Renewing America 3: Re-thinking, -designing & -building for Performance
We are a society of institutions - a large and complex society is too dependent on effective ones for its success, or lack thereof, as it is on any other factor. The institutions that govern our existence were created in the late 19tC and developed between 1890-1920 - and, by and large, haven't changed since then. In fact when you look at the modern University, the modern Hospital or any other major organization its roots lie in this period. That they are that "old" also means that they've been accumulating rules and procedures since then. Back then the populace could take it for granted that effective service, responsiveness and capability would result. Something we not only no longer take for granted but actively doubt. Sadly with fairly good reason. So there we are between a rock and a very hard place. We must have effective institutions to address the problems we must deal with yet the ones we've got are not longer as effective as they were. The questions are then why and what doe that tell us about what we can do about? Policy is merely good intention without results. Translation - in an odd way re-thinking, re-designing and re-structuring our modern institutions is the single most important domestic policy goal we have.
Looking Toward the Future: What We Need to Address
In the last post (Renewing America 2: Institutions, Values & Performance) we traced out the path from problem to policy to operations to implementation and discussed the problems with the differences between civics textbook ideals and practical realities inside the sausage factory. We also suggested several directions to move forward on. Here we revisit on graphic and add a little detail for each level as well as list the major groups of barriers (assume that the Interest Groups, Partisans and Voter issues recur at each level).
We also suggest some specifics and add a little more detail here without going into engineering specifics. But, for example, the 911 commission found some 15 different committees have intelligence oversight and often issued conflicting guidance. When the Commission called for a more focused oversight no committee was willing to give up its powers. And we've certainly had a sterling lesson in how Congressional voting rules hamstring the legislative process. Every single major piece of legislation has had to be fought tooth and toenail thru the system in the face of bitter partisan and interest group opposition as well as a general lack of voter support (more on that later). What we want to focus on here is agency operations.
Agency Governance and Management
Usually when someone is railing against government effectiveness there are several characteristics. First off it's never against a program that helps them, e.g. agricultural subsidies or (in the day) mortgage support. It's always some other spendthrift program. The second big argument is that if government just ran more efficiently and had better management and controls all would be well. You may recall Al Gore led the charge on re-engineering government in the 90s and Bush had a major initiative called PART designed to instill "modern management" methods. PART stands for Program Assessment Review Tool and attempt to do just that. And in the last Budget the Administration put the issue of High Performance Government as one of its key planks, with some high level discussion of re-thinking and re-designing PART. The graphic is four pages taken from a downloadble file that's online as USGOV where you can go and see the PART results for every program or department. The spreadsheet that lists the major programs being tracked has over a 1,000 lines and you can see it here. If that doesn't stun you we don't know what will. When you click to enlarge the graphic you'll get an idea of what kind of data is attempted to be collected for each one of these programs. The PART effort is huge, cumbersome and burdensome but nonetheless it wasn't designed or implemented by stupid people. Just the opposite, in fact.
The program, and similar attempts, has one major vulnerability, one major design flaw and two derived structural problems. All of which need to be addressed if we're going to fix OUR problems.
An Alternative Agency Management Philosophy & Design
The fundamental flaw starts with the argument of "run more efficiently", like a business. Well for one thing as someone with thirty years experience in management systems and performance assessment we're here to tell you most businesses are NOT in fact run very well. But they start with one great advantage - their performance is measurable and their goal is to provide a service that makes a profit in the marketplace. The goal of a government agency is to provide a service but by definition and innate character those services are not marketable services (otherwise obviously they would be). Performance is the result of Productivity and that's NOT the result of cost controls and so-called efficiency. It is the result of delivering a service that meets the policy goals using the optimized mix of resources. In "equation" form Performance = Service Result/Inputs. Note: PART is essentially collecting input data, not taking a top-down performance approach. 
So that's where we start in re-thinking government operations, by asking what what services we intend to provide (& breaking it down by major program, department, etc.), what strategies, objectives and outcomes and so forth. To put that in place would be a radical re-think that would change the way we deliver government services and should be a requirement of every current activity and proposed legislation.
Operationally the next step is to manage the delivery of those services thru Communication (Marketing if you would as the business analogy), Relationship management (Sales) and Service Initiation (Customer Service). Then you actually have to deliver the service, whether you're the VA running the world's largest healthcare system, the Agriculture Dept. with its myriad programs or any other government operation. ALL of which have few if any private sector equivalents. Finally you need a Planning & Management function as well as new service development capability that proposes, tests, evaluates and designs new programs in response to new needs and/or legislative requirements. This is the kind of service oriented design, for example, that ought to be in place for the new HC proposals when it reaches that stage. And should be retrofitted to all existing programs (which would be mechanically somewhat straightforward given the preexisting PART machinery).
Such an approach would solve the fundamental design flaw, the missing piece, as well as reduce the major vulnerability and reduce or control the two spinoff problems. Sidebar story: some of the senior government executives we've met are some of the brightest, most talented and public spirited people we've ever met. We well recall listening to a DoD official and talking to him afterwards and found out he was also the most gunshy - because he could always count on being hammered by some politician or interest group whose oxen were gored. His military counterparts were much more forthright because they could count on their services to have their backs. As the recent calls to punish the guilty in the Undybomber case show solving a systemic problem when you can ignore it in favor of punishing the innocent in your righteousness is always preferred. This would defend against that.
It would also defend against the two derived problems. The first of which is that without adequate performance measures the only way to judge is by the size and spending on a program. In other words bureaucrats are incented to maximize inputs, not performance. By putting Performance measurement in place that could be changed.
The Next Level Down: Performance and Productivity Management
Let's take that down a level. Productivity = Outcomes/Inputs. First we establish service performance goals at the highest levels and break them down across all the efforts and programs. And establish accurate objectives and measurements - not ask for opinions. And hold Congress responsible which changes the entire interference dynamic as well as putting up a defensive barrier. Inputs = Activities (People, Operating Expenses, Capital). In other words we allocate human resources, operating costs and capital investment in a balanced across each program and each function within a program. That would be a truly radical change.
When we talk about a service-driven management system that emphasizes measurable performance we're talking about something like this sort of blueprint. Perhaps most importantly we don't expect overnight miracles, either. We start by assessing each program or proposal for where it's really at, including starting with (for the first time we think) being responsible for developing measurable service delivery metrics. Then we look at the available resources and figure out what the best balance of overall performance improvement spending is possible for a given level of rsources. And set that as our first level improvement goal. Then we're in position to measure results vs. spending and control that spending against further stages of improvment.
This would be a radical improvement on all fronts. For one thing government executives would no longer be incented to increase the size of their empires. There would be an automatic counter-balanced because, now, additional resources would be available only on delivery of additional results. Turn that around - we could develop performance based compensation and incentive systems where one could do very well indeed by over-delivering on the Outcome/Inputs equation rather than just reaching for more inputs and the increased organization size. Nor would we need to have the excruciating level of mind-numbing input data collection that's built into PART but could operate at a much higher level of detail and leave the details to the judgments of the responsible executives. Finally we would be in a position to decide, quasi-objectively, on where, what and how to invest to get future improvements.
Finally, and perhaps most importantly, we would lay the groundwork to the various agencies to be able to challenge Congress on the thousands and thousands of line item exception mandates. We could insist that any new legislation pass the same tests - what are the services intended, what are the performance measures and what resources are allocated. Which would also provide further defense against interest group line item lobbying - can you imagine the Agriculture lobby having to show that the subsidies they are pushing for deliver results? They might win the first battle or the tenth. But over time....
There you go ... a government operations revolution in a nutshell. Of course it still needs to be coupled with rule changes at the Congressional level though a reverse feedback would be created. And we need to adopt dispersed and distributed localized implementation using new, alternative regulatory mechanisms (as previously discussed). [For a fuller discussion here's a history discussion of quasi-marketlike mechanisms].
And make no mistake - this is important to all our futures. In spite of the appearance of boring terminal wonkishness!
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Re-engineering Government
The DNA Problem in American Spying This time, at least, disaster was averted. But the parallels between Christmas Day and Sept. 11, 2001, were inescapable: a radical Islamist, an airplane, explosives that came close to destroying innocent lives. And — perhaps most alarming — the apparent failure of American intelligence to uncover an imminent terrorist attack despite what seemed ample clues. So why were signals missed? Why can’t intelligence agencies communicate better with each other? Those questions hint at a puzzle that has been at the center of modern intelligence-gathering since it took shape, early in the cold war. Then, as now, theorists and practitioners of intelligence sought a smoothly functioning, highly efficient and seamlessly integrated organization, or cluster of organizations. But they struggled at it, largely because the purposes to which intelligence were put were complex and at times contradictory. But once again, the intelligence establishment seems to have been divided. Now, as the review Mr. Obama has ordered goes forward, the results of the previous changes are coming under scrutiny, with some of the harshest criticism aimed at the National Counterterrorism Center, the clearinghouse established after 9/11 to “connect the dots” between the findings of disparate agencies. And while no one has suggested that the trouble is rooted in the longstanding conflict between analysis and interpretation, it does appear that the various agencies failed to mesh as seamlessly as they might have. The question most frequently heard now is whether yet another period of reform is needed. But the problem, no less in 2010 than in 1949 or 1985, may have less to do with the structural defects than with the competing approaches taken by different agencies. The particular disagreements between Sherman Kent and Willmoore Kendall belong to another era, but intelligence professionals still seem fated to work at cross purposes. It may be that even when security agencies speak to each other, they don’t necessarily hear what is being said.
Want real reform? Let's start with Congress. It's gotten to the point now where all it takes to kill something in the Senate is the mere threat of a filibuster, without anyone actually having to mount one. And if you somehow managed to get, say, health reform legislation to the floor, it would take 60 votes to pass a bill that included the public option and 60 votes to pass one without it. Despite what you hear from legislative leaders, there is nothing preordained about this wholesale disregard for majority rule. In fact, it violates the letter and spirit of the U.S. Constitution, which expressly delineates a limited number of instances in which anything other than a majority vote is required. And it makes a mockery of Senate rules and precedent, which for nearly two centuries were grounded in a tradition of comity and mutual respect between majority and minority. All of this, course, has developed so gradually that Washington insiders are inured to the undemocratic nature of the House and the Senate. Most days they are so caught up in the gamesmanship it has spawned that they barely notice how utterly ridiculous and ineffective the legislative process has become. Although most members of the House and Senate will acknowledge that the process is badly broken, they blame the other party and have convinced themselves that there is no way to change it until the other party is so thoroughly defeated that it agrees to change. In other words, they are frogs in a pot.
The Flow-Chart Fallacy Whenever government breaks down, there is tremendous political pressure on our elected leaders to do something about it, lest they be castigated by the voters for sitting on their hands. What do they often wind up doing? Changing the organizational chart. Do such reorganizations make government work better? We know that our government's financial watchdogs failed the public over the past decade, contributing to today's economic mess. In response, the Obama administration is reportedly weighing an overhaul of our financial regulatory apparatus and considering the creation of a mega-regulator that combines many existing agencies. This news comes on the heels of speculation that we might create a federal food safety agency, which would require a partial restructuring of 15 agencies. To be clear, government reorganizations themselves are not necessarily a bad thing. And perhaps we should restructure our financial regulatory agencies and consolidate oversight of food safety. But there are two major problems with such reorganizations. First, they are really, really hard. According to a survey of Fortune 500 executives, more than 70 percent of corporate mergers are doomed to "outright failure." Reorganizations require sustained commitment. In a town with collective attention-deficit disorder, carrying momentum for any reform effort beyond the next election cycle can be a pipe dream. With 535 potential authors of any overhaul, it is hard to achieve consensus and clarity on a plan. And reorganizing agencies should be accompanied by a restructuring of congressional oversight responsibilities so department officials don't have to answer to a dysfunctionally high number of bosses. The fact that DHS falls under the jurisdiction of 86 committees and subcommittees illustrates how agencies are set up for failure if a reasonable oversight structure is not built in. The bigger problem with reorganizations is that they distract from the real problems. The bigger problem with reorganizations is that they distract from the real problems. When government fails, it typically has little to do with the way an agency is organized and almost everything to do with the performance of senior leadership at federal agencies, their ability to effectively manage the people working under them and the culture of the agencies. The 9/11 Commission summed up this dynamic best when it said, "The quality of the people is more important than the quality of the wiring diagrams."
The Productivity Revolution Trickles Into Government Not long after taking over as secretary of energy, Steven Chu called in the top officials working on a program that had been one of his department's top priorities: providing government loan guarantees for $80 billion in clean and renewable energy projects. Congress had authorized the program in 2005, made the first appropriation the year after, and by the time gas prices reached $4 a gallon last year, even the Bush administration was keen to move ahead. And yet by the time the new energy secretary called his team together early in 2009, not a single loan guarantee had been approved. When could he expect the first one? Chu asked. Last quarter of 2010, he was told. The incredulous new secretary declared that that would not do. He hired a management consultant, Matt Rogers, and announced that he would shake up his department's notoriously slow-moving bureaucracy. It didn't take long. By March 20, Chu announced a conditional offer to guarantee a $535 million loan to a California firm to construct a commercial-scale manufacturing plant for its cylindrical solar panels. Last week, four utilities disclosed that they had been chosen for loan guarantees for next-generation nuclear reactors. And by the end of the year, the department expects to be pumping out the guarantees at the rate of several every month. What Chu discovered is what corporate executives and management consultants have long known -- namely, that there are tremendous efficiencies to be achieved by reengineering the way that work is done. And significantly, it can be done even in government, without changing laws, firing lots of employees or outsourcing work to the private sector. That is the same conclusion reached by McKinsey & Co., which published a report this week suggesting that the government could save $45 billion to $135 billion a year by increasing government productivity gains to match those of the private sector. Measuring performance, setting "stretch goals," tearing down silos, empowering front-line employees and encouraging them to take risks -- for decades these have been the hallmarks of a productivity revolution that is only now beginning to take root in government.But the lesson from business is also that the only way it works is with strong, consistent leadership and involvement from the top of the organization. In Washington, that means a president, a Cabinet and a White House staff that understand that it's not enough to come up with new and better policies if you don't have a government that can implement them efficiently and effectively.
Changes to PART Referenced in Obama Budget President Obama released more details of his FY 2010 budget request last week and I've been spending some time flipping through it today. I didn't have to flip far to find some encouraging news about how the new administration will tackle performance assessment over the next four years and what they plan to do with the Program Assessment Rating Tool (PART). Front and center on page 9 in the most important volume in the budget release - the Analytical Perspectives - is a section called "Building a High-Performing Government." This gives the first details about administration plans to replace PART with a new performance system the administration refers to as a "performance improvement and analysis framework." It has been no secret that the Obama administration was not satisfied with the PART or the Bush administration's attempts at assessing government performance. OMB Director Peter Orszag let it be known during one of his confirmation hearings before the Senate that he hoped to create a more open, responsive, and dynamic system to review program performance. Until now though, we had few details about how exactly OMB and the White House would go about creating such a system. While the budget release still is short on details with only one page specifically on performance measurement, there are some encouraging themes that are emerging from the budget, including overhauling the focus on the performance system and a commitment to transparency. While not throwing out the PART altogether, the budget speaks of taking a new approach: A reformed performance improvement and analysis framework will switch the focus from grading programs as successful or unsuccessful to requiring agency leaders to set priority goals, demonstrate progress in achieving goals, and explain performance trends. Also encouraging is that the administration wants to engage a variety of stakeholders - including the public, Congress, and outside experts - to help create a more open performance measurement process and identify high priority goals for agencies. In many ways, this was exactly what was missing from the PART - an open dialogue between a variety of stakeholders, including different parts of the government, about achieving shared goals. This is indeed different than under the Bush administration. We aren't likely to see a lot of movement on instituting a new framework until the CPO nominee Jeffrey Zients is confirmed by the Senate, but it will be exciting to see the Obama administration continue to add details to their overhaul of government performance systems.
Sunstein's Ideas at Work in U.S. Policy Cass Sunstein doesn't lack for ambition. His publisher describes him as the most-cited law professor in the U.S., "and probably the world." The 54-year-old Harvard University law scholar will soon enjoy even greater influence. Nominated as President Barack Obama's regulatory czar, Mr. Sunstein will hold sway over the federal bureaucracy at a time when new rules are touching virtually every corner of American life, from health and environment to labor and finance.Mr. Sunstein, who declined to be interviewed pending his Senate confirmation, expected this month, has been picked to run the obscure but powerful Office of Information and Regulatory Affairs within the White House Office of Management and Budget. Created by President Jimmy Carter in 1980 to reduce paperwork and weigh the usefulness of new regulations, the office is the final clearinghouse for rules written by agencies government-wide. The office became an antiregulatory hub under President Ronald Reagan but faded in influence under President Bill Clinton. It regained its punch within the bureaucracy under President George W. Bush. Mr. Obama now wants to reshape the office to dovetail with Mr. Sunstein's pioneering work in the school of "behavioral economics." The idea behind this approach is that rules work better if they are attuned to people's habits and predilections rather than simply to a desired outcome. In a significant, but little noticed, memo written 10 days after taking office, Mr. Obama ordered up a rewrite of how OIRA goes about its work, the first such revision since 1993. "Far more is now known about regulation -- not only when it is justified, but also what works and what does not," the president wrote. A regulatory review would make use of new tools and would "clarify the role of the behavioral sciences in formulating regulatory policy." The dizzying breadth of Mr. Sunstein's opining -- he has weighed in on everything from motorcycle helmets to ways to avoid "uncivil emails" -- has made him a target for both the right and left. He has written hundreds of legal papers and over 15 books, including the recent best seller "Nudge," which focuses on how policy makers could better steer people away from bad decisions. Some conservatives bristle at what they see as Mr. Sunstein's paternalism: that most people don't know what's best for them and need nudges from on high. Rural Republicans are alarmed over his statements on the wisdom of a hunting ban and his suggestion that animals may deserve more rights in court. It is liberals who appear the most uneasy about Mr. Sunstein's track record. He is a strong advocate for weighing the estimated costs against the benefits of regulation, a position that advocates fear could weaken efforts to strengthen federal rules on health and safety.
ROTC for civilians Imagine a time when government work was exciting, widely admired and much sought-after. It seems an outlandish thought at a moment when you cannot turn on your television without hearing government spoken of as almost an alien creature. It is cast as far removed from the lives of average Americans and more likely to destroy the achievements of private citizens than to accomplish anything worthwhile. True, we don't apply our anti-government sentiments to at least one group of Americans who draw government paychecks: our men and women in uniform. All the polls show they are, deservedly, held in high esteem. But civilians who do the daily work of government are more likely to be referred to as "bureaucrats," "timeservers," and various unprintable names than as public servants. This has not always been the American way. There were important eras in our history when citizens in large numbers were drawn to government service with a sense of mission and exhilaration. The New Deal was certainly such a time, as were the days of the New Frontier and (though it is unjustly derided now) the Great Society.