	Key Actions Have Been Taken over the Last 2 Years to Address Human Capital Weaknesses

When we placed strategic human capital management on our high-risk list  back in January 2001, as a governmentwide high-risk challenge, we noted  that after a decade of government downsizing and curtailed investments of  human capital, it had become increasingly clear that federal human capital  strategies were not appropriately constituted to adequately meet the  current and emerging needs of the government and its citizens. The first agency assessment was made public in  February 2002 as part of the President’s proposed fiscal year 2003  budget. Strategic Human Capital Management Remains at High Risk

Despite the building momentum for comprehensive and systematic  reforms, it remains clear that today’s federal human capital strategies are  not yet appropriately constituted to meet current and emerging challenges  or to drive the needed transformation across the federal government. The  basic problem is the long-standing lack of a consistent strategic approach  to marshaling, managing, and maintaining the human capital needed to  maximize government performance and assure its accountability. Building on the Current Momentum Can Create Lasting Change

Committed and sustained leadership and persistent attention on behalf of  all interested parties will continue to be essential to building on the  progress that has been and is being made, if lasting reforms are to be  successfully implemented. In response to these ongoing challenges, OPM has taken a number of  important actions. Congressional Leadership Continues to Be Critical

Congress has had and will need to continue to have a central role in  improving agencies’ human capital approaches. I  believe that the basic principles underlying these legislative proposals have  merit and collectively they would make a positive contribution to  addressing high-risk human capital issues and advancing the needed  cultural transformation across the federal government. I also believe that  certain additional safeguards and provisions should be considered by  Congress. The SES needs to lead the way in the federal government’s effort to better  link pay to performance. Much of the federal government’s knowledge and real-world experience  with performance-based pay reform has been obtained through  demonstration projects. The management weaknesses in some  agencies are deeply entrenched and long-standing and will take years of  sustained attention and continuity to resolve. We must move beyond this outdated, “one-size-fits-all” approach to paying  federal employees and seriously explore more market- and performance- based approaches to federal pay. As part of this exploration, we need to  continue to experiment with providing agencies with the flexibility to pilot  alternative approaches to setting pay and linking pay to performance. As with all pay for performance efforts, adequate safeguards, including  reasonable transparency and appropriate accountability mechanisms,  would need to be in place to ensure fairness, prevent politicalization, and  prevent abuse. The bottom line is that in order to receive any additional performance- based pay flexibility for broad-based employee groups, agencies should  have to demonstrate that they have the modern, effective, credible, and  validated performance management systems in place that are capable of  supporting such decisions. Unfortunately, most federal agencies are a long  way from meeting this requirement. 2. We seek to be  in the vanguard of the federal government’s overall transformation efforts,  including in the critically important human capital area. 2.) We have taken a number of  steps to empower and invest in our employees. This is a work-in-progress for us as it is for others.
Why GAO Did This Study

Federal employees represent the government's knowledge base, drive its capacity to perform, and define its character, and as such, are its greatest asset. The early years of the 21st century are proving to be a period of profound transition for our world, our country, and our government. In response, the federal government needs to engage in a comprehensive review, reassessment, reprioritization, and as appropriate, reengineering of what the government does, how it does business, and in some cases, who does the government's business. Leading public organizations here and abroad have found that strategic human capital management must be the centerpiece of any serious change management initiative and effort to transform the cultures of government agencies. In response to a Congressional request, GAO discussed the status of the federal government's efforts to address high-risk human capital weaknesses, possible short- and longer-term legislative solutions to those weaknesses, and other human capital actions that need to be taken to ensure that federal agencies are successfully transformed to meet current and emerging challenges.

What GAO Found

Since GAO designated strategic human capital management as a governmentwide high-risk area in January 2001, Congress, the administration, and agencies have taken a number of steps to address the federal government's human capital shortfalls. In fact, more progress in addressing the government's long-standing human capital challenges was made in the last 2 years than in the last 20, and GAO is confident that more progress will be made in the next 2 years than the last 2 years. Despite the building momentum for comprehensive and systematic reforms, it remains clear that today's federal human capital strategies are not yet appropriately constituted to meet current and emerging challenges or to drive the needed transformation across the federal government. The basic problem is the long-standing lack of a consistent strategic approach to marshaling, managing, and maintaining the human capital needed to maximize government performance and assure its accountability. Committed and sustained leadership and persistent attention on behalf of all interested parties will continue to be essential to building on the progress that has been and is being made. Congress has had and will need to continue to have a central role in improving agencies' human capital approaches. The basic principles underlying the legislative proposals Congress is considering have merit. Collectively, these proposals would make a positive contribution to addressing high-risk human capital issues and advancing the needed cultural transformation across the federal government. At the same time, additional safeguards should be considered by Congress in order to prevent potential abuse. Moreover, certain additional proposals should be considered as part of this legislative package. Looking forward, the time has come to seriously explore more market- and performance-based approaches to federal pay. As part of this exploration, we need to continue to experiment with providing agencies with the flexibility to pilot alternative approaches to setting pay and linking pay to performance. A more performance-based approach to Senior Executive Service pay would be a good place to start. The bottom line, however, is that in order to receive any additional performance-based pay flexibility for broad-based employee groups, agencies should have to demonstrate that they have modern, effective, credible, and validated performance management systems, with adequate safeguards, including reasonable transparency and appropriate accountability mechanisms in place, that are capable of supporting such decisions. Unfortunately, most federal agencies are a long way from meeting this requirement. GAO, on the other hand, has taken numerous steps to meet this requirement and is well positioned to experiment with additional pay for performance flexibility.