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The Business Case for Investing in Human Capital Management

The payoff will be improved agency performance—and the gains could be significant.

The new report from the National Academy of Public Administration, “Elevating Human Capital: Reframing the U.S. Office of Personnel Management’s Leadership Imperative,” is on target. Government needs to invest continually in improving its human capital management policies and practices. The payoff will be improved agency performance—and the gains could be significant. 

The 2020 National Defense Authorization Act directed the independent study by NAPA after the Trump administration tried to dismantle OPM, arguing that it was not resourced or structured to be effective. The NAPA study confirmed that’s largely true, but the Academy determined that the answer is not to break up OPM, but instead to elevate it and broaden the HR agency’s role. 

Human capital management is more than implementing laws and regulations, and more than policies or practices. It happens every workday and impacts the lives of employees and their families. When employees feel they are disrespected or not valued, they look for new employers. Those who feel locked in often become disengaged. Some become destructive. The factors that influence how employees feel about their work experience include the messages from leaders and interactions with local managers, not the policies announced by the HR office.

Prior NAPA reports focused on the “compliance culture” in government. Realistically, human capital practices have minimal impact on an organization’s culture. In government, the culture long predates the 1978 Civil Service Reform Act. Numerous reports and initiatives like President Clinton’s National Performance Review have focused on changing the culture but have had minimal impact. 

Government needs to rebuild its workforce and the recommendations in the new NAPA report will certainly help. But rebuilding will necessitate improving government’s brand—its reputation both as an employer and as a valued service provider. Agencies should consider publicizing their accomplishments. The early turnover of new hires confirms it will be important to improve the day-to-day work experience of employees, and that is not something an HR office controls. Both are fundamentally important to make rebuilding possible.

An important step following the release of the new NAPA report would be to document the workforce problems. These problems have a cost. Gallup’s studies linking engagement and performance metrics confirm the failure to engage employees is costly. Rebuilding will require hiring, retaining and engaging talent. New hires who resign represent a wasted, sunk cost. There have been repeated reports arguing that government needs to address its workforce problems but in the past the reports were quickly forgotten. That should not happen again.

Government’s Purpose Should be an Advantage

Businesses should be looking to government as a model. The latest idea on business websites is that when employers emphasize their purpose, it helps with recruiting and engaging top talent. The subject has been discussed at the World Economic Forum and by the Business Roundtable. To state what should be obvious: Agencies were created to serve a societal purpose.

The best source to understand the importance of purpose is a 2010 book The Why of Work, by the highly regarded organization consultant, David Ulrich and his psychologist wife, Wendy Ulrich. They explain why it’s important to emphasize purpose:

“On an individual level, people who understand their job's wider purpose are happier, more engaged, and more creative. And, from an organizational perspective, when employees see how their roles fit with the company's goals, staff turnover goes down and productivity rises. People work harder, use their initiative, and make sensible decisions about their work. Everyone, from the CEO to customers, feels the positive effects.”

Employees who are emotionally engaged, have requisite skills, and are empowered to make job-related decisions may make occasional mistakes but they are assets, not performance problems. Investing in employees and in improving their work experience pays off. 

The importance of purpose is clear in the scenes of hospital staff saying goodbye to patients treated successfully for COVID. Their satisfaction is almost palpable. We saw the celebration of the mission crew when Perseverance landed on Mars. The satisfaction from federal accomplishments is frequently displayed in movies and TV shows. The challenge of tackling problems and the anticipated gratification of success contributes to better performance. 

High performing organizations have employees who embrace the importance of their work. Those organizations celebrate achievements throughout the year. It builds collaboration and esprit de corps, contributing to better performance. Employees take pride in being members of a winning team. That has to be true for everyone involved in producing and distributing the COVID-19 vaccines. It does not have to be limited to major accomplishments. There is a saying in healthcare, “One patient at a time.” Everyone involved wins.

Last year the Presidential Rank Awards were cancelled but the Office of Personnel Management announced the awards program will resume this year. It's consistent with President Biden’s promise to value the contributions of federal employees. Recognizing accomplishments is important at every level.

In contrast, at a recent Congressional subcommittee hearing to “revitalize the federal workforce,” the discussion returned repeatedly to Trump’s controversial 2018 executive order making it easier to fire “poor performers.” Every organization has employees who need to improve their performance but only in government would the problem be discussed in a meeting to “revitalize” the workforce.

The workforce problem is heightened by the merit principles and addressed in Title 5, where unacceptable performance is defined as failure “to meet established performance standards in one or more critical elements of such employee's position.” Similarly, a Merit System Protection Board document discussing the nine principles reads, “employees should be retained on the basis of the adequacy of their performance” and says employees “should be used efficiently and effectively.” Those statements differ significantly with the management philosophy in the great places to work. 

The Merit Principles Need Updating

The merit principles became law when they were stated in the Civil Service Reform Act, although the management philosophy expressed in the principles goes back decades. The idea that employees should be protected goes back more than a century to the 1912 Lloyd–La Follette Act, which defined “just cause” as those that would promote the "efficiency of the service.”

The 1970s were a very different era. Then nearly one-third of U.S. workers belonged to a union. Today, in the private sector only 7.2% belong to a union; for employees in the primarily white collar sectors, it’s 3% or less. The phrase “blue collar blues” was used to capture what was happening in industry. The phrase “the presence of women in a male workplace” was used in an editorial. The demand for pay equity was just getting started. Microsoft was new. Personal computers were also new. 

Four decades later, the thinking behind the merit principles is the foundation of government workforce management. There is nothing wrong or ill-advised in the principles, but the language could be updated and expanded to express better government’s commitment to its employees. Suggested changes include:

  • Adding a commitment to assess workforce demographics regularly to identify patterns that suggest discriminatory personnel practices.
  • Replacing “equal value” with “fair and generally competitive” pay levels. Years ago, OPM searched for a practical way to define “value” and concluded it does not exist. All pay is relative and directly or indirectly based on market pay levels. “Value” is not a consideration in salary management.
  • Using the workforce “efficiently and effectively” and the phrase “required standards” is wording reflective of the era when industrial engineers determined worker performance expectations. The phrase “adequacy of their performance” focuses on minimum performance. The pandemic makes the idea of “standards” implausible. The goal should be to encourage employees to perform at their best. The commitment should be to confirm ratings are credible and defensible.
  • Modifying the principle related to training to emphasize effective supervision, with coaching to improve job-related skills, and to provide guidance to achieve career goals.

The merit principles should be seen as commitment to what employees can expect in a federal career. Many companies are now posting statements confirming the value of their employees. 

Rebuilding Public Support

A Pew Research survey late last year found only 20% of U.S. adults say they trust the government in Washington to “do the right thing” just about always or most of the time. That was near historic lows. With the Biden administration’s COVID success stories, it’s highly likely that a similar survey today would show increased levels of trust.

That is supported by Deloitte’s recent report, “Rebuilding Trust in Government.” They found four “signals” are linked to the public’s trust. Two of the signals, capability and reliability, are defined by statements associated with good performance. The research suggests agencies should highlight their achievements to keep the public informed. The other two signals, humanity and transparency, are exemplified by President Biden’s public statements. 

Government performance also plays a role in recruiting and retaining talent. Careers in government have always attracted a segment of young job seekers but many more would be attracted if agencies were valued by the public for their accomplishments. When agencies are respected for their service to the public, it enhances the way everyone views the organization, including career counselors, professors, and parents. Rebuilding is more than numbers; it’s about attracting and engaging top talent.