Securities and Exchange Commission: Some Progress Made on Strategic Human Capital Management
Published: 2006-01-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Corporate failures and accounting scandals led to changes in legislation governing U.S. securities markets, which resulted in increased workload demands on the Securities and Exchange Commission (SEC). As a result, Congress provided SEC with substantial budgetary increases to obtain more resources to help fulfill the agency's mission. GAO was asked to review SEC's strategic workforce planning efforts to efficiently and effectively utilize its resources. This report discusses (1) the progress SEC has made toward developing a strategic human capital plan and (2) whether SEC uses effective strategic workforce planning principles for acquiring, developing, and retaining staff.
section_title: What GAO Found
paragraphs: SEC has taken steps to implement a number of strategic human capital management initiatives, including developing its strategic human capital plan. In 2004, SEC split its Office of Administrative and Personnel Management into the Office of Administrative Services and the Office of Human Resources (OHR), allowing the agency to separate its administrative and personnel functions and hire an associate executive director to focus on assessing, developing, and implementing human capital programs. In April 2005, SEC created a more structured human capital council by expanding the role of the Executive Resources Board (ERB), now called the Human Capital Review Board (HCRB). The HCRB includes senior management from all major divisions and offices, the Chairman's office, the Executive Director, and OHR and follows a more formalized and regular process for reviewing and approving human capital decisions. According to SEC, as of November 2005, the agency was in the process of creating its first strategic human capital plan, which will be based on the Office of Personnel Management's Human Capital Assessment and Accountability Framework, but it has not set a completion date. GAO also found that many of SEC's efforts related to workforce planning to date have been consistent with five key principles for effective strategic workforce planning; however, some of these efforts were still being developed or could be improved. Specifically: SEC has involved top management and a variety of stakeholders during the development of its strategic human capital plan, but only some employees will have the opportunity to provide feedback before the plan is finalized; SEC has been taking steps to identify needed critical skills and competencies, but it lacks a formal process for identifying existing skills among staff and linking them to SEC's strategic goals; SEC has been using human capital strategies to address workforce needs and skill gaps, but some of these strategies have not been in place long enough to assess results; SEC is developing or changing many of the administrative, educational, and other requirements to support workforce strategies, particularly pertaining to the use of human capital flexibilities; and SEC is developing additional human capital indicators and a more formal process by which to measure the achievement of its human capital goals. However, SEC currently does not formally evaluate the effectiveness of its human capital strategies in fulfilling SEC's strategic goals.

section_title: Letter
paragraphs: Over the past several years, in the wake of corporate failures and  accounting scandals, changes in legislation governing U.S. securities  markets have resulted in increased demands on the Securities and  Exchange Commission’s (SEC) regulatory capacity. Through the  Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), Congress augmented SEC’s  responsibilities but also authorized a substantial budget increase for the  agency to better address workload challenges. In fiscal year 2003, SEC  received $716 million, or a 39 percent increase over its previous year’s  budget authority, and has used much of it to fund more than 842 new staff  positions. In addition, SEC used a portion of the fiscal year 2003  appropriations to fund its new pay parity authority, which allowed the  agency to pay staff commensurate with other federal financial regulators.  In fiscal year 2004, SEC received a 13 percent increase over its previous  year’s budget authority. These increases offered SEC a unique opportunity  to obtain the resources and expertise necessary to meet its mission, but the  transformation will require a rigorous effort to recruit, hire, and retain the  right staff with the right expertise to fulfill agency mission and strategic  goals.
In formalizing its strategic direction, on July 9, 2004, SEC approved its  2004-2009 strategic plan, which identifies the vision, mission, values, and  goals shaping the agency’s activities during the next 5 years. The fourth  goal of the strategic plan outlines SEC’s commitment to maximize the use  of SEC resources. It further states that in an effort to attract, hire, and  retain the right staff with the expertise necessary to carry out its mission,  the agency plans to use a variety of human capital strategies that will  complement the agency’s other ongoing activities. To respond to your  request to review SEC’s strategic workforce planning, our report discusses  the following: (1) the progress SEC has made toward developing a strategic  human capital plan and (2) whether SEC uses effective strategic workforce  planning practices for acquiring, developing, and retaining staff.
To address the first objective, we collected information and data from  representatives of SEC’s Offices of the Chairman and Executive Director,  SEC’s Office of Human Resources (OHR), and key divisions and offices on  the agency’s recent workforce planning activities. To gain insights on SEC’s  progress in this area, we also reviewed SEC’s strategic plan, budget  requests, and other relevant documents, and GAO reports. To address the  second objective, we compared SEC’s workforce planning activities with  five key principles for effective strategic workforce planning, which we  developed based on our review of studies by leading workforce planning  organizations and interviews with officials from the Office of Personnel  Management (OPM) and the National Academy of Public Administration.  We identified related tasks for each principle (described in our prior work)  to provide more specific examples of how each principle may be  implemented and we determined whether SEC was undertaking these or  similar tasks. In addition, we interviewed representatives from the Office of  Management and Budget (OMB) and OPM to discuss SEC’s activities and  best practices in strategic workforce planning in the federal government.  This report primarily focuses on strategic workforce planning efforts under  the former Chairman, whose resignation was effective June 30, 2005. We  conducted our work in Washington, D.C., from April 2005 through  November 2005 in accordance with generally accepted government  auditing standards. Appendix I provides additional information on our  scope and methodology.
subsections: section_title: Background
paragraphs: SEC was created by Congress in 1934 primarily to protect investors;  maintain fair, honest, and efficient securities markets; and facilitate capital  formation. SEC’s oversight responsibilities include rule making, surveilling  the markets, interpreting laws and regulations, reviewing corporate filings,  conducting inspections and examinations, and determining compliance  with federal securities laws. In addition, SEC monitors and regulates a  variety of key market participants, which as of July 2004 included more  than 7,200 broker-dealers, 900 transfer agents, almost 500 municipal and government securities dealers, and self-regulatory organizations (SRO).  However, as we have reported previously, SEC has faced resource and  management challenges that affected its ability to achieve its mission. The  following sections include a discussion of SEC’s organizational structure  and its human capital challenges, as well as a discussion of principles for  human capital management and planning.
subsections: section_title: SEC Staff and Organization
paragraphs: As of August 2005, SEC had approximately 3,800 staff working in four  divisions and 21 offices in Washington, D.C., and 11 regional and district  offices. Approximately 41 percent of staff were attorneys, 25 percent were  accountants or financial analysts, and 6 percent were investigators or  examiners. The remaining 28 percent were other professional, technical,  administrative, and clerical staff. Figure 1 depicts SEC’s organizational  structure, including the Chairman’s office and the agency’s key divisions  and offices.
The Managing Executive for Operations and Management, who works in  the Office of the Chairman, is responsible for overseeing all efforts to  enhance agency productivity, retain qualified staff, and manage agency  resources. In coordination with the Office of the Executive Director, the  Managing Executive for Operations and Management has primary  responsibility for OHR, which develops, implements, and evaluates SEC’s  programs for human resource and personnel management.
section_title: SEC Human Capital Management and Challenges
paragraphs: Over the past years, we have produced several reports relevant to human  capital and workforce planning issues at SEC. In 2001, we recommended  that the Chairman of SEC include a strategy for succession planning and  develop a comprehensive, coordinated workforce planning effort as part of  the agency’s annual performance plan. In March 2002, we found that SEC  had not reviewed its staffing and resource needs independent of the budget  process and that SEC generally developed its annual budget request based  on the previous year’s appropriation, not on what the agency actually  needed to fulfill its mission. We also commented that SEC was making its  staffing allocation decisions without the benefit of a strategic plan. We  recommended that SEC broaden its strategic planning process to  determine its regulatory priorities and the resources needed to fulfill its  mission, including identifying the staff skills needed to do so.
In July 2004, we found that although SEC received more flexible pay and  hiring authority, it continued to face challenges filling critical vacancies,  such as for accountants. Furthermore, we reported that although SEC’s  allocation of its newly authorized positions was generally consistent with  Sarbanes-Oxley directions, these decisions were made without the benefit  of an updated strategic plan that outlined the agency’s priorities—a tool  that could be used to help ensure that SEC was deploying its resources to  maximize organizational effectiveness. Later, in November 2004, we  reported the results of a GAO survey of human capital issues at SEC to  benchmark employee views following the implementation of pay parity and  several work-life programs. We found that the significant improvement in  employee satisfaction with compensation and work-life programs could be  attributed to SEC’s recent implementation of pay parity and an increased  focus on the use of flexible work schedules and telework programs since  2001.
In May 2005, we audited SEC’s financial statements for fiscal year 2004 and  found that SEC’s preparation of its financial statements was manually  intensive and consumed significant staff resources. To address the  weaknesses found in the audit, SEC stated that it would increase the  number of financial reporting staff. Finally, in August 2005, as a result of  our review of SEC’s facilities project management and related budget  planning, we recommended that SEC complete the hiring of new positions  in the Office of Administrative Services and the Office of Financial  Management.
section_title: Strategic Human Capital Management and Workforce Planning
paragraphs: Studies by several organizations, including GAO, have shown that  successful organizations in both the public and private sectors use strategic  management approaches to prepare their workforces to meet present and  future mission requirements. For example, preparing a strategic human  capital plan encourages agency managers and stakeholders to  systematically consider what is to be done, how it will be done, and how to  gauge progress and results. Federal agencies have used varying  frameworks for developing and presenting their strategic human capital  plans. More recently, various agencies have begun using OPM’s Human  Capital Assessment and Accountability Framework (HCAAF) as the basis  for preparing such plans. HCAAF, which OPM developed in conjunction  with OMB and us, outlines six standards for success, key questions to  consider, and suggested performance indicators for measuring progress  and results. These six standards for success and related definitions are as  follows:  Strategic alignment. The organization’s human capital strategy is  aligned with mission, goals, and organizational objectives and integrated  into its strategic plans, performance plans, and budgets.
Workforce planning and deployment. The organization is  strategically utilizing staff in order to achieve mission goals in the most  efficient ways.
Leadership and knowledge management. The organization’s leaders  and managers effectively manage people, ensure continuity of  leadership, and sustain a learning environment that drives continuous  improvement in performance.
Results-oriented performance culture. The organization has a  diverse, results-oriented, high-performance workforce, and a  performance management system that effectively differentiates  between high and low performance and links individual, team, or unit  performance to organizational goals and desired results.
Talent management. The organization makes progress toward closing  gaps or making up deficiencies in most mission-critical skills,  knowledge, and competencies.
Accountability. The organization’s human capital decisions are guided  by a data-driven, results-oriented planning and accountability system.
Strategic workforce planning, an integral part of human capital  management and the strategic workforce plan, involves systematic  assessments of current and future human capital needs and the  development of long-term strategies to fill the gaps between an agency’s  current and future workforce requirements. Agency approaches to such  planning can vary with each agency’s particular needs and mission;  however, our previous work suggests that irrespective of the context in  which workforce planning is done, such a process should incorporate five  key principles: (1) involve management and employees, (2) analyze  workforce gaps, (3) employ workforce strategies to fill the gaps, (4) build  the capabilities needed to support workforce strategies, and (5) evaluate  and revise strategies. Figure 2 provides a fuller description of each of the  five principles.
section_title: SEC Has Made Progress on Strategic Human Capital Initiatives and Is Developing a Strategic Human Capital Plan
paragraphs: SEC has shown progress on a number of strategic human capital  management initiatives that could help strengthen SEC’s efforts in  workforce planning and is developing its strategic human capital plan.  These initiatives include splitting its Office of Administrative and Personnel  Management into the Office of Administrative Services and OHR in order to  improve efficiency and effectiveness in both and creating a more  structured and institutionalized human capital council by expanding the  role of the ERB, now called the HCRB. Furthermore, SEC is in the process  of creating its first strategic human capital plan. According to SEC, this  plan is to be based on OPM’s HCAAF.
subsections: section_title: SEC Has Developed More Formalized Process for Strategic Human Capital Management
paragraphs: In 2003, after the passage of Sarbanes-Oxley, SEC undertook an extensive  workforce and work-flow review, and the ERB became the vehicle through  which SEC leadership met to align its programmatic goals and new  responsibilities with its human capital approaches and existing and new  resources. The ERB—composed of senior division managers, the Managing  Executive for Operations, and the head of OHR (after the creation of that  office)—met monthly and on an ad hoc basis to deal with special issues,  and produced recommendations for the Chairman’s approval. The 2003  workforce and work-flow review process required division and office  directors to present justifications for resource requests to the ERB for the  board’s approval. One outcome of the 2003 review was the decision to split  SEC’s Office of Administrative and Personnel Management into two  offices—the Office of Administrative Services and OHR. According to OHR,  the separation of the office’s administrative and personnel functions was  made to improve efficiency and effectiveness in these functions, which was  necessitated by the agency’s growth of approximately 1,000 individuals  after the implementation of Sarbanes-Oxley. In addition, the split created  an opportunity for SEC to hire an Associate Executive Director for OHR,  who is tasked with assessing, developing, and implementing human  resources programs.
Following the creation of OHR, SEC broadened the role of the  ERB—renamed the HCRB in April 2005—to include a senior executive  review of all human capital issues. SEC staff said that the HCRB has a  standing 2- to 3-hour biweekly meeting and is composed of (1) directors  from the major divisions and offices—Divisions of Corporation Finance;  Investment Management; Market Regulation; Enforcement; and the Office  of Compliance, Inspections, and Examinations (OCIE); (2) a designee  representing the interests of the field offices; (3) the Executive Director  (who serves as Chair); (4) a representative from the Chairman’s office; and  (5) the Associate Executive Director of OHR. According to SEC, although  smaller offices do not regularly participate in the HCRB, the Executive  Director is responsible for representing the interests of these offices. In  addition, these offices make presentations to the HCRB on an as-needed  basis.
The HCRB approves all human capital decisions, including staffing  allocations. Specifically, staffing allocations and current structures for each  division and office can now only be amended with the approval of the  HCRB. According to SEC officials, HCRB’s staffing decisions are made on a  consensus rather than formal voting basis. SEC staff also said that although  the commission does not directly participate in the agency’s human capital  planning process, a representative from the Chairman’s office attends  HCRB meetings. Furthermore, while the HCRB has the ability to approve  staffing requests, larger allocations of staff slots and staff reorganizations  are subject to final review and approval by the Chairman.
Representatives from SEC’s key divisions and offices said they felt that the  migration from the ERB to the HCRB was much more than a name change.  Specifically, the HCRB has a greater focus on SEC’s strategic needs.  Management staff from several SEC divisions attributed this change to the  hiring of the new Associate Executive Director of OHR, who was formerly  employed at OPM and who, they felt, is aware of what OPM and OMB  expect from agencies in their strategic planning and human capital  management processes. One division staff representative added that  whereas they felt that the ERB met more “sporadically” and many did not  feel compelled to gain board approval of staffing allocations, the HCRB  now meets regularly and has more “rigor and structure.”
section_title: SEC Is Developing a Strategic Human Capital Plan
paragraphs: SEC has been developing its human capital plan to address its strategic  planning goal of maximizing the use of agency resources. Specifically, OHR  officials told us that the plan will address how SEC will implement and  align its human capital strategies to achieve agency mission, goals, and  outcomes. OHR officials also told us that they are in the process of  developing a human capital plan based on OPM’s HCAAF (previously  discussed in the report), which identifies six standards for success: (1)  strategic alignment, (2) workforce planning and deployment, (3) leadership  and knowledge management, (4) results-oriented performance culture, (5)  talent management, and (6) accountability. A major component of the  human capital plan, according to OHR officials, will be a strategy map and  balanced scorecard to delineate and determine whether its strategies and  action plans are meeting each of HCAAF’s six standards. A strategy map  defines the strategic objectives and associated initiatives that support the  organization’s vision and mission. A balanced scorecard is a management  system that provides metrics and feedback about agency actions. The  actual scorecard uses indicators to measure the relative success of each  initiative. Following this approach, SEC plans to use some indicators  suggested by HCAAF to measure the success of each of the initiatives. OHR  officials told us that the balanced scorecard will also focus on OHR’s  internal operations and the agency human capital outcomes for which it  will be accountable. In early November 2005, OHR officials provided us  with a draft strategy map and possible draft objectives and indicators for  how OHR is planning to achieve SEC’s strategic planning goal of  maximizing the efficient and effective delivery of human resource services.
OHR has hired a contractor to help implement the balanced scorecard  approach and plans to involve a number of internal stakeholders in  developing the human capital plan, including the Executive Director, the  HCRB, and a cross section of division and office managers. According to  OHR officials, the contractor will interview branch chiefs and assistant  directors within OHR to discuss how to apply the balanced scorecard to  SEC, and will also interview managers from the divisions, but does not plan  to obtain input from employees below the supervisory level. As of  November 2005, OHR officials, working with the contractor, have identified  a list of human capital initiatives and indicators to measure the success of  these initiatives. OHR officials said that the next step is to communicate  with division staff to determine the appropriate targets for these indicators.  Once the development work is complete, the Executive Director will  approve a presentation of the human capital plan to the HCRB. After  receiving HCRB’s approval, OHR will disseminate the human capital plan  throughout the agency. We discuss stakeholder involvement in developing  the human capital plan and SEC’s communication strategy in greater detail  later in the report.
Once the strategic human capital plan is implemented, SEC officials intend  to update the plan quarterly and annually. The process will begin with an  evaluation of the results of the balanced scorecard measures. OHR  management said that the quarterly assessments of the plan will focus on  SEC’s ability to implement initiatives and demonstrate results in both  leading and lagging indicators. OHR officials said that the office plans to  conduct the quarterly review and present results to the Executive Director  and then to the HCRB. OHR also stated that it plans to conduct an annual  review to ensure that the human capital plan remains linked to the agency’s  strategic plan and to correct any gaps between the plan’s human capital  initiatives and the ability to meet the agency’s strategic goals. In addition to  data used in the quarterly reviews, annual reviews are to include input from  the HCRB and use performance management data and employee focus  groups to determine gaps.
Although the anticipated human capital plan should allow SEC to more  consistently plan for its staffing needs and adjust staffing or program  priorities, it does not appear to formally link resource needs to the  budgeting process. As we have previously reported, the absence of this  linkage results in reactive rather than proactive activities and planning that  tends to be tactical rather than strategic. According to OHR, divisions and  offices are not currently required to provide OHR with annual resource  allocation information such as number of planned promotions because  SEC’s divisions and offices do not have staff with the expertise to do  strategic human capital planning. Although OHR can provide some minimal  assistance to the divisions on long-term workforce planning and linking  these efforts to the budget, OHR recognizes the benefit to increasing such  assistance and plans to improve its capacity to provide this guidance.
section_title: Components of SEC Workforce Planning Efforts Are Consistent with Established Principles, but Some Efforts Could Be Improved
paragraphs: We found that many of SEC’s efforts related to workforce planning were  consistent with our five key principles for effective strategic workforce  planning; however, some of these efforts are still being developed or could  be improved. Figure 3 summarizes how SEC had incorporated GAO’s key  principles into its strategic workforce planning.
subsections: section_title: Principle 1: SEC Has Engaged Top Management and Expanded the Role of Certain External Stakeholders
paragraphs: In surveying SEC activities related to our first workforce planning  principle, we found that the creation of the HCRB expanded the role of top  management in strategic workforce decision making at SEC. As previously  discussed, HCRB meetings create a forum for regular dialogue between  OHR, key executives, and division leaders, and the HCRB now reviews and  approves all human capital decisions. Moreover, during the ongoing  development of its strategic human capital plan and other strategies, OHR  officials said that it has also sought the assistance and guidance of various  external stakeholders. In particular, SEC staff have been meeting regularly  with OPM and using several of OPM’s key tools to assist the development of  its strategic human capital plan. According to OHR officials, they have  researched best practices in government, academia, and the private sector.  However, SEC may have missed opportunities to conduct outreach with  congressional stakeholders and the securities industry. In addition, SEC  has not fully sought employee feedback during the development of human  capital initiatives and, specifically, during the development of the strategic  human capital plan.
subsections: section_title: SEC Has a Formalized Process for Its Top Leadership and Executives to Establish and Implement Human Capital Strategies
paragraphs: In our prior work, we have found that top management clearly and  personally involved in workforce planning can provide the organizational  vision that is important in times of change and generate cooperation within  the agency to ensure that planning strategies are thoroughly implemented  and sustained. Specifically, we have found that a key action in integrating  human capital approaches with strategies for achieving programmatic  results is the establishment of an entity, such as a human capital council,  that is held accountable for linking human capital management and  obtaining strategic goals. As demonstrated by their new responsibilities  and participation in the HCRB, SEC’s key executives and top management  have been actively engaged in SEC’s workforce planning efforts. As  discussed previously, biweekly HCRB meetings are chaired by the  Executive Director. This gathering of top leadership and executives helps  determine and respond to current and changing workforce needs at SEC.  For example, division managers we interviewed said that during HCRB  meetings, senior managers representing SEC’s major divisions and offices  make consensus-based determinations of staffing decisions at the agency.
In addition, the HCRB is to have a role in the development of the strategic  human capital plan. For example, OHR officials said it has presented status  reports to the HCRB on the development of the human capital plan.  According to OHR officials, once the plan’s proposed indicators and related  targets are developed, some HCRB representatives will review and approve  them for inclusion in the plan. Although a completion date for the plan has  not been established, OHR officials said that HCRB will continue to work  with OHR to make revisions and approve the strategic human capital plan.
section_title: SEC Has Been Seeking Guidance from Certain External Stakeholders and Resources
paragraphs: In prior work, we found that agencies should engage various stakeholders  to identify ways to streamline processes, improve human capital strategies,  and help the agency recognize and deal with the potential impact that the  organization’s culture can have on the implementation of such  improvements. Further, involvement of key congressional and other  stakeholders during the strategic planning process also helps ensure that  workforce planning efforts are clearly linked to the agency’s mission and  long-term goals.
In developing its strategic human capital plan, SEC has been using various  methods to obtain the assistance and viewpoints of external resources.  According to OHR officials, staff researched and identified a number of  best practice studies from government, academia, and the private sector.  For instance, OHR said that it is working with a private human capital  consulting company to obtain information on best practices for integrating  human capital functions at SEC. The human capital functions SEC plans to  integrate are (1) selection (hiring), (2) performance management, (3)  training, and (4) succession planning. These functions will be linked by a  common competency platform—meaning all four functions will be linked  to agencywide skills and competencies, which SEC is currently in the  process of identifying. As part of the integrated human capital functions  initiative, officials said SEC is planning to (1) implement the performance  management system within OHR by the end of 2005 and then throughout  the agency, (2) begin integrating performance management with its hiring  or “selection” system in May 2006, (3) offer training that develops employee  competencies used for selection and performance management, and (4)  use performance management, selection, and training to help institute  succession planning. OHR plans to completely implement these integrated  functions by May 2007.
SEC also plans to use written guidance developed by other government  agencies, including OMB, OPM, and us. Specifically, OHR plans to  incorporate measures outlined in HCAAF—and developed by OPM in  conjunction with OMB and us—into the balanced scorecard being  developed for SEC. OHR officials said that the office has consulted with  OPM staff and hired a specialist from OPM to help implement its new  human capital strategies, including the development of SEC  University—one of the agency’s new initiatives that focuses on staff  training. Furthermore, according to OHR officials, SEC formally and  informally communicates with other financial regulators through  networking events like the Small Agency Council, and also regularly  receives operational information and survey data from other regulators,  including compensation and benefit comparisons, labor relations  discussions, and recruiting strategies.
Although SEC has collected useful information and perspectives from  various external parties, SEC has not met with congressional and industry  stakeholders during the development of its strategic human capital plan.  OHR officials said that SEC had not met with congressional staff to obtain  their input on human capital planning at SEC and did not indicate any plans  to do so since SEC has communicated human capital issues to Congress  through congressional hearings and during the budget process. In addition,  OHR officials told us they have collected best practice data from the  private sector through a consulting firm, but they did not state that SEC has  had discussion with industry stakeholders on how the evolving securities  market may affect SEC’s resource needs.
section_title: SEC Has Communicated Its Strategic Workforce Initiatives Agencywide but Has Not Fully Sought Feedback from Employees during the Development of New Human Capital Initiatives
paragraphs: We have found that an effective communication strategy will create shared  expectations, promote transparency, and report progress. In general,  communication about the goals, approach, and results of strategic  workforce planning is most effective when done early and clearly. Effective  strategies also allow for a variety of two-way communication and are not  limited to top-down dissemination. Efforts that address key organizational  issues, like strategic workforce planning, are most likely to succeed if, at  their outset, agencies’ top program and human capital leaders set the  overall direction, pace, tone, and goals of the effort, and involve employees  and other stakeholders in establishing a communication strategy that  creates shared expectations for the outcome of the process.
SEC communicates relevant information on human capital issues to its  employees not only through SEC’s intranet and e-mail sent to  administrative contacts within divisions and offices, but also through other  forums such as staff meetings. In some cases, issues are communicated  top-down from executives to managers and supervisors, and sometimes  from managers and supervisors to nonmanagerial employees. For example,  OHR officials said that the presentation of SEC’s new human capital plan is  to be authorized by the Executive Director and then approved by the  HCRB. Following HCRB approval, other top-level executives (those who  are not on the HCRB), managers, and supervisors are to participate in  group meetings to discuss the plan. Finally, OHR officials said that all SEC  employees are to receive electronic presentations of the plan from OHR but  will not have the opportunity to provide feedback prior to the approval of  the plan. In general, informal methods of communicating human capital  issues include performance discussions that occur during the employee  evaluation process and impromptu communications between staff and  liaisons from OHR assigned to each division.
Overall, division officials said that OHR has been sensitive about the need  to communicate about human capital issues, programs, and policies.  However, one division manager noted that written agency communications  sometimes assume that the reader has adequate knowledge of policies and  procedures. For example, while SEC provides comprehensive new  employee orientation training, such training could be enhanced by  providing more basic information on federal government employment. This  additional training may help ensure that when there are changes or new  training opportunities, employees have a better understanding of the  context in which changes occur. Another division manager said that OHR  should e-mail employees directly regarding training opportunities instead  of delegating this responsibility to the division’s OHR liaison.
Although OHR has communicated with SEC staff on some human capital  matters, it has not sought feedback from all employees in the development  of SEC’s strategic human capital plan. Without such feedback, it is difficult  to determine employees’ awareness of issues and fully determine the  effectiveness of such human capital approaches. As previously discussed,  participation in the development of this plan will not take place below the  supervisory level. Nevertheless, OHR has indicated that it plans to use  some employees to help with the development of some of its integrated  human capital functions, such as performance management. Furthermore,  OHR officials said it plans to seek feedback from employees and to use  focus groups to evaluate the success of its strategic human capital plan.
section_title: Principle 2: SEC Has Been Taking Steps to Track and Identify Critical Skills and Competencies; However, It Currently Lacks a Formal Process for Identifying and Linking These Skills to Strategic Goals
paragraphs: SEC has been developing tools to measure needed skills and training for its  employees, but currently relies on management’s informal knowledge of  the skills and competencies possessed and needed within agency divisions.  OHR has started interviewing division management to identify agencywide  and position-specific competencies. As previously discussed, SEC also has  begun to integrate its human capital functions with agencywide skills and  competencies. Despite these efforts to identify and minimize gaps in  workforce skills, SEC currently lacks a formal process to link critical skills  and competencies to the goals and objectives outlined in its strategic plan.  As a result, SEC may incorrectly estimate workforce gaps, information that  helps agencies determine appropriate human capital strategies.
subsections: section_title: SEC Has Made Efforts to Identify Staff Deficiencies but Does Not Maintain Information on Skills Possessed by Its Employees
paragraphs: Our prior work suggests that maintaining information on the critical skills  and competencies that an organization’s staff possess is especially  important as the environment in which federal agencies operate changes.  Shifts in priorities, advances in technology, budget constraints, and other  factors all affect what sort of staff agencies will need to fulfill their  missions. For SEC, such information is particularly useful for determining  and addressing gaps in critical workforce skills or staff and making  efficient resource allocations, because SEC must respond to changing  regulatory conditions requiring its attention. For example, after the Energy  Policy Act of 2005 (P.L. 109-58) repealed the Public Utility Holding  Company Act of 1935 (PUHCA), the statute under which SEC is responsible  for regulating public utility holding companies, SEC had to assess the skills  of the 24 employees assigned to work in the Office of Public Utility  Regulation (OPUR) to determine where they might be reassigned.
Although SEC managers indicated that they were aware of the current  knowledge, skills, and abilities of staff in their divisions, OHR officials  stated that the agency does not currently maintain any formal inventory of  the staff’s skills and competencies. Documentation of staff experience and  skills may help management and OHR more effectively identify hiring  strategies and training and developmental opportunities for current staff  that would help eliminate skills gaps. In the OPUR case, OHR officials said  it has been somewhat difficult to identify the skills of employees in this  office. Nevertheless, during our interviews with divisions, senior staff  indicated that, in general, they have informal knowledge, mainly through  experience, of the skills and competencies of supervised staff. Also,  division management said that it draws upon staff knowledge when hiring;  in particular, this occurs when divisions work with OHR to write position  descriptions.
Despite lacking documentation of current skills, SEC has made efforts to  identify deficiencies in staff skills. For example, OHR officials indicated  that its office has interviewed directors and deputy directors at the agency  to identify where knowledge and skills could be improved at the agency.  The interviewees identified areas needing improvement, and branch chiefs  ranked them in order of importance: (1) research and analysis; (2)  knowledge of SEC process, rules, and regulations; (3) decision making; (4)  writing; (5) oral communication; (6) information technology knowledge  and skills; (7) management/supervisory skills; and (8) institutional  knowledge. In another instance, in July 2004, OCIE completed a survey of  examiners with higher degrees (e.g., MBA) to determine what skills were  possessed and needed in the office. Further, division staff said they contact  OHR when they need to identify persons with special skills and abilities.  Division staff explained that OHR helps locate staff to complete work  requiring special resources. Division staff interviewed generally agreed that  these liaisons have proved to be an adequate resource for locating  specialized skills and abilities on an as-needed basis.
Although SEC currently does not document and centrally compile skills  possessed by employees, OHR plans to use the skills and competencies  needed for SEC positions as the basis for integrating the four human capital  functions of selection (hiring), performance management, training, and  succession planning. Furthermore, SEC plans to identify competencies that  will be needed agencywide as well as for specific occupations. With the aid  of a private contractor, OHR plans to conduct a competency-based job  analysis for each occupation at SEC. OHR expects that, in consultation  with its contractor, it will determine two or three competencies that may be  applied agencywide, while other technical competencies will pertain to  specific positions at the agency. According to OHR officials, the core  competencies will be linked to broader agencywide strategic goals, and  job-specific competencies may be linked to programmatic goals listed in  the strategic plan. Eventually, all SEC employees will be evaluated through  a competency-based performance management system. As part of its wider  strategic human capital planning efforts, OHR is in the process of linking all  of its human capital functions. These functions will be linked to the critical  skills and competencies identified by the agency and provide information  that can be used in all personnel-related functions. For instance, skills gaps  identified by the performance management system may be remedied by  hiring or training initiatives.
section_title: SEC Is Taking Steps to Determine What Critical Skills and Competencies It Needs but Has Not Linked Them to Strategic Goals
paragraphs: In our prior agencywide work, we have found that the scope of agencies’  efforts to identify the skills and competencies needed for their future  workforces varies considerably, depending on the environment and  responsibilities of a particular agency. The most important consideration is  that the skills and competencies identified are clearly linked to the agency’s  mission and long-term goals, as developed with stakeholders during the  strategic planning process.
SEC has already taken some steps to identify the type of knowledge and  skills that would be beneficial. As discussed previously, OHR interviewed  division directors and deputy directors to identify areas where staff  knowledge and skills could be improved. According to OHR officials, these  interviews also led to the conclusion that management should (1) create a  career development plan, (2) develop an individualized training curriculum,  (3) mitigate or prevent loss of institutional knowledge, and (4) promote  knowledge transfer among its employees to strategically address its future  workforce needs. In addition, SEC has been conducting the triennial needs  assessment required by OPM. SEC has completed the first two phases of  the assessment, which gathered information from executives and  supervisors at the agency. According to officials, the assessment results  will form the basis for questions to ask subject matter experts. Following  interviews with subject matter experts, SEC anticipates that it will  distribute a survey to all employees asking them to identify the skills  needed to perform their jobs. The results of this assessment are to be used  by OHR to determine if SEC’s existing training programs should be  refocused and to identify additional courses or programs that should be  developed.
Although SEC has completed its 2004-2009 strategic plan, OHR officials  stated that goals and objectives outlined in the plan have not been linked to  specific skills or competencies. While the strategic plan lists potential  performance indicators, they are not directly linked to particular critical  skills or competencies. As it develops its integrated human capital  functions and determines workforce gaps, SEC plans to link the critical  skills and competencies it identifies to the strategic plan. According to  OHR officials, this linkage will occur eventually as competencies are  determined.
section_title: SEC Is Making Efforts to Reshape Its Workforce to Increase Its Efficiency and Effectiveness through Re-engineering Work Processes
paragraphs: When estimating the number of employees needed with specific skills and  competencies, we found, based on prior work, it is also important to  consider opportunities for reshaping the workforce by re-engineering  current work processes or sharing work among offices and divisions within  an agency. This is particularly important to SEC as it responds to changes  in legislation affecting its responsibilities and substantial growth in the size  of its workforce. Re-engineering processes have been particularly helpful  as SEC considers more strategically how to use employees to perform a  wider variety of functions at the agency, or seeks persons with differing  skills to perform certain functions. According to OHR officials, the office is  trying to improve employee versatility at the agency and is currently  developing a “versatility index” to measure how well employees may  perform a variety of tasks at the agency.
Changes in the structure and responsibilities of SEC have contributed to  some changes in workforce processes. SEC executives said that in an effort  to more proactively regulate the securities industry, they are taking  initiatives to identify emerging risks in securities markets and are working  on creating more coordination among divisions. For example, the recently  created Office of Risk Assessment (ORA) works with various divisions and  offices to develop methodologies to address identified risk. ORA consults  with risk-assessment committees that consist of staff from various  divisions. Committees currently exist for the following areas: (1) full  disclosure, (2) investment management and regulation, and (3) SEC  infrastructure. ORA also uses software in coordination with divisions to  identify how emerging risks have affected SEC’s workload and  responsibilities. However, according to SEC management, ORA is not  directly involved in workforce planning efforts at the agency.
Various divisions have also modified work processes to respond to  changing responsibilities and workload and identified skill gaps. For  example, SEC’s Enforcement staff attorneys were responsible for  collecting disgorgement, as well as investigating potential violations of  securities law. Partly in response to the new Fair Fund provision under  Sarbanes-Oxley, the Division of Enforcement hired attorneys dedicated to  collections, as well as case management specialists, to assist with  maximizing collections and addressing competing priorities and the  growing workload of the Enforcement attorneys. Enforcement also stated  that it is working with technology staff to improve systems, so that  collection information is tracked in one system rather than captured in  multiple systems. Furthermore, the Division of Investment Management is  now conducting integrated disclosure reviews and participates in  cross-divisional task forces, such as the Investor Education and Soft Dollar  task forces, to leverage skills across divisions. In addition, as a result of  using a risk-based approach to more proactively identify and address  compliance risks, OCIE recently gained the approval of the HCRB to create  20 additional staff positions, to be filled by individuals with data analysis  skills to collect surveillance data. SEC is also now responsible for  overseeing investment firms that want to become a consolidated  supervised entity (CSE). Because such oversight requires a combination  of specialized technical and auditing skills currently not found within the  agency, OCIE recently created a new unit to oversee CSEs.
section_title: Principle 3: SEC Has Developed Some Human Capital Strategies to Address Gaps, but It Is Too Early to Assess Results
paragraphs: SEC is using a variety of methods to address skill gaps and improve  employee benefits and work life. For example, SEC uses its student loan  repayment (SLR) program and teleworking opportunities to attract and  retain employees. In addition, SEC is linking its human capital functions  and focusing on developing skills and competencies to use for hiring,  performance management, training, and succession planning. SEC also has  been developing SEC University to expand employee training opportunities  and minimize critical skills gaps. Recently, OHR has used hiring and  retention data, focus groups, and surveys to assess the use of many of  SEC’s work-life programs. However, because many of the human capital  strategies have only recently been implemented, it is too soon to assess the  effectiveness of these strategies.
subsections: section_title: SEC Is Building More Comprehensive Human Capital Strategies to Recruit and Retain Employees and Address Skill Gaps
paragraphs: In our prior work, we have found that much of the authority that allows  agencies to tailor human capital strategies to their needs is already  available under current laws and regulations. Therefore, in setting goals for  their human capital programs and developing tailored workforce planning  strategies to achieve these goals, agencies should identify and use all  appropriate administrative authorities to build and maintain an effective  workforce for the future.
As mentioned earlier, SEC has been developing integrated human capital  functions to better recruit and retain the right staff with the right expertise  to help achieve its strategic goals and objectives. SEC indicated that  selection, or hiring, is a critical tool to meet its changing needs, particularly  following the increase in SEC’s responsibilities under Sarbanes-Oxley. SEC  made several changes to its hiring process to fill accountant positions  within Corporation Finance, which had been a challenging task for the  agency partly due to the slowness of the hiring process and the reluctance  of some candidates to relocate to Washington, D.C. First, SEC retained an  executive recruiting firm to carry out some of the recruitment. Second, to  expedite the hiring process, OHR introduced an automated hiring system to  accelerate the review of applications by automatically disseminating  information on job candidates to Corporation Finance. Third, to  accommodate qualified applicants who might not want to relocate to SEC  headquarters, Corporation Finance instituted a “virtual workforce” pilot  where several of its employees can work from an alternate site and  physically report to an SEC location on a limited basis. OHR staff indicated  that the pilot phase of the program would be useful in helping managers  learn how to manage off-site employees. However, it is unclear to what  extent the program will be expanded, or whether it will be continued.  Finally, OHR said that category rating will be introduced to the agency  during 2006.
In addition to exploring ways to improve the hiring processes, SEC also has  tried to more strategically allocate skills and experience when creating or  filling existing vacancies. For example, recognizing the need for more  administrative support for its collection program, the Division of  Enforcement recently filled a number of positions with paralegals and  administrative personnel instead of attorneys. SEC also recognized that as  an agency, it would benefit from the knowledge and skills possessed by  individuals with business degrees. Therefore, as mentioned earlier, SEC  developed a Summer Honors Business Program in 2001 to attract future  MBA graduates to SEC. In September 2005, OHR implemented a 2-year  program where MBA graduates rotate through various SEC divisions as  associates before being permanently placed in a division.
To increase employee retention, SEC has increased the use of its SLR   program and telework arrangements. SEC began using the SLR program in  the last half of fiscal year 2003 and reported making 384 student loan  repayments totaling approximately $3.3 million in fiscal year 2004. This is  an increase from fiscal year 2003, in which 257 employees received  payments. To receive loan repayment, enrollees agree to work for an  additional 3 years at SEC. According to SEC officials, few employees leave  before the 3-year employment agreement terminates. SEC is also  expanding the use of telework arrangements for its employees, with  approximately 20 percent of its workforce now participating in the  program. As of August 2005, SEC reported having 813 approved  teleworking employees, an increase from March 2005, when it had 648  employees approved for telework. SEC also found that strategic use of  recruitment and retention bonuses for employees with qualifications  critical to SEC’s mission has been an effective way to achieve its hiring  goals and an efficient use of funding.
In addition, SEC has been expanding its training programs to eliminate  gaps and maximize employee contributions. Training efforts at SEC  previously focused on specific division and office needs, and division  managers told us they have training units within their divisions. With the  development of SEC University, OHR hopes to bring about a cultural  change within the agency and encourage cross-divisional and agencywide  training. Although OHR plans to consolidate various training programs at  SEC through the university, some divisions indicated that they found  in-house training on technical issues performed by division staff critical to  meeting agency goals and felt such training should remain outside the main  training center at SEC. To date, OHR has taken no action to discontinue  training offered within divisions. In September 2005, SEC placed a new  position announcement to hire a person from within SEC who would be  devoted exclusively to directing SEC University. OHR officials expect this  position to be filled by the end of November 2005. As part of the current  SEC University plan, OHR is assessing employee training interests and  relevancy to programmatic functions, and is exploring establishing training  partnerships with government, public and private entities, and five or six  law and business schools. According to OHR, SEC University also plans to  provide supervisory training and help the agency maintain quality  leadership, which will be particularly important because 14 percent of SEC  managers will be eligible to retire by the end of 2005.
In addition to developing a curriculum for SEC University, OHR is also  working to automate and centralize employees’ training and skills  information. OHR has proposed that SEC develop a learning management  system to centrally track employees’ work experiences and training, as  well as provide a forum to share work experiences among employees.  OHR has produced a project plan outlining the business needs for the  learning management system, including key deliverable dates for  implementation and cost estimates.
section_title: SEC Has Various Methods in Place to Measure the Success of Its Human Capital Approach, but Many of These Assessments Are Not Yet Complete
paragraphs: Our previous agencywide work suggests that agencies could benefit by  assessing key aspects of their human capital approach to identify possible  obstacles and opportunities that may occur in meeting critical workforce  needs. Specifically, an agency can use HCAAF to create indicators to  measure the effectiveness of human capital approaches.
According to OHR officials, the office has used various methods to assess  recruitment, retention, and work-life issues at SEC, including (1) focus  group research, (2) employee satisfaction surveys on human capital  flexibilities, and (3) entrance and exit interviews. OHR has conducted  focus groups of employees on recruitment effectiveness, as well as  retention and job satisfaction. According to OHR officials, it has used the  findings from its research studies and OPM’s Federal Human Capital Survey in developing SEC’s strategic human capital plan. For example,  focus group results showed that SEC employees were most concerned  about being recognized for good performance and agency procedures for  dealing with poor performance. Consequently, OHR determined that  performance management and training needed to be enhanced. OHR also  determined that SEC needed to integrate the four human capital functions  of selection (hiring), performance management, training, and succession  planning. Specifically, OHR plans to enhance its performance management  by using individual development plans for employees that include more  comprehensive and targeted training and development opportunities.
As indicated above, SEC is using results from various surveys and informal  assessments to improve human capital management. However, many of its  human capital strategies are new or under development, and it is too soon  to gauge their effectiveness. As part of developing and implementing its  human capital plan, SEC plans to use a balanced scorecard to more  comprehensively assess the effectiveness of its human capital strategies  and workforce planning efforts. As of November 2005, OHR has worked  with a contractor to develop a list of indicators that SEC could use to  measure the progress the agency has made on its human capital strategies.
section_title: Principle 4: SEC Is Addressing Administrative, Educational, and Other Requirements Important to Supporting Workforce Strategies
paragraphs: Overall, SEC has been addressing many of the administrative, educational,  and other requirements to support human capital programs and workforce  strategies, including (1) educating managers and employees on the use of  flexibilities, (2) streamlining and improving administrative processes, and  (3) building transparency and accountability into its human capital system.  To this end, SEC requires some training for supervisors and new employees  on the use of human capital flexibilities. OHR told us that it informally  reviews its administrative processes and has been working to improve the  administration of some human capital flexibilities. In addition, we found  that SEC has promoted transparency and accountability in the use of these  flexibilities.
subsections: section_title: SEC Requires Some Training for Supervisors and New Employees on Flexibilities
paragraphs: As discussed in prior GAO work, managers and supervisors can be much  more effective in using human capital strategies that involve flexibilities if  they are properly trained to identify when they can be used and how they  can be administered. In addition, to avoid confusion and  misunderstandings, it is also important to educate employees about how  the agency uses human capital flexibilities and what rights employees have  under policies and procedures related to human capital.
According to OHR officials, supervisors are usually required to attend  training on policies and practices related to newly implemented human  capital programs. For example, SEC has focused on strengthening its  telework program. In the spring of 2005, the agency hired a consultant to  develop and deliver a comprehensive training program designed to better  equip supervisors to manage remote workers. SEC management said that  while the training was not mandatory, supervisors were strongly  encouraged to participate. In addition, management from several divisions  confirmed that all of their supervisors and managers had been briefed on  available human capital flexibilities at SEC, especially alternative work  schedules and telework.
SEC also has disseminated information on human capital programs to new  and current employees. New employees receive such information at a  required orientation session. OHR officials told us that current employees  can receive information concerning human capital flexibilities through  administrative notices, technical training, daily consultation with OHR  staff, and postings of human capital information on the agency’s intranet.  SEC has also been finalizing an SEC employee handbook that provides  information on human capital flexibilities.
section_title: SEC Has Improved Administrative Processes That Support the Use of Some Flexibilities
paragraphs: As suggested in our prior work, it is important that agency officials look for  instances in which administrative processes can be re-engineered to more  effectively administer flexibilities. OHR officials told us that while they do  not conduct a formal evaluation of the effectiveness of existing  administrative processes, they do solicit feedback from divisions and  agencies and adjust processes to meet their needs. For example, to  expedite the hiring process for a division that had a substantial number of  positions to fill, SEC delegated authority to grant recruitment bonuses to  the division’s director, allowing the division to more quickly and readily  recruit highly desirable candidates. In another example, OHR officials told  us they plan to develop and implement recommendations based on SEC  managers’ suggestions provided in our 2005 study of SLR programs implemented by various federal agencies. Specifically, we recommended  that SEC build on current efforts to measure the impact of the repayment  program by determining now what indicators SEC will use to track  program success, what baseline SEC will use to measure resulting program  changes, what data SEC needs to collect, and whether SEC could use  periodic surveys to track employee attitudes about the program.
Additionally, OHR officials said that their office has surveyed managers and  employees to gauge the ease of administering policies and procedures.  Similarly, OHR has asked employees hired using flexibilities (such as  recruitment bonuses) and employees who participate in the telework and  student loan repayment programs for suggestions to improve  administrative processes. According to OHR officials, OHR plans to  continue to refine collection and analysis of this information as the office  develops and implements the balanced scorecard.
section_title: SEC Has Processes to Promote Transparency and Accountability in the Use of Flexibilities
paragraphs: In our prior agencywide work, we found that clear guidelines for using  specific flexibilities and holding managers and supervisors accountable for  their fair and effective use are essential for successfully implementing  workforce strategies. SEC has some processes in place to promote  transparency and accountability in the use of flexibilities. According to  SEC management, key stakeholders—OHR staff, Employee-Labor  Relations (ELR) specialists, managers, and senior management  officials—have assisted in developing guidelines for using flexibilities. In  addition, OHR officials told us that the National Treasury Employees  Union, the labor organization that represents SEC employees, is involved in  all matters affecting employees in the union.
In using human capital flexibilities, SEC generally requires employees to  prepare and submit a written request that must then receive managerial  approval and, in some cases, input from ELR as well as OHR. To help  ensure accountability in the use of flexibilities, employees’ requests go  through more than one level for approval or disapproval. For example, to  telework, employees first submit a written request to their immediate  supervisor, who then forwards it to a second-level supervisor for final  approval or disapproval. If the request is denied, the second-level  supervisor must document why. If there is a “close call” in approving or  denying a telework request, ELR or OHR staff may be consulted. SEC  officials told us that ELR usually gets involved when a request is denied.  According to SEC officials, the agency requires written justification for  denials of employee application for most types of flexibilities, not just  telework.
Outside agencies also play a role in ensuring accountability in SEC’s use of  human capital policies, programs, and options. SEC’s use of flexibilities is  subject to review by OPM, OMB, the Merit Systems Protection Board,  Congress, and us. Specifically, OPM monitors SEC’s use of direct hire  authority, as well as student loan repayment. Moreover, according to SEC,  unionized employees can file a grievance under the provisions of the  collective bargaining agreement, and there is an administrative grievance  process in place for nonunionized employees.
section_title: Principle 5: SEC Is Developing Additional Human Capital Measures and a Formal Process by Which to Link the Achievement of Its Human Capital and Strategic Goals
paragraphs: Our prior agencywide work found that agencies should develop  appropriate performance measures to link human capital measures with  strategic goals. Performance measures, appropriately designed, can be  used to gauge success and evaluate the contribution of human capital  activities toward achieving programmatic goals. SEC management said that  SEC has informally monitored the agency’s progress toward achieving  some human capital goals using a few performance measures. SEC mainly  has monitored hiring, attrition, and retention rates. These indicators, along  with other indicators compiled by the divisions and offices to measure  performance related to programmatic goals, compose SEC’s management  “dashboards.” The “dashboards” are indicators compiled monthly by the  Executive Director’s office and are designed to present regular snapshots  of the divisions’ and offices’ progress in meeting budget, staffing, and  performance objectives. One division official said that the turnover rates  and measures of supervisors’ tenure included in the dashboards were  particularly useful. Division managers said they consulted with OHR when  the human capital indicators identified potential issues. For example, a  division manager we interviewed noted that one human capital measure  indicated few women in the division were applying for branch chief jobs,  and the division has been working with OHR to determine the reasons why.
Although SEC uses some human capital indicators, OHR officials  acknowledged that they needed to develop additional measures because  their current indicators capture output measures for overall human capital  strategies, such as turnover, but do not directly link to specific human  capital initiatives. OHR officials explained that the balanced scorecard,  discussed earlier, will link human capital initiatives to outcomes.  Identifying performance measures and discussing how the agency will use  them to evaluate the human capital strategies—before it starts to  implement the strategies—can help agency officials think through the  scope, timing, and possible barriers to evaluating the workforce plan.  However, as we have found in prior work, developing meaningful  outcome-oriented performance measures for both human capital and  programmatic goals, and collecting performance data to measure  achievement of these goals are major challenges for many federal agencies.
Further, one SEC division official said it was particularly difficult to  develop performance measures in areas dealing with the enforcement of  laws and regulations. For example, in 2002 we reported that SEC strategic  and annual performance plans did not clearly indicate the priority that  disgorgement collections should receive in relation to SEC’s other goals  and did not include collection-related performance measures. In our 2005  report, we found that SEC needed to make further progress in establishing  performance measures to better track the effectiveness of its collection  efforts, and track both receivers’ fees and the amounts distributed to  harmed investors.
Finally, SEC said that evaluations of the linkage between human capital  and strategic goals currently take place informally during various meetings,  including HCRB meetings, and the results of these evaluations are  addressed through periodic adjustments made to deal with short-term  problems. More specifically, SEC management said that HCRB members  used the management “dashboards” to help make staffing decisions, but  noted that the dashboards were not tightly linked to the HCRB process.  However, OHR anticipates that the implementation of the balanced  scorecard and its indicators will strengthen and formalize the linkage  between human capital activities and strategic goals.
section_title: Observations
paragraphs: With the enhancements being made to its human capital management, SEC  has begun to use a planning and management approach that ensures  ongoing attention to human capital issues. SEC has been making changes  to ensure management focuses not only on traditional personnel functions,  but also on the broader issues of human capital management. Further,  senior managers are beginning to focus on strategic issues in decision  making. In particular, SEC has undertaken a number of initiatives that  demonstrate its commitment to human capital planning. When enacted,  these initiatives should begin to help address the agency’s human capital  challenges, some of which are long-standing and cannot be quickly or  easily overcome, such as succession planning. To ensure the success of  SEC’s strategic goals, it is critical that SEC complete its human capital  initiatives—in particular, its strategic human capital plan. A  well-documented plan is an essential tool that can serve as a guide for SEC  in workforce management and direct an effective, ongoing  communications strategy that genuinely engages employees and other  stakeholders in the creation and administration of human capital programs.
Based on our discussions with OHR, SEC is in the process of creating a  human capital plan. SEC’s finalized human capital plan is to include many  of the best practices outlined in our five principles for workforce planning.  While we are encouraged by SEC’s progress, three areas may warrant  management attention as SEC continues to develop its human capital plan:  conducting outreach with congressional stakeholders and the securities  industry on strategic workforce planning, obtaining employee feedback on  human capital strategies before they are implemented, and taking steps to  better identify, understand, and document existing skills among staff.  Obtaining feedback from congressional stakeholders and the securities  industry could enhance SEC’s ability to gain feedback from these important  groups. Further, employee input prior to implementation may increase  SEC’s ability to determine whether its human capital strategies are  understood and supported by the staff. In addition, by formally identifying  and documenting existing skills among staff, SEC may more accurately  estimate workforce needs and skill gaps, which is information that helps  agencies determine appropriate human capital strategies. Finally, we want  to stress the importance of ensuring that the plan formally links human  capital activities with the goals in SEC’s strategic plan. This linkage will  help SEC to use its workforce to increase the agency’s operational  effectiveness and responsiveness.
section_title: Agency Comments and Our Evaluation
paragraphs: SEC, in written comments on a draft of this report that are reprinted in  appendix II, stated that it agreed with our findings. SEC commented that its  strategic human capital plan will soon be completed and that it will provide  the long-term infrastructure to ensure that the progress SEC has made in  human capital initiatives are institutionalized. SEC stated that its strategic  human capital plan will include a rigorous strategic planning system that,  once implemented, will address our concerns regarding the alignment of  SEC’s human capital and strategic goals. SEC also commented that the  work being done on integrating its human capital systems will more  formally capture SEC’s institutional knowledge, which was another  concern cited in the report.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time we will provide copies to the Chairman and  Ranking Minority Member of the House Committee on Government  Reform; the Chairman and Ranking Minority Member of the House  Committee on Financial Services; the Chairman and Ranking Minority  Member of the Senate Committee on Homeland Security and Governmental  Affairs; and the Chairman and Ranking Minority Member of the Senate  Committee on Banking, Housing and Urban Affairs. We will also send  copies to the Chairman of the SEC and other interested parties, and we 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 or your staff have any questions about this report, please contact me  at (202) 512-8678 or williamso@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix III.
section_title: Scope and Methodology
paragraphs: In order to describe the progress the Securities and Exchange Commission  (SEC) made in developing a strategic human capital plan, we gathered and  analyzed data from a variety of sources. We reviewed GAO’s recent prior  work on human capital issues at SEC. We also obtained information on  SEC’s operations and strategic planning efforts, recent budget requests,  human capital plans and strategies, workforce data, milestones and  timelines, and performance measures. To collect data not identified  through prior work, we contacted and conducted interviews with SEC, the  Office of Management and Budget (OMB), and Office of Personnel  Management (OPM) to obtain relevant information.
To evaluate how SEC was developing its long-term strategies for acquiring,  developing, and retaining staff to achieve the agency’s mission, we used the  key principles for effective strategic workforce planning developed in  Human Capital: Key Principles for Effective Strategic Workforce  Planning as our criteria for identifying workforce planning practices that  SEC planned or had under way. Using these five principles, we also  identified related tasks associated with each principle to provide more  specific examples of how each principle might be implemented.
Additionally, we met with SEC, OPM, and OMB to discuss and collect  information on the agency’s former and current practices and future plans  to address human capital issues. After these initial meetings, we held  follow-up meetings with SEC’s Office of Human Resources and other key  offices and divisions to gather relevant information.
We conducted our work in Washington, D.C., from April 2005 through  November 2005 in accordance with generally accepted government  auditing standards.
section_title: Comments from the Securities and Exchange Commission
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Karen Tremba, Assistant Director;  Allison Abrams; Marianne Anderson; William R. Chatlos; Kenneth Scott  Derrick; Marc Molino; and Barbara Roesmann made key contributions to  this report.