The Business of Government Hour


About the show

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.

Raymond W. Kelly interview

Monday, November 29th, 1999 - 20:00
Raymond W. Kelly
Radio show date: 
Tue, 04/25/2000
Intro text: 
Missions and Programs...

Missions and Programs

Magazine profile: 
Complete transcript: 

Arlington, Virginia

Tuesday, April 25, 2000

Mr. Lawrence: Welcome to The Business of Government Hour, Conversations with Government Leaders. I’m Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. To find out more about the Endowment, visit us on the web at

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Tonight's special guest is Raymond W. Kelly, commissioner of the U.S. Customs Service. Welcome, Commissioner Kelly.

Mr. Kelly: It is good to be here, Paul, thank you.

Mr. Lawrence: Joining us in our conversation is Craig Petrun, a consultant with PricewaterhouseCoopers. Hi, Craig.

Mr. Petrun: Hi, Paul.

Mr. Lawrence: Commissioner Kelly, in this first segment we would like to talk to you about your career in public service. I understand that you have more than 30 years of experience. So I would be interested in asking you about your career and what drew you to public service.

Mr. Kelly: Well, what drew me to public service was not just a cliché‚ but the opportunity or the potential to make a difference and, in fact, I can't think of a better way to make a living, at least for me. Public service has been very good. I started as a police cadet in the New York City Police Department. It was a program to get college students and then ultimately college graduates, into policing.

I became fascinated with policing as a result of this part-time job. I was also able at the same time to do something I wanted to do because I had three older brothers in the Marine Corps, to join the Marine Corps. So I joined the Marine Corps officer candidate program. I went on active duty in the Marine Corps and was on active duty for a little over three years. I went to Vietnam, came back to the Police Department and had sort of a parallel career in the Police Department and in the Marine Corps Reserve for 30 years. So public service, particularly policing, has been absolutely for me the most rewarding career I could have chosen.

Mr. Lawrence: How did you end up with the Customs Service?

Mr. Kelly: Well, a circuitous route. But I wasn't in the Police Department for 31 years. I was the police commissioner, the highest-ranking person in the department, and I left in 1994. I joined the faculty of the Wagner School at New York University. I then was asked to go to Haiti to be in charge of the police monitors which was part of the U.S. intervention, in 1994. I had some 1300 people, 850 professional police officers from 20 countries and 300 interpreters, U.S. military folks. Our job was to monitor the activities of the Haitian Police Force.

I then left that assignment. I was asked shortly thereafter by Robert Rubin, then Secretary of the Treasury, to become the Under Secretary of Treasury for Enforcement. The U.S. Treasury Department has about 40 percent of all the law enforcement personnel in the federal government. In that position we had the U.S. Customs Service, Secret Service, Bureau of Alcohol, Tobacco, and Firearms, Financial Crimes Enforcement Network, and other law enforcement organizations in Treasury reporting to that position and, of course, ultimately to the Secretary of the Treasury.

The position of customs commissioner became available in 1997. By August of 1998, I had been asked and Secretary Rubin agreed that I could and should become the commissioner of Customs. So the official swearing in was on August 4, 1998. I have been there ever since and it is a terrific job, a terrific experience. I really enjoy it.

Mr. Lawrence: Commissioner, what are some of the biggest changes that you have seen in public service jobs since you started working in public service?

Mr. Kelly: Well, obviously automation. I have been in public service now since 1962. There has been a huge change in the use of automation, the use of technology. Of course, it has only just begun but it has had significant impact in law enforcement throughout America, certainly, tremendous impact in the Customs Service.

In addition, I have seen a change as far as awareness of customer needs and customer concerns. We don't often times refer to the people we deal with in the public sector as customers but they are our customers. I think it is fair to say that government in general now is much more sensitive, much more aware, of the needs of its clientele than it was when I started. So I would see those two phenomena as being the most significant ones during my time in public service.

Mr. Lawrence: Can you contrast the management challenges that you have seen? You had a career with the police, you had a career with the Marines, and now a career in Federal government. I am wondering if those are similar management challenges or much different.

Mr. Kelly: Well, the technical aspects are different; in other words the knowledge that you have to have. Customs is a very technical, complex organization in dealing with some very complex organizations on the other side, businesses that we have to interact with. But I think a lot of the leadership principles are the same irrespective of where you operate, in the private or public sector. I mean, situational leadership is also significant. You have to adapt your leadership style to situations as they change, but I think the fundamentals remain the same.

People want integrity in their leaders. They want people who are able to communicate. The want people who do know the business. The world is changing but I think some of the leadership principles are standard and are fundamental to leading big organizations.

Mr. Lawrence: We have had a lot of people sit with us who have had a career, a long career, in the private sector who then came to the public sector. They were somewhat surprised by how different it was to manage organizations which appear to be similar size and similar functions. Do you think that people who have a career in the private sector can make that transition?

Mr. Kelly: Yes, I think people can make that transition. I mean, you are leading people. You are getting people to do what management wants, what the leadership wants to achieve the goals of the organization. Yes, I think there are some areas that are different, but I think that government fundamentally is business. We do a lot of things that the private sector does and in fact we want to do more things like the private sector does.

One of the things we say in Customs is, "We want to do business the way business does business," so we can bring people in from the business world, from the private sector. I think that is helpful to us in achieving that goal.

Mr. Lawrence: There are two areas you mentioned where you have seen differences in as you have gone through your different positions. One was management challenges are different. Can you talk a little bit about some of the management challenges you encountered when you came to the Customs Service?

Mr. Kelly: Well, Customs, as I say, is a very complex organization. We are the oldest law enforcement agency in America. We are charged with the responsibility of protecting the country from contraband. Obviously, we have a problem with drugs in this country. It is of major concern to us.

We also collect revenues for the government. We are the second biggest revenue collectors in government. We collect about $20 billion a year. There were some hot-button issues certainly that I faced when I came into Customs. There is concern about racial profiling. We search people at the border. It is an unpleasant but necessary function because we do have to protect America from contraband.

So we instituted a series of management changes. We involved management more in the determination of who is going to be searched. We embarked on a major training regiment for all of our inspectors. We are trying to make the process less onerous, and we want to make absolutely certain that no one is stopped or searched because of their race.

As I say, we have embarked on a major training initiative using all means that we can, using management and insisting on management involvement in the determination of who is going to be searched. So we are still obviously concerned about that issue. That is a management challenge, an organizational challenge, to keep the current system going.

Mr. Lawrence: That's great. Now it is time for a break. We'll be back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner in PricewaterhouseCoopers. Tonight's conversation is with Raymond W. Kelly, Commissioner of the Customs Service. Joining me is Craig Petrun, a consultant at PricewaterhouseCoopers.

Commissioner Kelly, in the last segment you talked about some of the things the Customs Service does. I think most people understand the movement of goods and services and people across the borders, but perhaps you could tell us the whole mission of the Customs Service so we understand the magnitude of the things you take care of.

Mr. Kelly: Right. Customs is charged as the oldest law enforcement agency in America with protecting our borders against contraband and collecting tariffs. Indeed, last year was a record year for us for seizures of drugs coming into the United States. At the same time we collect about $20 billion a year. Again, we are the second largest government contributors to the federal coffers.

We have a little over 19,000 employees. We are located at 450 locations throughout the United States and 26 countries overseas. We have in the U.S., 301 ports of entry. They range in size from very small ones on the northern border, where people actually just walk across, to very large ones like the Port of Miami, the Port of New York or JFK Airport in New York, O'Hare Airport in Chicago.

So we are challenged. There's no question about it. Trade has increased tremendously. Commodities coming into the United States have doubled in the last six years and are projected to increase by another 70 percent by the year 2005. So we are processing goods at record breaks.

Obviously, we are also very much concerned about drugs. We are concerned about money laundering. We are concerned about weapons of mass destruction. About 2700 of our employees are investigators, very sophisticated investigators, who conduct some of the most comprehensive and complex investigations of any agency. Again, my background is in law enforcement. I am very impressed with the quality of the work that our investigators do, money laundering investigations, controlled deliveries of drugs, investigations as far as weapons of mass destruction or weapons being exported from the United States to other countries.

So it is a broad agenda that we have. We have, for instance, 115 aircraft we fly over the borders. We also fly over drug-source countries, Colombia, Bolivia, and Peru, obviously at the request of those countries. We have host riders who ride along with us when we do that. So we have a broad agenda. I am very impressed with the quality of people that Customs has. They are hard working. They have a mission. They know what the mission is and they are dedicated to achieving that mission.

Mr. Lawrence: With such a diverse group of things going on how as a leader do you keep track of how you are doing?

Mr. Kelly: That's a good question. I think it is a question that everybody in a position of leadership asks himself or herself. Obviously, there are numbers that you can look at in our business. We can quantify certain things. We know that our seizures are up. We know how much money we are collecting as far as tariffs are concerned.

But there are areas that are always going to be questions as to just how well we are doing. One of the things that we did, as I mentioned before, that was an area of concern for us, is personal search. We put in comment cards for people that we search, who have gone through our secondary search locations. That is direct feedback. It has been very positive.

I have been very impressed with the response of the Customs employees to some concerns that people had a year or so ago. We have put these cards in place and we have received over 5,000 of them. Again, these are people who have gone through our search process. They are 84 percent positive. There were some complaints in there, yes, but 84 percent is an extraordinarily high number of positive comments. So I think this is a credit to Customs employees. We hope to get it even higher. But that is one of the ways we get feedback as to how we are doing.

Obviously, Congress is never reluctant to give us feedback on how we are doing. Their constituents will send them letters and they send them to us. We correspond back and forth. We put in a customer satisfaction unit to respond to complaints that people have with the Customs Service.

We had decentralized that. Again, with 301 ports of entry we wanted to bring that together so we knew what complaints were coming in and were able to determine if there was a problem and then respond quickly to people who had issues. That is working well. So I would say Congress, obviously, the public, and our standard indicators are ways that we know how we are doing.

Mr. Petrun: Commissioner Kelly, it is my understanding that Customs underwent a major reorganization around 1995 and continues to evolve to address the expanding trade volume, passengers volumes, and other tasks that you are involved in. Can you tell us a little bit about your current organization, how you are structured and what you are trying recently to address some of these changes you see in the environment?

Mr. Kelly: Well, we have two major components of our organization. One is the Office of Field Operations, which has about 12,000 employees, and they are located for the most part at our ports of entry. Those are the uniformed inspectors. Those you may come in contact with at the airport or land border crossings. We also have import specialists, people who are very well versed in the complexities of the tariff codes and tariff laws. There are about 15,000 different tariff codes that we have to interpret.

We have, as I say, 2700 investigators. We also have almost 400 pilots who fly our aircraft. We have an intelligence unit that is located in our Office of Investigations, which totals about 4,000 employees. We have an Office of Strategic Trade that looks at more or less the big picture, you might say, and is able to determine trends and helps us to adapt to changing circumstances. So those are kind major components. That is pretty much how we are organized.

Mr. Lawrence: It's time for a break. We'll be right back with The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back. I'm Paul Lawrence, the host of The Business of Government Hour. Tonight's conversation is with Raymond W. Kelly, Commissioner of the Customs Service. Joining me is Craig Petrun, a consultant at PricewaterhouseCoopers.

Commissioner Kelly, in this third segment, you mentioned it a little bit and we would like to talk about the role of technology in Customs. I think we are all aware of how technology is changing government agencies. I would be curious to see how that is working its way through Customs in terms of its missions, goals, and objectives.

Mr. Kelly: Well, technology is absolutely critical to our mission. We have, as I said, 301 ports of entry. All goods coming into the United States come through those ports of entry. There is an evaluation process that goes on to determine the value of goods and then the tariff that is charged for those goods.

In addition, we are protecting against the entry of contraband. So we need information as to what is coming into our country. That's what our system enables us to do. Quite frankly, it is being taxed to the extreme. There has been a tremendous increase in trade in the '90s. It puts a lot of strain on our automated systems and on people as well.

We are hopeful that we will be able to put in place a new automated system. We refer to it as ACE, the Automated Commercial Environment. It will enable us to do business the way business does business, as I say. We want to operate on the Internet. That is the way the world is moving. We are not able to do that now. That is what this new system will enable us to do. It will enable us to manage it nationally, manage it centrally. Now it is stovepipe, a port by port management approach. We want to change that.

It just will enable us to operate the way we think business is operating and should be operating as we come in to the next century.

Mr. Petrun: You described the tremendous need, but you say you are "hopeful" that you can do this.

Mr. Kelly: We are hopeful because it is a big-ticket item, no question about it. It is estimated to be maybe $1.8 billion. It will take at last four years to install and obviously our funds come from Congress, through the administration.

There are hearings that are scheduled in Congress. There are ways to fund this. We as an agency don't necessarily want to get involved in how it is funded. We just know that we need it and hopefully it will happen soon. Trade is just growing tremendously. By 2005 it may come very well close to doubling again. So we need a system that facilitates trade but gives us information as to what is coming into the United States.

There is another system that we hope to front-load with ACE. That is the ITDS, the International Trade Data System. Lots of agencies want information on what is coming into the United States. Up until now a lot of that has just been forms that have just been made out on paper. There has been a lot of redundancy. This system will enable us to gather that information and disperse it to the relevant agencies automatically.

So that's the way we want to operate. Hopefully, the resources will be made available to us in the near term.

Mr. Petrun: Since it is not clear when that opportunity may arise to embark on building ACE what are your plans for keeping the current systems operational and in the worst case scenario can you describe what would happen if the current system did go down?

Mr. Kelly: Well, we are keeping the current system going, of course. We have funding dedicated to do that. We have the continuance of operation plans, COOPs, we call them, at all of our ports of entry that will enable us to continue if the computer system breaks down. But in essence it is a paper system, so it is going to dramatically slow the process down, if the system goes under at a particular port or, God forbid, goes under totally throughout the country.

But our people have practiced that. Obviously, in preparing for Y2K and all the possible contingencies we have done a lot of work in that area. So I think we will be able to function but it is certainly not desirable for anyone, certainly not for the trade community or us.

Mr. Petrun: Would the general public notice the difference if the system went down or would it take some time for the general public to notice that ACS is not working?

Mr. Kelly: They would notice it because there would be tremendous delays, no question about it. As I say, traffic has increased tremendously and obviously goods coming into the United States as more and more shopping being done on the Internet, for instance, and people are now ordering goods from outside the United States coming in. Those sorts of things would be significantly impacted. But hopefully we will be able to keep the system going until we get adequately funded to put ACE in place.

Mr. Petrun: With all the introduction of technology, how has it changed how someone manages the Customs Service? I think you went through a long description of the different types of law enforcement individuals, investigators. Now it sounds like with all the introduction of technology one day it might have a much greater component of IT professionals.

Mr. Kelly: Oh, yes, just like the business community, we need top-flight IT people. So we are competing with the private sector to get the best people. There is no question about it. That has changed and put pressure on us to go out and recruit the best people. Of course, the government is somewhat restricted on what it can pay, so it is a challenge.

Technology has given managers more information, so I think you are really better able to manage in many ways. You have real- time information, so you can make decisions, I think, more quickly. You know, some people complain about information glut or information overload. That is a problem. You have to sift through what is important and what is not important.

But overall I think it has made managers much more effective and it is a huge productivity improvement story throughout America. Technology has just tremendously improved productivity. Certainly the Customs Service is doing much more than it has ever done with less, certainly static resources and less resources in some areas. So it is a major success story for America.

Mr. Petrun: Our colleagues in the private sector always talk about that the introduction of technology changes the average person in their organization, job and sometimes that change is very threatening. How are Customs Service employees thinking about all the changes technology could bring?

Mr. Kelly: I don't think it threatens anyone in terms of losing their job. Certainly we don't think it is appropriate to downsize. I believe we need larger staff, quite frankly. That is an argument that I make all the time. It means that the jobs are becoming more complex. What we have done in Customs is that we have brought in a director of training for the entire Customs Service. Up until last year our training was very localized, very diffused.

Now we have a director of training that directs all training throughout the organization, entry-level training, midlevel training, executive training. That enables us to make certain that the proper IT training is done throughout the organization.

Again, it is different. We are different than the private sector in that I think that most people who are familiar with our operation would say that we need more personnel. So people are not losing their jobs. Their jobs are changing as a result of technology. The training regime that we put in place will help people adapt to those new jobs.

Mr. Petrun: Well, let me ask you, you indicated that you will be facing as many of the shortages the private sector is in terms of attracting information technology professionals. You indicated that the government is somewhat restricted by its compensation. So how will you get those people and even a larger question is federal service, government service, something that should be attractive to young people with so many options and so many different compensation options?

Mr. Kelly: Well, I think it is exciting. Again, it is an opportunity to really make a difference. That is what attracted me to government service. I have been fortunate enough to get a few honorary degrees from colleges. When I make my speech I always say that money is overrated. People are living well in this country. It is ultimately, at least for me, about experiences and about a feeling of making a difference and doing good and impacting on people's lives. That is what government provides young people.

It is not for everybody. We understand that. That is, I think, the attraction that we try to use for IT folks as well. We are making a difference. We have a mission to protect Americans. Come on board.

We have some really bright people. We are able to bring people in from the private sector who like the challenge, who like the pace of work. We have a very high pace, no question about it. We want to make change and we want to do it quickly. So yes, we are competing. So far we have been able to compete. I like to think it is because of the nature of the Customs Service and the nature of government as we head into the next millennium. There is a lot of exciting things going on and a lot of challenges out there.

Mr. Lawrence: It's time for a break. We will be right back for more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I am Paul Lawrence, a partner in PricewaterhouseCoopers. Our special guest tonight is Raymond W. Kelly, Commissioner of the U.S. Customs Service. Joining us is Craig Petrun, a consultant to PricewaterhouseCoopers.

You alluded to, at the end of our last segment, about the future of the Customs and the role of technology in looking out. So we will start with that. What do you think are some of the key issues that Customs faces in the future?

Mr. Kelly: Well, again, the tremendous increase in trade projected to close to double in less than five years. The volume of trade that we are charged with the responsibility of looking at, examining it. The commodities that are coming in are going to put a lot of pressure on us. We need technology to help us do that.

We have a non-intrusive technology plan. We hope to have most of the components of that plan in place in another two years. It will enable us to X-ray vehicles, X-ray containers that are coming in to protect the country from contraband.

Terrorism is another issue. Our inspectors at Port Angeles, Washington, on December 14 last year stopped Aman Rassad who had almost 200 pounds of bomb-making materials in his vehicle. We have talked about this in theory, but this is real now. We have this individual coming in. Obviously, the investigation is continuing.

But there is concern in the law enforcement community about these kinds of amorphous break-away groups that want to harm America. They want to bring weapons, weapons of mass destruction, into the United States. We are charged with the responsibility of keeping those things out, of identifying contraband coming in that can be harmful to America, weapons of mass destruction, biological and chemical agents. Those are real challenges for the Customs Service to address.

Again, we look to technology to help us in those areas as well. We are looking at many things along with DOD that may be helpful in that regard. The explosion of trade, the threat of terrorism in an uncertain world, these are two major concerns that we have to address certainly in the next decade.

Mr. Petrun: Commissioner Kelly, recently it seems like you cannot help but open a newspaper or turn a radio on and hear about e-business and the Internet. What impact do you believe the Internet and e-commerce will have on Customs? Will it lighten your workload, make it more difficult to carry out your mission, or have a neutral impact?

Mr. Kelly: Well, I think it is going to be more challenging for us. I think, again, we see the growth of e-business in this country largely focused on American firms. People are ordering things over the Internet coming from U.S. locations, but we also see it coming from overseas. I think that will increase. So the volume of trade coming in will increase.

We have crimes being committed over the Internet. There's no question about it. We have child pornography. That's one of the things that we are charged with stopping. Virtually all child pornography comes in over the Internet from overseas.

There are intellectual property right issues. We have just created a new unit along with the FBI -- they are co-located with us in our headquarters -- to address IPR violations, particularly those that come about over the Internet.

There is fraud that is committed in cyberspace. We have a cyber-crime smuggling unit that we have established located not too far from where we are now. So it is going to increase the volume of trade coming in, but it is also going to put pressures on our investigators.

Again, Congress is particularly concerned about the increase in child pornography that we see coming in. We also hope to get some additional resources to address that. IPR violations, I think we have just scratched the surface there. Obviously, music is the big area that industry and Customs are concerned about. So it is going to make our life more complex, more challenges, but we are going to be up for the task.

Mr. Petrun: How do you balance these management challenges? As I hear you describe this I can't help but think you must be weighing the need for openness and free access that we would like about the United States versus the need to control, to restrict the people we don't want to move through our society. How does that play out in terms of a management challenge?

Mr. Kelly: Well, it is difficult. It is a balance that we have to affect no question about it. We can't stop everybody coming into the United States and talk to them. We certainly can't examine every commodity that comes in. We need information and we need intelligence to do that. Those are two different things. Information is not intelligence. But we need to work closely in the case of terrorist threats with our intelligence-gathering agencies.

We need more information as to what is coming in. That is where our ACE system comes in, our new automated system. We have to be sensitive to the issues and how we interact with people coming into the United States. Yes, we want to protect America from drugs. We have seen an increase in the internal carrying of drugs, people actually swallowing drugs and bringing them in in their person and also on their person.

But we want to be sensitive and be concerned as to how we use the substantial power that we have. A lot of that is addressed with training. Some of it is addressed with informing the traveling public that these things may happen. I think, quite frankly, we didn't do the best job we could in letting people know that they may be subject to search.

We are working in all of these areas, but it is a balance. It is a management challenge as to how you affect the enforcement authority that we have with civility, with sensitivity, while facilitating the flow of traffic in trade into the United States. There is no easy answer.

I think we have to be aware of the challenges that exist in these areas. Our managers are aware of it. They are the things that we talk about all the time. We bring our managers together and talk about these very issues. We have to do the job. It's very important to America, but we have to do it in a sensible, civil, sensitive way.

Mr. Petrun: Earlier you talked about some of the changes you have seen in your career in public service. You have mentioned some of the management challenges that you have seen change. You also mentioned leadership style change and need to be somewhat situational. Reflecting back over your career, can you talk about how your own leadership style has adapted to these changing management challenges?

Mr. Kelly: Well, of course. In the Marine Corps, life is a little different and the immediacy of decisions may come to the fore or the need for immediate decisions may be greater in the military than in policing. But, again, I think leadership principles are pretty fundamental and can transcend the public and private sector. People want to be treated fairly. People want to know who is in charge. They want whoever is in charge to be honest with them, to be direct with them, to communicate well. I think those fundamental traits that I would like to think that I learned early on in the Marine Corps are applicable today in government, applicable in business.

I don't think leadership per se has changed that much. You always want to be fair with people and civil with people. People want to be treated as you want to be treated. I don't think it is that complex, either. Things have become more hectic. You know, technology has burgeoned and impacts on every part of our lives and certainly on business. But how you deal with people, I think, has stood the test of time.

Mr. Lawrence: Well, thank you. I think that is a great point on which to end our conversation tonight. Craig and I would like to thank you for spending so much time with us, Commissioner Kelly. We very much enjoyed our conversation.

This has The Business of Government Hour, Conversations with Government Leaders. To learn more about the PricewaterhouseCoopers Endowment's programs and research into new approaches to improving government effectiveness, please visit us on the web at See you next week.

Raymond W. Kelly interview
Raymond W. Kelly

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