The Business of Government Hour

 

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The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

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David Mader interview

Friday, November 2nd, 2001 - 20:00
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David Mader
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Sat, 11/03/2001
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David Mader
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Arlington, Virginia

Friday, October 5, 2001

Mr. Lawrence: Welcome to "The Business of Government Hour." I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of The Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about the Endowment by visiting us on the Web at endowment.pwcglobal.com.

"The Business of Government Hour" features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with Dave Mader, assistant deputy commissioner of the Internal Revenue Service.

Welcome, Dave.

Mr. Mader: Good morning, Paul, glad to be here.

Mr. Lawrence: And joining us in our conversation is another PWC partner, Jim Cook.

Good morning, Jim.

Mr. Cook: Good morning, Paul.

Mr. Lawrence: Well, Dave, although we know the IRS is the collector and administrator of taxes, many listeners probably don't have a real sense for the scope of its mission. Could you tell us about the other activities of the IRS for our listeners?

Mr. Mader: I think, Paul, that most Americans would agree that the IRS touches the lives of most Americans, and certainly all of the businesses in the United States.

What I think people don't understand about our business is that we also have responsibility for two other important areas of our nation's commerce. And that is exempt organizations and pensions. And in those particular areas, we play a regulatory role. And when you look at the assets that those two particular organizations deal with, we're talking trillions of dollars.

So not only are we the tax collector, but we are also a regulator over trillions of dollars worth of investments that are made in those organizations.

Mr. Lawrence: Can you give us a sense of sort of the context in terms of how many employees there are at the IRS and what type skills they have? I always imagine them being accountants, but it sounds like there's much more.

Mr. Mader: When you look at the 100,000 people in the Internal Revenue Service, only probably 10,000 to 12,000 of those people are accountants. There are collectors, there are customer service representatives, and there are the folks that work in our processing operation that process the paper tax returns.

And because of our reorganization, what we're looking at now is areas such as marketing. So the skill set that exists in the new IRS that will exist in the new IRS is going to be vastly different than what people have imagined the IRS of the past to be.

Mr. Lawrence: What one thing do you wish most Americans knew about the IRS?

Mr. Mader: That Americans need to understand that the IRS understands what their needs are. Ours is a system of voluntary tax administration. The United States is unique that citizens self-assess and pay voluntarily.

Taxpayers need to understand that we as the tax collector understand that voluntary nature of the system and provide them the requisite customer service that they need to comply.

Mr. Cook: Dave, let's talk a little bit about your career. What first drew you into public service, and then how did you find your way to the IRS and how long have you been with the service?

Mr. Mader: Actually, this past June, I celebrated my 31st year of federal service. And actually, I began with the General Services Administration and spent about a year and a half with GSA and actually was lured over to the IRS, and have spent the vast majority of my time now with IRS.

And I began in New York as a management analyst in our support organization, and over time, moved over to different tax processing components. I've probably worked in every component of the IRS, with the exception of our counsel operation and our appeals operation.

Mr. Cook: Of the many positions that you've held, which one would you say prepared you best for your current responsibilities?

Mr. Mader: Jim, I think all of them have. They have all contributed to what I believe I bring to my current position, and that's a really good understanding of how this organization operates, how the complex part of this interact, and how it's important for that interaction to take place so that the American public gets good service.

Mr. Cook: Did you set out and did you manage your career so that you would see so many different functions and have so many different positions?

Mr. Mader: I'm the kind of person that, after doing a task for a couple years, I'm ready to move on and learn something new. And the IRS that I began with and, I think, the IRS that will continue in the future gives the employees the opportunity really to grow as much as they'd like.

Mr. Lawrence: Is it understood they should take advantage of that opportunity? I mean, my sense is that a lot of people don't do what you just described in terms of describing your career?

Mr. Mader: We're all unique personalities, Paul, and I thrive on change. I mean, I've really been fortunate that I've had the ability to move across the different organizational components. And geographically, too, within the United States, primarily on the East Coast. But there's tremendous opportunity for those who want that opportunity, and some folks are very content and do a great job doing the job that they like to do. I like the diversity.

Mr. Lawrence: Well, tell us about the role and responsibility of your present job.

Mr. Mader: The job that I'm in today was created as a result of the reorganization that's been ongoing in the IRS now for the past 2-1/2 years. And my role is as the principal assistant to the deputy commissioner and to the commissioner, and primarily focused on strategic planning and budgeting. Over the last 2-1/2 years, I have spent the vast majority of my time managing the transformation of the agency.

Mr. Lawrence: How does one do that? How does one manage the transformation? I'm curious. Not only the transformation, but an organization that's so large?

Mr. Mader: In the years that I've spent with the IRS, probably I was involved in some way in every reorganization that's taken place in the last 25 years. This has been a tremendous learning experience, to take an organization as complex as the IRS, as far-reaching as our mission is, and basically rethink how we interact with our customers, and then restructure it from an organizational standpoint, apply new thinking around human resources practices, and then start looking at business process re-engineering and the introduction of technology.

And it's the complexity that has made it for me personally so fascinating and so rewarding.

Mr. Lawrence: I'm interested. You say it's been a tremendous learning experience. Tell me about the lessons you learned.

Mr. Mader: Past reorganizations, we would look at changing an organizational structure, moving boxes around on an org chart, which I think all large organizations do, whether they be private or public.

This transformation is very different, because we looked at not only the organizational structure, but we looked at those integrating structures as well. How we compensate our managers: We've moved into pay-banding for our senior managers. We have introduced some unique training opportunities for our employees.

And at the same time, we're looking at re-engineering the core business processes and then applying technology.

Mr. Lawrence: How did people deal with this change versus the previous reorganizations? My sense is that some might have said, "Well, here comes change again. We can ride this one out."

Mr. Mader: When you look at the history of this transformation, it really has its foundation in a law that was passed in 1998, the IRS Restructuring and Reform Act, which basically called for the transformation of the IRS.

And that came on the heels of some very, very difficult hearings that we had in front of the Senate Finance Committee.

So on one hand, people were looking forward to the change. They realized that the Congress, the President, the taxpayers had said, "IRS, you need to change." So I think there was a very positive outlook towards changing. Change of this magnitude obviously is stressful, and impacted everybody in the organization.

Mr. Lawrence: You've been around a lot of leaders in your government service. What qualities have you observed as the characteristics of good leadership?

Mr. Mader: I think there are several, Paul. One in particular is the ability to listen. And I mean truly listen and understand the interests of the other party, whether it be dealing with an administration, dealing with the Office of Personnel Management, OMB, the Congress, and taxpayers.

Really, really understanding what people's interests are, I think, is a key leadership trait, because you need to better understand the environment, the ever-changing environment in which you operate as a leader.

Mr. Lawrence: It seems so obvious that listening skills are important. Why do you think people aren't good listeners?

Mr. Mader: Some of it, I think, has to do with, perhaps, ego: That I know best. The press of business to get things done. We all have a lot on our plate, and sometimes in the rush to get things done, we don't listen appropriately.

Mr. Lawrence: The order of magnitude of things at the IRS are so large. How about the development of skills in terms of just leading large numbers of people? How does that happen at the IRS?

Mr. Mader: One of the criticisms that I have as a long-time IRS employee was our lack of attention to management training over the years. If I were to point to a weakness, it would have been around that. And I think we recognize that the complexity of our business and the complexity of the world around us required that we spend the time and make the investment in the development of managers at all levels of the organization, and create a really robust succession management program. And we've undertaken that over the last 2-1/2 years.

Mr. Lawrence: Well, this is a good stopping point.

Come back with us after the break, when we ask Dave Mader of the IRS about restructuring and reform that's been going on since 1998. We'll learn about IRS modernization when "The Business of Government Hour" continues.

(Intermission)

Mr. Lawrence: Welcome back to "The Business of Government Hour." I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Dave Mader, the assistant deputy commissioner of the Internal Revenue Service.

Joining us is another PWC partner, Jim Cook.

Mr. Cook: Thanks, Paul.

Dave, in the last segment, you mentioned that the IRS Restructuring and Reform Act of 1998 was the impetus behind the restructuring effort that's gone on to date.

Let's drill down on that little bit more. Can you describe some of the key elements of that reform and the problems that you've been attempting to address?

Mr. Mader: I think, Jim, that the Restructuring and Reform Act of 1998 for the IRS was what I would characterize as our organization's significant emotional event. I think when you look at organizational change, whether it be in the private sector or in the public sector, large organizations don't change unless there's a reason. In the United States, I think there's lots of examples you could point to. The auto industry had to change because they were losing market share.

Well, in the case of the IRS, we had lost touch with our customers. And the origins of RRA '98, the Restructuring and Reform Act, actually began in legislation that was introduced in 1996 in our appropriations bill that called for the establishment of a commission to study the IRS. And the reason that legislation was enacted was because key members in both Senate and House felt that, because the IRS, for a lot of Americans, is their only interaction with their government, that we were losing touch with what the needs of American taxpayers were.

The commission worked for about a year and a half and created proposed legislation, which then was enacted and signed by the president in July of 1998. So that's what caused our bureaucracy to begin to change.

As I had mentioned earlier, we've made lots of organizational change in the past, but never to the extent that we are now. And RRA '98, one of the key components was to rethink how we approached dealing with taxpayers. And we have dramatically changed our approach from a geographic-based organization. And many of my colleagues in other federal agencies around town are configured the same way.

We moved from a geographic-focused organization to a customer-focused organization. We have taken the taxpayer base of the United States and actually segmented it into market segments.

By doing that, we have, I believe, an opportunity now to better understand what the unique needs are of each of those market components, so that if you're a small business taxpayer, your needs are very different than a multinational corporation, very different from a state or local entity.

And this segmentation by markets is what, basically, the private sector has done years ago, if you look at financial services, at commercial banking, and at insurance. So we have moved in that direction, and I believe that will allow us the opportunity to better understand our customer needs and react to them with products and services.

Mr. Cook: There are some who have said that in a lot of ways, the restructuring represents a cultural change at the IRS. Can you explain a little bit about what that means to you? You've talked about the reorganization of the functions and the people, but what's the cultural change that's taking place?

Mr. Mader: There are, Jim, a couple of changes that are affecting how we have thought about our business over the last 50 years. One is as simple as viewing taxpayers as customers. And I guess that shouldn't be a surprise to us, because I mentioned earlier that our system of taxation is based on voluntary compliance. And if we don't provide the kind of products and services and responsiveness to the public, to the taxpaying public, then they're not going to participate in that voluntary process anymore.

The other significant change was a better understanding and appreciation for the fact that there isn't a trade-off between customer service and compliance. Those two components need to exist within our tax system. But if you can work with the taxpayer so that they understand what their responsibilities are and they comply in the front end, then we're not going to be spending our resources and the customer's time in trying to fix the problem on the back end.

Mr. Lawrence: What do you hope that the taxpayers and the practitioners are now noticing about the IRS, given the changes that are taking place?

Mr. Mader: I think, Paul, a better understanding of what their needs are. And my interaction so far in the last year or so, with especially preparers, tax preparers who represent a lot of individuals, but certainly a lot of small business and self-employed, have been very positive, because we are now able to concentrate on a very discrete set of taxpayers and really listen to what are the problems that they're facing in weaving their way through the complexity of the tax code.

Mr. Lawrence: Let's talk about the union. The employees' union, the NTEU, played a role in making the reorganization work. Could you tell us about the approach you took to work with the union?

Mr. Mader: The relationship between NTEU, the National Treasury Employees Union, and the IRS has been an evolving relationship. We, I believe, have probably one of the most mature labor management relationships within the federal sector. And that didn't just happen because of this organizational transformation. We actually began working together in the mid-1980s as the result of another organizational problem that had developed at that time, and it's matured over this almost 20-year period.

So it was almost a no-brainer that, as we began to fundamentally rethink how we were going to deliver tax administration, that NTEU as an institution would be part of that process. Their involvement as an institution, and the involvement of the employees that they represent, was key to the organizational design and key to the implementation.

As I mentioned earlier, Paul, I mean, this reorganization touched every segment of the IRS. We actually negotiated, a year before we implemented the new organization, a process on how to move from the old structure to the new structure. And we did that without actually knowing what the final design was going to be like. And that was a result of this mature relationship and the trust that exists between the partners.

Now, that doesn't translate into we always agree on things. We don't, and there are processes and procedures to resolve those differences. But it goes back to, I think, a point I made earlier about a key leadership trait, about listening. I mean, in the case of a federal union, they are by statute the representative of a large portion of our employees. We need to listen to what their concerns are and factor them into our design and our implementation.

So I think the maturity of our relationship really blossomed, as evidenced in this reorganization.

Mr. Lawrence: Can you give an example of maybe one of their major concerns and how you worked through that?

Mr. Mader: We impacted the positions of thousands and thousands of IRS employees, managers and non-managers. And obviously, we as the employer and they as the exclusive representative, the bargaining unit, were concerned about how were we going to transition people from one series to another series and one location to another.

We shared a common interest there. I mean, they represent those employees, but they're our employees as well. And we needed to work together to ensure that employees were going to make a smooth transition from the old IRS to the new IRS.

Mr. Cook: What type of feedback have you received from employees to date, now having completed a year under the new structure?

Mr. Mader: We're still going through the change, Jim, and I think that's another key learning, that yes, the major portion of the structural change has taken place, but the change to business processes and practices will continue. And that is very, very different from the old IRS. Like I said, in the past, we've made organizational change, and then we stay status quo for a couple of years and then make some other change.

For us to be a viable tax administration agency, we have got to constantly look at how we deliver our services: Constantly, every day, re-examine how we do our business, both internally and externally. That kind of operating model, people are slowly starting to understand. And I can tell you that it causes a certain amount of stress in the organization. While employees embrace the new design, they're learning how to operate: What the expectations are of them that we have as the employer, and that taxpayers have of them. So it's a real learning process for everyone.

Mr. Lawrence: Well, that's a good point for a break.

Stick with us as we continue talking about IRS restructuring with Dave Mader. In the next segment, we'll explore how the IRS is becoming more businesslike. Join us, as we ask him whether business management differs from government management.

This is "The Business of Government Hour."

(Intermission)

Mr. Lawrence: Welcome back to "The Business of Government Hour." I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Dave Mader, assistant deputy commissioner at the Internal Revenue Service.

Joining us in our conversation is Jim Cook, another PWC partner.

Mr. Cook: Thanks, Paul.

Dave, in any restructuring process, an organization generally has to focus on asking themselves not just what we do, but why we do it.

Can you explain a little bit about how the IRS has gone about that process and what's come out of that?

Mr. Mader: Sure, Jim. I think the what we do was never in question, because the IRS collects 98 percent of the resources that this country uses to run. And so the "what" was never a question. It was more the "how are we going to do that task?" And that's what we have been fundamentally rethinking as part of this reorganization transformation.

As I mentioned a little bit earlier, this focus on the customer and moving to become a customer-centric organization is sort of the "how you're going to go about doing tax administration." So the focus is on the "how to do it," and then how do you go about translating that theory of how to do it into practical terms so that our customers really see a difference.

That, I think, is the major challenge of any kind of transformation. It's easy to design it and talk about it, but it's a lot more difficult after you implement it to really effect the change that you hope to get.

Mr. Cook: One of the other key components of the IRS restructuring process was -- and you mentioned this earlier -- the realignment of the functions to different locations and the IRS personnel.

Tell us a little bit about how you handled the logistics of doing that. That's a huge effort, 100,000 employees around the country. Tell us a little bit about how you planned to manage that.

Mr. Mader: The movement of the employees from the old structure to the new structure took an incredible amount of planning on the part of the entire organization, not just the human resources professionals. It took the requirement that we understand what changes were going to take place in each of the organizational components in the existing structure, how they were going to move to the new structure, and then take it down a couple of levels below the structural change to the actual impact, person by person.

And we actually, during the course of the planning for the implementation, had a plan that actually showed all 100,000 employees, where they exist in the old structure and where they were going to move into the new structure, by location, by series, by grade.

And then we just created a massive process that would, over time -- and this went on for several months -- move segment after segment after segment, because we wanted to make sure that when we moved 100,000 people, after we did it, first of all, they were in the right place, and second-of-all, they were all getting paid. And we changed all of our financial codes, all of our HR codes, as part of this organizational change.

And I'm pleased to say that everybody got paid. We didn't miss a beat. And I don't believe that, for taxpayers, they saw any change in the service that they get.

Mr. Lawrence: You talked about designing the change and executing the logistics of it. But how about dealing with the people through all of this change? What steps did you take to deal with their anxieties and concerns as they sort of worked through this process?

Mr. Mader: As I mentioned earlier, Paul, we've gone through lots of organizational change in the last 25 years. And I think we did that kind of organizational change in a very traditional way where we would pull together a group of probably primarily managers and executives, and they would come up with a change in the process or a change in the structure, and work as a small group, and then announce it to the workforce: "We're going to make this change."

This was very, very different. Because it was going to impact everybody, managers and employees alike, there was a concern that there needed to be a heavy degree of employee involvement. So the actual design phase of this involved executives, managers, the union, and employees. Everybody was involved in the design phase. And if you were selected for one of these design teams -- and at one time, there were about 1,800 employees working on hundreds of design teams -- the responsibility of those design team members included going back one day a week to your workplace and sitting with your colleagues and explaining what was going on.

That's a very different way of communicating organizational change than I think most organizations engage. Now, there were a lot of employees that were uncomfortable with that approach. It was, like, "Well, when are these guys going to really decide what the new structure's going to look like, and they keep changing it."

But the vast majority of the employees felt a real involvement. They were able to watch week by week what was going on on these design teams. So they could influence their colleagues. They could bring ideas to their colleagues, because they knew who was working on it, and they knew that this was a very iterative process. And that's very different than the kinds of processes that we've used in the past.

So it was heavy involvement across the organization and communicating, constantly communicating to employees where we are in the process in as much detail as we had. And as I mentioned, for some people, that was very, very welcome. For others, it made them a little bit nervous. Some people would prefer, "Just show me the final design, don't show me how you make sausage. I enjoy the product, but don't show me how to make sausage." And that in effect is what some of this organizational design looked like.

Mr. Lawrence: How did you balance the need for speed -- everyone advises, make change quickly -- versus the need to collaborate and involve all the people you just described?

Mr. Mader: Part of the concern was how to effect change in the organization within a given period of time. The process that we employed actually had a requirement for periodic reports from the teams. And these teams, these hundreds of design teams, actually reported their progress to the Commissioner and the senior leaders.

So we kept the discipline around a very, very precise project plan with very, very precise time frames. So the process was a push process. We pushed the teams along, sometimes faster than they would have liked, but we also recognized that we had to get this kind of change within a reasonable period of time. And I think the period of time that it took us was reasonable.

Were there a couple of details that remained when we moved into the new structure a year ago, October? Absolutely, but when we assessed what the risk was, there wasn't a risk to taxpayers, there wasn't a risk to employees. Was there some inconvenience to employees? Yes, there was.

Mr. Cook: During that process, you talked a lot about the internal communications. To what extent did the oversight organizations, the Congress, were they aware of the change that was being planned as that was coming together? How did you work through that?

Mr. Mader: I mentioned the legislation RRA '98. That also had a provision that on an annual basis, there would be a joint hearing by all of the various members and committees of Congress that had jurisdiction over the IRS, both in House and Senate. It's sort of unique that you would bring together both houses of Congress. That body -- Finance Committee, Ways and Means, and Appropriations in both House and Senate -- were monitoring our progress.

Also, our stakeholders: The practitioner community, the ABA and the AICPA. All of the tax professionals were included in this stakeholder involvement. And we had, during the course of design, several forums in which we said, here's what the design looks like thus far; give us your input.

Mr. Lawrence: Several of the reforms reflect the desire to have private business models: Efficiency, customer service, for example.

What's your thoughts on the differences or the similarities between managing in a government context versus, say, managing in a business context?

Mr. Mader: One of the things that I found really enlightening and fascinating as we worked our way through this process was that at least our business, the tax administration business, is very, very similar to what exists in the commercial world in financial services.

As we worked through with our consultant a re-examination of our structure, I was really struck personally with the fact that we were probably more similar to the private sector than we were dissimilar. Yes, there are some unique rules and regulations, especially around personnel, that perhaps don't exist in the private sector. But the business practices, the procedures, how we go about collecting taxes, how we go about auditing returns -- I was struck by the similarity to the private sector.

And I think that's something that we all need to focus on as leaders in the federal sector. I think sometimes we've said, "The federal sector, we're different." I think there are differences, but I think there are more similarities than there are differences.

Mr. Lawrence: That's a good point for a break.

We'll stop now, but come back after the break when we ask Dave Mader of the IRS about its future, find out how it might evolve, who will work there and what they'll be doing, when "The Business of Government Hour" continues.

(Intermission)

Mr. Lawrence: Welcome back to "The Business of Government Hour." I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Dave Mader, assistant deputy commissioner at the Internal Revenue Service.

Joining our conversation is Jim Cook, another PWC partner.

Mr. Cook: Thanks, Paul.

Dave, a little earlier, you talked about the restructuring or the modernization effort as being an ongoing effort. And you're one year into it, basically, operating under the new structure.

Tell us a little bit about what you see the next year or two holding for this effort. Do you see it as basically being completed? Do you see additional changes coming? What's your vision?

Mr. Mader: Jim, I think one of the things that we've learned as an organization is -- and I know this almost sounds like a cliché -- but change is constant. In order for us to deliver the goods and services that the taxpayers require, we're going to have to be continually re-examining how we do business and what offerings we have. I mentioned we were like a financial services organization. I mean, what improvements do we need to make around electronic filing. How do we appeal to more individuals to do business through e-government? So that constant re-examination of how we do our business and what we offer is going to require that we retain a high degree of flexibility.

Now, for some people, that's somewhat unsettling. The last major reorganization of the IRS before this took place in 1952. So we almost went 50 years and then had another massive reorganization.

What I tell employees around the country is, while we probably won't reorganize to the scope that we did over the last year and a half, don't get comfortable, because if we get comfortable, then we're going to lose touch with our customers. So we've got to every day examine what we do and how we do it from the point of view of are we meeting customers' expectations.

Mr. Cook: This massive effort has really touched on all the major aspects of the organization: The organization itself, the processes, and the technology.

Where would you say the biggest impact is going to come from a taxpayer's standpoint? Where are the taxpayers going to see the biggest benefit?

Mr. Mader: I believe in us being able to design products and services offerings that will help taxpayers understand what their requirements are for filing, and then actually interacting with us. I mentioned, we're trying to get more and more taxpayers to move to electronic filing and electronic deposit on refunds.

So we need to understand the unique needs of these different segments of taxpayers and then design offerings to meet those needs. And I believe that that's the biggest benefit of this structural change, by focusing on discrete market segments of taxpayers.

Mr. Lawrence: How do you want the taxpayers to see the IRS? It was once this tough-cop image, focused on compliance. It now seems to be more towards customer service. Is there a vision of sort of what this is supposed to look like?

Mr. Mader: There were a couple of key words that we used during our reorganization, Paul, in looking at this customer-facing organization. And two phrases sort of strike me. One is "service to each." And what I mean by that is, in each transaction we have with the taxpayer, we want them to be satisfied with that interaction and with that transaction. And for the vast majority of taxpayers, their interaction with us is usually just once a year when they file their return.

The other concept is "fairness to all." And the fairness to all is, are all taxpayers paying their fair share? And that gets to a comment I made earlier. I mean, there isn't a trade-off between customer service and compliance. Both of those concepts exist within good tax administration. Because taxpayers who do voluntarily pay and report and comply want to be sure that their next-door neighbor is, as well. And that's where the compliance aspect of our business comes into play.

Mr. Lawrence: Let me shift gears here a little bit. We hear a lot about the coming wave of retirement in government employees in federal agencies.

I'm curious, what kind of challenges do you think this might have for the IRS?

Mr. Mader: Our workforce is, I think, as most federal agencies, has been aging. I mean, many of us are into our ends of our career. And we were fortunate over the last year and a half to actually begin some fairly substantial hiring, so it's very, very nice to see some young faces joining the ranks in the IRS.

There are a lot of flexibilities within the current statutes that allow us to incentivize employees to stay. Years and years ago, legislation was put on the books that allows for the payment of retention allowances. We have recognized the need to use that and will continue to aggressively use that to retain a lot of experienced IRS employees and executives. And we started it, actually, during the Y2K crisis.

Mr. Lawrence: Is pay the only lever? Are there other exciting parts of the business that are just not obvious when we think about it that are attracting people as well?

Mr. Mader: It's interesting. Driving to work this morning, I was listening to a show on the radio, and they were talking about a study, and I don't know who did the study, but it was around what incentivizes employees to really perform on the job.

And this is, I guess, no surprise to any of us: Pay is not number one. It's really being appreciated for the job that they do. And I think there's a lot of non-monetary incentives that we as managers and leaders in any organization, whether it be private or public, can utilize to retain good employees. I mean, as simple as saying, thank you for a job well done.

Mr. Cook: What advice would you give, Dave, to a young person considering a career in public service?

Mr. Mader: I'm prejudiced, because I've spent my year in public service. But, I think with the changes, actually, to the retirement plan several years ago, I think it gives now individuals the opportunity to move in and out of government. And I think that's a very good thing. I think we do need a hardcore group of folks who really want to make public service their calling for their entire career. But I think it really would benefit individuals and organizations, both public service and private-sector organizations, to have more of a movement between those two parts of -- because I think the experience that a young person would get in the government could be leveraged in the private-sector environment and vice versa. I just hope that most folks would consider doing a couple of years in public service.

Mr. Lawrence: You indicated that you're doing recruiting for the first time in a while. I'm curious what type of skill you're looking for in the new folks that are joining.

Mr. Mader: Paul, you had mentioned earlier the stereotypical image of the IRS as auditors and collectors. And what's interesting is, when you look at the complexity of our organization, the kinds of skills that we need -- and, yes, we need auditors and we need collectors -- we need customer service representatives, people who really enjoy interacting with customers. We need, as most firms need, IT professionals. We need people with marketing skills. We need to understand what kinds of products and services will help people comply with the tax code.

So I can't say that there isn't a skill set that couldn't be utilized effectively in the IRS.

Mr. Lawrence: What's your vision for the IRS over the next 10 years? How do you see it evolving?

Mr. Mader: I believe that the changes that we've made over the last 2-1/2 years really creates the foundation for us to provide more effective tax administration, both from the government's perspective, as well as from the taxpayer's perspective.

The tax code is complex; there's not question about it. I think there is a lot that we can do as the administrators in understanding how to minimize the burden, whether it be in dollars or in time, that taxpayers need to comply with the code. So I think that's probably the biggest challenge, Paul, that we're going to face, is trying to create a higher degree of effectiveness.

Mr. Lawrence: Other organizations are partnering with the private sector to have the private sector come and perform part of their mission. Could you ever imagine that happening at the IRS?

Mr. Mader: The IRS over the last several years has relied heavily on the private sector for support in the IT arena, in e-commerce. We don't have that skill set. So we rely heavily on the private sector to partner with us in delivering improved services.

Mr. Lawrence: And how would you describe the lessons learned to, say, others who want to undergo the kind of reform and restructuring that the IRS has undertaken the last several years?

Mr. Mader: I think it's good for any organization, private or public, to step back and examine who their customers are and to examine what they do and how they do it, and not get lulled into a false sense of security, and to think about the future and anticipate the changes that you need to make. I would hope that most federal agencies don't have to get to the point where the IRS did, where the Congress and the Administration said, "You must change." And I think that's a challenge for any large bureaucracy to undertake.

Mr. Lawrence: Well, Dave, Jim and I want to thank you very much for joining us this morning. We've had a very interesting conversation.

Mr. Cook: Yes, thank you, Dave.

Mr. Mader: Thank you, Paul. Thank you, Jim.

Mr. Lawrence: This has been "The Business of Government Hour," featuring a conversation with Dave Mader, assistant deputy commissioner of the Internal Revenue Service.

Be sure to visit us on the Web at endowment.pwcglobal.com. There, you can learn more about our programs in research. You can also get a copy of the transcript of today's conversation. Once again, that's endowment.pwcglobal.com.

This is Paul Lawrence. See you next week.

David Mader interview
11/03/2001
David Mader

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