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entitled 'Human Capital: Observations on Agencies' Implementation of 
the Chief Human Capital Officers Act' which was released on May 18, 
2004.

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GAO Highlights:

Highlights of GAO-04-800T, a testimony before the Subcommittee on Civil 
Service and Agency Organization, Committee on Government Reform, House 
of Representatives 

Why GAO Did This Study:

Congress recognized the critical leadership role the agency Chief Human 
Capital Officers (CHCOs) and the CHCO Council must play in the 
fundamental changes that need to take place across the executive 
branch. A range of 21st century challenges are driving the need for a 
fundamental transformation of the federal government. People strategy 
must be a key element of this overall transformation effort. People 
define an organizationís culture, drive its performance, and embody its 
knowledge base. Congress has provided agencies across the executive 
branch with additional tools and authorities needed to strategically 
manage their workforces. The success of these and related initiatives 
will depend in large measure on the existence of high-quality CHCOs and 
a strategic and effective CHCO Council.

At the request of the subcommittee, GAO discussed (1) the different 
approaches agencies used in selecting CHCOs and creating the CHCO 
position,(2) the key responsibilities of the CHCOs, and (3) the initial 
steps taken by the CHCO Council and some suggested next steps.

What GAO Found:

The inaugural CHCOs appointed since May 2003 varied in the positions 
they were holding prior to their selection by the agency head, the 
responsibilities assigned to them when they became CHCOs, whether they 
were political appointees or career executives and whether they 
reported directly to the agency head.

According to the CHCOs, their efforts are primarily focused on the 
human capital efforts needed to address the Presidentís Management 
Agenda (PMA). In our discussions with the CHCOs, they cited strategic 
human capital management and, to a lesser extent, competitive sourcing 
as the two primary PMA initiatives on which they are focusing. 

The CHCO Councilís activities during its first year have largely 
revolved around start-up activities including organizing the council 
and establishing subcommittees. For example, the Council created 
subcommittees to address and recommend change for five key areas--the 
hiring process, performance management, leadership development and 
succession planning, employee conduct and poor performers, and 
emergency preparedness.

At the request of this subcommittee and others in Congress, we have 
undertaken a large body of work in recent years that should prove 
helpful to the Council and its subcommittees as they develop their 
initiatives in the five areas. For example, as we reported in May 2003, 
there is widespread recognition that the current federal hiring process 
does not meet the needs of agencies in achieving their missions, 
managers in filling positions with the right talent, and applicants for 
a timely, efficient, transparent, and merit-based process. We made a 
number of recommendations to the Office of Personnel Management (OPM) 
to address various parts of the hiring process. In addition, in March 
2004, GAO issued a guide for assessing strategic training and 
development efforts in the federal government. 

In addition to the important areas already receiving priority attention 
by the Council, our work suggests that the Council should ensure that 
as it moves forward, its efforts address agenciesí need for guidance, 
assistance, knowledge, and leading practices in several other key 
crosscutting areas such as:

* developing the capabilities required for successful implementation of 
human capital reform,
* strategic human capital planning, and 
* transforming the human capital office and its processes to more fully 
contribute to key agency decisions.

We believe that our work should prove helpful to the Council as they 
address these and other areas. 

www.gao.gov/cgi-bin/getrpt?GAO-04-800T.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact J. Christopher Mihm at 
(202) 512-6806 or mihmj@gao.gov.

Testimony:

Before the Subcommittee on Civil Service and Agency Organization, 
Committee on Government Reform, House of Representatives:

For Release on Delivery Expected at 2:00 p.m. EDT Tuesday, May 18, 
2004:

Human Capital:

Observations on Agencies' Implementation of the Chief Human Capital 
Officers Act:

Statement of J. Christopher Mihm, 
Managing Director, Strategic Issues:

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-800T] 

Chairwoman Davis, Mr. Davis, and Members of the Subcommittee:

I am pleased to be here today to discuss the actions taken to implement 
the Chief Human Capital Officers (CHCO) Act of 2002 and our preliminary 
observations on the role of both the agency CHCOs and the CHCO Council, 
as we approach the completion of the first year in which these senior 
agency leadership positions and this council were created. As you know, 
Congress created the CHCO position in 24 agencies to advise and assist 
the head of the agency and other agency officials in their strategic 
human capital management efforts; the CHCO Council was created to 
advise and coordinate the activities among the agencies.

Congress recognized the critical leadership role the agency CHCOs and 
the CHCO Council must play in the fundamental changes that need to take 
place across the executive branch. The nation's large and growing long-
term fiscal imbalance and a range of other 21st century challenges are 
driving a fundamental transformation of the federal government. This 
transformation requires a comprehensive reexamination of what the 
government does, how it does business, and in some cases, who does its 
business. Ultimately, to successfully transform, the federal government 
must change its culture to become more results-oriented, customer-
focused, and collaborative in nature.

People strategy must be a key element of this overall transformation 
effort. People define an organization's culture, drive its performance, 
and embody its knowledge base. Over the past couple of years, Congress 
has sought to modernize federal human capital policies by allowing 
certain agencies, most notably the Departments of Defense and Homeland 
Security, to adopt more flexible approaches to their human capital 
management. At the same time, Congress has provided agencies across the 
executive branch with additional tools and authorities needed to 
strategically manage their workforces. The success of these and related 
initiatives will depend in large measure on the existence of high-
quality CHCOs and a strategic and effective CHCO Council.

My statement today will describe first, the different approaches 
agencies used in selecting CHCOs and creating the CHCO position, 
second, the key responsibilities of the CHCO's, and third, the initial 
steps taken by the CHCO Council and some suggested next steps.

My comments today are based on our interviews with each of the agency 
CHCOs and the Executive Director of the CHCO Council; available 
documents on the start-up efforts of the CHCO Council such as the 
agenda and plans for its initial meetings; our experiences in 
evaluating the implementation of other major management reforms, such 
as the Chief Financial Officers (CFO) Act, the Government Performance 
and Results Act of 1993, and the Clinger-Cohen Act of 1996; and our 
broad body of work and resultant knowledge of human capital management 
issues.

CHCOs Vary in Their Prior Role, Designated Duties, Employment Status, 
and Reporting Relationships:

The 24 agency CHCOs appointed since May 2003 varied in the position 
they were holding prior to their selection by the agency head, the 
responsibilities assigned to them when they became CHCOs, whether they 
were political appointees or career executives, and whether they 
reported directly to the agency head:

* The inaugural CHCOs at most federal agencies were executives who were 
already in positions leading their agency's human capital management. 
Of the 21 agency CHCOs selected from within the agency, 14 have been 
the human capital director for their agency and 7 have been the 
executive to whom the agency's human capital director reported. OPM 
selected its CHCO from within the agency, but the individual has been a 
senior policy advisor, not an internal OPM human capital manager. Two 
of the 24 agencies--the Departments of Homeland Security and Treasury-
-selected CHCOs from outside their agencies.

* The 24 CHCOs positions were evenly split between those whose 
designated duties focus solely on human capital management and those 
who have significant additional responsibilities. For example, the 
Departments of Commerce, Interior, and Veterans Affairs have vested 
CHCO and CFO responsibilities in one person. The CHCOs at the 
Departments of Education, Housing and Urban Development, and Labor are 
also the Chief Information Officer (CIO) for those agencies. The 
additional responsibilities of various other CHCOs include 
administrative services, facilities management, and procurement.

* The CHCOs were evenly split between career executives and political 
appointees. Of the 24 CHCOs, 12 were career senior executives and 12 
were political appointees. Since the inaugural CHCO appointments, two 
agencies--the Departments of Agriculture and Health and Human Services-
-have changed their CHCO designation from the incumbent career 
executive to a higher-level political appointee. Most of the career 
executives (8 of the 12) focus solely on human capital management, 
while the political appointees generally had additional 
responsibilities.

* More than half (15 of 24) of the inaugural CHCOs reported directly to 
the agency head. While some CHCOs who report directly to the agency 
head told us this gives them an important "seat at the table" where key 
decisions are made, some CHCOs who do not report to their agency head 
said having all or most of the agency chief management positions do so 
may impede efficient management coordination within the agency. Most of 
the political appointees (9 of 12) report directly to the agency head, 
while half of the career executives (6 of 12) report to another agency 
official.

Agencies' appointments of CHCOs represent an important achievement 
considering the challenges agencies faced in filling the CFO and the 
CIO positions. For example, 5 years after the enactment of the law 
creating the agency CFO position, we found that some agencies had yet 
to fill the position or the Deputy CFO position.[Footnote 1]

The diversity of approaches that agencies are taking suggests that it 
is unlikely that there will be a single model for the CHCO position 
that will fit all agencies. Several CHCOs told us that agency size, 
available leadership talent and the agency's existing executive 
leadership structure were all considered in designating the CHCO 
position and determining the qualifications of those who should fill 
it. However, ensuring that the CHCO can provide the leadership 
necessary to do the job well in those situations where they also have 
additional direct management responsibilities should be closely 
monitored in the coming years. We have also raised similar concerns 
regarding the CFOs and CIOs who have direct leadership 
responsibilities for a variety of management areas.[Footnote 2] While 
some CHCOs with key responsibilities in multiple areas have said they 
believe this enables them to achieve quicker decision-making on 
strategic human capital issues, other CHCOs said they prefer devoting 
all their attention to human capital issues.

More generally, we have suggested that Congress consider establishing 
Chief Operating Officer (COO) or equivalent positions in selected 
agencies as one element of an overall strategy to address certain 
systemic federal governance and management challenges. These COOs would 
be part of a broader effort to elevate attention to management and 
transformation issues, integrate various key management and 
transformation efforts, and institutionalize accountability for 
addressing management issues leading a transformation.[Footnote 3] By 
their very nature, the problems and challenges facing agencies are 
crosscutting and thus require coordinated and integrated solutions. 
However, the risk is that management responsibilities (including, but 
not limited to information technology, financial management, and human 
capital) will be "stovepiped" and thus will not be implemented in a 
comprehensive, ongoing, and integrated manner. While officials with 
management responsibilities often have successfully worked together, 
there needs to be a single point within agencies with the perspective 
and responsibilities--as well as the authority--to ensure successful 
implementation of functional management initiatives and, if 
appropriate, transformation efforts.

CHCOs Are Giving Priority Attention to the Strategic Human Capital 
Initiative of the President's Management Agenda:

According to the CHCOs, their efforts are primarily focused on the 
human capital efforts needed to address the President's Management 
Agenda (PMA). The President's Management Agenda identified five 
crosscutting management initiatives: the strategic management of human 
capital, competitive sourcing, improved financial performance, 
expanded electronic government, and budget and performance integration. 
We collaborated with OMB and OPM regarding the broad standards of 
success for the strategic human capital management PMA initiative. The 
resulting standards are consistent with the need for agencies to 
address the challenges they face in four key areas outlined in our 
report on strategic human capital management as a government-wide high 
risk area:

* leadership, continuity and succession planning;

* strategic human capital planning and organizational alignment;

* acquiring and developing staffs whose size, skills and deployment 
meet agency needs; and:

* creating results-oriented organizational cultures.[Footnote 4]

We have noted that the PMA initiatives are intended to be mutually 
reinforcing and must be addressed in an integrated way to ensure that 
there is the needed management capacity to drive a broader 
transformation of the cultures of federal agencies.[Footnote 5] In our 
discussions with the CHCOs, they have cited strategic human capital 
management and, to a lesser extent, competitive sourcing as the two 
primary PMA initiatives where they are focusing their efforts.

As such, work on the PMA provides an early opportunity for the CHCOs to 
play an active integrating role with other key agency leaders. For 
example, the Environmental Protection Agency's (EPA) CHCO told us EPA 
is in the midst of phased implementation of a workforce planning 
methodology that EPA believes will enable EPA's line managers to make 
decisions on deploying employees with mission-critical skills and 
competencies both programmatically and geographically to fulfill EPA's 
mission. Similarly, the National Aeronautics and Space Administration's 
(NASA) CHCO told us NASA is refining an agencywide competency 
management system that will be used to identify, manage, and report 
workforce competencies, which NASA believes will be capable of 
capturing competencies for every employee, every position, and every 
budgeted program or project.

In the area of performance management, according to the Department of 
Justice's CHCO, the agency contracted with consultants to identify 
problems, issues, and barriers and suggest ways to transform the 
existing "paperwork exercise" performance management program into a 
results-oriented performance culture. In the area of aligning the human 
capital office for improved strategic contribution, the Department of 
Energy's (DOE) CHCO told us that the agency's Office of Human Resources 
Management completed a study of the organization resulting in a 
recommendation to transform it into "One HR,"--a more unified approach 
to developing and aligning HR activities, programs, services and staff 
with the strategic direction of DOE.

While we have not assessed these specific actions, they illustrate the 
kinds of agency human capital initiatives that position the agencies to 
move forward in the coming years. However, as our experience with major 
management reform efforts has demonstrated, achieving the goals of 
major reform requires a long-term sustained effort. We have noted that 
major reforms can take at least 5 to 7 years until such initiatives are 
fully implemented and the related cultures are transformed in a 
sustainable manner.[Footnote 6]

CHCO Council Taking Initial Steps to Improve Human Capital Management:

The CHCO Act calls for the establishment of a CHCO Council consisting 
of the Director of OPM as Chair, the Deputy Director for Management of 
OMB as Vice Chair, and the CHCOs of executive departments and any other 
members who are designated by the Director of OPM. An effective and 
strategic CHCO Council is vital to meeting the goals of the CHCO Act as 
well as addressing the federal government's crosscutting strategic 
human capital challenges. We have reported that interagency councils, 
such as the CFO and CIO councils, have emerged as important leadership 
strategies in both developing policies that are sensitive to 
implementation concerns and gaining consensus and consistent follow-
through within the executive branch.[Footnote 7] For example, the CFO 
Council has played a lead role in creating goals for improving federal 
financial management practices, providing sound advice to OMB on 
revisions to executive branch guidance and policy, and building a 
professional community of governmentwide financial management 
expertise.

The CHCO Council can play another similarly useful role. As stated in 
its charter, the Council's purposes include (1) advising OPM, OMB, and 
agency leaders on human capital strategies and policies, as well as on 
the assessment of human capital management in federal agencies, (2) 
informing and coordinating the activities of its member agencies on 
such matters as modernization of human resources systems, and (3) 
providing leadership in identifying and addressing the needs of the 
government's human capital community.

The Council's activities during its first year have largely revolved 
around three major areas: organizing the council, creating a CHCO 
Academy, and establishing subcommittees.

Council organization: The Council meets periodically, currently 
averaging a meeting every other month, with the meetings attended by 
the CHCOs as well as by the Council's Chair, Vice Chair, Executive 
Director, and representatives of other organizations that may be 
invited or approved by the Chair. The Council has formed an executive 
committee consisting of the Chair, Vice Chair, and seven Council 
members. When votes are taken, each Council member has one vote, and 
members must be present to vote.

The Council does not yet have a strategic plan to help guide its work 
and serve as a benchmark for measuring progress, although according to 
the Council's Executive Director, the Chair is reviewing the Council's 
draft strategic plan for FY 2004, which then has to be approved by the 
executive committee and by the full Council. The Executive Director 
told us the strategic plan would have some details on the priority 
items and target dates on which the Council is working this year. As we 
saw in the case of the CFO Council, achieving accomplishments that have 
strategic impact requires well-defined goals and measures.[Footnote 8] 
The timely completion of the CHCO Council's plan is therefore important 
to help provide a sense of direction for the Council as well as to 
communicate to Congress and other stakeholders the role the Council 
will play and how it will meet its responsibilities. The shared 
understandings that can be developed as part of the planning process 
are particularly important to councils since they play vital leadership 
and coordination roles. As just one illustration of the importance of 
their leadership and coordination role, OPM agreed with our May 2003 
recommendation to work with and through the Council to more thoroughly 
research, compile, and analyze information on the effective and 
innovative use of human capital flexibilities and more fully serve as a 
clearinghouse in sharing and distributing information about when, 
where, and how the broad range of flexibilities are being used, and 
should be used, to help agencies meet their human capital management 
needs.[Footnote 9]

CHCO Academy: OPM has created the Chief Human Capital Officers Academy 
as part of the CHCO Council. OPM created the academy as an outreach 
vehicle to educate CHCOs about current human capital management issues 
and available human resources flexibilities, with an emphasis on how 
they fit within an overall merit-based civil-service system. The 
academy has scheduled one-day monthly training and discussion sessions 
with CHCOs throughout 2004. Past sessions have focused on topics such 
as Title 5 and outsourcing human resources services.

Subcommittees: The Council created subcommittees to address and 
recommend changes for five key areas identified by the Council's 
leadership as critical to the success of the strategic management of 
the human capital initiative outlined in the PMA: the hiring process, 
performance management, leadership development and succession 
planning, employee conduct and poor performers, and emergency 
preparedness. The five subcommittees are examining their issues and 
developing recommendations for review by the executive committee and, 
subsequently, the Council. We understand that three of the five 
subcommittees--hiring process, leadership development and succession 
planning, and employee conduct and poor performers--have submitted 
their first reports for review by the executive committee. However, 
these reports have not been released.

The executive committee is expected to review these reports at its May 
meeting and, depending on that review, the full Council could review 
these reports at its scheduled July meeting.

At the request of this subcommittee and others in Congress, we have 
undertaken a large body of work in recent years that should prove 
helpful to the Council and its subcommittee as they develop their 
initiatives. For example:

Hiring Process: As we reported in May 2003, there is widespread 
recognition that the current federal hiring process does not meet the 
needs of agencies in achieving their missions, of managers in filling 
positions with the right talent, and of applicants for a timely, 
efficient, transparent, and merit-based process.[Footnote 10] We made a 
number of recommendations to OPM to address various parts of the hiring 
process including:

* studying how to simplify, streamline, and reform the classification 
process;

* assisting agencies in automating their hiring processes;

* continuing to assist agencies in making job announcements and Web 
postings more user-friendly and effective;

* helping agencies develop improved hiring assessment tools; and:

* reviewing the effectiveness of the Outstanding Scholar and Bilingual/
Bicultural Luevano Consent Decree hiring authorities.

At the request of this subcommittee we are assessing actions taken to 
improve the hiring process and plan to issue a report early next month. 
Agencies and OPM need to work together to improve the hiring process, 
and the CHCO Council should be a key vehicle for this needed 
collaboration.

Performance Management: There is little question that modernizing 
agency performance management systems and creating a clear linkage 
between individual performance and organizational success is a 
governmentwide strategic human capital challenge. Even though an 
explicit alignment of individuals' daily activities with broader 
results is one of the defining features of effective performance 
management, it is still a work in progress at the federal level. For 
example, in three governmentwide surveys we conducted in 1997, 2000, 
and 2003, an increasing but still less than 50 percent of federal 
managers reported that employees in their agencies received positive 
recognition to a great or very great extent for helping agencies 
accomplish their strategic goals.[Footnote 11]

High performing organizations have found that an effective performance 
management system can be a strategic tool to drive internal change and 
achieve desired results. These systems are not merely used for a once 
or twice-yearly individual expectation setting and rating process but 
are tools to help the organization manage on a day-to-day basis and to 
facilitate two-way communication throughout the year so that 
discussions about individual and organizational performance are 
integrated and ongoing.

In that regard, we have reported extensively on public sector 
organizations in the United States and abroad that have implemented a 
selected, and generally consistent set of key practices as part of 
their performance management systems that in turn help create the line 
of sight between individual performance and organizational 
success.[Footnote 12] These practices should be helpful to the CHCO 
Council's performance management subcommittee as it develops 
recommendations and strategies to assist agencies implementing 
effective performance management systems.

Leadership Development and Succession Planning:

In March 2004, GAO issued a guide for assessing strategic training and 
development efforts in the federal government.[Footnote 13] This guide 
introduced a framework, consisting of a set of principles and key 
questions that agencies can use to ensure that training and development 
investments are targeted strategically and not wasted on efforts that 
are irrelevant, duplicative, or ineffective. Using the principles in 
this framework, we reported on some agencies' experiences and lessons 
learned related to a) assessing agency skill requirements and 
identifying training needs, b) developing strategies and solutions, and 
c) determining evaluation methods.[Footnote 14] Some of the experiences 
and lessons learned that the agencies identified were from their 
leadership development programs. For example, the Internal Revenue 
Service (IRS) interviewed top agency leaders and benchmarked with 
leading practices in the public and private sector to develop its 
leadership competency model. This model forms the basis for IRS' 
leadership development efforts, as well as how IRS selects, evaluates, 
and recognizes its leaders. IRS also analyzed data from 360-degree 
feedback instruments and used this information in customizing its 
programs to build employees' strengths in areas that IRS has identified 
as key to providing effective leadership within its organizational 
culture and operating environment.

More generally, we have also reported that leading organizations engage 
in broad, integrated succession planning and management efforts that 
focus on strengthening both current and future organizational capacity. 
As part of this approach, these organizations identify, develop, and 
select their people to ensure that successors are the right people, 
with the right skills, at the right time for leadership and other 
positions. Based on our review of leading practices in selected public 
sector organizations in Australia, Canada, New Zealand, and the United 
Kingdom, we identified a set of succession planning and management 
practices that should prove helpful to the Council and individual 
agencies in their efforts to protect and:

enhance organizational capacity.[Footnote 15] Among these practices we 
found that these organizations address specific human capital 
challenges, such as diversity, leadership capacity, and retention.

Employee Conduct and Poor Performers: OPM and the Merit Systems 
Protection Broad have both done employee surveys and related important 
work on conduct and poor performers issues. Our work has focused on the 
broader issue of mechanisms and strategies that agencies can use to 
reduce workplace conflict, including those associated with conduct and 
performance issues. For example, our work has shown that alternative 
dispute resolution (ADR) processes are a way of dealing with workplace 
conflict.[Footnote 16] ADR is a resource to employees and supervisors 
alike and, in our view, can help prevent conflicts manifested as poor 
conduct or performance from arising in the first place or can 
facilitate resolution of problems. In short, we believe that a key part 
of the CHOC subcommittee's agenda should be to explore, validate, and 
disseminate mechanisms and strategies that can be used to address 
problems efficiently, effectively, and fairly, as well as keep them 
from occurring in the first place.

Emergency Preparedness: As we recently reported, federal continuity 
planning guidance has appropriately been given priority to the human 
capital considerations associated with the immediate aftermath of a 
crisis that is securing the safety of all employees and addressing the 
needs of employees who perform essential operations.[Footnote 17] 
However, we found that additional human capital considerations, 
especially those associated with the majority of an organization's 
employees who do not perform essential operations yet would be needed 
to resume all other agency operations, are also crucial and have not 
been well developed in federal guidance. To more fully address these 
considerations, we identified two human capital principles that should 
guide all continuity efforts--demonstrating sensitivity to individual 
employee needs and maximizing the contribution of all employees--and 
six key organizational actions designed to enhance these efforts:

* Demonstrate top leadership commitment.

* Seek opportunities for synergy.

* Maintain effective communication.

* Target investments in training and development.

* Leverage the flexibility of human capital.

* Build a process to identify and share lessons.

We made recommendations to the Federal Emergency Management 
Administration (FEMA) and OPM to more fully address human capital 
considerations in emergency preparedness guidance by incorporating the 
key actions listed above. We also recommended to OPM that they clearly 
define the role Federal Executive Boards play in improving emergency 
preparedness coordination in areas outside of Washington, D.C. Both 
FEMA and OPM need to work together to improve the federal continuity 
planning guidance, and the CHCO Council can be a key vehicle for this 
needed collaboration.

Council's Important Role in Other Areas:

In addition to these important areas, our work suggests that the 
Council should ensure that its efforts address agencies' need for 
guidance, assistance, knowledge, and leading practices in several other 
key crosscutting areas:

Developing the Capabilities Required for Successful Implementation of 
Human Capital Reform: As highlighted previously, the Council can play a 
central role in helping agencies build the internal capabilities needed 
to effectively use the authorities that Congress has provided. In that 
regard, our work has identified a set of capabilities that are central 
to the effective use of human capital authorities:[Footnote 18]

* Plan strategically and make targeted investments.

* Ensure stakeholder input in developing policies and procedures.

* Educate managers and employees on the availability and use of 
flexibilities.

* Streamline and improve administrative processes.

* Build transparency and accountability into the system.

* Change the organizational culture.

Strategic Human Capital Planning: Strategic human capital planning is 
an essential element of the institutional infrastructure to ensure that 
an agency's human capital program optimizes its workforce's strengths 
and addresses related challenges in a manner that is clearly linked to 
achieving the agency's mission. While each agency needs to tailor the 
strategic workforce planning process to the agency's particular needs 
and mission, our work has found that there are certain principles that 
should be addressed irrespective of the particular planning approach or 
model that is used.[Footnote 19]

These include:

* Involve top management, employees and other stakeholders in 
developing, communicating and implementing the strategic workforce 
plan.

* Determine the critical skills and competencies that will be needed to 
achieve current and future programmatic results.

* Develop strategies that are tailored to address gaps in number, 
deployment, and alignment of human capital approaches for enabling and 
sustaining the contributions of all critical skills and competencies.

* Build the capability needed to address administrative, educational, 
and other requirements important to support workforce strategies.

* Monitor and evaluate the agency's progress toward its human capital 
goals and the contribution that human capital results have made toward 
achieving programmatic goals.

The provisions of the CHCO Act recognize the critical importance of 
strategic human capital planning and require each CHCO to prepare the 
portion of the agency annual performance plan and describe how the 
performance goals and objectives are to be achieved, including the 
operation processes, training, skills and technology, and the human, 
capital, information, and other resources and strategies required to 
meet those performance goals and objectives. In addition, the agency 
performance reports are to include a review of the performance goals 
and evaluation of the performance plan relative to the agency's 
strategic human capital management. These provisions will give 
additional impetus to improve agencies' strategic human capital 
planning.

Transforming the Human Capital Office and Its Processes to More Fully 
Contribute to Key Agency Decisions: The need to more closely integrate 
the agency human capital approaches with agencies' strategies for 
accomplishing organizational missions places responsibility on the CHCO 
to develop the human capital office to fulfill enlarged roles, such as, 
partner with line managers, human capital expert, leader and change 
agent to meet current and future programmatic needs. To shift the 
resources of the human capital office from being providers of largely 
transaction-based services to better align with its role of integrating 
human capital approaches in agency plans and strategies, the CHCO will 
often be compelled to restructure its human capital office.

The pressures on human capital professionals to assume new roles 
present a significant learning and development challenge for human 
capital staff members. For human capital professionals to begin acting 
in their new capacities CHCOs must ensure that they develop the 
competencies through a systematic investment in training and 
development[Footnote 20] and gain the experience to effectively take on 
the expected roles. The CHCOs' personal leadership in providing the 
vision and the systematic approach to engaging the human capital staff 
in a positive transition from narrowly-focused specialists to larger 
roles, such as partners, human capital experts, leaders, and change 
agents, and assure the staff have all the skills necessary to play an 
active role in helping to determine the overall strategic direction of 
the organization will be a significant long-term challenge. The CFO and 
CIO experiences at a similar point in their histories recognized the 
need to build their staff's skills and capabilities.

In conclusion, the need to transform the way government does its 
business and the long-term fiscal challenges facing the government will 
only increase the importance of integrating human capital approaches 
that are linked to the agency's plans and strategies. While the initial 
steps taken over this first year have shown progress, the coming year 
is critical to leveraging that progress to achieve significant 
accomplishments and facilitate lasting change. This progress will come 
from aligning the agency human capital approach with program goals and 
integrating the human capital initiatives and organization as part of a 
comprehensive systematic approach to transforming the agency and 
dramatically improving its performance.

Madam Chairwoman and Mr. Davis, this completes my statement. I would be 
pleased to respond to any questions that you may have.

Contacts and Acknowledgments:

For further information regarding this testimony, please contact J. 
Christopher Mihm, Director, Director, Strategic Issues, on (202) 512-
6806 or at mihmj@gao.gov. Individuals making key contributions to this 
testimony included William Doherty, Clifton G. Douglas, Tony Lofaro, 
Jeffery McDermott, Susan Ragland, Lisa Shames, and Edward H. 
Stephenson, Jr.

(450328):

FOOTNOTES

[1] U.S. General Accounting Office, Financial Management: Momentum Must 
Be Sustained To Achieve the Reform Goals of the Chief Officers Act, 
GAO/T-AIMD-95-204 (Washington, D.C.: July 25, 1995).

[2] U.S. General Accounting Office, Financial Management: CFO Act Is 
Achieving Meaningful Progress, GAO/T-AIMD-94-149 (Washington, D.C.: 
June 21, 1994), and Chief Information Officers: Ensuring Strong 
Leadership and an Effective Council, GAO/T-AIMD-98-22 (Washington, 
D.C.: Oct. 27, 1997).

[3] For additional information on the COO concept and how it might 
apply to federal agencies, see U.S. General Accounting Office, 
Highlights of a GAO Roundtable: The Chief Operating Officer Concept: A 
Potential Strategy to Address Federal Governance Challenges, GAO-03-
192SP (Washington D.C.: October 2002). 

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

[5] U.S. General Accounting Office, Management Reform: Continuing 
Progress in Implementing Initiatives in the President's Management 
Agenda, GAO-03-556T (Washington, D.C.: Mar. 26, 2003). 

[6] U.S. General Accounting Office, Highlights of a GAO Forum: Mergers 
and Transformation: Lessons Learned for a Department of Homeland 
Security and Other Federal Agencies, GAO-03-293SP (Washington, D.C.: 
Nov. 14, 2002). For a specific discussion of this point in relation to 
financial management, see GAO/T-AIMD-95-204.

[7] U.S. General Accounting Office, Government Management: Observations 
on OMB's Management Leadership Efforts, GAO/T-GGD/AIMD-99-65 
(Washington, D.C.: Feb. 4, 1999).

[8] GAO/T-AIMD-98-22.

[9] U.S. General Accounting Office, Human Capital: OPM Can Better 
Assist Agencies in Using Personnel Flexibilities, GAO-03-428 
(Washington, D.C.: May 9, 2003).

[10] U.S. General Accounting Office, Human Capital: Opportunities to 
Improve Executive Agencies' Hiring Processes, GAO-03-450 (Washington, 
D.C.: May 30, 2003).

[11] U.S. General Accounting Office, Results-Oriented Government: GPRA 
Has Established a Solid Foundation for Achieving Greater Results, GAO-
04-38 (Washington, D.C.: Mar. 10, 2004).

[12] U.S. General Accounting Office, Results-Oriented Cultures: 
Creating a Clear Linkage between Individual Performance and 
Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003).

[13] U.S. General Accounting Office, Human Capital: A Guide for 
Assessing Strategic Training and Development Efforts in the Federal 
Government, GAO-04-546G (Washington, D.C.: March 2004).

[14] U.S. General Accounting Office, Human Capital: Selected Agencies' 
Experiences and Lessons Learned in Designing Training and Development 
Programs, GAO-04-291 (Washington, D.C.: Jan. 30, 2004). 

[15] U.S. General Accounting Office, Human Capital: Insights for U.S. 
Agencies from Other Countries' Succession Planning and Management 
Initiatives, GAO-03-914 (Washington, D.C.: Sept. 15, 2003).

[16] U.S. General Accounting Office, Human Capital: The Role of 
Ombudsmen in Dispute Resolution, GAO-01-466 (Washington, D.C.: Apr. 13, 
2001) and Alternative Dispute Resolution: Employers' Experiences With 
ADR in the Workplace, GAO/GGD-97-157 (Washington, D.C.: Aug. 12, 1997).

[17] U.S. General Accounting Office, Human Capital: Opportunities to 
Improve Federal Continuity Planning Guidance, GAO-04-384 (Washington, 
D.C.: Apr. 20, 2004).

[18] U.S. General Accounting Office, Human Capital: Effective Use of 
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-
2 (Washington, D.C.: Dec. 6, 2002). 

[19] U.S. General Accounting Office, Human Capital: Key Principles for 
Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.: 
Dec. 11, 2003).

[20] GAO-04-546G.