All Business

By Kellie Lunney

September 1, 2012

"The taxpayers shouldn’t have to have money taken out of their paychecks to pay people in government, who are our servants, who are making a lot more money than we are."

It’s the tail end of that remark that really smarts if you’re a federal employee. Romney’s net worth hovers between $200 million and $300 million, in spite of being “unemployed,” as he told a group of jobless Floridians in June 2011. A top career civil servant in the Senior Executive Service will earn $179,700 in 2012, the same annual salary as in 2011, when the current federal pay freeze took effect. Many federal employees earn more than a metal worker in Iowa, but none, including President Obama, has ever made money like Romney, the former head of a leading global private investment firm and savior of the 2002 Winter Olympics in Salt Lake City, Utah.

Romney wasn’t really talking statistics at that stop in Dubuque, though. The “we” in his statement was designed to underscore something he emphasizes nearly every chance he gets: He’s not a government guy, he’s a business guy.

Romney spent four years as governor of Massachusetts and crafted a state health insurance program that served in part as the template for his Democratic rival’s national health care reform law. But the son of a former federal housing secretary, Republican presidential candidate and Michigan governor has spent most of his career in the private sector as a business management and consulting whiz. Mitt Romney relates first and foremost to the business world: its people, its methods, its emphasis on data-driven results and its bottom-line sensibilities. That’s just what he told those metal workers in Iowa: “I’ve spent my life doing what you guys are doing; I’ve spent my life in the private sector. I spent my time in business.”

You might ask why a person with that background wants to run the federal government. But a more useful question is: How will Romney, a chief executive officer by trade and disposition, manage a workforce of 2 million employees who operate in a Byzantine network of agencies, departments, regulations and programs? 

“Government is a Fortune 1 company,” says Alan Balutis, senior director of the business solutions group at Cisco Systems Inc., who spent a big part of his career in government. In other words, the American government is in a league of its own as a business.  

‘Simpler, Smaller, Smarter’

George W. Bush was billed as the first MBA president, but if Romney is elected, he’ll be the first CEO in the White House. Romney positioned himself as the first CEO governor in Massachusetts, and he has adopted that brand on the presidential campaign trail. The founder of global private investment firm Bain Capital frequently talks about making government more efficient, whether it’s through consolidating agencies and programs or scaling back on federal workers’ pay and benefits. “Those three things—making government simpler, smaller and smarter—means getting rid of programs, turning programs back to states and finally making government itself more efficient,” Romney told the Dubuque audience. “Now, for me, this is not an impossible dream. It’s something I’ve seen happen in other settings.”

Romney the rainmaker helped Bain reap billions during his 15-year tenure there, according to The Real Romney, a 2012 biography by Boston Globe reporters Michael Kranish and Scott Helman. Some companies prospered as a result of Bain’s investment in their operations: Gartner Inc., a small technology research firm before Bain invested, is now a multibillion-dollar company with thousands of employees. Others, such as Damon Corp., a Needham, Massachusetts-based medical testing firm, closed its plant and laid off 115 people when Corning Inc. bought it—a deal Bain helped orchestrate, and which made the venture capital firm a lot of money. 

A winning formula for cutting deals, streamlining operations and making money in the private equity world, however, doesn’t always translate well to government. “Business, per se, is not a model for anything,” says Clay Johnson, who served as deputy director for management at the Office of Management and Budget during the George W. Bush administration. 

In government, Johnson says, the focus should be “on goals that are good for America.” Leaders have to clarify why they believe their goals are appropriate and be transparent and results-oriented in how they aim to achieve them, he adds. Many business executives are not good at those things.

Focusing on efficiency is not useful, because it simply means “people have to work longer and harder,” and there are ways to be more efficient that are not always effective at improving government, Johnson says. “I think the focus of any management agenda that has a chance of success has to be on government effectiveness.” 

As Massachusetts governor, Romney set out to shrink government, but did not make it significantly smaller, according to The Real Romney. His cuts to the state bureaucracy were “fairly modest,” the book notes. 

“After four years, he reduced the payroll of agencies under his direct control by 603 jobs, according to his administration’s tally,” states the book. “By contrast, a Republican predecessor, William F. Weld, had closed state hospitals, privatized services and slashed about 7,700 jobs during his first term, though the numbers had later increased when the economy improved.”

On the campaign trail, Romney strikes an activist tone on the subject of remaking the federal bureaucracy, although he has avoided providing specifics about his plans. He told campaign donors during an April closed-door fundraiser in Florida that he intended to restructure the bureaucracy, in remarks that were overheard by reporters outside the event. 

“I’m going to take a lot of departments in Washington and agencies and combine them,” Romney said, according to a report from NBC’s Garrett Haake. “Some eliminate, but I’m probably not going to lay out just exactly which ones are going to go. Things like Housing and Urban Development, which my dad was head of, that might not be around later. But I’m not going to actually go through these one by one. What I can tell you is, we’ve got far too many bureaucrats. I will send a lot of what happens in Washington back to the states.”

As governor, though, Romney wasn’t always a fan of delegating down. Take, for example, the comprehensive security plan he crafted for the 351 cities and towns in Massachusetts. In 2004, he told National Journal, a sister publication of Government Executive, that one of the state’s biggest challenges in that area was a lack of uniformity. He said avoiding ending up with a “hodgepodge of equipment” meant keeping a tight rein on how funds were distributed. Massachusetts’ grant process for receiving homeland security funds has “carefully delineated criteria,” he said, and the Homeland Security Department regarded the state’s system as a model.

Of course, talk of eliminating and reorganizing government agencies is nothing new from presidential candidates. Former GOP presidential contender Rick Perry famously forgot during a November 2011 debate which three departments he wanted to scrap; fellow Republican presidential hopeful and Texas Rep. Ron Paul pledged to get rid of several agencies. 

“That’s all about politics, not how you go about changing things,” says Johnson. 

Balutis agrees that Romney could be mirroring the GOP primary campaign rhetoric of smaller government when he talks about restructuring or eliminating agencies. “Somebody with his background, as a business and management consultant, you would really expect someone to take a more ordered and rational look at what is the largest, and some would say, most complex organization, on the globe,” he says.

Massachusetts Morale

When Romney took over as Massachusetts governor in 2003, the Bay State faced a budget crisis, with a potential $650 million deficit and a projected 2004 shortfall of more than $3 billion. He raised millions in revenue by charging residents more for permits, licenses and other services, according to The Real Romney. 

Romney and his team also looked for savings and efficiencies within the commonwealth, attempting to overhaul agencies and programs with mixed success. He consolidated some agencies within Massachusetts’ health and human services organization, but a plan to streamline its public university system did not win support. Other proposals, including one to reclassify hundreds of government attorneys as political appointees and create a new Office of the Solicitor General in the governor’s office, met strong resistance from workers and interest groups and ultimately were unsuccessful. Romney also floated the possibility of laying off some attorneys, including many in the state’s Environmental Protection Department, and looked into the legality of barring government lawyers from union membership.

“He approached government like a hostile takeover,” says Kyla Bennett, a former attorney at the federal Environmental
Protection Agency in Massachusetts, and current director of Public Employees for Environmental Responsibility in New England. Bennett said morale among state civil servants during Romney’s tenure was “awful.” 

Romney issued a gag order early in his term forbidding state environmental employees to speak with the media or have contact with members of the legislature. Violators were subject to disciplinary action. In addition, Romney moved citizen appeals of decisions by the Environmental Protection Department from under the purview of independent administrative law judges to political appointees, a practice still in place today under Democratic Gov. Deval Patrick.

Kerry Healey, who served as Romney’s lieutenant governor in Massachusetts and currently is an adviser to his presidential campaign, says morale was “quite good” among the state workforce during Romney’s term, citing his commitment to increasing diversity in hiring, especially women, to the top ranks of government. Romney created the commonwealth’s first human resources and diversity officer, a job held by Ruth Bramson, the current CEO of the Girl Scouts of Eastern Massachusetts. Healey also notes Romney’s efforts at “rooting out a culture of patronage in state government.” As governor, he barred family members of his Cabinet and senior staff from lobbying the government.

Rubbing Elbows 

Backslapping, glad-handing politics has never been Romney’s strong suit, in business or government. His reluctance to engage in horse-trading could prove problematic if he’s elected president, particularly in dealing with Congress. As governor, Romney—the son of a natural-born politico—saw his agenda derailed more than a few times by a legislature put off by his policies, but also his personality. Romney frequently couldn’t remember state lawmakers’ names and often did not extend them the little courtesies they’d come to expect from the state’s executive, according to reporters Kranish and Helman. Romney attempted to make changes through executive orders and other directives, but he couldn’t ignore the legislature altogether.

“Many other moves to reform state government required legislative support, and there Romney often faltered,” they write. “That was partly because he showed little interest in the lawmakers themselves. He and his brainy, idealistic staff seemed too often blind to the fact that sweeping reforms, even if they made great sense in a white paper, counted for nothing unless the spade work had been done to cultivate legislative support.” One state lawmaker the book quoted said Romney was “far removed” from the daily operations of government.

The annual federal budget, department reorganizations and changes to employees’ pension plans are just a few of the many things affecting the operations of government that require congressional approval. And even under the best of circumstances, getting anything through both chambers of Congress and to the president’s desk is nothing short of a miracle these days. 

As of early August, the House had passed only six of the 12 annual appropriations bills, while the Senate was 0 for 12. Lawmakers reportedly had cut a deal on a six-month stopgap funding measure to avoid (again) a government shutdown when the fiscal year ends Sept. 30. Congress undoubtedly will be just one of Romney’s headaches if he’s elected president.

Romney’s reluctance to engage in retail politics makes it even more important for him to surround himself with people who can effectively communicate and execute a government management agenda. One person he already has looked to is his running mate, House Budget Committee Chairman Paul Ryan, R-Wis. Even before Romney picked Ryan, the two enjoyed an easy camaraderie on the campaign trail that some observers credit with loosening up Romney. Ryan has supported an extended pay freeze for federal workers, an increase in the amount they contribute to their pensions and reductions to the federal workforce through attrition. Romney and Ryan are in sync policywise, at least as far as issues affecting government workers go. 

Another key relationship is with former Utah governor and friend Mike Leavitt, whom Romney tapped to lead his transition team, dubbed the Readiness Project. Leavitt was governor of Utah when Romney shepherded the 2002 Winter Olympics in Salt Lake City through crisis and spent a decent amount of time in the federal government, serving as administrator of the Environmental Protection Agency and Health and Human Services secretary during the Bush administration. 

Leavitt is known for his fondness of using technology to improve government, particularly when he was governor. Shortly after he was sworn in as head of EPA in 2003, he delivered a wide-ranging address to agency employees on policy issues, but also went out of his way to praise federal workers. “I came into this office with great respect for the work of the agency and as a believer in its mission,” he said. “Every day spent here has only heightened my admiration. It also has affirmed the greatest certainty I had going in—that I would be surrounded by the best people in the world.” Leavitt could end up as chief of staff in a Romney White House.

Building Relationships

Showing appreciation for federal workers is part of cultivating a good relationship with them, says Johnson. The former head of Bush’s transition team says Colin Powell, who served as secretary of State during the Bush administration, was particularly adept at forging a rapport with his workforce. “Colin Powell made it very clear to them that he was for their success and for helping them make State the darnedest department it could be,” Johnson says. 

Romney’s transition team has reached out to some of Bush’s management point people for input on different issues, according to Balutis and Robert Shea, an associate OMB director during the Bush years, who is now a principal at Grant Thornton, LLP. Shea, who says he’s been contacted by the campaign, believes government management and making the “day-to-day operations more efficient and effective” will be a primary focus of Romney if he is elected, based on his track record in the public, private and nonprofit sectors. “Pulling off the Olympics, that’s almost a metaphor for the government as a whole,” Shea says, praising Romney’s turnaround of the scandal-ridden and fiscally troubled Salt Lake Games. A Romney administration likely would pull from the “deep bench of talent” in the GOP, Shea says, as well as the business world.

When it comes to relating to federal employees, Romney will come in saddled with his repeated statements on the campaign trail that they are overpaid relative to their private sector counterparts. He says he would “align” their compensation packages with industry and “stop the unfairness of government workers getting better pay and benefits than the taxpayers they serve.” He also wants to shrink the federal workforce through attrition. 

Based on his proposals in Massachusetts, government employees could expect a more aggressive approach to consolidating and streamlining government than the Obama administration has taken so far.

Would that put Romney at odds with his own employees? 

If it did, it might not make him that different than his predecessor. “President Obama has not shown an interest in enhancing the morale and engagement of federal employees,” argues Shea. What about reports of low morale among state government workers during Romney’s tenure in Massachusetts? “I think if that’s the case, which I am not aware that it is,” Shea says, “there’s not a contrast between President Obama and Mitt Romney.” 


By Kellie Lunney

September 1, 2012

http://www.govexec.com/magazine/features/2012/09/all-business/57806/