Reversing Reinvention

Daniel Cooper, chief of the Veterans Benefits Administration, has switched the agency's focus from employee and customer satisfaction to productivity and efficiency.

Daniel Cooper, a retired Navy admiral who now heads the Veterans Benefits Administration, calls his predecessor, Joe Thompson, "a visionary." But it's not clear whether Cooper means Thompson was an impractical dreamer or a farsighted leader. During Thompson's tenure as the Veterans Affairs Department's undersecretary for benefits from 1997 to 2001, the VBA was a hotbed of management innovation: Thompson redesigned work processes, placed a priority on customer service and implemented a system of balanced measures to assess the performance of the agency's regional offices. Driven by productivity concerns, Cooper has abandoned or scaled back Thompson's innovations. With this change in direction, the agency has had to confront fundamental questions about its structure, its relationships with customers, and the relative merits of hierarchical vs. collaborative management.

Thompson, who had spent his entire career at the VBA, was out to fix what he regarded as fundamental flaws in the way the agency operated. In place of what he termed an "assembly line approach" to claims processing, Thompson sought to substitute a team-based structure that required employees to develop broader skills. He emphasized collaborative decision-making and employee empowerment. "I believed the system was flawed at its heart," Thompson says. "There was an over-focus on production, an under-focus on quality, an over-focus on seeing people as easily replaceable cogs in a machine."

Cooper, a 33-year veteran of the Navy, had no previous experience with the VBA when Veterans Affairs Secretary Anthony Principi appointed him in March 2001 to head a task force seeking to improve the disability claims adjudication process. Principi was determined to resolve a burgeoning backlog, which had risen to 285,000 claims by January 2001, when he took charge of the department. When the task force completed its work in October 2001, Principi appointed Cooper undersecretary for benefits. Cooper's primary mission has been to reduce the backlog.

The VBA administers programs to provide education, home loan guaranty, life insurance, vocational rehabilitation, disability compensation and pension benefits to qualified veterans. Sixty percent of the agency's 13,000 employees are assigned to the disability compensation and pension program, which manages benefit payments to veterans with disabilities connected to their military service. The process of adjudicating compensation claims is complex. VBA employees must determine whether a veteran is disabled, whether the disability is service-related and rate how severe the disability is. Traditionally, a series of claims examiners in the adjudication unit handled each claim. The work was specialized, involved repetitive tasks and included a large number of handoffs as claims passed from specialist to specialist.


Joe Thompson was determined to eliminate the assembly line approach. He had begun his career as a claims examiner at the VBA's New York Regional Office doing work he describes as "mind-numbing." After tours of duty in Washington and Philadelphia, Thompson returned to New York as regional director in 1990. He was convinced that the traditional approach to claims processing produced neither a high quality of work life for employees nor good service for veterans. A fundamental problem, Thompson believed, was the traditional separation between the services unit, responsible for all direct contact with veterans, and the adjudication unit, where claims were processed. The benefits counselors in the services unit didn't know enough about the claims process to answer veterans' questions, while the claims examiners in the adjudication unit had no direct contact with the veterans whose claims they were judging.

Thompson and his staff at the New York Regional Office convened focus groups in which veterans complained that they couldn't find out the status of their claims or talk to the people making decisions about them. "Veterans didn't understand what was going on through this process," says Thompson. "They didn't know why we made the decision, they were not kept apprised of it through the whole process and they got angry and frustrated."

Thompson envisioned an organization in which highly skilled workers performed a broad range of tasks and interacted directly with veterans. He and his colleagues at the New York Regional Office attempted to break down the wall between the services unit and the adjudication unit, combining the responsibilities of benefits counselors and claims examiners in a new position, called veterans service representative. These representatives were to manage each claim from start to finish and serve as a single point of contact for veterans about their claims. Workers would have opportunities to gain new skills and veterans would get better service.

The changes Thompson introduced at the New York Regional Office were consistent with those Vice President Al Gore was trying to introduce across government in the early 1990s as part of President Clinton's reinventing government initiative. Thompson and his staff at VBA's New York Regional Office became the first recipients of Gore's Hammer Award for reinvention excellence. Gore subsequently was instrumental in Thompson's promotion to VA undersecretary for benefits in 1997, a post from which he sought to extend the changes developed in New York across the entire agency.


Thompson's tenure was turbulent. He attempted to change multiple organizational systems and practices to accommodate the new claims adjudication process. Thompson instituted a case management system to keep veterans apprised of the status of their claims. The approach required new computer software and additional training for employees. Thompson expanded the amount and quality of training provided across VBA and developed a method for tracking employee development. He introduced a balanced scorecard method of measuring performance using a mixture of business, employee and customer satisfaction assessments. With only four years to reform long-standing practices, Thompson drove his change agenda aggressively.

Not all the changes were well received in VBA's regional offices. Faced with staff cuts and continuing performance pressures, many regional directors were concerned that the cascade of changes would slow claims processing. Employees who had counseled veterans on the telephone for most of their careers had to be trained to adjudicate claims, and employees whose focus had been on claims had to learn communication skills. Workers were pulled away from their regular duties to be trained in their new responsibilities.

VBA regional directors traditionally had a great deal of autonomy in running their offices, something Thompson was loath to change. So, instead of ordering regions to adopt his model, Thompson gave the regional directors substantial flexibility in adapting it to their circumstances. By 2001, as Thompson's term drew to a close, many offices still had not fully adopted the key innovations. Some had not even broken down the wall between service and adjudication. At the Chicago Regional Office for example, a separate phone team talked with veterans, rather than the team handling the claim. Thompson stepped down as undersecretary for benefits in September 2001, two months short of his four-year term. Secretary Principi asked for Thompson's resignation and that of his deputy, Patrick Nappi, subsequent to the discovery of an embezzlement scheme involving two employees at the Atlanta Regional Office. Neither Thompson nor Nappi were implicated in the scheme. Thompson served as special assistant to the secretary until January 2002, when he retired to become a management consultant.


One obstacle to implementing Thompson's model was continuing pressure to maintain productivity in light of an escalating backlog of disability claims. Although the backlog had been reduced to about 240,000 claims by October 2000 from a peak of more than 400,000 claims in the early 1990s, new legislation caused the backlog to spike. A 1999 decision by the Court of Veterans Appeals had lifted the requirement that VBA help with claims that were not "well grounded." But, under pressure from veterans advocacy organizations, Congress passed the 2000 Veterans Claims Assistance Act, reversing the court's decision and directing VBA to reassess 98,000 claims processed after the court's ruling. By mid-2001, the backlog was back up to more than 400,000 claims.

As head of the task force dedicated to finding ways to reduce the backlog, Cooper assigned task force members to three teams and required each team to visit one VBA regional office that was considered good, one considered poor and one in between. Early on, the task force concluded that the regional offices should revert to a more specialized approach to claims processing. "After about the first week, two people on the team came in and said, 'Look, the first thing we ought to do is have the regional offices reorganize. We've got to get into specialized teams. They are just unglued in the way they are working right now,'" Cooper says. "Everybody talked about it, pushed it back and forth. About halfway through, I said that's the only way to go." Specialization was appealing to many in the agency who felt that the range of tasks required of veterans service representatives under Thompson's approach was just too broad.

Once he took over VBA, Cooper directed regional offices to revert to a specialized approach, with six teams, each responsible for a different phase of adjudication. Though one team now handles all phone contact with veterans, Cooper's approach isn't entirely a return to past practice. New technology allows those handling phone calls also to provide updated information on claims status. Representatives rotate among the teams, allowing them to develop the full range of skills needed to process claims.

Opinion is split within the agency about whether Thompson's approach demanded too much of the representatives. Cooper acknowledges that some employees were able to master the job and that Thompson's model worked in some offices. "It wasn't necessarily the model that was bad, it was all the bells and whistles that were hung on it," Cooper says. Jack Ross, director of the Cleveland Regional Office, concurs. "We were going through something like 80 changes," he recalls. "There were so many changes that people couldn't react to them in a timely fashion."

Some who believed in what Thompson was trying to do say Cooper's return to specialization was needed to increase short-term efficiency. In addition to adopting a more specialized approach, Cooper created a Tiger Team-a specialized unit of experienced employees-to speed the processing of claims that had been pending for more than a year and those of veterans over age 70.

He also set up nine resource centers to collect and rapidly process claims that included all necessary evidence. Several regional directors say their employees were relieved to have some of the responsibility for claims development and rating lifted by the return to specialization.

"People were reaching the breaking point trying to do all facets of the job," says Ross. "It was just too complex. They were happier doing a segment of the job." Donald Stout, director of the Oakland Regional Office, says the generalist approach simply was not conducive to the efficient processing of claims.


Even more important to Cooper than his new model for processing claims is bringing discipline and accountability to the organization. "If there is one word that I will hang my hat on-and we mention frequently in the [task force] report and I mention it ad nauseam in any talk I give-it's accountability," Cooper says. "I honestly felt that there was not sufficient accountability everywhere. I was convinced that when headquarters said 'everybody do this,' 57 different offices set up the polling machine and they all voted."

Veterans organizations support Cooper's push for accountability. "The regional office directors were very autonomous in the past," says John McNeil, deputy director of the National Veterans Service at the Veterans of Foreign Wars. Headquarters officials "took away that autonomy, and they have iron fist control now. When they make a decision, all the regional offices fall in line. That is really critical and that has worked." Cooper has imposed the same structure on all regional offices. He contends that consistency is the only way to ensure that veterans are treated the same no matter where they live. "When I have a veteran who goes into an East Coast regional office and gets . . . 30 percent disability, and he goes to California and he gets 100 percent, there's something wrong," says Cooper. "So the whole goal is to get them consistent across the board."

Cooper also has moved to hold regional directors accountable for the performance of their offices. "Under [Thompson] and really even before [him], there really was no ramification for poor performance," says Michael Walcoff, associate deputy undersecretary for operations. "If you were a director and you ran a poor station, for the most part nothing ever happened to you." Under Cooper, the field operations office has issued performance standards for the number of claims processed, timeliness and the accuracy of claims processing. Regional office directors who fail to meet the targets get a call, often from Cooper himself. Some directors prefer the new approach to Thompson's balanced scorecard, which was used for the same purpose but required interpretation. "Cooper has given me a clear set of goals. They don't change from month to month," says Ross of the Cleveland Regional Office. "To figure your balanced scorecard you had to do two or three computations. You couldn't just look at data and say, 'OK, this is where I am.' Cooper has given us five to six areas to look at. On a day-to-day basis, I know right where I am in terms of what goals are set for me. That to me is what accountability means, when he tells me, 'Look, you've got to hit those marks.'"

Lost in the equation, however, are measures of employee satisfaction and customer satisfaction that featured prominently in Thompson's scorecard. "I never took a satisfaction muster on my ship, so I never saw one of these before," Cooper says. Customer and employee surveys still are performed, but directors are not held accountable for the outcomes. These measures have been "de-emphasized," according to Walcoff. The current emphasis is "let's get the work out the door," says Oakland Regional Director Stout.

The almost exclusive emphasis on productivity concerns Thompson, who contends that VBA sacrificed quality and service in its past attempts to hit the numbers. Thompson says his objective was to "put a human face on the process" by providing the veteran with a single point of contact and periodic status reports.

But Robert Epley, associate deputy undersecretary for policy and program management, contends that service still is emphasized. He says the most important element of service is fast, efficient handling of claims, something that comes only with increased productivity. "Part of customer service is timely service," Epley says.


Although people disagree over whether Thompson's claims processing model was flawed, the consensus is that it was doomed by circumstances. Under enormous performance pressure created by the increased backlog, the regional offices simply couldn't take the time to adequately train employees and to ensure each claim received case management treatment.

Although his model didn't survive in its original form, Thompson and his ideas still influence VBA. For example, under a program initiated by Thompson, employees must be certified as proficient in a range of tasks in order to get promoted.

Thompson's focus on data integrity also has had a significant effect. "Joe used to say, 'Give the VBA a number, and they'll hit the number,' and that was because they would find ways to cheat," Walcoff says. "Joe made it very clear when he first came on that if there was one thing he was going to accomplish here, he was going to bring some integrity to the organization. And we worked hard at it, and we brought stations in and brought directors in and we put numbers in front of them and said, 'How do you explain this?' We got to the point where I think you could at least give some credence to the data we were presenting."

Thompson says one of his most important accomplishments was boosting resources for the agency. From a low of 11,300 employees in 1999, the agency is now up to more than 13,000. Thompson contends the increase in staff, rather than Cooper's more specialized approach to claims processing, accounts for the drop in the backlog from 430,000 claims in December 2001 to 310,000 in February 2003. Some regional directors agree. "If you staff adequately and make sure that they're good quality folks [with] decent management, you're going to get a good product out of them," says Stout.

VBA now is well on its way to reducing the claims backlog to Principi's goal of 250,000 by the end of this year. Principi's second goal, reducing to 100 days the time it takes to process a claim, will be tougher to reach, though progress is being made. But once VBA is regularly meeting its production goals, will Cooper's model leave employees bored and stultified? A regional official who asked not to be named says yes. "You give somebody a routinized job, and the longer people do it, the more they're bored," the official says. "Bored people cause problems; they steal from their employer, they file grievances, they start playing other games."

Thompson worries that Cooper's model will drive top-flight employees to leave VBA for more meaningful and challenging work. "My fear is that some of the things that are being put into place will drive out the best of them," Thompson says. Nappi, Thompson's former deputy, agrees. "If you want government people to be clerks, then break up the process and make it an assembly line, and you will hire people who are just myopically concerned about their little focus," Nappi says. "If you want to attract people who are intelligent, who can use ingenuity, who can take pride in a product, then you don't want an assembly line. That was Joe's argument from the get-go." Cooper's model addresses the problem by rotating employees among the different teams, so they have a chance to learn the full range of skills. "You aren't going to be on that team in perpetuity," he says. "[Regional directors] ought to rotate the best people around and give them that broad view."

Thompson regards case management as his most important innovation. He says the close relationship between worker and veteran fostered by case management allowed workers to "see service to veterans as a noble experience, to make a difference in the lives of the people who sacrificed for this country." Even some who disagree with other parts of Thompson's program concur with him on this point. "I would hope we go back to case management. There is a certain amount of goodwill that is generated by that. It is the care and compassion element," says Ross. "We needed to put out a fire. Our backlog was so big. The timeliness was so poor. Something needed to be done immediately. Positive results are being generated. I would not want to return to the teams, but customer satisfaction and customer service, that's what we're about."

James Thompson is associate professor and director of graduate studies for the Graduate Program in Public Administration at the University of Illinois-Chicago.

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