Fighting for Talent

t was bound to happen. Federal agencies could only downsize so much, take on so many new responsibilities, slow recruiting to a virtual standstill and pare training resources to the bone before the civil service would experience what many consider a crisis. The situation is so dire, General Accounting Office officials say, that, in January, they added human capital to their list of high-risk management issues facing government (GAO-01-263). The government has "acted as if people were costs to be cut rather than assets to be valued," the report says. "Human capital shortfalls are eroding the ability of many agencies-and threatening the ability of others-to effectively, efficiently and economically perform their missions."

These problems took root in the early years of the Clinton administration, when downsizing ordered by government reinvention plans occurred haphazardly, without consideration of whether remaining staff would have the needed expertise. Agencies saw some of their best talent, especially in the technical fields, accept buyouts and flock to higher-paying private sector jobs. Eight years later, with baby boomers on the cusp of retirement age, many agencies fear they will lose so much institutional knowledge as these older workers leave that government's ability to do its job will be seriously hampered. Indeed, by 2004, nearly one-third of the federal workforce will be eligible to retire and another 21 percent will be eligible for early retirement. Though not all of them will retire at the same time, that's more than 900,000 people that could leave the workforce.

Fearing the impact of such an exodus, a handful of highly placed policy-makers have focused their attention on the problem in the last couple of years, helping to make "human capital" the new buzzword in public administration circles. Experts have realized that the results-oriented management so feverishly pushed on agencies during the 1990s cannot be fully achieved without good human resources management-that is, without workforce planning and considerable investment in recruiting, training and retention, so that agencies have the right skills on board.

GAO chief David Walker, for example, has made improving federal human capital management one of his priorities. He has spent much of his more than two years in office giving speeches, congressional testimony and media interviews on the subject. In addition, GAO has published guidance to help agencies learn how to strategically manage their workforces. On Capitol Hill, Sen. George Voinovich, R-Ohio, chairman of the Senate Governmental Affairs Subcommittee on Oversight of Government Management, Restructuring and the District of Columbia, has held several hearings on federal human capital matters. He, too, considers human capital management one of the most pressing issues facing government. "This whole area [of management] has been ignored," he says. "We do have a human capital crisis. There's no question about it." Substantial change is critical "if we are to achieve real and lasting improvements in government operations," he says.

Even the Clinton administration addressed the issue during its waning months. In June, Clinton issued a memorandum to agency leaders instructing them to "recognize and reinforce the critical role human resources management plays in achieving each agency's mission and strategic goals." The memo further directed agencies to integrate human capital matters into their planning, budgeting and mission evaluation efforts, and, beginning in October 2000, agencies were to include HR management objectives in their annual performance plans. Most important, growing evidence shows that top managers at individual agencies-including at some of this year's Federal Performance Report agencies-are hearing the call and integrating human capital management into strategic planning.

How things proceed depends on whether the Bush administration continues the push for human capital changes. Federal human resources issues are not politically sexy topics, and during his campaign, Bush seemed more concerned with further reducing the number of federal employees than with how best to manage government workers. But the high-profile push for better human capital management may already be on an irreversible course that may lead to long-needed and ultimately positive changes.

In the Spotlight

Both Voinovich and Walker-the most visible and potentially influential people on the human capital crusade-admit they have a big job ahead of them. Still, they are determined, for both come to the task after having seen effective HR practices transform public and private sector organizations. Walker saw dramatic paybacks at various organizations as head of the human capital services practice at Arthur Andersen LLP from 1989 until he joined GAO in 1998. He even co-wrote a book on the subject called Delivering on the Promise: How to Attract and Retain Human Capital (Simon and Schuster, 1998). Voinovich became a believer as mayor of Cleveland from 1979 to 1989 and later, as governor of Ohio from 1991 to 1998. Soon after taking his city and state positions, Voinovich realized that in terms of pay, benefits and training, public employees had been taken for granted for years. The result was general apathy within the workforce that hampered public services. Voinovich worked with labor unions to revamp classification systems and empower staff, boosting morale along the way. One notable change: Ohio workers are entitled to up to $2,600 a year for training and education. Unions helped pay for the benefit by accepting lower pay raises.

Lobbying Washington in one way or another for 18 years before he joined the Senate, Voinovich had long seen similar problems at the federal level. "I've never seen an organization as screwed up as the federal government," he says. "The civil service has been ignored" so that today, the personnel system is outdated and overly rigid, he says. For example, the generally slow hiring process puts government at a disadvantage when competing for top talent, he notes, recalling testimony from NASA Inspector General Roberta Gross in May 2000. "It is my experience that it just takes too long to hire staff," she said. "We have lost leading candidates . . . to private sector competitors because companies can hire top-performing candidates faster than we can." It takes an average of four to six months to hire someone in her agency, Gross said. Voinovich has held six hearings over the last two years highlighting the problems caused by such an inflexible system, as well as by inadequate workforce planning and not enough training. Because agencies essentially did no planning when they made staffing cuts to meet Clinton administration downsizing targets, in some cases they now face debilitating gaps in skills. "Some agencies have hollowed out their core capabilities," Voinovich notes. "They have a skills imbalance."

As GAO notes in its high-risk report, the skills needed for monitoring and evaluating work done by contractors are among those that agencies most severely lack. The Energy Department, the Housing and Urban Development Department and the Health Care Financing Administration, among others, "have experienced costly performance problems" because they lacked sufficient in-house expertise to oversee financial and other elements of contract work.

Agencies give so little priority to training that they do not even have a line item in their budgets dedicated to it, Voinovich notes. He concedes that in most cases agencies have tried to hide their training money in operations budgets for fear of Congress further slashing what has traditionally been an easy budget-cutting target. "There's no question that Congress is responsible [for skill shortages that have resulted from insufficient training] to a large degree," he says. But Voinovich insists that agencies have a responsibility not only to make training a priority, but to make a business case to appropriators about why training is important.

Drawing from evidence presented by civil service experts at his hearings, Voinovich released in December his "Report to the President: The Crisis in Human Capital," which he hopes the new administration-and Congress-will use as a blueprint for reform. Among the recommendations that don't require legislation are those urging agencies to conduct workforce planning and automate hiring systems to speed up the process. Those requiring legislative action include one to make the pay system more flexible by allowing broadbanding, as agencies such as the Forest Service, GAO and the Federal Aviation Administration have done under special waivers from the rigid General Schedule pay structure. Broad-banding typically establishes four or five pay ranges and gives managers more power in setting salaries within those ranges.

New Tools

Casting light on the issue is one thing, but getting agencies to actually integrate human capital into broader management efforts is another matter. This is new terrain for most human resources staffers. But GAO and the Office of Personnel Management have developed a number of documents and computer tools to help agencies. GAO's "Human Capital: A Self-Assessment Checklist for Agency Leaders," published in September 1999, encourages agency managers to study their workforce needs and determine whether they have the requisite skills on board. If not, they are to devise a plan to get them by recruiting, retraining or shifting resources. The checklist provides pertinent questions that should be answered in making these decisions. They relate to such things as aligning human capital strategies with core business practices; recruiting, hiring and developing staff; and motivating performance while maintaining accountability and fairness. Early last year, GAO released another report designed to help agencies learn from top-performing private companies known for their effective human capital practices. "Human Capital: Key Principles from Nine Private Sector Organizations" (GGD-00-28), which highlights strategies that can transfer to the federal sector, studied such companies as Sears, Roebuck and Co.; Southwest Airlines Co.; Federal Express Corp.; and IBM Corp. Each one has recognized that while good human capital management alone can't guarantee high performance, it is an essential element to meeting organizational goals and objectives. GAO identified common themes of the programs, including:

• Treat human capital management as fundamental to strategic business management.
• Integrate human resources staff into management teams.
• Identify leadership characteristics essential for achieving mission, and hire, develop and sustain leaders accordingly.
• Create line of sight between individual work and agency's overall results.
• Identify key competencies-knowledge, skills, abilities and behaviors-and hire, train and retain accordingly.
• Hold employees accountable for achieving results, and use financial and other incentives to reward good performance.
• Encourage a team culture where individuals learn from each other and, together, achieve high performance.
• Evaluate human capital practices and make changes based on results.

For its part, the Office of Personnel Management has spent the last couple of years developing a workforce planning model for all agencies. Why didn't OPM provide such assistance years ago to help avoid the current problems? OPM had proposals on the table five years ago to put the necessary data sources together to make a model possible, says an OPM official.

"But people were so caught up in the [downsizing] situation at the time and it didn't get the kind of focus it should have had," he says. In the closing months of the Clinton administration, the workforce planning model became an OPM priority. One of the most useful elements available so far is an online tool, called FedScope (www.Fedscope.opm.gov.), which gives agencies access to the Central Personnel Data File. This file includes data on the age, gender and education level of federal employees-information that can help agencies as they analyze workforce trends in an effort to predict future needs. OPM also dedicated a section of its Web site (www.opm.gov/workforceplanning) to sharing best practices.

OPM expects the trend toward better workforce planning will continue under the Bush administration. With the 1993 Government Performance and Results Act on the books, agencies have to have workforces that can meet their goals and mission needs, says the OPM official. "This isn't a Democratic or a Republican issue. This is about giving good government service."

On the Front Lines

On its face, workforce planning-and related elements such as seeing that employees get necessary training-seems remarkably simple. "So much of it is just common sense," says Rosslyn Kleeman, distinguished executive-in-residence at George Washington University and former director of workforce issues at GAO. "What do I need in the future and what have I got, and what do I have to do to get to where I want to be in the future?" Still, agencies have never had to think this way, she says. Indeed, because many agency personnel shops have been so focused on procedural regulations related to hiring, firing and benefits, they don't have strategic thinkers on board. In addition, downsizing has left many HR shops with bare bones staffs.

"There's no question that some agencies don't have either the people or the resources to do what needs to be done," GAO chief Walker says. Agencies in that situation need to contract out to get the necessary expertise or concentrate on hiring people who have the necessary skills, he says. If that means diverting money from another source, he adds, then so be it. Practically all agencies now are addressing workforce planning, says the OPM official. Among the agencies giving the matter serious attention is NASA, one of the agencies included in this year's Federal Performance Report. NASA lost 25 percent of its workforce during the downsizing years and, because no planning was involved in deciding what skills could or should be let go, the agency has since found itself largely ill-equipped for some of its high-tech work. Among the unfortunate results were two failed contractor-run missions to Mars in 1999-one for a weather satellite and one for a polar lander-that were blamed in part on NASA's lack of expertise needed to properly oversee the work being done. The experience made agency officials realize that "we need to have skills in the right areas," says Brian Keegan, NASA's chief engineer.

Why didn't NASA foresee that such problems could result from job cuts? "It's probably human inclination to focus on the near term and maybe in the process pay insufficient attention to the long term," Keegan says. NASA now understands that the best way to solve near-term problems is to meet long-term skill needs, Keegan says. But he admits that, although NASA's top management has endorsed this "strategic capability planning," the agency still faces a challenge in bringing all senior managers on board. "Planning for the planning becomes an important aspect" of ensuring success.

The Forest Service has trouble ensuring that people with the right skills are on staff to fulfill the agency's many missions, including harvesting timber, fighting forest fires, forest planning, law enforcement, recreation and wildlife and fisheries management. The agency struggles in particular to keep enough firefighters, but officials are trying to anticipate and meet needs. Each year, they develop a workforce plan that identifies needed skills during the upcoming year as well as during the next five years.

Elsewhere, planning can seem fruitless because of challenges beyond agency control. At the Bureau of Consular Affairs, officials try to plan staffing needs for overseas operations two years out, but actually, "it's hard for us to predict visa demand six months out," says Frank Moss, the agency's executive director. In Islamabad, Pakistan, for example, demand for non-immigrant visas more than doubled from 1999 to 2000 because of a baseless rumor that the State Department was moving its visa operations out of Pakistan to a regional center. In addition, the agency does not directly control funding or staffing of consular work around the world.

The Road Ahead

Whether agencies continue improving personnel management long enough for their efforts to make a difference depends on both the Bush administration and Congress. Observers say the Office of Management and Budget, for example, must treat human capital as a priority management issue. Congress, which historically has shown very little interest in federal personnel issues, also has a big role to play. Voinovich is convinced that legislators gradually will recognize the importance of human capital matters. Kleeman has her doubts. She commends Voinovich for his efforts. "But he can't do it by himself," she says, noting that in the House, there's little interest in carrying the human capital banner.

Still, Walker insists even a quiet momentum can lead to dramatic changes. "Great movements start with a single person," he says. Walker expects human capital management's placement on GAO's high-risk list will provide incentive for change. "History has shown that when something appears on our high-risk list, that generates heat," he says. "Action usually follows."

An experienced political player, Voinovich knows that victories will be few and infrequent. "I know it's not going to get done in one year, and it's not going to be an easy task," he admits. "But this is not another flavor of the month for me."

Susannah Zak Figura is a Washington-based freelance writer.