In the face of a looming retirement wave, agencies are hiring and retaining people with needed skills and holding them accountable for serving the public. Some examples of what agencies are doing:

1. The Social Security Administration has moved almost 300 employees from staff positions to front-line service delivery to provide better assistance to customers.
2. The Department of Defense, in a successful bid to reduce layers of bureaucracy built up over time, achieved an 11.1 % reduction in major headquarters staffing. Between September 2001 and September 2002 alone, DoD cut the number of its civilian employees by over 3,000, including over 1,400 supervisors and managers.
3. The Department of Housing and Urban Development has redeployed approximately 330 employees from its Field Policy and Management staff to core operations like Housing, Community Planning and Development, Fair Housing and Equal Opportunity, and Public and Indian Housing.
4. Faced with the retirement of possibly half of its workforce, HHS has launched a new recruitment initiative - the Emerging Leaders Program. The program recruits outstanding graduates from Colleges and Universities and puts them through a two-year management internship program in various sectors of HHS. Designed to attract exceptional individuals into public service in a variety of occupations in HHS, the program selected 62 university graduates with bachelors or master's degrees in its initial year.

Only six agencies are yellow for status, but 20 are green for progress. That means they have plans in place to assess their workforce and to use every tool at their disposal to recruit and retain the workforce they need to fulfill their mission.

One of the most difficult challenges facing the federal government in the management of its human capital is appropriately measuring and rewarding employees for their performance. So, to give managers greater flexibility to pay employees based on their performance, the Administration proposes in the FY 2004 budget a $500 million Human Capital Performance Fund. The fund could be used to reward high performing employees and/or pay more to individuals with the critical skills agencies need to meet their strategic goals. OPM will work with agencies to ensure the fund is used to improve employee performance.

Last year, we began an effort to improve the objectivity of agency appraisals of senior executives. In 2000, 85% of senior executives were rated at the highest possible level. In 2001, 83% were rated at the highest possible level. Although this change is incremental at this point, agencies such as OPM, SBA and OMB set an example by significantly reducing the number of senior executives rated at the highest level. SBA reduced the number of Outstanding ratings by 40% between 2001 and 2002; OPM by 50% between 2000 and 2001; and OMB by 68% between 2000 and 2001. With these examples to follow and continued attention to this issue, this trend should continue. Not only do we need to continue to make the appraisal of our senior executives more objective, we need to do the same for general schedule employees. The Human Capital Performance Fund will provide a useful tool in this effort by enhancing the resources and opportunities to improve employee performance.

We are at a critical stage in the strategic management of human capital initiative. Agencies have good plans in place, but they must implement them aggressively if we are to meet the challenges that the government's human capital crisis presents us.

Sincerely,

Kay Coles James



The Five Initatives:

• Strategic Management of Human Capital - Kay Coles James
• Competitive Sourcing - Angela Styles
• Improving Financial Performance - Linda Springer
• Expanded Electronic Government - Mark Forman
• Budget & Performance Integration - Robert Shea