Remarks of Max Stier, President and CEO Partnership for Public Service

The U.S. Equal Employment Opportunity Commission

Introduction

Good morning Chair Dominguez, Vice Chair Earp, and Members of the Commission. My name is Max Stier, and I am the President and CEO of the Partnership for Public Service. The Partnership is a non-profit, non-partisan organization dedicated to building excellence in the federal workforce. Through partnerships, communication, research, education and legislative advocacy, we are working to help the federal government overcome its human capital challenges to become a high-performing workplace with a world-class workforce.

I appreciate the opportunity to appear before you this morning to discuss the human capital challenges facing the EEOC and the factors that are driving change here and across the government. Two years into the Partnership's exploration of federal human capital management issues, I can state with confidence that although the EEOC's challenges are daunting, they are also quite familiar. Like the rest of government, the EEOC is facing a potential mass exodus of its top leaders as the baby boomers who comprise the heart of the organization become eligible to retire. There is fierce competition for the short supply of new talent coming into the workforce. These demographic challenges, combined with some significant performance issues, are affecting the EEOC's ability to achieve its mission.

Let me first heartily commend the EEOC for taking concrete steps to deal proactively with its workforce and performance issues by commissioning a report by NAPA, holding this Commission meeting and consulting with experts and stakeholders on these difficult and important issues. The agenda for today's hearing suggests that much of the rest of the day will be spent discussing your particular challenges and proposed solutions in a much finer level of detail. Therefore, I would like to devote my time before you to discussing why human capital matters, the key elements of strategic human capital management, and the collaborative opportunities that exist for federal agencies to learn from each other regarding their shared human capital challenges.

Why Human Capital Matters

The "human capital" approach to workforce management recognizes that in a knowledge-based economy, the people who work for you drive value and long-term organizational success. For years now, academicians, consultants and business experts have produced reports and studies on the connection between human capital management and business results. These works have resulted in a litany of proven correlations between people, profits, customer satisfaction and long-term success. The studies have suggested several critical links:

Consulting firm Watson Wyatt's Human Capital Index cites six key human capital practices as leading indicators of corporate success. A study showed that companies that successfully managed human capital had total returns to shareholders that were 300 percent higher than underperformers over five years â a 43 percent difference from 1996 to 2001.
Renowned Human Resource Professors Mark Huselid's and Brian Becker's decade-long study of 700 corporations in The HR Scorecard indicates that a 35 percent increase in the effectiveness of human capital systems results in a 20 percent increase in shareholder value.
Consulting firm Deloitte & Touche's research reveals that companies in the top quartile of their human capital index have a 65 percent higher market-to-book ratio and a300 percent higher five-year total return to shareholders.

The U.S. General Accounting Office (GAO) also conducted a review of private sector firms that had integrated their human capital management with both their strategic planning and day-to-day business management. The report concludes, as have many private sector studies, that effective human capital management is fundamental to strategic business management. Further, GAO found an important linkage between human capital shortfalls and agencies' programmatic challenges. As the largest single employer in the nation, it is critical that the federal government recognize this important linkage between sound people practices and organizational performance. Good government, like good business, requires good people.

Globalization, technological advances and other trends put increasing pressure on all organizations, not just government entities, to perform at higher levels. Customers expect faster, cheaper goods and services delivered by a more accountable and efficient workforce. Smart human capital practices can mean the difference between surviving and thriving in this new business environment.

Key Elements of Effective Human Capital Management

Where should federal agencies begin to invest in order to achieve the greatest return on their human capital? Many different studies and reports have sought to identify the major components of effective human capital management, and there is a general consensus around a few core elements. Successful organizations focus on the following critical success factors:

Building and maintaining effective leadership teams,
Creating performance driven cultures,
Attracting and retaining critical talent, and
Driving empowerment and accountability down to all employees.

How Government Stacks Up

Like many federal agencies, the EEOC is facing pressure to improve individual and organizational performance. Governmentwide, agencies are being asked to improve customer service, trim costs, and make better use of technology. However, according to the Administration's Scorecard, numerous GAO reports, and the Second Volcker Commission, government agencies still have a long way to go. No agency has rated "green" in human capital on the OMB Scorecard, human capital remains on GAO's "high risk" list, and according to the Volcker report, "The federal government is neither organized nor staffed nor adequately prepared to meet the demands of the 21st century." Simply put, many government organizations are failing to deliver the results that the American people deserve and expect.

If we look at how government stacks up point by point against the key elements of human capital management, there is obvious room for improvement:

Building and maintaining effective leadership teams

The recent government-wide survey results released by OPM confirmed that the federal workforce has long been concerned about the quality of their management and leadership. Only 36 percent of federal employees agree that their leaders generate "high levels of motivation and commitment." Further, only 43 percent hold their leaders in high regard. The Brookings Institution's report "To Restore and Renew" contrasts the public and private sectors' views on top leadership, concluding that private sector employees believe their senior leaders are more competent than federal employees do.

Creating performance-driven cultures

According to GAO's report on "Results-Oriented Cultures: Creating a Clear Linkage between Individual Performance and Organizational Success," federal agencies do not hold employees accountable or empower them to set and accomplish goals â activities that are critical to fostering high-performing environments. GAO's findings mirror public perception of government work environments as more focused on job security than on providing employees with challenging and meaningful work. It is also telling to note that the section of the OPM Federal Human Capital Survey dealing with performance culture received the lowest levels of positive responses of any section on the survey.

Attracting and retaining critical talent

It is no secret that the government faces serious recruitment and retention challenges. Data from a 2001 Hart Teeter poll commissioned by the Partnership showed that college graduates overwhelmingly believe the private sector is better than the government when it comes to offering interesting and challenging work, rewarding outstanding performance and allowing employees to take initiative. In addition, the aforementioned Brookings Institution report found that although interest in public service careers is growing among graduating seniors, they associate public service with the non-profit sector more so than with federal government employment. This study found that although 67 percent of the 1,000 students surveyed indicated a desire to help people, just 16 percent indicated that government was their preferred employer for doing so. Add to this picture the cumbersome and time-consuming hiring process many agencies face, and those talented young people who are interested in federal employment may drop out of the pipeline or be lured away by private sector firms who can hire on the spot and with minimal paperwork.

EEOC's particular recruitment challenges are compounded by the fact that a hiring freeze has been in place since August 2001. Even before the freeze took affect, EEOC's approach to hiring could be characterized as "feast or famine." Hiring in fits and starts can lead to serious skills gaps in the workforce, and EEOC would do well to embrace a strategic approach to recruitment based on comprehensive workforce planning.

Governmentwide, agencies also face significant challenges in recruiting experienced professionals, which are exacerbated by both internal and external barriers to attracting seasoned veterans from the non-federal sector. The need to do so, however, will become even more pronounced as senior managers and specialists in government begin to retire. Last year, a Partnership study on mid-career hiring in the federal government found that in FY2001, there were 48,000 vacancy announcements¹ at the mid-career (GS12-15) level, but only 53 percent of them were open to external applicants. Moreover, of the more than 60,000 federal positions filled at the GS-12 - 15 grade levels in FY2000, only 13 percent of competitively selected new hires came from outside government. Our preliminary data runs suggest that there has been a slight increase in mid-level hiring over the past two years, with the figure now nearing 20 percent. Even so, efforts to increase mid-career hiring from the non-federal sector must continue, as entry level hiring alone cannot sufficiently replace the intellectual capital that the government will be losing over the next several years as the government's senior managers begin to retire. Thus, increased fluidity between the public and private sector is essential.

But recruitment is only the first hurdle in addressing the government's need for a workforce composed of the "best and brightest." Once an employee is brought on board at a federal agency, the real challenge begins. Employees want to be part of a "high performing team," yet; as we have already noted, many of our agencies struggle to perform. Furthermore, the attraction of job security alone is insufficient to retain valued government employees. Brookings Institution's report instead suggests that we "show them the work." Federal employees are looking for meaningful, mission-driven projects to keep them engaged.

Another important element of retention is training and development. Transforming human capital rhetoric into substance requires an investment in people with training dollars and career development opportunities. Numerous retention studies have shown that a culture of continuous learning is critical for knowledge workers, who are eager to maintain and enhance their skills. Organizations that invest in their employees in this way reap the benefits of a more engaged and higher performing workforce. The converse is also true: 70 percent of Fortune 1000 companies surveyed cited a lack of trained employees as their biggest barrier to sustaining growth, according to a PricewaterhouseCoopers study. Further, employees will leave organizations if they feel they are not being given opportunities to develop professionally.

Driving empowerment and accountability down to all employees

The recent OPM Federal Human Capital Survey reveals a perceived gap in accountability in federal organizations. While 80 percent of federal employees believe that they are personally held accountable for achieving results, only 27 percent believe that the same is true for their underperforming colleagues. Moreover, the federal pay system does little to reinforce accountability for one's performance. The OPM survey also reveals that less than 50 percent of federal employees believe that awards depend on how well employees do their jobs. The Merit Systems Protection Board's "Merit Principles Survey 2000" flags the same perceived disconnect between pay and performance: 54 percent surveyed believed that it is very unlikely to somewhat unlikely that they would receive more pay for performing better in their jobs.

The federal government needs to do a better job of empowering its employees as well. The Brookings report, which interviewed participants in the prestigious Presidential Management Intern (PMI) Program, reveals that only 36 percent of these future federal leaders believe their jobs allow them any decision-making authority. In addition, only 32 percent of the PMIs interviewed believe they can influence what happens in their jobs.

Good News -- Change Is Underway

Certainly, there is much room for federal agencies to make improvements in order to create high-performing workplaces that attract and retain the best and brightest and achieve real results. The way to accomplish this goal is through strategic human capital management, which, according to GAO, "should be the centerpiece of any serious change management initiative or any effort to transform the cultures of government agencies."

Federal Leaders and Stakeholders are Making Change Happen

Fortunately, increasing attention has been paid to human capital management in the two years since GAO first called it a governmentwide "high-risk" area. President George W. Bush identified this issue as his first priority in the President's Management Agenda (PMA), aimed at promoting citizen-centered, results-oriented, market-based government. OMB, GAO and OPM collaborated on the development of performance standards for the human capital initiative, providing guidance on how agencies can improve their efforts in this area. Homeland Security legislation created a Chief Human Capital Officer (CHCO) position and a CHCO council in order to guarantee that human capital issues have a seat at the management table and are an integral part of agencies' overall strategic planning processes. These developments and others reinforce the growing consensus that strategic human capital management is key to achieving results.

The NAPA study "Equal Employment Opportunity Commission: Organizing for the Future" has laid out some excellent recommendations for change with respect to human capital, and considering these recommendations is certainly a step in the right direction. At EEOC, the timing is perfect to join in the change momentum.

Regulatory and Legislative Changes Continue

One place to start is by implementing some of the changes that have already been made to statutes and regulations. Last year, the Homeland Security Act did away with the antiquated "Rule of Three" hiring practice and granted category ranking flexibility to all federal agencies. This legislation also established Chief Human Capital Officers (CHCOs) at department level agencies. Furthermore, OPM has now issued regulations implementing direct hire authority as authorized by the Act". Federal agencies may now hire directly for some critical occupations in the medical, financial and information technology fields. At a minimum, EEOC can begin to take advantage of these existing human capital flexibilities to ease its workforce challenges and to plan for future human capital management tools that are surely forthcoming.

Federal Pioneers are Leading the Way

We recommend that, in addition to heeding NAPA's recommendations for restructuring the EEOC for maximum effectiveness, the EEOC look to successful reform efforts across government for potential models and templates. The Partnership for Public Service actively seeks out pockets of innovation in the federal government that can serve as models for governmentwide transformation. Toward this end, we have compiled a "Solutions Center" of case studies on federal agencies that are making great strides to creatively and effectively address their human capital challenges, and we would be happy to share what we have observed and learned with you.

The main learning we can share with you is that the EEOC is not alone in the human capital and performance challenges it faces. Based on our work to date, we have identified several agencies doing good work in the very areas where you face your most significant challenges. We recommend that you look to those colleagues who have blazed a trail in areas you seek to reform, rather than attempting to reinvent the wheel.

The IRS has completed some groundbreaking work on executive leadership that focuses on enhancing certain leadership strengths rather than on bolstering areas of weakness.
GAO is creating a performance-driven culture, by involving employees in the creation of a new pay for performance system.
The Court Services and Offender Supervision Agency (CSOSA), the second youngest federal agency in existence, has developed a solid system for evaluating performance that managers and employees alike say is fair and easy to use.
NASA's exemplary strategic workforce planning efforts are designed to make sure the agency recruits and retains the right talent at all levels of the organization.

These successful innovations will be profiled in our online Solutions Center, which will roll out this fall. The EEOC is perfectly positioned to take full advantage of the key learnings of agencies like these that have successfully made change happen in the areas of leadership, performance management, recruitment and workforce planning. We hope that the lessons learned and replicable models coming out of these case studies will be useful to the Commission and to any other agency looking to improve its workforce and strengthen its performance.

Conclusion

Considering implementing NAPA's human capital recommendations is a step in the right direction. Like GAO, the EEOC has a special obligation to model "best practices" for the organizations it provides oversight for. The EEOC can and should become a role model in managing performance. As per NAPA's recommendations, start at the top with creating a cadre of world class leaders to lead the EEOC in its transformation. Use comprehensive workforce planning to enable a strategic focus on human capital at the EEOC. Build a cohesive business case for training dollars to support your human capital transformation efforts. Use a smart system of rewards and recognition to motivate and retain the talent you need to accomplish your mission. And use all of these human capital tools to strategically align the skills of your workforce with the work to be done.

Finally, I would like to emphasize that the "how" you make change happen is as important as the "what."../ NAPA's human capital recommendations rightly reflect this need to involve stakeholders in the process. Change management done right is a 3 â 5 year endeavor, and the importance of involving employees in the change process cannot be overemphasized. In order for employees to buy-in to the change process, feel a part of the EEOC's new direction, and perform at the highest levels, every effort should be made to communicate strategically with employees at all levels of the organization, keeping them informed, listening to their valuable feedback, and incorporating their suggestions when appropriate. OPM's recent governmentwide survey is a useful example of how agencies can garner input that will be helpful to them as they attempt to improve their human capital management. NAPA's recommendations wisely include a phased implementation coupled with a comprehensive communications strategy that provides for two-way feedback with employees, identifies change champions for the effort, and considers internal and external stakeholders' needs.

The EEOC's own efforts thus far to communicate the need for change demonstrate a recognition of the importance of involving internal and external stakeholders, through employee focus groups and even public sessions such as this. Further, we understand that this concern for stakeholder involvement will continue, as the EEOC is considering conducting an employee survey along the lines of the OPM governmentwide human capital survey. This survey would be helpful in establishing a baseline for determining EEOC's critical human capital needs and would be another way to involve employees in the change process. Once again, in this regard EEOC can and should be the role model for government, illustrating and implementing best practices for employee communications in its own restructuring efforts.

Closing

Today's commission meeting will provide for a richer and more detailed discussion and exploration of steps the EEOC can take in the future. We applaud you not only for holding this hearing and commissioning the report from NAPA, but also for the other steps you have taken to proactively reach out to stakeholders and tap the expertise around you. Your extensive outreach bodes well for the success of your efforts, and we stand ready to help in any way we can.

Again, thank you for the opportunity to testify. I look forward to answering any questions you might have.

1 Each vacancy announcement can cover one or more vacant positions.

2 U.S. Merit Systems Protection Board, based on a review of vacancy announcements posted on USAJOBS during FY2001.

This page was last modified on September 8, 2003.

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