DOD’s civilian workforce has undergone a sizeable reduction but remains critical to DOD’s mission success. Strategic human capital management provides a framework for maximizing the value added by the civilian workforce through aligning its civilian human capital initiatives to support DOD’s overarching mission. Since the end of the cold war, DOD has undergone sizable reductions in its civilian workforce. Between fiscal years 1989 and 2002, DOD’s civilian workforce shrank from 1,075,437 to 670,166—about a 38 percent reduction. DOD accomplished this downsizing without proactively shaping the civilian workforce to have the skills and competencies needed to accomplish future DOD missions. As a result, today’s workforce is older and more experienced, but 58 percent will be eligible for early or regular retirement in the next 3 years. Moreover, the President’s fiscal year 2003 budget request projects that DOD’s civilian workforce will be further reduced by about 55,000 through fiscal year 2007. As shown in figure 1, at the end of fiscal year 2002, the military departments employed 85 percent of DOD’s civilians; 15 percent were employed by the other defense organizations. Furthermore, the 2000 Defense Science Board Task Force report observed that the rapid downsizing during the 1990s led to major changes in the roles of and balance between DOD’s civilian and military personnel and contractor personnel. The roles of the civilians and private-sector workforce are expanding, including participation in combat functions—as a virtual presence on the battlefield—and in support duties on both the domestic and international scenes. These changing roles call for greater attention to shaping an effective civilian workforce to meet future demands within a total force perspective. This perspective includes a clear understanding of the roles and characteristics of DOD’s civilian and military personnel and the most appropriate source of capabilities—military, civilian, or contractor. The Under Secretary of Defense for Personnel and Readiness is the principal staff assistant and advisor to the Secretary and Deputy Secretary of Defense for total force management as it relates to readiness, personnel requirements and management, and other matters. The Under Secretary’s office develops policies, plans, and programs for recruitment, training, equal opportunity, compensation, recognition, discipline, and separation of all DOD personnel, including active, reserve, and retired military and civilian personnel. This office also analyzes the total force structure as it relates to quantitative and qualitative military and civilian personnel requirements. Within this office is the Office of the Deputy Under Secretary of Defense for Civilian Personnel Policy, which formulates plans, policies, and programs to manage the DOD civilian workforce. Policy leadership and human resource programs and systems are provided through the Civilian Personnel Management Service. Strategic human capital management involves long-term planning that is fact based, focused on program results and mission accomplishment, and incorporates merit principles. Studies by several organizations, including GAO, have shown that highly successful performance organizations in both the public and private sectors employ effective strategic management approaches as a means to prepare their workforce to meet present and future mission requirements as well as achieve organizational success. In our 2001 High-Risk Series and Performance and Accountability Series and again in 2003, we designated strategic human capital as a high-risk area and stated that serious human capital shortfalls are threatening the ability of many federal agencies to economically, efficiently, and effectively perform their missions. We noted that federal agencies, including DOD and its components, needed to continue to improve the development of integrated human capital strategies that support the organization’s strategic and programmatic goals. In March 2002, we issued an exposure draft of our model of strategic human capital management to help federal agency leaders effectively lead and manage their people. The model is designed to help agency leaders effectively use their people and determine how well they integrate human capital considerations into daily decision making and planning for the program results they seek to achieve. Similarly, the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM) have developed tools that are being used to assess human capital management efforts. In October 2001, OMB developed standards for success for strategic human capital management—one of five governmentwide reform initiatives in the President’s Management Agenda. In December 2001, OPM released a human capital scorecard to assist agencies in responding to the OMB standards for success; later, in October 2002, OMB and OPM developed—in collaboration with GAO— revised standards for success. To assist agencies in responding to the revised standards, OPM released the Human Capital Assessment and Accountability Framework. In April 2002, the final report of the Commercial Activities Panel, mandated by Congress and chaired by the Comptroller General, sought to elevate attention to human capital considerations in making sourcing decisions. Federal organizations are increasingly concerned with sourcing issues because they are being held accountable for addressing another President’s Management Agenda initiative that calls for determining their core competencies and deciding how to build internal capacity or contract out for services. Until recently, top-level leadership at the department and component levels has not been extensively involved in strategic planning for civilian personnel; however, it is of higher priority to top-level leadership today than it has been in the past. With the exception of the Air Force, leadership at the component level has not been proactive, but is becoming more involved in responding to the need for strategic planning, providing guidance, or supporting and working in partnership with civilian human capital professionals. We have previously emphasized that high-performing organizations need senior leaders who are drivers of continuous improvement and also stimulate and support efforts to integrate human capital approaches with organizational goals. There is no substitute for the committed involvement of top leadership. Strategic planning for the Department of Defense civilian workforce is becoming a higher priority among DOD’s senior leadership, as evidenced by direction given in 2001 in the Quadrennial Defense Review (QDR) and the Defense Planning Guidance and by the Under Secretary of Defense for Personnel and Readiness to develop a civilian and military human resources strategic plan. We previously reported that a demonstrated commitment to change by agency leaders is perhaps the most important element of successful management reform and that leaders demonstrate this commitment by developing and directing reform. OMB and OPM have similarly advocated the need for top leadership to fully commit to strategic human capital planning. The Defense Science Board reported in 2000 that senior DOD civilian and military leaders have devoted “far less” attention to civilian personnel challenges than the challenges of maintaining an effective military force. In 1992, during the initial stages of downsizing, DOD officials voiced concerns about what they perceived to be a lack of attention to identifying and maintaining a balanced basic level of skills needed to maintain in-house capabilities as part of the defense industrial base. In our 2000 testimony, Strategic Approach Should Guide DOD Civilian Workforce Management, we testified that DOD’s approach to civilian force reductions was less oriented toward shaping the makeup of the workforce than was the approach it used to manage its military downsizing. In its approach to civilian workforce downsizing, the department focused on mitigating adverse effects (such as nonvoluntary reductions-in-force) through retirements, attrition, hiring freezes, and base closures. (See app. II for a time line of key events related to DOD’s civilian workforce downsizing.) DOD initiated a more strategic approach when it published its first strategic plan for civilian personnel (Civilian Human Resources Strategic Plan, 2002-2008) in April 2002. In developing the departmentwide plan, the Office of the Under Secretary of Defense for Personnel and Readiness made efforts to work in conjunction with defense components’ civilian human capital communities by inviting their leaders to contribute to working groups and special meetings and reviewing the services’ civilian human capital strategic plans. However, DOD has yet to provide guidance on how to integrate component-level civilian human capital strategic plans with its departmentwide civilian strategic plan. DOD officials said that full integration would be difficult because of the wide array of human capital services and mission support provided at the component level. However, one of the lessons learned in our previous work on strategic planning in the defense acquisition workforce was the need for leadership to provide guidance for planning efforts. Without guidance, defense components may not be able to effectively function together in support of the departmentwide plan. For example, DOD’s goal to provide management systems and departmentwide force planning tools may not be fully or efficiently achieved without a coordinated effort among all defense components. The component-level plans we reviewed included goals, objectives, or initiatives to improve analysis or forecasting of workforce requirements, but they did not indicate coordination with the departmentwide effort or with one another. Civilian human capital planning has emerged as an issue in another DOD-related forum for top leaders. In November 2002, the Human Resources Subcommittee of the Defense Business Practice Implementation Board released its report to DOD’s Senior Executive Council recommending, among other things, the establishment of a “Human Capital Transformation Team” to help implement agreed upon changes to transform human capital management in DOD’s civilian workforce. Leadership participation in strategic planning varies among the defense components we reviewed. High-level leaders in the Air Force, the Marine Corps, the Defense Contract Management Agency (DCMA), and the Defense Finance and Accounting Service (DFAS) have provided the impetus for strategic planning and are partnering with civilian human capital professionals to develop and implement their strategic plans. Such partnership is increasing in the Army and not as evident in the Department of the Navy. Since the mid-1990s, Air Force leadership has been relatively active in strategic planning for civilian human capital. In 1999, high-level Air Force leadership recognized the need for strategic human capital planning to deal with the significant downsizing that had occurred over the last several years. For the civilian workforce, this recognition culminated in the publication in 2000 of the Civilian Personnel Management Improvement Strategy White Paper; the Air Force produced an update of this document in 2002.