The Personnel Touch

ownsized, derided, pushed aside and worked around, the Office of Personnel Management is emerging from a decade in which its authority and purpose faded. Its staff is 52 percent smaller than it was eight years ago, down from 6,208 full-time employees in 1993 to fewer than 3,000 today. Despite a decentralization and deregulation frenzy in which the agency literally threw away the federal personnel rule book, political appointees and even some human resources specialists continue to blame OPM for the government's persistently unresponsive and slow personnel processes.

The agency's clout has become so limited that the key Bush administration initiative affecting the federal workforce-a competitive sourcing drive in which one-quarter of all federal workers are defending their jobs against private sector bidders-is being managed by the Office of Management and Budget, not OPM. On Capitol Hill, lawmakers and the agencies they oversee increasingly are taking advantage of the prevailing view that civil service rules are antithetical to efficient and effective operations, exempting more and more pockets of government from more and more of the rules that OPM enforces and promulgates.

In the last two years, OPM's stock in trade, human resources management, has become one of the hottest issues in government. Comptroller General David Walker brought it to the fore when he declared that the government is facing a human capital crisis after years of downsizing and weak personnel management. Sen. George Voinovich, R-Ohio, has made human resources in government one of his crusades, holding hearing after hearing about the poor state of HR management. In 2001, President Bush designated strategic management of human capital as one of his top five management priorities.

But OPM gets mediocre marks from people inside and outside government for its attempts at reform over the past decade. Frustrated personnel officers at agencies say OPM often can't answer their questions or help them solve their HR problems. Some have turned to private sector consultants-many of whom are former federal or even OPM employees-to improve their human resources divisions. At this rate, OPM could fade to insignificance.

What would happen if OPM vanished? "The flip answer is it would take people a while to notice," says Patricia Ingraham, a civil service scholar at Syracuse University's Maxwell School of Citizenship and Public Affairs. "The reality is this: It's a little hard to know what the real function of OPM is. . . . How OPM has redefined its role is just not very obvious."

Robert Moffit, an analyst at Washington's Heritage Foundation who served at OPM under President Reagan, agrees that the agency is not high on people's radar screens. "When you ask about OPM, it's remarkable how many people give you a blank stare," Moffit says. "They say, 'You mean OMB?'"

Full Review

The challenge of defining OPM's role in a changing federal government falls to Kay Coles James, the first Bush administration's assistant secretary of Health and Human Services for public affairs and Virginia's former secretary of health and human resources, who took the reins of the agency in July. Using the new Bush administration's three-pronged mantra of a government that is citizen-centered, results-oriented and market-based, James has ordered a top-to-bottom review of OPM's missions and structure.

When James arrived at the agency, she gave each of her senior managers a copy of Who Moved My Cheese? (Putnam, 1998), a book that equates change management to a mouse maze. "They all understand that we are change managers and that we should be excited about change," James says. "And the message I give to the senior people here and the line folks here at OPM is, 'If you like HR issues, there will never be a more exciting time to be in OPM than right now."

Executives are reviewing OPM's eight divisions, which include retirement and insurance, employment, merit system oversight and effectiveness, workforce relations, workforce compensation and performance, investigations, executive and management development and executive resources management. Another eight support offices handle procurement, technology, com- munications and other functions. "We have a very stovepiped organizational structure," James says. "We have not been a very nimble organization that can respond to change. Sometimes it's difficult to get answers from us because of the way we're organized."

Like many agencies, OPM must balance enforcement of federal regulations against providing service. It's a tricky game. The agency has to ensure that managers follow the principles that have been the basis of the civil service's merit system for more than 100 years, including selection based on qualifications, equal opportunity and protection from favoritism and arbitrary management actions. At the same time, the agency has to provide human resources services, such as training and hiring help, to government managers-sometimes for a fee.

That balancing act predates OPM's creation under the 1978 Civil Service Reform Act. The law split up the duties of the hundred-year-old Civil Service Commission, putting the role of workplace dispute resolution in the hands of the Merit Systems Protection Board, Equal Employment Opportunity Commission, Federal Labor Relations Authority and Office of Special Counsel. OPM retained some enforcement power as the President's HR policy shop, but the law pushed the agency toward the service side of its mission. In the early 1990s, the Clinton administration's first OPM director, James King, pushed the agency farther away from its enforcement role by eliminating the Federal Personnel Manual, a guide with 10,000 pages of one-size-fits-all answers to managers' HR questions. King also eliminated OPM's centralized hiring system and told agencies they could come up with their own performance appraisal and rewards systems. Instead of emphasizing the rules, OPM officials started discussing ways agencies could get around the rules.

Kay Coles James wants to go even further, giving agencies more control over hiring and eventually undoing OPM's centralized compensation and classification systems. James wants her agency to retain only a fraction of its enforcement mentality and become by and large a service organization.

Rules To Tools

Throwing out the Federal Personnel Manual six years ago didn't get rid of the rigid personnel rules that most agencies have to cope with. Many agency human resources offices have stuck by the rules learned through years of living by the book. Innovative personnel specialists have run into opposition-and even trouble-when they've tried to take advantage of the flexibilities that OPM has been passing down.

When political appointees come complaining to OPM about its rigid rules, OPM executives often discover that it's the agencies' rules that are rigid. In the past, agency personnel officers could use OPM rules to deny managers flexibility. If OPM's rules are gone in many areas, then why do personnel officers still say no?

Doris Hausser, OPM's assistant director for performance and compensation design, says personnel officers often say no now because they can't handle the additional work that reviewing their personnel policies would require. During the 1990s, personnel offices were disproportionately downsized compared with the rest of the government. Agencies' HR offices also say no because flexibility often means spending more money. In federal personnel offices "there's a kind of nervousness that if we let this group use this flexibility, everybody will want to use this flexibility," Hausser says. "So it's better to not let anybody use it."

At the same time, some rules are etched in law-in Title 5 of the U.S. Code and in the Code of Federal Regulations that accompanies it. An agency can develop its own performance appraisal system within certain parameters, but it has to religiously adhere to the highly structured governmentwide classification system, which dictates grade level and skills requirements for most jobs.

Comptroller General David Walker, like many observers, says OPM should continue down the path from enforcement toward service by further cutting regulations. "I think OPM can do a lot in trying to streamline and simplify existing requirements and in sharing best practices," Walker says. "OPM needs to help develop tools rather than promulgate rules." Even today, OPM's "assets are overwhelmingly allocated to rules and compliance," he adds.

According to Walker, OPM could follow the path of other regulatory agencies that issue blanket exemptions to the industries they oversee. The regulators monitor and punish abusers of the exemptions, but by and large assume that most people want to obey the law. That frees them up from unnecessary enforcement work and helps them focus on the worst lawbreakers.

James likes that approach, too. "At the core of any change that we initiate, we have to protect the merit system's principles, and we have to protect those things written into the law, like veterans preference. But I don't start with the assumption that we have managers who want to break the law," she says. "I start with the assumption that we have managers who want to understand it and live within it."

Union to Secession

In the shift from rules to tools, OPM hasn't been moving fast enough for some people. The National Imagery and Mapping Agency's chief of corporate HR programs, Jeri Buchholz, decided that OPM's governmentwide job classification standards didn't really describe the kinds of positions the agency needed to fill. As an intelligence agency, NIMA has the power to go its own way on personnel rules. A former OPM staffing specialist herself, Buchholz and her personnel team pushed aside OPM's 600-plus job descriptions and wrote 25 of their own, with standards targeted at meeting NIMA's strategic goals. NIMA also dumped the General Schedule and established broad pay bands in which managers have more leeway in setting salary levels. Buchholz hired Federal Management Partners, an Alexandria, Va.-based private consulting firm that helps agencies figure out ways to deal with HR challenges. Tim Barnhart, the firm's president, lauds NIMA as an example of an agency that has taken responsibility for its personnel system. "NIMA has a far greater ownership of HR," Barnhart says. "In traditional agencies, HR is like the weather. It just happens to you."

NIMA isn't the only agency to go its own way, eschewing governmentwide civil service rules and OPM control. Indeed, convinced that standard civil service rules were getting in their way, an increasing number of agency leaders have sought and obtained exemptions from Congress-a trend that has minimized OPM's role in agencies' personnel systems.

As of May, about half of the 2.7 million-member federal workforce still worked under the basic rules of the competitive civil service. The other half worked under other personnel systems. Of the 1.3 million people not covered by competitive civil service rules, about 850,000 work for the Postal Service, which gained an independent personnel system when it became a government corporation in 1971. Another 40,000 work for the legislative and judicial branches, and 7,000 are members of the Senior Executive Service. The remaining 440,000 work under special personnel systems, such as the ones at the Foreign Service and the Veterans Health Administration, or in agencies that are exempt from general civil service rules, such as the Federal Reserve System, Nuclear Regulatory Commission and the Tennessee Valley Authority. An estimated 40,000 additional people work for intelligence agencies and are not subject to OPM oversight. The list of agencies free from at least some OPM rules has been steadily growing over the past decade. The Office of Thrift Supervision, Federal Deposit Insurance Corporation, Comptroller of the Currency, and several other financial regulatory agencies gained pay freedom in a 1989 financial regulatory reform act. In 1996, the Federal Aviation Administration won some exemptions from civil service rules. The IRS gained some freedoms in 1998. The Securities and Exchange Commission has been begging Congress for exemption from pay rules. Chuck Williams, head of the State Department's Foreign Buildings Operation, has also asked for special personnel authority. Entire departments have pushed for freedom. In 1997, the Defense Department's civilian personnel policy office floated a list of proposals that included exempting its 680,000 employees from standard civil service regulations. The office's ideas fell on deaf ears in the Clinton administration and in Congress.

Furthermore, when Congress and the Bush administration created the new Transportation Security Administration in November, they exempted the agency from governmentwide civil service rules right off the bat. The legislation demanded that the administration's executives adhere to veterans' preference hiring rules, but otherwise handed the agency carte blanche on personnel issues. The one suggestion in the legislation was that the new agency model its personnel system after the Federal Aviation Administration's.

The fragmentation of the civil service provides a challenge to James, says National Academy of Public Administration President Robert O'Neill. "You do want to have some flexibility. Not every agency is in the exact same kind of business," O'Neill says. "While you have a strong central agency in theory, you have a lot of groups that are exempted. The challenge is figuring out what is the proper balance between overarching principles and ones that can be adapted."

Elaine Kamarck, leader of the Clinton administration's National Performance Review, says Title 5 of the U.S. Code, which includes civil service laws, is too rigid. Rather than just blaming OPM, though, Kamarck, now a professor at Harvard University, blames everyone with a leadership stake in the civil service. "I think it's been a failure of all parties to make the legal framework flexible enough to accommodate change," she says.

James says some of the disdain for Title 5 is misplaced. "There are a lot of urban myths and legends, and I hear them all the time. I hear a new manager come in and go, 'Oh my gosh, I hate this federal system! What do I need to do to get out from under it?'" she says. "Very often many of the things they want to do can be done within the confines of Title 5. Somehow, before they get here, they're told, 'Oh, you should hate that Title 5 thing. It's horrible. It's going to make your life miserable.' That's why I believe that a big part of my job is coaching and advising and offering flexibility when appropriate."

At the same time, James plans to give agencies even more latitude in their personnel systems. Legislation proposed by the Bush administration would allow agencies to develop alternative personnel systems. The legislation would require consultation with OPM.

Compliance to Competition

But as OPM becomes more of a consultant and less of a regulator, the agency is finding a crowded field of competitors. Many of them are OPM veterans who have turned their knowledge of federal HR systems into businesses. Federal Management Partners is one agency with some OPM alumni. Another is Avue, a Tacoma, Wash.-based HR services firm. In addition, services that OPM provides for a fee are also provided by private companies. Gallup conducted an organizational assessment for the Internal Revenue Service. The National Academy of Public Administration developed a workforce planning model for government agencies. QuickHire created an online hiring system for the U.S. Geological Survey. The Office of Personnel Management offers similar services to agencies for a fee. Almost 30 percent of OPM's employees already operate like those of contractors. OPM pays their salaries with the money collected for providing services to other agencies. So, an obvious question arises: Should OPM be competing with private sector consultants and companies?

Bryan Hochstein, vice president of business development at Alexandria, Va.-based QuickHire, has a quick answer: No. "They should be in the business of policy and oversight, but not product," Hochstein says. "It's unfair. OPM doesn't have to report a profit-loss sheet." In fact, for the past two fiscal years, the OPM employment service's reimbursable activities have not covered their costs. The service has closed several field offices and cut some staff in a push toward balanced books.

Furthermore, about half of OPM's workforce has been designated as "commercial in nature," meaning private sector firms could perform the work done by OPM employees. As is happening across government, OPM is reviewing commercial activities. Positions in its retirement and insurance service and in the employment service are under consideration for possible outsourcing or public-private competitions. In the 1990s, OPM conducted a similar review and decided to privatize its investigative service, which performs background checks of federal job applicants. That division is now U.S. Investigations Services Inc., an employee-owned company based in Annandale, Pa. OPM also shut down or outsourced many of its training services.

But as more reviews get under way, James cautions that much of OPM's work cannot be outsourced. "We're not just consultants. We do have an oversight role as well. For the President to have a coordinated HR policy, you can't send that out to consultants," James says. "I think sometimes people forget this is the President's HR office for the federal workforce."

OPM to OMB

The President's HR office has not always worked well with the President's budget office. Veteran OPM and Office of Management and Budget staffers report that tense relations long have made it tough to coordinate budgetary and human resources policy.

In the opening months of the Bush administration, OMB called the shots on personnel issues, launching a workforce planning initiative aimed at completely restructuring federal agencies. James "needs to take personnel leadership back from OMB," says Paul Light, director of governmental studies at the Brookings Institution. "OMB is holding on with a tight fist. OPM needs to be in charge." James and OMB Deputy Director Sean O'Keefe say they have developed a good working relationship, but O'Keefe was nominated in November to become head of NASA, meaning James will have to build a new relationship with the next deputy director.

"I think there's a natural tension and may always be," says James. "May I also suggest that it is less tension than it has been in previous administrations."

The presidential initiative likely to have the most noticeable impact on the federal workforce is Bush's competitive sourcing initiative, under which federal workers will defend their jobs against private sector firms that perform similar work. One in four federal workers could face such competitions-which can be very disruptive even when they lead to cost savings-and one in eight federal workers could see their jobs transferred to the private sector.

OMB's Office of Federal Procurement Policy is overseeing the initiative, which will likely have a major impact on personnel office workloads and employee morale. It also will affect how agencies plan their workforces, with contract oversight becoming as key a skill for success as program management. OPM needs to provide leadership in managing not just the civil service, but the whole range of people who do the government's work, says Carolyn Ban, dean of the University of Pittsburgh Graduate School of Public and International Affairs. "Contracting out does create specific challenges for human resources offices, and agencies increasingly face issues of the contract workforce working side by side with federal workers," says Ban, who worked at OPM in the early 1980s. "OPM has defined itself as just dealing with the civil service. It hasn't dealt with managing a workforce that's heavily reliant on contractors."

Present to Future

In one of her first public appearances as OPM director, James was followed on stage by Albert Hawkins, President Bush's secretary of Cabinet affairs. When asked how the President would implement all of his initiatives, Hawkins pointed to James and said it was her job to get them all accomplished. "The weight of the responsibility became very evident at that moment and has never left me since," James says.

Whether James and her agency have the power and prowess to lead the government's human resources policies remains to be seen. It depends on whether OPM can cast off its image as an enforcer of bureaucratic processes to become the key player in executive branch decision-making as James envisions. OPM would have to persuade recalcitrant personnel offices and skeptical political appointees and managers to take the time to improve their HR systems. And OPM would have to halt the fragmentation of the civil service, or at least lead it in a way that protects merit principles.

James' agenda includes all of those things, as well as shepherding compensation and civil service reform through Congress. "There's a lot that needs to be changed," James said before laying out her agenda. "And I'm not at all unaware of the fact that all the things I'm going to list for you are not things that I will necessarily see under my watch."

Comptroller General Walker says cultural change takes about seven years on average. Based on the tenure of previous OPM directors, James has at most four years to make a mark.