Source: Sloan Center on Aging and Work (Boston College)
We’ve all heard the advice about putting something aside for a rainy day. Trouble is, many of us fail to heed that advice. And when it comes to planning ahead for their human resources needs, many U.S. companies aren’t much better. A new analysis of the Talent Management Study, conducted by the Sloan Center on Aging & Work at Boston College, indicates that companies have not done a good job of gathering the information they need to ensure they have the right people in place to get the job done. This finding is being borne out in today’s coverage of the country’s labor troubles. News media regularly report on the shortage of skills that employers currently face. The 2009 Talent Management Study found that more than two-thirds of employers (68%) had done little or no analysis of the makeup of their work force. And three out of four employers had done little or nothing to collect information about employee career plans, work preferences or projected retirement rates.
The new analysis of these findings concludes that the more employers analyze their own talent management situations, the more likely they are to have policies and plans in place to recruit, engage and retain older workers. In other words, the analysis draws a direct link between employers’ lack of prior human resources planning and today’s skills shortage.
Designing Collaborative Networks
Source: IBM Center for the Business of Government
This report offers practical advice to public managers and political leaders who are addressing complex public challenges through multi-organizational networks. The use of collaborative networks of organizations has matured in the past decade. However, the developers of collaborative networks face political, organizational, and technological challenges in a world accustomed to the traditional, hierarchical approach to problem-solving and accountability.
Professors Fedorowicz and Sawyer draw on a six-year project which collected data on 266 collaborative networks of public safety organizations, such as law enforcement and first responders to emergencies. They found a great deal of diversity in these public safety networks. They also found, however, common patterns of issues. For example, most of the design issues surrounding public safety networks center on data security and access concerns of the various participants. The authors also found common principles for designing successful collaborative networks, and they believe that these design principles can be applied in policy arenas other than public safety.
One principle they present is the importance of leveraging the use of technology as a way to advance the work of a collaborative network. For example, to address the issue of data security and access, they recommend that those involved in designing a collaborative network “ensure that data custodianship remains with the data’s owners … the collaboration should be seen as providing a portal to data, not a warehouse for its storage.”
Much of their advice and recommendations come from the experience of people on the ground who have faced and solved knotty problems. As a result, we hope this report serves as a useful guide to federal managers as they develop collaborative networks to address challenges that reach across federal agency—and sometimes state, local, non-profit, and private sector—boundaries.
New GAO Report
Source: Government Accountability Office
U.S. Merchant Marine Academy: Additional Actions Needed to Establish Effective Internal Control. GAO-12-369, July 6.
Highlights – http://www.gao.gov/assets/600/592173.pdf
The Business of Government Magazine — Spring/Summer 2012
Source: IBM Center for the Business of Government
This edition of The Business of Government magazine provides a glimpse into the many challenges, risks, and opportunities facing today’s government executives. More importantly, it introduces a select group of government leaders who offer their insights, outline successes, and tell us how they, in their own unique way, are making a difference in an era of fiscal austerity.
Today’s conditions require government executives to go beyond simply doing more with less—to find smarter ways of doing business, using resources more efficiently, and investing them more wisely. The dramatic nature of this historical moment cannot be overstated. It is fully revealed by the depth of the vicissitudes being faced. How government leaders respond matters and the conditions require more than vague changes. It is to be understood that today’s actions affect future choices and lost opportunities result in ubiquitous costs. In the end, it is not necessarily retrieving something ideal from the past, but discovering a new path forward in the present.
This issue of The Business of Government Magazine also continues and expands on the core mission of the IBM Center, which is to connect public management research to practice. Whether it’s getting big things done in government, enhancing national competitiveness, revitalizing public service, reforming the federal IT budget, or evaluating citizen participation and using wikis in government, we bring together thoughtful perspectives from some of the leading practitioners and academics in the field.
CEO Pay and the Market for CEOs
Source: Federal Reserve Board
Competitive sorting models of the CEO labor market (e.g., Edmans, Gabaix and Landier (2009)) predict that differences in CEO productive abilities, or “talent”, should be an important determinant of CEO pay. However, measuring CEO talent empirically represents a major challenge. In this paper, we document reliable evidence of pay for CEO credentials and argue that the evidence is consistent with models of the CEO labor market. Our main finding is that boards’ compensation decisions reward several reputational, career, and educational credentials of CEOs, with newly-appointed CEOs earning a 5 percent ($280,000) total pay premium for each decile improvement in the distribution of these credentials. Consistent with boards using credentials as publicly-observable signals of CEO abilities, we show that pay for credentials displays key cross-sectional features predicted by theory, such as convexity in credentials and complementarity with firm size. Our main finding is robust to a battery of identification tests that address selectivity and endogeneity concerns, including instrumental variables estimates and controlling for firm and CEO fixed effects. We also show that credentials capture variation in CEO human capital that is different from lifetime work experience, and are positively related to long-term firm performance and board monitoring, which helps to distinguish our results from alternative stories based on CEO general human capital, hype, and entrenchment. Overall, our findings suggest that sorting considerations in the CEO labor market are an important determinant of CEO pay. Our results also suggest that the rise in CEO pay over the last decades may owe at least in part to a rise in the CEO talent premium.
Occupational Outlook Quarterly — Summer 2012
Source: Bureau of Labor Statistics
New GAO Reports and Testimony
Source: Government Accountability Office
1. Recovery Act: Tax Debtors Have Received FHA Mortgage Insurance and First-Time Homebuyer Credits. GAO-12-592, May 29.
Highlights – http://www.gao.gov/assets/600/591173.pdf
2. Management Report: Improvements Needed in Controls over the Preparation of the U.S. Consolidated Financial Statements. GAO-12-529, June 27.
Highlights – http://www.gao.gov/assets/600/591936.pdf
3. Millennium Challenge Corporation: Georgia and Benin Transportation Infrastructure Projects Varied in Quality and May Not Be Sustainable. GAO-12-630, June 27.
Highlights – http://www.gao.gov/assets/600/591950.pdf
4. Polar-Orbiting Environmental Satellites: Changing Requirements, Technical Issues, and Looming Data Gaps Require Focused Attention. GAO-12-604, June 15.
Highlights – http://www.gao.gov/assets/600/591644.pdf
5. Geostationary Weather Satellites: Design Progress Made, but Schedule Uncertainty Needs to be Addressed. GAO-12-576, June 26.
Highlights – http://www.gao.gov/assets/600/591913.pdf
6. Kachemak Bay Ferry: Federally Funded Ferry Was Constructed with Limited Oversight and Faces Future Operating Challenges. GAO-12-559, June 11.
Highlights – http://www.gao.gov/assets/600/591506.pdf
7. Planning and Flexibility Are Key to Effectively Deploying Broadband Conduit through Federal Highway Projects. GAO-12-687R, June 27.
8. National Mediation Board Mandates in the FAA Modernization and Reform Act of 2012. GAO-12-835R, June 27.
1. Environmental Satellites: Focused Attention Needed to Mitigate Program Risks, by David A. Powner, director, information technology management issues, before the Subcommittee on Energy and Environment and Investigations and Oversight, House Committee on Science, Space, and Technology. GAO-12-841T, June 27
New GAO Report
Source: Government Accountability Office
When Performance Trumps Gender Bias: Joint versus Separate Evaluation (PDF)
Source: Harvard Business School Working Papers
We examine a new intervention to overcome gender biases in hiring, promotion, and job assignments: an “evaluation nudge,” in which people are evaluated jointly rather than separately regarding their future performance. Evaluators are more likely to focus on individual performance in joint than in separate evaluation and on group stereotypes in separate than in joint evaluation, making joint evaluation the money-maximizing evaluation procedure. Our findings are compatible with a behavioral model of information processing and with the System 1/System 2 distinction in behavioral decision research where people have two distinct modes of thinking that are activated under certain conditions.
Employee Stock Options: Tax Treatment and Tax Issues (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The practice of granting a company’s employees options to purchase the company’s stock has become widespread among American businesses. Employee stock options have been praised as innovative compensation plans that help align the interests of the employees with those of the shareholders. They have also been condemned as schemes to enrich insiders and avoid company taxes.
The tax code recognizes two general types of employee options, “qualified” and nonqualified. Qualified (or “statutory”) options include “incentive stock options,” which are limited to $100,000 a year for any one employee, and “employee stock purchase plans,” which are limited to $25,000 a year for any employee. Employee stock purchase plans must be offered to all fulltime employees with at least two years of service; incentive stock options may be confined to officers and highly paid employees. Qualified options are not taxed to the employee when granted or exercised (under the regular tax); tax is imposed only when the stock is sold. If the stock is held one year from purchase and two years from the granting of the option, the gain is taxed as long-term capital gain. The employer is not allowed a deduction for these options. However, if the stock is not held the required time, the employee is taxed at ordinary income tax rates and the employer is allowed a deduction. The value of incentive stock options is included in minimum taxable income for the alternative minimum tax in the year of exercise; consequently, some taxpayers are liable for taxes on “phantom” gains from the exercise of incentive stock options. On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (P.L. 110-343) was enacted. This law included provisions that provided abatement of any taxes still owed on “phantom” gains.
Nonqualified options may be granted in unlimited amounts; these are the options making the news as creating large fortunes for officers and employees. They are taxed when exercised and all restrictions on selling the stock have expired, based on the difference between the price paid for the stock and its market value at exercise. The company is allowed a deduction for the same amount in the year the employee includes it in income. They are subject to employment taxes also. Although taxes are postponed on nonqualified options until they are exercised, the deduction allowed the company is also postponed, so there is generally little if any tax advantage to these options.
The following seven key laws and regulations concerning stock options are described: Section 162(m)—“Excessive Remuneration,” Sarbanes-Oxley Act: Stock Option Disclosure Reforms, SEC’s 2003 Requirement of Approval of Compensation Plans, FASB Rule for Expensing Stock Options, American Jobs Creation Act of 2004 (Section 409A), IRS Schedule M-3, and SEC’s 2006 Executive Compensation Disclosure Rules.
This report explains the “book-tax gap” as it relates to stock options and S. 2075 (Ending Excessive Corporate Deductions for Stock Options Act) introduced by Senator Carl Levin. U.S. businesses are subject to a dual reporting system. One set of rules applies when they report financial or “book” profits to the public. Another set of rules applies when they report taxable income to the Internal Revenue Service. The “book-tax” gap is the excess of reported financial accounting income over taxable income.
This report will be updated as issues develop and any new legislation is introduced.
Medicare Contractors Lacked Controls To Prevent Millions in Improper Payments for High Utilization Claims for Home Blood-Glucose Test Strips and Lancets
This report summarizes the results of our individual reviews of the 4 contractors that processed claims for home blood-glucose test strip and/or lancet supplies (test strips and lancets) for Jurisdictions A through D, which included all 50 States, 5 territories, and the District of Columbia. Medicare Part B covers test strips and lancets that physicians prescribe for diabetics. The quantity of test strips and lancets that Medicare covers depends on the beneficiary’s usual medical needs.For calendar year 2007, based on our analyses of our individual samples of the four contractors, we estimated that the contractors improperly allowed for payment a total of approximately $271 million in claims that we identified as high utilization claims for test strips and/or lancets. Of this amount, we estimated that the contractors improperly paid a total of approximately $209 million to suppliers.Of the 400 sampled claims for test strips and/or lancets that we reviewed at the 4 contractors, 303 claims (76 percent) had 1 or more deficiencies, including:
(1) The quantity of supplies that exceeded utilization guidelines was not supported with documentation that specified the reason for the additional supplies, the actual frequencies of testing, or the treating physicians’ evaluation of the patients’ diabetic control within 6 months before ordering the supplies;
(2) There was no supporting documentation that indicated refill requirements had been met;
(3) Physician orders were missing or incomplete; or
(4) Proof-of-delivery records were missing.We recommended that CMS:
(1) Ensure that contractors implement system edits recommended in our individual reports,
(2) Ensure that contractors are enforcing Medicare documentation requirements for claims for test strips and/or lancets, and
(3) Consider the results of our reviews when developing and evaluating coverage and reimbursement policies related to test strips and lancets.CMS concurred with all of our recommendations.
New GAO Reports
Source: Government Accountability Office
1. Indian Health Service: Action Needed to Ensure Equitable Allocation of Resources for the Contract Health Service Program. GAO-12-446, June 15.
Highlights - http://www.gao.gov/assets/600/591632.pdf
2. Managing for Results: A Guide for Using the GPRA Modernization Act to Help Inform Congressional Decision Making. GAO-12-621SP, June 15.
Paying It Forward Pays Back for Business Leaders
What makes a leader effective? Sound decision-making, knowing how to manage people, taking charge, and inspiring others to achieve goals are a few of the qualities. But helping others develop their full potential is also an integral part of successful leadership. According to a new Catalyst report, it pays off not only for emerging talent but for those who invest time in cultivating them. And more women than men, it turns out, are helping others move up the ladder. High-potential talent who were themselves mentored, coached, or sponsored to advance in their careers are more likely to “pay it forward” by developing the next generation of leaders, according to Leaders Pay It Forward, the latest report in Catalyst’s series that examines the career advancement of high-potentials throughout the world.
And, paying it forward pays back: It benefits not only protégés but leads to career advancement and compensation growth for those providing the assistance—$25,075 in additional compensation between 2008 and 2010, according to the report. Why? It may be that developing other talent creates more visibility and a following within the organization for the high-potentials who are doing the developing, which leads to greater reward and recognition for the extra effort.
Women, the report finds, are even more likely than men to develop other talent. Sixty-five percent of women who received career development support are now developing new talent, compared to 56 percent of men, and 73 percent of the women developing new talent are developing women, compared to only 30 percent of men. This finding helps bust the oft-cited “Queen Bee” myth that women are reluctant to provide career support to other women and may even actively undermine each other.
Centralizing Management of the Military Health System
Source: Heritage Foundation
The Government Accountability Office (GAO) released a paper last month urging the Department of Defense (DOD) to centralize the management of the Military Health System (MHS). GAO has long held the view that the management structure for supervising the MHS is too de-centralized to impose the discipline necessary to make the system efficient.
Generally speaking, the GAO recommendation makes sense. The DOD’s health care costs are growing so quickly that they are contributing to an internal imbalance in defense budgets. In the context of forecasted defense budgets that are way too low to meet U.S. national security commitments, these rising health care costs are effectively robbing from the accounts that fund new weapons and equipment for the military. Accordingly, all proposals that serve to reduce the projected growth rate in military health care deserve appropriate consideration. No stone should be left unturned, including ones related to the management structure for overseeing the MHS.
Although military accessions of women and minorities have increased over time, the proportions of these groups in the senior officer corps remain relatively low. RAND research conducted in the late 1990s found that, on net, white and Hispanic women entering the officer ranks were less likely to achieve the field grade level (O4) than were white men, while black women had the same likelihood of achieving O4 as white men, and black men had a greater likelihood. This volume updates the earlier RAND study by tracking the promotion and retention of personnel who entered the officer ranks between 1971 and 2002 through the rank of O6, using data from January 1988 through September 2010. The newer data enables the researchers to investigate differences later in the career and to consider differences for Hispanic officers and other minorities. The authors discuss their findings in relation to those of the earlier study.This updated study also examines the career progression of women serving in military occupations that are partially closed to them — that is, occupations that are deemed open to women but that have some positions for which assignment of women is restricted. The authors find no statistically significant difference between the career progression of women in partially closed versus open occupations, relative to the differences among men serving in the same occupations.
Improving the Decision Making Abilities of Small Unit Leaders
Source: National Research Council
For the past decade, the U.S. Marine Corps and its sister services have been engaged in what has been termed “hybrid warfare,” which ranges from active combat to civilian support. Hybrid warfare typically occurs in environments where all modes of war are employed, such as conventional weapons, irregular tactics, terrorism, disruptive technologies, and criminality to destabilize an existing order.
In August 2010, the National Research Council established the Committee on Improving the Decision Making Abilities of Small Unit Leaders to produce Improving the Decision Making Abilities of Small Unit Leaders. This report examines the operational environment, existing abilities, and gap to include data, technology, skill sets, training, and measures of effectiveness for small unit leaders in conducting enhanced company operations (ECOs) in hybrid engagement, complex environments. Improving the Decision Making Abilities of Small Unit Leaders also determines how to understand the decision making calculus and indicators of adversaries.
Improving the Decision Making Abilities of Small Unit Leaders recommends operational and technical approaches for improving the decision making abilities of small unit leaders, including any acquisition and experimentation efforts that can be undertaken by the Marine Corps and/or by other stakeholders aimed specifically at improving the decision making of small unit leaders. This report recommends ways to ease the burden on small unit leaders and to better prepare the small unit leader for success. Improving the Decision Making Abilities of Small Unit Leaders also indentifies a responsible organization to ensure that training and education programs are properly developed, staffed, operated, evaluated, and expanded.
Introduces eight new Strategic Initiatives that will guide SAMHSA’s work from 2011 through 2014 to help people with mental and substance use disorders and their families to build strong communities, prevent behavioral health problems, and promote better health for all Americans.