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entitled 'Securities and Exchange Commission: Some Progress Made on 
Strategic Human Capital Management' which was released on February 9, 
2006. 

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Report to the Subcommittee on Government Management, Finance, and 
Accountability, Committee on Government Reform, House of 
Representatives: 

January 2006: 

Securities and Exchange Commission: 

Some Progress Made on Strategic Human Capital Management: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-86]: 

GAO Highlights: 

Highlights of GAO-06-86, a report to the Subcommittee on Government 
Management, Finance, and Accountability, Committee on Government 
Reform, House of Representatives: 

Why GAO Did This Study: 

Corporate failures and accounting scandals led to changes in 
legislation governing U.S. securities markets, which resulted in 
increased workload demands on the Securities and Exchange Commission 
(SEC). As a result, Congress provided SEC with substantial budgetary 
increases to obtain more resources to help fulfill the agencyís 
mission. GAO was asked to review SECís strategic workforce planning 
efforts to efficiently and effectively utilize its resources. This 
report discusses (1) the progress SEC has made toward developing a 
strategic human capital plan and (2) whether SEC uses effective 
strategic workforce planning principles for acquiring, developing, and 
retaining staff. 

What GAO Found: 

SEC has taken steps to implement a number of strategic human capital 
management initiatives, including developing its strategic human 
capital plan. In 2004, SEC split its Office of Administrative and 
Personnel Management into the Office of Administrative Services and the 
Office of Human Resources (OHR), allowing the agency to separate its 
administrative and personnel functions and hire an associate executive 
director to focus on assessing, developing, and implementing human 
capital programs. In April 2005, SEC created a more structured human 
capital council by expanding the role of the Executive Resources Board 
(ERB), now called the Human Capital Review Board (HCRB). The HCRB 
includes senior management from all major divisions and offices, the 
Chairmanís office, the Executive Director, and OHR and follows a more 
formalized and regular process for reviewing and approving human 
capital decisions. According to SEC, as of November 2005, the agency 
was in the process of creating its first strategic human capital plan, 
which will be based on the Office of Personnel Managementís Human 
Capital Assessment and Accountability Framework, but it has not set a 
completion date. 

GAO also found that many of SECís efforts related to workforce planning 
to date have been consistent with five key principles for effective 
strategic workforce planning; however, some of these efforts were still 
being developed or could be improved. Specifically, 

* SEC has involved top management and a variety of stakeholders during 
the development of its strategic human capital plan, but only some 
employees will have the opportunity to provide feedback before the plan 
is finalized;
* SEC has been taking steps to identify needed critical skills and 
competencies, but it lacks a formal process for identifying existing 
skills among staff and linking them to SECís strategic goals; 
* SEC has been using human capital strategies to address workforce 
needs and skill gaps, but some of these strategies have not been in 
place long enough to assess results; 
* SEC is developing or changing many of the administrative, 
educational, and other requirements to support workforce strategies, 
particularly pertaining to the use of human capital flexibilities; and
* SEC is developing additional human capital indicators and a more 
formal process by which to measure the achievement of its human capital 
goals. However, SEC currently does not formally evaluate the 
effectiveness of its human capital strategies in fulfilling SECís 
strategic goals. 

What GAO Recommends: 

GAO is not making recommendations because many of SECís human capital 
initiatives, including the strategic human capital plan, are currently 
under development. However, GAO makes observations based on our audit 
work that highlight areas warranting management attention, such as 
conducting outreach with congressional stakeholders and the securities 
industry, obtaining employee feedback on human capital strategies 
before they are implemented, and taking steps to document existing 
skills among staff. SEC agreed with these findings and observations. 

www.gao.gov/cgi-bin/getrpt?GAO-06-86. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Orice M. Williams at 
(202) 512-8678 or williamso@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Results in Brief: 

SEC Has Made Progress on Strategic Human Capital Initiatives and Is 
Developing a Strategic Human Capital Plan: 

Components of SEC Workforce Planning Efforts Are Consistent with 
Established Principles, but Some Efforts Could Be Improved: 

Observations: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Securities and Exchange Commission: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Figures: 

Figure 1: Structure of SEC (Divisions and Offices): 

Figure 2: GAO's Five Key Principles for Effective Strategic Workforce 
Planning: 

Figure 3: Summary of SEC Actions As They Relate to the Five Key 
Principles of Effective Strategic Workforce Planning: 

Abbreviations: 

CSE: consolidated supervised entity: 

ELR: Employee-Labor Relations: 

ERB: Executive Resources Board: 

HCAAF: Human Capital Assessment and Accountability Framework: 

HCRB: Human Capital Review Board: 

MBA: master of business administration: 

OCIE: Office of Compliance, Inspections, and Examinations: 

OHR: Office of Human Resources: 

OMB: Office of Management and Budget: 

OPM: Office of Personnel Management: 

OPUR: Office of Public Utility Regulation: 

ORA: Office of Risk Assessment: 

PUHCA: Public Utility Holding Company Act of 1935: 

SEC: Securities and Exchange Commission: 

SLR: student loan repayment: 

SRO: self-regulatory organization: 

Letter January 10, 2006: 

The Honorable Todd Russell Platts: 
Chairman: 
The Honorable Edolphus Towns: 
Ranking Minority Member: 
Subcommittee on Government Management, Finance, and Accountability: 
Committee on Government Reform: 
House of Representatives: 

Over the past several years, in the wake of corporate failures and 
accounting scandals, changes in legislation governing U.S. securities 
markets have resulted in increased demands on the Securities and 
Exchange Commission's (SEC) regulatory capacity. Through the Sarbanes- 
Oxley Act of 2002 (Sarbanes-Oxley), Congress augmented SEC's 
responsibilities but also authorized a substantial budget increase for 
the agency to better address workload challenges. In fiscal year 2003, 
SEC received $716 million, or a 39 percent increase over its previous 
year's budget authority, and has used much of it to fund more than 842 
new staff positions. In addition, SEC used a portion of the fiscal year 
2003 appropriations to fund its new pay parity authority, which allowed 
the agency to pay staff commensurate with other federal financial 
regulators. In fiscal year 2004, SEC received a 13 percent increase 
over its previous year's budget authority. These increases offered SEC 
a unique opportunity to obtain the resources and expertise necessary to 
meet its mission, but the transformation will require a rigorous effort 
to recruit, hire, and retain the right staff with the right expertise 
to fulfill agency mission and strategic goals. 

In formalizing its strategic direction, on July 9, 2004, SEC approved 
its 2004-2009 strategic plan, which identifies the vision, mission, 
values, and goals shaping the agency's activities during the next 5 
years. The fourth goal of the strategic plan outlines SEC's commitment 
to maximize the use of SEC resources. It further states that in an 
effort to attract, hire, and retain the right staff with the expertise 
necessary to carry out its mission, the agency plans to use a variety 
of human capital strategies that will complement the agency's other 
ongoing activities. To respond to your request to review SEC's 
strategic workforce planning, our report discusses the following: (1) 
the progress SEC has made toward developing a strategic human capital 
plan and (2) whether SEC uses effective strategic workforce planning 
practices for acquiring, developing, and retaining staff. 

To address the first objective, we collected information and data from 
representatives of SEC's Offices of the Chairman and Executive 
Director, SEC's Office of Human Resources (OHR), and key divisions and 
offices on the agency's recent workforce planning activities. To gain 
insights on SEC's progress in this area, we also reviewed SEC's 
strategic plan, budget requests, and other relevant documents, and GAO 
reports. To address the second objective, we compared SEC's workforce 
planning activities with five key principles for effective strategic 
workforce planning, which we developed based on our review of studies 
by leading workforce planning organizations and interviews with 
officials from the Office of Personnel Management (OPM) and the 
National Academy of Public Administration.[Footnote 1] We identified 
related tasks for each principle (described in our prior work) to 
provide more specific examples of how each principle may be implemented 
and we determined whether SEC was undertaking these or similar tasks. 
In addition, we interviewed representatives from the Office of 
Management and Budget (OMB) and OPM to discuss SEC's activities and 
best practices in strategic workforce planning in the federal 
government. This report primarily focuses on strategic workforce 
planning efforts under the former Chairman, whose resignation was 
effective June 30, 2005. We conducted our work in Washington, D.C., 
from April 2005 through November 2005 in accordance with generally 
accepted government auditing standards. Appendix I provides additional 
information on our scope and methodology. 

Background: 

SEC was created by Congress in 1934 primarily to protect investors; 
maintain fair, honest, and efficient securities markets; and facilitate 
capital formation. SEC's oversight responsibilities include rule 
making, surveilling the markets, interpreting laws and regulations, 
reviewing corporate filings, conducting inspections and examinations, 
and determining compliance with federal securities laws. In addition, 
SEC monitors and regulates a variety of key market participants, which 
as of July 2004 included more than 7,200 broker-dealers, 900 transfer 
agents, almost 500 municipal and government securities dealers, and 
self-regulatory organizations (SRO).[Footnote 2] However, as we have 
reported previously, SEC has faced resource and management challenges 
that affected its ability to achieve its mission. The following 
sections include a discussion of SEC's organizational structure and its 
human capital challenges, as well as a discussion of principles for 
human capital management and planning. 

SEC Staff and Organization: 

As of August 2005, SEC had approximately 3,800 staff working in four 
divisions and 21 offices in Washington, D.C., and 11 regional and 
district offices. Approximately 41 percent of staff were attorneys, 25 
percent were accountants or financial analysts, and 6 percent were 
investigators or examiners. The remaining 28 percent were other 
professional, technical, administrative, and clerical staff. Figure 1 
depicts SEC's organizational structure, including the Chairman's office 
and the agency's key divisions and offices. 

Figure 1: Structure of SEC (Divisions and Offices): 

[See PDF for image] 

[End of figure] 

The Managing Executive for Operations and Management, who works in the 
Office of the Chairman, is responsible for overseeing all efforts to 
enhance agency productivity, retain qualified staff, and manage agency 
resources. In coordination with the Office of the Executive Director, 
the Managing Executive for Operations and Management has primary 
responsibility for OHR, which develops, implements, and evaluates SEC's 
programs for human resource and personnel management. 

SEC Human Capital Management and Challenges: 

Over the past years, we have produced several reports relevant to human 
capital and workforce planning issues at SEC. In 2001, we recommended 
that the Chairman of SEC include a strategy for succession planning and 
develop a comprehensive, coordinated workforce planning effort as part 
of the agency's annual performance plan.[Footnote 3] In March 2002, we 
found that SEC had not reviewed its staffing and resource needs 
independent of the budget process and that SEC generally developed its 
annual budget request based on the previous year's appropriation, not 
on what the agency actually needed to fulfill its mission.[Footnote 4] 
We also commented that SEC was making its staffing allocation decisions 
without the benefit of a strategic plan. We recommended that SEC 
broaden its strategic planning process to determine its regulatory 
priorities and the resources needed to fulfill its mission, including 
identifying the staff skills needed to do so. 

In July 2004, we found that although SEC received more flexible pay and 
hiring authority, it continued to face challenges filling critical 
vacancies, such as for accountants.[Footnote 5] Furthermore, we 
reported that although SEC's allocation of its newly authorized 
positions was generally consistent with Sarbanes-Oxley directions, 
these decisions were made without the benefit of an updated strategic 
plan that outlined the agency's priorities--a tool that could be used 
to help ensure that SEC was deploying its resources to maximize 
organizational effectiveness. Later, in November 2004, we reported the 
results of a GAO survey of human capital issues at SEC to benchmark 
employee views following the implementation of pay parity and several 
work-life programs.[Footnote 6] We found that the significant 
improvement in employee satisfaction with compensation and work-life 
programs could be attributed to SEC's recent implementation of pay 
parity and an increased focus on the use of flexible work schedules and 
telework programs since 2001. 

In May 2005, we audited SEC's financial statements for fiscal year 2004 
and found that SEC's preparation of its financial statements was 
manually intensive and consumed significant staff resources.[Footnote 
7] To address the weaknesses found in the audit, SEC stated that it 
would increase the number of financial reporting staff. Finally, in 
August 2005, as a result of our review of SEC's facilities project 
management and related budget planning, we recommended that SEC 
complete the hiring of new positions in the Office of Administrative 
Services and the Office of Financial Management. 

Strategic Human Capital Management and Workforce Planning: 

Studies by several organizations, including GAO, have shown that 
successful organizations in both the public and private sectors use 
strategic management approaches to prepare their workforces to meet 
present and future mission requirements. For example, preparing a 
strategic human capital plan encourages agency managers and 
stakeholders to systematically consider what is to be done, how it will 
be done, and how to gauge progress and results. Federal agencies have 
used varying frameworks for developing and presenting their strategic 
human capital plans.[Footnote 8] More recently, various agencies have 
begun using OPM's Human Capital Assessment and Accountability Framework 
(HCAAF) as the basis for preparing such plans. HCAAF, which OPM 
developed in conjunction with OMB and us, outlines six standards for 
success, key questions to consider, and suggested performance 
indicators for measuring progress and results. These six standards for 
success and related definitions are as follows: 

* Strategic alignment. The organization's human capital strategy is 
aligned with mission, goals, and organizational objectives and 
integrated into its strategic plans, performance plans, and budgets. 

* Workforce planning and deployment. The organization is strategically 
utilizing staff in order to achieve mission goals in the most efficient 
ways. 

* Leadership and knowledge management. The organization's leaders and 
managers effectively manage people, ensure continuity of leadership, 
and sustain a learning environment that drives continuous improvement 
in performance. 

* Results-oriented performance culture. The organization has a diverse, 
results-oriented, high-performance workforce, and a performance 
management system that effectively differentiates between high and low 
performance and links individual, team, or unit performance to 
organizational goals and desired results. 

* Talent management. The organization makes progress toward closing 
gaps or making up deficiencies in most mission-critical skills, 
knowledge, and competencies. 

* Accountability. The organization's human capital decisions are guided 
by a data-driven, results-oriented planning and accountability system. 

Strategic workforce planning, an integral part of human capital 
management and the strategic workforce plan, involves systematic 
assessments of current and future human capital needs and the 
development of long-term strategies to fill the gaps between an 
agency's current and future workforce requirements. Agency approaches 
to such planning can vary with each agency's particular needs and 
mission; however, our previous work suggests that irrespective of the 
context in which workforce planning is done, such a process should 
incorporate five key principles: (1) involve management and employees, 
(2) analyze workforce gaps, (3) employ workforce strategies to fill the 
gaps, (4) build the capabilities needed to support workforce 
strategies, and (5) evaluate and revise strategies. Figure 2 provides a 
fuller description of each of the five principles. 

Figure 2: GAO's Five Key Principles for Effective Strategic Workforce 
Planning: 

[See PDF for image] 

Note: In broad terms, human capital flexibilities represent the 
policies and practices that an agency has the authority to implement in 
managing its workforce to accomplish its mission and achieve its goals 
in areas such as recruitment, retention, compensation, incentive 
awards, training and development, performance management, work 
arrangements, and work-life policies. 

[End of figure] 

Results in Brief: 

SEC has made progress on a number of human capital initiatives and is 
in the process of developing a strategic human capital plan. In 2003, 
SEC completed a comprehensive workforce and work-flow review of the 
agency, subsequent to which it split its Office of Administrative and 
Personnel Management into the Office of Administrative Services and 
OHR. This change allowed SEC to separate and thereby increase its 
attention to its administrative and personnel functions, as well as 
hire an associate executive director of OHR to focus on assessing, 
developing, and implementing human resources programs. In addition, in 
April 2005, SEC created a more structured human capital council by 
expanding the role of the Executive Resources Board (ERB), now called 
the Human Capital Review Board (HCRB). In contrast to the ERB, the HCRB 
follows a more formalized and regular process for reviewing and 
approving all human capital decisions. Senior management from SEC's 
major divisions and offices, the Chairman's office, the Executive 
Director, and OHR compose the HCRB and regularly meet to discuss 
staffing allocations and alignment of their human capital resources and 
strategies to achieve strategic planning goals. Finally, as of November 
2005, SEC was in the process of creating its first strategic human 
capital plan, which according to OHR officials, will be based on OPM's 
HCAAF. However, SEC has not set a completion date. 

Overall, many of SEC's efforts related to workforce planning have been 
consistent with our five key principles for effective strategic 
workforce planning; however, some of these efforts were still being 
developed or could be improved. We found the following: 

* SEC has been making a concerted effort to include various 
stakeholders in the strategic workforce planning process, as noted in 
our first principle. For instance, OHR has been working with some 
internal and external stakeholders as it develops its strategic human 
capital plan. However, SEC may also benefit from conducting outreach 
with congressional stakeholders and the securities industry. In 
addition, not all SEC employees will be given the opportunity to 
provide feedback during the development of the plan, but may be more 
involved in related initiatives. Additional employee input, which SEC 
plans to obtain in the future, could provide SEC with more information 
to determine whether workforce planning efforts are understood and 
supported by staff. 

* Although SEC has been taking steps to identify needed critical skills 
and competencies, as outlined in our second principle, SEC could 
benefit from a formal process for identifying existing skills among 
staff and linking them to SEC's strategic goals. Specifically, although 
managers can determine knowledge and abilities possessed or needed 
within their divisions, SEC has not systematically collected and 
maintained information on employees' current skills and competencies 
across the agency. As a result, SEC may incorrectly estimate workforce 
needs and skill gaps, information that helps agencies determine 
appropriate human capital strategies. 

* As related in our third principle, SEC has been developing and using 
human capital strategies to address workforce needs and skill gaps, but 
some of these strategies have not been in place long enough to assess 
results. For example, SEC recognized that the agency would benefit from 
the knowledge and skills possessed by individuals with business 
degrees. Therefore, in addition to a Summer Honors Business Program 
that was implemented in 2001 to attract future master of business 
administration (MBA) graduates, OHR in September 2005 implemented a 2- 
year program where MBA graduates rotate through various SEC divisions 
as associates before being permanently placed in a division. However, 
it is too soon to assess the overall effectiveness of the 2-year MBA 
program. 

* SEC is developing or changing many of the administrative, 
educational, and other requirements to support workforce strategies 
that are discussed in our fourth principle. In particular, SEC has 
provided some training on human capital flexibilities, considered 
potential improvements to the administration of these programs, and has 
procedures in place to promote transparency and accountability in its 
administration of these programs. 

* SEC is developing additional human capital measures and a more formal 
process by which to link the achievement of its human capital and 
strategic goals, the importance of which are underscored in our fifth 
principle. Currently, SEC informally links its human capital and 
strategic goals during HCRB meetings. A formal linkage could help SEC 
to better evaluate how effectively human capital strategies are 
fulfilling strategic goals. 

This report includes no recommendations because many of SEC's human 
capital initiatives, including the strategic human capital plan, are 
currently under development. However, we made observations based on our 
audit work that highlight areas warranting management attention or 
possible enhancements in SEC's current strategic workforce planning 
efforts. In commenting on a draft of this report, SEC agreed with our 
findings and stated that the areas of concern cited in our report would 
be addressed once SEC's strategic human capital planning process is 
fully implemented. SEC's written comments are reprinted in appendix II 
and discussed near the end of this report. 

SEC Has Made Progress on Strategic Human Capital Initiatives and Is 
Developing a Strategic Human Capital Plan: 

SEC has shown progress on a number of strategic human capital 
management initiatives that could help strengthen SEC's efforts in 
workforce planning and is developing its strategic human capital plan. 
These initiatives include splitting its Office of Administrative and 
Personnel Management into the Office of Administrative Services and OHR 
in order to improve efficiency and effectiveness in both and creating a 
more structured and institutionalized human capital council by 
expanding the role of the ERB, now called the HCRB. Furthermore, SEC is 
in the process of creating its first strategic human capital plan. 
According to SEC, this plan is to be based on OPM's HCAAF. 

SEC Has Developed More Formalized Process for Strategic Human Capital 
Management: 

In 2003, after the passage of Sarbanes-Oxley, SEC undertook an 
extensive workforce and work-flow review, and the ERB became the 
vehicle through which SEC leadership met to align its programmatic 
goals and new responsibilities with its human capital approaches and 
existing and new resources. The ERB--composed of senior division 
managers, the Managing Executive for Operations, and the head of OHR 
(after the creation of that office)--met monthly and on an ad hoc basis 
to deal with special issues, and produced recommendations for the 
Chairman's approval. The 2003 workforce and work-flow review process 
required division and office directors to present justifications for 
resource requests to the ERB for the board's approval. One outcome of 
the 2003 review was the decision to split SEC's Office of 
Administrative and Personnel Management into two offices--the Office of 
Administrative Services and OHR. According to OHR, the separation of 
the office's administrative and personnel functions was made to improve 
efficiency and effectiveness in these functions, which was necessitated 
by the agency's growth of approximately 1,000 individuals after the 
implementation of Sarbanes-Oxley. In addition, the split created an 
opportunity for SEC to hire an Associate Executive Director for OHR, 
who is tasked with assessing, developing, and implementing human 
resources programs. 

Following the creation of OHR, SEC broadened the role of the ERB-- 
renamed the HCRB in April 2005--to include a senior executive review of 
all human capital issues. SEC staff said that the HCRB has a standing 2-
to 3-hour biweekly meeting and is composed of (1) directors from the 
major divisions and offices--Divisions of Corporation Finance; 
Investment Management; Market Regulation; Enforcement; and the Office 
of Compliance, Inspections, and Examinations (OCIE); (2) a designee 
representing the interests of the field offices; (3) the Executive 
Director (who serves as Chair); (4) a representative from the 
Chairman's office; and (5) the Associate Executive Director of OHR. 
According to SEC, although smaller offices do not regularly participate 
in the HCRB, the Executive Director is responsible for representing the 
interests of these offices. In addition, these offices make 
presentations to the HCRB on an as-needed basis. 

The HCRB approves all human capital decisions, including staffing 
allocations. Specifically, staffing allocations and current structures 
for each division and office can now only be amended with the approval 
of the HCRB. According to SEC officials, HCRB's staffing decisions are 
made on a consensus rather than formal voting basis. SEC staff also 
said that although the commission does not directly participate in the 
agency's human capital planning process, a representative from the 
Chairman's office attends HCRB meetings. Furthermore, while the HCRB 
has the ability to approve staffing requests, larger allocations of 
staff slots and staff reorganizations are subject to final review and 
approval by the Chairman. 

Representatives from SEC's key divisions and offices said they felt 
that the migration from the ERB to the HCRB was much more than a name 
change. Specifically, the HCRB has a greater focus on SEC's strategic 
needs. Management staff from several SEC divisions attributed this 
change to the hiring of the new Associate Executive Director of OHR, 
who was formerly employed at OPM and who, they felt, is aware of what 
OPM and OMB expect from agencies in their strategic planning and human 
capital management processes. One division staff representative added 
that whereas they felt that the ERB met more "sporadically" and many 
did not feel compelled to gain board approval of staffing allocations, 
the HCRB now meets regularly and has more "rigor and structure." 

SEC Is Developing a Strategic Human Capital Plan: 

SEC has been developing its human capital plan to address its strategic 
planning goal of maximizing the use of agency resources. Specifically, 
OHR officials told us that the plan will address how SEC will implement 
and align its human capital strategies to achieve agency mission, 
goals, and outcomes. OHR officials also told us that they are in the 
process of developing a human capital plan based on OPM's HCAAF 
(previously discussed in the report), which identifies six standards 
for success: (1) strategic alignment, (2) workforce planning and 
deployment, (3) leadership and knowledge management, (4) results- 
oriented performance culture, (5) talent management, and (6) 
accountability. A major component of the human capital plan, according 
to OHR officials, will be a strategy map and balanced scorecard to 
delineate and determine whether its strategies and action plans are 
meeting each of HCAAF's six standards. A strategy map defines the 
strategic objectives and associated initiatives that support the 
organization's vision and mission. A balanced scorecard is a management 
system that provides metrics and feedback about agency 
actions.[Footnote 9] The actual scorecard uses indicators to measure 
the relative success of each initiative. Following this approach, SEC 
plans to use some indicators suggested by HCAAF to measure the success 
of each of the initiatives. OHR officials told us that the balanced 
scorecard will also focus on OHR's internal operations and the agency 
human capital outcomes for which it will be accountable. In early 
November 2005, OHR officials provided us with a draft strategy map and 
possible draft objectives and indicators for how OHR is planning to 
achieve SEC's strategic planning goal of maximizing the efficient and 
effective delivery of human resource services. 

OHR has hired a contractor to help implement the balanced scorecard 
approach and plans to involve a number of internal stakeholders in 
developing the human capital plan, including the Executive Director, 
the HCRB, and a cross section of division and office managers. 
According to OHR officials, the contractor will interview branch chiefs 
and assistant directors within OHR to discuss how to apply the balanced 
scorecard to SEC, and will also interview managers from the divisions, 
but does not plan to obtain input from employees below the supervisory 
level. As of November 2005, OHR officials, working with the contractor, 
have identified a list of human capital initiatives and indicators to 
measure the success of these initiatives. OHR officials said that the 
next step is to communicate with division staff to determine the 
appropriate targets for these indicators. Once the development work is 
complete, the Executive Director will approve a presentation of the 
human capital plan to the HCRB. After receiving HCRB's approval, OHR 
will disseminate the human capital plan throughout the agency. We 
discuss stakeholder involvement in developing the human capital plan 
and SEC's communication strategy in greater detail later in the report. 

Once the strategic human capital plan is implemented, SEC officials 
intend to update the plan quarterly and annually. The process will 
begin with an evaluation of the results of the balanced scorecard 
measures. OHR management said that the quarterly assessments of the 
plan will focus on SEC's ability to implement initiatives and 
demonstrate results in both leading and lagging indicators. OHR 
officials said that the office plans to conduct the quarterly review 
and present results to the Executive Director and then to the HCRB. OHR 
also stated that it plans to conduct an annual review to ensure that 
the human capital plan remains linked to the agency's strategic plan 
and to correct any gaps between the plan's human capital initiatives 
and the ability to meet the agency's strategic goals. In addition to 
data used in the quarterly reviews, annual reviews are to include input 
from the HCRB and use performance management data and employee focus 
groups to determine gaps. 

Although the anticipated human capital plan should allow SEC to more 
consistently plan for its staffing needs and adjust staffing or program 
priorities, it does not appear to formally link resource needs to the 
budgeting process. As we have previously reported, the absence of this 
linkage results in reactive rather than proactive activities and 
planning that tends to be tactical rather than strategic. According to 
OHR, divisions and offices are not currently required to provide OHR 
with annual resource allocation information such as number of planned 
promotions because SEC's divisions and offices do not have staff with 
the expertise to do strategic human capital planning. Although OHR can 
provide some minimal assistance to the divisions on long-term workforce 
planning and linking these efforts to the budget, OHR recognizes the 
benefit to increasing such assistance and plans to improve its capacity 
to provide this guidance. 

Components of SEC Workforce Planning Efforts Are Consistent with 
Established Principles, but Some Efforts Could Be Improved: 

We found that many of SEC's efforts related to workforce planning were 
consistent with our five key principles for effective strategic 
workforce planning; however, some of these efforts are still being 
developed or could be improved. Figure 3 summarizes how SEC had 
incorporated GAO's key principles into its strategic workforce 
planning. 

Figure 3: Summary of SEC Actions As They Relate to the Five Key 
Principles of Effective Strategic Workforce Planning: 

[See PDF for image] 

[End of figure] 

Principle 1: SEC Has Engaged Top Management and Expanded the Role of 
Certain External Stakeholders: 

In surveying SEC activities related to our first workforce planning 
principle, we found that the creation of the HCRB expanded the role of 
top management in strategic workforce decision making at SEC. As 
previously discussed, HCRB meetings create a forum for regular dialogue 
between OHR, key executives, and division leaders, and the HCRB now 
reviews and approves all human capital decisions. Moreover, during the 
ongoing development of its strategic human capital plan and other 
strategies, OHR officials said that it has also sought the assistance 
and guidance of various external stakeholders. In particular, SEC staff 
have been meeting regularly with OPM and using several of OPM's key 
tools to assist the development of its strategic human capital plan. 
According to OHR officials, they have researched best practices in 
government, academia, and the private sector. However, SEC may have 
missed opportunities to conduct outreach with congressional 
stakeholders and the securities industry. In addition, SEC has not 
fully sought employee feedback during the development of human capital 
initiatives and, specifically, during the development of the strategic 
human capital plan. 

SEC Has a Formalized Process for Its Top Leadership and Executives to 
Establish and Implement Human Capital Strategies: 

In our prior work, we have found that top management clearly and 
personally involved in workforce planning can provide the 
organizational vision that is important in times of change and generate 
cooperation within the agency to ensure that planning strategies are 
thoroughly implemented and sustained. Specifically, we have found that 
a key action in integrating human capital approaches with strategies 
for achieving programmatic results is the establishment of an entity, 
such as a human capital council, that is held accountable for linking 
human capital management and obtaining strategic goals.[Footnote 10] As 
demonstrated by their new responsibilities and participation in the 
HCRB, SEC's key executives and top management have been actively 
engaged in SEC's workforce planning efforts. As discussed previously, 
biweekly HCRB meetings are chaired by the Executive Director. This 
gathering of top leadership and executives helps determine and respond 
to current and changing workforce needs at SEC. For example, division 
managers we interviewed said that during HCRB meetings, senior managers 
representing SEC's major divisions and offices make consensus-based 
determinations of staffing decisions at the agency. 

In addition, the HCRB is to have a role in the development of the 
strategic human capital plan. For example, OHR officials said it has 
presented status reports to the HCRB on the development of the human 
capital plan. According to OHR officials, once the plan's proposed 
indicators and related targets are developed, some HCRB representatives 
will review and approve them for inclusion in the plan. Although a 
completion date for the plan has not been established, OHR officials 
said that HCRB will continue to work with OHR to make revisions and 
approve the strategic human capital plan. 

SEC Has Been Seeking Guidance from Certain External Stakeholders and 
Resources: 

In prior work, we found that agencies should engage various 
stakeholders to identify ways to streamline processes, improve human 
capital strategies, and help the agency recognize and deal with the 
potential impact that the organization's culture can have on the 
implementation of such improvements. Further, involvement of key 
congressional and other stakeholders during the strategic planning 
process also helps ensure that workforce planning efforts are clearly 
linked to the agency's mission and long-term goals. 

In developing its strategic human capital plan, SEC has been using 
various methods to obtain the assistance and viewpoints of external 
resources. According to OHR officials, staff researched and identified 
a number of best practice studies from government, academia, and the 
private sector. For instance, OHR said that it is working with a 
private human capital consulting company to obtain information on best 
practices for integrating human capital functions at SEC. The human 
capital functions SEC plans to integrate are (1) selection (hiring), 
(2) performance management, (3) training, and (4) succession planning. 
These functions will be linked by a common competency platform--meaning 
all four functions will be linked to agencywide skills and 
competencies, which SEC is currently in the process of identifying. As 
part of the integrated human capital functions initiative, officials 
said SEC is planning to (1) implement the performance management system 
within OHR by the end of 2005 and then throughout the agency, (2) begin 
integrating performance management with its hiring or "selection" 
system in May 2006, (3) offer training that develops employee 
competencies used for selection and performance management, and (4) use 
performance management, selection, and training to help institute 
succession planning. OHR plans to completely implement these integrated 
functions by May 2007. 

SEC also plans to use written guidance developed by other government 
agencies, including OMB, OPM, and us. Specifically, OHR plans to 
incorporate measures outlined in HCAAF--and developed by OPM in 
conjunction with OMB and us--into the balanced scorecard being 
developed for SEC. OHR officials said that the office has consulted 
with OPM staff and hired a specialist from OPM to help implement its 
new human capital strategies, including the development of SEC 
University--one of the agency's new initiatives that focuses on staff 
training. Furthermore, according to OHR officials, SEC formally and 
informally communicates with other financial regulators through 
networking events like the Small Agency Council, and also regularly 
receives operational information and survey data from other regulators, 
including compensation and benefit comparisons, labor relations 
discussions, and recruiting strategies.[Footnote 11] 

Although SEC has collected useful information and perspectives from 
various external parties, SEC has not met with congressional and 
industry stakeholders during the development of its strategic human 
capital plan. OHR officials said that SEC had not met with 
congressional staff to obtain their input on human capital planning at 
SEC and did not indicate any plans to do so since SEC has communicated 
human capital issues to Congress through congressional hearings and 
during the budget process. In addition, OHR officials told us they have 
collected best practice data from the private sector through a 
consulting firm, but they did not state that SEC has had discussion 
with industry stakeholders on how the evolving securities market may 
affect SEC's resource needs. 

SEC Has Communicated Its Strategic Workforce Initiatives Agencywide but 
Has Not Fully Sought Feedback from Employees during the Development of 
New Human Capital Initiatives: 

We have found that an effective communication strategy will create 
shared expectations, promote transparency, and report progress. In 
general, communication about the goals, approach, and results of 
strategic workforce planning is most effective when done early and 
clearly. Effective strategies also allow for a variety of two-way 
communication and are not limited to top-down dissemination. Efforts 
that address key organizational issues, like strategic workforce 
planning, are most likely to succeed if, at their outset, agencies' top 
program and human capital leaders set the overall direction, pace, 
tone, and goals of the effort, and involve employees and other 
stakeholders in establishing a communication strategy that creates 
shared expectations for the outcome of the process. 

SEC communicates relevant information on human capital issues to its 
employees not only through SEC's intranet and e-mail sent to 
administrative contacts within divisions and offices, but also through 
other forums such as staff meetings. In some cases, issues are 
communicated top-down from executives to managers and supervisors, and 
sometimes from managers and supervisors to nonmanagerial employees. For 
example, OHR officials said that the presentation of SEC's new human 
capital plan is to be authorized by the Executive Director and then 
approved by the HCRB. Following HCRB approval, other top-level 
executives (those who are not on the HCRB), managers, and supervisors 
are to participate in group meetings to discuss the plan. Finally, OHR 
officials said that all SEC employees are to receive electronic 
presentations of the plan from OHR but will not have the opportunity to 
provide feedback prior to the approval of the plan. In general, 
informal methods of communicating human capital issues include 
performance discussions that occur during the employee evaluation 
process and impromptu communications between staff and liaisons from 
OHR assigned to each division. 

Overall, division officials said that OHR has been sensitive about the 
need to communicate about human capital issues, programs, and policies. 
However, one division manager noted that written agency communications 
sometimes assume that the reader has adequate knowledge of policies and 
procedures. For example, while SEC provides comprehensive new employee 
orientation training, such training could be enhanced by providing more 
basic information on federal government employment. This additional 
training may help ensure that when there are changes or new training 
opportunities, employees have a better understanding of the context in 
which changes occur. Another division manager said that OHR should e- 
mail employees directly regarding training opportunities instead of 
delegating this responsibility to the division's OHR liaison. 

Although OHR has communicated with SEC staff on some human capital 
matters, it has not sought feedback from all employees in the 
development of SEC's strategic human capital plan. Without such 
feedback, it is difficult to determine employees' awareness of issues 
and fully determine the effectiveness of such human capital approaches. 
As previously discussed, participation in the development of this plan 
will not take place below the supervisory level. Nevertheless, OHR has 
indicated that it plans to use some employees to help with the 
development of some of its integrated human capital functions, such as 
performance management. Furthermore, OHR officials said it plans to 
seek feedback from employees and to use focus groups to evaluate the 
success of its strategic human capital plan. 

Principle 2: SEC Has Been Taking Steps to Track and Identify Critical 
Skills and Competencies; However, It Currently Lacks a Formal Process 
for Identifying and Linking These Skills to Strategic Goals: 

SEC has been developing tools to measure needed skills and training for 
its employees, but currently relies on management's informal knowledge 
of the skills and competencies possessed and needed within agency 
divisions. OHR has started interviewing division management to identify 
agencywide and position-specific competencies. As previously discussed, 
SEC also has begun to integrate its human capital functions with 
agencywide skills and competencies. Despite these efforts to identify 
and minimize gaps in workforce skills, SEC currently lacks a formal 
process to link critical skills and competencies to the goals and 
objectives outlined in its strategic plan. As a result, SEC may 
incorrectly estimate workforce gaps, information that helps agencies 
determine appropriate human capital strategies. 

SEC Has Made Efforts to Identify Staff Deficiencies but Does Not 
Maintain Information on Skills Possessed by Its Employees: 

Our prior work suggests that maintaining information on the critical 
skills and competencies that an organization's staff possess is 
especially important as the environment in which federal agencies 
operate changes. Shifts in priorities, advances in technology, budget 
constraints, and other factors all affect what sort of staff agencies 
will need to fulfill their missions. For SEC, such information is 
particularly useful for determining and addressing gaps in critical 
workforce skills or staff and making efficient resource allocations, 
because SEC must respond to changing regulatory conditions requiring 
its attention. For example, after the Energy Policy Act of 2005 (P.L. 
109-58) repealed the Public Utility Holding Company Act of 1935 
(PUHCA), the statute under which SEC is responsible for regulating 
public utility holding companies, SEC had to assess the skills of the 
24 employees assigned to work in the Office of Public Utility 
Regulation (OPUR) to determine where they might be reassigned.[Footnote 
12] 

Although SEC managers indicated that they were aware of the current 
knowledge, skills, and abilities of staff in their divisions, OHR 
officials stated that the agency does not currently maintain any formal 
inventory of the staff's skills and competencies. Documentation of 
staff experience and skills may help management and OHR more 
effectively identify hiring strategies and training and developmental 
opportunities for current staff that would help eliminate skills gaps. 
In the OPUR case, OHR officials said it has been somewhat difficult to 
identify the skills of employees in this office. Nevertheless, during 
our interviews with divisions, senior staff indicated that, in general, 
they have informal knowledge, mainly through experience, of the skills 
and competencies of supervised staff. Also, division management said 
that it draws upon staff knowledge when hiring; in particular, this 
occurs when divisions work with OHR to write position descriptions. 

Despite lacking documentation of current skills, SEC has made efforts 
to identify deficiencies in staff skills. For example, OHR officials 
indicated that its office has interviewed directors and deputy 
directors at the agency to identify where knowledge and skills could be 
improved at the agency. The interviewees identified areas needing 
improvement, and branch chiefs ranked them in order of importance: (1) 
research and analysis; (2) knowledge of SEC process, rules, and 
regulations; (3) decision making; (4) writing; (5) oral communication; 
(6) information technology knowledge and skills; (7) 
management/supervisory skills; and (8) institutional knowledge. In 
another instance, in July 2004, OCIE completed a survey of examiners 
with higher degrees (e.g., MBA) to determine what skills were possessed 
and needed in the office. Further, division staff said they contact OHR 
when they need to identify persons with special skills and abilities. 
Division staff explained that OHR helps locate staff to complete work 
requiring special resources. Division staff interviewed generally 
agreed that these liaisons have proved to be an adequate resource for 
locating specialized skills and abilities on an as-needed basis. 

Although SEC currently does not document and centrally compile skills 
possessed by employees, OHR plans to use the skills and competencies 
needed for SEC positions as the basis for integrating the four human 
capital functions of selection (hiring), performance management, 
training, and succession planning. Furthermore, SEC plans to identify 
competencies that will be needed agencywide as well as for specific 
occupations. With the aid of a private contractor, OHR plans to conduct 
a competency-based job analysis for each occupation at SEC. OHR expects 
that, in consultation with its contractor, it will determine two or 
three competencies that may be applied agencywide, while other 
technical competencies will pertain to specific positions at the 
agency. According to OHR officials, the core competencies will be 
linked to broader agencywide strategic goals, and job-specific 
competencies may be linked to programmatic goals listed in the 
strategic plan. Eventually, all SEC employees will be evaluated through 
a competency-based performance management system. As part of its wider 
strategic human capital planning efforts, OHR is in the process of 
linking all of its human capital functions. These functions will be 
linked to the critical skills and competencies identified by the agency 
and provide information that can be used in all personnel-related 
functions. For instance, skills gaps identified by the performance 
management system may be remedied by hiring or training initiatives. 

SEC Is Taking Steps to Determine What Critical Skills and Competencies 
It Needs but Has Not Linked Them to Strategic Goals: 

In our prior agencywide work, we have found that the scope of agencies' 
efforts to identify the skills and competencies needed for their future 
workforces varies considerably, depending on the environment and 
responsibilities of a particular agency. The most important 
consideration is that the skills and competencies identified are 
clearly linked to the agency's mission and long-term goals, as 
developed with stakeholders during the strategic planning process. 

SEC has already taken some steps to identify the type of knowledge and 
skills that would be beneficial. As discussed previously, OHR 
interviewed division directors and deputy directors to identify areas 
where staff knowledge and skills could be improved. According to OHR 
officials, these interviews also led to the conclusion that management 
should (1) create a career development plan, (2) develop an 
individualized training curriculum, (3) mitigate or prevent loss of 
institutional knowledge, and (4) promote knowledge transfer among its 
employees to strategically address its future workforce needs. In 
addition, SEC has been conducting the triennial needs assessment 
required by OPM. SEC has completed the first two phases of the 
assessment, which gathered information from executives and supervisors 
at the agency. According to officials, the assessment results will form 
the basis for questions to ask subject matter experts. Following 
interviews with subject matter experts, SEC anticipates that it will 
distribute a survey to all employees asking them to identify the skills 
needed to perform their jobs. The results of this assessment are to be 
used by OHR to determine if SEC's existing training programs should be 
refocused and to identify additional courses or programs that should be 
developed. 

Although SEC has completed its 2004-2009 strategic plan, OHR officials 
stated that goals and objectives outlined in the plan have not been 
linked to specific skills or competencies. While the strategic plan 
lists potential performance indicators, they are not directly linked to 
particular critical skills or competencies. As it develops its 
integrated human capital functions and determines workforce gaps, SEC 
plans to link the critical skills and competencies it identifies to the 
strategic plan. According to OHR officials, this linkage will occur 
eventually as competencies are determined. 

SEC Is Making Efforts to Reshape Its Workforce to Increase Its 
Efficiency and Effectiveness through Re-engineering Work Processes: 

When estimating the number of employees needed with specific skills and 
competencies, we found, based on prior work, it is also important to 
consider opportunities for reshaping the workforce by re-engineering 
current work processes or sharing work among offices and divisions 
within an agency. This is particularly important to SEC as it responds 
to changes in legislation affecting its responsibilities and 
substantial growth in the size of its workforce. Re-engineering 
processes have been particularly helpful as SEC considers more 
strategically how to use employees to perform a wider variety of 
functions at the agency, or seeks persons with differing skills to 
perform certain functions. According to OHR officials, the office is 
trying to improve employee versatility at the agency and is currently 
developing a "versatility index" to measure how well employees may 
perform a variety of tasks at the agency. 

Changes in the structure and responsibilities of SEC have contributed 
to some changes in workforce processes. SEC executives said that in an 
effort to more proactively regulate the securities industry, they are 
taking initiatives to identify emerging risks in securities markets and 
are working on creating more coordination among divisions. For example, 
the recently created Office of Risk Assessment (ORA) works with various 
divisions and offices to develop methodologies to address identified 
risk. ORA consults with risk-assessment committees that consist of 
staff from various divisions. Committees currently exist for the 
following areas: (1) full disclosure, (2) investment management and 
regulation, and (3) SEC infrastructure. ORA also uses software in 
coordination with divisions to identify how emerging risks have 
affected SEC's workload and responsibilities. However, according to SEC 
management, ORA is not directly involved in workforce planning efforts 
at the agency. 

Various divisions have also modified work processes to respond to 
changing responsibilities and workload and identified skill gaps. For 
example, SEC's Enforcement staff attorneys were responsible for 
collecting disgorgement, as well as investigating potential violations 
of securities law.[Footnote 13] Partly in response to the new Fair Fund 
provision under Sarbanes-Oxley, the Division of Enforcement hired 
attorneys dedicated to collections, as well as case management 
specialists, to assist with maximizing collections and addressing 
competing priorities and the growing workload of the Enforcement 
attorneys. Enforcement also stated that it is working with technology 
staff to improve systems, so that collection information is tracked in 
one system rather than captured in multiple systems. Furthermore, the 
Division of Investment Management is now conducting integrated 
disclosure reviews and participates in cross-divisional task forces, 
such as the Investor Education and Soft Dollar task forces, to leverage 
skills across divisions.[Footnote 14] In addition, as a result of using 
a risk-based approach to more proactively identify and address 
compliance risks, OCIE recently gained the approval of the HCRB to 
create 20 additional staff positions, to be filled by individuals with 
data analysis skills to collect surveillance data. SEC is also now 
responsible for overseeing investment firms that want to become a 
consolidated supervised entity (CSE).[Footnote 15] Because such 
oversight requires a combination of specialized technical and auditing 
skills currently not found within the agency, OCIE recently created a 
new unit to oversee CSEs. 

Principle 3: SEC Has Developed Some Human Capital Strategies to Address 
Gaps, but It Is Too Early to Assess Results: 

SEC is using a variety of methods to address skill gaps and improve 
employee benefits and work life. For example, SEC uses its student loan 
repayment (SLR) program and teleworking opportunities to attract and 
retain employees. In addition, SEC is linking its human capital 
functions and focusing on developing skills and competencies to use for 
hiring, performance management, training, and succession planning. SEC 
also has been developing SEC University to expand employee training 
opportunities and minimize critical skills gaps. Recently, OHR has used 
hiring and retention data, focus groups, and surveys to assess the use 
of many of SEC's work-life programs. However, because many of the human 
capital strategies have only recently been implemented, it is too soon 
to assess the effectiveness of these strategies. 

SEC Is Building More Comprehensive Human Capital Strategies to Recruit 
and Retain Employees and Address Skill Gaps: 

In our prior work, we have found that much of the authority that allows 
agencies to tailor human capital strategies to their needs is already 
available under current laws and regulations. Therefore, in setting 
goals for their human capital programs and developing tailored 
workforce planning strategies to achieve these goals, agencies should 
identify and use all appropriate administrative authorities to build 
and maintain an effective workforce for the future. 

As mentioned earlier, SEC has been developing integrated human capital 
functions to better recruit and retain the right staff with the right 
expertise to help achieve its strategic goals and objectives. SEC 
indicated that selection, or hiring, is a critical tool to meet its 
changing needs, particularly following the increase in SEC's 
responsibilities under Sarbanes-Oxley. SEC made several changes to its 
hiring process to fill accountant positions within Corporation Finance, 
which had been a challenging task for the agency partly due to the 
slowness of the hiring process and the reluctance of some candidates to 
relocate to Washington, D.C. First, SEC retained an executive 
recruiting firm to carry out some of the recruitment. Second, to 
expedite the hiring process, OHR introduced an automated hiring system 
to accelerate the review of applications by automatically disseminating 
information on job candidates to Corporation Finance. Third, to 
accommodate qualified applicants who might not want to relocate to SEC 
headquarters, Corporation Finance instituted a "virtual workforce" 
pilot where several of its employees can work from an alternate site 
and physically report to an SEC location on a limited basis. OHR staff 
indicated that the pilot phase of the program would be useful in 
helping managers learn how to manage off-site employees. However, it is 
unclear to what extent the program will be expanded, or whether it will 
be continued. Finally, OHR said that category rating will be introduced 
to the agency during 2006.[Footnote 16] 

In addition to exploring ways to improve the hiring processes, SEC also 
has tried to more strategically allocate skills and experience when 
creating or filling existing vacancies. For example, recognizing the 
need for more administrative support for its collection program, the 
Division of Enforcement recently filled a number of positions with 
paralegals and administrative personnel instead of attorneys. SEC also 
recognized that as an agency, it would benefit from the knowledge and 
skills possessed by individuals with business degrees. Therefore, as 
mentioned earlier, SEC developed a Summer Honors Business Program in 
2001 to attract future MBA graduates to SEC. In September 2005, OHR 
implemented a 2-year program where MBA graduates rotate through various 
SEC divisions as associates before being permanently placed in a 
division. 

To increase employee retention, SEC has increased the use of its SLR 
program and telework arrangements. SEC began using the SLR program in 
the last half of fiscal year 2003 and reported making 384 student loan 
repayments totaling approximately $3.3 million in fiscal year 2004. 
This is an increase from fiscal year 2003, in which 257 employees 
received payments.[Footnote 17] To receive loan repayment, enrollees 
agree to work for an additional 3 years at SEC. According to SEC 
officials, few employees leave before the 3-year employment agreement 
terminates. SEC is also expanding the use of telework arrangements for 
its employees, with approximately 20 percent of its workforce now 
participating in the program. As of August 2005, SEC reported having 
813 approved teleworking employees, an increase from March 2005, when 
it had 648 employees approved for telework. SEC also found that 
strategic use of recruitment and retention bonuses for employees with 
qualifications critical to SEC's mission has been an effective way to 
achieve its hiring goals and an efficient use of funding. 

In addition, SEC has been expanding its training programs to eliminate 
gaps and maximize employee contributions. Training efforts at SEC 
previously focused on specific division and office needs, and division 
managers told us they have training units within their divisions. With 
the development of SEC University, OHR hopes to bring about a cultural 
change within the agency and encourage cross-divisional and agencywide 
training. Although OHR plans to consolidate various training programs 
at SEC through the university, some divisions indicated that they found 
in-house training on technical issues performed by division staff 
critical to meeting agency goals and felt such training should remain 
outside the main training center at SEC. To date, OHR has taken no 
action to discontinue training offered within divisions. In September 
2005, SEC placed a new position announcement to hire a person from 
within SEC who would be devoted exclusively to directing SEC 
University. OHR officials expect this position to be filled by the end 
of November 2005. As part of the current SEC University plan, OHR is 
assessing employee training interests and relevancy to programmatic 
functions, and is exploring establishing training partnerships with 
government, public and private entities, and five or six law and 
business schools. According to OHR, SEC University also plans to 
provide supervisory training and help the agency maintain quality 
leadership, which will be particularly important because 14 percent of 
SEC managers will be eligible to retire by the end of 2005. 

In addition to developing a curriculum for SEC University, OHR is also 
working to automate and centralize employees' training and skills 
information. OHR has proposed that SEC develop a learning management 
system to centrally track employees' work experiences and training, as 
well as provide a forum to share work experiences among 
employees.[Footnote 18] OHR has produced a project plan outlining the 
business needs for the learning management system, including key 
deliverable dates for implementation and cost estimates. 

SEC Has Various Methods in Place to Measure the Success of Its Human 
Capital Approach, but Many of These Assessments Are Not Yet Complete: 

Our previous agencywide work suggests that agencies could benefit by 
assessing key aspects of their human capital approach to identify 
possible obstacles and opportunities that may occur in meeting critical 
workforce needs. Specifically, an agency can use HCAAF to create 
indicators to measure the effectiveness of human capital approaches. 

According to OHR officials, the office has used various methods to 
assess recruitment, retention, and work-life issues at SEC, including 
(1) focus group research, (2) employee satisfaction surveys on human 
capital flexibilities, and (3) entrance and exit interviews. OHR has 
conducted focus groups of employees on recruitment effectiveness, as 
well as retention and job satisfaction. According to OHR officials, it 
has used the findings from its research studies and OPM's Federal Human 
Capital Survey in developing SEC's strategic human capital 
plan.[Footnote 19] For example, focus group results showed that SEC 
employees were most concerned about being recognized for good 
performance and agency procedures for dealing with poor performance. 
Consequently, OHR determined that performance management and training 
needed to be enhanced. OHR also determined that SEC needed to integrate 
the four human capital functions of selection (hiring), performance 
management, training, and succession planning. Specifically, OHR plans 
to enhance its performance management by using individual development 
plans for employees that include more comprehensive and targeted 
training and development opportunities. 

As indicated above, SEC is using results from various surveys and 
informal assessments to improve human capital management. However, many 
of its human capital strategies are new or under development, and it is 
too soon to gauge their effectiveness. As part of developing and 
implementing its human capital plan, SEC plans to use a balanced 
scorecard to more comprehensively assess the effectiveness of its human 
capital strategies and workforce planning efforts. As of November 2005, 
OHR has worked with a contractor to develop a list of indicators that 
SEC could use to measure the progress the agency has made on its human 
capital strategies. 

Principle 4: SEC Is Addressing Administrative, Educational, and Other 
Requirements Important to Supporting Workforce Strategies: 

Overall, SEC has been addressing many of the administrative, 
educational, and other requirements to support human capital programs 
and workforce strategies, including (1) educating managers and 
employees on the use of flexibilities, (2) streamlining and improving 
administrative processes, and (3) building transparency and 
accountability into its human capital system. To this end, SEC requires 
some training for supervisors and new employees on the use of human 
capital flexibilities. OHR told us that it informally reviews its 
administrative processes and has been working to improve the 
administration of some human capital flexibilities. In addition, we 
found that SEC has promoted transparency and accountability in the use 
of these flexibilities. 

SEC Requires Some Training for Supervisors and New Employees on 
Flexibilities: 

As discussed in prior GAO work, managers and supervisors can be much 
more effective in using human capital strategies that involve 
flexibilities if they are properly trained to identify when they can be 
used and how they can be administered. In addition, to avoid confusion 
and misunderstandings, it is also important to educate employees about 
how the agency uses human capital flexibilities and what rights 
employees have under policies and procedures related to human capital. 

According to OHR officials, supervisors are usually required to attend 
training on policies and practices related to newly implemented human 
capital programs. For example, SEC has focused on strengthening its 
telework program. In the spring of 2005, the agency hired a consultant 
to develop and deliver a comprehensive training program designed to 
better equip supervisors to manage remote workers. SEC management said 
that while the training was not mandatory, supervisors were strongly 
encouraged to participate. In addition, management from several 
divisions confirmed that all of their supervisors and managers had been 
briefed on available human capital flexibilities at SEC, especially 
alternative work schedules and telework. 

SEC also has disseminated information on human capital programs to new 
and current employees. New employees receive such information at a 
required orientation session. OHR officials told us that current 
employees can receive information concerning human capital 
flexibilities through administrative notices, technical training, daily 
consultation with OHR staff, and postings of human capital information 
on the agency's intranet. SEC has also been finalizing an SEC employee 
handbook that provides information on human capital flexibilities. 

SEC Has Improved Administrative Processes That Support the Use of Some 
Flexibilities: 

As suggested in our prior work, it is important that agency officials 
look for instances in which administrative processes can be re- 
engineered to more effectively administer flexibilities. OHR officials 
told us that while they do not conduct a formal evaluation of the 
effectiveness of existing administrative processes, they do solicit 
feedback from divisions and agencies and adjust processes to meet their 
needs. For example, to expedite the hiring process for a division that 
had a substantial number of positions to fill, SEC delegated authority 
to grant recruitment bonuses to the division's director, allowing the 
division to more quickly and readily recruit highly desirable 
candidates. In another example, OHR officials told us they plan to 
develop and implement recommendations based on SEC managers' 
suggestions provided in our 2005 study of SLR programs implemented by 
various federal agencies.[Footnote 20] Specifically, we recommended 
that SEC build on current efforts to measure the impact of the 
repayment program by determining now what indicators SEC will use to 
track program success, what baseline SEC will use to measure resulting 
program changes, what data SEC needs to collect, and whether SEC could 
use periodic surveys to track employee attitudes about the program. 

Additionally, OHR officials said that their office has surveyed 
managers and employees to gauge the ease of administering policies and 
procedures. Similarly, OHR has asked employees hired using 
flexibilities (such as recruitment bonuses) and employees who 
participate in the telework and student loan repayment programs for 
suggestions to improve administrative processes. According to OHR 
officials, OHR plans to continue to refine collection and analysis of 
this information as the office develops and implements the balanced 
scorecard. 

SEC Has Processes to Promote Transparency and Accountability in the Use 
of Flexibilities: 

In our prior agencywide work, we found that clear guidelines for using 
specific flexibilities and holding managers and supervisors accountable 
for their fair and effective use are essential for successfully 
implementing workforce strategies. SEC has some processes in place to 
promote transparency and accountability in the use of flexibilities. 
According to SEC management, key stakeholders--OHR staff, Employee- 
Labor Relations (ELR) specialists, managers, and senior management 
officials--have assisted in developing guidelines for using 
flexibilities. In addition, OHR officials told us that the National 
Treasury Employees Union, the labor organization that represents SEC 
employees, is involved in all matters affecting employees in the 
union.[Footnote 21] 

In using human capital flexibilities, SEC generally requires employees 
to prepare and submit a written request that must then receive 
managerial approval and, in some cases, input from ELR as well as OHR. 
To help ensure accountability in the use of flexibilities, employees' 
requests go through more than one level for approval or disapproval. 
For example, to telework, employees first submit a written request to 
their immediate supervisor, who then forwards it to a second-level 
supervisor for final approval or disapproval. If the request is denied, 
the second-level supervisor must document why. If there is a "close 
call" in approving or denying a telework request, ELR or OHR staff may 
be consulted. SEC officials told us that ELR usually gets involved when 
a request is denied. According to SEC officials, the agency requires 
written justification for denials of employee application for most 
types of flexibilities, not just telework. 

Outside agencies also play a role in ensuring accountability in SEC's 
use of human capital policies, programs, and options. SEC's use of 
flexibilities is subject to review by OPM, OMB, the Merit Systems 
Protection Board, Congress, and us. Specifically, OPM monitors SEC's 
use of direct hire authority, as well as student loan repayment. 
Moreover, according to SEC, unionized employees can file a grievance 
under the provisions of the collective bargaining agreement, and there 
is an administrative grievance process in place for nonunionized 
employees. 

Principle 5: SEC Is Developing Additional Human Capital Measures and a 
Formal Process by Which to Link the Achievement of Its Human Capital 
and Strategic Goals: 

Our prior agencywide work found that agencies should develop 
appropriate performance measures to link human capital measures with 
strategic goals. Performance measures, appropriately designed, can be 
used to gauge success and evaluate the contribution of human capital 
activities toward achieving programmatic goals. SEC management said 
that SEC has informally monitored the agency's progress toward 
achieving some human capital goals using a few performance measures. 
SEC mainly has monitored hiring, attrition, and retention rates. These 
indicators, along with other indicators compiled by the divisions and 
offices to measure performance related to programmatic goals, compose 
SEC's management "dashboards." The "dashboards" are indicators compiled 
monthly by the Executive Director's office and are designed to present 
regular snapshots of the divisions' and offices' progress in meeting 
budget, staffing, and performance objectives. One division official 
said that the turnover rates and measures of supervisors' tenure 
included in the dashboards were particularly useful. Division managers 
said they consulted with OHR when the human capital indicators 
identified potential issues. For example, a division manager we 
interviewed noted that one human capital measure indicated few women in 
the division were applying for branch chief jobs, and the division has 
been working with OHR to determine the reasons why. 

Although SEC uses some human capital indicators, OHR officials 
acknowledged that they needed to develop additional measures because 
their current indicators capture output measures for overall human 
capital strategies, such as turnover, but do not directly link to 
specific human capital initiatives. OHR officials explained that the 
balanced scorecard, discussed earlier, will link human capital 
initiatives to outcomes. Identifying performance measures and 
discussing how the agency will use them to evaluate the human capital 
strategies--before it starts to implement the strategies--can help 
agency officials think through the scope, timing, and possible barriers 
to evaluating the workforce plan. However, as we have found in prior 
work, developing meaningful outcome-oriented performance measures for 
both human capital and programmatic goals, and collecting performance 
data to measure achievement of these goals are major challenges for 
many federal agencies. 

Further, one SEC division official said it was particularly difficult 
to develop performance measures in areas dealing with the enforcement 
of laws and regulations. For example, in 2002 we reported that SEC 
strategic and annual performance plans did not clearly indicate the 
priority that disgorgement collections should receive in relation to 
SEC's other goals and did not include collection-related performance 
measures.[Footnote 22] In our 2005 report, we found that SEC needed to 
make further progress in establishing performance measures to better 
track the effectiveness of its collection efforts, and track both 
receivers' fees and the amounts distributed to harmed 
investors.[Footnote 23] 

Finally, SEC said that evaluations of the linkage between human capital 
and strategic goals currently take place informally during various 
meetings, including HCRB meetings, and the results of these evaluations 
are addressed through periodic adjustments made to deal with short-term 
problems. More specifically, SEC management said that HCRB members used 
the management "dashboards" to help make staffing decisions, but noted 
that the dashboards were not tightly linked to the HCRB process. 
However, OHR anticipates that the implementation of the balanced 
scorecard and its indicators will strengthen and formalize the linkage 
between human capital activities and strategic goals. 

Observations: 

With the enhancements being made to its human capital management, SEC 
has begun to use a planning and management approach that ensures 
ongoing attention to human capital issues. SEC has been making changes 
to ensure management focuses not only on traditional personnel 
functions, but also on the broader issues of human capital management. 
Further, senior managers are beginning to focus on strategic issues in 
decision making. In particular, SEC has undertaken a number of 
initiatives that demonstrate its commitment to human capital planning. 
When enacted, these initiatives should begin to help address the 
agency's human capital challenges, some of which are long-standing and 
cannot be quickly or easily overcome, such as succession planning. To 
ensure the success of SEC's strategic goals, it is critical that SEC 
complete its human capital initiatives--in particular, its strategic 
human capital plan. A well-documented plan is an essential tool that 
can serve as a guide for SEC in workforce management and direct an 
effective, ongoing communications strategy that genuinely engages 
employees and other stakeholders in the creation and administration of 
human capital programs. 

Based on our discussions with OHR, SEC is in the process of creating a 
human capital plan. SEC's finalized human capital plan is to include 
many of the best practices outlined in our five principles for 
workforce planning. While we are encouraged by SEC's progress, three 
areas may warrant management attention as SEC continues to develop its 
human capital plan: conducting outreach with congressional stakeholders 
and the securities industry on strategic workforce planning, obtaining 
employee feedback on human capital strategies before they are 
implemented, and taking steps to better identify, understand, and 
document existing skills among staff. Obtaining feedback from 
congressional stakeholders and the securities industry could enhance 
SEC's ability to gain feedback from these important groups. Further, 
employee input prior to implementation may increase SEC's ability to 
determine whether its human capital strategies are understood and 
supported by the staff. In addition, by formally identifying and 
documenting existing skills among staff, SEC may more accurately 
estimate workforce needs and skill gaps, which is information that 
helps agencies determine appropriate human capital strategies. Finally, 
we want to stress the importance of ensuring that the plan formally 
links human capital activities with the goals in SEC's strategic plan. 
This linkage will help SEC to use its workforce to increase the 
agency's operational effectiveness and responsiveness. 

Agency Comments and Our Evaluation: 

SEC, in written comments on a draft of this report that are reprinted 
in appendix II, stated that it agreed with our findings. SEC commented 
that its strategic human capital plan will soon be completed and that 
it will provide the long-term infrastructure to ensure that the 
progress SEC has made in human capital initiatives are 
institutionalized. SEC stated that its strategic human capital plan 
will include a rigorous strategic planning system that, once 
implemented, will address our concerns regarding the alignment of SEC's 
human capital and strategic goals. SEC also commented that the work 
being done on integrating its human capital systems will more formally 
capture SEC's institutional knowledge, which was another concern cited 
in the report. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time we will provide copies to the 
Chairman and Ranking Minority Member of the House Committee on 
Government Reform; the Chairman and Ranking Minority Member of the 
House Committee on Financial Services; the Chairman and Ranking 
Minority Member of the Senate Committee on Homeland Security and 
Governmental Affairs; and the Chairman and Ranking Minority Member of 
the Senate Committee on Banking, Housing and Urban Affairs. We will 
also send copies to the Chairman of the SEC and other interested 
parties, and we will make copies available to others upon request. In 
addition, the report will be available at no charge on the GAO Web site 
at [Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-8678 or [Hyperlink, williamso@gao.gov]. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix III. 

Signed by: 

Orice M. Williams: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendixes: 

Appendix I: Scope and Methodology: 

In order to describe the progress the Securities and Exchange 
Commission (SEC) made in developing a strategic human capital plan, we 
gathered and analyzed data from a variety of sources. We reviewed GAO's 
recent prior work on human capital issues at SEC. We also obtained 
information on SEC's operations and strategic planning efforts, recent 
budget requests, human capital plans and strategies, workforce data, 
milestones and timelines, and performance measures. To collect data not 
identified through prior work, we contacted and conducted interviews 
with SEC, the Office of Management and Budget (OMB), and Office of 
Personnel Management (OPM) to obtain relevant information. 

To evaluate how SEC was developing its long-term strategies for 
acquiring, developing, and retaining staff to achieve the agency's 
mission, we used the key principles for effective strategic workforce 
planning developed in Human Capital: Key Principles for Effective 
Strategic Workforce Planning as our criteria for identifying workforce 
planning practices that SEC planned or had under way.[Footnote 24] 
Using these five principles, we also identified related tasks 
associated with each principle to provide more specific examples of how 
each principle might be implemented. 

Additionally, we met with SEC, OPM, and OMB to discuss and collect 
information on the agency's former and current practices and future 
plans to address human capital issues. After these initial meetings, we 
held follow-up meetings with SEC's Office of Human Resources and other 
key offices and divisions to gather relevant information. 

We conducted our work in Washington, D.C., from April 2005 through 
November 2005 in accordance with generally accepted government auditing 
standards. 

[End of section] 

Appendix II: Comments from the Securities and Exchange Commission: 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION: 
OPERATIONS CENTER: 
OFFICE OF HUMAN RESOURCES: 
6432 GENERAL GREEN WAY: 
ALEXANDRIA, VIRGINIA 22312-2413: 

DEC 15 2005: 

Orice M. Williams: 
Director: 
Financial Markets and Community Investment: 
United States Government Accountability Office: 
441 G St. NW: 
Washington, DC 20548: 

Dear Ms. Williams: 

The Securities and Exchange Commission (SEC) has received the 
Government Accountability Office (GAO) draft report, "Securities and 
Exchange Commission - Some Progress Made on Strategic Human Capital 
Management," (GAO-06-86) prepared for the Subcommittee on Government 
Management, Finance and Accountability, Committee on Government Reform, 
House of Representatives. The SEC is in agreement with the findings of 
this report and offers the following comments. 

The SEC has recently faced significant changes to its mission, budget 
and human capital requirements creating the need for stronger strategic 
human capital practices. As indicated in the report, many of the 
efforts taken to date have been successful and delivered strong results 
but much work remains to be done. The SEC Strategic Human Capital Plan, 
which will soon be completed, will provide the long-term infrastructure 
to ensure that recent successes are institutionalized and built upon. 
This plan, designed to incorporate the Office of Personnel Management's 
(OPM) Human Capital Assessment and Accountability Framework (HCAAF), 
includes a rigorous strategic planning system which ensures long-term 
accountability. Once implemented, this system will specifically address 
the concerns cited in the report regarding alignment of human capital 
practices to SEC strategic goals. Also, the work being done regarding 
integrated human capital systems will more formally capture the 
institutional knowledge of the SEC and address a related concern cited 
in the report. 

The SEC is very confident in the strategic human capital planning 
process underway and believes that once completely implemented this 
planning will strengthen the areas of concern cited in the report as 
well as provide a foundation to continue to provide results in the 
areas of success that were cited. 

Sincerely, 

Signed by: 

Jeff Risinger: 
Associate Executive Director: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Orice M. Williams, (202) 512-8678 or [Hyperlink, williamso@gao.gov]: 

Staff Acknowledgments: 

In addition to the contact named above, Karen Tremba, Assistant 
Director; Allison Abrams; Marianne Anderson; William R. Chatlos; 
Kenneth Scott Derrick; Marc Molino; and Barbara Roesmann made key 
contributions to this report. 

(250234): 

FOOTNOTES 

[1] GAO, Human Capital: Key Principles for Effective Strategic 
Workforce Planning, GAO-04-39 (Washington, D.C.: Dec. 11, 2003). 

[2] SROs are organizations responsible for regulation of member broker- 
dealers. Among other things, transfer agents cancel stock certificates 
presented for transfer, issue new stock certificates, and maintain 
records reflecting the ownership of securities as agent for the 
issuers. 

[3] GAO, Securities and Exchange Commission: Human Capital Challenges 
Require Management Attention, GAO-01-947 (Washington, D.C.: Sept. 17, 
2001). 

[4] GAO, SEC Operations: Increased Workload Creates Challenges, GAO-02- 
302 (Washington, D.C.: Mar. 5, 2002). 

[5] GAO, Securities and Exchange Commission: Review of Fiscal Year 2003 
and 2004 Budget Allocations, GAO-04-818 (Washington, D.C.: July 23, 
2004). 

[6] GAO, Securities and Exchange Commission Human Capital Survey, GAO- 
05-118R (Washington, D.C.: Nov. 10, 2004). Work-life programs help 
employees balance their work and family lives and include compressed 
work schedules, alternative work schedules, telecommuting, and part- 
time work arrangements. 

[7] GAO, Financial Audit: Securities and Exchange Commission's 
Financial Statements for Fiscal Year 2004, GAO-05-244 (Washington, 
D.C.: May 26, 2005). 

[8] For example, in a March 2002 exposure draft, we introduced a 
strategic human capital model designed to help agency leaders 
effectively use their people and determine how well they integrate 
human capital considerations into daily decision making and planning 
for the program results they seek to achieve. This model is built 
around four cornerstones: (1) leadership; (2) strategic human capital 
planning; (3) acquiring, developing, and retaining talent; and (4) 
results-oriented organizational cultures. 

[9] A balanced scorecard provides feedback for both internal 
organizational processes and external outcomes in order to continuously 
improve strategic performance and results.Generally, the balanced 
scorecard approach suggests that the agency view its organization from 
four perspectives and develop metrics, collect data, and analyze itself 
relative to each perspective: (1) learning and growth, (2) business 
process, (3) customer perspective, and (4) financial perspective. 

[10] GAO, Human Capital: Selected Agency Actions to Integrate Human 
Capital Approaches to Attain Mission Results, GAO-03-446 (Washington, 
D.C.: Apr. 11, 2003). 

[11] The Small Agency Council is the voluntary management association 
of independent sub-Cabinet federal agencies. Established in 1986, the 
council represents about 80 small agencies. Members have diverse 
program responsibilities that include public-and private-sector 
employment, commerce and trade, energy and science, transportation, 
national defense, and finance and cultural issues. Almost half of the 
council's members are regulatory or enforcement agencies. 

[12] As a result of PUHCA being repealed, SEC will transfer 
responsibility for regulating these entities to the Federal Energy 
Regulatory Commission in February 2006. 

[13] Section 308(a) of Sarbanes-Oxley, the Federal Account for Investor 
Restitution provision, commonly known as the Fair Fund provision, 
allows SEC to combine civil monetary penalties and disgorgement amounts 
collected in enforcement cases to establish a fund for the benefit of 
victims of securities law violations. Disgorgement is a remedy designed 
to deprive defendants of their ill-gotten gains derived from their 
illegal activities. 

[14] Broker-dealers typically provide a bundle of services, including 
research and execution of transactions, that are paid for by broker- 
dealers' commissions. "Soft dollars" are commission dollars that broker-
dealers allocate to pay for the research component. 

[15] GAO, Financial Regulation: Industry Changes Prompt Need to 
Reconsider U.S. Regulatory Structure, GAO-05-61 (Washington, D.C.: Oct. 
6, 2004). Many of the largest financial legal entities are part of 
holding company structures--companies that hold stock in one or more 
subsidiaries. Holding companies that own large broker-dealers can elect 
to be supervised by SEC as consolidated supervised entities. SEC would 
provide groupwide oversight of these entities unless they are 
determined to already be subject to "comprehensive, consolidated 
supervision" by another principal regulator. 

[16] Category rating allows agencies to place job candidates in broad 
quality groupings rather than assigning candidates actual numerical 
ratings. This approach may give the selecting officials more candidates 
from whom to select rather than limiting agency officials to just the 
top three, as is the case with the traditional federal hiring system. 

[17] GAO, Federal Student Loan Repayment Program: OPM Could Build on 
Its Efforts to Help Agencies Administer the Program and Measure 
Results, GAO-05-762 (Washington, D.C.: July 22, 2005). 

[18] According to SEC, a learning management system automates the 
administration of learning processes to plan, register, deliver, and 
measure courseware. It provides the ability to create, store, access, 
and reuse learning content. Such a system can provide collaboration and 
communication tools for participants and instructors to interact and 
share information from different locations, as well as provide access 
to information, tools, and processes on the job, where it is most used. 

[19] The Federal Human Capital Survey is a biennial survey of federal 
employees that measures employees' perceptions of whether, and to what 
extent, conditions characterizing successful organizations are present 
in their agencies. 

[20] GAO-05-762. 

[21] SEC officials estimate that two-thirds of SEC's 4,000 employees 
are members of the union. 

[22] GAO, SEC Enforcement: More Actions Needed to Improve Oversight of 
Disgorgement Collections, GAO-02-771 (Washington, D.C.: July 12, 2002). 

[23] GAO, SEC and CFTC Penalties: Continued Progress Made in Collection 
Efforts, but Greater SEC Management Attention Is Needed, GAO-05-670 
(Washington, D.C.: Aug. 31, 2005). 

[24] GAO-04-39. 

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