Going Out of Business

Closing an agency is an executive's nightmare. Private sector executives presiding over massive downsizings have found themselves pictured on the cover of Newsweek magazine as "Corporate Killers." They've also become whipping boys for the likes of Republican presidential hopeful Pat Buchanan and Labor Secretary Robert Reich. Now the tide of moral contempt is turning against government downsizers.

In its March 6 lead editorial, the Washington Post warned government officials not to cast stones at companies laying off workers. "Under current leaders in Washington, job security is becoming a thing of the past in the federal workplace, too," the Post observed, adding that the Clinton Administration has shrunk the federal civilian workforce to its lowest level since 1965.

Nearly 70 percent of the 150,000 civil servants who left government between January 1993 and January 1995 were Defense Department civilian employees. But non-Defense agencies took healthy cuts as well. For example, the Office of Personnel Management lost 25 percent of its workforce, the General Services Administration dropped 18 percent, and the Federal Deposit Insurance Corporation shrank by 22 percent.

Despite the media's newfound sympathy for layoff victims, downsizing is certain to continue, and even worsen, in government. Congressional Republicans continue gunning for agencies. Clinton must cut another 60,000 jobs by 1999 just to hit the 272,900 cutback mark called for in the 1994 Work Force Restructuring Act. In addition, the churning budget upheavals of fiscal 1996 sank some agencies and left others barely afloat, their budgets ravaged by a series of continuing resolutions providing only temporary funding at levels lower than in 1995. Many are planning layoffs and furloughs.

In short, the future looks bleak, with most agencies facing deep cutbacks and some outright closure. Executives and managers now have no choice but to master the depressing details of downsizing. To help, Government Executive held a special roundtable discussion with executives who recently shut down agencies or are involved in the ongoing process of closing military bases.

Congressional Chaos

The Bureau of Mines was slated for closure in the Interior Department's 1996 appropriations bill. Instead, the bureau got caught up in continuing resolutions and Clinton's veto of Interior's budget.

The bureau found itself without legislative language needed to go through with layoffs, according to Dave Brown, director of external affairs and strategic planning. "I tell people this is the first time a statutory agency has been taken down on an appropriation bill, in 90 days," Brown said. "We got caught up in very tortured language in the conference report; we got caught up in a cosmic battle over budget."

Bureau employees were declared essential and worked through the winter furloughs to close the bureau. At the same time, their reduction-in-force date was put off from Jan. 8 to Jan. 22 and finally to Feb. 22, when approximately 1,000 staffers were let go.

The partial government shutdowns monkey-wrenched transfers as well. "We were charged to transfer 168 people to the U.S. Geological Service, but USGS was in furlough for three weeks, so there was no one there to work with over the holidays." The same thing happened with the Energy Department, where other Bureau of Mines staffers were headed, Brown said, but closure continued.

"Two years ago today, we were an agency of 2,368 people. Today we are 50, and those are people on skeletal crews at various locations that are closing. We are also writing what we have termed a liquidation order, something to finally set forward that the bureau has ceased to exist and what the remaining activities are and where those will be handled."

Linda Morgan, who now heads the Surface Transportation Board, confronted similar legislative hurdles in throttling down the Interstate Commerce Commission. "Congress had made the decision that the ICC would be eliminated, but then there was a misunderstanding as to what that really entailed," she said. "While the decision to eliminate was made over a year ago, the final legislation was not signed into law until two days before the ICC was to go out of business.

"It was probably, for Congress, a learning experience. But I had an agency that had work to do. At the same time, I had employees that needed to be separated because I didn't have the money to pay them. I had field offices I had to close. I had other personnel and equipment closures that needed to take place. I was faced essentially with winding down while Congress was still debating exactly what it was I was winding down to."

One of Morgan's chief complaints is that, so far, the process of closing agencies has been done backwards. Legislators have first abolished agencies, only later realizing they need to eliminate the regulations the agencies enforced and deal with the services the agencies provided. For example, Brown pointed out that despite closure of the Bureau of Mines, 158 laws still refer to its mission and function.

"I think we need to plan ahead as to where we want to end up and build that into the process," Morgan said. "You need a little time to wean the public, to help the employees to downsize in an orderly way so that the work is completed in an orderly fashion. I was in closure and opening and transferring and RIFing all at the same time."

Brown had this message for Congress: "People who are going to take the plane down need to be in on the takeoff. What we want is the ability to have as many options to make the best decisions we can in very bad outcomes."

Shaking the Shell-Shocked

Both Brown and Morgan were faced with employees' anger and denial. ICC and Bureau of Mines staffers spent the winter holidays closing their agencies. People faced RIFs without knowing exactly when they would happen and worked alongside colleagues whose jobs would be spared by transfer. The survivors, in turn, felt guilty and anxious.

"You had two-thirds of the workforce, 1,200 people, you gave RIF notices. Six hundred are going to foster homes. So you're loading those folks up in the boats. And you've got offices and facilities in which there are mixed groups. Some know where they are going. Some don't know. And some definitely know that they're going to be on the street. You've got to manage all of that," Brown said.

On top of the chaos and bad feelings, there was widespread denial among employees too shell-shocked to prepare for job searches or entirely new surroundings.

"There were individuals who knew that because of the function they were performing they likely would not survive this closure process," Morgan said. "Then there were other individuals who thought that because of their general professional training that they would survive-the attorneys, for example. Some were just in denial."

At the Bureau, Brown said, executives decided that only by predicting the most dire consequences could they shake employees out of denial. "As soon as we knew the outcome, we felt it was our responsibility to define reality in its worst possible portrayal, and do that over and over and over again in every means that we had-electronically, mass meetings, individual meetings.

"Early on, we actually had to tell people that they could not work on new work and the only thing that they could do was close down what they were doing. They would call and say, 'We've got this opportunity to do this kind of project here. We can do it in 30 days.' They understood the reality on one hand, but their orientation to solve problems and deal with things was still there."

Denial was a significant problem for Defense officials in the early years of base closure, said Capt. Burton Streicher, director of DoD's Base Closure and Transition Office. During the first rounds of closures, employees at targeted bases believed Members of Congress would intercede to save their jobs.

Self-deception slowed the closures and made it harder for employees to find new jobs. But resistance has weakened since the closures of 1988 and 1991, Streicher said, as employees have seen approximately 130,000 displaced workers successfully use DoD's Priority Placement Program.

As closures and realignments continued in 1993 and again last year, employees came to view them as inexorable and unavoidable. That has helped speed closure times from 5.6 years for the 1988 list to 3 years for facilities listed in 1993, Streicher said.

Bases slated for shutdown usually set up transition centers where employees can learn about the placement program, home sales assistance, retraining and other benefits available to them, Streicher said.

In addition, Streicher's office has created the post of base transition coordinator. Civilians and service members fill these jobs at every closing base. Linked to each other and Streicher's office through a network of laptop computers, the coordinators serve as ombudsmen and liaisons between the local communities, base officials and DoD. They help disseminate benefit information to employees, resolve problems faced by communities trying to take over base facilities, facilitate environmental cleanup, and help ease the way to new uses of base infrastructure. For example, coordinators worked out licensing agreements with movie companies anxious to use former airplane hangars as sound stages.

While non-Defense agencies rarely face the real estate and cleanup problems faced by the military, lack of a plan for reuse of equipment and facilities can hang up downsizing plans. Brown rapped Congress for failing to consider the Bureau of Mines' investment in laboratories and research facilities when closing the agency.

"We have a quarter of a billion dollars worth of infrastructure. We were supposed to take it down in 90 days with no options as to what would be the best use of facilities or equipment," Brown said.

Acknowledge Ambiguity

All the roundtable participants agreed that in downsizing and closing agencies, to fail to plan is to plan to fail. DoD has learned from hard experience to create closure schedules that allow time for communities to develop reuse plans, base officials to handle environmental cleanup, and employees to move on.

"One of the problems that a commander faces, particularly at a place like a shipyard or a laboratory, is the first people that you usually lose are your most highly critical, skilled people because it is relatively easy for them to get a job somewhere else. So you're faced with still producing your function, but the key people that you need are now gone. That puts a double burden on the people that are still there," said Streicher.

ICC and Bureau of Mines officials were reluctant to let top people jump ship too soon because of uncertainty about when Congress would provide legislation permitting final layoffs. The problem has become common as many agencies have gone deeper and deeper into the fiscal year without final 1996 budgets.

"This is really the critical dilemma facing managers if agencies do not have permanent appropriations: Do they tell the employees the worst possible situation and get them out there and get them to use the career transition center and get them motivated to look for another job? Or do they try to say that everything is going to be all right because they don't want the employees to leave?" said Ed McHugh, director of the OPM Workforce Restructuring Office.

Morgan dealt with the dilemma by frankly acknowledging the ambiguity of the ICC's situation. "I think you need to paint the entire picture. It's not an either/or. I was constantly saying, 'It could be this, or it could be this, or it could be this. Some of you may be retained, some of you won't. This is the worst case, this is the best case.' And then, really, the employee has to make the decision."

Managers inclined to soften the blow or spare their staffers some of the uncertainty aren't doing them any favors, said McHugh. "I was giving a transition seminar a few months ago over in Virginia to an agency that was going out of business within three or four months. So I was telling the employees, being brutally frank, 'You guys are going to have to find another job.'

"In the audience was the head of this particular component, and I noticed her furiously scribbling on a piece of paper. She actually had this piece of paper passed up to me while I was giving a session. What she had written was, 'Please don't be so negative. You will cause anxiety in these employees.' And I'm thinking, 'These employees really need to have anxiety because they are not going to be employed.' "

In the end, these executives agreed, it is constant and caring communication with employees that makes the difference during downsizing. "You must open communication with your employees to let them know where they stand. Most commanders have open all-hands meetings, where they basically say, 'Here I am, ask me your questions. If I don't know, I'll go get the answer for you,' " Streicher said.

Morgan spent a great deal of time circulating among the ICC staff and pitching her message to the needs and concerns of different groups of employees. She said she hoped to fend off cynicism and, ultimately, to perform a public service. "Sometimes, the hard feelings that can develop are because employees feel that their managers are not telling them everything," Morgan explained. "One of the things that I was always concerned about was sending people out of the building who were cynical and angry and upset. Where were they going to go and how were they going to contribute to society?"

But honesty won't come easily to those accustomed to wielding executive powers, Morgan cautioned. "When I didn't know something, I told them, 'I don't know, I cannot tell you,' which is hard when you're a boss. You think you're supposed to know everything."

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