Pension Benefit Guaranty Corporation: A More Strategic Approach Could Improve Human Capital Management
Published: 2008-06-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Pension Benefit Guaranty Corporation (PBGC) employs over 800 federal employees and uses some 1,500 private sector employees to insure the pensions of millions of private sector workers and retirees in certain employer-sponsored pension plans. In recent years, PBGC's projected financial liabilities and workloads have increased greatly due to a large number of pension plan terminations. Given this, it is important that PBGC remain well positioned to fulfill its promise to those retirees who depend on it. GAO was asked to report on (1) PBGC's recent experience in hiring and retaining key staff and how it compares to other federal agencies and (2) the actions PBGC has taken to strategically hire and retain key staff and what additional steps, if any, can be taken. To do this, we analyzed PBGC's workforce by using the Office of Personnel Management's (OPM) Central Personnel Data File to identify data and compared those data to data from other federal agencies. We also interviewed officials from selected agencies, including PBGC, OPM, and the Department of Labor.
section_title: What GAO Found
paragraphs: From fiscal years2000to 2007, PBGC was generally able to hire staff in its key occupations--such as accountants, actuaries, and attorneys--and retain them at rates similar to those of the rest of the federal government. However, PBGC has had some difficulty with hiring and retaining staff for specific occupations and positions, including executives and senior financial analysts. Despite the general ability to hire and retain key staff, data also suggest that PBGC may be faced with workforce challenges; these include managing a workforce with relatively few years of federal experience, the prospect of nearly one-quarter of its key staff retiring within the next 4 years, and difficulty hiring and retaining key staff in the future due to PBGC's existing compensation structure, which offers salaries lower than some federal agencies that employ similar staff, such as the Federal Deposit Insurance Corporation. While PBGC is making progress in its human capital management approachby taking steps to improve its human capital planning and practices--such as drafting a succession management plan--the corporation lacks a formal, comprehensive human capital plan that integrates several critical components such as workforce planning. Also, even though it collects workforce data, PBGC has not routinely and systematically targeted and analyzed all necessary workforce data--such as attrition rates, occupational skills mix, and trends--to understand its current and future workforce needs. Instead, officials stated that they generally reacted to management personnel requests, and developed human capital data as needed. In addition to limited planning and data analysis, PBGC has not fully explored all available compensation options under its existing statutory authority, even though officials say and data suggest that the corporation's current compensation structure may limit its ability to hire and retain certain key staff.

section_title: Letter
paragraphs: The Pension Benefit Guaranty Corporation (PBGC) insures the pensions  of 44 million private sector workers and retirees in over 30,000 employer- sponsored pension plans. Established with the passage of the Employee  Retirement Income Security Act of 1974 (ERISA), PBGC employs over 800  federal employees and utilizes the services of some 1,500 private sector  employees working for the corporation under various contracts. These  individuals support, in part, the corporation’s timely and uninterrupted  payment of pension benefits to thousands of Americans. PBGC’s financial  portfolio is one of the largest of any federal government corporation—in  September 2007, its assets totaled almost $70 billion. Since fiscal year  2000, the number of participants to whom PBGC has paid benefits has  more than doubled and PBGC’s projected financial liabilities have  increased significantly due to a large number of companies terminating  their pension plans.
Although PBGC has taken steps to address its projected financial  liabilities, the accumulated large and growing deficits resulting from the  termination of several large plans in recent years continue to threaten  PBGC’s solvency. In prior GAO work, we have highlighted how these  losses may have significant implications for retirement security and the  federal budget. In fact, in 2003, we added PBGC’s single-employer pension  insurance program—its largest insurance program—to our high-risk list, a  group of federal programs that need urgent attention and transformation.  PBGC’s single-employer insurance program remains on the high-risk list  today. As of September 30, 2007, PBGC projected an accumulated deficit  of $14.1 billion for both its single-employer and multiemployer insurance  programs.
Given PBGC’s liabilities and increased responsibilities, it is important that  PBGC remain well positioned to fulfill its promise to those retirees who  depend on it. Governmentwide, many federal agencies have lacked a  strategic approach that integrates their human capital efforts with their  mission and program goals; therefore, we have also placed the area of  strategic human capital management on our high-risk list. On the basis of  these concerns, we were asked to review PBGC’s human capital approach  to recruiting and retaining its federal workforce. Specifically, this report  assesses (1) PBGC’s recent experience in hiring and retaining key staff and  how it compares to that of other federal agencies and (2) what actions  PBGC has taken to strategically hire and retain key staff and what  additional steps, if any, can be taken.
To determine PBGC’s recent experience in hiring and retaining staff, we  consulted with PBGC executives and human capital officials to identify  the key occupations critical to conducting its organizational mission. On  the basis of these discussions and in conjunction with a 2002 PBGC  workforce planning team report, it was agreed with PBGC officials that we  would focus on seven occupations—accountants, actuaries, attorneys,  auditors, financial analysts, information technology specialists, and  pension law specialists. To identify trends in PBGC’s hiring, we analyzed  data from the Office of Personnel Management’s Central Personnel Data  File (CPDF) on PBGC’s key occupations from fiscal year 2000 to 2007 and  compared that information with that of the rest of the federal government  during the same time period. We determined that the CPDF data were  sufficiently reliable for the purposes of this report. To identify what  actions PBGC has taken to strategically hire and retain staff in key  occupations, we reviewed previous GAO work on strategic human capital  management, PBGC’s insurance programs, and the corporation’s  management challenges.
We also reviewed information on PBGC’s organizational objectives and  succession planning goals from PBGC documents, such as annual reports  and workforce and succession documents. For both objectives, we  interviewed officials from PBGC, the Department of Labor (DOL),  representatives of PBGC’s board of directors, as well as officials from  Office of Personnel Management (OPM). As part of our work, we  coordinated with OPM on a concurrent review of PBGC human capital  operations. At the time of our review, OPM officials confirmed they were  finalizing a PBGC Human Resource Operations Evaluation. While OPM’s  review covered certain aspects of strategic human capital management,  OPM’s review also focused on specific human capital programs, such as  competitive examining. OPM officials stated they would be presenting  findings and working with PBGC on corrective measures to improve the  corporation’s human capital program.
We conducted this performance audit from July 2007 to June 2008 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 audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives. Appendix I discusses our scope and  methodology in further detail.
subsections: section_title: Background
paragraphs: Congress passed ERISA to protect the interests of participants and  beneficiaries of private sector employee benefit plans. Before the  enactment of ERISA, few rules governed the funding of defined benefit  pension plans, and participants had no guarantee that they would receive  promised benefits. Title IV of ERISA created PBGC to insure private sector  plan participants’ benefits. PBGC receives no funds from general tax  revenues. Instead, operations are financed by insurance premiums set by  Congress and paid by sponsors of defined benefit plans, investment  income, assets from pension plans trusteed by PBGC, and recoveries from  the companies formerly responsible for the plans.
Since its inception, PBGC’s workloads have increased significantly. In  fiscal year 1975, PBGC administered three pension plans covering a total  of 400 participants. By fiscal year 2007, PBGC administered almost 3,800  pension plans, incurring responsibility for more than 1.3 million  participants. To service this increased workload, PBGC employed 847  federal employees in fiscal year 2007 working across several divisions. Of  the 847, PBGC’s key staff totaled 486, of which approximately 10 percent  were attorneys, 7.2 percent were accountants, and 3.4 percent were  financial analysts (see table 1).
PBGC also relies heavily on the services of a variety of private sector  contractors to assist in its mission. As of June 2007, these contractors  accounted for 64 percent of PBGC’s total workforce. In fiscal year 2007,  PBGC reportedly spent $297 million (75 percent) of its $398.3 million  operating budget for contracting and related expenses. In addition to  operating PBGC’s 10 field benefit administration offices throughout the  country, private sector contractors supplement federal staff at the  corporation’s headquarters and a call center facility.
PBGC, like many executive branch agencies, is subject to the General  Schedule and the federal pay system. In contrast, certain federal financial  regulatory agencies, including the Federal Deposit Insurance Corporation  (FDIC), the Office of the Comptroller of the Currency (OCC), the National  Credit Union Administration (NCUA), and the Securities and Exchange  Commission (SEC), have the flexibility to establish their own  compensation programs outside the various statutory provisions on  classification and pay for executive branch agencies. (See app. II for a list  and description of the federal financial regulatory agencies.) These  financial regulatory agencies are generally required to seek to maintain  pay comparability with each other.
In June 2007, we examined the actions these agencies have taken to assess  and implement comparability in pay and benefits with each other. While  PBGC has unique responsibilities pertaining to insuring certain employee  defined benefit pensions, some of these federal financial regulators  highlighted under the Federal Institutions Reform, Recovery, and  Enforcement Act of 1989 (FIRREA), such as FDIC and NCUA, also have  insurance programs and funds. Further, PBGC employs occupations not  only similar to those of the FIRREA agencies, but also to those of SEC, the  Office of Federal Housing Enterprise Oversight (OFHEO), and the Federal  Reserve Board (FRB).
While human capital authorities and flexibilities vary governmentwide, we  have noted in our prior work that there are two key principles that remain  central to the human capital idea. First, people are assets whose value can  be enhanced through investment, and second, an organization’s human  capital policies must be aligned to support the organization’s “shared  vision”—that is, the mission, vision for the future, core values, goals and  objectives, and strategies by which the organization has defined its  direction and expectations for itself and its people. As noted in the report,  all human capital policies and practices should be designed, implemented,  and assessed by the standard of how well they help the organization  pursue its shared vision.
We have also reported that strategic workforce planning generally  addresses the alignment of an organization’s human capital program with  its current and emerging mission and programmatic goals and the  development of long-term strategies for acquiring, developing, motivating,  and retaining staff to achieve programmatic goals. There are a variety of  models of how federal agencies can conduct workforce planning, but  certain key principles are generally common to such planning:  involving top management, employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan;    determining skills and competencies needed in the future workforce to  meet the organization’s goals and identifying gaps in skills and  competencies that an organization needs to address;    selecting and implementing human capital strategies that are targeted  toward addressing these gaps and issues;    building the capacity needed to address administrative, educational,  and other requirements important to support workforce planning  strategies; and    evaluating the success of the human capital strategies.
According to our strategic human capital management model, self- assessment is the starting point for creating “human capital  organizations”—agencies that focus on valuing employees and aligning  “people policies” to support organizational performance goals. Part of the  impetus for creating human capital organizations comes from the  Government Performance and Results Act of 1993, but agencies  themselves must follow through on tailoring their human capital systems  to their specific missions, visions for the future, core values, objectives,  and strategies. To strategically manage an agency’s human capital  approach, there are certain planning documents an agency can utilize:    Strategic mission plan: An overall agency strategic plan includes a clear  and coherent shared vision of an agency’s mission, goals, values, and  strategies that is clearly and consistently communicated and reinforced to  all employees.
Human capital strategic plan: A coherent human capital strategic plan,  integrated with the agency’s overall strategic planning, outlines a  framework of human capital policies, programs, and practices specifically  designed to steer the agency toward achieving its shared vision.
Succession plan: A formal succession plan includes a review of the  agency’s current and emerging leadership needs in light of its strategic and  program planning, identifies sources of executive talent both within and  outside the agency, and includes planned development opportunities,  learning experiences, and feedback for executive candidates.
Workforce plan: A workforce planning document, linked to the agency’s  strategic and program planning efforts, identifies its current and future  human capital needs, including the size of the workforce; its deployment  across the organization; and the knowledge, skills, and abilities needed for  the agency to pursue its shared vision.
Appendix III discusses elements of GAO’s human capital framework in  further detail.
section_title: PBGC Has Generally Been Able To Hire and Retain Key Staff, but May Face Workforce and Compensation Challenges in the Future
paragraphs: From fiscal years 2000 to 2007, PBGC was generally able to hire and retain  staff in its key occupations, but the corporation has had some difficulty  hiring and retaining financial analysts and certain other staff. Despite  difficulty in these areas, PBGC’s overall ability to retain staff in key  occupations has been similar to that of the rest of the federal government.  However, our analysis suggests that PBGC may face several workforce  and compensation challenges in the future—such as (1) a workforce with  relatively fewer years of federal experience, (2) the possible retirement of  up to a quarter of its workforce within the next 4 years, and (3) the  potential difficulty of hiring and retaining staff due to the corporation’s  existing compensation structure, which offers salaries lower than those of  some other executive branch agencies that employ similar staff.
subsections: section_title: PBGC Has Generally Been Able to Hire Staff for Key Occupations, but Has Experienced Difficulties in Filling Certain Positions
paragraphs: From fiscal years 2000 to 2007, PBGC was generally able to hire staff for  occupations it views as key to its organizational mission—accountants,  actuaries, attorneys, auditors, financial analysts, information technology  specialists, and pension law specialists. Our analysis of OPM’s CPDF  found that from fiscal years 2000 to 2007, PBGC hired 289 employees in  these key occupations, compared to 203 employees in those occupations  who left PBGC. Of these, PBGC hired more people than it lost in each of  the key occupations except for attorneys and pension law specialists.
Additionally, PBGC officials stated that data indicated that it was able to  fill 65 percent of its vacancies in fiscal year 2007 across all occupations  within 45 days of the close of the announcement of the job vacancy,  exceeding OPM’s government standard of 60 percent for that year.  However, PBGC officials emphasized that the 45-day hiring model, which  includes data across all occupations, can hide the corporation’s inability to  fill certain key positions.
PBGC officials acknowledged that the corporation was generally able to  hire people for most of its key occupations, but they stated they have had  difficulty filling certain positions like the chief financial officer, senior  financial analyst, systems accountant, and procurement attorney. To  address this difficulty, PBGC officials stated that the corporation has left  some positions unfilled and on occasion has hired individuals who  required in-house training.
section_title: PBGC’s Overall Attrition Rate Is Similar to Those of Other Federal Agencies, but Rates Differ for Certain Key Occupations
paragraphs: From fiscal year 2000 to 2007, PBGC retained staff at rates similar to the  rest of the federal government for the corporation’s key occupations.  PBGC’s overall average attrition rate was about 6 percent for these  occupations, roughly equal to that of other federal agencies over that  period (see fig. 1). For example, for occupations like attorneys and  information technology specialists, the attrition rates were similar to those  of other federal executive branch agencies. Likewise, the attrition rates for  PBGC’s executives were similar to those of other federal executive branch  agencies. Our analysis also found that PBGC’s overall attrition experience  was comparable to those at the federal financial regulatory agencies— such as FDIC and SEC. However, attrition rates did differ for certain key  occupations. For example, PBGC’s attrition rates for financial analysts  were greater than those of other agencies, with an average attrition rate of  8.4 percent, compared to 3.7 percent in other federal executive branch  agencies governmentwide, and 5.5 percent for the financial regulators.
Further, over the last 3 years, PBGC’s and other executive branch  agencies’ overall attrition rates were higher than their 8-year averages,  which were nearly identical, as shown in figure 2, while the rates for the  federal regulators collectively dipped below their 8-year average in 2007  (see fig. 2).
PBGC’s attrition rates for staff hired from fiscal years 2000 to 2007 were  also similar to rates at other federal executive branch agencies. For the  seven key occupations collectively, a total of 10.8 percent of key PBGC  staff hired from fiscal years 2000 to 2007 left during their first 2 years of  employment, roughly equal to staff in these positions at other federal  executive branch agencies. However, at PBGC, only 60 percent of financial  analysts remained; a rate lower than for the six other key occupations  hired during these 8 years (see fig. 3).
In reviewing staff separations from the corporation, we found that  departing PBGC staff in key occupations were more likely to resign from  federal employment—for example, seeking employment outside the  federal government—than their counterparts in other federal agencies (see  fig. 4). We could not determine where employees that resigned from the  federal government moved to because CPDF does not include information  on employment outside the federal government. However, PBGC officials  indicated that while they do not systematically track the employment of all  their employees after separation, it was common for employees to find  employment with private sector entities after leaving PBGC.
Our analysis also found that during the same time period, key staff  departing from PBGC were slightly more likely than staff from other  agencies to transfer to another federal agency (see fig. 4). However, no  identifiable pattern existed among the specific federal agencies to which  PBGC staff transferred. In fact, from fiscal year 2000 to 2007, CPDF data  showed that 47 PBGC staff in key occupations transferred to 23 different  federal agencies and only one of those agencies—the Department of  Labor—employed more than 5 of these staff. On the basis of the results of  PBGC’s voluntary exit surveys and additional information collected by  PBGC officials, employees frequently cited greater pay as a reason why  they left PBGC for the private sector or another federal agency.
Further differences existed in PBGC’s seven key occupations with respect  to whether departing staff retired, transferred to another agency, or  otherwise resigned. According to CPDF data, resignations accounted for  83 percent of separations for financial analysts, the highest rate of any key  occupation, while resignations accounted for just 13 percent of auditors’  separations. Other federal agencies also experienced varied rates across  occupations with respect to types of separations (see fig. 5).
section_title: PBGC May Face Workforce Challenges Regarding Key Staff Experience, Retirement Eligibility, and Compensation Limitations
paragraphs: Despite the corporation’s overall ability to hire and retain key staff, our  analysis of CPDF data suggests that PBGC may face several workforce  challenges in the future, such as (1) a staff with relatively fewer years of  federal experience, (2) the possibility of losing a significant number of its  key staff due to retirement eligibility, and (3) potential difficulties hiring  and retaining certain staff because of PBGC’s compensation.
First, in fiscal year 2007, PBGC’s key staff had relatively fewer years of  federal experience than their counterparts in other federal executive  branch agencies. Specifically, according to CPDF data, overall key PBGC  staff had an average of 12.8 years of federal experience, while staff in  similar positions at the other federal executive branch agencies had 16.8  years of federal experience. Additionally, we found that while 25 percent  of PBGC’s accountants had less than 3 years of experience, only 10  percent of accountants in other executive branch agencies had similar  years of experience. In fact, for every key occupation except pension law  specialist, PBGC had a greater percentage of staff with less than 3 years of  experience compared to other agencies, though in some cases the  differences were slight (see table 2). Similarly, PBGC’s workforce data  corroborated this finding. Our analysis of the corporation’s tenure data  indicated that 23.3 percent of accountants, auditors, attorneys, financial  analysts, and actuaries had 3 or fewer years of experience.
The limited federal experience may indicate a workforce challenge for  PBGC, because PBGC officials said that it can take entry-level staff 3 to 4  years to reach full productivity. However, PBGC officials added that the  corporation regularly hires individuals with prior private sector  experience, so not all staff with limited tenure at PBGC would be entry- level staff. For more seasoned staff, PBGC officials said that there is  generally an expectation that such staff will reach full productivity within  a 90- to 120-day time frame. Using CPDF, we could not determine the  extent of an individual’s work experience outside of the federal  government.
Second, PBGC faces the prospect of losing a significant number of its key  staff due to retirement eligibility. Over the next 4 years, nearly one-quarter  of PBGC’s staff in key occupations will be eligible to retire. While this rate  is lower than that of other federal executive branch agencies—about 32  percent of staff at other federal executive branch agencies in these  occupations will be eligible to retire in the next 4 years—retirement  eligibility could still present a workforce challenge for PBGC, because the  corporation could lose key institutional knowledge. According to CPDF  data, PBGC’s pension law specialists and attorneys will have the greatest  retirement eligibility over the next 4 years (see fig. 6).
Third, PBGC may face difficulties in hiring and retaining certain key staff  in the future due to the corporation’s existing compensation structure,  which offers salaries lower than some other federal agencies that employ  similar occupations. Specifically, PBGC officials noted that the  corporation—which is subject to the General Schedule—has lost staff to  some federal financial regulators that are not on the General Schedule and  pay higher salaries for these key occupations. While our analysis found  that PBGC has lower pay ranges and lower average basic salaries (which  do not include locality pay) than the federal financial regulators in these  key occupations, CPDF data did not suggest that large numbers of key  PBGC staff were leaving the corporation for these agencies. In addition,  PBGC’s data indicated that just 7 of 99 departing employees (from all  occupations, not just key occupations) transferred to federal financial  regulators between fiscal year 2005 through 2007—PBGC officials said  that these 7 employees left PBGC for increased pay.
While PBGC’s average salaries were lower than those at the financial  regulators, PBGC staff collectively have pay ranges and salaries similar to  those in other federal executive branch agencies, many of which are  subject to the General Schedule. For example, salaries for attorneys,  auditors, and executives at other federal agencies were generally similar to  those at PBGC. However, PBGC had higher average salaries for financial  analysts, accountants, and information technology specialists and lower  average salaries for pension law specialists and actuaries (see fig. 7).
While this information may be informative on a broad scale, the number of  years of experience and general schedule grade level at which PBGC  workers are hired play a significant role in their salaries, as is true for  other federal executive branch agencies on the General Schedule as well.  However, because the financial regulators are not subject to the General  Schedule, these agencies have greater flexibilities in setting their salaries.  (App. IV contains information on minimum and maximum pay ranges and  average salary for mission critical occupations for selected federal  agencies.)
section_title: PBGC Has Taken Some Steps to Strategically Manage Its Workforce, but Has Not Prepared for Possible Workforce and Compensation Challenges
paragraphs: PBGC has taken some steps in recent years to improve its human capital  planning and practices. These steps have included drafting planning  documents, such as components of a human capital plan like a succession  management directive. However, as of March 2008, the corporation had no  formal, comprehensive human capital plan integrating all necessary  components to prepare for future challenges, nor had it systematically  collected and analyzed its workforce data to identify such challenges. In  addition to limited planning and data, PBGC had not fully explored all  available compensation options under its statutory authority even though  corporation executives stated that PBGC’s compensation structure may  hinder it from attracting and retaining key staff.
subsections: section_title: While PBGC Is Making Progress toward Better Human Capital Management, No Formal, Comprehensive Human Capital Plan Exists to Prepare for Future Challenges
paragraphs: PBGC has taken steps to improve its human capital planning and  practices. These steps have included drafting planning documents, such as  components of a human capital plan like a succession management  directive. In addition, PBGC has included key human capital goals in its  annual report. This report highlights PBGC’s initiatives for the  management of human capital, such as ensuring employees have the skills  and competencies needed to support its mission and establishing a  performance-based culture within the corporation. PBGC has made some  progress toward these goals. For instance, PBGC recently hired a new  director of human resources and a new human capital specialist with  expertise in human capital and succession planning. Also, in an effort to  establish a performance-based culture, PBGC linked employees’  performance expectations to corporate goals and objectives in 2007.  Specifically, key PBGC human capital officials, including the Chief  Management Officer, are to be evaluated based on their progress toward  developing strategic human capital plans and policies.
In addition, the human capital office is developing new human capital  policies and practices, including increasing management’s involvement in  order to produce better results. Toward that end, a PBGC official stated  that the human capital office is planning to adjust the process of writing  position descriptions so that the human capital specialist and the  department manager can discuss the position’s responsibilities and duties  and create job announcements more collaboratively. Furthermore, PBGC’s  human capital office has developed and implemented various recruitment  strategies in recent years, such as an outreach program to colleges and  universities and recruitment through federal internship and fellowship  programs. PBGC human capital officials stated that certain recruitment  strategies are being reassessed, with the goal of increasing their  effectiveness.
Despite these actions, the corporation lacks a formal, comprehensive  human capital strategy, articulated in a formal human capital plan that  includes human capital policies, programs, and practices. In our previous  work we have identified critical success factors that agencies should use  to manage their workforces strategically. The critical success factors are  interrelated and mutually reinforcing so that no human capital issue can  be compartmentalized and addressed in isolation (see app. III). Workforce  planning and succession management, among other things, are critical  components of a comprehensive human capital plan.
Workforce planning uses workforce data to develop long-term strategies  for acquiring, developing, and retaining staff to achieve programmatic  goals and prepare the agency for its current and future needs. In 2001,  PBGC established a workforce planning team and conducted a  comprehensive review of its future human capital needs in response to a  GAO recommendation in 2000. As part of this effort, the team identified  needed skills and future critical needs for the corporation and prepared a  gap analysis for the seven key occupations.  From this analysis, the team  then determined if and where workforce gaps existed and formulated  corresponding strategies to address the gaps, all of which was  documented in a workforce planning report drafted in 2002 that was to  serve as the basis for its future ongoing workforce planning efforts. Since  that time, the corporation has conducted little workforce planning and the  workforce planning team has dissolved. However, PBGC has recently done  more in the area of succession planning, with the goal of identifying and  developing appropriate leaders to meet their future challenges. In fact,  PBGC human capital officials have drafted a succession management plan,  and the corporation continues to use a program developed in 2002 to  prepare staff for PBGC’s leadership vacancies.
According to a senior PBGC official, the corporation has lacked a formal,  comprehensive human capital plan in recent years because the increased  workload and demand for qualified staff required the human capital office  to primarily focus on hiring and training new staff, with little time to  strategically plan, and because the human capital office required a higher  level of expertise to develop a comprehensive human capital strategy.  However, PBGC officials stated that because PBGC has now acquired such  expertise with the hiring of a new human capital director and a new  human capital specialist, the corporation intends to have a formal human  capital strategic plan by the end of fiscal year 2008.
GAO’s prior work has shown that high-performing organizations must  have a leadership team committed to human capital management who  personally develop and direct reform and continuously drive  improvement. Several PBGC officials have undertaken actions to conduct  succession planning within their own departments; however, differing  opinions among PBGC’s leadership concerning some aspects of human  capital planning—such as workforce and succession planning—may  complicate and prolong PBGC’s strategic efforts. For example, some  PBGC executives conduct departmental succession planning, while others  believe any succession management plan should incorporate a corporate  viewpoint. Our prior work suggests that efforts to address human capital  management are most likely to succeed if an agency’s top management  and human capital leaders set the overall direction, pace, tone, and goals  from the outset.
section_title: Limited Data Analysis on PBGC’s Overall Workforce May Hinder Its Ability to Address Current and Future Human Capital Needs
paragraphs: PBGC has not routinely and systematically targeted and analyzed all key  workforce data—such as attrition rates, occupational skills mix, and  trends—necessary to create an overall workforce profile that addresses  current and future workforce needs. Instead, PBGC human capital officials  stated that they generally collected personnel data and reported certain  workforce statistics—such as counts of the number of open positions  filled, recruitment and retention incentives used, workforce diversity, and  separation—for top management on a monthly basis. However, the  monthly report does not provide context regarding the significance of  these statistics for the corporation as a whole. Furthermore, officials  stated that they generally conducted in-depth data collection and analysis  in response to requests from the corporation’s executive management. For  example, in 2006, PBGC’s human capital office conducted an analysis of  the representation of minorities and women by grade and occupation to  target the corporation’s recruitment with the goal of ensuring a diverse  workforce. However, because such analysis has been conducted only  periodically and on requested topics, information on PBGC’s overall  workforce trends has been limited and therefore unavailable for  anticipating the corporation’s current and future needs.
While PBGC’s human capital office has conducted some workforce  analysis, it has not taken steps to formally evaluate needed data that could  inform its workforce planning efforts. Our prior work has found that  collecting and analyzing workforce data are fundamental to measuring the  effectiveness of an organization’s human capital approaches in support of  the mission and goals of an agency. To evaluate factors affecting attrition,  agencies can compare their attrition rates to those of other federal  agencies, estimate the cost of recruiting and training new employees who  leave and the cost of recruiting and training their replacements, and  evaluate labor market conditions in locations where it operates. While  PBGC’s human capital office maintains data on the corporation’s attrition  rates, it does not perform certain types of analysis to better understand its  attrition. As of March 2008, PBGC had not conducted any of these  analyses.
Similarly, the corporation has done little since 2002 to identify and analyze  its workforce skills by gathering skills data on current employees, critical  skills that are needed throughout the agency, to determine if and where  gaps exists. Our prior work has noted that maintaining current information  on staff members’ critical skills and competencies is especially important  for federal agencies operating in an ever-changing environment. Shifts in  national priorities, budget constraints, and other factors affect the critical  skills an agency needs to fulfill its mission. For PBGC, such information  is particularly useful for determining and addressing gaps in the critical  workforce skills of staff and making efficient resource allocations,  because PBGC must respond quickly to changes in the financial markets  and defined benefit pension plan industry. However, PBGC has only in  recent months, and at the request of the newly hired Chief Information  Officer, taken steps to evaluate the critical skill needs and gaps of one of  its key occupations—Information Technology Specialist. For the other key  occupations, PBGC had not yet determined or updated the skills inventory  and competencies of its workforce, as of March 2008. PBGC officials told  us that they planned to develop a process for identifying such skill needs  by the end of fiscal year 2008.
section_title: Although PBGC Faces Possible Compensation Challenges, It Has Not Fully Explored All Available Compensation Options
paragraphs: PBGC has not fully explored all available compensation options under its  statutory authority, even though corporation officials stated that PBGC’s  current compensation structure limits its ability to hire and retain certain  key staff. While data suggest that PBGC is generally able to hire and retain  most key staff, PBGC officials have expressed the belief that the  corporation is at a competitive disadvantage not only with the private  sector, but also with certain federal agencies like FDIC and SEC that  employ similar staff. As we noted, while PBGC staff in key occupations  have pay ranges and salaries similar to those of the rest of the federal  government, PBGC’s pay ranges and average salaries are lower than those  of their counterparts at some similar agencies. Moreover, data suggest that  as of September 2007, PBGC’s highest pay for financial analysts, the key  occupation that PBGC appears to have the most difficulty hiring and  retaining, was lower than that of both the federal financial regulators and  the rest of the federal government. Yet, despite corporate concerns, PBGC  has not taken steps to fully explore all available compensation options  with OPM and the Office of Management and Budget (OMB).
Our prior work has found that the insufficient and ineffective use of  flexibilities can significantly hinder the ability of an agency to recruit, hire,  retain, and manage its workforce, and that the effective, efficient, and  transparent use of human capital flexibilities must be a key component of  agency efforts to address human capital challenges. According to our  Internal Control Management and Evaluation Tool, an agency’s  compensation system should be adequate to acquire, motivate, and retain  personnel, and incentives should be used to provide encouragement for  personnel to perform at their maximum capability. Further, to assist  agencies, OPM has developed a handbook describing currently available  human capital flexibilities.
In recent years, PBGC has made use of various human capital flexibilities  in which the corporation has discretionary authority to provide direct  compensation in certain circumstances to support its recruitment and  retention efforts. Our review of PBGC’s use of the compensation options  recorded in CPDF found that PBGC had used options such as recruitment  and retention incentives, superior qualification pay-setting authority, and  special pay rates for specific occupations. We also found that PBGC used  performance management incentives, such as awards (bonuses) for  suggestions, superior accomplishments, or special acts. (See app. V for a  list of selected compensation flexibilities and authorities.) However, some  PBGC officials stated that the corporation has not used these flexibilities  to their fullest potential. For example, some senior management officials  said the corporation should provide recruitment and retention incentives  to more employees. Our review of CPDF found that between fiscal year  2004 and 2007, PBGC used recruitment incentives 14 times and retention  incentives 10 times.
Further, PBGC officials said that they had not recently explored additional  flexibilities that required the approval of OPM and OMB to determine  whether they would be applicable or appropriate for the corporation. For  example, as of March 2008, PBGC officials said that they had not explored  whether positions, such as its Chief Insurance Program Officer, Chief  Financial Officer, and Chief Investment Officer—positions that require  specialized technical expertise specifically related to defined benefit  pension plan structure and finance—may fall under OPM’s criteria for  critical position pay authority. While most of these positions are currently  filled, PBGC officials have cited difficulty filling some of these more  technical positions and have expressed concern about filling them in the  future as individuals leave. In another example, PBGC had not explored  whether it would be appropriate or applicable to waive the recruitment  and retention incentive limitation of 25 percent based on a critical agency  need.
In addition to not exploring all available compensation options, PBGC has  done little over the last decade to determine what effect its compensation  system and lower pay ranges may have on its recruitment and retention  efforts and the extent to which an alternative pay system may be needed.  In the early 1990s, PBGC evaluated its workforce and conducted a  compensation study comparing its compensation system with those of  federal financial regulators and the private sector. The study concluded  that some PBGC staff were relatively under compensated compared to the  private sector and those federal agencies classified under FIRREA. On  the basis of that evidence, PBGC sought to establish a new compensation  system (outside of the federal government’s General Schedule and merit  pay systems), arguing that PBGC could do so because the corporation did  not pay compensation entirely from appropriated funds. However, in  response, the Solicitor of Labor concluded that PBGC’s compensation was  in fact paid from appropriated funds and that PBGC was not exempt from  the General Schedule. As of March 2008, DOL’s Office of the Solicitor had  not changed its conclusions. In addition, GAO has long held the view that  the revolving funds of PBGC are appropriated funds.
According to PBGC officials, the corporation has not taken steps to  evaluate its compensation structure since the early 1990s, because of the  position taken by the Department of Labor. Officials told us that it would  not be cost-effective for the corporation to invest resources in evaluating  the corporation’s compensation structure if no action could be taken to  modify the pay system, if needed. However, other federal agencies also  facing increased workload demands have in some cases explored and  obtained alternative pay systems—systems where market rates and  performance are central drivers of pay—after establishing a need for  additional compensation. For example, Congress enacted FIRREA after  the U.S. savings and loan crisis, and specifically provided the federal  financial regulators with the flexibility to establish their own pay system.
section_title: Conclusions
paragraphs: Although PBGC is a relatively small agency, it is faced with the challenge  of insuring retirement income for millions of Americans’ promised defined  benefit pensions. Because of this, PBGC must have at its disposal a highly  qualified workforce with the skills necessary to seek the best financial  arrangements needed to support its mission. While it appears that PBGC is  generally able to hire and retain key staff, the corporation has faced hiring  and retaining difficulties in certain technical positions, such as its financial  analysts and chief financial officer. In addition to these difficulties, the  corporation may face several workforce challenges in the near future if it  does not take steps now to strategically prepare itself by identifying its  current and future challenges. However, because PBGC does not  systematically collect and analyze all necessary workforce data, the  foundation on which to identify and address such challenges is limited. In  order to develop strategies for identifying and filling any workforce gaps  or spotlight areas in need of attention, PBGC management must rely on  valid workforce data. If it does not, the corporation’s ability to effectively  target its resources or know which key areas to focus on when recruiting,  developing, and retaining top talent is limited. While the costs of collecting  such data may require some trade-offs among PBGC’s competing  priorities, the costs of making decisions without the necessary information  could be even greater over time.
PBGC officials have suggested that the corporation’s compensation system  places it at a competitive disadvantage not only with the private sector,  but also with other federal entities when competing for some key staff.  While such perceptions may be reasonable for certain occupations, the  fact that PBGC has not fully explored all compensation options with OPM  and OMB may hinder its ability to develop innovative compensation  packages within its current statutory authorities. If PBGC were to fully  exhaust all available options, PBGC executives, in conjunction with the  corporation’s board of directors, could more reasonably take steps to seek  additional flexibilities, such as an alternative compensation structure, if it  seemed warranted. By doing so, PBGC’s ability to insure and deliver  retirement benefits to the millions of Americans that rely upon them could  be strengthened.
section_title: Recommendations for Executive Action
paragraphs: To improve PBGC’s human capital management structure, we recommend  that PBGC’s Director instruct PBGC’s Chief Management Officer to  Integrate formal workforce and succession planning components as part  of the corporation’s efforts in developing a formal strategic planning  approach to managing its workforce.
Systematically collect and analyze workforce data and integrate the results  of such analyses into its workforce planning efforts. Such an approach  could include updating PBGC’s 2002 Workforce Planning Report, analyzing  the reason for and the associated costs of its attrition, and identifying the  types of skills and competencies critical to PBGC’s mission.
Fully explore with the Office of Personnel Management and Office of  Management and Budget all compensation options currently available to  determine and document what options are appropriate and applicable  within its statutory authority. Subsequently, the corporation should make  use of all applicable and appropriate options, and continuously track,  document, and monitor the use of such options. Once such steps are  taken, PBGC should determine the extent to which its ability to hire and  retain is hindered by its compensation structure. If such efforts conclude  that PBGC is in fact hindered, the corporation’s board of directors and  Director should work to formulate recommendations to Congress for  modifying its structure.
section_title: Agency Comments and Our Evaluation
paragraphs: We obtained written comments on a draft of this report from PBGC, which  are reproduced in appendix VI. In addition, we provided copies of the draft  report to the Departments of the Treasury, Labor, and Commerce as well  as OPM for their comments. In instances where comments were provided,  they were incorporated in the report where appropriate.
In response to our draft report, PBGC generally concurred with our  recommendations and outlined the actions the corporation has underway  or plans to take with regard to them.  Specifically, PBGC stated that the  corporation would do more to better manage its workforce particularly  with regard to its human capital succession planning and workforce data  analysis. PBGC reiterated the steps that the corporation is taking to  strengthen its human capital management, and added that these  improvements were expected to address many of our concerns. Further,  PBGC stated that the corporation has taken steps in years past to explore  compensation options, but noted that legal and policy considerations  beyond the purview of PBGC’s management have hindered the  corporation’s ability to do so. Nevertheless, as we recommended, PBGC  stated that the corporation will continue to explore other compensation  options considered appropriate and maintain a dialogue with OPM, OMB,  and members of PBGC’s board of directors regarding this issue.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will send copies of this report to the director of  PBGC; the Secretaries of the Treasury, Labor, and Commerce; and other  interested parties. We will also make copies available to others on request.  If you or your staff have any questions concerning this report, please  contact me on (202) 512-7215. Key contributors are listed in appendix VII.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the Pension Benefit Guaranty Corporation’s (PBGC) recent  experience in hiring and retaining mission-critical staff, we worked with  PBGC executives and human capital officers to identify which staff were  considered critical to PBGC’s mission. On the basis of these discussions  and in conjunction with a 2002 PBGC workforce planning team report, it  was agreed with PBGC officials that we would focus on seven occupations  that were considered key to the corporation’s business operation and also  made up the majority of the corporation’s workforce. These occupations  were  6. information technology specialists, and  7.  pension law specialists.
After identifying these key occupations, we assessed PBGC’s recent  experience in hiring and retaining staff by using the Office of Personnel  Management’s (OPM) Central Personnel Data File (CPDF) to identify  different workforce data, such as hiring, attrition, separation types,  retirement eligibility, federal tenure, and pay averages for these positions.  To identify trends in some of these data, we analyzed hiring, attrition, and  separation workforce data sets for PBGC’s key occupations from fiscal  year 2000 to 2007 and compared attrition and separation information with  comparable information from the rest of the federal government for the  same period. We chose to review this data from these fiscal years to  determine what trends, if any, existed prior to and after the significant  workload increases and financial liabilities resulting from several large  companies terminating their defined benefit pension plans around fiscal  years 2003 and 2004.
To assess the reliability of OPM’s CPDF, we reviewed GAO’s prior data  reliability work on CPDF data. We supplemented that work as necessary  by analyzing employee movement using CPDF data when we found  exceptions from standard personnel procedures, such as employees with a  transfer-out code but with an accession code in the hiring agency that did  not include a transfer-in code. We also found duplicate separation or  accession records for the same individual on the same day. However,  these types of data limitations represented less than 1/10th of 1 percent of  the data used. As a result, we concluded that the data were sufficiently  reliable for the purposes of our review. We also requested attrition and  other workforce data from PBGC’s computerized system called the  Federal Personnel and Payroll System (FPPS) to determine the extent to  which CPDF data matched FPPS data. We reviewed related agency  documentation, interviewed agency officials knowledgeable about the  data, and brought to the attention of these officials any concerns or  discrepancies we found with the data for correction or updating.  However, we did not independently verify the workforce data we received  from PBGC. In a number of cases, we compared PBGC’s CPDF data with  data on other federal executive branch agencies as a group that employ  the seven key occupations, or with financial regulators specifically.
The following describes the steps that we took to identify selected  workforce data in CPDF for the seven occupations.
We identified all new hires for fiscal years 2000 through 2007 by using  personnel action codes in CPDF for accessions to career or career  conditional positions. Accessions include new hires and hires of  individuals returning to the government. To put PBGC hiring into context,  we used attrition data (discussed below) to compare the numbers of staff  hired with the number of staff leaving. Additionally, we used PBGC hiring  data from 2007 to describe how quickly PBGC fills its job vacancies and  compared that data to OPM standards.
To determine the overall attrition rates for staff in these key positions, we  analyzed data from the CPDF for fiscal years 2000 to 2007. For each fiscal  year, we counted the number of permanent (career) employees with  personnel actions indicating they had separated from PBGC. Separation  (attrition) data for new hires included resignations, retirements,  terminations, and deaths. We did not include a small percentage of  individuals with inconsistent data such as multiple or different hiring or  separation dates. The small percentage of employees with inconsistent  data is congruent with the generally reliable data in the CPDF we have  reported previously. We then divided the total number of separations for  each fiscal year by the average of the number of these employees in the  CPDF as of the last pay period of the fiscal year before the fiscal year of  the separations and the number of these employees in the CPDF as of the  last pay period of the fiscal year of separation.
To determine the attrition rates for new hires in the seven critical  occupations, we used CPDF data to identify the newly hired staff and  followed them over time to see how many left PBGC. We identified all new  hires for fiscal years 2000 through 2007 by using personnel action codes  for accessions to career or career conditional positions. Next, we  determined whether these individuals had personnel actions indicating  they had separated from PBGC. By subtracting the hire date from the  separation date, we determined how long individuals worked before  separating. We calculated the attrition rates for a specific time period by  dividing the number of individuals who left within that time period by the  total number of new hires tracked for that time period.
Once we identified the overall attrition and new hire attrition rates, we  examined CPDF data to determine any patterns or trends for each of the  seven key occupations and for PBGC executives. Additionally, we  conducted a comparative analysis by calculating the attrition rates of the  rest of the federal government and the federal regulators to put PBGC  attrition rates into context.
To identify the ways key staff separated from PBGC from 2000 through  2007, we reviewed CPDF data identifying employees who resigned from  federal employment, retired, transferred to another federal agency, or  were separated in another way, such as a reduction in force. As part of this  work, we built on our analysis of the CPDF to determine the extent to  which PBGC is losing staff to other federal agencies. To determine those  PBGC staff that moved to another federal agency, we identified employees  who had a CPDF separation code for a voluntary transfer and who also  had a CPDF accession code from a federal agency within 25 days of the  transfer out. We analyzed separation data to determine any patterns for  the receiving agency. To understand whether there were any patterns  within PBGC’s key occupations, we reviewed CPDF data to examine the  distribution by type of separation for each of the key occupations. To put  PBGC’s separation data into context, we compared the types of  separations for its key employees with the same information for the rest of  the federal executive branch agencies. To identify the reasons that staff  left PBGC, we reviewed available reports with information about the  reasons for attrition and interviewed officials to determine the reasons  why employees leave the agency and how PBGC collects data on such  departures.
To determine PBGC employee retirement eligibility for fiscal years 2012  and 2017, and after 2017, we used CPDF information on age at hire, years  of service, birth date, and retirement plan coverage. We compared PBGC  eligibility information to eligibility information for staff in the seven key  occupations in the rest of the federal government.
To determine federal tenure rates, we examined CPDF information on  number of years of federal service for key staff, at both PBGC and other  federal agencies. We compared PBGC tenure information to tenure  information for staff in the seven key occupations in the rest of the federal  government. We also compared CPDF federal tenure data to PBGC’s data  for length of service at PBGC specifically.
Average Pay and Pay Ranges  To report on the average pay and pay ranges for employees in selected  occupations and executives, we analyzed basic pay data from CPDF from  September 2007 for PBGC, financial regulators, and other federal  executive branch agencies that also had staff in the seven mission-critical  categories. Using CPDF, we determined the low, high, and mean pay for  each of these occupational categories and executives. We did not  separately analyze locality pay for these entities.
To identify the steps that PBGC had taken to strategically hire and retain key  staff, we reviewed previous GAO work on strategic human capital  management, PBGC’s single-employer insurance programs, and the  corporation’s management challenges. We also reviewed information on  PBGC’s organizational objectives and succession planning goals from  documents such as annual reports and workforce or succession plans.  Moreover, we reviewed GAO and OPM reports on human capital to establish  criteria for PBGC’s recruitment, retention, and succession planning efforts.  On the basis of the information we obtained, we assessed PBGC’s human  capital strategic plan, performance measures, and policies and procedures  against GAO’s Standards for Internal Controls in the Federal Government to  determine if internal control weaknesses or inefficiencies existed.  Weaknesses identified directed our review of PBGC’s human capital  operations and were explored further in interviews with PBGC officials.
We reviewed PBGC’s efforts to analyze attrition, interviewed PBGC and  OPM officials, and relied on prior GAO reports on federal human capital  issues to determine how federal agencies develop and analyze data on the  reasons for this attrition.    other selected agencies’ performance management and pay systems,  including succession and strategic plans, guidance, and policies and  procedures on the systems;    PBGC’s internal assessments of its workforce challenges;    OPM’s 2006 Federal Human Capital Survey;   recent OPM human capital operations audits; and    OPM’s 2006 Recruitment, Relocation, and Retention study.
Further, we reviewed relevant provisions of federal law, including the  Employee Retirement Income Security Act of 1974; the Government  Corporation Control Act; the Financial Institutions Reform, Recovery, and  Enforcement Act of 1989; and the Classification Act. As part of this work,  we collected and reviewed memorandums and documentation related to  PBGC’s compensation proposal as well as correspondence from the  Department of Labor (DOL) and Office of Management and Budget (OMB).  We also obtained a legal opinion from DOL’s Office of the Solicitor  confirming that DOL still held the view that PBGC is not exempt from the  General Schedule. Moreover, we collected documents and interviewed  officials at PBGC to determine the extent to which PBGC governance and  organizational structure have affected PBGC’s ability to pursue alternative  compensation and benefit flexibilities. We also used recent GAO work that  reviewed compensation flexibilities at the financial regulatory agencies.
To gather information on PBGC’s use of human capital flexibilities related to  compensation, we used CPDF data to calculate the number of occasions on  which these flexibilities were administered between fiscal year 2004 and 2007.  Specifically, we identified the number of times PBGC used recruitment  incentives, individual and group cash awards, individual and group time-off  awards, individual and group suggestion/invention awards, quality step  increases, student loan repayments, and retention incentives. In addition, we  interviewed PBGC’s human capital officials to determine if PBGC was using  certain compensation flexibilities that we did not identify in CPDF. We did  not assess whether PBGC was using these flexibilities appropriately.
To address both objectives, we also interviewed board representatives, the  PBGC Director, PBGC’s executives, senior PBGC management officials, and  officials from OPM and DOL. Additionally, we met with the corporation’s  union representatives and PBGC’s Inspector General, and coordinated with  OPM’s human capital evaluators regarding their audit of PBGC human capital  policies and programs. At the time of our review, OPM officials confirmed  they were finalizing a PBGC Human Resource Operations Evaluation. While  OPM’s review covered certain aspects of strategic human capital  management, OPM’s review also focused on specific human capital programs,  such as competitive examining. OPM officials stated they would be  presenting findings and working with PBGC on corrective measures to  improve the corporation’s human capital program.
section_title: Appendix II: List of Federal Financial Regulators and their Mission
paragraphs: Regulates commodity futures and option markets in the United  States.
Ensures a safe, sound, and dependable source of credit and  related services for agriculture and rural America.
Preserves and promotes public confidence in the U.S. financial  system by insuring deposits in banks and thrift institutions for at  least $100,000 per depositor; by identifying, monitoring, and  addressing risks to the deposit insurance funds; and by limiting  the effect on the economy and the financial system when a  bank or thrift institution fails.
Regulates the 12 Federal Home Loan Banks that were created  in 1932 to improve the supply of funds to local lenders that, in  turn, finance loans for home mortgages.
Federal Reserve Board  Conducts the nation’s monetary policy by influencing money  and credit conditions in the economy in pursuit of full  employment and stable prices; supervises and regulates  banking institutions to ensure the safety and soundness of the  nation’s banking and financial system and to protect the credit  rights of consumers; maintains the stability of the financial  system and containing systemic risk that may arise in financial  markets; provides certain financial services to the U.S.  government, to the public, to financial institutions, and to  foreign official institutions, including playing a major role in  operating the nation’s payments systems.
Charters and supervises federal credit unions. National Credit  Union Administration, backed by the full faith and credit of the  U.S. government, operates the National Credit Union Share  Insurance Fund (NCUSIF) insuring the savings of 80 million  account holders in all federal credit unions and many state- chartered credit unions.
Charters, regulates, and supervises all national banks. It also  supervises the federal branches and agencies of foreign  banks.
Promotes housing and a strong national housing finance  system by ensuring the safety and soundness of Fannie Mae  (Federal National Mortgage Association) and Freddie Mac  (Federal Home Loan Mortgage Corporation)—the largest  housing finance institutions in the United States.
Primary federal regulator of federally chartered and state- chartered savings associations, their subsidiaries, and their  registered savings and loan holding companies.
Administers federal securities law in the United States. The  agency is charged with protecting investors, maintaining fair,  orderly, and efficient markets, and facilitating capital formation.
section_title: Appendix III: Elements of Strategic Human Capital Management
paragraphs: People are an agency’s most important organizational asset. An  organization’s people define its character, affect its capacity to perform,  and represent the knowledge base of the organization. As such, effective  strategic human capital management approaches serve as the cornerstone  of any serious change management initiative. They must also be at the  center of efforts to transform the cultures of federal agencies so that they  become less hierarchical, process-oriented, stovepiped, and inwardly  focused; and flatter and more results-oriented, integrated, and externally  focused.
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. Various agencies are using OPM’s Human Capital  Assessment and Accountability Framework (HCAAF) as the basis for  preparing such plans. HCAAF, which the Office of Personnel Management  developed in conjunction with the Office of Management and Budget 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.
As we have reported, 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 (see fig. 8).
Our human capital model highlights the kinds of thinking that agencies  should apply, as well as some of the steps they can take, to make progress  in managing human capital strategically. The model consists, in part, of  the Critical Success Factors Table. This table identifies eight critical  success factors for managing human capital strategically, which embody  an approach to human capital management that is fact-based, focused on  strategic results, and incorporates merit principles and other national  goals. These factors are organized in pairs to correspond with the four  governmentwide high-risk human capital challenges that our work has  shown are undermining agency effectiveness (see fig. 9). When  considering the human capital cornerstones and the critical success  factors, it is important to remember that they are interrelated and mutually  reinforcing. Any pairing or ordering of human capital issues may have a  sound rationale behind it, but no arrangement should imply that human  capital issues can be compartmentalized and dealt with in isolation from  one another.
All of the critical success factors reflect two principles that are central to  the human capital idea:  People are assets whose value can be enhanced through investment. As  with any investment, the goal is to maximize value while managing risk.
An organization’s human capital approaches should be designed,  implemented, and assessed by the standard of how well they help the  organization achieve results and pursue its mission.
In developing this model, we built upon GAO’s Human Capital: A Self-  Assessment Checklist for Agency Leaders (GAO/OCG-00-14G, September  2000). Self-assessment is the starting point for creating “human capital  organizations”—agencies that focus on valuing employees and aligning  their “people policies” to support organizational performance goals.  Certain unifying considerations should be kept in mind:  All aspects of human capital are interrelated: The principles of  effectively managing people are inseparable and must be treated as a  whole. Any sorting of human capital issues may have a sound rationale  behind it, but no sorting should imply that human capital issues can be  compartmentalized and dealt with in isolation from one another.
Trust requires transparency: To pursue its shared vision effectively, the  agency must earn the trust of its workforce by involving employees in the  strategic planning process and by ensuring that the process is  transparent—that is, consistently making it clear that the shared vision is  the basis for the agency’s actions and decisions.
Merit principles and other national goals still apply: Performance- based management does not supersede the merit principles or other  national goals, such as veterans’ preference. A modern merit system will  achieve a reasonable balance among taxpayer demands, employer needs,  and employee interests.
Constraints and flexibilities need to be understood: The purpose of  human capital self-assessment is to help agencies target areas in which to  make changes in support of their organizational missions and other needs.  Agencies that identify areas for improvement need to learn what  constraints exist that apply to them and what flexibilities are available.
Fact-based human capital management requires data: Federal  agencies typically do not have the data required to effectively assess how  well their human capital approaches support results. A more fact-based  approach to human capital management will entail the development and  use of data that demonstrate the effectiveness of human capital policies  and practices—thereby improving managers’ ability to maximize the value  of human capital investments while managing the related risks.
The use of best practices requires prudent decision making:  Identifying best practices and benchmarking against leading organizations  are both potentially useful and important pursuits. Federal agencies must  be careful to recognize the unique characteristics and circumstances that  make organizations different from one another and to consider the  applicability of practices that have worked elsewhere. For example, the  environments in which public and private sector organizations operate  differ significantly; our work has shown that many management principles  identified in the private sector are applicable to the federal sector, but  these differences need to be taken into account when agencies consider  alternatives to their current management approaches.
Attention to human capital must be ongoing: To be effective, strategic  human capital management requires the sustained commitment and  attention of senior leaders and managers at all levels of the agency.  Managing the workforce is not a problem for which the organization can  supply an answer and then move on. Rather, managers must continually  monitor and refine their agencies’ human capital approaches to ensure  their ongoing effectiveness and continuous improvement.
section_title: Appendix IV: Minimum and Maximum Pay Ranges and Average Basic Pay for Critical Occupations by Selected Federal Agency
subsections: section_title: Baalary minimum and maximum by occupation
paragraphs: CPDF did not indicte tht OFHEO employed IT pecili as of encieExecutives include political appointees above GS-15, such as those in the Senior Executive Service,  those in the Senior Level and Senior Scientific or Professional pay plans, and equivalent officials.  Different executive pay plans have different pay ceilings. For example, the Senior Level and Senior  Scientific and Professional pay plans (SL and ST) have lower ceilings than the Senior Executive  Service pay plan. PBGC executives included the Director of PBGC and those in the Senior Level pay  plan. The maximum base pay allowed for SES in 2007 was the rate for level II of the Executive  Schedule ($168,000) for agencies with a certified performance appraisal system, or the rate for level  III of the Executive Schedule ($154,600) for agencies without a certified performance appraisal  system. The maximum base pay allowed for SL/ST employees in 2007 was $145,400 (the rate for  level IV of the Executive Schedule). However, SL/ST employees working in the 48 contiguous States  also received locality payments ranging from 12.6percent to 30.3 percent in 2007, depending on  location, with locality rates capped at the rate for level III of the Executive Schedule, or $154,600.
We submitted the relevant PBGC data to PBGC officials, who concurred with the basic ranges and  averages for PBGC.
While CFTC, FCA, and NCUA senior management could be classified as executives, each agency  has a pay plan that, as of this writing, did not allow GAO to specifically identify executives’ salaries  through CPDF.
The agencies in the table include the Commodity Futures Trading Commission (CFTC), Farm Credit  Administration (FCA), Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance  Board (FHFB), National Credit Union Administration (NCUA), Office of the Comptroller of the  Currency (OCC), Office of Federal Housing Enterprise Oversight (OFHEO), Office of Thrift  Supervision (OTS), Pension Benefit Guaranty Corporation (PBGC), Securities and Exchange  Commission (SEC), and the Federal Reserve Board (FRB).
section_title: Appendix V: Selected Compensation Flexibilities and Authorities Available in the Federal Government
subsections: section_title: Flexibilities addressing recruitment of new employees
paragraphs: A monetary payment to a newly hired employee when the agency has determined that the position  is likely to be difficult to fill in the absence of such an incentive. The employee must sign an  agreement to complete a specified period of service with the agency (not to exceed 4 years).
Upon the request of the head of an agency, OPM may waive the recruitment or relocation incentive  25 percent limitation based on a critical agency need. Under such an approval, the total amount of  recruitment or relocation incentive payments may not exceed 50 percent of an employee’s annual  rate of basic pay at the beginning of the service period multiplied by the number of years in the  service period.
Agencies may set the rate of basic pay of a newly appointed employee at a rate above the minimum  rate of the appropriate General Schedule grade because (1) the candidate has superior  qualifications or (2) the agency has a special need for the candidate’s services.
A step increase to reward General Schedule employees at all grade levels who display high-quality  performance. It is a step increase that is given sooner than the normal time interval for step  increases.
A monetary award to recognize superior employee and group performance (also known as spot  awards).
A monetary award for suggestions, inventions, or a productivity gain.
An award of time off to recognize superior employee and group performance.
A monetary award to recognize employees who bring new talent into the agency.
A monetary payment given to a current employee when the agency determines that the unusually  high or unique qualifications of the employee or a special need of the agency for the employee’s  services makes it essential to retain the employee and if the employee would be likely to leave the  federal service in the absence of a retention incentive.
At the request of an agency head, OPM may waive the retention incentive limitation of 25 percent of  basic pay for individual employees or 10 percent for a group or category of employees (but not to  exceed 50 percent of basic pay) based on a critical agency need. The agency must determine the  unusually high or unique qualifications of the employee(s) are critical to the successful  accomplishment of an important agency mission, project, or initiative (e.g., programs or projects  related to a national emergency or implementing a new law or critical management initiative).
The federal student loan repayment program permits agencies to repay federally insured student  loans as a recruitment or retention incentive for candidates or current employees of the agency.
A monetary payment to an employee who must relocate to a position in a different geographic area  that is likely to be difficult to fill in the absence of such an incentive. In return, the employee must  sign an agreement to fulfill a period of service of not more than 4 years with the agency.
OPM may, upon the request of an agency head, and after consultation with OMB, grant authority to  fix the rate of basic pay for one or more critical positions in an agency at not less than the rate that  would otherwise be payable for that position, up to the rate for level I of the Executive Schedule  under the critical pay authority. A higher rate of pay may be established upon the President’s written  approval.
section_title: Appendix VI: Comments from the Pension Benefit Guaranty Corporation
section_title: Appendix VII: Contacts and Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: The following team members made key contributions to this report: David  Lehrer, Assistant Director; Jason Holsclaw, Analyst-in-Charge; Susannah  Compton; Monika Gomez; Catherine Hurley; Anar Ladhani; Armetha Liles;  Andrew Nelson; Mimi Nguyen; Jessica Orr; Roger Thomas; Rebecca Shea;  and Gregory Wilmoth.
section_title: Related GAO Products
paragraphs: Pension Benefit Guaranty Corporation: Governance Structure Needs  Improvements to Ensure Policy Direction and Oversight. GAO-07-808.  Washington, D.C.: July 2007.
PBGC’s Legal Support: Improvements Needed to Eliminate Confusion  and Ensure Provision of Consistent Advice. GAO-07-757R. Washington,  D.C.: May 18, 2007.
High Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007.
Private Pensions: The Pension Benefit Guaranty Corporation and Long- Term Budgetary Challenges. GAO-05-772T. Washington, D.C.: June 9, 2005.
Pension Benefit Guaranty Corporation: Single-Employer Pension  Insurance Program Faces Significant Long Term Risks. GAO-04-90.  Washington, D.C.:   October 2003.
Pension Benefit Guaranty Corporation: Contracting Management Needs  Improvement. GAO/HEHS-00-130. Washington, D.C.: September 2000.
Strategic Workforce Planning and Human Capital Management  Federal Deposit Insurance Corporation: Human Capital and Risk  Assessment Programs Appear Sound, but Evaluations of Their  Effectiveness Should Be Improved. GAO-07-255. Washington, D.C.:  February 2007.
The Federal Workforce: Additional Insights Could Enhance Agency  Efforts Related to Hispanic Representation. GAO-06-832. Washington,  D.C.: August 2006.
Securities and Exchange Commission: Some Progress Made on Strategic  Human Capital Management. GAO-06-86. Washington, D.C.: January 2006.
International Trade: USTR Would Benefit from Greater Use of Strategic  Human Capital Management Principles. GAO-06-167. Washington, D.C.:  December 2005.
Department of Homeland Security: Strategic Management of Training  Important for Successful Transformation. GAO-05-888. Washington, D.C.:  September 2005.
Human Capital: Selected Agencies Have Opportunities to Enhance  Existing Succession Planning and Management Efforts. GAO-05-585.  Washington, D.C.:   June 2005.
Human Capital: Agencies Need Leadership and the Supporting  Infrastructure to Take Advantage of New Flexibilities. GAO-05-616T.  Washington, D.C.: April 21, 2005.
Human Capital: Selected Agencies’ Statutory Authorities Could Offer  Options in Developing a Framework for Governmentwide Reform.   GAO-05-398R. Washington, D.C.: April 21, 2005.
National Nuclear Security Administration: Contractors’ Strategies to  Recruit and Retain a Critically Skilled Workforce Are Generally Effective.  GAO-05-164. Washington, D.C.: February 2005.
Diversity Management: Expert-Identified Leading Practices and Agency  Examples. GAO-05-90. (Washington, D.C.: January 2005).
Human Capital: Principles, Criteria, and Processes for Governmentwide  Federal Human Capital Reform. GAO-05-69SP. Washington, D.C.:  December 2004.
Human Capital: Increasing Agencies’ Use of New Hiring Flexibilities.   GAO-04-959T. Washington, D.C.: July 13, 2004.
Human Capital: Key Practices to Increasing Federal Telework.   GAO-04-950T. Washington, D.C.: July 8, 2004.
Human Capital: Status of Efforts to Improve Federal Hiring.   GAO-04-796T. Washington, D.C.: June 7, 2004.
Human Capital: A Guide for Assessing Strategic Training and  Development Efforts in the Federal Government. GAO-04-546G.  Washington, D.C.: March 2004.
Human Capital: Selected Agencies’ Experiences and Lessons Learned in  Designing Training and Development Programs. GAO-04-291.  Washington, D.C.: January 30, 2004.
Human Capital: Key Principles for Effective Strategic Workforce  Planning.   GAO-04-39. Washington, D.C.: December 2003.
Human Capital: Succession Planning and Management Is Critical Driver  of Organizational Transformation. GAO-04-127T. Washington, D.C.:  October 1, 2003.
Human Capital: A Guide for Assessing Strategic Training and  Development Efforts in the Federal Government (Exposure Draft).   GAO-03-893G. Washington, D.C.:   July 2003.
Human Capital: Opportunities to Improve Executive Agencies’ Hiring  Processes. GAO-03-450. Washington, D.C.: May 2003.
Human Capital: OPM Can Better Assist Agencies in Using Personnel  Flexibilities. GAO-03-428. Washington, D.C.: May 2003.
Human Capital: Effective Use of Flexibilities Can Assist Agencies in  Managing Their Workforces. GAO-03-2. Washington, D.C.: December 2002.
A Model of Strategic Human Capital Management. GAO-02-373SP.  Washington, D.C.: March 2002.