one of the  most effective ways to ensure protection of employees’ rights when  implementing these flexibilities is making certain that supervisors and  employees are fully aware of the available flexibilities, the procedures to  use them, and the associated rights and responsibilities of both managers  and employees when using them.  Clear guidelines for consistently  applying the flexibilities and straightforward explanations from managers  about how and why they made decisions are essential, according to some  of the individuals we interviewed.  The consensus of agency officials, with  some union representatives agreeing, was that putting personnel authority  in the hands of agency managers through human capital flexibilities will  not affect employee protection as long as managers are held directly  accountable for their personnel decisions.
In our previous work, we recognized the importance of involving employee  unions when agencies propose major changes in the work environment  that may be of particular concern to the unions.  We found that obtaining  union cooperation and support through effective labor-management  relations can help achieve consensus on the planned changes, avoid  misunderstandings, and more expeditiously resolve problems that occur.   When agencies and employee unions maintained an ongoing working  relationship in an environment of trust and openness, agencies and unions  were able to work cooperatively even in the face of significant change.  For  example, both IRS and the National Treasury Employees Union officials  credited the excellent working relationship they developed over the last  decade for helping the reorganization of IRS.  One IRS official, for example,  stated that it is important to involve the union as a part of the discussions  about flexibilities because the union is sometimes more effective than  agency managers in communicating with employees.
Agency managers and supervisors also cited the importance of securing a  close working relationship with the agency’s human resources officials in  the protection of employee rights.  Officials commented that human  resources officials are often good sources of information about flexibilities  and effective monitors of potential problems involving their use.   According to several supervisors we interviewed, this assistance and  monitoring by human resources officials, along with managers’ and union  representatives’ efforts to keep each other honest, help to ensure that  employee protection can coexist with the use of human capital flexibilities.
section_title: Key Practices Can Assist Agencies in Effectively Using Flexibilities
paragraphs: Based on our interviews with human resources directors across the federal  government and our related human capital work, we identified six key  practices that agencies can implement for effectively using human capital  flexibilities.  These practices are (1) planning strategically and making  targeted investments, (2) ensuring stakeholder input in developing policies  and procedures, (3) educating managers and employees on the availability  and use of flexibilities, (4) streamlining and improving administrative  processes, (5) building transparency and accountability into the system,  and (6) changing the organizational culture.  We confirmed the  importance of these practices in our discussions with managers and  supervisors, human resources officials, and local union representatives at  the seven agencies we selected for more detailed review.  We also identified  relevant examples of the use of these key practices from the seven  agencies.  The following is a more detailed discussion of these practices  along with examples we identified.
subsections: section_title: Planning Strategically and Making Targeted Investments
paragraphs: With strong commitment on the part of their leadership, federal agencies  need to ensure that the use of human capital flexibilities is part of an  overall human capital strategy clearly linked to the program goals of the  organization.  Agencies need to plan for how they will use and fund these  authorities, what results they expect to achieve, and what methods they  will use to evaluate actual results.  Our review found that a significant  reason why managers and supervisors had not made greater and more  effective use of existing human capital flexibilities was agencies’ weak  strategic human capital planning and inadequate funding for using these  flexibilities given competing priorities.  Such a strategic focus would allow  for answering critical questions such as whether current staff and  resources are sufficient; whether they are being allocated in a manner best  suited to promote mission accomplishment; and, ultimately, whether  agencies and Congress may wish to consider a variety of targeted  investments or new human capital flexibilities in the future.  The following  are elements and examples of planning strategically and making targeted  investments from the seven agencies we reviewed.
Obtain agency leadership commitment.  Top leadership commitment  is crucial to instilling a common vision across the organization and  creating an environment that is receptive to innovation.  In earlier  reports and testimonies, we observed that top leadership plays a critical  role in creating and sustaining high-performance organizations.  We  also highlight the importance of top leadership commitment in our  recently issued model of strategic human capital management, in which  we note that political leaders and senior career executives demonstrate  this commitment by personally developing and directing reform, driving  continual improvement, and characterizing the agency’s mission in  reform initiatives.  At IRS, for example, Commissioner Rossotti’s  efforts demonstrated a clear case of leadership’s commitment to change.   As mandated by Congress in the IRS Restructuring and Reform Act, the  Commissioner articulated a new mission for the agency, together with  support for strategic goals that balance customer service and  compliance with tax laws.  The Commissioner led a modernization  effort that touched virtually every aspect of IRS, including  implementation of IRS’s newly authorized personnel system and the  additional human capital flexibilities that accompanied it.
Determine agency workforce needs using fact-based analysis.
Federal agencies often have not gathered and analyzed the data required  to effectively assess how well their human capital approaches have  supported results.  High-performing organizations identify their current  and future human capital needs, including the appropriate number of  employees; the key competencies for mission accomplishment; and the  appropriate deployment of staff across the organization.  For example,  in 1998 the Air Force Materiel Command (AFMC), the largest employer  of civilians in the Air Force, began a two-phased workforce study  designed to tailor its human capital to meet future business needs.   AFMC’s planning efforts, as documented in its April 2000 study called  Sustaining the Sword, involved an assessment of the current and  projected 2005 workforce by workforce mix, skills, skill levels, and  demographics and then a more detailed position-level analysis of  workforce data from AFMC locations.  AFMC reported that these data  and the results of its workforce shaping activities led to a more  informed understanding of workforce gaps, for which corrective  strategies could be then developed.
Develop strategies that employ appropriate flexibilities to meet  workforce needs.  After identifying current and future workforce  needs, agencies ought to develop effective strategies that fill the gaps.   In developing these strategies, agencies should assess which human  capital flexibilities might work best given current and future needs.  For  example, in 2000 the Mint created a “human resources flexibilities team”  to assess the agency’s current and future use of existing human capital  flexibilities.  This initial assessment, as outlined in a December 2000  report, revealed that the Mint had pursued a number of key flexibilities  but had not done so uniformly across its organizational, occupational,  and grade-level structures.  In its report, the Mint assessed over 80  disparate human capital flexibilities and developed specific plans to use  each of the flexibilities that had not been used or that required  immediate attention for full use.
Make appropriate funding available.  After developing strategies,  agencies need to assess the associated costs of using any human capital  flexibilities as part of these strategies.  Such assessments will allow  agencies to better plan for the use of these flexibilities and to ensure  that appropriate funding is available when needed.  Air Force, for  example, developed a comprehensive, multiyear funding plan to  implement its Civilian Personnel Management Improvement Strategy  (CPMIS), which comprises 28 separate human capital initiatives  grouped into the areas of accession planning, workforce development,  retention/separation management, and support activities.  Under  accession planning, for instance, one initiative calls for the Air Force to  expand its use of the “3Rs”—recruitment bonuses, relocation bonuses,  and retention allowances—to sustain necessary skills in the civilian  workforce.  Beginning in fiscal year 2004, the Air Force projects offering  approximately 1,300 recruitment bonuses annually at an average cost of  $11, 250, approximately 650 relocation bonuses at an average cost of  $10,000, and approximately 650 retention allowances at an average cost  of $9,000.  (See table 2.)
section_title: Ensuring Stakeholder Input in Developing Policies and Procedures
paragraphs: Agency leaders, managers, employees, and employee unions need to work  together to identify and effectively implement human capital flexibilities.   Engaging all of the stakeholders in developing policies and procedures for  the use of flexibilities helps in reaching agreement on the need for change,  the direction and scope that change will take, and how progress will be  assessed.  Stakeholder input should also be used to ensure that the policies  surrounding the use of flexibilities are clear and the procedures to  implement them are uncomplicated.  The following are elements and  examples from our seven selected agencies on how they ensured  stakeholder input in developing human capital flexibility policies and  procedures.
Engage the human capital office.  Because flexibilities influence the  entire human capital system, human capital professionals are needed to  supply the energy and expertise in helping to develop policies and  procedures on the use of flexibilities.   As noted in our model of  strategic human capital management, this assistance requires the  expansion of the role of human capital professionals from largely  paperwork processors to functioning as advisors to and partners with  senior leadership and managers.  By transforming from focusing largely  on transactions to more on total customer service, the role of the human  capital office in facilitating the use of flexibilities will become  increasingly important.  GSA’s Philadelphia regional office, for example,  established a Human Resources Council, which is composed of the  human resources director and representatives of various GSA offices, to  discuss human capital policies and practices in the region, such as  alternative work arrangements and incentive awards.  In another  example, State’s IRM Bureau directly involved human capital  professionals in its working group that crafted its skills development  program to provide retention allowances (ranging from 5 to 15 percent)  to certain information technology workers who obtain job-related  degrees and certifications.
Engage agency managers and supervisors.  Soliciting the input of  managers and supervisors on how best to implement human capital  flexibilities is a key component for their successful use.  Because  managers and supervisors are virtually certain to be negatively affected  by unclear policies and procedures, their perspectives on how to make  strategic use of flexibilities, while avoiding potential problems caused  by poor implementation, are essential.  To address the potential  problems of limited input, for example, 160 frontline managers from  GSA’s central and regional offices convened in four sessions in March  2001 to exchange information about effective workforce-related  practices using many of the flexibilities already available to the agency.   This effort resulted in a catalog of “best practices” that their offices had  implemented in the areas of recruiting and orienting employees,  engaging existing employees, and developing leaders.
Involve employees and unions.  As with any significant change in the  workplace, involving employees and unions in decisions to use human  capital flexibilities increases employees’ understanding and acceptance  of the objectives for implementing change, helps to avoid  misunderstandings, and can assist in more expeditiously resolving  problems that might occur.  While frontline employees can help ensure  a more operationally oriented perspective on the use of flexibilities,  obtaining union cooperation and support through effective labor- management relations can help achieve consensus on the changes  accompanying their use.  For example, the Mint and VBA made changes  to employee work schedules based on input from employees in open  forums.  At a “town hall” meeting at the Mint’s San Francisco coin- making plant, employees (with assistance from the local union) were  able to vote on various options for implementing an alternative work  schedule for the facility.  At a “listening post” session at VBA’s regional  office in Philadelphia, employees offered input to change the operating  hours of the facility’s phone operations.
Use input to establish clear, documented, and transparent  policies and procedures.  After obtaining sufficient input from key  players, agencies need to develop and implement human capital  flexibilities using clear, documented, and transparent policies and  procedures.  This practice is essential to ensuring that they are used  fairly and, at the same time, are not encumbered with so many  administrative burdens that they lose their value as flexibilities.   Agencies can take various steps to ensure that policies and procedures  are clear and uncomplicated.  For example, the Mint’s Office of Chief  Financial Officer hired a writer-editor to assist the agency in writing  personnel-related policies and procedures in “plain English.”  As an  example of developing uncomplicated policies and procedures, GSA  officials provided us with a merit promotion plan that had been reduced  from 75 to 5 pages.
section_title: Educating Managers and Employees on Availability and Use of Flexibilities
paragraphs: Agencies need to ensure that they have an effective campaign not only to  inform agency managers and employees of their personnel authorities, but  also to explain the situations where the use of those authorities is  appropriate.  Our work at the seven agencies showed that the lack of  awareness and knowledge of human capital flexibilities was one of the  most significant reasons why federal managers and supervisors have not  made better use of these flexibilities.  In some cases, senior managers  might not know that such flexibilities were already available to their  agencies.  In other cases, agency leaders or parent departments might place  restrictions on the use of a flexibility—either strategically or haphazardly— and then not communicate the source and reasons for such restrictions to  line managers and supervisors within the agency.  Educating managers and  employees goes a long way in ensuring effective use of these flexibilities  across the federal government.  The following are elements and examples  of how agencies educated managers and employees on the availability and  use of human capital flexibilities.
Train human capital staff.  Traditionally, what has been called the  personnel or human resources function has often been viewed as  strictly a support function involved in administering personnel  processes and ensuring compliance with rules and regulations.   As  human capital professionals take a more consultative approach to their  jobs, they will need not only the knowledge of and expertise in the full  range of human capital flexibilities available but also skills on  communicating this information to their clients in the agencies they  serve.  For example, GSA held a conference in September 2000 for its  human resources staff members to increase their knowledge of  emerging human capital issues and to better their skills in responding to  the needs of clients throughout the agency.  According to a senior  human resources manager at GSA, the conference included a  presentation and discussion of the human capital flexibilities available  for use within the agency.
Educate agency managers and supervisors on existence and use  of flexibilities.  Ultimately the flexibilities within the personnel system  are only beneficial if the managers and supervisors who would carry  them out are actually aware of their existence and of the best manner in  which they could be used.  Educating managers and supervisors is key  to ensuring that agencies use all of the tools and flexibilities needed to  manage their workforces to accomplish agency missions and achieve  goals.  For example, AFMC developed and distributed a Supervisor’s  Guide to Work Force Planning to educate agency managers and  supervisors on numerous flexibilities available to attract and retain  quality employees.  GSA’s Philadelphia office has educated its  supervisors on human capital flexibilities with its “Human Resources  Solutions Series” training, which includes topics such as employee leave  and work schedules, options for dealing with performance and conduct  problems, and balancing managerial flexibility and accountability under  merit system principles.
Inform employees of procedures and rights.  In previous work, we  have highlighted the importance of informing employees of personnel- related policies and procedures and their rights under them.  This  communication helps in minimizing employee confusion and  apprehension and ensuring that flexibilities are implemented fairly  within and across the organization.  Agencies can use a variety of  methods to communicate this information.  For example, GSA’s human  resources manager in Philadelphia said that most updates concerning  employee rights and procedures are communicated via GSA’s intranet  Web site.  The office also distributes an employee newsletter with  information about related personnel policies and procedures.
section_title: Streamlining and Improving Administrative Processes
paragraphs: Agencies also need to streamline and improve administrative processes for  using flexibilities and review self-imposed constraints that may be  excessively process oriented.  Indeed, our interviews with agency  managers and supervisors revealed that they viewed burdensome and time- consuming approval processes as a significant reason why they did not  make better use of available human capital flexibilities.  Although sufficient  controls are important to ensure consistency and fairness in using  flexibilities, agency officials should look for instances in which processes  can be reengineered.  This reengineering of processes for using flexibilities  can assist the agencies in increasing efficiencies, decreasing costs, or both.   In this effort, agency managers need to bear in mind that they should first  determine requirements and design processes before developing any  information systems to support the new processes.  The following are  elements and examples of how the agencies streamlined and improved  administrative processes.
Ascertain the source of existing requirements. As we have  previously reported, some of the barriers to effective strategic human  capital management in the federal government do not stem from law or  regulation but are self-imposed by agencies.  The source of these  barriers can sometimes be a lack of understanding of the prerogatives  that agencies have.  For example, the head of State’s office responsible  for overseas building operations asked OMB in May 2001 for a series of  increased flexibilities to accomplish various personnel management  goals.  In its response, OMB noted that the department already had the  authority to implement many of these requested changes.  In another  example, personnel policy at the Mint had required that job vacancy  announcements for certain positions be publicly posted for at least 30  calendar days.  OPM, however, generally allows agencies the flexibility  to post such announcements for as few as 5 business days.  Mint  officials told us that the Mint’s parent agency, the Department of the  Treasury, had initially established this 30-day posting requirement and  that the Mint’s original policy had been drafted to concur with  Treasury’s.  After Mint officials realized that this 30-day requirement  flowed from its parent department, the Mint was able to work to modify  the policy to require a minimum of only 5 business days for posting  these job announcements.
Reevaluate administrative approval processes for greater  efficiency.    In our interviews at the selected agencies, some managers  and supervisors complained about the lack of time to initiate and  implement the justification and approval processes that agencies have  in place to use existing flexibilities.  If senior managers within the  agency want supervisors to use these flexibilities, supervisors must view  the required initiation and approval processes worth their time  compared to the expected benefit to be gained in using the flexibility.  In  simplifying processes to provide for greater efficiencies and improved  quality and responsiveness, agencies have often turned to automation of  paper-based personnel processes and procedures.  For example,  managers and supervisors at GSA’s Philadelphia office cited the agency’s  recently automated processes for granting employees on-the-spot cash  awards (ranging from $50 to $2,000).  Previously, agency supervisors  were required to complete lengthy justifications and send these forms to  the personnel office for review.  According to the human resources  manager, the perceived burdens of the previous administrative process  led to very few awards being granted.  Now, according to GSA managers  and supervisors, by accessing GSA’s intranet Web site, an agency  supervisor can complete the award initiation process within minutes  and on the next business day receive a certificate to present to the  employee that shows what the award is for and when the employee can  expect the money in his or her paycheck.
Replicate proven successes of others.  When developing processes  and procedures for using flexibilities, agencies can potentially learn  valuable lessons from other agency components or from other  organizations altogether.  These lessons learned could be instructive in  developing ways to best implement such flexibilities along with  determining which flexibilities are most effective.  For example,  officials at VBA’s Oakland office informed the agency’s Philadelphia  office of the success they had in using the student cooperative program  to recruit needed staff members for the office.  This special hiring  authority, called the Student Career Experience Program, allows  agencies to appoint students who are enrolled or have been accepted for  enrollment at least part-time at accredited institutions.  After completing  their academic requirements, these employees can then be converted  noncompetitively to term or permanent positions within 120 days.
section_title: Building Transparency and Accountability into the System
paragraphs: To ensure effective use of human capital flexibilities, agencies need to  delegate authority to use these flexibilities to appropriate levels within the  agency, and then agency managers and supervisors need to be held  accountable—both for achieving results and for treating employees fairly.   Agency managers and supervisors are more likely to support changes when  they have the necessary authority and flexibility—along with  commensurate accountability and incentives—to advance the agency’s  goals and improve performance.  Indeed, devolving decision-making  authority to program managers in combination with holding them  accountable for results is one of the most powerful incentives for  encouraging results-oriented management.  However, achieving a proper  balance between managerial flexibility and adequate controls to ensure  consistency and accountability can be a challenging endeavor.  Moreover,  agencies that expect their managers and employees to take greater  responsibility and be held accountable for results must ensure that the  managers and employees have the training and tools they need to fulfill  these expectations.  The following are elements and examples from the  agencies we reviewed of how they built transparency and accountability  into their human capital systems.
Delegate authority to use flexibilities to appropriate levels  within the agency.  In a recent report, we found that only about one- third of agency managers we surveyed from 28 agencies believed that  they had, to a great or very great extent, the authority they needed to  help accomplish agency goals.  Providing managers and supervisors  with such authority gives those who know the most about an agency’s  programs the power to make those programs work.  This delegation of  authority is equally important when implementing human capital  flexibilities.  For example, the Department of the Treasury delegated  authority to IRS and its other bureaus to establish their own policies on  superior qualifications appointments (SQA), a flexibility that allows  agencies to hire individuals at advanced rates of pay based on the  individuals’ superior qualifications or special needs of the agencies.  To  expedite timely approval in hiring situations, IRS in turn redelegated this  approval authority for SQAs to the human resources officers within  each of the agency’s business units.  In another example, VBA in  Philadelphia delegated authority to immediate supervisors to approve  on-the-spot monetary awards for their employees without review by  senior managers.  VBA supervisors said that under this delegated  authority they simply complete a short form and present it to the  employee, who can then proceed to the on-site credit union and receive  cash, all within 1 hour.
Hold managers and supervisors directly accountable.   Agencies  must develop clear and transparent guidelines for using flexibilities and  then hold managers and supervisors accountable for their fair and  effective use.  Managers need to be held accountable for their  contributions to results and recognized and rewarded for those  contributions.  Internal and external parties, such as agency human  resources offices, offices of inspectors general, and OPM, can help to  ensure transparency in the use of flexibilities through appropriate  review and oversight.  For example, according to the senior human  resources official at GSA’s Philadelphia regional office, the human  resources office monitors supervisors’ granting of employee awards to  ensure that supervisors are effectively using this flexibility.  This list of  award amounts and frequencies (without personal identifiers) can be  provided to supervisors within the region so that they know how their  use of such flexibilities compares with that of other regional  supervisors.
Apply policies and procedures consistently.  While recognizing  differences in each individual’s job performance and competencies,  supervisors need to make concerted efforts to apply policies and  procedures for using flexibilities consistently.  Our review at the seven  agencies showed that a significant reason why supervisors have not  made greater use of flexibilities is supervisors’ fears that some  employees will view the use of various flexibilities as somehow unfair.   The consistent application of policies and procedures helps to lessen  employee fears because decision-making criteria are well defined,  documented, transparent, and applied the same way in similar  situations.  For example, after some concerns expressed by newly hired  IRS employees about possible inconsistencies, the agency developed  guidelines for its managers to use in determining if a job applicant  qualifies for a recruitment bonus.  According to IRS officials, these  guidelines helped to ensure consistent application of recruitment  bonuses based on the specific backgrounds of new employees.
section_title: Changing the Organizational Culture
paragraphs: Organizational culture represents the underlying assumptions, beliefs,  values, attitudes, and expectations generally shared by an organization’s  members.  Because an organization’s beliefs and values affect the behavior  of its members, changing the organizational culture related to outdated  personnel-related approaches is crucial to effectively using human capital  flexibilities.  Changing this culture is important particularly in areas related  to ensuring the involvement of senior human capital managers in key  decision-making processes and decreasing managers’ and supervisors’  resistance to change.  Agencies also need to address managers’ and  supervisors’ concerns that employees will view the use of flexibilities as  inherently unfair, and the belief that all employees must be treated  essentially the same regardless of job performance and agency needs.  By  addressing such organizational culture issues, agencies can better assist  managers and staffs in developing creative ways to employ tools and  flexibilities to address human capital challenges.  The following are  elements and examples from the seven agencies we reviewed of practices  they implemented to change their organizational cultures.
Ensure involvement of senior human capital managers in key  decision-making processes.  A fundamental reorientation is required  to ensure that human capital leaders take a “seat at the table” as full  members of the top management team rather than isolating them to  provide after-the-fact support.  By expanding the strategic role of human  capital officials beyond providing traditional personnel administration  services, agencies are in a better position to integrate human capital  considerations when identifying the mission, strategic goals, and core  values of the organization as well as when designing and implementing  policies and procedures.  The senior human capital manager at IRS, for  instance, has been heavily involved in the agency’s recent restructuring  initiative as well as its overall strategic direction.   Recognizing the  importance of this strategic role, he also recently devolved the agency’s  human resources office into three units; two are strategically focused  and the third is transaction focused.
Encourage greater acceptance of prudent risk taking and  organizational change.  Managers and supervisors need to have an  appropriate attitude toward risk taking and proceed with new  operations after carefully analyzing the risks involved and determining  how they may be minimized or mitigated.  Managers and supervisors  will at times resist making changes because they would have to work in  new and unfamiliar ways.  Although managers and supervisors can  initially be uncomfortable exercising newly delegated authorities, they  will often gain confidence as they better understand their importance  and become more experienced in exercising them.  For example, IRS’s  regional office in Oakland hired a consultant to conduct training for  managers that promotes creative thinking, empowerment for decision  making, and prudent risk taking.  The training course is an ongoing  process with managers returning each year to ensure their continued  comfort with and use of principles covered in the training.  In another  example, according to a senior human resources official in State,  managers in the department’s Office of Logistics Management were  initially hesitant to allow the use of alternative work schedules for  employees in that office but finally accepted use of the flexibility when  they realized that it would not drastically affect the office’s operations.
Recognize differences in individual job performance and  competencies.  In previous work looking at the practices of private  sector organizations regularly cited as leaders in the area of human  capital, common principles of human capital management we identified  include the importance of recognizing differences in employees’ job  performance and competencies.  Rather than follow the federal  government’s traditional approach of compensating federal employees  strictly based on their status at a particular grade level, agencies should  look at using performance management systems, including pay and  other meaningful incentives, to more clearly recognize individual job  performance as well as employee competencies.  In an example of  recognizing differences in individual job performance, GSA’s Public  Buildings Service (PBS) created a performance measurement and  incentive awards system for its regional offices and its employees in its  “Linking Budget to Performance” initiative.  Under this initiative, each of  PBS’s 11 regional offices strives to achieve preestablished goals for nine  standard performance measures.  On the basis of each region’s  performance, monetary incentives can be provided based on employees’  contribution to the region’s accomplishments.  Furthermore, an  example of recognizing differences in employee competencies is  demonstrated with State’s use of retention allowances for employees  who obtain job-related degrees and certifications in the information  technology field.
section_title: Conclusions
paragraphs: The insufficient and 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.  On the  basis of our review at seven selected agencies, the most effective  flexibilities cited were work-life policies and programs, monetary  recruitment and retention incentives, special hiring authorities, and  employee incentive awards.  Our review at the seven selected agencies also  found several categories of additional flexibilities that agency and union  officials cited as being potentially helpful in managing their workforces.  If  such additional flexibilities are desired, agencies should develop business  cases to justify the need for the authority to implement these additional  flexibilities.  Although comprehensive civil service reform will likely be  necessary to address the federal government’s human capital challenges,  agencies need not wait in seeking additional flexibilities where clear  business cases have been established.
The appropriate and effective use of flexibilities is essential to ensuring  that employees’ rights are protected, agencies adhere to merit system  principles, and employees are shielded from prohibited personnel  practices.  To ensure the most 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 transparency and 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.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report on September 4, 2002, to the Director of  OPM, the Secretary of Defense, the Commissioner of IRS, the Director of  the U.S. Mint, the Secretary of Veterans Affairs, the Administrator of GSA,  the Under Secretary for International Trade, and the Secretary of State.
OPM, Defense, IRS, the Mint, VA, GSA, and ITA provided comments on the  draft report.  These agencies either generally agreed with the information  presented or did not express an overall opinion about the report.  In some  cases these agencies provided written technical comments to clarify  specific points regarding the information presented.  Where appropriate,  we have made changes to this report to reflect these technical comments.   State did not provide comments on this report.
The following summarizes significant comments provided by the seven  agencies.
In her written comments (see app. II), the OPM Director noted that OPM  was pleased that our report acknowledges the need for greater  personnel flexibilities in cases where existing law constrains OPM in  providing policies and programs to assist agencies in accomplishing  their missions.  In technical comments, OPM raised concerns, however,  about our position that individual agencies could be authorized  additional legislative flexibilities if they develop sound business cases  that such flexibilities are needed.  OPM stated that its obligation is to  review and analyze all agencies’ requests to use additional flexibilities or  create additional flexibilities to ensure that they promote the efficiency  and effectiveness of the federal government and do not create an unfair  competitive advantage for selected agencies.  In this regard, OPM  commented that it supports the need for a standardized approach to  governmentwide flexibilities.  As we noted in this report and in previous  reports and testimonies, comprehensive legislative reform of the civil  service will likely be necessary to address the federal government’s  human capital challenges.  We believe, however, that agencies need not  wait in seeking additional flexibilities where clear business cases have  been established for such flexibilities.  It is possible that civil service  reform could provide a broader range of agencies with a more standard  set of human capital tools and flexibilities to manage their workforces.   Ultimately, in addressing civil service reform, policymakers will likely  want to consider the potential needs of individual agencies along with  the governmentwide need to manage competition between agencies for  skilled employees.  We added a discussion of this issue to the report in  the section dealing with agency and union officials’ views on authorizing  additional flexibilities.
In its technical comments, OPM also emphasized that the outstanding  scholar hiring program can only be used as a supplement to competitive  examining and should not be viewed as an “alternative” hiring authority.
OPM expressed concern that we not recommend that agencies use this  program for a purpose other than that for which it was intended.  We  noted in the draft report, however, that this program was intended to  serve as a supplemental hiring tool.  Our report states that many agency  officials we interviewed viewed this program as effective because the  program allows the agency to hire more quickly given that the agency  does not have to rank and rate candidates as usually required under the  standard competitive hiring process.  Although OPM does not include  the outstanding scholar program as an alternative hiring or staffing  option in its Flexibilities Handbook, many of the agency officials we  interviewed viewed this program as an effective flexibility, and the  program meets the definition of human capital flexibility that we used in  this report.  Our report, however, does not recommend that agencies use  this program to circumvent the standard examining process.  As with  many of the flexibilities available to agencies, the outstanding scholar  program could be used in inappropriate or inefficient ways.  As we note  under key factors for effective use of flexibilities, agencies must build  transparency and accountability into their human capital systems to  ensure that managers and supervisors are held accountable for the fair  and effective use of these flexibilities.  In response to OPM’s concerns  on this issue, we added additional language to the report to emphasize  that this program is to be used as a supplement to competitive hiring  and to note OPM’s statement that agencies must have an established  pattern of competitive examining into the covered jobs before agencies  can use this program.
Defense’s comments, provided by E-mail through its Office of Inspector  General, did not express an overall opinion about the report.  However,  the comments noted that it appeared we were asserting in the report  that telecommuting had been clearly shown to increase employee  productivity.  We noted in the draft report that our discussions with  agency and union officials about telecommuting brought about strongly  mixed views, including its effect on employee productivity and the  challenges of managing such a program.  Still, we changed the text to  clarify that some managers and supervisors told us that telecommuting  has not been shown to increase employee productivity and that  telecommuting is not practical for all occupations or situations.
In written comments (see app. III), the IRS Commissioner stated that he  generally agreed with the list of available human capital flexibilities that  agency and union officials cited as most helpful for managing their  workforces.  Nonetheless, he said that these flexibilities may not be as  important in the long run as some of the more deep-rooted changes to  human capital management policies and practices that agencies like IRS  have undertaken recently to improve their workforces’ performance and  accountability.  He noted that IRS’s recently acquired statutory  flexibilities, such as a broadbanding pay system and an expedited and  flexible hiring process, were instrumental to achieving the agency’s  transformation to a modern, business-like organization.  He stressed the  importance of providing additional flexibilities to federal agencies so  that they can manage their workforces in a manner comparable to the  private sector.
In written comments (see app. IV), the Mint’s Director stated that the  report provides an objective, balanced review and assessment of the  issues surrounding the implementation of human capital flexibilities.   She commented that the report would serve as a useful tool that  policymakers could use to guide federal agencies seeking to employ  greater flexibilities to manage their workforces.
VA provided comments by E-mail through its GAO liaison.  VA agreed  with the information presented and had no additional comments on the  draft report.
GSA’s comments, provided by E-mail from its Office of Human  Resources, were largely clarifying and technical in nature and did not  express an overall opinion on the report.  In a point similar to that made  by Defense, GSA commented that our report should more fully draw  attention to the drawbacks of telecommuting in our discussion of work- life programs.  Again, we added clarifying text indicating that some  managers and supervisors told us that telecommuting has not been  shown to increase employee productivity and that telecommuting is not  practical for all occupations or situations.
In written comments from ITA (see app. V), the Under Secretary for  International Trade said that the report thoroughly and comprehensively  addresses the critical issue of the programs needed to manage the  federal workforce.  In addition, he emphasized the need for the  additional flexibilities mentioned in the report.
We are sending copies of this report to the Chairman and Ranking Minority  Member, House Committee on Government Reform, and its Subcommittee  on Civil Service, Census and Agency Organization, and other interested  congressional parties.  We will also send copies to the Director of OPM, the  Secretary of Veterans Affairs, the Secretary of State, the Secretary of  Commerce, the Secretary of the Air Force, the Secretary of the Treasury,  and the Administrator of GSA. 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 or Edward  Stephenson on (202) 512-6806.  Key contributors to this report are listed in  appendix VI.
section_title: Objectives, Scope, and Methodology
paragraphs: The objectives for this study were to provide information on   agency officials’ and union representatives’ views on (1) the most  effective flexibilities for managing their workforces, (2) additional  flexibilities that would be the most helpful in managing their  workforces, and (3) whether employee rights could be protected if  additional flexibilities were authorized and implemented within  agencies and  key practices that agencies should implement for effective use of human  capital flexibilities, along with specific examples of such practices from  selected agencies.
To respond to the objectives of this report, we conducted this work in two  phases and gathered information from a variety of sources using several  different data collection techniques.  During phase one of this review,  which was completed from May to December 2001, we first interviewed  representatives from OPM, the federal government’s human resources  agency; MSPB, a federal agency that hears and decides civil service cases,  reviews OPM regulations, and conducts studies of the federal government’s  merit systems; and NAPA, 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 to obtain suggestions about which federal  agencies we should consider for a more detailed review during phase two  of our study.  We also reviewed numerous reports issued by these  organizations on governmentwide human capital issues and the use of  various human capital flexibilities in federal agencies.  In addition, we  reviewed previous GAO reports on a broad range of human capital issues.
During phase one of this study, we also gathered information for our two  objectives by conducting semistructured interviews with (1) the human  resources directors of the 24 largest federal departments and agencies and  (2) representatives from 4 national organizations representing federal  employees and managers—National Treasury Employees Union, American  Federation of Government Employees, National Association of  Government Employees, and Senior Executives Association.  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.
During phase two of this study, which was done from January to May 2002,  we conducted semistructured interviews with managers and supervisors,  human resources officials, and local union representatives from seven  federal agencies we selected for more detailed review—the Air Force, GSA,  IRS, ITA, the Mint, State, and VBA.  We interviewed over 200 officials at  these seven agencies.  Our interviews with these agency and union officials  focused on their views about the most effective flexibilities, additional  flexibilities needed, and protection of employee rights.  We also asked  these officials to confirm and provide examples of the key practices we had  identified on the basis of our interviews with the human resources  directors and our related human capital work.  To produce a general  summary of these agency and union officials’ views, a staff reviewer coded  their responses to our questions according to the recurring themes we had  developed.  A separate reviewer verified the coding when entering the  information into the database we created for our analysis.  We sought to  obtain views from a broad and diverse set of officials who would have  relevant knowledge and experience regarding human capital flexibilities.   We did not employ random selection in our choice of individuals to  interview; thus the responses we obtained should not be viewed as a  representative sample of all managers and supervisors, human resources  officials, or local union officials at the seven agencies.
We selected the seven agencies for various reasons, including their variety  of existing human capital challenges and their range in use of available  human capital flexibilities.  Specifically, we included Air Force because the  Department of Defense, Air Force’s parent department, historically has  represented a large percentage of civilian federal employees and we had  previously reported that the Air Force lacked sufficient acquisition and  logistic capabilities.  We included GSA because it had displayed a high use  of monetary incentives compared to other large federal agencies based on  our review of data from OPM’s Central Personnel Data File (CPDF).  IRS  was included based on congressional requesters’ interest in including an  agency with a strong union presence, and IRS was frequently cited as an  agency that had recently received increased authority to implement a broad  range of human capital flexibilities.  ITA was included because the  Department of Commerce, ITA’s parent department, had shown a high use  of monetary incentives, and we had previously reported that ITA lacked an  experienced staff to monitor and enforce trade agreements.  We selected  the Mint because it was originally a candidate to receive performance- based organization (PBO) status in the late 1990s and it continued to seek  additional human capital flexibilities when it did not receive this PBO  designation.  We selected State because our review of CPDF data showed  it to be a low user of monetary incentives, and it had recently established  an often-cited skills development program for its information technology  employees.  Lastly, we included VBA because the Department of Veterans  Affairs, VBA’s parent department, continued to actively seek authority for  increased human capital flexibilities, and we had previously reported that  VBA was lacking a sufficient workforce of skilled claims processors.
For the Air Force, we focused on work at Wright-Patterson Air Force Base  in Dayton, Ohio, and Langley Air Force Base in Hampton, Virginia.  For  GSA, IRS, VBA, and the Mint, we focused our work at their field offices in  the Philadelphia and San Francisco metropolitan areas.  At State, we  concentrated our work on the IRM Bureau, the Bureau of Administration,  and the Bureau of Overseas Buildings Operations in Washington, D.C.  At  ITA, we focused our work primarily on the headquarters office in  Washington, D.C.  Our agency selection process was not designed to  identify examples that could be considered representative of all the human  capital flexibilities used at the seven agencies reviewed or the federal  government as a whole.
In addition, we collected and analyzed data from CPDF on the extent of use  of human capital flexibilities, both governmentwide and for the seven  federal agencies we reviewed in more detail.  We also collected and  analyzed documents from the seven selected agencies on their experiences  with and use of human capital flexibilities.  We did not attempt to verify the  usage data we gathered.  We conducted our audit work in accordance with  generally accepted government auditing standards.
section_title: Comments from the Office Personnel Management
section_title: Comments from the Internal Revenue Service
section_title: Comments from the U.S. Mint
section_title: Comments from the International Trade Administration
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to the persons named above, K. Scott Derrick, Charlesetta  Bailey, Tom Beall, Ridge Bowman, Molly K. Gleeson, Judith Kordahl, Sylvia  Shanks, Shelby D. Stephan, Gary Stofko, Mike Volpe, Gregory H. Wilmoth,  and Scott Zuchorski made key contributions to this report.
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section_title: Public Affairs