Human Resources Management in Agencies, 23012-23049 [E8-8661]

Download as PDF 23012 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations OFFICE OF PERSONNEL MANAGEMENT 5 CFR PART 250 RIN 3206–AJ92 Human Resources Management in Agencies Office of Personnel Management. ACTION: Final Rule. AGENCY: SUMMARY: The Office of Personnel Management (OPM) is issuing final regulations to implement certain provisions of the Chief Human Capital Officers Act of 2002, which set forth new OPM and agency responsibilities and requirements to enhance and improve the strategic management of the Federal Government’s civilian workforce, as well as the planning and evaluation of agency efforts in that regard. Further, we are including a plain language rewrite of the subpart titled ‘‘Authority for Personnel Actions in Agencies.’’ Effective Date: The regulations are effective on May 28, 2008. FOR FURTHER INFORMATION CONTACT: Charles D. Grimes by phone at 202–418– 3163, by FAX at 202–606–2838, or by email at pay-performance-policy. You may contact Mr. Grimes by TTY on 202– 418–3134. SUPPLEMENTARY INFORMATION: On May, 23, 2006, the Office of Personnel Management (OPM) issued proposed regulations (71 FR 29593) to change 5 CFR part 250, to read ‘‘Human Resources Management in Agencies’’ to reflect current usage, to make a plain language revision in subpart A, and to add regulations on strategic human resources management as new subpart B. DATES: sroberts on PROD1PC70 with RULES Case for Action Section 1304 of the Chief Human Capital Officers Act (CHCO Act), which was enacted within the framework of the Homeland Security Act (Pub. L. 107–296), and codified at 5 U.S.C. 1103(c), authorizes OPM to develop an assessment system, including metrics, for agency human capital management. Rather than establish a new reporting requirement, OPM elected to incorporate the CHCO Act requirements within the newly established Human Capital Accountability System and Human Capital Management Report (Accountability System). To accommodate the accountability assessment, OPM has modified the existing 5 CFR part 250. Subpart A, which establishes requirements for VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 delegations of personnel authority to agencies, has been rewritten in plain English. Agencies will continue to operate in an environment of delegated personnel authority and will be required to ensure merit system accountability. The new subpart B details both agency and OPM responsibilities under the CHCO Act as well as the fundamental requirements of the Accountability System. OPM is cognizant of the burden placed on agencies by reporting requirements, and the regulations mitigate against increasing that burden through the incorporation of existing reporting requirements (e.g., PMA scoring) into the annual report to the maximum extent practicable. The CHCO Act metrics and the Accountability System will provide OPM with the data necessary to meet statutory requirements of 5 U.S.C. 1103(a) and (c) and 5 U.S.C. 2301. Major Issues As a general matter, multiple commenters suggested OPM collaborate directly with each affected agency or with a team of agency representatives to develop metrics tailored to each agency’s requirements. We disagree. The CHCO Act gives OPM responsibility for assessing strategic management of human capital across Government. The Governmentwide focus requires standard metrics. OPM consults with agencies on a regular basis through a variety of mechanisms including the CHCO Council, the Human Resources Directors’ Forum, and OPM’s Human Capital Officers. HCAAF requirements are designed to enable OPM to fulfill this responsibility through a set of human capital management systems, standards and metrics. There also was general concern expressed by commenters that the CHCO Act regulations add significantly to agency OPM reporting requirements. However, the intent of the CHCO regulations is to coordinate human capital management reporting requirements in a single reporting system. A commenter noted that the Chief Human Capital Officer should approve workforce plans. A commenter also contended that it was the agency’s responsibility to determine the timing and format of the human capital plan. We agree, but note that OPM has the responsibility to assess and approve agency human capital accountability systems. OPM’s role is to assure that agencies engage in workforce planning that meets approved standards. Commenters also raised concerns about the interplay between the CHCO PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 Act reporting requirements and the Annual Employee Survey regulations. While data from the Annual Employee Survey could be used for HCAAF metrics, there is no substantive overlap in these two regulations. HCAAF The Human Capital Assessment and Accountability Framework (HCAAF), annexed hereto as an Appendix to the regulation, details the concepts and systems for planning, implementing, and evaluating the results of human capital management policies and practices. Commenters contended that the framework is too transactional, broad and theoretical. Commenters further contended that agencies cannot be held accountable for ambiguous human capital management practices. We disagree. HCAAF tools are not designed to ensure strict compliance, but to assist agencies to meet HCAAF requirements. Measuring effective and efficient HCM is best accomplished through representative, flexible indicators, which OPM has established in the HCAAF metrics. Commenters also objected to sections of 5 CFR 250.203(a)(1)(ii) on workforce analysis. While we agree that other measurement methods could be effective, OPM has chosen the current Human Capital and Workforce Analysis Plan elements based on welldocumented workforce plan models used in the public and private sectors. A commenter proposed that performance measures should support agency goals instead of agency measures. We agree. The wording in 5 CFR 250.203(a)(1) (iii) has been changed accordingly. Metrics By this regulation, OPM defines the metrics to be used pursuant to 5 U.S.C. 1103(c) as the HCAAF and the HCAAF Systems, Standards, and Metrics (HCAAF–SSM). See 5 CFR 250.202(b). See the Appendix to this regulation. These metrics may be adapted, in the future, pursuant to notice and comment, to meet the future needs of both agencies and OPM. Commenters are providing feedback on the metrics to OPM through the public comment process and in other forums like the CHCO Council. OPM may incorporate this feedback, as appropriate, and pursuant to notice and comment, to further refine the measures in the future. Commenters generally contended that the metrics were inflexible, overly detailed and potentially inaccurate. We disagree. The HCAAF–SSM is a systematic method to examine strategic human capital practices across all E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations sroberts on PROD1PC70 with RULES Government agencies. Standardization is important because OPM cannot roll up metrics that are based on different calculations. Moreover, OPM, through the Accountability System, encourages all agencies to develop separate measures that address relevant agency issues. The HCAAF–SSM enables OPM to meet its statutory responsibility in the CHCO Act. That responsibility is to assess the strategic management of human capital across all of Government. OPM has determined that this can be accomplished only through using a common set of metrics. Accountability Commenters expressed confusion surrounding the reporting requirements under the Human Capital Accountability System and annual Report. Commenters were concerned by the interplay of new and existing reporting requirements and whether there would be redundancy. However, the intent of the annual Human Capital Management Report is to provide a mechanism to consolidate human capital reporting into one annual report, and to incorporate this into agency performance and budget reporting. Commenters also contended that the reporting requirements are of no value to the agencies. We disagree. The Human Capital Management Report serves a number of purposes, including providing agencies a mechanism to document human capital results and actions planned to address areas needing improvement. Agencies will benefit from having effective, comparable human capital data. A commenter also proposed that the report be issued biennially to give agencies more time. We disagree. The annual report is appropriate as it provides timely feedback on agency human capital management systems. Moreover, the first complete accountability reporting with all required metrics is not required until 2008 to give agencies sufficient time to comply. A commenter proposed that the agencies’ Chief Human Capital Officers have the authority to approve the agency accountability systems. We disagree. OPM has the authority to require agencies to establish accountability systems consistent with OPM standards. We made a clarifying change to 5 CFR 250.203(a)(1)(iii)(2) to ensure that any independent audit process is conducted with OPM participation. A commenter also suggested implementing a third-party appeals system prior to OPM withdrawing an agency’s delegated examining unit or VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 otherwise penalizing the agency. We disagree. OPM has longstanding authority under 5 U.S.C. 1104 to exercise oversight and control over agencies’ use of delegated authorities without the intervention of a third party. Commenters proposed that OPM’s role be more as advisor than auditor. While we will continue to provide guidance, advice and leadership to agencies, OPM has a statutory role as auditor of agency human capital management that must be fulfilled. Some commenters expressed confusion over whether a third party auditor would be required, but the proposed regulations have no such requirement. A commenter also suggested OPM change the language in 5 CFR 250.103 regarding OPM discretion to require agency corrective action from may to must. We disagree. OPM retains discretion to determine the appropriate response to particular cases. A commenter contended that it was unnecessary to review each HC policy, program and operation every year. However, the regulations do not require such a review. Another commenter proposed that the annual Human Capital Management Report measure the number of employee complaints and resolution of such complaints. While we encourage agencies to include such measures in their accountability plans, and many agencies do track complaints, this is not a required metric. Commenters raised concerns about the sufficiency of pre-determined budgets when implementing the newly required Human Capital Management Report. Commenters contended that the timeline provided in the proposed regulation did not allow time to align the Accountability System and the budget development process. Concern was also raised about the availability of funding for accountability systems when agency human resources management does not control the budget. We disagree. The CHCO Act holds agencies responsible for maintaining accountability for results including merit system compliance. At the agency level, leadership is required to align budgets with strategic management of human capital. The first complete Human Capital Management Report with all required metrics is not required until 2008 to give agencies sufficient time to comply. Commenters also requested that OPM differentiate the requirements for agencies that have already implemented conforming accountability systems from the requirements for agencies that have not implemented such systems. We disagree. The regulations detailing the PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 23013 Accountability System have been drafted to provide individual agencies maximum flexibility while providing OPM comparable information across agencies. A commenter requested that OPM require agencies to post their Human Capital Management Reports on their Web sites. We disagree. While OPM believes that agencies should post their Human Capital Management Reports, an agency may have a number of valid reasons (e.g., national security) for not posting its report. Executive Order 12866, Regulatory Review This proposed rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866. Regulatory Flexibility Act I certify that these regulations would not have a significant economic impact on a substantial number of small entities (including small businesses, small organizational units, and small governmental jurisdictions) because they would only apply to Federal agencies and employees. List of Subjects in 5 CFR Part 250 Authority delegations (Government agencies), Government employees. Office of Personnel Management. Linda M. Springer, Director. Accordingly, OPM is amending 5 CFR 250 to read as follows: I 1. Revise part 250 to read as follows: I PART 250—HUMAN RESOURCES MANAGEMENT IN AGENCIES Subpart A—Authority for Personnel Actions in Agencies Sec. 250.101 Standards and requirements for agency personnel actions. 250.102 Delegated authorities. 250.103 Consequences of improper agency actions. Subpart B—Strategic Human Capital Management 250.201 Coverage and purpose. 250.202 Office of Personnel Management responsibilities. 250.203 Agency responsibilities. Authority: 5 U.S.C. 1101 note, 1103(a)(5), 1103(c), 1104, 1302, 3301, 3302; E.O. 10577, 12 FR 1259, 3 CFR, 1954–1958 Comp., p. 218; E.O. 13197, 66 FR 7853, 3 CFR 748 (2002). Subpart B also issued under 5 U.S.C. 1401, 1401 note, 1402. E:\FR\FM\28APR2.SGM 28APR2 23014 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Subpart A—Authority for Personnel Actions in Agencies § 250.101 Standards and requirements for agency personnel actions. When taking a personnel action authorized by this chapter, an agency must comply with qualification standards and regulations issued by the Office of Personnel Management (OPM), the instructions OPM has published in the Guide to Processing Personnel Actions, and the provisions of any delegation agreement OPM has made with the agency. When taking a personnel action that results from a decision or order of OPM, the Merit Systems Protection Board, Equal Employment Opportunity Commission, or Federal Labor Relations Authority, as authorized by the rules and regulations of those agencies, or as the result of a court order, a judicial or administrative settlement agreement, or an arbitral award under a negotiated agreement, the agency must follow the instructions in the Guide to Processing Personnel Actions and comply with all other relevant substantive and documentary requirements, including those applicable to retirement, life insurance, health benefits, and other benefits provided under this chapter. § 250.102 Delegated authorities. OPM may delegate its authority, including authority for competitive examinations, to agencies, under 5 U.S.C. 1104(a)(2), through a delegation agreement. The delegation agreement developed with the agency must specify the conditions for applying the delegated authorities. The agreement must also set minimum standards of performance and describe the system of oversight by which the agency and OPM will monitor the use of each delegated authority. sroberts on PROD1PC70 with RULES § 250.103 Consequences of improper agency actions. If OPM finds that an agency has taken an action contrary to a law, rule, regulation, or standard that OPM administers, OPM may require the agency to take corrective action. OPM may suspend or revoke a delegation agreement established under § 250.102 at any time if it determines that the agency is not adhering to the provisions of the agreement. OPM may suspend or withdraw any authority granted under this chapter to an agency, including any authority granted by delegation agreement, when OPM finds that the agency has not complied with qualification standards OPM has issued, instructions OPM has published, or the regulations in this chapter. OPM also VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 may suspend or withdraw these authorities when it determines that doing so is in the interest of the civil service for any other reason. Subpart B—Strategic Human Capital Management § 250.201 Coverage and purpose. The Chief Human Capital Officers (CHCO) Act of 2002 acknowledges the critical importance of Federal employees to the effective and efficient operation of Government. As a part of OPM’s overall leadership responsibilities in the strategic management of the Federal civil service, and pursuant to 5 U.S.C. 1103, OPM is responsible for designing a set of systems, including standards and metrics, for assessing the management of human capital by Federal agencies. In this subpart, OPM establishes a framework of those systems, including system components, OPM’s role, and agency responsibilities. § 250.202 Office of Personnel Management responsibilities. (a) As the President’s chief human capital officer, the Director of OPM provides Governmentwide leadership and direction in the strategic management of the Federal workforce. (b) To execute this critical leadership responsibility, OPM adopts the Human Capital Assessment and Accountability Framework (HCAAF) to describe the concepts and systems for planning, implementing, and evaluating the results of human capital management policies and practices. See Appendix. In addition, OPM adopts the related set of assessment systems required by the CHCO Act as the HCAAF Systems, Standards, and Metrics (HCAAF–SSM), also included in the Appendix. Each such assessment system associated with the HCAAF consists of: (1) A standard against which agencies can assess the results of their management of human capital; and (2) Prescribed metrics, as appropriate, for organizational outcomes, employee perspective, and compliance measures with respect to relevant laws, rules and regulations. (c) Together, the HCAAF and the HCAAF–SSM guide agencies in planning, evaluating and improving the efficiency and effectiveness of agency human capital management with respect to: (1) Alignment with executive branch policies and priorities, as well as with individual agency missions, goals, and program objectives, including the extent to which human capital management strategies are integrated into agency PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 strategic plans and performance budgets prepared under OMB Circular A–11; (2) Identifying and closing competency/skill gaps in the agency’s mission-critical occupations; ensuring leadership continuity through the implementation of recruiting, development, and succession plans; sustaining an agency culture that values, elicits, identifies, and rewards high performance; and developing and implementing a knowledge management strategy, supported by appropriate investment in training and technology; and (3) Holding the agency head, executives, managers and human resources officers accountable for efficient and effective human capital management, in accordance with merit system principles. § 250.203 Agency responsibilities. (a) To assist in the assessment of the management of human capital in the Federal Government, and to help meet the statutory requirements to prepare that portion of the performance budget for which agency Chief Human Capital Officers are accountable as well as relevant portions of performance and accountability reports, heads of agencies or their designees must maintain a current human capital plan and provide OPM an annual Human Capital Management Report, as outlined below, based on an approved human capital accountability system. The HCAAF and the HCAAF–SSM provide more specific information on coverage and content for the plan and report. (1) Human Capital Plan. Using a format established by agreement between the agency and OPM, at a minimum the plan must include: (i) Human Capital Goals and Objectives. These are a comprehensive, integrated set of human capital goals and objectives, with detailed policy and program priorities and initiatives as appropriate, consistent with agency strategic plans and annual performance goals. These human capital goals and objectives must address each of the human capital management systems included in the HCAAF. (ii) Workforce Analysis. This analysis of the agency’s workforce describes its current state, projects the human resources needed to achieve the agency’s program performance goals and objectives during the term of the agency’s strategic plan, and identifies potential shortfalls or gaps. An ongoing analysis must, for relevant agency mission requirements, describe the occupation(s) most critical to agency performance (including associated managerial and executive positions) and E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations describe mission-critical competencies and key demographics (e.g., talent analyses, turnover, and retirement eligibility); and for each such occupation, describe its current and projected staffing levels, attrition and hiring estimates, and proposed training and development investments. (iii) Performance Measures and Milestones. One or more human capital metrics, as well as appropriate program milestones, for each human capital goal or objective, provide a basis for assessing progress and results, including compliance measures with respect to relevant laws, rules and regulations. These metrics must include, but are not limited to, those described in the HCAAF–SSM issued under § 250.202(b). These metrics and milestones must be specifically linked to broader agency program performance goals, to evaluate the impact of the agency’s human capital management on its overall mission performance. (2) Human Capital Accountability System. This system provides for an annual assessment of agency human capital management progress and results including compliance with relevant laws, rules, and regulations. That assessment is conveyed in an annual Human Capital Management Report to OPM. The human capital accountability system must: (i) Be formal and documented; (ii) Be approved by OPM; (iii) Be supported and resourced by agency leadership; (iv) Measure and assess human capital management systems for mission alignment, effectiveness, efficiency, and compliance with merit system principles, laws, and regulations; (v) Provide for an independent audit process, with OPM participation, for periodic review of human resources transactions to insure legal and regulatory compliance; (vi) Ensure that action is taken to improve human capital management programs and processes and to correct deficiencies; and (vii) Ensure results are analyzed and reported to agency management and OPM. (3) Human Capital Management Report. At a minimum, the agency’s SECTION I—Introduction to the HCAAF 23015 annual Human Capital Management Report must: (i) Provide an evaluation of and report on the agency’s existing human capital management policies, programs, and operations, as they relate to the agency’s overall mission/program performance. The report must address the performance measures and milestones contained in the agency human capital plan including compliance measures with respect to relevant laws, rules and regulations. The report must also document actions taken to correct any violations or deficiencies that are identified. (ii) Inform the development of human capital goals and objectives during the agency’s strategic planning and annual performance budget formulation process, as well as the treatment of human capital results during the annual performance and accountability reporting process. (b) [Reserved] Note: The following appendix will not appear in the Code of Federal Regulations. Human Capital Assessment and Accountability Framework (HCAAF) Metrics Human Capital Assessment and Accountability Framework (HCAAF). sroberts on PROD1PC70 with RULES Five Systems of HCAAF Relationships Among the HCAAF Systems. VerDate Aug<31>2005 The HCAAF establishes and defines five human capital systems that together provide a single, consistent definition of human capital management for the Federal Government. The HCAAF fuses human capital management to the merit system principles—a cornerstone of the American Civil Service—and other civil service laws, rules, and regulations. Establishment of the HCAAF fulfills OPM’s mandate under the Chief Human Capital Officers Act of 2002 (CHCO Act) to design systems and set standards, including appropriate metrics, for assessing the management of human capital by Federal agencies. The regulation at 5 CFR 205.203 establishes requirements for an agency to submit to OPM annually a Strategic Human Capital Plan and an Agency Human Capital Accountability Report. The requirements in the regulation are by design congruent with the planning and reporting requirements contained in OMB Circular A–11 and title 31 U.S.C. The HCAAF outlines an ongoing process of human capital management in every Federal agency—planning and goal setting, implementation, and evaluating results—in five systems: • Strategic Alignment (Planning and Goal Setting). A system led by senior management—typically the Chief Human Capital Officer (CHCO)—that promotes the alignment of human capital management strategies with agency mission, goals, and objectives through analysis, planning, investment, measurement, and management of human capital programs. • Leadership and Knowledge Management (Implementation). A system that ensures continuity of leadership by identifying and addressing potential gaps in effective leadership and implements and maintains programs that capture organizational knowledge and promote learning. • Results-Oriented Performance Culture (Implementation). A system that promotes a diverse, high-performing workforce by implementing and maintaining effective performance management systems and awards programs. • Talent Management (Implementation). A system that addresses competency gaps, particularly in mission-critical occupations, by implementing and maintaining programs to attract, acquire, promote, and retain quality talent. • Accountability (Evaluating Results). A system that contributes to agency performance by monitoring and evaluating the results of its human capital management policies, programs, and activities; by analyzing compliance with merit system principles; and by identifying and monitoring necessary improvements. Each system consists of components that allow human capital practitioners to assess how well the system is strategically managing its human cpaital in compliance with merit system principles. Figure 1 below shows the relationships among the human capital systems. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations HCAAF Taxonomy ............ Standard ...................... Metrics ......................... Critical Success Factors. Results ........................ Key Elements .............. sroberts on PROD1PC70 with RULES Suggested Performance Indicators. VerDate Aug<31>2005 Implementation of the HCAAF will enable agencies to transform the Federal workplace into high-performing arenas where every employee is enabled to understand and maximize his or her contribution to agency mission. Through implementation of the HCAAF, Federal agencies will be able to focus on: • Human capital management systems and practices that most impact attainment of their mission. • Measurable, observable agency and individual performance results. This will help to assure the American people’s continuing trust in their Government’s ability to serve them and protect our national security. The following components reflect the overall taxonomy of the HCAAF. A standard describes the critical human capital management outcomes for agencies to strive toward in each of the five HCAAF systems. These are measurements that provide a basis for comparison. Strategic human capital management requires a reliable and valid set of metrics that provides an accurate baseline against which individual agency progress can be assessed. Required outcome metrics are provided for the three systems that implement strategic human capital plans and programs: Leadership and Knowledge Management, Results-Oriented Performance Culture, and Talent Management. These required metrics are summarized on the following pages. Additional suggested metrics are also included. Each system is based on critical success factors that make up the overall system. Critical success factors are the areas on which agencies and human capital practitioners should focus to achieve a system’s standard and operate efficiently, effectively, and in compliance with merit system principles. For example, Change Management and Diversity Management are two critical success factors associated with the Leadership and Knowledge Management system. The results describe the desired effects when key elements of a critical success factor are effectively implemented. Results are presented in two categories: Effectiveness results and compliance results. Compliance results refer to specific statutory or regulatory requirements. Each critical success factor contains several key elements that are similar to the Elements of Yes that were initially developed as part of the HCAAF. Key elements describe what you would expect to see in an effective critical success factor. The suggested indicators—both effectiveness indicators and compliance indicators—describe examples of visible evidence of the existence of key elements and compliance with merit system principles. Cumulatively, the indicators identify how well the agency is doing relative to key elements. The suggested performance indicators are linked to the key elements and are not meant to be an all-inclusive list. Human capital practitioners may need to search for other indicators if agency approaches differ from the list of suggested performance indicators provided. Agencies may decide which suggested performance indicators provide the best evidence that they have implemented practices that lead toward achieving the standard. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 ER28AP08.000</GPH> 23016 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations SECTION I—Introduction to the HCAAF 23017 Human Capital Assessment and Accountability Framework (HCAAF) Metrics Metrics ............................... Leadership and Knowledge Management System Standard. Metrics have been established to help agencies accomplish the standard for the three systems that implement strategic human capital plans and programs—i.e., Leadership and Knowledge Management, Results-Oriented Performance Culture, and Talent Management. These three systems have both required and suggested metrics. • Required metrics focus on human capital management outcomes and are required for Governmentwide reporting. They focus on human capital management outcomes from three perspectives: organization, employee, and merit system compliance. • Suggested metrics focus on human capital management activities that support outcome metrics and show the health of a specific HCAAF critical success factor. The metrics were developed based on extensive research from a variety of expert sources. To be incorporated in the HCAAF, a metric needed to meet the following criteria: • Align with the HCAAF. • Drive organizational effectiveness directly or indirectly. • Be applicable Governmentwide. • Be actionable (under the control of the agency). • Be practical (cost effective and acceptable). • Be reliable (stable). • Be valid (accurate and appropriate for its purpose). The metrics described in this Guide were carefully chosen to maintain their usefulness over time. However, many additional human capital metrics exist that agencies may find they want to implement. Agencies are encouraged to augment these Governmentwide metrics with other activity and outcome metrics that are relevant to the agencies’ human capital objectives. The following pages provide the system standard and the required outcome metrics for the Leadership and Knowledge Management, Results-Oriented Performance Culture, and Talent Management systems. Refer to each specific system’s section for the suggested metrics. Agency leaders and managers effectively manage people, ensure continuity of leadership, and sustain a learning environment that drives continuous improvement in performance, and provide a means to share critical knowledge across the organization. Knowledge management must be supported by an appropriate investment in training and technology. Required Outcome Metric Description Purpose Organization Metric: Competency Gaps Closed for Management and Leadership. Difference between competencies needed and competencies possessed by managers and leaders. Employee Perspective Metric: Questions from Annual Employee Survey about Satisfaction with Leadership. Merit System Compliance Metric: MeritBased Execution of the Leadership and Knowledge Management System. Items from Annual Employee Survey .............. To determine how the agency should target its recruitment and retention, and development efforts to bring the competencies of its managers and leaders into alignment with the agency’s current and future needs. To determine the extent to which employees hold their leadership in high regard, both overall and on specific facets of leadership. To determine that decisions, policies, processes, and practices executed under the Leadership and Knowledge Management system comply with the merit system principles and related laws, rules, and regulations. Results-Oriented Performance Culture System Standard. An assessment of compliance with merit system principles and related laws, rules, and regulations governing the Leadership and Knowledge Management system. The agency has a diverse, results-oriented, high-performing workforce and a performance management system that differentiates between high and low levels of performance and links individual/team/unit performance to organizational goals and desired results effectively. Description Purpose Organization Metric: SES Performance/Organizational Performance Relationship as Linked to Mission. Relationship between SES performance ratings and accomplishment of the agency’s strategic goals. Organization Metric: Workforce Performance Appraisals Aligned to Mission, Goals, and Outcomes. sroberts on PROD1PC70 with RULES Required Outcome Metric Degree of linkage between employees’ performance appraisal plans and agency mission, goals, and outcomes. Employee Perspective Metric: Questions from Annual Employee Survey about Performance Culture. Items from Annual Employee Survey .............. To determine the extent to which SES appraisals and awards are appropriately based on achievement of organizational results. To determine whether all employees have performance appraisal plans that effectively link to the agency’s mission, goals, and outcomes. To determine the extent to which employees believe their organizational culture promotes an improvement in processes, products and services, and organizational outcomes. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23018 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Required Outcome Metric Description Purpose Merit System Compliance Metric: MeritBased Execution of the Performance Culture System. An assessment of compliance with merit system principles and related laws, rules, and regulations governing the Performance Culture system. To determine that decisions, policies, processes, and practices executed under the Performance Culture system comply with the merit system principles and related laws, rules, and regulations. Talent Management System Standard. The agency has closed skills, knowledge, and competency gaps/deficiencies in mission-critical occupations, and has made meaningful progress toward closing skills, knowledge, and competency gaps/deficiencies in all occupations used in the agency. Required Outcome Metric Description Purpose Organization Metric: Competency Gaps Closed for Mission-Critical Occupations. Difference between competencies needed and competencies possessed by employees in mission-critical occupations. Employee Perspective Metric: Questions from Annual Employee Survey about Organizational Capacity. Employee Perspective Metric: Questions from Annual Employee Survey about Employee Satisfaction. Merit System Compliance Metric: MeritBased Execution of the Talent Management System. Items from Annual Employee Survey .............. To determine how the agency should target its recruitment, retention, and development efforts to bring the competencies of its workforce into alignment with the agency’s current and future needs. To determine the extent to which employees think the organization has talent necessary to achieve organizational goals. To determine the extent to which employees are satisfied with their jobs and various aspects thereof. To determine that decisions, policies, processes, and practices executed under the Talent Management system comply with the merit system principles and related laws, rules, and regulations. Items from Annual Employee Survey .............. An assessment of compliance with merit system principles and related laws, rules, and regulations governing the Talent Management system. SECTION II—Strategic Alignment System The Strategic Alignment System Human Capital Planning Workforce Planning Human Capital Best Practices and Knowledge Sharing Human Resources as Strategic Partner The Strategic Alignment System. Definition ........................... Standard ............................ Critical Success Factors sroberts on PROD1PC70 with RULES Applicable Merit System Principles. Metrics ............................... This section contains information specific to the Strategic Alignment system, which focuses on having a human capital management strategy that is aligned with mission, goals, and organizational objectives. A system led by senior management—typically the Chief Human Capital Officer (CHCO)—that promotes alignment of human capital management strategies with agency mission, goals, and objectives through analysis, planning, investment, measurement, and management of human capital programs. Agency human capital management strategies are aligned with mission, goals, and organizational objectives and integrated into its strategic plans, performance plans, and budgets. The Strategic Alignment system is comprised of the following critical success factors: • Human Capital Planning: The agency designs a coherent framework of human capital policies, programs, and practices to achieve human capital requirements to directly support the agency’s strategic plan. • Workforce Planning: The organization identifies the human capital required to meet organizational goals, conducts analyses to identify competency gaps, develops strategies to address human capital needs and close competency gaps, and ensures the organization is appropriately structured. • Human Capital Best Practices and Knowledge Sharing: To leverage its efforts, the agency works with others to share best practices and learn about new developments. • Human Resources as Strategic Partner: Human resources (HR) professionals act as consultants with managers to develop, implement, and assess human capital policies and practices to achieve the organization’s shared vision. Senior leaders, managers, HR professionals, and key stakeholders contribute to the human capital vision and the agency’s broader strategic planning process. The following merit system principle is especially relevant to the Strategic Alignment system: • The Federal work force should be used efficiently and effectively. (5 U.S.C. 2301(b)(5)). Activities and outcomes of this system are assessed through documented evidence of a Strategic Human Capital Plan that includes human capital goals, objectives, and strategies; a workforce plan; and performance measures and milestones. Agencies are required under OPM regulations implementing the CHCO Act to submit the Strategic Human Capital Plan described by this system to OPM on an annual basis. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations SECTION II—Strategic Alignment System 23019 The Strategic Alignment System Human Capital Planning Workforce Planning Human Capital Best Practices and Knowledge Sharing Human Resources as Strategic Partner Results: Human Capital Planning. When the key elements of the critical success factor Human Capital Planning are effectively implemented, agencies will realize the following results: Effectiveness Results • The agency’s strategic plan establishes an agency-wide vision that guides human capital planning and investment activities. • The agency has a system in place to continually assess and improve human capital planning and investment and their impact on mission accomplishments. • Managers are held accountable for effective implementation of human capital plans and overall human capital management. Compliance Result • In accordance with the Chief Human Capital Officers Act of 2002 (CHCO Act), the agency CHCO carries out the functions authorized in 5 U.S.C. 1402, including aligning the agency’s human resources policies and programs with organizational mission, strategic goals, and performance outcomes. The following pages provide key elements and suggested performance indicators for this critical success factor. HUMAN CAPITAL PLANNING Key Elements Suggested Performance Indicators The agency has a human capital planning system that: • Promotes alignment of human capital strategies with agency mission, goals, and objectives through analysis, planning, investment, and management of human capital programs sroberts on PROD1PC70 with RULES • Establishes a process for including human capital activities and investments in the agency annual performance plan and budget VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00009 Fmt 4701 Effectiveness Indicators • Key stakeholders, including HR, participate in the development and revision of the agency’s strategic plan and facilitate workforce planning and analysis efforts. • Documents substantiate involvement of key human capital leaders and key stakeholders in the planning process (e.g., team members of review boards, working groups, or executive off-sites). • Human capital planning is managed by a human capital review team or similar collaborative body comprised of the CHCO and senior leaders and managers from human resources, information technology, finance, and mission-specific program areas. Compliance Indicator • As provided by 5 U.S.C. 1303(c), the agency holds managers and human resources officers accountable for efficient and effective human resources management in support of the agency’s mission, in accordance with merit system principles. Effectiveness Indicators • The agency’s annual performance plan and budget request include human capital activities and investments. • The annual plan identifies resources required to implement human capital strategies (e.g., retention bonuses, ‘‘buyouts,’’ awards, training, student loan repayments, tuition assistance, Voluntary Early Retirement Authority (VERA)). Funding requirements are prioritized in case not all human capital strategies can be funded. Compliance Indicators • The agency has a standard for integrating its human resources strategies into the budget as stated in 5 U.S.C. 1303, as added by the CHCO Act of 2002. • As prescribed in the CHCO Act (31 U.S.C. 1115), the agency’s performance plan provides a description of how the performance goals and objectives are to be achieved, including: —The operational processes, training, skills and technology, and the human capital information and other resources —The strategies required to meet the performance goals and objectives. [Note: In addition to amending and adding to title V, the CHCO Act amends provisions of the Government Performance and Results Act of 1993 (GPRA), which requires agencies to prepare annual performance plans.] Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23020 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations HUMAN CAPITAL PLANNING Key Elements Suggested Performance Indicators • Results in the development of an annual human capital plan establishing human capital goals, objectives, and investments that link to the agency strategic plan and support mission accomplishment • Provides for a formal agency-wide evaluation of the strategies in the human capital plan and its implementation The agency has a human capital planning system that: Effectiveness Indicators • The agency’s planning process links the human capital framework to the mission, function, and strategic management of the agency, as well as to other management initiatives such as e-Government and competitive sourcing. • The agency has designed human capital performance improvement strategies that support mission accomplishment. • The agency has approved and communicated human capital planning documents that describe human capital goals, objectives, investments, and strategies that are linked to the agency strategic plan. Compliance Indicators • The agency includes human capital strategic planning in agency performance plans and performance reports as stated in 31 U.S.C. 1115, as amended by the CHCO Act. • As prescribed in the CHCO Act (31 U.S.C. 1115), the agency’s program performance report includes a review of the performance goals and evaluation of the agency’s performance plan relative to the agency’s strategic human capital plan. Effectiveness Indicators • The strategic human capital plan sets human capital progress milestones and identifies those responsible for meeting them. • The agency’s annual performance review tracks and measures human capital activities and investments. • The agency defines successful achievement of the mission in terms of quantified long- and short-term human capital performance goals. • The agency has a documented change management/implementation process that identifies necessary human capital practices that facilitate change. • Where appropriate, individual performance plans and evaluations address accountability for successful implementation of human capital strategies. • Human capital partnering is considered in senior leaders’ and managers’ annual performance reviews. Compliance Indicators • In accordance with the Executive Performance and Accountability Interim Rule (5 CFR 430 and 1330), senior employee performance ratings appropriately and clearly link to organizational mission, GPRA strategic goals, or other program objectives. • Agency managers plan and communicate performance elements and standards that are linked with strategic planning initiatives in accordance with the Executive Performance and Accountability Interim Rule (5 CFR 430 and 1330). SECTION II—Strategic Alignment System The Strategic Alignment System Human Capital Planning Workforce Planning Human Capital Best Practices and Knowledge Sharing Human Resources as Strategic Partner sroberts on PROD1PC70 with RULES Results: Workforce Planning. VerDate Aug<31>2005 When the key elements of the critical success factor Workforce Planning are effectively implemented, agencies will realize the following results: Effectiveness Results • The agency approaches workforce planning strategically and in an explicit, documented manner. The workforce plan links directly to the agency’s strategic and annual performance plans and is used to make decisions about structuring and deploying the workforce. • Mission-critical occupations and competencies are identified and documented, providing a baseline of information for the agency to develop strategies to recruit, develop, and retain talent needed for program performance. • The agency’s documented workforce plan identifies current and future workforce competencies and the agency is closing identified competency gaps through implementation of gap reduction strategies such as: —Restructuring. —Recruitment. —Competitive sourcing. —Redeployment. —Retraining. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23021 —Retention (e.g., compensation, quality of work life). —Technology solutions. • A business forecasting process is implemented that identifies probable workforce changes, enabling agency leadership to anticipate changes to human capital that require action to ensure program performance. • Based on functional analyses, the agency is appropriately structured to allow the right mix and distribution of the workforce to best support the agency mission. • Based on analysis of customer needs and workload distribution, the agency has the right balance of supervisory and non-supervisory positions to support the agency mission. Compliance Result • The CHCO assesses workforce characteristics and future needs based on the agency’s mission and strategic plan in accordance with the CHCO Act of 2002 (5 U.S.C. 1402). The following pages provide key elements and suggested performance indicators for this critical success factor. WORKFORCE PLANNING Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES The agency’s workforce planning system includes a workforce analysis process that: • Identifies mission-critical occupations and competencies that are essential to achieving strategic goals. • Analyzes current strengths and weaknesses regarding missioncritical occupations and competencies. • Identifies competency gaps and deficiencies, including current and future competency needs and losses due to voluntary attrition. • Systematically defines the size of the workforce needed to meet organizational goals. • Uses workforce planning reports and studies in conjunction with the best practice benchmarks to determine the most effective work levels, workloads, and resources for efficient functioning. • Bases decisions related to restructuring, redeployment, and reorganization on current empirical and workforce analysis. • Conducts risk assessments to minimize adverse impacts on workforce due to restructuring. • Documents and assesses key supporting functions of all business areas. • Regularly evaluates customer/citizen needs and incorporates these needs into workforce plans, organizational goals, and functions. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00011 Fmt 4701 Effectiveness Indicators • Studies indicate which occupations and competencies are essential to achieving the agency’s strategic goals. • Mission-critical occupations and competencies are identified in the agency’s strategic plan and/or performance plan, and its strategic human capital plan. • A methodology exists for determining mission-critical occupations and competencies based in part on professional qualifications (e.g., certifications, licenses). • Trends in mission-critical occupations are analyzed in terms of the following suggested factors in order to continually adjust the agency’s recruitment and retention strategy to its current state of need: —Number and distribution of positions by pay plan/grade or pay band/ series and geographic location. —Average age. —Average length of service. —Diversity trends. —Average grade/band. —Retirement eligibility (current and expected). —Turnover (e.g., separations, resignations, transfers, retirements). —Surpluses in occupations and competencies. • Competency and/or staffing models have been developed and there is analysis of gaps between the current and desired competencies for mission-critical occupations. • Documentation indicates workforce analysis occurs on a periodic basis and is used to drive human capital policy and decisions. • The agency uses a documented, systematic strategic workforce planning process that addresses the following issues: —The link to the agency’s strategic plan and the strategic human capital plan. —The link to the agency’s annual performance/business plan. —Work activities required to carry out the goals and objectives of the strategic plan (long term) and performance plan (short term). —How to structure the organization (e.g., determine what must be done for continuance of Government operations, determine necessary layers, streamline functions, consolidate organizational elements) and its work processes/workflow to carry out work activities —How to continually update the process to reflect mission changes, technology advances (e.g., e-Government), funding levels, competitive sourcing, and other change drivers. —Analysis and assessment of the current workforce (e.g., skills, demographics, attrition) to meet long-term and short-term goals and objectives. —Workforce analysis including indicators such as size and distribution of workforce (including Senior Executive Service (SES)) by grade, series, geographic locations, types of positions occupied, pay plan, veteran representation, etc. —How to develop current employees, recruit to fill long-term and shortterm goals, and provide for continuity of leadership through succession to key positions. —How to minimize the adverse impact on the workforce in restructuring the organization and its work processes. • The agency uses multi-faceted techniques to close competency gaps within the organization (e.g., strategic recruitment, mid-career hiring, training). Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23022 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations WORKFORCE PLANNING Key Elements Suggested Performance Indicators • Forecasts future business changes in the work of the agency and how the changes will affect the workforce. • Regularly tracks established performance measures, workforce trends, and technological advances to ensure updated models for meeting citizen and organization needs. The agency’s workforce analysis process is based on sources of information such as: • Current workforce demographic and competitive sourcing studies. • Descriptive and documented plans and processes for hiring, recruiting, employment, and retention efforts. • Past agency assessments and workforce data. • Information about anticipated changes related to e-Government and competitive sourcing, goals, and objectives. sroberts on PROD1PC70 with RULES The agency’s workforce planning system includes an organizational structuring process that: • Utilizes functional analysis to determine appropriate organizational and physical structure. • Clearly organizes the agency staffing plan by workflow, organizational initiative, and functional area. • Anticipates change in citizen needs by continuously monitoring the evolution of needs, trends, and events affecting workforce planning. • Avoids excess organizational layers. • Reduces redundant operations. • Analyzes internal workforce statistics (e.g., ratio of managers to workforce, distribution of workforce), data, and trends to make the most efficient choices for workforce deployment. • The agency conducts regular assessment of its need for, and deployment of, executive resources. Effectiveness Indicators • Line managers and key staff, including HR, consider and prepare for possible workforce changes in areas such as mission/goals, technology, program additions or deletions, functions, and outsourcing initiatives. • The agency’s strategic plan and/or performance plan and its strategic human capital plan reflect forecasts of the human capital implications of future business plans, including expectations and trends concerning: —Future workload and staffing needs. —Workforce demographics in mission-critical occupations. —Changing competency requirements —Industry benchmarking for similar occupations. —Availability of competencies within applicable labor markets. • The forecast is shared widely and used within the agency by those who are responsible and accountable to meet human capital needs. Effectiveness Indicators • Information systems are in operation which provide human capital data to all appropriate management levels to guide planning, analysis, and decision making. Data integrity is maintained through quality control checks. • The agency conducts and uses management studies to: —Eliminate work and interfaces that add no value. —Assess the organization’s deployment strategies, including identification of situations where competitive sourcing is the most appropriate means to meet their strategic objectives. • Staffing data showing trends in appointments, promotions, conversions, separations, and retirements are analyzed regularly, and management decisions regarding workforce deployment are based on documented data. • Turnover indicators (e.g., transfers, retirements, and separations in each of the last several years, overall, and by professional, administrative, technical, clerical, and other occupations) are monitored regularly. Effectiveness Indicators • Documentation of analyses of organizational functions shows review, planning, design, and, if applicable, implementation and outcome of efforts to realign the workforce. • Functional analyses and data analyses result in specific targets for workforce redeployment, which are reflected in the strategic human capital plan and the workforce plan. • The benefits of proposed changes to the structure and/or the workforce mix are quantified and incorporated into the budget submissions. • Duplications in support areas such as communications, legislative affairs, budget, and personnel and/or duplications in program areas are reduced and programs are streamlined and consolidated wherever possible. • Analysis of data includes statistics such as ratio of administrative jobs (e.g., administrative officer, budget analyst, budget clerk, management analyst, personnel clerk, personnel professional, support services specialist) to the workforce, distribution of administrative jobs by organizational component and geographic location, and trends in numbers and proportions of administrative jobs. • A model organization has been developed that: —Reflects the numbers of employees needed and their appropriate skill and grade or pay band/level mix. —Identifies key leadership positions. —Includes specific recruiting and training/development activities. Compliance Indicator • The agency appropriately applies pertinent regulations and statutes to group or individual deployment-related actions as specified in the Talent Management system (Voluntary Early Retirement Authority (VERA), Voluntary Separation Incentive Payments (VSIP), Transfer of Function (TOF), etc.). The agency’s organizational structuring process demonstrates that it: VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23023 WORKFORCE PLANNING Key Elements Suggested Performance Indicators • Includes statistics regarding number of supervisors, their series and grade/pay band, geographic location, and ratio of supervisors to employees. • Obtains the mix of supervisory and non-supervisory positions to best meet customer needs. • Documents the need for redirecting supervisory positions and the planned program design and assessment for the implemented changes. • Addresses impediments to restructuring by analyzing solutions found within the current environment. • Uses a documented change management strategy. Effectiveness Indicators • Analysis of data includes statistics related to the number of supervisors, their geographic and organizational location, their series and grades/pay bands, the ratio of supervisors to employees, percent of supervisors in grades GS–12–15 or equivalent, etc. • Supervisory needs are clearly tied to the workflow process and the organizational structure resulting in a staffing plan that indicates the necessary number of supervisors by functional area. • The agency has documented the need to redirect supervisory positions, designed and implemented a program to support their redeployment, and developed an evaluation process to determine if the anticipated outcomes are being achieved. • Impediments are identified and solutions to overcome impediments within the current environment (e.g., Title V and/or other appropriate systems) are identified and documented. • Through consultation with the Office of Personnel Management (OPM), the agency makes a sound business case for any waivers, exemptions, or regulatory or legislative relief needed to overcome barriers. • The agency has a documented change management strategy, where appropriate, to overcome barriers and facilitate restructuring/culture change efforts. • The agency’s restructuring, redeployment, and reorganization decisions are substantiated with empirical evidence. • Agency records indicate that, during restructuring, redeployment, and reorganizing, operational disruption is minimized through the use of: —Effective internal and external communication plans —Retraining —Reassignment —Placement assistance —Relocation allowances —VERA and VSIP where appropriate SECTION II—Strategic Alignment System The Strategic Alignment System Human Capital Planning Workforce Planning Human Capital Best Practices and Knowledge Sharing Human Resources as Strategic Partner Results: Human Capital Best Practices and Knowledge Sharing When the key elements of the critical success factor Human Capital Best Practices and Knowledge Sharing are Effectively implemented, agencies will realize the following results: Effectiveness Result • The agency looks beyond its own experience and resources when developing human capital strategies and works with others to share best practices. Compliance Result • As provided in 5 U.S.C. 1303(c), the agency holds managers and human resources officers accountable for efficient and effective human resources management in support of the agency’s mission, in accordance with merit system principles. The following page provides key elements and suggested performance indicators for this critical success factor. HUMAN CAPITAL BEST PRACTICES AND KNOWLEDGE SHARING Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES The agency has a human capital best practices and knowledge sharing system that: • Benchmarks best practices and lessons learned by other Government agencies and private sector organizations. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00013 Fmt 4701 Effectiveness Indicator • The agency uses resources (e.g., Web sites, research findings, special studies, program guidance) from sources such as: —OPM. —Office of Management and Budget (OMB). —Government Accountability Office (GAO.) —Society for Human Resource Management (SHRM). —International Public Management Association for Human Resources (IPMA–HR). Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23024 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations HUMAN CAPITAL BEST PRACTICES AND KNOWLEDGE SHARING Key Elements Suggested Performance Indicators • Establishes a method or process for collaborating with other agencies regarding effective human capital strategies. • Provides valuable information to human capital planners on effective human capital strategies that is used to improve human capital planning. Compliance Indicator • The agency’s CHCO identifies best practices and benchmarking studies in accordance with the CHCO Act (5 U.S.C. 1402). Effectiveness Indicators • The agency uses Governmentwide benchmarks (e.g., staffing timeliness, Central Personnel Data Files/FedScope, Federal Human Capital Survey (FHCS) responses) in setting human capital strategic goals. • The agency participates in human capital managerial/professional employee groups (e.g., the Chief Human Capital Officers Council, the Small Agency Council, Federal Executive Boards, and National Academy of Public Administration). Effectiveness Indicators • Agency representatives participate in Governmentwide collaborative efforts and/or managerial/professional/employee organizations to share best practices and leverage lessons learned. SECTION II—Strategic Alignment System The Strategic Alignment System Human Capital Planning Workforce Planning Human Capital Best Practices and Knowledge Sharing Human Resources as Strategic Partner Results: Human Resources as Strategic Partner. When the key elements of the critical success factor Human Resources as Strategic Partner are effectively implemented, agencies will realize the following results: Effectiveness Results • HR professionals and key stakeholders are involved in the agency strategic and workforce planning efforts. • The HR function is adequately staffed and prepared, in competencies and resources, to proactively partner and consult with line managers. • The HR staff reaches out to other organizational functions and components through facilitation, coordination, and counseling to provide integrated mission support. Compliance Result • As provided by 5 U.S.C. 1303(c), the agency holds managers and human resources officers accountable for efficient and effective human resources management in support of the agency’s mission, in accordance with merit system principles. The following pages provide key elements and suggested performance indicators for this critical success factor. HUMAN RESOURCES AS STRATEGIC PARTNER Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES The agency’s human resources system: • Is proactively involved in the agency strategic and workforce planning efforts. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00014 Fmt 4701 Effectiveness Indicators • The HR staff consults with managers and supervisors across the agency on various management issues. • The HR staff provides advice and guidance to managers on human capital strategies tailored to meet organizational needs. • The HR staff assesses and anticipates needs of customers (i.e., managers, supervisors, employees, and applicants), develops functions and services to support and fulfill those needs, ensures quality of services, and communicates program requirements to customers. • The HR staff involves line functions in program review and/or development and likewise is invited by line functions to organizational meetings and retreats to identify and advise on HR issues. • FHCS and/or other surveys or interviews indicate that HR staff members are viewed as internal consultants and that human capital strategies support the broader agency mission. • Policies describe the process and procedures for communicating customer issues, resolving customer dissatisfaction, and handling customer comments. • The HR staff measures and communicates the value of products and services it provides through feedback mechanisms. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23025 HUMAN RESOURCES AS STRATEGIC PARTNER Key Elements Suggested Performance Indicators • Includes a staff that has the skills and competencies required for partnering with executives and managers in strategic planning. • Has a human resource information system with the capacity to provide relevant and reliable data necessary for making factbased human capital decisions. Compliance Indicator • As provided by 5 U.S.C. 1303(c), the agency holds managers and human resources officers accountable for efficient and effective human resources management in support of the agency’s mission, in accordance with merit system principles. Effectiveness Indicators • The agency conducts HR staff development needs-assessment studies to identify competency gaps. • The agency has strategies (e.g., automation, competitive sourcing, recruitment, mentoring, training) in place to close competency gaps in HR staff and to provide managers the advice and tools they need to operate. • HR staff conducts program reviews, customer surveys, and regular assessments of information systems and other support functions to identify areas for continuing improvement. • Analysis of staffing levels includes considerations such as HR servicing ratio, HR staff distribution by series/grade/pay band, HR staff average grade/pay band, age, length of service, training completed, retirement eligibility, HR supervisory ratio, and ratio of personnel actions to personnel staff. Effectiveness Indicator • HR staff partners with managers to: —Conduct workforce studies and analyze results in collaboration with managers; the data is used for decision making —Use all available functions and features of the agency’s current system to facilitate effective agency workforce management (e.g., process and report on personnel transactions, query data) and provide routine reports to managers. —Participate, as appropriate (i.e., depending on level in organization), in agency and/or OPM initiatives to support the OPM Enterprise Human Resources Integration initiative, which will support HR management across Government. —Participate, as appropriate, in other e-government initiatives such as e-payroll and RSM. —The agency uses an HR information system that promotes employee self-service and manager access to a broad range of human capital information and indicators. SECTION III—Leadership and Knowledge Management System The Leadership and Knowledge Management System Leadership Succession Management Change Management Integrity and Inspiring Employee Commitment Continuous Learning Knowledge Management The Leadership and Knowledge Management System. Definition ........................... Standard ............................ sroberts on PROD1PC70 with RULES Critical Success Factors VerDate Aug<31>2005 This section contains information specific to the Leadership and Knowledge Management system, which focuses on identifying and addressing agency leadership competencies so that continuity of leadership is ensured, knowledge is shared across the organization, and an environment of continuous learning is present. A system that ensures continuity of leadership by identifying and addressing potential gaps in effective leadership and implements and maintains programs that capture organizational knowledge and promote learning. Agency leaders and managers effectively manage people, ensure continuity of leadership, and sustain a learning environment that drives continuous improvement in performance, and provide a means to share critical knowledge across the organization. Knowledge management must be supported by an appropriate investment in training and technology. The Leadership and Knowledge Management system is comprised of five critical success factors: • Leadership Succession Management. The organization identifies leadership competencies and establishes objectives and strategies to ensure there is a continuous pipeline of available leadership within the organization. • Change Management: The agency has in place leaders who understand what it takes to effectively bring about changes that achieve significant and sustained improvements in performance. • Integrity and Inspiring Employee Commitment: Leaders maintain high standards of honesty and ethics that serve as a model for the whole workforce. Leaders promote teamwork and communicate the organization’s shared vision to all levels of the organization and seek feedback from employees. Employees respond by maintaining high standards of honesty and ethics. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23026 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Applicable Merit System Principles. Required Outcome Metrics. • Continuous Learning: Leaders foster a learning culture that provides opportunities for continuous development and encourages employees to participate. Leaders invest in education, training, and other developmental opportunities to help themselves and their employees build mission-critical competencies. • Knowledge Management: The organization systematically provides resources, programs, and tools for knowledge sharing across the organization in support of its mission accomplishment. Together, these critical success factors ensure: • A constant flow of leaders who can properly direct an agency’s efforts to achieve results. • A workforce with the competencies required to achieve the agency’s mission. • That the workforce is motivated to use its competencies in service of the agency’s mission. The following merit system principle is especially relevant to the Leadership and Knowledge Management system: • Employees should be provided effective education and training in cases in which such education and training would result in better organizational and individual performance. (5 U.S.C. 2301(b)(7)). The following are required outcome metrics for the Leadership and Knowledge Management system. Required Metric Description Purpose Organization Metric: Competency Gaps Closed for Management and Leadership. Difference between competencies needed and competencies possessed by managers and leaders. Employee Perspective Metric: Questions from Annual Employee Survey about Satisfaction with Leadership. Merit System Compliance Metric: MeritBased Execution of the Leadership and Knowledge Management System. Items from Annual Employee Survey .............. To determine how the agency should target its recruitment, retention, and development efforts to bring the competencies of its managers and leaders into alignment with the agency’s current and future needs. To determine the extent to which employees hold their leadership in high regard, both overall and on specific facets of leadership. To determine that decisions, policies, processes, and practices executed under the Leadership and Knowledge Management system comply with the merit system principles and related laws, rules, and regulations. Suggested Metrics An assessment of compliance with merit system principles and related laws, rules, and regulations governing the Leadership and Knowledge Management system. In addition to the required outcome metrics, the following metrics associated with the Leadership and Knowledge Management system are suggested. Suggested Metric Description Purpose Bench Strength ................................................... The relationship between the number of employees in the leadership pipeline who demonstrate the required level of performance on leadership competencies and the number of critical leadership positions. Average time from date vacancy closes to date offer is extended (expressed in working days). Percentage of critical leadership positions filled from internal sources, other Government sources (including military), and nonGovernment sources. Items from Annual Employee Survey .............. To ensure that enough internal organizational capacity exists to mitigate leadership attrition and maintain progress toward mission attainment. Time To Hire Critical Leadership Positions ........ Succession Sources ........................................... Culture of Workforce Improvement .................... SECTION III—Leadership and Knowledge Management System To determine the efficiency of a critical phase of the Federal hiring process. To determine the extent to which various succession planning efforts (including internal career development programs) result in the selection of critical leaders. To determine the extent to which employees believe their leaders have developed a culture that values personal growth. The Leadership and Knowledge Management System Leadership Succession Management Change Management Integrity and Inspiring Employee Commitment sroberts on PROD1PC70 with RULES Continuous Learning Knowledge Management VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Results: Leadership Succession Management. 23027 When the key elements of the critical success factor Leadership Succession Management are effectively implemented, agencies will realize the following results: Effectiveness Result • The agency has taken action to ensure continuity of leadership through succession planning and executive development programs that results in a diverse pool of qualified internal, other Government, and non-Government sources for all mission-critical leadership positions. Compliance Result • The agency has established a comprehensive management succession program that provides training to employees to develop them as managers for the agency as prescribed by the Federal Workforce Flexibility Act of 2004. The following pages provide key elements and suggested performance indicators for this critical success factor. LEADERSHIP SUCCESSION MANAGEMENT Key Elements Suggested Performance Indicators The agency has a leadership succession management system that: • Is based on accurate data on the current workforce. • Is based on accurate projections of attrition at all leadership levels. • Identifies a diverse pool of high-potentialleaders through a fair and accurate process. • Includes a formal process to address management potential. sroberts on PROD1PC70 with RULES • Invests in an SES candidate development program linked to the ECQs. • Provides mentoring to new and prospective leaders. • Invests in first-line supervisors to ensure they have the competencies to direct the day-to-day work of the agency. • Includes an ‘‘employee development’’ performance indicator for managers and senior leaders. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00017 Fmt 4701 Effectiveness Indicators • The agency’s leadership development strategy and policy, which reflect its mission and culture, are developed, documented, and implemented, based on the agency’s workforce analysis and succession planning process. • The agency performs an ongoing workforce analysis to identify current and future workforce and related leadership needs. The analysis includes information concerning: —Workforce size —Workforce deployment by location, function, and occupation —Leadership competencies needed for mission accomplishment —Trends in hiring, promotion, reassignment, and attrition in leadership positions —Trends in competency needs (e.g., surpluses and gaps in specific skills). —A forecast of future leadership requirements and changes due to retirement and other losses —Inclusion of all demographic groups. • A succession planning process based on workforce analysis is in place that considers current and future leadership needs to meet strategic and performance plans. The plan includes: —Specific goals and identification of leadership positions needed —Target positions and key leadership competencies (i.e., a leadership competency model based on the Office of Personnel Management (OPM) executive core qualifications (ECQs) plus appropriate agencyspecific competencies) —Potential sources of talent (e.g., internal, other Government, nonGovernment) that best support the agency’s mission and culture —Recruitment or development strategies needed to ensure availability of well qualified staff to fill leadership positions at all levels including identification of high-potential employees and establishment of a formal Senior Executive Service (SES) candidate development program, other merit-based methods of developing future executives, and/or other appropriate development programs. • The agency conducts regular assessments of leadership policies and performance of its leaders to ensure that succession planning goals (e.g., recruitment and retention of high-performing leaders) are being met. Effectiveness Indicators • The agency leadership has demonstrated its commitment to leadership development through dedication of resources (e.g., appropriate percentage of salaries set aside specifically for leadership development) to develop current and future leaders. • Trained mentors are available to employees participating in development programs. Compliance Indicator • As prescribed by 5 CFR 412, the agency has established a system to provide: —The competencies needed by supervisors, managers, and executives to perform their current functions at the mastery level of proficiency —Learning through development and training in the context of succession planning and corporate perspective to prepare individuals for advancement. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23028 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations LEADERSHIP SUCCESSION MANAGEMENT Key Elements Suggested Performance Indicators • Invests in the continuous development of senior leadership Effectiveness Indicators • Leadership skill training and development programs address the needs of each level of management (e.g., supervisors, managers, executives, and potential leaders). These programs have been communicated to all levels of management and potential leaders and are reflected in Individual Development Plans (IDPs) for this group. • Training and development needs are identified in IDPs by obtaining input from multiple sources (e.g., customers, peers, subordinates, supervisors). IDPs are monitored and include training and experiential development. Identified needs are generally being met. • The agency’s annual training needs assessment reflects needs identified in IDPs. Training is targeted to meet the most commonly identified needs. • Employee survey results, including the Federal Human Capital Survey, indicate that employees believe that leadership development receives appropriate emphasis and dedicated resources and results in effective leaders who are a source of motivation. • Agency leadership development programs are analyzed against agency measures of success to determine usage and impact including statistical data on average grade or pay band/age/length of service, diversity, attrition, and retirement eligibility. The analysis is documented and used by senior management to make decisions about leadership development issues and resource allocation. Compliance Indicator • The agency has a program to provide training to managers on actions, options, and strategies to use in (1) communicating with employees whose performance is unacceptable, and (2) mentoring employees and improving employee performance and productivity as prescribed by the Federal Workforce Flexibility Act. SECTION III—Leadership and Knowledge Management System The Leadership and Knowledge Management System Leadership Succession Management Change Management Integrity and Inspiring Employee Commitment Continuous Learning Knowledge Management Results: Change Management. When the key elements of the critical success factor Change Management are effectively implemented, agencies will realize the following result: Effectiveness Result • The agency has in place leaders who understand what it takes to effectively bring about changes that achieve significant and sustained improvements in performance. The following page provides key elements and suggested performance indicators for this critical success factor. CHANGE MANAGEMENT sroberts on PROD1PC70 with RULES Key Elements Suggested Performance Indicators The agency has a change management system in which leaders: • Provide adequate resources to support the change. • Take visible actions to support new ways of working. • Understand there is a need for a change process and facilitate the change management process by monitoring and addressing problems in the transition process. • Hold people accountable for performance results and meeting their commitments to the change process. • Focus on performance and progress against change milestones. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00018 Fmt 4701 Effectiveness Indicators • Annual performance plans, budgets, and performance reports document plans for and progress toward change goals. • Individual performance plans rate leaders and managers on their implementation of change initiatives. • Newsletters, intranet, and other agency media show efforts to share a vision for change. • The agency has a strategy and plan for communication of change. • The Federal Human Capital Survey (FHCS) and/or other climate surveys are conducted and analyzed and relevant results lead to change in strategy. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations SECTION III—Leadership and Knowledge Management System 23029 The Leadership and Knowledge Management System Leadership Succession Management Change Management Integrity and Inspiring Employee Commitment Continuous Learning Knowledge Management Results: Integrity and Inspiring Employee Commitment. When the key elements of the critical success factor Integrity and Inspiring Employee Commitment are effectively implemented, agencies will realize the following results: Effectiveness Results • Leaders maintain high standards of honesty and ethics that serve as a model for the whole workforce; employees respond by maintaining high standards of honesty and ethics. • Leaders promote teamwork and communicate the organization’s shared vision to all levels of the organization, and seek feedback from employees. Compliance Result • The agency complies with the Ethics in Government Act of 1978 and other statutory and governing guidance compiled by the Office of Government Ethics to cover conflict of interest and ethics. The agency also complies with its own supplemental standards of conduct. The following pages provide key elements and suggested performance indicators for this critical success factor. INTEGRITY AND INSPIRING EMPLOYEE COMMITMENT Key Elements Suggested Performance Indicators Employee integrity and commitment is in evidence when: • Senior leaders foster an environment of open communication (top-down and bottom-up communication) throughout the agency. • Employees view the agency as a desirable place to work. • Teamwork is valued and rewarded in the agency. • Agency policies reinforce the Office of Government Ethics Standards of Ethical Conduct for Executive Branch Employees and, at a minimum, meet the Office’s requirements for ethics training. Ethical behavior and standards are included in competencies for all employees. Programs for identifying violations exist and leaders take appropriate disciplinary actions. sroberts on PROD1PC70 with RULES Employee integrity and commitment is in evidence when: Effectiveness Indicators • The FHCS and/or other employee climate sureys reflect a positive, committed work environment. • Human resources staff, in partnership with management, seeks anhd considers continuous feedback from employees (e.g., focus groups) regarding workplace environment and responds to feedback with appropriate action. • Agency has been cited in applicant feedback and media stories as an employer of choice. • Agency awards policy promotes teamwork through the use of group awards and communication of group successes. • Agency analyzes trends across management indicators such as per capita overtime, worker’s compensation charges, sick leave usage, forfeiture of annual leave, turnover, removal of probationers, disciplinary actions, adverse actions (5 CFR part 752), and exit interviews. • Senior leaders sign statements of conduct or agency-wide declarations. • The FHCS and/or other employee surveys report that an ethical climate exists, that employees are aware of their whistleblower rights and other personnel protections, and they are likely to report wrongdoing. • Agency has a whistleblower support and Inspector General hotline program; activities are recorded and analyzed. • Communication strategies include a variety of media to convey senior leadership’s message to the workforce. • Agency has a positive record in program reviews and congressional reviews. Compliance Indicators • Agency is certified by the Office of Special Counsel to be in compliance with the 5 U.S.C 2302(c) requirement that the workforce be informed of whistleblower rights and other personnel protections. • Provides current and future leaders with an annual course on Government ethics. SECTION III—Leadership and Knowledge Management System The Leadership and Knowledge Management System Leadership Succession Management Change Management VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23030 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Integrity and Inspiring Employee Commitment Continuous Learning Knowledge Management Results: Continuous Learning. When the key elements of the critical success factor Continuous Learning are effectively implemented, agencies will realize the following results: Effectiveness Results • The agency has achieved a culture of continuous learning through investments in education, training, and other developmental opportunities that help employees build mission-critical competencies. • Training and development initiatives and strategies support mission-critical competencies, are linked to the agency mission, and have demonstrated a positive impact on agency mission performance. • The agency uses appropriate learning technology and innovative learning strategies to meet the training and development needs of the workforce. • The agency has developed and implemented a process to evaluate its training and development program impact in terms of learning, performance, work environment, and contribution to mission accomplishment. The results of the evaluation reflect a positive contribution to mission accomplishment. Compliance Results • As prescribed by the CHCO Act of 2002 (5 U.S.C. 1402), the agency CHCO has developed and advocates a culture of continuous learning to attract and retain employees with superior abilities and sets the workforce development strategy. • The agency’s training programs comply with the provisions of 5 U.S.C. 4101 and 5 CFR 410 and 412. • As provided in the CHCO Act of 2002 (5 U.S.C. 1304), the agency: —Sustains a culture that cultivates and develops a high-performing workforce. —Develops and implements a knowledge management strategy supported by appropriate investment in training and technology. The following pages provide key elements and suggested performance indicators for this critical success factor. CONTINUOUS LEARNING Key Elements Suggested Performance Indicators The agency has a continuous learning system that: • Is based on accurate information from IDPs and an annual organizational needs analysis. • Focuses on mission-critical occupations. sroberts on PROD1PC70 with RULES • Uses a wide variety of methods including classroom training, distance learning, mentoring, and experiential learning. • Encourages attendance at conferences, workshops, and seminars. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00020 Fmt 4701 Effectiveness Indicators • A training needs assessment is conducted that is linked to strategic and mission-critical competencies. Based on assessment results, employees are trained in specific, job-related skills and knowledge. • Training programs are designed and implemented which build competencies that are important to strategic goals and objectives and the agency’s performance plan execution. —Competency-based career development programs, including various development activities and learning opportunities, have been implemented and documented and are being used by employees. —Competency models have been established which document standards for competency levels (e.g., entry, journey, expert). • IDPs, or a similar process, are established for employees in missioncritical occupations. IDP completion is tracked and review indicates that IDPs are being completed in most cases. • Performance evaluations reflect consideration of employee developmental training and developmental needs. Review indicates that action is usually taken to follow through on meeting these needs. • Agency policy and practice reflect that responsibility for employee development is shared between employees and managers. Compliance Indicators • In accordance with 5 CFR 410, the agency assesses training needs annually. • The agency closes skill gaps in mission-critical occupations in accordance with the CHCO Act (5 U.S.C. 1304). Effectiveness Indicators • The agency conducts an analysis to select and implement the best array of learning strategies (e.g., rotational assignment, shadowing, mentoring) for the targeted audience(s) to provide them with missioncritical competencies. • Learning technology and other alternative learning strategies are reflected in the agency’s strategic human capital planning documents and training plans. • Where appropriate, the agency has implemented e-learning activities such as eGov Online Learning Center. • The agency has invested in the infrastructure necessary to leverage learning opportunities that include the application of reasonable accommodation, where justified by return-on-investment analysis. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23031 CONTINUOUS LEARNING Key Elements Suggested Performance Indicators • Leaders are responsible for leadership development and emphasize the value of learning, foster learning opportunities for employees, and demonstrate their support through personal involvement and resource allocation decisions. For example, they: —Set aside a percentage of salary dollars for employee training and development. —Provide tuition assistance for formal education. —Establish long-term technical development programs. —Fund employee certification requirements as authorized. • Policies, practices, and resource allocation decisions demonstrate agency support for continuous learning. Effectiveness Indicators • Employee survey results, including the Federal Human Capital Survey, indicate that employees believe they have appropriate opportunities to develop skills through training and experience. • Analysis of education, training, and development opportunities shows no disparate treatment of segments of the workforce (i.e., training is appropriately aligned with workforce planning goals, priorities are based on available funding, and opportunities are provided equitably across the employee population). • A training evaluation system has been implemented which measures the impact of training at the following levels: —Did learning occur? —Was learning applicable to job performance or other behavior that is important to the organization and to results? —Did the employee apply the learning or behavior to his/her job or work environment? —If the employee applied the learning, did it have the expected impact on performance or other job-related behavior? • An analysis has been conducted of the evaluation results and this information is used to make decisions about investments in employee training and development. Generally, the evaluation indicates that training and development investments are making a positive impact on the organization’s performance and/or work environment and meet the training goals and expectations established between supervisors and employees prior to participation in training. Compliance Indicators • As prescribed by the Federal Workforce Flexibility Act, the agency has evaluated each training program or plan established, operated, or maintained with respect to accomplishing specific performance plans and strategic goals in performing the agency mission; and the agency has modified such programs or plans to accomplish goals. • As established by 5 CFR 410.601, the agency evaluates training to determine how well it meets short- and long-range program needs by occupations, organizations, or other appropriate groups. • Is properly funded, monitored, and evaluated. • Is administered fairly. SECTION III—Leadership and Knowledge Management System The Leadership and Knowledge Management System Leadership Succession Management Change Management Integrity and Inspiring Employee Commitment Continuous Learning Knowledge Management sroberts on PROD1PC70 with RULES Results: Knowledge Management. VerDate Aug<31>2005 When the key elements of the critical success factor Knowledge Management are effectively implemented, agencies will realize the following results: Effectiveness Results • The agency has developed and implemented a knowledge management process that provides a means to share critical knowledge across the organization. Leadership also encourages and rewards knowledge sharing. • Information technology tools that facilitate gathering and sharing knowledge within and outside the agency are available to employees to improve individual and organizational performance. Compliance Result 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23032 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations • As prescribed in the Chief Human Capital Officers (CHCO) Act of 2002 (5 U.S.C. 1304), the agency has developed and implemented a knowledge management strategy supported by appropriate investments in training and technology. The following page provides key elements and suggested performance indicators for this critical success factor. KNOWLEDGE MANAGEMENT Key Elements Suggested Performance Indicators The agency has a knowledge management system that: • Captures, indexes, processes, and easily retrieves data that may be composed of text, audio, video, and Web-based elements • Facilitates the sharing of knowledge and best practices throughout the agency • Maintains active participation in communities of practice outside the agency • Establishes communities of practice for sharing key knowledge at all managerial and leadership levels. Effectiveness Indicators • A knowledge management process has been developed, documented, and systematically shared with employees. Training and/or orientation is provided to the workforce. An infrastructure which facilitates knowledge capture, indexing, processing, and retrieval is established to support knowledge sharing through the use of the intranet, shared networks, and communities of practice and/or best practices. • The agency has analyzed the use of the knowledge-sharing process and established the utility and usage of the process and tools. —Knowledge sharing has been established as an organizational value through management communications and recognition of employees who exemplify the practice of knowledge sharing. —Requirements and specifications for tools support work performed by employees. • The agency has begun codifying knowledge through the use of the intranet, shared networks, and communities of practice and/or best practices. Compliance Indicator • As prescribed in the CHCO Act (5 U.S.C. 1304), the agency has developed and implemented a knowledge management strategy supported by appropriate investments in training and technology. SECTION IV—Results-Oriented Performance Culture System The Results-Oriented Performance Culture System Communication Performance Appraisal Awards Pay for Performance Diversity Management Labor/Management Relations The Results-Oriented Performance Culture System. Definition ........................... Standard ............................ sroberts on PROD1PC70 with RULES Critical Success Factors VerDate Aug<31>2005 This section contains information specific to the Results-Oriented Performance Culture system, which focuses on having a diverse, results-oriented, high-performing workforce, as well as a performance management system that effectively plans, monitors, develops, rates, and rewards employee performance. A system that promotes a diverse, high-performing workforce by implementing and maintaining effective performance management systems and awards programs. The agency has a diverse, results-oriented, high-performing workforce and a performance management system that differentiates between high and low levels of performance and links individual/team/unit performance to organizational goals and desired results effectively. The Results-Oriented Performance Culture system is comprised of the following critical success factors that work together to create a diverse, results-oriented, high performance workforce: • Communication: The agency has a process for sharing information and ideas about the organization with all employees. This vital process includes eliciting employee feedback and involvement so that all employees play an appropriate role in planning and executing the mission. • Performance Appraisal: The agency has a process under which performance is reviewed and evaluated. • Awards: The organization takes actions to recognize and reward individual or team achievement that contributes to meeting organizational goals or improving the efficiency, effectiveness, and economy of the Government. Such awards include, but are not limited to: employee incentives which are based on predetermined criteria, rating-based awards, or awards based on a special act or service. • Pay for Performance: The agency uses pay-for-performance systems, where authorized by law and regulation, to link salary levels and adjustments to an individual’s overall performance and contribution to the agency’s mission. Employees receive base salary adjustments within their assigned bands. • Diversity Management: The agency maintains an environment characterized by inclusiveness of individual differences and responsiveness to the needs of diverse groups of employees. • Labor/Management Relations: The organization promotes cooperation among employees, unions, and managers. This cooperation enhances effectiveness and efficiency, cuts down the number of employee-related disputes, and improves working conditions, all of which contribute to improved performance and results. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Applicable Merit System Principles. Required Outcome Metrics. 23033 The following merit system principles are especially relevant to the Results-Oriented Performance Culture system (5 U.S.C. 2301): • All employees and applicants for employment should receive fair and equitable treatment in all aspects of personnel management without regard to political affiliation, race, color, religion, national origin, sex, marital status, age, or handicapping condition, and with proper regard for their privacy and constitutional rights. (5 U.S.C. 2301(b)(2)) • Equal pay should be provided for work of equal value, with appropriate consideration of both national and local rates paid by employers in the private sector, and appropriate incentives and recognition should be provided for excellence in performance. (5 U.S.C. 2301(b)(3)) • Employees should be retained on the basis of adequacy of their performance, inadequate performance should be corrected, and employees should be separated who cannot or will not improve their performance to meet required standards. (5 U.S.C. 2301(b)(6)) The following are required outcome metrics for the Results-Oriented Performance Culture system. Required Metric Description Purpose Organization Metric: SES Performance/Organizational Performance Relationship as Linked to Mission. Relationship between SES performance ratings and accomplishment of the agency’s strategic goals. Organization Metric: Workforce Performance Appraisals Aligned to Mission, Goals, and Outcomes. Degree of linkage between employees’ performance appraisal plans and agency mission, goals, and outcomes. Employee Perspective Metric: Questions from Annual Employee Survey about Performance Culture. Items from the Annual Employee Survey ........ Merit System Compliance Metric: MeritBased Execution of the Performance Culture System. An assessment of compliance with merit system principles and related laws, rules, and regulations governing the Performance Culture system. To determine the extent to which SES appraisals and awards are appropriately based on achievement of organizational results. To determine whether all employees have performance appraisal plans that effectively link to the agency’s mission, goals, and outcomes. To determine the extent to which employees believe their organizational culture promotes improvement in processes, products and services, and organizational outcomes. To determine that decisions, policies, processes, and practices executed under the Performance Culture system comply with the merit system principles and related laws, rules, and regulations. Suggested Metrics ........... In addition to the required outcome metrics, the following metrics associated with the Results-Oriented Performance Culture system are suggested. Suggested Metric Description Purpose Performance Ratings .......................................... To track the extent to which agencies make meaningful distinctions among employees’ performance. Respect for Diversity .......................................... Percent of employees achieving each rating level used in an agency’s performance appraisal system in relation to organizational and individual performance. Relationship of the distribution of performance ratings to awards. Items from Annual Employee Survey .............. Employee Grievances and Complaints .............. Review of formal grievances and complaints .. Awards ................................................................ SECTION IV—Results-Oriented Performance Culture System To track the extent to which agency monetary awards reflect employee performance. To determine the extent to which employees believe that their organization is respectful of and welcoming to the great diversity that makes up the Federal workforce. To determine whether the underlying facts of complaints and grievances indicate agency mistake or wrong doing. The Results-Oriented Performance Culture System Communication Performance Appraisal Awards Pay for Performance sroberts on PROD1PC70 with RULES Diversity Management Labor/Management Relations Results: Communication VerDate Aug<31>2005 When the key elements of the critical success factor Communication are effectively implemented, agencies will realize the following results: 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23034 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Effectiveness Results • The agency’s strategic plan has been shared with and/or is accessible to all agency employees. Employees are knowledgeable about the agency’s strategic plan and their role in supporting the agency’s mission. • Employees have a direct line of sight between performance elements (performance expectations) and award systems and the agency mission. These links have been communicated to and are understood by employees, enabling them to focus their work effort on those activities that are most important to mission accomplishment. All employees are held accountable for achieving results that support the agency’s strategic plan goals and objectives. The following page provides key elements and suggested performance indicators for this critical success factor. COMMUNICATION Key Elements Suggested Performance Indicators The agency has a continuous learning system that: • Ensures that employees understand the agency’s mission, goals, and objectives and what employees’ roles are in achieving the mission, goals, and objectives. • Elicits employee feedback and involvement in decision-making and planning processes. Effectiveness Indicators • The agency has developed and implemented a communication strategy to share the vision, strategic plan, and related documents (e.g., Strategic Human Capital Plan) with all employees. • A variety of media are used to communicate the strategic plan and related documents to all levels of the workforce. • Surveys and/or interview data/summaries indicate that employees are aware of the strategic plan goals and understand how they relate to the agency’s mission and their duties. Effectiveness Indicators • Communication up and down the organization is effective. Documentation shows innovation and problem solving between employees and management. • Employees are involved in the decision-making process, fostering their support for organizational decisions. Surveys and/or interviews indicate that employees are satisfied with their level of participation in the organizational decision-making process and feel empowered to share their ideas and/or concerns with supervisors and other management officials. SECTION IV—Results-Oriented Performance Culture System The Results-Oriented Performance Culture System Communication Performance Appraisal Awards Pay for Performance Diversity Management Labor/Management Relations sroberts on PROD1PC70 with RULES Results: Performance Appraisal. VerDate Aug<31>2005 When the key elements of the critical success factor Performance Appraisal are effectively implemented, agencies will realize the following results: Effectiveness Results • Employees have a direct line of sight between performance elements (performance expectations) and recognition systems and the agency mission. These links have been communicated to and are understood by employees, enabling them to focus their work effort on those activities that are most important to mission accomplishment. All employees are held accountable for achieving results that support the agency’s strategic plan goals and objectives. • The agency’s performance management system differentiates between high and low levels of performance. Agencies with a high percentage of outstanding ratings also demonstrate a high level of achievement of their strategic goals and objectives and/or program accomplishments as reflected in the agency annual performance plan. • Supervisors and managers use performance results to offer feedback, identify developmental needs to help improve employee performance and address instances of poor performance. Compliance Results • The agency has an OPM-approved performance appraisal system(s) in place and administers the system(s) in accordance with 5 U.S.C. 43; or other congressionally-mandated enabling legislation. • The agency CHCO carries out workforce development provisions of the CHCO Act of 2002 (5 U.S.C. 1402). The following pages provide key elements and suggested performance indicators for this critical success factor. 02:53 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23035 PERFORMANCE APPRAISAL Key Elements Suggested Performance Indicators The agency has a continuous learning system that: • Aligns employee performance plans with organizational goals. • Focuses employees on achieving results. • Requires employee performance plans to include clear performance elements (expectations) with measurable standards of performance. The agency has a performance appraisal system that: sroberts on PROD1PC70 with RULES • Makes meaningful distinctions in levels of performance. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00025 Fmt 4701 Effectiveness Indicators • Work units have documented performance goals and objectives that are linked to the agency strategic plan and performance plan. • Performance elements (expectations) for employees are: —Aligned with organizational goals. —Clear, specific, and understandable. —Reasonable and attainable. —Measurable, observable, or verifiable, and results oriented. —Communicated in a timely fashion. —Key in fostering continual improvement in productivity. Compliance Indicators • Agency managers plan and communicate performance elements (expectations) and standards that are linked with strategic planning initiatives in accordance with the Executive Performance and Accountability Interim Rule (5 CFR 430 and 1330) or applicable agency directives. • In accordance with 5 CFR 430 subparts b and c, performance plans must: —Be issued at the beginning of the appraisal period. —Include at least one critical element. —For SES, must include balanced measures of business results, employee, and customer perspectives. • Senior employee ratings (as well as subordinate employees’ expectations and ratings for those with supervisory responsibilities) appropriately reflect the employee’s performance elements (performance expectations), relevant program performance measures, and any other relevant factors in accordance with the Executive Performance and Accountability Interim Rule (5 CFR 430 or applicable agency directives and 1330). • As stated in 5 CFR 430 or applicable agency directives.204, the agency has established employee performance plans, including, but not limited to, critical elements and performance standards. Effectiveness Indicators • The agency performance appraisal systems for other than senior executive and senior professional employees provides for meaningful distinctions based on relative performance. These systems include multiple levels against which to appraise employees. The rating levels identified are appropriate to the employees covered by the system (e.g., four or five levels for systems certified by the Office of Personnel Management (OPM) covering Senior Executive Service (SES) employees). • Agency performance appraisal systems for other than senior executive and senior professional employees provide for adequately distinguishing between levels of performance (i.e., include multiple performance levels against which to appraise employees, with at least one summary rating level above ‘‘Fully Successful’’). A review of performance plans indicates that performance standards are clear and understandable and are an effective tool for distinguishing between levels of performance. • A high number of outstanding performance ratings or large cash awards is supported by achievement of strategic goals and objectives and/or program goals as reflected in the agency’s annual performance report. Compliance Indicators • Performance information is used to adjust pay or reward, reassign, develop, and remove senior executives or make other personnel decisions in accordance with 5 CFR 430.304; and for all other employees in accordance with 5 CFR 430 or applicable agency directives. • To satisfy the requirements of the Executive Performance and Accountability Interim Rule (5 CFR 430 and 1330 or applicable agency directives), the agency’s certified performance appraisal system for senior employees provides for performance differentiation so that its annual ratings, pay adjustments, and awards result in meaningful distinctions based on relative performance. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23036 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations PERFORMANCE APPRAISAL Key Elements Suggested Performance Indicators • Provides a process for dealing with poor performance. • Involves employees in the development of their performance plans. • Requires that employees receive feedback on their performance. sroberts on PROD1PC70 with RULES • Provides for training to executives, managers, and supervisors to ensure they have the knowledge, skills, and abilities to effectively manage performance. • Holds executives, managers, and supervisors accountable in their performance plans for the rigorous appraisal of their subordinates. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00026 Fmt 4701 Effectiveness Indicators • Policies and procedures, including delegation of authority, for addressing poor performance have been developed and communicated to supervisors. • Analysis is performed to identify the cause of any organizational or individual performance shortfalls, and appropriate performance improvement strategies are identified and implemented. Compliance Indicators Effectiveness Indicator • The agency performance appraisal system encourages employee participation in establishing performance plans. Compliance Indicators • Employees are covered by recorded performance plans, which are communicated to employees at the beginning of each appraisal period. Plans include critical elements and performance standards, in accordance with 5 CFR 430 or applicable agency directives. • Employee performance is monitored by the supervisor and discussed with the employee on an ongoing basis during the designated appraisal period, with one or more progress reviews conducted and documented, in accordance with 5 CFR 430 or applicable agency directives. • Employees are given ratings of record at the end of each appraisal period and/or at other appropriate times during the appraisal period in accordance with 5 CFR 430 or applicable agency directives. • The agency encourages employee participation in establishing performance plans as stated in 5 CFR 430.206 or applicable agency directives. Effectiveness Indicators • Performance elements (performance expectations) for senior executives, managers, and supervisors are: —Aligned with organizational goals. —Clear, specific, and understandable. —Reasonable and attainable. —Measurable, observable, or verifiable, and results oriented. —Balanced between expected results and other indicators such as leadership behaviors and employee and stakeholder feedback. —Communicated in a timely fashion. —Key in fostering continual improvement in productivity. • All supervisors, managers, and executives receive training on performance management and coaching/feedback techniques. • Sources of data (e.g., Federal Human Capital Survey, upward feedback, multi-rater assessment) indicate that supervisors, managers, and executives demonstrate effective performance management and coaching/feedback skills. • Reviews of performance plans for all levels of the agency indicate that supervisors, managers, and executives are held accountable for the performance management of their subordinates. Compliance Indicators • The agency has established and implemented a specific training program for managers in accordance with the Federal Workforce Flexibility Act that provides training on actions, options, and strategies a manager may use in: —Communicating with employees whose performance is unacceptable. —Mentoring employees and improving employee performance and productivity. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23037 PERFORMANCE APPRAISAL Key Elements Suggested Performance Indicators • Establishes a process for periodically evaluating the effectiveness of the appraisal system so that the agency can use the evaluation data to improve the system. Effectiveness Indicator • The agency regularly tracks performance and reports results. • Survey results and/or interviews indicate that employees understand their performance elements (performance expectations), consider them to be fair, and understand how their efforts contribute to mission accomplishment. • Workforce survey results indicate that employees perceive a linkage between high performance and recognition and awards. Employees also believe that creativity and innovation are rewarded and that their own performance evaluations properly reflect their level of performance. • Statistical data for performance ratings and awards, in the context of an empirical review of the performance decision-making process, show appropriate distribution and meaningful distinctions. • Statistical data for performance ratings and awards show appropriate distribution and meaningful distinctions (e.g., top performers are rewarded). Compliance Indicator • The agency’s performance appraisal system(s) and program(s) are evaluated in accordance with 5 CFR 430 or applicable agency directives. SECTION IV—Results-Oriented Performance Culture System The Results-Oriented Performance Culture System Communication Performance Appraisal Awards Pay for Performance Diversity Management Labor/Management Relations Results: Awards ............... When the key elements of the critical success factor Awards are effectively implemented, agencies will realize the following results: Effectiveness Results • Employees have a direct line of sight between performance elements (performance expectations) and recognition systems and the agency mission. These links have been communicated to and are understood by employees, enabling them to focus their work effort on those activities that are most important to mission accomplishment. All employees are held accountable for achieving results that support the agency’s strategic plan goals and objectives. • The agency has created a ‘‘reward environment,’’ beyond compensation and benefits, that contributes to attracting, retaining, and motivating employees. Compliance Result • The agency has developed one or more awards programs for its employees that obligates funds, and documents awards justifications in accordance with 5 CFR 451. The following page provides key elements and suggested performance indicators for this critical success factor. AWARDS Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES The agency has an awards system that: VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23038 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations AWARDS Key Elements Suggested Performance Indicators • Is aligned with organizational goals and values. • Has clear criteria for awards that are communicated effectively so that employees understand the purpose of the awards. • Includes a variety of types of awards (e.g., formal, monetary, nonmonetary, time-off) so that supervisors have a wide range of tools available to recognize performance. • Provides incentives for performing at an exemplary level. • Recognizes top performers appropriately. • Establishes a process for periodically evaluating the effectiveness of the awards system so that the agency can use the evaluation data to improve the system. Effectiveness Indicators • The agency has designed, communicated, and implemented an awards program that is aligned with organizational goals, based on clear criteria, and tailored to the interests and priorities of the agency’s workforce. • The agency uses a variety of monetary and nonmonetary awards (e.g., certificates, recognition in agency publications, award ceremonies). • Executives, managers, and supervisors receive training on awards that are available and how to use them to attract, retain, and motivate employees. • Surveys and/or interviews indicate that employees feel valued and appropriately recognized for performance. Compliance Indicator • The agency communicates with employees and supervisors about awards programs, evaluates its programs, documents awards appropriately, and gives due weight to awards in qualifying and selecting employees for promotion promoting employees in accordance with 5 U.S.C. 3362. SECTION IV—Results-Oriented Performance Culture System The Results-Oriented Performance Culture System Communication Performance Appraisal Awards Pay for Performance Diversity Management Labor/Management Relations Results: Pay-for-Performance. When the key elements of the critical success factor Pay-for-Performance are effectively implemented, agencies will realize the following results: Effectiveness Results • The pay-for-performance system, where authorized by law and regulation, is results-driven, producing a distribution of pay adjustments and bonuses based on individual contribution, organizational performance, and/or team performance. • The pay-for-performance system, where authorized by law and regulation, ensures employee and supervisory accountability with respect to individual performance and organizational results. • Employees’ pay is linked to their performance ratings. • Supervisors and managers make meaningful distinctions in performance ratings. Compliance Result • Pay adjustments, cash awards, and levels of pay based on the results of the appraisal process accurately reflect and recognize individual performance and/or contribution to the agency’s performance in accordance with applicable agency directives. The following pages provide key elements and suggested performance indicators for this critical success factor. PAY FOR PERFORMANCE Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES When authorized, the agency has a pay-for-performance system that: VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23039 PAY FOR PERFORMANCE Key Elements Suggested Performance Indicators • Makes pay distinctions based on performance. • Includes a transparent process for making pay adjustments. • Requires clear and frequent communications about the pay system and how it operates. When authorized, the agency has a pay-for-performance system that: Effectiveness Indicators • An understandable pay pool structure (e.g., roles and responsibilities) and process for making timely pay determinations have been communicated across the agency using a variety of methods (e.g., Web sites, handbooks, policies, announcements). • Managers, supervisors, and employees are oriented and/or trained at the beginning of the performance cycle on the relationship between their performance and salary adjustments and awards at the end of the cycle. • Data on pay pool determinations/discussions indicate: —The budget is effectively managed. —Top performers are getting the highest pay increases and/or awards. —Employees perceive the process to be fair and credible. —Pay adjustments correlate with performance ratings. Compliance Indicators • For senior employees, individual pay rates and pay adjustments reflect meaningful distinctions based on relative contribution to agency performance in accordance with the Executive Performance and Accountability Interim Rule (5 CFR 430 or applicable agency directives and 1330). • Pay-for-performance systems, authorized by OPM as part of Demonstration Projects, are evaluated periodically to determine compliance with the Project Plan in accordance with 5 CFR 470.317. • Pay-for-performance systems authorized by Congress are in compliance with their enabling legislation, regulations, and operating guidance (e.g., DHS HRM system in chapter 97 of title 5, U.S. Code, part 9701 of 5 CFR and the provisions of the National Security Personnel System, chapter 99 of title 5, U.S. Code and part 9901 of 5 CFR). SECTION IV—Results-Oriented Performance Culture System The Results-Oriented Performance Culture System Communication Performance Appraisal Awards Pay for Performance Diversity Management Labor/Management Relations Results: Diversity Management. When the key elements of the critical success factor Diversity Management are effectively implemented, agencies will realize the following results: Effectiveness Results • The agency has implemented a diversity management program and has shown positive results in creating a diverse workforce. • The agency is responsive to the needs of diverse groups, resulting in a positive work environment that is conducive to all employees achieving their potential without fear or abuse. Compliance Result • The agency ensures equal opportunities for employees without discrimination as prescribed in 5 U.S.C. 7201. The following pages provide key elements and suggested performance indicators for this critical success factor. DIVERSITY MANAGEMENT sroberts on PROD1PC70 with RULES Key Elements Suggested Performance Indicators The agency has a diversity management system that: • Tracks and analyzes workforce diversity trends • Develops and implements diversity outreach plans as part of the agency’s overall outreach efforts VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00029 Fmt 4701 Effectiveness Indicators • The agency’s diversity program intent and processes are communicated to all employees. • Surveys and/or interviews show that the workforce is aware of, and generally supports, diversity program efforts. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23040 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations DIVERSITY MANAGEMENT Key Elements Suggested Performance Indicators • The agency develops and implements diversity programs to improve diversity within the agency including: —A recruitment strategy to reach diverse populations at colleges/universities, minority-focused professional organizations, and other organizations representing women, veterans, people with disabilities, and other groups, as part of the agency’s overall outreach strategy. —Encouragement of the participation of diverse groups in occupationfocused and leadership training and development programs. —Family-friendly policies relating to work schedules, telework, and other workplace flexibilities. • The agency’s diversity program is inclusive of all groups and is based on analysis of representation of various groups including people with disabilities, various minority groups, and women. • The diversity program is actively endorsed and supported by agency senior leadership through policy, budget allocation, and personal endorsements. • The agency supports forums and activities for recognized interest groups to provide ways to communicate with the workforce about the importance of diversity. • Managers, supervisors, and employees receive training from an agency-developed, diversity-related training curriculum. • The respect for diversity index score from OPM’s Federal Human Capital Survey indicates employees perceive that their organization respects and welcomes the diversity that makes up the Federal workforce. • Data on human resources program and system decisions/actions (e.g., complaints, personnel actions such as selections, promotions, and disciplinary actions) are analyzed in the context of empirical information about the agency’s employment practices, to verify that discrimination is not occurring. • The agency provides resources in accessible formats. Compliance Indicators • The Federal Equal Opportunity Recruitment Program (FEORP) [5 CFR 720.205], the Disabled Veterans Affirmative Action Program (DVAAP) [5 CFR 720.304], and other outreach programs are implemented in accordance with 5 U.S.C. 7201 and the following Federal Equal Employment Opportunity (EEO) laws: —Title VII of the Civil Rights Act of 1964 (Title VII) —Equal Pay Act of 1963 (EPA) —Age Discrimination in Employment Act of 1967 (ADEA) —Title I and Title V of the Americans with Disabilities Act of 1990 (ADA) —Sections 501 and 505 of the Rehabilitation Act of 1973 —Civil Rights Act of 1991. [Note: The Equal Employment Opportunity Commission is the jurisdictional authority for the EEO laws listed immediately above, not OPM. These legal citations are listed for human capital practitioners’ reference because agencies are subject to them.] • The agency has published up-to-date policies indicating zero tolerance for sexual harassment and discrimination in the workplace in accordance with EEOC guidelines, including 29 CFR 1604. [Note: This indicator is also under the jurisdiction of the EEOC.] SECTION IV—Results-Oriented Performance Culture System The Results-Oriented Performance Culture System Communication Performance Appraisal Awards sroberts on PROD1PC70 with RULES Pay for Performance Diversity Management Labor/Management Relations VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Results: Labor/Management Relations. 23041 When the key elements of the critical success factor Labor/Management Relations are effectively implemented, agencies will realize the following results: Effectiveness Result • Managers effectively administer contractual and statutory provisions to accomplish agency goals; workplace conflicts are resolved fairly, promptly, and effectively; and managers, union officials, and employees work together to accomplish the agency’s mission through effective communication and problem solving. Compliance Result • The agency recognizes the right of employees to organize, bargain collectively, and participate through labor organizations in accordance with chapter 71 of title 5, U.S. Code. The following page provides key elements and suggested performance indicators for this critical success factor. LABOR/MANAGEMENT RELATIONS Key Elements Suggested Performance Indicators The agency has a labor/management relations system that: • Provides a process that encourages labor and management to jointly develop successful plans to accomplish organizational goals and to develop effective solutions to workplace challenges. • Sets the stage for effectively working through human capital issues. • Ensures management is aware of and properly applies collective bargaining agreements and satisfies statutory labor-management relations obligations. Effectiveness Indicators • Data on complaints, grievances, and unfair labor practices are gathered, analyzed, and acted upon as appropriate. Data indicate that problems are usually resolved at the lowest practicable level and that management is complying with contractual and statutory requirements. • Management works to resolve conflicts promptly and in a manner that enhances agency performance. • The agency implements an alternative dispute resolution program to resolve employee/labor relations issues. The program achieves documented results in resolving problem situations. Compliance Indicator • Recognized labor organizations are afforded the rights established in 5 U.S.C. 7101 or other congressionally-mandated enabling legislation. SECTION V—Talent Management System The Talent Management System Recruitment Retention The Talent Management System. Definition ........................... Standard ............................ Critical Success Factors sroberts on PROD1PC70 with RULES Applicable Merit System Principles. Required Outcome Metrics. VerDate Aug<31>2005 This section contains information specific to the Talent Management system, which focuses on agencies having quality people with the appropriate competencies in mission-critical activities. A system that addresses competency gaps, particularly in mission-critical occupations, by implementing and maintaining programs to attract, acquire, develop, promote, and retain quality talent. The agency has closed skills, knowledge, and competency gaps/deficiencies in mission-critical occupations, and has made meaningful progress toward closing skills, knowledge, and competency gaps/deficiencies in all occupations used in the agency. The Talent Management system is comprised of two critical success factors that work together to ensure that agencies have people with the right skills, in the right places, at the right times. Addressing the critical success factors helps eliminate gaps and deficiencies in the skills, knowledge, and competencies of employees of mission-critical occupations in the current and future workforce. The two success factors usually work together. • Recruitment: The workforce plan drives the aggressive and strategic recruitment of diverse and qualified candidates for the agency’s workforce. • Retention: Leaders, managers, and supervisors create and sustain effective working relationships with employees. The workplace is characterized by: —A motivated and skilled workforce. —Attractive and flexible working arrangements. —Compensation packages and other programs used to hire and retain employees who possess mission-critical skills, knowledge, and competencies. The following merit system principles are especially relevant to the Talent Management system (5 U.S.C. 2301): • Recruitment should be from qualified individuals from appropriate sources in an endeavor to achieve a work force from all segments of society, and selection and advancement should be determined solely on the basis of relative ability, knowledge and skills, after fair and open competition which assures that all receive equal opportunity. (5 U.S.C. 2301(b)(1)) • All employees and applicants for employment should receive fair and equitable treatment in all aspects of personnel management without regard to political affiliation, race, color, religion, national origin, sex, marital status, age, or handicapping condition, and with proper regard for their privacy and constitutional rights. (5 U.S.C. 2301(b)(2)) The following are required outcome metrics for the Talent Management system. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23042 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations Required Metric Description Purpose Organization Metric: Competency Gaps Closed for Mission-Critical Occupations. Difference between competencies needed and competencies possessed by employees in mission-critical occupations. Employee Perspective Metric: Questions from Annual Employee Survey about Organizational Capacity. Employee Perspective Metric: Questions from Annual Employee Survey about Employee Satisfaction. Merit System Compliance Metric: MeritBased Execution of the Talent Management System. Items from Annual Employee Survey .............. To determine how the agency should target its recruitment, retention, and development efforts to bring the competencies of its workforce into alignment with the agency’s current and future needs. To determine the extent to which employees think the organization has talent necessary to achieve organizational goals. To determine the extent to which employees are satisfied with their jobs and various aspects thereof. To determine that decisions, policies, processes, and practices executed under the Talent Management system comply with the merit system principles and related laws, rules, and regulations. Suggested Metrics ........... Items from Annual Employee Survey .............. An assessment of compliance with merit system principles and related laws, rules, and regulations governing the Talent Management system. In addition to the required outcome metrics, the following metrics associated with the Talent Management system are suggested. Suggested Metric Description Purpose Turnover of Employees in Mission-Critical Occupations. Percent of turnover .......................................... Turnover of Employees in Mission-Critical Occupations during Probationary Period. Percent of turnover among those serving in their probationary period. Time To Hire ...................................................... Average time from date vacancy closes to date offer is extended (expressed in working days). Management responses to items from Annual Employee Survey. To track turnover of Federal employees in mission-critical occupations by reason for leaving. To determine how many new Federal employees in mission-critical occupations leave Federal service during their probationary period of employment and to determine whether their exit was voluntary or involuntary. To determine the efficiency of a critical phase of the Federal hiring process. Management Satisfaction with the Hiring Process. Applicant Satisfaction with the Hiring Process ... A questionnaire that is published on OPM’s USAJobs Web site. To determine if hiring managers believe the recruitment and selection process achieves recruitment and retention goals. To determine if applicants have a favorable impression of the recruitment and selection process. SECTION V—Talent Management System The Talent Management System Recruitment Retention sroberts on PROD1PC70 with RULES Results: Recruitment ....... VerDate Aug<31>2005 When the key elements of the critical success factor Recruitment are effectively implemented, agencies will realize the following results: Effectiveness Results • Workforce competency gaps are closed through the use of effective recruitment and retention strategies, creating a workforce that is capable of excellent performance in the service of the American people. • Senior leaders and managers are involved in strategic recruitment and retention initiatives, which ensures that the necessary organizational focus and resources are allocated to achieve recruitment and retention goals. • Recruitment strategies are appropriately aggressive and multi-faceted to ensure a sufficient flow of quality applicants to meet staffing needs identified in the workforce plan, positioning the agency for successful program accomplishment. • Flexible compensation strategies are used as needed to attract and retain quality employees who possess mission-critical competencies. • Quality of work/life programs are provided and obstacles to recruitment and retention of a quality workforce have been addressed, positioning the agency to be successful in acquiring and retaining the talent needed for program goals and objectives. Compliance Result • Recruitment, hiring, and merit promotion processes adhere to the merit system principles in 5 U.S.C. 2301 and follow other pertinent legal and regulatory guidance (including but not limited to 5 U.S.C. 3101, 3102, 3301, 3302, 3308–3318, 3319, 3502, 3503; as well as 5 CFR 315, 316, 317, 330, 332, 335, 337, 338, 550; and other congressionally-mandated enabling legislation). The Recruitment and Retention systems work together to produce many of these results. 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23043 The following pages provide key elements and suggested performance indicators for this critical success factor. RECRUITMENT Key Elements Suggested Performance Indicators The agency has a recruitment system that: • Identifies the challenges involved in attracting a high-quality workforce. • Establishes competency gap reduction goals and develops action plans to address current and future competency gaps. • Uses appropriate hiring flexibilities and tools. • Attracts and hires applicants who possess needed mission-critical competencies. sroberts on PROD1PC70 with RULES The agency has a recruitment system that: • Involves senior leaders and managers in recruitment planning and the implementation of strategic recruitment initiatives to attract talent. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00033 Fmt 4701 Effectiveness Indicators • The goals of recruiting for mission-critical occupations and competency gap reduction are established and documented in the agency’s strategic planning (or strategic human capital planning) process and tracked through the agency’s accountability system. • Recruitment strategies are created to maintain mission-critical competencies at the desired level using business forecasting and workforce analysis results. • Statistical data are analyzed related to the relative success of various types of appointments and recruitment flexibilities. • The agency conducts ‘‘lessons learned’’ or other evaluation activities and uses the findings to make improvements. • New hire follow-up (e.g., supervisory assessment of the employee’s productivity, adjustment to the job, and adjustment to the work environment) is conducted. Compliance Indicators • The agency closes skill gaps in mission-critical occupations in accordance with the Chief Human Capital Officers Act (CHCO Act) (5 U.S.C. 1304). • When OPM delegates examining or other personnel management authorities to the agency under the auspices of 5 U.S.C. 1104, the agency complies with the standards established by OPM and with merit system principles. Effectiveness Indicators • Adequate staff with the requisite competencies are allocated to the recruitment and hiring process commensurate with workload. • Senior leaders and managers manage resources and participate in job analysis and in the planning, communication, and evaluation of recruitment strategies. Information is provided to senior managers on a regular basis including: —Actual versus budgeted staffing levels. —Recruitment effectiveness based on an assessment of the quality of hires, timeliness in filling positions (e.g., use of 45-day model, 30-day model for Senior Executive Service (SES), or similar hiring model), and diversity statistics. —Turnover rate for mission-critical occupations by grade/pay band and location. • Senior leaders and managers assist human resources (HR) staff in implementing strategic recruitment initiatives, including participation in such activities as recruitment fairs and outreach programs and visits to schools. • Training classes, intranet, and other forms of guidance provide information to senior leaders and managers on available staffing options. Compliance Indicator • As prescribed by the CHCO Act (5 U.S.C. 1304), the agency holds managers accountable for effective and efficient human resources management that supports the mission in accordance with merit system principles. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23044 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations RECRUITMENT Key Elements Suggested Performance Indicators • Utilizes strategies that are both aggressive and multi-faceted when competing for desired talent. sroberts on PROD1PC70 with RULES • Reviews recruitment, hiring, and merit promotion programs to ensure fair hiring and assess overall results. VerDate Aug<31>2005 02:53 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00034 Fmt 4701 Effectiveness Indicators • The agency’s recruitment strategies include assessment of sources, such as professional organizations, colleges/universities, veterans’ organizations, state and private disability and rehabilitation offices, and community groups that are likely to yield high quality and diverse candidates. • Recruitment strategies have been developed based on an analysis of the primary sources for qualified applicants. • Ongoing relationships are established and maintained with recruitment sources such as: —Colleges and universities, outplacement organizations, professional associations. —Veterans’ organizations and special programs for veterans (e.g., Veterans Invitational Program (VIP)). —Recuritment fairs (e.g., fairs sponsored by the Office of Personnel Management (OPM or special interest groups). —Special programs/organizations that support people with disabilities (e.g., Department of Defense (DoD) Computer/Electronic Accommodation Program (CAP), deaf and hard of hearing in Government, rehabilitation institutions, vocational rehabilitation). —Recruitment flexibilities and appointing authorities authorized by OPM (e.g., direct hire, category rating, language expertise) are publicized widely throughout the agency and are used to enhance recruitment scope and timeliness. • Additional recruitment flexibilities are requested if needed and are justified by a human capital business case. Necessary funding is provided to support implementation of the flexibilities. • Managers are able to make valid selections from lists of high-quality candidates. Effectiveness Indicators • Recruitment activities are evaluated to assess factors such as: —Return on investment. —Cost effectiveness of various media and other recruitment sources in generating qualified and available applicants. —Quality and quantity of applicants. —Timely notification of applicants throughout the selection process re´ garding the status of their resume/application. —Timeliness (e.g., use of 45-day model, 30-day model for SES, or similar hiring models). —Applicant and manager satisfaction with the application process. —Reasons for declination of job offers. —Recruitment strategies and flexibilities that are most effective in meeting agency needs. —Reasons (e.g., poor fit between the employee and job requirements) for resignations and separations within the first year after appointment. • Managers and HR staff are trained on the merit system principles, legal requirements, and other policies governing Federal employment. • Audit and evaluation results (e.g., OPM, Government Accountability Office (GAO), and Inspector General (IG)) are used to drive process changes when systemic problems are identified. Compliance Indicators • The agency examines (when authorized by OPM delegation), appoints, promotes, and reassigns employees consistent with merit system principles (5 U.S.C. 2301) and other pertinent laws, rules, and regulations (e.g., the Uniform Guidelines in 5 CFR 300.103). • The agency’s annual self-audit of delegated examining operations demonstrates that operations are accomplished in accordance with OPM procedural requirements as delegated under the authority of 5 U.S.C. 1104. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23045 RECRUITMENT Key Elements Suggested Performance Indicators • Ensures that application and decision-making processes are not unduly burdensome or time consuming. Effectiveness Indicators • The agency establishes an ‘‘applicant friendly’’ process for applying for jobs that includes: —Vacancy announcements, application instructions, recruitment brochures, and marketing products that target the desired applicant pool(s) and are clearly written in plain language, attractive, and informative; are easily accessible; and highlight benefits (e.g., work/life flexibilities, Federal Employees Health Benefits, Employee Assistance Program, Flexible Spending Accounts, defined-benefit pension plan, Thrift Savings Plan, life insurance, and long-term care insurance). —Regular communication about the status of an individual’s resume/ application as well as answers to applicant questions (as evidenced by correspondence records). —A timely decision-making process. • Data from applicant surveys and entrance interviews reflect a positive experience for applicants. • Length of time to hire is consistent with recommended hiring models. SECTION V—Talent Management System The Talent Management System Recruitment Retention Results: Retention ............ When the key elements of the critical success factor Retention are effectively implemented, agencies will realize the following results: Effectiveness Results • Workforce competency gaps are closed through the use of effective recruitment and retention strategies, creating a workforce that is capable of excellent performance in the service of the American people. • Senior leaders and managers are involved in strategic recruitment and retention initiatives, which ensures that the necessary organizational focus and resources are allocated to achieve recruitment and retention goals. • Flexible compensation strategies are used as needed to attract and retain quality employees who possess mission-critical competencies. • Quality of work/life programs are provided and obstacles to recruitment and retention of a quality workforce have been addressed, positioning the agency to be successful in acquiring and retaining the talent needed for program goals and objectives. Compliance Result • Retention policies and practices adhere to merit system principles set forth in 5 U.S.C. 2301 and other Federal laws, rules, and regulations (e.g., 5 U.S.C. 5301 and 5706; the Federal Workforce Flexibility Act of 2004; 5 CFR 531, 550, and 575; etc.). The Recruitment and Retention systems work together to produce many of these results. The following pages provide key elements and suggested performance indicators for this critical success factor. RETENTION Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES The agency has a retention system that: • Utilizes flexible compensation strategies to retain employees who possess mission-critical competencies. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00035 Fmt 4701 Effectiveness Indicators • The agency’s strategic, performance, and/or strategic human capital plans and policies promote appropriate use of compensation flexibilities (e.g., recruitment bonuses, relocation bonuses, retention allowances) to attract and retain high-quality employees who possess mission-critical competencies. The agency also makes a successful case to support funding. • Written policies and procedures describe guidelines for use of compensation flexibilities in meeting the agency’s need for highly qualified employees consistent with legal requirements governing the use of the flexibilities. Managers have been informed about and use available compensation flexibilities where justified. • Incentive and recognition programs are established, budgeted, and implemented to focus on retention of high performing employees with mission-critical competencies. • Use of compensation flexibilities and awards is analyzed to determine that there is a discernable relationship between the use of the flexibilities and successful recruitment and retention of high-quality employees in mission-critical occupations. The analysis includes consideration of retention and exit interview information. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23046 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations RETENTION Key Elements Suggested Performance Indicators • Develops short- and long-term strategies and targeted investments in current employees to eliminate competency gaps in mission-critical occupations. • Trains the current workforce in mission-critical competencies that are needed by the agency. • Documents planned and completed retention activities, including requested budget funding, staff allocation, and management accountability. sroberts on PROD1PC70 with RULES • Creates a productive, supportive work environment through a variety of programs, such as telework, childcare assistance, fitness centers, health assessments, safety seminars, employee assistance programs, parking facilities, and transit subsidies. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00036 Fmt 4701 Compliance Indicator • When OPM delegates examining or other personnel management authorities to the agency under the auspices of 5 U.S.C. 1104, the agency complies with the standards established by OPM and merit system principles. Effectiveness Indicators • Strategies are developed and implemented for reducing competency gaps through training, development, or alternative sources (e.g., intern program, contractor outsourcing). • Staffing, training, and performance data indicate success in closing competency gaps. Effectiveness Indicators • Retention trends are tracked and analyzed by the appropriate management level. • Exit interviews are conducted and data/information are analyzed at the appropriate level to allow supervisors and managers to address retention. • Senior leaders and managers manage resources and participate in the planning, communication, and evaluation of retention strategies. Senior leaders and managers and first-line supervisors implement strategic retention initiatives in partnership with HR. • Appropriate metrics, as defined by OPM guidance or developed by the agency, are reported to senior managers and human resource executives to assess the outcomes from retention strategies. • Policies and procedures are established indicating how retention activities are evaluated. Effectiveness Indicators • The agency has determined which quality of work/life programs meet the needs of the workforce and has implemented programs to promote flexible working arrangements and to sustain a productive, supportive work environment. • Senior leaders and managers promote the use of quality of work/life programs and provide resources necessary to establish and sustain these programs to create an effective environment. • Policies and procedures describe guidelines for flexible working arrangements, including: —Temporary, term, and seasonal appointments. —Flexible and/or part-time work schedules. —Telework, including technology required to support it, where appropriate. • Policies and procedures describe guidelines for sustaining a productive, supportive work environment, including: —Ergonomic work stations. —Reasonable accommodation. —Child care/elder care assistance. —Wellness programs (e.g., fitness centers, health assessments). —Employee Assistance Program. —Safety inspections and education. —Parking facilities and transit subsidies. —Benefits (e.g., Federal Employees Health Benefits, Thrift Savings Plan, Flexible Spending Accounts, defined-benefit pension plan, life insurance, and long-term care insurance). • These policies and procedures have been communicated to the workforce and prospective applicants via Web pages, letters from the CHCO, recruitment materials, vacancy announcements, job fair announcements, or other methods. • The cost and benefits of quality of work/life programs are evaluated (e.g., surveys, entrance and exit interviews) to determine if they are perceived by employees as creating a positive work environment, are meeting an identified workforce need, and are contributing to recruitment and retention goals. Compliance Indicators • The agency operates work/life programs in accordance with governing laws, rules, and regulations (e.g., telework (Public Law No. 106–346, Section 359), flexible work schedules (5 CFR 610), transit subsidies (Executive Order 13150)). • On-the-job injury and other Workers’ Compensation claims are filed in accordance with 5 U.S.C. 8102, 20 CFR parts 1-25, and other guidelines of the Office of Workers Compensation Programs (OWCP). Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23047 RETENTION Key Elements Suggested Performance Indicators • The agency has an emergency preparedness plan in place in accordance with OPM’s requirements for individual agencies, as outlines in OPM’s Federal Manager’s/Decision Maker’s Emergency Guide and in accordance with GSA’s guidance on occupant emergency plans (Executive Orders 12656 and 12472). SECTION VI—Accountability System The Accountability System. Definition ........................... Standard ............................ Applicable Merit System Principles. Metrics ............................... Results ............................... The Accountability System This section contains information specific to the Accountability system. The Accountability system provides consistent means to monitor and analyze agency performance on all aspects of human capital management policies, programs, and activities, which must themselves support mission accomplishment and be effective, efficient, and in compliance with merit system principles. A system that contributes to agency performance by monitoring and evaluating the results of its human capital management policies, programs, and activities; by analyzing compliance with merit system principles; and by identifying and monitoring necessary improvements. Agency human capital management decisions are guided by a data-driven, results-oriented planning and accountability system. Results of the agency Accountability system must inform the development of the human capital goals and objectives, in conjunction with the agency’s strategic planning and performance budgets. Effective application of the Accountability system contributes to agencies’ practice of effective human capital management in accordance with the merit system principles and in compliance with Federal laws, rules, and regulations. The following merit system principle is especially relevant to the Accountability system: • All employees should maintain high standards of integrity, conduct, and concern for the public interest. (5 U.S.C. 2301(b)(4)) This system is assessed based on documented evidence of a Human Capital Accountability System that provides for annual assessment of agency human capital management progress and results including compliance with relevant laws, rules, and regulations. The system will: • Be formal, documented, and approved by OPM. • Be supported and resourced by agency leadership. • Measure and assess all human capital management systems for mission alignment, effectiveness, efficiency, and compliance with merit system principles, laws, and regulations. • Include an independent audit process with periodic review of human resources transactions to insure legal and regulatory compliance. • Ensure that action is taken to improve human capital programs and processes and correct deficiencies. • Ensure results are analyzed and reported to agency management and OPM. Agencies are required under 5 CFR 250.203 to submit the Agency Human Capital Accountability Report described by this system to OPM for review and approval on an annual basis. This Accountability Report supports the systems of oversight prescribed by 5 CFR 250.102. When the key elements of the Accountability system are effectively implemented, agencies will realize the following results: Effectiveness Results • The agency has documented its human capital management processes, measures, and results; evaluated its accomplishments; and reported findings to agency decisionmakers and other stakeholders. • Agency leadership demonstrates commitment to the accountability system, based on OPM’s standards, through its actions and allocation of appropriate resources. • The agency conducts a continuous assessment of its human capital practices to ensure they are sound, produce results, and adhere to merit systems principles, laws, and regulations. The agency provides an annual report, which identifies areas needing improvement. A process is in place that assigns responsibility for taking corrective action that results in improved human capital strategies and program integrity. Compliance Results • In accordance with Civil Service Rule X, the agency has established and maintains a system of accountability that meets OPM’s standards for a sound human capital accountability system, measures effectiveness in meeting the standards, and corrects deficiencies in meeting the standards. • As provided in the Chief Human Capital Officers Act of 2002 (CHCO Act) (5 U.S.C. 1304), the agency holds managers and human resources officers accountable for efficient and effective human resources management in support of the agency’s mission, in accordance with merit system principles. • Human capital programs, activities, and practices are evaluated in accordance with law, regulation, and public policy within the Leadership and Knowledge Management, Results-Oriented Performance Culture, and Talent Management systems. The following pages provide key elements and suggested performance indicators for this system. sroberts on PROD1PC70 with RULES ACCOUNTABILITY SYSTEM Key Elements Suggested Performance Indicators To ensure that the agency’s human capital practices support its mission and are based on merit system principles, the agency has an accountability system that: VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 23048 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations ACCOUNTABILITY SYSTEM Key Elements Suggested Performance Indicators sroberts on PROD1PC70 with RULES • Is designed and conducted in accordance with OPM requirements. • Is formal and clearly documented, including description of agency system, statement of agency policy, key responsibilities, outcomes and measures, milestones, and results. • Is fully supported by top management, including review and approval of the system and allocation of sufficient resources to promote and support the system. • Ensures that managers are held accountable for their human capital and human resources decisions and actions. ` • Evaluates human capital results vis-a-vis agency mission goals and objectives and measures; assesses compliance of HC programs and decisions with laws, rules, and regulations; and identifies and resolves significant problems. The system should cover all human capital systems and include the following: —Measures identified to address: • Success in supporting agency mission accomplishment. • Effectiveness of human resources (HR) programs. • Efficiency of HR processes. • Programmatic and transactional compliance with laws, rules, and regulations. —Data collection and analysis processes to support the measures. —Periodic review of HR transactions to ensure compliance with legal, regulatory, and specific agency requirements; corrective action taken in cases of noncompliance. —An independent audit (i.e., one conducted by individual(s) outside of the operations management chain of command) to obtain and objectively evaluate evidence. —Results used to improve human capital programs and the human capital accountability system. • Evaluates specific human resources programs (recruitment and staffing, performance management, training, awards, other, etc.) • Provides for evaluation of human capital and human resources activities throughout the organization (e.g., component/geographic), including individual HR transactions. • Ensures human capital results and merit system compliance are determined and reported to management and OPM. • Evaluates the effectiveness of the accountability system itself. • Promotes continuous improvement, which is reflected in updates to the strategic human capital plan. VerDate Aug<31>2005 02:30 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00038 Fmt 4701 Effectiveness Indicators • Human capital program management guidelines, authorities, processes, measures, and accountabilities are issued via agency policy and procedural issuances and are accessible to agency managers, supervisors, and employees. • Key leaders and subordinate managers and supervisors throughout the agency have at least one performance element that relates to achieving human capital outcomes. • Human capital risks are tracked, documented, and reported to a central advisory or management board, and action is taken to mitigate high-risk areas. • Program and initiative implementation efforts include published plans that clearly outline roles, responsibilities, reviews, and desired outcomes. • Accountability for implementing improvement strategies for each initiative or program is assigned and resources are provided to accomplish the resulting actions. • Assessment results are provided to senior management and action is taken to communicate best practices, improve current practices, and correct problem areas. • A process is in place which identifies problems that pose high risk to organizational integrity including: —Financial or legal threats. —Systemic violations of employee protections or veterans’ preference. —Potential loss of integrity in the public eye. • Analysis of workforce survey results related to the effectiveness of the Leadership and Knowledge Management, Results-Oriented Performance Culture, and Talent Management systems indicates that employees perceive their agencies as high-performing workplaces where their skills and abilities are used well. • Human capital data are current and accurate as indicated by documentation. • OPM evaluations, agency reviews, and/or other human capital assessments indicate that: —Programs and processes are efficient, effective, and compliant. —The agency meets measures of success as reflected in strategic human capital plans. • Individual human capital programs that do the following are developed and implemented: —Establish clear responsibility for the program. —Establish clear authority for enacting and evaluating the program. —Clarify consequences of success or failure. —Identify baseline performance. —Set program goals. —Set program milestones. —Identify key measures. —Collect appropriate data. —Track progress. —Develop and implement an ongoing evaluation plan. —Evaluate program results. —Identify opportunities for program improvement. —Implement improvements. —Monitor success of improvements. —Provide progress reports on schedule. Compliance Indicators • In accordance with Civil Service Rule X, the agency has established and maintains a system of accountability that meets OPM’s standards for a sound human capital accountability system, measures effectiveness in meeting the standards, and corrects deficiencies in meeting the standards. In accordance with the Executive Performance and Accountability Interim Rule (5 CFR 430 and 1330), the agency’s appraisal system for senior executives provides for balance so that, in addition to expected results, the performance expectations for individual senior employees include: —Appropriate measures or indicators of employee and/or customer/ stakeholder feedback. —Quality, quantity, timeliness, and cost effectiveness measures. Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2 Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules and Regulations 23049 ACCOUNTABILITY SYSTEM Key Elements Suggested Performance Indicators • As provided in the CHCO Act (5 U.S.C. 1304), the agency holds managers and human resources officers accountable for efficient and effective human resources management in support of the agency’s mission, in accordance with merit system principles. [FR Doc. E8–8661 Filed 4–25–08; 8:45 am] sroberts on PROD1PC70 with RULES BILLING CODE 6325–43–P VerDate Aug<31>2005 02:45 Apr 26, 2008 Jkt 214001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\28APR2.SGM 28APR2

Agencies

[Federal Register Volume 73, Number 82 (Monday, April 28, 2008)]
[Rules and Regulations]
[Pages 23012-23049]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-8661]



[[Page 23011]]

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Part II





Office of Personnel Management





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5 CFR Part 250



Human Resources Management in Agencies; Final Rule

Federal Register / Vol. 73, No. 82 / Monday, April 28, 2008 / Rules 
and Regulations

[[Page 23012]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR PART 250

RIN 3206-AJ92


Human Resources Management in Agencies

AGENCY: Office of Personnel Management.

ACTION: Final Rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final 
regulations to implement certain provisions of the Chief Human Capital 
Officers Act of 2002, which set forth new OPM and agency 
responsibilities and requirements to enhance and improve the strategic 
management of the Federal Government's civilian workforce, as well as 
the planning and evaluation of agency efforts in that regard. Further, 
we are including a plain language rewrite of the subpart titled 
``Authority for Personnel Actions in Agencies.''

DATES: Effective Date: The regulations are effective on May 28, 2008.

FOR FURTHER INFORMATION CONTACT: Charles D. Grimes by phone at 202-418-
3163, by FAX at 202-606-2838, or by e-mail at pay-performance-policy. 
You may contact Mr. Grimes by TTY on 202-418-3134.

SUPPLEMENTARY INFORMATION: On May, 23, 2006, the Office of Personnel 
Management (OPM) issued proposed regulations (71 FR 29593) to change 5 
CFR part 250, to read ``Human Resources Management in Agencies'' to 
reflect current usage, to make a plain language revision in subpart A, 
and to add regulations on strategic human resources management as new 
subpart B.

Case for Action

    Section 1304 of the Chief Human Capital Officers Act (CHCO Act), 
which was enacted within the framework of the Homeland Security Act 
(Pub. L. 107-296), and codified at 5 U.S.C. 1103(c), authorizes OPM to 
develop an assessment system, including metrics, for agency human 
capital management. Rather than establish a new reporting requirement, 
OPM elected to incorporate the CHCO Act requirements within the newly 
established Human Capital Accountability System and Human Capital 
Management Report (Accountability System).
    To accommodate the accountability assessment, OPM has modified the 
existing 5 CFR part 250. Subpart A, which establishes requirements for 
delegations of personnel authority to agencies, has been rewritten in 
plain English. Agencies will continue to operate in an environment of 
delegated personnel authority and will be required to ensure merit 
system accountability.
    The new subpart B details both agency and OPM responsibilities 
under the CHCO Act as well as the fundamental requirements of the 
Accountability System.
    OPM is cognizant of the burden placed on agencies by reporting 
requirements, and the regulations mitigate against increasing that 
burden through the incorporation of existing reporting requirements 
(e.g., PMA scoring) into the annual report to the maximum extent 
practicable. The CHCO Act metrics and the Accountability System will 
provide OPM with the data necessary to meet statutory requirements of 5 
U.S.C. 1103(a) and (c) and 5 U.S.C. 2301.

Major Issues

    As a general matter, multiple commenters suggested OPM collaborate 
directly with each affected agency or with a team of agency 
representatives to develop metrics tailored to each agency's 
requirements. We disagree. The CHCO Act gives OPM responsibility for 
assessing strategic management of human capital across Government. The 
Governmentwide focus requires standard metrics. OPM consults with 
agencies on a regular basis through a variety of mechanisms including 
the CHCO Council, the Human Resources Directors' Forum, and OPM's Human 
Capital Officers. HCAAF requirements are designed to enable OPM to 
fulfill this responsibility through a set of human capital management 
systems, standards and metrics.
    There also was general concern expressed by commenters that the 
CHCO Act regulations add significantly to agency OPM reporting 
requirements. However, the intent of the CHCO regulations is to 
coordinate human capital management reporting requirements in a single 
reporting system.
    A commenter noted that the Chief Human Capital Officer should 
approve workforce plans. A commenter also contended that it was the 
agency's responsibility to determine the timing and format of the human 
capital plan. We agree, but note that OPM has the responsibility to 
assess and approve agency human capital accountability systems. OPM's 
role is to assure that agencies engage in workforce planning that meets 
approved standards.
    Commenters also raised concerns about the interplay between the 
CHCO Act reporting requirements and the Annual Employee Survey 
regulations. While data from the Annual Employee Survey could be used 
for HCAAF metrics, there is no substantive overlap in these two 
regulations.

HCAAF

    The Human Capital Assessment and Accountability Framework (HCAAF), 
annexed hereto as an Appendix to the regulation, details the concepts 
and systems for planning, implementing, and evaluating the results of 
human capital management policies and practices. Commenters contended 
that the framework is too transactional, broad and theoretical. 
Commenters further contended that agencies cannot be held accountable 
for ambiguous human capital management practices. We disagree. HCAAF 
tools are not designed to ensure strict compliance, but to assist 
agencies to meet HCAAF requirements. Measuring effective and efficient 
HCM is best accomplished through representative, flexible indicators, 
which OPM has established in the HCAAF metrics.
    Commenters also objected to sections of 5 CFR 250.203(a)(1)(ii) on 
workforce analysis. While we agree that other measurement methods could 
be effective, OPM has chosen the current Human Capital and Workforce 
Analysis Plan elements based on well-documented workforce plan models 
used in the public and private sectors.
    A commenter proposed that performance measures should support 
agency goals instead of agency measures. We agree. The wording in 5 CFR 
250.203(a)(1) (iii) has been changed accordingly.

Metrics

    By this regulation, OPM defines the metrics to be used pursuant to 
5 U.S.C. 1103(c) as the HCAAF and the HCAAF Systems, Standards, and 
Metrics (HCAAF-SSM). See 5 CFR 250.202(b). See the Appendix to this 
regulation. These metrics may be adapted, in the future, pursuant to 
notice and comment, to meet the future needs of both agencies and OPM. 
Commenters are providing feedback on the metrics to OPM through the 
public comment process and in other forums like the CHCO Council. OPM 
may incorporate this feedback, as appropriate, and pursuant to notice 
and comment, to further refine the measures in the future.
    Commenters generally contended that the metrics were inflexible, 
overly detailed and potentially inaccurate. We disagree. The HCAAF-SSM 
is a systematic method to examine strategic human capital practices 
across all

[[Page 23013]]

Government agencies. Standardization is important because OPM cannot 
roll up metrics that are based on different calculations. Moreover, 
OPM, through the Accountability System, encourages all agencies to 
develop separate measures that address relevant agency issues. The 
HCAAF-SSM enables OPM to meet its statutory responsibility in the CHCO 
Act. That responsibility is to assess the strategic management of human 
capital across all of Government. OPM has determined that this can be 
accomplished only through using a common set of metrics.

Accountability

    Commenters expressed confusion surrounding the reporting 
requirements under the Human Capital Accountability System and annual 
Report. Commenters were concerned by the interplay of new and existing 
reporting requirements and whether there would be redundancy. However, 
the intent of the annual Human Capital Management Report is to provide 
a mechanism to consolidate human capital reporting into one annual 
report, and to incorporate this into agency performance and budget 
reporting. Commenters also contended that the reporting requirements 
are of no value to the agencies. We disagree. The Human Capital 
Management Report serves a number of purposes, including providing 
agencies a mechanism to document human capital results and actions 
planned to address areas needing improvement. Agencies will benefit 
from having effective, comparable human capital data.
    A commenter also proposed that the report be issued biennially to 
give agencies more time. We disagree. The annual report is appropriate 
as it provides timely feedback on agency human capital management 
systems. Moreover, the first complete accountability reporting with all 
required metrics is not required until 2008 to give agencies sufficient 
time to comply.
    A commenter proposed that the agencies' Chief Human Capital 
Officers have the authority to approve the agency accountability 
systems. We disagree. OPM has the authority to require agencies to 
establish accountability systems consistent with OPM standards. We made 
a clarifying change to 5 CFR 250.203(a)(1)(iii)(2) to ensure that any 
independent audit process is conducted with OPM participation.
    A commenter also suggested implementing a third-party appeals 
system prior to OPM withdrawing an agency's delegated examining unit or 
otherwise penalizing the agency. We disagree. OPM has longstanding 
authority under 5 U.S.C. 1104 to exercise oversight and control over 
agencies' use of delegated authorities without the intervention of a 
third party.
    Commenters proposed that OPM's role be more as advisor than 
auditor. While we will continue to provide guidance, advice and 
leadership to agencies, OPM has a statutory role as auditor of agency 
human capital management that must be fulfilled. Some commenters 
expressed confusion over whether a third party auditor would be 
required, but the proposed regulations have no such requirement. A 
commenter also suggested OPM change the language in 5 CFR 250.103 
regarding OPM discretion to require agency corrective action from may 
to must. We disagree. OPM retains discretion to determine the 
appropriate response to particular cases.
    A commenter contended that it was unnecessary to review each HC 
policy, program and operation every year. However, the regulations do 
not require such a review. Another commenter proposed that the annual 
Human Capital Management Report measure the number of employee 
complaints and resolution of such complaints. While we encourage 
agencies to include such measures in their accountability plans, and 
many agencies do track complaints, this is not a required metric.
    Commenters raised concerns about the sufficiency of pre-determined 
budgets when implementing the newly required Human Capital Management 
Report. Commenters contended that the timeline provided in the proposed 
regulation did not allow time to align the Accountability System and 
the budget development process. Concern was also raised about the 
availability of funding for accountability systems when agency human 
resources management does not control the budget. We disagree. The CHCO 
Act holds agencies responsible for maintaining accountability for 
results including merit system compliance. At the agency level, 
leadership is required to align budgets with strategic management of 
human capital. The first complete Human Capital Management Report with 
all required metrics is not required until 2008 to give agencies 
sufficient time to comply.
    Commenters also requested that OPM differentiate the requirements 
for agencies that have already implemented conforming accountability 
systems from the requirements for agencies that have not implemented 
such systems. We disagree. The regulations detailing the Accountability 
System have been drafted to provide individual agencies maximum 
flexibility while providing OPM comparable information across agencies.
    A commenter requested that OPM require agencies to post their Human 
Capital Management Reports on their Web sites. We disagree. While OPM 
believes that agencies should post their Human Capital Management 
Reports, an agency may have a number of valid reasons (e.g., national 
security) for not posting its report.

Executive Order 12866, Regulatory Review

    This proposed rule has been reviewed by the Office of Management 
and Budget in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations would not have a significant 
economic impact on a substantial number of small entities (including 
small businesses, small organizational units, and small governmental 
jurisdictions) because they would only apply to Federal agencies and 
employees.

List of Subjects in 5 CFR Part 250

    Authority delegations (Government agencies), Government employees.

Office of Personnel Management.
Linda M. Springer,
Director.

0
Accordingly, OPM is amending 5 CFR 250 to read as follows:
0
1. Revise part 250 to read as follows:

PART 250--HUMAN RESOURCES MANAGEMENT IN AGENCIES

Subpart A--Authority for Personnel Actions in Agencies
Sec.
250.101 Standards and requirements for agency personnel actions.
250.102 Delegated authorities.
250.103 Consequences of improper agency actions.
Subpart B--Strategic Human Capital Management
250.201 Coverage and purpose.
250.202 Office of Personnel Management responsibilities.
250.203 Agency responsibilities.

    Authority: 5 U.S.C. 1101 note, 1103(a)(5), 1103(c), 1104, 1302, 
3301, 3302; E.O. 10577, 12 FR 1259, 3 CFR, 1954-1958 Comp., p. 218; 
E.O. 13197, 66 FR 7853, 3 CFR 748 (2002).

    Subpart B also issued under 5 U.S.C. 1401, 1401 note, 1402.

[[Page 23014]]

Subpart A--Authority for Personnel Actions in Agencies


Sec.  250.101  Standards and requirements for agency personnel actions.

    When taking a personnel action authorized by this chapter, an 
agency must comply with qualification standards and regulations issued 
by the Office of Personnel Management (OPM), the instructions OPM has 
published in the Guide to Processing Personnel Actions, and the 
provisions of any delegation agreement OPM has made with the agency. 
When taking a personnel action that results from a decision or order of 
OPM, the Merit Systems Protection Board, Equal Employment Opportunity 
Commission, or Federal Labor Relations Authority, as authorized by the 
rules and regulations of those agencies, or as the result of a court 
order, a judicial or administrative settlement agreement, or an 
arbitral award under a negotiated agreement, the agency must follow the 
instructions in the Guide to Processing Personnel Actions and comply 
with all other relevant substantive and documentary requirements, 
including those applicable to retirement, life insurance, health 
benefits, and other benefits provided under this chapter.


Sec.  250.102  Delegated authorities.

    OPM may delegate its authority, including authority for competitive 
examinations, to agencies, under 5 U.S.C. 1104(a)(2), through a 
delegation agreement. The delegation agreement developed with the 
agency must specify the conditions for applying the delegated 
authorities. The agreement must also set minimum standards of 
performance and describe the system of oversight by which the agency 
and OPM will monitor the use of each delegated authority.


Sec.  250.103  Consequences of improper agency actions.

    If OPM finds that an agency has taken an action contrary to a law, 
rule, regulation, or standard that OPM administers, OPM may require the 
agency to take corrective action. OPM may suspend or revoke a 
delegation agreement established under Sec.  250.102 at any time if it 
determines that the agency is not adhering to the provisions of the 
agreement. OPM may suspend or withdraw any authority granted under this 
chapter to an agency, including any authority granted by delegation 
agreement, when OPM finds that the agency has not complied with 
qualification standards OPM has issued, instructions OPM has published, 
or the regulations in this chapter. OPM also may suspend or withdraw 
these authorities when it determines that doing so is in the interest 
of the civil service for any other reason.

Subpart B--Strategic Human Capital Management


Sec.  250.201  Coverage and purpose.

    The Chief Human Capital Officers (CHCO) Act of 2002 acknowledges 
the critical importance of Federal employees to the effective and 
efficient operation of Government. As a part of OPM's overall 
leadership responsibilities in the strategic management of the Federal 
civil service, and pursuant to 5 U.S.C. 1103, OPM is responsible for 
designing a set of systems, including standards and metrics, for 
assessing the management of human capital by Federal agencies. In this 
subpart, OPM establishes a framework of those systems, including system 
components, OPM's role, and agency responsibilities.


Sec.  250.202  Office of Personnel Management responsibilities.

    (a) As the President's chief human capital officer, the Director of 
OPM provides Governmentwide leadership and direction in the strategic 
management of the Federal workforce.
    (b) To execute this critical leadership responsibility, OPM adopts 
the Human Capital Assessment and Accountability Framework (HCAAF) to 
describe the concepts and systems for planning, implementing, and 
evaluating the results of human capital management policies and 
practices. See Appendix. In addition, OPM adopts the related set of 
assessment systems required by the CHCO Act as the HCAAF Systems, 
Standards, and Metrics (HCAAF-SSM), also included in the Appendix. Each 
such assessment system associated with the HCAAF consists of:
    (1) A standard against which agencies can assess the results of 
their management of human capital; and
    (2) Prescribed metrics, as appropriate, for organizational 
outcomes, employee perspective, and compliance measures with respect to 
relevant laws, rules and regulations.
    (c) Together, the HCAAF and the HCAAF-SSM guide agencies in 
planning, evaluating and improving the efficiency and effectiveness of 
agency human capital management with respect to:
    (1) Alignment with executive branch policies and priorities, as 
well as with individual agency missions, goals, and program objectives, 
including the extent to which human capital management strategies are 
integrated into agency strategic plans and performance budgets prepared 
under OMB Circular A-11;
    (2) Identifying and closing competency/skill gaps in the agency's 
mission-critical occupations; ensuring leadership continuity through 
the implementation of recruiting, development, and succession plans; 
sustaining an agency culture that values, elicits, identifies, and 
rewards high performance; and developing and implementing a knowledge 
management strategy, supported by appropriate investment in training 
and technology; and
    (3) Holding the agency head, executives, managers and human 
resources officers accountable for efficient and effective human 
capital management, in accordance with merit system principles.


Sec.  250.203  Agency responsibilities.

    (a) To assist in the assessment of the management of human capital 
in the Federal Government, and to help meet the statutory requirements 
to prepare that portion of the performance budget for which agency 
Chief Human Capital Officers are accountable as well as relevant 
portions of performance and accountability reports, heads of agencies 
or their designees must maintain a current human capital plan and 
provide OPM an annual Human Capital Management Report, as outlined 
below, based on an approved human capital accountability system. The 
HCAAF and the HCAAF-SSM provide more specific information on coverage 
and content for the plan and report.
    (1) Human Capital Plan. Using a format established by agreement 
between the agency and OPM, at a minimum the plan must include:
    (i) Human Capital Goals and Objectives. These are a comprehensive, 
integrated set of human capital goals and objectives, with detailed 
policy and program priorities and initiatives as appropriate, 
consistent with agency strategic plans and annual performance goals. 
These human capital goals and objectives must address each of the human 
capital management systems included in the HCAAF.
    (ii) Workforce Analysis. This analysis of the agency's workforce 
describes its current state, projects the human resources needed to 
achieve the agency's program performance goals and objectives during 
the term of the agency's strategic plan, and identifies potential 
shortfalls or gaps. An ongoing analysis must, for relevant agency 
mission requirements, describe the occupation(s) most critical to 
agency performance (including associated managerial and executive 
positions) and

[[Page 23015]]

describe mission-critical competencies and key demographics (e.g., 
talent analyses, turnover, and retirement eligibility); and for each 
such occupation, describe its current and projected staffing levels, 
attrition and hiring estimates, and proposed training and development 
investments.
    (iii) Performance Measures and Milestones. One or more human 
capital metrics, as well as appropriate program milestones, for each 
human capital goal or objective, provide a basis for assessing progress 
and results, including compliance measures with respect to relevant 
laws, rules and regulations. These metrics must include, but are not 
limited to, those described in the HCAAF-SSM issued under Sec.  
250.202(b). These metrics and milestones must be specifically linked to 
broader agency program performance goals, to evaluate the impact of the 
agency's human capital management on its overall mission performance.
    (2) Human Capital Accountability System. This system provides for 
an annual assessment of agency human capital management progress and 
results including compliance with relevant laws, rules, and 
regulations. That assessment is conveyed in an annual Human Capital 
Management Report to OPM. The human capital accountability system must:
    (i) Be formal and documented;
    (ii) Be approved by OPM;
    (iii) Be supported and resourced by agency leadership;
    (iv) Measure and assess human capital management systems for 
mission alignment, effectiveness, efficiency, and compliance with merit 
system principles, laws, and regulations;
    (v) Provide for an independent audit process, with OPM 
participation, for periodic review of human resources transactions to 
insure legal and regulatory compliance;
    (vi) Ensure that action is taken to improve human capital 
management programs and processes and to correct deficiencies; and
    (vii) Ensure results are analyzed and reported to agency management 
and OPM.
    (3) Human Capital Management Report. At a minimum, the agency's 
annual Human Capital Management Report must:
    (i) Provide an evaluation of and report on the agency's existing 
human capital management policies, programs, and operations, as they 
relate to the agency's overall mission/program performance. The report 
must address the performance measures and milestones contained in the 
agency human capital plan including compliance measures with respect to 
relevant laws, rules and regulations. The report must also document 
actions taken to correct any violations or deficiencies that are 
identified.
    (ii) Inform the development of human capital goals and objectives 
during the agency's strategic planning and annual performance budget 
formulation process, as well as the treatment of human capital results 
during the annual performance and accountability reporting process.
    (b) [Reserved]

    Note: The following appendix will not appear in the Code of 
Federal Regulations.


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
SECTION I--Introduction to the HCAAF                  Human Capital Assessment and Accountability Framework
                                                       (HCAAF)
                                                     -----------------------------------------------------------
                                                      Metrics
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Human Capital Assessment and Accountability           The HCAAF establishes and defines five human capital
 Framework (HCAAF).                                    systems that together provide a single, consistent
                                                       definition of human capital management for the Federal
                                                       Government. The HCAAF fuses human capital management to
                                                       the merit system principles--a cornerstone of the
                                                       American Civil Service--and other civil service laws,
                                                       rules, and regulations. Establishment of the HCAAF
                                                       fulfills OPM's mandate under the Chief Human Capital
                                                       Officers Act of 2002 (CHCO Act) to design systems and set
                                                       standards, including appropriate metrics, for assessing
                                                       the management of human capital by Federal agencies.
                                                      The regulation at 5 CFR 205.203 establishes requirements
                                                       for an agency to submit to OPM annually a Strategic Human
                                                       Capital Plan and an Agency Human Capital Accountability
                                                       Report. The requirements in the regulation are by design
                                                       congruent with the planning and reporting requirements
                                                       contained in OMB Circular A-11 and title 31 U.S.C.
Five Systems of HCAAF                                 The HCAAF outlines an ongoing process of human capital
                                                       management in every Federal agency--planning and goal
                                                       setting, implementation, and evaluating results--in five
                                                       systems:
                                                       Strategic Alignment (Planning and Goal Setting).
                                                       A system led by senior management--typically the Chief
                                                       Human Capital Officer (CHCO)--that promotes the alignment
                                                       of human capital management strategies with agency
                                                       mission, goals, and objectives through analysis,
                                                       planning, investment, measurement, and management of
                                                       human capital programs.
                                                       Leadership and Knowledge Management
                                                       (Implementation). A system that ensures continuity of
                                                       leadership by identifying and addressing potential gaps
                                                       in effective leadership and implements and maintains
                                                       programs that capture organizational knowledge and
                                                       promote learning.
                                                       Results-Oriented Performance Culture
                                                       (Implementation). A system that promotes a diverse, high-
                                                       performing workforce by implementing and maintaining
                                                       effective performance management systems and awards
                                                       programs.
                                                       Talent Management (Implementation). A system that
                                                       addresses competency gaps, particularly in mission-
                                                       critical occupations, by implementing and maintaining
                                                       programs to attract, acquire, promote, and retain quality
                                                       talent.
                                                       Accountability (Evaluating Results). A system
                                                       that contributes to agency performance by monitoring and
                                                       evaluating the results of its human capital management
                                                       policies, programs, and activities; by analyzing
                                                       compliance with merit system principles; and by
                                                       identifying and monitoring necessary improvements.
                                                      Each system consists of components that allow human
                                                       capital practitioners to assess how well the system is
                                                       strategically managing its human cpaital in compliance
                                                       with merit system principles.
Relationships Among the HCAAF Systems...............  Figure 1 below shows the relationships among the human
                                                       capital systems.


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                                                      Implementation of the HCAAF will enable agencies to
                                                       transform the Federal workplace into high-performing
                                                       arenas where every employee is enabled to understand and
                                                       maximize his or her contribution to agency mission.
                                                       Through implementation of the HCAAF, Federal agencies
                                                       will be able to focus on:
                                                       Human capital management systems and practices
                                                       that most impact attainment of their mission.
                                                       Measurable, observable agency and individual
                                                       performance results.
                                                      This will help to assure the American people's continuing
                                                       trust in their Government's ability to serve them and
                                                       protect our national security.
HCAAF Taxonomy......................................  The following components reflect the overall taxonomy of
                                                       the HCAAF.
    Standard........................................  A standard describes the critical human capital management
                                                       outcomes for agencies to strive toward in each of the
                                                       five HCAAF systems.
    Metrics.........................................  These are measurements that provide a basis for
                                                       comparison. Strategic human capital management requires a
                                                       reliable and valid set of metrics that provides an
                                                       accurate baseline against which individual agency
                                                       progress can be assessed. Required outcome metrics are
                                                       provided for the three systems that implement strategic
                                                       human capital plans and programs: Leadership and
                                                       Knowledge Management, Results-Oriented Performance
                                                       Culture, and Talent Management. These required metrics
                                                       are summarized on the following pages. Additional
                                                       suggested metrics are also included.
    Critical Success Factors........................  Each system is based on critical success factors that make
                                                       up the overall system. Critical success factors are the
                                                       areas on which agencies and human capital practitioners
                                                       should focus to achieve a system's standard and operate
                                                       efficiently, effectively, and in compliance with merit
                                                       system principles. For example, Change Management and
                                                       Diversity Management are two critical success factors
                                                       associated with the Leadership and Knowledge Management
                                                       system.
    Results.........................................  The results describe the desired effects when key elements
                                                       of a critical success factor are effectively implemented.
                                                       Results are presented in two categories: Effectiveness
                                                       results and compliance results. Compliance results refer
                                                       to specific statutory or regulatory requirements.
    Key Elements....................................  Each critical success factor contains several key elements
                                                       that are similar to the Elements of Yes that were
                                                       initially developed as part of the HCAAF. Key elements
                                                       describe what you would expect to see in an effective
                                                       critical success factor.
    Suggested Performance Indicators................  The suggested indicators--both effectiveness indicators
                                                       and compliance indicators--describe examples of visible
                                                       evidence of the existence of key elements and compliance
                                                       with merit system principles. Cumulatively, the
                                                       indicators identify how well the agency is doing relative
                                                       to key elements. The suggested performance indicators are
                                                       linked to the key elements and are not meant to be an all-
                                                       inclusive list. Human capital practitioners may need to
                                                       search for other indicators if agency approaches differ
                                                       from the list of suggested performance indicators
                                                       provided. Agencies may decide which suggested performance
                                                       indicators provide the best evidence that they have
                                                       implemented practices that lead toward achieving the
                                                       standard.
----------------------------------------------------------------------------------------------------------------


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----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
SECTION I--Introduction to the HCAAF                  Human Capital Assessment and Accountability Framework
                                                       (HCAAF)
                                                     -----------------------------------------------------------
                                                      Metrics
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Metrics.............................................  Metrics have been established to help agencies accomplish
                                                       the standard for the three systems that implement
                                                       strategic human capital plans and programs--i.e.,
                                                       Leadership and Knowledge Management, Results-Oriented
                                                       Performance Culture, and Talent Management. These three
                                                       systems have both required and suggested metrics.
                                                       Required metrics focus on human capital
                                                       management outcomes and are required for Governmentwide
                                                       reporting. They focus on human capital management
                                                       outcomes from three perspectives: organization, employee,
                                                       and merit system compliance.
                                                       Suggested metrics focus on human capital
                                                       management activities that support outcome metrics and
                                                       show the health of a specific HCAAF critical success
                                                       factor.
                                                      The metrics were developed based on extensive research
                                                       from a variety of expert sources. To be incorporated in
                                                       the HCAAF, a metric needed to meet the following
                                                       criteria:
                                                       Align with the HCAAF.
                                                       Drive organizational effectiveness directly or
                                                       indirectly.
                                                       Be applicable Governmentwide.
                                                       Be actionable (under the control of the agency).
                                                       Be practical (cost effective and acceptable).
                                                       Be reliable (stable).
                                                       Be valid (accurate and appropriate for its
                                                       purpose).
                                                      The metrics described in this Guide were carefully chosen
                                                       to maintain their usefulness over time. However, many
                                                       additional human capital metrics exist that agencies may
                                                       find they want to implement. Agencies are encouraged to
                                                       augment these Governmentwide metrics with other activity
                                                       and outcome metrics that are relevant to the agencies'
                                                       human capital objectives.
                                                      The following pages provide the system standard and the
                                                       required outcome metrics for the Leadership and Knowledge
                                                       Management, Results-Oriented Performance Culture, and
                                                       Talent Management systems. Refer to each specific
                                                       system's section for the suggested metrics.
Leadership and Knowledge Management System Standard.  Agency leaders and managers effectively manage people,
                                                       ensure continuity of leadership, and sustain a learning
                                                       environment that drives continuous improvement in
                                                       performance, and provide a means to share critical
                                                       knowledge across the organization. Knowledge management
                                                       must be supported by an appropriate investment in
                                                       training and technology.
----------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------
   Required Outcome Metric         Description             Purpose
------------------------------------------------------------------------
Organization Metric:          Difference between    To determine how the
 Competency Gaps Closed for    competencies needed   agency should
 Management and Leadership.    and competencies      target its
                               possessed by          recruitment and
                               managers and          retention, and
                               leaders.              development efforts
                                                     to bring the
                                                     competencies of its
                                                     managers and
                                                     leaders into
                                                     alignment with the
                                                     agency's current
                                                     and future needs.
Employee Perspective Metric:  Items from Annual     To determine the
 Questions from Annual         Employee Survey.      extent to which
 Employee Survey about                               employees hold
 Satisfaction with                                   their leadership in
 Leadership.                                         high regard, both
                                                     overall and on
                                                     specific facets of
                                                     leadership.
Merit System Compliance       An assessment of      To determine that
 Metric: Merit-Based           compliance with       decisions,
 Execution of the Leadership   merit system          policies,
 and Knowledge Management      principles and        processes, and
 System.                       related laws,         practices executed
                               rules, and            under the
                               regulations           Leadership and
                               governing the         Knowledge
                               Leadership and        Management system
                               Knowledge             comply with the
                               Management system.    merit system
                                                     principles and
                                                     related laws,
                                                     rules, and
                                                     regulations.
------------------------------------------------------------------------


------------------------------------------------------------------------
 
------------------------------------------------------------------------
Results-Oriented Performance   The agency has a diverse, results-
 Culture System Standard.       oriented, high-performing workforce and
                                a performance management system that
                                differentiates between high and low
                                levels of performance and links
                                individual/team/unit performance to
                                organizational goals and desired results
                                effectively.
------------------------------------------------------------------------


------------------------------------------------------------------------
   Required Outcome Metric         Description             Purpose
------------------------------------------------------------------------
Organization Metric: SES      Relationship between  To determine the
 Performance/Organizational    SES performance       extent to which SES
 Performance Relationship as   ratings and           appraisals and
 Linked to Mission.            accomplishment of     awards are
                               the agency's          appropriately based
                               strategic goals.      on achievement of
                                                     organizational
                                                     results.
Organization Metric:          Degree of linkage     To determine whether
 Workforce Performance         between employees'    all employees have
 Appraisals Aligned to         performance           performance
 Mission, Goals, and           appraisal plans and   appraisal plans
 Outcomes.                     agency mission,       that effectively
                               goals, and outcomes.  link to the
                                                     agency's mission,
                                                     goals, and
                                                     outcomes.
Employee Perspective Metric:  Items from Annual     To determine the
 Questions from Annual         Employee Survey.      extent to which
 Employee Survey about                               employees believe
 Performance Culture.                                their
                                                     organizational
                                                     culture promotes an
                                                     improvement in
                                                     processes, products
                                                     and services, and
                                                     organizational
                                                     outcomes.

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Merit System Compliance       An assessment of      To determine that
 Metric: Merit-Based           compliance with       decisions,
 Execution of the              merit system          policies,
 Performance Culture System.   principles and        processes, and
                               related laws,         practices executed
                               rules, and            under the
                               regulations           Performance Culture
                               governing the         system comply with
                               Performance Culture   the merit system
                               system.               principles and
                                                     related laws,
                                                     rules, and
                                                     regulations.
------------------------------------------------------------------------


------------------------------------------------------------------------
 
------------------------------------------------------------------------
Talent Management System       The agency has closed skills, knowledge,
 Standard.                      and competency gaps/deficiencies in
                                mission-critical occupations, and has
                                made meaningful progress toward closing
                                skills, knowledge, and competency gaps/
                                deficiencies in all occupations used in
                                the agency.
------------------------------------------------------------------------


------------------------------------------------------------------------
   Required Outcome Metric         Description             Purpose
------------------------------------------------------------------------
Organization Metric:          Difference between    To determine how the
 Competency Gaps Closed for    competencies needed   agency should
 Mission-Critical              and competencies      target its
 Occupations.                  possessed by          recruitment,
                               employees in          retention, and
                               mission-critical      development efforts
                               occupations.          to bring the
                                                     competencies of its
                                                     workforce into
                                                     alignment with the
                                                     agency's current
                                                     and future needs.
Employee Perspective Metric:  Items from Annual     To determine the
 Questions from Annual         Employee Survey.      extent to which
 Employee Survey about                               employees think the
 Organizational Capacity.                            organization has
                                                     talent necessary to
                                                     achieve
                                                     organizational
                                                     goals.
Employee Perspective Metric:  Items from Annual     To determine the
 Questions from Annual         Employee Survey.      extent to which
 Employee Survey about                               employees are
 Employee Satisfaction.                              satisfied with
                                                     their jobs and
                                                     various aspects
                                                     thereof.
Merit System Compliance       An assessment of      To determine that
 Metric: Merit-Based           compliance with       decisions,
 Execution of the Talent       merit system          policies,
 Management System.            principles and        processes, and
                               related laws,         practices executed
                               rules, and            under the Talent
                               regulations           Management system
                               governing the         comply with the
                               Talent Management     merit system
                               system.               principles and
                                                     related laws,
                                                     rules, and
                                                     regulations.
------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
SECTION II--Strategic Alignment System                The Strategic Alignment System
                                                     -----------------------------------------------------------
                                                      Human Capital Planning
                                                     -----------------------------------------------------------
                                                      Workforce Planning
                                                     -----------------------------------------------------------
                                                      Human Capital Best Practices and Knowledge Sharing
                                                     -----------------------------------------------------------
                                                      Human Resources as Strategic Partner
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
The Strategic Alignment System......................  This section contains information specific to the
                                                       Strategic Alignment system, which focuses on having a
                                                       human capital management strategy that is aligned with
                                                       mission, goals, and organizational objectives.
Definition..........................................  A system led by senior management--typically the Chief
                                                       Human Capital Officer (CHCO)--that promotes alignment of
                                                       human capital management strategies with agency mission,
                                                       goals, and objectives through analysis, planning,
                                                       investment, measurement, and management of human capital
                                                       programs.
Standard............................................  Agency human capital management strategies are aligned
                                                       with mission, goals, and organizational objectives and
                                                       integrated into its strategic plans, performance plans,
                                                       and budgets.
Critical Success Factors............................  The Strategic Alignment system is comprised of the
                                                       following critical success factors:
                                                       Human Capital Planning: The agency designs a
                                                       coherent framework of human capital policies, programs,
                                                       and practices to achieve human capital requirements to
                                                       directly support the agency's strategic plan.
                                                       Workforce Planning: The organization identifies
                                                       the human capital required to meet organizational goals,
                                                       conducts analyses to identify competency gaps, develops
                                                       strategies to address human capital needs and close
                                                       competency gaps, and ensures the organization is
                                                       appropriately structured.
                                                       Human Capital Best Practices and Knowledge
                                                       Sharing: To leverage its efforts, the agency works with
                                                       others to share best practices and learn about new
                                                       developments.
                                                       Human Resources as Strategic Partner: Human
                                                       resources (HR) professionals act as consultants with
                                                       managers to develop, implement, and assess human capital
                                                       policies and practices to achieve the organization's
                                                       shared vision. Senior leaders, managers, HR
                                                       professionals, and key stakeholders contribute to the
                                                       human capital vision and the agency's broader strategic
                                                       planning process.
Applicable Merit System Principles..................  The following merit system principle is especially
                                                       relevant to the Strategic Alignment system:
                                                       The Federal work force should be used efficiently
                                                       and effectively. (5 U.S.C. 2301(b)(5)).
Metrics.............................................  Activities and outcomes of this system are assessed
                                                       through documented evidence of a Strategic Human Capital
                                                       Plan that includes human capital goals, objectives, and
                                                       strategies; a workforce plan; and performance measures
                                                       and milestones.
----------------------------------------------------------------------------------------------------------------
Agencies are required under OPM regulations implementing the CHCO Act to submit the Strategic Human Capital Plan
 described by this system to OPM on an annual basis.
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----------------------------------------------------------------------------------------------------------------
SECTION II--Strategic Alignment System                The Strategic Alignment System
                                                     -----------------------------------------------------------
                                                      Human Capital Planning
                                                     -----------------------------------------------------------
                                                      Workforce Planning
                                                     -----------------------------------------------------------
                                                      Human Capital Best Practices and Knowledge Sharing
                                                     -----------------------------------------------------------
                                                      Human Resources as Strategic Partner
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Results: Human Capital Planning.....................  When the key elements of the critical success factor Human
                                                       Capital Planning are effectively implemented, agencies
                                                       will realize the following results:
                                                      Effectiveness Results
                                                       The agency's strategic plan establishes an agency-
                                                       wide vision that guides human capital planning and
                                                       investment activities.
                                                       The agency has a system in place to continually
                                                       assess and improve human capital planning and investment
                                                       and their impact on mission accomplishments.
                                                       Managers are held accountable for effective
                                                       implementation of human capital plans and overall human
                                                       capital management.
                                                      Compliance Result
                                                       In accordance with the Chief Human Capital
                                                       Officers Act of 2002 (CHCO Act), the agency CHCO carries
                                                       out the functions authorized in 5 U.S.C. 1402, including
                                                       aligning the agency's human resources policies and
                                                       programs with organizational mission, strategic goals,
                                                       and performance outcomes.
                                                      The following pages provide key elements and suggested
                                                       performance indicators for this critical success factor.
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                             HUMAN CAPITAL PLANNING
-----------------------------------------------------------------------------------------------------------------
                      Key Elements                                   Suggested Performance Indicators
----------------------------------------------------------------------------------------------------------------
The agency has a human capital planning system that:
     Promotes alignment of human capital         Effectiveness Indicators
     strategies with agency mission, goals, and           Key stakeholders, including HR, participate in
     objectives through analysis, planning, investment,   the development and revision of the agency's strategic
     and managem

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