Federal managers have complained for years about the rigid and elaborate procedures required for federal personnel administration, often expressing the need for more flexibility within a system that has traditionally been based on uniform rules. Reformers have long sought to decentralize the personnel system and simplify the rules, arguing that however well the system may have operated in the past, it is no longer suited to meet the needs of a changing and competitive world. In 1983, for example, NAPA published a report critical of the excessive constraints on federal managers, including constraints on their human resources decisions. As part of the response to these criticisms, OPM decentralized and delegated many personnel decisions to the agencies and has encouraged agencies to use human capital flexibilities to help tailor their personnel approaches to accomplish their unique missions. Our strategic human capital model also advocates that agencies develop a tailored approach to their use of available flexibilities by taking advantage of those flexibilities that are appropriate for their particular organizations and their mission accomplishment. Because of this tailoring, the federal personnel system is becoming more varied, despite its often-cited characterization as a “single employer.” The trend toward increased flexibility has manifested itself a number of ways, including the efforts of some agencies to seek congressional approval to move away from the personnel provisions of Title 5 of the U.S. Code that have traditionally governed much of the federal government’s civil service system. As noted by OPM in a 1998 report, federal agencies’ status relative to these Title 5 personnel requirements can be better understood by thinking of them on a continuum. On one end of the continuum are federal agencies that generally must follow Title 5 personnel requirements. These agencies do not have the authority, for example, to establish their own pay systems. On the other end of the continuum are federal agencies that have more flexibility in that they are exempt from many Title 5 personnel requirements. For example, Congress provided the Tennessee Valley Authority and the Federal Reserve Board with broad authority to establish their own personnel systems and procedures. The movement in the direction of greater flexibility, in fact, has gained momentum to the extent that about half of federal civilian employees are now exempt from at least some of the personnel-related requirements of Title 5. In addition to receiving congressional authorizations for exemptions from the personnel-related requirements of Title 5, other mechanisms are available to introduce human capital innovations and flexibilities within federal agencies. OPM has the authority to review and make changes to its existing regulations and guidance to provide agencies with additional flexibilities. Additionally, a federal agency can obtain authority from OPM to waive some existing federal human resources laws or regulations through a personnel demonstration project. The goal of these demonstration projects is to encourage experimentation in human resources management by allowing federal agencies to propose, develop, test, and evaluate changes to their own personnel systems. In some cases, Congress has allowed some agencies to adopt alternatives that have been tested and deemed successful. For example, more flexible pay approaches that were tested within the Department of the Navy’s China Lake (California) demonstration project in the early 1980s were eventually adopted by other federal agencies, such as the Department of Commerce’s National Institute of Standards and Technology. Exemptions from Title 5 personnel requirements within our seven selected agencies help to illustrate the gradations of flexibility. IRS, for example, represents an agency with broad authority related to its human capital management. Efforts to reform IRS led to provisions under the IRS Restructuring and Reform Act of 1998, which gave the Secretary of the Treasury various pay and hiring flexibilities not otherwise available under Title 5, such as the authority to establish new systems for hiring and staffing, compensation, and performance management. State and ITA are examples of organizations in which some employees are not subject to Title 5, while the remainder of the organization is covered. In this case, Foreign Service employees at State and ITA are outside of Title 5. For the remaining four agencies we included in our review, the majority of their employees are covered under the personnel requirements of Title 5, with some limited exemptions. Air Force, for instance, has made use of flexibilities under the demonstration project authority and currently participates in two such demonstration projects, one involving laboratory personnel and another for the civilian acquisition workforce. In addition, several of our selected agencies, such as GSA and VBA, received additional flexibility through legislative authority to offer voluntary separation incentive payments, commonly known as buyouts, to help restructure their workforces. Figure 2 provides background information on the seven agencies along with a summary of some of their related exemptions from Title 5 personnel requirements. Even under current Title 5 personnel provisions and their applicable regulations, efforts to reform and improve the personnel system have provided many human capital flexibilities for agencies to use. Within broad parameters, such as adherence to merit system principles and employee protection from prohibited personnel practices, these flexibilities offer the agencies effective ways to accomplish their missions while maintaining the key values of a centralized system. For example, agencies have many flexibilities available to help them restructure and realign their workforces. Moreover, agencies have numerous compensation flexibilities that authorize them to provide additional direct payments to support their recruitment, relocation, and retention efforts, although some of them may require the approval of OPM or the Office of Management and Budget (OMB). Today, federal agencies are facing many human capital challenges. With the increasing numbers of employees retiring and the numbers of employees who will be eligible to retire in the near future, along with competition from private companies, federal agencies are in a struggle to recruit and retain highly skilled employees. In response to these challenges, agencies need to use the various human capital flexibilities that are available to them in managing their workforces to achieve agency missions and accomplish goals. Our discussions with agency officials and union representatives revealed numerous human capital flexibilities that they deemed effective in managing their workforces. These flexibilities encompassed broad areas of personnel-related actions such as recruitment, retention, compensation, position classification, incentive awards and recognition, training and development, performance management and appraisals, realignment and reorganization, and work arrangements and work-life policies. On the basis of these discussions, we identified the flexibilities that were the most frequently cited by agency and union officials as being the most effective for managing their agencies’ workforces. These flexibilities include work-life programs, such as alternative work schedules, child care assistance, and transit subsidies; monetary recruitment and retention incentives, including retention and relocation bonuses and retention allowances; special hiring authorities, such as student employment and outstanding incentive awards, which range from performance-based cash awards to time-off awards to symbolic items of nominal value, such as plaques and T-shirts. Table 1 provides a summary of these flexibilities and the cited benefits of implementing them. Agency officials and union representatives cited work-life programs among the most effective flexibilities for recruiting, motivating, and retaining staff. These programs are offered to help employees balance their work and family lives and include alternative work schedules, employee assistance programs, child care centers and assistance, transit subsidies, and telecommuting options. OPM has strongly supported the use of these family-friendly programs, indicating that they can help to attract and retain quality employees, boost morale, and reduce unscheduled leave. Our recent report looking at human capital challenges at the Securities and Exchange Commission revealed how agencies can sometimes overlook the effectiveness of these work-life programs in recruiting, retaining, and motivating staff. The following is additional information about the effectiveness of these work-life flexibilities. Alternative work schedules. Federal agencies generally have the authority to determine the hours of work for their employees to ensure that agencies meet organizational goals. Agencies may establish hours of work and scheduling flexibilities to replace the traditional schedules of 8 hours per day and 40 hours per week, such as full-time and part-time, overtime hours, and flexible work schedules. Scheduling flexibilities, such as alternative work schedules, were among the effective flexibilities most cited by agency managers and supervisors, human resources officials, and union representatives. Although some supervisors told us that such schedules can be a challenge to manage, these supervisors stated that this scheduling flexibility increases employee morale, strongly motivates employees, and allows employees to be more flexible in accomplishing job responsibilities. For example, IRS officials told us that the agency has made use of alternative work schedules since the early 1980s and that this flexibility is attractive to both current and potential employees. Supervisors at the San Francisco Mint said that the use of alternative work schedules reduces the amount of accumulated leave taken because employees can accomplish personal errands and tasks on their days off. According to human resources officials in GSA’s San Francisco region, about 1,300 of the region’s 1,500 employees make use of alternative work schedules. Employee assistance programs. Through these programs, agencies can provide a range of free, confidential counseling and referral services to assist employees who may be experiencing personal problems affecting their job performance or personal health. Agency and union officials said that these programs can be valuable in helping employees deal with issues such as work and family pressures. IRS supervisors in Philadelphia told us, for example, that IRS’s employee assistance program offers employees and their family members a way to address both work-related and nonwork- related issues and that the employees they had referred to the program had found the services to be quite beneficial. Officials at Langley Air Force Base told us that both civilian and military personnel use the agency’s employee assistance programs, which were designed to meet the needs of various employee groups. Child development centers and child care assistance. Many federal agencies provide on-site or near-site child development centers to help employees with child care needs. Civilian federal agencies recently obtained authority through federal statute to use appropriated funds from salaries and expenses to assist their lower income employees with the cost of child care. Agencies can also assist their employees with information about other organizations that can help employees locate quality child care services. At some of the field locations we visited, agencies provided on- site or near-site child care for their employees.