Introduction to Human Capital Management in Public ... - CQ Press

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Introduction to Human
Capital Management in Public
Organizations
1
chapter
Under the leadership of commissioner Jacqueline P. King, the Chicago
Department of Human Resources is focused on making the city a great
place to work. The department is leading the city into a new era of strategic thinking
and planning. In 2006 the City of Chicago changed the name of the department
from the Department of Personnel to the Department of Human Resources.
The name change was one step in changing a transactional personnel department
into a business partner to serve its client departments and applicants for city
employment. The 2006 change included a budget increase of approximately three
million dollars and an increase of approximately thirty-seven staff positions.
The City of Chicago employs approximately 39,000 people. The city is a
large, complex, and demanding organization with a diverse recruiting environment
comprising more than forty departments, multiple unions, diverse job
types, varying processes, and high-volume hiring. It must meet the needs of
various constituents while complying with federal mandates for the hiring
process. The mandated hiring process significantly affects internal controls, the
segregation of duties, auditing, security, and reviews.
Chicago’s current hiring process is cumbersome, paper intensive, and
time-consuming. As part of its effort to become a strategic business partner, the
Department of Human Resources has embarked on several projects to address
the inefficiencies of the current process. Its goals include
• improving the means of attracting applicants to increase the number
of qualified candidates;
• improving the candidate application experience;
• decreasing time to hire; and
• improving monitoring and control to ensure that the hiring
process is objective, transparent, and fully compliant.
The Department of Human Resources Hiring Process Redesign Initiative began
in 2006 and includes three work streams:
• a new on-line application system,
• citywide job analysis, and
• citywide competency models.
1

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The City of Chicago has over 1,500 job titles. The purpose of the citywide
job analysis is to ensure that all of the job descriptions are current and conform
to industry standards and to recommend consolidation of titles where appropriate.
The city is developing a citywide Core Competency Model, as well as
job-specific functional competencies. Chicago’s charge is not only to recruit
specific talent, but to recruit individuals who are ethical, accountable, and loyal
to the public interest.
Motivating and retaining excellent employees are also goals of the City of
Chicago. In 2008 the Department of Human Resources will launch a citywide
new-employee orientation program, as well as enhance its training and professional
development programs. Commissioner King has said that that the
rewards of public service are not always material. They can be moral, psychological,
or even spiritual. According to King, Chicago’s development programs
will highlight and emphasize the rewards of public service.
The City of Chicago wants to continually find ways to improve its
processes, including the posting of positions; recruiting, screening, and selection;
hiring activities; and training and development. In transforming the
Department of Human Resources, Commissioner King believes, the city will
create a high-performing, values-based organization that will attract, motivate,
and retain talented public service employees. The city’s ultimate goal, however,
is to ensure that its improved processes have a direct and positive impact on
service delivery to the taxpayers of Chicago.
The Chicago example illustrates the ways in which governments are
changing how they operate their civil service systems, even in environments
where change might not be expected. Chicago’s civil service is over one hundred
years old, labor unions are strong, and politics is highly centralized in the
political machinery (Kasperson 1965). These are all conditions that might create
barriers to modernization. However, as illustrated throughout this book,
the types of changes occurring in Chicago are happening throughout federal,
state, and local governments.
HUMAN CAPITAL MANAGEMENT IN PUBLIC SYSTEMS
Human capital management (HCM) is an essential component of any public
management system. It refers to the systems, policies, procedures, and practices
of managing human capital within public organizations, whether merit or nonmerit
systems, civil or non–civil services. The term is often used interchangeably
with “human resource management” and “personnel management.” However,
practitioners, such as David Walker, comptroller general of the United States,
and scholars use the term “human capital” to emphasize the importance of people
to the success of government and the need to change the ways employers and
organizations interact. In an extensive review of human capital efforts of federal
agencies, the Center for Innovation in Public Service outlined four guideposts
for human capital management. Organizations need to

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Introduction to Human Capital Management in Public Organizations 3
• recognize and manage employees as critical assets;
• strategically plan and manage staffing;
• prioritize/plan human capital costs for sustained investment; and
• openly engage employees via communication and collaboration
channels.(Center for Innovation in Public Service 2006, 4)
The primary goal of human capital management is to create a performance-aligned
workforce by adopting HCM systems, policies, procedures, and
practices that are driven by, or aligned with, an agency’s strategic mission and
that are internally consistent and integrated (Center for Innovation in Public
Service 2006). In operation these practices are extensive and include strategic
human capital and workforce planning, recruiting prospective employees,
selecting employees and leaders, training and developing employees, managing
employee rewards and recognition, evaluating employee performance, classifying
positions, creating a positive and safe work environment (employee relations),
and administering employee benefits.
The aim of this book is to engage public organizations in the strategic
management of their human capital. The objective is to move away from a fragmented
approach to human capital management and toward an approach that
facilitates the integration of human capital into the overall strategic management
of public agencies. This movement requires that human capital decisions
be based on evidence or data. For that to occur, public organizations must
establish performance metrics that will enable them to monitor, identify, and
diagnose human capital opportunities and challenges. This chapter discusses
• how governments organize their human capital systems,
• how the scope of human capital activities has expanded, and
• a framework for planning, aligning, and assessing human capital
management.
HOW GOVERNMENTS ORGANIZE
THEIR HUMAN CAPITAL SYSTEMS
An organization’s human capital system comprises components that sometimes
work together and sometimes clash. A public organization’s human capital
system is embedded within larger political relationships, and its
components are shaped by public opinion, legislation, regulations, union contracts,
and history. Each political organization has its own unique set of environmental
influences that need to be taken into account. Legislation, judicial
decisions, executive orders, and regulations related to the merit system and
labor relations all may come into play (for a thorough review of these issues see
Ingraham 1995; Mosher 1968; and Van Riper 1958).
Prior to the passage of the Pendleton Act in 1883, elected officials largely
decided who was appointed to work for the government (Hoogenboom 1959).

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Although originally the act only required a limited share of the “classified service”
to be selected by competitive exam, it was extended over time to cover more
and more employees. The classified service includes po,, taOver time merit systems
diffused through all levels of government and public bureaucracies, as
political machines were transformed into professionally administered institutions
(Hoogenboom 1959). Carolyn Ban and Norma Riccucci (2002) write,
“Public personnel management, for better or worse, continues to embody the
concept of merit. Notwithstanding, the nature of civil service and the personnel
practices which sustain it have changed considerably since 1883.”
In addition to merit-based hiring, most civil service systems give employees
other administrative and legal due process rights, such as a right to grieve or
appeal an employment decision (e.g., on promotion or compensation) or a
decision to discharge them for cause, and protection from partisan pressure
and removal (Mosher 1968). In the past decade some governments have tried
to eliminate the classified civil service. A few states, such as Georgia and
Florida, have shifted at least part of the legal basis of their employment systems
from a civil service structure to an employment-at-will model. Employment at
will typically connotes an employer’s right to terminate an employee without a
reason and an employee’s right to leave when she or he elects (Baucus and
Dworkin 1998; Fulmer and Casey 1990). 1 The Department of Homeland Security
has an at-will human capital system independent of the federal classified
service. Although most governments operate a classified civil service or merit
system, the percentage of employees covered by it varies. For example, in 2008,
only 60 percent of Indiana’s state government was part of its classified civil
service, whereas more than 99 percent of North Carolina’s workforce was covered
by its merit system (GPP 2007). The administrative and legal protections
that these systems provide public employees vary.
The structure of civil service systems also varies across governments, with
some largely decentralized and others very centralized. The purported benefits
of a centralized structure include equitable treatment of employees, consistency
in the delivery of services, efficiency gains through economies of scale,
and clear division of functions between the central human resource department
and agencies. In the 1990s many scholars and practitioners pushed for
central human resources departments to decentralize authority over some
human resource practices to give more flexibility to public agencies and their
managers (Kellough and Nigro 2006). Today responsibilities are often shared
by a central human capital department or agency, such as the U.S. Office of Personnel
Management (OPM), and other agencies, such as the U.S. Environmental
Protection Agency and the U.S. Department of the Treasury.
1 Both federal legislation and state laws provide exceptions to the doctrine of at will, including, but
limited to, participation in union activities, whistle blowing, public policy, employer motivation,
race, ethnicity, religion, national origin, sex, and disabilities (Fulmer & Casey, 1990). Montana is
the only state that has passed legislation that prohibits employers from discharging employees
without “good cause” (Falcone, 1999; Wallihan, 2003).

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Introduction to Human Capital Management in Public Organizations 5
Labor relations—the spectrum of interactions among public employees,
public managers, and institutions (governments and unions)—also influence
today’s public human capital systems. The academic literature on labor relations
is vast. There is great variation in labor relations across governments,
depending on the extent of unionization; the scope, nature, and number of
issues over which unions bargain; the laws that govern collective bargaining
processes; the locus of authority to negotiate labor contracts; and the contentiousness
of the bargaining process. In some governments, employees may
join a union, but the union has no formal authority to negotiate employment
contracts on behalf of its members. In governments where collective bargaining
is allowed, there are often restrictions on which employment actions can be
bargained. As with merit systems, there is not a common legal framework governing
the labor relations of state and local governments (see Cayer 1996).
CHANGING PERSPECTIVE
Historically public personnel management had a strong functional focus that
emphasized the administration and regulation of civil service and other public
personnel systems and policies—such as job classification, hiring, discipline,
performance evaluation, training, and compensation—used to manage people
in an organization (Pynes 1997). Public personnel agencies were typically
organized into the aforementioned functions, with limited integration across
the functions (Wright and McMahan 1992). Although some continue to view
human resources traditionally, increasingly public organizations are integrating
the traditional responsibilities of managing personnel systems with strategic
human capital management (Center for Innovation in the Public Sector 2006).
A strategic human capital perspective suggests that an organization is forward
thinking and conceives of its human capital as a valuable asset to the government.
It implies that human capital can play a strategic role in the
organization’s success. Wright and McMahan (1992, 298) define it as “the pattern
of planned human resource deployments and activities intended to enable
the [organization] to achieve its goals.”As a result of this shift in the field, HCM
departments are shifting from a preoccupation with policing the merit or civil
service system and its rules to a broader human resources or human capital
perspective that emphasizes planning, collaboration, and partnership with
public leaders and managers to achieve government and agency goals (U.S.
GAO 2002; Selden, Ingraham, and Jacobson 2001). Human capital management
staff are moving away from primarily making operational decisions to
acting as consultants to other departments and managers, designing and delivering
policies and programs that give managers the tools and training they
need to perform effectively in their positions. Below are three examples that
illustrate the new role that central human resource offices are assuming.
The Office of Personnel Management is leading the federal government initiative
on strategic management of human capital. In conjunction with the

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BOX 1.1 Five Systems of the Human Capital Assessment
and Accountability Framework
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. It
implements programs that capture organizational knowledge and promote learning.
Results-Oriented Performance Culture (Implementation). A system that promotes a
diverse, high-performing workforce through the use of effective performance management systems
and awards programs.
Talent Management (Implementation). A system that addresses competency gaps, particularly
in mission-critical occupations, through programs to attract, acquire, develop, 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.
It analyzes compliance with merit system principles and identifies necessary improvements.
Source: U.S. Office of Personnel Management,
www.opm.gov/hcaaf_resource_center/assets/HCAAF_1_Intro.pdf.
Office of Management and Budget (OMB) and the Government Accountability
Office (GAO), OPM has developed a Human Capital Assessment and
Accountability Framework to provide consistent guidance on human capital
management for federal agencies (see Box 1.1).
The Georgia Merit System partners with state agencies to hire, train, and
retain the workforce. It provides leadership for workforce planning and development,
mediation and employee relations services, work-life services, training and
organizational development, compensation and staffing services, salary development,
recruitment and testing services, and consultation services. It develops
products and services for the enterprise of state government but also customizes
services for individual agencies, provides policy development and analysis, and
provides employee benefits and financial security services (GPP 2004).
Washington State’s Department of Personnel (DOP) leads in building a performance-based
culture that will help state government attract and retain a
highly capable and productive workforce. After consulting with managers,
employees, and human resource (HR) professionals in its customer agencies
about their needs and preferences, DOP develops and adopts the foundation
HR system, including the personnel rules and job classification structure.
Beyond that it focuses on providing creative, responsive consultation, guidance,
and solutions. It offers myriad optional tools, services, and training in all

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Introduction to Human Capital Management in Public Organizations 7
aspects of human resource management to help agencies achieve their missions.
Expert consultation and guidance have become especially important
with the passage of the 2002 Personnel System Reform Act, which has resulted
in much more flexible central regulation and much greater latitude for decentralized
HR policy and decision making at the agency level (GPP 2004).
These examples illustrate the ways that central human resource management
offices are expanding the focus and scope of their professional efforts.
Central HRM offices are increasingly taking the initiative in developing practices
that support high performance. Regardless of whether a government operates
a merit or civil service system or is unionized, it must manage its human
capital system in ways that allow it to provide high-quality services, meet agency
and department goals, and achieve desired results, while complying with relevant
merit or classified civil service principles, laws, and regulations.
This book puts forward a framework that public organizations can use to
examine the effectiveness of their current human capital management practices.
The framework has been used to assess the performance of local, state,
and federal agencies since the late 1990s. As shown in Figure 1.1 and discussed
in the next section, it outlines the essential goals of Strategic Human Capital
Management that all public organizations should attain. These goals, while distinct,
are necessarily interrelated to ensure that human capital systems, policies,
and activities are consistent and mutually supportive. The human capital goals
set forth in Figure 1.1 apply to civil service and non–civil service systems as well
as labor contracts. By focusing on how well their core human capital practices
are enabling them to achieve their strategic mission and goals, public organizations
should be able to use their most important asset, human capital, in a way
that creates the greatest value.
GUIDANCE FROM THE GOVERNMENT
PERFORMANCE PROJECT
The model presented in this book builds upon the Government Performance
Project. The Pew Charitable Trusts have supported the Government Performance
Project (GPP) since 1996, and it is one of the nation’s best sources for
independent, comprehensive information about state management performance.
The initiative evaluates how well states are managing their people, money,
infrastructure, and information—four areas critical to ensuring that states’ policy
decisions and practices actually deliver their intended outcomes. The GPP
produces a fifty-state report card, including both cross-state comparisons and
detailed analyses of individual states (Governing 2008).
Figure 1.1 shows the five goals that the GPP uses as research criteria to
assess human capital systems in the public sector. This list is similar to the
Human Capital Assessment and Accountability Framework (shown in Box 1.1)
set forth in the Chief Human Capital Officers Act of 2002 and to Washington
State’s strategic human capital initiative (shown in Figure 1.2). A panel of pub-

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FIGURE 1.1 Strategic Human Capital Management (SHCM) Goals
Source: Compiled by author.
lic human capital experts, including both practitioner and academics, developed
the initial GPP criteria in 1998, and since then they have been reviewed
and revised formally four times. This framework emphasizes the importance of
an agency’s human capital architecture rather than individual human capital
practices in isolation. For example, an agency may be investing considerable
financial resources into training staff, only to learn that its employees are being
trained on topics that are not essential to the agency’s mission. A careful review
may reveal that the training experiences are not structured or designed to prepare
the less-tenured employees to succeed their agency leaders and managers,
many of whom are poised to retire in the next five years.
Although the framework for this book is based on the Government Performance
Project, the book moves beyond the project’s analytical approach. Not
only does it integrate key systems, processes, and outcomes at the agency and
government levels, it also focuses on key metrics by which to evaluate individ-

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FIGURE 1.2 Washington State’s Strategic Human Capital Initiative
How Priorities of Washington State Government Are Achieved
Source: www.dop.wa.gov/NR/rdonlyres/25B90642-1CAE-4321-9835-25267261735/0/DOP0709FinalStrategicPlan.pdf.

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ual employees. It uses information and data collected by the GPP to illustrate
an array of innovative human capital management practices that public organizations
are using, with the goal of providing a framework for planning, aligning,
and assessing human capital management.
As shown in Figure 1.1, there are five primary goals of a human capital
system:
1. Strategic human capital planning. The public organization regularly conducts
and updates a thorough analysis of its human capital needs. This
goal hinges on the extent to which a public organization is aware of and
addresses its human capital capacity over time. Particular attention is paid
to the extent to which the public organization’s mission drives its human
capital system. Strategic human capital planning requires the strategic
analysis of present and future human capital needs and competencies
(knowledge, skills, and abilities that are the foundation of employee
behaviors) and formal connections among strategic planning, workforce
planning, budgeting, and human capital processes, so that the organization
makes its strategic decisions on the basis of data.
2. Recruiting and selecting employees. The organization acquires the
employees it needs. This goal addresses the extent to which the public
organization is able to obtain needed employees and determine the quality
of its new hires. To accomplish this, a public organization must be able to
conduct effective recruiting and hire qualified employees in a timely manner,
especially for positions critical to its core services and competencies.
3. Retaining employees. The public organization retains a skilled workforce.
This goal evaluates the public organization’s ability to retain skilled and
experienced employees by focusing on its workforce environment, including
employee benefits, work-life balance, and labor relations.
4. Training and developing employees and leaders. The public organization
develops its workforce. This goal captures a public organization’s commitment
to training and developing its employees and its future leaders, especially
in areas that are critical to its mission. It includes providing
resources for training and leadership development, focusing on employee
career development, providing internal opportunities for employees’ professional
growth, and facilitating critical knowledge transfer.
5. Managing employee performance. The public organization manages its
workforce performance programs effectively. This goal focuses on whether
a public organization is able to encourage employees to perform effectively
in support of its goals, discipline poor performers, and terminate
employees who cannot or will not meet performance and behavioral standards.
Effective motivation typically rests on the use of appropriate monetary
and nonmonetary rewards and incentives, an effective performance
appraisal system linking individual and agency goals, and sound mechanisms
that both facilitate and use employee feedback.

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Introduction to Human Capital Management in Public Organizations 11
The overall effectiveness of the human capital system depends on the extent to
which the policies and practices used to achieve these goals are integrated internally
and aligned with external environmental conditions.
Public organizations should avoid adopting sets of policies and practices
that work in opposite directions, such as Total Quality Management (TQM)
and individual pay for performance. TQM emphasizes the need for employees
to collaborate with each other to improve quality and performance. Therefore,
an organization that adheres to the TQM philosophy would be sending mixed
messages to employees if it awarded incentive pay increases or bonuses based
on how well an individual performs, as opposed to how well the group performs.
TQM promotes collaboration, whereas pay for performance emphasizes
competition among employees. Even if an organization’s pay-for-performance
system works well, it symbolizes how well an employee did relative to other
employees, rather than how well the employees performed as a whole. Addressing
such contradictions between policies is important because public organizations
face complex and changing political environments. New administrations
often want to implement new initiatives. Such efforts may not be preceded by a
careful review of existing policies. If that is the case, then new initiatives often
are just layered upon the existing mountain of policies, programs, and practices
used throughout agencies.
When considering changes, political executives and their administrators
need to assess whether their workforce has the expertise it needs to accomplish
a new set of goals. That is the first question an HCM system must answer. If the
workforce does not have the needed expertise, how can the needed talent be
acquired Should public organizations recruit the talent or develop it internally
Does the organization need to modify its existing policies and practices,
such as performance evaluation and reward systems, to get the desired results
These questions are fundamental to leading a public organization effectively
and should be contemplated during the HCM planning stage. It is critical to
align the five activities listed in Figure 1.1 if the agency or department’s goals
are to be met (horizontal alignment).
Moreover, human capital professionals and managers should base their
management on evidence. That is, they need to make human capital management
decisions based on the most recent knowledge of what works both within
and outside of public organizations. For example, the Indiana State Police laboratory
invested considerable resources over several years to train its forensic
scientists. As the state began to monitor turnover, it found that many of the
state-trained forensic scientists were leaving less than two years after completing
their training (some left within months of completing training), contributing
to a significant backlog in DNA casework. After carefully researching the
causes of the turnover and examining the human resource management practices
of its competitors, the state increased the forensic scientists’ pay by
approximately 30 percent, bringing its rate of pay into line with those of its
competitors in the private sector and other public sector laboratories. Not only

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has the turnover of forensic scientists decreased in the Indiana State Police, but
the backlog of DNA casework has dropped by more than 30 percent.
This approach to management will ensure that public organizations and
their decision makers are continually updating their assumptions and modifying
their practices to attain the results they are seeking. Robert I. Sutton, professor
of management science and engineering at the Stanford Engineering
School, contends that evidence-based management requires a “willingness to
find the best evidence you can, and then act on it.” Moreover, it “is about testing
ideas, and learning from your mistakes. It’s really an attitude—in fact, you
could call it the Attitude of Wisdom” (Pearlman 2006). Public organizations
need to ensure that the systems and practices they have in place work effectively
and allow them to meets their strategic goals. To do that they must collect and
use key metrics across the five goals (Figure 1.1), for example, to measure the
quality of new hires and the amount of voluntary turnover.
THE STRUCTURE OF THE BOOK
The book has three parts. The first part is devoted to strategic human capital
management. It explores the concepts of strategic human capital planning,
workforce planning, and workforce competencies. It provides guidance about
assessing an organization’s strategic human capital management systems. The
second part focuses on the other human capital elements presented in Figure
1.1, including separate chapters on hiring employees, retaining employees,
training and developing employees, managing employee performance, and recognizing
and rewarding employees. There are several special features, including
one called “Human Capital Metrics” that identifies how different human capital
activities can be measured. Whenever possible, the book presents the human
capital process and results metrics for both the organizational and employee
levels. The book also highlights examples of human capital management in
practice, which have been collected as part of the Government Performance
Project. The final section explores workforce analytics and new directions for
the field of public human capital management.