Investing in people keeps the U.S. Department of Veterans Affairs on mission.
In the book you co-authored with Linda Bilmes, The People Factor: Strengthening America by Investing in Public Service, you wrote, "Training is the single most important step the country can take to reform personnel and to strengthen the civil service." Tell us why you believe this to be true.
It's an observation that stems back to my earliest days as a division officer in the Navy. I've never seen a ship put to sea or a helicopter leave the deck without people. It's people who make organizations. They create its esprit de corps, own the knowledge, and achieve the mission. Any way you put it, people make organizations go. Beyond any question, people are the organization's most important asset. Training and developing them, therefore, is critical to the functioning of the organization. It's that simple.
It seems almost shocking to say, but the extraordinary value you get from investing in people is still dawning on many organizations.
When you joined VA three years ago, what opportunities existed for enhancing the investment in people?
We are predominantly a healthcare organization and about 87 percent of our bottom line goes to delivering healthcare. Because of that, we must have a focus on training, on quality, and on our people getting it right the first time.
When I joined VA, it already had a tremendous investment—more than $1 billion annually—in the training, certification, and monitoring of the skills and abilities of our 60,000 nurses and 20,000 physicians. What I didn't see was a matching investment in training the people who run the management infrastructure, IT, acquisition, human capital, logistics, and the like that would complement the investment that the organization was already making in its healthcare practitioners. So we extended the training franchise to everyone in the organization and set our sights on training all 314,000 employees over a three-year period.
We had to do a lot of negotiating to get funds to do that. We knew what our top line was going to be in 2010. We went to Peter Orszag, who was then director of the OMB [Office of Management and Budget], and said, "We will stay within that target but allow us to reallocate funds in a way that we think will best serve the interests of our veterans."
We developed a series of major initiatives that totaled about $2.1 billion. And we won approval from OMB, the president, and subsequently Congress for a $300 million investment each year focused on human capital. We're now in our third year of doing that and we can show the connection between the investment and a positive return.
Tell us more about how you rationalize that investment.
Our investment in human capital delivers value for our veterans and supports OMB in bringing more mission for the money. We are doing this through increased hiring of veterans and individuals with disabilities by providing resources for necessary accommodations. More than 30 percent of VA's workforce is composed of veterans, and the secretary of VA, Erik Shinseki, is working on increasing that number to 40 percent.
Additionally, these investments are helping VA become a better steward of public dollars. Targeted financial management training has helped reduce the amount of outstanding accounts receivable. IT project and program management training has led to improved IT system delivery and significant cost avoidance.
To measure the impact of our training investment, we started in the design phase to ask ourselves, "How will we calculate the return-on-investment?" In 2011, we showed a 35 percent return on our investment in people. We use a series of measures of direct reductions in cost, including reduced employee turnover, dispute resolution, and wellness, as well as measures of improved mission performance.
Lowering employee turnover lowers the high cost of recruiting. Investing in people's dispute-resolution skills ultimately lowers legal costs downstream. And having good health, balance, and equanimity supports people's ability to serve veterans and be good contributing members of our community.
We provide day care and offer coaching on how to lose weight and stop smoking. We've been able to engage our unions in that process. We encourage people to meditate, to stretch at their desks, to do yoga. The result is fewer sick days, which translates into a return on the investment in employees' health.
We also measure improvements on mission performance—another area where we've put a lot of investment. We track it using our all-employees survey to get at performance as well as morale. The response rate was more than 70 percent.
Are there some lessons for the private sector in the ability of VA to show a return on its investment in human capital?
Some of our experts say that they can show a causal link that is statistically valid. I haven't seen the data yet, but if it's true, it would be a major accomplishment that might actually inform discussions in the private sector.
That's one of the great roles of public organizations; you can do things that perhaps you couldn't justify on a [profit and loss] basis quarter by quarter, but that do create value in the long term.
You've proposed national standards for management and supervisory skills for the nation's public managers and supervisors. Which skills are most needed by today's public managers to produce better results and why? And what about national standards for trainers?
I very much support the idea that there should be national skill standards for managers and supervisors and also for coaches and trainers. The mechanics of doing that are a big challenge.
For managers, the most important skill is collaboration, in my view. That's not the usual criteria for a government environment but I think that, given the complexity of the issues we're facing, the ability to cooperate and coordinate activities across government agencies, or across the aisle or the hallway, is critical.
Another important skill for public managers and supervisors is project and program management. And a third is change management—being able to motivate, drive, and inspire people to make the changes they need to move ahead. Those are areas where I think there should be national standards for public managers and supervisors.
What progress has VA made in implementing those standards?
We train on all three of those now. Currently about 240,000 of our employees have had training in those areas, so we're on our way to our goal of 314,000 over a three-year period.
But we had and still have some significant challenges in VA from a managerial standpoint, so my choice of skill sets relates to what I want to accomplish from a mission perspective. We are divided into three major operating lines: health, benefits, and cemeteries. Beneath that is the management infrastructure of about 60,000 people who do IT, financial management, acquisition, logistics, human capital, and the like. For that group, which upholds all the activities of the operating units, we were bright red on our balanced scorecard. For example, when I first arrived, only 30 percent of the 300 IT projects that we evaluated were delivering on cost, schedule, and budget. Only one-third had a project manager, a budget, and a clear plan.
Today, we hit 89 percent of our IT milestones. Part of that I believe came from the investment in training around project management and certification. Our certification in the IT space leads the government. If you look at our budgets for 2012 and 2013, you will see real confidence in our IT operations.
We have a $3.3 billion stream of costs just to IT alone—so imagine the value of moving the needle from 30 percent to almost 90 percent. That's a value proposition that I'm counting on Congress and the public to recognize.
With budget cuts, a third year for federal pay freezes, and increasing expressions of concern about the size of the federal workforce, how do you keep leadership focused on training as a priority?
When times are tough, you want to increase your investment in training and in making sure people have the tools they need to get jobs done in a challenging environment. That is something to which the private sector would offer a resounding "of course!"
The President's Management Council has approved a governmentwide senior executive leader development program. Ten agencies have signed up almost 3,000 senior executives. Our goal is to get the senior executive community talking, thinking, and acting together.
We will create a social network infrastructure with some world-class content for senior leaders. And we will do a first-ever assessment of leadership skills across government to identify collective deficiencies that need work. As part of their development, the senior leaders will undertake a simple, definable project, the cumulative effect of which will more than offset the money committed to the effort. We'll be ready to go live Q3 2012.
What issues do you have with succession planning?
If we worked in the Sarbanes-Oxley world of the private sector, as chief operating officer I'd be able to show you two internal candidates and an external one for all of my key positions. But one of our constraints under Title V [of the U.S. Code] is that you can't have a selection bias in the hiring process. That said, leader development and succession planning are very important and can be done in a government environment. We are creating pools of candidates who are ready for key roles and who have been trained to a standard.
A related issue for us concerns the development and retention of hospital directors. We have 152 of them across the country. Their maximum pay is about $175,000 a year, give or take. In a commercial hospital, they could be earning $700,000 to $800,000 a year. But what we have is "the mission that matters"—a shared love of serving veterans. We've got to invest in them to hold on to them, particularly as their public-health-oriented skills will become more valuable with healthcare reform going into effect in 2014.
In 2009, you recommended a training program for political appointees, members of Congress, and their staffs to cover their shared ownership in creating better results in government. How has that been implemented at VA?
We have programs to educate Hill staff about our goals and how we work. Joan Mooney, our assistant secretary for congressional and legislative affairs, has developed a 101 and 201 course series for that purpose.
One area we like to educate people about is the customer satisfaction rating of our National Cemetery Administration. It is the number one customer satisfaction organization in the United States. People who think government doesn't do customer service well have got that wrong.
The Department of Veterans Affairs has a goal of making VA the federal government's employer of choice. What steps has the agency taken toward that goal, and how would you rate success to date?
It is indeed our goal and it stems from the simple fact that we are working in a competitive labor environment. We want to compete for our fair share of the best and brightest. At one level, that means making this a better environment for the employee. Some areas are going well—pride in our mission, positive relationships with co-workers, and labor-management relations.
One area that needs work is the quality of our leaders and managers. As I mentioned, we have been investing in improving management and supervisory skills through the training process and by implementing a new system for performance evaluation and reward. And we've also taken steps to remove people from government employment at the SES [Senior Executive Service] level. It's about sending a basic signal of accountability as well as all the positive work we are doing to invest in training.
We have also invested a lot in determining and rolling out our values. We use the acronym I CARE, which stands for integrity, commitment, advocacy, respect, and excellence. The level of engagement by the senior executives was so high that the rollout went like wildfire. I presented I CARE at a meeting of the National Association of State Directors of Veterans Affairs. They introduced and approved a motion that each state would adopt I CARE, so we're aligned on the fundamental level of how to be advocates for veterans and what it means to be committed to their service.
In October 2011, VA launched MyCareer@VA, an online resource to help employees match their skills and capabilities to career opportunities. What's the evidence that these and other HR initiatives help increase employee engagement?
MyCareer@VA has the ability to show someone new to the organization what his or her career track might be given particular skill sets. We've identified the skills and competencies needed to pursue career development pipelines at multiple levels, and we're tailoring our training to be able to match those requirements.
An interesting aspect of this process is the power it gives individuals to decide whether they are ready to step up, or step laterally into different work at the same level, or take a step back. We're getting some positive reaction to that. It blends well with people's family obligations and other things that we think organizations need to be more flexible about. In exchange for providing career flexibility, the organization gets something it wants—good people staying longer, investing in the organization, and giving back.
What are your expectations for your senior learning team?
My expectations couldn't be higher. They are all about identifying, pursuing, and exploiting opportunities on many fronts. When you develop learning systems for an entire organization, you don't always know where you will get your uptick or what the culture will bear, so pursuing opportunities on many fronts is critical.
Let me give you an example. When we asked employees what would be the most valuable thing we could do to improve work life, the answer was to help people quit smoking. We have finished a long pilot program in which the quit rate was three times higher than the national rate. One thing that contributed to the program's success was that training went to the front line and asked what they were ready for culturally. That resulted in a high level of involvement and support.
VA uses a balanced scorecard to measure performance. At a very high level, how do you know learning is working? When evaluating the senior team in learning, what are some of VA's key metrics?
On the balanced scorecard I look at four strategic goals: quality of care and access to it, customer satisfaction, safety and security, and management infrastructure. I look at them from a financial management, operating, customer satisfaction, and people perspective. That's the human capital, training, [and] learning component.
In monthly performance reviews, we use a "heat chart," which grades 300-odd measures as yellow, green, or red. I dive in on the reds with action plans and a follow-up process to make those happen.
When it comes to the human capital factors, because they are so long-lived, it takes a while to see the results, so I tend to focus more on inputs and outputs. Are we doing the training? What are the sign-up rates? What are our rates of innovation? Are we getting the new career tracks in place? What are the customer satisfaction ratings? Am I seeing growth in competence in the before and after testing for a course? Will the annual employee survey show that managers have made behavioral changes and will there be an increase at the macro level in mission outcomes?
Let's use the example of financial management at VA, which showed weaknesses in several areas. We brought 4,000 people together in 2009 with an average tenure of 15 years. The CFO asked how many had financial management training at the VA. Only about 4 percent raised their hands. It was embarrassing. We were entrusting them with billions of dollars and we weren't training them in financial management. So we used a strong dose of training with those 4,000 people to fix the problem.
The training received very high accolades. You could see the knowledge growing about our financial management policies. And guess what? We eliminated three of four material weaknesses and we sustained a clean audit. So you can see the connection between that training and results over time.
But proving the business value of training is still a big challenge. The ROI team has done a deep dive into mission orientation at the most senior level, but I'm still challenged to see a direct relationship [between development and an increase in mission orientation] on a month-by-month basis, although I get it anecdotally.
That being said, the value of people is deeply held by the secretary of VA, Erik Shinseki. There's an old Army saying: "mission first, people always." The whole team is on board with the investment in people and the need to do it well. I think it's helped the political team connect with the career team because it demonstrates a commitment to them, to their career development, and to being a future-oriented institution.
The questions that arise about investing in people—where to invest, how to train, what values to emphasize, how to select leaders, how to measure performance—quickly get to the heart and the lifeblood of the organization. I feel this is work that we will need to do for a very long time and that it's well begun.
W. Scott Gould was interviewed by Tony Bingham and Pat Galagan.