Workforce in transition

Governments today face a growing set of challenges around the recruitment, retention and management of their workforces. In short, one of the most critical jobs of government today is getting the best from its biggest asset — its people. Getting the most from people and building a workplace that promotes top performance is a huge challenge — one that we address in a new book called "Human Capital 2004."

The first human capital challenge is that of building a workplace supported by an effective, streamlined personnel system that promotes top performance. After decades of relative stability, the federal personnel system is now in the midst of a period of profound change. In 1993, Congress passed the Government Performance and Results Act requiring managers to report on how their budgets had been spent on various programs. Today, government managers develop multiyear strategic plans, complete with mission, goals and descriptions of the steps necessary to achieve them.

Departments and agencies struggling to improve performance have sought increased flexibility in order to improve their ability to hire, compensate and manage their employees. A new Internal Revenue Service leadership team has used these flexibilities to transform the IRS into a customer-centric, performance-oriented organization. A crucial component of the successful implementation of the IRS' organizational strategy was its ability to design a new human resource system that supported and was clearly linked to achievement of the organization's mission.

In August 2001, President Bush placed human capital on his management agenda. With the Homeland Security Act of 2002, Congress and the president did away with the "rule of three," an artifact of federal hiring practices that dated back to the 1870s. The same law gave flexibility to the new Homeland Security Department from key provisions of the federal civil service law including those relating to compensation, classification, hiring and promotion. In January 2003, the National Commission on the Public Service issued its second call for sweeping reform in the federal government's personnel incentives and practices.

The economic reality of a smaller — as well as an aging — federal workforce adds to the momentum for change. More than half of the senior managers in the federal government are nearing retirement age. Many talented public servants are abandoning federal service in their 30s after reaching government's middle level. Entry-level hiring has produced equally disappointing results. Graduates of top universities too often see public service as rigid, cumbersome and lacking opportunities to perform.

The government is recognizing that one key to organizational performance is a high-performing workforce. The Office of Personnel Management, Defense Department, DHS and NASA have all embarked on pay system reorganizations. The vision is a payroll system that rewards performance over tenure.

Like the federal government, state governments historically adopted civil service systems as a bulwark to guard against patronage hiring and firing and to insulate public employees from the political fallout

of their work. Recently, states also have begun dramatically changing the way they recruit, hire, promote, classify and pay their

employees.

So what does this mean for managers and employees?

First, when it comes to the management of human capital, governments are quickly moving into a world where one size does not fit all. ... In the 21st century, the tasks undertaken by government are so complex and varied that it must now embrace the most flexible and progressive human capital management practices that are characteristic of a fast-moving, globally connected society.

Second, human resource managers as well as employees will be shifting their perspective. Human resource managers must learn to partner with senior leaders, see their activities within a broader context and understand how their programs impact employees' performance as part of the organization's overall performance. There will be a need for new models and tools to help undertake this significant shift.

In many ways, existing systems have become a barrier to effective agency performance. Without the right frameworks to capture, give incentives to and reward the workforce, these systems are seen as obstacles to becoming a high-performance organization. For these reasons, in November 2003, Congress gave broad new authorities to the DOD secretary to redesign the civil service system governing the department's 700,000 civilian employees. The secretary is authorized to design a new pay-for-performance system, to hire highly skilled workers more quickly and to promote top employees. Pentagon officials will be able to rewrite the rules governing collective bargaining with agency unions.

The people challenge

The second human capital management challenge is getting the most from people. ... We are seeing a much greater recognition that the workforce is the key to meeting the core mission of an organization.

To integrate human capital management practices with

mission-specific targets, a government manager must:

Become less process-oriented and inwardly focused.

Focus the workforce on the explicit core mission of the department.

Become more partnership-based and results-oriented.

Work more closely with other governmental organizations, nongovernmental organizations and the private sector.

In the future, we expect to see managers contribute to a performance-sensitive personnel system. In this results-based culture, managers place greater emphasis on knowledge, skills and contribution to the mission when considering an employee for promotion and compensation.

Retention is an important factor in the people challenge in human capital management. Research indicates that devotion to government service waxes and wanes. One such example is Army officers approaching their decision point on whether or not to stay in the Army between their eighth and 10th years of service. A major lesson for the entire federal government, including the military, is that increased attention on retaining individuals who have completed 10 to 20 years of federal service will likely pay off with increased retention rates.

The future

Looking ahead, we see a number of changes on the horizon. We see a shift from rewarding seniority to recognizing performance. We see a shift from hierarchical, stovepiped structures to flexible, results-oriented, fluid teams. And we see how improving the management of people will produce much better performance results.

There are huge implications for employees as a result of all these changes. Their training, their measurements and their very jobs will undergo profound change. Governments must embrace human capital management principles that allow for more flexible management, greater responsiveness to modern technology and increased resiliency in adjusting to new demands and problems.

With DHS and now DOD putting new personnel systems in place, less than a quarter of the federal government's workers remain under the traditional civil service system. As more agencies receive new personnel flexibilities, Congress and the president will soon have to discuss what rules are appropriate for the remaining civilian agencies.

These are changing times, and government employees are in an exciting spot. New opportunities exist for leaving a significant legacy of commitment to excellence and people.

Breul is a senior fellow at IBM Corp.'s Center for the Business of Government and an associate partner at IBM Business Consulting Services. He can be reached at jonathan.d.breul@us.ibm.com. Gardner is a partner at IBM Business Consulting Services and is its Human Capital Management Practice leader. She can be reached at nicole.gardner@us.ibm.com. They are co-editors of a new book, "Human Capital 2004," published by Rowman & Littlefield.