By Tom Shoop

June 1, 1994

In his State of the Union address last January. President Clinton had a rare opportunity to put his administration's crusade to reinvent government on the national agenda.

Here's how he chose to describe it:

"We've cut staff, cut perks, even trimmed the fleet of federal limousines. After years of leaders whose rhetoric attacked bureaucracy but whose actions expanded it, we will actually reduce it by 252,000 people over the next five years. By the time we have finished, the federal bureaucracy will be at its lowest point in 30 years."

That was it. For popular consumption, the National Performance Review was reduced to three sentences and one simple message: The Republican bureaucrat-bashers of the '80s didn't follow through on their rhetoric; we will.

Ever since the performance review was created last year, NPR officials have complained that their strategy to reengineer, restructure and deregulate government has been portrayed as merely a means to slash federal jobs. The government's systems, not its people, they keep saying, are the cause of its current difficulties.

But Clinton was touting cuts of at least 100,000 jobs while still on the campaign trail, long before he or his staff had studied the federal bureaucracy to see just how many jobs could be reengineered out of it. And nobody forced Vice President Gore to use the NPR report to trumpet the fact that the Administration had upped the ante another 152,000 jobs, for a total reduction in federal employment of 12 percent.

Few people argue that government should not downsize. The question is how to go about it. According to the NPR report, job cuts follow from reinventing government. But while agencies have just begun to reduce red tape, eliminate regulations and redesign work processes, the downsizing has begun in earnest. The Administration has said it will cut 118,000 jobs by the end of fiscal 1995, a decrease of 5 percent from the 1993 base.

Early this year, Congress voted to accept the Administration's proposal to slash employment -- and upped the total to 272,000 jobs -- in a law authorizing agencies to offer $25,000 buyouts to employees who agree to retire or resign. There was little debate on how to cut so deeply.

"Very frankly, folks, what we did was, we took a number," said Rep. Steny Hoyer, D-Md. -- who voted for the buyouts -- on the House floor in April. "We did not make an analogy between the programs that we wanted accomplished and the level of personnel that would be required to accomplish those objectives. No. We took a number. It sounded politically good, it gets us below 1.9 million civilian employees. And it was not targeted, so it was an easy vote."

"If-Then Scenario"

Across government, agencies are not only trying to "work better and cost less" (to quote the mantra of the NPR), they're trying to do more with fewer people:

The Education Department is starting a major new direct student loan program this year with no net increase in the department's staff. The 600 new positions needed for the program will be offset with cuts elsewhere. "They really feel they have enough wasted people in other programs to pull them in?" said an incredulous Sen. Sam Nunn, D-Ga., in a New York Times interview earlier this year. "They're woefully short staffed now."

In April, while Congress was considering a crime bill that would put billions of dollars into local law-enforcement activities, FBI director Louis Freeh and Drug Enforcement Administration chief Thomas Constantine went before a Senate Appropriations panel to say that they plan to cut hundreds of jobs next year. "Considering what we are doing in the crime bill, our budget for federal law enforcement doesn't make any sense," said Sen. Phil Gramm, R-Texas. "We are eliminating positions at a time when the country is screaming about violent crime."

The demand for services at national parks is increasing by 3 percent to 5 percent a year, as is the number of students in Bureau of Indian Affairs schools. But these and other Interior Department agencies have to shed a total of 3,300 jobs by 1995. Nearly a third of the Interior employees who applied for $ 25,000 buyouts earlier this year came from BIA or the Park Service.

These are just a few examples of how agencies must simultaneously manage expanding roles and declining resources. The only way out of the bind, Administration officials argue, is better use of technology and, more importantly, relief from stiffing regulations and other legislative constraints.

NPR staffers call this the "if-then scenario." The government, they argue, is burdened with roughly 700,000 "central control" or "overhead" employees -- managers, supervisors and people who work in personnel, budget, accounting, procurement and headquarters offices. If agencies carefully determine who in this group doesn't contribute to fulfilling the agency's mission, and if Congress passes procurement reform legislation, simplifies the personnel system and gives agencies more flexibility in budgeting, then the government should be able to make deep cuts in "overhead" employment, the reinventors argue.

It's critical that agencies "cut to a plan, not to a number" dictated from the top, according to a draft of an as-yet-unreleased NPR report on streamlining government. "A central office, such as the Office of Management and Budget, has little chance of meaningfully determining where cuts should be made so the right culture changes occur and the wrong service cuts do not occur," says the draft report.

That's the theory. In practice, agencies were ordered last year to prepare rush streamlining plans without knowing how much regulatory relief Congress would give them and without, in many cases, having had time to study how to reengineer their organizations in order to work with fewer employees.

Despite the lack of "if-then" analysis, there was plenty of top-down focus on raw numbers. This year, for example, Interior will cut 1,300 full-time equivalent (FTE) positions department-wide. By what rigorous process did they arrive at that figure? "It was given to us by OMB," says Theresa Trujeque, Interior's deputy assistant secretary for human resources.

Banking on Buyouts

To make those cuts, Interior, like most other departments, offered buyouts to many of its employees earlier this year.

The buyouts are "the best thing that could've happened around here," says Trujeque. "We had a lot of really happy people who had been waiting for the bill before deciding whether they were going to retire." More than 3,000 Interior employees signed up for buyouts in April.

Agencies say the buyouts will help them not only to avoid costly, cumbersome reductions-in-force (RIFs) but also to meet a key Clinton Administration goal: cutting the government's ratio of supervisors to employees in half, from 1:7 to 1:15. Buyouts "will be a great tool for getting us there," says Leonard Klein, head of the staffing group at the Office of Personnel Management, who helped craft the buyout legislation. "They tend to be most advantageous to the more senior grades, because those people tend to have more seniority and an annuity that will allow them to retire early."

Almost all agencies are banking on this theory, which has yet to prove itself in practice.

Last year, the Postal Service bought out 48,000 of its employees. Fewer than 14,000 of those who took the offer were managers. The results were dramatic increases in overtime and the use of temporary help, a $ 1 billion deficit in fiscal 1993 and poor-service scandals in Chicago and other cities.

The Defense Department, whose buyout program served as a model for the government-wide plan, enticed more than 30,000 of its employee to leave last year. But Ronald Sanders, chief of civilian personnel policy at DoD, said late in the year that the buyouts were unlikely to affect supervisory ratios in the department. DoD typically offers buyouts to employees at military bases slated for closure, and in those instances the department wants all personnel, both man agers and front-line employees, to leave.

On the domestic side, most agencies are trying to make sure the buyouts improve manager-to-employee ratios by targeting them at the higher grades. For example, the Federal Aviation Administration, which expects to offer about 2,500 buyouts this year, has devised a complex plan to aim them at managers and supervisors. Front-line air-traffic controllers and others in safety-sensitive jobs are ineligible for buyouts.

Other agencies have taken a cruder approach, simply limiting buyouts to employees as GS-13 or -14 and above. And others, such as the Department of Education and the General Services Administration, have placed no restrictions on buyout eligibility. NASA has actually excluded Senior Executive Service members from its buyout pool. on the theory that with recent pay increases sweetening retirement packages, SESers already have enough incentive to leave.

Even those agencies that did target their buyouts at managers often did so more for fiscal reasons than to reduce the number of supervisors. It's simple arithmetic: Agencies save more money in reduced salary expenses by letting higher-paid employees go. To break even or come out ahead on buyouts to lower-level employees, agencies must get those workers off the payroll very early in the fiscal year. "If the buyout bill had been passed last fall, [OPM] could have offered buyouts to everyone," says Klein. But because the bill was passed so far into the fiscal year, the agency restricted its offer to GS-13s and above.

Virtually no agencies have tried to use buyouts to target the NPR's "overhead" positions -- personnelists, budgeteers and the like. "Suppose we said '[Overhead employees], go to the head of the line,'" says Spence M. Armstrong, associate administrator for human resources and education at NASA. "We'd have no way of stopping the bleeding. Suppose all [of them] left. Then what are you going to do?

"It's nice to say that we need people who actually produce, and the people who just sit around and control things we can do without. But if you're interested in paychecks, personnel records and such, you can't do that. First you have to come up with ways of outsourcing, ways of consolidating and doing things electronically. It's not something that you can start from a standing stop."

Mimicking the Corporate Cut

Nevertheless, slashing middle managers and administrative overhead from a "standing stop" is exactly what the Administration has in mind. Its approach mimics the recent wave of private-sector downsizings.

According to the Bureau of Labor Statistics, 1.5 million executives, managers and administrative professionals have lost their jobs in the last five years -- twice as many as were laid off from 1981 to 1988. While middle managers make up 5 percent of the corporate workforce, they have accounted for almost 20 percent of those who have lost their jobs in recent downsizings, says Eric Greenberg, director of management studies at the American Management Association.

Much of the cutting has been indiscriminate, says Craig Dreilinger, head of the Dreiford Group, a Bethesda, Md., consulting firm that helps both businesses and government agencies in downsizing efforts. Typically, he says, companies implement across-the board reductions before process improvements have been thoroughly studied, much less implemented.

The Clinton Administration is "making a tragic mistake" in following that pattern, says Dreilinger. "They should have stayed on the course they started down, which said, 'First, we have to have reinvent government and then move on to [downsizing].'"

Greenberg says surveys of private-sector firms indicate that only about a third of companies that have downsized since 1987 have seen higher productivity, and less than half have increased their profits. Senior corporate executives, says Dreilinger, "are admitting they made a mistake to cut to the bone, and they're bringing back many of their experienced managers as consultants." Over time, he predicts, 500,000 to 700,000 of the managers laid off in the last five years will be rehired by their employers.

In trying to buy out its managers and executives, the government is encouraging its best people -- that is, those most likely to be able to get jobs elsewhere -- to leave. Dreilinger tells of meeting three executives, two from the Commerce Department and one from the Nuclear Regulatory Commission, who are planning to take buyout offers. "They are extraordinarily well respected senior managers," he says, "and two of them have highly technical skills. They are saying, 'I have no confidence in this agency,' and they are marketable elsewhere."

New "Implied Contract"

The Administration expects 60,000 to 100,000 employees to take buyouts before agencies' authority to offer them expires next March. But that would still leave more than 150,000 jobs to cut.

If agencies can't eliminate those jobs through attrition and hiring freezes, they'll have to resort to RIFs. Federal Times, a weekly newspaper for executive-branch employees, reported in April that DoD installations were planning to issue thousands of RIF notices, because only about 18,000 civilians in the department are expected to take buyouts this year. Earlier this year, even after buyout legislation passed Congress, OPM went ahead with a plan to RIF more than 500 employees, mostly in the agency's investigations office.

Federal employees "don't know what the future holds," says Dreilinger. "But they don't believe it's going to be in their best interest. They feel that the implied contract that they had with the government has been violated."

That implied contract -- stating, essentially, that as long as an employee does his or her job at or above a minimum competency level, lifelong employment is guaranteed -- has been in force in the federal bueaucracy for generations.

Now, say management experts, it must be renegotiated.

Clinton and Gore have tried to send the message that workers throughout the American economy need to adjust to a future in which job security is based on the skills they acquire, not on developing a long-term relationship with a single employer. Now they must take that message to their own employees.

Those employees are doubtless relieved that voluntary buyouts will accomplish the bulk of the first round of job cuts. But many wonder whose jobs will be the next to go, and whether Clinton and Gore will complete the reinvention effort that Administration officials themselves argued should have preceded the cutbacks.

After the current wave of downsizing is over, it's likely that, as Clinton has said, the bureaucracy will be at "its lowest point in 30 years." The question is, will it be at a low point merely of numbers, or of morale and effectiveness, too?

By Tom Shoop

June 1, 1994