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hat set the Clinton Administration's National Performance Review apart from

previous federal reform efforts was its earnest bureaucrat-friendliness.

Vice

President Al Gore's team, distancing itself from the abortive reforms of the

Carter and Reagan eras, operated from the premise that convoluted systems of

government, not individual bureaucrats were the source of waste and

inefficiency.

"Our bedrock premise is that ineffective government is not the fault of the

people in it." Gore said last summer. "Our government is full of

well-intentioned, hard-working, intelligent people -- managers and staff."

But in Washington, as in Hollywood, every saga must have its heroes and

villains -- not systems or concepts, but real live people. So last fall, the

Clinton Administration started fitting executive-branch employees for white hats

and black hats. The good guys, the Administration concluded, are at the bottom

and the top of the federal workforce: the front-line workers who struggle

against the rule-encrusted system to deliver services, and the political

appointees fighting to reinvent government who are at least in theory, more

directly accountable to its taxpaying customers.

In between are the bad guys: nearly 700,000 mid- and upper-level career

managers and overseers.

Last October, when Administration officials trooped to Capitol Hill to try to

sell the NPR's initial round of legislative proposals, they talked less about

systems reform and more about getting rid of 12 percent of the government's

civilian employees -- 252,000 jobs -- by cutting layers of management.

Rhetorically, managers were transformed from struggling civil servants to paper

pushing, rule-obsessed stewards of the government's arcane rules and regulations - "the administrators of red tape," in the words of one NPR

official.

It was a rude welcoming to downsizing, '90s-style. Private-sector middle

managers have already felt the pinch. Earlier this year, an American Management

Association survey revealed that although middle managers made up less than 8

percent of the workforce, they accounted for 19 percent of staff cuts made by

8,000 companies between July 1992 and June 1993.

Now it's the feds' turn. On Sept. 11, shortly after the NPR report was

released, Clinton sent all agency heads a memo telling them to prepare

streamlining plans by Dec. 1, "consistent with the National Performance Review's

recommendation to reduce the executive branch civilian workforce by 252,000."

Each agency's plan, said Clinton, should address "the means by which it will

reduce the ratio of managers and supervisors to other personnel, with a goal of

. . . halving the current ratio within five years." The memo did not say how

much of the overall job cuts each agency would bear.

Late last year, Congress failed to provide what the Administration regarded

as its main downsizing tool: targeted, $ 25,000 buyouts to entice managers and

supervisors to leave government voluntarily. But even if a buyout plan is

eventually approved, Clinton's memo speaks only to reducing the number of managers and supervisors. It doesn't say anything about cutting layers of

management, which may remain even if the overall ratios are reduced. Unless the

layers are eliminated along with the people, say public administration experts,

flexibility, accountability and creativity in government will remain elusive

goals.

Cuts and Ratios

The had news for federal managers is that practically everybody thinks it's a

good idea to cut their ranks.

In their book Improving Government Performance (Brookings, 1993), public

administration theorists John J. Dilulio, Gerald Garvey and Donald F. Kettl

argue that government organizations were designed with multiple layers of

management for two reasons: to lighten supervisors' load by reducing the number

of subordinates they have to supervise, and to provide multiple points of

contact for information on whether top-level initiatives were actually being

implemented at the bottom.

Now, the authors contend, "Senior managers are discovering that they can use

management information systems instead of pyramids of fact finders to acquire and transmit information.

Agency executives echo that argument. "I think a lot of management

structures in government are built on the premise that you needed a richer mix

of managers because you didn't have reliable data," says Michael Dolan, deputy

commissioner of the Internal Revenue Service. "You were on cycles that were

weeks and months old, so you were dependent on managers who were actually

touching the work."

"Government-wide, there are far more supervisors than we need," says Robert

Stone, project director of the National Performance Review and former assistant

secretary of Defense for installations. "We had 200 federal managers working on

the NPR, and every one of them knew that."

Using Office of Personnel Management data, the NPR team concluded that

executive branch agencies averaged one manager or supervisor for every seven

employees (see box at right). The private-sector average, says the report, is

1:15. Hence Clinton's order to cut the federal ratio in half over five years.

Even that may not be enough, argues Gore. "If you look at the

high-performing companies in the private sector," he told Government Executive

last fall, "typically the manager-to-employee ratio is much larger than 1:15. In some cases we found companies that were among the highest performing

companies in the world where the ratio was as high as 1:75."

There's no guarantee, though, that cutting 252,000 federal jobs will result

in the kind of supervisor-employee ratio the Administration wants. The Clinton

White House has provided only sketchy information to agencies on where the cuts

should come from.

Early last year, when President Clinton first proposed cutting 100,000 jobs,

he directed that 10 percent of the cuts come from the Senior Executive Service

and the GS-14 and GS-15 ranks. No such guidance was issued when another 152,000

cuts were added as a result of the NPR. Indeed, as of late last year, the

Administration had still not said how the second round of cuts would be

apportioned among the agencies.

The lack of guidance is part of a deliberate

effort to decentralize federal management, say Office of Management and Budget

officials. They want agencies to figure out for themselves how much they can

contribute to the Administration's overall job-cut goals. Late in the year,

agency budget officials were engaged in back-and-forth negotiations with OMB

about how much each should cut in preparation for the fiscal 1995 budget

submission, due next month.

What is clear, according to internal NPR documents, is that the

Administration wants to get rid of roughly 140,000 supervisors, managers and

SESers (see "The Ayers Memorandum"). Then it wants to eliminate an

additional 112,000 non-managerial jobs in what the NPR calls "administrative

control" functions: personnel, budget, audit, acquisition and headquarters.

That adds up to the 252,000 in total cuts.

How did the Administration settle on these numbers? Testifying before a

House subcommittee last fall, OPM officials said they didn't know where the

figure came from. Here's Stone's explanation:

"We made a head count government-wide of supervisors, budget specialists,

financial specialists, procurement specialists, personnel specialists and

headquarters people, plus regional offices. The total count was -- I think the

report says 690,000. We have a little later count that's about 670,00. We

said, 'This is twice as big as it ought to be.'

"But if you cut that group in half, you have to substitute for them -- for

example, groups that measure progress, that set goals. So you can't just cut

335,000. The judgment was that maybe a quarter of what you cut out you ought to

put back to perform these other functions. So half of the control and

micromanagement force is 335,000, a quarter of the 335,000 is about 85,000 or 83,000. That leaves you at about 252,000. That's roughly the arithmetic."

Layers, Not Numbers

Mathematical gymnastics notwithstanding, Stone insists the performance review

"was not a numbers drill." (He also says it's sheer coincidence that cutting

252,000 jobs would enable the Administration to declare that it reduce federal

employment below two million for the first time in decades.) But the

Administration is clearly obsessed with the twin numbers of job cuts and

manager-employee ratios, to the dismay of some observers.

"The challenge is to reinvent and restructure, not to achieve a certain

supervisory ratio," says Bruce Moyer, executive director of the Federal Managers

Association.

The Administration's approach is like a crash diet, says Paul Light of the

University of Minnesota's Humphrey Institute of Public Affairs. "You can take

off a lot of weight through a reduction in managers, but not reduce the number

of layers," he says.

Light argues that it's hard to tell exactly what the span of control -- that

is, the number of people each manager actually supervises -- is in government.

The Administration is "using the term 'span of control' as if organizational

boxes and charts showed a 1:7 ratio," says Light. "But there is no good

organizational chart of government." Light is trying to create one by studying

federal employment directories to see how the people listed in them sort into

layers -- as many as 60 tiers in some of the Cabinet departments, he says.

The trick, says Light, is to get rid of the jobs, not just the people. He'd

start with what he calls "alter-ego deputies," those whose principal function is

to do the job of the head of a department, agency or branch when he or she isn't

around. "In 1960, we didn't have associate deputy undersecretaries," says

Light. "We didn't have assistant deputy assistant IGs."

Eliminating such

positions, he says, would eliminate 100,000 jobs.

The problem is that many "alter-ego deputies" are politically appointed. The

National Performance Review said nothing about eliminating political layers of

management, even though previous reform efforts, such as Paul Volcker's National

Commission on the Public Service, had recommended cutting the number of

politically appointed officials in half.

But, says Stone, the government has only about 3,000 political appointees to

manage millions of federal workers. "That's not what's wrong with the federal

government," he argues.

"I used to think that was true," says Light. "But when you find out that

those 3,000 appointees sort into 20 to 30 layers between the President and the

career service, you begin to wonder if you can do something about the layers in

the middle without doing something about the layers at the top."

The $ 25,000 Solution

Whether or not agencies de-layer, they have to get rid of 252,000 jobs. With

federal attrition rates hovering at about 3 percent -- down from a high of

nearly 9 percent in the mid-1980s -- mere turnover isn't going to do the job.

That's why last fall the Administration proposed legislation to offer buyouts

of up to $ 25,000 to federal employees who agreed to resign or retire

voluntarily during a 90-day window in fiscal 1994. The Administration said

agencies would be directed to target the buyouts at managers and supervisors,

and estimated that between 60,000 and 100,000 such officials would accept the

offer.

Both the Defense Department and the Postal Service have reported success in

using buyouts in recent years. In 1992, more than 18,000 postal employees

grabbed early-retirement packages featuring bonuses equal to six months' salary.

Last year at DoD, 30,000 of the 70,000 civilians who left their jobs took $

25,000 early retirement bonuses. That meant only about 3,000 civilians had to

be laid off to meet the department's downsizing goals.

The problem with such buyout plans, of course, is finding a way to pay for

them -- and for the added costs of benefits for new retirees.

OMB officials

argued that the Administration's government-wide buyout proposal would be

budget-neutral. (It would have to be, or else it would violate "pay-as-you-go"

budget restrictions.) Agencies, OMB said, would simply reduce spending in other

areas to pay for the buyouts and the benefits -- despite the fact that they'll

be operating under a "hard freeze" on discretionary spending as a result of last

summer's budget agreement.

The Congressional Budget Office refused to buy OMB's logic. Instead, CBO

calculated that the buyouts would actually cost agencies $ 519 million over five

years. This didn't dissuade House and Senate committees from approving buyout

legislation, but it led Senate leaders to take the buyout bill off the

end-of-term Senate calendar, effectively killing the measure for 1993. As this

issue of Government Executive went to press, it was unclear whether the Administration would try again for the buyouts next year.

Meanwhile, Members of Congress eyed the potential $ 30 billion in savings

from trimming 252,000 federal jobs without the aid of buyouts and tried to

earmark the money for unemployment insurance, anticrime legislation and other

priorities.

The Administration played the game, too. In late November, OMB

lumped the job-cut money in with a few billion dollars of other NPR-related cuts

in a $ 37-billion, last-ditch budget-cutting package. The House approved that

package, and the Senate is slated to take it up this month.

If Congress votes to write the job reductions into law, the employees will

have to go -- if not voluntarily, then through reductions-in-force. "There is

no doubt that RIFs would be unavoidable without voluntary separation

[incentives]," said OPM director Jim King last October.

Unless the Administration can craft some budget-neutral buyout package,

"they're going to be firing people come February," predicts a congressional

aide.

At the Agencies

It wasn't just the cost of the buyout idea that bothered some Members of

Congress. "I am concerned that the proposal . . . is insufficiently connected

to any clear plan for implementing the 'reinvention' of the federal government,"

said Sen. William Roth, R-Del., ranking member of the Senate Governmental

Affairs Committee, last fall. "At the very least, it seems to come to us too

early in the proper sequencing of reforms."

When the Administration proposed the buyouts, agencies were just starting the

reinvention process that presumably will result in job reductions. At the same

time, during discussions with OMB late last year, many agency budget offices

were working overtime trying to dodge the job-cut axe.

The Internal Revenue Service, for example, is loathe to cut staff, because

the agency is already straining under a rapidly growing workload. In the last

five years, the gap between income taxes paid and those due has grown from $ 88

billion to $ 118 billion, and the amount of outstanding tax debts that the

agency entertains any hope of collecting has doubled, to about $ 27 billion.

Nevertheless, to meet the Administration's initial goal of eliminating

100,000 jobs government-wide, the IRS will be cutting nearly 5,000 of its

116,000 jobs through attrition over the next three years. IRS officials hope

they will be exempted from further workforce cuts, in the managerial ranks or elsewhere. If the agency simply slashed middle managers, says Dolan, "we'd be

in the ditch quicker than you could blink."

The agency's argument should fly. "I suspect there will not be cuts [at the

IRS]," OMB director Leon Panetta told a House Ways and Means Subcommittee last

fall.

Even without cutting overall employment, IRS officials say, they will reduce

management layers by shifting positions to the front lines. By the end of

fiscal 1995, the IRS plans to move 2,000 management and "overhead" positions out

of headquarters and regional offices to direct service positions in districts.

Much of the shift will be accomplished through attrition.

In its reorganization, the IRS also plans to eliminate half of its regional

processing centers, leaving five. The other five will remain open as customer

service centers, but with smaller staffs.

At the Department of Housing and Urban Development, Secretary Henry Cisneros

has pledged to eliminate the department's 10 regional offices entirely, leaving

no layers between the department's Washington headquarters and its 73 field

offices.

The move, slated to occur over five years, would eliminate the jobs of more

than 4,000 of HUD's 13,500 employees. None will be RIFed, Cisneros has said.

Some will be transferred to the field offices, and the agency hopes to offer

early retirement packages to others.

Can It Be Done?

While IRS and HUD move ahead, other agencies have barely begun their efforts

to cut people and layers. Will they be able to give President Clinton what he

wants?

If all he really wants is just 252,000 fewer employees, the answer is yes.

"I think they'll hit the mark," concedes a leader of a managers' association.

"The 252,000 will be something they will have the numbers to be able to say

they've achieved."

Indeed, it's increasingly clear that the bulk of the cuts will come from just

a few agencies. DoD, for example, is reportedly slated to cut 160,000 positions

by 1999, meaning that it alone could account for more than 60 percent of the

Administration's total projected job cuts. But reducing layers of management is a different story. The Administration's

projections of 252,000 in cuts aren't based on any rigorous analysis of

agencies' needs, but rather on a collective gut feeling on the part of the NPR

staff that half of government's managers and overseers are superfluous.

Even if you accept that premise, and even if you can offer buyouts, it's hard

to get the right people to leave. In the Postal Service, the group of 48,000

employees who accepted its early-retirement offer included fewer than 14,000

managers. The rest were experienced letter carriers, mail handlers and

postmasters. In connection with the buyouts, Postmaster General Marvin Runyon

said a year and a half ago that he would eliminate 30,000 managerial and other

"overhead" jobs; late last year, he still had 7,000 jobs to go to meet that

goal.

Likewise, while DoD has exceeded its targets for reducing civilian employment

-- the 1993 target was 966,000 and the department had 937,000 employees at the

end of the year -- DoD officials have no idea how the reductions have affected

spans of control. "To the extent that we have closed or reduced organizations

that had high-grade employees or too much overhead in supervisory structure,

[the high-grade employees] have been offered incentives and they're gone," says

Ronald Sanders, director of civilian personnel policy at DoD. "But we have not

offered incentives with the express purpose of reducing the number of supervisors in the department."

DoD is gathering data on how its reductions have affected management

layering, but "I wouldn't expect much there," Sanders says. "Most of these

incentives have been targeted at blue-collar workers rather than white collar.

In our blue-collar ranks, the supervisory span of control is pretty good."

Even in the government's white-collar ranks, the span of control varies

greatly from department to department, agency to agency and bureau to bureau.

And simple managerial ratios often don't tell the whole story. Take the

Department of Energy, whose supervisor-employee ratio of 1:4.81 is the lowest of

the major agencies or departments, according to OPM. But most of those

supervisors oversee not just other DOE employees, but some of the 150,000

contract employees the agency hires to manage its nuclear-weapons facilities.

For years, the General Accounting Office has documented DOE's inability to

effectively manage its contractors. Even Gore and Stone concede that the last

thing Energy needs is to slash its management ranks.

That's the problem with a blanket order to cut jobs and reduce ratios, say

federal career executives. "The biggest frustration in all this," says Carol

Bonosaro, president of the Senior Executives Association, "is that it was not a

mission-related decision. Our hope had been that the NPR was going to do a program-by-program review that would say, 'Here are 45 Agriculture programs that

can be phased out, and here are the accompanying resources that can therefore be

dropped.'"

Instead, under its decentralized management approach, the Administration has

simply told agencies they must cut managers and left it up to them to figure out

how to get their work done. It's a challenge they don't take lightly.

"People sometimes treat reductions in management as a no-brainer exercise

where you just go out and carve out the middle of an organization," says the

IRS's Dolan. "If you go at it that way, you're going to get a disastrous

result."

THE AYERS MEMORANDUM: MANAGERS FIRST TO GO

Just who is on the chopping block in the Administration's plan to cut the

government's white-collar workforce by 252,000? Under what circumstances, and

when, are they supposed to leave?

For weeks after the National Performance Review was released, answers to

these questions, if they existed at all, remained shrouded in mystery.

But the picture became clearer in mid-December, when Government Executive

obtained an NPR staff explanation of the job-cut proposal. The Dec. 6

memorandum by NPR staffer John Ayers of the Peace Corps describes in detail the

"reasoning behind our recommendations to streamline certain areas of our

government."

The memorandum addressed to NPR project director Robert Stone, begins with

good-news talking points. "A point worth making early and often is that the 252,000 position reductions are not an end in themselves, but result from system

and management changes recommended by NPR," it says. "Another point that merits

repeating is that the attack on the central control structures is not an attack

on the employees. The people who occupy the targeted positions are often the

best and brightest in government. For this reason we strongly recommended that

training and transfer opportunities must be made available . . ."

The NPR staff, the memo shows, divided targeted positions into two

categories; jobs in management, and jobs in "administrative control structures."

A table attached to Ayers memo lists 278,458 people in the category of

"Supervisors, Managers & SES." Another 382,907 positions are listed in five

administrative support categories.

The memo makes it clear that managers will be the first out the door.

"Cuts in specialist positions like personnel, budget, audit and procurement

should be in part conditional on regulatory and legislative relief from

excessive controls," the memo says. "No one is expected to have to perform the

work of those who leave the central control structures." Agency plans, the memo

said, should "reflect the need for legislative change" and "clearly identify

where cuts cannot be made until legislative remedies are passed." In contrast, the memo says, "the reduction in managers [is] not tied as

directly to the need for regulatory relief. Agencies have latitude in how they

manage their staff; regulations do not specify a span of control, or the

existence and specific role of managers. Therefore, the first wave of

reductions are anticipated to be among the management ranks."

Moreover, some 55 percent of the reductions -- or 140,000 jobs -- are

supposed to come from the management ranks "as the span of control increases

from 7 employees to 15 employees per manager," Ayers writes. The cuts are to

come over five years, but, the memo says, "We feel that front-loading the

reductions is very important. The quote from General Electric, 'We found that

downsizing had to precede empowerment . . .' summarizes much of the expert

advice we received over the past few months."

The memo makes it clear that the buyout legislation currently stalled in

Congress is viewed as key to making the reductions. The strategy, the memo

says, should be to offer the buyouts "across the board and not just to staff in

the targeted positions. The reason is that the targeted pool of approximately

700,000 positions could not be significantly reduced without RIFs. Our plan is

to encourage voluntary separations using buyouts with a migration of staff from

the targeted positions to line positions as vacancies occur. In this way there

would be a one-way flow of staff from the targeted pool to the line or by separation from government service."

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