Memo to the President

The top management challenges facing government's new CEO and what he ought to do about them.

As George W. Bush takes office primed with national policy plans, he may find he lacks the management machinery and staff to enact his agenda. Lacking a clear electoral mandate and facing a nearly evenly divided Congress, the government's chief executive officer also confronts an executive branch that is increasingly unsuited for the 21st century. He'll find departments uncertain of their core missions and riven by conflicting priorities. This confusion will hamper presidential efforts to set strategy and measure progress toward achieving politically meaningful results. The federal workforce is pockmarked with shortages in high-skill, high-demand professions. Thus the President's programs may go begging for the expertise and technical know-how to put them into action.

These problems are amenable to solution if Bush and his staff quickly set and communicate their goals and if they include good management high on the list. The transition from campaign to governance must be swift and sure. Policies must be transformed into a management agenda and then into programs that deliver results. "The first thing they need to do is make clear statements about their priorities," says Constance Berry Newman, Office of Personnel Management director under the administration of the senior George Bush. "A great deal of confusion takes place early on in an administration when the civil service is trying to respond to what a leader wants and they don't understand it because it's all fuzzy language from the campaign."

Newman says incoming political appointees should be able to say, "As Secretary of this agency, these are the six things I want to do and be measured on." The clarity of Ronald Reagan's first term as President offers a model, says Allan Burman, who headed the Office of Management and Budget's Office of Federal Procurement Policy (OFPP) during the senior Bush's administration and who writes a column for Government Executive. "Reagan had a vision of what he wanted: Restore the Defense Department, cut back the federal government and reduce taxes. He had a message anybody could come back with," Burman says. "It makes it a heck of a lot easier [for agency managers] to make decisions without guessing or treating everything as a new situation."

But policy clarity soon must give way to management, lest the new administration become lost in a universe of endless policy-making and little delivery, warns Council for Excellence in Government President and CEO Patricia McGinnis. "There has not been nearly enough emphasis on setting priorities and taking a few important things and getting them across the finish line," she says. McGinnis, who served as OMB deputy associate director in the Carter administration and was on the Senate Budget Committee staff, points to Federal Emergency Management Agency Administrator James Lee Witt as a political appointee who chose a set of goals, won support for them and managed to them. "[He] took a management approach and anchored what [he] did in results for the people [he] served. He worked with the career staff and they came up with a plan and they owned it."

The success of Witt and others like him demonstrates that the most prized candidates for the Cabinet and political appointments aren't partisans, but people experienced in running large enterprises. Witt had been director of the Arkansas Office of Emergency Services before taking over FEMA. "To run a program, increasingly you do not need a great policy person, says John Koskinen, who served as deputy director for management at OMB during the Clinton administration. "To run programs is a management issue. It isn't a Democratic or a Republican thing to run government." He recommends that all deputy secretaries of departments and agencies be experienced managers of large organizations and be prepared to serve as chief operating officers of their agencies. "Not all the first set [of deputy secretaries] under the Clinton administration had ever even seen a chief operating officer, [but] we wanted people who would be the focal point for management and management reform in the agencies," Koskinen recalls. "Deputy secretaries have to be people who understand management," he says. "The tendency has been that they are people who are good at policy, so management devolves down into the hierarchy. But if management is not on the agenda of the Secretary or the deputy secretary, then you've already sent the message that it is a secondary consideration.

"If I had to ask the new administration to do one thing to improve management it would be to continue the President's Management Council-the regular meeting of all the deputy secretaries across agencies," Koskinen says. The Clinton administration used the council to signal the importance of management, set a governmentwide management agenda and to kick off reforms, according to Koskinen. Created by a Clinton memorandum, the council would have to be re-established by the new President. Organization as Impediment But even with the world's best managers, the new administration might not be able to wring results from a government better organized for the 19th than the 21st century. Government's current structure is choking off the kind of performance needed to win back Americans' trust, says Paul Light, former staff member of the National Commission on the Public Service and the Senate Governmental Affairs Committee. He'd like to see the President lead an effort to identify government's core competencies. "I wouldn't spend a minute on [the 1993 Government Performance and Results Act] or on implementing any of the other statutes that have been under-implemented over the last 20 years," says Light, now director of governmental studies at the Brookings Institution and a contributing editor to Government Executive. "I would take a look at these big structural issues. Everybody says it's a big waste of time because the President's never going to get what he wants . . . [but] we are at the point now when how government is organized is a major impediment to management reform."

David Walker, head of the General Accounting Office, says now is the time for the President to lead the country in examining "what government should do and how it should do it better. Most departments and agencies were created decades ago based on needs, resources available and demographic trends of that time," Walker adds. "There have been significant changes since then and there are going to be even more. We need to take advantage now-when we're not having deficits but with a major fiscal problem looming because of entitlements-and take a look at what we're doing."

"Maybe the President should push to get reorganization authority," suggests Light. The 1949 Reorganization Act enabled the President to create Cabinet-level departments as well as giving him general reorganization powers. Congress rescinded part of this authority in 1964, when it amended the act to prevent a President from creating or abolishing departments without its approval. The law fell into disuse after further amendments in 1983. Last year, legislators tried again to address government's structural problems with the Government for the 21st Century Act (S 2306). Several members of the Senate Governmental Affairs Committee, led by chairman Sen. Fred Thompson, R-Tenn., and Sen. Joseph Lieberman, D-Conn., introduced the bill, which would have created a commission to report to the President and Congress by Dec. 1, 2002, on ways to restructure agencies and programs.

Virginia Thomas, a senior fellow in government studies at the Heritage Foundation, calls for an even deeper review of how government is organized. "There needs to be a presidential initiative that takes stock of government as a whole [just as] Vice President Al Gore's National Performance Review started out doing," Thomas says. "I was hoping a Republican candidate for President would launch a discussion of the role of government. But changing the debate in Washington to [focus on] performance is a way of doing the same thing."

Bully Performance Pulpit

Thomas favors the Government Performance and Results Act (GPRA)-with its requirements for strategic planning and performance measurement and reporting-as the perfect vehicle for reorienting the debate toward performance, re-examining government's role and enacting the new President's agenda. While she acknowledges that the law has not developed much traction so far, Thomas contends that it offers one of the only politically viable means for halting the unrestrained and unplanned growth of government.

"We watch in horror as the Congress and the executive branch create new programs and spend new money without regard for the fact that there are existing programs and without attention to curtailing them or asking whether they are working," Thomas says. She says Republicans learned from their failed efforts to eliminate agencies in 1995 that they needed the compelling evidence about performance that GPRA can provide. But according to Thomas, only presidential backing can boost the law over opposition by those who control government's purse strings. "GPRA has suffered from the fact that congressional appropriators have been extremely resistant to it," she says. "It has been led by Congress, agency staff and OMB, not by the President. If led by the President it could have fewer and more meaningful goals and measures and a real connection to the budget." What's more, Thomas argues, using the Results Act, "the President can create a performance plan that [brings] the Cabinet together and lays out an achievable agenda. If [the President's campaign agenda includes education], then the focus could be how to close the achievement gap between advantaged and disadvantaged children. If it's the military, then the focus can be readiness." Steven Kelman, former Clinton administration OFPP administrator, suggests the President focus on convincing his agency heads to use the Results Act's requirements. "I would use the bully pulpit to make the case that GPRA is a way for agency heads to improve performance and is an information tool," Kelman says. "I would have a senior official like the OMB director meeting one-on-one with secretaries and deputy secretaries at least once every six months to talk about their performance and to make the case to them that performance measurement most importantly is a tool for senior executives."

Frank Hodsoll, former OMB management chief under Bush senior, also advises further efforts to bring around congressional appropriators. "I wouldn't give up so easily on the appropriations side. When I was at OMB, [the appropriations committees] were all run by Democrats, but there were people in the process who would be willing to push things," he says. "You need to court people; it's governance politics. Gore and [House Majority Leader] Dick Armey, R-Texas, are hardly soul mates, but they worked together on government management issues," Hodsoll points out. "I talked to Armey about it, and he actually gave some credit to Gore. If they can work together, anybody can."

Drilling to the Core

Koskinen, now District of Columbia city administrator, notes another advantage of using GPRA to steer government. "It is a statutory requirement. It won't go away," he says. Furthermore, it addresses a key preoccupation of government-resource allocation-at a fundamental level. "Most of the arguments in Washington are about resources at a high level [for problems such as] how we educate children," Koskinen says. "The real question is, what difference does the money make and how would you know? The key thing about performance measurement is that when you miss a goal it doesn't mean you stop the program; it may mean you need more resources. It may also drive you to say, 'Am I doing the work in the best way? Maybe I should rethink how I'm doing it and whether this is the right place to be putting the dollars.' "

G. Edward DeSeve, who became OMB management director after Koskinen left in 1997, suggests that the Results Act will have meaning and be used in agencies only when program managers are required to demonstrate what they are achieving for the money they're spending. "They've never been asked to justify their existence in terms of getting program performance," says DeSeve, now managing partner of American Government Management, a Washington consulting firm. "No one has said, "Here are the performance metrics and you'll be paid based on them.' "

Mortimer Downey, Transportation Department deputy secretary, adds that measuring managers against agency performance goals helps broaden them and improves the way agencies allocate resources. "It's important that career managers see the agency goals as the areas where you measure success and not see themselves strictly as the manager of a particular service or function," Downey says. "We did something over the last few years that people thought was excessively risky: We're doing the budget in the sunshine with all senior management together," he continues. "We have a management retreat in which all those with new ideas have to expose them. It validates and builds consensus about the important things we have to do. People will admit that maybe there are more important things than what they want to do and that when they get a budget cut or don't get what they asked it's not a personal reflection on them but of the importance of some other element of the portfolio."

Light, on the other hand, believes that as long as performance management and GPRA are tied to budget formulation, especially in Congress, they will never be effective. "GPRA now is a useless process," Light says. "It never truly will be linked to budget decisions because they are made for political reasons that performance data cannot trump." GAO's Walker argues that whether or not GPRA is linked to resource allocation it can serve the President as a sales tool and a defense against negative coverage in the media. "Government needs to demonstrate it is making productive use of taxpayer dollars and generating results people can relate to and appreciate. GPRA provides the means to do that," he says. "Annual accountability reports provide a more balanced picture of what agencies have been able to accomplish. Without them, periodic reports of waste and mismanagement are going to take on more importance." Gene Dodaro, principal assistant comptroller general at GAO, suggests that GPRA could even provide the base from which the White House and Congress could drill down to agencies' core competencies. "Past efforts to reexamine what government does have been ineffective because there's been a lack of information," Dodaro says. "GPRA could be refocused on examining the fundamental goals of agencies."

How vs. What

Despite his support for determining what the principal functions of government are, Light warns against efforts such as the 1998 Federal Activities Inventory Reform Act, which requires agencies to identify jobs currently being performed by federal workers that could be contracted out to the private sector. He says the law put the cart before the horse by requiring agencies to identify jobs for contracting before the agencies have identified their core functions. "The question is whether they are needed for the core mission," Light says. "If the answer is no, contract them out if it is cost effective." Newman also urges caution in contracting. "Outsourcing for outsourcing's sake is not the answer," she says. "You can't just pronounce we're going to be better off outsourcing." Downey is troubled by the apparent acceptance of the idea that most things are done better by the private sector. It isn't necessarily so, he argues, especially in the realm of safety regulation. "If we privatize everything that has to do with safety, I don't think we'd have the dedication of the government workforce. The private sector profit orientation might say, 'Yeah, kill a few people,'" he says. Downey underscores his concern by citing the privatization of rail service in Great Britain. "It was driven by an ideological focus on how government business was being done versus what is it that we really want to achieve," he says. "Now one entity owns the tracks and contracts out maintenance. Twenty-five companies use the tracks and no one is in charge of being safe. Every few months they have a derailment and kill people."

When Hodsoll served on Bush administration management "swat teams," one of his chief targets was the Environmental Protection Agency, where, he says, contracting had gone too far. "There was no one left in the civil service or among political appointees with any idea of what was going on," Hodsoll remembers. "Their information, including scientific information, was all what the contractor had put together." Such wholesale outsourcing not only puts the agency's management and mission at risk, but it can endanger responsible use of contractors in the future, Downey argues. "What happens when everything is contracted out and the competitors disappear and you're stuck with whoever the one vendor is?" he asks. "We want to make sure we still have somebody to contract with."

Recent Republican and Democratic administrations have relied increasingly on the private sector to perform services as well as to provide goods. Light estimates that the federal government generated work for more than 5.5 million contractor employees in 1999. Most government watchers expect this trend to continue under the new administration. But there is mounting concern that government lacks the internal bench strength to oversee the work being handed off. "You have to make sure the private sector can do the work," Newman says. "Competition is healthy, but before you compete something, you have to have the right kind of people on the inside who can manage the outsourced service." Each agency needs a core staff to weigh whether to move work to the private sector and which work to move, says Burman. That staff must "know as much as the contractor knows," says Hodsoll. McGinnis encourages open-mindedness toward public-private partnership as a means of improving government's results, but says those holding private sector partners accountable must be excellent managers. "They have to be very strategic and very well prepared to operate in a flexible, performance-oriented culture."

"The reason a lot of contract management areas have been deemed high risk is because of the human capital aspect-not having the capacity to manage contracts," says Walker, whose GAO has flayed many agencies for failing to control their contractors, and who will head a panel reviewing contracting rules this year. "Without concerted management attention and proper leadership, the contract management risk is going to increase because of the increasing movement to contract out, historical efforts to shrink the size of government and problems with succession planning and hiring."

Heroes for the Next Four Years

Indeed, Walker says that addressing government's human capital crisis had better be high on the President's management agenda. After all, America's CEO will be managing a workforce larger than that of the top three Fortune 500 corporations combined. The civil service workforce is out of shape, Walker says. It's smaller and older than ever and its skills are out of balance with today's demands. At the end of fiscal 1999, 12 percent of full-time workers were eligible to retire, but in most agencies, succession planning is weak, he adds. John Hamre, former Clinton administration deputy secretary of Defense, says staff cuts over the past eight years have left the workforce out of whack. "We tended to downsize by not bringing in new people because it was so hard to fire people," he says. "We created a talent distribution problem. We have a lot of older people and we did not bring in younger people to replace them."

Burman and Light view the imminent retirement of a large number of federal employees as both a challenge-a potential loss of significant experience and institutional memory-and an opportunity. "If we're losing a lot of folks, that may be an opportunity to bring in people with a different point of view," says Burman. Light suggests that agencies use the coming exodus to redistribute jobs from excess management layers to core functions. "Set up a recapture mechanism to make sure that [the job of] every person who leaves in the next five years is pulled out of the hierarchy and only reallocated via a deliberative process," says Light. "Recapture the jobs to refill or reallocate them to the bottom." To make government service more attractive to the young, the President will need a variety of approaches, some symbolic, others concrete. A first step, says James Colvard, deputy director of the Office of Personnel Management during the Reagan administration, is to restore civil service morale and standing so working for the government is once a gain seen as honorable. "It's politically attractive to denigrate [federal workers] when you run for office and then call on them to be heroes for the next four years," says Colvard. "But the people chosen to follow the elected officials are the most important element of democracy. Without that knowledge of taking a desired direction into action, you can't have a functioning democracy."

Government also must acknowledge the career aspirations of younger people, says Burman. "Younger people have a time horizon of five years-they have no commitment to be in government 30 years," he says. "We have to offer opportunity to get people at the mid-level of their careers to move in and to take advantage of their abilities and then they can move out. If there are critical skills we need, we may have to target pay, benefits [and] opportunities. In some areas, this may cost a lot more money." Burman acknowledges that such targeting and disparate benefits may run afoul of the current civil service system. The challenge, he says, is "coming up with a more enlightened approach-with the risks worth taking to get the workforce you need."

Once skilled people are lured into the civil service, the President ought to help agencies keep them by avoiding the temptation to further erode federal pay, Colvard says. "Presidents have ignored the [1990 Federal Employees Pay Comparability Act] and its use of the Employment Cost Index [a measure of labor costs in metropolitan areas across the country]," Colvard notes. "The idea of using the ECI was to allow public sector workers to feel they got an average of what the rest of the country got and to allow the public to feel federal workers weren't on the gravy train. Using it should be avoided only by a vote of Congress." He also advises the President to make the government, not its employees, responsible for civil service career development. "Now the initiative has to come from the individual. The theory is that the cream is going to float to the top, but a lot of other things float, too," Colvard observes. "Outgoing extroverts ought not be the only ones who get ahead."

Promising E-Government

In the end, however, government's rapid adoption of technology may do as much as improved human resources management to solve the staffing crisis. In fact, advocates of electronic government contend that it may also be the key to rationalizing government's structure, improving its results and winning back public trust. "E-government is government offering virtually all information, services transactions and interactions online as one alternative," says McGinnis. "I can't say enough about its potential for changing government, for improving the way it manages and delivers service and connects with the people it serves." Unlike government's current organization, which reflects decades of accretion of organizations as new laws were passed and programs were created, e-government is focused on citizens, businesses and other governments. Thus, e-government holds the promise of forcing government to restructure based on services to those people and entities. "We'd like people to be able to ask their questions without knowing the intricacies of how government runs and operates," Burman notes. "The purpose of e-government ought to be, to be customer-friendly, to make the burden of government as light as possible." Transportation's Downey concurs and emphasizes the workforce-altering effects of digital government. "People are going to be looking for a government they can access and deal with on their own terms," he says. "The tool for that is e-government, but it's got to be thought of as more than the technology and wires and boxes. It's having the right attitude about serving the constituency." McGinnis suggests that digitizing federal services also may address the human capital problem. "If you can figure out how to attract people with the skills to solve e-government, you've probably solved the government workforce crisis," she says.

The President should move carefully into e-government, the experts caution, lest it leave some citizens behind or raise false hopes. "Until people are clear about what they want to accomplish, until all the people in the agency are trained, until people have the proper equipment, you're raising expectations you're not going to be able to meet," Newman warns. "Just to announce we're moving to e-government doesn't mean anything." And e-government can't replace federal employees, McGinnis notes. "I do not want to advocate eliminating face-to-face communications," she says. "You have to be versatile. . . . What we're doing with e-government is focusing face-to-face communications on the people who need them." Some Americans lack the tools and skills to use e-government and others fear its privacy implications, McGinnis notes. But those who are skeptical about the effectiveness of today's government as well as about digital government still want tax dollars to be invested in it, she says. "Polls show people feel disconnected," McGinnis adds. "They don't feel they know enough about government or are involved enough by it. There is a real opportunity to get them involved in setting priorities and holding government accountable."

The 'Anonymous Caucus'

Preferring to rely on existing systems, experienced government hands don't place new management laws or rules high on the agenda for the new President. "There's always the anonymous caucus of issues: financial management, computer security, etc.-the things that need to be fixed, but there's no glory in fixing," notes Thomas, a former Republican congressional staffer. But dealing with them requires going "department by department and finding the top two or three a Secretary could focus on," she says. For that, the President and his staff can rely on inspectors general and GAO's list of programs at high risk of waste, fraud, abuse and mismanagement.

Downey notes that while some of the management reform laws are potentially useful, "American business distinguishes between management and leadership and expects CEOs to be leaders. Defining the mission and deciding how to deal with it is leadership. You can't get there solely through management reform. If you are not doing the right thing, all the efforts at management reform in the world won't get you there. If you're doing the wrong thing well, you're not getting the outcome you seek. There is a lot to be accomplished through the Chief Financial Officers Act, GPRA, the Clinger-Cohen IT management reform act, etc. They're all tools, but you also have to decide what you want to be doing."

Thompson came to much the same conclusion in October, when his Governmental Affairs Committee reported on management challenges facing the new administration. "In particular, the new President needs to lead by example, embracing results-oriented government by word and deed," according to the report. "If the President does this, OMB and the agencies are sure to follow suit. In all likelihood, Congress also will show much greater interest."

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