State of HUMAN CAPITAL MANAGEMENT IN GOVERNMENT Report

THE HCMG

Developing the Strategies and Technologies to Support America’s Workforce

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Table of CONTENTS

Executive SUMMARY

Executive Summary ................................................... 2

Additional Contributors .......................................... 3

Key Analysis .................................................................. 3

Research Findings ...................................................... 4

In 2018, recruitment is more critical than ever to fill gaps in lines of succession ............................................4

How human capital managers perceive their current performance...........................................................5

Engaging the workforce now and in the next 12 months ............................................................................9

Using technology to transform human capital management ......................................................................12

Key Recommendations ............................................ 14

Appendices .................................................................... 14

Appendix A: Methodology ................................................14

Appendix B: Demographics .............................................15

Cornerstone .................................................................. 15

WBR Digital .................................................................... 15

Together with our partner Cornerstone, HCMG has benchmarked the last five years of progress in human capital management for government. This research is designed to aid leaders across Federal, Defense, State, and Local sectors in benchmarking their own performance and in developing America’s present and future leaders.

In 2018, human capital managers face long- standing challenges. Engagement and morale building initiatives, crucial to employee engagement and retention, are threatened by a methodical and often change-averse culture, as well as a limited ability to effectively use compensation as a performance motivator. These limitations mean government HCM leaders must rely on other tools to achieve talent management goals.

Fortunately, another long-standing trend has been government HCM leaders’ dedication to their roles and ability to identify those with the right skills for the job. Leaders are leveraging multiple strategies, including flexible work arrangements, job rotations, and one-on-one attention through training and mentorships, to drive development and engagement.

A newer but still significant trend is a desire to integrate technology with workforce management. This trend is spurred by a need to identify and develop tomorrow’s leaders, especially as high-level retirements intensify and the Millennial generation establishes its place within the workforce.

In this year’s results, we see a shift in priorities, most notably in leadership development’s fall from primary concern to third. Instead, amid increasing retirements and increased competition from the private sector, today’s HCM managers are most concerned about the ability to source appropriate talent and provide continuous training and development.

This report will uncover where HCM leaders face their hardest challenges, as well as how they are overcoming them through technology and best practices.

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Additional CONTRIBUTORS

Key ANALYSIS

In addition to the benchmark data and analysis contained in this report, we have the privilege to share insight from some of the most respected members and experts of the Government HR community. These HR leaders have reviewed our research and used their experience to add context and color to the data. Interviews centered on benchmark findings as well as key trends identified by research.

The most-cited barriers to change? Culture, in tandem with organizational structure and internal communications.The agency environment moves more slowly than the private sector, and this translates to fewer opportunities to roll out new initiatives. Creativity can be a key asset for getting around this challenge.

Technology is a double-edged sword, both a barrier and an enabler to success. Respondents are clear on the importance of gaining analytics in the areas of engagement, skill development, morale management, and leadership development, with all of these areas ranked as important or critically important by at least 70%.

For the first time, a critical need for succession planning has supplanted leadership development as the top priority. Recruiting people with the right skills for the job, along with closing skill gaps, are both ranked as top priorities for human capital managers this year, pushing leadership development down into third place. However, this does not imply that leadership is no longer critical; rather, that expanding the workforce and setting them up for success is now even more important, as a robust and well-trained workforce is crucial to thriving in today’s rapidly changing economy.

Steve Dobberowsky Senior Principal Cornerstone OnDemand

Kami Keszler Deputy Director, Office of Talent Management & Succession Planning Covered California

Aaron Lee Director of Leadership & Professional Development Veterans Benefits Administration

Debra Schweikert Assistant Inspector General for General Management Federal Deposit Insurance Corporation

Angela Bailey Chief Human Capital Officer Department of Homeland Security

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Research FINDINGS

In 2018, recruitment is more critical than ever to fill gaps in lines of succession.Human capital management leaders in government are worried about the future—and for good reason. Agencies face increasing leadership and knowledge gaps, primarily due to Boomer retirements. Thus, it’s not surprising that 36% of respondents reported that succession planning is the greatest need for staff development. This new urgency is reflected by the fact that, in past years, succession planning has been ranked not first, but third.

Continuous learning and development is also now the second most cited priority, suggesting that

strengthening the pipeline of talent within the workforce is being looked at as another key to filling emerging gaps in the high-level workforce.

Interestingly, prioritizing technology integrations to help streamline human capital management processes has remained the greatest area of development for just over 10% of respondents for the past two years. As human capital management programs develop, leaders who are ahead of the curve prioritize bringing in next generation tools to boost the potential of the employee base even further.

Where do you see the greatest need for staff development within your organization?

36% 28% 24% 12%Succession Planning Continuous Learning

& DevelopmentLeadership

DevelopmentUse of Technology Systems

& Applications

What are your organization’s top three talent management priorities for 2018?

Identifying/Closing Skills

Gaps

Recruiting People with

the Right Skills for the Job

Training and Development

for All Staff

Annual Performance

Reviews

Identifying/Retaining Top Performers

Succession Planning

Employee Engagement

Leadership Development

First Priority Second Priority Third Priority

27%34%

10%

6%

16%

6%6% 9% 13% 12%24%

10%10%9%9%5%2%3%

10% 11%8%

24%19% 19%

“You have to know who on the staff is actually interested in leadership. There is many a story of how a person was identified as “high potential” and given extra training, mentoring, etc., only to find out that they had no interest in a higher level position because they didn’t want the stress or wanted to be able to spend more time with their family than a higher level position would allow. We recently conducted a survey of 12s, 13s and 14s to see who is actually planning on seeking a higher grade as an initial step.”

- Debra Schweikert, Assistant Inspector General for General Management, Federal Deposit Insurance Corporation

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Respondents’ talent management priorities align with the desire for more succession planning. As in 2017, leaders are most concerned about the ability to recruit people with the right skills for the job. Identifying and closing skill gaps within the current workforce ranked second in talent management priorities, followed by

leadership development. Employee engagement is notable as a leading secondary priority.

It’s clear that talent management priorities are centered around bringing more high-potential talent into the ranks, then focusing on rolling out broad development strategies while remaining attentive to the stars that rise to the top.

How human capital managers perceive current performance.

Where are agencies performing well?

Annual performance reviews and recruiting people with the right skills are standout areas, along with training and development for all staff. This points to the fact that government human capital managers are adept and experienced at identifying the highly specialized skills required of people within their organizations.

Challenge areas include the ability to provide continuous feedback, as well as identifying and retaining top

performers. The identification and closing of skill gaps is an area where the majority feel that they are performing on a strictly average level. Retention is a commonly echoed pain point within government agencies, as competition from the private sector for top performers can be difficult to counteract without a clear strategy in place. In addition, without the proper resources in place, it can be a challenge to follow up on employee development with continuous feedback.

“Succession planning, especially in the federal sector, is a great challenge because of the concerns of pre-selections. You don’t want to build a succession plan with any particular person in mind because that gives the appearance that there is no room for competition for those roles.

The way that we address that is by looking at position management. That’s an archaic HR terminology that I’d like to bring back because I think it has a lot of utility. In position management, you really look at the totality of the work that you have and build a succession plan around your needs versus your wants. That is one of the challenges that we have in succession planning because we look at the workforce versus the work.

When we look at the work that we have to get done, we can then determine which positions are critical to ensure success for those particular duties versus focusing on projects and initiatives. We focus so much on those projects that we think losing ten people on a particular project means we will need ten more people to replace them. However, if we look at it five to ten years down the road from a portfolio perspective, then those projects might have been phased out, rendering themselves obsolete.”

- Aaron Lee, Director of Leadership & Professional Development, Veterans Benefits Administration

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“It’s not a good thing that we are under the same classification of the Civil Service Reform Act which is almost 40 years old. That says a lot about our willingness to change. It goes to the government’s willingness or ability to actually adapt and change its approach to different things. We’re often rigid and we err on the side of what has passed and what is law.

The majority of organizations would still say that they’re understaffed and can’t meet their mission because of it. There is a huge shortage, and we are unable to fill it because it’s so complicated getting the right people with the right skills at the right time with the right level of effort. It’s tough. That’s recruiting and onboarding. We have to take some steps to revamp some of the classification issues, barriers, etc. that are causing problems. Also, I think that the hiring freeze did damage to federal agencies as it hampered the way that they’re able to meet their mission.

Organizations that we rely on for services to our citizens, such as the IRS for example, said this year that they’re only able to handle a certain percentage of customer calls because of staffing. If we’re not able to fill those positions, we’re not able to meet those missions.”

- Steve Dobberowsky, Senior Principal, Cornerstone OnDemand

17%

27%

37%

19%

18%

8%

21%

48%

52%

43%

45%

48%

54%

65%

35%

21%

20%

36%

34%

38%

14%

How do you feel your current agency performance ranks on the following initiatives?

Leadership development

Identifying/retaining top performers

Continuous feedback

Annual performance reviews

Training and development for all staff

Recruiting people with the right skills for the job

Identifying/Closing skills gaps

Low performing Somewhat successful High performing

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Human capital managers report strong results in job satisfaction and employee engagement. This syncs with years past, as employees from federal, defense, state, and local government sectors have a reputation for being committed to their jobs.

Trouble spots this year include succession planning, with agencies reporting new challenges, and change management, with agencies uncertain they are navigating change effectively.

Recruitment and development of talent is strictly average, which in the context of a succession and leadership crisis is a negative finding.

Leaders in human capital management are proud of their ability to know the right skills when they see them, as well as the ability to find people who are engaged with the work that they are doing. Where issues arise is in developing systems for identifying and rewarding high performers who stand out in the course of supporting the workforce at large, as well as facilitating an evolving workforce that can retain talent in the face of private sector competition.

“I think the old approaches to talent management are not working with the younger generation. I firmly believe agencies are realizing they need to develop and implement a true human capital plan that will work with the younger generations. This is now a necessity, not just something that would be a “nice to have.” Older methods of developing staff are simply too slow. Staff don’t have the patience for lots of classroom learning. Anytime, anywhere development solutions are critical.”

- Debra Schweikert, Assistant Inspector General for General Management, Federal Deposit Insurance Corporation

20%

22%

23%

46%

26%

28%

35%

58%

45%

40%

43%

45%

49%

46%

22%

33%

37%

11%

29%

23%

19%

How do you feel your agency ranks on the following metrics?

Recruitment and development of high-potential talent

Employee engagement

Job satisfaction

Succession planning

Results-oriented performance culture

Leadership and knowledge management

Change management

Low performing Somewhat successful High performing

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“With the continued wave of retirements over the next decade, the challenges of attracting and retaining talent has never been greater. Slow, stodgy, and standardized practices simply won’t work in winning the talent race. The employers that will win the talent race are those that adapt to changing times, anticipate their workforce needs, share great stories about the opportunities of working for their organization, and invest in and engage their employees. Purposeful, intentional, and strategic attention to talent management and succession planning are keys to preparing for workforce transitions, building needed bench strength, and growing future leaders. Covered California understands the risk of not addressing these challenges could result in having inadequate time to develop potential internal leadership candidates, become more dependent on the external talent market and top employees would be more likely to pursue outside employment opportunities because they do not see a career path within Covered California. Covered California continues to make the case for change and champions it.”

- Kami Keszler, Deputy Director, Office of Talent Management & Succession Planning, Covered California

Human capital managers report strong results in job satisfaction and employee engagement.

JobSatisfaction

Employee Engagement

Agencies report trouble spots and new challenges, as well as uncertainty in navigating these areas effectively.

Succession Planning

Change Management

Flash Findings

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Engaging the workforce now and in the next 12 months.

Which of the following has your organization implemented/plans to implement to improve and increase employee engagement and motivation within your organization?

Increase training and employee

resources

Non monetary recognition

Mentorship programs

Rotations Teleworking/workplace flexibilities

Salary adjustments

Work/life programs

Has implemented in the past 12 months Plans to implement in the next 12 months

49%59%

50%34%

69%

30%

52%39% 36% 41%

13%27% 25%24%

Human capital managers are tasked with finding budget-neutral strategies for improving morale and increasing engagement, and to that end, the majority of respondents have implemented teleworking and workplace flexibilities, non monetary recognition, and work/life programs to balance the pressures of employees’ jobs. Mentorship programs are implemented in 50% of respondents’ working environments, and can be a key component in retaining and elevating the next generation of leaders. Just under half of respondents have been able to increase the training and resources that they provide to their employees, whereas 30% were able to make salary adjustments.

Going forward, rotations are the most common strategic tool that human capital managers are planning on rolling out, thus allowing employees to gain experience in different areas, departments, or agencies. Even cross-departmental employee exchanges can create a work experience that feels dynamic and is rich with new opportunities.

A further 39% of respondents are planning to increase training and employee resources, while 36% will be implementing new mentorship programs, bringing the total percentage of respondents embracing the value of mentorship in a formal capacity up to 89%. In the case of salary adjustments, the total value is 57%.

“One of the strategies outlined in our 2017-2020 Workforce and Succession Plan centers on ‘maintaining a culture that values and engages people.’ Culture matters. Every organization has a culture and you can either respond to it or influence it. Culture is what draws people to an employer. It is something that fuels being able to do well in the organization. A culture that provides a framework for action, guides behavior, engages employees, encourages collaboration, and builds employee commitment and loyalty helps make an organization an employer of choice – and a great place to work. Connecting employees to Covered California’s mission and creating an environment in which employees are actively engaged, know they are valued resources whose work matters, and are proud to work for Covered California is of utmost importance. An inclusive culture, a comprehensive employee engagement program, flexible HR practices, leadership development opportunities and access to great technology tools all support such efforts. Covered California utilizes employee engagement surveys because they provide useful information that enables the department to identify meaningful opportunities for organizational improvement.”

- Kami Keszler, Deputy Director, Office of Talent Management & Succession Planning, Covered California

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“Over the last seven to ten years, we’ve seen a major increase in younger workers entering into federal service. In the past, there were fewer programs and initiatives geared towards bringing college-age students into the workforce. Now we’re seeing more of that. There are new hiring initiatives that bring in scholars and have brought in a surge of younger workers. Younger workers, inclusive of the interns that we receive during the summer, didn’t always have a strong desire for leadership development. Now, they really want to grow, and there is a great need for that. They also have a strong desire to be able to work when they want, where they want.

The needs of younger workers are much more advanced and much more aggressive than those in the last ten to fifteen years. The telework movement, although an archaic idea, is still very new in practice. Some agencies are just now introducing the option to telework, let alone a telework schedule and virtual or remote work. These newer employees are now requiring these flexible work arrangements. If we want to be competitive with industry, we have to consider these options because the industry is offering virtual work.

These students that are coming into the workforce are looking for those benefits that the government offers. One of the benefits the federal sector tends to offer more so than the industry is training and leadership development. This is why that percentage of younger workers entering Federal service increased, and I think you will continue to see that number grow. Younger workers really do want the development, but they also have the need and desire to be able to have workplace flexibility.”

- Aaron Lee, Director of Leadership & Professional Development, Veterans Benefits Administration

Thought Leader SPOTLIGHT

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Existing strategies used to build morale and boost engagement are primarily driven by employee recognition, which 81% of respondents are applying as a technique. The practical applications of how this works will vary, but the recognition of positive contributions plays a key role in developing a highly effective workforce.

Work from home options have been a staple of government engagement strategies, as reflected by previous years’ studies. Teleworking offers an additional layer of control to the employee, which can work wonders for engagement and build a higher quality of life that can be more valuable than salary adjustments in the right contexts.

One-on-one trainings, as well as the provision of work retreats and other planned activities, are additional pieces of value that are used by over a third of respondents. The low prevalence of mentoring in the morale boosting category reflects the importance of the technique as a tool for developing talent that is often already highly engaged with their roles and seeking the tools to take the next steps.

Human capital managers are finding ways to influence engagement and morale by allowing a more flexible and balanced approach to work and life to emerge, though their biggest challenges are centered on making these changes stick within a culture that can be averse to untested methodologies and full of high achievers.

What are some strategies you are using for morale management and boosting engagement?

81%Employee

recognition programs

71%Work from home

options

39%One-on-one

training/coaching

34%Work retreats/

planned activities

6%Other

5%Mentoring/shadowing programs

“DHS has integrated our engagement and leader development strategies, given the symbiotic role that both play in cultivating and sustaining workforce excellence. Effective leadership results in engaged employees, and engaged employees, in turn, can serve as leaders. But while development and engagement strategies are important catalysts to increase awareness and innovation – they don’t alone equal “engagement.” That requires a culture that inspires, highlights, rewards, and builds upon principles and practices such as transparency, communication, fairness, and opportunity for all. This year, the Deputy Secretary traveled around the country on listening tours, talking to employees about their experiences at DHS and soliciting their ideas. The Deputy Secretary also launched DHS Leadership Year in order to further promote a culture of effective and strong leadership at DHS, highlight the importance of leadership at all levels, and set expectations for a culture of DHS leadership excellence.

- Angela Bailey, Chief Human Capital Officer, Department of Homeland Security

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Using technology to transform human capital management.

Technology plays a critical role in transforming human capital management. Automation of key processes streamlines workflows, reduces or eliminates manual work, and increases access to real-time data and workforce insights.

Today, automation is most commonly used to streamline onboarding, preboarding, and assessments. The area where it is the least commonly adopted is ironically also one of the areas of greatest need for government human capital managers: succession planning.

64%

39%

30%

43%

10%

41%

47%

43%

3% 23%

6% 14%

13% 10%

7% 7%

Are you currently using or planning on using automated tools for the following processes?

Succession

Assessment

Onboarding

Preboarding

Not using Currently using Implementing now Implementing in the next 12 months

“IT has the ability to help us with better decision making by putting more meaningful, relevant information in front of us. That’s the real opportunity. IT can help us become more aware of what’s going on in our organizations to make better decisions. We could make decisions based on what we’re seeing in terms of trends, or on the flip side, based on what we don’t want. It could tell us things not to do and things we might want to do.

The other thing that IT and learning technologies can do for the organization is create opportunities for our employees to collaborate. All the research out there points to the fact that learning needs to be done in a collaborative way. Most people value the learning that they have with their teammates, coworkers, or colleagues as opposed to getting sent to do a course at an organization, with a vendor, or online. That ability to collaborate and do things together is enabled by IT.

With technologies, analytics, and machine learning, we find that the talent management solutions and IT solutions for human capital are becoming able to give you that Netflix-feel. You watch something on Netflix and it tells that if you liked it you might be interested in this one, too.

It’s that ability to curate content in the talent management solution. “People in your position often take this.” Those types of things haven’t been in our solutions until now. It’s time that human capital starts to employ analytics and machine learning for its benefit.”

- Steve Dobberowsky, Senior Principal, Cornerstone OnDemand

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7%

6%

14%

12%

30%

27%

31%

26%

34%

28%

29%

38%

22%

29%

22%

14%

7%

10%

4%

10%

On a scale of 1-5, how developed are the analytics you are currently getting in the following areas?

Skill development

Employee engagement

Morale management

Leadership development

1 - Least developed 2 3 4 5 - Most developed

Respondents are reporting their most developed analytic capabilities are centered on employee engagement and skill development. While proportionally more respondents feel that they must

improve how they are handling analytics related to leadership development and morale management, in both cases, at least 24% of respondents have well developed or highly developed analytics in place.

2%

2%

2%

7%

6%

14%7%

5%

4%

17%

34%

23%

18%

30%

37%

33%

45%

43%

33%

38%

On a scale of 1-5, how important is it to gain analytics in the following areas?

Skill development

Employee engagement

Morale management

Leadership development

1 - Least important 2 3 4 5 - Most important

Compared to their self-reported development of analytics around key talent management priorities, the level of importance human capital managers assigned to each listed metric is much greater than the capability supporting it. Government human capital managers must focus on implementing the right tools, bridging gaps in insights into key areas, such as skill development, engagement, and leadership development.

Skill development is the leader in overall importance, followed closely by employee engagement metrics, as understanding how engaged an employee base is along with whether their skill set can support their workload are the pillars of workforce management. That said, both leadership development and morale management have at least 70% of respondents assigning them a heightened or extreme level of importance.

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Key RECOMMENDATIONS

Think beyond compensation to build morale and engagement.The human capital managers who are most successful in building morale and engagement recognize that monetary rewards are not always the most effective way to influence highly dedicated and skilled people.

Learning and career development opportunities are very effective at engaging both Millennials and more established workers. While flexible work programs are widely used as an engagement method, other methods such as job rotations are also being looked at to add value and sustain enthusiasm, with the added benefit of helping identify where talent can best flourish.

Promote mentor-mentee relationships among leaders and high potentials. Mentorship offers value that can last a lifetime through the transfer of leadership skills and the creation of important relationships. As 68% of respondents invest in training and development this year, they should seek to identify highly engaged employees and provide them with opportunities for guidance that can stay with them throughout their professional lives.

Look to technology to build greater efficiency into human capital management initiatives. Human capital managers have clearly expressed that they value the use of analytics to evaluate their methods. The next step is to extend those capabilities to include metrics more relevant to their missions, and to expand the use of automation beyond onboarding and preboarding. While some of the most advanced organizations have begun to take these steps, technology remains an area with significant potential for the majority of the government workforce.

Appendices

Appendix A: Methodology

The results analyzed in this report were gathered from responses to an on-site benchmarking survey delivered at HCMG 2017, as well as emails delivered to the HCMG Email Database in Q4 of 2017 and Q1 of 2018. 109 government HR executives on the Federal, State, and Local levels responded to the survey. Interviews with sources were conducted after survey data was compiled and centered on the discussion of benchmark results.

The data in this report and the views expressed therein do not represent the views of any of the Agencies mentioned in this document, but are the subjective opinions of the contributors and publisher.

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About

Appendix B: Demographics

Cornerstone OnDemand (NASDAQ: CSOD) is pioneering solutions to help organizations realize the potential of the modern workforce. As a global leader in cloud-based human capital management software, Cornerstone is designed to enable a lifetime of learning and development that is fundamental to the growth of employees and organizations. From recruitment, onboarding, training and collaboration, to performance management, compensation, succession planning, people administration and analytics, Cornerstone is there at every phase of the employee lifecycle.

Cornerstone is a single, unified solution that is completely configurable to meet the talent strategy, compliance, business and workflow needs of an organization. Cornerstone works with corporations of all sizes, government agencies, hospitals, nonprofits and schools. Our software and services are used by more than 3,200 clients worldwide, spanning more than 35 million users across 192 countries and 43 languages.

For more information, visit www.cornerstoneondemand.com/federal-government or www.cornerstoneondemand.com/state-local, follow us on Twitter @CornerstoneInc and like us on Facebook at facebook.com/CSODcommunity.

WBR Insights connects solution providers to their target audiences with year-round online branding and engagement lead generation campaigns. We are a team of content specialists, marketers, and advisors with a passion for powerful marketing. We believe in demand generation with a creative twist. We believe in the power of content to engage audiences. And we believe in campaigns that deliver results.

In which sector does your organization belong? What is your primary job function within your organization?

2% Other2% Diversity and inclusion

70% Federal

10% Defense /Military

7% Local

5% State

3% Contractor

3% Combination of State, Local, and Federal

38% Human resources

25% Workforce planning

11% Training & development

7% Other

7% Management

6% Recruitment

3% Employee Engagement