Human Capital: The Missing Link

f Comptroller General David Walker has his way, human resources-or human capital, as he calls it-will never again be an afterthought in federal management. He laments that in the past, agencies haven't given their human resources the attention they deserved. In Walker's view, the government cannot maximize its resources and accountability without focusing on its most important asset: employees.

"The key competitive difference in the 21st century will be people," he told human resources managers at a September 1999 conference sponsored by the National Academy of Public Administration in Washington. "It will not be process. It will not be technology. It will be people. . . . The stakes are high." Walker also believes that personnel matters deserve the same level of congressional attention that performance, financial and information technology management have received in recent years. "We have not had significant legislation dealing with the missing link-the people," he notes.

There appears to be a growing realization among government executives that Walker is right. Having struggled through downsizing and budget cuts over the last several years, agency officials are now seeing the unfortunate results of not having given their personnel function adequate priority during those transitions. In fact, human resources departments were among the hardest hit by job cuts. In hindsight, agencies see that buyouts and reductions in force were done largely without planning, so that in many cases they lost some of their best employees and now don't have the skills they need on board .

Demographic and market trends make correcting past failures all the more difficult and important. The federal workforce is aging rapidly. By 2004, nearly 30 percent of federal employees will be eligible to retire, with 19 percent eligible for early retirement. For senior managers, the numbers are even more dramatic. In the next five years, 60 percent of Senior Executive Service members will be eligible to retire, with another 21 percent eligible for early retirement. Exacerbating the problem is the tight labor market, which makes attracting new employees-especially those in technical occupations-hard to do with government salaries. All these signs point to an emerging crisis in the federal workforce, Walker says.

But there is a solution, insist Walker and many within the human resources community. Aggressive recruiting, quality training and leadership development are part of that solution. But overshadowing these elements are the critical tasks of workforce analysis and planning to make sure skill needs are being met today and will be met in the future. "When we're coming out of a situation where we've been under constant streamlining and downsizing and rightsizing, as some people may call it, it's all the more important that we engage in this kind of analysis because our resources are fewer-both human and dollar resources-so we can't afford to make mistakes about what we're going to need in the future," says Evelyn White-Brown, deputy assistant secretary for human resources at the Health and Human Services Department. Indeed, workforce planning appears to be today's guiding principle for federal human resources managers.

Practical Steps

Walker realizes that many agencies may feel intimidated by the work they need to do, so the General Accounting Office is offering various forms of guidance. First, the agency is trying to lead by example, by making human capital matters a top internal priority. Walker himself has long been interested in the issue. "It's a topic I care about deeply," he says. Before taking GAO's helm, he headed the human capital services practice at Arthur Andersen LLP and has co-authored a book called Delivering on the Promise: How to Attract and Retain Human Capital (Simon and Schuster, 1998). Second, GAO is trying to raise the profile of the issue with Congress so that eventually there might be legislative reforms that can speed up federal hiring and fix other frustrations with the civil service system. In the next few years, GAO also will identify private-sector best practices that can serve as potential models.

Perhaps most helpful to agencies in the short-term is GAO's discussion draft document published last September called "Human Capital: A Self-Assessment Checklist for Agency Leaders." In his preface to the document, Walker argues that while legislative reforms ultimately will be needed to make the civil service system more flexible and competitive, stakeholders have yet to reach the consensus needed to achieve that reform. "But even in the absence of fundamental legislative change, agency leaders can still take practical steps to improve their human capital practices," he writes. "The first step to this end is self-assessment." Through this process, Walker believes, a consensus will develop on the changes needed in law.

The five parts of GAO's self-assessment framework are:

• Strategic planning: to establish agency mission, vision, core values, goals and strategies.
• Organizational alignment: to integrate human capital strategies with core business practices.

• Leadership: to foster committed leadership and give continuity through succession planning.

• Talent: to recruit, hire, develop and keep appropriately skilled staff.

• Performance culture: to enable and motivate performance while maintaining accountability and fairness for all employees.

Data Driven

The Office of Personnel Management, too, is spotlighting workforce planning as a critical element in federal management. Agencies can't hope to achieve their strategic mission goals without paying attention to the talent factor, says OPM Director Janice Lachance. "There are no results without the people to put them in place," she says.

In an effort to provide leadership on the matter, OPM is developing a workforce planning model that agencies can tailor to their particular needs. The personnel agency started the project in late 1998, after an internal analysis showed it soon would lose large numbers of employees to retirement. The more research they did, the more OPM planners realized that all agencies would be facing similar problems, Lachance says. "The numbers [on expected retirements] are an urgent wake-up call for anybody who expects to lead an agency into the 21st century."

While the product is still in the design phase, the plan is to create a Web-based system that will prompt users with relevant questions guiding them through the following phases of the planning process:

• Setting strategic direction: Establish agency vision and objectives, and position human resources to be a strategic partner in the process.

• Identifying supply and demand: Analyze demographic and other data to determine workforce needs and the best sources from which to draw talent.

• Scoping the discrepancies: Study gaps in agency skills base and needs, and how future demographics or other factors might change either.

• Developing a plan of action: Determine strategy for filling needs via recruitment, succession planning, restructuring or other means.

• Monitoring and evaluation: Constantly reassess plans based on successes, failures and changing agency needs.

The system will allow users to link to a library of helpful research. It also will be able to access various data from a single point of entry. These will include data from: the Bureau of Labor Statistics; OPM's Central Personnel Data File, which includes workforce data on diversity, educational levels and age; and the Census Bureau. Agencies will be able to pull their own human resources data into the system to do trend analysis and comparisons between the agency's workforce and the broader workforce. "It's going to be a one-stop shop for anyone who wants to do workforce planning," Lachance says.

Last September, OPM awarded a contract to the SAS Institute to develop a prototype that will be tested by OPM and the Social Security Administration. Once the kinks are worked out of the prototype, a larger pilot test with more agencies will begin. OPM hopes to have the system available governmentwide by late 2001. Unlike other OPM services, the data system will be provided free of charge to agencies.

Results from the Defense Department, which spent several years developing its own workforce modeling system, suggest OPM's effort could be a real boon to other agencies. DoD's model is built on the probabilities of various factors affecting a person with certain demographic characteristics. DoD officials can aggregate the data and then project future needs. "That is enormously helpful because we can see where we're going to be if we don't make any policy changes and if we don't like where we're going to be we can start making the changes now that give us a different result," says Diane Disney, deputy assistant secretary of Defense for civilian personnel policy. "We believe very strongly that you can't rely on anecdotes for something as important as the future of the workforce. You need to look at what the data tell you."

Time Is Right

This is not the first time GAO and others have stressed the importance of workforce planning. In fact, in 1980, GAO published a report on the same topic, yet little was done in response. But back then, no one really knew how to do workforce planning, says Rosslyn Kleeman, distinguished executive-in-residence at The George Washington University and former director of GAO's human resources division, which published the 1980 report. Besides, agencies had the luxury of having enough employees to do any necessary jobs, so no one thought planning was crucial. But now, "It's even more important with budget cuts and downsizing to identify where your needs are and where your priorities are," she says.

Kleeman and others believe federal managers are better equipped now to make the transition. There have been a number of related reports published over the last 20 years from GAO, the NAPA and the Merit Systems Protection Board that have contributed to the debate and helped educate agencies, notes John Palguta, director of policy and evaluation at the MSPB. A September 1999 NAPA study, for example, describes efforts at several agencies such as SSA-which was ranked highly by last year's Government Performance Project--where workforce planning is successful. In addition, the 1993 Government Performance and Results Act and the Clinton administration's reinvention effort have forced agencies to focus on performance and strategic planning as never before, Palguta adds.

At the same time, the federal personnel function itself has dramatically changed since 1980. In 1993, OPM abolished the massive Federal Personnel Manual and delegated most human resources duties-such as "examining" authority to decide which job applicants warrant serious consideration-to departments, many of whom then delegated down to bureaus and even lower levels. That decentralization has shifted human resources concepts to the minds of line managers. Now it's in their best interest to make sure human capital planning is done and that it takes their mission goals and objectives into consideration.

The fact that today's workforce is more mobile makes planning essential, Lachance says. "People don't stay in a single job in a single agency anymore." They not only move among agencies, but also between government and the private sector. In addition, government today must hire people who have specific task-related skills, but who also are team players and able to promote good customer service--qualities OPM refers to as "whole person skills." With all these changes, Lachance says, "agencies are facing a very, very different world and one that they can't deny is crying out for strong workforce planning."

Follow Through

Few federal officials would disagree with GAO's self-assessment principles. "But as with most good ideas and frameworks, of course, the hard part is putting them into practice," Palguta says. "I suspect that workforce planning in many agencies takes a definite back seat to the day-to-day operational concerns of human resources management." Lachance agrees. "Most agencies look at human resources as a support function," she says.

In many cases, it's all downsized human resources staffs can do to keep up with their daily responsibilities. Between September 1993 and September 1997, the number of employees in civilian personnel offices across government fell by nearly 9,000, or 21 percent, according to GAO (GGD-98-93). As a result, there are fewer knowledgeable people to do the analysis and planning. And because the system has been oriented more to process than performance for so long, most federal managers and human resources specialists are still more focused on short-term needs than long-term ones. The performance mentality hasn't yet permeated the workforce, Palguta notes, adding that such a culture change may take years.

Even agencies that are able to do analysis and planning aren't guaranteed results. For planning to be effective, officials must have "the will to follow through on those plans," Palguta says. "You need somebody who cares about these issues at the highest levels of the agency." The workforce planning process needs to be part of an agency's broader strategic thinking, adds Lachance. "It has to be integrated in any agency's [overall] planning effort." And plans must be routinely reassessed and updated, she says. "It's not something you can do periodically."

Agency Progress

No agency has mastered workforce planning-and the challenge of follow through-but some clearly are ahead of others. At the Coast Guard, the top performer among this year's Government Performance Project agencies, for example, human resources is considered one of the "Big Four" management priorities, along with operations; systems; and marine safety, security and environmental protection. The agency went through a major downsizing from 1994 to 1998 that cut 4,000 people from its ranks, including 18 percent of its human resources management staff. Despite the ensuing personnel staff and skill shortages, the agency continued workforce planning to determine where the most critical needs were and how to meet them. One planning document, "Coast Guard 2020, Ready Today...Preparing for Tomorrow," describes operational challenges the agency expects to face 20 years from now. Officials also have the capability to pull data-on topics such as personnel, payroll and available training funding-into predictive models so they can monitor and project needs.

The planning process highlighted the urgency for an aggressive recruiting program, prompting Coast Guard officials to actually divert resources from other programs to boost recruiting efforts. Because of the strong economy, they've had the most trouble attracting entry-level military recruits. So now they're strategically targeting their audience of potential candidates.

One of their more innovative tactics-and unusual for a government agency-was a six-month advertising contract with the World Wrestling Federation. "While there has been great concern among many that an association with the WWF might hurt the Coast Guard's image, marketing information showed that a significant percentage of the eligible recruiting population watches professional wrestling," agency officials note.

The Veterans Benefits Administration also is engaged in aggressive recruiting, primarily to prepare itself for the upcoming exodus of retiring baby boomers. In 1998, the agency developed a workforce succession plan and related national recruiting plan called "Opportunity 1998." Recruiting focused on key benefits-delivery positions such as veterans' service representatives and vocational rehabilitation counselors. They repeated the recruiting effort in 1999 and expect to continue doing so for the next several years.

At the National Park Service, a major shift in mission focus has made targeted recruiting essential. After more than 80 years, officials are refocusing the agency's primary management concern from recreation to conservation. The Natural Resource Challenge launched last August to jumpstart the change included a hiring plan to build the agency's natural resource management workforce. Officials are planning a brochure and a new Web site specifically designed to promote the resource management career field.

Once agencies have successfully recruited, they must develop staff skills and cultivate leaders-no easy task in these tight budget times. The Coast Guard complains that most of its training funds must go toward job-specific training, leaving too little for professional development.

Still, in 1998 the service created its Leadership Development Center, which provides leadership training for both civilian and military staff. Anticipating large numbers of retirements among senior staff, the Veterans Benefits Administration also is turning attention to leadership training. Last August, the agency launched an SES candidate development program.

Civil Service Reform

If one follows GAO's logic, once agencies perform thorough self-assessments and workforce planning, they'll understand exactly where the biggest barriers to effective HR management are and will be ready to agree on civil service reform. It's unclear whether stakeholders will ever reach consensus, however. The Clinton administration has tried to initiate reform, but each time failed to win sufficient stakeholder support. The latest attempt last year focused on a performance-based pay structure that would have established financial incentives for managers to achieve desired program outcomes. Clinton's proposal also would have increased delegation of human resources authority to line managers.

The proposal didn't get far. Unions refused to support it until Clinton forced agency leaders to expand the scope of issues addressed during labor-management negotiations, as called for by the 1993 executive order establishing labor-management partnerships. Agency managers, meanwhile, have opposed expanded negotiating. The proposal also failed to get the support needed in Congress for hearings, much less passage.

The administration hasn't given up, though, says Lachance, who insists, "this is a good time for civil service improvements." Negotiations are ongoing with all the stakeholders, she says. For his part, Walker is working to build awareness and support for changes in Congress. "You have to have a few seeds" of support, Walker says, adding that he's actively recruiting willing congressional sponsors. "I think we'll be successful. But we've got to walk before we run. The issue is not ripe for legislative change and it probably won't be for a while." GPP report card

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