Strategic human capital management is receiving increased attention across the federal government. In January 2001, we designated strategic human capital management as a governmentwide high-risk area and continued this designation with the release of High-Risk Series: An Update in January 2003. Despite the considerable progress over the past 2 years, it remains clear that today’s federal human capital strategies are not appropriately constituted to meet current and emerging challenges or drive the needed transformation across the federal government. One of the key areas that federal agencies continue to face challenges in is creating results-oriented organizational cultures. Agencies lack organizational cultures that promote high performance and accountability and empower and include employees in setting and accomplishing programmatic goals, which are critical to successful organizations. To help agency leaders effectively lead and manage their people and integrate human capital considerations into daily decision making and the program results they seek to achieve, we developed a strategic human capital model. The model highlights the kind of thinking that agencies should apply, as well as some of the steps they can take, to make progress in managing human capital strategically. Since we designated strategic human capital management as a high-risk area in January 2001, the President’s Management Agenda, released in August 2001, placed the strategic management of human capital at the top of the administration’s management agenda. In October 2002, OMB and OPM updated the standards for success in the human capital area of the President’s Management Agenda, reflecting language that was developed in collaboration with GAO. To assist agencies in responding to the revised standards and addressing the human capital challenges, OPM released the Human Capital Assessment and Accountability Framework. One of the standards of success in the framework is a results-oriented performance culture, specifically a performance management system that effectively differentiates between high and low performance. On September 24, 2002, we convened a forum to discuss useful practices from major private and public sector organizational mergers, acquisitions, and transformations that federal agencies could learn from to successfully transform their cultures and that the then proposed Department of Homeland Security could use to merge its various originating agencies or their components into a unified department. The participants identified the use of performance management systems as a tool to help manage and direct the transformation process. Specifically, performance management systems must create a line of sight showing how team, unit, and individual performance can contribute to overall organizational results. The system serves as the basis for setting expectations for employees’ roles in the transformation process and for evaluating individual performance and contributions to the success of the transformation process and, ultimately, to the achievement of organizational results. An effective performance management system can be a strategic tool to drive internal change and achieve desired results. We found that public sector organizations in the United States and abroad have implemented a selected, generally consistent set of key practices as part of their performance management systems. Federal agencies can implement these practices to develop effective performance management systems that help create the line of sight between individual performance and organizational success and transform their cultures to be more results-oriented, customer- focused, and collaborative in nature. An explicit alignment of daily activities with broader results is one of the defining features of effective performance management systems in high- performing organizations. These organizations use their performance management systems to improve performance by helping individuals see the connection between their daily activities and organizational goals and encouraging individuals to focus on their roles and responsibilities to help achieve these goals. Such organizations continuously review and revise their performance management systems to support their strategic and performance goals, as well as their core values and transformational objectives. High-performing organizations can show how the products and services they deliver contribute to results by aligning performance expectations of top leadership with organizational goals and then cascading those expectations down to lower levels. To this end, we reported that in fiscal year 2000 the Federal Aviation Administration (FAA) was able to show how the Department of Transportation’s (DOT) strategic goal to promote public health and safety was cascaded through the FAA Administrator’s performance expectation to reduce the commercial air carrier fatal accident rate to a program director’s performance expectation to develop software to help aircraft maintain safe altitudes in their approach paths, as shown in figure 2. The FAA Administrator’s performance agreement for fiscal year 2000 included a performance expectation to reduce the commercial air carrier fatal accident rate by implementing the Safer Skies Agenda. As part of implementing the Safer Skies Agenda, the Flight Standards Service Director had a performance expectation to meet milestones for reducing a type of crash called controlled flight into terrain, which occurs when pilots lose their sense of the plane’s relation to the surface below. Among these milestones included validating Minimum Safe Altitude Warning software, which had to be developed by the Aviation Systems Standards Program Director. This software system is designed to aid air traffic controllers through both visual and aural alarms by alerting them when a tracked aircraft is below, or predicted by the computer to go below, a predetermined minimum altitude. Similarly, we recently reported that as a first step in establishing a permanent performance management system, the Transportation Security Administration (TSA) has implemented standardized performance agreements for groups of employees, including transportation security screeners, supervisory transportation security screeners, supervisors, and executives. These performance agreements include both organizational and individual goals and standards for satisfactory performance that can help TSA establish a line of sight showing how individual performance contributes to organizational goals. For example, each executive performance agreement includes organizational goals, such as to maintain the nation’s air security and ensure an emphasis on customer satisfaction, as well as individual goals, such as to demonstrate through actions, words, and leadership, a commitment to civil rights. To strengthen its current executive performance agreement and foster the culture of a high- performing organization, we recommended that TSA add performance expectations that establish explicit targets directly linked to organizational goals, foster the necessary collaboration within and across organizational boundaries to achieve results, and demonstrate commitment to lead and facilitate change. TSA agreed with this recommendation. We reported in September 2002 that some agencies set targets for individual performance that were linked to organizational goals. For example, the Veterans Benefits Administration (VBA) identified targets with specific levels of performance for senior executives that were explicitly linked to VBA’s priorities for fiscal year 2001 and the Department of Veterans Affairs’ (VA) strategic goals for fiscal years 2001 to 2006. For example, to contribute to VA’s strategic goal to “provide ‘One VA’ world class service to veterans and their families through the effective management of people, technology, processes and financial resources” and to address its priority of speed and timeliness, VBA set a national target for property holding time—the average number of months from date of acquisition to date of sale of properties acquired due to defaults on VA guaranteed loans—of 10 months for fiscal year 2001. To contribute to the national target, the senior executive in the Nashville regional office had a performance expectation for his office to meet a target of 8.6 months. As public sector organizations shift their focus of accountability from outputs to results, they have recognized that the activities needed to achieve those results often transcend specific organizational boundaries. Consequently, organizations that are flatter and focused on collaboration, interaction, and teamwork across organizational boundaries are increasingly critical to achieve results. High-performing organizations use their performance management systems to strengthen accountability for results, specifically by placing greater emphasis on fostering the necessary collaboration both within and across organizational boundaries to achieve results. For example, in August 2002, we reported that Canada’s agricultural department, Agriculture and Agri-Food Canada, used individual performance agreements to specify the internal or external organizations whose collaboration is needed to help individuals contribute to the departmental crosscutting goals or areas. Specifically, the head of the department’s Market and Industry Services Branch had in his 2001-02 performance agreement the expectation to “lead efforts to develop the department’s ability to deal with emerging technical trade issues” that aligned with the crosscutting area of “international issues.” The agreement also listed two internal units whose collaboration was needed to meet the expectation—the department’s Research Branch and its Strategic Policy Branch—as well as two external organizations—the Canadian Food Inspection Agency and Health Canada. While the performance agreement provides a vehicle for identifying and communicating with the various organizations associated with each crosscutting performance expectation, the department leaves it up to individuals to determine how to collaborate with their organizations when working to fulfill their performance agreements. Similarly, we reported in October 2000 that the Veterans Health Administration’s (VHA) Veterans Integrated Service Network (VISN) headquartered in Cincinnati implemented performance agreements that focused on patient services for the entire VISN and were designed to encourage the VISN’s medical centers to work collaboratively. In 2000, the VISN Director had a performance agreement with “care line” directors for patient services, such as primary care, medical and surgical care, and mental health care. In particular, the mental health care line director’s performance agreement included improvement goals related to mental health for the entire VISN. To make progress towards these goals, this care line director had to work across each of the VISN’s four medical centers with the corresponding care line managers at each medical center. As part of this collaboration, the care line director needed to establish consensus among VISN officials and external stakeholders on the strategic direction for the services provided by the mental health care line across the VISN; develop, implement, and revise integrated clinical programs to reflect that strategic direction for the VISN; and allocate resources among the centers for mental health programs to implement these programs. High-performing organizations provide objective performance information to individuals to show progress in achieving organizational results and other priorities, such as customer satisfaction and employee perspectives, and help individuals manage during the year, identify performance gaps, and pinpoint improvement opportunities. Having this performance information in a useful format also helps individuals track their performance against organizational goals and compare their performance to that of other individuals.