Also, as federal agencies have  taken on additional roles and responsibilities, their missions have become  increasingly complex, and their employees need to possess a range of  expertise and skills that may not be adequately captured by the GS  system. However, as OPM  implemented the system, the attributes of transparency, internal equity,  simplicity, flexibility, and adaptability were reduced. This occurred, in part,  because some attributes are at odds with one another. So, fully achieving  one attribute comes at the expense of another. The  Working Group has identified skills gaps in six government-wide, mission- critical occupations: cybersecurity specialist, auditor, human resources  specialist, contract specialist, economist, and the science, technology,  engineering, and mathematics (STEM) professions. Although this effort  was an important step forward, our 2015 work identified skills gaps in  nearly two dozen occupations with significant programmatic impact. With a continual focus on implementing the recommendations we have  made in these areas, we believe that OPM, the CHCO Council, and  agencies should begin to make progress on addressing current and  emerging skills gaps. As a  result, a key resource for helping agencies improve the capacity of their  personnel offices is likely being underutilized. Our  past work has shown that a long-standing challenge for federal agencies  has been developing credible and effective performance management  systems that can serve as a strategic tool to drive internal change and  achieve results. OPM agreed to consult with  stakeholders to determine whether longer probationary periods are  needed for certain complex positions. We  maintain that additional action should be considered to ensure equity in  ratings and performance awards across departments. Preliminary observations  from our ongoing work have found that government-wide levels of  employee engagement have recently declined 4 percentage points, from  an estimated 67 percent in 2011, to an estimated 63 percent in 2014, as  measured by the OPM FEVS, and a score derived by OPM from FEVS—  the Employee Engagement Index (EEI). However, our ongoing work also indicates that the recent government- wide average decline in EEI masks the fact that the majority of federal  agencies either sustained or increased employee engagement levels  during the same period. Our preliminary  work indicates that 13 of 47 agencies saw a statistically significant decline  in their EEIs from 2013 to 2014. Through a variety of initiatives, Congress, OPM, and individual  agencies have strengthened the government’s human capital efforts since  we first identified strategic human capital management as a high-risk area  in 2001. Still, while many actions towards progress have been taken over  the last 13 years, the job is far from over. At the  end of the day, strategic human capital management is about mission  accomplishment, accountability, and responsive, cost-effective  government. Appendix I: Content and Status of Prior Human Capital GAO Recommendations

	Product ISSUE AREA: IMPROVING MANAGEMENT AND OVERSIGHT OF THE FEDERAL CLASSIFICATION SYSTEM GAO-14-677

Human Capital: OPM Needs to Improve the Design, Management, and Oversight of the Federal  Classification System (July 2014)  To improve the classification system and to  strengthen OPM’s management and oversight,  the Director of OPM, working through the Chief  Human Capital Officer Council, and in  conjunction with key stakeholders such as the  Office of Management and Budget, unions, and  others, should use prior studies and lessons  learned from demonstration projects and  alternative systems to examine ways to make the  GS system’s design and implementation more  consistent with the attributes of a modern,  effective classification system. Product ISSUE AREA: CLOSING MISSION CRITICAL SKILLS GAPS GAO-15-223

Federal Workforce: OPM and Agencies Need to Strengthen Efforts to Identify and Close Mission- Critical Skills Gaps (January 2015)   To assist the interagency working group, known  as the Federal Agency Skills Team (FAST), to  better identify government-wide skills gaps  having programmatic impacts and measure its  progress towards closing them, the Director of  OPM-in conjunction with the CHCO Council- should strengthen its approach and methodology  by (1) assisting FAST in developing goals for  closing skills gaps with targets that are both clear  and measurable; (2) working with FAST to  design outcome-oriented performance metrics  that align with overall targets for closing skills  gaps and link to the activities for addressing  skills gaps; (3) incorporating greater input from  subject matter experts, as planned; and (4)  ensuring FAST consistently follows key practices  for project planning. A government-wide strategic plan should  include input from the many participants in the human  capital community—reflecting the different perspectives,  missions, and resources of these organizations. Recommendation  Results Oriented Management: OPM Needs to Do More to Ensure Meaningful Distinctions Are Made  in SES Ratings and Performance Awards (January 2015)  As OPM convenes the cross-agency working  group, the Director of OPM, as the head of the  agency that certifies-with OMB concurrence-SES  performance appraisal systems, should consider  the need for refinements to the performance  certification guidelines addressing distinctions in  performance and pay differentiation. Federal Workforce: Improved Supervision and Better Use of Probationary Periods Are Needed to  Address Substandard Employee Performance (February 2015)  To help strengthen the ability of agencies to deal  with poor performers and to help ensure  supervisors obtain the skills needed to effectively  conduct performance management  responsibilities, the Director of OPM, in  conjunction with the CHCO Council and, as  appropriate, with key stakeholders such as  federal employee labor unions, should assess  the adequacy of leadership training that agencies  provide to supervisors. This report is expected  to be issued by OPM in late 2014/early 2015. In October 2014, OPM partially agreed with our  recommendation.
Why GAO Did This Study

Strategic human capital management plays a critical role in maximizing the government's performance and assuring its accountability to Congress and to the nation as a whole.
GAO designated strategic human capital management as a government-wide, high-risk area in 2001. Since then, important progress has been made. However, retirements and the potential loss of leadership and institutional knowledge, coupled with fiscal pressures, underscore the importance of a strategic and efficient approach to acquiring and retaining individuals with needed critical skills. As a result, strategic human capital management remains a high-risk area.
This testimony is based on a large body of GAO work issued from January 2014 through February 2015; and ongoing work related to employee engagement. This testimony, among other things, focuses on key human capital areas where some actions have been taken but attention is still needed by OPM and federal agencies on issues such as: (1) the GS classification system; (2) mission-critical skills gaps; (3) performance management; and (4) employee engagement.

What GAO Found

Serious human capital shortfalls can erode the capacity of federal agencies and threaten their ability to cost-effectively carry out their missions. GAO's prior work has shown that continued attention is needed to ensure agencies have the human resources to drive performance and achieve the results the nation demands. Key areas where the federal government has taken some actions but additional attention is still needed include the following:
General Schedule (GS) Classification System: In 2014, GAO identified eight key attributes of a modern, effective classification system, such as, flexibility, transparency, and simplicity. The GS system's design reflects some of these eight attributes, but when the Office of Personnel Management (OPM) implemented the system, the attributes of transparency, internal equity, simplicity, flexibility, and adaptability were reduced. This occurred, in part, because some attributes are at odds with others so fully achieving one comes at the expense of another. GAO recommended and OPM partially concurred with the need to examine ways to make the GS system consistent with the eight attributes of an effective classification system.
Mission-Critical Skills Gaps: The challenges that agencies face were not fully captured by the Chief Human Capital Officers Council Working Group's efforts that identified skills gaps in six government-wide, mission-critical occupations. In 2015, GAO identified skills gaps in nearly two dozen occupations with significant program implementation impacts. As a result, GAO recommended OPM take a number of steps to address this issue. OPM concurred and in response has established an interagency working group, which is expected to identify a new set of government-wide skills gaps by June 2015.
Improving Performance Management: OPM makes a range of tools and guidance available to help agencies address poor performance. In 2015, GAO concluded that improved supervision and better use of probationary periods are needed to address substandard employee performance. In response, OPM agreed to consult with stakeholders regarding the need for longer probationary periods for some complex positions. In 2015, GAO also found that OPM needed to do more to ensure meaningful distinctions are made in senior executive ratings and performance awards. OPM disagreed with the recommendation. GAO maintains that additional action should be considered to ensure equity in ratings and performance awards across departments.
Strengthening Employee Engagement: GAO's ongoing work indicates that the recent government-wide decline in engagement, as measured by OPM's Employee Engagement Index, masks the fact that the majority of agencies either have sustained or increased their employee engagement levels. Government-wide, engagement has declined 4 percentage points from an estimated 67 percent in 2011 to an estimated 63 percent in 2014. However, this decline is primarily attributable to 13 agencies where employee engagement declined from 2013 to 2014. In contrast, 31 of 47 agencies have sustained and 3 agencies have increased their employee engagement levels from 2013 to 2014.

What GAO Recommends

Over the years, GAO has made numerous recommendations to agencies and OPM to improve their strategic human capital management efforts. While OPM and the agencies have implemented some of GAO's recommendations, actions are still needed on others to continue to make progress in these areas in the future.