In the 1990s, Congress constructed a statutory framework to address long-standing weaknesses in federal operations, improve federal management practices, and provide greater accountability for the use of resources and achieving results. This framework included as its essential elements the Government Performance and Results Act of 1993 and key financial management and information technology reform legislation: the Chief Financial Officers Act of 1990—as expanded by the Government Management Reform Act of 1994—and the Paperwork Reduction Act of 1995 and the Clinger-Cohen Act of 1996, respectively. In 1993, NPR recommended to the President that agencies reduce by half the costs related to central management control positions, by 1999. NPR targeted administrative costs and positions, such as managers, personnel specialists, budget analysts, procurement specialists, and other headquarters staff positions to reduce administrative layers at headquarters and streamline field structures. NPR estimated that these central control positions cost about $35 billion a year in salaries and benefits. To achieve NPR’s streamlining goals, in 1994, the Office of Management and Budget (OMB) required agencies to prepare streamlining plans detailing, in addition to other things, how they planned to reduce these targeted positions. The typical federal personnel office carries out a wide range of functions related to the management of an organization’s people, from the time they apply for a position to the time they leave. This includes establishing policies and carrying out activities, many of which are prescribed by federal law. The range of personnel functions generally includes, but is not limited to, recruitment and employment (including workforce diversity), classification (i.e., determining the appropriate grade and classification series of a position), merit promotion, and employee and labor relations. A personnel office collects and maintains data related to the employment process. Personnel activities include such tasks as advertising positions to be filled, verifying candidate information, processing paperwork on health insurance and other employee benefits, and processing paperwork on employee discipline and promotions. Although agencies use automation to store and analyze various pieces of personnel information (e.g., employees’ occupations, grades, and performance ratings) and process payroll data, personnel administration has been largely a paper-based, labor-intensive operation, as often is the case with administrative functions. Each year, hundreds of federal personnel offices process millions of personnel actions that affect the federal workforce of almost 1.9 million civilian, nonpostal employees. For example, nearly every official personnel action affecting a specific employee, such as a promotion, begins with the preparation of a Standard Form 52, “Request for Personnel Action.” And when the request is approved, it is followed by the preparation of a Standard Form 50, “Notification of Personnel Action.” Figure 1 shows various processes that typically are included in personnel operations. Federal efforts to reduce administrative overhead positions, including personnel, somewhat parallel streamlining efforts in the private sector. For example, human resource managers in the private sector have been asked to integrate the company’s personnel management practices with its business goals and objectives while also providing cost-effective, traditional personnel services. Private sector human resource managers increasingly are expected to quantify their operations’ return on investment or what “value-added” the function provides. In the federal sector, cost concerns have forced managers to reexamine the role of the personnel function and its relationship as a support function to the mission of the agency. For example, the Results Act recognizes the importance of human resource management as a key element for achieving performance goals as part of agencies’ strategic and annual performance plans. We have suggested that agencies’ performance plans that contain a description of how workforce knowledge, skills, and abilities can contribute to the achievement of program performance goals would be most useful to congressional decisionmakers. In addition to the reexaminations that are taking place about the role of the personnel function and its relationship to mission accomplishment, the departments’ restructuring efforts also were taking place within a context of evolving concerns about the federal human resource management system’s statutory and regulatory framework. These concerns, which have been expressed by agencies, OPM, NPR, and Congress, center on striking the best balance among the priorities of managerial flexibility and decentralization on the one hand, and systemwide consistency and adherence to merit principles on the other. How these priorities are balanced and any changes to current regulatory or statutory requirements may have important implications for federal human resource management and personnel offices, as well as how personnel services are provided to line managers. In planning how to restructure personnel operations and what personnel processes to automate, agencies are now required by the Clinger-Cohen Act of 1996 to reassess their work processes to determine whether their administrative and mission-related business processes should be improved before investing in major information systems to support them. As federal agencies decide how to streamline administrative support functions, they must choose among options for providing automated personnel and payroll services. Such options include purchasing personnel and/or payroll services from another government agency (or franchise, also called cross-servicing) or contracting with the private sector. To meet our first objective in this self-initiated review—to describe the activities that have taken place in restructuring personnel offices and operations—we first surveyed 24 CFO agencies (as designated by the Chief Financial Officers Act of 1990), which employ most executive branch employees—to identify those that were restructuring personnel operations. These 24 CFO agencies represent about 97 percent of the nonpostal, full-time workforce of the executive branch. From among those that were restructuring personnel operations, we reviewed USDA, DOI, HHS, and VA to obtain further information about restructuring activities at these agencies. We selected these agencies primarily because they said they were using business process reengineering as an approach to restructuring and/or were providing or planning to provide personnel and payroll services to other agencies. We interviewed personnel officials from the four departments and selected component agencies to obtain information on the reasons for restructuring, the planning in preparation for restructuring, the activities undertaken to restructure, and the status of restructuring efforts. We also reviewed the restructuring plans of the four departments and component agencies. (The component agencies we reviewed are listed in app. I.) To address our second objective—to ascertain what, if any, performance measures are in place to gauge the results of restructuring activities—we discussed with responsible officials of the four departments and component agencies whether their organizations had or were developing measures to assess the performance of the restructured personnel offices and operations. Where measures were said to exist, we reviewed the documentation that described and supported the measure. In addition, to better understand the major issues associated with restructuring personnel operations and performance measurement, we reviewed current literature on the two subjects and spoke with performance measurement experts from the National Academy of Public Administration (NAPA) and the Saratoga Institute. In connection with our second objective, we computed one common measure—the personnel servicing ratio—to assess progress in restructuring. To compute the ratios, we obtained September 1993 and September 1997 data from OPM’s Central Personnel Data File (CPDF) on the number of employees and personnelists at the 24 agencies we surveyed. These personnelists were in the federal Personnel Management and Industrial Relations occupational group—GS-200s—that NPR specifically targeted for reduction. We used the NPR definition of personnel specialist with the understanding that some agencies classify some employees working in personnel offices in other occupations, such as program analysts (GS-345) or management analysts (GS-343). In addition, all personnel specialists in the GS-200 group may not have worked in personnel offices; some may have worked in allied offices, such as training and counseling. To address our third objective—to identify issues agencies may commonly encounter as they consider purchasing automated personnel and payroll services—we interviewed officials from the departments and component agencies who were involved in the development or purchase of computer hardware and/or software for use in personnel/payroll operations. We obtained information from these interviews on the decision processes for acquiring new technology, the challenges that surface in acquiring new technology, and the status of implementing the new technology at their departments and agencies. We also met with officials from OMB and OPM and representatives of two governmentwide councils to discuss governmentwide efforts to streamline personnel operations, including the use of technology to automate personnel processes. (For additional information on our objectives, scope, and methodology, see app. I.) We did our work in the Washington, D.C., metropolitan area and at several other locations listed in appendix I between October 1996 and January 1998 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Directors of OMB and OPM, the Secretaries of DOE, DOI, HHS, USDA, and VA, or their designees. A discussion of their comments appears at the end of this letter, and their written comments are included in appendixes II through VIII. The four departments we reviewed generally approached the restructuring of their personnel offices with the intent of achieving staff reductions. Although all four departments reduced the number of personnelists they employed by 14 percent or more, the personnel servicing ratio for three of the four departments did not change as much. Another key component of the departments’ restructuring plans was to install new technology—hardware and/or software—to automate paper-based personnel processes and thereby improve the responsiveness and quality of personnel services. However, for various reasons, such as an agency deciding to do additional system testing, these automation efforts had all fallen behind schedule. The four departments we reviewed had all developed restructuring plans. One of the primary goals of those plans was to reduce administrative staff, including the number of employees working in personnel offices. In reducing their administrative staffs, the departments were responding to a number of factors. One major impetus was the 1993 NPR recommendation to reduce administrative staff. Other major factors were the governmentwide reality of operating with reduced budgets, exemplified by a succession of budget agreements between Congress and the administration, as well as the requirement in the Federal Workforce Restructuring Act to reduce governmentwide full-time equivalent positions.