Key Issues > Strategic Management of Human Capital - High Risk Issue
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Strategic Management of Human Capital - High Risk Issue

Federal agencies face a number of challenges as they attempt to build a workforce, ensure effective leadership, strategically manage critical skills gaps, and manage employee performance. The skills gaps within individual federal agencies and government-wide are of particular concern because they can lead to costly, less-efficient government.

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Because skills gaps within individual federal agencies—as well as across the federal workforce—can lead to costly, less-efficient government, the issue has been identified as the focus of the Strategic Human Capital Management GAO high-risk area since February 2011. Effective talent management, agency leadership, and performance management are all part of how agencies can ensure they have the right mix of skills to accomplish their missions.   

Strategic Workforce Planning

Federal agencies must address critical skills shortages across the government, such as cybersecurity, acquisition management, and foreign language capabilities. Moreover, if not carefully managed, anticipated retirements could widen skills gaps or open new ones, adversely affecting agencies’ capabilities. As shown in the figure below, more than 31 percent of federal employees on board by the end of fiscal year 2017 will be eligible to retire in the next 5 years.

Federal Employees on Board at End of Fiscal Year 2017 Eligible to Retire in the Next 5 Fiscal Years, by Agency

Notes: Our calculations include permanent employees in the competitive service, the excepted service, and the senior executive service with all work schedules (e.g. full time, part time, seasonal, and intermittent). Retirement eligibility is not affected by work schedule. Temporary and term employees are excluded.   

“Eligible to retire” is defined as the year in which a person is first eligible for retirement with unreduced annuity.    
Data are from the OPM Enterprise Human Resources Integration (EHRI) database.

EHRI covers federal civilian employees at most Executive Branch agencies and some Legislative Branch agencies. Among those agencies excluded from EHRI are the Central Intelligence Agency and other intelligence organizations; the U.S. Postal Service; Tennessee Valley Authority; and the White House Office. 

The total number of employees included in our calculations on Jan. 17, 2017 is 1,712,547.   

Talent Management   

Federal agencies need a hiring process that is applicant-friendly, flexible, and meets policy requirements, such as hiring on the basis of merit. The federal classification system (the GS system) was designed to (among other things) uphold the merit system principle of equal pay for equal work. However, the GS system has not kept pace with the government’s evolving requirements—it must modernize and become more effective at meeting the needs of the workforce.    

Additionally, employee engagement can translate into higher levels of organizational performance. There are six drivers of federal employee engagement that can help strengthen engagement levels, such as support for constructive performance conversations, career development and training, and work-life balance.    

Federal agencies must also train staff in accordance with key priorities. Cost-effective training programs can help develop necessary skills (particularly for federal leaders).   

Human Capital Leadership    

Federal agency leaders can support human capital management by implementing leading practices in areas such as strategic workforce planning, training, performance management, recruitment and hiring, and diversity management. Moreover, given the budgetary and long-term fiscal challenges facing the nation, agencies must identify options to meet their missions with fewer resources, such as strengthening coordination to address a fragmented human capital community and creating more agile talent management to address inflexibilities in the current system.    
Results-Oriented Cultures     

There are a number of tools that can help build a results-oriented culture within the federal government. For example, an effective employee performance management system—one that creates a clear link between individual performance and organizational results (particularly for federal leadership)—can drive internal change and achieve desired results.  However, developing modern, credible, and effective employee performance management systems and dealing with poor performers have been long-standing challenges for federal agencies.     

Agency-Specific Challenges      

While many human capital issues apply to the whole federal government, others are unique to particular agencies. For example, the Department of the Interior should explore the expanded use of existing authorities, such as recruitment and retention incentives, to ensure that it has a sufficient number of geologists, petroleum engineers, and geophysicists to oversee oil and gas resources. Additionally, the Veterans Health Administration needs to evaluate the training of its recruiters to ensure an adequate and qualified nurse workforce, and the Small Business Administration should develop workforce assessments to reflect the reorganization of key loan processing functions.

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