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.

The interviews

Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

Hector Barreto interview

Friday, March 26th, 2004 - 20:00
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Hector Barreto
Radio show date: 
Sat, 03/27/2004
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Intro text: 
Missions and Programs; Leadership; Strategic Thinking...

Missions and Programs; Leadership; Strategic Thinking

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Complete transcript: 

Wednesday, December 10, 2003

Arlington, Virginia

Mr. Lawrence: Good morning, and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of the IBM Center for The Business of Government. We created the Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more by visiting us on the Web at www.businessofgovernment.org.

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Hector Barreto, administrator of the U.S. Small Business Administration.

Good morning, Hector.

Mr. Barreto: Good morning.

Mr. Lawrence: Joining us in our conversation from IBM is Tom Burlin.

Good morning, Tom.

Mr. Burlin: Good morning, gentlemen.

Mr. Lawrence: Hector, perhaps you could begin by talking to us about the Small Business Administration. Could you explain its mission to our listeners?

Mr. Barreto: Sure. I'd be glad to. The U.S. Small Business Administration was created 50 years ago. In 1953, President Eisenhower signed the Small Business Act, and that really created the beginning of what we know today as the SBA. Interestingly, the mission really hasn't changed that much. The mission at the very onset was to aid, counsel, assist and protect all small businesses in the United States, and that's really what the SBA does through all of our programs and services.

Mr. Lawrence: How do you describe the size of the SBA, its budget, its number of people, the people it serves? How do you think about it?

Mr. Barreto: Well, it's approximately $800 million, but we leverage that $800 million in so many ways, with partnerships, with initiatives. Last year, we did pretty close to $17 billion in access to capital. We have a portfolio of loans that we manage, well in excess of $35 billion, and we literally train millions of companies every year, provide billions of dollars worth of contracts for small businesses. So we have really learned over those 50 years how to leverage the resources that we have.

Mr. Lawrence: What are the skills of the folks working at the Small Business Administration? You described so much financially, I began to imagine bankers.

Mr. Barreto: That's one of the great things about the SBA. Because of the folks that work for us and all of the people that are a part of our network, we truly have a cross-section of small business talent and expertise, everything from financial assistance, and that could be microloans, working capital loans, real estate. We even have a Small Business Investment Company Program, which is really our venture capital arm. So very sophisticated applications of that capital.

Entrepreneurial development is really the place that we touch the most small businesses. Last year, we figure that we helped about 2.1 million small businesspersons in the United States, everything from how do you put a business plan together, how do you put a loan package together, how do I do better marketing, how can I use technology in my business, international trade. And then of course, we have a number of contracting programs that help small businesses access that $230 billion federal procurement pie. So it really is a cross-section, a lot of talent and expertise, for the benefit of small businesses.

Mr. Burlin: What about the administrator's position? Could you tell us about the duties and responsibilities that go with that title?

Mr. Barreto: Sure. My responsibility is to make sure that the Agency is reaching more small businesses every year in all of those areas. I am a small business champion. I am an advocate. I like to think that what I do is find the best people for the job and then get out of the way and let them do what they do best. So it is very much an internal and external function. I'm passionate about it. I've been doing it now for a little over 2-1/2 years, and I'm very excited about what's ahead for the SBA.

Mr. Burlin: We know you had experiences before that 2-1/2 years. Could you tell us about that?

Mr. Barreto: Sure. I've been involved with small business all my life. My parents were small business owners, so I like to say that I was born into a small business family. I learned a lot about many types of small businesses. My parents had restaurants, they had a little construction company. They even did a little importing and exporting. So I got a lot of experience at a very early age.

Later on, I went to work for a large corporation in Texas. I worked as an area manager for Miller Brewing Company in Texas for about four years. Then later on, I moved to California and started my own business. I had an employee benefits agency, and then later on, a securities broker/dealer, specializing in retirement plans.

I also got very involved in the community. I was the chairman of the Latin Business Association in Los Angeles, which is one of the largest Hispanic business organizations in the United States, and that's really where I met the President when he was the governor of Texas and got involved with him, and the rest is history, as they say.

Mr. Burlin: That is an interesting background. How did that background prepare you for your current assignment?

Mr. Barreto: One of the things is, I've lived the experience of starting a small business from scratch. I know the trials and tribulations, but I also know the great satisfaction and opportunities that are available by being in business for yourself, and I think that's the reason the President asked me to do this. He wanted somebody that had small business experience leading the SBA. What a novel concept, to have somebody that's actually done it be leading an organization like the one that I have the pleasure and honor to represent. So it's a great opportunity for me because I get to work with my heroes, which are those small business owners all across the United States.

Mr. Lawrence: A lot of people go to work for large businesses, others open their own business. When you think about that choice people make, are there characteristics, or what distinguishes people at that point?

Mr. Barreto: Many, many people would like to be their own boss, but a lot of times, what prevents them from doing that is just really the knowledge, the resources, the tools to be able to do it. I tell people that the first thing they need to do is their homework, because a lot of times, people throw themselves into a new enterprise, they're excited, they're passionate, they've got a great idea, but they haven't thought through all the different stages of the evolution of that business and what types of tools they're going to need to succeed.

But small business people are visionary, they're very entrepreneurial, they're trendsetters. I like to think that they're very courageous and patriotic people who work very, very hard and really have a higher purpose in mind oftentimes when they go into that small business, because they know what they do is going to impact their community, their employees, and, yes, their country.

Mr. Lawrence: Your experiences have been in the private sector, and now for two years now, you're in the public sector. How do you compare the two sectors in terms of management style and approach?

Mr. Barreto: Well, it's very, very interesting. When we came into the SBA, we wanted to take a more entrepreneurial approach. One of the things that we felt was very necessary is to change the perception of what it means to do business with the government. We wanted our customers, which are those small businesses, to really think of us as a partner, not an adversary. We wanted them to think of us as an advocate. We also wanted them to know that we were going to be responsive, because we know that small business people can take a yes and they can take a no, but the maybes kill them. So that's one of the things that we've tried to preach inside of the Agency; we're not a business, but we can think more like a business, and in that way, being much more customer service-oriented, much closer to our customers, and really by that measure really measure our own success by the success of the people that we're serving.

Mr. Lawrence: How about the speed by which decisions are made now? I think a lot of people who have come from business before in this administration as well as previous administrations wake up surprised at the difference in speed. Have you found that to be true?

Mr. Barreto: Well, that's a big challenge, because in business, time is money, and so you want to be able to capitalize on the time that you have and move the agenda as quickly as you can. What you realize is that things are going to take longer. More people are going to be involved in decisions. You're not always going to have all of the resources that you need to fast-forward an initiative or an agenda. So I also tell our folks that it's very important for us to focus in on less things, do less things better. I like to think of the concept of low-hanging fruit, and there is a lot of low-hanging fruit if you can focus in on it and really execute on a good business plan.

Mr. Lawrence: One of the things people are often surprised to discover in the public sector is the scrutiny you get. How have you found that?

Mr. Barreto: There is a lot of scrutiny, but I think the reason for that is that there's a lot of passion around small business. When I first came to town, they told me look, small business isn't a partisan issue. There are just small business solutions. There is not a D solution or an R solution, and I've found that pretty much to be the truth. I think everybody wants the same thing. We might have different ways of getting there. And again, what we want to measure ourselves by is the results, not just the outputs, but the outcomes that come from the things that we are able to offer to small businesses.

Mr. Burlin: What drew you to public service? How did you end up here?

Mr. Barreto: In a way, I've learned about public service from my own parents. My father was the founder of a Chamber of Commerce in Kansas City, Missouri. And then later on, he was one of the founders of the U.S. Hispanic Chamber of Commerce. So I saw my father giving a lot back to the community and to other small business owners. I think he imbued me with that sense of responsibility.

Of course, when the President of the United States asks you to take on a responsibility like this, it's a true honor, and it's something that I wasn't necessarily thinking about. I like to say I was busy minding my own business, literally, when the call came. But I've been so honored to be able to do this work.

Mr. Burlin: As a constituent of the Small Business Administration in your entrepreneurial days, has your perspective changed now that you sit on the other side of the fence?

Mr. Barreto: What has changed is my understanding of what is available to small businesses. I had no idea of the breadth and the scope of the SBA. I felt like I knew a lot about it before I came on board. I had no idea that over those 50 years, the SBA has helped 20 million small businesses in the United States. We have facilitated something in excess of $200 billion. We've helped create some of the best-known names in corporate America that started off as small businesses, and all businesses start of small.

So I just had no perspective as to the kinds of results that the SBA has created on behalf of small business, and that makes me very proud to be attached with an organization like the SBA, and really for that matter very proud of the legacy of the SBA.

Mr. Lawrence: That's an interesting point, especially those numbers you cited.

Why is health care such an important issue for small businesses? We'll ask Hector Barreto of the Small Business Administration for his thoughts when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Hector Barreto, administrator of the U.S. Small Business Administration.

Joining us in our conversation is Tom Burlin.

Mr. Burlin: Welcome back, gentlemen. Hector, let's talk about the President's Small Business Agenda and his vision to create an environment where small businesses flourish. Could you begin by telling us about tax incentives that the SBA is promoting?

Mr. Barreto: Absolutely. This President is very focused on small business, because he understands that small business really isn't small when you consider that there are 23 million small businesses in the United States. They generate 52 percent of the gross output of the economy. And they also generate about three-fourths of the net new jobs and a lot of the innovation that's coming out of the economy. So they're critically important.

The President calls them the engine that fuels the economy, and that's why his Small Business Agenda included this very important jobs and growth package that was passed earlier this year. That really provided millions of small businesses some very necessary and important tax relief, because the President understood that most small businesses are not incorporated; they pay some of the highest tax rates in the country, and when you lower that marginal tax rate from where it was at 38.6 to 35, you return $10 billion into the hands of small businesses. In other words, 80 percent of the benefit of reducing the top marginal tax rate accrues to small businesses.

We didn't stop there. He also quadrupled the business deduction from $25,000 to $100,000. So a lot of the purchases that small businesses were delaying because they were worried about if the economy is going to turn around quick enough, they're making now, and that's something that's helping get the economy going again, and also helping those small businesses create a lot of those new jobs that we need so desperately.

Mr. Lawrence: Expanding and improving health care coverages for small business employees is also a part of the President's agenda. Health care insurance can be very costly for small businesses. How is the SBA thinking about this?

Mr. Barreto: It not only can be, it is very costly for small businesses. I travel all around the country and talk to small businesses every day, and this is high on their radar screen. They tell me oftentimes that they're getting double-digit increases every single year whether they have a claim or not, and they're worried about it. The majority of folks that don't have health coverage or are underinsured either work for a small business or have a spouse that works for a small business.

Sixty-five percent of small businesses that don't have health insurance coverage say that they would gladly buy it if they could get access to affordable health care. So the President has proposed Association Health Plans. That is legislation that's currently working its way through Congress that allows small businesses to pool together, to band together the way that union employees can, the way that large corporations do, and really negotiate the best rates and the best benefits. This is something very important. It won't solve the whole health care crisis, but it goes a long way to providing those small businesses with the kind of coverage and the kind of access that they desperately need.

They need it for themselves and their families, they need it to attract, and they need it to retain, employees. The Department of Labor believes that this could save as much as 25 percent off of the cost of insurance year one. The House of Representatives has passed it and we're waiting for the Senate to take it up, and we hope that they will and that they'll pass this very important legislation soon.

Mr. Burlin: Hector, I'm sure many of your constituents have the perception that Washington is synonymous with red tape. Can you tell us what the SBA is doing to cut red tape, to streamline the processes?

Mr. Barreto: Absolutely, Tom. We're doing a lot. We're using technology more now than we ever have before. We've streamlined the time that it takes for somebody to get a loan with the SBA. We're providing a tremendous amount of information now online so that people don't have to send us a phone book of forms just to get into one of our programs or to get registered, and it's really working. Time is money, especially for small businesses, and for a lot of our partners on the lending side. We work with over 6,000 lending organizations or banks, and we're also increasing the distribution channels, adding more partners to that. So we need to make sure that we can do it quicker, better, faster than we ever have done it before, and so that's really helping. It's one of the reasons that we're seeing the kinds of increases in our loans and our technical assistance and our contracting programs.

Mr. Burlin: You mentioned earlier that every business starts as a small business, and although they're household names today, I think many of our listeners would be surprised to learn that such firms as AOL, Staples and Outback Steak House all received in their formative years help from the SBA. Can you tell us what the SBA is doing to really empower these entrepreneurs of today?

Mr. Barreto: Absolutely. We don't want to rest on our laurels, and we're very proud of the fact that we helped those companies and many, many others, companies like Nike and Intel, Sun Microsystems, Compaq Computer, Ben and Jerry's Ice Cream, Callaway Golf, and many, many others. They all were very small companies that came to the SBA at a time when they needed some help. Either they needed some lending assistance, access to capital, if you will, a loan to buy a building. Some of these businesses received venture capital through the Small Business Investment Company Program. Some of them got technical assistance through our service corps of retired executives or small business development centers.

So we're very proud of that, but we want to make sure that we're helping the next generation of those companies, and as I said, all companies start off small. Coca-Cola and Ford Motor Company started off as small businesses, and they had some trials and tribulations before they were successful.

We also want to make sure that we're helping those companies that are coming from the emerging markets, which is really the fastest growing segment of small business; from women-owned businesses, which now represent 40 percent of all small businesses in the United States. So it's critically important. The three C's is what I call it. Small businesses have always needed capital, capacity, and contracts, and the SBA can deliver and provide all three of those.

Mr. Lawrence: You talk about the assistance. SBA provides small businesses with financial assistance, I think it’s capital under your three C's. But obviously, there are many more small businesses who would like assistance, so let's go through that process. How does the SBA figure out who gets a loan?

Mr. Barreto: We want to talk to any small business who is ready to take their business to the next level. Business is evolutionary. So, for example, a lot of times, people don't realize that we can do very, very small loans, microloans, which could be $10,000. We can do working capital loans, which could be hundreds of thousands of dollars, if not a million dollars, for fixed costs. We can do real estate loans, especially right now when interest rates are so low; a lot of businesses want to buy their building, expand their building, but a new facility. We can loan for heavy equipment and machinery. This is especially important in the manufacturing sector. We can connect them with venture capitalists so that they can expand their business across state lines and go national or international. So there are a variety of different loan programs that are available.

It's very easy. They can either contact us at their local district office, and we have a district office in every state in the union by law; we're in every major city. We work also with about 11,000 retired executives. Those are our SCORE volunteers that can help them. We work with 1,200 small business development centers that are in every county in the country. We have women business centers, business information centers. A very easy way to get information on all of this is just to go online to sba.gov, which gets 1-1/2 million visitors every single week to the website. So there's a lot of information out there. They can call us on the 1-800 number, 1-800 UASK-SBA. The bottom line is if you're a small business or thinking about starting a small business, we'd like to talk to you because we want to be your partner.

Mr. Lawrence: What are the management challenges of making sure that money is used as it's intended?

Mr. Barreto: If you're talking about default rates or improper usage of money, we don't see that a lot. We have a very good underwriting program. Oftentimes when a small business gets to the point where they're going to get an SBA guaranteed loan, they've already gone through a couple of levels of preparation. They've already done their business planning, they've gotten some counseling, they've worked with their lender. So a lot of times, by the time that small businesses are getting to the point where they're going to get that loan, they're already been taken through that paces. That doesn't have to take a long time. But what we know is that when a small business is prepared, when they get this kind of technical assistance on the front end, their chances of success multiply exponentially, especially in those first few years when they're so vulnerable.

Mr. Lawrence: One of the things that I was interested to learn as we were preparing for this was that another service SBA provides is disaster recovery assistance. I wonder if you could tell us about this program and how it was used to help the victims of the California wildfire.

Mr. Barreto: I was just out in California, that's my home state, and we were able to help many homeowners that lost their residences. A lot of people don't realize that the SBA provides loans not only to small businesses in times of disaster, but we also do loans for homeowners or even renters who have lost personal property. And the California fires were a major disaster. We lost close to a million acres of land, something in excess of 4,000 residences. We're not even sure how many small businesses may have been lost or affected by the disaster yet. As of a couple of weeks ago, we had already topped $100 million in loans, and we know that's going to climb a lot.

But we've been there. We were there during Hurricane Isabel. A lot of people don't realize that we also made a tremendous amount of loans after 9/11, not just in New York and around the Pentagon, but to small businesses around the country that were affected through no fault of their own because of something that happened around 9/11. Maybe it was a business in an airport or a travel and tourism company, or a small aviation company, or maybe they were doing business with somebody in the World Trade Center. We did about $1.2 billion and helped save over 10,000 businesses and literally tens of thousands of jobs that would have been lost if we wouldn't have been able to help them.

That's something that the SBA has always done. We really are America's disaster bank, and whether it's a flood, a fire or an earthquake or a terrible disaster like 9/11, the SBA is there to help.

Mr. Lawrence: That's an interesting point, especially about the loans around 9/11.

The management focus of this administration flows from the President's Management Agenda. How is the SBA doing with the issues called out in the PMA? We'll ask Hector Barreto of the SBA to bring us up to date on this when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Hector Barreto, administrator of the U.S. Small Business Administration.

Joining us in our conversation is Tom Burlin.

Hector, can you give us an overview of the SBA's strategic management goals and how these goals were developed?

Mr. Barreto: A lot of our goals are very consistent with the President's Management Agenda. We want to make sure that we're managing our human capital. That's so critically important for any organization. Small businesses deal with it all the time. In other words, what kind of succession planning do you need to do; what does the next generation of leaders inside your organization look like. And that's critically important, especially to an agency like the SBA, where the average age of an SBA employee is 49 years old with 20 years' experience at the Agency. That's a two-edged sword. We're very happy to have so much experience, knowledge, compassion and commitment. But we also know that folks will move on. They'll retire or they may move to another agency. So we constantly have to be concerned with that.

It's also very important, as I mentioned before, that we use technology to reach more small businesses. Government is not getting bigger. We're all asked to do more with less. Technology can be a great leveler of the playing field, a great tool for us. So our e-government initiatives are very important. Eventually, we'd like our clients to be able to access all of our programs online if they choose to, and not have to necessarily get in a car and drive someplace or fill out a bunch of forms.

The financial management of our agency is very important as well. Every resource is critically important, especially in this environment. So we need to validate how we spend those resources and validate the results that we get out of our programs. Our budget needs to be integrated with those kinds of results.

We also need to look and make sure that whatever it is that we're doing at the Agency is the most efficient and effective way possible. I mentioned to you that the SBA really learned to leverage its resources. In the good old days, which I'm not sure if they were the good old days, we did a lot fewer loans because we were doing those directly. We don't do direct loans anymore. We do those through 6,000 partners. In the good old days, if you wanted technical assistance of counseling, you had to go to an SBA office. Now you can go to 1,200 small business development centers, you can get counseling online, you can get all kinds of expertise and knowledge from our retired executives that work for us. So there are lots of opportunities to think outside the box and to get better results for our customers. So everything that we're doing is really aligned with those very key President's management goals.

Mr. Burlin: Hector, you talk about measurements and results, and this administration is strongly supportive of the need to accurately measure and record that performance. Can you tell us what the SBA is doing in the way of measurements and tracking that performance?

Mr. Barreto: Absolutely. It is true that you get what you measure, and we've been measuring everything that we do. That was a commitment that we made at the very beginning. We said look, there is not going to be anything that's off the table. We need to look at everything that we're doing, and we need to hold our people accountable and make sure that they also have the tools that they need to be successful, and that's what we've done.

One of the things that we were able to do is implement an execution scorecard. That's what we call it at the SBA. It was mirrored after some of the scorecards that's taking place, again, on the President's Management Agenda, but we try to take it a step further. There was a great book that we read about a year ago called Execution by Larry Bossidy. It was a wonderful book that that opened our eyes. There were a lot of things that were very applicable to the way that we were doing business.

The net results are that because we have been doing that, we have been able to accomplish a lot of great things. For example, when I first came into the SBA, the average-sized loan was a quarter of a million dollars. We know that most small businesses don't need a quarter of a million or a million. Many businesses are capitalized with as little as $50,000. So we worked with our lenders to get that average loan size down. It doesn't mean that we're not doing large loans. We still have a great program where we do a lot of multimillion-dollar loans, which is really our real estate loan program.

We're reaching more small businesses, as I said, online. Last year, we trained 700,000 small businesses online. So many, many things that have been accomplished through creating some very specific objectives that we measure every day on our scorecard have really yielded great results. Just again to touch on the loans, because that's what we're known for, we broke a record this year. We did more loans this year than we ever have in our 50-year history. We were up 30 percent. But what was exciting to me is we were up in every single category in every single demographic group. So we had a wonderful year and we're looking forward to raise the bar again this next year.

Mr. Burlin: That's interesting, you said you get what you measure. Setting those targets and determining where you need to be has to be challenging. I'm sure there are many demands on your agency. How do you go about setting those targets?

Mr. Barreto: We try to do it in a very collaborative spirit. We work very closely with the folks that are on the ground where the rubber meets the road, which are our district offices and our district directors. We have a goals team that's constantly meeting and making sure that the goals that we have are not only consistent with our strategic plan, but that are also feasible and doable. So there is a lot of exchange. At the end of the day, the goals teams makes recommendations. They need to be ambitious and "stretch goals," and then we approve those and we hold them accountable to them.

Mr. Lawrence: At the beginning of the show, we talked about the overall mission of the SBA, which is increasing the health of small businesses in America. How do you measure the success of that goal?

Mr. Barreto: We get a tremendous amount of feedback from our customers, which are those small businesses, and we like to say that we measure our success by their success, and it's very important. One of the things that we look at, for example, are a lot of the bottom-line indicators. Are these businesses growing? Are they hiring more people? Is their business longevity increasing? Those are all bottom-line indicators. I know that when I was in small business, those are the kinds of things that I looked at. So we're measuring a lot of that as well.

Again, doing a tremendous amount of outreach, asking for a lot of input, and really listening to our customers. I learned a long time ago that you learn everything that you need when you listen to your customers versus talking at them. Your customers are always going to tell you what they need to be successful. So we've done a lot of that. But not just that. We've implemented a lot of those recommendations, and that's one of the reasons that I think that the SBA is more visible than it probably has been in a while.

Mr. Lawrence: In terms of the goals, I think longevity is great and the profitability, but is also growing into a big business one of the things you look at?

Mr. Barreto: Not every business wants to grow into a big business. Every business has different goals. Some folks are pretty satisfied at the level of success that they've attained. They just want to maintain it. They don't want to lose it, or if they can find better ways of doing business. I a lot of times say small businesses don't know what they don't know, and it's not their fault. They're busy, so that's really where the SBA can come in and I think be a very important strategic partner for them.

Mr. Burlin: Hector, we're all limited in some way in our resources, whether it's human capital or it's financial. How do you link those resources and the use of those resources to the results, to the performance that you achieve?

Mr. Barreto: Again, what we want to make sure of is that we're doing more of everything. So it's very easy for us to measure did we do more loans this year, did we do more loans in the fastest-growing communities, are the kinds of services that we're providing to those small business owners what they want. Something that's very important for a small business, they tell me all the time I need the same thing that big business needs. I need more business, so help me get more business. So we've done a lot of things around that as well, trying to create that environment that you referenced.

I think the President says it the best when he says the role of government is not to create wealth. Government doesn't create wealth, Americans create wealth; small businesses create wealth. The role of government is to create an environment where entrepreneurs who are willing to take a risk, an environment where they're willing to risk capital, an environment where they're being heralded and celebrated. So we've spent a lot of time over the last couple of years making sure that the right environment, the right conditions are there for those small businesses to be optimistic about their future, and to also take their business wherever they want to take it.

Mr. Burlin: You come from that community, and you say a lot of your results and your feedback comes from the community. Both as the administrator and having come from that community, do your old friends call you and give you a report on your results?

Mr. Barreto: Every day. Small business people are some of the most passionate people that you're ever going to meet. They're not shy. They're going to tell you, if you're doing well, they're going to tell you what you need to be doing more of, and we try to listen to that as much as we can and again apply a lot of what it is that we have learned.

By and large, I think we're making some good progress. We're not satisfied. We're not again resting on our laurels. We think that the best of the SBA is yet to come. We want the SBA to be strong and very relevant in the lives of these small businesses for at least another 50 years. So I think the kinds of things that we're doing right now are very important to plant the seeds for the future.

Mr. Burlin: You talked about change and the importance of change. The buzzword is transformation, and we know that this is across government. Can you tell us a little bit about transformation in the SBA?

Mr. Barreto: Sure. It's very important. I tell our folks all the time that small businesses are constantly changing. They know that you're either moving forward or you're moving backwards. There is no such thing as staying in place. So as those small businesses have changed over those 50 years, and they have changed a lot and there's a lot more of them, we need to change too. The good news is that SBA has been changing a lot over the last few decades. There are things now that we do that we were never able to do before, and we need to keep doing that.

One of the things that we're looking at is the way that we distribute our programs and our services, especially out in the field. One of the things that we want to make sure that we're doing is that we're freeing up those SBA employees to be out there in those communities to reach out for more small businesses. Not wait for the small businesses to come to them, but for them to go out and find those small businesses, and that's what they're doing.

What they've told me many times is we're as passionate about small business as you are, but a lot of times, our hands are tied. There's a lot of process, there are a lot of responsibilities, there's a lot of bureaucracy that we're responsible for, and if we have to do that, we can't be out there developing these new partnerships and helping these small businesses. So we're looking at ways that we can take a lot of that away from them, and we've found some ways to be able to do that. So that's one of the things that we're very excited about.

There is not a recipe or a cookie-cutter approach to every district office. They're all in different parts of the country and they all have different approaches. But we've been able to be very flexible and work with them and really find some creative strategies on how we're able to reach more of those small businesses.

Mr. Lawrence: That's an interesting point.

The SBA is celebrating it's fiftieth anniversary. What do the next 50 years hold? We'll ask Hector Barreto of the SBA when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Hector Barreto, administrator of the U.S. Small Business Administration.

Joining us in our conversation is Tom Burlin.

Mr. Burlin: Hector, you've talked a couple of times about how technology is enhancing the effectiveness of the Small Business Administration, and computer network security is a critical issue, not just to large business but small business, and probably a challenge across the digital divide to many of your clients. Can you tell us a little bit about how you're educating your constituency in this very important practice area?

Mr. Barreto: We think it's very important. A lot of this education again happens through our technical assistance providers, our small business development centers, our retired executives, but we've also done some new things. For example, we're working closely with Tom Stemberg of Staples. Tom Stemberg was one of those small businesses that came to the SBA for assistance and of course now is a great success story. He is very interested in this issue, and we've been doing some town hall meetings in Staples stores around the country, and also producing a newsletter together to give small businesses some tips on how they can protect their business from cybertheft and from other problems that they may encounter.

There's an old saying in business that no small business plans to fail, but many small businesses fail to plan. So to the extent that they can have contingency plans and really understand where they're exposed, that is going to help them a lot. We saw that after 9/11. The businesses that were prepared, that had a contingency plan, could get back on their feet very quickly. Some that didn't never made it back. So this is a very important issue for a lot of small businesses, and a lot of times they don't realize how exposed they are.

Mr. Burlin: And they're highly dependent on it. As you've talked about having more and more access to the SBA through their electronic means, it becomes even more important. In the Small Business Administration, you talked about your geographic dispersion, the district offices across the United States. You maintain several resource partnerships. Can you describe a little bit about the resource partnership and how you plan to use that to leverage your presence?

Mr. Barreto: Absolutely. We're great believers in public-private partnerships. That's the way that we're able to leverage these resources. I mentioned to you all the things that we're able to do with all these partners by having the banks. This year, we also opened up our loan programs to credit unions. We'd never done that before. Many folks go to the credit unions to get small business loans. They are working, but they also have a business on the side, so that was a great thing. We're training more people, as I said, through the small business development centers, which are independent from us. There are 1,200 of them. We provide the financing and a lot of the best practices. We work with the retired executives. That's another partnership.

We're increasingly working with more and more corporations, because corporations are also very focused on the small business community, and they have partnered with us so that we can reach them together to educate them and inform them and really develop some success stories with these small businesses. So that's very important, and that's going to keep going on in the future, because it's critically important and it just makes a lot of good sense.

Mr. Lawrence: Earlier in our conversation, you talked about the SBA celebrating its fiftieth anniversary this year. What's your vision for the SBA over the next 5 to 10 years?

Mr. Barreto: We want SBA to do more. We want to reach more small businesses. As I said, there are 23 million small businesses. Many of those businesses weren't around 5 years ago or 10 years ago. In the cases where we need to, we want to reintroduce ourselves to small businesses, especially if they think that they already what SBA does, kind of like the way I did. I thought I knew all about SBA and I really didn't. In other cases, we need to reintroduce ourselves, so we'll do much more outreach than we ever have, and we do a lot now, but we'll do even more. We'll reach more people through the Internet. That's just a great way to reach people. As I mentioned to you, we're getting about 1-1/2 million visitors to that website every single week. We'll also make that a very effective tool for them so that they can apply for our programs. I think there will come a day when small businesses will be able to go online to get their loans. They're already going online to register for our major events, to register for our contracting programs, to get forms that they download. So there are a tremendous amount of things that we can do there.

Also, we want to do very impactful events across the country. This year, we've been doing regional events. We've also been doing some major procurement events, where we actually take the buyers out of Washington, D.C., and take them to Main Street. This has enabled us to set up more than 10,000 one-on-one procurement appointments for small businesses. It really takes the needle out of the haystack when you're talking about trying to do business with the government. That's been a very effective initiative. We want to continue those kinds of opportunities for small business.

Mr. Lawrence: Have the trends in the small businesses that are your customers changed over time? Was a small business 10 years ago the same people now?

Mr. Barreto: I just think that they're in more industries. There is not a particular sector where you find all the small businesses. It really cuts across the board. You have high tech companies, you have manufacturers, you have service providers, consultants, retail, you name it. Many more businesses are getting involved in international trade. People don't realize that. Ninety-seven percent of all businesses that do international trade are small businesses. That's over 200,000 companies. That wasn't the case 5 or 10 years ago, and so you're starting to see it.

Also, the growth that you see in different communities. I mentioned that the fastest-growing segment are the emerging markets, which are the minority communities. They represent 15 percent of all small businesses in the United States. Women represent 40 percent. Those weren't the same kinds of percentages when the SBA first started in 1953. So that's exciting. That's breathing a lot of new energy and enthusiasm into the small business sector.

Mr. Burlin: Hector, let me take you to the other side of the spectrum. I'm a little bit envious actually of your day, as least as I imagine it, because I know when I get to work with small business and get to sit in front of folks, you talked about their passion and enthusiasm for their business, are some of the most reinvigorating days that I spend at work. The question is, large companies, how can they engage to be more proactive in this process of engaging small business?

Mr. Barreto: Many of them are already doing it. IBM does a great job of focusing on business solutions for small businesses, and I know that they want to do a lot more. I think that small business is really on the radar screen more now than ever before. In some cases, I think SBA had a hand in putting the spotlight on the importance of small business, and many more people have gotten involved. Obviously, the SBA would love to be a partner with any organization that wanted to reach out to small businesses, and we hope that they'll give us a call. But there are so many opportunities to do this. There are so many organizations that represent small businesses, and so there is really no excuse for those that are really committed to helping small businesses not to be involved, especially now.

Mr. Lawrence: Hector, you've had an interesting career, primarily in the private sector, but now coming to the public sector. So I'm curious, what advice would you give to somebody interested in joining the public sector?

Mr. Barreto: The first advice is it's not about you. That's the first advice. When you come here, you really need to be coming from the place of wanting to serve, to wanting to make a contribution. I think it's also important to be passionate about your work. I would say that in any activity that you're involved with with regards to your career. But when you're doing it not so much as a job but as a higher purpose, you can get so much fulfillment out of it and your days can fly by, and it's a lot of fun. It's fun to work with the level of people that we get to meet and work with every single day. It's an exciting, exciting opportunity, and it is very fulfilling.

Mr. Lawrence: Hector, I'm afraid we're out of time. Tom and I want to thank you for squeezing us into your very busy schedule.

Mr. Barreto: Thank you very much. I hope that all that listening that are interested in the SBA will reach out to us at sba.gov, or you can also call us at 1-800 UASK-SBA. Paul and Tom, thank you very much for this opportunity.

Mr. Lawrence: Thank you.

Mr. Burlin: Thank you.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Hector Barreto, administrator of the U.S. Small Business Administration.

Be sure and visit us on the Web at www.businessofgovernment.org. There, you can learn more about our programs and research into new approaches to improving government effectiveness. You can also get a transcript of today's very interesting conversation. Again that's www.businessofgovernment.org.

This is Paul Lawrence. Thank you for listening.

Hector Barreto interview
03/27/2004
Hector Barreto

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