Weeding the Federal Garden

President-elect Barack Obama 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.

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.

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. 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.