A Model of Strategic Human Capital Management

8/2/2019 A Model of Strategic Human Capital Management

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GAOUnited States General Accounting Office

Exposure Draft

March 2002 A MODEL OFSTRATEGIC HUMANCAPITALMANAGEMENT

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United States General Accounting OfficeWashington, D.C. 20548

Comptroller Generalof the United StatesA

March 15, 2002

This exposure draft of our Model of Strategic Human Capital Management

is intended to help federal agency leaders better manage their

organizations most important assettheir people. Federal agencies that

acquire, develop, and retain high performing employees with the

appropriate skills and competencies are better able to respond to the needs

of the public on a daily basis and in times of crisis. The events of

September 11, 2001, and the continuing efforts to ensure homeland security

reinforce the vital importance of public servants at all levels.

The model is designed to help agency leaders effectively use their people,

or human capital, and determine how well they integrate human capital

considerations into daily decision-making and planning for the program

results they seek to achieve. In so doing, the model highlights the

importance of a sustained commitment by agency leaders to maximize the

value of their agencies human capital and manage related risks.

In publishing this model, we are aware that GAO is not the only agency

releasing tools for strategic human capital management. On October 30,

2001, the Office of Management and Budget (OMB) developed standards

for success in each of its five governmentwide management initiatives,

including the strategic management of human capital, to show how well anagency is executing the initiatives. In December 2001, the Office of

Personnel Management (OPM) released a human capital balanced

scorecard to assist agencies in responding to the OMB tool. While GAOs

human capital model was developed independently of OMB and OPM, we

provided drafts of the model for their review prior to publication to help

ensure that the three efforts are conceptually consistent. We hope that

agencies will find the perspective and information in our human capital

model helpful in their efforts to respond to the administrations

management initiatives, get to green on OMBs management scorecard,

and use the tools developed by OPM.

Over the coming months, we will continue to work closely with OPM, OMBCongress, and others to explore opportunities to develop a more fully

integrated set of guidance and tools for agencies to use to address their

human capital challenges. Consistent with that collaborative approach, we

are issuing this model as an exposure draft as a way of seeking further

advice and feedback. We also hope to identify additional examples of
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specific and practical steps agencies are taking to make progress. If youhave comments, questions, or would like to inform us regarding theprogress you have made, please contact J. Christopher Mihm, Director,Strategic Issues, [email protected].

David M. WalkerComptroller GeneralOf the United States
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Preface

People are an agencys most important organizational asset. Anorganizations people define its character, affect its capacity to perform,and represent the knowledge-base of the organization. As such, effectivestrategic human capital management approaches serve as the cornerstoneof any serious change management initiative. They must also be at thecenter of efforts to transform the cultures of federal agencies so that theybecome less hierarchical, process-oriented, stovepiped, and inwardlyfocused; and more flat, results-oriented, integrated, and externally focused

In January 2001, GAO designated strategic human capital management as agovernmentwide high-risk area.1 As GAOs January 2001High-Risk Series

and Performance and Accountability Series reports make clear, serioushuman capital shortfalls are eroding the ability of many agencies, andthreatening the ability of others, to economically, efficiently, and effectivelyperform their missions.2 Plainly, the major problem is not federalemployees. Rather, the problem is the lack of a consistent strategicapproach to marshaling, managing, and maintaining the human capitalneeded to maximize government performance and ensure itsaccountability. OurHigh-Risk report outlined four pervasive humancapital challenges now facing the federal government:3

Leadership, continuity, and succession planning Strategic human capital planning and organizational alignment Acquiring and developing staffs whose size, skills, and deployment meet

agency needs Creating results-oriented organizational cultures

1 See U.S. General Accounting Office,High-Risk Series: An Update, GAO-01-263(Washington, D.C.: Jan. 2001).

2 U.S. General Accounting Office,Performance and Accountability SeriesMajorManagement Challenges and Program Risks: A Governmentwide Perspective , GAO-01-24(Washington, D.C.: Jan. 2001). In addition, see the accompanying 21 reports (numberedGAO-01-242 through GAO-01-262) on specific agencies.

3GAO-01-263.
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These challenges are longstanding and will not be quickly or easilyaddressed. They require sustained and inspired efforts by many parties,including the President, department and agency leaders, the Office ofManagement and Budget, the Office of Personnel Management, Congress,and others.4 Comprehensive human capital legislative reforms will likelybe needed, but agency leaders must not wait for them to happen. Much ofthe authority agency leaders need to manage human capital strategically isalready available under current laws and regulations. Therefore, webelieve the first step toward meeting the governments human capitalchallenges is for agency leaders to identify and make use of all theappropriate administrative authorities available to them to manage their

people for results. The use of these authorities often will need to beundertaken as part of and consistent with proven change managementpractices. The second step is for policymakers to pursue incrementallegislative reforms to give agencies additional tools and flexibilities to hiremanage, and retain the human capital they need, particularly in criticaloccupations. The third step is for all interested parties to work together toidentify the kinds of comprehensive legislative reforms in the humancapital area that should be enacted over time. These reforms should placegreater emphasis on skills, knowledge, and performance in connectionwith federal employment and compensation decisions, rather than thepassage of time and rate of inflation, as is often the case today.

A Model Of StrategicHuman CapitalManagement: A NewTool For AgencyLeaders

The human capital model highlights the kinds of thinking that agenciesshould apply, as well as some of the steps they can take, to make progressin managing human capital strategically. The model consists of thefollowing:

The Critical Success Factors Table identifies eight critical successfactors for managing human capital strategically, which embody anapproach to human capital management that is fact-based, focused onstrategic results, and incorporates merit principles and other nationalgoals. Each critical success factor is then presented in a table,

illustrating their development across three levels. Discussions inPointers expand upon the eight critical success factors

to highlight not just the needed actions but the kind of thinking thatmarks high-performing organizations approaches to managing people

4 See U.S. General Accounting Office,Human Capital: Taking Steps to Meet Current andEmerging Human Capital Challenges, GAO-01-965T (Washington D.C.: July 17, 2001).
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through the presentation of concepts, steps for progressing, and agencycase illustrations.

Appendix A includes a list of related GAO products corresponding to theeight critical success factors.

In developing the model, we built upon GAOsHuman Capital: A Self-Assessment Checklist for Agency Leaders (GAO/OCG-00-14G, September2000). In addition, we considered lessons learned from GAO reports onpublic and private organizations that are viewed as leaders in strategichuman capital management and managing for results. Additional GAOreports highlighting the progress and shortcomings of individual federal

agencies in these two areas were also consulted (Appendix A). Our modewas further informed by the findings of external reports on strategic humancapital management and managing for results from academia, OPM, theMerit Systems Protection Board, the National Academy of PublicAdministration, and others.

We also reflected upon our own experience in strategic human capitalmanagement and lessons learned from our use of flexibilities available toGAO for maximizing the performance and accountability of GAOemployees.5 Since maximizing performance and assuring accountabilityare at the heart of our mission at GAO, we believe it is our responsibility tolead by example, especially in the human capital area. By managing GAOsworkforce strategically and focusing on results we are helping to improveour performance and enhance accountability. By doing so, we also hope todemonstrate to other federal agencies that they can make similarimprovements in the way they manage their people.

Individuals who made key contributions to this product include StephenAltman, Martin DeAlteris, Ellen V. Rubin, Shelby D. Stephan, and EdwardStephenson.

5 For more information on GAOs efforts, see GAO-01-965T.
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Critical Success Factors Table

The Critical Success Factors Table identifies eight critical success factorsfor managing human capital strategically. These factors are organized inpairs to correspond with the four governmentwide high-risk human capitachallenges that our work has shown are undermining agency effectiveness(Figure 1). Taken together, the eight critical success factors embody anapproach to human capital management that is fact-based, focused onprogram results and mission accomplishment, and incorporates meritprinciples and other national goals. When considering the human capitalcornerstones and the critical success factors, it is important to rememberthat they are interrelated and mutually reinforcing. Any pairing or orderingof human capital issues may have a sound rationale behind it, but no

arrangement should imply that human capital issues can becompartmentalized and dealt with in isolation from one another.
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Figure 1:

All of the critical success factors reflect two principles that are central tothe human capital idea:

People are assets whose value can be enhanced through investment. Aswith any investment, the goal is to maximize value while managing risk

4 Human CapitalCornerstones 8 Critical Success Factors

Leadership Commitmentto Human CapitalManagement

Role of theHuman Capital Function

TargetedInvestments inPeople

HumanCapital ApproachesTailored to Meet

Organizational Needs

Acquiring,Developing, andRetaining Talent

Results-Oriented Organizational

ultures

Empowermentand Inclusiveness

Unit andIndividual PerformanceLinked to OrganizationalGoals

StrategicHuman CapitalPlanning

Integrationand Alignment

Data-DrivenHuman CapitalDecisions
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An organizations human capital approaches should be designed,implemented, and assessed by the standard of how well they help theorganization achieve results and pursue its mission.

For each of the eight critical success factors, the table describes threelevels: Level 1, Level 2, and Level 3 (Figure 2).

Figure 2: The Three Levels

The descriptions portray the approach to managing people that can beexpected of an organization at each level. To understand the progressionfrom level to level, it is best to keep in mind the two central human capitalideas just discussed. An agency atLevel 1 is unlikely to have effectively puthese two principles into practice. AtLevel 2 an agency is clearly takingsteps to apply them. An agency atLevel 3 has made these principles anintegral part of its approach to doing business, and can see demonstrableresults from having done so. Progressing to Level 3, which each agencyshould strive to accomplish, will take considerable time, effort, andresources on behalf of agency leadership to successfully manage therequired organizational change. The use of this model requires a long-termcommitment to valuing human capital as a strategic asset.

Level 1

The approach to human capital is largely compliance-based; the agencyhas yet to realize the value of managing human capital strategically toachieve results; existing human capital approaches have yet to beassessed in light of current and emerging agency needs.

Level 2

The agency recognizes that people are a critical asset that must bemanaged strategically; new human capital policies, programs, andractices are bein desi ned and im lemented to su ort mission

accomplishment.Level 3

The agency's human capital approaches contribute to improved agencyperformance; human capital considerations are fully integrated intostrategic planning and day-to-day operations; the agency is

continuously seeking ways to further improve its "people management"to achieve results.
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Human CapitalCornerstone

Leadership

Critical SuccessFactors

Commitment toHuman CapitalManagement

Role of theHuman Capital

Function

Agency leaders view people ascosts to be cut rather than asassets to be valued.Management decisionsinvolving the workforce areoften made without consideringhow these decisions may affect

mission accomplishment.Similarly, business decisionsare often made without dueconsideration of the humancapital needs they entail or thehuman capital approaches thatmay be needed for successfulimplementation.

Human capital management isconsidered a support function,

separate from and generallysubordinate to the agencyscore planning and businessactivities. The personnel orhuman resource managementoffice is largely process-oriented and focused onensuring agency compliancewith merit system rules andregulations. Expectations forstaff in these offices are limitedto processing transactions andaddressing personnel issueson a case-by-case basis.

Agency leaders acknowledgethe importance of human capitalto mission accomplishment, andhave informed managers at alllevels of the roles they need toplay in acquiring, developing,and retaining people to meet the

agencys programmatic needs.The agency is working toexplicitly link its human capitalapproaches to intended programresults.

Human capital professionalshave begun to focus on the

agencys business needs andtheir role in filling them. Thehuman capital function is intransition from rules to tools,facilitating compliance with meritsystem principles and othernational goals, and helping theagency more effectively meet itsstrategic and business goals.Human capital professionals areexpected to be customer-oriented and to develop theexpertise needed to be effectivein their new roles.

Agency leaders view people asan important enabler of agencyperformance, recognize the needfor sustained commitment by theagency to strategically manageits human capital, and stimulateand support efforts to integrate

human capital approaches withorganizational goals. Theagencys human capitalapproaches are consistentlydeveloped, implemented, andevaluated by the standard of howwell they support the agencysefforts to achieve program results.Managers at all levels activelysupport these concepts and areprepared and held accountablefor effectively managing people.

Human capital professionalspartner with agency leaders and

line managers in developingstrategic and program plans. Thehuman capital office provideseffective human capital strategiesto meet the agencys current andfuture programmatic needs andfulfil merit systems principles andother national goals. Humancapital professionals areprepared, expected, andempowered to provide a range oftechnical and consultativeservices to their internalcustomers; agency leaders andmanagers consistently recognizethe key role of human capitalprofessionals in helping theagency and its people effectively

pursue their mission. The agencyhas streamlined personnelprocesses and effectivelyemploys technology to meetcustomer needs.

Level 1 Level 2 Level 3
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StrategicHumanCapitalPlanning


Integrationand Alignment

Data-DrivenHuman CapitalDecisions

The agency has yet to fullyrecognize the link between itshuman capital approaches andorganizational performanceobjectives. Existing humancapital approaches have yet tobe assessed in light of currentand emerging agency needs.The agency changes or adoptshuman capital approacheswithout considering how wellthey support organizationalgoals and strategies, or howthese approaches may beinterrelated.

Decisionmakers lack criticalinformation with which tocreate a profile of theworkforce (e.g., skills mix,deployment, and demographictrends) or to evaluate theeffectiveness of human capitalapproaches, partially due toinadequate data sources.Performance measures andgoals for the agency's humancapital programs, especially asthey link to programmaticoutcomes, have yet to beidentified.

The agency's human capitalneeds are considered duringstrategic and annual planning.Existing human capitalapproaches have been assessedfor their alignment with currentand emerging needs. Newhuman capital initiatives are indesign or implementationspecifically to supportprogrammatic goals. Theseinitiatives are building towards acoherent, results-oriented humancapital program.

The agency is working to ensurethat information systems are inplace to generate meaningfuland reliable data across a rangeof human capital activities. Datagathered includes workforceshape, competencies and skillsmix, and demographic trends.The agency has profiled itsworkforce so that usableinformation is on hand withwhich to make decisions in suchareas as acquiring, developing,and retaining talent. The agencyhas identified performancemeasures and goals for itshuman capital programs, withattention to establishing the linkbetween these programs andagency results.

The agency's human capitalapproaches demonstrably supportorganizational performanceobjectives. The agency considersfurther human capital initiatives orrefinements in light of bothchanging organizational needsand the demonstrated successesor shortcomings of its humancapital efforts. The human capitalneeds of the organization andnew initiatives or refinements toexisting human capitalapproaches are reflected instrategic workforce planningdocuments.

Decisions involving human capitalmanagement and its link toagency results are routinelyinformed by complete, valid, andreliable data. Data gathered iskept current. Agency leaders usethis information to manage risk byspotlighting areas for attentionbefore crises develop and toidentify opportunities forimproving agency results.Performance measures for theagency's human capital programshave been distilled to a vital few,and are an integral part of theagency's strategic planning,performance measurement, andevaluation efforts. Data on theagency's workforce profile,performance goals and measuresfor human capital approaches,and areas requiring agencyattention are reflected in strategicworkforce planning documents.

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Acquiring,Developing,and RetainingTalent

TargetedInvestments inPeople

Human CapitalApproachesTailored to MeetOrganizationalNeeds

Agency leaders approachhuman capital expenditures(e.g., professional developmentand knowledge management,recruiting programs, pay andbenefits, performanceincentives, and enabling

technology) as costs thatshould be minimized ratherthan as investments that shouldbe managed to maximize valuewhile minimizing risk. Fundingdecisions may be ad hoc,without clearly definedobjectives or adequateconsideration of theirimplications for the workforce.

Agency managers believe thatmeaningful improvements inhuman capital managementare not feasible. The range oftools and flexibilities available

to the agency under currentlaws and regulations have yetto be explored. In addition, thedepartment or agency mayhave self-imposed constraintsin place that are excessivelyprocess-oriented or based onobsolete perceptions of civilservice laws, rules, orregulations.

Human capital expenditures areregarded as investments inpeople and in the agency'scapacity to perform its mission.Investment strategies foracquiring, developing, andretaining staff are evaluated and

developed in light of modernhuman capital managementpractices.

Standardization and by-the-bookhuman capital management areyielding to flexible and innovativeapproaches. Managers haveidentified the tools and

flexibilities available to themunder current law and are usingmany of these to modernize theirhuman capital approaches tohelp meet current and emergingneeds. The agency is lookingboth within and outside itself formodel principles and practices,and is pursuing opportunities totest new and more results-oriented approaches.

Agency strategies for investing inhuman capital are fully integratedwith needs identified through itsstrategic and annual planning.The goals and expectations forthese investments are transparentand clearly defined, and their

rationale is consistent across therange of human capital programs.The efficiency of the investmentsis continuously monitored and theeffectiveness is periodicallyevaluated.

The agency tailors its humancapital strategies to meet itsspecific mission needs. As such,it is taking all appropriateadministrative actions available to

it under current laws, rules, andregulations. In addition, it isexploring opportunities toenhance its competitiveness asan employer and eliminatebarriers to effective human capitalmanagement. If needed, thisincludes producing a compellingbusiness case to support selectedlegislative initiatives.

Level 1 Level 2 Level 3Critical Success

Factors
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Results-OrientedOrganizationalCultures


EmpowermentandInclusiveness

Unit andIndividualPerformanceLinked toOrganizationalGoals

Managers and staff rigidlyadhere to standardizedprocedures and traditionalmodes of thinking. Humancapital management in theagency is driven by top-downdecision-making; relations

between management andemployees and theirrepresentatives are frequentlymore adversarial than isnecessary. Substantial timeand resources are consumedby reacting to workplacedisputes and long-standingsources of conflict. Theagency's approach to equalopportunity is compliance-oriented and reactive.

The organizational culture ishierarchical, process-oriented,stovepiped, and inwardlyfocused. Performanceexpectations for managers andstaff are blurred by an unclearorganizational mission and alack of clearly defined andconsistently communicatedcore values.

The agency is lessening itsreliance on standardizedapproaches and encouragingprogram managers to innovateand take risks. Agency leadersare acknowledging the value ofemployee input and feedback to

improve the workplaceenvironment and focus onresults; management andemployee representatives stresscommunication and identifyshared interests. The agencyworks to build a diverseworkforce and has declared"zero tolerance" ofdiscrimination.

The agency has created thebasis for employee expectationsby defining and communicatingits mission, core values, strategicgoals and objectives, andbusiness strategies.Expectations for managers areshifting from complying withdetailed rules and procedures toaccomplishing program goals.The agency's performancemanagement and incentivesystems are being designed and

tested to make employees awareof their roles and responsibilitiesin helping the agency achieve itsperformance goals. Effor ts areunder way to enhance internalcooperation.

Managers, teams, and employeesat all levels are given the authoritythey need to accomplishprogrammatic goals; innovationand problem-solving areencouraged. In developingapproaches to managing the

workforce, agency leaders seekout the views of employees at alllevels and communication flowsup and down the organization.Management and employeerepresentatives workcollaboratively to achieveorganizational outcomes. Theagency works to meet the needsof employees of all backgrounds,maintains "zero tolerance" ofdiscrimination, strives actively toreduce the causes of workplaceconflicts, and ensures thatconflicts are addressed fairly andefficiently. The agency recognizesand demonstrates that aninclusive workforce is a

competitive advantage forachieving results.

The organizational culture isresults-oriented and externallyfocused. Individual performancemanagement is fully integratedinto the agency's organizationalgoals and is used as a basis formanaging the organization.Managers are held accountablethrough performancemanagement and rewardssystems for achieving strategicgoals and objectives, creatinginnovation, and supporting

continuous improvement. Clearlydefined, transparent, andconsistently communicatedperformance expectationsaddressing a range ofresults/customer/employee issuesare in place to rate, reward, andhold accountable employees andteams at all levels.

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Maximizing the value of human capital is a function not just of specificactions but of cultural transformation. This section expands the discussionof the eight critical success factors to highlight the kind of thinking andaction that marks high-performing organizations approaches to managingpeople through the presentation ofConcepts andSteps for Progressing thaagencies can pursue to help maximize the value of their human capital.

Accompanying the discussion of each critical success factor is a caseillustration involving a federal agency that has taken positive steps towardaddressing one of its human capital challenges. We have also noted, whereappropriate, the positive consequences that have resulted from such

efforts. The fact that an organization is profiled for a particular criticalsuccess factor is not meant to imply complete success or lack of success inother dimensions. Furthermore, the efforts highlighted in the caseillustrations are not intended to exemplify all the potential steps an agencymay take to make progress under each critical success factor.

Leadership

Commitment to HumanCapital ManagementConcepts:An effective organization includes a senior leadership teamcommitted to developing more effective ways of doing business,accomplishing results, and investing in human capital. Perhaps the mostimportant element of successful management reform is the demonstratedcommitment of top leaders to change.6 Political leaders as well as seniorcareer executives demonstrate this commitment by personally developingand directing reform, driving continuous improvement, and characterizingthe agencys mission in reform initiatives.

6 U.S. General Accounting Office,Management Reform: Elements of SuccessfulImprovement Initiatives . GAO/T-GGD-00-26 (Washington, D.C.: October 15 1999).
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Previous GAO reports and testimonies have underscored the importance ohaving agency leaders and managers with the skills and commitment todrive cultural change that focuses on results.7 Agency leaders, career andpolitical alike, should be held accountable and should hold othersaccountable for the ongoing monitoring and refinement of human capitalapproaches to ensure continuous effectiveness, constant improvement,and increased mission accomplishment within the agency. Moreover, a keyfactor in the success of any specific strategic human capital initiative is thesustained attention of senior leaders and managers at all levels of theagency to valuing and investing in their employees. This leadership iscritical for an agency to overcome its natural resistance to change, to

marshal the resources needed in many cases to improve management, tobuild and maintain an organizationwide commitment to improving its wayof doing business, and to create the conditions for effectively improvinghuman capital approaches.

Steps for Progressing: We have noted that successful organizations knowthe importance of fostering a committed leadership team and providingreasonable continuity through succession planning and executivedevelopment. Career executives can provide the long-term commitmentand focus needed for the agency to achieve strategic human capitalmanagement. Two mechanisms for fostering a committed leadership teamare an executive development program and comprehensive successionplanning which are linked to agency goals and objectives. The executivedevelopment program can include planned developmental opportunities,learning experiences, and feedback for candidates. Support for and use ofgovernment and nongovernment executive development programs canhelp agency leaders in establishing an active executive developmentprogram.

To hold managers accountable for human capital management, agencyleaders can make an effort to select managers who have the ability tomanage human capital and can see the connection between that

7 For example see U.S. General Accounting Office,Human Capital: Implementing anEffective Workforce Strategy Would Help EPA to Achieve Its Strategic Goals (GAO-01-812,July 31, 2001); U.S. General Accounting Office,HUD Management: Progress Made onManagement Reforms, But Challenges Remain (GAO-02-45, October 31, 2001); U.S. GeneraAccounting Office,Medicare: 21 st Century Challenges Prompt Fresh Thinking AboutPrograms Administrative Structure (T-HEHS-00-108, May 4, 2000); and U.S. GeneralAccounting Office,Major Management Challenges and Program Risks: Department ofEnergy (GAO-01-246, January 1, 2001).
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responsibility and the organizations ability to achieve its long-term goals.Performance appraisal feedback for those managers selected shouldinclude a review of human capital management competencies, technicalskills, and the accomplishment of program results. Furthermore, agenciescan modify incentive systems to emphasize the consideration of long-termconsequences of human capital management decisions in addition toimmediate results.

Agency leaders have other opportunities for displaying their commitmentto human capital. Continuous learning efforts, employee-friendlyworkplace policies, competency-based performance appraisal systems, and

retention and reward programs are all ways in which agencies can valueand invest in their human capital. The sustained provision of resources forsuch programs can show employees and potential employees thecommitment agency leaders have to strategic human capital management.


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Role of the Human CapitalFunction

Concepts: The effective pursuit of organizational alignment and strategichuman capital management requires the integration of human capitalapproaches with strategies for accomplishing organizational missions andprogram goals. Such an integration allows the agency to ensure that itscore processes efficiently and effectively support mission-relatedoutcomes. This new strategic approach, or redirected focus of the human

Leadership:Commitment toHuman Capital Management

Case IllustrationU.S. MintMint)

To demonstrate its commitment to human capital, agency leadership at the U.S.Mint (Mint) has supported several initiatives involving the use of human capitallexibilities. According to officials at the Mint, the full support of agency leadership

was attained for these initiatives that were pursued for their strategic value andalignment with business goals. The Mint has pursued approaches in the areas ofrecruiting, hiring, developing, and retaining talent, increasing the flexibility of theworkforce, and respecting and rewarding employees.

The U.S. Mint is facing considerable challenges to recruit and retain a high qualityworkforce and, in response, has begun to explore ways to take advantage of all thehuman capital flexibilities currently available under existing laws and regulations.Recognizing this challenge, the Office of the Chief Financial Officer obtained the fullsupport of agency leadership to assign two full time employees and provide budgetresources for a Human Resources Flexibilities Team that was formed to do a two-phase study concerning human capital flexibilities. Phase one included anextensive review of all human capital flexibilities currently available to the Mint underexisting laws and regulations. Phase two included an analysis of the Mint's currentuse of flexibilities and the development of recommendations to agency leadershipfor increasing their effectiveness as recruitment and retention tools that wereprioritized against the Mint's strategic goals. Many new programs have beeninitiated or are planned as a result of this effort. For example, the Mint hasimplemented an Information Technology Pilot Study to facilitate the hiring process,

which has resulted in the Mint hiring six new IT employees in an average time spanof 15 days. Still in development is a Single Agency Qualifications Standard with thepurpose of collapsing 13 occupations into one occupation to provide managementand employees with the flexibility to move from one job to another. Also indevelopment is an Occupational Training Agreements program in conjunction withthe Competency Based Careers initiative. Under the Mint's competency based jobdescription, an employee can sign an occupational training agreement stating thathe or she will acquire new skills which will allow for promotion without the one yeartime-in-grade requirement. According to agency officials, managers, unionrepresentatives, human resources staff, and employees were informed of andinvolved in the development of these new approaches.


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capital function, centers on the contributions that it can make to the long-term accomplishment of the agencys mission. The new focus will alsorequire an expansion of the role of human capital professionals fromlargely paperwork processors to functioning as advisors to and partnerswith senior leadership and managers as well as technical experts whoensure that merit principles and other national goals are upheld. Withthese newly skilled human capital professionals as trusted members of themanagement team, the agency can be provided with the knowledge ofstrategic human capital management that will allow it to incorporate suchprinciples into the overall strategic and program plans of the organization.

Steps for Progressing: High-performing organizations we examined treatstrategic human capital management as fundamental to effective overallmanagement, evidenced through the integration of the human capitalfunction into management teams.8 The human capital office in suchorganizations provides effective human capital strategies to meet currentand future programmatic needs and works to ensure that merit systemsprinciples and other national goals are fulfilled. The role of human capitalprofessionals should focus on:

Developing, implementing, and continually assessing human capitalpolicies and practices that will help the agency achieve its mission

Leading or assisting in the agencys workforce planning efforts Participating as partners with line managers Reaching out to other organizational functions and components through

facilitation, coordination, and counseling Providing integrated mission support.

Human capital professionals functioning in this role can serve as animportant source of information for strategic workforce planning,continuous learning, and knowledge management initiatives. Moreover,they can provide agency leaders with an interpretation of agency data inareas such as retirement eligibility and projection numbers, retention ratesor skills assessments that can allow agency leaders to more effectively

pursue strategic human capital management and organizational alignmentHigh-performing organizations also recognize the need for leveraging theinternal human capital function with external expertise, such asconsultants, professional associations, and other organizations, as needed

8 U.S. General Accounting Office,Human Capital: Key Principles From Nine PrivateSector Organizations . GGD-00-28 (Washington D.C.: January 2000).


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For human capital professionals to begin acting in this new capacity,agency leaders must ensure that they have the competencies andexperience to effectively take on the expected role. One tool available toagencies for identifying the appropriate competencies is the InternationalPersonnel Management Associations Human Resource CompetencyModel. The new role of the human capital function will require agencies torecruit new professionals and train existing professionals in thecompetencies to help align human capital management with the specificneeds and circumstances of each agency. It will also require agencies toconstantly reevaluate their internal procedures so that fewer staffresources are required for processing transactions and more resources can

be dedicated to meeting the strategic needs of the organization.Streamlining personnel transactions in conjunction with the greater use oftechnology to automate paper-based personnel processes is critical tomaking this shift.9

9 U.S. General Accounting Office,Management Reform: AgenciesInitial Efforts toRestructure Personnel Operations GAO/GGD-98-93 (Washington, D.C.: July 1998).
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Strategic HumanCapital Planning

Integration and Alignment Concepts: Effective organizations integrate human capital approaches asstrategies for accomplishing their mission and programmatic goals andresults. The effectiveness of this integration and alignment is judged byhow well it helps achieve organizational goals. Furthermore, high-performing organizations stay alert to emerging mission demands andhuman capital challenges and remain open to reevaluating their human

Leadership:Role of theHuman CapitalFunction

Case IllustrationNuclear Regulatory CommissionNRC)

ecause of the varying needs of managers at different program and regionaloffices, the Nuclear Regulatory Commission (NRC) refers to its personnelspecialists as account representatives in an attempt to integrate the human capitalfunction into management teams. Approximately 5 years ago, the Office of HumanResources within NRC attained its goal of providing full service operations by

creating one-stop shopping for its clients.

In an effort to integrate human capital throughout the organization so that it is not astand-alone function and it is incorporated during the budget process, NRC refersto its personnel specialists as account representatives. Teams of accountrepresentatives are assigned to specific program/regional offices within NRC to actin a consultant role for managers. This provides managers in the field with an on-site team of HR account representatives whom they consult with on the full rangeof HR management issues, services, and operations. The account representativesprovide information and insights on such matters as organizational structure andposition management, staffing and recruiting strategies, performancemanagement, awards and recognition, and labor and employee relations issues tomanagers at the various program/regional offices. NRC reported that for the firsttime, internal fiscal year 2003 budget documents reflected the agencywide humancapital management component of agency programs and resources. NRC also

reported that this approach, implemented as part of the agency's Planning,Budgeting, and Performance Management process, established an agencywideperspective for human capital management and facilitated an integrated andcoordinated approach to human capital planning and budgeting.


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capital practices in light of their demonstrated successes or failures inachieving the organizations strategic objectives.

Steps for Progressing: Organizations can evaluate the extent to whichhuman capital approaches support the accomplishment of programmaticgoals through the use of workforce planning. Workforce planning efforts,including succession planning, linked to strategic goals and objectives, canenable an agency to remain aware of and be prepared for its current andfuture needs as an organization, such as the size of the workforce; itsdeployment across the organization; and the knowledge, skills, and abilitiesneeded for the agency to pursue its mission. This planning will entail the

collection of valid and reliable data on such indicators as distribution ofemployee skills and competencies, attrition rates, or projected retirementrates and retirement eligibility by occupation and organizational unit.Agencies can use an organizationwide knowledge and skills inventory andindustry benchmarks to identify current problems in their workforces andplan for future improvements.

To begin assessing how well existing human capital approaches supporttheir missions, goals, and other organizational needs, agencies can useGAOs human capital framework,Human Capital: A Self-AssessmentChecklist for Agency Leaders (GAO/OCG-00-14G). This assessment toolidentifies a number of human capital elements and underlying valuescommon to high-performing organizations. Furthermore, the planningrequirements of the Government Performance and Results Act (GPRA)provide a useful framework for agencies to integrate their human capitalstrategies with their strategic and programmatic planning.10 Other toolsavailable, including OPMs five-step workforce planning model, mayprovide additional guidance.

The appropriate geographic and organizational deployment of employeescan further support organizational goals and strategies. Effectivedeployment strategies can enable an organization to have the right people,with the right skills, doing the right jobs, in the right place, at the right time

by making flexible use of its internal workforce and appropriately usingcontractors. The use of contractors will require decisions to be made,based upon strategic planning efforts, about what types of work are best

10 Executive Office of the President, Office of Management and Budget, Circular No. A-11Part 2: Preparation and Submission of Strategic Plans, Annual Performance Plans, andAnnual Program Performance Reports (Washington, D.C.: July 2001).
http://www.gao.gov/cgi-bin/getrpt?GAO/OCG-00-14Ghttp://www.gao.gov/cgi-bin/getrpt?GAO/OCG-00-14G


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done by the agency or contracted out. While reviewing outsourcingoptions, it is also important to consider whether or not the agency has theexpertise available to manage the cost and quality of contractor activities.

aSee U.S. General Accounting Office, Human Capital: Taking Steps to Meet Current and EmergingHuman Capital ChallengesGAO-01-965T (Washington, D.C.: July 17, 2001); U.S. General Accounting

Office, Tax Administration: IRS' Implementation of the Restructuring Act's Personnel FlexibilityProvisionsGGD-00-81 (Washington, D.C.: April 2000); U.S. General Accounting Office, IRSModernization: IRS Should Enhance Its Performance Management SystemGAO-01-234 (WashingtonD.C.: February 2001); and U.S. General Accounting Office, IRS Modernization: ContinuedImprovement in Management Capability Needed to Support Long-Term TransformationGAO-01-700T(Washington, D.C.: May 8 2001).

Strategic HumanCapital Planning:Integration and Alignment

Case IllustrationInternal Revenue Service

(IRS)

In response to the Restructuring and Reform Act of 1998 (Restructuring Act), the

Internal Revenue Service (IRS) has taken several steps toward modernizing itsorganizational structure and its performance management system. TheRestructuring Act led IRS to adopt a new mission statement that places greaterimportance on serving the public and meeting taxpayer needs, developing andimplementing a reorganization plan, and enhancing taxpayers' rights. In respondingto the requirements of the Restructuring Act, IRS has begun to align human capitalapproaches to assist in accomplishing its strategic goal of improved customerservice.

In the first 3 years since the implementation of the Restructuring Act, IRS hasdeveloped an integrated modernization strategy and implemented a neworganizational structure with four customer-focused operating divisions to meet theneeds of the taxpayer segments it serves and reflect the agency's strategic plan.The four operating divisions that have resulted from the modernization strategyinclude: large and mid-size business, tax-exempt and government entities, small

business and self-employed, and wage and investment. This new direction,reflected in the strategic plan, outlines three strategic goals and correspondingbalanced measures, including a strategic goal of providing service to each taxpayerthat is measured through customer satisfaction data. To achieve this goal, IRS hasrecently implemented a customer service employee-training program that offersemployees specialized training geared toward the taxpayer segment they serve. Inaddition, IRS's new performance management plan calls for each operating divisionto have complementary goals, objectives, and measures for front-line managers todevelop plans identifying the actions they need to take to support operationalobjectives. To assist in this effort, IRS implemented a realigned performanceevaluation system for executives, managers, and supervisors in February 2000.
http://www.gao.gov/cgi-bin/getrpt?GAO-01-965Thttp://www.gao.gov/cgi-bin/getrpt?GAO-01-234http://www.gao.gov/cgi-bin/getrpt?GAO-01-700Thttp://www.gao.gov/cgi-bin/getrpt?GAO-01-700Thttp://www.gao.gov/cgi-bin/getrpt?GAO-01-234http://www.gao.gov/cgi-bin/getrpt?GAO-01-965T


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Data-Driven Human CapitalDecisions

Concepts: A fact-based, performance-oriented approach to human capitalmanagement is crucial for maximizing the value of human capital as well asmanaging risk. As discussed in the previous section, high-performingorganizations use data to determine key performance objectives and goalswhich enable them to evaluate the success of their human capitalapproaches. These organizations also identify their current and futurehuman capital needs, including the appropriate number of employees, thekey competencies and skills mix for mission accomplishment, and theappropriate deployment of staff across the organization and then createstrategies for identifying and filling gaps. Valid and reliable data are critica

to assessing an agencys workforce requirements and heighten an agencysability to manage risk by allowing managers to spotlight areas for attentionbefore crises develop and identify opportunities for enhancing agencyresults. Although the cost of collecting data may be significant, the costs omaking decisions without the necessary information can be equallysignificant.

Steps for Progressing: Collecting and analyzing data is a fundamentalbuilding block for measuring the effectiveness of human capitalapproaches in support of the mission and goals of an agency. For exampleagencies may have data on the number of people receiving training andmoney spent on training, however to measure the real impact of training,

agencies should develop additional indicators to determine the relationshipof training efforts to the accomplishment of agency goals and objectives.This effort should include developing a knowledge, skills, andcompetencies inventory for employees and updating it regularly todetermine if there is an increase in the inventory of skills for whichemployees are being trained. Organizations should also consider collectingand using performance data to identify gaps in performance, skills,competencies, workforce shape, and other areas. Just as human capitalapproaches are aligned with strategies for accomplishing programmaticgoals, so should performance measures of human capital approaches bealigned with performance measures of programmatic efforts.

The types of data that can inform workforce planning efforts include butare not limited to: size and shape of the workforce, skills inventory,attrition rates, projected retirement rates and eligibility, deployment oftemporary employee/contract workers, dispersion of performanceappraisal ratings, average period to fill vacancies, data on the use ofincentives, employee feedback surveys, feedback from exit interviews,grievances, or acceptance rates of job candidates.


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aSee The Air Force Materiel Command's Work Force Shaping Study: Sustaining the Sword(April 14,2000).

Acquiring, Developing,And Retaining Talent

Targeted Investments inPeople

Concepts:Agencies that embrace the principles of human capitalmanagement realize that as the value of their people increases, so does theperformance capacity of the organization. They also realize that investing

Strategic HumanCapital Planning:Data-Driven Human CapitalDecisions

Case IllustrationAir Force Materiel Command(AFMC)

The Air Force Materiel Command (AFMC) has taken steps toward improving thecollection and use of its human capital data to manage the risk it faces in light ofretirement eligibility projections and the potential loss of institutional memory bydeveloping plans for reshaping its workforce to meet its future business needs. Themission of AFMC, the largest employer of civilians in the Air Force, is to develop,deliver, and sustain the best products for the Air Force.

In October 1998 AFMC began a workforce study, Sustaining the Sword, so that theagency's human capital approaches for civilian, military, and contractor employeescould be tailored to meet future business needs, such as depot maintenance andinformation management.a The work force study was conducted in two phases.AFMC reports that Phase I provided an overarching view of the current andprojected 2005 work force and the potential impact of a prolonged hiring freeze anda workforce nearing retirement. Phase II was reportedly a more detailed analysis,focusing on work force data collected from AFMC centers, at position-level detail.Results were analyzed in support of workforce planning for the purpose of achievingfuture business needs. The study led to the development of metrics for fact-basedpersonnel management to collect data for demonstrating the successes andshortcomings of AFMC human capital approaches. Such metrics include retentionand attrition of new IT recruits, progress made in fulfilling individual professionaldevelopment plans, and exit survey data, to name a few. AFMC reported that these

data and the results of initial workforce shaping activities have led to a moreinformed understanding of current workforce gaps and those that may surface aslarge numbers of employees become eligible to retire. In light of this detailed effort,AFMC's workforce study was designated as one of a number of best practices by theOffice of the Secretary of Defense that should be benchmarked for acquisitionworkforce planning across the department.


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in and enhanci

Documents

A Model of Strategic Human Capital Management