People are the key strategic asset in an organization. According to Chris Mihm, Director of Strategic Issues at the General Accounting Office (GAO), people policies must be at the heart of mergers and acquisitions to achieve success. In Mihm's talk "Going Beyond Green: Strategic Transformation through Human Capital Planning" (November 14, 2002, Washington, D.C.), Mihm indicated that 80 percent of the GAO's budget goes towards people, namely salaries and earnings. Individual transformation needs to be made before organizational transformation can be achieved. Mihm outlined some key practices for organizational transformation:
Ensure that top leadership drives the transformation.
Establish a coherent mission and integrated strategic goals to guide the transformation.
Focus on a key set of principles and priorities at the outset of the transformation.
Set implementation goals and a timeline to build momentum and show progress from day one.
Dedicate an implementation team to manage the transformation.
Use the performance management system to help define responsibility and assure accountability for change.
Establish a communications strategy to create shared expectations and report related progress.
Involve employees and obtain their ideas and gain their ownership for the transformation.
Build a world-class organization.
At the same Strategic Human Capital Planning conference on November 14, 2002, Lisa Fairhall (Branch Chief for the Personnel Policy Branch at the Office of Management and Budget, or OMB) presented a "top 10 list for getting to green" for an agency's strategic management of human capital:
Meet with OMB and OPM (Office of Personnel Management) to find out what they think you need to do.
Complete (or continue to refine) your comprehensive workforce and skills analysis and discuss outstanding issues with OMB and OPM. Get consensus on what are your critical occupations. Identify holes in the information, and work to fill in that information.
Identify current and projected skills gaps; understand their relationship to your ability to meet program performance goals.
Develop and begin to implement a strategy to address these gaps, using existing personnel flexibilities wherever possible. Focus on critical occupations.
Target excess organizational layers (vertical) or redundant operations (horizontal) to eliminate unwarranted duplication and layers that do not provide value added.
Redirect supervisory positions to line functions to better meet customer needs.
Show how resources are associated with human capital strategies, and how these strategies are in turn linked to specific program outcomes or improvements.
Address the human capital needs of competitive sourcing, e-gov, and financial management initiatives.
Have strategies in place to reward high performers and to address poor performance.
Meet again with OMB and OPM to find out what they think you need to do.
People issues are at the crux of any organizational transformation. According to Michael Munoz, Deputy Assistant Secretary of Education-Performance Improvement, the U.S. Department of Education has had 104 reorganizations, in some form or another, in ten years (Strategic Human Capital Planning Conference, Washington, D.C., November 14, 2002). Human capital needs to be integrated within the business case of the organization, as is now being done at the Department of Education. To produce a results-oriented culture, a GAO study (GAO Report-02-966) found that successful organizations understand that they must often change their culture to successfully transform themselves, and such change starts with top leadership. Thus, all evidence seems to point to the "people issues" as being the heart and soul of organizational transformation.
If people form the "body" of an organization, then their knowledge is the blood that keeps the organization alive. As a result, management of that knowledge ("knowledge management") must be a central part of an organization's human capital strategy. The following sections address what knowledge management is, and how it should play its vital role in a human capital strategy.