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United States General Accounting Office: 
GAO: 

Testimony: 

Before the National Commission on the Public Service: 

For Release on Delivery: 
Expected at 2:00 p.m. EDT: 
Monday, July 15, 2002: 

Managing For Results: 

Using Strategic Human Capital Management to Drive Transformational 
Change: 

Statement of David M. Walker: 
Comptroller General of the United States: 

GAO-02-940T: 

Chairman Volcker and Members of the National Commission on the Public
Service: 

I am pleased to be here today to discuss the essential actions that the
federal government needs to take in order to manage its most important
asset—its people, or human capital. An organization’s people define its
culture, drive its performance, embody its knowledge base, and are the
key to successful merger and transformation efforts. As such, strategic
human capital management is the critical element to maximizing
government’s performance and assuring its accountability for the benefit
of the American people. 

The early years of the 21st century are proving to be a period of 
profound transition for our world, our country, and our government. 
This transition is being driven by a number of key trends including: 
global interdependence; diverse, diffuse, and asymmetrical security 
threats; rapidly evolving science and technology; dramatic shifts in 
the age and composition of the population; important quality of life 
issues; the changing nature of our economy; and evolving government 
structures and concepts. These trends present a range of challenges 
that have no boundaries. These trends also contribute to a huge, longer-
range fiscal and budgetary challenge facing the United States. Given 
these trends and long-range fiscal challenges, the federal government 
needs to engage in a comprehensive review, reassessment, and 
reprioritization of what the government does, how it does business, and 
who does the government’s business. We must re-examine a range of 
government policies, programs, and operations. The status quo is simply 
unacceptable. The long-range numbers do not add up. We must re-examine 
the base, including our current human capital policies and practices. 
This re-examination will in turn require federal agencies to transform 
their cultures and shift their overall orientation from: 

* processes to results; 

* stovepipes to matrixes; 

* hierarchical to flatter and more horizontal structures; 

* an inward focus to an external (citizen, customer, and stakeholder) 
focus; 

* management control to employee empowerment; 

* reactive behavior to proactive approaches; 

* avoiding new technologies to embracing and leveraging them; 

* hoarding knowledge to sharing knowledge; 

* avoiding risk to managing risk, and; 

* protecting turf to forming partnerships. 

Leading public organizations here in the United States and abroad have
found that strategic human capital management must be the centerpiece of
any serious change management initiative and efforts to transform the
cultures of government agencies. Unfortunately, as the Commission has
made clear, the federal government is not well positioned to make the
needed transformation. GAO designated strategic human capital
management as a governmentwide high-risk area in January 2001 because
of a long-standing lack of a consistent strategic approach to 
marshaling, managing, and maintaining the human capital needed for 
government to deliver on its promises. [Footnote 1] We reported then 
and still find today that serious human capital shortfalls are eroding 
the capacity of many agencies, and threatening the ability of others, 
to economically, efficiently, and effectively perform their missions. 
[Footnote 2] The federal government’s human capital weaknesses did not 
emerge overnight and will not be quickly or easily addressed. The 
enormous human capital and other transformation challenges that need to 
be addressed to transform the Federal Bureau of Investigation (FBI) and 
create a successful Department of Homeland Security are instructive of 
the critical and difficult task ahead. [Footnote 3] Committed,
sustained, highly qualified, and inspired leadership, and persistent
attention by all key parties will be essential if lasting changes are 
to be made and the challenges we face across the federal government
successfully addressed. 

Fortunately, we are now seeing increased attention to strategic human
capital management and a real and growing momentum for change is now
evident since we placed strategic human capital management on our High-
Risk list. 

* In August 2001, President Bush placed human capital at the top of his
management agenda. 

* The Office of Management and Budget (OMB) is assessing agencies’
progress in addressing their individual human capital challenges as 
part of its management scorecard and mid-point review process. 

* As one of its many efforts to help agencies with these issues, the 
Office of Personnel Management (OPM) released a human capital scorecard 
last December to assist agencies in responding to the OMB scorecard. 

* Finally, Congress has underscored the consequences of human capital
weaknesses in federal agencies and pinpointed solutions through the
oversight process and a wide range of hearings held over the last few
years. 

Therefore, the key question today is how do we best seize the 
opportunity and build on the current momentum? I have often noted that 
the first step toward meeting the government’s human capital challenges 
is for agency leaders to identify and make use of all the appropriate 
administrative authorities available to them to manage their people for 
results both effectively and equitably. Much of the authority agency 
leaders need to manage human capital strategically is already available 
under current laws and regulations. Agency leaders should not wait for 
comprehensive human capital legislative reforms to happen. The use of 
these authorities often needs to be undertaken as part of, and 
consistent with, proven change management practices. The second step is 
for policymakers to pursue incremental legislative reforms to give 
agencies additional tools and flexibilities to hire, manage, and retain 
the human capital they need, particularly in critical occupations. Key 
provisions of legislative proposals under consideration in Congress 
represent an important step to helping agencies address their human 
capital management challenges. Many of the provisions contained in the 
bills are consistent with authorities we have been urging for other 
federal agencies. [Footnote 4] The third step toward meeting the 
federal government’s human capital challenges is for all interested 
parties to work together to identify the kinds of comprehensive 
legislative reforms in the human capital area that should be enacted 
over time. These reforms should place greater emphasis on knowledge, 
skills, and performance in connection with federal employment, 
promotion, and compensation decisions, rather than on the passage of 
time, the rate of inflation, or geographic location, as is often the 
case today. Shockingly, over 80 percent of the cost associated with the 
annual increases in federal salaries is due to cost-of-living and 
locality pay adjustment. This must change. 

Today, I will discuss three broad human capital reform opportunities 
that are instrumental to agency transformation efforts and that the
Commission may want to consider as its work moves forward. These
broad opportunities include: first, aligning individual and 
organizational performance; second and directly related to that, 
implementing results-oriented pay reform; and third, sustaining agency 
transformation efforts. I will conclude with some comments on how we in 
GAO are playing a constructive role in helping the government address 
its human capital challenges, including our efforts to “lead by 
example” in this critically important area. 

Using Performance Management Systems to Help Transform Agencies: 

Leading organizations use their performance management systems as a
key tool for aligning institutional, unit, and employee performance;
achieving results; accelerating change; managing the organization on a
day-to-day basis; and facilitating communication throughout the year so
that discussions about individual and organizational performance are
integrated and ongoing. [Footnote 5] Performance management systems in 
these leading organizations typically seek to achieve three key 
objectives. First, they strive to provide candid and constructive 
feedback to help individual employees maximize their potential in 
understanding and realizing the goals and objectives of the agency. 
Second, they seek to provide management with the objective and fact-
based information it needs to reward top performers. Third, performance 
management systems provide the necessary information and documentation 
to deal with poor performers. Most federal performance management 
systems fail to achieve these objectives. In addition, many federal 
agencies are just beginning to recognize that their performance 
management systems can be strategic tools to achieve success. In my 
opinion, modernizing agency performance appraisal and management 
systems and linking them to agency strategic plans and desired outcomes 
should be a top priority. Results-oriented performance agreements are 
one mechanism in a performance management system that creates a “line 
of sight” showing how individual employees can contribute to overall 
organizational goals. [Footnote 6] Agencies that effectively implement 
such systems must first align agency leaders’ performance expectations 
with organizational goals and then cascade performance expectations to 
other organizational levels. These employees are then held accountable 
for their contributions to achieve desired results. Our work has shown 
that agencies have benefited from their use of results-oriented 
performance agreements for political and senior career executives. The 
performance agreements: 

* strengthened alignment of results-oriented goals with daily 
operations; 

* fostered collaboration across organizational boundaries; 

* enhanced opportunities to discuss and routinely use performance
information to make program improvements; 

* provided a results-oriented basis for individual accountability, and; 

* maintained continuity of program goals during leadership transitions. 

Governmentwide, agencies need to place increased emphasis on holding
senior executives accountable for organizational goals. OPM amended
regulations that change the way agencies evaluate the members of the
Senior Executive Service (SES). While agencies will need to tailor their
performance management systems to their unique organizational 
requirements and climates, they nonetheless are to: hold executives
accountable for results; appraise executive performance on those results
balanced against other dimensions, including customer satisfaction and
employee perspective; and use those results as the basis for performance
awards and other personnel decisions. Agencies were to implement the
new policies for the SES appraisal cycles that began in 2001. 

Ultimately, an effective performance management system must link pay
and incentive programs to individual knowledge, skills, and 
contributions to achieving organizational results. The affect of poor 
performers on agencies’ performance and morale can far exceed their 
small numbers. Still, while important, dealing with poor performers is 
only part of the challenge; agencies need to create additional 
incentives and rewards for valuable and high-performing employees who 
represent the vast majority of the federal workforce. Congress and the 
administration have repeatedly expressed a commitment to more fully 
link resources to results. The American people expect and deserve this 
linkage as well. However, we will never achieve this linkage without 
modern and effective performance management strategies. Additional 
information on the performance management programs in use in agencies 
and the relative strengths and weaknesses of those programs, along with 
best practice information, would prove very helpful as agencies seek to 
link pay to individual knowledge, skills, and performance. 

Efforts to link federal pay to knowledge, skills, and performance 
should be part of a broader effort to align resource decisions to 
results. As I noted, fostered in part by the Government Performance and 
Results Act (GPRA), there has been an increasing interest within the 
executive branch and the Congress in linking performance and results to 
resource allocation and other decisions. Consistent with that view, we 
need to continue efforts to shift agency accountability—with 
appropriate safeguards and oversight—to budgeted resources and results 
and away from other inputs and processes. The work of the recently 
completed Commercial Activities Panel, which I had the privilege of 
chairing, is illustrative in this regard. [Footnote 7] One of the 
sourcing principles adopted by the Panel was that the federal 
government’s sourcing policy should avoid arbitrary full-time equivalent
(FTE) or other numerical goals. The principle is based on the unarguable
point that the success of government programs should be measured by the
results achieved in terms of providing value to the taxpayer, not the 
size of the in-house or contractor workforce. I believe that the 
Panel’s principle should also apply to resource allocation generally. 
We need to continue—and even augment—efforts to shift the focus of 
management, resource allocation, and decisionmaking from inputs and 
process to a greater focus on results and outcomes and to provide 
management reasonable flexibility while incorporating appropriate 
safeguards to prevent abuse. In this regard, holding managers 
accountable for results based on a specific dollar allocation versus 
FTE caps would be a major step in the right direction. 

Creating a Results-Oriented Approach to Federal Pay: 

As you know, I believe that a greater emphasis should be placed on
knowledge, skills, and performance in connection with federal
employment promotion and compensation decisions at all levels, rather
than the passage of time, the rate of inflation, or geographic 
location, as so often is the case today. In recent years, widespread 
concern has been expressed about the methodology and results of the 
procedures to determine the federal pay gap. These concerns are among 
the reasons that the pay gap has never been fully addressed. I believe 
that careful study is needed to develop more realistic and workable 
methodologies and solutions to federal pay issues. Part of that 
assessment should focus on options for moving away from a compensation 
system that contains governmentwide pay increases with locality 
adjustments, and toward a system that is based to a greater degree on 
the knowledge, skills, and performance of the individuals involved. 

I fully appreciate that much work may be needed before agencies’
respective performance management systems are able to support a more
direct link between pay and individual knowledge, skills, and
performance. OPM certainly has a continuing and vital role to play in
connection with these issues. OPM’s recently released white paper on
federal pay provides a good foundation for the results-oriented pay 
reform discussion that must now take place. [Footnote 8] The greater 
use of “broadbanding” is one of the options that deserves to be 
discussed. In the short term, Congress may wish to explore the benefits 
of (1) providing OPM with additional flexibility that would enable it 
to grant governmentwide authority for all agencies (i.e., class 
exemptions) to use broadbanding for certain critical occupations and/or 
(2) allowing agencies to apply to OPM (i.e., case exemptions) for 
broadbanding authority for their specific critical occupations. 
However, agencies should be required to demonstrate to OPM’s 
satisfaction that they have modern, effective, and validated 
performance management systems before they are allowed to use 
broadbanding. 

Ensuring Leadership and Accountability for Agencies’ Transformation 
Efforts: 

The nature and scope of the cultural transformation that needs to take
place in many agencies across the federal government will take years to
accomplish—easily outrunning the tenures of most political appointees. 
At the same time, GAO’s work over the years, most prominently in our 
High-Risk and Performance and Accountability Series, has amply 
documented that many agencies suffer from a range of long-standing 
management challenges and a lack of attention to basic stewardship 
responsibilities, requiring concerted action and sustained top-level 
attention if they are to be addressed. [Footnote 9] 

One option for addressing the issues agencies face is to create a Chief
Operating Officer (COO) position for selected agencies that would 
provide the sustained management attention essential for addressing key
stewardship responsibilities in an integrated manner while helping to
facilitate the transformation process within an agency. [Footnote 10] 
These long-term responsibilities are professional and nonpartisan in 
nature. They cover a range of “good government” responsibilities that 
are fundamental to effectively executing any administration’s program 
agenda. Statutory COOs would differ from—but hopefully complement—the 
roles often assumed by the current Deputy Secretaries in assisting the 
Secretaries in executing the administration’s policy and program agenda 
and achieving an agency’s mission. The good government responsibilities 
that could be led by a COO include: 

* strategic planning; 

* organizational alignment; 

* core values stewardship; 

* human capital strategy; 

* performance management (aligning institutional, unit, and individual
measurement and reward systems to achieve overall organizational 
goals); 

* communications and information technology management; 

* financial management; 

* acquisition management; 

* risk management; 

* knowledge management; 

* matrix management, and; 

* change management. 

While various models for structuring such a position could be used, one
option would be to have a COO who is appointed, subject to Senate
confirmation, to a term of 5 to 7 years (generally considered to be the
minimum time needed for major change initiatives to provide meaningful
and sustainable results). The COO should be at an organizational level
equivalent to the current deputies in major departments and agencies in
order to help assure the effectiveness of this position. A term 
appointment would help to provide continuity that spans the tenure of 
the political leadership to ensure that long-term stewardship issues 
are addressed and change management initiatives are successfully 
completed. The individual would be selected without regard to political 
affiliation based on (1) demonstrated leadership skills in managing 
large and complex organizations, and (2) experience achieving results 
in connection with a number of the above responsibilities. To further 
clarify accountability, the COO could be subject to a clearly defined, 
results-oriented performance contract with appropriate incentive, 
reward, and accountability mechanisms. 

If Congress and the executive branch decide to move forward with the
COO approach, it may make sense to use a pilot in a select number of
agencies using a value and risk-based approach. For example, an agency
that is experiencing particularly significant challenges in integrating
disparate organizational cultures (such as the proposed Department of
Homeland Security) may be an especially appropriate first phase
candidate. Agencies engaged in major transformation efforts, like the 
FBI, the Internal Revenue Service (IRS), and the National Aeronautics 
and Space Administration (NASA) could also benefit from such an 
approach. Similarly, a “challenged agency’’—one that has longstanding 
management weaknesses and high-risk operations or functions, such as 
the Department of Defense (DOD)—may also be a good first phase 
candidate. [Footnote 11] The point would be for the Congress, executive 
branch leadership in OMB and OPM, agencies, and others to gain 
experience with the COO approach before deciding how and where it 
should be applied across the government. 

More generally, we need to comprehensively examine opportunities for
better using the federal government’s career SES leadership. This
examination should focus on a number of issues that have been suggested 
to strengthen the SES and thereby improve federal performance and foster
transformation efforts. These issues include, for example, concerns over
SES compensation and pay compression. I believe that the issue of
whether and how much to increase SES pay must be discussed within the
context of how to make any pay increases variable and performance-based
rather than across-the-board and fixed. We also must carefully examine
the composition of the SES. It seems to me that, in general, current
members of the SES fill three broad roles: executive leadership, program
management, and senior technical and specialists positions. We need to
look at the implications that these differing roles have for a range of
issues, such as SES core competencies, performance standards,
recruitment sources, mobility, and training and development programs.
We also need to look at whether the number of levels within the SES 
(i.e. ES 1 through 6) are necessary and appropriate. 

GAO’s Constructive Efforts to Help Agencies Address Their Human Capital
Challenges: 

As the federal government’s leading accountability organization, we have
made a concerted effort to identify and encourage the implementation of
human capital practices that improve the efficiency, effectiveness, and
accountability of the federal government. Over the last few years, we 
have issued numerous reports with practical recommendations on the steps
individual agencies can take to address their specific human capital
challenges. [Footnote 12] In addition, we have reported on 
governmentwide trends and lessons learned by successful organizations. 
[Footnote 13] We also understand that we have a responsibility to “lead 
by example” and “practice what we preach” in all key management areas, 
including strategic human capital management. 

On March 15, 2002, we released A Model of Strategic Human Capital
Management, the latest in a series of tools designed to assist agency
leaders in effectively managing their people. [Footnote 14] Our model 
is designed to help agency leaders effectively lead and manage their 
people and integrate human capital considerations into daily decision 
making and the program results they seek to achieve. In so doing, the 
model highlights the importance of a sustained commitment by agency 
leaders to maximize the value of their agencies’ human capital and to 
manage related risks. Accordingly, it raises the bar for all of 
us—those in positions of leadership, federal managers, employees, 
unions, and human capital executives and their teams. 

Consistent with OPM’s and OMB’s views, our model of strategic human
capital management embodies an approach that is fact-based, focused on
strategic results, and incorporates merit principles and other national
goals. As such, the model reflects two principles central to the human
capital idea: 

* People are assets whose value can be enhanced through investment. As
with any investment, the goal is to maximize value while managing risk. 

* An organization’s human capital approaches should be designed,
implemented, and assessed by the standard of how well they help the
organization pursue its mission and achieve desired results or 
outcomes. 

The model highlights the kinds of thinking that agencies should apply, 
as well as some of the steps they can take, to make progress in managing
human capital strategically. The concepts presented in the model are
arranged around eight critical success factors, which are organized in
pairs to correspond with four cornerstones of effective strategic human
capital management. (See Fig. 1.) 

Figure 1: Critical Success Factors Organized by Human Capital 
Cornerstones: 

[See PDF for image] 

This figure is an illustration of Critical Success Factors Organized by 
Human Capital Cornerstones. The following data is depicted: 

Human Capital Cornerstone: Leadership; 
Critical Success Factors: 
* Commitment to Human Capital Management; 
* Role of the Human Capital Function. 

Human Capital Cornerstone: Strategic Human Capital Planning; 
Critical Success Factors: 
* Integration and Alignment; 
* Data-Driven Human Capital Decisions. 

Human Capital Cornerstone: Acquiring, Developing, and Retaining Talent; 
Critical Success Factors: 
* Targeted Investments in People; 
* Human Capital Approaches Tailored to Meet Organizational Needs. 

Human Capital Cornerstone: Results-Oriented Organizational Cultures; 
Critical Success Factors: 
* Empowerment and Inclusiveness; 
* Unit and Individual Performance Linked to Organizational Goals. 

[End of figure] 

As I noted before, OPM and OMB also have developed tools that are being
used to assess human capital management efforts. We provided drafts of
our human capital model to OPM and OMB for their review prior to
publication to help ensure that the three efforts are conceptually
consistent. We hope that the perspective and information provided in 
our management initiatives, such as “getting to green” on OMB’s 
management scorecard and using the tools developed by OPM. While we 
remain sensitive of the need to maintain our institutional 
independence, we are working constructively with OPM, OMB, and others 
to explore opportunities to develop a more fully integrated set of 
guidance and tools for agencies to address their human capital 
challenges. [Footnote 15] 

GAO’s Efforts to Lead by Example: 

In addition to providing tools to help agencies help themselves, we 
believe it is our responsibility to lead by example. We are in the 
vanguard of the federal government’s efforts to modernize existing 
human capital strategies and we are committed to staying in this 
position. Our people are our most valuable asset and it is only through 
their combined efforts that we can effectively serve our clients and 
our country. By managing our workforce strategically and focusing on 
results, we are helping to maximize our own performance and ensure our 
own accountability. By doing so, we also hope to demonstrate to other 
federal agencies that they can make similar improvements in the way 
they manage their people. 

We have identified and made use of a variety of tools and flexibilities,
some of which were made available to us through the GAO Personnel Act
of 1980 and our 2000 legislation, but most of which are available to 
federal agencies. 

The most prominent change in human capital management that we 
implemented as a result of the GAO Personnel Act of 1980 was a 
broadbanded pay-for-performance system. The primary goal of this system
is to base employee compensation primarily on the knowledge, skills, and
performance of individual employees. It provides managers flexibility to
assign employees in a manner that is more suitable to multi-tasking and
the full use of staff. Under our current broadbanded system, analyst and
analyst-related staff in Grades 7 through 15 were placed in three 
bands. We expect to modify our banded system in the future based on our 
experience to date. 

In January 2002, we implemented a new competency-based performance
management system that is intended to create a clear linkage between
employee performance and our strategic plan and core values. It includes
12 competencies that our employees overwhelmingly validated as the keys
to meaningful performance at GAO. (See Fig. 2.) 

Figure 2: GAO’s Competency-Based Model: 

[See PDF for image] 

The following data is depicted: 

* Achieving Results; 

* Maintaining Client and Customer Focus; 

* Developing People; 

* Thinking Critically; 

* Improving Professional Competence; 

* Collaborating with Others; 

* Presenting Information Orally; 

* Presenting Information in Writing; 

* Facilitating and Implementing Change; 

* Representing GAO; 

* Investing Resources; 

* Leading Others. 

[End of figure] 

Our October 2000 legislation gave us additional tools to: realign our
workforce in light of mission needs and overall budgetary constraints;
correct skills imbalances; and reduce high-grade, managerial, or
supervisory positions without reducing the overall number of GAO
employees. This legislation allowed us to create a technical and 
scientific career track at a compensation level consistent to the SES. 
It also allowed us to give greater consideration to performance and 
employee skills and knowledge in any Reduction-in-Force actions. We 
believe that other agencies could benefit from these additional 
authorities. 

Since the legislation was enacted, we have established agency 
regulations and conducted and completed our first offering of voluntary 
early retirement opportunities. Once employees registered their 
interest in participating in the program, we considered a number of 
factors including: employee knowledge, skills, performance, and 
competencies; the organizational unit or subunit in which an employee 
worked; an employee’s occupational series, grade, or band level, as 
appropriate; and the geographic location of the employee. As authorized 
by the 2000 legislation, employee performance was just one of many 
factors we considered when deciding which employees would be allowed to 
receive the incentives. However, let me assure you, we did not use 
performance to target certain individuals. 

We are also using many recruiting flexibilities that are available to 
most agencies, including an extensive campaign to increase our 
competitiveness on college campuses and extending offers of employment 
during the fall semester to prospective employees who will come on 
board the following spring and summer. We are also using our internship 
program in a strategic fashion and we often offer permanent positions 
to GAO interns with at least 10 weeks of highly successful work 
experience. Moreover, we are building and maintaining a strong presence 
of both senior executives and recent graduates on targeted college 
campuses. We have also taken steps to streamline and expedite our 
hiring process. In this regard, the current length of time that it 
takes to hire a person in most other federal agencies is much too long 
and must be addressed. 

Even after we hire good people, we need to take steps to retain them. We
have taken a number of steps to empower and invest in our employees. 
For example, we have active employee feedback and suggestion programs.
In addition, we are in the midst of implementing our first student loan
repayment assistance program for about 200 employees who have indicated 
interest and are willing to make a three-year commitment to staying 
with the agency. 

Overall, we have implemented the following initiatives and targeted
investments, some of which are relatively recent and some of which are
longstanding: [Footnote 16] 

* Prepared a human capital profile and needs assessment to understand
employee demographics and distribution. 

* Conducted an employee survey in 1999 and 2002 to understand the status
and progress of the agency and the areas in which we need to improve. 

* Completed a knowledge and skills inventory for all employees. 

* Conducted an employee preference survey so that employees could be 
given the opportunity to work in the areas that interest and energize 
them in light of our institutional needs. 

* Implemented an Executive Candidate Development Program to prepare
candidates for assignments in the SES. 

* Initiated a Professional Development Program for newly hired GAO
analysts to help them transition and progress. 

* Initiated a redesign of our training curriculum to directly link and 
support our validated core competencies. 

* Established an Employee Advisory Council to facilitate open 
communication and direct input from line employees to the Comptroller
General and other GAO senior leadership. 

* Provided an on-site child care center called “Tiny Findings” and the
Wellness and Fitness Center. 

* Implemented additional employee-friendly benefits such as business
casual dress, flextime, and public transportation subsidies. 

* Used recruitment bonuses, retention allowances, and student loan
repayment assistance to attract and retain employees with specialized
skills. 

* Implemented a new “state of the art” performance appraisal system 
that is linked to our strategic plan and based on key competencies. 

As we engage in these changes, we also know that we are not perfect and
we never will be. This is a work-in-progress for us as it is for 
others. Our approaches are not the only way for agencies to proceed, 
but they can help others identify ways to address their individual 
human capital challenges. In this regard, we have shared our lessons 
and experiences with others, and are happy to do so. 

In summary, Mr. Chairman, I believe that there is no more important
management reform than for agencies to transform their cultures to
respond to the transition that is taking place in the role of 
government in the 21st century. Strategic human capital management must 
be at the center of this transformation effort. We all need to seize 
the momentum that has recently emerged—agencies must use existing 
authorities to strategically manage their people; Congress needs to 
consider some statutory changes in the short term; and all interested 
parties need to work together toward enactment of more comprehensive 
civil service reform over time. I look forward to continuing to work 
with Congress, OPM, OMB, agencies, the National Commission on the 
Public Service, and other interested parties as we jointly seek to 
ensure that the federal government modernizes its human capital 
strategies in order to maximize performance, assure accountability, 
transform itself, and prepare for the future. 

Chairman Volcker and members of the Commission, this concludes my
statement. I would be pleased to respond to any questions that you may
have. 

Contact and Acknowledgments: 

For further information regarding this statement, please contact J.
Christopher Mihm, Director, Strategic Issues, on (202) 512-6806 or at
mihmj@gao.gov. Individuals making key contributions to this testimony
included Amy Choi, Rebecka Derr, Judith Kordahl, Ellen Rubin, Lisa
Shames, and Ed Stephenson. 

[End of section] 

Footnotes: 

[1] U.S. General Accounting Office, High-Risk Series: An Update, GAO-01-
263 (Washington, D.C.: January 2001). 

[2] U.S. General Accounting Office, Performance and Accountability 
Series—Major Management Challenges and Program Risks: A Governmentwide 
Perspective, GAO-01-241 (Washington, D.C.: January 2001). In addition, 
see the accompanying 21 reports (numbered GAO-01-242 through GAO-01-
262) on specific agencies. 

[3] U.S. General Accounting Office, Homeland Security: Proposal for 
Cabinet Agency Has Merit, But Implementation Will be Pivotal to 
Success, GAO-02-886T (Washington, D.C.: June 25, 2002) and FBI 
Reorganization: Initial Steps Encouraging but Broad Transformation 
Needed, GAO-02-865T (Washington, D.C.: June 21, 2002). 

[4] U.S. General Accounting Office, Managing for Results: Building on 
the Momentum for Strategic Human Capital Reform, GAO-02-528T 
(Washington, D.C.: Mar. 18, 2002). 

[5] U.S. General Accounting Office, Human Capital: Key Principles From 
Nine Private Sector Organizations, GAO/GGD-00-28 (Washington, D.C.: 
Jan. 31, 2000). 

[6] U.S. General Accounting Office, Managing for Results: Emerging 
Benefits From Selected Agencies’ Use of Performance Agreements, GAO-01-
115 (Washington, D.C.: Oct. 30, 2000). 

[7] Commercial Activities Panel, Improving the Sourcing Decisions of 
the Government: Final Report (Washington, D.C.: April 2002). 

[8] Office of Personnel Management, A White Paper: A Fresh Start for 
Federal Pay: The Case for Modernization (Washington, D.C.: April 2002). 

[9] For example, see U.S. General Accounting Office, Energy Markets: 
Concerted Actions Needed by FERC to Confront Challenges That Impede 
Effective Oversight, GAO-02-656 (Washington, D.C.: June 14, 2002); HUD 
Management: Progress Made on Management Reforms, but Challenges Remain, 
GAO-02-45 (Washington, D.C.: Oct. 31, 2001); Major Management 
Challenges and Program Risks: Department of Energy, GAO-01-246 
(Washington, D.C.: January 2001); and Medicare: 21st Century Challenges 
Prompt Fresh Thinking About Program’s Administrative Structure, GAO/T-
HEHS-00-108 (Washington, D.C.: May 4, 2000). 

[10] See U.S. General Accounting Office, Architect of the Capitol: 
Management and Accountability Framework Needed to Lead and Execute 
Change, GAO-02-632T (Washington, D.C.: Apr. 17, 2002); and GAO-02-528T. 

[11] U.S General Accounting Office, DOD Financial Management: 
Integrated Approach, Accountability, Transparency, and Incentives Are 
Keys to Effective Reform, GAO-02-497T (Washington, D.C.: Mar. 6, 2002). 

[12] For example, see U.S. General Accounting Office, Human Capital: 
Practices That Empowered and Involved Employees, GAO-01-1070 
(Washington, D.C.: Sept. 14, 2001); Human Capital: The Role of 
Ombudsmen in Dispute Resolution, GAO-01-466 (Washington, D.C.: Apr. 13, 
2001); Human Capital: A Self-Assessment Checklist for Agency Leaders, 
GAO/OCG-00-14G (Washington, D.C.: September 2000); Human Capital: 
Design, Implementation, and Evaluation of Training at Selected Agencies,
GAO/T-GGD-00-131 (Washington, D.C.: May 18, 2000); Human Capital: Using 
Incentives to Motivate and Reward High Performance, GAO/T-GGD-00-118 
(Washington, D.C.: May 2, 2000); and Management Reform: Elements of 
Successful Improvement Initiatives, GAO/T-GGD-00-26 (Washington, D.C.: 
Oct. 15, 1999). 

[13] U.S. General Accounting Office, Federal Employee Retirements: 
Expected Increase Over the Next 5 Years Illustrates Need for Workforce 
Planning, GAO-01-509 (Washington, D.C.: Apr. 27, 2001); and Senior 
Executive Service: Retirement Trends Underscore the Importance of 
Succession Planning, GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000). 

[14] U.S. General Accounting Office, A Model of Strategic Human Capital 
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002). 

[15] U.S. General Accounting Office, Managing for Results: Next Steps 
to Improve the Federal Government’s Management and Performance, GAO-02-
439T (Washington, D.C.: Feb. 15, 2002). 

[16] For more information on these efforts, see Human Capital: Taking 
Steps to Meet Current and Emerging Human Capital Challenges, GAO-01-
965T (Washington, D.C.: July 17, 2001). 

[End of section] 

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