Government Executive - Authors - David Osborne

Weeding the Federal Garden

David Osborne — Wed, 12 Nov 2008 00:00:00 -0500

Before the financial bailouts, we already had planned to borrow 24 cents of every dollar we will spend. And with baby boomers starting to retire, the Congressional Budget Office warns, Social Security, Medicare, Medicaid and interest on the debt will consume all federal revenue in just 14 years if we don't change course.

Obama will need to weed the federal garden, and then radically increase the productivity of what's left. Success will hinge on his leadership. He must hire good managers, give them a vision of 21st century governance and help them develop critical skills.

He must avoid a mistake the last two presidents made: leaving Congress out of the reform process. In our system, major changes require legislation -- and Congress rarely passes bills when it feels no ownership. The president should seize on the fiscal crisis to appoint a government reform commission, including members from both houses and parties and experts from outside government. There will be much to do, but here are some of the top priorities.

Focus on Results

It's time to move from assessing programs, using OMB's Program Assessment Rating Tool, to choosing among them.

The new administration should take a lesson from states and cities that have adopted budgeting for outcomes. Obama should define the outcomes most important to Americans -- improved health care, better education, a cleaner environment and so on -- and around each organize a team made up of strategic thinkers from OMB and the various policy councils and czars' offices. Their job would be to analyze what drives the desired outcome, to define the most effective strategies, and to rank all programs -- existing and proposed -- from most cost-effective to least. The president would set a spending target for each outcome and strategy and "purchase" from the top of the list. When the money ran out, he would draw a line and, with necessary adjustments for political realities, propose to eliminate programs below the line.

This ranking process not only weeds the garden, it drives program managers to search for cheaper ways to deliver results, because they are at risk of falling below the line. It also encourages them to collaborate across agency boundaries.

The next step is to move from measuring to managing performance. Every Cabinet member and agency director should have a performance agreement, and the president's performance team should create a "FedStat" process, modeled on similar efforts at the state and local levels, to ensure quarterly reviews. These sessions would bring together key decision-makers -- often from multiple agencies -- around a targeted result and strategy, to figure out what works, what doesn't and how to make improvements.

Measures need tweaking to focus not just on activities but on outcomes, and managers need training in performance management. Then the president should create rewards for employees whose work units improve their performance.

Federal contracting cries out for a similar focus on results. We need more managers who understand how to write and manage performance contracts. The pressing question is not whether we need more or less contracting, but how we can get better results for our dollars.

Answer to Customers

It is time to renew the Clinton administration's focus on customer surveys and service standards -- for example, "We will process your passport application within X days."

During the 1990s, the Social Security Administration, which operated the most heavily used toll-free number in the world, reengineered its teleservice operation to answer 95 percent of calls within five minutes. Other agencies made similar strides. The proposed Federal Customer Service Enhancement Act, which passed the House in 2007, would require customer service standards throughout government.

The biggest reason for poor performance in government is that managers and employees are tied up in rules and red tape. We must liberate them. This was President Clinton's greatest success (and the Bush administration's greatest oversight).

Vice President Al Gore encouraged innovators throughout the bureaucracy to create reinvention labs, helped them get waivers to rules that stood in their way, and gave them awards and political protection when they succeeded. Obama should do likewise.

Clinton and Gore also convinced Congress to authorize two performance-based organizations -- the Education Department's Office of Federal Student Aid and the Commerce Department's Patent and Trademark Office. Like charter schools, those entities were held strictly accountable for results but given greater latitude to control their own rules. Both were successful, but when the Bush administration showed little interest, their departments quickly withdrew the flexibilities. The next president should create dozens of PBOs and protect their freedoms through OMB oversight.

He also will need to remove management layers from the hierarchy and finish civil service reform. The detailed job classification system and hierarchical General Schedule were designed for an industrial-era government of clerks. Today the system's rigidity produces enormous waste, because managers often cannot hire, promote, move or reward employees to drive performance. Broad job classifications and paybands have been tested for 25 years, and they work.

There's an old Lakota saying: "When you're riding a dead horse, the best strategy is to dismount." In today's Information Age, centralized, hierarchical, rule-driven bureaucracy is a dead horse. Given the fiscal realities we face, it is high time we developed a new ride.

David Osborne, a senior partner for the Public Strategies Group and co-author of The Price of Government (Basic Books, 2004), was a senior adviser to Vice President Al Gore and chief author of the National Performance Review's 1993 report.

]]>

Weeding the Federal Garden

David Osborne — Sat, 01 Nov 2008 00:00:00 -0400

The next president must make way for innovative reforms-but some seeds already are planted.

The next president will be faced with enormous challenges, including a deficit ballooning out of control. The Office of Management and Budget projects a fiscal 2009 deficit of $482 billion, plus $80 billion in war costs, plus $180 billion we quietly borrow from the Social Security Trust Fund every year-not to mention the $700 billion package Congress passed to rescue the credit industry.

Our next president needs to weed the federal garden, and then radically increase the productivity of what's left. Success will hinge on his leadership. He must hire good managers, give them a vision of 21st century governance and help them develop critical skills.

He must avoid a mistake the last two presidents made: leaving Congress out of the reform process. In our system, major changes require legislation-and Congress rarely passes bills when it feels no ownership. The president should seize on the fiscal crisis to appoint a government reform commission, including members from both houses and parties and experts from outside government. There will be much to do, but here are some of the top priorities.

Focus on Results

It's time to move from assessing programs, using OMB's Program Assessment Rating Tool, to choosing among them.

The administration should take a lesson from states and cities that have adopted budgeting for outcomes. The president should define the outcomes most important to Americans-improved health care, better education, a cleaner environment and so on-and around each organize a team made up of strategic thinkers from OMB and the various policy councils and czars' offices. Their job would be to analyze what drives the desired outcome, to define the most effective strategies, and to rank all programs-existing and proposed-from most cost-effective to least. The president would set a spending target for each outcome and strategy and "purchase" from the top of the list. When the money ran out, he would draw a line and, with necessary adjustments for political realities, propose to eliminate programs below the line.

The next step is to move from measuring to managing performance. Every Cabinet member and agency director should have a performance agreement, and the president's performance team should create a "FedStat" process, modeled on similar efforts at the state and local levels, to ensure quarterly reviews. These sessions would bring together key decision-makers-often from multiple agencies-around a targeted result and strategy, to figure out what works, what doesn't and how to make improvements.

Answer to Customers

It is time to renew the Clinton administration's focus on customer surveys and service standards-for example, "We will process your passport application within X days."

This time around, standards should be widely publicized and agencies should provide redress when they fail to meet key standards. In Great Britain, people who ride commuter trains get discounts on their monthly passes if their trains fail to meet on-time standards. An even more powerful strategy is to give customers a choice of service providers and let public money follow their choices. Since the feds deliver few direct services to individuals, this applies more often in areas where they send money to state and local governments. One example would be education: We should boost the number of charter schools, to increase competition and choice within public education. The biggest reason for poor performance in government is that managers and employees are tied up in rules and red tape. We must liberate them. This was President Clinton's greatest success (and the Bush administration's greatest oversight). Vice President Al Gore encouraged innovators throughout the bureaucracy to create reinvention labs, helped them get waivers to rules that stood in their way, and gave them awards and political protection when they succeeded. The next president should do likewise. Clinton and Gore also convinced Congress to authorize two performance-based organizations-the Education Department's Office of Federal Student Aid and the Commerce Department's Patent and Trademark Office. Like charter schools, those entities were held strictly accountable for results but given greater latitude to control their own rules. Both were successful, but when the Bush administration showed little interest, their departments quickly withdrew the flexibilities. The next president should create dozens of PBOs and protect their freedoms through OMB oversight.

He also will need to remove management layers from the hierarchy and finish civil service reform. The detailed job classification system and hier-archical General Schedule were designed for an industrial-era government of clerks. Today the system's rigidity produces enormous waste, because managers often cannot hire, promote, move or reward employees to drive performance. Broad job classifications and paybands have been tested for 25 years, and they work.

David Osborne, a senior partner for the Public Strategies Group and co-author of The Price of Government (Basic Books, 2004), was a senior adviser to Vice President Al Gore and chief author of the National Performance Review's 1993 report.

]]>

Paying For Results

David Osborne — Thu, 01 Feb 2001 00:00:00 -0500

Now that agencies are setting goals for performance, it's time to take the next step by creating rewards and sanctions for employees.

or the past two years, federal employees have sent a clear message about the way agencies evaluate and reward their workers: The system isn't working.

In 1999, the Clinton administration's National Partnership for Reinventing Government (NPR) reported that in its annual survey of federal workers, "employees expressed the greatest dissatisfaction with how employee performance is handled. Two out of three employees believe rewards are based on something other than merit; many cited bias and favoritism. Still more employees say that no action is taken against poor performers; many pleaded strongly for something to be done about this problem."

In the 2000 survey, the results were only slightly better. Only 31 percent of employees said they understood what constituted "good performance" and only a little more than a third said "recognition and rewards are based on merit."

Surveys by the Merit Systems Protection Board have had similar results. The bottom line is that the traditional evaluation and rewards approach, based on subjective ratings by supervisors, is an utter failure. When rewards are based on subjective ratings, employees distrust and resent the process. Last year, when GovExec.com, the Web publication of Government Executive, invited e-mail messages on the ratings system, responses flooded in. A comment by Joe Chandler of the Marine Corps Logistics Base in Albany, Ga., was typical: "I can't believe that there can ever be a fair performance rating system. There are always going to be personalities involved, be they good, bad or indifferent, and there will always be a supervisor, and no matter how good or bad they are, or no matter how hard they try, there will always be favorites, and there will most certainly always be a whipping boy."

Managers find the process equally troubling. Few want to give employees poor ratings and take on the unwelcome job of documenting and justifying performance decisions. Nor do they want to anger or demoralize most of their employees by singling out a few for superior ratings. So most simply bless all but the absolutely worst employees. Hence, most federal managers and employees get positive ratings, and financial rewards are so diluted they are meaningless.

Exactly the same thing happens in other governments. When Australia tried a bonus pay program, for instance, 94.4 percent of those eligible got bonuses the first year.

Because it rewards marginal and superior employees equally, the traditional system promotes mediocrity. Superior performers become demoralized and cynical, either reducing their efforts or leaving their jobs.

Last year, the Clinton administration began to shift the focus from subjective evaluations to objective results. NPR officials had already worked with 32 agencies identified as having the greatest impact on the public to help them develop systems of "balanced measures" that include three basic elements: the operational results they measure under the Government Performance and Results Act; customer satisfaction; and employee satisfaction. Last year, the President's Management Council, an organization of top management officials at agencies, issued a policy requiring agencies to refocus their performance systems on those three performance factors. "Formal and informal recognition programs should be linked to desired performance outcomes," the council said.

The administration immediately required the new approach for political appointees, and last October the Office of Personnel Management released regulations putting it into effect for members of the Senior Executive Service.

"The regulations require agencies to evaluate senior executive performance using measures that balance organizational results with customer satisfaction, employee perspectives and any other measures agencies decide are appropriate," OPM said.

This practice, known as performance management, is the next logical step toward results-oriented government. Federal agencies that learned how to define and measure performance goals in the 1990s should now start learning how to reward people for achieving those goals.

Agency Pioneers

A few agencies already have pioneered results-oriented performance management. The Veterans Benefits Administration (VBA), for example, uses a balanced scorecard for measuring agency performance. It includes five elements: timeliness, quality, customer satisfaction, unit cost, and employee development and satisfaction. VBA put together an executive appraisal system built around these and other factors to determine bonuses for senior executives. (By law, these bonuses range from 5 percent to 20 percent of salary.)

Now VBA is driving this approach down through the ranks. Last year, each of VBA's nine service delivery networks began receiving a quarterly pool of bonus money based largely on the performance of its "stations" (or regional offices). Each service delivery network awards bonus funds to its stations, which can decide how to distribute the money to employees. VBA officials are encouraging the stations to reward team performance, but aren't requiring any particular model. "We've encouraged folks to take the balanced scorecard down to the team level," says Mike Walcoff, associate deputy undersecretary of Veterans Affairs for operations. "For example, in Los Angeles, each team has a balanced scorecard. That is ideally what we want to see: that we're organized in teams, and that each team has a scorecard that measures their performance, and that they are rewarded based on their performancev as a team."

The IRS has also developed a set of balanced performance goals. This fiscal year, for the first time, SES members will be eligible for performance bonuses equal to 5 percent to 20 percent of salary based on a new appraisal system that combines objective results on performance goals with subjective ratings of their accomplishments. IRS Commissioner Charles Rossotti has also approved a broad pay band for senior managers below that level, where the agency will offer performance bonuses in the 5 percent range.

Managers' salaries also will rise based on performance. "Today, they advance based on time in grade," explains Chief Human Resources Officer Ron Sanders. The new system "will move them through based exclusively on performance evaluation. The principle is: the higher the pay, the higher the expectation. So as someone moves up in salary range, they have to perform better to get base pay increases, with a comparable formula for bonuses."

But the real leader is the U.S. Postal Service, which has far more freedom to innovate than other agencies because it is not subject to civil service regulations. In 1995, the Postal Service adopted a balanced measures approach and radically revamped its performance management system. Today, everyone and every team in the 800,000-member postal workforce has performance goals based on "the voice of the customer, the employee and the business."

All 84,000 managerial and executive staffers at the Postal Service have a smaller number of team goals that determine their lump-sum performance bonuses under the agency's Variable Pay Plan. The goals all focus on on-time deliveries, net income, productivity improvement, employee satisfaction (based on surveys), lost workdays due to injury and similar measures. Over the past five years, the average bonus for postal executives (the equivalent of SESers) has ranged from 9 percent of salary to 14 percent. Other managers, supervisors and professionals have averaged bonuses of 5 percent to 7 percent.

The Postal Service also did away with cost-of-living adjustments for managers, supervisors and other professionals, and created a merit pay program in their place. "The merit pay program is the way that people get [salary] increases, based on individual assessments of a person's performance," explains Paul Weatherhead, manager of pay programs. "We try to . . . tie the person's individual objectives back into the goals of the organization. For instance, human resource people have a balanced scorecard and could get [bonuses] based on three voices: the customer, the employee and the business. But as a function, HR probably has a greater impact on the voice of the employee. Finance people probably have a greater impact on the voice of the business. The merit pay program allows management to take it down and personalize it."

Finally, the Postal Service uses a separate recognition program to reward outstanding individual efforts. These rewards range from awards certificates to cash payments as high as 20 percent of salary for executives. (This maximum cash award is limited to 50 people a year). Postal workers' unions have resisted performance pay of any kind, but union members are also eligible for both financial and nonfinancial recognition awards for extraordinary efforts.

The results of the Postal Service's Variable Pay Plan have been dramatic. Since the program was begun:

On-time scores for express mail have jumped from 82 percent to 94 percent.
Lost workdays due to injuries have fallen from 3 percent to less than 2 percent.
Personnel costs have fallen from 82 percent of operating expenses to 78 percent. Other strategies no doubt had an impact on these results. "But I think most executives and officers here will point to the Variable Pay Plan as a major contributor," says Weatherhead.

Rewarding Objective Results

As the Postal Service's experience makes clear, performance management works. Success in the rest of the federal government will require two things: a focus on results that matter to citizens and customers, and a shift from subjective ratings to objective measures of performance. As OPM's Handbook for Managing Employee Performance says, "Too often, employee performance plans with their elements and standards measure behaviors, actions or processes without also measuring the results of [the] employee's work." And as correspondent after correspondent told GovExec.com last year, subjective ratings result in resentment, anger and anxiety.

The solution is to tie financial incentives to objective measures of performance, although there may need to be room for some subjectivity to adjust for realities outside the organization's control. A snow-plowing crew, for example, may do a heroic job in a bad winter and still end up with bad numbers. Conversely, if there is little snow, they'll almost inevitably look good.

As agencies make the shift to basing rewards on objective measures, here are 10 lessons they should keep in mind:

1. Use financial rewards, but don't underestimate the power of nonfinancial rewards.
Money matters more than most people will admit, but so do psychological rewards, such as recognition and increased responsibility. There are dozens of ways leaders can publicly recognize employees' performance, from awards to newsletter stories to flowers, gift certificates, tickets, vouchers for a dinner out or even attendance at conferences or workshops. Some agencies, such as the Patent and Trademark Office, have created Employee Peer Satisfaction Awards, through which employees can recognize fellow workers.

2. Magnify the power of incentives by applying them to groups as well as individuals.
Most results are produced by groups of people working together, not by a single individual. In those cases, use collective rewards for performance. Unless individual work leads directly to outputs you can measure, you are better off rewarding teams. This binds employees to a collective purpose. At the Postal Service, says Weatherhead, "The key thing is we made it a group incentive program, so there were cooperative behaviors." At the Veterans Benefits Administration, if you are a regional service officer, 50 percent of your evaluation is based on results in your Service Delivery Network, 35 percent is based on results in your regional office, and 15 percent is based on overall results at VBA. The agency wants "people to not only think about how I'm doing in Phoenix, but . . . how I'm going to give resources to help Los Angeles," says Walcoff.

Team-based rewards are most effective if the teams have real control over their work. Can they get rid of bad apples? Can they change their work processes? Can they hold their internal suppliers accountable for their performance? Can they buy what they need elsewhere if support agencies let them down? If they can do these things, they can usually improve their performance dramatically.

3. Use lump-sum performance bonuses, not salary increases.
Salary increases are expensive, because they cost money not just in the year they are earned, but every year thereafter. Budget officials typically get nervous about escalating personnel costs and soon cap these costs, undermining the value of the tool.

Outstanding employees also hit the top of their salary range after several pay increases, at which point the tool becomes useless. When that happens, good employees often begin looking for jobs that pay more-an unintended consequence of the worst kind.

Salaries should be determined by what it takes in a particular labor market to attract and keep talented employees. To reward high performance, use bonuses.

4. Make performance bonuses big enough to get people's attention.
People with experience in performance management recommend bonuses that are at least double the size of a regular pay increase. The old Performance Management and Recognition System for federal managers failed in the 1980s in part because the bonuses and merit increases were simply too small. "Our managers told us, 'It's not worth all the time and effort it takes, for $1,000 or $1,500,' " says the IRS' Sanders. A good minimum threshold for bonuses is 5 percent of salary.

5. Avoid arbitrary targets.
One of the difficulties of any reward program is picking performance levels that will trigger rewards. W. Edwards Deming, the pioneer of total quality management, railed against using numerical targets. Among his famous 14 points, the 10th is: "Eliminate slogans, exhortations and numerical targets."

Deming argued that you only know how much better performance can be after you have improved your work processes. Hence, he reasoned, all targets are arbitrary and negative. Arbitrary targets create cynicism among the workforce. When workers fail to reach targets that are set too high, for example, they are blamed unfairly. If they exceed targets, they are praised and rewarded-regardless of how difficult or easy the improvements were.

Deming was right, but he went too far when he railed against all performance targets. The businesses with which he worked never eliminated all of them. They still measured profit and loss, market share, return on investment, net worth and customer satisfaction. And they faced real consequences if they succeeded or failed in hitting their targets. Deming may have been right to say that they did not need performance targets for individuals, but that is not the same as saying objective targets weren't needed for the entire organization, or for its divisions and work units. The best solution to this apparent conundrum is the one pioneered by the city of Sunnyvale, Calif., which in the 1980s was the first American government to create a successful performance management system. Sunnyvale simply measured current performance and created rewards for improvement. Managers in Sunnyvale whose units demonstrate significant improvement are eligible for raises and bonuses of up to 10 percent of their salaries. But the performance level they have achieved becomes their expected target.

6. Create winners, not losers.
Many programs limit the number of bonus winners. This creates a competition for bonuses, turning many employees into losers, even though they are improving their performance. Instead, bonuses should be tied to significant improvement, and those who improve more than others should get bigger bonuses. That way, people compete against themselves, rather than each other. This may be expensive, but the investment will be repaid in spades. At the Postal Service, "there has been some big money paid out," says Weatherhead. "But it has been worth it because of the organization's performance."

7. Involve employees, owners and customers in negotiating performance goals.
Setting performance goals should involve at least three parties: the organization, including both its leaders and employees; a neutral executive agency committed to performance improvement, such as the National Partnership for Reinventing Government; and something like a customer council. The nonprofit Fund for the City of New York, for example, has pulled together focus groups from neighborhoods to help several departments develop better performance measures. If possible, those involved in working out performance targets should have information about the performance of comparable organizations.

8. Don't make reward formulas too complex.
Many agencies at all levels of government have made this mistake. In an effort to create the fairest formula, they include so many goals and such complex weighting formulas that few employees can understand the process. And what people can't understand, they tend to ignore. Concentrate on the vital few results you want the organization or team to produce. You don't have to include everything you measure in the reward formula. You might use some data for feedback and learning, not for rewards. For example, a 360-degree evaluation, in which employees rate supervisors as well as the other way around, provides wonderful feedback. But if you attach financial consequences to it you may find that employees won't deal with it honestly and that it triggers serious trust and morale problems.

9. Develop a continuum of negative consequences.
Performance management giveth and, yes, it taketh away. Although you should rely primarily on positive incentives, you need clear signals when performance is not good enough. Without them, your system may lack credibility with both elected officials and employees. Start with training and help. If that doesn't work, make sure you have swift, defined penalties at the ready.

Stay away from financial penalties for poor performance, except at the very highest levels, such as agency directors and Cabinet secretaries. The threat of losing income fuels fierce resistance to performance management. And financial sanctions can curb innovation; if failure could mean losing pay, employees are less likely to try new things.

Organizations that use work teams find that peer pressure can be a powerful disciplining force. Several other types of negative consequences can be designed into performance management systems:

Negative publicity. Most people don't want the world to know they are failing.
Loss of privileges. If performance falls below certain levels, travel and other privileges can be revoked until it improves.
Loss of autonomy. When organizations fail to perform, you can take away managers' control over their budgets or their flexibility in other areas. If you then provide the coaching and/or training they need, things sometimes turn around.
Demotion. If poor performance continues despite training, help and sanctions, the employee is probably in the wrong job.
Dismissal. This is the ultimate sanction. Surveys of federal employees show that it is rarely used, because most managers believe it is too difficult to fire someone for poor performance. The President's Management Council white paper on performance management urged that the laws covering termination be simplified, while preserving due-process protections.

10. Create a culture of learning, not fear.
If you push too hard on narrow results, people will concentrate on reaching their goals at all costs, regardless of whether that makes sense for the rest of the agency. To use a manufacturing metaphor, factories will meet their quotas, even if it means shipping junk.

The solution is to reward experimentation and learning as part of the organization's performance management system. Focus on rewards far more than penalties, and include rewards for innovation. Create a culture of trust, not fear.

Watch Your Targets

Because performance incentives can be so powerful, federal managers must carefully select the results they intend to reward. If goals are all short-term, that's what people will work on-to the detriment of the long-term health of the organization. This is why the Postal Service puts two-thirds of its variable pay bonus each year into a reserve account, which is then paid out based on performance in future years. "You want to maximize performance over a three- or four-year period," says Weatherhead. If you emphasize productivity, but not effectiveness, that's what you will get. "Most program administrators will do whatever they can to generate good numbers," says Roger Vaughan, a veteran consultant to state and local agencies.

A striking example occurred at the IRS. Before Charles Rossotti took over and shifted to balanced measures, the agency measured employees' performance largely on how much money they collected. Managers' evaluations were tied to how well they achieved these goals, and the IRS' 33 district offices were ranked by how well they met collection targets. Critics said this approach placed taxpayer rights at risk. Members of Congress declared it a scandal in a series of highly publicized hearings. This is why a balanced approach, with a mix of business results, customer satisfaction goals and employee satisfaction goals, makes sense. As Vaughan says, "the wrong measure of performance can be-and has been-more harmful than no measure."

David Osborne, a partner in the Public Strategies Group, a consulting firm, is co-author of Reinventing Government (Addison-Wesley, 1992) and Banishing Bureaucracy (Addison-Wesley, 1997). This article is drawn from his latest book, The Reinventor's Fieldbook: Tools for Transforming Your Government (Jossey-Bass, 2000). ]]>

The Culture Chasm

David Osborne and Pete Plastrik — Fri, 01 Sep 2000 00:00:00 -0400

letters@govexec.com

hen Doug Ross arrived in Washington in 1993 to run the Labor Department's Employment and Training Administration, he was convinced that the 1,800-employee organization did not treat its customers very well. ETA's Employment Service funded and oversaw the nation's unemployment offices, where millions of people turned up each year to obtain unemployment benefits, receive job counseling and apply for job openings.

Ross hired a respected polling firm, Yankelovich Partners, to organize a series of meetings in which small groups of customers-blue-collar workers, white-collar workers, African-Americans, and small business owners who used the service to find new employees-talked candidly about their recent experiences. Ross took his top managers to the sessions, to listen from behind a one-way mirror.

They got an earful. "These people said they were treated like numbers, not people," remembers Carolyn Golding, then a deputy assistant secretary. "That was the most devastating thing I had ever heard. They said they weren't called by their names, they were called 'Next.'"

"What came across actually stunned some of the civil servants," Ross says. They couldn't believe how angry their customers were. In one of the focus groups, he recalls, a customer declared, "I hate this place, and if you gave me a chance, the first thing I would do is privatize it!" Another unemployed worker complained that government workers "talk down to you like they know better. I want to be treated as a customer!"

When a blue-collar group in Baltimore said that going to the Employment Service was as frustrating as visiting a motor vehicle bureau, "That immediately hit the ETA professionals," says Ross. "It was something they dreaded having to do, too."

Yankelovich later summarized the customers' dissatisfaction this way:

"Workers feel they are treated as second- class citizens, given inaccurate information about prospects for employment and provided with little guidance that can help them find a job. . . . Workers feel that the staff is poorly trained and unmotivated to provide customer service. There are also complaints that the service is impersonal-there is a lack of interest in the individual."

Ross showed video clips of the focus groups to ETA employees who had not been there. "The visual impact had a long-lasting impact," says Lorraine Chang, who ran the agency's reinvention office. "You can talk forever about being customer-focused and listening to the customer, but it is important to actually be struck in the face by the image-either in person or on video-of who the customer really is. ... the customer focus groups were one of the first key steps in getting the organization to begin seeing the world differently."

Golding and some of her colleagues threw themselves into Ross's struggle to reinvent ETA. During the long, mind-numbing hours of negotiations with ETA administrators, state and local governments, and public employee unions, the focus group experience became a touchstone for them. They doggedly steered discussions back to the issue of customer service. "Bureaucracy is like water on a stone, it does wear you down after a while," Golding says. "You really need something to hang on to that is worth fighting for. That's what the customer experiences gave us."

Doug Ross was attempting to change the culture of his organization. This is not easy, as many a federal manager has discovered over the past decade. Bureaucratic culture-too often marked by a tendency to avoid risks and duck responsibility, blame others for problems, follow the rules, settle for mediocrity, and resist change-is deeply embedded in most public organizations.

The most powerful ways to transform bureaucratic cultures are to give organizations clear missions and goals, create consequences for their performance, make them more accountable to their customers, eliminate many of the rules that constrain them and empower their employees to deliver results.

But these strategies are rarely sufficient. Bureaucratic culture fights back. Some people comply with change but don't embrace it. Others avoid or openly resist it. Even when the culture changes, it rarely does so fast enough. These realities have led experienced reinventors of government to conclude they need a strategy that seeks to reshape the culture consciously and deliberately-in specific, intended ways.

What would such a strategy look like? Well, think of culture as a product of experience interacting with emotion and reason. No one set out intentionally to create bureaucratic government cultures, after all; they grew up because people experienced bureaucratic government realities. These experiences produced a set of unspoken, often unconscious emotional commitments: expectations, attitudes, hopes and fears. Together, these experiences and emotional commitments shaped a set of ideas and assumptions-a mental map of reality.

All of these elements hold the keys to culture change. When there is dissonance among them-when new experiences conflict with one's mental models or emotional commitments, for instance-people either reject the new experience (reinterpreting it or simply denying its significance), or they change their ideas and emotional commitments. Changing a culture is the process of provoking this dissonance by exposing people to new experiences, new emotions and new ideas-then working with them to help them adjust the other elements to align with the new one.

Using this framework, there are three basic approaches you can use to change your organization's culture. We call them Changing Habits, Touching Hearts, and Winning Minds.

Changing Habits

When Doug Ross had his staff sit through focus groups, he was giving them a new experience designed to challenge their existing cultural paradigm. Meeting customers is one of many tools you can use to do this. An even more powerful tool is walking in the customers' shoes-having employees file for unemployment insurance and work their way through the system as a customer, for example.

Another alternative is to help employees experience new roles by giving them encounters with other jobs, other organizations and other people. Tools here include job rotation, internships and externships.

Once people begin to let go, you need to coax them through what author William Bridges calls the "neutral zone," to get them to begin to commit to new behaviors. Several tools can help, including institutional sponsors. In most governments, the risks of innovating outweigh the rewards. By creating institutional sponsors for innovation-people who encourage, protect, and assist innovators-reinventors can change this balance dramatically. Michigan's Department of Commerce used an internal "business incubator" to turn loose civil servants with promising ideas, for example. They received seed budgets, advice, and the visible blessing of top management.

Redesigning work is perhaps the most profound and permanent step you can take to give people new experiences. When the New York City Veterans Affairs office reengineered its work processes, it shifted people from rote jobs in which they performed one function repeatedly to teams that handled all aspects of processing a customer's application. Traditionally, says VA undersecretary for benefits Joe Thompson, then the regional director in New York City, "We really broke things down into pieces. We had jobs called searchers. Their only job was to find lost things. Some of it was just disheartening, it seemed to me."

Once VA employees in New York began meeting customers face-to-face and performing the many tasks necessary to serve them, their attitudes changed. "I went up there when about a third of the operation had been converted to teams, rather than this assembly line process," says Doug Farbrother, then with Vice President Al Gore's National Performance Review. "I talked to people who were working on teams, and people who were working the old way. The old people called their job 'the hump,' because it was just this burden you carried through your life, having to get up in the morning and go to the hump. And the people on the teams were just wildly enthusiastic about what they were doing. They kept talking about helping the veterans. And I think all Joe Thompson did was change the work they did every day."

Touching Hearts

When Gen. Bill Creech took over the Air Force's Tactical Air Command (TAC) in 1978, he was determined to change its culture from the bottom up. He wanted a culture focused on quality, teamwork and performance. One of the first things he did was to begin refurbishing the shabby buildings and equipment he found throughout TAC.

"Quality begets quality," Creech wrote later in his book, The Five Pillars of TQM (Plume, 1995). "And one cannot justifiably expect employees to appreciate quality, think quality, and produce quality if top management shows by its actions that it is indifferent to it."

During his journeys from one TAC base to another, Creech ran across a beat-up old office chair used by a maintenance supervisor responsible for more than 100 people and hundreds of millions of dollars of resources. "One of its four casters was missing, stuffing was coming out, and its general appearance was atrocious," he recalls. "In using that chair he was making a graphic statement regarding the quality standard he expected."

Creech took the chair back to his headquarters at Langley Air Force Base, Va. "It became my symbol of the way we had been neglecting our people, their attitude, and the quality mind-set," he said. "Everyone got the message."

Fifteen years later, people were still talking about that chair. But by now the legend had grown. Maj. Carl Williamson, then deputy director for quality education at the Air Combat Command (successor to TAC), told it this way: "The chair was a beat up kind of chair, very small, and had a brick under one of the legs. He asked the young man, 'Have you tried to get a chair? Do you have another chair?' He said, 'Well, yes, sir, we've requisitioned that, but you know, it's going to take a lot of time for it to get out here.'

"[Creech] took the chair, he had the chair flown back to Langley. So he flew himself back to Langley and walked into our senior logistician and said, 'Can I have your chair?' Now we're talking about a beautiful, plush chair here. He took that chair, he flew it out to the young airman, and took the chair with the brick under it and gave it to the senior officer and said, 'And when you fix the system that supports the people, then you can get yourself a chair.'"

This tool-creating a symbol-is one way to signal the change you want in the emotional commitments of your employees. Organizational cultures are rooted in these commitments, many of which are barely even conscious. Typically, many people are committed to their status in the organization's hierarchy. Others are committed to deep resentments-toward management, toward unions, toward politicians. Still others are committed to their powerlessness, to their status as victims.

To create a more entrepreneurial culture, you must get employees to commit to new things: to leading change; to taking personal responsibility for the health of their organizations; to performing well for their customers; to collaborating with their colleagues; to trying new approaches. There are at least five elements in this process of conversion:

Dislodging old emotional commitments through experience, using the Changing Habits tools.
Creating new emotional touchstones to guide behavior, such as symbols and stories.
Staging events that embody new emotional commitments.
Investing in the workplace to build new commitments.
Using bonding events to create new emotional commitments.

New touchstones, such as Gen. Creech's chair, give people a gut sense of the new values and norms you are trying to create. Events such as celebrations, honors and rituals embody and reinforce the new emotional commitments you want people to make. They actively fortify people when they begin to embrace the new culture, by recognizing and cheering on their efforts. They proclaim to everyone in the organization, "This is the kind of behavior we want!"

Celebrating success also makes people feel good about their work, their colleagues and themselves. More important, it reinforces the values and mission of the organization. Celebrating the behavior you want to see is one of the easiest, most effective ways to get people to buy into a new culture at an emotional level.

Honoring failure may be equally important, however. An innovative organization will always have failures, simply because its members are trying new things. This is widely recognized in the private sector. "Tolerance for failure is a very specific part of the excellent company culture-and that lesson comes directly from the top," wrote Thomas J. Peters and Robert H. Waterman in In Search of Excellence (Warner Books, 1988).

The same is true in the public sector. When the Ford Foundation and Harvard's Kennedy School of Government launched their Innovation Awards in the mid-1980s, one of the first things they learned was that the winners experimented constantly. Just as in any other field, they made progress through trial and error, and they learned from their errors.

Yet federal organizations typically have little tolerance for error. To change this, it helps to honor those who try new things and fail. Ted Gaebler, the co-author of Reinventing Government (Addison-Wesley, 1992), created a good example when he served as city manager of Visalia, Calif. At the suggestion of two of his department heads, he created an award for the year's most spectacular failure. One year he even won it himself.

Dan Beard, former commissioner of the Interior Department's Bureau of Reclamation, issued "forgiveness coupons" to his senior managers. They read: "It is easier to get forgiveness . . . than permission." Managers could cash them in when they made mistakes.

Another good tool for Touching Hearts is investing in the workplace. This strategy helps answer what Creech calls one of the four great management questions: "What's in it for me?" Employees read management's indifference to workplace quality as a signal that they, the workers, are not valued. This affects their attitudes, reducing their sense of commitment to the organization and producing a culture of low expectations. Smart leaders make upgrading the workplace a central part of their culture change strategies.

Creech was a fanatic on the subject: He had virtually every building in TAC repainted; he gave the mechanics new uniforms and cleaned up their facilities; and he launched programs with names like "Proud Look" to refurbish every part of the organization.

Finally, a fifth method is to build new emotional bonds between people-covenants-based on the values and commitments you want, through bonding events, such as retreats. This can be a powerful way to solidify the new beginnings you are asking people to make. Webster's says a covenant is a "solemn and binding agreement." When your people make that kind of agreement with one another, they are forging the new culture.

Winning Minds

Every organization has a set of governing ideas, the compelling concepts that guide its members' behavior. These include its values, its mission, its vision, its assumptions and even its language. They have power because they become part of people's mental models-their understanding of how the world works.

To change these governing ideas, you must change peoples' mental models, one by one. This involves a process of inquiry, discovery and reflection, which, like the Touching Hearts process, also can have five elements:

Opening minds by dislodging old mental models.
Introducing new mental models.
Collectively building the new mental models.
Creating new mental touchstones.
Spreading new mental models through teaching.

Sometimes new experiences dislodge old mental models, but often someone with a strong paradigm will ignore or deny the validity of contradictory experience. For some people, rational processes such as benchmarking performance are necessary.

You can then introduce new models, using tools such as learning groups and site visits. Officials in Hampton, Va., send "venture teams" to other cities that are on the cutting edge. Phoenix, Ariz., has a study tour budget, so it can send a team on a site visit whenever it needs to.

Taking employees to see something for themselves is always more powerful than telling them about it or having them read about it. People not only are exposed to new concepts, they experience those concepts in action. They talk to leaders, employees, customers and stakeholders. They get a visceral feel for the new reality.

Gen. Creech used site visits constantly. If he wanted to convert someone, Creech says, "We'd get 'em to come down. We'd give them a briefing, but most of the trip was devoted to going down and touching and feeling and seeing and sensing. We didn't just set 'em down and jawbone 'em, we took 'em down to the front line, and they could see the numbers, and how much better we were, but more than that, they could measure the enthusiasm of those kids. The proof's in the pudding. So when they saw all those data, and then the kids explaining all they did, and what they used to do, they became converts."

Bob Stone, former director of the NPR, believes the site visit is the single best way to convert people. In 1993, he fought hard to make sure Vice President Gore's first trip in the reinventing government crusade was to Langley. "It was wonderful," he remembers. "Gen. [Mike] Loh [one of Creech's successors] had an awful lot of charts that he briefed Gore on. I was afraid Gore was going to be irritated, but he was really captured by them. And then they walked around, and Gore and his staff talked to young pilots and mechanics. When we had our reinventing government summit with corporate CEOs, he insisted on having Mike Loh there. He wanted Loh to be the last person to speak in the last session of the day, because he wanted to punctuate the day with . . . an example of government working well."

Group site visits have even greater benefits. They give people an opportunity to analyze and discuss what they are learning-and its relevance for their organization-with their colleagues. And they help people bond as a team. Done well, a site visit not only gives people powerful images of alternative futures they could create, it gives them the emotional bonds necessary to take on the job.

The third element is probably the most important part of developing new mental models: a collaborative process, such as a retreat or group process, for building shared mission, vision or values statements. Collaboration is so important because an organization's culture changes when its members change their minds together. It is not enough for a few leaders to change their mental models-the rest of the organization must, too.

The next step often is to codify the new models in ways that provide touchstones for everyone in the organization. Although mission, vision, and values statements play this role after they are written, it is not as important as the role they can play as employees help create them. Many leaders also use new language as a way of providing new touchstones. As Ted Gaebler once said, "Our words will think our thoughts for us, so we've got to change our words."

When he was in Visalia, Gaebler wanted people to think more like entrepreneurs than bureaucrats. He wanted them to ask themselves, "If this were my money, would I spend it this way?" So he talked about the city as a corporation, himself as its CEO, and the council as its board of directors. He used phrases like "product lines," "profit centers," "business reports," and the annual "corporate report."

"It was important to talk a different language-very important," he says. "You've got to get yourself rid of the tar baby of bureaucratic words and images-get that stuff off of you-before you get more entrepreneurial behavior."

Finally, most successful leaders of culture change do not stop at creating the new governing ideas, even collectively. They work hard to spread them, through tools such as in-house schoolhouses and orienting new members. In-house schoolhouses are transformational schools; they train employees to be cultural change agents. They reorient employees' thinking and prepare them to spread the gospel.

One of the most impressive examples is the Quality Center at the Air Combat Command, which has trained thousands of change agents in TQM and leadership. In a typical year, more than 600 senior officers attend courses in the organization's leadership philosophy and the team approach to quality improvement.

The in-house schoolhouse was a crucial part of Gen. Loh's effort to change the ACC culture. "We're talking about 150,000 people out there," he points out. "You don't do this overnight."

David Osborne and Peter Plastrik are co-authors of a new book, The Reinventor's Fieldbook: Tools for Transforming Your Organization (Jossey-Bass), from which this material is drawn. Osborne is also a partner in the Public Strategies Group, a consulting firm.

]]>

The Reinventor's Fieldbook: Tools for Transforming Your Government

David Osborne and Pete Plastrik — Mon, 14 Aug 2000 00:00:00 -0400

Chapter 9

Customer Quality Assurance:
Making Organizations Accountable
for Service Quality

Customer Quality Assurance creates guarantees and standards of customer service, complaint systems and means of redress to make it up to customers when organizations fail to meet those standards, and customer boards, councils, and service agreements to hold organizations accountable for meeting them.

In 1993, when Vice President Gore asked Bob Stone to be project director of his National Performance Review (NPR), one of the first people Stone recruited was an old colleague named Greg Woods. Woods, who had worked with Stone at the Defense Department, was running a high-tech company in New Mexico. But he was excited by the prospect of helping reinvent the entire federal government. They decided he should handle the "customer service" portfolio: his job would be to improve service throughout the government.

Woods immediately began contacting private companies that were legendary for their customer service, like Disney and Ritz Carlton, and pumping them for their secrets. Deputy Director John Kamensky, who had come over from the General Accounting Office (GAO), where he had drafted a report on reinvention in other countries, told Woods about the British Citizen's Charter. It required that all public organizations in the U.K. adopt customer service standards defining the levels of service they promised their customers, among other things. Intrigued, Woods invited Diana Goldsworthy from the Citizen's Charter unit to visit the NPR.

Excited by what Goldsworthy told him, he called a meeting of people from federal agencies that served the most Americans: the Social Security Administration (SSA), Veterans Affairs, the U.S. Postal Service, the Internal Revenue Service, and a few others. He did a briefing on customer service standards and laid out an idea for one standard at each agency, to trigger discussion.

Woods knew that the SSA's toll-free number was important to millions of people. So he suggested that the agency promise that every citizen would get through on their first call. Only a few years old at the time, the 800 number was already the most heavily used in the world, with 60 million calls a year. But the agency was having trouble keeping up with the demand. Customer satisfaction had fallen for four years in a row, in part due to problems callers had reaching someone on the phone.

Toni Lenane, then the chief policy officer at the agency, attended the briefing. Woods remembers her reaction well: "She said, 'That's insane!'"

He asked what she meant. "She said, 'You've got to understand, currently we can't answer anywhere near 100 percent of the calls. The idea that we would invest the money to add the system and operators to do this is just not feasible.'"

But Greg Woods rarely takes no for an answer. He began talking with others at Social Security, finding allies. Larry Thompson, the acting commissioner, was receptive. Toni Lenane kept listening as well, as Woods argued that the agency could find new technologies and new methods to deal with calling volume by learning from business. When Shirley Chater, president of a women's college in Texas, was nominated to be commissioner, Lenane briefed her about Gore's and the NPR's interest in customer service. It turned out Chater had been working hard to improve customer service at her college. In her confirmation hearings, Woods remembers, "She was talking about world-class service-making it clear that customer service was something she absolutely, positively believed in."

So Woods kept pushing. He sent Lenane draft language for standards, which included his idea on the 800 number. He negotiated with Thompson and Lenane almost daily. Gore's report was scheduled to be released on September 7. As the deadline loomed, the phone conversations migrated into the late evenings. "I just hung in there," says Woods. "I was telling them, 'Well, I won't be able to include you in the book. I'll just have to take you out, and tell the VP, and we'll just go with the postal service,'" which had agreed to standards. "And finally they came through."

The Gore report prominently featured a promise from the Social Security Administration to post four performance standards in its offices.

You will be treated with courtesy every time you contact us.
We will tell you what benefits you qualify for and give you the information you need to use our programs.
We will refer you to other programs that may help you.
You will reach us the first time you try on our 800 number.

When Lenane and her colleagues managed to get complete data on the 800-number service, she says, they realized that she had been right: it was impossible. At the busiest times of the year in 1993, half the calls got busy signals. At the best times, 18 percent did. Every time payments went out at the beginning of the month, calls flooded the number. After weekends and holidays there were other huge "spikes." On most days, volume crested between 10 A.M. and 2 P.M., then fell off.

And the agency couldn't ask just anyone to answer the phone. Fielding questions from anxious senior citizens about their retirement checks requires knowledge, patience, and courtesy. The agency had already considered contracting the service out and decided it wouldn't work. Its phone people prided themselves on their customer service. They knew a tremendous amount. And they required significant training. Agency leaders simply didn't trust private contractors to provide the required quality of service.

So the agency put together a team and began studying its dilemma. In response to the NPR pressure, it had launched a series of new, more detailed customer surveys. When the team analyzed the new data, it was clear that Woods's instinct had been right: endless busy signals on the 800 number damaged the agency's reputation with its customers."Our data showed that access was the single biggest driver for customer satisfaction," says Lenane. "Getting through to the 800 number influenced the public's perception of our competency and knowledge and their overall satisfaction."

One of the surveys said, "From the time someone first tries to call the 800 number, it would be good service if he/she is able to get through within (blank)." The median answer was five minutes. If callers got through in two minutes, the agency could please nine out of 10 people.

"We knew we wouldn't be able to hit two minutes," says Lenane. "So we chose this median." In 1994, as Woods prepared a progress report on the customer service initiative, she negotiated to change the standard.

Woods pushed hard, telling Lenane, "You can't give ground on this, this is very visible in our report, from the vice president's office." With Gore's authority behind him, he had real leverage. "We went over and over and over it," he remembers. "Finally, we kept some things as standards and others as goals. What was essential-what I hung on to-was that they were committed in writing to someday get there."

The NPR's September 1994 report listed a series of new commitments from the Social Security Administration (SSA)-more specific this time and again featured prominently in the book. They included the following:

If you request a new or replacement Social Security card from one of our offices, we will mail it to you within five work days of receiving all the information we need....
When you make an appointment, we'll serve you within 10 minutes of the scheduled time.
SSA knows that you expect world-class service in all your dealings with us. Today we are unable to meet your expectations in all areas, but we are working to change that. When we redesign our processes, you can expect that when you call our 800 number, you will get through to it within five minutes of your first try. Today we often are not able to meet this pledge. During our busiest days, you will get a busy signal much of the time.

Almost no one familiar with the 800 number thought meeting the five-minute standard was possible. The number of calls kept rising, and Congress kept giving the agency more responsibilities. To make matters worse, downsizing was now under way, thanks to the president and Congress's agreement to cut federal employment. The agency was no longer even allowed to replace teleservice representatives (TSRs) who left. The "busy rate" was going up, not down: in fiscal 1994 the monthly low was 28.4 percent, the high 53 percent.

Yet because of their surveys, the agency's leaders knew how important access to the 800 number was to their customers. They knew the NPR was pushing for good reason. So they got to work. They led a benchmarking study the NPR did on telephone service, looking for operational changes and new technologies they could use. They considered hiring temporary employees for peak periods but decided their limited use would not justify the high cost to train them. Finally they began increasing the number of people from their Program Service Centers (PSCs), which did back-office processing of individual benefit cases, who also handled phone service when volume spiked. They knew full well that benefit processing would suffer, so at first they went slowly.

At this point, the new Republican Congress weighed in. In his budget hearings in April 1995, Congressman John E. Porter (R.-Illinois) extracted a series of performance commitments from the SSA, as part of the Government Performance and Results Act (GPRA) process. One was that 85 percent of calls to the 800 number would be answered within five minutes during fiscal 1996, and 95 percent in fiscal 1997.

Agency leaders had concluded that hitting the five-minute standard on the highest-volume days, on every call, would cost a fortune. "We had to say, the rule of common sense has to apply," says Jack McHale, deputy regional commissioner for the Philadelphia region. "Every hour [that] one of those benefit authorizers is on the telephone answering calls is an hour away from their regular work." Beneficiaries would suffer in other ways, by not having their claims processed on time. Greg Woods also agreed to the 95 percent goal.

But the fact that congressional appropriators were taking the standard seriously changed the stakes. Money talks. "We call it a Porter commitment," says Steve DeMarcos, then deputy director of the Mid-Atlantic PSC. "This is a commitment we make to Congress, where we say, we will deliver this level of service, and thereby continue to be able to receive budgetary considerations." GPRA "not only gave it teeth, but it made it a very, very clear and focused goal that everybody knew and everybody was shooting for."

Just as Porter was extracting his commitment, the agency received a huge shot in the arm. In April 1995, Business Week reported that Dalbar Financial Services Inc., after an independent survey of customer service over the phone, had rated the SSA's customer service the best in the country. It topped that of L.L. Bean, Federal Express, Disney World, and every other private corporation tested.

Dalbar placed calls to measure performance, explains Lenane. "We did very poorly on access but very well on competency and knowledge. And in their scoring, those were the things they valued."

This was a huge boost for those pushing for the resources necessary to meet the 95 percent standard. "It helped a great deal," says McHale.

While as an agency we were struggling to get the budget commitment for the TSR replacement and get the spike commitment, boy, did that get us favorable attention. That got us in the headlines. It was much easier to say afterward, "If we want to continue in our world-class status, we have to do these things."

The employees loved it. We had a celebration. Every employee got a copy of the Dalbar letter, and of course the agency got a Hammer award [from Vice President Gore] out of that. We were able to say to employees, "Hey, we're better than Disney World, you know!" It really was a boost in morale for employees.

Unfortunately, the access rate was still going south. In fiscal 1995, only 73.5 percent of callers got through in five minutes, the worst rate yet. The monthly busy rate went from a low of 35.5 percent to a high of 61.8 percent.

Finally, agency and administration leaders bit the bullet. First, they agreed to replace teleservice representatives when they left, despite the downsizing effort. Then they converted two Data Operations Centers (DOCs), with about 700 people, to full-time telephone work.

These two centers had low-level employees who spent their days keying information into computers. It was not clear that they could handle telephone work. "There was a reaction: 'You're going to do what?'" remembers Janice Warden, then the deputy commissioner for operations. The agency did have to spend more time than usual training them, but it worked. "It changed a lot of people's mind-sets about what we could do, because we found out that these people were perfectly capable of becoming teleservice representatives."

Finally, agency leaders decided to expand teleservice responsibilities to virtually every technical person who worked in a PSC, starting in January 1996. They trained 3,700 people in six large processing centers to handle calls when volume spiked-more than tripling the number of "spikers."

"We worked out a sophisticated call routing system, with the ability to quickly bring these people on during peak calling periods," says Jack McHale. "When calls fell off, they went back to their work."

This required a mammoth training program and a long effort to win the support of the union, part of the American Federation of Government Employees. The key factor was job security: automation was expected to do away with some of the processing center jobs, so shifting to telephone service saved people's jobs. Once they had won union support, Warden, Larry Thompson, and the union council president spent two months visiting the PSCs that were going to have to change.

These folks "did not do public contact work," remembers McHale, "and many of them were not at all interested early on in interviewing the public on the telephone. A lot of them resisted."

We spent "an enormous amount of time with employees, talking about the reasons we were doing it, and relating it back to the customer: customer expectations, the results of our survey," adds Warden.

Managers followed up in their own facilities. Larry Massanari, regional commissioner for the Philadelphia region, remembers those meetings. "The key is always to keep people in an agency like this one focused on customer service," he says. "Because the employees in the SSA, not surprisingly, are very much moved by serving people. And when you can put this in terms not of a number but what it means for people-who are like our parents, our brothers and sisters-then it takes on more meaning."

Meanwhile, the agency restricted leave for teleservice reps and spikers at peak times and accelerated use of overtime. It worked with employees to come up with changes in processes and rules that would improve performance. And because calls peaked after people received payments at the beginning of every month, it began staggering monthly payments for all new recipients. (Surveys had revealed that existing recipients would not take kindly to shifting away from the beginning of the month.)

The transition was hardly smooth. As the agency retrained thousands of people, customer service suffered-both in the processing centers and on the phones. November 1995 was the low point for 800-number access: only 57.2 percent of callers got through within five minutes. Then, on the first morning back to work in January 1996, as the agency put all the new spikers on to handle the post-holiday surge, AT&T's SSA 800 system crashed. Hundreds of thousands of social security recipients called in, and for several days they all got busy signals. The media gave the agency a drubbing, and agency leaders lost a lot of credibility with their employees.

But once AT&T fixed the system, the numbers began to turn around. By February the five-minute access rate was 92.1 percent, and it stayed in the 80 and 90 percent ranges for the rest of the fiscal year. In November 1996 it hit 95.9 percent, and it has stayed above 95 percent every year since. Meanwhile, customer ratings of the courtesy and knowledge of the agency's teleservice reps remained more than 95 percent positive.

It hasn't been easy. "We still really torture ourselves in terms of trying to make up for a very few days of the year [after holidays and long weekends] when you can't do 95 and five," DeMarcos told us in mid-1999. "You just can't do it on some days, and because those days come out so much lower than 95 and five-and because they're so high volume-it takes you forever to make up for them."

Agency leaders acknowledge that the improvement in 800-number service has come at the price of decreased performance in benefits processing. Many believe the agency has gone too far-that it would be much better off with a lower standard for the 800 number and faster turnaround in benefits processing. Others defend the standard, pointing to the customer surveys that prove how important access to the 800 number is to the agency's customers.

Still, achieving the goal has created real pride in the organization. "There was a lot of internal celebration" when we met "the goal in 1997 and 1998," DeMarcos remembers.

When you do it one year, two years, now into the third year, it really becomes a part of your culture. Internally, if you were to talk to all the people on the network ... they know the 95 and five commitment. People know that, and that's what people work toward now. That's what drives us.

Agency leaders also agree that it would not have happened without the service standard. Jack McHale, who was then in charge of the 800-number service, had been lobbying for many of the changes for a long time. "We had to improve, because we were so bad," he says.

But I don't think we would have stretched as far as we did. As someone who was asked what we needed to do to meet this standard, I would come up with these recommendations, and I could always lean on the standard. I could always do calculations of how short we would be. Had the standard not existed, we would have improved, but not as much.

USING SERVICE STANDARDS TO MAKE CUSTOMERS POWERFUL

The SSA story demonstrates how powerful service standards can be in driving public organizations to deliver what their customers want, when those organizations take them seriously. In September 1993, a few days after Gore presented his report, President Clinton followed through on its recommendation to issue an executive order requiring all federal agencies and departments "that provide significant services directly to the public" to identify and survey their customers, set service standards, and measure progress against them. The order proclaimed that "the standards of quality for service provided to the public shall be: Customer service equal to the best in business."

By fiscal year 1998, according to the NPR (now the National Partnership for Reinventing Government), 570 federal organizations had created 4,000 standards. But they measured performance for only 2,800 of them, and unlike the SSA's standards, the vast majority were quite vague. So in 1998 the president ordered the agencies to talk with their customers about their service and standards and to use what they learned to improve both.

Though progress has been gradual, the entire process has clearly had an impact. In a survey of federal managers conducted by the Office Of Personnel Management in 1991, only 36 percent agreed that their organizations had "service goals aimed at meeting customer expectations." When the National Performance Review asked the same question in a 1998 survey, 80 percent of supervisors agreed.

By 1998, according to the NPR:

The National Archives and Records Administration met this standard 99 percent of the time: "Within 15 minutes of walking in, you'll have either the information or the help you need."
The Occupational Safety and Health Administration had reduced a one-month turnaround time for responding to worker complaints to one day.
The Bureau of Land Management had trimmed turnaround time for permits from 15 days to a few minutes.
The U.S. Postal Service had boosted on-time (three-day) delivery of first-class mail from 79 percent in fiscal 1994 to 92 percent in fiscal 1997, though it was doing far less well on Priority Mail and Express Mail.

Every public organization can use quality assurance tools: customer service standards and guarantees, redress systems (to provide compensation to customers for failure to meet standards), complaint systems, customer service agreements, and customer councils and boards. Customer quality assurance is much like performance management, but it makes public organizations accountable to their customers, not just to their superiors in the chain of command. Like performance management, it creates less pressure-and thus slower improvement in most cases-than other approaches, such as competitive customer choice. But it works.

In the U.K., which pioneered customer quality assurance, the Labor Party conducted an in-depth review of the Citizen's Charter in 1998, after it came to power. By then there were some 200 national charters and an estimated 10,000 local government charters, each setting service standards, most outlining complaint systems, and a few promising redress to customers if the chartered organization failed to meet a standard. The review found that although many standards "were vague, unclear and missed the issues that were most important to users," as in the United States, others were quite effective. It quoted several other positive assessments:

"The Charter programme has provided both a stimulus and a means for organisations to raise their performance," the National Audit Office testified.
"The Citizen's Charter is an important initiative in making public services more responsive to consumers and should be retained," added the National Consumer Council.
"There are tangible benefits from the Charter programme which have persuaded at least some of the original sceptics," concluded Parliament's Public Service Committee. "There have indeed been real improvements, a 'change of culture' in public services."

The Labor Party pledged to continue and strengthen the program, though it made sure to remind citizens that "the Charter idea was pioneered by Labour local authorities in the 1980s." It also gave the initiative a new name, "Service First," as political parties often do when they embrace the opposition's ideas.

The basic tool of customer service standards makes so much sense that at least 15 countries have adopted it in some form, including Australia, Canada, Belgium, France, Ireland, Italy, Finland, Norway, Sweden, Portugal, Spain, Singapore, and, of course, the U.S. Some, like Australia and Canada, have done so in both national and state or provincial governments.

Survey research in Canada demonstrates why customer service standards have such appeal. The Canadian Centre for Management Development's Citizen-Centred Service Network surveyed 2,900 Canadians in 1998. After asking about 30 different aspects of service delivery, it found that "Citizens' assessments of service quality are determined primarily by five factors: timeliness, knowledge and competence of staff, courtesy/comfort, fair treatment, and outcomes.... Timely services is the single strongest determinant of service quality across all services across three levels" of government. As we saw with the SSA, it is precisely these factors that service standards can improve, when used well.

Customer quality assurance has one final advantage: employees usually welcome it. Unlike managed competition and competitive choice, it is rarely threatening. Most employees genuinely want to provide excellent service.

The Key to Success: Making Customer Service Consequential

Perhaps the most important lesson learned by the pioneers of customer quality assurance is this: when you create standards, guarantees, complaint procedures, and the like, create rewards for fulfilling them and penalties for failing. As with customer choice, consequences give this approach its teeth. Service standards, complaint systems, service agreements, and customer councils will help managers and employees understand what their customers want, but consequences will give urgency to the challenge of providing it.

Consider the Social Security story. Though the SSA's leadership understood that service on its 800 number was critical to customer satisfaction, answering every call within five minutes-or even 95 percent of all calls within five minutes-seemed impossible. If Greg Woods had not used Vice President Gore's authority to cajole the agency into publishing a standard and then reported its performance every year, it would never have committed to the standard. If Representative Porter had not demanded that the SSA meet the standard or suffer budgetary consequences, the agency might never have gone to the extraordinary lengths it did to reengineer its work.

Or consider the U.K. When the Labor Government reviewed the Citizen's Charter, "Many said that, at present, the public can feel frustrated when they discover that little can be done to enforce charter targets." Without enforcement of consequences, in other words, standards pack much less punch. There are several ways to create this enforcement-all of which have been used by at least a few organizations in the U.K.

Create guarantees and redress policies. Guarantees commit public organizations to give customers who are not satisfied-or have not been delivered the quality of services promised-either their money back or free redelivery of the services. Redress gives customers some form of compensation-financial or otherwise-if the organization fails to meet its service standards. We discuss these tools in detail later.
Build service standards into your performance management system. The Social Security Administration holds some top managers accountable for meeting its service standards; if the organization fails, it affects their pay. Many of the U.K.'s executive agencies, which we discuss in Chapter Three, have begun to include key service standards among their annual performance targets-which also affect top management's performance bonuses.
Publicize and compare performance against the standards. NPR's annual publication of the SSA's results was a big part of what kept it from abandoning its 800-number standards. "I think part of what helped transform them was we kept reporting on it," says Candace Kane, who succeeded Greg Woods as head of the NPR's customer service team. "They knew that they were going to be publicly humiliated if in fact they hadn't delivered what they needed to deliver."
In the U.K., the Citizen's Charter led to the publication of comparative data on local governments, schools, hospitals, and passenger rail lines. This, the government concluded after its review, "was considered by many respondents to the consultation exercise to be a major success of the old Charter programme." The Labor Government promised to expand public reporting on performance. "The key is for standards, and performance against them, to be regularly published, so that they are available to all," it said.

When there are problems with service delivery in the U.K., the published information gives the media, the government, and interest groups the facts they need to press for improvement. The performance of privatized rail lines has been disappointing, for example. Virtually every time the press or a politician calls attention to the problem, they cite the number of complaints against the rail line, the numbers of delays and cancellations, and the amount of redress money paid. The private railroads are required to provide this data by the charters they inherited from the public sector, and the government posts the information company by company on the World Wide Web. Though the railroads have at least seven-year monopoly franchises on individual lines, publishing their performance against service standards keeps significant pressure on them to improve.
Create awards for meeting tough customer service standards. The Social Security Administration gives awards to teleservice centers for outstanding service. Vice President Gore gives out Hammer awards. The U.S. Department of Education has an "honor roll" to recognize achievement in "satisfying customers." The IRS awards a "Seal of Approval" customer service award. The Federal Emergency Management Agency (FEMA) allows employees and customers to nominate FEMA workers.
Many other organizations have done likewise. One of the most successful elements of the Citizen's Charter was its Charter Mark: a seal of approval for customer service that winners are allowed to display on their buildings, stationery, and other materials for three years. The criteria for receiving a Charter Mark are demanding, and the competition is fierce: in 1998 there were 1,202 applications, from all levels of government.

The Labor Government's review found broad support in the public sector for the Charter Mark awards. And surprisingly, 29 percent of the public was aware of them. Prime Minister Tony Blair takes the awards so seriously that he speaks at the annual ceremony.

One of the Charter Mark award's best features, in our view, is that organizations win the right to display the Charter Mark for only three years; to win again, they must continue improving their customer service. By 1999, only 18 organizations in the country had won Charter Marks three times in a row. The threat of losing a Charter Mark puts real pressure on winners. British Gas won in 1993, then saw its customer service slip after it was privatized and began downsizing. Rather than suffer the embarrassment of losing it three years later, it handed its Charter Mark back to the government-which of course attracted great publicity.

Kent County Council's Arts and Libraries won in 1992. "I think we felt much more anxious about it this time," Development Manager Maggi Waite told the Charter News in 1995, "because in 1992 we had nothing to lose by applying. This time our reputation was at stake.... The suspense in the fortnight before we received the results was awful-just like waiting for your exam results."

Customer Quality Assurance in Compliance Organizations

Some public organizations don't primarily deliver services; they enforce compliance with rules. These include police forces, court systems, corrections systems, environmental protection agencies, permitting agencies, tax collection agencies, and the like. Their activities may include services-such as a 911 emergency phone system for the public or free help lines for taxpayers-but their core missions are the enforcement of laws and regulations. (Occasionally, the same people are both customers and compliers. Welfare recipients, for example, are compliers with state and federal laws about who is eligible for welfare, but customers of welfare services such as monthly checks, job training, and job placement. As we discuss in Chapter Three, welfare departments should separate their compliance functions from their service functions, because the two roles conflict so much that one staff person cannot effectively play both.)

Can compliance organizations use the customer quality assurance tools? Yes, with some adjustments. Normally, their customers are not the people they deal with directly but the community at large, represented by elected officials-as we explain in the introduction to Part Three. We call the people that these organizations deal with day in and day out-taxpayers, suspected criminals, polluters, and so on-compliers. Compliance organizations can use quality assurance tools to improve their service to compliers, as a way to improve voluntary compliance. They can treat compliers as if they were customers. But when they do, they must balance the interests of compliers against those of their true customers. Tax collection agencies don't want to please taxpayers by letting them off the hook for taxes they owe, for example.

Many compliance organizations are now using the quality assurance approach as part of what we call "winning compliance." They have shifted some of their energies from catching noncompliers to encouraging voluntary compliance-which is the cheapest form of compliance. Quality assurance is harder to use in most compliance organizations than in service organizations, because their employees don't (and often shouldn't) think of compliers as customers. They more often see them as "deadbeats," "criminals," "polluters"-or other words we won't print. Hence it is harder to get them to buy in. "They have the enforcement mentality," says Peter Hutchinson, president of the Public Strategies Group. "Since all they see are deadbeats, day in and day out, they can't imagine treating them like valued customers."

But it can be done, and increasingly it is being done. The Public Strategies Group defines eight steps that go into winning compliance:

1. Build support for standards, if possible, by involving compliers and other key stakeholders in helping to make or even enforce the rules.

In the early 1990s, the Massachusetts Department of Environmental Protection (DEP) accomplished a sweeping reform of its permitting systems, including dramatic reductions in the time required, one-stop shopping for most permits, and reduction of the number of permits required. The crucial ingredient in its success was the inclusion of environmentalists and business leaders in a series of stakeholder groups to redesign the state's rules and processes. The first group began by doing an inventory of all 137 permits required by the state and describing the processes associated with each. This pinpointed where backlogs were occurring, where too many steps were required, and where permits were unnecessary. When business and environmental leaders agreed on solutions, the legislature was often willing to act.

The federal Occupational Safety and Health Administration went even further: it gave control over enforcement to large businesses that developed teams of managers and union members to perform inspections and solve problems. Workplace safety improved dramatically in those plants. The Vermont Department of Corrections even let some nonviolent offenders negotiate with community boards to define their penalties-and how they would make restitution to their victims and the local community. Recidivism rates fell.

2. Focus regulations on results, not process.

Many regulations prescribe exactly how compliers have to comply with the law, particularly in the environmental arena. They tell them what technology they must use, how it must be installed, how often it must be inspected, and so on. Often compliers know there is a better way, but the law won't let them use it. Reinventors have begun to substitute regulations that define the outcome required, but leave it up to compliers to figure out how to produce it. If a new technology will meet the goal at a lower price, they are free to use it. This not only makes it easier for them to comply, it stimulates innovation to find better and cheaper methods.

3. Educate compliers about what is expected of them.

When the Minnesota Department of Revenue shifted hundreds of employees from enforcement work to educating businesses about how to pay the proper amount of sales tax, it increased sales tax collections dramatically. The U.S. Customs Service similarly shifted part of its staff from inspecting goods brought into ports and airports to working with importers "so we can rely on their internal control processes," as former commissioner George Weise put it.

"Those out to break the law will continue to be apprehended," explained Dennis Murphy, then director of the Norfolk, Virginia, Customs district, "but we're moving from what you might call a 'gotcha' focus, in which we just try to catch somebody, to one of trying to make sure that the people we deal with understand what's required of them so they don't make mistakes based on ignorance, sloppy work or poor communications."

4. Make compliance easy, by providing services that facilitate it.

The Massachusetts DEP invited businesses planning large projects that required multiple permits to come in early in their planning process. Businesses would map out what they intended to do, and the department would help them design the project to minimize the number of permits required. This worked so well that the department decided to establish four regional service centers. It hired new staff to act as lead contacts, to shepherd businesses through the process. They and others used analytical techniques drawn from Total Quality Management (TQM) to find out who had the most permitting problems and then invited those businesses, municipalities, and consultants in early in the planning process.

Other states have since taken similar steps. California introduced "tiered permitting," replacing one-size-fits-all permits with different types based on the level of environmental risk involved. The California Environmental Protection Agency also established ten "one-stop" permitting centers around the state, to help developers get all the permits they needed for a project in one place.

5. Establish quality guarantees, standards, and redress mechanisms for service to compliers.

The first stakeholder group at the Massachusetts DEP recommended a money-back guarantee. Permits would have to be issued within strict time limits, and if the department missed a deadline, it would return the fee. The legislature passed the necessary legislation, and "it was the single best thing we did," then-commissioner Dan Greenbaum told us.

It created a dynamic like a business trying to collect a fee for a service. It provided impetus for management reforms, like a real tracking system so you would know what was happening with each permit.

Staff told us they'd need lots more people to meet the time lines. We managed to get a few new people from budget, but then further cutbacks frustrated even that. We got like a tenth of what people thought they needed. But we met the deadlines the first year; it turned out there was a lot of slack in the system. Part of it was poor management: for example, no tracking system. And part of it was that the department had people who were environmentalists and believed that by delaying things they were protecting the environment.

Greenbaum used a two-stage process to give the organization time to improve: after the first year, the deadlines automatically tightened by 30 percent. But over the first four years the department missed only 75 deadlines out of 14,000. Word got around about which regional and program offices were refunding the most fees. "There's a certain pride in not being the one to show up as doing the worst," said Greenbaum's successor, Thomas B. Powers.

6. Report to the public on compliance levels, and give compliers feedback on their level of compliance.

If taxpayers are told that they have filed incorrectly, or businesses are informed that they have violated an environmental rule, most will correct their mistakes. Even police forces use feedback to change the behavior of citizens. Captain Michael Masterson of the Madison, Wisconsin, police department describes a particularly good example.

Instead of going out and writing tickets in one neighborhood, we went out and set up individual speed display boards and took neighborhood residents with us. We did a little poster, a little warning notice that talked about fines for speeding. It was during the holiday, so we [gave] people a holiday greeting. But anybody that speeded, not only did the cop talk with them, but the resident talked to them too. In a very cordial, nonthreatening way, we said, "Look, this neighborhood is important, our children play here, they use this sidewalk, and the speed limit is 25."

They got off with a warning. We got an incredible response. The people that were stopped felt it was great that the police dealt with people in this manner. The neighborhood thought it was a great effort working with them, helping them create an awareness of the problem. And the officers thought it was great. Officers have hearts; they don't like to be laying $100 tickets on somebody around Thanksgiving and Christmas.

7. Treat compliers differently, based on their past performance, competence to comply, and motivation levels.

There is little sense in treating law-abiding citizens who have made a mistake the same as habitual lawbreakers. The police don't do it, the courts don't do it, but many compliance agencies do. Before it reengineered its sales tax process, the Minnesota Department of Revenue sent the same nasty letter to any business that missed a deadline for payment of the tax. After the reforms, it reacted very differently, based on the past performance of the business. If it had a perfect record, it sent out a very nice letter noting the missed deadline, mentioning that the check was probably already on its way, but reminding the business owner of the oversight. A series of other letters, each slightly tougher, went out to those with less than stellar records. And state revenue collectors visited habitual nonpayers-sometimes with police protection.

8. Employ a continuum of incentives and consequences for compliance.

Refunds and other forms of redress help salve the wounds inflicted by poor service, but they don't create incentives for people or businesses to comply. Governments usually use sticks, not carrots, to do this: they create stiff penalties, including fines and jail time, for failure to comply. Reinventors don't abandon the sticks, but they add carrots. The Minnesota Revenue Department announced that if you got your tax return in by a certain date, for example, you would get a refund within 48 hours. Normal turnaround was 24 days.

QUALITY ASSURANCE: OTHER LESSONS LEARNED

Because using service standards, guarantees, and redress has a lot in common with using other performance goals, we recommend Chapters Six and Seven as well as this one for guidance. Many of their lessons apply here as well. In addition, the following lessons apply to all or most of the customer quality assurance tools.

1. Involve customers in the creation of guarantees, standards, redress policies, complaint systems, and customer service agreements.

If you don't, you won't know what is important to them. When the Oregon Division of Motor Vehicles was reengineering its offices, its leaders "knew" their customers' main concern was long lines. They planned to add clerks and automate the process. But when they surveyed those customers, it turned out that their top complaint, by a wide margin, was unflattering pictures on their drivers' licenses. So they reengineered that too.

"Never assume what people want," says Steve DeMarcos at the Social Security Administration. "Find out from the customers. You can kill yourselves to do something that you find out people think is a yawner."

In both the U.S. and the U.K., many organizations have neglected this step-and paid the price with worthless, or even harmful, standards. "The place agencies have had the most trouble is the idea that they have to ask their customers what they want and whether they're getting it," says Greg Woods. "They revert to the Washington mentality: we figure it out in D.C. So they always get it wrong."

Customer surveys are useful here, but face-to-face contact with customers is even more important. Customer councils are perhaps the best tool, though you can use many of the customer voice tools outlined later in the chapter. "It is really valuable for people to see and speak directly to their customers," says Laurie Ohmann, a Public Strategies Group partner who has helped several organizations do this. "Get the people who are charged with doing the improvements to look at people they're serving square in the face and ask the questions." You can even videotape the sessions and show them to the rest of your organization.

This not only helps generate standards that are meaningful to your customers, it helps convince your employees to take them seriously. They have to be "connected to what the customer has actually told you in the surveys and from discussions," says the SSA's Janice Warden, who now works on these issues as a deputy director of the NPR. "You have to be able to point to that, to make it credible to the entire organization." Otherwise, she says, you will run smack into this attitude: "Let's not kid ourselves. Are we doing this because it's important or because Vice President Gore told us to?"

2. Educate customers about your services, so they will have realistic notions of what is possible and will understand their own responsibilities.

If people think it should be simple for them to call the SSA's 800 number and reach a knowledgeable employee right away, they will be disappointed if they have to try for five minutes. If they know, on the other hand, that the SSA runs the world's largest toll-free service and that it gets more than 65 million calls a year, they may feel differently. So tell them. Put an explanation on a tape that plays as they wait on hold. Send one out with their monthly checks. Put signs and pamphlets in your offices.

Often, services won't work unless customers uphold their end of the deal. For example, tax agencies can't send speedy refunds if taxpayers don't fill out their returns completely and accurately. Permit offices cannot process permits rapidly if developers hide information from them. In cases like these, add customer (or complier) responsibilities to your service standards and guarantees-and publicize them.

3. Keep pressure on from outside the organization to create meaningful guarantees, standards, redress policies, and complaint systems.

As we saw at the Social Security Administration, setting meaningful standards and then fulfilling them can take almost heroic efforts. Most organizations won't do that-or will only do it until the leader who drove it moves on. So you need some external force that keeps the pressure on-forever.

In the U.S., the NPR played this role, as best it could. In the U.K., publication of performance data kept external pressure on railroads, schools, local governments, and hospitals. Another good method is a customer council or board with real power-a tool we discuss later in this chapter. Diana Goldsworthy, former deputy director of the U.K.'s Charter unit, says the British would have benefited from the presence of such a customer council:

The truth is that the Charter unit itself, inside the Cabinet office, is all civil servants reporting to a minister. It's very difficult for us, credibly, to present ourselves to the tabloid press as people who go and kick down doors. But that role ought to be exercised by somebody. We could have had this outside panel being the nasty guys, in the press and on the TV, saying, "I'm just going to make sure that Charter does this and Charter does that, and I've told John Major today ..." I think it's difficult to have people who are inside the machine, if I can put it that way, also be the people who are beating your sheet to death, publicly.

Even an elected minister or vice president cannot really do this, she points out. Imagine the media flap if Al Gore had publicly criticized Education Secretary Riley's or Labor Secretary Reich's department, and you can understand why.

4. Create an outside review process to approve guarantees, standards, redress policies, complaint systems, and the performance measurement processes associated with them.

Just as you need outside pressure, you need an external body to review and approve standards, redress policies, and the rest. Otherwise, vague standards that cannot be measured and have no means of redress attached-"We will do our best to provide timely, courteous service"- will be the norm. The review process should involve both customers (ideally through a customer council or board) and a neutral reinvention office such as the NPR or the Charter unit. In the U.K., the Labor Government has asked departments to review all charters at least once every two years, and the Cabinet Office has set up an audit system to check on the quality of charters and intervene when necessary.

When private contractors deliver public services, this is equally important. Because some private rail operators in the U.K. made their charters less uniform and harder for customers to decipher after they took over, the Cabinet Office had to force them to use a standard format. Many organizations, public and private, have quietly redefined what "on time" or "a 30-minute" wait means, as well. In the National Health Service, for instance, some clinics began to measure waiting time not when the patient arrived but when he or she first talked to the receptionist. Because this kind of fudging is inevitable-as with any kind of performance measure-an outside body also needs to review definitions, indicators, and measures to keep them honest.

5. Publicize your standards, guarantees, redress policies, complaint systems, and results.

If people don't know about these policies, they will have far less effect than they should. For example, the U.S. Postal Service has publicized its first-class on-time delivery standards (three days within the continental U.S., one day locally) and reported quarterly on its performance. The results have generated front-page newspaper stories, creating useful urgency within top management. But the postal service has been silent about another standard: "You will receive service at post office counters within five minutes." If you look hard next time you go into a post office, you may find a tiny, 4-inch by 5-inch sign announcing the standard. But you've probably never noticed it. As a result, it is meaningless to the customer. Nor does it seem to have had any impact on employee behavior, from our observations. It is, sadly, a wasted opportunity to win over the public.

Publicizing your progress is also necessary, at times, to convince your employees that you can improve. It was only when the five-minute-access rate at the SSA began inching up that employees started to believe the goal was possible, for example.

6. Involve frontline employees in creating standards and other tools-and in figuring out how to meet them-to help them buy in.

If standards and redress policies are simply imposed on employees, few will respond to the challenge. At the SSA, says Janice Warden, "I don't think we could have done it without really engaging the employees in discussions, getting their ideas about how we could do this better. We talked with thousands of them." The commissioner made the decision to set standards, but employee input was critical in figuring out how to meet them.

The British also learned this lesson. Their review pointed out that frontline employees had "often been ignored in the past." The government's guide, How to Draw Up a National Charter, added, "They are the people who will have to deliver the standards in your charter, and they are often well placed to offer practical suggestions for improvements, and to identify people or organisations who should be consulted."

7. Involve the union, if there is one.

To improve services, you will often need to redesign work processes, change work rules, change job descriptions and classifications, and the like. Unions can block such changes. Hence it is critical to get them on board. In the SSA, this took months of discussion, but it was worth it, says Janice Warden.

8. Empower frontline staff to make decisions.

When organizations fail to deliver the quality of service that they have promised or customers have legitimate complaints, frontline staff need to be able to make it right, immediately. If you have to wait three weeks for management to make a decision, you will alienate your customers. Lesley Harvey at British Gas, a privatized company with a charter, remembers a customer who ordered a new oven that turned out to be defective. "I just agreed to change it," she says. "Before, I would have had to refer it to a senior manager." But "there's nothing more annoying for a customer than to be told you can't make a decision, you have to refer it upstairs. This way, the customer has more faith in you."

9. Use standards, guarantees, complaints, and customer councils to drive redesign, reengineering, and restructuring.

There's only so much improvement you can produce by changing attitudes and getting employees to work harder. If customer quality assurance doesn't lead to reengineering work processes and restructuring organizations, as it did at the SSA, then it won't be worth using.

Customer-driven agencies typically organize around customers' needs, not organizational functions. They create single points of contact for customers, one-stop services, and integrated work teams to handle all of a customer's needs. They use TQM and business process reengineering to redesign their work processes and organizational structures. They use internal enterprise management to get better value from their suppliers, so they can serve their customers better. Sometimes they even convert their service systems to give customers more choices-or vouchers they can use to choose their own providers.

10. Study other organizations, including private companies, to see how you might rethink, redesign, and reengineer.

Studying the best in business gets you out of your box. "We would not be where we are with the 800 number if we had not participated in benchmarking, primarily with the private sector," says Toni Lenane of the SSA. "It just opens up this whole world that you never even contemplated might be there."

11. Back up your quality assurance approach with training, mentoring, learning networks, and other support for employees.

To improve customer service, your employees will need much more than "smile training." They will need new skills: the ability to do customer surveys and focus groups; the ability to analyze, improve, and redesign work processes; the ability to build teams. You will need to support them with training, expert consultants-and if you're smart, mentoring, learning networks, and site visits.

When John Christian took over the Parks and Recreation Department in Sunnyvale, California, he sent six people to Disney's customer service training program in Anaheim: clerical, frontline, and managerial staff. When they came back, they became the Customer Action Service Team-an internal training unit for customer service. Then he took a team to the Granite Rock Corporation, a California construction company that won the Malcolm Baldridge National Quality Award in 1992, "to see what we could learn from private companies." That was so effective that he institutionalized regular "benchmarking trips" to cutting-edge parks and recreation departments as well as private corporations. The key is to send not just managers, he told us, but also professional, frontline, and clerical staff. "That's very, very powerful."

In the U.K., the Charter unit has helped build 25 "quality networks" around the country, with over 2,000 public sector members that share what they are learning. It also sponsors an annual conference and a best-practice quality forum, which brings network leaders and Cabinet Office staff together to learn from one another. There is a mentoring system, through which Charter Mark holders provide support to other organizations in their regions. And finally, the renamed Service First unit is creating a self-assessment package based on the Charter Mark criteria so that organizations that aren't ready to apply can still use the criteria to figure out what they need to do to improve their customer service.

12. Don't create a separate unit to do this; integrate customer quality assurance into your strategic and performance management systems.

If you create a separate unit to handle service guarantees and standards, redress policies, and complaint procedures, then your line operations will see these things as headquarter's agenda, not their own. They may go through the motions, to comply, but they won't build their own work around customer service. You may need a reinvention office to catalyze action, but development of standards and the like should be done by line organizations-with review by a reinvention office and customers, as we argued in lesson four. Then make sure the standards are an integral part of your strategic and performance management systems, like any other outcome goals and performance targets. Don't treat them as something separate from your performance goals.

13. Make sure your leadership is seriously committed.

To succeed, you need commitment from your organization's leaders, their leaders, and your top civil servants. "If Shirley Chater and Larry Thompson had said to me, 'You've got to do this,' and Larry had then walked away from it, it would not have taken on the power it did," says the SSA's Janice Warden. It also helped that the vice president and president talked about service standards and the SSA's 800 number.

Then, says Warden, you have to "get the buy in from the top career executives-that layer that remains in place when the administration goes away. And you know, you do that through discussions. And there's the same credibility issue in terms of how the standards were established"-are they rooted in real customer needs?

What do you do if your organization's leader is not committed? Toni Lenane has a good answer:

I teach customer service at the Western Management Development Center run by the Office of Personnel Management, and what I frequently hear from agency people is, "I'm interested, but I can't get my boss to be." My advice is, find out the thing that'll make it worthwhile to them, so they'll get some kudos and some recognition. All it takes is your boss getting some success, and they'll become a believer.

QUESTIONS PEOPLE ASK ABOUT CUSTOMER QUALITY ASSURANCE

Q: When the needs of different customers conflict, what do you do?

Often, public organizations have multiple sets of customers. Public schools, for instance, have parents, the community at large, and the future employers of graduates. Compliance organizations have both customers and compliers. Sometimes the needs of different customers conflict, and the needs of customers and compliers often conflict.

The first step is to carefully define your primary and secondary customers and compliers. Then ask each group what they want. When their needs conflict, you can sometimes work out win-win solutions. For example, if the public wants less pollution but business wants less burdensome regulation, you can reinvent your regulatory system, as the Massachusetts DEP did. The best method is often the one the DEP chose: create a customer or stakeholder council, which includes all major perspectives, and ask them to help you craft solutions.

Q: When more than one organization is involved in delivering the service or producing the outcome, what do you do?

Many outcomes that are important to the public involve the work of multiple organizations. Even some distinct services involve more than one organization. For example, when a public works department sweeps the streets, it usually relies on a police department to have the streets clear of parked cars. Often, this is so low on the police's priority list that it doesn't get done. The result: dirty streets and dissatisfied customers.

When customers tell you what is important to them, if it involves services from multiple agencies, bring the agencies together to develop mutual standards and policies, as well as reinforcing standards and policies. Have them report to a mutual customer council, if that is practical.

Prime Minister Tony Blair in the U.K., aware of how often this problem frustrates citizens, has made a priority of what he calls "joined-up government." "We are encouraging the development of new cross-cutting charters, which bring together information on related services," his government announced after its review of the Citizen's Charter.

When you create mutual charters-or even when you can't-another useful tool is a customer service agreement between agencies. For example, the public works department could negotiate a service agreement with the police department, specifying the level of service the police would provide in ticketing and towing illegally parked cars as well as the consequences if they failed to meet those standards.

Q: Won't guarantees, redress, and a complaints system cost too much, taking money away from investment in real customer service?

In a word, no. In fact, they will probably save your organization money. Budget offices may assume that money-back guarantees and financial redress will cost money, but if the funds come out of the organization's budget and the incentives in the

]]>

The Reinventor's Toolbox: An Alphabetical Index of Approaches, Tools, and Competences

David Osborne — Fri, 11 Aug 2000 00:00:00 -0400

The Reinventor's Toolbox: An Alphabetical Index of Approaches, Tools, and Competences / xi

Acknowledgments / xiii

Introduction / 1

Part I: The Core Strategy: Creating Clarity of Purpose/11

Chapter 1:Improving Your Aim: Using Strategic Management to Create Clarity of Direction / 13

Visioning / 26
Outcome Goals / 30
Steering Organizations / 35
Strategy Development / 39
Mission Statements / 43
Performance Budgets / 43
Long-Term Budget Forecasting / 54
Strategic Evaluation / 56

Chapter 2: Clearing the Decks: Eliminating Functions That No Longer Serve Core Purposes / 61

Program Reviews / 78
Periodic Options Reviews / 87
Asset Sales / 93
Quasi-Privatization Methods / 102

Chapter 3:Uncoupling: Creating Clarity of Role by Separating Steering and Rowing / 105

Flexible Performance Frameworks / 124

Part II: The Consequences Strategy: Introducing Consequences for Performance
/ 149

Chapter 4:Enterprise Management: Using Markets to Create Consequences / 153

Corporatization / 164
Enterprise Funds / 169
Internal Enterprise Management / 174

Chapter 5: Managed Competition: Using Competitive Contracts and Benchmarks to Create Consequences / 183

Competitive Bidding / 188
Activity-Based Costing: A New Competence / 208
Competitive Benchmarking / 210

Chapter 6:Performance Management: Using Rewards to Create Consequences / 215

Performance Awards / 231
Psychic Pay / 232
Performance Bonuses / 232
Gainsharing / 237
Shared Savings / 241
Performance Contracts and Agreements / 243

Chapter 7:Performance Measurement: The Critical Competence / 247

Part III: The Customer Strategy: Putting the Customer in the Driver's/ 273

Chapter 8:Competitive Customer Choice: Making Customers Powerful Through Choice and Competition / 279

Competitive Public Choice Systems / 303
Vouchers and Reimbursement Systems / 308
Customer Information Systems / 311
Brokers / 320

Chapter 9: Custommer Quality Assurance: Making Organizations Accountable for Service Quality / 323

Service Standards / 346
Quality Guarantees / 359
Redress / 362
Complaint Systems / 368
Customer Councils and Boards / 377
Customer Service Agreements / 380
Customer Voice: A Critical Competence / 382

Part IV: The Contol Stradegy: Shifting control Away From the Top and Center. /389

Chapter 10:Organizational Empowerment: Giving Managers the Power to Manage / 393

Reforming Administrative Systems / 404
Site-Based Management / 427
Waiver Policies / 430
Opting Out or Chartering / 434
Reinvention Laboratories / 444
Mass Organizational Deregulation / 450

Chapter 11: Employee Empowerment: Giving Frontline Employees the Power to Improve Results / 453

Delayering Management / 462
Breaking Up Functional Silos / 463
Labor-Management Partnerships / 466
Work Teams / 478
Employee Suggestion Programs / 487

Chapter 12:Community Empowerment: Giving Communities the Power to Solve Their Own Problems / 489

Empowerment Agreements / 514
Community Governance Bodies / 518
Collaborative Planning / 520
Community-Based Funding / 527

Part V: The Culture Strategy: Developing an Entrepreneurial Culture/531

Chapter 13: Changing Habits: Creating a New Culture by Introducing New Experiences / 535

Meeting the Customers / 540
Walking in the Customer's Shoes / 542
Job Rotation / 543
Externships and Internships / 545
Institutional Sponsors / 545
Contests / 548
Large-Scale, Real-Time Strategic Planning / 549
Hands-On Organizational Experiences / 553
Redesigning Work / 554

Chapter 14: Touching Hearts: Developing a New Covenant Within Your Organization / 557

Creating New Symbols and Stories / 562
Celebrating Success / 564
Honoring Failure / 566
New Rituals / 569
Investing in the Workplace / 571
Redesigning the Workplace / 572
Investing in Employees / 574
Bonding Events / 575
Sending Valentines / 581

Chapter 15: Winning Minds: Changing Employees' Mental Models / 583

Benchmarking Performance / 591
Learning Groups and Site Visits / 592
Creating a Sense of Mission / 596
Building Shared Vision / 599
Articulating Organizational Values, Beliefs, and Principles / 602
Using New Language / 606
In-House Schoolhouses / 608
Orienting New Members / 609

Appendix: General Resources / 611

Notes / 615

About the Authors / 665

Index / 667

]]>

Higher Standards

David Osborne — Sat, 01 Jul 2000 00:00:00 -0400

letters@govexec.com

reg Woods will never forget the reaction when he first suggested to the Social Security Administration that it promise that everyone who called its 800 number would get through on the first try. Toni Lenane, then SSA's chief policy officer, minced no words: "That's insane!"

It was 1993, and Woods was the National Performance Review's new point man on strategies to improve customer service. He made the suggestion at a briefing he held to introduce the idea of customer service standards to a handful of large agencies.

When he recovered, Woods asked Lenane what she meant. "She said, 'You've got to understand, currently we can't answer anywhere near 100 percent of the calls,' " he remembers. "The idea that we would invest the money to add the system and operators to do this is just not feasible.' "

But Woods rarely takes no for an answer. He kept pushing, arguing that by using new technologies and learning from the private sector, the agency could provide a 100 percent response rate without hiring more staff. And in August, as the first NPR report went to bed, agency leaders finally agreed. In addition to three innocuous, unmeasurable policy statements promising courtesy, good information and referrals to other programs, the one on the 800 number stood out like a beacon: "You will reach us the first time you try on our 800 number."

Swallowing Hard

Lenane and her colleagues swallowed hard, then set to work gathering better data. What they discovered confirmed her initial reaction: It was impossible. At the busiest times of the year, half the calls got busy signals. And volume-already the highest of any 800 number in the world, with more than 60 million calls a year-just kept rising.

The agency had already considered contracting the phone service out to private firms and decided it wouldn't work. Fielding questions from anxious senior citizens about their retirement checks requires knowledge, patience and courtesy. SSA's teleservice representatives knew a tremendous amount and required significant training.

So the agency put together a team and began studying its dilemma. It launched a series of more detailed customer surveys, and when the team analyzed the new data, it was clear that Woods' instinct had been right: Endless busy signals on the 800 number damaged the agency's reputation with its customers. "Our data showed that access was the single biggest driver for customer satisfaction," says Lenane. "Getting through to the 800 number influenced the public's perception of our competency and knowledge and their overall satisfaction."

As they began work, they also negotiated to soften the standard. After lengthy discussions between the agency and NPR, they settled on a commitment that 95 percent of all callers would be served within five minutes. In 1995, Rep. John E. Porter, R-Ill., the new chairman of SSA's appropriations subcommittee, forced agency leaders to include that commitment in their Government Performance and Results Act (GPRA) goals.

Porter controlled the agency's purse strings, and money talks. His insistence "not only gave it teeth, but it made it a very, very clear and focused goal that everybody knew and everybody was shooting for," says Steve DeMarcos, an assistant regional commissioner in Social Security's mid-Atlantic region.

But with downsizing well under way, thanks to the 1994 decision by the Clinton administration and Congress to eliminate 273,000 federal jobs, the access rate was still declining. In fiscal 1995, only 73.5 percent of callers got through in five minutes, the lowest rate ever.

So after 18 months of study, including a benchmarking study of telephone service in the private sector, agency leaders finally bit the bullet. First, they agreed to replace teleservice representatives when they left, despite the downsizing effort. Then they converted two SSA Data Operations Centers, with about 700 people, to full-time telephone work.

SSA officials had already developed a new phone system with AT&T and had begun training employees who didn't ordinarily deal with phone calls to handle them when volume spiked. "We worked out a sophisticated call-routing system, with the ability to quickly bring these people on during peak calling periods," says Jack McHale, who was then in charge of the 800 service. "When calls fell off, they went back to their work."

Then, in January 1996, SSA expanded teleservice responsibilities to virtually every technical person who worked in a Program Service Center-back offices designed to process benefit applications, among other activities. They trained 3,700 people in six large processing centers, more than tripling their number of "spikers."

This required a long campaign to win the support of the American Federation of Government Employees, which represented affected workers. The key to success was job security: Automation was expected to do away with some of the work at the processing centers, so shifting to telephone service saved people's jobs. Once the union had agreed, SSA leaders and a union official spent two months visiting the centers that were going to have to change, talking with the employees, explaining the importance of customer service and working through the resistance.

Meanwhile, the agency restricted leave for teleservice representatives and spikers at peak times, accelerated the use of overtime and worked with employees to come up with changes in processes and rules that would improve performance. Because calls peaked after people received checks at the beginning of every month, it began staggering monthly payments for all new recipients.

The transition was hardly smooth. As the agency retrained thousands of people, customer service suffered-both in the processing centers and on the phones. November 1995 was the low point for 800-number access: Only 57.2 percent of callers got through within five minutes. Then, on the first morning back to work in January 1996, as the agency put all the new spikers on line to handle the post-holiday surge, AT&T's 800 system crashed. Hundreds of thousands of Social Security recipients called in, and for several days they all got busy signals. The media gave the agency a drubbing, and agency leaders lost a lot of credibility with their employees.

But once AT&T fixed the system, the numbers began to turn around. By February, the five-minute access rate was 92.1 percent, and the percentage stayed in the 80s and 90s for the rest of the fiscal year. In November 1996 it hit 95.9, and it has stayed above 95 percent every year since. (In 1997, the agency added a promise that 90 percent of all callers would get through on their first try.) Meanwhile, customer ratings of the courtesy and knowledge of teleservice reps remained more than 95 percent positive.

"There was a lot of internal celebration [when we met] the goal in 1997 and 1998," DeMarcos remembers. "When you do it one year, two years, three years, it really becomes a part of your culture. Internally, if you were to talk to all the people on the network. . . . They know the '95 and five' commitment. That's what drives us."

McHale had been lobbying for many of the changes for a long time. "We had to improve, because we were so bad," he says. "But I don't think we would have stretched as far as we did. As someone who was asked what we needed to do to meet this standard, I would come up with these recommendations, and I could always lean on the standard. I could always do calculations of how short we would be. Had the standard not existed, we would have improved, but not as much."

A Mixed Bag

The Social Security story demonstrates the power a good customer service standard can have to force agencies to do the unthinkable. SSA endured tremendous expense, dislocation, pain-and even failure-to meet its standard.

That's why President Clinton issued an executive order in 1993, at the NPR's recommendation, requiring all agencies that deal directly with the public to survey their customers and establish customer service standards. By fiscal year 1998, 570 agencies had published more than 4,000 standards, according to the NPR.

Predictably, they were a mixed bag. Some, like those at Social Security, were specific, measurable and meaningful to customers. But too many were vague and unmeasurable. ("We will maintain the facility in a clean, safe condition," "We will answer your questions or refer you to additional sources of assistance," and "We will display schedules of programs and activities available throughout the park"-all from the National Park Service-were fairly typical.) Performance was measured on only 2,800 of them, and few brought any consequences for success or failure.

So in 1998 the NPR shifted its strategy to focus on the real outcome it wanted: higher customer satisfaction. It commissioned the producers of the American Customer Satisfaction Index (ACSI) to survey customer groups selected by most of the 32 "high-impact agencies." It then compared their satisfaction levels with ACSI data on customers of similar private services and published the results.

NPR leaders also pushed the high-impact agencies to include customer satisfaction in their performance goals. And they worked with the President's Management Council to fashion a policy statement urging that all senior management performance bonuses and awards depend on success measured against a "balanced scorecard" that included measures in three areas: customer satisfaction, mission effectiveness and employee satisfaction.

"Instead of focusing on the development of customer service standards, we shifted our focus to ask, 'Are our customers satisfied?' " explains John Kamensky, longtime NPR deputy director. "We jumped straight to the outcome of customer satisfaction."

This was a wise move, and it has had a real impact. A quick review of performance goals at the high-impact agencies shows that customer satisfaction is now taken quite seriously in most. And the new PMC policy should make it more important to top managers.

But now that more agencies are taking customer satisfaction seriously, it may be time to reintroduce them to one of the most powerful tools they can use to increase it: customer service standards.

Lessons From Experience

If the next administration were to launch a renewed customer service standards initiative, how could it make the new effort more successful than the first? The experiences of government agencies with this tool-both successes and failures-in the United States, Great Britain and Canada suggest a number of lessons:

1. Involve customers in the creation of standards.
If you don't, you won't know what is important to them. "Never assume what people want," says SSA's DeMarcos. "Have some concrete reason and basis for what you're setting as a service goal. Find out from the customers. You can kill yourselves to do something that you find out people think is a yawner."

In both the United States and abroad, many organizations have neglected this step-and paid the price with worthless standards. "The place agencies have had the most trouble is the idea that they have to ask their customers what they want and whether they're getting it," says NPR's Woods. "They revert to the Washington mentality: 'We figure it out in D.C.' So they always get it wrong."

Customer surveys are useful, but face-to-face contact is even more important. "Get the people who are charged with doing the improvements to look at people they're serving square in the face and ask the questions," recommends Laurie Ohmann, who has helped several organizations develop standards. Ongoing customer councils are perhaps the best tool, though you can use many others-focus groups, panels, interviews and so on. You can even videotape the sessions and show them to the rest of your organization.

The obvious reason to do this is to generate standards that are meaningful to your customers. The less obvious reason is to persuade your employees to take them seriously. They have to be "connected to what the customer has actually told you," says Janice Warden, who led the successful effort at SSA, then moved on to the NPR. "You have to be able to point to that, to make it credible to the entire organization." Otherwise, she says, employees will say, "Are we doing this because it's important or because Vice President Gore told us to?"

2. Make your standards specific, measurable commitments, not vague statements.
If you can't measure it, you can't tell whether you're meeting it, and you can't reward success. And if you aren't specific, you will only feed the cynicism of your customers. As a guide published by the Canadian government says, " 'We guarantee' is better than 'We will,' which is better than 'We aim to.' "

Candace Kane, who succeeded Woods as head of the NPR customer service team, says she saw more than her share of the "We're going to be responsive to you" variety of standards. The agencies "discovered that responsiveness to me is different than responsiveness to you. You really want to get specific: 'We will resolve the problem within 24 hours.' "

3. Publicize your standards-and your results.
If people don't know about your service standards, they will have far less effect. The U.S. Postal Service, for example, publicized its first-class on-time delivery standards (three days within the continental United States, one day locally) and reported quarterly on its performance. The results generated front-page newspaper stories, creating useful urgency within top management. But the Postal Service was silent about another standard it committed to in 1993: "You will receive service at post office counters within five minutes." If you look hard next time you go into a post office, you may find a tiny, 4-inch-by-5-inch sign announcing the standard. But you've probably never noticed it. As a result, it meant nothing to you, the customer. Nor did it seem to have any impact on employee behavior. It was, sadly, a wasted opportunity to win over the public.

4. Make service standards consequential, by creating rewards for fulfilling them and penalties for failing.
Consequences give this tool its teeth; they lend urgency to the often difficult challenge of meeting the standards. At Social Security, the leadership understood that service on its 800 number was critical to customer satisfaction, but answering every call within five minutes-or even 95 percent of calls within five minutes-seemed impossible. If Woods had not used Gore's authority to cajole the agency into publishing a standard and reporting its performance every year, it would never have happened. If Rep. Porter had not demanded that SSA meet the standard or suffer budgetary consequences, the agency might never have gone to the extraordinary lengths it did to reengineer its work.

Without enforcement of consequences, in other words, standards pack much less punch. There are several ways to create consequences:

Guarantees give customers who have not received the promised level or quality of service either their money back or free redelivery of the services. This costs the agency money-a negative consequence-while also building customer loyalty.
Redress policies give customers some form of compensation-financial or otherwise-if the organization fails to meet a service standard. For example, British rail lines award discounts on future purchases when they miss their on-time standards.
Performance awards or bonuses reward units that meet their standards. Performance against service standards is in the bonus formula for some top managers at Social Security. And many British agencies include key service standards among their annual performance targets, which affect top management's performance bonuses.
Public comparisons of performance against the standards builds pressure. NPR's annual publication of SSA's results was a big part of what kept it from abandoning its 800-number standards. "They knew that they were going to be publicly humiliated if in fact they hadn't delivered what they needed to deliver," says NPR's Kane. In the United Kingdom, a Citizen's Charter led to the publication of comparative data on local governments, schools, hospitals and passenger rail lines. This, the new Labor government concluded after a review of the initiative, "was considered by many respondents to the consultation exercise to be a major success of the old Charter programme."

5. Keep pressure on from outside the organization to create meaningful standards and to meet them.
Setting meaningful standards and then fulfilling them sometimes takes almost heroic efforts, as we saw in the case of Social Security. Most organizations won't do that-or will only do it until the leader who drove them moves on. So you need some external force that keeps the pressure on-forever.

You also need an external body to review and approve standards, redress policies and so on. Otherwise, vague statements that cannot be measured and have no consequences attached-"We will do our best to provide timely, courteous service"-will be the norm. The review process should involve customers, ideally through an ongoing customer council.

A neutral reinvention office like the NPR can handle the review and approval process. But it helps to use an organization independent of the administration-such as the Government Accounting Office, a customer council or even a private entity like Consumer Reports-to bring outside pressure to bear. There are limits to how much pressure an internal arm like the NPR can bring on agencies. Imagine the media flap if Al Gore had publicly criticized Education Secretary Richard Riley's standards, and you can understand why.

Because some fudging is inevitable in any kind of performance measurement, an outside body also needs to audit definitions, indicators and measurement efforts to keep them honest.

6. Involve employees in creating and meeting standards.
If standards are simply imposed on employees, few will respond to the challenge. At Social Security, says Warden, "I don't think we could have done it without really engaging the employees in discussions, getting their ideas about how we could do this better. We talked with thousands of them."

There are many reasons to involve staff: to get their ideas and buy-in; to see if draft standards are feasible; to learn what work-process and other changes need to be made to reach them; to identify the training employees need to meet the standards; and to identify other offices or units whose cooperation will be necessary to meet the standards.

Similarly, if you fail to deliver the quality of service you have promised, front-line staff need to be able to make it right immediately. If they have to wait three weeks for management to make a decision, you will alienate your customers.

7. Beware of perverse incentives that actually hurt customer satisfaction.
"Watch out for how you set your standard up," warns Warden. "You've got to present a total picture of what the customer wants. We could have very well said '95 and five,' without continuing to emphasize the courtesy and accuracy" in other standards.

The result could have been teleservice representatives hanging up on customers before they were satisfied. As Warden reminds us, "What you say is what you get."

You have to watch closely for any backfires, adds Larry Massanari, SSA's regional commissioner for the mid-Atlantic region. "You don't always know; only the customer begins to feel it." This is yet another reason to keep measuring customer satisfaction. As the NPR emphasizes, it's important to keep your eye on the ultimate outcome. Customer service standards are powerful, but they are only a means to an end.

David Osborne, a partner in the consulting firm The Public Strategies Group, is co-author of Reinventing Government (Addison-Wesley, 1992) and Banishing Bureaucracy (Addison-Wesley, 1997). This article is drawn from material in his new book, The Reinventor's Fieldbook: Tools for Transforming Your Government, published this month by Jossey-Bass.

]]>

Winning Compliance

David Osborne and Peter Hutchinson — Thu, 01 Jun 2000 00:00:00 -0400

letters@govexec.com

very other Wednesday, before the sun comes up, thousands of people in Minneapolis stumble to the ends of their driveways with bins full of old cans, bottles and newspapers. In Essex, Mass., they haul them to the dump every Saturday.

Like millions of other Americans, these people are participating in what has become a community ritual-recycling. It wasn't always this way. There was a time when we blissfully threw our bottles, cans and newspapers in the garbage. Now we treat them as if they were precious: We meticulously separate and wash the bottles and cans, we bag the newspapers, and we put them all in the right containers. Garbage just isn't what it used to be.

It was governments that got us to change how we think about garbage. Somehow, our governments persuaded us to comply with a new set of expectations and norms. But they did so without resorting to the usual set of compliance tools. There are no recycling inspectors. There are no recycling police or recycling tickets. There isn't even a 12-step program for recovering nonrecyclers.

Yet a majority of American households recycle regularly.

Recycling is a "compliance activity"-one designed to get individuals or organizations to comply with community norms, expectations and rules. Compliance functions are everywhere in government: Taxation, environmental protection, policing and food and drug enforcement are just a few examples.

The results they achieve vary wildly. More than 90 percent of us comply with the tax laws, but at best 60 percent to 70 percent of us comply with speed limits or mandatory seat belt laws, and only about half of all liquor stores comply with prohibitions on the sale of alcohol to minors.

To achieve compliance, most public organizations rely on enforcement: detecting and punishing violators in order to deter inappropriate behavior. Enforcement has a long history, and it is often effective. But it is very expensive, both in the taxpayers' dollars we spend on it and in the public support for government we squander in doing it.

Enforcement is costly in part because it is based on a set of assumptions that don't apply in most cases. Enforcement agencies often assume the worst (and often produce the worst) from people who are expected to comply. They assume we have to force people to do things they don't want to do, for example. Yet most people want to comply with what is expected of them, and when they don't, it's usually because they didn't know they were supposed to or they don't know how to comply. Enforcement also relies on fear as the primary motivator. While this may be necessary in some cases, people are more often motivated by other factors, such as pride, peer pressure, rewards and recognition.

All of this makes enforcement a blunt instrument. As public leaders recognize its limitations, governments around the world are shifting to cheaper, more effective options. They keep enforcement as a last resort, but they turn first to other tools. They build public support for community standards. They create partnerships with those who must comply: businesses, local governments and communities. They educate compliers about what is necessary and how to comply. They streamline processes such as permitting and inspections. They add services that make it easier to follow the rules. And they shift from requiring specific actions to requiring specific results-allowing compliers to figure out the best and cheapest way to produce those results.

Think back to our recycling example. Local governments worked to establish community norms and expectations. They used extensive advertising and education (especially in schools) to win support for recycling and to explain how it was done. Then they made it relatively easy, by distributing recycling bins, establishing regular collection cycles, and so on. The bins had the powerful side effect of mobilizing peer pressure: Everyone in your neighborhood could see if you were doing your civic duty. Finally, some governments rewarded recyclers with a small credit on their solid waste bills.

By using these tools many communities have achieved a high rate of voluntary compliance, without resorting to enforce- ment approaches that are expensive, antagonistic and often ineffective. This new strategy, which is spreading rapidly, can be described as "winning compliance." It includes nine elements-all of which federal agencies can use to win voluntary compliance.

1. Build support for standards by working in partnership with compliers and other stakeholders.

To persuade people and businesses to comply with society's rules, it helps to give them a voice in the process. Increasingly, compliance agencies are bringing businesses and environmentalists together to design programs that meet everyone's needs. At the Environmental Protection Agency, for example, the Common Sense Initiative brings together business, environmental, community and EPA leaders in committees that each focus on one industry, such as metal finishing, iron and steel, or computers and electronics. Together they develop methods to streamline compliance processes and eliminate barriers to compliance. EPA's Project XL does the same thing with individual companies.

The Occupational Safety and Health Administration's frustrations in taking a similar partnership national illustrate the importance of building support among compliers. In 1992, OSHA officials in Maine pioneered a remarkably successful partnership called the Maine 200 Program. Its leaders were frustrated by the failure of their traditional inspect-and-fine approach: Although they won gold medals from headquarters for issuing the most citations and fines, the state's workplace safety and health records remained the worst in the nation. So they decided to try something different: They asked the 200 employers with the highest volume of injury claims (45 percent of the state's total) to create employee teams dedicated to improving safety. The teams would draw up action plans, conduct comprehensive surveys of hazards in their plants, and correct most of them within 12 months. As long as the company was making a good-faith effort, OSHA would forgo its traditional inspections and fines. But each quarter the employers had to file a report on their progress, and OSHA would visit occasionally to verify those reports. Employers who failed to fulfill their obligations would be subject to comprehensive inspections.

Faced with the alternative of increased OSHA inspections, all but a handful of firms chose the self-inspection model. Over the previous eight years, OSHA had identified some 37,000 hazards at 1,316 work sites. In the program's first two years, employers identified 174,331 workplace hazards and corrected 118,671 of them. Two of every three companies decreased their injury and illness rates. Altogether, participating firms saw their payable workers' compensation claims drop by 47 percent-far outpacing declines in other companies.

OSHA consulted with the 200 firms in Maine before rolling out its experiment. But when it took the program national, the U.S. Chamber of Commerce filed suit to block it, claiming it was coercive, not voluntary, and therefore required a formal rule-making process in which business could comment. The lesson: Building partnerships requires extensive discussion with compliers to get their buy-in. "Even when an agency has the solution, you can't just impose it on people," says former OSHA head Joe Dear. "We got in a big rush to replicate the program and we skipped some of the preparatory work."

2. Use a performance-based approach to regulation.

Many regulations prescribe exactly how compliers have to follow the law, particularly in the environmental arena. For example, they tell businesses what technology they must use, how it must be installed, and how often it must be inspected. Often compliers know there is a better way, but the law won't let them use it. Now some agencies are beginning to substitute regulations that define the outcome required but leave it up to compliers to figure out how to produce it. This not only makes it easier for them to follow the rules, it stimulates innovation to find better and cheaper methods.

Both EPA's and OSHA's reinvention efforts exemplify this principle. For example, EPA's metal finishing committee, the furthest along in its Common Sense Initiative, has adopted performance goals that would cut toxic emissions by as much as 75 percent, while giving companies more flexibility in how they reach the goals.

OSHA shifted its performance goals for area offices from maximizing citations to reducing work-related injuries, illnesses and deaths. After surveying 80,000 employees around the nation, it gave field offices data on injury and illness rates in high-hazard industries, by company, so they could target workplaces with the highest rates.

3. Educate compliers about what is expected of them.

"For some, the failure to comply comes down to a simple lack of understanding about what's required," EPA officials concluded in a recent paper on the agency's reinvention efforts. "We need to do a better job of providing information in timely, helpful ways so people can fulfill their environmental responsibilities." Anyone who has filed the Internal Revenue Service's long form without the help of a tax accountant knows this problem firsthand.

The U.S. Customs Service developed an education strategy, called "Informed Compliance," in the mid-1990s. It shifted part of its staff from inspecting goods brought into ports and airports to helping importers improve their internal control processes. "Those out to break the law will continue to be apprehended," Dennis Murphy, director of public affairs, told Government Executive at the time, "but we're moving from what you might call a 'gotcha' focus to one of trying to make sure that the people we deal with understand what's required of them so they don't make mistakes based on ignorance, sloppy work or poor communications." Overall compliance rates, measured through statistical sampling of imports, have improved.

In a similar vein, the IRS has set up an education program to help small businesses. EPA has created virtual compliance assistance centers on the Web, developed in partnership with industry, environmental and academic organizations. They give businesses quick access to regulatory requirements, tips on preventing pollution, and information about best practices in other firms.

4. Make compliance easy.

The best way to do this is to simplify and streamline compliance requirements. If government can make it easier to pay our taxes, ensure a safe workplace, and meet our legal obligations when we employ nannies and after-school baby sitters, more of us will comply with the law. OSHA, EPA, the IRS and other federal agencies have begun creating one-stop permitting processes, consolidating related processes into single applications and waiving rules for businesses that are already performing well.

The second method is to offer services that facilitate compliance. For example, OSHA has developed a series of Web-based "expert systems"-computer programs that answer questions and guide people through compliance processes. Each is focused on a problem or substance, such as asbestos, lead or cadmium.

Since Congress hauled them on the carpet in 1998, IRS leaders have struggled to make it easier to file taxes (in the face of increased complexity imposed by Congress). They have:

Simplified forms and notices.
Created a 24-hour-a-day, seven-day-a-week telephone hot line.
Expanded their electronic and telephone filing options.
Opened 250 IRS offices on Saturday mornings during tax-filing season.
Added temporary locations in banks, libraries and shopping malls (even on a bus, in rural areas) to distribute forms and publications.
Implemented "problem-solving days" in every district, during which employees listen to and resolve taxpayer problems.

5. Make the quality of agency service to compliers consequential.

If compliance agencies face consequences when they provide poor service to compliers-and rewards when they provide excellent service-they will hasten to improve. The 1998 IRS reform law dipped a toe in this water by listing 10 actions for which employees could be fired and creating a new taxpayer advocate, who can determine compensation for taxpayers who suffer significant hardship because of poor performance at the IRS.

But these are relatively blunt instruments-and the list of firing offenses appears to have backfired, causing IRS employees to proceed with such caution that tax collections have plummeted. Several state governments have been far more creative, setting service standards and offering compliers some form of compensation when the agency fails to meet them.

A decade ago, for example, the Massachusetts Department of Environmental Protection set strict time limits for processing each permit and issued a money-back guarantee: If the department missed the deadline, it had to return the permit fee. "It was the single best thing we did," remembers former Commissioner Dan Greenbaum. "It created a dynamic like a business trying to collect a fee for a service. It provided impetus for management reforms, like a real tracking system so you would know what was happening with each permit.

"Staff told us they'd need lots more people to meet the time lines. But we met the deadlines the first year; it turned out there was a lot of slack in the system. Part of it was poor management: for example, no tracking system to tell you how many permits were in the pipeline, how many got permits and so on. And part of it was that the department had people who were environmentalists and believed that by delaying things they were protecting the environment."

Over the first four years the department missed only 75 deadlines out of 14,000. Word got around about which regional and program offices were refunding the most fees. "There's a certain pride in not being the one to show up as doing the worst," said Thomas Powers, Greenbaum's successor.

6. Report compliance information.

Feedback is the breakfast of champions. If taxpayers find out when they have filed incorrectly, or businesses are informed when they violate environmental rules, most will correct their problems.

When citizens care about compliance and organize to demand it-as the environmental movement does-reports to the public are even more powerful, because citizen groups use them to keep the heat on. The EPA has seized on this tool to give the public an extraordinary amount of data.

Its "Envirofacts" Web page (www.epa.gov/enviro/index.html) provides access to a dozen EPA databases, so users can see information on drinking water and air quality, toxic and hazardous waste sites, water discharge permits and Superfund sites in any ZIP code, city, county, state, watershed or basin in the country. It includes EnviroMapper, which can present the data on a national, state or county map. EPA's Sector Facility Indexing Project even gives the public access to environmental compliance data on 650 large industrial facilities in five sectors that create significant pollution: auto assembly, pulp manufacturing, petroleum refining, iron and steel production, and primary smelting and refining of aluminum, copper, lead and zinc.

7. Treat different compliers differently.

There is little sense in treating law-abiding citizens or businesses that have made a mistake the same as habitual lawbreakers. The police don't do it and the courts don't do it, but many compliance agencies do. Before its recent reforms, the IRS went after everyone who owed money. If it was a significant amount, it brought down the hammer-often going after the equity in people's homes, for example-regardless of the taxpayer's past record, current situation or ability to pay. Thanks to the 1998 reform bill, it can now use common sense. If the payment problem is chronic, the IRS still uses the hammer. But otherwise, its agents can offer taxpayers several options, including compromise settlements and installment payments. If a taxpayer is ill or has lost a job and has no history of avoiding payments, the agent can design a special hardship installment plan.

The Consumer Product Safety Commission won an Innovation in American Government Award from the Ford Foundation in 1998 for creating two different tracks for product recalls. Traditionally, recalls have dragged on for months, while the CPSC staff investigates, then negotiates with the manufacturer's attorneys. Meanwhile, the dangerous product stays on the market. In 1995, the agency announced a program called Fast Track Product Recall, in which companies that acknowledge defects can reach agreement with the agency and launch corrective action within 20 days. Since recalls miss most products once they have moved from the retail shelves into people's homes, speed is critical. According to Harvard Professor John Donohue, who reviewed the program for Ford, "Fast Track recalls take less than half as long as the traditional process and reach three times the proportion of affected products."

8. Create a continuum of public consequences and rewards for compliance.

Governments usually use sticks to ensure compliance: They create stiff penalties for failure, including fines and jail time. Those who adopt the winning compliance approach don't abandon the sticks, but they add carrots.

The EPA has developed a series of incentives for businesses that reduce pollution, from waivers and flexible permits to reduced reporting requirements and inspections. It is working to develop a "performance track" of rewards for businesses with outstanding environmental records. It may even emulate state experiments in Colorado and Oregon that reward facilities as they meet higher and higher standards, not only with regulatory flexibility but also with financial incentives.

The Interior Department's Fish and Wildlife Service has the ultimate stick: By invoking the Endangered Species Act, it can shut down commercial operations like logging or development on vast swaths of land. That kind of action is so Draconian, however, that it is rarely used. In the 1990s, FWS has turned to a carrot, called a habitat conservation plan. Businesses and local governments can apply for permits to work or develop land important to endangered species if the agency approves such plans, which must promote the long-term conservation of the species. For example, a plan negotiated with local governments and developers in Orange County, Calif., set aside 38,000 acres of land as nature reserves to protect more than 40 species. A similar plan set aside 172,000 acres in San Diego. The carrot: Those that donate the land get to develop other parcels free from restrictions under the act. They also get a promise that if they abide by the plan, they will not be required to take or pay for further conservation measures in the area, if the species continue to decline. The government will have to foot the bill the next time.

9. Create market incentives to
encourage compliance.

The most powerful way to win voluntary compliance is to reward it financially, through the marketplace. When some states required 5-cent deposits on bottles and cans, to be returned when the empty bottle or can was turned in for recycling, they were using a classic market incentive. Without a single public program or employee, these "bottle bills" significantly reduced litter and broken glass in streets and parks.

Any form of tax on pollution encourages voluntary compliance. Perhaps the granddaddy of winning compliance initiatives is emissions trading, in which the government gives credits to companies that reduce pollution below the amount required by law and allows them to sell those credits to other firms. The idea is to reward companies for reducing pollution but let them figure out how to do it. If they can reduce one source of pollution economically, they can use the credits they generate to offset areas where reduction is too costly. The federal government has used this mechanism for 25 years to clean up the air, get lead out of gasoline, and reduce acid rain. It has saved American businesses tens of billions of dollars, while meeting the government's environmental goals.

These nine steps to win voluntary compliance can work in virtually any compliance activity. Used as a checklist, they can help agencies find alternatives to enforcement strategies they cannot afford. When an agency like OSHA can afford to inspect the average workplace only once every 80 years, cheaper alternatives are necessary.

The winning compliance tool kit offers an enormous bang for the buck, because it can cut costs-for both government and business-at the same time that it improves outcomes. In the 21st century, with a shrinking federal workforce confronting such problems as the burgeoning specter of global warming, winning compliance is no longer simply a nice innovation. It may be our only hope.

]]>

Lessons From Abroad

David Osborne — Sat, 01 Jan 2000 00:00:00 -0500

T he best clues to what managing in the new millennium will be like probably come from overseas, in countries where parliamentary systems have allowed reformers to sweep away many of the bureaucratic structures so characteristic of 20th century governance. Traveling to New Zealand or Great Britain feels like gazing into the future. Both countries have leaped far ahead of the United States into what they call "the new public management."

In a parliamentary system, if a few people at the top of the majority party decide something must be done, it usually happens. Back-benchers risk their careers if they vote against their party. There is no separation between the executive and legislative branches; no checks and balances. When a party has a majority, it simply pushes its program through.

Britain and New Zealand also lack federal systems. Virtually all power lies with the national government. When national policy undergoes seismic shifts, the whole country feels the earth move.

So what can we discern in the crystal ball by looking at these and other countries? A public sector focused intensely on performance but less bound by rules and procedures--an environment in which managers can manage, innovators can innovate, and success sometimes even generates a reward. Overall, they are operating in a more challenging but far more satisfying managerial environment.

Consider a few of the headlines:

* In 1988, New Zealand did away with its rule-bound civil service system, while preserving its protections against political interference in hiring and firing. Several years later, the United Kingdom let agencies radically simplify their personnel rules. Both countries have enjoyed excellent results, with few problems.

* New Zealand split up its large departments into smaller units more focused on specific missions, guided by "output budgets" and perform- ance agreements. The United Kingdom carved some 140 "executive agencies" out of its large departments, each with a performance agreement and far greater flexibility.

* Managers in both systems are eligible for significant financial bonuses if their organizations hit their targets.

* Having focused agencies on improving their outputs, both New Zealand and Great Britain are now struggling to hitch these more efficient machines to the outcomes citizens care most about.

* And both countries are wrestling with the challenge of getting different agencies to work hand-in-hand to solve citizens' problems.

Most of the developed democracies are experiencing a collision between their industrial-era bureaucracies and information-age challenges. Many are transforming their bureaucratic systems into the more decentralized, flexible, responsive systems necessary to succeed in the 21st century. In this process, at least seven trends that should be harbingers of events to come in our own federal government have emerged.

1. While the trend toward privatization, public-private partnership and devolution will continue, the federal government will not wither away.

New Zealand has shrunk its core public sector from 88,000 employees to 32,000 since 1987, while Britain has privatized dozens of enterprises and slimmed down the rest of the civil service by more than a third. Rather than creating a "hollow state," as some academics have warned, the process has in many ways created a stronger state. By getting out of businesses the private sector could do better, leaders in Britain and New Zealand have increased their ability to concentrate on areas in which the public sector is indispensable.

It turns out that smaller governments are sometimes stronger governments, because they are more effective. Majorities of citizens abroad, as in the United States, no longer want big, bureaucratic government--but that doesn't mean they want minimalist government. Instead, they want lean, activist government that solves problems with as little waste and bureaucracy as possible.

2. Though politics will always make management at the federal level less than optimal, we can do far more to protect our agencies from political pressures.

How? By uncoupling "steering" (policy and direction) from "rowing" (service delivery and compliance enforcement) and walling off the rowing agencies behind more effective barriers to political manipulation. The New Zealanders carved out several dozen new operational departments and gave their chief executives the power to manage their resources free from the constraints of civil service rules and bureaucratic procurement processes. But they did not let elected officials appoint those chief executives; the State Services Commission, staffed by top civil servants, does that.

The United Kingdom did something similar with its 140 new executive agencies. Neither country managed to eliminate political pressures on its chief executives. But in both countries the executives have the power to negotiate performance agreements with elected ministers, which by design leave most management issues to the agency.

3. The future lies in handing organizations dramatic new flexibilities in return for serious accountability for results.

This is the basic deal at the heart of the new public management. Once a service delivery or compliance organization is uncoupled--that is, set up as an independent or semi-autonomous agency with a clear mission--it is held to high performance standards but liberated from burdensome red tape. In Britain and New Zealand, managers are now empowered to control their budgets, manage their people, and buy what they need. If they want to offer performance bonuses, they can. If they want to radically simplify their job classification systems, they can. If they want to buy goods and services that offer the best value rather than the lowest cost, they can.

But these same managers are held personally responsible for their organizations' performance. Every year they have up to a dozen clear, measurable performance targets. If they meet most or all of them, they are eligible for bonuses of around 10 percent of their salaries. If they consistently fail, they may find themselves out of work.

This trade-off works for both sides. The politicians and policy-makers get the leverage they need to deliver results to citizens at a cost they can afford, while the managers get the freedom they need to succeed in producing those results. This is the basic model for the Clinton administration's initiative to create performance-based organizations (PBOs). Though Congress has approved only two PBOs--the Education Department's Office of Student Financial Assistance and the Commerce Department's Patent and Trademark Office--we can expect the idea to spread.

If we really want to learn from overseas, we will copy the New Zealanders rather than the British and set up PBOs as independent agencies, operating under performance contracts with departments but not within their management systems. In the United Kingdom--and in our first PBOs--departments have often been reluctant to give executive agencies all the flexibilities allowed under law. The cultural pressure to conform with departmental practice is simply too strong.

4. Civil service reform is an indispensable element of performance improvement.

Foreign experience proves that we won't get dramatic leaps in performance until we junk the rigid personnel rules and structures built up over the last century. As General Motors concluded 15 years ago, you can't build a Saturn using traditional GM rules.

The building blocks of personnel reform have become clear, both overseas and in some of our state and local governments. They typically involve the following:

* Management delayering, to reduce the levels of hierarchy.

* Simplified job classification systems.

* A handful of broad pay bands within each classification, rather than a complex step-and-grade system.

* Freedom for managers to set pay levels within those broad pay bands and to use performance, team-based, and skill-based pay.

* More freedom for managers to reward performance with bonuses and other financial incentives, such as gain-sharing.

* Elimination of pay increases and personnel reductions based solely on longevity.

* Allowance for work teams in which various employees share tasks and are cross-trained to share skills as well.

* New forms of performance appraisal, based more on measurable team or unit performance than on subjective ratings.

* Streamlined hiring and firing processes.

* More freedom for managers to invest in professional development, employee training and other forms of capacity building.

5. The customer is here to stay.

A decade ago, few civil servants talked about their "customers." In 1992, Ted Gaebler and I were roundly criticized for the emphasis on customers in our book, Reinventing Government. Today, leading public organizations here and abroad carefully define their customers, then rethink, reengineer and reorganize to maximize results.

The British have led the way. Their Citizen's Charter, launched in 1991 (and since relabeled "Service First" by the Labor government) requires every public organization in the country to define its customers and create a charter. That document sets service standards based on input from customers. For example, "90 percent of trains should arrive within 10 minutes of the scheduled time." Organizations are encouraged to offer redress to customers if they fail to meet their standards--discounts on the next train ticket, for instance. They must have systems to deal with complaints. And if they succeed in meeting Service First criteria--including customer choice, service standards, independent validation of performance, and continuous improvement in both quality and customer satisfaction--they can apply for a "Chartermark," a symbol of public-sector quality they can put on their stationery, publications and signs.

The Citizen's Charter created a paradigm shift among public employees. It moved the customer from the periphery of organizations' concerns to the center. It injected quality service into organizations' performance standards. And it has been copied by more than a dozen countries, from Canada to Malaysia. The Clinton administration's 1993 executive order requiring agencies that dealt directly with the public to create customer service standards was inspired by the Citizen's Charter.

6. One of the next big challenges will be getting different organizations to work together to deliver seamless services to the customer.

If the customer is at the center, an organization's work processes and outputs are less important than meeting customer needs. And often, that can't be done by one organization alone. If a poor, at-risk student from a dysfunctional family has four different public-sector adults involved in his or her life (a guidance counselor at school, a caseworker at the county welfare office, a different caseworker at the bureau that deals with child abuse, and a parole officer), it's not enough for all of those adults to follow their own organizations' protocols. They must work together to help the family and child.

British Prime Minister Tony Blair calls the solution "joined-up government." His civil servants are working hard to figure out how to make it happen. In New Zealand the same discussion is taking place. U.S. managers are already struggling with it in many initiatives. In the 21st century, few will be able to avoid it.

Information technology will be a big part of the solution. Customers will be served in one-stop shops by multiple organizations collaborating through technology. Already, several Asian countries have developed smart cards--plastic cards with embedded chips--that help people get seamless service in sectors like health care. Even developing nations such as Malaysia are intent on leapfrogging the West using advanced information technologies.

7. The biggest challenge on the horizon is improving our ability to steer.

As the 21st century opens, Great Britain and New Zealand have created far more efficient rowing organizations. Both systems focus primarily on improving outputs--improving what public organizations already produce. But neither has figured out how to systematically examine whether those outputs actually produce the outcomes citizens value most. Public organizations are doing things right, in other words, but they are not necessarily doing the right things.

In both countries, however, elected leaders have recently begun to define their key outcome goals. This is a big step, because elected officials are not rewarded for thinking strategically. If they succeed, the results are rarely evident during their terms in office. And if they start measuring outcomes, they are handing their political opposition a scorecard with which to grade them.

In the United States, leading state and local governments (for example, Oregon, Texas, Florida, Sunnyvale, Calif., and Multnomah County, Ore.) are wrestling with this challenge. But the federal government is still trying to master output measurement, through the 1993 Government Performance and Results Act. Next it must create the frameworks for flexibility and performance accountability (such as PBOs) necessary to improve outputs. But some day, when it has mastered this challenge, it will turn to the $64,000 dollar question: Are the outputs we fund producing the outcomes our citizens want?

One hundred years ago, as the 20th century dawned, reformers in business, government and academia--and in both major political parties--were struggling to overcome the abuses and failings of 19th century government. To do so, they invented the modern, rule-driven bureaucracy. Today, we are struggling to overcome the limits of that model and to create its successor. We are gradually redesigning our public systems, to create adaptive, decentralized institutions capable of producing continuous improvement.

This movement is not dependent on either political party. My final lesson from abroad--perhaps the most encouraging--is that these reforms tend to survive even when political power changes hands. In the United Kingdom, the Labor Party embraced 95 percent of the Conservatives' public administration reforms and kept right on going. In New Zealand, when the National Party defeated the Labor Party in 1990, the same thing happened. Australian reforms have also survived political transitions.

If you doubt this will occur in the United States, take a closer look. The domestic policy chiefs of both front runners in this year's presidential campaign--Elaine Kamarck of Al Gore's staff and former Indianapolis Mayor Stephen Goldsmith in the George W. Bush camp--are themselves reinventors. Kamarck designed and ran Gore's effort for five years, while Goldsmith led more reinvention initiatives in his eight years as mayor than virtually any other state or local executive. The two see themselves as part of the same movement. And they know its century has come.

David Osborne, a partner in the consulting firm The Public Strategies Group, is co-author of Reinventing Government (1992) and Banishing Bureaucracy (1997). His next book, The Reinventor's Fieldbook: Tools to Transform Your Government, will be published in June by Jossey-Bass.

]]>

Reinventing Your Government

David Osborne — Sun, 01 Sep 1996 00:00:00 -0400

ince publishing Reinventing Government, I have turned my attention to issues of implementation: How can an agency like yours make this historic crossing from the bureaucratic model to a more flexible, innovative, entrepreneurial approach? My partner Peter Plastrik and I have researched successful reinvention efforts in five countries, to discover which strategies and tools have been most effective. We have authored two books-one on strategies and the other on tools-that will be published in 1997.

The most important lesson we have learned can be summed up in two words: Be strategic.

To change a huge, complex system in fundamental ways, you need enormous leverage. You get this leverage by using strategies that change the most powerful dynamics that shape public organizations: their purposes, incentives, accountabilities, power structures and cultures. The goal is to create a system in which every organization and every employee wants to improve performance. Being strategic is like using judo: You need to know where a little force will produce big effects.

Some places have figured out how to do it. These include U.S. cities such as Phoenix, Sunnyvale, Indianapolis, and Hampton. At the federal level, organizations such as the Air Combat Command and regions of the U.S. Forest Service have achieved success. National governments in the United Kingdom, New Zealand and Australia have transformed themselves, as have other units such as the school districts in East Harlem, New York, and Edmonton, Alberta.

But it's still rare. Most leaders who try to reinvent are not strategic. To some degree this is true of the Clinton Administration's efforts. There has been a lot of progress-there are many islands of innovation-but they still operate in a sea of bureaucracy. The administration hasn't yet found the levers that will force the entire system to change in fundamental ways.

Getting Leverage for Change

The first thing you need to understand about leverage is that you can apply it at different levels, which have different power to force change:

The system within which the organization functions.
The administrative systems that control the organization.
The organization where you work.
The work processes that determine how work is done.
The people who do the work.

If you change a "system" (the federal system, the welfare system, the education system), you can force change in every organization within it. Systems control their organizations through their administrative systems-budgeting, personnel, procurement, accounting, auditing and the like. Hence changing these administrative systems also creates tremendous leverage.

The organization where you work is constrained by the system's rules and incentives, as well as its administrative systems. You can change a great deal within an organization, particularly if you can carve out some flexibility from the administrative systems. But obviously you have little leverage to force change in other organizations within the system.

Changing work processes is important, but it won't force change anywhere else-in fact, it is hard to change work processes without changing the organizational structure and administrative systems of an institution.

Finally, changing your people offers the least amount of leverage. Bureaucratic systems are designed to work in the way they do, regardless of who fills the job. You need to change the culture of those people, but this is a long, slow process that rarely leverages change back up through the system.

The second thing you need to understand about leverage is that there are some basic building blocks of all public organizations that must be changed to shift them from a bureaucratic to a more entrepreneurial model. In every city, county, state, or country we have examined, there are five basic strategies that have power. We have given them all names that begin with the letter C, and we describe them as the "five C's."

The Core Strategy. Creating clarity of purpose.
The Consequences Strategy. Creating consequences for performance.
The Customer Strategy. Making organizations accountable to their customers.
The Control Strategy. Pushing control down from the top and out from the center.
The Culture Strategy. Changing employees' habits, hearts and minds.

To be strategic in reinventing a public organization you must get leverage as high in the system as possible and you must change as many of the fundamental building blocks (the C's) as possible. Creating a clear purpose and decentralizing power are major changes, for example-but without consequences for performance they are rarely enough. The weakest approach is to bring in a person with a different, albeit very clear, notion of the organization's purpose-probably the most common change "strategy."

If these five C's represent the basic levers for reinvention, how does each of them work?

The Core Strategy

The core strategy focuses on steering, not rowing-making policy and setting direction rather than producing services. This is typically a role for elected officials and the top civil servants who report to them. It involves three basic approaches. The first is stripping away what does not contribute to the purpose of public organizations-by abandoning it, devolving it, selling it, or leasing it. The issue is not privatization; it is clearing the decks for action. By stripping away multiple and conflicting missions, you give managers the clarity of purpose they need to manage effectively.

A second approach is uncoupling steering from rowing and compliance from service functions. Separating these roles into distinct organizational units with separate missions can enhance the quality and effectiveness of both steering and rowing. The British and New Zealanders have done this systematically, at both the national and local levels. It has helped these two countries achieve enormous improvements in the efficiency and effectiveness of their programs and agencies.

A third core approach is to clarify your aim by creating new steering mechanisms. In the United States, steering functions tend to be concentrated in elective bodies. But elected bodies like the Congress, state legislatures, and city councils have great difficulty thinking and acting strategically. There are, however, ways to get around this. The New Zealand government has adopted long-term outcome goals, which it then translates into medium- and short-term outcome goals, which it then translates into output targets for agencies. Oregon has created a highly visible body representative of stakeholder groups in the community, called the Oregon Progress Board. It has set long-term goals, called the Oregon Benchmarks, and it measures progress and reports to the governor, legislature, and community.

The Consequences Strategy

Creating consequences for performance is probably the most powerful lever in the reinvention tool kit. There are three approaches to working this lever. When appropriate, the greatest leverage can be achieved by using enterprise management: putting a public enterprise in a competitive market, making it dependent on its customers for its revenue, and letting it sink or swim based on how well it serves those customers. There is nothing like competition to force rapid change. Agencies that serve the public can be turned into corporations or enterprises funds, but agencies that serve other agencies-maintenance shops, print shops, data processing offices, and the like-can also be turned into enterprises. This approach is only appropriate for services that should be paid for directly by their customers.

A second approach is called managed competition. If you can't put the organization in a market you can often create competition through competitive contracting. For example, Indianapolis has put more than 27 of its services out to bid, saving more than $100 million over seven years. The U.K. has used this approach-what it calls "market testing"-nationwide. Ironically, when Indianapolis put the operation of its airports out for bid, the winner was the British Airports Authority, a British agency privatized by Margaret Thatcher.

The third approach is performance management. If you can't use competition, you can measure results and create incentives or rewards for those who achieve them. You can use tools such as performance contracts, performance awards, performance pay, performance-based budgets, and gainsharing to create incentives for high performance. Sunnyvale, California has increased its productivity 6 percent a year using performance management.

The Customer Strategy

One of the best ways to change a public organization is to make it accountable to its customers.

In most public organizations, accountability flows up the chain of command. If the steering organization sets goals in terms of its customers, however, it can be held accountable for achieving goals that are important to the customer.

The most powerful way to do this is by creating customer choice. If customers can choose the service providers they prefer-the flow of money follows their choices-then the organizations that serve them must be accountable for satisfying their needs.

The second approach is quality assurance. You can set customer service standards and require public organizations to meet them or offer their customers some form of redress.

The British pioneered this approach with their Citizen's Charter. British Rail's Passenger Charter, for example, offers passengers delayed for more than one hour a voucher worth 20 percent or more of the ticket price. If commuter rail line does not meet its punctuality or reliability targets, passengers get a 5 percent to 10 percent discount on their next season ticket.

To use the customer strategy, you need to listen to the customer, using surveys, focus groups, interviews, rating systems, complaint tracking systems, and the like. Although essential, this is not in itself enough to force change. You may know what the customer wants, but your organization may not be willing to go through the pain of the changes required to deliver it.

The Control Strategy

The control strategy pushes significant decision-making power down through the hierarchy and at times out to the community. It shifts the form of control from detailed rules and hierarchical commands to shared missions and systems that create accountability for performance.

There are three approaches to this strategy. Organizational empowerment moves control down to organizations by loosening the grip of the central administrative structures, such as budget, personnel and procurement systems. Organizations then use employee empowerment to push decision-making authority down to those with front-line knowledge. Finally, some reinventers use a third approach, called community empowerment. They shift control from public organizations to the community, empowering community members and organizations to solve their own problems and take responsibility for running their own institutions.

The Culture Strategy

This strategy is the weakest of the five C's. However, it is a lever that must be worked if you are to sustain a reinvented public organization. The other four C's will drive changes in the culture-but they will not always create exactly the culture reinventors want. At some point in the change process, all successful reinventors discover that they must consciously work to change their employees' habits, hearts, and minds.

The approach that creates the most leverage is to change what people do. If you create new experiences and new behavior, you will get new thinking. Available tools include interactive strategic planning, job rotation, internships and externships, cross-walking and cross-talking (e.g., interdepartmental task forces), and contests.

Dealing with people's emotions has leverage because emotions are far more powerful than ideas. You can do this by celebrating successes and honoring failures; creating new stories, language, and symbols; establishing new rituals; building a sense of team among the people in your organization; and investing in your employees and their physical work space.

The final approach to working the culture lever is what we call winning minds. Some leaders develop new mental models by involving their employees in the creation of mission statements, in visioning processes, and in articulating their beliefs, values, and assumptions. Others use systems models to create common understanding of the way things work and how changes will be effective.

You will face many barriers as you use these strategic levers: elected officials who play politics when leadership is needed; unions that see their role not as asserting employee's interests and principles, but as maximizing their membership; resources that are stuck in narrow line items; personnel rules that eliminate the flexibility you need to make changes; and, perhaps most of all, the complex array of stakeholders in your existing system.

There are ways around, over, under and through these various barriers to better serve citizens' needs. But make no mistake: Working the levers to reinvent your government is not easy. That's why they call it "work."

David Osborne, co-author of Reinventing Government and author of Laboratories of Democracy, is managing partner of the Reinventing Government Network, a consulting firm, and co-chairman of the Alliance for Redesigning Government, a nonprofit learning network. His next book, Banishing Bureaucracy: The Five Strategies For Reinventing Government, will be published in February 1997 by Addison-Wesley. This article was condensed from a speech Osborne delivered to a National Performance Review/Government Executive conference on "The Reinvention Revolution."

]]>

Government Executive - Authors - David Osborne

Weeding the Federal Garden

Focus on Results

Answer to Customers

Weeding the Federal Garden

Focus on Results

Answer to Customers

Paying For Results

The Culture Chasm

The Reinventor's Fieldbook: Tools for Transforming Your Government

Customer Quality Assurance: Making Organizations Accountable for Service Quality

USING SERVICE STANDARDS TO MAKE CUSTOMERS POWERFUL

The Key to Success: Making Customer Service Consequential

Customer Quality Assurance in Compliance Organizations

QUALITY ASSURANCE: OTHER LESSONS LEARNED

QUESTIONS PEOPLE ASK ABOUT CUSTOMER QUALITY ASSURANCE

The Reinventor's Toolbox: An Alphabetical Index of Approaches, Tools, and Competences

The Reinventor's Toolbox: An Alphabetical Index of Approaches, Tools, and Competences / xi

Acknowledgments / xiii

Introduction / 1

Part I: The Core Strategy: Creating Clarity of Purpose/11

Chapter 1:Improving Your Aim: Using Strategic Management to Create Clarity of Direction / 13Visioning / 26 Outcome Goals / 30 Steering Organizations / 35 Strategy Development / 39 Mission Statements / 43 Performance Budgets / 43 Long-Term Budget Forecasting / 54 Strategic Evaluation / 56

Chapter 2: Clearing the Decks: Eliminating Functions That No Longer Serve Core Purposes / 61Program Reviews / 78 Periodic Options Reviews / 87 Asset Sales / 93 Quasi-Privatization Methods / 102

Chapter 3:Uncoupling: Creating Clarity of Role by Separating Steering and Rowing / 105 Flexible Performance Frameworks / 124

Part II: The Consequences Strategy: Introducing Consequences for Performance / 149

Chapter 4:Enterprise Management: Using Markets to Create Consequences / 153 Corporatization / 164 Enterprise Funds / 169 Internal Enterprise Management / 174

Chapter 5: Managed Competition: Using Competitive Contracts and Benchmarks to Create Consequences / 183 Competitive Bidding / 188 Activity-Based Costing: A New Competence / 208 Competitive Benchmarking / 210

Chapter 6:Performance Management: Using Rewards to Create Consequences / 215 Performance Awards / 231 Psychic Pay / 232 Performance Bonuses / 232 Gainsharing / 237 Shared Savings / 241 Performance Contracts and Agreements / 243

Chapter 7:Performance Measurement: The Critical Competence / 247

Part III: The Customer Strategy: Putting the Customer in the Driver's/ 273

Chapter 8:Competitive Customer Choice: Making Customers Powerful Through Choice and Competition / 279 Competitive Public Choice Systems / 303 Vouchers and Reimbursement Systems / 308 Customer Information Systems / 311 Brokers / 320

Chapter 9: Custommer Quality Assurance: Making Organizations Accountable for Service Quality / 323 Service Standards / 346 Quality Guarantees / 359 Redress / 362 Complaint Systems / 368 Customer Councils and Boards / 377 Customer Service Agreements / 380 Customer Voice: A Critical Competence / 382

Part IV: The Contol Stradegy: Shifting control Away From the Top and Center. /389

Chapter 10:Organizational Empowerment: Giving Managers the Power to Manage / 393 Reforming Administrative Systems / 404 Site-Based Management / 427 Waiver Policies / 430 Opting Out or Chartering / 434 Reinvention Laboratories / 444 Mass Organizational Deregulation / 450

Chapter 11: Employee Empowerment: Giving Frontline Employees the Power to Improve Results / 453 Delayering Management / 462 Breaking Up Functional Silos / 463 Labor-Management Partnerships / 466 Work Teams / 478 Employee Suggestion Programs / 487

Chapter 12:Community Empowerment: Giving Communities the Power to Solve Their Own Problems / 489 Empowerment Agreements / 514 Community Governance Bodies / 518 Collaborative Planning / 520 Community-Based Funding / 527

Part V: The Culture Strategy: Developing an Entrepreneurial Culture/531

Appendix: General Resources / 611

Notes / 615

About the Authors / 665

Index / 667

Higher Standards

Winning Compliance

Lessons From Abroad

Reinventing Your Government

Customer Quality Assurance:
Making Organizations Accountable
for Service Quality

Chapter 1:Improving Your Aim: Using Strategic Management to Create Clarity of Direction / 13

Visioning / 26
Outcome Goals / 30
Steering Organizations / 35
Strategy Development / 39
Mission Statements / 43
Performance Budgets / 43
Long-Term Budget Forecasting / 54
Strategic Evaluation / 56

Chapter 2: Clearing the Decks: Eliminating Functions That No Longer Serve Core Purposes / 61

Program Reviews / 78
Periodic Options Reviews / 87
Asset Sales / 93
Quasi-Privatization Methods / 102

Chapter 3:Uncoupling: Creating Clarity of Role by Separating Steering and Rowing / 105

Flexible Performance Frameworks / 124

Part II: The Consequences Strategy: Introducing Consequences for Performance
/ 149

Chapter 4:Enterprise Management: Using Markets to Create Consequences / 153

Corporatization / 164
Enterprise Funds / 169
Internal Enterprise Management / 174

Chapter 5: Managed Competition: Using Competitive Contracts and Benchmarks to Create Consequences / 183

Competitive Bidding / 188
Activity-Based Costing: A New Competence / 208
Competitive Benchmarking / 210

Chapter 6:Performance Management: Using Rewards to Create Consequences / 215

Performance Awards / 231
Psychic Pay / 232
Performance Bonuses / 232
Gainsharing / 237
Shared Savings / 241
Performance Contracts and Agreements / 243

Chapter 8:Competitive Customer Choice: Making Customers Powerful Through Choice and Competition / 279

Competitive Public Choice Systems / 303
Vouchers and Reimbursement Systems / 308
Customer Information Systems / 311
Brokers / 320

Chapter 9: Custommer Quality Assurance: Making Organizations Accountable for Service Quality / 323

Service Standards / 346
Quality Guarantees / 359
Redress / 362
Complaint Systems / 368
Customer Councils and Boards / 377
Customer Service Agreements / 380
Customer Voice: A Critical Competence / 382

Chapter 10:Organizational Empowerment: Giving Managers the Power to Manage / 393

Reforming Administrative Systems / 404
Site-Based Management / 427
Waiver Policies / 430
Opting Out or Chartering / 434
Reinvention Laboratories / 444
Mass Organizational Deregulation / 450

Chapter 11: Employee Empowerment: Giving Frontline Employees the Power to Improve Results / 453

Delayering Management / 462
Breaking Up Functional Silos / 463
Labor-Management Partnerships / 466
Work Teams / 478
Employee Suggestion Programs / 487

Chapter 12:Community Empowerment: Giving Communities the Power to Solve Their Own Problems / 489

Empowerment Agreements / 514
Community Governance Bodies / 518
Collaborative Planning / 520
Community-Based Funding / 527