Arlington, Virginia

Tuesday, January 22, 2002

Mr. Lawrence: Welcome to The Business of Government Hour.� I'm Paul Lawrence, a partner of 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 this morning is with Norman Bowles of the FAA Logistics Center in Oklahoma City.

Good morning, Norman.

Mr. Bowles: Good morning, Paul. It's a pleasure to be here.

Mr. Lawrence: Great.� And joining us in our conversation, also from PWC, is John Kamensky.

Good morning, John.

Mr. Kamensky: Good morning, how are you doing?

Mr. Lawrence: Well, Norman, let's talk about the FAA. It's received a lot of attention recently, but I'm guessing that many of our listeners don't know it's a full range of responsibilities. � Could you describe its mission, its activities, for our listeners?

Mr. Bowles: The FAA is the one-stop aviation safety organization. � Most people know us for our air traffic control system, so if you're going to fly from New York to San Francisco, you're going to go through the air traffic control system. � But we also provide the regulation of the airlines and the flight attendants -- the pilots, the people who person the airlines. We also, if you have a large airport in your city, Federal funds from the FAA have gone into that.� We also regulate something that's very unusual, the commercial space transportation.� Those rockets that are putting satellites into space are now regulated by the Federal Aviation Administration.

Mr. Kamensky: Well, how does the role in the activities of the FAA's Logistics Center fit into this broader FAA mission?

Mr. Bowles: When we talk about the air traffic control system, there's something like 45,000 different systems that make up the air traffic control system. � These are located in 28,000 locations around the United States.� We provide the parts to the air traffic control system -- to radar, to the landing systems. � We also do what is known as depot-level repair.� Those things that can't be repaired in the field, we repair in Oklahoma City. � We also have traveling teams that go around and repair the radar that are used to the air traffic control system. � We do logistics consulting.

And all of this is done now on a fee-for-service basis.� We now have a new service that we are offering, and it's solutions through a contracting device comprised of 150 companies where people in the FAA who are trying to find additional capability to modernize the air traffic control system can get help.

Mr. Lawrence: How big is the Logistics Center?� How many people, what type of a budget do you have?

Mr. Bowles: We are about 600 people, 550-so Federal employees, and we have another hundred or so contractors.� Our revenues are on the order of $120 million a year.

Mr. Lawrence: And you described a wide range of activities in terms of the different functions.� What type skills do these employees have?

Mr. Bowles: We have engineers, item managers, technicians, logistics consultants.� A wide range of professions and disciplines.

Mr. Kamensky: Norman, let's spend some time talking about your career. � You and I first met probably about 8 years ago.� Tell us a little bit about your career as a change agent in the Government?

Mr. Bowles: Well, John, I've had a marvelous career, I think, from that perspective.� I've worked in a number of different programs.� I started off in the Federal Railroad Administration in the mid-'70s, and went to the Office of the Secretary of Transportation in a time when the Department of Transportation was relatively new.� For those people who are not familiar with the Department of Transportation, we have the Coast Guard, FAA, Federal Highways.� At the time that I had gone there, those agencies had come from different places, so the Treasury Department was the one that provided the Coast Guard. FAA was an independent agency.� The highway program came from the Department of Commerce.

So in the very early years, we were trying to create a consolidated and unified Department of Transportation. � I worked as an internal consultant and at that time got an opportunity to work with all of those different agencies.

At one time we tried to merge the Federal Highways and the Transit Administration, two organizations with very different cultures, different constituencies. We came very close to being able to do it. During this time, we were consolidating the field, rationalizing the field among all the different organizations.

I had an opportunity to work on one of the first studies that recommended privatizing the National and Dulles Airports. At that time, they were part of the Department of Transportation.

During this time, there were a lot of things going on in transportation.� There was deregulation going on, so they were sunsetting the Civil Aeronautics Board.� The Northeast Corridor Railroad System back in those days failed, and so the Federal Government did a takeover, and we created a new organization called the United States Railway Association.

And so in that period of time, I had the opportunity to work with a lot of different programs and learn a lot about the different cultures of organizations and how you lead them through a change period.

In 1984, President Reagan made the decision that we were going to privatize commercial space transportation, the launch of rockets into space.� Up to that time, it had all been done by NASA and by the Air Force. � Secretary of Transportation Elizabeth Dole wanted that function, and so did a number of other agencies. � But the argument that won the day in terms of which agency got it was the agency that said this industry was going to have to be regulated in a brand new and entirely different way.

So I had the great experience of being tasked with building that brand new regulatory function, and I did that for 10 years.� It was really quite a challenge, because of a number a things.� Number one was that the Air Force and NASA dominated space at that time, and in the privatization effort, they could be both a support, but they could also be a barrier.

The second thing that made it a challenge was, there's really a very different view between the Federal Government about what space should be used for and the private sector, which saw it as a great place for commercial exploitation.

Then the other challenge that I found that was a very broadening experience is, it involved a lot of work with a brand new industry as well as some established industries. � It involved a lot of work with the Hill, with the public, and the press.

So in that period of time, I got to do a lot of firsts for the Federal Government.� I licensed the first commercial space launches, approved the first commercial space launch site, set the insurance requirements for a brand new industry, and even had the distinction of being the first one to approve space for the use of burial of human remains.� So it was quite challenging, and it was a very different experience.� The thing that I came away from that one with is that you can go on the assumptions of what conventional wisdom were and how things ought to be, because every time you turned around, somebody had a different idea than what was the prevailing thought.

After that, in 1995 is was when I got to meet you, John.� That's when I went to the National Performance Review.� That was another exciting experience, and one in which I really got an opportunity to see the best of the change leaders in the Federal Government.� During that time, I was on a team lead that was overseeing and facilitating changes that were taking place in seven different cabinet agencies.� I had the privilege to be a project director for a National Performance Review book and to participate in a number of different other changes.

In 1996, mid-'96, is when I went to the Logistics Center, and I've been leading their effort ever since.

Mr. Lawrence: Tell us about your role as the program director.

Mr. Bowles: As the program director, I'm the senior official in the Logistics Center.� It's a leadership position that I really see primarily as a change leadership.� The Logistics Center has a very interesting place within the Air Traffic Control System.� It's actually a leverage point that we can talk about a little bit later. � And if you can introduce changes into the Logistics Center, they actually have a tendency to carry all the way through into other parts of the FAA and really boost the rest of the agency's performance.

Mr. Lawrence: Was there any one job, as you describe your career, that best prepared you for this present job?

Mr. Bowles: I think it was the combination of all of those jobs. � In the first 10 years, it was dealing with all those different agencies -- the one thing I could tell you would be that whatever you would find one agency thought was illegal, another agency was doing.� And if anything, that becomes that real beneficial perspective of that part of my career, as well as working for the National Performance Review: It is that most people in the government's perspective of what's doable is limited by their own imagination, or by their own perception of the rules.

And that's actually, I think, one of the biggest impediments to the changing Government. � We really are bound at times by narrow interpretations of the rules that are founded by our own agency cultures.

Mr. Lawrence: Did you plan the changes you made throughout your career?

Mr. Bowles: Each job seemed to come at the right time and the right place, and it almost seemed to be a natural segue. So the first 10 years gave me a lot of exposure to different regulatory programs. And the reason that I think I was selected to lead the one for the space program and build the regulatory program for that was because I was able to see that there were a multitude of different regulatory strategies and approaches.� And had I only been in one agency, I never would have been able to see that.

Then going from space to NPR was an easy jump because of the concepts of dealing with different agencies on a fairly big change plane.� It was a fairly easy to do. And besides, space is really an out-of-the box experience.

Mr. Lawrence: Come back with us after the break as we continue our discussion with Norman Bowles of the FAA Logistics Center.� We'll ask him about the changes that have been taking place. � In particular, we'll ask him why they became ISO 9000-certified. If you don't know what ISO 9000 is, you'll learn more when The Business of Government Hour returns. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour.� I'm Paul Lawrence, a partner of PricewaterhouseCoopers.� And this morning's conversation is with Norman Bowles, program director at the FAA Logistics Center in Oklahoma City.� And joining me, also from PWC, is John Kamensky.

Mr. Kamensky: Thank you.

Norman, when you left NPR in 1996, you went out to Oklahoma City, you took over their Logistics Center. � What did you find when you got there, and what did you do?

Mr. Bowles: I found an organization with a great group of employees and a really challenging mission, but I also found an organization that was in trouble, like a lot of the logistics organizations around the Federal Government. � Norman Mineta at the time had been asked to do a study for Al Gore on the air traffic control system. His commission recommended, among other things, that the logistics function be outsourced.� At that time, there was some senior associated administrators who were asking, or suggesting, that the Logistics Center should be closed down.� And every time I'd go into D.C. to meet with our number one customer, his question to me would be, "Well, Norman, why do we need a logistics center?"

So that was where we were 5 years ago.� To give you kind of a teaser, here's where we are today.� The Logistics Center 2000 and 2001 won the President's Quality Award recognition. � One year we were a merit award winner and the next year we were a finalist.� We were, by the way, the only nonmilitary organization or nonmilitary-related organization to win those 2 years.� A GAO report this year went to Congress and touted us as a model of employee empowerment.� We're listed in -- two management books have sections devoted to our strategic planning process. � And we're ISO 9000-certified. � And we believe that we're the highest-performing organization in our class in the Federal Government. � And in the last year we've been recognized by industry, by the Office of Personnel Management, and by the FAA for some of our accomplishments.

We did that by two things. Five years ago, in 1996, we set two goals. One goal is that we want to take our $120 million in appropriations -- because at that time we were an appropriated organization -- we were going to give all the money away to our customers. � And we were going to go into a revolving fund, and instead of giving parts away free, we were going to charge them, and that's how we were going to collect our salaries and our contracts and our benefits money.� And it would also make the FAA work better if we did that.

The other thing was that, since we're going to give our money away in 3 years, we figured we'd better really do a turnaround in 2, so that when our customers got the money, they didn't decide that they wanted to go elsewhere.

Mr. Kamensky: What did your employees feel about all that?

Mr. Bowles: It was kind of a mixed feeling.� Everybody was a little bit worried about the fact that there was so much discussion about us being closed down, and at the same time, the prospect of giving money away that contained our salaries was kind of a frightening prospect.

Mr. Lawrence: Well, how did you get there?� You decided you were going to give away the money, you were going to turn it around in 2 instead of 3 years, but how did you actually get there?

Mr. Bowles: We did it with an incredibly wonderful work force that wouldn't quit.� But we did a number of things.

To make changes like this, most Government agencies would say, "Oh, well, we need additional money."� And we recognized that our budget was declining and our staffing was going down, and we weren't going to get any more money.� So we decided we would take the approach that they do in the private sector, like Chrysler back in the '70s when the Japanese auto makers were coming in. � It was the idea that you're losing market share, you're losing revenues, you're laying off employees, and you've got to get your product better than your competitor, who actually is the one who's flush with money.� So we decided that if we got cut in a budget year, we would cut ourselves even more and take that additional money and invest it.

We moved all of our managers. � The idea was that we would not own the organizations that we were heading.� We were going to be responsible just for making the changes. � And so this gave all of our management team a lot more flexibility to make changes.

Mr. Kamensky: That meant your CFO went to go ahead with something and your IT expert --

Mr. Bowles: Our engineer, our top engineer, went to the distribution organization.� And so we moved people around. It was really a marvelous experience, because this is where you learn the difference between management and technical knowledge within the Government.� Probably a lot of other places as well.� People get promoted because they're technically proficient.� What this meant was that we were going to be taking people and we were going to be relying on their management skills, rather than their technical skills, to lead this change.

We really had to increase the training for our workforce.� As you say, they were a little worried.� In a 9-day period we took 600 employees, 200 at a time, in intensive 3-day sessions, learning how to be a customer-driven organization.

Mr. Kamensky: And you led all those yourself?

Mr. Bowles: I participated in the training of every one of those sessions, yes, I did.

We created a lot of teams. � There were a lot of gaps that we had. �We had no performance measurements. � We didn't do very well in the way of customer service.� So we created teams wherever there was a gap, and these were almost entirely employee teams with no supervisors, or just occasionally there might be a supervisor.

These teams were tasked to become experts in their particular areas, because they would help us come up with the fixes. We had the opportunity or the choice of either going to expert consultants and having them tell us what to do -- and you run into that problem of not-invented-here -- or what we could is use our employees to become experts, and then they could adapt to whatever they knew. � So what we did was, we created those teams, and then we let them do benchmarking.� And our turnover is not very great in Oklahoma City. � At the Logistics Center, it's about 3.8 percent at that time. So we weren't getting an influx of new ideas.

But by sending these teams out to the best places in the United States and giving them their opportunity to see the best, they came back with a number of things. Number one, so dissatisfied: They didn't want to work in a place that wasn't what the best was. � So that was number one. � Number two, we came out with large numbers of change champions, people who had a passion for what they were doing. � And so we ended up with the makings of a very good cost and performance measurement system, with a 1-800 24/7 customer care center.� So at one point in time we had somewhere between 10 and 20 percent of our workforce off making changes.

We did all the changes simultaneously rather than sequentially.� If you have only 2 years, you don't have a lot of time to do things one at a time.� Since we're going to be a business, what we did is, we decided we would throw away the traditional way of tracking the money the Government sends in.� We brought in the controller from one of the largest food distributors in the United States the day he retired, brought him in to change our books over to a financial private sector-like system.� So today we use private sector-like financial statements. � We do have the backup Government types of documents.� But our organization runs entirely off of private sector-like financial statements.

We partnered with the union. � There was no way that we were going to give away our money and make all these changes if we didn't have a very good working relationship with our union.� So at that time, since this was kind of a Hail Mary pass, what we did is, we just included the union in everything. The concept of management rights, we just totally ignored.� Anything they wanted to see, they could see.� Anything that we were going to decide, they participated on.� But it gave us 2-1/2 years of a really rapid change process. � Then we realigned our organization. � It had been all functionally aligned. � We went into a product division structure.

The outcome was really pretty phenomenal, in fact, so much so that last year that there was a study that was done by the Reason Foundation on privatizing their traffic control system. � And they had all their discussion about how other countries had already done this.� But they said that the reason that it would work in the United States was because the FAA had already proved that it would work in the FAA, because there was an organization down in Oklahoma City that had essentially privatized itself and had these phenomenal performance changes.

Mr. Lawrence: Could you tell me the role of money?� You mentioned two things in that description that were very interesting.� First you said you were going to give away all the money.� Then you said it was very important that you have private sector financials to, I guess, track the money.

Why were both of those things so important?

Mr. Bowles: Well, giving away the money was very, very important because number one, it was going to have a lot of changes to the FAA. � You've read a lot about the air traffic control system and the modernization process.� The Logistics Center, in giving away all of the parts, was not -- probably was not, in the long run, something that was good for the agency. � It just had been a practice that had been done for a long time.

It also made a lot of difference to the Logistics Center, because if we were on a kind of fixed mission, and that mission was slowly declining, there was no opportunity for the Logistics Center to get into something new.� But if we gave away the money, then we, in essence, would be contractors, and now our performance would really make a lot of difference. � So that covered the first one.

The second thing that you were asking about was the --

Mr. Kamensky: The importance of financial systems.

Mr. Bowles: Oh, the financial statements.� With the financial statements, we would really be able to tell how well we were doing.� It wasn't a matter of working with budgets.� It was trying to be able to track our gains and determine our costs as well as they could in the private sector. And, in our minds, if we were going to be super efficient, we really had to be as efficient as in the private sector.

The goal was this. � The goal was that if we were in the private sector, you wouldn't want to compete with us.� It wasn't if you were in the Government and you were in the private sector, looking at the Government, saying, "Oh, they're not doing a bad job."� The goal was that if the Logistics Center ever got privatized, you wouldn't want to be one of our competitors.� So the best way to do that was shoot with that as the target at the outset.

Mr. Lawrence: Great, and that's a good stopping point. � Rejoin us after the break as we continue our discussion with Norm Bowles of the FAA Logistics Center.� This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour.� I'm Paul Lawrence, a partner of PricewaterhouseCoopers.� And this morning's conversation is with Norman Bowles, program director of the FAA Logistics Center in Oklahoma City.� Joining us in our conversation, also from PWC, is John Kamensky.

Mr. Kamensky: Norman, you told us a little bit about the kinds of changes that occurred at the FAA Logistics Center.� How did that affect the rest of the FAA?

Mr. Bowles: A number of different ways.� Let me just talk about the one about the giving away our money, though, first. The best way to describe it is what we had was a free-issue system, meaning if somebody in the air traffic control system needed a part, all they had to do was call us and get a free part.� DOD used to use that kind of a system.� They eventually got rid of it.� They described it as a communistic system, and they had a hard time figuring out how they could fight the Cold War using a communistic system. � So the last vestiges of free issue disappeared in DOD in the last 20 years.

I personally believe that the free issue system was part of FAA's problem in modernizing the air traffic control system. The FAA has got many really dedicated and talented people. � And so the people in the field -- the 6,000 people in the field who repair the air traffic control system -- can fix just about anything.� The people in the Logistics Center can fix any part, no matter how old it is. � And so when the agency would start running short on funds and they would say, "Well, we'd like delay the modernization of something, of the particular system." They would go out to the field and they'd say, "Well, what would the effect be if we delay the implementation or the replacement of this?"

The people in the field would come to us and they would say, with the effect, "Are you going to be able to support us with this old equipment?"

Our answer would be, "Yes, of course we can."

And then their answer to the headquarters, they'd say, "Well, there's no impact."

Over the long period of time, that began, I believe, to have an effect, a negative effect. � When we started charging people for parts, all of a sudden the people in the field were able to connect their labor with the parts and the costs of the parts. If you're a technician and your job is to repair things and if somebody keeps you with the free parts, that's fine. � But when you start seeing what the costs of those parts are as a taxpayer is when you start to have your reaction. � And so there have been a lot of changes in the field in terms of the behavior.

Mr. Kamensky: Can you give an example?

Mr. Bowles: Oh, I can give you a number of examples. � One of the problems that the agency was running into was that, because there would be repeated cuts of various programs, projects for implementing or deploying new systems would start to run out of money toward the end of those programs. At that time, the people who were doing the installation of new facilities would turn to their operational counterparts in the field and would say, "We're out of money. � Can you get parts?"� And so they would come to the Logistics Center, they would order the parts -- the parts were free -- we'd send them the parts, and the facility would get completed.� Now, there was a hidden subsidy there, because the operational capabilities and dollars of the agency were being drained by the lack of funding on the implementation side.

The first time that the people in the field had to pay for those parts, the first time that somebody came in and said, "We don't have enough money to finish this facility," the person that failed said, "I'm sorry, this is my money, I'm not going to finish this project for you.� That's your problem," that created a crisis within the agency that quickly got resolved.� And as a result, these facilities now have enough money to be finished.

It used to be that when you were in the field, if you needed a part -- and since the performance of the Logistics Center was a little bit uncertain -- if you needed a part, you might order three.� What happened is, when we started -- or you didn't know what the value of a part was, and so you might take an extra part, you might store it, and then later on, when you need another part, you might order another one.� When people started having to pay for their parts, all of a sudden they started ordering only one.� Or if they were going to order one and they realized they had one on the shelf, they might use that one instead.� The first 2 years, the demand for the traditional parts dropped something like 30 percent.

There were a lot of decisions that were being made when parts were free, when somebody would say, "Oh, I've got this radio. I need to have it repaired," and they'd send it to the Logistics Center to have it repaired, because that was free. � Because they couldn't see what the cost of that was.

However, when we started charging them, what they saw was, it cost $2,000 to repair a radio or you could buy a brand new one for $400.� I got a call from one of our top customers in Washington, D.C. � He said, "Norman, is it true that you'll carry different things now that we're paying for these parts?" � My answer was yes.

He says, "Well, you know, we're noticing that this particular monitor for this radar system costs $28,000 to repair. It's a black and white.� And we notice that there's a $7,000 color monitor that the air traffic controllers like better.� Can you start carrying that?"

Well, in the past, that organization would not order new equipment, because that was the job of the acquisition side of the FAA.� But all of a sudden, they're able to see what the real cost of it was, and that it makes a lot more sense to buy a brand new one than pay $28,000 for a repair. � So rather than waiting for the acquisition side, the operations side was now beginning to modernize the air traffic control system.

There are all sorts of examples where people couldn't see obsolescence within the air traffic control system.� But today there's a particular radar that's got just six parts that have gone up in cost a million dollars in the last 2 years.� And in the past that would have been invisible, so the agency wouldn't be able to deal with it. � The Logistics Center might know, but unless anybody was really paying attention to what we were saying, that might not get addressed. Now there are 6,000 people in the field who can see those obsolescence costs, and so the agency now is getting a lot better at being able to address those.

It really is a fundamental systems change, and what's really powerful about it is, it's not one that requires top management direction.� It's a systems change that just alters behavior, because it's a fundamental paradigm shift.

Mr. Lawrence: In the last segment you talked about the period of change that has taken place during your tenure, and I'm curious. � Normally, employees resist change in these kinds of periods. � How do you incent the employees to facilitate the change?

Mr. Bowles: Actually, first of all, I don't believe that people consciously resist change.� All of us deal with change every single day in our lives.� If you bought a computer and it's a brand new computer, one year from now it's going to be obsolete.� And car metals change on us and food products change on us and our favorite television shows change.� People really aren't resistant to change.� I think a lot of times, it's the system itself or people are not motivated or they can't see why there's a need for a change.

In our case, we've got two programs that we're particularly proud of.� One of them is an informal award system where it involves a recognition of less than $50.� We partnered with an employee association store to carry something like 50 different items, all of the same value, and we have coupons that we give out to our work force when they do things right.� And we try to give out about 10 percent of those coupons a month. This is to reward risk taking, innovation, those kinds of things.

This year we were moving something like 300 of our employees from one building to another. � Our performance levels were really, really high, and we really wanted to get our work force to focus on specific goals of maintaining the quality level, the responsiveness that we have, and at the same time try to break even.� So we came up with a program where we offered our employees a bonus of $500 apiece at the end of the year if we hit these four targets.� We told the union we definitely wanted to be able to pay out, and so we worked with the union to get the performance standards into every single employee's performance standards, so they were all tied to those goals, and each person had their specific task.� If they did and they all added up and we all achieved it, we would get those bonus.

We came very close. � We gave out $350 in bonuses to every single employee this past year.� That cost us a couple hundred thousand dollars.� But we would have been willing to pay millions to get that kind of performance in the first place.� It worked really well.� In fact, we're going to do it again this year.� Our workforce responded very well to it.� It helped them stay focused, and it gave them a sense that they know where they fit in the mission of the Logistics Center, and it gave them an opportunity to believe that they can make a difference.

Mr. Lawrence: We know the Center became ISO 9000-certified. � Why was that important?

Mr. Bowles: It was a number of things.� Number one is, ISO 9000 is the international standard of quality. � It's a very rigorous standard. � It's not something that you just get. � Actually, it's certification. � You get audited every 6 months.

And so while we're making all of these changes, it was a difficult enough process that tied everybody in the organization to the same thing, and this allowed us to make a lot of other changes while they were all focusing on the ISO 9000.

The other thing is, if you really want to be able to turn on a dime and make a lot of changes on a continuous basis, the difficult thing is keeping quality, because you've got some things that are working, and then you're going to make another change and it's going to affect those things that are working.

ISO 9000 actually is a very good platform for that, because it documents everything that you do. � When you start making changes, you document those as well. Now you know what the effects -- and you can trace the effect of that change throughout the whole organization.� We have one organization, the item managers, that in the last several years made 600 changes to their work constructions. � Six hundred different changes.� And ISO 9000 lets us know exactly where we made a mistake. � You can do something that will show up 6 months later in your quality, and with ISO 9000, you can trace it back to when you made that change.

So it's a phenomenal tool. � We really exported that throughout the FAA.� A half dozen FAA organizations have now adopted ISO 9000.

Mr. Lawrence: That's a good stopping point.� Rejoin us after the break as we continue our conversation with Norman Bowles of the FAA Logistics Center.� This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour.� I'm Paul Lawrence, a partner of PricewaterhouseCoopers, and today's conversation is with Norman Bowles, program director, FAA Logistics Center, in Oklahoma City. � Joining us also from PWC is John Kamensky.

Mr. Kamensky: Norman, you've told us some fascinating stories in the last segment about change.� What lessons have you learned through the restructuring process at your center that you think you can share with other agencies?

Mr. Bowles: I think that there are a lot of things to be learned from the Logistics Center in our experience.� First and foremost is that change is chaotic.� And if anything would cause people to back off from change, it's the fact that it is chaotic.� So if you're interested in making performance changes, you have to look past the chaos and you have to focus on the results.� I believe that results are more important than process, and chaos is process, if you can understand that.

The other thing is that performance changes that come out of a change like this are not linear; they tend to be exponential. But once you start getting those changes made, it's really important to start focusing on what the successes are, rather than wait till the Big Bang at the end.� For the Logistics Center, I think that's what made it so that our employees were able to continue through this process, because we spent a special effort on trying to communicate the successes.� In a process like this, it's really important to focus on measures rather than perceptions, and the reason being that the chaos of change -- and it's a positive term, not a negative term -- can be a little bit misleading.

And let me give you an example. � We were about into the second year of our change.� We'd been taking 10 to 20 percent of our workforce off the job to be making these changes. � And all of a sudden, I start getting some managers coming to me, saying, "You know, we've got to stop this. � Our production is going down and our productivity is going down."

This was a little odd, because at the same time, I was hearing from our customers that they didn't know what was going on down there at the Logistics Center, but, boy, whatever it was don't stop it, because they really liked it.

So we created another employee team -- of course, that's our solution -- to take a look at it, and they started taking a look at why were our numbers going down. Well, what they found out was that we were measuring the wrong thing.� We were measuring outputs rather than outcomes. � And so if you deal on the perception side, it's very easy to get discouraged about the change. � But if you're starting to watch the results, that becomes really important.

And then finally, I think that the thing I would say that we learned is that you don't change the people. � My management team is pretty much the same as the one that I started with, and my employees are all the same. � All of these achievements have been done with that same group of people.� It's not that the people don't want to do a great job; it's that the systems that they're working in are the barriers.� So if you start looking for systems changes -- things like ISO 9000, that gives somebody a better basis on which to do their quality -- if you give away your dollars and it allows people in the field to make a better decision, you can get some really startling and amazing outcomes.

Mr. Kamensky: Well, you've just described the change in the system at FAA Logistics Center and then also the change in behavior.� What kinds of these changes do you think are replicable elsewhere in the Government?

Mr. Bowles: I believe that everything that we have done is replicable. In fact, we believed in that so much, and we took a sheet of music from NPR and we started doing publications.� And so we have two publications that we share with other Government organizations. � One is a book called "Paradigm Shift: Changing Government Using Private Sector Approaches." � And it chronicles how we made our changes.� We have another one that's a little more light-hearted, but equally serious, and it's a book that was called "A Taste of Reinvention."� We first published it back in 2000.� It's "A Taste of Reinvention: Sizzling Change Recipes from the Heartland." And we've got wonderful recipes in it like "Chaos and Risk-taking in the Kitchen," "Communication Omelet," "Strategic Plan for a Reinvention Restaurant."� It's written by managers and by employees, and it actually describes the strategies that we are using. So there have been a number of organizations that use this for training their workforce.

But it is replicable. � I believe that you're seeing the trend toward the same thing taking place throughout Government. The franchise funds were the start of that. And, by the way, actually when we say a revolving fund, we used a franchise fund for this purpose.� But President Bush has a proposal, or will be making a proposal that would take all the funding for administrative programs and put them in the program operations, and those program operations would pay for the services that they get. And it's just yet another sign that the Government is moving more and more into the business mode.

Mr. Lawrence: Throughout our conversation, you've talked about dollars and measuring and having outcomes, and even having a bottom line. � Why is it so important in a public setting to have a bottom line?

Mr. Bowles: I think because in the private sector, we use the bottom line to determine what companies will stay and what executives in those companies will stay. There's nothing like a bottom line to get somebody focused on using measures and on genuine performance.

On the other hand, take the 10 worst Federal agencies -- and take your pick, whoever you believe those are -- where there is no bottom line, and those are still here today. � And so are all the executives. � And how do you measure? � How do you really determine that you're not getting your money's worth?� I think that there are some people in the Federal Government who say that Government is not a business.� I believe we are a business; in fact, your radio show is called The Business of Government. � We do a lot of things in the Federal Government that seem to be, we believe, unique.� We give out grants, we do research and development, we do major insurance programs.� But just virtually anything that we do in the Federal Government, you're going to find a private sector counterpart and maybe a not-for-profit, like the Ford Foundation, and I believe the Endowment probably gives out grants.� And all of those organizations have a bottom line, and it's the means by which they decide whether they're going to stay in business or not. � So I believe that it really makes a tremendous amount of difference in terms of accountability and how much the taxpayer gets for its money.

The one thing I would say with the Logistics Center is, our performance is 30 percent higher or more, and it's all because we created a bottom line, because now we really have a lot of real-life incentives to make sure that we're not only delivering a really service, but there's a value for our service.

Mr. Lawrence: Let me ask you about the people who were involved in the change. What qualities do leaders need to implement these changes?

Mr. Bowles: Well, I think for a change leader, it's a number of different things.� You certainly have to have a vision. You have to see beyond what the current reality is to what the potential is beyond. Perseverance is a really important trait. There are a lot of factors that would encourage people to slow down or stop a change. � And for those who do, that's where the term "flavor of the month" comes from.

I think a focus on results is probably a very important factor.� People who tend to get caught up in a process -- well, they would get lost in the change, because you get caught lost in the fact that you're proposing to make changes and you're planning to make changes, but unless you're really focusing on anything happening as the results of your effort, you're likely to not see the results that you're looking for.

And I think the ability to communicate becomes really important. Imagine, one change affects a lot of things for a lot of people.� Two changes now makes it so you've got twice as much.� But one of the first changes starts to affect the second change. � When you do what we did within the Logistics Center, there's a lot of potential for confusion, because everybody else's changes are having an effect on the last change that they just made. � And so there needs to be leadership that's continually communicating the vision, so that people -- everybody's going to figure out what they have to do make a change possible, but they need to see that vision.� They need to know how they are doing in the context of what the goals are -- are we succeeding? � Are we not succeeding? � And then they just need a lot of encouragement.� So communication becomes a really important trait.

Mr. Lawrence: I was surprised a few minutes ago when you said that the personnel on your team hadn't really changed throughout this process. � Was that as you expected, or did you imagine you would have to change people as you went through this restructure?

Mr. Bowles: It never really became a question.� When we started out, everybody on the management team wanted to get someplace.� Their comment was, "As we've tried in the past, we've never gotten there. All we need is that leadership to make the changes."� And I think the only thing that I did was support their ideas, and then not quit when the going got tough.� And so I think that's where the perseverance comes in.

It's a wonderful workforce. � It's a wonderful organization. � There are a lot of people who see a bright future in the Logistics Center, and they were willing to do whatever it took to make that happen.

Mr. Lawrence: What advice would you give to a young person interested in a career in public service?

Mr. Bowles: Oh, I think that Government service is a very high calling. And my recommendation is, if you really do care about this country, if you really do want to make a difference, this is a great place to be. � And then the other thing I would say is, don't buy the notion when you go into the Federal Government, when people tell you that you can't do something, because somewhere else, somewhere, someone is doing what they are being told they can't do.

Mr. Lawrence: That's a good ending point, Norm, because I'm afraid we're out of time.� John and I want to thank you for spending some time with us this morning. Thank you very much.

Mr. Bowles: Thank you very much, Paul.� Thank you, John.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Normal Bowles, program director, FAA Logistics Center in Oklahoma City.

Be sure and visit us on the Web at endowment.PWCglobal.com.� There you can learn more about our programs and research and you can get a transcript of today's conversation. Again, that's endowment.PWCglobal.com. � This is Paul Lawrence. � See you next week.