Military Personnel: Oversight Process Needed to Help Maintain	 
Momentum of DOD's Strategic Human Capital Planning (05-DEC-02,	 
GAO-03-237).							 
                                                                 
The Department of Defense (DOD) has, in the past, lacked a	 
strategic approach to human capital management. In April 2002,	 
DOD issued two human capital strategic plans for military	 
personnel. One plan addresses military personnel management and  
policies; the second addresses quality of life issues affecting  
service members and their families. As a follow-on to its recent 
work on benefits for military personnel, GAO reviewed the extent 
that these two plans, in addressing military benefits, promote	 
(1) the integration and alignment of human capital approaches to 
meet organizational goals and (2) the use of reliable data to	 
make human capital decisions--two critical success factors for	 
human capital planning. GAO also reviewed DOD's plans for	 
overseeing the progress and implementation of its human capital  
plans.								 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-237 					        
    ACCNO:   A05645						        
  TITLE:     Military Personnel: Oversight Process Needed to Help     
Maintain Momentum of DOD's Strategic Human Capital Planning	 
     DATE:   12/05/2002 
  SUBJECT:   Human resources utilization			 
	     Personnel management				 
	     Military personnel 				 
	     Quality of life					 

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GAO-03-237

Report to the Secretary of Defense

United States General Accounting Office

GAO

December 2002 MILITARY PERSONNEL

Oversight Process Needed to Help Maintain Momentum of DOD*s Strategic
Human Capital Planning

GAO- 03- 237

DOD*s human capital plans addressing military personnel and quality of
life represent a positive step forward in fostering a more strategic
approach to human capital management. The two plans lay some of the
groundwork needed to incorporate benefits into the strategic management of
human capital. The plans, for example, recognize that benefits are
important elements to meeting recruiting and retention goals and to
alleviating some of the hardships of military life. However, the two plans
do not satisfy the two critical success factors GAO has identified for
human capital planning.

 The plans do not specifically address how DOD will integrate and align
benefits with other human capital approaches to meet organizational goals.
DOD*s plans identify a number of initiatives, but the plans do not
describe how individual initiatives, many of which are studies, will work
in conjunction with one another to meet DOD*s goals and objectives. For
example, one of DOD*s initiatives is to study alternatives to the military
retirement system, and another initiative is to study variable career
lengths for officers. However, the human capital plans do not explain how
these two initiatives may be integrated and aligned with each other to
achieve desired outcomes.  The military personnel strategic plan also
does not identify outcomeoriented performance measures or discuss, at a
strategic level, military

workforce needs or gaps in meeting these needs* the kinds of data used by
high- performing organizations to manage their human capital.

DOD lacks a process for overseeing the progress and implementation of its
human capital plans from a strategic vantage point. Without such a
process, DOD may have difficulty integrating and aligning benefits and
other human capital approaches to meet organizational goals and promoting
a datadriven, performance- oriented approach to human capital management.
Moreover, an oversight process could help DOD officials maintain the
momentum of their strategic human capital planning efforts. DOD is
considering establishing a Defense Human Resources Board to maintain the
viability of its strategic human capital planning, but DOD officials have
not determined the roles and responsibilities of the board.

MILITARY PERSONNEL

Oversight Process Needed to Help Maintain Momentum of DOD*s Strategic
Human Capital Planning

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 237. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Derek B. Stewart at (202) 512- 5140 . Highlights of
GAO- 03- 237, a report to the

Secretary of Defense

December 2002

The Department of Defense (DOD) has, in the past, lacked a strategic
approach to human capital management. In April 2002, DOD issued two human
capital strategic plans for military personnel. One plan addresses
military personnel management and policies; the second addresses quality
of life issues affecting service members and their families.

As a follow- on to its recent work on benefits for military personnel, GAO
reviewed the extent that these two plans, in addressing military benefits,
promote (1) the integration and alignment of human capital approaches to
meet organizational goals and (2) the use of reliable data to make human
capital decisions* two critical success factors for human capital
planning. GAO also reviewed DOD*s plans for overseeing the progress and
implementation of its human capital plans.

GAO recommends that DOD establish an oversight process by which senior DOD
officials may integrate and align benefits and other human capital
approaches and promote a fact- based, performance- oriented approach to
human capital management. As one option, DOD may wish to consider
incorporating this oversight responsibility into the mission of the
planned Defense Human Resources Board. DOD agreed with the recommendation.

Page i GAO- 03- 237 Human Capital Planning Letter 1

Results in Brief 2 Background 3 Human Capital Plans Are a Step Forward but
Not Fully Developed 5 Conclusions 8 Recommendation for Executive Action 9
Agency Comments 9 Scope and Methodology 9

Appendix I Comments from the Department of Defense 11

Table

Table 1: Compensation- Related Studies and Milestones in DOD*s Military
Personnel Strategic Plan 6 Contents

Page 1 GAO- 03- 237 Human Capital Planning

December 5, 2002 The Honorable Donald H. Rumsfeld The Secretary of Defense

Dear Mr. Secretary: People are at the heart of an organization*s ability
to perform its mission, yet a key challenge for many federal agencies,
including the Department of Defense (DOD), is to strategically manage
their human capital. 1 Along with Congress and the administration, we have
been focusing increased attention on the need for improved human capital
management across the government. In March 2002, we published a model to
assist federal agencies in their human capital management. 2 Under our
model, one of the four cornerstones of strategic human capital management
is strategic human capital planning. 3 The two critical success factors to
strategic human capital planning that we identified in our model are (1)
integration and alignment of human capital approaches and (2) human
capital decisionmaking that is data- driven. Since 1997, a number of DOD
studies have recommended that DOD adopt a strategic approach to managing
its human capital. We too have encouraged DOD to improve its human capital
management by taking a more strategic approach. For instance, we testified
in March 2001 that DOD must step up its efforts to identify current and
future workforce needs, assess where it is relative to those needs, and
develop strategies for addressing any related gaps. 4 More recently, in
our work on benefits for active duty military personnel, we noted that DOD
lacked a human capital strategy that would align all

1 Throughout this report, we use the term *human capital* to refer to an
organization*s workforce or human resources. 2 See U. S. General
Accounting Office, A Model of Strategic Human Capital Management, Exposure
Draft, GAO- 02- 373SP (Washington, D. C.: Mar. 2002). 3 The other three
cornerstones are leadership; acquiring, developing, and retaining talent;
and results- oriented organizational cultures. 4 See U. S. General
Accounting Office, Human Capital: Major Human Capital Challenges at the
Departments of Defense and State, GAO- 01- 565T (Washington, D. C.: Mar.
29, 2001).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 237 Human Capital Planning

elements of DOD*s human capital management, including pay and benefits,
with its broader organizational objectives. 5

As a follow- on to our work on active duty military benefits, we reviewed
two human capital strategic plans that DOD published in April 2002. One of
these plans addresses military personnel priorities. The other plan
addresses quality of life issues affecting service members and their
families. According to DOD officials, the plans are intended to complement
one another and, together with a third human capital plan addressing
civilian personnel, constitute DOD*s overall human capital strategy. We
have undertaken a separate review of DOD*s civilian human capital
strategic management. For this report, our specific objectives were to
review the extent that these two plans, in addressing active duty military
benefits, promote (1) the integration and alignment of human capital
approaches to meet organizational goals and (2) the use of reliable data
to make human capital decisions* the two critical success factors
identified in our model. We also reviewed DOD*s plans for overseeing the
progress and implementation of its human capital plans. In conducting our
work, we recognized that federal agencies employ a wide variety of
approaches to manage human capital. These human capital approaches may
include policies and practices for recruitment, compensation (which
includes pay as well as benefits), promotion, career development, and
retention. Benefits are one of the important human capital tools an agency
has at its disposal for shaping its workforce and meeting organizational
goals. As such, they may provide a useful lens for examining the current
state of DOD*s strategic human capital planning as represented by the two
human capital plans we reviewed.

DOD*s human capital plans addressing military personnel and quality of
life represent a positive step forward in fostering a more strategic
approach to human capital management within DOD. The two plans lay some of
the groundwork needed to incorporate benefits into the strategic
management of human capital, but they do not satisfy the two critical
success factors identified in our strategic human capital management
model. The plans recognize that benefits are an important element to
meeting recruiting and retention goals and to alleviating some of the

5 See U. S. General Accounting Office, Military Personnel: Active Duty
Benefits Reflect Changing Demographics, but Continued Focus Is Needed,
GAO- 02- 557T (Washington, D. C.: Apr. 11, 2002). Results in Brief

Page 3 GAO- 03- 237 Human Capital Planning

hardships of military life; establish long- term goals for a number of
benefits, including health care, housing, and family support; and call for
studies of other benefits, including the military retirement system and
sabbaticals. The plans, however, do not specifically address how DOD will
integrate and align benefits with other human capital approaches to meet
organizational goals. For example, one of DOD*s initiatives is to study
alternatives to the military retirement system, and another initiative is
to study variable career lengths for officers. However, the plans do not
explain how these two initiatives may be integrated and aligned with each
other to achieve desired outcomes.

The human capital plans do not identify outcome- oriented performance
measures. High- performing organizations use relevant and reliable data to
determine key performance objectives and goals that enable them to
evaluate the success of their human capital approaches. Neither plan
discusses, at a strategic level, military workforce needs or gaps in
meeting these needs* the kinds of data used by high- performing
organizations to manage their human capital.

Moreover, DOD lacks a process for overseeing the progress and
implementation of its human capital plans from a strategic vantage point.
Without such a process, DOD may have difficulty integrating and aligning
benefits and other human capital approaches to meet organizational goals
and promoting a data- driven, performance- oriented approach to human
capital management. An oversight process also could help DOD officials
maintain the momentum of their strategic human capital planning efforts.
The military personnel strategic plan calls for the establishment of a
Defense Human Resources Board by March 2003. However, DOD officials have
not decided on the roles and responsibilities of the board, the
composition of the board, or how the board would work with existing
processes.

We are recommending that DOD establish an improved oversight process. One
option is to incorporate this oversight responsibility into the mission of
the planned Defense Human Resources Board. In commenting on a draft of
this report, DOD concurred with our recommendation.

Recognizing the human capital challenges facing federal agencies,
Congress, the administration, and others are focusing increased attention
on strategic human capital management. Congress has underscored the
consequences of human capital weaknesses in federal agencies and
pinpointed solutions through the oversight process and a wide range of
Background

Page 4 GAO- 03- 237 Human Capital Planning

hearings held over the last few years. The President, in August 2001,
placed human capital at the top of his management agenda. The Office of
Management and Budget is assessing agencies* progress in addressing their
individual human capital challenges.

In January 2001, we designated strategic human capital management as a
governmentwide high- risk area and stated that one of the pervasive human
capital challenges facing the federal government was a lack of strategic
human capital planning and organizational alignment. 6 In March 2002, we
issued our model of strategic human capital management, stating that
federal agencies needed to adopt a consistent strategic approach to
marshaling, managing, and maintaining the human capital needed to maximize
government performance and ensure accountability. 7

Several DOD studies have identified the need for a more strategic approach
to human capital planning. The 8th Quadrennial Review of Military
Compensation, completed in 1997, strongly advocated that DOD adopt a
strategic human capital planning approach. The review found that DOD
lacked an institutionwide process for systematically examining human
capital needs or translating needs into a coherent strategy. Subsequent
DOD and service studies, including those by the Defense Science Board Task
Force on Human Resources Strategy (2000), the Naval Personnel Task Force
(2000- 2001), and the DOD Study on Morale and Quality of Life (2001),
endorsed the concept of human capital strategic planning. For example, the
Defense Science Board Task Force found there was *no overarching framework
within which the future DOD workforce is being planned aside from planning
conducted within the military services and ad hoc fora in the Office of
the Secretary of Defense. An overarching strategic vision is needed that
identifies the kind of capabilities that DOD will need in the future, the
best way to provide those capabilities, and the changes in human resources
planning and programs that will be required.*

In view of these studies, the Office of the Secretary of Defense published
the Military Personnel Human Resource Strategic Plan (referred to in this
report as the military personnel strategic plan) in April 2002 to

6 See U. S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Defense, GAO- 01- 244 (Washington, D. C.:
Jan. 2001). 7 See U. S. General Accounting Office, Managing for Results:
Building on the Momentum for Strategic Human Capital Reform, GAO- 02- 528T
(Washington, D. C.: Mar. 18, 2002).

Page 5 GAO- 03- 237 Human Capital Planning

establish military personnel priorities for the next several years. DOD,
in the military personnel strategic plan, states that the plan is intended
to be a dynamic document that will be assessed and refined. In April 2002,
DOD also published A New Social Compact: A Reciprocal Partnership Between
the Department of Defense, Service Members and Families (or Social
Compact) to review measures for improving the quality of life for military
personnel and their families. These two plans were developed separately
within the Office of the Under Secretary of Defense for Personnel and
Readiness, and they differ in their methodological approach and structure.
Nevertheless, DOD officials said the plans should be considered in
conjunction as part of DOD*s overall strategic human capital strategy.

DOD, in its military personnel strategic plan and Social Compact,

recognizes that benefits are an important component to human capital
management and deserve attention. In this regard, the two plans constitute
a positive step forward in DOD*s strategic management of the military
workforce. The Social Compact indicates that benefits are important to
alleviating some of the hardships of military life and emphasizes that
providing consistent, high- quality benefits that meet the needs of
service members and their families can yield a committed and long- term
workforce. The Social Compact also outlines DOD*s vision and goals for a
number of benefit areas, including child and youth services, parent
support, commissaries and exchanges, financial literacy, health, housing,
spouse employment, fitness and recreation, and tuition assistance. The
military personnel strategic plan indicates that DOD considers benefits
important elements in its efforts to develop, sustain, and retain the
force and to transition members from active duty. The plan lists a number
of planned studies (see table 1) that ultimately could lead to changes in
pay and benefits. Human Capital Plans

Are a Step Forward but Not Fully Developed

Page 6 GAO- 03- 237 Human Capital Planning

Table 1: Compensation- Related Studies and Milestones in DOD*s Military
Personnel Strategic Plan

Study Milestone

Sabbatical programs that could be implemented in DOD Final report due
October/ November

2002 Nonmonetary incentives that support retention Final report due
December 2002 Programs designed to improve retention by informing military
members of career opportunities and military benefits available to them

Action plan due December 2002 Alternatives to the military retirement
system Report due January 2003 Proposals of the 9th Quadrennial Review of
Military Compensation Staff recommendations due March

2003 Programs designed to inform members of their transition benefits when
leaving active duty service

Final report due March 2003 Military pay levels compared to pay levels of
civilians by age, education, and occupation Final report due December 2003

Source: GAO*s analysis of military personnel strategic plan.

While progress has been made, DOD*s human capital plans do not yet satisfy
the two factors we identified in our model as critical to the success of
strategic human capital planning (one of the four cornerstones of sound
strategic human capital management). First, the plans do not specifically
address how DOD will integrate and align benefits and other human capital
approaches to meet its overall organizational goals. According to our
model, effective organizations integrate human capital approaches as key
strategic elements for accomplishing their mission and programmatic goals
and results. These organizations consider further human capital
initiatives or refinements in light of both changing organizational needs
and the demonstrated successes or shortcomings of their human capital
efforts. DOD*s military personnel strategic plan identifies more than 30
discrete initiatives. It is unclear from the plan how these initiatives
are integrated and aligned with each other, except that they are grouped
under five broadly stated human capital goals such as recruit the right
number and quality of people. 8 It is also unclear how the initiatives,
many of which are studies, will work in conjunction with one another to
meet DOD*s goals. For example, one of the initiatives is to study
alternatives to the

8 The four other human capital goals are (1) develop, sustain, and retain
the force; (2) increase the willingness of the American public to
recommend military service to youth; (3) transition members from active
status; and (4) sustain the process and maintain its viability.

Page 7 GAO- 03- 237 Human Capital Planning

military retirement system. The plan does not explain how retirement
reform may be integrated and aligned with other initiatives such as DOD*s
study of variable career lengths for officers. In addition, the retirement
study is listed under the human capital goal of transitioning members from
active status but does not explain why a new approach to retirement may be
needed to meet this goal. It is also unclear why the initiative was not
listed under the human capital goal of developing, sustaining, and
retaining the force, even though an organization*s retirement system is
considered an important retention tool. Further, the military personnel
strategic plan and the Social Compact, which were developed separately,
address different sets of human capital issues, and there are no explicit
linkages between the two plans. For example, while the Social Compact

addresses such benefit areas as housing, health care, and family support,
the military personnel strategic plan is silent on these topics. Thus, DOD
lacks an overarching framework integrating its human capital plans for
military personnel. DOD officials said they are working to improve the
integration of the human capital plans by developing an *umbrella* plan.

Secondly, the plans do not satisfy the critical success factor of using
data in human capital decisions. We state in our model that a fact- based,
performance- oriented approach to human capital management is crucial for
maximizing the value of human capital as well as managing related risks.
High- performing organizations use relevant and reliable data to determine
key performance objectives and goals that enable them to evaluate the
success of their human capital approaches. These organizations also
identify current and future human capital needs, including the appropriate
number of employees, the key competencies and skills mix for mission
accomplishment, and the appropriate deployment of staff across the
organization and then create strategies for identifying and filling gaps.
The military personnel strategic plan provides measures of effectiveness
for each initiative; however, these measures are not adequate to assess
the success of DOD*s human capital approaches because they (1) do not
describe the significance of outcomes in terms of programmatic goals and
results, (2) are not always specific or stated as measurements, and (3)
are activity- based rather than outcome- oriented. For example, one
initiative calls for a study of sabbatical programs. However, the measure
of effectiveness for this initiative is to implement guidance for a
sabbaticaltype program. The relationship between sabbatical programs and
the human capital goal of improving retention is not described. In
addition, DOD*s plans do not discuss, at a strategic level, military
workforce needs or gaps. Furthermore, they do not address how the military
workforce may change in its total end strength, distribution among the
services, grade level, geographic deployment, or force mix. For example,
DOD has faced

Page 8 GAO- 03- 237 Human Capital Planning

challenges in providing benefits to service members that respond to their
changing needs. A major demographic change has been the growing proportion
of service members who are women. In 2000, women comprised about 15
percent of the active duty force, compared with 4 percent in 1974. Up to
10 percent of women in the military become pregnant each year. If these
trends continue, DOD may need to take into account the benefits that this
population values to better retain these trained, experienced service
members. For example, we have recommended that DOD assess the feasibility,
costs, and benefits of offering extended time off to parents of newborn or
adopted children. 9

Moreover, DOD lacks a process for enabling senior DOD officials to oversee
the progress and implementation of its human capital plans from a
strategic vantage point. Our model of strategic human capital management
identifies the sustained and active commitment of senior leaders as a
critical success factor for effective strategic human capital management.
Top leaders need to stimulate and support efforts to integrate human
capital approaches with organizational goals and direct that approaches be
evaluated by the standard of how well they support the agency*s efforts to
achieve program results. A senior DOD official told us that implementing
the plan will be a long- term endeavor. One of the human capital goals in
the military personnel strategic plan is to sustain the strategic
management process and maintain its viability. According to the plan, DOD
needs to establish a process and forum to regularly review the progress of
its human capital strategy in order that its strategy will remain viable
and relevant. The plan calls for the establishment of a Defense Human
Resources Board by March 2003. However, DOD officials have not decided on
the roles and responsibilities of the board, the composition of the board,
or how the board would work with existing processes.

DOD, in developing its human capital plans addressing military personnel
and quality of life, has made progress in adopting a more strategic
approach to human capital management. Since the military personnel
strategic plan is intended to be a dynamic document that periodically will
be assessed and refined, DOD will have opportunities to incorporate
additional elements of human capital strategic planning in future
iterations

9 See U. S. General Accounting Office, Military Personnel: Active Duty
Benefits Reflect Changing Demographics, but Opportunities Exist to
Improve, GAO- 02- 935 (Washington, D. C.: Sept. 18, 2002). Conclusions

Page 9 GAO- 03- 237 Human Capital Planning

of the plan. A positive step toward such improvements would be the
establishment of an oversight process enabling senior DOD officials to
oversee the progress and implementation of the human capital plans. Such a
process could assist in the integration and alignment of benefits and
other human capital approaches to meet organizational goals and in
promoting a fact- based, performance- oriented approach to human capital
management.

To improve DOD*s strategic human capital management, we recommend that you
direct the Under Secretary of Defense for Personnel and Readiness to
establish an oversight process by which senior DOD officials may integrate
and align benefits and other human capital approaches and promote a fact-
based, performance- oriented approach to human capital management. As one
option, you may wish to consider incorporating this oversight
responsibility into the mission of the planned Defense Human Resources
Board.

In written comments on a draft of this report, DOD concurred with our
recommendation. DOD stated that it will establish a senior leader
oversight process to ensure integration and alignment of benefits and
other human capital approaches and to continue a fact- based, performance-
oriented approach.

DOD*s comments are reprinted in appendix I. To critique DOD*s human
capital plans for military personnel, we drew primarily from our model of
strategic human capital management. The model highlights some of the steps
agencies can take to make progress in managing human capital
strategically. The model identifies eight critical success factors, which
are organized in pairs to correspond with four cornerstones of effective
strategic human capital management. We focused on the two critical success
factors that correspond to strategic human capital planning, namely (1)
the integration and alignment of human capital approaches to meet
organizational goals and (2) the use of data to make human capital
decisions. We reviewed DOD*s human capital plans to determine the extent
they satisfied these two critical success factors with respect to active
duty military benefits. In analyzing DOD*s plans, we reviewed our prior
work on military personnel issues and DOD studies of human capital
management. We discussed the human capital Recommendation for

Executive Action Agency Comments Scope and Methodology

Page 10 GAO- 03- 237 Human Capital Planning

plans with officials in the Office of the Under Secretary of Defense for
Personnel and Readiness.

We conducted our review from June to September 2002 in accordance with
generally accepted government auditing standards.

This report contains recommendations to you. Under 31 U. S. C. 720, the
head of a federal agency is required to submit a written statement of the
actions taken on our recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform not
later than 60 days after the date of the report. A written statement also
must be sent to the House and Senate Committees on Appropriations with the
agency*s first request for appropriations made more than 60 days after the
date of the report.

We are sending copies to appropriate congressional committees and the
Director, Office of Management and Budget. We will make copies available
to other interested parties on request. In addition, the report will be
available at no charge at the GAO Web site at http:// www. gao. gov.

If you or your staff has any questions regarding this report, please call
me at (202) 512- 5140. Brenda S. Farrell, Thomas W. Gosling, and Stefano
Petrucci made significant contributions to this report.

Sincerely yours, Derek B. Stewart Director, Defense Capabilities and
Management

Appendix I: Comments from the Department of Defense

Page 11 GAO- 03- 237 Human Capital Planning

Appendix I: Comments from the Department of Defense

(350217)

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