Federal Workforce: Human Capital Management Challenges and the Path to Reform
Published: 2014-07-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Strategic human capital management plays a critical role in maximizing the government's performance and assuring its accountability to Congress and to the nation as a whole.
GAO designated strategic human capital management as a government-wide high-risk area in 2001 because of a long-standing lack of leadership. Since then, important progress has been made. However, retirements and the potential loss of leadership and institutional knowledge, coupled with fiscal pressures underscore, the importance of a strategic and efficient approach to acquiring and retaining individuals with needed critical skills. As a result, strategic human capital management remains a high-risk area.
This testimony is based on preliminary findings of GAO's ongoing work on the classification system and a body of GAO work primarily from 2012 to 2014 and focuses on the progress made by OPM and executive branch agencies in key areas of human capital management, including: (1) how the GS classification system compares to the attributes of a modern, effective classification system, (2) the status of performance management and efforts to address poor performance, (3) progress addressing critical skills gaps, and (4) strategies to address human capital challenges in an era of highly constrained resources.
section_title: What GAO Found
paragraphs: Serious human capital shortfalls can erode the capacity of federal agencies and threaten their ability to cost-effectively carry out their missions. While progress has been made, continued attention is needed to ensure agencies have the human resources to drive performance and achieve the results the nation demands. Specifically, additional areas needing to be addressed include:
Classification
GAO's preliminary work has found eight key attributes of a modern, effective classification system, such as: internal and external equity, transparency, and simplicity. The attributes require trade-offs and policy choices to implement. In concept, the General Schedule's (GS) design reflects some of the eight attributes, but falls short of achieving them in implementation. For example, the GS system's grade levels provide internal equity by making it easy to compare employees in the same occupation and grade level across different agencies. However, the number of grade levels can reduce transparency because making clear distinctions between the levels may be nuanced, as the basis for them hinges on, for example, how officials determine the complexity of the work.
Performance management
Effective performance management systems enable managers to make meaningful distinctions in performance in order to reward top performers and deal with poor performers. In 2011, five agencies piloted the Goals-Engagement-Accountability-Results (GEAR) framework to help improve performance management. GEAR addressed important performance management practices, such as aligning individual performance with organizational goals. However, while Office of Personnel Management (OPM) officials said they are working with the Chief Human Capital Officer's Council to promote GEAR, it is unclear if any additional agencies have adopted the GEAR framework.
Critical skills gaps
Since GAO included identifying and addressing government-wide critical skills gaps as a high-risk area in 2011, a working group led by OPM identified skills gaps in six government-wide mission critical occupations including cybersecurity and acquisition, and is taking steps to address each one. To date, officials reported meeting their planned level of progress for three of the six occupations. Additional progress will depend on the extent to which OPM and agencies develop the infrastructure needed to sustain their planning, implementation, and monitoring efforts for skills gaps, and develop a predictive capacity to identify newly emerging skills gaps.
Strategies for an era of highly constrained resources
Agency officials have said that declining budgets have created the impetus to act on management challenges and a willingness to consider creative and nontraditional strategies for addressing human capital issues. GAO identified strategies related to (1) strengthening coordination of the federal human capital community, (2) using enterprise solutions to address shared challenges, and (3) creating more agile talent management that can address these challenges.
section_title: What GAO Recommends
paragraphs: Over the years, GAO has made numerous recommendations to agencies and OPM to improve their strategic human capital management efforts. This testimony discusses some actions taken to implement key recommendations.

section_title: Letter
paragraphs: I am pleased to be here today to discuss some of the key human capital  management challenges facing the federal workforce and what can be  done going forward to ensure a top-notch civil service. As we have long  reported, strategic human capital management plays a critical role in  maximizing the government’s performance and assuring its accountability  to Congress and to the nation as a whole. Addressing challenges in areas  such as disaster response, homeland security, economic stability, and  numerous other complex and evolving issues requires a skilled federal  workforce able to work seamlessly with other agencies, levels of  government, and across sectors.
High-performing organizations have found that the full life-cycle of human  capital management activities—including workforce planning, recruitment,  on-boarding, compensation, engagement, succession planning, and  retirement programs—need to be fully aligned and focused on the cost- effective achievement of an organization’s mission. However, despite  some noteworthy improvements in the federal government’s management  of its personnel in recent years, strategic human capital management  continues to be a pervasive challenge that needs to be addressed.
The direct link between personnel management and organizational  performance can be seen, for example, in a number of our recent studies  that identified operational and other problems at various federal agencies.  These problems include wait times at Department of Veterans Affairs  medical facilities; management of oil and gas operations by the  Department of the Interior; information technology management at the  Social Security Administration; rail safety inspections by the Federal  Railroad Administration; and acquisition management at the Departments  of Defense and Homeland Security. All of these examples share a  common problem: a breakdown of one or more human capital activities  such as robust workforce planning or performance management.
Strategic human capital management has been a GAO high-risk area  since 2001. Since then, Congress, the Office of Personnel Management  (OPM), and some individual agencies have made substantial progress  toward addressing the government’s human capital challenges. For  example, in 2002 Congress created the chief human capital officer  (CHCO) position in 24 agencies to advise and assist the heads of the  agencies with human capital efforts. The same law created the CHCO  Council to advise and coordinate the human capital activities of member  agencies. As we reported in February 2013, although progress has been  made toward improving the government’s human capital efforts, the area  remains high risk because more work is needed to address government- wide mission critical skills gaps.
Today’s hearing is particularly timely as the General Schedule (GS)  classification system—the government’s primary method of defining and  organizing federal positions and the foundation of the federal personnel  system—approaches its 65th anniversary in October. Almost since its inception in 1949, questions have been raised about the GS system’s  ability to keep pace with the evolving complexity and nature of federal  work, and this hearing provides an important opportunity for Congress to  review the GS system and consider how well it is aging.
My remarks today will focus on the General Schedule and the extent to  which it has the attributes of a modern and effective classification system.  I will also discuss some of the other key issues facing federal strategic  human capital management including compensation, the status of  performance management and efforts to address poor performance, the  need to close government-wide mission critical skills gaps, and strategies  to help agencies meet their missions in an era of highly constrained  resources.
Significantly, the results of our work on these topics point to one simple  fact: Serious human capital shortfalls are eroding agencies’ capacity and  threatening their ability to cost-effectively carry out their missions. While  some progress has been made in addressing these shortfalls, continued  action is needed to ensure federal agencies have the human resource  tools, flexibilities, and guidance required to drive performance and  achieve the programmatic results the nation demands.
My observations on the classification system represent the preliminary  findings from our ongoing work that we are doing at the request of this  Subcommittee and the House Committee on Oversight and Government  Reform. For that study we interviewed more than 25 subject matter  specialists from think tanks, academia, government employee unions,  and current and former high-level officials at OPM and agencies that have  implemented alternative classification systems. The rest of this statement  is based on our large body of work on federal human capital management  issued primarily between June 2012 and May 2014, and is updated with  more recent information as appropriate. Detailed descriptions of scope  and methodologies can be found in the original reports. Both our ongoing  work and completed work that this statement is based on are either being  conducted or were conducted in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: OPM Needs to Improve the Design, Management, and Oversight of the Federal Classification System
subsections: section_title: The GS System Could Better Balance Attributes of a Modern, Effective Classification System
paragraphs: The GS classification system is a mechanism for organizing federal white- collar work, notably for the purpose of determining pay, based on a  position’s duties, responsibilities, and difficulty, among other things. The  GS system—which is administered by OPM—influences other human  capital practices such as training, since training opportunities link position  competencies with the employee’s performance. In 2013, the GS system  covered about 80 percent of the civilian white-collar workforce, or about  1.6 million employees.
Several public policy groups and some OPM reports have questioned the  ability of the GS system to meet agencies’ needs for flexible talent  management tools that enable them to align employees with mission  requirements. In our ongoing work, among other things, we are assessing  (1) the attributes of a modern, effective classification system and the  extent to which the current GS system balances those attributes, and (2)  OPM’s administration and oversight of the GS system. Our preliminary  findings from this work are as follows:
While there is no one right way to design a classification system,  based on our analysis of subject matter specialists’ comments, related  literature, and interviews with OPM officials, there are eight key  attributes that are important for a modern, effective classification  system. Collectively these attributes provide a useful framework for  considering refinements or reforms to the current system. These key  attributes are described in table 1.
While each attribute is individually important, there are inherent  tensions between some attributes, and the challenge is finding the  optimal balance among them. The weight that policymakers and  stakeholders assign to each attribute could have large implications for  pay, the ability to recruit and retain mission critical employees, and  other aspects of personnel management. This is one reason why— despite past proposals—changes to the current system have been  few, as it is difficult to find the optimal mix of attributes that is  acceptable to all stakeholders.
In comparing the GS system to these key attributes, during our ongoing  work we found a number of examples of how the current system’s design  reflects some of these key attributes but falls short of achieving them in  implementation. As one example, the GS system includes 15 statutorily- defined grade levels intended to distinguish the degrees of difficulty within  an occupation. Standard grade levels can simplify the system and provide  internal equity. Agency officials assign a grade level to a position after  analyzing the duties and responsibilities according to the factor evaluation  system.occupation and grade level across different agencies, providing simplicity  and internal equity to the system, and may help employees move across  agencies.
This allows for easy comparisons of employees in the same  However, having 15 grades requires officials to make meaningful  distinctions between things like the extent of the skills necessary for the  work at each level, which may be more difficult to determine in some  occupations than others. For example, officials must be able to determine  how the work of a GS-12 accountant is different from a GS-13  accountant. Making clear distinctions between these occupations may be  nuanced, as the basis for them hinges on, for example, how agency  officials determine the degree of complexity of the work. As a result,  having 15 grade levels may make the system seem less transparent, as  distinguishing between the levels may not be precisely measured by the   Otherwise agencies risk having  elements of the factor evaluation criteria. two employees performing substantially equal work but receiving unequal  pay, which decreases the degree to which the system can ensure internal  equity.
We believe that, going forward, these eight attributes of a more modern,  effective classification system can help provide criteria for policymakers  and other stakeholders to use in determining whether refinements to the  current GS system or wholesale reforms are needed.
section_title: OPM Has Not Conducted Oversight of Agency Classification Programs
paragraphs: Not all occupations comprise all 15 grade levels. The occupational category determines  the grade levels covered by an occupational series. because it determined that the reviews were ineffective at overseeing  agency compliance with the occupational standards. Specifically, officials  said the reviews were time consuming and agencies did not agree with  how OPM selected the position descriptions to review. OPM officials said  agencies frequently contested the results of the reviews leading to  another time- and resource-intensive review process for both OPM and  the agencies. OPM officials said they rely on agencies’ internal oversight  programs to ensure proper application of the classification policies.  However, OPM officials told us they do not review agency oversight  efforts, nor do they know which agencies, if any, have robust internal  oversight mechanisms.
OPM officials told us that in 2014 they had 6 full-time classification policy  specialists tasked with maintaining the classification standards, compared  to 16 that they had in 2001, and many more in the 1980s. OPM officials  said that lower staffing levels limit the agency’s ability to perform  oversight. Based on our ongoing work, we believe that OPM, like all  agencies, will have to make difficult tradeoffs between competing  demands in this era of limited resources.
section_title: Creating a Results- Oriented Approach to Federal Pay
subsections: section_title: Compensation Has Remained Relatively Constant as a Proportion of Total Discretionary Spending
paragraphs: A key federal human capital management challenge is how best to  balance the size and composition of the federal workforce so that it is  able to deliver the high quality services that taxpayers demand, within the  budgetary realities of what the nation can afford. Recognizing that the  federal government’s pay system does not align well with modern  compensation principles (where pay decisions are based on the skills,  knowledge, and performance of employees as well as the local labor  market), Congress has provided various agencies with exemptions from  the current system to give them more flexibility in setting pay. Thus, a  long-standing federal human capital management question is how to  update the entire federal compensation system to be more market based  and performance oriented. This type of system is a critical component of  a larger effort to improve organizational performance.
As we reported in January 2014, between 2004 and 2012 spending on  total government-wide compensation for each full-time equivalent (FTE)position grew by an average of 1.2 percent per year, from $106,097 in  2004 to $116,828 in 2012 (see figure 1). Much of this growth was driven  by increased personnel benefits costs, which rose at a rate of 1.9 percent  per year. Other factors included locality pay adjustments, as well as a  change in the composition of the federal workforce (with a larger share of  employees working in professional or administrative positions, requiring  advanced skills and degrees). In terms of employee pay per FTE,  spending rose at an average annual rate of 1 percent per year (a 7.9  percent increase overall).
As we reported earlier this year, while spending on compensation  increased from 2004 to 2012, it remained relatively constant as a  proportion of the federal discretionary budget at about 14 percent from  2004 to 2010, with slight increases in 2011 and 2012.
The composition of the federal workforce has changed over the past 30  years, with the need for clerical and blue collar roles diminishing and  professional, administrative, and technical roles increasing. As a result,  today’s federal jobs require more advanced skills at higher grade levels  than in years past. Additionally, federal jobs, on average, require more  advanced skills and degrees than private sector jobs. This is because a  higher proportion of federal jobs than nonfederal are in skilled  occupations such as science, engineering, and program management,  while a lower proportion of federal jobs than nonfederal are in  occupations such as manufacturing, construction, and service work. The  result is that the federal workforce is on average more highly educated  than the private sector workforce.
section_title: Studies Comparing Federal and Nonfederal Pay Came to Different Conclusions Because of Different Methodologies
paragraphs: As we reported in 2012, the policy of Congress is for federal workers’ pay  under the GS system to be in line with comparable nonfederal workers’  pay. Annual pay adjustments for GS employees are either determined  through the process specified in the Federal Employees Pay  Comparability Act of 1990 (FEPCA) or set based on percent increases  authorized directly by Congress. GS employees receive an across-the- board increase (ranging from 0 to 3.8 percent since FEPCA was  implemented) that has usually been made in accordance with a FEPCA  formula linking increases to national private sector salary growth. This  increase is the same for each covered employee. Most GS employees  also receive a locality payment that varies based on their location. While  FEPCA specifies a process designed to reduce federal-nonfederal pay  gaps in each locality, in practice locality increases have usually been far  less than the recommended amount, which has been between 15 and 20  percent in recent years. The President’s Pay Agent, the entity responsible  for recommending federal locality pay adjustments to the President, has  recommended that the underlying model and methodology for estimating  pay gaps be reexamined to ensure that private sector and federal sector  pay comparisons are as accurate as possible. To date, no such  reexamination has taken place.
However, other organizations have compared federal and non-federal  pay. The findings of the six studies published between 2009 and 2012  that we reviewed came to different conclusions on which sector had the  higher pay and the size of the pay disparities because they used different  approaches, methods, and data. With that in mind, when looking within  and across these or other studies, it is important to understand the  studies’ methodologies because they affect how the studies can be  interpreted.
The across-the-board and locality pay increases discussed above are  given to all covered employees nearly every year and are not linked to  performance. employees that are linked to performance ratings as determined by  agencies’ performance appraisal systems include within-grade increases,  ratings-based cash awards, and quality step increases. Within-grade  increases are the least strongly linked to performance, ratings-based  cash awards are more strongly linked to performance depending on the  rating system the agency uses, and quality step increases are also more  strongly linked to performance.
Pay increases and monetary awards available to GS  Based on our past work, we believe that implementing a more market- based and more performance-oriented pay system is both doable and  desirable. However, experience has shown it certainly is not easy. For  one thing, agencies must have effective performance management  systems that link individual expectations to organizational results.  Moreover, representatives of public, private, and nonprofit organizations,  in discussing the successes and challenges they have experienced in  designing and implementing their own results-oriented pay systems, told  us they had to shift from a culture where compensation is based on  position and longevity to one that is performance oriented, affordable, and  sustainable.
In fiscal years 2011, 2012, and 2013, there was neither an across-the-board or locality  pay increase due to a government-wide pay freeze. useful lessons learned that will be important to consider to the extent the  federal government moves toward a more results-oriented pay system.  Lessons learned include the following:  1.  Focus on a set of values and objectives to guide the pay system.  2.  Examine the value of employees’ total compensation to remain  competitive in the labor market.  3.  Build in safeguards to enhance the transparency and ensure the  fairness of pay decisions.  4.  Devolve decision making on pay to appropriate levels.  5.  Provide clear and consistent communication so that employees at all  levels can understand how compensation reforms are implemented.  6.  Provide training on leadership, management, and interpersonal skills  to facilitate effective communications.  7.  Build consensus to gain ownership and acceptance of pay reforms.  8.  Monitor and refine the implementation of the pay system.
section_title: Opportunities Exist to Strengthen Performance Management and Deal with Poor Performers
subsections: section_title: Efforts to Improve Performance Management
paragraphs: Our past work has shown that a long-standing challenge for federal  agencies has been developing credible and effective performance  management systems that can serve as a strategic tool to drive internal  change and achieve results. In 2011, various federal agencies, labor  unions, and other organizations developed the Goals-Engagement- Accountability-Results (GEAR) framework to help improve performance  management by articulating a high-performance culture; aligning employee and organizational performance management;  implementing accountability at all levels;  creating a culture of engagement; and  improving supervisor assessment, selection, development, and  training.
Five federal agencies volunteered to pilot GEAR, either agency-wide or in  specific components, including the Departments of Energy, Homeland  Security/Coast Guard, Housing and Urban Development, Veterans  Affairs/National Cemetery Administration, and OPM—with the intention to  expand GEAR government-wide.
In our September 2013 report we found that the GEAR framework  generally addressed key practices for effective performance management  that we had previously identified, such as aligning individual performance  expectations with organizational goals. Additionally, we concluded that  the GEAR framework presented an opportunity for federal agencies to  increase employee engagement and improve performance management.  Even though the GEAR pilot had only been in place for a short time,  agency officials described benefits such as improved engagement and  communication between employees and supervisors.
To improve the dissemination of the GEAR framework, our 2013 report  included recommendations for OPM to, among other actions, better  define the roles and responsibilities of OPM, the CHCO Council, and  participating federal agencies, including how to identify future promising  practices and how to update and disseminate information on the  government-wide implementation of GEAR. We concluded that clearly  defined roles and responsibilities are important for capitalizing on the  improvements made at the five pilot agencies, as well as for sustaining  and achieving the current administration’s goal of implementing GEAR  more broadly.
OPM agreed with our recommendations and, working with the CHCO  Council, has taken some initial steps to implement them. For example,  the CHCO Council recently released a “toolkit” describing the next steps  for implementing the GEAR principles, and the Executive Director of the  CHCO Council described efforts in 2014 to improve employee  engagement. Moreover, in June 2014, OPM officials said that OPM will  be responsible for facilitating the collaboration and information-sharing  between agencies on their approaches to implement GEAR, and OPM  will continue to provide technical support and expertise on GEAR and  successful practices for performance management. However, OPM  officials said that while they will continue working with the CHCO Council  to promote GEAR and to encourage other agencies to adopt the  framework, it is unclear if any additional agencies have formally adopted  GEAR to date. OPM said it will also work with the CHCO Council and  implementing agencies to determine effective and appropriate evaluation  tools and metrics to assess the progress of the implementation of GEAR.
section_title: Efforts to Address Poor Performers
paragraphs: As our past work has demonstrated, effective performance management  systems can help create results-oriented organizational cultures by  providing objective information to allow managers to make meaningful  distinctions in performance in order to reward top performers and deal  with poor performers. Although poor performance is not defined by  statute, title 5 of the United States Code defines “unacceptable  performance” as “performance of an employee which fails to meet  established performance standards in one or more critical elements of  such employee’s position.” Even a small number of poor performers can  have negative effects on employee morale and agencies’ capacity to  meet their missions. The 2013 Federal Employee Viewpoint Survey found  that only 28 percent of federal employees agreed that their work unit  takes steps to deal with a poor performer who cannot or will not  improve.
Although the exact number of poor performers in the federal government  is unknown, it is generally agreed that poor performance should be  addressed earlier rather than later, with the objective of improving  performance. Various studies, reports, and surveys of federal supervisors  and employees we reviewed have identified impediments to dealing with  poor performance, including issues related to (1) time and complexity of  the processes; (2) lack of training in performance management; and (3)  communication, including the dislike of confrontation. It will be important  for agencies to hold managers accountable for using probationary periods  and other tools for addressing poor performers as well as to ensure that  supervisors have adequate support from upper-level management and  human capital staff in dealing with poor performance subject to applicable  safeguards.
Our prior work on this topic identified various tools and approaches for  addressing performance “upstream” in the process within a merit-based  system that contains appropriate safeguards.the following:
An effective performance management system that (1) creates a clear  “line of sight” between individual performance and organizational  success; (2) provides adequate training on the performance  management system; (3) uses core competencies to reinforce  organizational objectives; (4) addresses performance on an ongoing  basis; and (5) contains transparent processes.
A probationary period that provides managers with a provisional  period to rigorously review employee performance.
section_title: Sustained Attention Is Needed to Address Current and Emerging Critical Skills Gaps
paragraphs: Since we first narrowed the strategic human capital high-risk area to  focus on identifying and addressing government-wide mission critical  skills gaps in February 2011, executive agencies and Congress have  continued their efforts to ensure the government takes a more strategic  and efficient approach to recruiting, hiring, developing, and retaining  individuals with the skills needed to cost-effectively carry out the nation’s  business. At the same time, we have recommended numerous actions  individual agencies should take to address their specific human capital  challenges, and we have also made recommendations to OPM to  address government-wide human capital issues.
For example, in September 2011 OPM and the CHCOs—as part of  ongoing discussions between OPM, the Office of Management and  Budget (OMB), and GAO on the steps needed to address the federal  government’s human capital challenges—established the Chief Human  Capital Officers Council Working Group (Working Group) to identify and  mitigate critical skills gaps. Further, the Working Group’s efforts were  designated an interim Cross-Agency Priority (CAP) goal within the  administration’s fiscal year 2013 federal budget.
Using a multi-faceted approach including a literature review and an  analysis of various staffing gap indicators, the Working Group identified  the following government-wide mission critical occupations: human resources specialist;  science, technology, engineering, and mathematics occupational  group.
The Director of OPM—as leader of the cross-agency priority goal to close  critical skills gaps—identified key federal officials from each of the six  government-wide mission critical occupations to serve as “sub-goal  leaders.” For example, the sub-goal co-leaders for the cybersecurity  workforce are from the White House Office of Science and Technology  Policy and the Department of Commerce’s National Institute of Standards  and Technology. OPM noted that in working with their occupational  communities, the sub-goal leaders have selected specific strategies to  decrease skills gaps in the occupations they represent. OPM also noted  that the OPM Director is to meet quarterly with these officials to monitor  their progress, address their challenges, and identify support needed from  OPM.
The Working Group also identified seven mission critical competencies,  including data analysis, strategic thinking, influencing and negotiating,  and problem solving, as well as agency-specific mission critical  occupations such as nurses at the Department of Veterans Affairs. For  both the occupations and competencies, high-risk skills gaps were  defined as those where staffing shortfalls could jeopardize the ability of  government or specific agencies to accomplish their mission.
Under the skills gap CAP goal, OPM reported that “by September 30,  2013, skills gaps will be reduced by 50 percent for three to five critical  federal government occupations or competencies, and additional agency- specific high-risk occupations and competency gaps will be closed.”  However, OPM’s progress against this metric cannot be determined  because as of June 2014 OPM has not provided any data on it.
Nonetheless, in November 2013, sub-goal leaders reported to OPM on  the activity and progress made toward targets for each of the mission- critical occupations in fiscal year 2013. Specifically, leaders for three of  the six sub-goals (cybersecurity, acquisition, and economist) reported that  they had met their planned level of performance for fiscal year 2013,  while the other three sub-goal leaders (human resources, auditor and  STEM) reported that they did not make their target or were developing  action plans for fiscal year 2014. For example, we found in June 2014  that the acquisitions sub-goal group established a target for increasing  the certification rate of GS-1102 contract specialists to 80 percent. The  final quarterly status update to the closing skill gaps CAP reported that  the target was met and the certification rate increased to 81 percent.  Conversely, the auditor sub-goal group reported that it was still gathering  information on the extent of the skill gaps in the government-wide auditor  workforce.
Government Efficiency and Effectiveness: Views on the Progress and Plans for  Addressing Government-wide Management Challenges, GAO-14-436T (Washington,  D.C.: Mar. 12, 2014). remain a priority and efforts related to it will continue to be implemented  using various approaches led by the Director of OPM and the team of  sub-goal leaders. Metrics that will be tracked include increasing the  certification rates for contract specialists to 84 percent in the acquisition  area, and for the cybersecurity area, increasing manager satisfaction with  the quality of applicants from 65 percent to 67 percent.
As we reported in February 2013, extent to which OPM and agencies develop the infrastructure to sustain  their planning, implementation, and monitoring efforts. It will be important  for OPM and agencies to implement refinements to the approaches the  Working Group used to identify and address critical skills gaps in order to  enhance their effectiveness. These refinements can include   further progress will depend on the  identifying ways to document and assemble lessons learned, leading  practices, and other useful information for addressing skill gaps into a  clearinghouse or database so agencies can draw on one another’s  experiences and avoid duplicating efforts; examining the cost-effectiveness of delivering tools and shared  services such as online training for workforce planning to address  issues affecting multiple agencies;  reviewing the extent to which new capabilities are needed to give  OPM and other agencies greater visibility over skills gaps  government-wide to better identify which agencies may have  surpluses of personnel in those positions and which agencies have  gaps, as well as the adequacy of current mechanisms for facilitating  the transfer of personnel from one agency to another to address those  gaps as appropriate; and determining whether existing workforce planning and other tools can  be used to help streamline the processes developed by the Working  Group.
GAO-13-283. that these were important areas for consideration and is taking steps to  implement them. We will continue to monitor OPM and agencies’ efforts  in closing mission-critical skills gaps.
section_title: Management Challenges and Strategies to Help Agencies Meet Their Missions in an Era of Highly Constrained Resources
paragraphs: In addition to mission critical skills gaps, our recent work has identified  other management challenges that, collectively, are creating fundamental  capacity problems that could undermine the ability of agencies to  effectively carry out their missions. Although the way forward will not be  easy, agency officials said these same challenges have created the  impetus to act and a willingness to consider creative and nontraditional  strategies for addressing issues in ways that previously may not have  been organizationally or culturally feasible.
The Balanced Budget and Emergency Deficit Control Act of 1985, as  amended, establishes discretionary spending limits for fiscal years 2012  through 2021, but many agencies had experienced flat or declining  budgets for several years prior. agencies are reducing hiring, limiting training, offering employee buyouts  and providing early retirement packages. As we concluded in our report,  without careful attention to strategic and workforce planning and other  approaches to managing and engaging personnel, the reduced  investments in human capital can have lasting, detrimental effects on the  capacity of an agency’s workforce to meet its mission.
2 U.S.C. § 901(c).
Officer (CFO) Act agencies we reviewed,10 had a lower number of  career permanent employees in 2012 than they did in 2004, 13 had a  greater number, and 1, the Department of Transportation, was  unchanged.
Earlier this year we reported that 31 percent of all career permanent  employees who were on board in September 2012 will become eligible to  retire in September 2017. As shown in figure 3 below, not all agencies  will be equally affected by this trend. By 2017, 20 of the 24 CFO Act  agencies will have a higher percentage of staff eligible to retire than the  current 31 percent government-wide. For example, about 21 percent of  DHS staff on board as of September 2012 will be eligible to retire in 2017,  while over 42 percent will be eligible to retire at both the Department of  Housing and Urban Development and the Small Business Administration.  Certain occupations—such as air traffic controllers and those involved in  program management—will also have particularly high retirement  eligibility rates by 2017.
Various factors affect when individuals actually retire, and some amount  of retirement and other forms of attrition can be beneficial because it  creates opportunities to bring fresh skills on board and allows  organizations to restructure themselves in order to better meet program  goals and fiscal realities. But if turnover is not strategically monitored and  managed, gaps can develop in an organization’s institutional knowledge  and leadership. The high projected retirement eligibility rates across  government underscore the importance of effective succession planning.
According to OPM, factors such as a 3-year pay freeze, automatic  reductions from sequestration that included furloughs for hundreds of  thousands of employees, and reductions in training and other areas have  taken their toll on the federal workforce. In the 2013 Employee Viewpoint  Survey results, the “global satisfaction index” showed an 8-percentage- point decline since 2010. Each of the four factors that make up the global  satisfaction index showed downward trends from last year’s results:  job satisfaction dropped 3 points to 65 percent, pay satisfaction was down 5 points to 54 percent, organization satisfaction fell 3 points to 65 percent, and  respondents that said they would recommend their organization  declined by 4 points to 63 percent.
As we reported earlier this year, to identify strategies for managing the  federal workforce and plan for future needs in an era of constrained  resources, we used several approaches including convening a full-day  forum that included 25 of the 27 members of the CHCO Council. Our  analysis and recommendations based on this effort provide an important  framework for prioritizing and modernizing current human capital  management practices to meet agencies’ current and future missions.  The strategies included the following:  Strengthening collaboration to address a fragmented human capital  community. Our analysis found that the federal human capital  community is highly fragmented with multiple actors inside government  informing and executing personnel policies and initiatives in ways that are  not always aligned with broader, government-wide human capital efforts.  The CHCO Council was established to improve coordination across  federal agencies on personnel issues, but according to CHCOs, the  council is not carrying out this responsibility as well as it could. This  challenge manifests itself in two ways: across organizations, with many  actors making human capital decisions in an uncoordinated manner, and  within agencies, excluding CHCOs and the human capital staff from key  agency decisions.
Using enterprise solutions to address shared challenges. Our  analysis found that agencies have many common human capital  challenges, but they tend to address these issues independently without  looking to enterprise solutions that could resolve them more effectively.  Across government, there are examples of agencies and OPM initiating  enterprise solutions to address crosscutting issues, including the  consolidation of federal payroll systems into shared-services centers.  CHCOs highlighted human resource information technology and strategic  workforce planning as two areas that are ripe for government-wide  collaboration.
Creating more agile talent management to address inflexibilities in  the current system. Our analysis found talent management tools lack  two key ingredients for developing an agile workforce, namely the ability  to (1) identify the skills available in existing workforces, and (2) move  people with specific skills to address emerging, temporary, or permanent  needs within and across agencies.
As we reported earlier this year, the CHCOs said OPM needs to do more  to raise awareness and assess the utility of the tools and guidance it  provides to agencies to address key human capital challenges. CHCOs  said they were either unfamiliar with OPM’s tools and guidance or they  fell short of their agency’s needs. OPM officials said they had not  evaluated the tools and guidance they provide to the agencies. As a  result, a key resource for helping agencies improve the capacity of their  personnel offices is likely being underutilized.
Among other things, in our May 2014 report we recommended that the  Director of OPM, in conjunction with the CHCO Council, strengthen  OPM’s coordination and leadership of government-wide human capital  issues to ensure government-wide initiatives are coordinated, decision  makers have all relevant information, and there is greater continuity in the  human capital community for key reforms. Specific steps could include,  for example, developing a government-wide human capital strategic plan  that, among other things, would establish strategic priorities, time frames,  responsibilities, and metrics to better align the efforts of members of the  federal human capital community with government-wide human capital  goals and issues. OPM and the CHCO Council concurred with these  recommendations and identified actions they plan to take to address  them.
section_title: Conclusions
paragraphs: In conclusion, strategic human capital management must be the  centerpiece of any serious effort to ensure federal agencies operate as  high-performing organizations. A high-quality federal workforce is  especially critical now given the complex and cross-cutting issues facing  the nation.
Through a variety of initiatives, Congress, OPM, and individual agencies  have strengthened the government’s human capital efforts since we first  identified strategic human capital management as a high-risk area in  2001. Still, while much progress has been made over the last 13 years in  modernizing federal human capital management, the job is far from over.  Indeed, the focus areas discussed today are not an exhaustive list of  challenges facing federal agencies and are long-standing in nature.
Greater progress will require continued collaborative efforts between  OPM, the CHCO Council, and individual agencies, as well as the  continued attention of top-level leadership. Progress will also require  effective planning, responsive implementation, robust measurement and  evaluation, and continued congressional oversight to hold agencies  accountable for results.
In short, while the core human capital processes and functions—such as  workforce planning and talent management—may sound somewhat  bureaucratic and transactional, our prior work has consistently shown the  direct link between effective strategic human capital management, and  successful organizational performance. At the end of the day, strategic  human capital management is about mission accomplishment,  accountability, and responsive, cost-effective government.
Chairman Farenthold, Ranking Member Lynch, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions you may have at this time.
section_title: Contacts and Acknowledgments
paragraphs: For further information regarding this statement, please contact Robert  Goldenkoff, Director, Strategic Issues, at (202) 512-6806, or  goldenkoffr@gao.gov.
Individuals making key contributions to this statement include Chelsa  Gurkin, Assistant Director; Robyn Trotter, Analyst-in-Charge; Jeffrey  Schmerling; Devin Braun; Tom Gilbert; Donald Kiggins; and Steven  Lozano. Key contributors for the earlier work that supports this testimony  are listed in each product.
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