No management issue facing federal agencies could be more critical to their ability to serve the American people than their approach to strategic human capital management, including attracting, retaining, and motivating their employees. High-performing organizations in the private and public sectors have long understood the relationship between effective “people management” and organizational success. However, the federal government, which has often acted as if federal employees were costs to be cut rather than assets to be valued, has only recently received its wake-up call. As our January 2001 Performance and Accountability Series reports made clear, serious federal human capital shortfalls are now eroding the ability of many federal agencies—and threatening the ability of others—to economically, efficiently, and effectively perform their missions. The problem lies not with federal employees themselves, but with the lack of effective leadership and management, along with the lack of a strategic approach to marshaling, managing, and maintaining the human capital needed for government to discharge its responsibilities and deliver on its promises. All five of the agencies we reviewed have experienced challenges in managing their human capital. Each has implemented management changes in response to the challenges they face, including implementing strategies to empower and involve employees. FAA faces challenges, including the need to enhance communication and teamwork, and to provide employees with the training and skills they need to operate effectively. For example, we have reported on FAA’s implementation of management reforms, including delegating authorities to teams, to improve its rulemaking processes. In our July 2001 report on aviation rulemaking we recommended, among other things, that the FAA Administrator take steps to (1) empower team members by giving them the authority to coordinate with the associate administrators (which would eliminate a separate review and approval step), (2) empower team members by permitting them to set their own schedules and deadlines, and (3) hold staff and management accountable for ensuring that schedules are realistic. At IRS we identified the challenges the organization faces in revamping its human capital policies to help achieve its congressionally mandated transformation to an agency that better balances service to the taxpayers with enforcement of the tax laws. IRS has made major changes to modernize its organization and operations and comply with the IRS Restructuring and Reform Act of 1998. These changes present major management challenges and will require considerable time to successfully implement them, and IRS managers and employees are still learning how to work effectively in the new environment. In revamping its performance management system, for example, we reported that IRS’ new system is weakest at the front line, where interactions with taxpayers occur. However, IRS officials told us that IRS is conducting customer satisfaction surveys to enhance its knowledge about what IRS employees can do to better meet taxpayers’ needs. VBA faces challenges in processing veterans’ benefit claims accurately and in a timely manner. In its fiscal year 2000 performance report, the Veterans Administration reported that performance declined with respect to its rating-related claims-processing timeliness and national accuracy rate. Among the reasons it cited for this decline was underestimating how long it would take to realize the impact of initiatives such as increased staffing and improved training. We reported that many experienced claims-processing staff are expected to retire and that VBA’s training and recruitment programs may not be adequate to ensure a sufficient workforce of competent claims processors. VBA officials told us that, in response to the concern we raised that many of the training modules might not be available in time to train new employees, VBA has stepped up implementation of its plans to use a new Training and Performance Support System (TPSS). This system is intended to provide standardized training to new employees who will replace the wave of employees expected to retire during the next several years. According to VBA officials, they are currently using TPSS training modules to facilitate the training of some new employees, but the training modules needed for other newly hired employees will not be available until November 2001. In the interim, VBA is using a web-based “field guide” to train those employees. The field guide uses a variety of delivery mechanisms including satellite broadcasts, video teleconferencing and centralized and localized classroom instruction. FEMA also faces special mission-related challenges, including providing timely responses to disaster aid requests, preventing or reducing harm and losses from future disasters through cost-effective mitigation efforts, and working effectively with other federal, state, and local programs. To address its strategic human capital management challenges, FEMA has started an initiative to reduce middle management layers and streamline its organization. The fifth agency we report on—OPM—downsized significantly during the 1990s. Among its many responsibilities, OPM receives tens of thousands of federal employee claims for retirement and insurance benefits each year. Although its processes have not changed significantly since the 1980s, OPM plans to modernize its retirement systems. This modernization is OPM’s central strategy to meet the long-term customer service and financial management objectives for CSRS and FERS. In its fiscal year 2002 performance plan OPM reported that, beginning in fiscal year 2002, it will phase in a new business model for retirement claims processing. To meet our objectives, we asked officials at five agencies to identify initiatives they had that empowered or involved employees. From the inventories of the initiatives they developed in response to our request, we asked agency officials to identify those agency components and initiatives that, in their view, had successfully involved and empowered employees. We sought to identify practices that were commonly implemented by the agencies within the past 5 years. In some cases, agencies focused our attention on practices that began earlier. We interviewed agency executives, managers, supervisors, front-line employees, and union representatives to discuss how agencies had implemented these practices to empower and involve employees, and we analyzed related documents and information they provided. We did not attempt to verify the performance data that agencies provided. We included FAA in our review because it has certain exemptions from the Federal Acquisition Regulations designed to facilitate delegating procurement authorities to lower levels. We included IRS and OPM in our review, given IRS’ exemption from certain title 5 personnel provisions and OPM’s human capital leadership role in the federal government. FEMA and VBA were selected because a literature review of relevant articles indicated that front-line employees from those agencies had been empowered or involved in key agency decisions or operations. Because we were seeking to review initiatives that had successfully empowered and involved employees, we asked headquarters officials to identify organizational components for our review. Our FAA work was concentrated at the Mike Monroney Aeronautical Center in Oklahoma City, OK. Our FEMA work was done at the National Security Affairs Office, the Response and Recovery Directorate, and the Operations Support Directorate within FEMA headquarters in Washington, D.C., and at FEMA’s U.S. Fire Administration in Emmitsburg, MD. Our work at IRS was done at the Wage and Investment Division in IRS’ headquarters in Washington, D.C., and at the Accounts Management, Submissions Processing, and Compliance branches at the Ogden, UT, Service Center. Our OPM work was conducted at its Retirement and Insurance Service locations in Washington, D.C., and Boyers, PA. Our VBA work was conducted at VBA’s regional offices in Los Angeles, CA; Muskogee, OK; and Phoenix, AZ. Our selection process was not designed to provide examples that could be considered representative of all the employee empowerment and involvement initiatives at the agencies reviewed or the federal government in general. We conducted our work from October 2000 through August 2001 in accordance with generally accepted government auditing standards. The five agencies we reviewed implemented key empowerment and involvement practices as part of making organizational changes intended to realign organizations and processes to improve performance. The practices were (1) demonstrating top leadership commitment; (2) engaging employee unions in making changes; (3) training employees to enhance their knowledge, skills, and abilities; (4) using employee teams to help accomplish agency missions; (5) involving employees in planning, and sharing performance information; and (6) delegating authorities to front- line employees. Top leadership commitment is crucial in developing a vision, initiating organizational change, maintaining open communications, and creating an environment that is receptive to innovation. In earlier reports and testimonies, we observed that top leadership must play a critical role in creating and sustaining high-performing organizations. Without the clear and demonstrated commitment of agency top leadership, organizational cultures will not be transformed, and new visions and ways of doing business will not take root. Consistent attention to employee empowerment and involvement issues helps to ensure that changes are sustained. Agency leaders need to commit their organizations to valuing and investing in their employees by empowering, involving, and providing them the tools to do their best, and by implementing the modern performance management and incentives systems needed to focus employees’ efforts on achieving agency missions and goals. Top leadership commitment entails time, energy, and persistence in providing incentives and establishing accountability. Agency leaders must commit their organizations to valuing and investing in their employees and focusing their employees’ efforts on achieving stated agency missions and goals. While top leadership commitment can be demonstrated in many ways, the following are examples employees and managers identified for the selected initiatives we reviewed at these agencies. Think strategically about areas where innovation would make good business sense. Leaders conceptualized new approaches to improve performance and engaged employees and managers in shaping the implementation of that vision. For example, the Director at FAA’s Logistics Center saw the need for operating more like a private sector business and envisioned the organizational and operational changes that would be required to do that. The Logistics Center’s Director helped to ensure that all employees shared his vision by discussing proposed changes with his top-level managers and by meeting with front-line employees and union representatives to obtain their input about potential changes. Reorganize and integrate operations. Leaders implemented their visions by realigning their organizations to improve performance and increase the coordination of mission-related activities.