# HCM:21 — PyTorch Conference NA 2026 Poster Draft

> Status: Path A complete — reward recalibrated, policy separation proven on real
> data, 43/43 tests passing. Figure `poster_figure.png` is generated from
> `poster_experiment.py` (raw numbers in `results.json`). Hermes-Agent
> enhancement designed below.

---

## Title

**Primary:** *HCM:21 — Reward Design for Long-Horizon LLM Agents in an OpenEnv
Workforce-Planning Benchmark*

**Subtitle:** *Why naïve efficiency rewards get hacked by downsizing, and a
health-gated fix that restores policy separation — plus a skill-growing
(Hermes-Agent) training pipeline.*

Two-author max (per CFP). Submit on Sessionize by **July 26, 11:59 PM PDT**.

---

## 1. Motivation (top-left)

- **Long-horizon planning + sparse/delayed rewards** is the hardest axis of agent
  evaluation. HCM:21 puts an LLM agent in the seat of a Chief Human Capital
  Officer steering a 200–500-person company across **6 quarters / 150–200 steps**,
  scored on validated Fitz-enz HR analytics (HCVA, HCROI, QIPS).
- **A non-code domain.** Most agent benchmarks are code/math/games. Workforce
  strategy is a fresh, economically grounded long-horizon testbed.
- **OpenEnv-native.** Built to the `meta-pytorch/OpenEnv` contract → plugs
  directly into the PyTorch RL-environments ecosystem (the conference's own turf).

## 2. The environment (left column)

- **4-phase × 6-quarter state machine** (`phases.py`): Scanning → Planning →
  Producing → Controlling, with per-phase minimum-action gating.
- **Company simulation** (`company.py`): 5 departments, Cobb-Douglas production
  linking headcount × skills × engagement → output; per-employee performance,
  engagement, flight-risk, promotability, salary, tenure.
- **Fitz-enz metrics** (`metrics.py`): HCVA = (Rev − non-employment cost)/FTE;
  HCROI = Rev/employment cost; QIPS composite; Five Indexes of Change; Employee
  Value composite.
- **Stochastic events** (`events.py`): market downturns, competitor poaching,
  exec departures, budget cuts — force re-planning.
- **4 scenario tasks**: high-turnover, budget-cuts, rapid-growth, balanced-opt.
- *Figure 1: architecture diagram. Figure 2: the phase × quarter loop.*

## 3. Finding: the reward was being hacked (center — the hook)

Running three **non-LLM** policies through the env (5 seeds each) exposed a
reward-hacking failure in the original scoring:

| Policy | v1 score (sigmoid-centred) | What actually happened |
|---|---|---|
| Null (do-nothing) | **0.672** | workforce collapses 300→41; HCVA/HCROI *rise* +75% |
| Random | 0.652 | — |
| Heuristic (real strategy) | 0.649 | keeps 96 staff, +65% HCVA, QIPS maintained |

**All three were indistinguishable.** Root cause: HCVA (per-FTE) and HCROI
(per-employment-cost) are *ratios* that a do-nothing agent inflates by letting
attrition shrink the denominator. The original scoring also mapped "no change" to
0.5 via a sigmoid, handing out free credit. The benchmark rewarded **gutting the
company**.

> This is the poster's intellectual hook: *efficiency ratios are reward-hackable
> in long-horizon economic environments, and a do-nothing baseline is the cheapest
> way to discover it.*

## 4. The fix: health-gated scoring (center-right)

`scoring.py` v2 (this work):

1. **One-sided ramps** — "no improvement" scores **0**, not 0.5 (no free credit).
2. **Health gate** — HCVA/HCROI credit is multiplied by workforce retention; an
   agent that keeps <60% of staff cannot bank efficiency "gains."
3. **Sustainability as a first-class term (30%)** — headcount × engagement
   retention. Solvency is itself gated by health (a profitable shell ≠ healthy).

Measured after recalibration (5 seeds, real runs, fully deterministic):

| Policy | v2 score | ± |
|---|---|---|
| Null (do-nothing) | **0.247** | 0.017 |
| Random | 0.262 | 0.028 |
| Heuristic | **0.448** | 0.029 |

**Separation restored:** strategy now scores ~1.8× no-strategy, with headroom to
~0.65+ for a trained agent. All 43 unit tests pass. Runs are bit-reproducible —
all stochastic streams (turnover, hire generation) are seeded from the episode
seed, so the same seed yields the same score every time.

- *Figure 3 (hero): `poster_figure.png` — left: v1 collapse vs v2 separation;
  right: sparse quarterly-reward trajectory.*

## 5. Training pipeline (right column)

- **GRPO** (TRL `GRPOTrainer`) + **Unsloth**, `unsloth/Qwen3-0.6B`, LoRA r=16,
  4-bit, T4-friendly (batch 2 × grad-accum 4, 4 generations, lr 5e-6).
- **Reward** = the env's health-gated quarterly reward; completions are parsed for
  JSON action sequences and executed in the live OpenEnv server (HF Space).
- *Figure 4: GRPO loop diagram. Figure 5 (Path A follow-up): post-fix GRPO reward
  curve + trained-agent bar added to Fig 3.*

## 6. Skill-growing agents with Hermes-Agent (right column — the differentiator)

A from-scratch GRPO'd 0.6B model struggles to even emit valid 150-step action
sequences (cold start). We pair HCM:21 with **Nous Research's Hermes-Agent**
("the agent that grows with you") to attack this on three fronts:

1. **Expert rollouts → SFT warm-start, then GRPO.** Run Hermes (model-agnostic)
   as the CHCO against the HCM:21 OpenEnv server; use its **batch trajectory
   generation + trajectory compression** to build a dataset of successful
   6-quarter episodes; SFT Qwen3-0.6B on it as a warm start *before* GRPO. Fixes
   the cold-start that makes raw GRPO on a small model fail.
2. **Skills as procedural memory for long-horizon competence.** Hermes' skills
   system (agentskills.io standard, autonomous skill creation/self-improvement)
   lets the agent distill reusable HR sub-routines — `diagnose_at_risk_depts`,
   `rebalance_hiring_to_offset_turnover`, `protect_engagement_under_budget_cut`.
   "Grows with you" = the agent accumulates HR strategy across episodes. This is a
   direct mechanism for the long-horizon theme.
3. **Memory for state beyond the context window.** By Q4 full state history
   exceeds 128K tokens. Hermes' agent-curated memory (`MEMORY.md`/`USER.md`) +
   session search/summarization lets the agent compress prior quarters into
   durable memory instead of carrying raw history — addressing the "beyond
   context memory limits" requirement head-on.

**Experimental matrix the poster can show (learning in weight-space vs.
memory/skill-space vs. hybrid):**

| Regime | Mechanism | Hypothesis |
|---|---|---|
| GRPO-only (0.6B) | weight updates | strong but cold-start-limited |
| Hermes skills-only | in-context skills + memory, no weight updates | strong sample-efficiency, larger model |
| Hermes→SFT→GRPO (hybrid) | distill expert trajectories into a small model | best score-per-param |

**Integration path:** expose HCM:21 actions as an **MCP tool server** (Hermes
supports MCP natively) → Hermes calls `step()`/`reset()` as tools with zero glue.

> Caveat to verify before final: exact Hermes script names for batch generation /
> trajectory compression aren't in the public README — confirm against the repo
> (`agent/`, `skills/`, any `batch_runner.py`) before printing command names.

## 7. Try it (footer)

QR codes → HF Space (`paretooptimal-hcm21.hf.space`), GitHub repo, Colab notebook.
MIT licensed. OpenEnv-compliant (`openenv validate`).

---

## Figure checklist

| # | Figure | Status | Source |
|---|---|---|---|
| 1 | Architecture diagram | **DONE** | `poster_diagrams.py` → `fig1_architecture.png` |
| 2 | Phase × quarter loop | **DONE** | `poster_diagrams.py` → `fig2_phase_loop.png` |
| 3 | **v1→v2 recalibration + reward trajectory** | **DONE (real)** | `poster_experiment.py` → `poster_figure.png` |
| 4 | GRPO training loop | **DONE** | `poster_diagrams.py` → `fig4_grpo_loop.png` |
| 5 | Post-fix GRPO reward curve + trained-agent bar | NEEDS Colab run | auto-built by `poster_experiment.py` when `grpo_results.json` is present |

Four of five figures are generated and committed. Fig 5 (and the trained-agent
bar on Fig 3) is wired to auto-generate: drop the Colab `grpo_results.json` in the
repo root and re-run `poster_experiment.py` — no code edits. See RUNBOOK.md §2–3.

## Hermes integration assets (in repo)

`integrations/hcm21_mcp_server.py` — an MCP tool server exposing
`hcm21_reset / hcm21_step / hcm21_available_actions / hcm21_state / hcm21_score`.
Hermes (MCP client) drives the env natively. Verified end-to-end in-process.
Setup in RUNBOOK.md step 5.

## Reproducibility appendix (for reviewers)

```bash
pip install -e ".[server]"          # faker, numpy, fastapi, pydantic
python poster_experiment.py         # writes results.json + poster_figure.png
python -m pytest tests/ -q          # 43 passing
```

Raw measured numbers live in `results.json`.