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.

Arlington, Virginia

DECEMBER 6, 2001

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with Clarence Crawford, Chief Financial Officer and Chief Administrative Officer of the Patent and Trademark Office. Good morning, Clarence.

MR. CRAWFORD: Good morning.

MR. LAWRENCE: And joining us in our conversation is another PWC partner, Steve Watson. Good morning, Steve.

MR. WATSON: Good morning, Mr. Crawford. Thanks for joining us.

MR. CRAWFORD: Thank you.

MR. LAWRENCE: Well, Clarence, perhaps you could begin by telling us about the Patent and Trademark Office or PTO as I understand it's referred to, and perhaps tell us about its mission and its activities.

MR. CRAWFORD: Well, we are a $1 billion fee funded agency. Our mission is to promote the intellectual property rights in the United States, to strengthen the economy. We essentially have two major lines of business; one is a policy role, where we provide advice to the Secretary of Commerce and to the President on intellectual property rights and protections. We also have a secondary role, which is a very large role, and we are, in effect, a factory.

We issue patents and trademarks. We issue hundreds of thousands of patents and trademarks each year. We play a critical role in the economy. If you listen to the Federal Reserve, they will argue that much of the economic boom of the '90's was driven by technological innovation.

Well, this is what we do; we issue protected technological innovations. And if you continue to listen to the Federal Reserve, you will hear them also state that that same technological innovation will probably help bring the country out of the current economic slow down.

The PTO is an exciting place. We think of ourselves as being like a business, not a business, we are a federal agency, we still have to adhere to federal rules, we are part of the executive branch, we receive an appropriation, although we're fee funded. But our mission is a very important one, but in some ways it's a very easy one and it lends itself to being business-like. We produce things at the end of the day. It's pretty easy to figure out whether we've been successful. Do we issue a patent or do we issue a trademark? Those are pretty easy to measure.

The kinds of employees that we have, we're about 6,300 employees. Most of our employees are in the patent organization, they are engineers and scientists. We recruit, just like the private sector, for the very best people we can find. On the trademark side, we have trademark attorneys.

Again, the competition is very steep. Intellectual property is a very hot area. We've had to be very, very creative in our recruitment and retention strategies. In addition, we have other lawyers and our general counsel's organization. We have a sizeable information technology organization, you have my organization, made up of administrative people and financial people, and we also have technical people. We have a number of support staff, and we have a good number of contractors. We have seen a change and we anticipate a change in the way we'll do business. We'll become more digital in the future. So we've made a conscious decision to hire more of our technical support staff under contract as opposed to career government employees in anticipation of changes in the work force.

MR. WATSON: Clarence, what are your responsibilities as Chief Financial Officer and Chief Administrative Officer; what skill sets does this position require?

MR. CRAWFORD: I'm a pretty simplistic guy, so I've had to distill it to something that I can understand and remember. One of my chief responsibilities is to create and grow value. Not unlike CFO's in the private sector, my goal is to help the organization improve the quality of their products and services and to do it at the lowest possible cost. My responsibilities include financial management.

We have a great organization. We have received clean opinions in our financial management area for the past eight years. We merged our strategic planning and budgeting shop several years ago, so we have an integrated planning and budgeting shops already in place. We've been recognized as being one of the better ones in the Federal Government.

Our procurement shop is considered a leader in federal procurement. We're about to start a pilot, looking at reverse auctioneering. Our human resources shop, we've made a number of changes there. They were very successful in helping the patent organization achieve a 10 percent special pay rate, one of the few in the Federal Government. We've made a number of changes and improvements. Our civil rights organization, when you look at the Patent and Trademark Office, we're probably one of the most diverse employers in the entire country.

In our administrative services area, we move thousands of files a day. Some files are just a couple of pages; some files can be boxes of pages. Space acquisition, we're going to be moving to Carlisle. We are in the final stages of the planning. We hope to go to closing within the next 30 days. When that happens, and when we construct the complex, we will be the fourth largest federal complex. We'll be over two million square feet; we'll be in five buildings. This will be a great improvement over where we are today. We're in Crystal City; we're in 18 buildings on 118 separate floors. So managing it and managing the process, it's a little bit of a challenge when you're so spread out.

I also have security. Had we had this interview in August, I would have just mentioned security and moved right along. We've made a number of improvements there. We have worked hard and we've reduced the numbers of crimes against our property, theft of property, we've cut that about 47 percent in a year. But I think probably one of the more interesting and challenging aspects in this area is in the wake of 9-11. We are the largest recipients of express mail in the world. Our express mail comes through the Brentwood facility. We receive 10 of those mail carts a day. That's about 7 to 8,000 pieces of mail a day.

We had an anthrax scare, since we're downstream from Brentwood. We had to bring in a contractor to test the environment. One of the things that we did very well, I'm not sure exactly how we figured it out, maybe just being very fortunate, we communicated and told everyone everything. So we ended up bringing in a firm. They came in their spacesuits, and we did our testing, tested the air filtration systems and the like.

Then we got a call back and said that three of the samples were suspicious, so we went out and told the employees everything, put it all out for them. Working with the CDC, we concluded and found that we didn't have anthrax. It was a great lesson.

We have beefed up our security in the organization, but nothing will be probably as it was. Since about the middle of October, we receive very little mail through Brentwood, so we've had to come up with an alternative mailing process, but for us, that's about six weeks of mail. The mail not only includes applications, the mail also includes sometimes checks. And since we have what is called an offsetting appropriation, we're fee funded, the money is appropriated back to us. In order to spend the money, we have to collect the money, so we are watching this very carefully as we go.

I think in terms of the skills, I think having a good understanding of the business, having a good mix of financial and administrative skills and experiences, I think the leadership is very critical; the interpersonal skills are very critical.

When I spoke before about my role in helping grow value, I don't own the patent process, I don't own the trademark process, I don't own the CIO's activities. So much of what I have to do is by way of encouragement and working with my colleagues to make improvements.

Sometimes, as anyone in this business knows, you also sometimes need to have a little thick skin, as well.

MR. LAWRENCE: It's time for a break. Come back with us after the break as we continue our conversation with Clarence Crawford of PTO. In the next segment, we'll ask about the new technology PTO is using. 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 Clarence Crawford, Chief Financial Officer and Chief Administrative Officer of the Patent and Trademark Office. Joining us in our conversation is another PWC partner, Steve Watson.

MR. WATSON: Mr. Crawford, in your last segment, you discussed your responsibilities, a wide ranging set of responsibilities. Can you tell us a little bit about your career and the positions you've held that prepared you to handle that diverse set of responsibilities?

MR. CRAWFORD: Sure. I started out as a police cadet and police officer in the District of Columbia. And I went to school at night as a police officer and earned my bachelor's and graduate degree. My graduate degree has a concentration in financial management. I had decided I wanted to be the chief of police in the District, and then realized, no, I want to go to something else.

I decided then I wanted to be a city manager and decided, well, I'm going to have to leave the police department to do that.

One day I happened to be at school, and I saw an announcement for the Presidential Management Intern program. I didn't know what it was. I figured, well, I'll apply, but I cannot imagine that the Federal Government would have anything of any interest to me, and maybe I'll go do it for two or three years if I'm selected and I'll go back into city management.

Well, that was in 1979, and I've been with the Federal Government ever since. I went over to the Internal Revenue Service and as a presidential management intern, and everyone thought with my background, I would end up either in the criminal investigation division or in the budget or finance arena. And what I ended up doing was going to Atlanta, moving the family to Atlanta, to be a labor relations specialist for about two or three years in Atlanta. Came back to Washington as a planning officer in Strategic Planning, went over to the research division where we did quantitative research on tax compliance, had a wonderful time there, a budget officer for IRS's headquarters budget, director of planning and project management, the tax systems modernization. I had responsibility for developing the project management system, doing the planning, and the budgeting.

I went over to the General Accounting Office, into their SES candidate development program. And I concluded, well, I'd probably end up auditing the IRS, I would be in law enforcement, I would do something maybe in financial management.

My first assignment out of the SES candidate program was to be the associate director for education and employment. So I'm looking at K through 12, student loans, job training programs. And my first day on the job in that area, I testified before the Congress on gender equity issues. So I arrived on a Monday, I testified as GO's lead witness before the congress on Tuesday on gender equity.

I had a wonderful time there. We did a lot of work for the appropriations committee, so I learned a lot about appropriations, did a lot of testifying before the committees, especially on the senate side. And from there, I was asked to go to the National Security and International Affairs Division as one of the deputy directors there. I had no background in this area either. We were changing our job processes, our audit processes. I'm very happy about what we did. We significantly improved the timeliness of our products. We reduced the cycle time and the cost of those products. We earned the highest quality score ever given for an assignment. We increased our usefulness to the Congress.

I decided I wanted to return to the executive branch. I wanted to get back into the executive branch. So I applied for and was selected for the associate director for administration position in the Office of Management and Budget in the White House.

There I learned an incredible amount. I had never worked at OMB before. This gave me some insight then to understand how OMB interacts with the agencies, how OMB supports the President, how OMB works with the domestic policy counsels. So it gave me, again, another piece of -- especially on the financial and administrative side, of how government gets done.

I had seen it on the Congressional side, working with the members and the chairs, but now having an opportunity to see it at OMB and see how it happens in the executive office of the President. And in November of '99, I was very fortunate to be selected as the CFO CAO for the Patent and Trademark Office. I was very interested in the organization. I wanted to go some place that wasn't so large that you -- some places are just so large that driving change is almost overwhelming. Patent and Trademark Office is big, but it's not too big. The mission is easily understood. They're great people. And most importantly, everything I had read about them and understood about them, this organization was committed to improvement and to quality and willing to try new things.

MR. LAWRENCE: In our last segment, you talked about the technology that's being used at PTO, and I had done some research in preparation for the interview and learned about a large acquisition to supply PTO with desk top, lap tops, and hand held computers; could you tell us about this project and its goals?

MR. CRAWFORD: We call it the smart contract. It's a contract to replace our desktop hardware. I think the real story is not the numbers of PC's that we're buying or the hand held. The real story is the story behind the story, the why.

We recognize that technology is going to be an increasingly important part of how we do business, whether it is processing applications or whether it's needed as part of our recruitment and retention strategy for top-flight talent. The PTO has made a number of key investments over the years. We have greatly improved our automated search systems. We have issued six million patents. Part of the process of determining whether an invention is patentable is, you have to look at all of the prior patents, you have to search those, you have to search what we call non-patent literature, other literature where innovation may be referenced. You also have to search foreign literature.

Well, with our search systems, it has allowed us, in part, to keep pace with the massive growth that we have seen over the past few years. It also provides us with some other benefits. We're now far enough along that we're now getting within two or three years of rolling out the next generation of technology. And this will allow us to better manage our files.

Right now, we have paper files. We have paper files that are, if you go to some of our rooms, that are probably 12 to 15 feet high. We have a warehouse full. It's overwhelming to see the amount of paper that's in our active files.

Well, if you have paper, sometimes things get lost; if you have paper and it's actively being examined. As I said, we're in 18 buildings on 118 floors, so if an applicant needs to send an amendment, just the logistics, I was trying to figure out where, in Crystal City, or maybe in one of our storage facilities, so that we can associate that amendment with the actual application. We've already done some studies and we believe that we're going to be able to bring down our cost of operations and handling paper.

And again, the paper handling is one of the areas where, over the years, the organization made some wise decisions, and that would be to hire contractors versus career employees and recognize that within a few years, hopefully much of the paper handling will go away.

It also serves as a recruitment and retention tool for us. The technology gives us an ability to attract and retain top talent. When you're in the schools or in the private sector trying to bring in electrical engineers or computer scientists, they expect to have not necessarily state-of-the-art, but clearly, very useful tools to do their jobs.

As we move to more of a digital environment, people will need to be able to have systems that allow them to examine and analyze applications on a computer screen versus paper. I don't think we'll ever get rid of all paper, but I think our ability to receive applications to process and manage that we'll be able to do electronically. This is, again, part of our strategy of sort of an electronic, more of our electronic environment. We are the first intellectual property organization in the world to receive both patent and trademark applications over the Internet.

An applicant can file anywhere in the world an application with us. You can come online and you can check the status of your application. You can pay any fees. You can go, for example, and research issued patents back to 1790 over the internet.

We envision down the road, we have a work at home program that has been very successful. With the work at home program, we have been able to hold onto a number of our employees that probably would have gone otherwise. And I think down the road you're going to see work at home will increasingly mean working outside of Washington/Metropolitan area.

MR. LAWRENCE: That's a good stopping point because it's time for a break. Rejoin us after the break as we continue our discussion with Clarence Crawford of PTO. 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 Clarence Crawford, Chief Financial Officer and Chief Administrative Officer of the Patent and Trademark Office. Joining us in our discussion is another PWC partner, Steve Watson.

MR. WATSON: Mr. Crawford, before the break, you were talking about the extent of the PTO's business that you've moved online. What are the security and privacy concerns that the government faces in the future as more services are conducted online, and what steps are you taking to address these concerns?

MR. CRAWFORD: I think that what is very evident is that the internet has changed the way we will do business. I think also, 9-11 will have changed that, as well. I foresee an increased reliance upon technology to do business.

One of the challenges that we're working on, and from a security standpoint is, like the private sector, we take payments electronically, so we've had to make sure that our systems are secure, that when someone gives us a credit card or pays by credit card online, that those transactions will be safe and secure.

In terms of our basic infrastructure, we have intrusion testing. We've enhanced our firewalls; we will continue to do that. We just see that this is the right thing to do. And being online gives us also a capability to communicate with our employees differently. In the trademark organization, for example, we have 100 employees who work at home. They're much further along than the patent organization. We're implementing a hoteling pilot this fall, where the employees will only come into the office one day a week; they will work at home over the internet.

At home, we are beginning to realize into the future could be any place in the world, so we've got to have secure ways to communicate with our employees so that they can access our data bases, examine applications, and then transmit that information safely either back to the Patent and Trademark Office or in their communications ultimately with our customers.

MR. WATSON: We know that many Federal Government agencies anticipate a critical need to modernize their financial systems in the next few years. What kinds of technology does the Patent and Trademark Office use to manage its financial operations?

MR. CRAWFORD: I'm very fortunate to be here at the Patent and Trademark Office. We have a strong history of excellence in financial management. We have had clean opinions for the past eight years. The last three years, we haven't even gotten any management letters or anything in that area. We have a modern system and we're upgrading. We are currently on the FFS system, and we're in the process of migrating to Momentum. What Momentum will give us is easier access and easier queries. It's a web-based application. It will facilitate not only people working at the Patent and Trademark Office, but people also potentially on the road, our employees on the road.

We also have implemented activity based costing, that's very important to us. It's an integral part of how we do business. We're required by statute to keep separate trademark fees from patent fees. So it is a process that we use to make sure that we do not spend trademark related funds on patent or non-trademark related activities.

We also use the ABC system to give us data as we're putting together our budgets and for the future year budgets, also when we're putting together our financial plans and managing our financial plans. We look at sort of the allocation of funding. Are we still consistent with what we need to do to ensure the separation of trademark fees from patent fees?

We're also looking more closely to make sure that the fees that we are charging actually cover the costs of the patent and trademark operation. So we have a culture that has used financial systems, we have modern systems, we're upgrading them, and we're now at the point, we're not perfect, but we're now at the point that we have the basic infrastructure in place, we're now beginning to learn how you actually use it to support executive decision-making, how to use it to make resource allocation decisions, how to use that as we get ready to plan a new activity to see whether there's historical costing data.

We have a data warehouse where we our managers, we probably have about 300 users. A good chunk of those users are first line supervisors in the patent and trademark organizations, where they're going in to get financial and program data for their own units, tailoring the reports in a way that makes sense to them.

So we're beginning to understand how to use it. We're not there quite fully, but we are making, I think, the right steps. And, again, we have a culture that values this information and the use of the information.

MR. LAWRENCE: The Patent and Trademark Office was, I believe, the second Federal Government agency to become a performance based organization or a PBO. What managerial flexibilities do you have as a result of being a PBO?

MR. CRAWFORD: I think the first thing I'd like to mention is the notion of the PTO becoming a PBO. I think the most important thing is that making a transition, while it has been challenging, was a logical next step for the PTO. For years our employees have been on performance standards for goal, for quality and production. That makes it easier for us with our work place flexibilities. People can come in as early as 5:00 in the morning, stay as late as 10:00 at night, work the weekends, because we generally know how much work a person does.

We also, because we're sort of business-like, we have a mission, it's pretty clear, you either issue a patent or a trademark or you don't. We have the financial systems in place.

What the performance-based legislation has allowed us to do is to take the next step on the performance arena. The patent commissioner and the trademark commissioner have signed performance plans with the Secretary of Commerce.

And what we have been working on is, in taking those performance plans and commitments and cascading those first through the executive core to the managers and then linking those to the employees, we're not to the employee level necessarily quite yet because we're highly unionized, so there are a lot of issues about negotiations. In terms of the management flexibilities, we have control of our human resources program. We have a very good relationship with the Department of Commerce, and we have a very supportive relationship. While we have the flexibilities, we generally keep them informed of everything that we're doing, but we can control our human resources, we can make our own selections for executives, we can resolve union agreements without having to go to the Commerce Department, we're able to prepare and submit our budgets directly to the Office of Management and Budget.

But again, we work with the Commerce Department in keeping them advised and working with the Secretary and deputy secretary. We have flexibility in the procurement arena. We're going to put some new regulations out soon that gives us some additional flexibility.

We now have a full service legal shop, so we now have our own general counsel. I think one of the other things that we've had, which has been very good, is we now have the public advisory committees, we have one for patents and one for trademarks, and they are our advisors.

We've now engaged them in our budget formulation process. They also take a look at proposed regulations. So it has been good. These are people from the private sector who have some private sector experience with patents and trademarks, but also some business or academic experience, as well.

MR. LAWRENCE: PTO has developed a balanced scorecard performance measurement system, I think you hinted at this a little bit in your last answer; could you tell us about that?

MR. CRAWFORD: On a quarterly basis, each business unit in the executive committee makes a report on the balance scorecard. If you look at patents and trademarks, the kinds of things that are on there, everyone has a financial management component, but then when you look at the patents and trademarks, essentially they have two major goals, improve the quality of the products and services, improve the timeliness.

So there are a number of measures that patents and trademarks use to report on how well they're doing in terms of overall, how long it takes to get a patent or a trademark, how long it takes to get to what we call a first office action, which is important for people that are applying for applications.

We look at quality. We have our own in-house quality review activity. We also look at customer service. We regularly survey our customers. We take that data and we look at what our customers are telling us. And as the customers point out problems, we then try to address those problems in our operations. We look at employee satisfaction. And for most of the organization, especially in the two business units, they actually use that data as they are preparing performance appraisals for their senior executives and for their managers, so it actually gets used.

MR. LAWRENCE: Well, that's a good stopping point. It's time for a break. Come back with us after the break as we continue our conversation with Clarence Crawford of the PTO. 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 Clarence Crawford, Chief Financial Officer and Chief Administrative Officer of the Patent and Trademark Office.

Joining us in the discussion is another PWC partner, Steve Watson.

MR. WATSON: Clarence, we hear a lot about the coming government retirement wave and the expected impact on federal agencies. What kinds of challenges will this present to PTO and what solutions are you considering?

MR. CRAWFORD: I think in some ways, our challenge is perhaps a little different than many other federal agencies. By comparison, our executive cadre is younger than the federal average. Our managers, many of our managers are younger than the federal average. And when you get into our workers, especially in the patent and trademark organizations, they are much younger than the federal average.

We have about 70 percent of the PTO employees are in the FIRS retirement system. And when you look at the patent and trademark examination corps., you're probably looking at 80 to 90 percent are in FIRS.

Now, what that does for us is, it makes things a little different. Because these are highly skilled people and they're highly sought after in intellectual property environment, we're far more sensitive to changes in the economy. When the economy was going very well, we compete directly for the private sector, and because these people have pension portability. I think FIRS is probably one of the most effective programs ever implemented by the Federal Government, for it wanted to give people pension portability, wanted to reduce retirement costs, done both. We're now living with that. So we now have to, in terms of our strategies, have strategies that come close to matching salaries. We will not match the kinds of salaries that our employees can draw from the private sector.

So we've implemented a number of workplace flexibilities. If we can't match the dollars, can we match the flexibilities? I think we probably have one of the most flexible workplaces in the Federal Government, where people can take mid-day flex.

I've often said that I want to go to the movies at mid-day, I've yet to do that, hopefully at some point I will. But people can mid-day flex, you can start early, you can stay late, you can work on the weekends.

We have attractive incentive pay packages for sustained performance, quality, and production. We're very fortunate working with the Office of Personnel Management in achieving a special pay rate for patent examiners. It's a 10 percent pay rate for patent examiners. Which along with perhaps a slowing economy, we've seen a dramatic reduction in our attrition. We went from double digits to around 5or 6 percent. In the trademark area with the work at home, we've yet to see any of the employees who work at home leave. We have training programs and graduate education to help keep our skills of our employees current. I think the challenges we're looking at in the future as we try to do more mid-career hiring; the federal system is not very good for mid-career people.

If you've worked for 10 or 15 years in a private sector, you come to the Federal Government and you get four hours of annual leave and four hours of sick leave a pay period, these people probably had two or three weeks of annual leave. So we want to look at how can we change the system to do that, how can we let them roll over, for example, their pension, their 401K's into the TSP system, those kinds of things, to make it more attractive, and maybe even look at using TSP down the road as a vehicle for encouraging people to pay, stay long, we'd allow them to make larger contributions to TSP.

MR. LAWRENCE: What kind of advice would you give to young persons who's interested in joining PTO?

MR. CRAWFORD: I think this is an exciting place. I think that it's exciting on a number of levels. I've had the opportunity to talk with patent examiners and trademark attorneys and have them tell me that, did you see that particular logo, I registered that trademark, or I've had some tell me that, with some of the latest innovations, let's say in medical science, that they issued that patent.

The other thing that's exciting about the Patent and Trademark Office as an employee, once you're fully trained, you can issue a patent or register a trademark on your own signature. You do this on behalf of the federal government. There is no supervisory review. So you have a lot of flexibility, you have a lot of responsibility. It is, at times, a pretty challenging job, but it's also pretty rewarding.

The environment is great. We're going to move to a new facility in a couple of years. We're going to have a nice atrium. My private sector colleagues tell me I need to have a climbing wall so people can climb the walls. Maybe this will be for someone else.

But again, the flexibilities, the opportunity to see some of the new inventions and new trademarks that are coming along, the opportunities to meet some of the inventors or the proponents of the different trademarks, and it's a good place. It's not too big, it's innovative, and we do try to have fun.

MR. LAWRENCE: What type of skills would such a person need? It sounds from your description of many of the highly technical occupations at PTO, they would need advanced degrees in law and engineering and the like; is that absolutely true or are there less specialized positions?

MR. CRAWFORD: Well, I think if you wanted to be a patent examiner, then you will need an engineering degree or a science degree. And I think that in the future, more of our work is going to be electrical and computer related. So I think having those skills make you very, very competitive. Graduate training is fine, but we also provide some of that and will help you with that, as well.

On the trademark side, we're looking for trademark attorneys, people who have actually passed the bar. But there are a number of other great opportunities. People in my organization are generally not engineers or lawyers. These are people who may be accountants, or computer scientists, program analysts. It is just a very, very good place. It is a growth place. It is growing in importance and in stature, I think, for the federal government, but I think also for the country, it's a fun place.

MR. LAWRENCE: Pull out your crystal ball and look into the future. How do you think PTO might evolve over the next 10 years; what might it look like?

MR. CRAWFORD: I think, if you look closely today, you begin to see the initial indications of the way PTO will be. I think on the international front, all of the patent and trademark organizations around the world are having the same problem we have, growing workload, difficulty in recruiting and retaining highly skilled employees.

Right now, there is a considerable redundancy. We examine a patent and we issue property rights for the U.S. The U.S. company wants to do business overseas, then it must file again overseas. I would imagine over the next 10 years there will probably be more harmonization where either there's some type of reciprocity or recognition of an intellectual property right that's granted here, for example.

I don't envision a paperless organization, but I think you'll see one that is far more digital than we are today, which will give our employees considerable flexibility.

I think we will always have a core complex, but I think over the future, to meet some of our recruitment needs and quality of life needs, it is not inconceivable that we would not have a good chunk of our employees working essentially any place. Right now, two career families, one leaves the area, the other one has to quit. We're now starting to look, especially in the trademark organization, of the possibility of letting that spouse actually travel and remain an employee.

So I think it's going to be very, very interesting. I think you're going to see an explosion continue on the electrical and the computer related, and I think you're going to see a greater recognition of the value of intellectual property as underpinning the continued health and growth of the American economy.

MR. LAWRENCE: As you've described the type of people who do this work, are highly educated, as you describe the type of work, it sounds very complex. I'm just sort of curious from just a simple management kind of perspective, how challenging is it to manage these complex issues with highly educated people?

MR. CRAWFORD: Hopefully, our people won't be listening. What this requires you to do is to think and be creative, for we have extraordinarily talented and capable employees across the board, whether you look in my shop or you look in the patents or trademarks in the CIO. So what it requires and what it does is, it pushes us, it pushes us to think, they challenge our conventional wisdom about this or that. So I think it helps keep the organization alive and very vibrant. But it is intellectually challenging, for they can come up with things you just could hardly imagine.

MR. LAWRENCE: Well, that's a good stopping point. Clarence, I'm afraid we're out of time. Steve and I want to thank you for joining us this morning.

MR. CRAWFORD: Thank you very much. This was a pleasure I enjoyed it greatly.

MR. LAWRENCE: And if anyone is interested in PTO's or a website they can go to to learn more?

MR. CRAWFORD: Yes, you can go to uspto.gov.

MR. LAWRENCE: Thanks a lot. This has been The Business of Government Hour featuring a conversation with Clarence Crawford, Chief Financial Officer and Chief Administrative Officer of the Patent and Trademark Office. 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 also get a transcript of today's conversation. Again, that's endowment.pwcglobal.com. This is Paul Lawrence. See you next week.

Friday, October 5, 2001

Arington, Virginia

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy.

Welcome, Joe.

MR. CIPRIANO: Thank you. It's good to be here, Paul.

MR. LAWRENCE: And joining us for our conversation is another PWC partner, Bill Phillips.

Welcome, Bill.

MR. PHILLIPS: Good morning, Paul.

MR. LAWRENCE: Well, Joe, since the terrorist attacks, Americans are more acutely aware of our military forces. However, many of our listeners probably are not familiar with the specific missions and the roles of the U.S. Department of the Navy. Could you describe the Navy's missions and activities for our listeners?

MR. CIPRIANO: I'll be glad to. The Department of the Navy is made up of maritime services, the U.S. Navy and the U.S. Marine Corps. In times of war, the U.S. Coast Guard also becomes part of the force.

The Navy is responsible for all fighting at sea, and the Marine Corps is responsible for fighting from the sea; they project power ashore. We work very closely together, obviously, the Navy and the Marine Corps, to accomplish that mission.

There is a common mission that both services, in fact, all services, share. And that is the mission to train, maintain and equip the war fighters to fight and win, to maintain freedom of the seas and to deter aggression.

MR. LAWRENCE: Can you give us a sense of sort of the size of the Department of the Navy in terms of the number of military personnel, and also, the number of civilians that assist in supporting them.

MR. CIPRIANO: In the Department of the Navy, there is over 900,000 people, so it's a big department. In the Navy, we have about 350,000 or 375,000 active duty and we have another 170,000 or so in the reserves. Civilians total about 180,000 of that number, and the Marine Corps has about 212,000 active and reserve members.

MR. LAWRENCE: What are the challenges of managing, essentially, three groups under the same umbrella?

MR. CIPRIANO: Well, there are challenges, because obviously, there are some differences in culture between the civilians and the military and also between the Marines and the Navy. But we share a lot of common objectives as well.

And we tend to work together, between military and civilian, by alternating management levels. And so you will have, at one level of management, a civilian, and the next level up might be a military, the next level up might be a civilian and so forth. And we tend to, at least in the shore establishment, alternate levels of management so that we have both perspectives at every level -- if the principal is a military, the deputy will be a civilian and vice versa to get both of those perspectives as we go up.

And the military brings an understanding of the mission, understanding of what an objective is and the civilians tend to have more in-depth training on the rules of contracting and law and administrative things necessary for procurement and to exercise the other functions. So they bring functional expertise, and the war fighters bring understanding of the mission and focus to the job.

MR. PHILLIPS: Joe, let's switch gears and talk about your career a little bit. What drew you to the Navy, how long have you been with the Navy and what has been your career path?

MR. CIPRIANO: Well, I first joined up with the Navy right out of college. A recruiter came to Baylor University, where I was getting a degree in physics, and they were looking for folks to help with missile programs in the Navy. And that sounded interesting to me. It was the lowest job offer I got, but I took it because it was in California. I had never been in California and it sounded like it might be fun.

So I went and signed up with the Navy as a civilian at the time, became a missile guy. Stayed in the weapons and combat systems business for about the first ten years of my career with the Navy and enjoyed it immensely. Very challenging, very exciting, great people to work with.

But then I left the Navy; went to private industry. And I spent about three years in private industry, became vice president and head of a cost center in industry. And then, after a time, the Navy asked me to come back during the Reagan defense build-up to help them with that, and I did. I came back to the Navy, took another pay cut to go back, and spent a number of more years working my way up to the point where I became the head civilian of the weapons and combat systems business for ships and submarines in the Navy.

And then I left again to go to the Department of Energy, where they asked me to come over and be the project director for the super-conducting super-collider project. And I spent some time there, and then came back to the Navy; once again, to help with another transformation the Navy's going through, which is transforming itself into a network-centric organization.

And that had enormous implications to everything that the Navy did, on how it designed ships and airplanes and all the pieces on it, to how we were organized and how we budgeted. And so it was another very interesting challenge.

MR. PHILLIPS: I guess you were meant to be in the Navy, right?

MR. CIPRIANO: I guess I was. And I've enjoyed immensely working with the people there.

MR. PHILLIPS: Now, of all those things you've done, Joe, what best prepared you for the position that you have now?

MR. CIPRIANO: Each job, I think, contributed something. I've tended to have more of a military career than a civilian-type career in that I've changed jobs every three or four years, and I've learned and moved around with most of those job changes. So I've learned a lot of stuff.

And my industry experience, I think, taught me how to manage cost and cost centers; how to make a profit, how to understand how much things cost, and control those things better than any job I've had in government could have. The super-collider experience helped me understand how Congress works. And when you're working on a big, big project with lots of money and visibility, the other things that you have to consider in management besides just meeting a costing schedule, there's national, there's regional employment concerns and lots of other considerations that have to be taken into account.

And then a couple of jobs I've had, I've created organizations from scratch. In other words, they gave me a charter and said go build a warfare systems directorate, for instance. And here's a secretary and a charter and good luck. And so figuring out how to do that -- and I've done that a couple of times, also helped, because that's kind of what happened with this job; this job being PEO for information technology, didn't exist. They asked me to go create it and gave me -- I didn't even have a secretary -- they gave me an office and I started from there to put the organization together, to be able to treat or deal with information technology at an enterprise level.

MR. LAWRENCE: Well, speaking of your present job, tell us about it. What are your responsibilities as the program executive officer for information technology?

MR. CIPRIANO: The program executive officer for information technology is the enterprise acquisition manager for IT. So I buy IT for the enterprise. And in the past, we have bought IT at various levels in our organization and each requirement was tailored to support one of our echelon commands or missions.

And we found that in doing that, there was inter-operability problems. There were problems talking to each other because there were no standards that were being imposed across. And we also had security issues with some of the places that made it difficult to exchange information with them -- have to go through firewalls, which again caused problems. And it wasn't particularly efficient.

So as we were moving to a network centric, if you will, kind of organization, where we're trying to speed up our decision making -- that's really what we're trying to do -- is to use information so that a decision maker has in front of him the best information available to make a decision and so he can make it quickly -- that we needed to be able to share all that information that was resident in all these different places around the world and be able to access it and get it in front of the decision maker very quickly and securely.

So the PEO-IT was created to do that, and we have kind of two big organizational chunks: One of which is to put the infrastructure in place, which is NMCI's job, so that we can move information seamlessly across the enterprise and it enables that information flow and access so that everybody has access to the knowledge that's available to support their decisions.

And then the other piece is to work on applications that are enterprise wide applications. Some of the big projects we have are DIMERS (?), which is a joint OSD manpower and pay system. And the Navy is executive agent for that program for OSD, and PEO-IT is the Navy executing organization. So the DIMERS program manager works for me. And we're responsible in that program to develop this system to a set of requirements given to us by OSD to support all personnel pay for the Department of Defense, a big, big enterprise wide system. We have some others that are Navy wide systems that we also manage out of PEO.

And that's our primary focus, is infrastructure to support information movement seamlessly across and securely across the Department, and then managing large applications that are used by many people across the Department.

MR. LAWRENCE: Let me just get some context. What's the relationship between your job and other IT professionals in the Department of the Navy? Do they all report to you? How does that work?

MR. CIPRIANO: We have a couple of different relationships: We have a CIO for the Navy, who is Dan Porter; the Marine Corps has a CIO and the Navy has a CIO as well. So there's a Department CIO, a Marine Corps and a Navy CIO. And we have an Information Executive Council, which I'm a member of, which has those three CIOs on it, and also comptroller folks and things like that, to help with the financing of whatever great schemes we come up with.

So they have operational responsibility, the CIOs for systems, and they have policy responsibility. I essentially am responsible for equipping -- I do the equipping part of the mission; buying the capability that those CIOs say they need. And then after I buy them, they're turned over to them to operate and maintain.

MR. LAWRENCE: That's a great point for a break; we've got to stop. Stay with us through the break. When we come back, we'll ask Joe Cipriano about one of the largest and most innovative contract awards ever made. If you don't know what NMCI is, you will when we continue with The Business of Government Hour.

(Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy. And joining us in our conversation is Bill Phillips, another PWC partner.

MR. PHILLIPS: Joe, in our first segment, you described your responsibility to head this thing called the Navy/Marine Corps Internet, NMCI project. Tell us, if you would -- tell our listeners what exactly is NMCI, and what do you hope to accomplish through it?

MR. CIPRIANO: NMCI is a service, a voice, video, and data service that we provide to everyone in the enterprise, military and civilian. And that service is provided to a guaranteed service level. So they can count on it being available a certain percentage of the time, they can count on message traffic moving across it with packet losses less than some number, and with cross-country transit times less than some number. They can count on it being refreshed. And essentially, what we've done is, we've said, we're going to treat IT as a service rather than a commodity.

Prior to NMCI, we bought stuff. We bought software, we bought hardware, we bought networks, we refreshed them as we could afford to. Hard to synchronize those refreshments. And so we could continue to talk to each other when one guy got a bunch of money and could buy the next upgrade and the other guy couldn't. And it was very hard to synchronize that across our very large and diverse organization, where individual commanders were making decisions on the priority of these investments versus other priorities that they had.

And so we looked at this and we said, you know, this is what we want to do. In order to be able to share this information to improve our decision time, as we desired, and also address security issues across the board and inoperability issues, we really needed to think about this differently.

And we decided that operating and maintaining networks wasn't a core competency of the Department of the Navy, that there were people in industry that did this better than us, did it less expensively than us. And we imagined that if, without spending any more money than we were spending today, by just letting somebody do this for us, where it was in their core competency, we could get all of these improvements we were seeking without spending any more money.

So the objective that I was given was, don't spend any more money than we're spending now; I want service for all of these people, including an extra 55,000 that don't have service today that need it. I want this improved security; I want this improved availability; I want built-in tech-refresh; I want help-desk services; I want standard software packages that everybody has and that are automatically upgraded; and I want it all without spending any more money than I'm spending today.

The first step was to agree on what this service, what these service levels had to be, because they had to support, you know, 400,000 people that are on active duty and civilians and military that are ashore at any one time.

So agreeing on what those were took some doing. And everybody insisted that their requirements were unique, that nobody else but -- you know, I have special requirements that nobody else has.

We found that in fact that there is a core set of requirements that everybody shares, and we were able to agree on a service level that if this service level were met by the network, it would support everybody's requirements for information. And so this became the basis for a contract.

And we went out to industry and we said, here is a statement of objectives, this is what I want to do; here is a design-reference mission; here is the environment it has to work in because our environment is different than maybe what some of the commercial IT industry was used to working in. But this is how our surge requirements impact, information technology requirements; we may have four- or five-time increases in traffic during certain times. This is where our people are and here are the service levels that we want you to meet.

And we gave them no other direction than that. We did not specify any hardware and we did not specify any software. And we said you go figure it out, I just want to buy this from you as a service. And we had a lot of discussions with industry so they could ask a lot of questions, and then we put this RFP out.

The second thing we did was, we said we want to get out of this business. And so we turned over to industry our existing infrastructure. We said you can have it and you can use it if you can, and if you can't, fine; just make it go away because we want to be out of that business. We just want a service, like a telephone service or electricity, where it's just there and I don't have to worry about however it is gets there. It's just there every day and I can count on it and I want to be able to count on IT that same way.

So industry responded to this challenge. We asked them to bid against this service level agreement, and also to give us a best-value proposal, because we, quite frankly, didn't know where the knee and the curl was between costs and performance for the elements in the service level.

We didn't know if getting four 9s availability versus five 9s availability was a lot cheaper or just a little bit cheaper. And we didn't know, you know, if specifying certain packet losses -- for instance, cross-country costs a lot of money, or I could get better than that for very little more investment, or I could get just a little bit less and save a whole bunch of money.

So we let industry tell us where the knee and the curl was for their particular technical solution, and we competed at best value. And so we allowed innovation that was out there to be a big part of this effort.

MR. LAWRENCE: It seems very logical to spend no more money and get a consistent level of service, yet I can't help but think that the people who had the different systems at various levels all believed what they were doing made some sense, and therefore, were comfortable where they were. How did you get them to understand, sort of, I guess, sort of global optimization?

MR. CIPRIANO: Right. And that's a very good word is optimization, because everybody had optimized their network for their situation, and that may not be optimized for the next echelon or the echelon several echelons up. So the trick is always to -- how do you optimize requirements for everyone without decreasing anybody's requirements? And it was difficult.

The other thing is that anything that's managed out of Washington couldn't possibly be as good as something I'm managing myself; just previous experience would lead one to conclude that. And so we had to work on that.

We did some things. First of all, we met with all of these people every month. And we facilitated these meetings with very senior Navy leadership, four-star-level participation; the CINCs, the commanders-in-chief from Atlantic fleet and PAC fleet, from the CNOs office and so forth -- so we had very senior Navy leadership saying this is important to us, and re-enforcing that idea.

And then we listened to people's concerns about it. And then we put provisions in the contract and in our governance structure to accommodate those concerns, to the extent we could. For instance, there was a concern that, since a contract was held centrally instead of locally, that the contractor would try to please the central holder of the contract instead of pleasing the end-user.

And so, in NMCI, we dealt with that by having a customer-satisfaction incentive that's built into the contract that is up to $200 a seat, per person incentive, which adds up -- which can come to $150 million a year. It's a lot of money -- that is controlled based on surveys of the end-users; it isn't based on whether I'm happy or not with the service, but is the end-user happy with the service. And so every quarter, they're given an opportunity to fill out an online survey. And based on that survey, the contractor can earn $25, $50 or $100 a person more, if he delights those people with the service.

And that was intended to focus the service provider on making the customer happy and take some of the focus away from worrying about meeting every little contract nuance. We were more concerned about customer satisfaction than we were on meeting all these very specific metrics that had been specified in the contract, because who knows if they're right or not.

So customer satisfaction was given a lot of attention as a way to help settle that. But to change management is always hard, and the hardest part of this as we transition through this is that.

Another factor that was identified, another concern was, there were a lot of people's jobs that were affected by NMCI, since we had about 2,000 civilians and military that were operating and maintaining networks that would no longer have that responsibility once NMCI came to their sites. And of course these people were concerned about what had happened to them as a result. And we asked industry to help us with that, too.

And so each of the industry proposals contained a how we think you should deal with this problem. The proposal we selected has a very nice program for dealing with this. For anyone that we identify as being impacted by NMCI to the contractor, the contractor promises to hire them. They get a 15 percent raise; they get a hiring bonus; they get guaranteed employment for three years. And so they have a pretty nice package to transition to industry if they want to continue doing the kind of work they were doing before.

If they want to move into knowledge management, or if they to move into some of the other areas in IT where we are growing people and moving, then we were offering training opportunities for those people, and said, you know, if you decide you want to take this industry offer, great; if not, we will try to place you in the Navy in other locations to help with some of the remaining responsibilities we have, because these are very talented, very high-value people. And IT people, as you know, are in short supply, so it's not like we wanted to get rid of them or that it's hard for them to find jobs.

MR. LAWRENCE: How long did all this take, describing the vision, selling the vision and executing such a big contract?

MR. CIPRIANO: We started in May of 1999 with an off-site, with all of our echelon two commands, facilitated by one of our 4-stars, where we come up with a vision for NMCI. This is what we want to do; here's the scope of it, and began an acquisition strategy.

In December, we issued an RFP, so between then and December, we got all the requirements together, got agreement on the service level agreements, did industry visits of everybody who had provided this service to over 100,000 people, and learned, therefore, you know, how they had done that, and tried to incorporate that in our process. And so it took less than a year to go through the whole acquisition process.

MR. LAWRENCE: And speaking of time, it's a good point for us to stop. We're talking with Joe Cipriano about the NMCI project. Stick with us through the break. When we come back, we'll ask him more about this large and fascinating project.

This is The Business of Government Hour.

(Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy. Joining us in our conversation is another PWC partner, Bill Phillips.

Well, Joe, let me ask you one more question as we're coming out, about the challenges at NMCI. You describe that as a result of this, the Navy will now be buying a service, whereas it once actually did it itself and owned all the infrastructure. That seems like a huge management challenge to come around to that point of thinking and actually execute it. How was that done?

MR. CIPRIANO: It actually was a process that was started a year or two ahead of NMCI, where the Navy looked at and identified what its core business was. And we also looked at where our people were. And we had an objective of putting more of our people assets, because we were seeing challenges in recruiting and retaining kinds of people, that the ones we had, we wanted to make sure were focused on the areas that were our core business areas.

So we identified those core business areas, we identified how we had distributed our knowledge workforce and our talents to support that. And then we started doing business cases on the non-core areas, to understand how much it was costing us to do them ourselves, and then, how much it might cost us to have somebody else do them for us that could do them more efficiently.

And we did that within NMCI; we did a business case. If we were to do this ourselves, this is how much it would cost. We had that done before we got the proposals back from industry. So we said this is how much it's costing us to do it ourselves, and this is the result of that cost. And then we got bids back from industry that said this is how much it would cost us to do that same thing if we had industry do it. And by comparing those two, it's a very compelling business case in this particular example, that it's something you want to let somebody else do for you.

MR. LAWRENCE: Did the numbers alone work or -- wasn't there the argument made -- I think you just made it, that of course, somehow me touching it and controlling it beats any number differential? How do people get over that?

MR. CIPRIANO: There's always that, and you have to keep enough in-house expertise, I think, in these things so that you can be a smart buyer. And so we made some decisions about, you know, we looked at our workforce and made sure we retained enough expertise and enough work for them to do that we could continue to be a smart buyer and continue to reinforce the fact that yes, this is a valid business case; yes, we are getting this service, meeting our requirements, and we're doing it in a cost-effective way.

So it's not something you can stop, I think. It's something you have to look at and continue to look at over time.

MR. PHILLIPS: Joe, you've described a number of specific success measures over the course of your response to our questions here in the last few minutes. But when you sit in a room with the Secretary of the Navy or the CNO or the four-stars or the senior leadership of the Navy, what things are they asking you and wondering about to measure the success of NMCI?

MR. CIPRIANO: Most of the measures from their viewpoint are customer satisfaction. Are the customers or the users happy with the service that they're getting? That's really the key. If you did everything right, they are; and if you haven't, then there's things you need to do. So customer satisfaction is a big one, and something that we try to stay right on top of.

Like I say, we have online surveys that we do, even starting out during the transition to do these surveys and so we can find issues that are involved during that period of time.

But when we're done, and I'm sure this will change -- the questions will change, you know, as now we're getting started and we're identifying budgets and so forth and going through transition phases. I think the question when we're done is going to be, have we in fact sped up our decision making process? Because when all is said and done, if we aren't making faster, better decisions as a result of this investment, then we didn't do it right. That's the real reason for doing it, because I think faster, better decisions is the key to success in business, and it's the key to success in warfare.

So to the extent that you can do that and take advantage of technology to allow you to do that, I think you will be successful on both of those fronts.

So we've tried to identify measures. It's hard to measure the reaction time of an organization directly, but we've identified about 200 metrics that we think in a group allow us to get an indication of the reaction time of the organization as a system; that if these metrics are being met, then we are -- have optimized our reaction time as an organization.

Lots of elements -- NMCI alone doesn't do that; you have to work the applications side. We have other initiatives, such as Taskforce W, which is a web-enabled initiative or web-enabling applications. We have organizational issues where we're changing how we look at requirements to buying capability instead of buying stuff. And that is impacting how we're organized, how we budget, how we prioritize things. And so there are lots of things that come along with this.

But I think if you keep in focus, bottom line, how do you speed up the reaction time of the organization, and is this speeding up the reaction time of the organization? That's really the bottom-line measure.

MR. PHILLIPS: You used the phrase:"A faster, better decision." that's clearly consistent with what Secretary Rumsfeld has said that he expects the Department of Defense to do. Are there applications of NMCI and what you're trying to accomplish there elsewhere in DoD, in the Army, the Air Force, or for that matter, across the federal government?

MR. CIPRIANO: I think there are. The other DoD agencies and other government agencies as well have asked us what we're doing, and we've briefed them. In fact, foreign governments even have. And so NMCI has raised an enormous amount of interest across the government, here and abroad. And we have talked to them about what we did and how we did it. We've freely given them copies of our service level agreements and contracting strategies and whatnot so that they can borrow from those, improve upon them, which is what we did.

We went out and looked at everybody else that had done this and tried to come up with a little better way than anybody else had. And I'm sure others that choose to go this path will find a better way to do it than we did; you know, here's what worked well and here's what didn't.

But I think there is a large part of this that is directly applicable to other government agencies and even commercial agencies, because we tried to follow best practice, you know. And we went out and discovered what that was and followed best practice to the best we could understand it at the time. Tried to make it better in some places. So best practice is best practice, and to the extent that we were successful at identifying it, I think it is directly applicable.

MR. LAWRENCE: Do you give them any other lessons learned from your experience?

MR. CIPRIANO: We had a couple of things that we would recommend people do in preparation for this. One in particular is that most big companies, IBMs and so forth, Microsofts, have 80 or 100 applications that they run their business with that are critical to their business.

In the Department of the Navy, we have like 100,000 of those that were identified as critical; I can't do my business without them. So we had a very, very big, large number of those. And to make all of those run in this new environment didn't make a lot of sense. So we wanted to rationalize those applications. And that rationalization process is being done at the echelon 2 level, and then again at the enterprise level. So we have to come to two levels of rationalization.

First of all, we were somewhat surprised at the number of them. There were more of them than management was aware of that had snuck in over the years. And it has taken us a little longer to get that rationalization process done. So I would start with that process in advance of NMCI would have started a year ahead of time, working that a little harder.

The problem is you can't get anybody to work on it unless you have a forcing function. NMCI is providing the forcing function, so we're working on it. But if you can figure out a way to get people to work on that problem in advance of the forcing function, maybe the threat of the forcing function would be very good.

MR. LAWRENCE: If one thought about the place such an innovative idea and project would have come from, they might not have immediately thought of the Navy; rich in tradition, not prone to change, and that's probably been an attribute of its success. What sparked this innovation, or what in the Navy culture makes innovation possible that people really don't understand?

MR. CIPRIANO: I think there's a lot of innovation, I believe, in the Navy and in the other services as well. Because I believe innovation is fostered by a results-oriented organization or management approach. When you are the commanding officer of a ship at sea, and you have command of all these resources and you are being held accountable for success of a mission, innovation is important, and allowed.

You have a lot of authority to make decisions on how to do things and you are being held accountable for result. And in the culture of the Navy and in the Marine Corps, accountability is very strong. And so innovation, you know, what does it take to be successful, which is where innovation comes from, is right below the surface, if not at the surface.

And the balance of that, with complying with policies and procedures and all those other things that we're required to do in government sometimes means that the innovation doesn't break through the surface. In this particular case, I was very fortunate that the ASN, Assistant Secretary of the Navy for Research Development and Acquisition, at the time this was created said I'm going to give you extra credit for every rule you break. I want this contract done as fast as humanly possible. You have my full authority to waive any procedures or processes, and if it's a statute, come tell me about it and I'll work on that, too.

So I had that kind of support from my boss as we started this thing. And we had a sign that was hung on the front of the contracting team's office that said this team has been bludgeoned into believing they can do anything consistent with common sense; please do not convince them otherwise. And that was signed Lee Buchanan (?). And that was actually hanging out in front of the door, just to remind people that, you know, it's okay in this case, to think out of the box, to look at things that you may have been told or led to believe you couldn't do and to challenge those.

And we found there wasn't a single statute that had to be changed or violated. And in fact, we have an enormous amount of freedom, if we use it, to do things very quickly and efficiently.

MR. LAWRENCE: Great. It's a good stopping point. Rejoin us after the break and we'll talk about the future with Joe Cipriano. We'll find out how the possible retirement wave might affect many of the things he's been talking about with us.

This is The Business of Government Hour.

(Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy. And joining us in our conversation is another PWC partner, Bill Phillips.

MR. PHILLIPS: Joe, in the last few months and the last couple of years, there's been a lot written about retirement and the retirement wave that's impacting the federal government. The Navy, I'm sure, is not immune to that. What are your thoughts on that situation? What are the specific challenges that the Navy has? And what kinds of things are you considering to help deal with that?

MR. CIPRIANO: Yes, that is a concern, Bill, for us and for the Department of the Navy, and we're looking at it in functional areas. The IT workforce in the Navy, for instance, was one of them where there was an aging population; we're looking at our average going up. We're looking to getting to a crisis situation not too far away because our demands for that expertise were going up and the number of people we had were going down.

And so one of the ways that we're dealing with that is by turning over to industry responsibility for those things that aren't core, aren't things that we absolutely have to have our people do, so we can free up the folks we have left to do the things that we have to do ourselves in-house that are core to our mission.

And I think that is a mitigating thing that can help. And I think that for those areas that are not core mission, that is the strategy, I think, that's quite effective. Because if you give it to somebody where it is their front-room business, they could probably do it more efficiently, with less people.

For instance, one of the reasons that NMCI has allowed us to get more for the same amount of money is that they used technology to reduce the number of people necessary. About 70 percent of the cost of running an IT network is personnel.

But when you have a large enterprise network where you can consolidate server farms; you can have automatic fail over, so they don't have to be manned; you can have a guy show up once a week to replace modules and what-not; you can reduce that cost greatly. You can reduce the number of people it takes to get that capability.

And I think there's a lot of opportunities like that, when you look across a big enterprise, that aren't available if you're looking at a piece of the enterprise, but become a cost-effective way to reduce manpower requirements; when you look at the enterprise from the top-down perspective, that will become evident.

The other thing we try to do is we try to target key expertise that we need and recruit it at places that we've had success in the past, use people that have come from there to help us with recruiting so they can go tell them what great fun they're having working for us. And we offer in the Navy, and I think all the services, very challenging jobs. And what I found -- and I've left a couple times and come back -- is, it's hard to find a job with as much scope, as much excitement as you can find working in the government.

So people that are interested in that, that are interested in that big, big project challenge, an opportunity to work on multi-billion-dollar programs and do things that nobody's ever done before -- there are a certain kind of people that love to do that kind of stuff, and we were able to attract them.

MR. PHILLIPS: Are you finding, as you have changed the mix of technologies, you're moved technology off to the private sector, are you finding that the people who are remaining in the Navy are becoming more engaged and more excited about what their roles are, and therefore, urging them to stay or join?

MR. CIPRIANO: I think, as a matter of fact, NMCI has improved our retention in this area because the work that's left is exciting work; it's more fun work, it's more challenging work than perhaps the work that they were doing before. And so I believe our retention numbers are up even in the enlisted and on the military side.

MR. LAWRENCE: With the widespread expansion and advancement of technology, what kinds of skills does a young person need who might be contemplating joining the Navy either as a civilian or a service member?

MR. CIPRIANO: Well, I think most of our young people today are a lot more savvy, at least in computers and things than I was, certainly, and some of us were when we went through because it's been built into our education system from elementary school on up these days. And those skills, I think, are important today, will be continuing important because I believe the military, as well as most every place else, is going to be working on speeding up the decision process, which I keep coming back to.

And IT is key to that; the technology that that technology brings enables that speeding up of the decision process. And anyone, therefore, that has those kinds of skills is going to be valuable for a long, long time to come and be able to be used on many different kinds of jobs.

The military, you know, starts with good people and we teach them unique things that we do, but if you have a good strong background, understanding of technology, systems engineering is another discipline that is highly valued. We engineer the largest systems in the world, and we have great jobs for systems engineers. And so we're always looking for them, but those kinds of skills are very important to us.

And if you want to do it for a time, all branches of the military offer great opportunities for a young person to come in, get experience, and get training that looks great on their resume for whatever they want to do for the long-term.

MR. PHILLIPS: What kinds of specific steps are you taking to get people, to attract workers and to retain them? You've described a number of things about the characteristics of the job, but how do you go out and actually get them and find them?

MR. CIPRIANO: They find us. When you're doing something that's new and exciting, people come and they want to work for you. We have people coming into the PEO all the time that want to work there because they've heard about the project. It sounds exciting, it sounds like something that they want to be involved in. It's something they always wanted to do and couldn't wherever it was they were.

And I think if you have a project that is big and new and different and it's getting visibility, you don't have to hunt for them to dome. The jobs that you have to hunt people for are the ones that aren't so exciting.

MR. LAWRENCE: You described taking a pay cut a couple segments ago, several times, I think, in your career as you did this for challenging work, and I'm guessing, from interviews say, a year and a half ago, that all we heard was technology workers were drawn for stock options and very exciting Internet things, I think dot-coms. And I'm curious, what's the relationship between the pay differential, which I think exists in and around government, and this exciting work? Is that really enough?

MR. CIPRIANO: It turns out that having done it both ways, that when you work in industry and you get paid more, I've found that people; the more you get paid, the more you have to work. Or as Pete Pinoffsky (phonetic spelling) who is a Nobel Laureate, once told me; he said, your compensation is equal to the fun plus the one. So if you're having fun, you probably aren't making as much money as somebody that isn't having fun. I know there are some exceptions to that, but generally, the combination of fun and financial compensation should be what you look at in that total package.

And sure enough, there are some great opportunities for fun and very interesting work in the government, even though it may not pay as well as the other opportunities. At different times of your life, that is a great thing to do. When you have kids you're trying to put through school, it's a little bit challenging sometimes.

MR. LAWRENCE: What's your vision for the Navy over the next ten years?

MR. CIPRIANO: I think the Navy is truly on a path to be one of the best-run organizations of any kind. They're really looking at getting information to decision makers faster, restructuring themselves from top to bottom -- from budget to planning; to how we buy things; to how we think about things; to buying capability instead of stuff; to organizing to take advantage of technology to expand the boundaries of system. You know, we optimize systems based on what we're capable of comprehending and dealing with. And the ship used to be the biggest thing that the Navy built, and now we're building battle forces, you know, and joint taskforces. And technology is making those physical and time boundaries between what's in the system and what isn't go away.

And so to the extent we=re able to understand that and manage that, we can extend the system to include assets anywhere on the globe to be part of the problem solution or the mission accomplishment. And the Navy understands that very well. And I believe it is preparing itself and its people to take advantage of that technology and move in that direction as quickly as they can.

MR. LAWRENCE: How about the future in terms of its management capabilities? I mean, you described sort of the past, where a leader or a manager ran a ship or a battleship or a fleet, and now, NMCI is a window into a future that has a great deal of civilians working with the Navy. Will the management skills and capabilities need to change, too?

MR. CIPRIANO: I think they will and I think they are. How do you train people to manage big, big things? Because you can't do it in the old hierarchical well, where you have one guy that's the boss and he runs everything, because it's too big for anybody to understand. So you need to have contracts with employees and members of the organization. Okay, my contract to you is I'm going to provide you this, and your contract with me is you're going to go do this. And you go do that and operate as independently as you possibly can to do that. If you can't establish those contracts, if you can't break up the problem into pieces that you can allocate and contract with individuals to do, then there's a limit to how big the system is that you can manage and you can make-work for you.

And I think the managers that are successful at figuring out how to do that, figuring out how to structure their organizations, how to structure these relationships with the people that support them, will be the ones that are able to handle these very, very big systems and make them work to generate great benefit to the organization.

MR. LAWRENCE: Well, Joe, I hate to bring this interesting conversation to an end, but we are out of time. And Bill and I want to thank you very much for being with us here today.

MR. CIPRIANO: It's been a pleasure to be here. It's a pleasure talking to both you, Paul, and, Bill, and I enjoyed it very much.

MR. LAWRENCE: This has been The Business of Government Hour, featuring a conversation with Joe Cipriano, program executive officer for information technology at the U.S. Department of the Navy.

Be sure and visit us on the web at endowment.pwcglobal.com. 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 interesting conversation.

Once again, that's endowment.pwcglobal.com.

This is Paul Lawrence. See you next week.

Washington, D.C.

Wednesday, August 22, 2001

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with Amy Comstock, Director of the Office of Government Ethics.

Good morning, Amy.

MS. COMSTOCK: Good morning.

MR. LAWRENCE: Well, let's start by finding out something about the Office of Government Ethics. Could you tell us about its history and its activities?

MS. COMSTOCK: The Office of Government Ethics was created in 1978 as part of the Ethics in Government Act, under the leadership of President Carter, actually. It was created in the wake of the declining trust in government, following Watergate. There was, obviously, a lot of responses to that scandal and one of the concerns was that the public had lost its trust in government and also, needed a little more ability to assess for itself the integrity and impartiality of government officials.

So the Office of Government Ethics was created, as I said, in 1978. At that time it was part of the Office of Personnel Management, OPM. In 1989, the Office of Government Ethics, which I will refer to as OGE, was made a separate agency and it has been a separate agency since.

We are a nonpartisan agency. I am a presidential appointee, but I have a term appointment, so that my position doesn't change as a result of the recent election, for example.

Our mission is to oversee ethics programs for the entire Executive Branch. We establish the policies and regulations governing conflicts of interest and other ethics matters for all Executive Branch employees. We, as we'll discuss in more detail later, we work directly with each of the departments and agencies in the Executive Branch to ensure that their ethics programs are functioning properly.

So, that's a quick thumbnail sketch of what we do.

MR. LAWRENCE: Well, one of the questions I have is does OGE have enforcement responsibility?

MS. COMSTOCK: Well, we're responsible for overseeing the ethics programs, but if we determine that they're -- or an agency ethics official determines that there is a problem or a question with one of the employees in their agencies, we generally rely on the Inspector Generals for investigation. And, then, if there's still determined to be a problem, the matter would be referred to the Department of Justice for prosecution.

So we do not consider ourselves an enforcement agency, although we are responsible for ensuring the integrity of the programs and if we need to, we will then refer and rely on other agencies for the enforcement actions.

MR. LAWRENCE: How big is OGE and what type of employees work there?

MS. COMSTOCK: OGE is 82 full-time employees. So we're actually, as government goes, pretty small. And we have a very specialized skill. We have a very strong staff of, oh, maybe 20 lawyers and a strong number of maybe 50 government ethics experts. Because what our field, our function is fairly unique to the federal government, we have people who are trained on the job and come and learn about government ethics.

We have -- I'm happy to say, we have a lot of long-time employees who really enjoy the work they do and feel strongly about our mission. And that's really good, given the fact that the skills that we need for our job are really unique to OGE and people learn it on the job.

MR. LAWRENCE: And then what's the relationship between OGE and the other organizations that are also working with ethics? How do you all work with the departments?

MS. COMSTOCK: Well, we're the only agency that does government ethics, as defined by the federal government. But ethics officials in agencies often are also responsible for giving advice on matters such as political activities, discrimination issues. Those are handled by other agencies. Political activities, the Hatch Act, are covered by the Office of Special Counsel; EEOC, Equal Employment Opportunity Commission, deals with discrimination matters. Obviously, as I indicated, the Department of Justice prosecutes; Inspectors General investigate matters.

So, our jurisdiction relates, if you will, but our jurisdiction is only on what are considered absolutely ethics conflict-of-interest matters.

MR. LAWRENCE: Well, let's spend some time talking about your career. Could you tell us about your career and how you got here?

MS. COMSTOCK: After graduating from law school, I went to a private law firm in Washington and, to be quite frank with you, I just decided that that was not going to be for me. It did �

MR. LAWRENCE: How long did that take?

MS. COMSTOCK: About two years. Actually, I decided right away, but I didn't leave for two years. I just decided that the private law-firm mission was not going to be mine. And started looking into the government and, actually, had always been interested in teaching. And saw an attorney position open up at the Department of Education and thought, well, that might be a good compromise; kind of combine my interests. And I applied there and started working there in 1988. I worked in the field of special education as a staff attorney for a couple of years and that was a fascinating job.

But then moved on from there and started -- became the executive assistant to the general counsel, which is where I was first exposed to government ethics issues. And I think that was in 1990. And I moved on from there and became the assistant -- at the Department of Education, assistant general counsel for ethics, I think in 1993. And I oversaw the ethics program at the Department of Education until 1998.

At which time, I went on detail, which I can explain in a minute, to the White House to oversee the ethics program there for about 15 months. On detail meant, I went as a career employee; I didn't become a political in the Clinton Administration, although I was working in the White House.

It was during that 15-month period that I was nominated to be the head of the Office of Government Ethics. And my -- I was confirmed in 2000.

MR. LAWRENCE: Which of the positions that you described gave you the best preparation for your work now? I mean it seemed as though each one of those was a function where you didn't have a lot of management responsibility and now, you have a great deal. How did -- or did I not hear the descriptions correctly?

MS. COMSTOCK: No, in the education, as the assistant general counsel, I was head of the ethics division, so there was a fair amount of management and responsibility there. And in both agencies, Education and the White House, I oversaw the ethics programs, so there certainly was a lot of management responsibility in that perspective.

Both of them were excellent training for the work that we do from the perspective that the ethics program, and we'll talk about the details of what it encompasses in a bit. But the ethics program is actually something that has a huge impact on the lives -- can have a huge impact on the lives of Executive Branch employees.

The areas that we oversee are, in fact, the areas where someone's job and their personal life may overlap. And that's pretty serious business. You're talking about affecting someone very personally. The experience that I had in running the ethics programs at Education and the White House, the experience of having to train employees, having to counsel employees, having to sit with employees when you're telling them they simply can't do -- either in their jobs or in their personal lives -- that which they very strongly want to do -- that's a hard thing to do.

I think it was important for me to be able to bring that kind of experience to OGE. I am, actually, the first director of OGE to come from the ethics community as someone who has run programs working directly with the employees we work with. Again, OGE basically has an oversight function. So I think it was good for me to be -- I know -- it's important for me to be able to bring to that job the perspective of the person who has to deal directly with the unhappy employee or the frustrated employee. And that kind of customer orientation is something I've been able to instill in OGE, since I've been there.

MR. LAWRENCE: Well, I'm curious. What was the most effective tool in those conversations, because without enforcement ability, I guess, you're left with education to explain why they can't do these things? But at some point, obstinate people probably didn't listen.

MS. COMSTOCK: Well, I have to say; I've been pretty lucky. I mean, each of our -- we should always try and run a prevention program and so we do try, and it's very important, to educate people why the answer is either no that you can't do that or, if you're going to do it, you know, you must do it the following ways.

But I've been very lucky that I haven't run into too many obstinate people. I mean the fact is that the rules and regulations and the laws that we implement are all designed to ensure impartiality and integrity in decision-making by government officials. But behind all those rules, obviously, there are regulations that you cannot violate and criminal statutes. So, while I may never have been able to personally have the enforcement, I mean, the fact is if you're sitting across from someone and you say, you cannot do that; that is criminal. It generally works.

MR. LAWRENCE: Well, you've had a chance to be around some leaders in, I guess, a unique perspective. What qualities have you observed are crucial to be a good leader?

MS. COMSTOCK: There are a number of qualities that are important for leadership. One is, obviously, honesty and to try and actually be the kind of person you would want to have as your most trusted adviser, someone who's honest, someone who's up-front, someone who will always be open-minded and fair. And I think those qualities are infectious in terms of the people you work with directly, either on my own staff or on the clients that I serve.

I also think, as a leader of an agency, that has such a broad impact on the entire Executive Branch, it's extremely important for me to be able to instill a sense of mission in my own staff and in ethics officials across the agency.

MR. LAWRENCE: It's a good breaking point, so it's times for a break. Stick with us through the break, because when we come back, we'll ask Amy Comstock, Director of the Office of Government Ethics, about the financial disclosure processes for political appointees. Did you ever wonder what you'd have to reveal if you were asked to join the Administration? We'll find out when The Business of Government Hour returns.

(Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Amy Comstock, Director of the Office of Government Ethics.

Well, Amy, in the first segment, you mentioned a couple of things that I probably want to make sure I have a complete understanding of. And that's conflict of interest and disclosure. Could you spend a minute telling me -- making sure I got the right definitions of those?

MS. COMSTOCK: Absolutely. A conflict of interest, in the government sense, means that a government official may have worked -- or a conflict would be where a government official works on a matter or participates in an issue, if you will, where they also have a personal financial interest.

And so the criminal statute at issue and then the regulations are actually written in a prophylactic way. They prohibit federal officials from working on any matter in which they have a financial interest.

An easy example of this would be if I have $50,000 worth of stock in a particular company that would be affected by a decision I make as a government official because the decision would affect that segment of an industry. For an example, the easiest one is companies that make tires and I'm working on a regulation that might affect the tire industry. And I, in fact, own $50,000 of stock in a company that makes tires. I, under these rules, cannot participate in any decisions that would affect the finances of the tire companies.

What's interesting about these statutes is, as I said, they prophylactic, they keep people from having to decide am I doing the right thing -- am I sure I'm not making a decision just because I own stock in the company or, in fact, what they do is prohibit the employee from participating at all. They keep the federal employee from having to do the right thing or struggle to do the right thing.

That is the easiest example. There are a couple possible resolutions. Because, in fact, if we step back and look at all the different kinds of people who come in to the federal government, either as career servants who will be there long term or during the change of administration, as we've just seen. People have all different kinds of investments and they come in with all sorts of assets that they own.

What we do is, through a process of financial disclosure, we review someone's holdings and assets to determine if we think they will have a conflict of interest. We have something called a public financial disclosure form, which is filled out by all presidential nominees. And then, once a year, by the 20,000 top government executives, federal government executives, that form discloses all assets someone owns, financial transactions they've had in the last year, any outside positions they may hold, gifts they've received for -- not for nominees, but beyond that, gifts someone's received.

We review those forms to determine if there are any conflicts or, potentially, will be any conflicts. If a conflict, again, the tire industry, for example, if a conflict is found to have -- to be at issue, the possible resolutions are that someone divest themselves of the holding. In that case, I would sell my tire company stock or I agree to recuse, meaning I agree to not participate in the tire company decision or another common resolution is a waiver. Ethics officials throughout the federal government have the authority, if they review a number of factors that have to be taken very seriously, they have the authority to determine that, given all the factors, and looking at exactly how much stock this person owns and what the government question at issue is they waive the conflict and they've determined the person can participate in it.

The example I gave that might not be a good candidate for a waiver because that seems to be a pretty clean conflict -- pretty clear conflict. And it's a liquid holding, something I really couldn't divest.

When I referred to public financial disclosure forms, this is an important aspect of our program. The mission behind the Office of Government Ethics is not just for us to assess conflicts of interest or for ethics officials throughout the Executive Branch to assess conflicts of interest. It's also to ensure that the public has the ability to assess the integrity of government decision-making on its own.

So for those 20,000 Executive Branch employees who file financial disclosure forms every year, they are available to the public for the public to view themselves. They -- and they are viewed. They're requested quite regularly by the media and are used to determine whether there might be questions behind a public official's decision-making.

MR. LAWRENCE: What are some of the management challenges that OGE faced in the most-recent presidential election?

MS. COMSTOCK: Well, in terms of the most-recent presidential election, we did -- because we review for every presidential nominee -- Senate-confirmed nominee -- the financial disclosure to determine if there will be any conflicts of interest -- quite frankly, the extended election did mean that we began that process a little bit later than we expected to, but I have to say that the staff at OGE and the agencies and the White House have worked very hard so we feel that we are caught up in that. So that was just a -- that was just some late nights in the spring when we expected to have the late nights in late winter.

But in terms of the management challenges that I think I've seen at OGE since I started in November -- and actually in the years that I've been working at ethics -- one issue that I struggle with is, honestly, the name of our agency. We are, of course, the Office of Government Ethics and I have had many conversations with people who feel that we have, therefore, usurped what you and I might consider to be ethical decision-making.

Our office does issue a code of conduct that all federal employees are expected to abide by. We have conflict-of-interest regulations, we have post-employment regulations that everyone, based on statutes, that everyone is expected to abide by. But it was never intended that the codes-of-conduct that we have would usurp individual employees' and executives' personal decision-making.

I am a strong proponent of ethical decision-making and values-based decision-making by all executives. And I would always challenge everyone that the code-of-conduct is not the last place to -- is not the last stop for your own decision-making as a government executive. We establish minimal standards for behavior, but if something -- one must always bring their own values, their own judgment to any decision that they make.

If something feels wrong, you need to pursue it. If one of our rules tells you that something is wrong and you firmly disagree with it, you need to call me. I -- government executives, I firmly believe and will always will encourage, still need to bring their own years of experience and judgment to any issue they consider to be ethical -- now if it's -- an ethical question, if it's clearly covered by our rules, we need to talk about that and have that conversation with someone in my office or with an ethics official. But never think that our office has usurped individual ethics decision-making values, if you will.

MR. LAWRENCE: Are there any challenges around the disclosure form? The example you gave of the tire company and the stock and that kind of decision, seem clear. But I'm wondering about the sort of blurring of companies and services and the Internet and how even to unravel that in a possible �

MS. COMSTOCK: It's getting harder. I think you've hit on a real point that we struggle with. Investments are getting more complicated. Companies are getting more complicated, in terms of parent companies and subs. We will discuss in a little bit some legislation that we've sent up to the Congress just this summer to try and streamline the financial disclosure process. But one of the components of that legislation is a new provision to help us deal with limited partnerships, for example.

Ten years ago, most often, even for very wealthy individuals, assets tended to be just straight equity stock holdings. Many, many people now have limited partnerships where they hold something that then holds another partnership, it's much more complicated to even figure out, believe it or not, what someone actually owns. And if you buy some share of a limited partnership, you don't even always know exactly what you own. You may know what industry it is. So that is becoming more of a struggle.

We're trying to achieve that perfect balance between not putting so much burden on an employee that it's hundreds of hours work to fill out the financial disclosure form. But, quite frankly, the public still absolutely, under our system and I believe it, has a right to know what this person owns and where their interests are.

Remember -- and this is an important concept we always have to keep in mind in our office -- our government is basically designed to turn over at the highest levels every four-to-eight years. So we do have a constant churning of new people coming into the government. And we're trying to ensure that our system of disclosure is not so burdensome that, without need, without unnecessarily, that it deters people -- that it's such a struggle, in and of itself, to do these forms that it deters people from wanting to come into government.

I don't think we've ever reached that point, but there -- in the last two years, there have been some complaints that we're close.

MR. LAWRENCE: That's a good place for us to stop for a break. We'll come back. We'll ask Amy Comstock of the Office of Government Ethics more about how the ethics programs work.

This is The Business of Government Hour.

(Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Amy Comstock, Director of the Office of Government Ethics.

Well, Amy, in our last segment, you talked about new legislation that you're developing and you described some of the characteristics, could you give us a little more insight into the legislation?

MS. COMSTOCK: One of the things that I mentioned is that there has been sense, and I agree with it, that the nominations process and the financial disclosure or public financial disclosure process has become too burdensome. I'm focusing, primarily, on the financial disclosure aspect of that.

The information that we've required for the last 20 years for public financial disclosure is actually quite detailed. And as a result of the Presidential Transition Act, legislation that was enacted last fall, OGE was asked to do a study to see if that process could be streamlined.

Quite basically, what we did was go in with the mandate that we were not going to lessen our or ethics officials' ability to assess conflicts at all. But we went in with the mission that after 20 years of experience is there information that we receive from that form, that is either never used, useless, redundant? So we just went through with those questions in mind and, as a result were able to propose legislation that really eliminates a lot of the, I would call, unnecessary information that we accept on the form.

For example, currently, if someone comes from a private corporation and they're coming into the government, they have to list on the form the exact dollar figure of their salary from their prior corporation. Quite frankly, it doesn't matter what that dollar figure is, it will not change the fact that they should have a one-year cooling off period from their corporation and any official decision-making they make unless they receive a waiver. And if they own stock in the corporation it will be a conflict. It doesn't -- they -- but someone has to actually go through the -- take the time to get the exact dollar figure written down on the form. We've proposed to eliminate that requirement.

In addition, the current form has 11-different categories for the range, the value of an asset you hold. And this is -- this is the most significant change that we're proposing. Currently, if you have to -- if you own stock in that tire corporation, again, you have to check in a range if it's worth between I think it's $15,000 and $50,000, between $100,000 and $250,000; but, with certain limits, if that asset is worth maybe $50,000 or $250,000, there is a conflict. It actually doesn't matter to assess a conflict the exact value of that asset but, especially for people who have any significant assets at all, the amount of the hours it takes to go through and determine the exact value of all their assets is phenomenal.

We've been able to eliminate the 11 categories or propose eliminating the 11 categories of value and reduce it to three. I could go through all these and I don't think our listeners want to hear all the details of all of them. But the fact is that if these proposals are enacted, we will be able to reduce hours and hours the amount of time it takes to fill out this form. But we firmly believe not impede at all an ethics officials' or the public's ability to determine whether someone has a conflict and assess integrity in decision-making.

MR. LAWRENCE: Well, earlier you mentioned that you were, in fact, a political appointee, yourself. Do you have any suggestions or lessons-learned for those nominees who are currently involved in the process?

MS. COMSTOCK: Well, be patient, I think would be the most important guidance. Answer all questions you're asked fully, but most important hang in there because it's worth the wait. From my own experience, as well as from surveys that I've read, a position as a presidential appointee, a Senate-confirmed position, according to a presidential appointee initiative survey, the vast majority of people who have held those jobs would recommend it to a friend. It's just a wonderful opportunity for public service and to really work on issues and matters that are important to the country. And I think it is definitely worth the wait.

MR. LAWRENCE: Well, let's shift a little bit in terms of talking now about manage OGE. What are the strategic priorities for OGE for the year?

MS. COMSTOCK: Paul, obviously, the number-one priority will be to do anything we need to do to ensure the passage of the legislation that we've just talked about. I'm hopeful that it will go through. We sent it up in July and it should be introduced in the fall. It is nonpartisan, good-government legislation, and I'm hoping it will go through.

But keeping my fingers crossed and assuming that that task is done because it's up on the Hill and we'll be successful, I am now committed to starting a review of the criminal conflict-of-interest statutes. We haven't really talked about that, but the criminal statutes that underlie the need for financial disclosure cover the areas of conflict-of-interest, post-employment, and issues of, for example, representations a federal employee can make to other agencies on behalf of outside organizations, volunteer activities, that kind of thing.

These statutes are very broad; they need a lot of modernization. Some of the activities that are actually criminal under these statutes, in my mind, should not be criminal and are not even intuitively wrong. This is an area that I'm very committed to working with the Department of Justice to see what proposals we can come up with to revise these statutes.

The criminal conflict-of-interest is, obviously, the main topic today. And there are some areas, I think, where that statute is very broad and the most educated person, in terms of government ethics training still can be surprised sometimes when I say not that would be considered a conflict and you need to be careful and stay out of that.

MR. LAWRENCE: What process does OGE go through to choose those strategic priorities?

MS. COMSTOCK: Obviously, I'm a firm believer in team management. And we work as a -- I have some excellent, excellent deputy directors. And we work, as a team to focus on the issues that we think are priorities for the next year or two.

I have a five-year term and, so, I have four more years within that term. The -- I also look very closely and take very seriously the issues that are raised with me by the ethics officials in the agencies, in terms of the problems that they're seeing or the issues that arise when they deal directly with their clients.

We haven't talked about that in great detail, but every department in the federal government and agency, has a designated agency ethics official. They're the people who bring to life, if you will, the programs and regulations and policies that are set by our office. They are each tasked with the responsibility of overseeing the ethics program within that agency. It's really a -- at least, in hindsight -- brilliant structure because it allows each department and agency to have someone who can tailor the ethics problem within that agency to the needs of that agency.

For example, the ethics issues that might arise at the SEC, the Securities and Exchange Commission, could be very different than the ethics issues that would arise at the Department of Education. And so, it's very important for those DEOs, that we call them, to be able to tailor the ethics rules to the needs of their clients.

MR. LAWRENCE: What role does OGE have in terms of evaluating the successes of those different ethics programs?

MS. COMSTOCK: It's our responsibility to oversee those programs. Under the statute, we're called the supervising ethics office, so that if particular issues arise, it is our responsibility to follow-up and ensure that that agency is responding to that issue to ensuring that that issue is dealt with properly. And, unfortunately, issues do arise occasionally.

And we keep in fairly close contact with the DEOs in the sense of we have regular written guidance, obviously, a number of the DEOs at the larger departments we speak with personally on a fairly regular basis. We have other communication tools that we use. Once a year we have an annual conference of between 400 and 500 ethics officials who come together to talk about the hot ethics topics of the year.

But, in addition, we every four years, audit the ethics program of every agency and department. We send out a team of staff from our office who will go and look at various aspects of the ethics program at each agency and, always, they walk away with some recommendations because, obviously, everything always could use a little improvement or tweaking.

But that's the process we use to ensure that the fundamental components of a program are in place.

MR. LAWRENCE: What is or does a successful ethics program look like? How do you measure it?

MS. COMSTOCK: A successful ethics program, in terms of the components that the law requires, would include a financial disclosure system, obviously, that is being monitored; the forms are being reviewed carefully in a timely manner. It also includes a training component, which we haven't really discussed, but at the highest levels, federal employees, all those who file these public financial disclosure forms, are required to be -- to receive ethics training once a year and a strong ethics program includes a training component. And these are all things that we can measure.

The fact is, though, that the best ethics program is one that is used by employees, where the employees will reach out to ethics officials and ask their questions. They receive answers that are workable for that agency. It's very important to me, as a leader and in terms of the mission of OGE to ensure that our program is not just a stand-alone, bureaucratic program. We need to be able to give guidance that is integrated well with the mission and the programs of an agency.

And that's much harder to measure. But counseling in a really strong program -- whenever we've seen a really strong program, it has a very strong counseling component.

Now, when you step back -- the bigger picture -- how do we know if the ethics program for the whole Executive Branch is successful? I don't really know. And that's what I meant if someone knew the answer.

If you see -- if an ethics official is getting an increase in calls, does that mean people understand the issues more and are calling more? Or does that mean they didn't learn a thing in training, they're totally confused and they're calling with questions? If the calls stopped, does that mean they learned all the answers, or they don't care about the issues?

I don't know how to measure that.

MR. LAWRENCE: Okay, and that's a good breaking point. Come back with us after the break, and we'll find out what the future of government ethics might look like. Will all this technology be an advantage or a disadvantage?

This is The Business of Government Hour.

(Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Amy Comstock, the Director of the Office of Government Ethics.

Well, Amy, what advice would you give to a young person who's interested in a career in public service?

MS. COMSTOCK: Well, I actually, Paul, have to say that the first thing I want to say because my husband is a high school teacher, is work hard, stay in school and go to college. Beyond that, I'm really proud of my career in government service. I'm proud of the fact -- I still consider myself a career public servant, in spite of the fact that I am a presidential appointee. And I have to say that in the, I guess, 13 years that I've been in the government now, I have seen so many instances where a person's personal interests, personal passion, hard work, has allowed them to get a policy through to effect a change in the government, to actually have an impact. So, when I hear people espouse that the government is so big, it's such a large ship it can never be turned around that, you know, what's the point of going there, you know, you get lost in bureaucracy -- I can't deny that that occurs, I mean, obviously, I've seen enough of that in government, too.

But the fact is that that's not always the case. I've seen just as many instances where a person does come in, they do make a difference, their passion shows through in the work they do and it has an effect. So I would encourage people to keep the government in mind as an option for your work, because it really can be an effective, exciting place to work.

MR. LAWRENCE: Is there any set of skills you recommend they acquire?

MS. COMSTOCK: Gosh, it really depends on what area they want to go in. I'm a big believer, personally, in a liberal arts education because someone who can write well and who can speak well, will always be able to argue most -- argue their case and position very effectively.

MR. LAWRENCE: Well, how about somebody who's very interested in ethics, perhaps now, as a result of this conversation? What skills should they be learning or acquiring?

MS. COMSTOCK: Certainly that would be one where you'd want to write well. Someone who's interested in ethics, that's still -- that's a really broad term. You can have, you know, you can go back and talk about the philosophers, you can talk about codes-of-conduct, which a lot of corporations have. There are a lot of private organizations out there, which are now looking -- working with private corporations are looking at ethics from the broader perspective and the impact on society. If anyone's interested in those, I would suggest they go on the Internet, there are a lot of organizations that are dealing with ethics in the workplace now or ethics and society.

MR. LAWRENCE: Let's think a little bit about the future. What will be the future demands for ethics programs?

MS. COMSTOCK: Well, I think that the demand should remain the same and I hope it does. The mission, in terms of, for government ethics, ensuring integrity and impartiality in government decision-making should always remain the same. I think how we achieve that may change over the years -- and I hope it does because there's a lot of benefit that we can achieve through technology.

Currently our system is very paper-based and, as I indicated earlier people, for example, file an annual form. I think that -- I hoped that in ten years, for example, that will not be the case anymore. I foresee the day where employees will be able to go onto their computer and put in the asset, hopefully, because we run a prevention program that they're thinking of buying, not that they've already bought -- and determine if it's a problem. That they'll be able to instantaneously receive advice on a question about an outside position they want to take or something related to that; post-employment question for our former employees.

I really see kind of more immediate response. I do, eventually, believe, for example, that the public will be able to receive financial disclosure forms over the Internet. I don't know if they'll -- excuse me, over email. Currently, it's a very paper-based system, but I think there's a lot we can do through technology.

MR. LAWRENCE: Will there be any other benefits from technology that you can imagine other than replacing paper?

MS. COMSTOCK: Well, certainly, the instantaneous guidance is what I enjoy about the Internet, it's, you know, you basically can receive your information immediately. And the ethics program does not necessarily guarantee that now in terms of conflict-of-interest guidance, review of financial disclosure forms, it's a much longer process right now because it goes -- it will travel from person to person. And I would like to see that -- or I foresee the day where that will be -- that that will simply already be in the computer in terms of what problems are and someone will receive instantaneous guidance. And that will prevent a lot of problems.

MR. LAWRENCE: If it became easier, could we imagine a world in the future where lots more government employees participated in this process of disclosure, that it was rolled out much wider?

MS. COMSTOCK: Well, currently, we have 20,000 who file the public financial disclosure form now. But beyond that, there's, I believe -- gosh, I believe it's 250,000, although I'd have to check that figure, Paul, who file a confidential financial disclosure form. These are public officials who are not at the level that it's been determined that the public, really, should be able to determine their own decision-making, but they're still officials who have a lot of discretion in decision and have potential for conflicts.

Of course, all these people, I believe, are honest good civil servants. But they file financial disclosure forms, as well, but those forms are only reviewed by the ethics officials to determine that there aren't conflicts.

I don't know that we'll ever get to the point where more people than that need to file, but we may. But I think we've tried to cut it off at the people who already have the discretion, have the ability to have a conflict.

MR. LAWRENCE: How do you think OGE will evolve in the next ten years?

MS. COMSTOCK: Well, one other area where I think we will evolve and that also will be impacted by technology is training. The Executive Branch, as you know, actually has employees all over the world because of the Department of State, certainly, people at all sorts of embassies; Agriculture has people in all sort of -- in many parts of this country where there aren't large offices for the federal government.

So, another area where I see technology benefiting us is training. It does allow us for immediate interaction through the Internet, conversations that are significantly improved over telephone conversations. But that are more, you know, face-to-face interactive, but where people do not have to fly, to a post that is, you know, to have a conversation with one or two people. So I do -- I'm very excited about the opportunities that technology will give us in terms of reaching out to people individually, but without having to travel there because training, again, training will always be a very strong mission.

MR. LAWRENCE: How important or what are the characteristics of a good ethics program in an agency? I've heard it said that having strong leadership support for ethics is really key in having a program. And having all the other things but without that leadership support, probably it'll be difficult for that message to be carried?

MS. COMSTOCK: I think that's right. We all look to our leaders to see how they act and, in terms of setting our own standard. But -- and there's no doubt -- there's many studies that show that the actions taken and the standards set by our leaders, by our CEOs establish the culture for the agency.

But I have to say that in the federal government, I think, as is often the case, it's more complicated than that. We certainly look to our leadership, we look to the President to establish the standards and the Cabinet for ethical behavior and that's an extremely important influential statement.

But, in addition, quite frankly, we also look to the culture of the agency and to individual supervisors. One of the areas that I'm trying to focus on is to reach out, clearly to reach out to the highest-level leaders but, also, to reach out to the supervisors in all the agencies and ensure that they understand the importance of ethics and their role in ethics.

Quite frankly, if an employee ever has a problem, a dilemma, and they walk into their boss's office and say here's my dilemma, you know, where should I go with this and the boss gives them an answer. For most of us that is the answer, that's where they'll stop. So, one of the things that I'm trying to do in terms of building on this leadership -- the impact of leadership, is to include in our concept of leadership all the supervisors and managers in an agency and instill in them the highly influential role they have in establishing the ethical culture in the workplace.

MR. LAWRENCE: What kind of conflicts or challenges result because of what you just said, that those are, in fact, the people that you would turn to with issues and if they're not, perhaps, enlightened?

MS. COMSTOCK: Well, I don't know if it results in a conflict, but it certainly results in a challenge for us because our system -- as I came to OGE, our system is to basically communicate through, as I said, the one person whose the designated agency ethics official. In a large department, like Treasury, you know, that one person, I then in the system as we're structured, I kind of expect that person to then filter down what I said into the incredible number of people who work at Treasury.

The challenges -- what I'm talking about is reaching out more directly to supervisors and instilling in them from us the sense of mission and ethical culture that we're talking about. We're working with HUD to establish a pilot project to reach out directly in terms of ethics training to the supervisors at HUD to address the issues that we're talking about. And I'm hoping that that pilot project will show that the kind of training we want to do for supervisors will be effective and become a part of the culture in the agency.

MR. LAWRENCE: Well, Amy, I'm afraid we're out of time. I want to thank you for joining us this morning.

MS. COMSTOCK: It was a pleasure to be here, thank you. Oh, and I do want to mention that if anyone is interested in more details about what the Office of Government Ethics does, they can go to our website which is www.usoge.gov. And, again, thank you for having me.

MR. LAWRENCE: Great, thanks a lot. This has been The Business of Government Hour, featuring a conversation with Amy Comstock, Director of the Office of Government Ethics.

Be sure to visit us at the website www.endowment.pwcglobal.com, there you can learn more about our programs and research into new approaches to improving government effectiveness. And you can also get a transcript of today's interesting conversation; once again, that's endowment.pwcglobal.com.

This is Paul Lawrence, see you next week.

Arlington, Virginia

Thursday, August 2, 2001

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

The Business of Government Hour features a conversation about management with government executives who are changing the way government does business. Our conversation today is with Morgan Bantly, knowledge management coordinator in the Department of Veterans Affairs.

Welcome, Morgan.

Mr. Bantly: Hello.

Mr. Lawrence: And joining us is Miriam Browning, principal director for enterprise integration in the Office of the Army CIO. Welcome, Miriam.

Ms. Browning: Good morning.

Mr. Lawrence: Let's begin by finding out more about your agencies. Morgan, could you tell our listeners a little bit more about the VA, its roles and responsibilities?

Mr. Bantly: Well, the VA consists of primarily three major aspects. One is -- and they all are involved in providing benefits to veterans, either cemetery benefits, benefits, such as compensation and pension benefits, housing loans, education loans. And then the bulk is health care services that we provide.

Mr. Lawrence: And I know everybody could describe the Army, but perhaps you could talk about its official responsibilities?

Ms. Browning: Officially, the Army is charged with safeguarding our national interests in war and peace. This is basically a nonnegotiable contract with the American people, grounded in the Constitution.

Just to give you an example of the size of the Army, we have an annual budget of over $74 billion; approximately 1.5 million people; and we have over 180 installations worldwide.

Mr. Lawrence: And how about your careers? Miriam, perhaps you could begin by telling us about your career.

Ms. Browning: I began with the Army over 30 years ago. Actually, at Fort Ord, California, during the buildup of Vietnam. I have worked mainly with the Army, but also at the Centers for Disease Control and Prevention in Atlanta; the Department of Energy, and the Department of Defense, Office of the Inspector General. I was also very fortunate to work 2 years as the director of the Center for Management Information at the National Academy of Public Administration. So I've had a broad spectrum across both government and in a nonprofit organization.

Mr. Lawrence: And in those different jobs, what type of positions did you hold?

Ms. Browning: Predominantly jobs in information technology and business management.

Mr. Lawrence: Morgan, how about you?

Mr. Bantly: I had -- I started out working for the Department of Veterans Affairs about 20 years ago as a medical illustrator and ended up moving up through the organization in terms of managing a graphics illustration department and then managing both graphics illustration and video production, and we were producing linear video products, as well as satellite broadcasts. And then I started -- added to those responsibilities managing new media, which includes web design and CD-ROM production. So a whole gamut of media-related products for education and communication.

And in the course of that, eventually moved up to managing one of the sites that provided those services for the Veterans Health Administration, as well as overall VA, and then was involved in a lot of business reorganization activities within our organization.

Mr. Lawrence: Now, your title is -- you're described as the knowledge management coordinator. What are your responsibilities in terms of knowledge management?

Mr. Bantly: Well, the organization that I'm in directly within the VA is the employee education system, which is the main educational arm of veterans health administration and the VA. There is a smaller unit within Veterans Benefits Administration that's responsible for education. But we're -- we consist of approximately 300 employees in the employee education system. And we, about a year ago, recognized the value of knowledge management and decided that we wanted to pilot some activities in that area so that we could demonstrate the value of that to Veterans Health Administration and the VA. And we created a position of knowledge management coordinator, and I was selected for that position.

And in the past year, I've been working on three initiatives with three different communities within Veterans Health Administration to establish knowledge management strategies.

Mr. Lawrence: Miriam, how about you?

Ms. Browning: Knowledge management in the Army is in the office of the chief information officer. And basically, knowledge management in the Army is about transformation and change. So it includes not only the traditional knowledge management aspects of collaborative computing and collaborative systems, but it also includes changes in governance, in infrastructure consolidation -- we have a major effort to do that for our IT infrastructure -- as well as building up our Army enterprise portal, which is Army Knowledge Online.

And like the Veterans Administration, we also started off about 3 years ago with several pilot projects which have come to fruition and have proved very beneficial in terms of knowledge sharing and bringing the Army into the Internet age.

Mr. Lawrence: What set of skills do the people have who are doing knowledge management in the organizations?

Ms. Browning: I would say the first skill is probably organizational and political savvy. You really need to know the organization, what areas should connect, what areas are ripe for change -- that's probably the most important skill.

The second skill would, of course, be organizational and interpersonal communications. And probably the third skill would be strategic and revolutionary thinking, because knowledge management can really be used to transform and to change how an organization does business.

Mr. Bantly: I would agree with all of those. And in addition, I think for enacting a knowledge management strategy, working with people -- the ability to work with people and create a sense of commitment and enthusiasm and clearly communicate the goals and final vision of what you're trying to achieve, so you can bring that into action and accomplish that -- along with, you know, some technical knowledge, because there's technical issues involved, as well as some librarian knowledge, in terms of taxonomy and control vocabulary, and project management skills.

Mr. Lawrence: I'm surprised it took so long to list technology, given the backgrounds you both describe. Was that intentional or --

Ms. Browning: Probably not intentional, but technology is not the dominant skill in knowledge management. It clearly is an enabler, because you have to have not only a good infrastructure to be able to collaborate and to share and access information across an organization. But first and foremost, the organization needs to focus on where it wants to go and how it wants to change and then apply the technology.

Mr. Lawrence: How would you describe the development of knowledge management? As you went through the skills there, sort of skills we've heard before, but now they've been collectively organized in this new discipline, I might suggest. How do you describe the development of knowledge management?

Ms. Browning: It actually is a -- the Army knowledge management team is composed of many, many types of skills. Many that we have mentioned, plus financial management skills, human resource skills, in addition to the project management technology skills. So on any single day, on Army knowledge management, we have a group of people with that blended skill set working together.

When we first started knowledge management, it was more about providing knowledge centers. The Army has over 30 knowledge centers. Some of them have won national awards. But as we expanded that to become more enterprise-wide, to develop our portal to bring in new governance ideas and to bring in new ideas about consolidation, we expanded, not only the scope of knowledge management, but also we expanded the types of people that we need to run this -- this is a major transformation in the Army.

Mr. Bantly: I think in general, knowledge management evolved because there was a recognition in the intellectual capital that organizations and corporations had that really wasn't being tapped. And I think one of the areas of focus in knowledge management is capturing the knowledge and experiences of employees that they get on the job, that help them accomplish their work.

And when you normally think of people retiring and the organization losing the corporate knowledge that those people have, that corporate knowledge is what we're trying to capture through knowledge management strategies, and make that knowledge available for everyone within the organization.

Mr. Lawrence: Which of the positions you just described when you were going through your careers best prepared you to be a leader in the knowledge management area and why?

Ms. Browning: I think the positions that have best qualified me are those positions where I sat high in the corporate headquarters -- that is, the Pentagon, and you could look out across the Army and see the interactions and see how the organization really works.

And I've had several opportunities -- one, when I was a very junior civil servant in the mid-seventies, I was fortunate to be part of a think tank under the Army vice chief of staff of the -- the vice chief of staff of the Army. And he let all of us in his little think tank walk around with him all the time and see how decisions were made at the three- and four-star level. That gave me great insight into how the Army operates: what are the informal processes, how people get things done. And basically you learn that the skills which are really important, of course, are knowledge of the subject areas, a high degree of integrity, common sense and just good communication skills.

So I think that early knowledge of an organization can help you craft a knowledge management program, because it is not about technology, it's just not about library science, it's not about project management. It's about all of those.

Mr. Bantly: And I think, from my point of view, having a background and an experience in providing education and learning for employees, we were able to see some of the gaps that existed from the line workers in a variety of areas, whether it was clinical or administrative. And to get a good understanding of the need for knowledge sharing that exists within the organization. And not just knowledge sharing within certain areas of focus, but knowledge sharing across communities and from high levels of the organization to low levels of the organization.

Mr. Lawrence: It's time for a break. That's a good stopping point. Stick with us through the break, because afterwards, we'll come back and we'll find out how technology supports knowledge management. This is The Business of Government Hour.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and our conversation today is with Morgan Bantly, knowledge management coordinator of the Department of Veterans Affairs and Miriam Browning, principal director for enterprise integration in the Office of the Army CIO.

Well, knowledge management is a concept that's still rather new for many organizations. Can you describe knowledge management for our listeners?

Mr. Bantly: The way we describe knowledge management is that it's a blend of management practices and technology that provides a structured method to capture, organize, and share knowledge in a deliberate and systematic way to accomplish business objectives.

And one of the main points that we try to make with the people that we're working with and with our executive sponsors is that knowledge management focuses more on the flow of information or knowledge, rather than stockpiling of knowledge, because there's already a lot of information overload, and we need to make the information -- one of the goals of knowledge management is, not only share knowledge, but make knowledge easily accessible by the employees.

And to do that, we need to help filter that for them so they get exactly what they need when they need it.

Ms. Browning: In the Army, knowledge management is harnessing human capital, building and operating an Internet-age enterprise infrastructure, and effecting governance and cultural changes to accomplish mission objectives. And our main goal with knowledge management is to produce results. And the results that we are looking at are a number of classic knowledge-management pilots in our knowledge communities, in acquisition, personnel, finance, and in medical.

Another result we're looking at is our enterprise portal, Army Knowledge Online, which right now has 180,000, we are scaling that up to the full Army of about 1.2 -- 1.5 million folks within the next year.

And an interesting story is that Army knowledge management actually started with our portal Army Knowledge Online, about 4 years ago, when the Chief of Staff of the Army decided he wanted to talk collaboratively to approximately 300 of his general officers. And we developed a network for him. It was called at that time, America's Army Online. And we have an interactive network that the Chief of Staff used to effect decisions within the Army with his generals. And that reduced the time to many of our decisions on officer personnel management, on some high-level governance decisions in the Army. That was the basis for our portal. It has since grown substantially from those 300 people. And that's really one of the crown jewels in the Army knowledge management program.

Mr. Lawrence: How direct is the link between results and knowledge management?

Ms. Browning: In the Army, it's very direct. When we talk about knowledge management, we have developed a strategic plan that encompasses the goals that I've talked about -- the cultural goals, governance goals, infrastructure consolidation, the scale-up of our portal, strategies to improve the workforce -- especially in the IT area -- so we have very specific goal areas that we have initiatives linked to those with milestones and timelines. So the Army has put together our Army knowledge management plan in a very aggressive strategy to accomplish that.

Mr. Bantly: And as we both mentioned in our -- when we were defining knowledge management, one of the key points in both of our definitions was that it's linked to the business outcomes or business results and that's a really important point.

In terms of what we've been trying to accomplish through our pilot initiatives -- in measuring how effective that is in business outcomes, we found that to be actually a difficult area. And just as an example, one of the communities that we've worked with are patient advocates, who are the liaisons between the veteran patients and our staff. And the patient advocates are there to help resolve problems or answer questions that the veterans and patients might have.

And one of the things that we want to do with this initiative is to try to improve our customer service to those veterans and provide that information more accurately, more consistently, and more quickly across the organization. And when we came to trying to measure how effectively our knowledge management system was going to do that, in terms of linking it directly to customer service improvement, we found that it was very difficult for us to be able to do that because there are so many other factors that affect customer service satisfaction or perception among our veterans.

And so we had to -- you know, our goal is to try to link that as objectively and as directly as possible to the business outcomes. And that's going to be an areas where we're going to continue to have to do more work in trying to achieve that level of definite measurement.

But we're trying to do the best we can at this point in terms of measuring how that contributes to the patient advocates providing information more accurately and more quickly through this system of sharing knowledge. And also becoming more -- increasing their core competencies across the system, because they're very spread out, and administratively, they actually report to different types of organizations within the VA, depending upon how they were assigned that responsibility.

Ms. Browning: Let me cite also that, like the Veterans Administration, the Army also started off in knowledge management with several pilot projects. I mentioned one of them, our Army Knowledge Online portal. But there are two others that I think are worth mentioning because they did produce some results.

One was our acquisition knowledge center at Fort Monmouth, New Jersey, which has won a number of national awards. And it is a very robust knowledge center. It has all kinds of archival capabilities, message capabilities, the ability to access subject mater experts, the ability to store information, it has instant messaging, white boards, video teleconferencing, access to documents. A very, very robust center that combines collaborative computing with access to knowledge and the packaging of that knowledge.

Some of the results or some of the metrics from there were, one, we reduced the time it took to get documents to the field; we consolidated a lot of archival information and put it in one place. As you all know, if you have a big PowerPoint briefing and send it to 500 people, you can choke up the airways. However, if you put that same PowerPoint briefing in a centrally accessible file, then you save on bandwidth and it's easy for people to understand where that is.

We also did some classic reductions in cost by the consolidation of a number of our IT facilities up at Fort Monmouth in conjunction with that. So that has been a very successful pilot.

Let me talk about a second pilot. That was in our military personnel career management system. Previously this was a very manual process. At certain points in an officer's career, he was asked to make career decisions in terms of which career field he or she would like to be in. That was done by mailing out thousands of envelopes with all kinds of questionnaires that you would fill in with a number 2 pencil. We totally automated that process. We put it up on our AKO portal. We cut the time it took, we reduced all the postage costs, but most importantly, as the officers put their information in, they could also get analytical results back that would affect whether or not that would be their final decisions.

For example, if someone wanted to be a computer specialist and they put that on in their report form, and it came back that we have many, many slots and these are all being filled, the person may say, I may want to go into another area where there's more opportunities and therefore make a separate decision. So we provided analysis, cut down the time, and it was actually a -- it's a good recruitment and a retention aspect, when our people can do that online instead of the old-fashioned way.

Mr. Bantly: I was just going to add that some of the things that we've established in our pilot have been very similar to what you've done, in terms of providing, you know, quick and easy access to information that's pertinent to the work that those community members need to accomplish. And we've provided a method also for them to contribute their knowledge and experiences into the system and a process, also, for the review of those before they're actually added into the system to make sure that information is accurate in specific areas, that it conforms to VHA and VA policy and other regulations, and that there's not sensitive information in there, for example, that we don't want to share -- for example, patient Social Security numbers or any of that information or even physician names or specific employee names. And make sure that also, descriptions of how people can do things -- accomplish things faster and more efficiently -- are written up so that they can be repeatable, and they're not, you know, missing an instruction that somebody assumes when they write it, but when somebody else reads it, they realize that there's a step missing that they don't quite understand.

So we want to make sure that the knowledge assets are really consistent, accurate and complete before they're entered into the system. And also, we have a bulletin board system for announcements so we can get information out quickly to all employees. We have an expert director so that we can connect with experts in different areas throughout the VA.

And also, there are other processes in addition to the portal aspects that we have incorporated as part of the knowledge management strategy, in terms of getting more sharing of information between people. And that is through other activities like conference calls, you know, audio conference calls, video conference calls, through satellite broadcasts and educational instruction that we produce that are distributed in that manner and through face-to-face meetings.

So we're documenting those kinds of collaborative activities that are occurring, also, in trying to measure the effectiveness of our knowledge management strategy on sharing information.

Mr. Lawrence: That's a good stopping point. Come back with us after the break and we'll ask our guests more about the challenges of implementing knowledge management.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and our conversation today is with Morgan Bantly, knowledge management coordinator at the Department of Veterans Affairs and Miriam Browning, principal director for enterprise integration in the Office of the Army CIO.

One of the things we talked about in the last segment was the role of technology in knowledge management. Is technology robust enough to handle what's going on in knowledge management now?

Ms. Browning: Generally, yes, I think the technology is very good. It's a matter of making sure that you have an infrastructure that is capable of providing information access to all the members of the organization. And I think it's there, but there are a lot of areas, still, that we are working on. Let me just give you three examples.

One of the issues, of course, is Web mail. We're struggling with that right now in the Army. As you know, there's a difference between Web mail and client server mail, which is the typical Microsoft mail that you have. And the typical Microsoft mail is very robust in terms of providing you a calendar and the ability to move a document in there, et cetera. Web mail does not have that capability. And for those of you, of course, who have, you know, an Internet account commercially, you get access to people's e-mail with all the full range of functions that are there and in Microsoft you don't have that. And the technology really doesn't exist today in the commercial marketplace for a full robust Web mail.

So as we look at providing universal e-mail for all 1.5 million Army people, we are probably looking at this stage at a hybrid. Some will have Web e-mail, some will have full robust client server e-mail. So this is one technology issue.

The second issue, of course, is the last mile communications to remote sites. The Army has remote sites all over the globe. And we have very robust long-distance communications lines to the major hubs, but it's getting that last mile to the desk of the PFC in let's say, at Fort Polk, Louisiana and making that robust enough to go into the Internet and access our portal, which is an issue.

Now, it's not only an issue within the Army or the Defense Department, it's also an issue globally. I read the other day that only about 6 percent of American homes have high-speed access to the Internet. So this is something that everybody is working on. So we struggle with that, because it's an information access issue.

The third issue, of course, is information security. And that is especially becomes exacerbated with the proliferation of wireless devices. So the Defense Department continues to work on its defense in-depth strategy to make sure that we don't have any security breaches and we are also working with manufacturers with many of the wireless devices to make those devices a lot more secure.

But technology continues to evolve. I think you can start a knowledge management program clearly with the current infrastructure. The ideal infrastructure is not there, but those are issues that everybody faces for all kinds of applications within the organization.

Mr. Bantly: I agree with those, especially the point about being with access, for example, and with the security issue. For example, some of the communities that we're working with in the VA are going to require or want to have access to be able to provide access to extended community members that are outside the VA. And so there will need to be security issues around allowing community access to the information and knowledge that we've got internally. And that's -- we have people now working on providing patient record information to, you know, the patients that those records belong to so that they could access those records from outside the VA and get the information that they want to see about themselves without having to go through the VA to do that.

And that same technology or processes that are established to do that, we could apply to our knowledge management practices as well, in terms of providing that knowledge to people outside the VA.

Another issue that's related to the technology, but it's not -- I don't really see it as a technology issue at this point, and that is -- is really managing the knowledge the maintaining accuracy and currency in the knowledge. And the technology brings the knowledge to the fingertips to the knowledge, but we need -- another really major issue is to make sure that that knowledge is accurate and current.

And so there are a lot of issues around maintaining that and managing the -- that process that I'm really interested in and learning more about. And I think that the field has -- there's still a ways to go in that area.

Ms. Browning: There's also an interesting cultural aspect of information access. Typically, in any organization, there are areas that say my area and only my area can have access to this information. And if it is not a privacy or a security issue, which it frequently is not, then the question becomes, well, why can't everybody have access to it?

So it gets into the issue of knowledge is power and how people hoard knowledge. But I think one of the cultural changes that knowledge management forces, it forces us to review what kind of information we give to everyone. Again, that is not bounded by privacy or security issues.

So I think we're seeing more and more in the Army a real desire on the part of top leaders and we're beginning to see this in the middle management of people loosening the grip a little bit and providing information to the entire organization, but this does not come fast.

Mr. Bantly: Another issue related to technology, also, is establishing metatagging standards so that -- and that's the data that describes the knowledge chunks. And some of that data can describe, for example, copyright issues. So that that would enable people to determine to the extent to which they can reuse those assets in other ways. And that's an issue where, although there are standards that exist that have been developed by international standards organizations getting the vendors to incorporate standards in their products and even agreeing on standards between government agencies is still something that needs to be done.

Mr. Lawrence: Well, this was just -- you also just hinted at some of the organizational changes. Well, how does knowledge management affect corporate culture?

Ms. Browning: I think knowledge management has a good effect on corporate culture because what it does -- it evokes a different type of organizational model. One where you have more emphasis on including more people in the decision-making process, working in teams, I think that is becoming more and more the norm. Whether that's actual teams or virtual teams. Also, more of a constant learning and educating people on what are the concepts, what are we doing, what is the project management.

Within our own Army CIO office, we have started professional development sessions at our biweekly staff meetings. So not only do we find out what's going on, we also pick a topic and inform and educate people on that. So it's an opening up, if you will, of the cultural channels in terms of how we do business.

I will tell you, also, you say, well, how do you spur that on? How do you incentivize that? It was probably not a coincidence that the people during the last -- this performance appraisal cycle who got the highest awards were those people who were leaders in the knowledge sharing and in some of these changing cultural aspects. So those are the aspects and you do have to reward the people who are the early adopters and who want to do that.

Mr. Bantly: I think what a knowledge management strategy does is, it kind of turns on its side the initial tradition of having more of a top-down management approach to accomplishing business objectives, where managers determine what needed to be done and then they delegated responsibilities to others to accomplish those objectives.

And what this does, I think it brings more authority to the line workers to recognize and to advocate certain changes that meet certain goals and directives that management would identify. So the community leader identifies or sets the direction for the community. And then it allows the community members to come up with the solutions to achieve the business outcomes through, you know, to accomplish those goals.

Mr. Lawrence: Skeptics have suggested that knowledge management is difficult to implement. What have been your lessons learned that you might share with others?

Mr. Bantly: I think that, just to name a few areas off the top of my head, where there's -- where there's some difficult in establishing these.

First of all, it is very important, it says this in all the literature, and from experience, it's true, as well, from what I've observed from, not necessarily within the VA, but from other organizations, is that it's absolutely important to have corporate sponsorship or management sponsorship of those activities to get the commitment of all the others to allow the -- to provide the time to support those activities.

And I think to a lot of people, knowledge management is a confusing topic, and it's somewhat an abstract topic. And they don't -- it takes them a while to understand what that means and what the impacts will have on how they do business and how they will operate, because it is a changed behavior.

And so getting that understanding to the workers that you're working with, because you work with the community members to help design the strategy for the way they would use it to accomplish business objectives, is a little bit of a challenge.

Ms. Browning: Very simply, here's some advice. First, develop your own definition and your own political ends for knowledge management. Then weave it into the fabric of the organization, especially in organizational transformation. Obtain executive support; that's very important, and it's not just, okay, we'll do it. It almost has to be a visceral buy-in, a real active buy-in by the leadership.

And then develop a strategic plan with milestones and implement for results and hold yourself accountable. So it's like many other transformation efforts. Understand where you want to go. Use knowledge management in this case. It's sort of a buzzwordy thing, but kind of use it to get where you're going and then forge ahead.

Mr. Lawrence: Good stopping point for this segment. We gotta go to a break. But when we come back, we'll ask our guests to tell us their visions for the future of knowledge management.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Morgan Bantly, knowledge management coordinator at the Department of Veterans Affairs and Miriam Browning, principal director for enterprise integration in the Office of the Army CIO.

Well, how will knowledge management help the government with the impending retirement wave?

Ms. Browning: Knowledge management can be used to capture both the explicit and the tacit information of the workforce so that new workers coming in can shorten their learning curve. We have actually done this in the Army through the development of a template that we have used both within the Pentagon and at some of our field organizations to do that. Where you can capture lessons learned, how to get to documented sources, who are the subject matter experts, where are some -- how to define a certain process, where archival material is.

And actually, in one of our case studies, we found that we really reduced the learning curve of a typical staff officer in this office in the Pentagon from about 6 months to about 2 months. So that was -- that was very helpful. I think, though, the larger construct of knowledge management as part of transformation, no only in the Army, but within government, will also be from a long-range perspective. I think the better legacy of knowledge management, it will make the government a more attractive place to work -- being more high-tech, being more close to how business is conducted in the private sector.

So I think it's that long-range aspect of knowledge management that will prove beneficial over the years.

Mr. Bantly: I agree. I think it's -- you can see it in our organization, in terms of relatively long-term effects in terms of getting all the portions of the VA more unified and consistent in access to information that they have.

And then, also, government agencies, as well, so that we become more of one network and the work of all the employees becomes much more efficient and in accessing, you know, the information that they need, because they're sharing information rather than duplicating efforts and recreating the same kind of information in different places.

Ms. Browning: It's very much an expectation issue. If young folks know in their private lives that they can access all kinds of things on the Internet. If people know they can do that in a private sector job, the expectation is that that should be the same in the government. So I think knowledge management helps move the government toward that direction, which is good.

Mr. Lawrence: What advice would you give a person contemplating a career, whose perhaps thought about public service and maybe even is interested knowledge management -- what advice would you give such a person?

Mr. Bantly: My general advice is that they -- I think it's beneficial to have a perspective from a variety of topic areas or subject areas. Because you can bring experiences in seemingly unrelated areas -- you can bring those to other areas in more innovative ways. And I think that's a key way to create more innovation is to recognize similarities between what normally people would thing of very different areas of concern.

And, obviously, computer literacy, which I think is something that more people are getting involved with technology that's being developed. And I think communication skills is another key area in working with people.

Ms. Browning: The best reason to go into government, of course, is because of the challenging work -- there are jobs in the government that are absolutely unique and nowhere else in the world. So it's that challenging work and the ability to contribute to the nation. I think people who have that first and foremost in their minds will be the ones that really should go into government.

Clearly, also, the government is also good in terms of relative job security and benefits, so I think that that's an aspect that should be emphasized.

If someone wants to make a lot of money, I recommend that they do not go into the government. That's a personal decision. There are all kinds of people out there and, certainly, this nation holds employment opportunities for many.

I would also suggest that people interested in the government pursue some of the higher-level skill sets, such as, business skills and leadership skills. Because in the information technology area over the years, more and more of the technical skills will be outsourced. We have seen that trend in the Defense Department for decades, that will continue. So that we will need people in the government who are generally very highly educated, who understand business, the organization, and the leadership skills so that they can manage contractors, manage large horizontal projects, not only within their agency but, as Morgan has mentioned, across agencies. So we're looking at some really, really high-level skill sets and some absolutely fascinating work.

Mr. Lawrence: How do you think knowledge management will evolve in the next 10 years at each of your organizations? What's your vision for the future of knowledge management?

Ms. Browning: I think a lot of knowledge management tools and processes that we have right now will become embedded in normal business processes. Very similar to business process re-engineering. You know, in any process re-engineering endeavor, you can include knowledge management components, such as lessons learned, or best-practices, access to subject matter experts, knowledge templates, common archives, et cetera.

So I think that will become part of how we build applications, how we do business. I think that it will become common place.

Let me add one more item too. I think one of the -- some of the cutting-edge areas in knowledge management will be in the use of intelligent agents. We see them already on the Internet. Agents that help us make decisions. Agents that are intelligent agents that are embedded into how we select things and actually how we buy things on the Internet. You can weave those into how we perform processes and how to reduce the cycle times.

I also think that you will probably see a blossoming of some of the newer management concepts in the federal government. More self-service applications, you know, people can do more things online. There is still a gap between government and the private sector, in terms of simple things, like access to your benefits. Filing travel vouchers, it varies by organization. But in the private sector more and more of these things are absolutely automated.

I think you'll see more virtual teaming, more knowledge repositories, more knowledge portals, so there really will be a blossoming of a knowledge generation, not only in the government, but in the private sector.

Mr. Lawrence: Do you think our concern for privacy will impede knowledge management? It seems as though we're always walking a fine line between having a lot of information to do the things you just described, but yet not wanting to have a lot of information out there?

Mr. Bantly: I think the desire to -- for the access to information, actually, is going to drive knowledge management more than impede it. And I think that it will help others focus on defining how they can provide, you know, what the limitations will be to providing certain information -- allowing certain information to go to people that need it and keeping, certainly, private information private and only available to those who should have access to that information.

Mr. Lawrence: And how are the economics of knowledge management working out? Often the benefits are long-term and the costs are immediate, and that sometimes limits people's desire to go forward with things.

How are the economics being worked?

Ms. Browning: That's a classic technology problem, and I think one of the best things to do is what both Veterans and Army have done, and that is to start small and demonstrate with pilots. In other words, you need to put in a strategic long-term program, but as you're doing that, you must have some very short-term pilot projects that can produce results and that can gain organizational commitment to continue.

So that's typically how you go about instituting a change using information technology.

Mr. Bantly: I think a key part of that is identifying the communities and the goals that you're trying to accomplish through knowledge management. I think some things can be much more easily and directly measured. And I know that in some corporations, for example, some have set a limit to actually working on a knowledge management project. They won't work on one unless they can expect to receive a profit within 6 months from that initiative. And I've -- I'm familiar with cases where that's occurred and they've been able to demonstrate that profit through measurable, you know, through measurements.

I think within our initiative, that it's going to require more of a long-term effort to see true benefits because a lot of this is through organizational change. And we need to develop this and establish this more strategically across the entire organization.

So to see larger benefits, it's going to take a longer time before that's actually realized. I think in terms of trying to achieve the executive sponsorship to establish or continue to provide initiatives that use knowledge management. I think, like Ms. Browning, was saying, that, you know, you just need to identify ways in which you can accomplish that quickly and then be able to verify that so you can demonstrate value and continue to go forward with those initiatives.

Mr. Lawrence: Well, this is a good stopping point. Miriam and Morgan, I want to thank you very much for joining us this morning. This has been a great conversation.

Ms. Browning: Thank you, Paul.

Mr. Bantly: Thank you for inviting me.

Mr. Lawrence: This has been The Business for Government Hour, featuring a conversation with Morgan Bantly, knowledge management coordinator of the Department of Veterans Affairs and Miriam Browning, principal director for enterprise integration in the Office of the Army CIO.

To learn more about the programs and research, visit us on the Web at endowment.pwcglobal.com. And at this website, you an also get a transcript of today's fascinating conversation.

See you next week.

Arlington, Virginia

Monday, July 30, 2001

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with John Dalrymple, commissioner, Wage and Investment Division of the Internal Revenue Service.

Welcome, John.

Mr. Dalrymple: Thank you, it's nice to be here.

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

Mr. Cook: Thank you, Paul.

Mr. Lawrence: Well, John, let's begin by talking about the IRS. Most of our listeners know the IRS as a collector and administrator of taxes, but they don't have a true sense of the scope of the IRS. Could you describe some of the other activities of the IRS for our listeners?

Mr. Dalrymple: Well, the IRS actually is comprised of about 115,000 employees during our peak seasons. And, you know, we do everything from sending out the tax packages to people so that they can understand how to file their tax returns to actually processing taxes and then, ultimately, as you said earlier, collecting it and examining returns. We also have a lot of outreach activities that we do that allow us to help taxpayers understand what their obligations are.

So, you know, we really do have a pretty varied operation at the service, other than just collecting taxes.

Mr. Lawrence: What are the skills of the employees of the IRS? Again, I guess my perspective is accountants and examiners, but what other type of folks work here?

Mr. Dalrymple: Well, you know, before I came to work at the IRS, I pretty much thought that was the case, too. I personally do not have an accounting degree, and there's a lot of people here who don't. On the other hand, there are also a lot of people here who do have accounting degrees.

Our revenue agents are all accountants. We have other people who are accountants and we have law degrees, a lot of people with business degrees. I, personally, have an economics degree. We also hire a lot of people who don't have degrees -- work in our submission processing sites and our service centers. So it's a really a very wide divergence of backgrounds and abilities that we hire for, here in the service.

Mr. Cook: John, obviously, there's been a lot of conversation over the years, especially in the last 3 or 4 years, about the fundamental reinvention that's taking place at the IRS, in large part to become a more customer-centric organization. Can you comment a little bit about what that really means in terms of the daily responsibilities of the people at the IRS, what type of impact does that have?

Mr. Dalrymple: Yeah, I think it's -- that's a great question, actually, because, you know, we're actually still dealing with that on a very real-time basis here at the IRS, because everybody has to internalize that to make it actually happen here. And I think from my perspective, it means actually that from now on -- from this point forward, we take into account what our actions -- impact our actions have on our customers.

So for example, if, you know, if we have very long lines for people to get help at our customer-assistance centers -- our tax-assistance centers in the field -- you know, we're trying to figure out ways to make that service faster for our employees. And our telephone sites, you know, if someone can't get in to ask their question, it's pretty difficult for us to serve them. So we're focusing a great deal of attention on increasing our ability to actually have people access our services.

You might think, well, gee, on the compliance side of the house, how does that fit, because, you know, you've got a particular role there, and it's not necessarily a customer-friendly kind of role. But on the other hand, if you think about the experience that people have when they go through those activities, which is some examination or a collection activity, you know, we're actually serving those people to find out, in fact, you know, A, were we professional, were we courteous, what things were important to you in that interaction? And then we're trying to make changes to in fact deliver on those things.

So I guess what I would say is, the main thing people would see if they were, you know, sort of stepping back and trying to compare us from where we -- the way we used to do business to the way we're doing business now and how we see ourselves in the future is, we're listening more to what our customers are telling us, and we're trying to react to that in real time.

And that's easily said; that's very difficult to accomplish.

Mr. Cook: Well, one of the things that I guess is most visible about the reinvention is the new organization structure. And you're the commissioner of the Wage and Investment Division. Maybe you could talk a little bit about what that really means and what the responsibilities are of your division.

Mr. Dalrymple: The Wage and Investment Division -- you know, there's about 40,000 people in the IRS that are in the Wage and Investment Division, give or take a few thousand, depending on which time of the year it is. There's about 116 million taxpayers that the Wage and Investment Division serves. And the whole concept behind the reorganization of the IRS was to segment our businesses. Before, we were set up geographically and any district director -- any location was responsible for all the taxpayers within that geographical area, and so it had broad responsibilities around that taxpayer population.

What we try to do now is segment that so that we're focused much more on segments of the population. So in Wage and Investment, it is my responsibility to actually provide -- to understand and provide the services and the activities, actually, that the public need in order to comply with the tax laws.

So no longer are we -- are we in a situation where our scope is so large that our focus is difficult to attain -- like a laser focused in on the Wage and Investment customer.

Mr. Lawrence: John, tell us about your career.

Mr. Dalrymple: Well, I started with the Internal Revenue Service in 1975. In fact, I just had my 26th anniversary with the IRS a couple weeks ago. I came on as a revenue officer, which is a collection officer with the Internal Revenue Service. My job was literally to collect taxes from people who had failed to respond to notices or our office collection activities in those days, and then they were turned over to revenue officers to collect the money from. And I started here in Washington, D.C. In fact, I was at the old 11th and E Street office -- I'm sorry, the 12th and E Street office, which no longer exists -- it's now part of the Warner building, which has a Pennsylvania Avenue address.

And, you know, I spent a number of years here -- I spent 5 years, actually, as a revenue officer here, and then I took different management positions in the IRS, primarily in collection, until I was selected for the Executive Development Program in 1990. And as an executive in the IRS, I've spent time as an assistant director, district director, in Los Angeles and in Hartford, Connecticut. I've spent time as a district director in St. Paul, Minnesota. I've been the deputy chief operations officer here in the national office and the chief operations officer here in the national office until I became the commissioner of Wage and Investment.

Mr. Lawrence: What's been the attraction of public service?

Mr. Dalrymple: Well, you know, I grew up in the sixties, I got out of high school in 1968, so I guess I was influenced a lot by, you know, John Kennedy in a lot of ways. And there were a whole lot of people in my -- are a lot of people, I suspect, in my age group who grew up really internalizing the whole concept of, you know, asking not what your country can do for you, but what you can do for your country. And also, the whole idea of being able to make change from the inside out. And so that's actually what drew me into government service. That and the fact that, you know, I wanted to get a job.

Mr. Cook: As you described your career, John, obviously, you've been in various positions of leadership for quite a while and in your current position you have some direct involvement in developing some of the future leaders in the IRS. Talk a little bit about what you look for in leaders, and in fact, in particular, when you set up your organization, what did you look for in your key directors and managers, as you positioned them?

Mr. Dalrymple: I looked for people who had vision, first of all, that's important -- very important to me. People who I trust, so trust is a very important thing. And you only get trust by -- through honesty, so I tend to look for people who have built up a long history of being honest and forthright. And then finally, people who have good technical skills in the areas in which they're going to be responsible for.

So if you can find that combination in a person, you know, my -- my sense is to grab onto them and then give them lots and lots of flexibility and room to do their job.

Mr. Lawrence: It's a good time for a break. So stick with us through the break, because when we continue our conversation with John Dalrymple of the IRS, we'll return and ask him about the IRS's efforts to modernize and innovate.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with John Dalrymple, commissioner, Wage and Investment Division of the Internal Revenue Service. And joining us in our conversation is Jim Cook, another PWC partner.

Jim?

Mr. Cook: John, throughout the planning and implementation of the reinvention that we talked about in the first segment, I would imagine there was a number of creative and innovative ideas that came up and some that were adopted and some that were -- that were passed on.

What would you say were some of the more innovative ideas that came up and that have been implemented and what type of impact do you believe they've had?

Mr. Dalrymple: Well, I'd say the biggest innovative ideas that came up had to do with establishing two organizations within -- one in small business and one in wage and investment -- that are outward looking -- looking at partnering with different segments in order to further tax compliance. And part of their activity -- well, almost all of their activity is in the pre-filing arena, so that the whole concept of it -- if you can really get people to understand what their responsibilities are and help them comply with the tax law, you'll have a lot fewer compliance activities on the back end. And so each organization, wage and investment and small business, have put, A, quite a few resources into that activity, and frankly, quite a bit of energy, because it's all about training people in things that we haven't done before, and then measuring outcomes that we haven't measured before.

So I would say that's probably the most innovative thing that I've seen out of the reinvention.

Mr. Cook: How well do you think the organization took to that change, because that's a rather significant break from --

Mr. Dalrymple: I think, actually, everyone intuitively knew that that was something that made sense and knew that for a long time. I think, though, that when you're swept up in your day-to-day activity, sometimes it's hard to peel away time and intellectual capacity, actually, to focus enough attention on that sort of thing to come up with a robust way to accomplish it. And what the re-engineering effort that we were going through -- we had enough people and enough capacity offline to actually think this thing through and put a plan in place that looked like we could accomplish it.

And so the old adage, if, you know, sometimes you step away from the things that are right in front of you sometimes, you can get a different perspective on them. And I think that's actually what happened here.

Mr. Lawrence: What are the lessons would you pass along to other government leaders who are dealing with modernization efforts?

Mr. Dalrymple: Well, one of the things I would say is, don't undertake it unless you are fully committed to it, because this really is changing a tire while you're driving a car or living in a house as it's being renovated. It is incredibly difficult. And you still have a mission to accomplish, and so you can't just set aside the work that you have to do.

And we still had to process tax returns, we had filing seasons going on. I mean, it is reasonably celebrated that some of our compliance activities have fallen off. But aside from the reasons behind that, you know, we still had to have a focus on what our responsibilities were, and so you can't undertake something like this unless you really understand the scope of what you're going to do and then be committed to that scope, because if you're not, I think what would happen is, you'd only get partway there, and you'd probably just slide back to what you had before, because it would be easier to do that.

Mr. Lawrence: What does it mean to be fully committed? I mean, how long does it take to think through these things and who all needs to be involved?

Mr. Dalrymple: Well, I think "fully committed" means that you have to have a process in place that will actually help everyone understand -- in your organization -- understand where you're going. And just an example of the way we did this, and I don't think that it has to be replicated for change, but Charles Rizotti (phonetic) actually helped us completely understand that you had to bring a process to do this, because we probably could have thought through this with a very small group of people and sort of instituted this thing top-down. But I don't think it would have worked, because what he helped us understand was that we needed to have a very broad base here.

We have a couple thousand people actually involved in the re-engineering effort. And we brought employees from the lowest-grade employees we have in the organization through executives leading teams that folks were on.

We partnered with our union NTEU to pull this off. And then we used all those people that worked on the teams as ambassadors to go back out and discuss and describe what was going on -- get feedback from the rest of the rank and file, bring that back into the organization so that we could figure out how better to communicate. So when I say that, I mean, it really has to be a process that you buy into that's going to ensure that everybody feels that they at least had an opportunity to be heard in the reorganization. Not everybody's ideas were accepted. But everybody had an opportunity to actually be heard and offer suggestions. And in the end, that's actually what I think helped us tremendously.

And, you know, we're not done yet, so I'd like to declare victory, but it may be a bit too soon for that.

Mr. Cook: Well, that's actually an interesting lead-in to the next question, because the -- I would imagine that many outside of the organization have tended to view the IRS as an organization that's kind of staunchly tied to the old ways of doing things. And you just described a process that engaged a lot of internal people to come up with some new ideas.

Talk a little bit about how you worked with the teams and the individuals that your brought in to get them to start thinking about things in a different way.

Mr. Dalrymple: Well, yeah. I mean, I actually described what we did with the internal folks. We got our internal folks focused on the external activities and our partners and stakeholders that we have to deal with. So as the teams were actually responsible for looking at best practices and finding out, for example, from the Federal of Tax Administrators, you know, how they wanted to interact with the IRS in the future and the AICPA and the bar association and the Chamber of Commerce. I mean, we reached out to, literally, hundreds of stakeholders that we felt had an interest in what we were doing and had an interest in us understanding what their needs were.

And so I think by doing that, our employees then understood how important that was in order to move forward.

Mr. Cook: Got a different perspective. Good.

Mr. Lawrence: It's interesting, you've spoken a lot in terms of modernization right now about the people and the processes. And I would have guessed you would have talked about technology. How have you been using technology in the modernization?

Mr. Dalrymple: Well, I mean, the organizational change was strictly a structural organizational change. And we did it in that fashion, in other words we did it without a dependency on technology for thee purpose of, if there were technology hurdles, it would not affect us reorganizing.

Having said that, our future is tied inextricably to technology improvements. I mean, I think it's reasonably well known that the IRS is tied to some 1960s architectural designs for their technology infrastructure. We're still batch processing tax returns and keeping our data in batch files. No one does that anymore that I know of and nobody, definitely no one does it in the scope that the IRS does it.

It's only been 3 years since we actually started routing telephone calls within our telephone system because prior to that we had stand-alone telephone sites out that handled geographic areas.

We are, without question, in order to make the kinds of inroads in services that we intend to provide to our customers, we have to make some dramatic changes in the way we -- in the technology that underlies that activity.

Mr. Cook: John, in general, what are some of the barriers to innovation, especially using some of the new technologies that you described -- what are some of the barriers you've run into and how have you dealt with them?

Mr. Dalrymple: Well, our size, actually, has been an incredible impediment to anybody that's come in to try to help us figure out how to do things differently. Almost any contractor that's bid on any work for us has always been able to tell you, you know, how they've done things elsewhere before and how it would apply to the Internal Revenue Service, but when they get in here and actually start dealing with the problems because of the scope of the activity that we have -- we have probably one of the world's largest databases. And so clearly that's been an issue.

And so, I would say, actually, that is the biggest hurdle that we have is our size and the complexity of the work that we do has over and over gotten in our way.

Mr. Lawrence: It's a good stopping point. Stay with us through the break. When we continue our conversation with John Dalrymple of the IRS, we'll ask him about his recent recognition by Federal Computer Weekly magazine as a fed 100 executive.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with John Dalrymple, commissioner, Wage and Investment Division of the Internal Revenue Service. And joining us in our conversation is Jim Cook, another PWC partner.

Well, John, as I mentioned at the exit of the last segment, you were recently recognized by Federal Computer Weekly magazine as one of the Fed 100 executives for 2001, an honor that recognizes your successfully managing the Wage and Investment division.

What are some of the things that you feel were most important in your success leading the organization through this challenge?

Mr. Dalrymple: Well, I'd have to say that, you know, my years in experience -- I'm a long-term employee with the IRS. I mentioned earlier, I have 26 years of experience. And I've also managed a number of different aspects of the operation here at the IRS over that period of time. And then I think, also, you know, listening to customers -- I think that's been incredibly important to me, because that's helped me reframe and rethink a lot of the old attitudes I had about how to do business.

So I guess if I -- I mean those would be the things I would say that helped me to be recognized here.

Mr. Lawrence: Well, let me ask that question about experience. There's a lot of experienced people who aren't successful. So what is it about the experience that has enabled you to succeed?

Mr. Dalrymple: Well, I actually think that the fact -- I'll say my varied experiences, because I've had a lot of different jobs at the IRS. I've lived in, you know, seven different states, and I've had, you know, eight or nine different jobs at the IRS. I've managed -- in the field, I've had the experience of actually having face-to-face activities with taxpayers and I was a collection officer when I started my career. So, you know, I've had the opportunity to sit down across the table from someone who owed taxes and talk about how they were going to satisfy those taxes.

I've also had lots of opportunities to hear feedback from our customers about what they -- what their experiences are -- at lots of different levels in the organization. And so I think that's really what I talk about when I say I've had a lot of experiences.

And I think the other thing is, I've also had the benefit of a lot of people helping me understand what it means to lead people, because leading people isn't always about, you know, pulling out your sword and your shield and marching forward. Most of the time, it's actually listening to the people that you work with and your customers to figure out what the best solutions are.

In fact, every management job I ever had, I've always felt that I learned more from the people who I was so-called managing than they ever learned from me. Now, I don't know that that's actually true or not, but it's definitely the way I felt about it.

Mr. Cook: Well, that's an interesting point, because you've mentioned the people aspect a number of times in the earlier sections. Talk a little bit about what you've done with your division to keep your people involved and to really lead them versus manage them.

Mr. Dalrymple: Yeah, I think what I've done is that I -- I'm out constantly in the field organization. I generally am in the field at least twice a month. And by "the field," I mean I'm at a center, at a call site. I have focus group interviews with employees and managers. I listen in on telephone calls so that I can hear the customer experience. I'll sit down with an examination employee in the center and go -- and literally sit through and work through an examination case. Or I'll listen in on collection calls and work an inventory by myself. I'll go out in the field to one of our tax assistance centers and actually have an experience helping someone across the counter during the filing season or off-filing season.

I mean, that's how I stay in touch with what's going on. And it's also how I stay in touch with what the real experiences our customers and our employees are having. So then when I have an opportunity to make decisions about things, I'm informed by what I've seen and what I've touched. And in addition to that, I have a little more credibility when I make a decision; it doesn't sound like it's the soundest decision by my employees, they tend to give me a little bit of benefit of the doubt, because they know that I understand what their jobs are.

Mr. Lawrence: We understand that the IRS has become a flatter organization in terms of management layers. What kind of benefits and challenges has this presented for the Wage and Investment Division?

Mr. Dalrymple: Well, I mean, the thing that's made the most positive impact, without question, is getting messages out. I mean, anytime you have to filter messages through lots of layers, they get garbled. So the fewer layers there are, the more direct and clear the messages are.

In terms of challenges, the amount of work we have on our plate with a restructured organization, all the re-engineering that we're doing along our business practices and then trying to deliver a whole new IT environment, technologywise, there's a tremendous drain on our management capacity. And so, you know, that layer that we took out was somewhat comfortable in terms of having people available to fill some of the capacity needs that we have. So I mean, it's always -- the glass is only half full or half empty. It's neither full or empty here. So it's not without a bit of strain to lose the management level. But, you know, overall, long-term, I think it will pay big dividends.

Mr. Lawrence: What's the feedback from the staff below the management level that got taken out about the removal of that layer?

Mr. Dalrymple: That's a great question, because we've been actually sitting down and talking to them. Initially, they were pretty concerned that a lot more work was just going to sort of fall on them. And in fact, some work did shift to them, but what we tried to do is also take some other work away from them.

And we're actually still working through that whole activity about what's important to be done, what's not important to be done, what can literally be taken off the table? Also, we're trying to look at pay-banding for our first-line managers so that, in fact, they can be compensated at higher rates for doing more and, frankly, more challenging work than they've done before.

I think overall, they're starting to step into those jobs and appreciate them more. But there's anxiety still.

Mr. Cook: What about the performance aspect of that, with all the changes that you've talked about in flattening the organization? What have you done differently to measure the performance of the management and the staff level below management and make everyone accountable for achieving the new mission?

Mr. Dalrymple: Well, we have a lot of new measures in place. And certainly, we have a balance measures approach in the Internal Revenue Service: employee satisfaction, customer satisfaction, and business results. And even the business results are balanced between a productivity and a quality measure.

And what we're doing, actually, is bringing those measurements as low in the organization as we possibly can with the management information systems that we currently have in place, and making people as responsible as possible for -- on the outcomes there. And frankly, we're pretty embryonic with some of this. Our customer satisfaction measures are really, in terms of our surveys and the -- and our measurement tools are only a couple years old, and we're still understanding a lot of the information we're getting back from them.

And even though we've had an employee satisfaction survey for the last 7 years, we changed it dramatically this year with a new contractor, so -- in fact, almost baselining that activity again this.

So I guess what I'd say is, we have some pretty sound measures in place, and we're driving them down as low as we can in the organization. But they're not as well understood as I'd like them to be. And I also think that it is going to take a little bit of time to ensure we've got the exactly correct -- especially productivity measures out there.

Mr. Lawrence: Adopting some of these new performance measurement systems means dropping some of the other indicators and targets, including collection or lien amounts.

What kind of activities are you undertaking to communicate these changes to folks who were perhaps used to the previous measures?

Mr. Dalrymple: Well, we've actually done a lot around communicating the new balanced-measures approach. All of our first-line managers have -- and employees -- have been through balanced measures training about what it means, what we're going to be measuring in the future, et cetera.

We haven't thrown away all of our old productivity measures by any means. And in fact, many of them are very good measures; they're diagnostic in nature. But they're only numbers, and it's really getting behind those numbers that are important. So for example, no one is -- we're still looking to see how many liens we file. We don't hold individuals responsible for how many liens they file, but corporately look at how many liens were filed, and if the numbers fall off dramatically or increase dramatically, I want to know what's going on to cause that to happen, from an impact on our employees and our customers.

So it is really a matter of the use of the measures as opposed to what the measures are.

Mr. Lawrence: It's time for a break. Stay with us through the break. When we come back, we'll ask John Dalrymple of the IRS how the IRS is preparing its workforce for the future. With all the possible retirements, let's find out if anyone will be left.

This is The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence partner at PricewaterhouseCoopers. And today's conversation is with John Dalrymple, commission, Wage and Investment Division of the Internal Revenue Service. And joining us in our conversation is Jim Cook, another PWC partner.

Mr. Cook: Thanks, Paul. John, let's focus on the future for a minute. One of the things that we're hearing from a lot of agencies is the concern over the future of the workforce. And there's a lot being said about the retirement wave that's coming. Can you talk a little bit about the impact you expect that to have on the IRS and what you're doing to respond to that or mitigate the risk there?

Mr. Dalrymple: Well, there's a couple things going on. First, the IRS was granted quite a bit of flexibility by Congress through the IRS restructuring their format. And it's helped us to actually fill quite a few key executive roles in the IRS. And that's a big help, because we have had a number of people leave the organization. And in addition to that, it's brought in a lot of new ideas to help us move forward.

And I think the second part to that has to do with, you know, how are we going to recruit people into the organization sort of the next generation of IRS folks to come in here? We haven't done a lot of hiring at the IRS, really, in the last 5 or 6 years, primarily because of the budget situation. And we're out -- we're doing a lot of recruiting and hiring this year. And I actually think the recent slowdown in the economy has helped us, actually, in some of our ability to recruit.

And we've been trying to use some best practices in private industry that we've -- that we've seen to have the -- to make sure that we've got recruits with the right aptitudes. In the past, we'd go out and recruit people for our telephone sites, basically, just put out an advertisement and bring in as many people who applied, interview them, and then put them on the telephone. We contracted recently with a couple of search firms to help us determine aptitudes for people for telephone work and we actually got that as a best practice from a couple of pretty successful call centers in private industry.

So, you know, we're doing things a little bit differently than we've done in the past in terms of making sure we got a correct match for the people when they get here -- the jobs we have.

Mr. Lawrence: How about the retention of the workers, especially the technology workers? Does the IRS have any special programs in place to ensure that?

Mr. Dalrymple: We actually have and have had -- and I'm, frankly, no sure what we're doing right now, today, but for a period of time, especially during the Y2K time frame, we were paying stipends up to 25 percent retention bonuses to a lot of our IT folks. And I believe, actually, that those have -- at least some, if not all, of those have expired. But, clearly, if we need to do that, that's something we're going to do.

Mr. Lawrence: Looking at people who may be considering coming into public service, what type of advice would you give to a young person who is considering a career in public service?

Mr. Dalrymple: Well, I'd say, first of all, if you were coming to work for the Internal Revenue Service, that we're looking for people who like a good challenge. We have lots to do here.

I think, also, it's interesting -- and I suspect this is true of many agencies, although I've only worked for the IRS, there's a real feeling of family in these organizations once you come on the job and work. I've been to lots of retirements for different people over my career, and the one thing that people say when they leave the IRS, sometimes they're not all that unhappy about leaving the job that they had and coming to work on Monday mornings, but they're always sad to be leaving the people that they work with.

So -- and I think that's because we do have a difficult job. We oftentimes do have shots taken at us from outside the agency. People don't really understand what we're about. And so it brings -- it brings us, actually, close together, people who are working inside the agency. And I think people who like that kind of environment -- which really is sort of a family kind of an environment -- really do thrive in the IRS.

Mr. Lawrence: What type of skills would a young person need should they be interested in working for the IRS?

Mr. Dalrymple: Well, I think definitely the ability to meet and deal with people is a very primary skill for working in the Internal Revenue service. A good number of our jobs are -- require that kind of activity.

And then, also, being a part of a team. People who can problem-solve with other people do well with the Internal Revenue Service. And, frankly, it's a skill that if you don't have it, you need to develop anyway, because I'm not sure you can be too successful these days without that skill.

So, you know, other than that, I wouldn't tell anybody that, just because you're not an accountant or a tax attorney, not to come to the IRS. I think, frankly, bright people who can deal with other people and who problem-solve in a team environment can work here and have very fruitful careers.

Mr. Cook: What's your vision over the next 5 years for customer service -- when you look out into the future, how do you think the IRS is going to be doing business with taxpayers?

Mr. Dalrymple: Well, first of all, there'll be a lot less reliance on individual compliance activities and a lot more on helping people comply before they get into trouble. I mean, that's clearly going to be the case.

Then, in addition to that, I mean, I do have a vision on how things might work around here in the future. We're going to have an incredible amount of interactive services on the Internet. I mean, I think you'll see virtual offices, literally, online for people. Anything you could do in a walk-in center, you'll be able to do over the Internet.

We're going to have world-class telephone service here. We're really on the threshold of some big things with our telephone service. I mean, clearly, people -- we'll be in 90 -- 95 percent level service ranges. You know, a few seconds hold and wait times. And then very easy, accessible offices to provide the face-to-face services for the people who really need that. So, you know, my perspective is that there's just an incredible amount of new things going to happen in the IRS over the next 10 years.

Mr. Lawrence: What are the implications of that vision on the workforce -- does it have the right skills now, and will this mean more IRS employees?

Mr. Dalrymple: I don't know that it will ever mean more IRS employees. But I think -- what the commissioner has said over and over again is that we'll get more efficient. Our work is ever expanding, but we need to get more efficient so that we maintain the basic employee base that we have now. We're refreshing that base as we get attrition each year, which is important. But that we have -- we will be retraining our employees fairly constantly as new and better approaches deal with taxpayer population evolve here.

We're going to be going from a much less, I'll call it, almost factory environment, if you look at our processing centers, to a much more service-oriented environment for our employees. So we'll have a lot fewer people data entering things off tax returns in the future, because, frankly, most of that will come into us electronically in the 8-to-10 year environment that you asked me about here. And so those employees will migrate into jobs that are, frankly, a lot more interesting and challenging than they have now.

Mr. Lawrence: And how about -- how about in terms of the vision, then, for management? You talk about management saying -- managing the factory versus now the managing these knowledge workers doing these incredibly complex things. How do you see the management skills changing?

Mr. Dalrymple: Well, I think our management skills are going to have to evolve along with the workforce that we have, clearly, again, this whole concept of team environment, as opposed to, you know, managing a group of people who are just doing what you tell them to do.

You're now going to be managing people in an environment where you're going to be team problem-solving and then going out and implementing actions and activities that you, as a team, decided were the right things to do. And that is -- that is a different skill than a lot of people currently have and it is one that we're trying, even as we speak, that's a skill that we're trying to ensure that our management cadre is endowed with.

Mr. Lawrence: How about the general vision for the IRS over the next 10 years? Would you describe customer service? When we think about the IRS 10 years from now, will it be any different?

Mr. Dalrymple: That's pretty difficult to say. You know, our mission -- even though our mission statement -- we changed our mission statement, but our -- you know, the basic mission of the Internal Revenue Service is to collect taxes. That's not going to change.

The reason we're in business is to make sure that people pay their fair share. Now, how they do that, in terms of whether or not you help them understand their responsibilities on the front end so that they voluntarily comply, or whether you have a huge compliance workforce on the back end to go out and make sure they comply, I think is the basic difference what the future looks like and what the past looked like.

Mr. Lawrence: I think that's a great stopping point. John, Jim and I want to thank you very much for spending time with us today. We've had a very interesting conversation.

Mr. Dalrymple: Thank you.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with John Dalrymple, commissioner of Wage and Investment Division of the Internal Revenue Service.

To learn more about our programs and research into new approaches to improving government effectiveness, visit us on the Web at endowment.pwcglobal.com. And at this website, you can also get a transcript of today's very interesting conversation.

See you next week.

Washington, D.C.

Monday, June 4, 2001

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with John Helgerson, deputy director, National Imagery and Mapping Agency.

Welcome, John.

Mr. Helgerson: Good afternoon, Paul. Happy to be here.

Mr. Lawrence: And joining us in our conversation is another PwC partner,

Bill Phillips. Welcome, Bill.

Mr. Phillips: Paul, thank you.

Mr. Lawrence: Well John, let's start by finding out more about the National Imagery and Mapping Agency, or NIMA. I understand it's a relatively young organization. Could you tell us about it and its mission?

Mr. Helgerson: You're absolutely right. NIMA, this fall, will be celebrating its 5^th birthday. We were created in October of 1996, and to this day we're the newest, youngest therefore member of the intelligence community, and also the newest combat support agency within the Department of Defense.

We have a kind of an unusual situation in that we have two masters. We're an agency who is, as I say, in the intelligence community, and in DOD, and interestingly, our budget comes in about equal parts from those two sources.

NIMA has at the moment something on the order of 7,000 employees, almost all of whom are civilians. But we have a critical minority of military employees as well, and probably 4 or 5,000 contractors who work with NIMA full-time. So it's a substantial operation.

Our headquarters, Paul, are in Bethesda, Maryland, but we have a big population of the workforce in Northern Virginia, in the District of Columbia, in the Navy Yard, and also about 2,500 employees out in St. Louis. So it gives me an opportunity to get around the metropolitan area here, and also out to St. Louis regularly.

You asked about our history. In fact, the two largest components that came together to make up NIMA were the former Defense Mapping Agency, which was headquartered in Bethesda, and substantially smaller but still a big operation, CIA's National Photographic Interpretation Center, a lot of people know as NPIC.

But in fact � and I won't give you much of our earliest history � we like to say that our heritage goes all the way back to the founding of our republic. There was a fellow named Colonel Erskine, who was George Washington's mapmaker, and our headquarters building is named Erskine Hall.

So we've a rich heritage, and now NIMA tries to capture it all.

Mr. Lawrence: What type of skills do these 7,000 people have?

Mr. Helgerson: Well, the workforce, the largest single group are cartographers, and what we now call geospatial analysts, and probably the next largest group would be the imagery analysts. They make up the bulk of the workforce, but in fact, they are complemented with a whole lot of experts in acquisition, and computer science, and attorneys, and finance officers, and everything it takes to keep a modern government agency going.

Mr. Phillips: John, you've used a couple of words here. You've mentioned imagery, geospatial information, imagery intelligence. What exactly are those things?

Mr. Helgerson: Bill, there is a little bit of jargon that goes with our business. But those words are not as complicated as they might seem. Imagery is our catchall phrase of saying, really, photography. The imagery that NIMA acquires and exploits is mostly acquired with satellites that are built and launched by the National Reconnaissance Office, our critical mission partner.

But we also use imagery that comes from aircraft that the military collects, in some cases civilian firms collect. We also get imagery from aerial vehicles, or drones. So whatever may be the source, NIMA collects it all, tries to archive and exploit it and get the fruits of that to the people who need it.

Which brings me to the second category related to imagery, and that is imagery intelligence, or imagery analysis. I guess the simplest way to put this, Bill, is that while we provide raw imagery to ourselves in NIMA, and particular to military forces, usually deployed, but also the services in the Washington area and elsewhere, the real payoff from our enterprise is the imagery intelligence.

That comes from the work of our experienced analysts who look at this raw material, and make something of it. So if you or I were to look at an image, we might be at a loss about what good it might be. But a highly trained imagery analyst would say, "Hey, you know, what really is here is a newly constructed nuclear plant in Country X, or a missile facility in North Korea, or even a terrorist training camp elsewhere."

So the imagery itself is of use for certain purposes. The imagery intelligence, or analysis, is infinitely more valuable, and that's where the skilled personnel come in.

The third general category that you mentioned, and that I had mentioned, is what we call geospatial information, which really is the modern term for what used to be mapping and cartography. Basically, geospatial information is about any feature on the earth, natural or man-made, and its location and significance.

So, together, these really are the heart of our business: imagery, imagery intelligence, and geospatial information.

Mr. Lawrence: Well, John, tell us about your career. I understand that you have come to NIMA fairly recently. So I'd be interested in knowing, how does one get there?

Mr. Helgerson: You're right. I have not been at NIMA all that long. I am delighted to say now that I've been there 15 months as the agency's deputy director, and I've enjoyed every minute of it.

The "how I got there" was probably not typical of NIMA employees. I began my professional career � I'd been a political science graduate from Duke University, and I had advanced degrees there, and then had gone off to be on the faculty at the University of Cincinnati, a professor of international relations.

But one thing led to another. And I have spent most of my career as a CIA officer, primarily but not exclusively in the analytic ranks. And I spent also one assignment in a State Department job in London.

And in all of these capacities, but particularly as a CIA analyst, and later as a mid-level manager, and later still as one of CIA's deputy directors, I was always a user of the imagery and the geospatial product that came from these legacy organizations that now make up NIMA.

So I was a great fan of imagery and geospatial work, and a promoter of it. And so when the job of deputy director of NIMA came open, the director of Central Intelligence and the deputy secretary of Defense wanted a civilian deputy to complement the military director. Our director is a distinguished Army officer, Lieutenant General Jim King.

And the thought is that given our complicated relationships and situation within the Washington Department of Defense and intelligence community, as I say, the thought was to have a director who is military, and a deputy who is civilian or in principle, perhaps, vice-versa.

But this led to my going to NIMA. And as I say, I have enjoyed every minute of it.

Mr. Phillips: John, you mention a number of different jobs in the course of your career. Which had the biggest challenges, and offered the best preparation?

Mr. Helgerson: Well, Bill, that's a tough question. I've had a great variety of jobs over the years in government and academic world before that as I mentioned. And each has been challenging in its own way.

But I think if one applies the test of what was most relevant to the job I now hold at NIMA, I would refer to the one I mentioned briefly earlier, and that is when I was deputy director for intelligence at CIA, I headed an organization of fairly substantial size, and with a fairly substantial budget.

But more important, I had that job during the earlier George Bush administration, at a time when we were going through great organizational change. I had a fundamental role in standing up the unit that is the CIA's counter-narcotics outfit, and I had a role in much of the downsizing of the people and resources that had been devoted to analyzing the former Soviet Union.

So it was a period of very profound change. And I think that job, probably more than any other, gave me a real advantage as I came to be deputy director of NIMA.

Mr. Lawrence: We're talking with John Helgerson, deputy director of NIMA. This is The Business of Government Hour. We'll rejoin our conversation in just a few minutes. (Break)

 

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at Pricewaterhouse Coopers, and today's conversation is with John Helgerson, deputy of the National Imagery and Mapping Agency. And joining us in our conversation is another PwC partner, Bill Phillips. Bill?

Mr. Phillips: John, in the last year or so, what was the most innovative or dramatic development involving NIMA?

Mr. Helgerson: Well Bill, there's been a lot going on at NIMA over the last year, but if you forced me to mention one specific item, I guess the thing that would come to my mind first would be the Endeavor Space Shuttle mission that flew now almost exactly a year ago, a little over a year ago.

This was a cooperative effort between my agency, NIMA, and NASA, which of course does most of the space work. But what it was, was a truly unique undertaking in which we together put into space a modified radar system, that mapped the earth in a way that has simply never been done before.

So this was the highlight of NIMA's year, and indeed the highlight of a scientific year, in many respects. There were also some kind of fun aspects to it. We had, for example, on that crew that NASA assembled, a group of astronauts that came from Germany and Japan as well as the U.S. And it was a crew that included two female astronauts.

But what they accomplished was truly incredible. We mapped or measured approximately 80 percent of the planet. That is every mountain and valley and hill and dale. Owing to the orbitology of it all, so to speak, we did not get good radar mapping of the polar regions, but we did capture the area of the earth, about 80 percent of it, as I say, where 95 percent of the world's population live.

And this exercise took some 11 days and got even higher quality data than we had dared expect. To give you some sense of what was accomplished, an area the size of Alaska, for example, was mapped in about 15 minutes. And the state of Florida, with this radar system, was mapped in about 90 seconds.

All this was done with a � as I say, a radar system. And part of it extended out on a 200-foot mast that was the longest, rigid structure ever deployed in space.

So we were really excited about this. And in large part, excited because of the payoff that will come down the road. Needless to say, we got a mountain of data from all this, and we have another mission partner, the Jet Propulsion Laboratory out at Cal Tech, who are doing the processing of this data.

But over the next two or three years, we � NIMA � and the civilian scientific community and the military community, will get the data and the information that will allow them to deal with things like floods and earthquakes, and analyze ecological zones, do better weather forecasts, climate change, and so on. And even such pedestrian but critical uses as land use planning, or where best to put the towers that make our cell phones operate.

So we in the defense community think of it in large part in terms of mission planning for defense operations, or what it will do for missile and weapons guidance systems. But I think, really, the larger and the basic payoff from this mission will be in the humanitarian, scientific, civilian areas.

So, NIMA's really proud of this. And it was clearly the highlight of our past year, because we feel we've made a real contribution to so many enterprises, both in and out of government.

Mr. Lawrence: John, in preparing for our discussion today, I was surprised to learn of your role in the unclassified arena of safety of navigation at sea. What can you tell us about your role in this area?

Mr. Helgerson: Well, Paul, your reaction there is typical. In fact, safety of navigation at sea is a major mission of NIMA, and it's one that's been mandated in legislation going back far beyond our own history.

We have on the wall in one of our offices, for example, a message that was sent by the radio operator on a ship at sea in the North Atlantic to the Titanic, prior to its sinking, after it struck an iceberg. But interestingly, that message about icebergs in the area did not get from the radio operator on the Titanic to the captain of the ship, nor to others, on a timely basis.

So, without reading too much into that lesson, we of course take from it the critical role that timely provision of information related to safety and navigation is absolutely critical. Now, we have within NIMA a component called the Maritime Safety Information Center. And its job is to run a worldwide navigation warning service that broadcasts information to ships at sea, military and civilian, 24 hours a day.

In fact, our customers in the modern world don't wait for a message from the Titanic or anybody else. They access our Maritime Safety website 9,000 times a day, free of charge, to get maritime safety information.

So, what does it really translate into? If you were not working at PricewaterhouseCoopers some weekend, but were sailing in the Caribbean, you can, through this website or otherwise accessing our information, get the latest information on broken buoys or inoperative lighthouses, or even activities of pirates in the area.

So we are very proud of this work. I should say it relates almost entirely to foreign waters and ports outside the U.S. As an intelligence agency, there are certain restrictions on what we can do within U.S. territory.

One other aspect of our business related to maritime safety that I should mention, we of course are putting all this information in digital form as quickly as we can, so people don't rely only on the paper publications. And thinking again about your earlier question, Bill, about the last year, another highlight, again about a year ago, was that a U.S. Coast Guard icebreaker, the USS Healy made the first transit around the famed Northwest Passage north of Greenland, relying entirely on NIMA's so-called digital nautical chart. That is, they had no paper charts at all � or at least they were directed to keep them hidden. And they used the digital nautical chart to make this passage.

I have to say we at NIMA were immensely proud that this project has progressed to the point where the Navy and the Coast Guard can do that. But frankly, we were also relieved when they had completed that passage.

But it's a big effort. And down the road, U.S. Navy is at the forefront of this transition. They will go entirely to digital nautical charts. The civilian sailing community will be close behind, or, in some cases, even ahead. And we support both.

Mr. Phillips: As if that's not enough, we also understand that NIMA works in the area of aeronautical safety. John, can you tell us a bit about your activities there?

Mr. Helgerson: Well, happy to, Bill. I'll say a little less about this, because unlike the maritime area, less of what we do in the aeronautical area is available to the public. We don't provide information, for example, directly to commercial users. But a good deal of our information is available for purchase through the Commerce Department, National Oceanic and Atmospheric Administration.

But basically, what we do is provide the information that enables every U.S. military aircraft to operate safely in takeoffs, or landings, or en route navigation. Last year, for example, we produced 12 million charts for the cockpit. These are things that fold up in a complicated way, so you don't have it spread all over the cockpit.

But the truth is, once on the ground, you can unfold it in such a way that it will cover the cockpit and give you some shade on the parking apron. We hope our products are useful for more than providing shade. But here, as in the maritime area, the trick is to move from the 12 million paper charts, to all digital formats. We're well down that road, but as I say, this effort relates primarily to the military, rather than to civilian and commercial users. That's more indirect support.

Mr. Lawrence: Well, it's time for a break. We'll be back in a few minutes with more of The Business of Government Hour, and our conversation with John Helgerson of NIMA. (Break)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with John Helgerson, deputy director of the National Imagery and Mapping Agency. And joining us in our conversation is another PwC partner, Bill Phillips.

Well John, we've learned through the trade press that you've been modernizing your information handling capabilities. Can you tell us about that?

Mr. Helgerson: We've talked earlier in this hour about what NIMA does in the imagery business, and in the geospatial business. That is, the mapping side, and how the two are coming together.

Nowhere is this more the case than in this effort you've referred to to modernize how we handle all this information. It's kind of hard to know where to start here in a way that's most useful, except I might tell you a fact I try sometimes to keep hidden, and that is that last year, NIMA produced on the order of 30 million paper maps.

At the same time, we've built up a so-called gateway where our users � that is, deployed military forces or civilian analysts in government, whoever they may be � can, with a click of their mouse, access our geospatial mapping information, and create -- on the spot -- their own map from this digital data so that the area of operation is not where the four maps come together, or in the fold, but it's right in the middle.

So we get now tens of thousands of hits per month on this NIMA electronic gateway. Our aspiration, of course, is to get to a situation where we no longer produce the 30 million maps, but everybody gets their information through the gateway or similar systems. Getting from one to the other, of course, is a challenge.

Now, related, just to use a separate example about modernizing information handling in the imagery business, it's no secret that imagery is a bandwidth hog like no other. And we at NIMA have created and are building and deploying a whole set of digital libraries, both large and small, to handle the classified imagery that we deal with, as well as imagery that we are now acquiring and will be increasingly acquiring from commercial sources.

So we supply data, for example, to national-level analysts, up to and occasionally literally including the President himself, from huge data sets. And at the same time, we produce and market our imagery information in very compact forms to enable someone deployed in the field to get it with a handheld computer.

The overall effort in this process, Paul, is that we're trying to move this system of libraries � and we are � almost exclusively, on the order of 95 percent, to a situation where it rests on COTS hardware and software. That is, commercial off the shelf.

Going the COTS way is not always cheap, but it does keep us in NIMA and all of our users in the military and civilian communities abreast of current technologies. It sharpens our partnership with industry and enables us to change with changing times in a way that we could not do when we used idiosyncratic government solutions to these kind of problems.

In addition to these libraries that we've built and are deploying, I should not fail to mention that we are also providing systems supports to military services, military commands, civilian analysts literally around the world. And again, I keep thinking of your earliest question about what happened that's important over the last year.

One of the other things that's just really critical in my mind is that for three of our major unified commands, we have now replaced all of their government-built exploitation capability � imagery work stations, and so on � with a modern commercial-based capability that's superior in performance and cheaper to maintain than those Legacy systems that they replaced.

So this is another real highlight of our business. We at NIMA, in addition to delivering the imagery and the geospatial substantive information, deliver the systems that enable others to use that information, now cheaper and more reliably than ever.

But modernizing the information handling, is one of our greatest challenges. But we've got a lot of partners, both in government and industry, and we'll clearly continue this.

Mr. Phillips: John, at the outset of our conversation, you mentioned that NIMA was formed by a combination of several different organizations and agencies. What issues and challenges did you face as you tried to manage the changes inherent in reorganization, and what lessons could you pass along to other leaders going through similar reorganizations?

Mr. Helgerson: Well Bill, that's another tough question. And it was a tough challenge initially for NIMA, because we did inherit components, sometimes very substantial components in terms of manpower and budget, from both the civilian and military legacy organizations.

There were enough differences that it was a challenge. And clearly, the only way to go � and I claim no credit, because it was largely accomplished before I came to NIMA � but managers and employees at all levels realized that they all had to be involved. So, transition teams were formed that included representatives of all these organizations, each focused on one or another specific area of activities under NIMA's charter.

And they established the sort of top-level organizational framework for whatever functional area that was, and then other groups took care of the implementation.

I guess if there's one obvious lesson that I'd pass along to any other leaders or managers grappling with this kind of thing, it would be that obvious one that I've mentioned already, namely, involve personnel at all levels in all areas of the reorganization. You have to have the buy-in. You have to provide the direction, but everybody's got to get involved to make it work.

I'd have to say, concluding thought on this question that although it's now five years down the road, the process of change never ends. I hope we'll have a chance to talk in a few minutes about our human resources system, for example, which we created as a part of all this change that we believe really is a leader in government.

Additionally, another example is that in the coming two, three, four years, we will be consolidating dramatically our physical facilities footprint. We're going to close down, for example, the facility that we have in the Navy Yard in Southeast Washington, so that we can consolidate in our Bethesda location all of the East Coast operational elements of NIMA.

That will bring together the old imagery and the old mapping enterprises, so that they can more effectively do the melded, common leading edge work that we need to do as we move into this digital age.

As part of that, of course, again, the consultation process as we consolidate our facilities and continue this change � we're dealing with the Congress, we're dealing with local civic organizations where these changes occur. We're dealing with local governments, doing the environmental impact studies and the rest.

So the lesson I draw from all this is you have to involve an awful lot of people in and outside your organization to make fundamental organizational change the success that it has to be for mission accomplishment.

Mr. Lawrence: John, NIMA recently announced negotiations to privatize the work done by 600 people. What are the potential benefits of this venture, and where are you in the process?

Mr. Helgerson: Well Paul, we're well into it. We discovered at NIMA the same thing many other government agencies have discovered, and that is a great proportion of what is done in the information services and information technology areas is not unique to government.

The same things need to be done in your firm, throughout the private sector, and throughout government. So these areas where we do not have a comparative advantage, we're turning over to the private sector. The work done by approximately 300 people in the Washington area is affected by this, and the work done by approximately 300 people in St. Louis is also affected.

Now, what we've found is that there is a way that we can do this that allows this effort to be phased to the private sector over a period of the next few years, so that we expect that we will not need any mandatory reduction in force. But we have a workforce-friendly approach to this, I believe that will allow the change to occur entirely through retirements and routine departures.

The overall point of it is that commercial vendors have shown that they can do this kind of work faster, and easier and with a comparative advantage that government does not have.

Mr. Lawrence: We'll be right back with more of The Business of Government Hour, and our conversation with John Helgerson, deputy director of NIMA. (Break)

Mr. Lawrence: We're back with The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with John Helgerson, deputy director of the National Imagery and Mapping Agency. And joining us in our conversation is another PwC partner, Bill Phillips.

Well John, we finished the last segment by talking about future outsourcing � or outsourcing efforts. And so I'm just sort of curious about the future of such efforts at NIMA.

Mr. Helgerson: Paul, that is an important subject. We were talking about outsourcing or privatization that NIMA's doing, primarily in the IS/IT areas. But it is worth coming back to, because we do a lot of such work, even in our fundamental mission area unrelated to IS and IT.

For example, we've talked this afternoon about the geospatial or mapping work that NIMA does. And many of our overseers, and indeed even our own employees, are surprised to find that almost half of all the geospatial work that NIMA does is in fact produced by private contractors.

Now, this trend undoubtedly will continue and expand, although it's frankly impossible to say just how far it will go, because it's largely a function of the capability of industry to take on this responsibility. But industry has become steadily more capable, and we are happy to outsource as it becomes competitively sensible to do that.

I should say, in this general connection of talking about privatization and outsourcing, that it's not only the support operations and even the mission analytic work that's being outsourced, but increasingly, NIMA is relying on commercial imagery providers to provide even the raw material with which we do our work.

The commercial imagery industry is a new one, and is still maturing. But each of the last couple of years, NIMA has spent on the order of $35 million on commercial imagery or related processing capabilities. And we have no doubt that the tempo will increase here.

The commercial imagery potentially is a wonderful solution to providing much of the raw material that we need to do our mapping mission. And more than that, it provides important back-up for intelligence uses as well. So that if we have areas that are high priority, we are more than willing, we are delighted to turn to the commercial sector.

Right now, there's one U.S. vendor, Space Imaging, that has its own satellite up. And there are other U.S. vendors that sell commercial imagery product. We are heartened by their initial successes, and we certainly look forward to a more robust commercial industry connection with additional launches by these other vendors in the future.

This clearly is a growth industry. So we use and rely on the private sector in a great many respects.

Mr. Lawrence: John, let's talk about the people at NIMA, and specifically the fact that I understand that you have a very innovative human resources system. Some have said in fact you're at the forefront of government and commercial best practices. Can you tell us about that system?

Mr. Helgerson: As part of the change that we have gone through forming up NIMA from half dozen or more different agencies, we were virtually forced to come up with a whole new human resources system. And as long as we were doing it, we really went after the fundamentals of it, and have come up with a system that we are just very proud of.

The easiest way to describe it probably is that we have simply got away entirely from the 15 GS grades in the normal civil service system. We have in NIMA a paybanding system, with five bands that capture all of those 15 grades. So employees have many fewer promotions from one band to another, but within each of those broader bands, good work is rewarded.

So we have a pay for performance system that allows employees with strong performance to move ahead more quickly, and to be recognized for the contribution that they make. We put a great deal of effort into the paybanding, the pay for performance, and the ancillary efforts that are associated with it.

If there is any caution I would offer to other agencies or firms exploring such a thing, it is to think through very carefully the bureaucracy involved. We in NIMA built a system so that we could be absolutely confident it was fair and equitable. It is. We're proud of it, but it is also a bit cumbersome. And we are now working with teams drawn from employees at every level, to simplify it and to calibrate it in such a way that we retain our confidence that it's fair, but also we don't have to spend as much time, either as employees or managers, in implementing it.

So, we're proud of it, but we continue to refine it. We're glad we did it, but again, it's still a work in progress.

Mr. Phillips: There's a lot of press coverage about the impending wave of retirements, large numbers of retirements in the federal service. How is NIMA approaching that issue and that problem? What solutions have you put in place?

Mr. Helgerson: Well Bill, we are experiencing the same things that most other agencies are. Ten or 11% of NIMA's civilian population is eligible to retire today. Some 25 to 30 percent will be eligible to retire over the next five years.

What this translates into, or at least has in recent years, is that NIMA as a whole has an attrition rate of something like 5.6 %. Now there are those who argue that this is a problem. Frankly, I am of quite another school, and I believe that it's healthy to have attrition in that range.

If it were substantially larger, I would worry because of the cost of getting security clearances and bringing on board the technically qualified employees we need. But as far as NIMA's concerned, the attrition we now have, and the attrition that we foresee I believe is a healthy one. And we look at it frankly not as a problem, but as a grand opportunity to strengthen our organization.

Happily, and this is probably the most heartening thing of all, I have found in these 15 months I have been at NIMA that we have absolutely no difficulty in attracting the very highly qualified young people we need to join our organization, whether they're imagery analysts, or computer scientists, or whatever.

It just requires continual monitoring and effective programs, which we believe we have, to hire and retain the best.

Mr. Lawrence: Earlier in our conversation, you talked about how change would continue in government. So I'm curious. How will NIMA fit into the larger national security apparatus in the future?

Mr. Helgerson: Well, Paul, I am, again, very optimistic as we look ahead to the future, and in particular how NIMA fits into it. As I mentioned at the outset, we're a unique organization in that we live in both the intelligence community, and among the combat support agencies in DOD.

The history of these communities has been frankly one in which we've been stovepiped. That is, each done our own thing. The future clearly is one of more seamless integration among us.

To put it another way, if a national policymaker or war fighter wants information on a given country, or a region, or if they want information on a functional issue, whether it's terrorism or narcotics, or whatever, they should not have to go separately to the State Department, or to CIA for information on human source intelligence. Or they should not have to go then to NSA to say what does signals intelligence contribute, or to NIMA for imagery.

The consumer needs to be able to go to one place, like you do with your personal computer on the Internet at home in the evening, type in the country or region, and find out what they need to know from all these disciplines.

We believe that NIMA, because it produces geospatial information, and imagery information and intelligence, provides the real basic, common reference framework that is the basis on which you can layer all these other kinds of information.

So looking at the future, I think NIMA's role is a critical one, in that we provide the basic common reference framework. But more than that, our recent history has given us a lot of experience in how to bring different cultures, different missions together. I believe we really can help lead the way forward into the future.

Mr. Lawrence: Well, I'm afraid we're out of time, John. Bill and I want to thank you very much for being with us today. We've had a very interesting conversation.

Mr. Helgerson: Well Paul, it's been a pleasure. Bill, enjoyed talking with you.

Mr. Phillips: Thank you, John.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with John Helgerson, deputy director, National Imagery and Mapping Agency.

To learn more about our programs and research into new approaches to improving government effectiveness, visit us on the web at endowment.pwcglobal.com. See you next week.

Arlington, Virginia

Thursday, May 10, 2001

Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of The Endowment for The Business of Government. We created the endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about the endowment by visiting us on the web at endowment@pwcglobal.com. The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business.

Our conversation today with Marty Wagner, associate administrator for the Office of Governmentwide Policy at the General Services Administration. Welcome, Marty.

Mr. Wagner: Good to be here.

Mr. Lawrence: And joining us in our conversation is Steve Seike, another PwC partner. Welcome, Steve.

Mr. Seike: Good to be here, Paul. Thanks.

Mr. Lawrence: Well, Marty, let's start by finding out more about GSA and specifically the Office of

Governmentwide Policy. Could you tell us about its activities and its role?

Mr. Wagner: Okay, I think most of your listeners probably know about GSA. It's the government's big buyer of stuff. And we tend to do a lot through the Public Buildings, through the Federal Supply Service, Federal Technology Service. This is where about 14,000 employees set up contracts that are used by the government as a whole for all the goods and -- or for many of the goods and services that they do.

I don't do that. I have what's called the policy function, where we look at the overall system, not just the specific contracts that GSA does, but the $200 billion or so of government procurement, the $300 billion a year of grants that are issued, how those systems manage the way we travel.

I have the policy function at GSA. Now, the policy function used to be -- until about five years ago -- simply part of the different operational arms of GSA. But what we got into through some discussions with OMB and various reviewers is a sense that GSA was getting too much into the operations, and that frankly, there were some concerns that there was a conflict of interest between managing the policies for how the government bought everything and also being in the system of running contracts that then other agencies use.

So in fact, that's what we do in Governmentwide Policy. We've centralized all the management functions of government in one place. We look at the government as a whole and try to make things so that the government is better managed than it otherwise would be.

Mr. Seike: Marty, the thing that I'm curious about is how is the Office of Government Policy different than some of the other agency policy development units, like the Government Accounting Office or the Office of Management and Budget?

Mr. Wagner: Well, I think we probably have some parallels. General Accounting Office probably has more of an audit and oversight role than we would have. We're really not in the business of looking over the shoulders of agencies. We're more in the business of developing best practices and, frankly, the regulations and the guidance for how agencies ought to operate.

OMB tends to operate at a higher level. We work very closely with OMB, but we're not OMB. OMB has the budget; it has the management and the regulatory reviews. A lot of those areas have implications that are a lot broader than OMB can actually do itself, and that's where we get involved.

So, for example, OMB does the budget, but working with the other agencies on the federal acquisition regulations, the federal travel regulations, and the way the -- developing the government's internal processes, that's where we work.

We work also a lot with the agencies. One of the things that we found when we consolidated our operations is the government probably historically has had a top-down approach to policy. Something would go wrong, and we would develop a rule against doing that bad thing. And we found that that probably gets you a fair distance, but you're actually going to do better in developing your policies if you work with the community that is affected by those policies to develop approaches that solve the overall problem � not avoiding the bad thing, but doing the right thing. And we would work closely with the agencies and OMB to develop and then implement those policies.

Mr. Lawrence: How big is the Office of Governmentwide Policy, and what are the skills of the people who work there?

Mr. Wagner: We're about 300 people overall, and the skills tend to be management skills in all the management policy areas. So we find-- and I may miss a few as I go down the list, but for example, acquisition, procurement. The Federal Acquisition Regulations, the Federal Acquisition Institute for Training, acquisition professionals, we have those policy functions. So you have people who understand procurement. That's one community. The Federal Travel Regulations, those who understand travel management, travel contracting, procurement of travel services, per diem, when we set the per diem rates in different cities -- a function that makes us extremely popular in certain circles, he said, tongue in cheek. But there's that area. Mail management, management of personal property, management of real property, disposal of personal property, disposal of real property. And then one that I think is particularly important and has certainly been growing in importance: electronic commerce, information technology, all those areas. A lot of what the government is going through is using information technology to be more effective, and it cuts across all management areas and, frankly, is probably our key to productivity gains in the future.

Mr. Lawrence: GSA seems to have somewhat of a unique role. How would you describe the culture at GSA, perhaps in contrast to other parts of the government?

Mr. Wagner: Well, I think GSA's got a very customer-oriented culture, is embracing technology more avidly than many agencies, but certainly not as quickly as some of the real technology-focused agencies. Very much into using an e-marketplace.

I think part of that is driven by -- when we talked earlier about the policy function and the separation and all the

forces that led that to being -- one of the things that happened with GSA is we, as a matter of conscious policy, moved it from a mandatory source of supply to one where it was optional.

And that's got a couple of advantages. One advantage is human nature. People tend to run away from the thing they're told they must use. So that barrier to using the vehicles went away. But it also means that it's an enormous incentive on the services to be efficient and effective. And that also cuts through into the way they operate internally. So it's actually been a -- I don't want to say it's better than every other agency I've worked in, because all the agencies I've worked in have had a lot of advantages. But it does have a somewhat more customer-centric culture, and I enjoy that. And since I like technology, I like being able to have it on my desktop and use it to good effect.

Mr. Lawrence: Marty, let's spend a little time now talking about your career? What drew you to public service?

Mr. Wagner: I think my big drive to public service is that I wanted to make a difference. I wanted scope. I wanted some ability to change the world. Originally, when I finished graduate school; I had gone through as an aeronautical engineer; I did a bachelor's and a master's degree, but the first job I got was working for a consulting company doing the cost/benefit analysis of the space shuttle. And it was all under contract for NASA. And I just thought space was neat, and being a player in the decisions of how we were going off into outer space in a standard, effective, businesslike way was sort of fun.

So from that, I went back to graduate school, this time in public administration and was trained in economics and public policy and thought that's a way to affect things. And after that, well, where is the action?

At the time, the action was the Environmental Protection Agency. So I went and worked there. And after awhile, the action was in telecommunications, and I went to OMB and worked there. And then � you don't want to be too long at OMB. I think it's a very good place to work but I thought it was time to move on.

I went to Treasury and did telecommunications for Treasury. Then I left Treasury to go to GSA, where I did information technology -- computers. And I did that for awhile, and then I got into electronic commerce, and these days I'm doing management.

As I look back on my career, I say, "Gee, I kept moving around and doing different things and they were always interesting and they always broadened me and improved my skills." And where else but the federal government could I have done all of those things? So that's pretty much how I got into it.

Mr. Lawrence: We're talking with Marty Wagner of GSA. This is The Business of Government Hour. We'll rejoin our conversation in just a few minutes. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Marty Wagner, associate administrator for the Office of Governmentwide Policy at the General Services Administration. And joining us in our conversation is another PwC partner, Steve Seike.

Marty, in your years of government service, what qualities have you observed as key characteristics of good leadership?

Mr. Wagner: That's a good question. I'm not sure I can give a complete answer, but I think one of the most important characteristics is to be able to see the big picture, to see the things that really matter. It's so easy to get caught up in the things that look really important but turn out to be not so important.

So, I'd say see the big picture, be ready to ask the right questions. I think you also have to be ready to work flat. Most of the things that really matter need you to get a lot of other people, who don't necessarily work for you, to do something that helps you achieve the goal that you want to get. Part of that, you ought to be able to articulate the vision; not just have it in your head, but explain it to other people. Better be flexible, be ready to deal with ambiguity, because there's an awful lot of ambiguity out there. And flexibility is, I sometimes think, the most important trait.

And finally, perhaps a silly one, but say "please" and "thank you." I once was working with an interagency group, and there were several folks that were there who really liked me a lot. And I'd like to tell you it was because I was wonderful, but it wasn't. It was I said "please" and "thank you," and they came from an environment where they basically had to deal with a lot of, it sounded like, not so nice managers, very directive. And just the basics of courtesy -- it's amazing what people will do for you if you just say "please" and "thank you." So that would be my closing thought. A lot of other things as well.

Mr. Lawrence: Let me follow up and ask you about working flat and what the management challenges are from doing that. We note in talking to a lot of government folks that they all would like to collaborate more, yet somehow it never seems to happen. So I'm wondering what the lessons learned might be from working flat.

Mr. Wagner: I think working flat, you've -- first, I think collaboration has worked pretty well. We've done a lot of it. Most of what we do is, in fact, collaborative effort. A problem may be working flat is not the same as working shallow. You've got to be not just talking to people, but moving toward some set of concrete results.

So working flat does require discipline, it requires focusing on deliverables, things that matter. It doesn't mean that you're getting together once a week to, sort of, talk about problems and issues. It means that you're each working towards getting something done. I think probably also it -- a lot of the important things -- an ecological metaphor is maybe not a bad way to think about it. You're doing something, but it keeps changing on you. The goals keep changing. The priorities keep changing. But if you recognize how that happens, you can use the fact that the world will be changing on you to get more done. Because you know something outside of your control is going to happen. You can even predict what a lot of those things are, and act accordingly.

That may be a bit obscure, but think of ecologies, and then think about how that metaphor applies to Washington, D.C.

Mr. Seike: GSA presents achievement awards for real property innovation. Could you describe some of these recent winners and what the impact this has had?

Mr. Wagner: First, let me briefly explain that what we do through many of our programs is that we create awards, which involve personal money going to government employees for things they achieve. Now, that's not altruism that leads us to do this. It's because if you want to find out what best practices are and disseminate them across government, an awards scheme is a pretty good way of doing it. The ones you mention are those for real property. We have them for travel, for mail management, and several other areas as well.

Recently, we gave one to the Department of the Army for privatization of Army utility systems; basically innovative ways of buying things like electricity cheaper.

Building Green went to GSA's Public Buildings Service; a lot of environmentally better ways of building buildings.

So because we make those awards, then we put them on our web page, and then people can learn about them. And we also work with other agencies, so that the average level of management starts rising to the level of what was the innovation of a few years before.

Mr. Lawrence: Now, we've been hearing a lot lately about FirstGov, which is a collaborative government Internet portal. And I'm curious as to what GSA's role in that is, and maybe you could share with the listeners a little bit more about FirstGov.

Mr. Wagner: Let me begin by first giving the URL. If you go to www.firstgov.gov -- and spell it out, f-i-r-s-t-g-o-v dot g-o-v -- although we also made sure to cover various misspellings of that as well; you're going to go to a search engine or a home page which searches everything that the federal government documents on the web.

Right now, that's up to about 33 million documents renewed every week or so. I'm sorry -- renewed every two weeks. And it's a very effective tool for finding out just what's going on in the federal government. It's arranged by category, so it doesn't require you to be an expert in the U.S. government's internal plumbing.

If you type in "passport" in the search box, you go to the place in the State Department, which has the passport office, where you find out about passports. You don't have to know that's how the government is lined up.

And it's, I think, a pretty good model of the transformation the government as a whole is going through. We're going from what I'll call inside-out government to outside-in government. Now, what do I mean by that? I mean that mostly, when we look out, working for the government, we work in our programs and we deliver those programs. We have an organizational view, and we deliver it out to customers.

Turns out that you can also look at it from the other viewpoint. A customer looking into the federal government, what I'm calling outside-in. FirstGov is one of the cuts at doing that. There are some others, which I could get into if you're interested.

First of all, though, it's a webpage that takes you to everything. Then it has taxonomies that lay out -- the information is organized in different ways. It's also consciously shallow. We're not building some sort of huge edifice in front of everything else that the government is doing. The government is too big, it's too important, too diverse to build one thing to be the front end for everything.

But what we can do is make it easier for folks to get to the place where it matters. So if the place you want, the information you want is at a NASA website or an EPA website or something like that, FirstGov will get you there in a fast and efficient way.

Mr. Lawrence: Telecommuting is a big issue, and I noticed that OGP has developed the Interagency Telecommuting Program Manual. I'm curious to know from your perspective, sort of, what's the state of telecommuting within the federal government?

Mr. Wagner: Well, the short answer is telecommuting has got a long way to go. It's going to be really, really a lot more important than it's been to date. It's where a lot of society is going. Because with technology, things like laptops and high-speed access and wireless access, you're a lot more able to work anyplace at any time. Now, the problem you get into is not all jobs fit that way of operating. In fact, we actually probably would prefer to say "telework" instead of "telecommuting." "Telecommuting" carries with it the idea of you really doing the same thing, but "telework," you can take a laptop, be on the road, be in a train, be in an airport, depot, you can do a lot of that work. We're doing more and more in that direction.

We in our own office are setting up hoteling arrangements by which people can more easily move around and do telecommuting that way. There are some real issues to work out. How do you manage a telecommuting work force? A lot of the people who telecommute, or telework, they get nervous about it because if they're not in the office, they're worried about being forgotten. How do you deal with those legitimate concerns and work through that? And frankly, there are a lot of issues in using the information technology, to make it standard and reliable, to work that out.

But we see that as pretty much the wave of the future. It's not going to be for everybody. And you've got true believers who somehow think that anyone can be a teleworker. I don't think that's the case. But an awful lot of us are going to be teleworking more and more.

Mr. Seike: I was interested as a follow-up to that in how many people currently are taking advantage of the program, and do you see that trend continuing over the next five to ten years?

Mr. Wagner: I'm afraid I don't have any good numbers about how many are actually teleworking at the moment, although those figures do exist. They're just -- I don't have them on the tip of my tongue. I'm pretty confident they're going to grow, and they're going to grow a lot. Because at least -- I just look at my own office, and we're just the tip of the iceberg as we start working out exactly how to do this and how to measure it and work more effectively. So the short answer is there's some going on and there's going to be a lot more numbers to follow.

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

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner in PricewaterhouseCoopers. And today's conversation is with Marty Wagner, associate administrator for the Office of Governmentwide Policy at the General Services Administration. And joining us in our conversation is another PwC partner, Steve Seike.

Mr. Seike: Thanks, Paul. Marty, can you tell us how FirstGov came about?

Mr. Wagner: Well, I think I talked earlier about FirstGov when we were talking a little more about how that came about. It's an interesting project, because I don't think it fits the traditional mold. It didn't have any budget. It was interagency. It had no natural home. But it did have a presidential management directive that, sort of, told the government to go set up a portal for all its content.

And there had been the work that various folks -- for example, under the Chief Information Officers Council in the GSA � had been working. And so you had a push to do something. And then it went in a period of roughly three months from being an idea to actually being something up and operational -- maybe six months, if you count some of the precursor work.

And the way it kind of happened, I think, is an interesting model. I learned a lot of lessons from how FirstGov came about. You know, lessons -- these may be obvious lessons to the listeners, but sometimes we have trouble seeing the obvious.

The first was leadership mattered. FirstGov was something that people at the senior levels wanted to have happen and did the work cross-agency to get the money together, took a lead to make it happen. So we had high-level involvement: make this happen.

The second lesson is that if you want to get something done, you have to have ability to execute. And in fact, we had a cadre of people in various agencies, including GSA, who could actually get up and get something up and running quickly. We were able to use a lot of the acquisition reforms of the past several years to move very, very quickly to do a very competitive acquisition in a short period of time. We found the value.

Talking to everybody is really important. Communications matters. Even when you're moving quickly, you need to be talking to everybody.

Speed matters, too. We found that not only does speed help you get things done quickly and focus on the things that matter, it also means that your critics are criticizing -- they're behind you because you're already doing something different because you ran into the problems that the critics were pointing out and now moving into another area.

And then, I think, one that may seem a little silly, but it's nice to be aligned with the forces of history. I mean, what FirstGov is is an Internet portal, it's customer-centric, it ties the government as a whole to the people as a whole. And that's a lot of what the whole Internet is about. The Internet is turning a lot of companies inside out. It's changing the way we do business.

And by moving and using what this technology was doing, and moving in the direction of commercial off-the-shelf products stitched together to solve a problem, worked pretty well. And frankly, FirstGov is a model for a lot of the other things we're doing as well.

Mr. Lawrence: What I found interesting about your answer in terms of the lessons was none of them describe the technology; none of them involve technology. They were all management lessons about people, for the most part.

Mr. Wagner: I think that's true. I thought about that, and I thought I might be even overdoing not mentioning technology.

You tend to be in trouble when you're driven by technology, as opposed to technology being a catalyst to enable you to do something else. But you really do have to understand the technology. And when I talked about that middle-management cadre of people who understood stuff, it was really important to have people who understood what the web could do, what it couldn't do, who could weigh the different clouds as the vendors make their offerings and say what you're doing. So technology matters, but it doesn't matter as much as what you're trying to do.

Mr. Seike: What are the plans for the future of FirstGov?

Mr. Wagner: The biggie is, I think, it's less so much a FirstGov set of plans. The FirstGov plans really boil around we've got the search engine substantially improved now over the way it was in the beginning. We're improving the taxonomies. We're working more and more closely with the states on how to tie that in because in fact the states have many of the same issues we have. For example, the U.S. government has 30 million documents online, the states have about 14 million documents online. There's a lot of working through making it better.

But the really important, I think, ties back to the various other cross-agency efforts and, frankly, agency-specific web

portal efforts.

How do you get feedback to be better? We're starting to deliver services over the web. You want to run that closed loop, not open loop. By that I mean you listen to what's happening, and then you adjust accordingly.

So I think we need to do a lot more work with the feedback side and better links back into the other cross-agency portals, like students.gov, or seniors.gov, or disability.gov. I mean, there are various of these websites all built around presenting the problem from this outside-in perspective rather than the inside-out perspective, as well as all those really important agency-specific websites to which we are handing off traffic coming via FirstGov.

Mr. Lawrence: Let me continue this discussion about management by talking about another interesting topic, which is the balanced scorecard. We understand that you're using the balanced scorecard to manage the operations of the ten units under you. Could you tell us about this?

Mr. Wagner: Okay. Balanced scorecard is a pretty interesting approach. What has historically happened with many organizations is the focus on things like the bottom line misses a lot of other things that are important. And what balanced scorecard fundamentally tries to do is discipline yourself to look at more than just a few things.

And in fact, in our case, I think we're nontraditional. I think there are supposed to be four perspectives, but we have five perspectives. But when you look at the things you're going to measure your performance on, you don't just look at the one thing, like customer satisfaction. That's important, but you want more than that perspective.

So what are our perspectives? Well, first is what do we measure from a stakeholder perspective? Our stakeholders are all the folks who are interested in management across the government as a whole. So there are measures from that perspective. There are also the measures from a customer's perspective. We have customers too. If they're happy or unhappy, that matters a lot. We also have internal business processes. Are those processes working well or badly? Very much -- that's another balance scorecard. Budget, keeping track of the money � fairly important to do. And finally, something that I think tends to have been neglected and is going to matter more and more, is the learning and growth perspective. Do your employees know what they need to know? Do they have the tools that they need to know? Are they the right tools for the right job?

So, what are the measures? How do you make sure that you aren't so caught up in making customers happy that you don't deal with longer-run issues like making sure that people will be able to make them happy in the future.

Anyway, we're managing using those five measures. It's, I think, more difficult for a policy organization than an operational entity because a lot of our measures tend to be how do you measure the effectiveness of a policy. It's a somewhat trickier question than, you know, cost per item produced or something like that. But we're finding it a useful way of looking at it.

I will give a suggestion to those looking at it. This is a really good way to look at your programs, but don't get carried away with it. It should be a simple way to look -- it should be a simpler tool for looking at what you do. And this is one way of looking at things, and it's a way of keeping balance. You know, find things that work and be prepared to change. Because what we also find is what we were sure was the right way to do things a year ago, turns out to have been wrong. And that's not bad. It just means you adjust and start working as you evolve towards a better way of managing.

Mr. Lawrence: Let me follow up quickly. When you say use the scorecard to manage, and you describe the different areas, how actually do you use it to manage? Is it the scores or the results in those five areas or is it driven down to a personal level?

Mr. Wagner: We're not as far along as that, to drive it all the way down to every individual in the organization. But basically, you have five perspectives and you look at -- you find things to measure in those five perspectives.

They should be things that encourage the behavior you want. If you want a behavior that you want customers to be satisfied, find a customer satisfaction measure of some sort or another to measure, and that's one of the things doing. If you want your folks to be educated on what they need to be educated on, find something to measure that leads you in that direction.

Mr. Lawrence: Well, great. It's time for a break. We'll be back with more of The Business of Government Hour in just a few minutes. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Marty Wagner, associate administrator for the Office of Governmentwide Policy at the General Services Administration. And joining us in our conversation is Steve Seike, another PwC partner.

Well, Marty, let me double back on some of the management issues we were talking about in the last segment. Could you tell us about the linking budget to performance program?

Mr. Wagner: I guess I'll begin, since you're talking budget to performance -- I think I'm quoting Mitch Daniels, the new director of OMB, who said something along the lines of, "If you're not keeping score, you're just practicing." And I think some of the stuff we talked about on balanced scorecard earlier is if you -- things you measure, you'll get more of. And I think that's the first important point -- trying to measure something, and then move in that direction; understand those measures as step one.

Now, there's been a lot of, I think, discussion that gets almost religious about things called outcome measures and output measures and things like that. I think there's something about outcome measures that may bring out the worst in some people. But this is my take on the way we have to go.

First, an outcome is something that you really want to achieve. It's not necessarily what you produce but it's some measure of programmatic effectiveness that is as far away from the nitty-gritty outputs -- it's the higher-level things.

I think what we ought to do is figure out what are the outcomes we want, and then try to measure them. Then we also will be going -- we'll have programs that are moving in the direction to get those outcomes that we want. Those would be outputs that we do measure. Frankly, outputs is things we've done a pretty good job of measuring across a lot of it. We can count what we spend to do X or to do Y, or how many of them that we built, whether they be regulations or sizes or things like that. You can do your outputs. The problem is linking the outputs to the outcomes. And what I would suggest there is, rather than get into trying to quantify it too exactly, tell the story, that people can either believe or not believe, of why the things you as an agency are producing help achieve the outcomes you want to achieve. In my case, the outputs I would have might be things like regulations or accounting best practices or number of visits to a website or something like that. The outcomes I might want, or that I do want, are better management at an agency level. Well, I can't prove that because some best practice came out or that we developed performance measures that they're really making a big difference. But I think I can make a case of why the regulations or the guidance or the performance measures then being used by an agency has led to better behavior.

And the important question is, people can listen to that case, and they can believe it or not believe it and make their judgments. And that's better than being in this well, I can't measure anything or any measure that I have has to be so purely perfect that I can never achieve that. So that's kind of my take on that.

Mr. Lawrence: Marty, let's turn now and focus a little bit on the future. We're hearing this a great deal about the upcoming federal government retirement wave and the impact that that's having on agencies. How big an issue is that for GSA and the Office of Governmentwide Policy? And are you doing some planning and working on some solutions around that?

Mr. Wagner: It's probably the strategic issue for GSA and, I suspect, for most agencies. We have this building retirement wave coming in. I think we've got 90 employees that are currently eligible to retire or will be eligible to retire in the very near future, a significant percentage of the work force. And it's going to continue for a while. It's not so much Armageddon, but it's this rising issue that we're going to have to deal with. So how do you deal with it? Well, one thing is you try to retain people. And there are some financial incentives that you can use in that direction. There are also, frankly, some quality of life, quality of work things that you can offer.

A lot of what we have to offer in the government, frankly, is not salary. We actually can offer scope and opportunity to do things that are really significant. When I was working at EPA, which by now is probably 15, 20 years ago, I was, I guess, down the hall from someone, a GS-11 maybe, GS-12, a key guy working on billion-dollar standards, air quality standards. And he was the person doing all the modeling work. He had a major impact on a multibillion-dollar decision that the government made. Now, that's EPA. I was recently talking to a fellow who worked in GSA's Public Buildings Service, who told me about a job interview when he was a couple years in government and was thinking maybe he'd go into real estate for a company. And the companies that he was interviewing didn't believe what he told them he was doing, because nobody that junior, that lowly paid, would be in charge of projects that big. That's what we've got to offer. We have really good opportunities to make a difference. In addition, I think we've got, you know, good salaries and benefits. And we can have discussions about which areas -- information technology would clearly have some areas of being able to recruit the folks we need and that's going to cut into more than just those areas.

Mr. Seike: Well, speaking of young people, what kind of advice would you give to a young person who's interested in a career in public service?

Mr. Wagner: Pursue things that interest you that you think matter. I think that what public service offers you is a chance to do a wide range of things. And my basic advice was if you're interested in the environment, you ought to be talking to EPA. If you're interested in energy, you know, you've got the Department of Energy. If you're interested in the Treasury Department. There's just a wide range of things that you can do. So the first thing is find something that interests you. Second is move around. Don't stay in just one agency or one office. You move around, you may find that you like government a lot and want to stay, and you may find that you want to go work for PricewaterhouseCoopers, I suppose. I mean, those are opportunities too. You know, but there are your opportunities to do interesting things. And you should care about what you achieve. At the end of the day, if all you do is you're putting in time, you're just doing the job and getting paid, life's too short to focus on that. You ought to be happy that you're achieving something, whatever that thing could be.

Mr.Seike: Would you recommend the development of any certain special set of skills?

Mr. Wagner: Well, I think the � whatever skills that you like. I mean, some people want to be accountants; some, economists; some, engineers; some, marketeers. I mean, there's sort of -- you'll have the skills of the things that interest you. So I'd begin with that. The thing that you may not have thought of, though, is you need to stay current. You need to have the skill to learn a new skill. Half the things I do today I had no -- I knew nothing about only a couple of years ago. And that just keeps happening. So the key skill to learn is the ability to learn new skills and adjust.

Mr. Lawrence: Marty, let's turn now to another really hot topic, and that's the one of Internet privacy. How much involvement do you think that GSA will have in regulating privacy issues in the government going forward?

Mr. Wagner: Well, we're certainly not going to be a regulator of privacy issues, but we're certainly going to be a participant in working through the privacy issues. Privacy is one of those issues that tends to be often mixed in with security, and they are different. When we move to a more and more electronic government, we need to guarantee that we protect the privacy of our citizens.

Frankly, there are some probably larger issues in how the Internet is evolving, when you look at some of the privacy issues there. Simple one; you have a right to be anonymized, unless there's some reason that you need to identify yourself. If you go and pull down a tax form, no one's going to collect anything about you if you're downloading a tax form because that's our duty, is to make sure that that's private. If you are, however, let's say interacting directly with a government agency through the Internet, we have to guarantee that it is in fact you that we're talking to because that's private information.

We're going to be working through a lot of how you actually make that work. We haven't worked out all the answers, but since we have a collaborative model, we've got OMB and all the other agencies that we'll be working together with on solving that over the next few years.

Mr. Lawrence: Marty, I'm afraid we're out of time. Steve and I want to thank you very much for the conversation today. It's been very interesting.

Mr. Seike: Thanks, Marty.

Mr. Wagner: Thank you. Appreciate it.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Marty Wagner, associate administrator for Office of Governmentwide Policy at the General Services Administration. To learn more about our programs and research into new approaches to improving government effectiveness, visit us on the web at endowment@pwcglobal.com. See you next week.

Arlington, Virginia

Tuesday, April 24, 2001

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

The Business in Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation today is with George Fields, director, Transportation Administrative Service Center at the U.S. Department of Transportation.

Welcome, George.

Mr. Fields: Thank you very much.

Mr. Lawrence: Well, let's start by finding out more about TASC. Can you describe the activities for our listeners?

Mr. Fields: TASC is a unit of the Department of Transportation. We were officially created as a separate unit within the Department of Transportation in 1995. It was one of the reinvention initiatives. Prior to that time, the unit had existed as the Department's working capital fund. And, essentially, the Department, as most other government agencies, has administration within their purview and the Department decided to breakup policy from the operations side of administration.

Mr. Lawrence: How many employees are at TASC?

Mr. Fields: There are approximately 280 employees.

Mr. Lawrence: And could you compare the culture at TASC with the culture with the rest of the Department of Transportation?

Mr. Fields: TASC is a not-appropriated-funded agency. And, as such, we have a sense of urgency with respect to the programs that we're administering, or I should say the services that we're delivering. Given that we receive no appropriation, all of the revenue that's generated is based upon our ability to deliver services that are both cost-effective, as well as services that are deemed to be of value to the customers. So there's a real cultural difference here.

Mr. Lawrence: So without revenue for services, there might not be any TASC?

Mr. Fields: Without revenue there may not be a TASC. There may not be employees that are performing these functions.

Mr. Lawrence: And when you say it generates a sense of urgency, what does that mean?

Mr. Fields: It means that employees fully understand that they have to have satisfied customers -- customers that are, in fact, willing to pay for the services delivered. Otherwise, we would, in fact, not exist.

Mr. Lawrence: Well, tell us about your career. Tell us, you know, what led you to where you are now.

Mr. Fields: Mine is a rather interesting career, in that I had graduated from the University of Kansas, and at that time, had studied political science, but as most political scientists, realized coming out of school, you know, you generally look to do just about anything. I always had an intention to go into government. I saw it as a noble calling.

I started my career with the City of Kansas City, Missouri, in the management intern program there. And studied, while at Kansas City, a number of areas, transportation being one of those, budgeting, financing, and saw very much at that early stage the real benefit associated with understanding the operations of government -- not so much the matter of delivering direct service to customers or to the public but, really, appreciating the actual operation and flow of government.

I moved from there and actually started my own business. So, I got little bit of the private sector into me in that I understood how to make a payroll at that time; I had an electrical wholesale company. I sold that company and then moved to the East Coast and at that point did some work in county government, the County of Arlington. And after that, went to work at the state government and worked under two governors. In state government, I was politically appointed as the Deputy Secretary of General Services, and following an approximately ten-year stint with the Commonwealth of Pennsylvania, then came to work here at the federal government. So, I've had an exposure, in terms of government, city, county, state, now at the federal level.

Mr. Lawrence: And then how did you get involved with TASC?

Mr. Fields: The Department of Transportation, at that point, in 1995/1996 was contemplating the creation of this organization, and it sounded extremely attractive to me because it looked like an opportunity actually run a business inside a government organization. So, it was a blend of the kinds of things that I, in fact, had been involved in and very much, you know, was attracted to.

Mr. Lawrence: You've had private-sector experience, yet most of your career has been with public service. What drew you to public service?

Mr. Fields: It sounds a little bit corny, but it's the nobility of the service. I very much have been interested in serving the public and have never had an interest in working in the private sector, other than if it were for myself and, in that instance, I would in fact control. I'm very much interested in terms of the programs that are, in fact, delivered to the public. And from my perspective, those programs are affected by how one, in fact, shapes them from the inside, and I feel as though I can make a contribution that way.

Mr. Lawrence: How would you compare the ability to deliver programs at the county, state, and federal levels?

Mr. Fields: At the city/county level, you have a little closer contact with the citizenry. Here at the federal level, you're a little bit more removed. However, I think the concept and the basic principles are still the same. How can you, in fact, deliver services that are of benefit to the public? You know, what is it that the public is looking for? How can you, in fact, deliver that in a cost-effective way? And, quite frankly, take into consideration all of the public, not just simply individual segments.

Mr. Lawrence: Does the culture differ at the different levels of government?

Mr. Fields: Yes, very much so. I think that you see at the city and county level, very much more citizen participation in what is, in fact, being delivered to the public. That sense of citizen participation is lost once you look at it from the federal level. I think there are many efforts ongoing to try to do that kind of outreach, but I don't think it nearly gets there as it does at the city and county levels.

Mr. Lawrence: Which positions best prepared you to be the leader of TASC?

Mr. Fields: I would say, quite frankly, my experience in my own business. In that environment, I truly did understand what it took to actually develop a business, make a payroll, and understand how to make those rather critical calls necessary to keep the doors open every day.

Mr. Lawrence: How do you translate that experience to someone who has had a career not in the private sector?

Mr. Fields: I would say that if, in fact, you understand the issues of accountability, which is rather key here, I think it's very easy to understand then that the public is looking for someone that's delivering services to them, that is keeping the public in mind, and making certain that those services are very much attuned to what that public is looking for. I don't think that it's any secret what occurs in the private sector. The private sector is looking at, if you will, the quarterly return, you know, what is in fact in the best interest of that private-sector company at the end of the quarter. Same thing here is true with respect to the taxpayer. They're looking for that return, as well.

Mr. Lawrence: In your years of government service, what qualities have you observed as key characteristics of good leadership?

Mr. Fields: Surely, there are a number of factors but I would say that, as I look at that, a couple factors are probably key, character being one. Character as it relates to one's ability to obtain trust of those that you are leading. Because without trust of those, you cannot, in fact, lead an individual and/or a group. And, so, character is extremely important.

I think the other thing is a matter of connection with employees or with individuals, because without a sense of connection, you're asking to lead someone and asking them to perform without really having appealed to their heart, quite frankly. And until you've appealed to the heart, you cannot get an individual to perform for you. And so I think a combination of character and connection with the individuals that you're attempting to lead.

Mr. Lawrence: Do you think these characteristics have changed over time, or will change going forward?

Mr. Fields: Doesn't matter the time, doesn't matter the issues of how much technology we're introducing. I think those are basic human instincts.

Mr. Lawrence: Okay, that's a good stopping point. I'm talking with George Fields. This is The Business of Government Hour. We'll rejoin our conversation in just a few minutes. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and our conversation today is with George Fields, the director of the Transportation Administrative Service Center at the U.S. Department of Transportation.

We know that TASC has had some involvement in the recent increases in public transit ridership being reported here in the Washington metropolitan area and nationally. What's TASC's contribution in this effort?

Mr. Fields: We're rather proud of our contribution here. It's a behind-the-scenes activity but, quite frankly, that's how we deliver most of our services: behind the scenes. In April of 2000, the President signed an Executive Order that extended a transit benefit to federal employees, specifically here in the National Capital Region where the transit benefit was to be made standard at $65 a month and going up to $100 a month come January of 2002 in the rest of the nation and other regions. That was optional.

In any event, TASC, for the Department of Transportation and a few other agencies throughout the metropolitan area, we had in fact been delivering these services by way of delivery and administration of their transit benefit programs. A rather small activity for us over about a nine-year period. And this even predates TASC. With the signing of the Executive Order, and that taking effect in October of 2000, many agencies found themselves faced with the rather large hurdle of how do they, in fact, implement such a program in such a short period of time.

We had stepped to the plate and suggested that we could deliver a rather holistic approach to delivery of transit benefits for them -- without them to replicate, in each instance, such a program for themselves -- and have been rather successful at that over the last year period. We've increased from about a $15 million revenue-generating activity for TASC to about $113 million activity for TASC, just in this area of transit benefits. And now we're delivering to all but one of the cabinet agencies, and we're delivering that service across the board to all those agencies and across the nation, not just here in the metropolitan area.

Mr. Lawrence: What were the management challenges from expanding that program so quickly to be so large?

Mr. Fields: You can't imagine the challenges associated with that. Even a private-sector firm going through that kind of a growth in short period, you know, really finds itself faced with some challenges.

Probably our largest challenge has been a matter of attracting and obtaining the right mix of personnel that would staff this activity. We went through a series of, literally, burning people out in terms of long hours before we were able to get fully staffed in order to meet that October 1 time line. But we have finally gotten there. We still have a number of issues yet facing us, such as our accounting systems that haven't kept pace, but we think that we at least understand the issues that we can systematically address those.

Mr. Lawrence: One of the services provided by TASC is contract administration. Could you tell us more about this service?

Mr. Fields: Contract administration is one of the services of one of our business practices. TASC is divided into ten separate business practices. We established ourselves along the lines of a professional services organization. This particular practice, we call it acquisition services, we provide the normal contract and acquisition services of any contract shop that any agency would find themselves faced with.

However, one of the unique features associated with TASC is that we provide expertise in niche areas. And with respect to our contract services area, one of the niche areas of expertise that we have or, I should say, centers of excellence, that we have is our ITOP program. And ITOP stands for Information Technology Omnibus Procurement. And that was a creation of the procurement reform, streamlining of procurement. And you think back, maybe ten years ago, when we were having this influx of information technology acquisitions, most of those acquisitions were taking anywhere from a year to two years to achieve. The technology was advancing so rapidly, it was almost impossible to acquire the appropriate technology for customers, in fact, to have that technology be meaningful for them, and it's taking you that long to acquire it. So by the creation of ITOP, what we're able to do is move from a year's time to do an acquisition to, in some instances, as little as three weeks. And so, what we've done there, is we've put the contractors under contract to deliver certain categories of services, and we're able to reach those contractors almost immediately to fulfill customer requirements.

Mr. Lawrence: How's TASC helping agencies comply with the Electronic and Information Technology Accessibility Guidelines, which require that Web sites of agencies be accessible to disabled Americans?

Mr. Fields: Approximately two years ago, in anticipation of these requirements and in conjunction and consultation with the disability community, the Department created, through TASC, the Department's Disability Resource Center. That particular center was established for the purposes of providing accommodations to employees with disabilities. This act, the 508 Act requirement, is just one aspect of accommodation for employees.

Once again, this is an area where a particular service is provided by TASC where we have expertise within that particular unit that can respond to employee requirements, employee needs -- in this instance, employee requirements as it relates to disabilities.

Mr. Lawrence: We also know that TASC provides human resource services to customers. Could you tell us more about that and which services are most popular with the customers?

Mr. Fields: We provide the normal recruitment, benefits counseling, retirement counseling, kinds of activities as part of our human resource activity. But again, we provide those services with a look towards providing real expertise in terms of value to our customers and, as a result, we are able to reach out to customers outside of DOT. And that's a feature that we have within TASC in that the services that we're providing within DOT, we're trying to make certain that those services are broad enough that we can, in fact, cross-service other agencies so as is the case here with our human resources activities -- not just providing the very traditional retirement counseling, but providing real expertise as it relates to retirement counseling, so that it becomes attractive to other agencies to want to use these services and so, to a great degree, word-of-mouth would suggest that others want to come to you to use those services from you.

Mr. Lawrence: TASC has a Worklife-Wellness program that promotes health and fitness and provides disability resource center, career counseling and even employee assistance services. What kind of impact do these things have on staff?

Mr. Fields: I would say it has a rather tremendous impact. In �96, when I came to the department and began to work with TASC, our Worklife-Wellness activity was one of those activities that many within the Department questioned; I mean, what's the relevance of this to my ability to deliver services to the public? And it was our challenge to demonstrate that an individual that is treated in terms of the issues that are surrounding that individual, beyond just simply that work setting, is a more productive individual for you.

And it didn't take long for us to capture, quite frankly, the hearts and minds of those within DOT to realize that this is an extremely worthwhile activity. Our fitness center is a good example, in that we have one of the highest rates of participation as an employer in our fitness center of any within government. And, quite frankly, that's something for us to be extremely proud of. Now, many may say, what does that really have to do with delivery of services by the federal government to the taxpayers?

Well, the reality of it is that if in fact we can pay attention to the health and well-being of the individual, that individual's going to be more productive for you.

Mr. Lawrence: It's time for a break. We'll be back in just a few minutes with more of The Business of Government Hour, and our conversation with George Fields. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and our conversation today is with George Fields, director of Transportation Administrative Service Center at the U.S. Department of Transportation.

George, what's "TVU"?

Mr. Fields: TVU is the Transportation Virtual University. We have branded that just for Department of Transportation, however, we have carried the same concept to other agencies, such as HUD and have branded it around HUD. But what it amounts to is electronic learning and distance learning.

We find ourselves in a time, when time, quite frankly, is a value. Individuals aren't able to take the time to do the rather traditional classroom training, and individuals are looking for training when they need it, as they need it, what they need. And this whole method of electronic training is a way of achieving that.

TVU is something that we're rather proud of, in that we recently received an award -- recognition for our efforts here in that we have blended some new technology, while keeping the individual in mind, in terms of the design of the course, work design of the activity that the person is learning. And as a result of the award, I think, that we have gotten some recognition. It's been a little bit slow-starter for us in terms of the service, but I think that we'll probably be expanding this and you'll probably be hearing more about it. It wont' be necessarily TVU, because again, it's branded towards each of the agencies that we may deliver for.

Mr. Lawrence: We know that one of your roles at TASC is to manage the Headquarters Procurement Project, which is leading of new space for the Department of Transportation. What are the biggest challenges in managing this process?

Mr. Fields: It's several challenges. Of course, we're looking to obtain the support of both OMB and Congress. We're looking for making certain that we have a viable strategy for how we, in fact, are going to house the employees of DOT. We have been participating in a procurement process since June of last year, and I guess the biggest challenge for us today is just simply trying to bring conclusion to that procurement.

Mr. Lawrence: What lessons-learned could you pass on to other leaders undertaking a complex facility project?

Mr. Fields: I can't say clearly enough: Define your project goals. You have to understand what your goals are and keep yourself focused yourself upon those goals. I would also suggest that, and this is something that we learned, before we started the project and we're very grateful that we followed through with it: Bring in someone from the private sector to be of assist to you. I think that too often we in government are rather myopic in our views as to how to achieve things. And I think in a proper partnership relationship with someone from the private sector, the real estate community in this instance, we have found that to be quite beneficial to us. Mr. Lawrence: TASC is self-described as a customer-service oriented with both the public and other agencies as customers. How do you build a customer-service culture?

Mr. Fields: Asking that question is like asking, 'how do you build the foundation of TASC?' Our whole foundation is based upon customer service. Customer service is, in fact, part of our logo itself. Service, value, success -- whenever you see the name TASC, you'll see under that "service, value, success." We very much are focused upon how the customer is, in fact, going to be serviced here.

From the very beginning of an employee's employment with TASC, we take them through a very specific training to orient them to this whole concept of customer service. And especially those that are longstanding within government, where they're coming from an environment that we're working off of, in many instances, mandates because we're talking about statutory requirements. That's not the case with TASC. TASC has a culture where we do not survive unless we're satisfying customer requirements, keeping the customer ever-focused upon, you know, our minds, because it affects our revenue.

Mr. Lawrence: How does TASC build partnerships with other government agencies, particularly those partnerships that provide additional services?

Mr. Fields: Those partnerships are built based upon our ability to deliver. And our ability to deliver is demonstrated to those other government agencies by a demonstration of the products that we have, the services that we have. As an example of that, we have a system called Dockets Management System, where we have built for the Department of Transportation an electronic means to communicate with the public. The Department of Transportation is, as is the case with many agencies, engaged in publishing rules and regulations. Looking for comments back from the public with respect to those proposed rules. The Dockets Management System gives the public an ability to do just that.

Prior to our establishment of that Dockets Management System, and it's been in place now for about three years, we were getting responses, about 3,000 responses a year, to the proposed rules from individuals across the country. Quite frankly, across the world. Now, we're in excess of 300,000 responses coming in from individuals, you know, weighing in on the matter of government.

Demonstrating that for DOT has translated into our ability to demonstrate that to other government agencies and have them see the benefit of that. So, that's the way that we partner by way of demonstrating those kinds of services, the availability of those services, and as a result, having customers coming to us.

Of course, yes, we do some marketing to those customers, but for the most part, customers are coming to us asking to have those kinds of technologies deployed with them.

Mr. Lawrence: TASC administers a purchase card program at the Department of Transportation. How do you administer this program and what capability should customers have?

Mr. Fields: We administer a program where we, essentially, have a two-part role. On one hand, we provide a contract-management role for the Department's senior procurement official, where we've established the contract with the bank for the purchase card, and established certain tools such as the remote accessing of account, assuring that the customer is able to pull up electronically their account, making certain that that account is, in fact, compliant with federal requirements, in terms of procurements. So, those are some of the tools.

But, in addition, we perform a secondary role, one that we're involved in almost on a daily basis. And that is actually administering the purchase card program on behalf of a number of agencies, including for ourselves. We, as employees, do, in fact, have a need for a purchase card and we do that for ourselves, but we do that also for other customers within DOT.

Mr. Lawrence: TASC administers or participates in the Merit Promotion Program. Could you tell us more about this program and its impact on TASC?

Mr. Fields: Well, rather than isolate so much just to the Merit Promotion Plan which, quite frankly, is something that we do in terms of the statutory requirements with respect to civil service requirements, one of the basic philosophies of TASC in our creation was that we did not ask for, nor have we sought any special dispensation from the procurement and/or personnel rules. And what we'd suggest is that it is possible to actually run a business in government with the government requirements still in place, not asking that those governmental requirements be relaxed. Because we think that it is, in fact, true that most of those requirements were put in place for good reasons. Even if they're social reasons, they're good reasons, and there's no reason why a business should not, in fact, be adhering to that.

If we're in the private sector, there are, in fact, impositions placed upon us. And we would suggest that we shouldn't get special exemption from those requirements inside of government. And so, as it relates to Merit Promotion, as it relates to the Federal Acquisition Requirements, all of those requirements, we're saying that, not only are we adhering to, but we're going to sign up to, very much.

Mr. Lawrence: We'll be right back with more of The Business of Government Hour and our conversation with George Fields. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with George Fields, director of Transportation Administrative Service Center at the U.S. Department of Transportation.

After five years of operating a fee-for-service agency, what management lessons have you learned?

Mr. Fields: Be patient. Running a business inside a government is something that does, in fact, truly require a sense of patience. It's an ability to actually work with people and get involvement of the employees within the organization. I think that without their involvement, you don't get their buy-in. And that's something that we've been very careful to do in constructing this organization. We are currently going through our budgeting process where we have to actually build our budgets in order to project our potential cost for each of the operating administrations within DOT that are going to be buying our services, hopefully.

And, as a result of that, we have to actually have the employees participate in that process. So this is not a matter of you build the budget at the top and then pass it down to the employees. We actually go through a process where the employees build the budgets. And, so, that's a management instruction that I would give to many, even if you're not running a fee-for-service organization.

Mr. Lawrence: We hear a lot about the coming government retirement wave and the expected impact on federal agencies. What kind of challenges will this present to TASC?

Mr. Fields: We're presented with the same challenges everyone is in terms of there are, you know, basically cycles of hiring that have taken place over the years at the federal government level. Twenty years ago, a large wave of employees came in, and it's time for those employees to be leaving.

One of the unique situations that we find ourselves faced with, though, is that, as earlier stated, we're looking for real expertise in the areas in which we provide service. And so we quite frankly, are looking for those long-term employees. And so, while at the same time that we're bringing in some new entries to the workplace, we're really trying to supplement ourselves with the long-term employee. And so, we've been successful in both attracting and retaining past retirement period some employees that have the real expertise that we need in the given areas that we're providing service.

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

Mr. Fields: You have an interest in public service if you are dedicated to the public and delivering services to the public. If you think that there is in fact some monetary reward, public service is not where it is. If you are not, quite frankly, thick skinned, public service is not where it is.

I mean, quite frankly, public service back in the '60s when I came into it was in fact a noble calling. It has over the years lost that gilt, but I think it's beginning to come back. I think it is beginning to be identified as some place that is a place of choice, and I think that once government gets to the point, where we are not only asked to be held accountable, but we are accountable for what we are delivering, then I think that the young person will be coming back to government service.

Mr. Lawrence: What kind of skills should that young person have?

Mr. Fields: What we're looking for are people that have an ability to maintain interpersonal relationships, people that, you know, understand how to think through a problem so it's a real solving of problems. Looking for people who, quite frankly, have good communications skills. Those are the basics and beyond that, then, a lot of it is going to be based upon the ability to be trained. But very much the issue of interpersonal skills, because you're going to be interfacing not only with the colleagues that you're working with, but you're going to be interfacing with what we call customers, be it governmental or customers be it the public.

Mr. Lawrence: What kind of services does TASC provide in the area of information technology?

Mr. Fields: We provide a host of services in terms of the IT arena. And we provide those services, quite frankly, in partnership and in conjunction with the private sector. We don't maintain a large workforce ourself. As I noted earlier, we have a workforce of approximately 280 employees, and we have a workforce any day of approximately 800 contractors. We are providing data warehousing services, we're providing telecommunication services, we're providing what we call mail-store, or email services, so the traditional desktop services, all of these are services that we, in fact, are providing, and providing, I think, very well in a real partnership with the private sector.

Mr. Lawrence: What steps does TASC take to recruit and retain technology employees?

Mr. Fields: For one, we don't attempt to maintain a large workforce of our own, but those that we do have, we have the real expertise in given areas. And we're retaining them, quite frankly, through the ways that many of the other federal agencies are finding that they're having to deploy, such as retention bonuses, signing bonuses. Within TASC, we have what we call an entrepreneur award, where employees that are able to attract and retain business beyond the ongoing business, are able to receive monetary reward for that activity.

Mr. Lawrence: What progress is TASC making in reviewing positions for competition through the FAIR Act?

Mr. Fields: We are, in fact, exposing all of our positions to FAIR. We, quite frankly, find that we're in an environment where we are partnered, right now, with the private sector, more so than many agencies. As noted, most of our employees that we're actually using to deliver services are, in fact, contracted employees. And what we find is that that represents an environment where the private sector sees that they, in fact, are participating in the activity of the service delivery and so it's not a matter of the private sector's on the outside looking in, trying to obtain this business. They're already working the business right now.

Mr. Lawrence: What are your lessons-learned from managing so many contractors?

Mr. Fields: That is just it. That is the value that we bring to the table in TASC, in that having an expertise in the given area that we're delivering the service, then we understand what it is that both the customer is looking for, as well as, what the options are for ways in which to deliver that service and, as a result, can direct our contractors consistent with what our customers are looking for.

Also, we're entering into relationships with contractors where it truly is a partnership, not just a cliche in terms of partnership, where the contractor is participating as a partner, meaning that they're at risk. So if, in fact, we're successful, our contract partner is successful. If we're not, our contract partner is not successful, either.

Mr. Lawrence: What's your vision for the next ten years of TASC?

Mr. Fields: At present, I'm looking at the next week, but for ten years, I look that TASC actually becomes a bit of a model for the federal government in terms of how to deliver these behind-the-scene kinds of activities. You know, one of the things that, I think, the public is asking, when the public is asking the question about the growth of government, the public is really interested to know, what are we getting for the dollars that we, in fact, are seeing?

The Department of Transportation is a $58 billion organization. About $44-45 billion of that is, in fact, being delivered in terms of grants to the states, to localities. The public is wanting to know, how much is it, in fact, costing you to deliver those dollars to us? And organizations like TASC help the public really get a handle on lowering that cost of government for delivering the services directly to the people.

Mr. Lawrence: I'm afraid we're out of time, George. Thank you very much for having this conversation with us this afternoon.

Mr. Fields: Thank you, Paul.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with George Fields, director, Transportation Administrative Service Center at the U.S. Department of Transportation.

To learn more about our research into new approaches to improving government effectiveness, visit us on the Web at endowment.pwcglobal.com. See you next week.

Arlington, Virginia

Monday, April 30, 2001

Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and a 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 our research by visiting us on the web at endowment.pwcglobal.com

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business.

Our conversation today is with William R. Ferris, chairman, National Endowment for the Humanities. Welcome, Bill.

Mr. Ferris: Thank you. It's great to be with you, Paul.

Mr. Lawrence: A lot of people know about the National Endowment for the Humanities. But I bet they don't know all the things it does. Could you describe its activities for us?

Mr. Ferris: Well, the National Endowment for the Humanities is the nation's largest supporter of the humanities and in so doing, we support public television, radio series like the Ken Burns series on the Civil War and his recent series on jazz. We support programs in local libraries and museums. We support classroom teaching, websites that help teachers and summer institutes for teachers. We also support research -- scholars, the preservation of presidential papers. And we increasingly are reaching out to all American people to try to make the humanities a household word, in initiatives like family history website, called "My History is America's History" that allows anyone to put their stories and genealogy online, and to connect through that with American history. So we have a broad, wide web of relationships and support that we bring to our nation on behalf of the humanities.

Mr. Lawrence: How big is it? How many people work there? And what type people are they?

Mr. Ferris: Well, by Washington standards, we're very small. We have a 170 staff, an annual budget of $120 million. And the staff I think of as a university. These are many PhDs, who speak many languages. The diversity of expertise is really extraordinary, not unlike the National Science Foundation.

We vet an extraordinary range of programs from international research to the history of American culture. We often have to draw on different languages, different periods of history to vet our projects. And we have scholars in house who are fully equipped to do that.

Mr. Lawrence: Well, tell us about your career.

Mr. Ferris: Well, I grew up on a farm in Mississippi. And studied English and later folklore. In terms of the South, my interests have focused on the Deep South traditions like blues. I did a book on a storyteller, a mule trader called You Live and Learn, Then You Die and Forget It All. And I think of that as a sense of urgency in my work as a folklorist.

I've also been privileged to direct for 18 years before coming here, a Center for Study of Southern Culture at the University of Mississippi. And we produced an encyclopedia of Southern culture that looks at one of the nation's great regions in great detail.

And all of that work has in various ways shaped important initiatives that we're now doing here at the Endowment.

Mr. Lawrence: How did you get out of academia and come to the Endowment?

Mr. Ferris: Well, I was invited. To be offered the position that I have, I think of as the highest honor an academic can ever have. I've worked for many years over my life with the humanities, and have been blessed with support, both as a scholar and as an administrator from NEH.

So, to come here and to return that favor by leading and supporting the initiatives that NEH is doing was something that I never dreamed would be a part of my life. And so when I was offered that opportunity three and a half years ago, it was certainly an easy choice to make.

Mr. Lawrence: It's interesting that you describe the position as both a scholar and an administrator. Which jobs in your career best prepared you for both of those functions?

Mr. Ferris: I think they both did because I was on the other side of the fence before coming here, requesting support for scholarly research and teaching, and also for administrative work -- the renovation of an antebellum observatory, the creation of new curriculum on the South. All of which happened because of NEH.

So I know, in a very personal way, a lot about our programs because I've been a part of them for probably 22 years before coming here.

So I feel as though I am knowledgeable advocate for the humanities. In speaking to the White House and to Congress and to the American people on behalf of our agency, I can call on personal experience in saying how powerfully important this work is for the whole nation.

Mr. Lawrence: How would you contrast the cultures of academia versus the public sector?

Mr. Ferris: Well, I think in many ways they're similar, in that you are responsible to the public, both at a university and at the Endowment.

But there are differences. Within the university, you respond to a department chair or to a university president. Here, I'm responsible to the White House, to Congress and to the American people.

And I think all three of those entities are equally important. You have to respect and be accountable to all of them. There are new ways of walking here, in the sense that you have ethical restrictions that normally would not apply in a private world within a university.

But ultimately it's following your heart, trying to be as honest and clear in what you are doing and want to do as possible. And when I first came here I was very intimidated by the thought of going into the White House, or going into a Senator or a Congressional office and speaking with people that I had read about and admired enormously.

But to go in and actually talk about your business was something I had never thought would be possible. But you quickly realize that you're dealing with other people who share values and once they understand that the work we're doing is improving and enriching the lives of people they represent, it becomes a clear choice of, I think, supporting this agency.

The increased support that we've had from Congress over the last two years reflects, I think, the confidence that they have in our work.

Mr. Lawrence: How about the differences in management styles?

Mr. Ferris: Well, the differences in management style at the basic level I don't think have changed. I'm the same person I was before. But the scale of management is far greater.

I mean, I was directing a Center for Study of Southern culture, managing about 18 people. Here, there are 170, and it's far more complex.

So, I had a steep learning curve. I'm still learning every day. But as a result of trying to understand an agency that I already felt I knew, but was quickly able to see that there was far more there than anyone really understood, we created over the last three years four working papers as a way to look in great depth at our programs, with international programs, with regional programs, science, technology and the humanities and teaching and lifelong learning.

And these are all on our website, a very impressive upgraded website. We are making ourselves much more visible to the American people and to our own staff. I mean, the range of projects and activities within this single agency is very impressive. And it helps to be able to also pull up a 35-year time line on our website, and look at the distinguished work that has taken place under every president and every chair since our creation 35 years ago.

Mr. Lawrence: Well, since you're an expert in Southern culture, I'm curious to know how would you contrast Washington, D.C. with the rest of the South?

Mr. Ferris: First of all, I have to say very proudly that I would consider Washington a part of the South. In our Encyclopedia of Southern Culture we include Washington. And from the very earliest colonial period Southern leaders like Thomas Jefferson played a significant role in the city.

So as a Southerner coming here, having worked on the South for 30 years, I found myself very comfortable here.

Mr. Lawrence: This is The Business of Government Hour. We'll re-join our conversation in just a few minutes.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with William R. Ferris, chairman of the National Endowment for the Humanities.

Could you tell us about the development of the Rediscovering America program?

Mr. Ferris: Yes. Our real initiative at the Endowment is to connect the humanities to every American. And to do that, we are reaching out to American families and communities with a number of initiatives that are making a significant difference.

Mr. Lawrence: We know that you're planning ten regional centers as part of this program. What will these centers do?

Mr. Ferris: Well, these centers will be housed within major universities in 10 five-state areas that roughly correspond to the areas we think of as New England, the Deep South, the Southwest, the Midwest.

They will offer the B.A. and M.A. interdisciplinary degrees on the history and culture of their region. They will support research projects like encyclopedias on each region. And they'll do public programs -- television, radio, exhibitions.

And they'll link over the five-state area the infrastructure of education and culture: religious groups, civic groups, national parks, universities, colleges, K through 12, arts and humanities councils.

Groups that normally don't talk to each other will be gathered together at a common table so that when an initiative like an exhibition on the California Gold Rush is being developed all of these groups will have a chance to take part in it and to help make it a stronger initiative.

Mr. Lawrence: What are the management challenges of running these centers?

Mr. Ferris: Well, the centers will all be run by the universities in which they're housed. They're actually built on already existing work, in some cases; programs that have been focused on the region for 20 and 30 years.

And what we are issuing is a challenge grant over five years that will offer each university a million dollars a year. And they in turn will match it with a three to one match.

And we are turning to Congress for only four of the six. The other six we are raising support from private sources for -- we recently received a two and a half million dollar gift from the Knight Foundation which is the largest single gift in the 35 year history of our agency.

So I think Congress and the private sector are very excited about the ways that this will deepen our knowledge of what American culture is all about.

Mr. Lawrence: We know that you spearheaded an effort to put statewide cultural encyclopedias online. Could you tell us what this is and what the biggest hurdle to doing this is?

Mr. Ferris: Prior to coming here, I was co-editor of an encyclopedia of Southern culture, which the NEH funded. And I saw firsthand how powerfully important that was in helping people understand about their own history and culture. And we have already seen in the last few years a growing number of state-based encyclopedias, mostly print encyclopedias.

So we've decided to create an online encyclopedia in every state through our state humanities councils. There is one that we funded earlier, which is up and running: The Handbook of Texas, which is an enormously successful project. And it's a prototype for what will be available in every state over the next five to 10 years.

It allows teachers and students to develop new curriculum. It has an impact on economic growth through cultural tourism. They have a tremendously important role in the life of the individual state. And they virtually cover the globe in the ability they offer to learn more about Texas, for example.

We have recently funded 17 states and we'll fund another round of states this summer with $50,000 planning grants to get the process started. And then we'll come back with $450,000 implementation grants to help put it all together.

Mr. Lawrence: What's the Schools for the New Millennium program?

Mr. Ferris: The Schools for the New Millennium is a very exciting approach to looking at the entire school and reshaping curriculum by developing technology and bringing together not only the students and faculty but parents and the administration. We partner that entire group of the school's leadership with a local museum and a university. For example, the Booker T. Washington High School in Memphis, Tennessee is partnered with the National Civil Rights Museum in Memphis and with Northeastern University in Boston developing a new curriculum on the civil rights movement.

And for those students in the classes in Memphis, the civil rights movement is a part of history. It's something that took place before they were born. So it's a wonderful way of doing oral histories with parents and family and neighbors to give them a deeper sense of their local history. We have similar projects with the Laguna Pueblo in New Mexico, looking at their Native American myths and comparing those with the theater of Shakespeare.

In each of these schools around the country, wonderful new, innovative work is being done; again, using technology and partnerships with museums and universities that make a high school curriculum far more exciting than ever before.

Mr. Lawrence: The Endowment is encouraging Americans to write down their stories through the My History is America's History project. Could you tell us more about this project?

Mr. Ferris: This My History project is our most comprehensive effort to reach out to all Americans. It involves first of all a book that is also online at thatsmyhistory.org.

And if one wishes, you can either get the book or you can pull down on the web all the information on it. And you can also get a copy of the book by calling 877-NEH-history.

Basically, what the book or the website does is to walk you through the ways of putting together your genealogy or gathering your family stories and then putting those online. And through those stories, and your own personal genealogy, you begin to connect in a much more exciting way with American history. We've put two copies of this wonderful book in every library in the nation. And we're working with teachers to use family history as part of their curriculum.

In states like Pennsylvania the State Humanities Councils are launching special oral history initiatives in communities all over the state. It's a project that is growing in terms of the numbers that are using it, and it's also bringing the humanities in a very powerful way into the personal life and family history of all Americans.

Mr. Lawrence: You've suggested that NEH should function as a traditional endowment where both private and public funds are added to the large pot of funding. What are the benefits of this structure?

Mr. Ferris: I think our new administration believed very strongly that there should be a private- public partnership. And our current budget of $120 million is simply not adequate to fully address the needs of the nation in the humanities areas.

So we have turned, with the encouragement of both the White House and Congress to corporations, to foundations, and to individual donors. We've had a wonderful gift of about $1.7 million from the WorldCom Foundation to create Edcitement, which is a K through 12 website that includes 105 websites, the Smithsonian, the Library of Congress and others.

And now, thanks to this gift and this website a teacher in Oklahoma can pull up Thomas Jefferson or Martin Luther King and it will sweep all these websites and give you the information.And then they can say I'm a 10th grade teacher in Tulsa. Give me a teaching unit on this subject using the Oklahoma teaching standards. So within 5 or 10 minutes, a teacher has a wonderful lesson plan on the subject they need that they carry into the classroom.

So we are very encouraged by the growing numbers of gifts for specific projects in the humanities that we are receiving. And Congress and the White House applaud this kind of entrepreneurial spirit within the humanities.

Mr. Lawrence: I'm talking with William Ferris of the National Endowment for the Humanities. This is The Business of Government Hour. We'll rejoin our conversation in just a few minutes. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with William R. Ferris, chairman of the National Endowment for the Humanities. Well, you've been credited with refocusing the Endowment's mission from funding controversial projects to those that preserve America's heritage. Can you tell us about the process that you used to shift the mission of the NEH?

Mr: Ferris: As a folklorist, I think of humanities as the human story and I think of a proverb, an African proverb, that I often use in teaching my students folklore. The proverb says that when an old man or woman dies, a library burns to the ground. And I view the humanities as a work of urgency, that we need to be about preserving those stories, not only of our family, but understanding more deeply the stories of our nation's history, our literature our philosophy, our folklore. These are all fields that we study really from kindergarten on; they are the humanities and there's nothing controversial about this. It's simply getting a good education. Our founding legislation draws on the language of Thomas Jefferson, which says that a democracy must depend on an educated citizenry, and we in our democracy have to protect and nurture our education for all ages, from kindergarten through lifelong learning. And that's what the humanities is all about -- there's nothing controversial about the work that we do. It is an urgently needed necessity for our nation, to support the programs that we have.

Mr. Lawrence: NEH regularly deals with competing and sometimes conflicting interests. How do you keep all the stakeholders satisfied?

Mr. Ferris: I view the various groups within the humanities as a parent would view children. You love them all, you want to nurture them all and take care of each of them.

And that is exactly our approach. We have public programs that nurture the public television, radio, and museum worlds. We have research programs that deal with scholarly research. We have education that assists classroom teaching and develops websites. We have challenge grants that help build long term support for institutions. And we have preservation and access, which is a way of preserving historic documents and making them available to the public. All of these are part of what we think of as the pipeline of the humanities. We have to preserve the collections of papers in order that scholars can write about them and filmmakers can draw on the photography -- like Ken Burns has done. Eventually, these films and scholarly works will find their ways in to the classroom of K through 12. So in some ways, you can look at a decade-long process of preservation and making accessible resources that are then used and turned into very public and very accessible worlds. All of these steps are important. We view all each area with equal care, and we try to be as fair as possible in supporting them all.

Mr. Lawrence: Money is often an issue and has been in the past has been somewhat of a struggle. You testified after the budget cuts of 1996 that NEH was forced to close down many of its core grant programs, lay off a quarter of its employees, and downsize many of its functions. How did you prioritize what would continue to receive funding in this period?

Mr. Ferris: Actually, that all happened before I became Chairman. It was several years after those deep cuts that I came on board. It clearly had a terrible effect on the agency. All of our younger staff that had just come on fairly recently had to be let go. Many of our programs that people depended on in a variety of areas were reduced or cut. It's been my challenge to rebuild those programs through Congressional or White House support or through private support; to seek additional funding for these programs. And I'm delighted to say that we're on the right course, both with Congress and the White House and the private sector. Private support also is flowing in ways that I think will steadily increase in the coming years.

Mr. Lawrence: NEH was able to increase its budget in the past year. What lessons would pass on to other leaders navigating the budget process?

Mr. Ferris: I'm very proud that we've had a five million dollar increase over each of the last two years and that was after flat funding for a number of years. My sense is that there are no shortcuts to this process, it's a process of learning to understand and respect the Congressional and White House leadership and over time -- over a number of years-- explaining about your programs, and why there're important, and how they affect to the American people. The bottom line here is that we are a democracy and the Endowment exists because of the generosity of the American people and their elected officials. We are responsible to those people and to the degree that our programs enrich and support their lives in every part of the nation, then I think we will thrive and grow. That's what we're doing. The growth in our budgets and in other areas of the agency represent our work.

Mr. Lawrence: In 1999, the NEH was criticized for inviting President Clinton to deliver the Endowment's annual Jefferson Lecture. What lessons can you pass along to other leaders faced with this level of controversy?

Mr. Ferris: Our idea was -- and I think it continues to be a valid idea -- that every sitting president should have an opportunity at the end of their term to reflect on the humanities and their role on of history in their leadership during their four year period. Regardless of who the president might be, I think that would be a significant resource for the nation. If we had such a resource on every president from George Washington to the present, it would be a treasure trove. I continue to think that this is an idea that is very important. We certainly are open to seeing this be made a part of the future of humanities if the leadership in the White House and Congress feel that it is important.

Mr. Lawrence: In an era where all government agencies are being asked to produce results, and track performance, how does NEH track and communicate performance information?

Mr. Ferris: Well we increasingly are using our website and electronic reporting of information from grantees and from audience participation and programs to monitor and track the results of our projects.

We've also responded to the Government Performance and Results Act in creating what is called a Performance Plan for all of our projects. It establishes goals and sets forth a series of indicators that help us understand how our various grants are succeeding. And we in turn report that to Congress and the White House.

I think technology is in our favor in that our website and our ability to use technology to move data quickly and to sort data is increasingly giving us a clear picture of how successful our projects are. And they are enormously successful. We can begin to see a summer institute for a high school teacher gives that teacher a much firmer knowledge of the subjects they teach.

And then you can only imagine for the next 10, 20, maybe 40 or 50 years that teacher, year after year, is a better teacher for hundreds and thousands of students who will then go forth and be better citizens.

So you multiply that one teacher by hundreds of teachers at the secondary and college level, and then you multiply the numbers of students whose lives they touch. And you begin to see it's like a pebble dropped in the water and the ripples go out. That is but one example of how our programs make our nation far stronger and far richer.

Mr. Lawrence: It's time for a break. We'll be back with more of The Business of Government Hour and our conversation with William R. Ferris, chairman of the National Endowment for the Humanities.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with William R. Ferris, chairman of the National Endowment for the Humanities.

One of the toughest challenges that many employers are facing now is recruiting and retaining new employees. Does NEH have this problem?

Mr. Ferris: I would say we have a problem with retaining employees. But our problem, like many federal agencies, is that we have a graying workforce, which is particularly acute in our situation, because so many of our younger staff were cut when the 40 percent budget reductions came through a few years earlier. But we are slowly and steadily rebuilding this workforce. As our staff retires, then we are bringing in wonderful young leadership within the humanities, and many of whom are PhDs in various fields.

And there's a great love for the Endowment across the nation. And I think it's going to be exciting and easy to recruit highly professional trained scholars who are interested in helping through the Endowment to build the humanities all over the nation.

Mr. Lawrence: Will they come for a job that will last a career, or will they be moving back and forth to, say, academia?

Mr. Ferris: Well, one can do both. But I think in most cases we will be bringing in people to work for a career. But it's also possible to come into the government for a year or two and to have that experience, and then to go back into the university. But most of the examples that I'm familiar with within the agency indicate that once staff is there, they do not leave until they retire. Because it's an extraordinarily and moving experience to see institutions and individuals grow and flourish. Because -- and I'm the best example. I mean, my whole career as a teacher and scholar and administrator would not have been possible without the NEH support.

So, I know full well that the kinds of advantages the Endowment offers individuals are in direct relationship to the leadership we have at our agency. These are leaders who become very personally involved and they have a chance to watch over several decades, sometimes, a small institution grow and flourish, or an individual scholar who's totally unknown, a young Ken Burns get help for his first film on Huey Long, and then become one of the nation's greatest filmmakers.

There are many examples like that. Ralph Applebaum, who designed the Holocaust Museum began his career as an unknown designer for museums with NEH support. The examples that one can cite are many. And to bring staff in and to give them a chance literally to shape the nation for the better I think is very appealing. And I look forward to seeing the growth and the development of young staff as they increasingly come to our agency.

Mr. Lawrence: What advice would you give to a young person who is interested in a career at NEH?

Mr. Ferris: Well, I always tell young people to follow their hearts. Life is too short to do otherwise. And do what you love. And if you love the humanities, and want to come to the NEH, then look at those positions that appeal to you most.

In some cases, it might be working with research, in others with public programs. A person who has a strong background in film or radio would be much more challenged and excited by the public program sector. If you've done research and published books and so on, then the research division would be a more likely venue.

But there's a wide range of wonderful opportunities within our agency. And each summer we bring in summer fellows who are college students. And they bring a wonderful new energy for the summer into the agency. And many of those are inspired and have indicated that they would like to come back, you know, after they finish their education and join our staff full-time.

And so there is a process here that clearly is exciting to the public. And we are never without wonderful choices when we're seeking to hire new staff.

Mr. Lawrence: Is there a key characteristic, from your observation, that separates the really excellent researchers or filmmakers from the other ones you see -- the Ken Burns, for example, from the other filmmakers?

Mr. Ferris: Well, I think there are really no filmmakers who are not good. I mean, I'm a filmmaker myself. And I know a lot of what separates one filmmaker from another is simply the access to resources. And Ken Burns really is unique in his ability to raise support and to build institutions around the subjects he's done, such as the Civil War and jazz.

And we seek not only to help the blockbuster productions, but to help the unknown filmmakers who are just beginning their career. We're launching support for filmmakers who are coming to us for the first time. And maybe $10,000 spread over 50 filmmakers -- of 10,000 each -- will yield a handful of truly significant filmmakers over the next 50 years who will be household names in the ways that Ken Burns' name is today.

So I think no one can distinguish between good, better, best. In scholarship, in filmmaking we simply can't judge what a decade or two from now will be viewed as a very powerful and important grant. And many of our smallest grants have had this effect. We funded a perhaps about $10,000 or $12,000 to a scholar to do a research project and a book on the Amistad incident about 25 years ago. Well, that book was one of the key resources for Steven Spielberg's wonderful film.

We can point to many examples where we gave an archeologist a modest amount of money to do work in Peru that led to the discovery eventually of the Ice Maiden. So, our work moves in wonderful and mysterious ways. And I think these are all God's children that we support. And they're all very beautiful and significant work in our eyes.

And I think as we look back over our 35 years, we can see the patterns of growth that have come in very unexpected ways that have blessed and enriched the lives of all Americans thanks to this great institution, the National Endowment for the Humanities.

Mr. Lawrence: What does the future hold for the National Endowment of the Humanities five, 10 years out? What do you think it will look like, and what do you think it will be doing?

Mr. Ferris: I think it will be hardly recognizable in terms of what we see now. First of all, all of our applications will be done electronically. We will have virtually every resource in our nation, presidential papers, family trees, the histories of local communities on websites that will all be linked so that a student in the 5th grade in rural Montana will have equal access to the rich worlds of the Library of Congress, as rich as anyone in the country. And we will see the agency partnered in a very intimate way with the White House, and Congress as we shape national and international policies, economic, cultural. We will have a whole new sense of pride and understanding about our nation's culture.

And that step will have been made because of NEH. I think NEH will grow and will become an essential part of all public policy. Not only education, but cultural and economic because culture is related to economic development. And we grow as a community, as a region and as a nation in direct proportion to our ability to know our history and our culture.

In our recent book on the 35-year history of the agency, there's a preface by Stephen Ambrose, in which he says, "I can't imagine an America without the NEH." And I think that will be the thought of every American in the coming years.

Mr. Lawrence: I want to thank you, Bill. I'm afraid we're out of time. I've enjoyed our conversation very much.

Mr. Ferris: Thank you very much.

Mr. Lawrence: This has been The Business of Government Hour featuring a conversation with William R. Ferris, chairman of the National Endowment for the Humanities.

To learn more about our programs and research into new approaches to improving government effectiveness, visit us on the web at endowment.pwcglobal.com. See you next week.