Thursday, January 26, 2006

Arlington, Virginia

Mr. Morales: Good morning and welcome to The Business of Government Hour. I'm Albert Morales, your host and managing partner of The IBM Center for The Business of Government. We created the center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the Center by visiting us at the web at businessofgovernment.org.

Mr. Enger: Good morning.

Mr. Morales: And joining us in our conversation, also from IBM, is Don Shaw. Good morning, Don.

Mr. Enger: OPM was created by the Civil Service Reform Act of 1978. It has a number of different responsibilities, one of which is to build a high-quality and diverse federal workforce based on merit-system principles. Essentially, it's the guardian of the integrity of the federal merit system. The director of OPM is the HR consultant for the executive branch. She's the President's principal advisor on matters that relate to the civilian workforce.

In addition to this responsibility, the OPM also has responsibility, for example, for the employee benefits systems, and in effect operates and administers the Civil Service Retirement Systems, the Federal Employee Retirement System, and the Civil Service Retirement System, which is servicing millions of retired federal employees. It also administers the Federal Employee Health Benefit System, which, again, services millions of both employed and retired civilian employees.

In addition, a very large responsibility that OPM now has is the processing of personnel background investigations. OPM now performs 90 percent of all the federal government's personnel background investigations, which covers both the civilian workforce, DoD, and also includes contractor personnel.

Mr. Morales: You've been with the Office of Personnel Management now for, I believe, about four years, Norm. Is that correct?

Mr. Enger: That's correct, yes.

Mr. Morales: And you came on board to lead the implementation of the e-government initiatives. Could you describe the various roles at OPM that you've had in these past four years?

Mr. Enger: My background has been private sector. I spent my life in the private sector and what happened, I then was asked by the federal government to help out the federal government. I met with the director of OPM and the chief of staff back in 2000. They asked me would I consider doing some public service. Essentially, at that time, the OPM had five of the original 24 e-government initiatives. These were initiatives that really had three primary mandates, if you will. First one was to make transformational change -- really change a business process in the federal government. Number two, do it in a relatively short space of time -- say, two to three or four years. And also the third mandate was to prove you've been successful. Show us by numbers, metrics, or whatever that you really have achieved that goal. The five that we had really framed the employee life cycle from recruitment to retirement. Essentially, the five we had were what I call point solutions.

For example, one of them dealt with the website where someone goes to find a federal job. That's called usajobs.gov, and we, in effect, transformed that website. What happened is in last three to four years, we've moved those five to a point where they're ready to graduate into the regular business of OPM. They've been successful and met all of their milestones. However, what you're looking at is fixing a piece of the overall HR business process. Namely, you fix the website, but you don't fix the entire hiring process.

What happened is that OMB recognized that perhaps it was wise to expand upon the original concept of improving federal HR systems, and what they did in March of 2004, they announced something called Lines of Business. They announced at that time five lines of business, and one of those five was the Human Resources Line of Business. Essentially, the difference between the original five e-gov I had and the new Line of Business is that this is much broader in scope. They're looking at everything you do in terms of the business process from hiring a person to retiring a person and saying, let's look at the entire scope of this, the entire business process and all the sub-functions and really try and change as much as possible, and where possible use technology.

Mr. Shaw: Norm, you are now the director of the Human Resources Line of Business. Could you tell us about the mission of your office? You've spoken briefly about it, but could you provide some more detail?

Mr. Enger: The mission of my office is really to implement the vision of, now, the Human Resources Line of Business and also to complete the final graduation, if you will, of the original e-gov initiatives. Essentially, we are following the President's Management Agenda, the PMA, which sets forth as one of the five major components, e-government. We're following the goals and desires specified in the PMA -- the part, of course that deals with e-government. We also are following the E-Gov Act of 2002, which, again, has visions to improve federal IT systems. And finally, there's also something now called the Federal Enterprise Architecture, which is a big picture of the government from a business point of view, whereby it's looking at the government as one organization, saying, what does this one organization, this one government do? So we're responsible for, in effect, giving detail and giving the structure to the Human Resources part of the Federal Enterprise Architecture.

In terms of my mission, I have a staff of approximately 37 people working for me. With contractors, we have approximately 60 people working to implement both the HR Line of Business, but also to finish off or complete the earlier 5 e-gov initiatives.

Mr. Shaw: Norm, some of our listeners may have difficulty understanding what the federal government means by "human resources." Could you share your understanding of this term?

Mr. Enger: Human resources really means the 1.8 million people in the civilian workforce. What we are trying to do is we're trying to, in effect, improve how we recruit, how we motivate, how we reward the people in the federal workforce. So human resources means people. Another term that's come into popularity is "human capital." Essentially, this is also the people, but it wants to give the flavor, if you will, of the people in terms of a real asset to the organization. So when you say "human capital," you mean: Think about these people you have and think of them as an asset, like any other asset you have in a large corporation.

Now, the goal of the HR Line of Business is essentially to implement modern and cost-effective HR solutions to support the strategic management of human capital. A goal here is to, in effect, free up the HR professionals in the government from routine back-office type of work and move a lot of that work to federal processing centers -- I should say federal and also private processing centers. So in effect, you free them up to focus on the mission of recruiting, motivating, training, rewarding the people in the federal workforce, the move to a more strategic use of our HR professionals to build a better work force. And of course, a secondary consideration here is the fact that by doing this you also achieve many, many operational efficiencies, you save a lot of money, and you become much more efficient.

Mr. Shaw: As you mentioned earlier, you came to OPM after working in the private sector, including a successful launch of your own technology company. How have you translated your private sector experiences to your work now at OPM?

Mr. Enger: Well, I spent most of my professional life running my own company. It was a consulting, professional services, IT system integration type of company, and then what happened is the company was bought in 2000 by a large multibillion-dollar company called Computer Associates. I spent two years with that company as a vice president. So I really had the experience of both working at my own company and also working for a very successful large corporation.

Now, to answer your question specifically, what has happened is the federal government has moved toward trying to follow the best practices in the private sector. I was surprised when I joined the government in 2002 that I was seeing the government actually turning more and more to the private sector for help, answers, and solutions. Essentially, if you look at how the federal government rates their senior executives, they have several criteria that you have to really try and meet. One is leading change. A second one is leading people. A third one is being results-driven -- give us some results or some tangible evidence you're successful. A fourth one is having business acumen -- namely, you can intelligently operate a business-type function. And the fifth one is building coalitions and communications.

Well, all of these elements, these five, are very, very critical in the private sector. When I ran my own company and when I worked for Computer Associates, these were the criteria by which you judged the successful executives. And now, what I see is that that structure has now moved over into the federal sector, and we find the federal government trying to follow the same model, if you will, that we have in the private sector.

I might also add that a very key element here is results-driven. You see now a very, very keen desire in the federal government to tie performance to results, and that is very much a private sector orientation.

Mr. Morales: What role did OPM play in changing government recruiting? We will ask HR Line of Business director Norm Enger to share with us when the conversation about management continues on The Business of Government Hour.

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with OPM director Norm Enger. Also joining us in our conversation is Don Shaw.

Mr. Enger: Well, this is one of the original five e-gov initiatives. It was called Recruitment One Stop; it's really focused on usajobs, our website. What happened is, when I joined the government, there was an old legacy system, which was definitely in need of replacement, renovation, or whatever. So what happened is in August of 2003, we actually brought up a brand new replacement site. Now, let me mention that this is the primary site where a person goes to locate, search for, and apply for a federal job. All competitive federal jobs must be posted by law on this website.

What happened is that in August of 2003, we shut down the old website on a Friday evening, and we were averaging 20,000 visits a day to that old website. We came live on a Monday morning, and fortunately, there were no glitches with the operation, but what did surprise me is on day one, we had 200,000 people on the site. We increased tenfold when people knew there was a new site. The new site is complete -- it's a modern site, the site appearance, the search engines, the r�sum� builder, the guidance on the site, how to locate a job that meets your desires or qualifications -- this has all been totally redone. It's now a modern, very robust site. So what's happened is that we're now averaging over 300,000 visits on the site per day, and that comes down to over 70 million people a year are actually going to this website. By every rating that we know -- and we actually have third parties evaluate the site -- 91 percent of the people that go to the site say they would return to the site and recommend the site to other people looking for a federal job.

At this point in time, we have over one million r�sum�s on the site. The site, I think, has met the earlier mandate I mentioned of e-government -- namely, you transformed a business operation, you've done it in a relatively short space of time, and you can prove that it's been successful by the number of visitors and outside surveys judging how well the site services the U. S. public.

The site is still evolving. Now, we are trying to give the applicants more feedback as to the status of their application or r�sum� to actually have it so they will know who's looking at their r�sum�, and what the next step in the hiring process is. This is a significant step forward into fixing the hiring process, which is a very high priority with the U. S. government and the director of the Office of Personnel Management. Where we are now is we're trying to have the site integrated more fully with what I call back-end systems in the agencies. Namely, they have systems that asses the applicant r�sum�, and the more we integrate their assessment systems with the r�sum�s produced by usajobs, the more you'll speed up the time it takes to hire somebody and the more you'll improve the federal hiring process.

Mr. Morales: That's a very impressive transformation. Two years ago, we also discussed your efforts to improve the federal government's security clearance process. Could you describe how the E-Clearance Initiative has transformed this approach to granting security clearances in the federal government?

Mr. Enger: This is a very, very major area -- topic area -- especially after 9/11, when the awareness of security really intensified across the country. There are several aspects to e-clearances, the initiative which we're talking about now. It's one of the original five. The first thing that we did is we built a system called the Clearance Verification System. This system -- it's the first time this was ever established -- this system holds 98 percent of all active security clearances. This covers all of the civilian workforce, the DoD workforce, and also all contractors. So one of our major accomplishments here is to build a central database or a central system whereby authorized people can put a name in and rapidly find out their clearance status and who granted that security clearance.

Also under this initiative we have moved forward to automate the forms people use to apply for a security clearance. One of the more common forms is called the SF-86; there are several other forms. What we have done is we have built electronic versions of all of these forms whereby it simplifies the process of filling out the application and also transferring the information to the appropriate investigative agencies.

The third element to this is to develop the specifications, to image background investigation information, the paper files that are produced by the investigators to do the background investigation. So the three pieces of this were the Clearance Verification System, the automation of the forms -- it's called E-hyphen-Q-I-P or e-QIP -- and also the imaging standards to image background investigations.

So in effect, what we've done here is we have moved from a paper-driven security clearance process to an electronic process. A very significant act was the 2004 Intelligence Reform and Terrorism Prevention Act. Based upon the mandate of this very important act, and based upon the progress in e-government, we are now looking that 80 percent of all background checks will be finished within 90 days by the end of 2006. As I said earlier, at this point in time, OPM is doing 90 percent of all the federal government's personnel background investigations. At the present time, we're conducting over one million investigations a year.

Mr. Shaw: Norm, one aspect of the Human Resources Line of Business is skill development, employee skill development. Could you share an update on the E-Training Initiative and the usalearning.gov website?

Mr. Enger: Essentially what this was to accomplish was to build a web-based learning site where people could obtain from the Internet, from a website, courses, books, mentoring, the various things required to develop competencies and skills. We launched, in July of 2002, a very, very simple site. It was extremely basic; at that time, Mark Forman was in charge of e-gov -- now it's Karen Evans. Mark Forman was there, and in effect, we launched the site. We had a handful of courses, maybe 30 or 40 courses; we had a handful of books. It was a very, very humble beginning.

Since July of 2002, it's really grown very, very rapidly. We now have four providers of web-based training services under the E-Training Initiative. We have golearn.gov, which is operated by OPM, which is the site that I mentioned that we brought up in July 2002. We have FasTrac, F-A-S-T-R-A-C, a site operated by NSA. We have a site operated by Department of Commerce, NTIS. And our newest web provider is Department of State, the Federal Service Institute. They all are working with us under the E-Training Initiative, and we have, in effect, an advisory council that works with all of these providers.

And what's happened is now we have 1.3 million registered federal people using the courses and materials under the E-Training websites. These courses -- we now have thousands of courses, not 30 courses, but thousands -- we have hundreds of books, we have collaboration on the site, we have mentoring. The site keeps on getting richer and richer, and it's become a primary vehicle to educate and help the federal workforce build knowledge, skills, and also competencies. The site keeps on expanding in terms of what it's offering.

A very significant aspect now is we're moving into career planning or pathing on the site. We worked with the Chief Information Officer Council and we developed, basically, a career path for people in information technology. We mapped out what they should know from an entry-level position in IT to becoming a chief information officer. A person can go into this site and see at every step in their career in IT what they should know in terms of knowledge areas, skills, abilities, and they're able to, in effect, plan a curriculum and using our USALearning, they're able to, in effect, start taking courses, and the site will help them to track their training and their curriculum. So, in effect, you've moved now from just having courses and materials to actually helping people move forward in a well-defined career. This really is improving competencies. We plan to follow this model of building competencies. We're now working with the HR community, the acquisition community, and the financial community to, in effect, add to this web-based training, career pathing, or planning facilities similar to what we did with the IT community.

Let me also add that we have established a council. It's called the Learning and Development Advisory Council. Now, we have 23 agencies, and we have these four service providers all working with us on this council, which, in effect, as a government, is looking together, saying, how can we better use web-based training to improve and help the federal workforce. This ties very, very much into the whole move to pay-for-performance because you have to have people properly trained to do their job in order to be able to have them able to give the results you want, which ties to their performance on the job.

Mr. Morales: How is OPM supporting electronic payroll? We will ask HR Line of Business director Norm Enger to explain this to us when the conversation about management continues on The Business of Government Hour.

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with HR Line of Business director Norm Enger. And joining us in our conversation is Don Shaw.

Mr. Enger: When I joined the government in 2002, I learned that there were 26 agencies paying the 1.8 million federal employees. Coming from the private sector, where efficiency is very important, I was wondering why do you have 26 places paying the federal workforce. It turns out that the same question was asked many, many times by OMB and other parts of the federal government, and in effect, this initiative was to consolidate and standardize civilian payroll processing. What happened is, starting in 2002, we've moved forward, and what we have done is we have gone through a process in establishing 4 of the 26 agencies to be payroll providers, and we are finishing now the consolidation of civilian payroll into those four providers' sites. The four are the National Finance Center, which is part of Agriculture. It's based in New Orleans. You have the National Business Center, which is part of Interior, based in Denver. You have GSA, which is based in Kansas City. And you have, of course, you have DoD, something called Defense Finance Accounting System of services, payroll also.

Now, where we are in this process is we now are 85 percent complete. We now have 1.5 million of the 1.8 million people in the workforce being serviced by these four payroll providers. I think this is a very, very great success in e-government. We've done this in a relatively short space of time, and we've had no significant problems in terms of somebody getting the wrong paycheck or whatever.

Let me also add that one of our sites, the National Finance Center in New Orleans, they actually were shut down, essentially, during Katrina. They were able, through their planning, to be able to operate at other locations. They were able to continue processing pay for roughly 600,000 federal employees, which I think is a real tribute to how robust and how well this E-Payroll Initiative has progressed. From my point of view, the great success of E-Payroll, which has saved large sums of money and led to a more standard and more coherent civilian payroll system, really was one of the main reasons why the government thought of the Lines of Business. A major part of the Lines of Business is moving away from stovepipe installations, moving to more sharing and, in effect, offering modern, robust solutions at these service centers.

Mr. Morales: We know that OPM, GAO, and the OMB are encouraging the link between employee performance, organizational outcome, and pay. How is your office supporting the development of performance-based organizations?

Mr. Enger: Part of the Human Resources Line of Business, we have a task force of 24 agencies that meets every month to talk about direction, progress, for the Line of Business. But in addition to which, we've established something called the requirements board. This requirements board consists of OPM management, but also we have on the board, for example, we have Defense, Homeland Security, and other parts of the civilian workforce. They are looking at the legislation and requirements that drive information systems.

One of the main areas here is compensation management, which deals with payroll and also the various HR systems. What's happening is that they are developing the requirements which, in effect, become the IT structures, if you will, that will be running at the Federal Service Centers. What I'm saying here is that we now are, through the HR Line of Business, we're putting in place the infrastructure, we're putting in place the data centers or the service centers, and also we're putting in place the requirements for the new personnel payroll systems that'll run at those centers. And all of that supports the new pay-for-performance systems, which are now being implemented at DoD, the National Security Personnel System, and you have a new system at DHS -- Homeland Security -- MAX HR, and they're also talking about a new system for the rest of the civilian workforce in the Working for America Act.

In addition, I said earlier that many aspects of my early initiatives, like the E-Training and such, are really key to building competencies necessary for the workforce to perform properly.

Mr. Shaw: Norm, we've been discussing the coming wave of Lines of Business: Human Resources, Financial Management and Grants, and Information Security. We understand that agencies are planning centralized service providers for these functions. What role does your office have in supporting Human Resources shared service centers?

Mr. Enger: When the business case for the HR Line of Business was finished by our task force in 2004 and delivered to OMB, there were essentially two main recommendations in the business case, one of which was the government should move toward establishing shared service centers that would offer quality modern systems to support HR professionals that manage the civilian workforce.

The second major thrust was there should be more standardization -- where it makes sense -- in the HR business processes. What happened is that in roughly September of 2004, OMB asked agencies who would like to volunteer to be a federal shared service center, as we call it in the HR Line of Business -- namely a provider of these services. At that time, five federal agencies submitted proposals to be these centers. There was a proposal from Defense, a proposal from Agriculture -- the National Finance Center, a proposal from Interior -- the National Business Center, a proposal from Health and Human Services, and a proposal from Treasury. OMB reviewed these five proposals and in February of last year, they announced that from their point of view, from a budgetary and managerial point of view, they passed the OMB review. They were called candidates.

At that point in time, the proposals were turned over to OPM and the HR Line of Business, and we formed a number of panels, a technical and also an advisory board, and we spent many months analyzing these five proposals. We asked for more information from these five proposed providers, we met with them, et cetera. In September of 2005, the director of OPM, Linda Springer, and OMB announced that these had also passed the criteria, if you will, to be certified by OPM. So, in effect, as of September of 2005, you had five established, certified, federal shared service centers. And right now, these centers are in business to, in effect, offer agencies solutions, and they're following all the guidelines of the HR Line of Business, and they're also taking and looking at and moving toward meeting the requirements that we're publishing all the time relative to what they should be offering in terms of modernizing the IT systems that support the federal government.

Let me also add that beyond the IT services, they can offer other services also, but essentially, we're looking at moving routine, back-office type of work from the agencies to these centers.

Mr. Shaw: We understand the Human Resources Line of Business is a significant collaborative effort across multiple agencies. How would you characterize this collaboration, and what lessons learned can you share with us?

Mr. Enger: Well, we established the HRLOB task force in March of 2004, and it meets every month. And the task force is very, very active. We have very, very strong participation. The task force, of course, developed the business case for the line of business, the task force reviews all of the requirements we're putting out in terms of what should be offered at our shared service centers. And what we have now, we have established -- I think there are four poles to the HR Line of Business. One is we have the governance structure, which is the task force of 24 agencies with many, many sub-working groups. We also have established a shared service center advisory council, which consists of the four new HR service providers. And on the same council we also have the earlier four payroll providers, so there are nine components there. Then we also have as part of the task force, we have a group of 11 agencies that represent the voice of the customer.

So we have now the governance structure. We have the voice of the customer, which is a part of my task force, to speak for what the customers want, and they'll develop service-level agreements and performance metrics whereby they'll say what they want from the service centers. Then we have the voice of the service centers, or providers, which is this advisory council I mentioned before. And the last piece, the fourth piece, is we're publishing and making available to both the private sector and the federal government what we want in terms of the modern business systems. We're defining exactly what those systems should do and how they should operate and what their functionality should be. So we're actually telling the private sector and these centers, here's what those systems should do in terms of responsiveness, functionality, and also, you know, various performance criteria. So those are the four poles, if you will, of the HRLOB.

Now, to answer your question, though, what I've learned from this is that you can never do too much communication. You really have to outreach as much as possible to, in effect, make people understand what you're doing and why you're doing it. I've learned, if you will -- it's reinforced what I guess I understood earlier -- that you've got to make an effort, go out to meet whoever wants to meet with you in Congress or an agency, who wants to know more about what you're doing and why you're doing it, and make the presentations. And in that way you build the support which is really critical to moving ahead with these initiatives.

Mr. Shaw: Norm, can you briefly describe the technology that will support the HR Line of Business solution? Are you planning COTS software, or will custom software development be required?

Mr. Enger: Well, essentially, the federal government very much wants to learn and use the private sector as much as possible. There's a real movement away from the federal government building its own systems. So a major thrust here will be to, as much as possible, use commercial off-the-shelf software. Wherever possible, turn to the private sector, bring in their commercial software, and contract with them to, in effect, use that software and benefit from all the evolving technology they've put into that software. A major thrust also is to use the private sector wherever it makes sense, and contract out where it makes sense, and then, in terms of technology, it's really no different from what the private sector is facing in moving toward XML, Java, moving more and more toward Internet-based systems, moving away from the client server toward the Internet-hosted and -based systems. In terms of technology, it's really the exact same technology any large American corporation would be looking at and assessing at this point in time.

Mr. Morales: What does the future hold for the HR Line of Business? We will ask OPM director Norm Enger to discuss this with us when the conversation about management continues on The Business of Government Hour.

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Norm Enger, HR Line of Business director at OPM. Also joining us in our conversation is Don Shaw.

Mr. Enger: I mentioned earlier that we now have in place five federal HR service centers. We anticipate that in fiscal '06 three agencies at least will migrate major HR functions to these Shared Service Centers. I anticipate that the numbers will accelerate in the next fiscal year, so we'll see over the course of the next year more and more of the back-office work moving from the agencies to these service providers. In the course of this year, we'll continue our meetings with the task force, we'll meet every month with these five providers -- we have a council of five providers -- we also will continue the work we're doing to, in effect, define the solutions that we want to run at these service centers.

I think that the work we've done in defining solutions is really key to the future because for the first time, the government is defining what do we want these federal HR systems to do, and these are coming out in published specifications available to the private sector so they can build systems that meet those requirements.

So we have a lot of activity this year to, in effect, move forward defining solutions, and I might add also in defining solutions, that we anticipate that at some point in time, we'll actually be able to certify solutions. So if a vendor says, I have a new HR system that does this and this, we'd be able to take that and match it to our requirements, and then if it passes the requirements testing, we could certify that as a certified federal HR system. And that, of course, would wind up running at one of our shared service centers.

Mr. Morales: Norm, we spent a fair amount of time talking about commercial best practices, and certainly, you have a perspective coming from the private sector. What emerging technologies hold the most promise for improving the federal management of human resources?

Mr. Enger: Well, from a technology point of view, I think we're looking at knowledge management being one broad area. I think open architectures being another one. Web-based services, XML -- I mentioned this before. I think that the technologies that let us integrate systems more and pass information more easily and seamlessly between systems, all of this -- which is really the keynote of the open architecture -- will let us have more flexibility in how these service centers operate, how they communicate with each other, and how they're able to add new functionality, in terms of new vendor software becomes available, and they can plug this in, if you will, and offer this to the federal agencies.

Mr. Shaw: Norm, if we can ask you to look into the future now, what types of human resources concerns will face the federal government in 10 years and then even further out in 25 years?

Mr. Enger: Well, the federal government, as Linda Springer, our director, has said several times now, we're facing the fact that roughly 60 percent of the federal workforce can retire within five years. So you're looking at a very large potential for retirement from a 1.8 million civilian workforce. This puts great pressure on the federal government to do succession planning -- namely to be training people, hiring people to replace these people who leave. Because they leave with many years of knowledge about certain activities and functions, so you have to have in place people who are able to understand that functionality and replace these people.

So we're looking at that, which ties into the very important task of attracting talented young people into the federal workforce. It's very key that we have the ability to attract these young people. One step forward has been this usajobs site that I mentioned. We have to make the federal government more attractive to young college graduates and people looking for long-term careers. The federal government right now has an aging population and in effect, we now really need some new blood and quality -- talented young blood to enter our federal workforce.

Looking forward, we're looking at a more diverse population, a more diverse federal workforce which reflects the American population. The federal government tries to, in effect, represent the U.S. population, which is becoming more diverse. I think we're talking about what I call a blended federal workforce. We find that, in reality, most of your major operations or programs are a blend of both federal people and contractor. We're looking at a realization that we can't just look at a federal workforce, but we have to realize that it's a federal workforce totally supported by a competent private-sector workforce. So you really have to look at the whole picture -- the blended workforce is what I call it. I think this requires a little bit of assessment as to the best way to deal with the blended workforce.

The other issues, I think, are more general, like globalization. You know, there are jobs going overseas, software is being built in India and elsewhere. This does have some impact upon the long-term view we have as to what we're doing in the federal sector.

Mr. Shaw: How will OPM need to evolve to respond to these significant challenges in the future, Norm?

Mr. Enger: Well, the OPM, as I mentioned earlier, is really the guardian of the civilian workforce. Essentially, OPM has as a goal to have agencies adopt human resource systems that allow them to build a competent workforce. A second goal of OPM is to create a work environment so that people want to stay with the federal government or join the federal government. So OPM puts in place the policies, the guidance, to agencies that lets them establish this positive work environment so people can, in effect, do their job properly and, in effect, be results-oriented.

And the third part of OPM's goal here is to deliver services that are both efficient and quality. OPM has major, major roles in benefits, retirement systems, health benefit systems, and also investigative service systems. So OPM wants to deliver its services to the U. S. public very effectively and efficiently and cost-effectively. And also to pass on this view to the agencies that in turn have to service or are servicing both U.S. public and the civilian workforce.

Mr. Morales: Norm, on this theme of guidance, you spent most of your career in the private sector. But you've obviously successfully transferred to public service. What advice could you give a person who's interested in a career in public service?

Mr. Enger: Well, I think we have a significant situation now in terms of the federal government wants to be more like the private sector where it makes sense. The whole idea of pay-for-performance whereby every year you put in place a plan which specifies your goals for the year and ways to measure your achievement of those goals, this is very much a private-sector mentality. I think this will attract many young people who are looking for challenges, who are looking for accomplishments. The federal government offers individuals a chance to work on systems and projects that are much larger than most private companies can offer. I mean, you're talking about systems that affect millions of people, that involve billions of dollars in many cases, and the scale here is quite attractive, I think, to many young professionals coming out of college.

This is a good time for a person to join the federal government. Hopefully our usajobs website has been able to show people some of the benefits of working for agencies and working for the federal government. We have, on usajobs, numerous aids to help people who might have interest in the environment, interest in law enforcement, intelligence, military, whatever -- there are numerous guides on the site that let a person put in their desires, what they'd like to see in the job that'll guide them to what jobs are available in the federal sector. I encourage young people to go to this site and explore the site.

We also have on the site a special area for student jobs. In effect, someone who wants to work part time for the government can go to Student Jobs and find these part-time jobs. We also have something called a Presidential Management Fellows Program, designed to attract young people into the federal service, a special program to motivate and incentivize these young people.

So in summary, I think that this is a very, very good time for a young person looking for a positive career to consider federal service.

Mr. Morales: That's great advice. Norm, we've unfortunately run out of time, and that'll have to be our last question. First, I want to thank you for fitting us into your busy schedule today. Second, Don and I would like to thank you for your dedicated service to the public and our country in the various roles you've held at the Office of Personnel Management and in the information technology industry.

Mr. Enger: Yeah, I would suggest that people go to the opm.gov website. There's much more information about the Line of Business at the site. And also I mentioned the usajobs.gov website where a person can locate and apply for a federal job. Thank you very much.

Mr. Morales: This has been The Business of Government Hour featuring a conversation with Norm Enger, director of the Office of HR Line of Business at the Office of Personnel Management. Be sure to visit us on the web at businessofgovernment.org. There you can learn more about our programs and get a transcript of today's conversation. Once again, that's businessofgovernment.org.

Thursday, March 11, 2004

Arlington, Virginia

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

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Norm Enger, E-government program director in the Office of Personnel Management.

Good morning, Norm.

Mr. Enger: Good morning.

Mr. Lawrence: And joining us in our conversation is Tom Romeo, also from IBM.

Good morning, Tom.

Mr. Romeo: Good morning.

Mr. Lawrence: Well, Norm, let’s start by sort of focusing on the mission and the activities of OPM. Could you describe for our listeners what OPM does?

Mr. Enger: The main job of OPM is to build a high-quality and diverse federal workforce based on merit system principles. To do this, OPM works with the President, the Congress, departments, and agencies to help them to develop and implement good human capital policies that in turn let the agencies meet their strategic objectives. OPM is essentially a consulting organization that guides the federal government, the civilian sector, to improve how it works with, manages, and guides development of human capital.

Mr. Lawrence: So you would characterize the relationship between OPM -- you use the word “guide.” What’s the relationship between OPM and, say, the rest of the federal government? How would you describe that?

Mr. Enger: Well, the OPM has the mandate, if you will, to give policy guidance to the civilian sector of the government, the human capital officers throughout the civilian sector, to properly manage their personnel and payroll systems, and all the systems that deal with the federal employee.

Mr. Romeo: Can you tell us a little bit about your role as the E-government program director for OPM?

Mr. Enger: My role is the E-gov program director, and the OPM received five of the 24 original E gov initiatives. The five E-gov initiatives, which we’ll talk about shortly, deal with human capital. The mandate of E-government is to transform government business systems. Therefore, in this context, the OPM initiatives seek to transform the human resource, the human capital systems, in the federal agencies. What is interesting in this context is that OPM, I believe, has been successful in this mission because we are the second agency to achieve green status, which is given by OMB to agencies that meet all of their criteria and milestones for E-government. So right now, we have just achieved green status in E-government.

Let me also add that E-government is a little bit unique in the sense that what we’re talking about is not minor Band-Aid changes to systems; we’re looking at transformational change, which means major, radical change to how the government does business. What’s also very relevant here is we’re talking about change in a very short space of time. E-gov has objectives to transform systems within 18 to 24 months. We wind up with a very, very ambitious schedule to accomplish these things.

I work very closely with the director of OPM, Kay Coles James, the OPM officials, and the agencies to, in effect, put into place and implement the vision of E-government. I also, of course, work closely with the CIO of OPM, because we have to work within the infrastructure developed by the OPM’s CIO.

Mr. Romeo: I know in other agencies, there are also E-government lead positions. Can you talk a little bit about some of those positions and the advantages of having such a role?

Mr. Enger: Well, there were, as I said before, 24 E-gov initiatives. Every agency that has an E gov initiative has assigned a project manager for the initiative. This is because of what I said earlier; namely, you’re looking a radical change in a very, very short space of time, 18 to 24 months. Therefore, to accomplish that, each of the 24 initiatives has a project manager, and each agency that is a managing partner, such as OPM, has assigned a manager for that purpose. These are really government-wide in scope, so just because an agency has an initiative, it means, in effect, the agency is responsible for working across the government to provide a government-wide solution. The perception here is not agency-centric, but government-wide. So as we’ll talk about in a few minutes here, what we have developed from OPM are used throughout the federal government, not just by OPM.

Mr. Romeo: Thanks, Norm. How many employees would you say work for the E government program at OPM, and what kind of skill sets do they have?

Mr. Enger: I have approximately 60 individuals working for me in the OPM E-gov program. These 60 individuals are a combination of full-time OPM personnel and contractors and detailees. The E-gov initiatives really require quite a spectrum of skills. We have IT specialists, human resource specialists, risk management specialists; a wide range, security specialists, privacy specialists. We really wind up with a mosaic and quite a spectrum of people required to effectively design, develop, and implement that E-gov initiative.

Mr. Romeo: Can you tell me a little bit about your career prior to joining OPM, and what type of skills do you think best prepared you for the E-gov program lead at OPM?

Mr. Enger: Well, my background has essentially been private sector. I ran my own computer system integration firm for many, many years, for over 20 years, providing basically systems and E-commerce solutions to federal and commercial clients. My firm was acquired about four or five years ago by Computer Associates, a very large system software and business software firm. And I therefore wound up running a smaller firm and then working as a vice president for a very large firm.

And then what happened is that approximately two years ago, I got a call from the chief of staff of OPM, asking me to come down and talk to them. I was quite unprepared for this. I went down, and essentially, the chief of staff and director asked me if I would be interested in public service. And I’d always had some interest in this, but never really focused upon where I would do public service. I met and talked to the chief of staff and the director, and was very impressed by their vision and their dedication to transforming federal systems, and I was asked to interview for the position. I interviewed, among other people, and I was selected to become the OPM E-gov program manager.

I must say that my prior many, many years in the business, and especially my private sector background with IT, information systems, for many, many years prepared me very, very well for the current position.

Mr. Lawrence: When you think about your days in the private sector, how would you compare the management styles used in the private sector versus the public sector?

Mr. Enger: Well, I was a bit surprised that in reality, the difference is not that dramatic. The senior executives in the federal sector are judged upon such qualifications as leading change, leading people, results-driven, business acumen, building coalitions. Well, these are very, very much the same criteria used to judge successful managers in the private sector. What has happened is that the government is more and more looking to the private sector for metrics and ways to improve its operations. I see more and more the transfer of solutions, metrics, and ideas from the private sector into the federal government. So therefore, in that sense, I don’t think at this point in time, you’re talking about a dramatic difference in the criteria or the mode of operation of successful federal people or private sector individuals.

Let me also mention that I was very, very pleasantly surprised to find when I joined the government that I had five project managers that were very, very talented. I was very impressed by the caliber of the people I had to work with, working for me. And I remain very, very impressed by the dedication and the hard work and the results of the people working for me in the federal sector.

Mr. Lawrence: Let me ask the question again, only this time focusing in on your technical skills, because you describe your experiences of leading technology organizations. How about comparing potential differences between creating technology solutions in the public sector as opposed to or compared to creating them in the private sector?

Mr. Enger: I don’t see a fundamental difference in the process of creating technology solutions in the public versus the private sector. In general, the private sector, though, is where you have the great breakthroughs in IT technology in terms of new software solutions, new hardware solutions, new communications solutions. So in general, the private sector is the leading edge, and the cauldron, in effect, where you have most of the breakthroughs in technology.

One goal of E-government is to look for the best solutions, whether they be public or private, and then implement the best solutions. What we do is we look carefully at a solution to a business problem in the government, and also outside. We do studies and then a cost/benefit analysis and then we determine where is the best solution, federal or private sector?

Let me add that my E-gov initiatives have very, very much used the private sector. We’ve outsourced a number of operations to the private sector. We’ll talk some more about this when we discuss USAJOBS E-training. But in effect, we have, under my five initiatives, used off-the-shelf commercial software and we’ve outsourced several operations from the public to the private sector.

Mr. Lawrence: That’s an interesting point, especially about the cost comparison.

What is golearn.gov and why was OPM recognized for this work? We’ll ask Norm Enger of OPM to tell us more about this when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence, and this morning’s conversation is with Norm Enger. Norm’s the E-government program director in the Office of Personnel Management.

And joining us in our conversation is Tom Romeo.

Well, Norm, could you describe the E-government vision and how the six OPM E government initiatives relate to the employment life cycle?

Mr. Enger: Well, what we have done is we took the five original E-gov initiatives, and the five which we can talk in more detail deal with recruitment of federal people, training federal people, their personnel systems, their payroll systems, their security clearance systems. The original five deal with those five discrete areas. And if we think about it, that frames the employee life cycle from recruitment and eventually into retirement. I should add also, our systems feed into the retirement system, which is managed and run by OPM. So we were able to effectively communicate a vision of the employee life cycle to the agencies and to the human resource people in the federal sector.

This is very important, because one of the difficulties IT people have is we talk in acronyms and jargon, and very often, we lose the audience for our vision. By framing the OPM initiatives into an employee life cycle, we’ve been able to very effectively convey what we’re trying to accomplish to the human resource officers in the federal sector.

We also have a sixth initiative, and that is called HRIS, Human Resource Information Systems. What that really is is going into a phase two, if I can use that term, of E-government, and that really now is looking at an enterprise solution for the entire human resource piece of the federal line of business. We’ll talk about that a bit more later.

Mr. Romeo: Let’s talk about the six initiatives in more detail. Since recruitment is at the beginning of the employment life cycle, can you describe the recruitment one-stop online service?

Mr. Enger: The recruitment one-stop initiative basically has a role or a mission to help the citizen find federal jobs. We want to simplify the process of locating and applying for federal jobs. When I came on board about two years ago, the OPM ran an old legacy system site called USAJOBS. The initiative has completely replaced and transformed that site. In August of last year, we brought up a brand-new actually outsourced site, using commercial off-the-shelf software; radically changed the old site. We actually shut down the old site.

I might add that this took place in August, August 4th, I believe, of last year. And I was apprehensive, because shutting down a complete site and then going live with a new one, there is some risk there. We shut down the old site on a Friday, went live on a Monday morning. And to my great surprise, on the Friday before, on the old site, we had 20,000 people a day on the site; on Monday, we had 200,000 people on the site. We increased the volume tenfold over that weekend from the old to the new site. I must say, to my great happiness and satisfaction, there wasn’t a glitch at all. The site went fully operational, and it’s simply grown in utilization. We now have 60 million citizens a year go to our USAJOBS site to locate federal jobs, put in résumés, and also to look and see what’s available relative to positions in the federal sector.

This has really improved the hiring process, because one of the real passions of Director Kay Coles James is to fix the federal hiring process. And what we’re doing here is we have replaced an old site with a brand-new site where a citizen can go, see what jobs are available, they can build a résumé. They actually now are able to track the application they file. They can see the status of the application.

We also have on the site here, we have all kinds of guides relative to helping them to determine what jobs they might be suitable for, help them with their career pathing. So in effect, we’ve gone and replaced an old legacy system with a very, very user-friendly, vibrant, and very successful new job site called USAJOBS. This site also is used by the agencies to -- we call it data mining. They can go in there and search for candidates for positions, and in effect, use that as a database, if you will, to see who’s applied for federal jobs.

Mr. Lawrence: Okay. So we just described the process of recruiting and hiring. So now once hired, a government employee is encouraged to build skills across a variety of subjects. And as I understand it, in 2003, OPM received a Distinguished Technology Leadership Award for the successful implementation of golearn.gov. Could you tell us what makes this a successful and innovative site?

Mr. Enger: Well, the concept behind the E-training initiative, and the website is golearn.gov, was to provide to the federal employee one-stop shopping for high-quality learning resources. Going back historically, in July of 2002, we launched a relatively humble site. I was standing with Mark Forman, and Director Kay Coles James gave the introductory remarks and we launched this site, which had at that time roughly 30 or 40 online courses, web-based courses. Since July of 2002, we have improved the site and it has evolved. So from a humble beginning, we now have well over 3,000 courses on the site. We have hundreds of E-books. As of last year, we had 30 agencies using this for their primary training. By the end of this year, we’ll have 60 agencies. It’s become a primary site for quality online web-based training for federal people.

The site itself is a -- it’s a virtual building with floors. And people can, in effect, go into classrooms and look at and take any one of these 3,000 courses. We have hundreds of books of all types, both technology and management and career-building and ethics, on the site. We have mentoring. People can have mentors help them to answer questions they have about either technology or about careers or whatever. We have resource centers that tie them to dictionaries, encyclopedias, libraries, et cetera. We now have over 1 million people a year actually come to this site and use this site. And actually, to my great surprise, the utilization is half civilian and half military. The site is running 24 by 7; it’s available full-time, 7 days a week. It’s used by federal people on every continent in the world.

And we have received numerous awards for this site. We received a very prestigious Gracie Award this year from our peers in the private and federal sector. So we’re very proud to, in effect, have a site which is delivering to the federal workforce an easy-to-use, available way to have continuous learning, to let the federal people continuously improve their job skills and make learning a process that is not difficult to reach, but becomes a part of their normal job pattern, per se.

Mr. Romeo: Norm, providing security clearances to federal civilian workers can be a very lengthy process, especially given the heightened importance of background checks since the September 11th incident. How does the government’s E-clearance initiative facilitate the security clearance process?

Mr. Enger: Well, this initiative, E-clearance, essentially wants to speed up and also improve the process whereby one gets a security clearance. When I first came on board two years ago, to my surprise, there was no central system whereby an authorized person could check security clearances across the government. What we did is, we at OPM, through this initiative, gathered into a warehouse all of the clearance information held by individual civilian agencies. We built this warehouse, and then in January of 2003, we linked this warehouse to a DoD system, called Joint Personal Adjudication System.

And the system I’m talking about, we call it the clearance verification system, CVS. And for the first time ever, you had a system which let a person who’s authorized inquire across the entire civilian and military sector for the status of somebody’s clearance. This system we built will hold 98 percent of all active clearances. To our great satisfaction, it was used by the new Department of Homeland Security last year to stand up and become operational. It used this system to do the background checks of the employees coming into that department from 22 different organizations. Roughly 160,000 employees were actually checked with this system.

A second part is moving all of the paper and forms for a clearance. For example, one form is the SF-86 you fill out. It’s a 13-page paper form to request a security clearance. We’ve made this electronic, and we’re making all the forms that people use for clearances electronic. By doing this, we’re moving from a paper system to an electronic system, and this cuts down the time it takes to get a security clearance, the time it takes to move information around, and in effect, the basic goal of E-clearance is to speed up and also to improve the whole process of security clearances.

Mr. Lawrence: This is a fascinating conversation of the life cycle, but we’ve got to go to a break.

Rejoin us in a few minutes as we continue our conversation with Norm Enger of OPM. This is The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence, and this morning’s conversation is with Norm Enger, the E-government program director at the Office of Personnel Management.

And joining us in our conversation is Tom Romeo.

Well, Norm, we can’t talk about the employment life cycle without discussing one of the most important parts of employment, to the employees that is, the receiving of a paycheck, and that it’s current and consistent and timely. How does the E-payroll initiative help facilitate the government to do this in the most cost-effective manner?

Mr. Enger: Well, two years ago, when I took this position, to my great surprise, there were 26 agencies processing payroll for the 1.8 million civilian employees. I scratched my head, saying why are there 26 places paying these employees? The initiative essentially is to standardize and to consolidate civilian payroll processing. What we are doing is essentially we are consolidating civilian payroll processing from 26 down to basically two partnerships. We are collapsing from 26 down to two partnerships comprising four agencies, and eventually down just to two centers, if you will, that process civilian payroll. In the process, we’ll standardize payroll, but also, I might add, by shutting down these redundant operations, we’ll save the government, over a 10-year period, $1.1 billion. So in effect, we also don’t just achieve efficiency, but we also achieve significant cost savings by these initiatives. I might add that our partners here, the agencies that are in effect comprising the partnerships are Agriculture, Interior, Defense, and GSA.

Mr. Romeo: Norm, can you describe the vision, goals, and benefits of the Enterprise Human Resources Integration initiative? What is the EHRI’s relationship to the other E-gov initiatives?

Mr. Enger: Well, essentially, this initiative, EHRI, has several goals. Again, going back several years, I was quite surprised to realize that, from my point of view anyway, there really wasn’t a very rich corporate database on the civilian workforce. One part of EHRI, one goal is to build a corporate database or warehouse of real accurate information about the 1.8 million people in the civilian workforce.

Last September, September 2003, we actually brought up this new operation, this new website used by federal people. And what we have now is a richer and richer repository, describing in more and more detail the skills, the abilities, et cetera, of the 1.8 million civilian people. This is used for all kinds of workforce analysis, planning. We can look in there and determine retirement rates; we can do studies of age, sex, ethnic backgrounds, et cetera. So what we’ve done here is establish a corporate warehouse.

A second role of EHRI is to move away from paper personnel form. We call it the EOPF, Electronic Official Personnel Folder. What we’re doing is we’re leading the government in terms of showing the government how to get away from those voluminous and bulky personnel folders and move toward an electronic personnel record for the employee. Eventually when a person joins the government, there’ll be an electronic record created for them, a personnel record, and that will follow them through their federal career. So a second part of this is to, in effect, move toward an electronic personnel system.

To answer your question about its relationship, this initiative is defining all of the data elements that pertain to federal human resources and payroll. We have defined over 800 data elements that really comprise the standardization, if you will, of the information that is used in the federal personnel and payroll systems, and this also are the standards being followed by my other initiatives.

Mr. Lawrence: Norm, you’ve described the scenario where Executive Branch agencies may potentially invest in duplicative human resource information systems that perform core personnel transaction processing. For those of us who aren’t HR professionals, could you describe what a core personnel transaction process is? And then I’m curious, with this consolidation, you know, how you thought about, you know, the effect standardization will have on the government and others involved in the HR area.

Mr. Enger: The core personnel transaction processing is really the processing that updates the employee personnel record, the actions that update that record. This is called in the federal government the SF-5052 processing. This initiative, the HRIS, essentially is now moving toward an enterprise view of the human resource line of business.

Let me address it this way. We proved that the government could be transformed in a very short space of time. I think the original E-gov initiatives, the 24, have shown that there can be rapid change in the federal government. You can implement solutions in a very short timeframe. You can show tangible results, either dollar-wise or utilization. So in effect, this is really building upon the initial 24 and our five, I should say. And now we’re saying let’s look not just at those five points, if you will: training, recruitment -- look at the entire business itself of human capital in the federal government.

This HRIS is really using something that OMB has really pioneered called the Federal Enterprise Architecture. What that really says is that the OMB FEA is looking at the government as a business, just as you would look at a commercial private business, and what it’s done, looked at it across all of its operations and then defined lines of business: one being financial management, another one being human capital. And what we’re doing is we’re looking at the entire human capital line of business, what people do in the government relative to people and payroll. And what we’re doing is we are, within that context, looking at all the operations, all the business functions there. And now we’re looking to improve across the board, where we can, with better solutions and making the government more efficient and also to, in effect, improve how human capital operates in the federal sector.

Mr. Romeo: Norm, you just talked about the business processes and how they go across the federal government. All of the E-gov initiatives involve coordination of IT systems across the federal government, also. How is OPM working with other federal agencies to accomplish the goals of the different E-gov initiatives?

Mr. Enger: The agencies are right now all signing agreements to use wherever possible the 24 original E-gov initiatives. For example, we are on the Steering Committee, and we’re using E-authentication; another initiative. E-authentication essentially is used to credential or to identify who is on a terminal. That’s fundamental to all of E-gov, because E-gov depends on the Internet, on web-based services. So for example, in this one case, we’re on the Steering Committee and we plan to use the initiative.

The same thing goes with other initiatives. We’re using USA Services, an E-gov initiative, which provides help desk services to operations. So what’s happening here is that all agencies, including OPM, wherever possible, are incorporating and using other E-gov initiatives.

Mr. Lawrence: How much funding has been allocated to the E-gov initiatives?

Mr. Enger: Well, the OPM funding in 2004, we received approximately $10.8 million in appropriation. We also have fee-for-service operations for E-training and recruitment one-stop. So in effect, we have a combination of appropriations, and also, we have fee-for-service operations.

Mr. Romeo: What other critical success factors besides funding are needed to make these initiatives a success?

Mr. Enger: Well, when you have these initiatives, you obviously want agencies to shut down redundant systems and migrate to your initiative. Well, what happens here is you have to give tangible evidence that you have a solution. I think that a critical success factor is not just to say I have achieved success at E-training or USAJOBS or E-clearance, but you have to demonstrate and have a tangible, kick-the-tires proof that you have a solution. So step one in terms of a critical factor is you’ve got to be able to demonstrate a viable robust solution before people will shut down their old or redundant systems.

Another very important factor here is agency participation in the initiative. It’s very, very important that you outreach, that you work with agency partners. You go out and, in effect, you sell, you show what you’ve done and get buy-in from people that you’re asking to migrate to the initiative. So I think these two things: one, really have a solution, not smoke; and also to go out and really build up coalitions of support so people will use and migrate to your solution.

Mr. Lawrence: We left the conversation about E-payroll and the human resource information systems. The one thing I meant to ask was what’s the timetable for their implementation?

Mr. Enger: Well, for example, E-payroll, we have a target of September 2004, this year, for many of the migrations to be finished. We have at this point all of the agencies lined up for migrations, and we will pretty much meet the target of September 2004 for migrations.

Let me also add that in general, the plan of E-government is that by September 2004, the initiatives will graduate. And what that means, they’ll be operational. They’ll have achieved what the original goal was, is that from two years ago, the start, until September 2004, we have actually gone from concept to real operations. So the answer to you with E-payroll is, our target is September 2004, to, in effect, have finished many, many of the migrations.

The other one, HRIS, that you mentioned, this is really starting now. It’s a newer initiative, called a line of business initiative. And in fact, a task force for this is being formed for this as we speak, and I believe OMB and OPM will have an event on March 18th, this month, to announce the formation of this task force. And again, the task force and initiative, they’ll address enterprise solutions for the human capital line of business.

Mr. Lawrence: That’s interesting. It sounds like 2004 will be a busy year.

What’s the future of E-government? We’ll ask Norm Enger of OPM for this thoughts and perspectives when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence, and this morning’s conversation is with Norm Enger, E-government program director at the Office of Personnel Management.

And joining us in our conversation is Tom Romeo.

Mr. Romeo: Norm, we’ve talked a lot about the current E-government initiatives. In your opinion, what others do you think the future will hold?

Mr. Enger: Well, the vision of E-government is a government that is citizen-centered, not bureaucracy- or agency-centered, results-oriented, and market-based. The goal of E-government is to provide one-stop online access to the citizen to information and services. Citizens should be able to find what they want quickly, in seconds; not in hours or whatever, or days. A good example of this, for example, is the FirstGov website, where a citizen can go to a site and from that one site, they’re tied to all federal agencies; they’re tied to a variety of resources relative to grants, to national parks, to employment opportunities. So what we’re looking for here is to use the web, the Internet, to provide the citizen with very rapid -- three clicks or whatever -- access to a wide variety of accurate information that in effect provides them with first-quality service.

Mr. Romeo: How do you envision the government will conduct transactions across other federal agencies and/or state and local governments?

Mr. Enger: Well, what’s happening is that some initiatives are in effect dealing with the federal, state, and local situation. For example, one Homeland Security initiative is a secure portal that will deal with disaster management; in effect, dealing with disaster management and public safety, E-government is in effect developing systems and communications that link together federal, state, and local governments into one context, into one response to a disaster or public safety challenge.

Mr. Lawrence: Norm, you’ve been working in the field of E-government now for some time. What advice would you have for future leaders in E-government on how to be successful in this field?

Mr. Enger: I would advise future leaders in E-government to be aware that major transformations in federal business systems requires a full recognition of the need to build coalitions of support in affected agencies. Change management is a major factor in the success of E-government. Future E-gov leaders should not focus on technology solutions without recognizing the other dimensions of change necessary for success.

Mr. Lawrence: And how about in terms of a person considering a career in public service? You’ve been in both sectors, and you moved into public service after a long career in the private sector. What advice would you give to somebody interested in joining public service?

Mr. Enger: Well, I think this is a very exciting and challenging time for a young person to join the federal government. Our government faces challenges, even though we are the world’s greatest economy and have the world’s greatest and strongest military force. What is very exciting, and I think E-gov has made this possible, is that we have shown that you can transform government operations in a very, very short space of time. We can show that government can, in effect, reach out and, in effect, become more efficient, more effective, more responsive to the citizen population in a short space of time.

My advice to a young person considering a public service career would be to go and look at the OPM USAJOBS website. The site is www.usajobs.opm.gov. On this website, the person can locate a vast array of educational and job opportunities, all kinds of internships, grants, and job situations. Young people will be able to use the site. They can also on the site develop a job résumé to apply for a federal job.

Let me also add, there is also a Presidential Management Fellow program designed to attract into federal service outstanding young men and women from a variety of disciplines. Again, if the person goes to our site, USAJOBS, they will find more information about this PMF, this fellowship program.

Mr. Lawrence: Well, Norm, that’s our last question. Tom and I want to thank you for joining us this morning and being our guest.

And would you like to tell the people the website one more time, in case they’re --

Mr. Enger: Yeah, the website I mentioned earlier was www.usajobs.opm.gov/; g-o-v.

Mr. Lawrence: Thank you very much.

This has been The Business of Government Hour, featuring a conversation with Norm Enger, E-government program director in the Office of Personnel Management.

Be sure and visit us on the web at businessofgovernment.org. 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 very interesting conversation. Once again, that’s businessofgovernment.org.

This is Paul Lawrence. Thank you for listening.

Arlington, Virginia

Tuesday, January 30, 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 www.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 Nolan, Deputy Postmaster General, and Chief Marketing Officer of the U.S. Postal Service. Welcome, John.

Mr. Nolan: Glad to be here.

Mr. Lawrence: And joining me in our conversation is another PwC partner, Nancy Staisey. Welcome, Nancy.

Ms. Staisey: Thank you, Paul.

Mr. Lawrence: John, in this first segment let's talk about your career. You began with the Postal Service in 1970. Could you tell us about the various positions you've held?

Mr. Nolan: Well, I actually started in the Postal Service as a management intern right out of college, and I did that for a short period of time and then moved into a program management position in Washington. And got involved in the start-up of our new bulk mail centers back then in the late-'70s, or mid-'70s, starting up these 33 centers.

I came back to Washington from New York where I had been starting up the first of those centers and worked in Washington for a while, and then moved back out to the region from our regional office in New York City and held a couple of positions before I became postmaster in New York City.

After 19 years I left the Postal Service and then went to work for Merrill Lynch for 11 years, and like a bad penny I'm back.

Ms. Staisey: John, you served as general manager and postmaster for the New York division, as you mentioned, which is the largest division not only in the Postal Service but also worldwide. What did you learn from that experience?

Mr. Nolan: Well, it was a great job. As postmaster in New York, you're the 800-pound gorilla, and so pretty much you had the opportunity to do what you wanted and people were just happy that you wanted to do it. If you were successful, they wanted you to keep being successful.

But I think the biggest thing in that job, you're really running a business. You really are. You have customers, you have a mission that you have to carry out every day. Constantly talking to your customers and communicating their needs aggressively within the organization I think was the most critical thing because if not for the customers, we don't have a reason for being in existence. So I think in an organization that large, 25,000 employees, and as many customers as we have, you can't overcommunicate. You've just got to constantly communicate.

Mr. Lawrence: You also mentioned that you worked for Merrill Lynch for 10 years after a long tenure with the Postal Service. How do you contrast your experience in the private sector with that in the public sector?

Mr. Nolan: Well, there's a much greater focus on money in the private sector, I'd say. We had one figure really that drove a lot of our behavior at Merrill Lynch, and that was turn on equity. We can't do that in the Postal Service. It's just a little bit more complex so in a sense it's easier in that sector, although Merrill Lynch is a very complex company.

I think our set of problems is very challenging because you not only worry about what a normal businessperson would do in such a situation like this, but what are the political implications because we're not just a regular business. But I think it's very similar in many ways. The business I was running was actually a related business for Merrill Lynch and so they had a lot of similarities. But I found the focus on profits, the overriding focus on money, to be a very all-encompassing one, and a very healthy one in many respects because it forced people to really think about the consequences of what they did in very clear monetary terms very day.

Ms. Staisey: How did your experience at Merrill Lynch prepare you for your present position?

Mr. Nolan: I think that there was a greater breadth at the way we looked at problems that I've got now. I had the postal experience, now I've got the Merrill Lynch experience. I've seen things from both sides. I think I understand better all sides of issues that typically come in front of us.

I was a customer, so I knew what it's like to be a customer at the Postal Service and the satisfactions and sometimes the frustrations in that regard dealing with a very large organization. I had an advantage because I knew about the inside of the Postal Service so that gave me some advantages. But I saw the way our people had to deal with the Postal Service, and I think it's enabled me as we get into discussions of key policies, programs, futures, et cetera, to stop and say, "well, wait a minute, what would I be thinking if I were sitting on the other side of the fence again," and I think that's certainly an advantage.

Mr. Lawrence: What is it about public service that attracts you?

Mr. Nolan: It's just a very challenging period. I was very fortunate in the years I was at Merrill Lynch financially, so I'm able to consider this again because the big drawback for me of course is financially doing this. But I've known Bill Henderson for 25 years, the prospect of working alongside of him and the rest of the management team is one that I thought would be interesting.

It certainly is a very challenging time in the history of the Postal Service. I think finally the one thing that got to me is that 20 years from now Bill said someone is going to write a book about the Postal Service, you need to be in that book, again, referencing the fact this is a particularly critical time. As soon as my wife heard me make that statement, she says, "oh no, you're taking the job."

So I think the challenge, the tremendous challenge, the sheer size and the importance of what we do is something that's pretty, especially, for someone like me, hard to overlook.

Ms. Staisey: Which positions or management challenges provided you the best opportunity to develop as a leader?

Mr. Nolan: I think that being postmaster of New York with 25,000 employees trying to change directions in what we were trying to do, dealing with the unions, the customers, the management groups, really helped me grow as a leader. I think that some of the -- or just before then my position as the regional director of customer services in the Northeast region of the Postal Service and had to deal with the entire regional area and, again, communication being key was one.

Frankly, at Merrill Lynch trying to build a company within a company that's not a mail business to try and figure out how do you get people whose main mission in life isn't what you're to accomplish, but for whom it's very important that we do well, how do you get them moving in that direction and getting people excited about this new company you want to form. I think all three of those things would be things I'd point to.

Mr. Lawrence: You mentioned communication, and I'm wondering about some other key characteristics of leadership.

Mr. Nolan: Well, I think leaders challenge limits. They challenge processes that exist to make sure that we are on the right track. I think leaders have to inspire a shared vision. I think that's a very important thing that just managers sometimes don't do, but that shared vision is very critical.

I think leaders find a way to enable others to do their best and to really serve as a role model to encourage the heart. It's not just the things that you do, but why you do them and to get enthusiastic about those.

I think leaders have a tremendous performance bias. It's not "let's sit down and think about it," it's "let's go, let's go, let's make something happen." So I think those are critical things for a leader.

Mr. Lawrence: How do you do that in such large organizations?

Mr. Nolan: In some ways, I don't know that the size is part of the problem I guess, but it's the bias within the organization. It's the way you structure things. It's the way you challenge people within an organization. Size can be a tremendous advantage because you've got tremendous resources to bring to bear on a given issue. So I think structure comes into play there and how people feel about what needs to be done.

I think the big thing is that you can't get into this mind-set that this is a big ocean liner and when you turn the wheel it takes all those analogies that you always hear. The fact is that you give an order and a whole lot of dust can start to move in one direction if you get people moving that way. So you can make some pretty big changes in a hurry if you're crystal clear about what you're doing and why you're doing it and you're able to communicate that.

Mr. Lawrence: Do you think the characteristics of leadership have changed over time?

Mr. Nolan: I don't know. I think that it may be that the need for increasing flexibility because of the speed at which change occurs is one that's risen to the top of the list of things that leaders have to be aware of and concerned about. So I think that flexibility, of all the things, I think that's probably one that leaders have to be conscious of.

Mr. Lawrence: We're talking with John Nolan of the U.S. Postal Service. 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 tonight's conversation is with John Nolan, Deputy Postmaster General, and chief marketing officer of the United States Postal Service. Joining me in our conversation is another PWC partner, Nancy Staisey.

Ms. Staisey: Thank you, Paul. John, as Deputy Postmaster General and as Chief Marketing Officer, what are your areas of responsibility?

Mr. Nolan: Well, there are several. First, I have the chief technology officer who reports to me, and obviously the marketing functions, everything from product development, to pricing. The sales organization is about to shift over to my area of responsibility.

The other area, which is new to the Postal Service, is an area called corporate and business development. We're really looking at more Internet/e-commerce related products and services and alliances and partnerships that we're going to see more and more of.

Mr. Lawrence: Throughout your tenure at the Postal Service you have stressed positive labor/management relationships, particularly in your work in New York City. How have you been able to improve labor/management relationships, and what lessons learned would you advise other managers?

Mr. Nolan: Again, I go in with a certain bias that people do want to do a good job. I mean, you always have the ÄÄÄÄ but you don't structure a whole approach to business for a few people, you do it for the large group.

I think honesty is very important. I mean, if you're going to do something, if you need to do something, you ought to be honest about it and get it on the table and discuss it. I think I try and work hard to understand the other's viewpoint to be direct about what my viewpoint is and to encourage them to see things from my side as well.

And don't give up on important goals. I mean, if the first time you get a "no" that you go off and pout, it doesn't accomplish very much. If people know what's important and you can get a way for people to work cooperatively to achieve a compatible end, I think that's important.

Ms. Staisey: As New York City postmaster, you also improved service and productivity. At the same time, you exceeded safety, performance, and budget goals. How did you do it? What were some of the keys to this success?

Mr. Nolan: Well, following a good management team didn't hurt. George Schuman who was postmaster in front of me, and Bill Dowling who was head of operations really did a great job. The team that I first inherited and then built were very good people.

I think one of the things we did is, we focused very heavily. I think we tried to focus on the customer to make sure that what we were doing made sense for the customer. We paid a lot of attention to that, as well as paying a lot of attention to detail. In our kind of business it's "what have you done for me lately," and it's sticking to the knitting every day and making sure you're doing the fundamentals right.

Then the other big thing as I mentioned before is communication. You just cannot overcommunicate to an organization as large as that.

Mr. Lawrence: What do you mean when you say you focus on the customer?

Mr. Nolan: A lot of times what we do is we say if we do our job right, then the customer benefits because obviously what we're doing is in the customer's best interest. That's an operations- centric look at this, and basically what we're doing may not be the right things for the customer, and what we've got to understand is what does the customer want.

It may be that they're using our products, but they're using our products in spite of the fact that the product is the way it is and they wish that something could be done slightly differently. What we've got to do is constantly look at what are our customers telling us, what do they want? Certainly if you make your budget goals and you make your service goals, in general that's got to be good for customers, but it may not be enough. So I think that's the big think that we tried to focus on.

Mr. Lawrence: How would you describe the challenges today from your current position in terms of improving service and productivity?

Mr. Nolan: Well, in our structure, the chief operating officer really handles the day-to-day operations of the company, but I think that working as part of the management team in a leadership role, we've got to make sure that we're challenging ourselves enough. If you set easy targets, you achieve easy things. If you set very tough targets, you sometimes find a way to achieve those tough targets.

So I think the challenge from our standpoint is to make sure that we understand what is it going to take to be competitive, to meet the needs of the marketplace, and then to try and exceed those and set tough targets. In some cases things that would seem impossible you've got to lay out there as a challenge, just like a number of years ago the Postal Service decided it was going to hit mid-nineties on service, and at the time they were in the seventies and everyone figured that's crazy, that will never happen, and it happened. Why? Because they set tough targets and they didn't take no for an answer.

Ms. Staisey: The Postal Service recently launched a number of new online service such as secure electronic documents and net post certified. Can you tell us more about these and the directions the Postal Service is going in terms of online services and products?

Mr. Nolan: Well, there's been a lot of questions about what in the world are you all doing. This doesn't look like mail. What are you doing going into this business. Our answer is, look, we've been dealing in money, messages, and merchandise for over 200 years. It's what we do. And if you follow that line of reasoning, why in the world did we ever leave the Pony Express?

We helped develop commercial aviation. Mail was the first big user of planes. Our customers are continuing to see incredible value and importance in mail, but they're also trying to communicate in other ways, to move money in other ways, to receive merchandise in other ways over the Internet. We need to be there to make sure we're providing a full range of services.

Just as any other company would seek to diversify if part of its product line was in jeopardy from diversion, we're diversifying. But the big thing is that we think that it's what our customers want us to do. We bring a tradition of trust. The secure messaging, again, the old game, who do you trust. When people ask that question we come up very high on the list so we think we can bring a greater element of trust to the Internet.

We think that our NetPost Certified for example is going to enable government and individuals to take a lot of the difficulty out of transactions, costs out of transactions back and forth by offering the ability to authenticate the sender of information whether it's birth certificate information or medical information and be able to authenticate it. Encrypt the document that's being sent to Social Security or to the Health Care Finance Administration or whoever so that they're able to get it in a mode that eliminates their work to get it in a machine readable format. It will speed everything significantly, reduce costs, enable government to work better, and enable citizens to be satisfied.

Part of what makes it possible is our ubiquity. We're everything, and people have an easy time dealing with us. We've partnered with some very, very good people in AT&T and IBM. The other of course big one that we've mentioned is eBill Pay. Some people want to pay bills online. I mean, we love it in the mail. We like to keep bills in the mail and payments in the mail, but some customers want to do things differently.

We believe that nobody in America or in the world offers a better bill payment service than we do. We've partnered with a very good company there as well, Check Free, and so we bring strengths, they bring strengths, and we think this is helping us be of a complete answer for your customers.

Mr. Lawrence: What are the management challenges of introducing online services?

Mr. Nolan: Well, it's being sure you're very crystal clear about what you know and what you don't know, what you should do and what you shouldn't do and leave to partners on the outside who do this for a living. But that's no different for any company or any issue, whether it's transportation issues or whatever.

But again, things more very quickly. Things that seem really interesting and exciting and a lot of companies want to jump at them right way without thinking. You've heard that dot-coms caused everyone to lose their judgment about what makes sense in business, you've got to, again, go back and do what makes sense in business and not just get enamored with a new technology.

So I think you have to understand the technology, understand the customer and what they want and, again, stick with the things you do well, and partner with the best for those things that you don't.

Mr. Lawrence: Many are apprehensive about having partners so deeply involved in the operation of the organization. They're actually worried about the management challenge. How have you addressed that?

Mr. Nolan: I think first of all what you do is to make sure you're careful about who you partner with. Second of all, you've got to sit down very carefully and make sure that you understand along with your partners what is it that each member of the team wants out of this relationship; what is it that each person on the team brings to the relationship; and how can we make sure that those things are being delivered. Then to constantly reevaluate that to make sure that you're asking the question is the equation changing or are we still in good shape here.

Mr. Lawrence: We'll be back in a few minutes with more of the Business of Government Hour and our conversation with John Nolan of the United States Postal Service.

(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 Nolan, Deputy Postmaster General and Chief Marketing Officer of the United States Postal Service. Joining me in our conversation is another PWC partner, Nancy Staisey.

Ms. Staisey: John, we've heard a great deal in the news lately about the $6.3 billion alliance between the Postal Service and FedEx. Can you tell me more about this?

Mr. Nolan: No. It's top secret. Actually, what this is, it's a two-part agreement really, and it's a business alliance or business partnership that we've created here. The first is a transportation contract where they're transporting express mail, priority mail, and some first class mail for us on both the night and day network just as we have contracted with other airlines in the past, except they just happen to be one of the largest airlines in the world and have a network that's very beneficial for us and for our customers.

The other is a retail agreement where we are agreeing to enable them to put their collection boxes in front of our post offices so that areas that we can't hit with the services that our customers want, FedEx might be an answer to their shipping needs. So it becomes more convenient for customers, and it's something that FedEx wanted because it's a whole lot easier to explain to people where your boxes are if you say go to the post office.

So we're enthusiastic about the partnership. We think it's good for our customers, for the industry as a whole. I think it's a win-win.

Ms. Staisey: Seems like it's one of the biggest strategic moves ever for the Postal Service.

Mr. Nolan: Yes, and no. Yes, in the -- well, no in the sense that we've done transportation contracts all over the place and other kinds of deals. I mean, you can mail things through Mail Box, Etc. now. So we've done a business partnership with them. You can buy stamps in grocery stores. So that's the "no" part.

But the "yes" part is who would have thought about it. I mean, who would have thought that the Postal Service would actually be partnering with one of its competitors. I think what's that, competition or something like that is used so we're going to compete like crazy in certain spaces where we do compete. Some areas we just don't overlap at all. But I think it does signal for people in this country that this is a Postal Service that's going to do whatever it takes to make sure that we are effective for our customers and are there for them with solid services that are very affordable.

Ms. Staisey: Is it a sign that there will be more new and different ways of doing things in the future?

Mr. Nolan: I would certainly think so.

Mr. Lawrence: What's been the reaction of the various stakeholders?

Mr. Nolan: By and large, positive. I mean, some of the initial questions dealt with antitrust issues, gee, is there a problem here, and we feel strongly that there isn't, and some initial indications are that there seems to be no problems. But some people are concerned about that.

Obviously some of our competitors are curious and concerned about it. You had some of the airlines that were hauling or are hauling our mail that will phase out certainly aren't thrilled to death with it. But by and large, from our customers, from the analysts in the industry, I think it's by and large seen as a very shrewd maneuver.

Mr. Lawrence: How about with the postal employees?

Mr. Nolan: Well, it doesn't negatively impact the postal employees at all. It makes us more competitive we feel. No postal employees are losing jobs because it's a transportation agreement and putting retail boxes in front of our facilities for which we're being paid. So we think it makes us more competitive which should help us sell more product and help pay for the retail structure that we have out there with some additional revenue.

So our employees have been very positive about it. Surprised because we haven't done this with a competitor in the past but again, our people are very sophisticated when it comes to these kinds of things, and I think that they just like any analysts analyzed the thing and saw that it was a good deal.

Ms. Staisey: Besides alliances, does USPS plan to use any other new mechanisms for doing business? I'm thinking of things like joint ventures, teaming approaches.

Mr. Nolan: Yes. Well, we actually already are, interestingly enough. Again, with our e-bill pay service we partnered with Check Free, which is a top company in the bill payment area. On net post certified we've set up a partnership with -- business arrangement partnership with AT&T and IBM. There's a company called Imagitas, which handles our moving guides that we have in post offices for which we were recognized by former Vice President Gore in efficiency in government.

So we've begun to do some partnering. Do I think that the phrase "you ain't seen nothing yet" may apply? I think so. I think that there will be more things we're going to do, more interesting relationships, whether it's with ISPs, Internet providers, whether it's with other companies that can bring something to the table and we can add something. I think we'll look to do a lot more innovative things to make sure that our products and services are everything they can be.

Ms. Staisey: What about taking an equity position with some of your teammates?

Mr. Nolan: Well, it's something that we're looking at certainly. It's not without controversy as they say to some. We think it's -- any business would reasonably look at that and look to determine whether that would be a beneficial way of ensuring financial viability in the future. So I think we acting as a business as we're supposed to do by our law that formed us in 1970 look at all opportunities and try and determine what's appropriate given our statutes.

I think that there are some things that clear that we can do, some things that we can't do, and some things in the middle that we have to sit down and evaluate. But certainly looking to make sure that our investments in services and products give us the best possible return would make you want to look at the financial alternatives that exist.

Mr. Lawrence: There's been talk of postal reform by the Postal Service board of governors and the postmaster general. What do they hope to accomplish with postal reform, and what do they mean?

Mr. Nolan: Well, our hands are tied. I mean, one of our competitors complains that they don't have a level playing field. Every time I talk I say anytime you want to trade playing fields, I'm happy to do it, believe me. The rub is we don't pay parking tickets, we don't park illegally, and we don't pay taxes. We don't make money. You want me to pay taxes? Fine. Give me a chance to make some money.

The big thing for us, frankly, is that you've got a company here that doesn't control 76 percent of its costs, its wages. It's set by an outside arbitrator. We don't control our pricing, we're limited as to what products we can offer, and we can't make investments. If someone said, "Paul, I've got this great opportunity for you. You're going to be CEO of this company and there's only a few things that we're not going to let you do." Would you jump at a chance to run this company? I think the answer to that would be "no."

We need these freedoms to be able to operate in the future we believe. Business is challenging. It has nothing to do with whether mail is relevant or irrelevant because mail is relevant. But the Postal Service sparked a whole explosion in the mailing industry in the '70s and '80s because we freed up the industry to do things.

In some ways we're beginning to be a roadblock. We think with the value of mail that still exists that the industry can explode more, but we need to be freer to offer our customers greater opportunities.

Mr. Lawrence: And yet a tremendous amount of creativity has already been demonstrated through the alliances that you just described. So I'm wondering ...

Mr. Nolan: It's not enough. It starts to go a little way, but it's not enough. Again, when you don't control your prices it's very difficult, or your costs to a large extent.

Ms. Staisey: What are the most critical freedoms that you need?

Mr. Nolan: Well, again, for example, we have a tremendous customer in the priority mail area and our prices are set and are fixed we can't negotiate those. So it enables a competitor to go in there and undercut is anytime they want to. If they happen to have space on a plane and want to fill it up, let's see which customers the Postal Service has and we'll just go with marginal costing and, bingo, we're toast. So I think pricing is a big thing.

I think that offering new products. Again, there's a lot of people that have questioned why are you into these things, the Internet, et cetera. And yet when other companies do it -- boy, that makes a lot of sense. Well, there's no difference there.

From an investment standpoint, again, when you're going to work very closely with a company, the opportunity to make investments so that you grow two ways certainly makes a lot of sense.

Mr. Lawrence: We'll be right back with the Business of Government Hour and our conversation with John Nolan of the United States Postal Service.

(Intermission)

Mr. Lawrence: Welcome back to the Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with John Nolan Deputy Postmaster General and Chief Marketing Officer of the United States Postal Service. Joining me in our conversation is another PWC partner, Nancy Staisey.

John, we hear a lot about the forthcoming retirement wave and the difficulty of attracting young people or new people to government. Can you tell us whether these issues are problems for the U.S. Postal Service, and if so how they're being dealt with?

Mr. Nolan: Well, they are. I think I saw a figure that 85 percent of executives in the Postal Service are within 10 years of retirement. That's a huge number because we have a couple of folks in the executive ranks in the Postal Service.

One way of looking at it is it's a tremendous opportunity. When I joined in 1970 there was a whole wave of retirements that occurred and I got positions of importance a lot faster than I ordinarily would have because they needed people. So I think if there are people listening out there that want a real challenge, the Postal Service is the place to be.

Nobody is as diverse as we are. Nobody values diversity as much as we do I think, and so there are tremendous opportunities. We're stressing very heavily development, redevelopment actually of a management intern program that we sort of had let slide for a while. We have leadership training programs. We've got our own management academy out at Potomac so we do value training.

And we send people to Harvard and Stanford and MIT because we need to have leaders that are savvy, that have rub shoulders with a lot of other leaders in industry. So you've got a great opportunity in the Postal Service to get a lot of responsibility, do a lot of interesting things, and be trained very well.

So I think these are the kinds of things we're trying to stress. We've got 800,000 employees. We're trying to move as aggressively as we can to get people within our own ranks interested in moving up and trying to get people from outside of our industry to move in because the things we do are pretty exciting.

Ms. Staisey: John, one of the demographic trends on the customer side has been an increasing number of new businesses and a great deal of residential development that's been going on. What's the impact of this in terms of the ever-increasing number of daily physical deliveries that USPS has to make?

Mr. Nolan: Well, the way we look at it, last year we added Chicago. We added 1.8 million new deliveries. We added the city of Chicago in terms of deliveries. Now, we don't get paid a penny for delivering to those residences unless there's an increase in revenue from people sending mail. Last year our revenue or the volume went up some, but not as much as it has in the past. So that's a tremendous cost on our operation; 1.8 million, the city of Chicago we added last year, and that's continuing. We don't see any signs of abatement there.

We had a huge influx of dot-coms and we had to build infrastructure to serve them, and then they collapse in some cases. So the breathing that we're doing in and out to grow and shrink from some of those businesses or something, but we haven't stopped growing when it comes to possible deliveries.

Ms. Staisey: Now, are there ways you can use technology to further your mission and also to help serve the ever-expanding number of deliveries you need to --

Mr. Nolan: Well, we're as big a user of technology as almost anybody in the world. That's why we have so many companies eager to do business with us. Unfortunately, there's not many ways that technology can help us walk up to the front door or to the curb to serve new deliveries. But when it comes to the use of mechanized equipment, automated equipment, bar code technology, scanning devices, electric vehicles. Technology is everywhere in what we do. Finding new ways for customers to reach us using the Internet at usps.com, finding ways of making call centers more efficient by using artificial intelligence. I mean, there's very little that we're not looking at or working on. So technology is critical for our future.

Mr. Lawrence: How is the Internet and use of e-mail and even the rise of e-commerce affected the way the Postal Service does business? Does it threaten the volumes?

Mr. Nolan: Well, the way we look at it, the Internet is both a disruptive and supportive technology. It's disruptive in the sense that some of our business could go away, and bill payment and bill presentment is certainly a very big part of our company, 25 percent of our revenues. And so the extent that that's threatened, that would be categorized as disruptive I would think.

On the other hand, it's very supportive. The most important thing that we're doing on the Internet now is using the Internet to reduce our internal costs. It's the biggest thing that we're doing. Second, it's enabling us to build an information platform more efficiently that enables us to manage better what we do every day.

The third thing, we're going to be adding a lot more value to our current core products and services. If you have a post office, for example, in the future we envision that you'll be able to look on the Internet to see whether you have mail in the post office box, whether you need to stop by the post office, and things like that; the status of your mailing. We'd be able to scan documents en route, and you'll know whether or not you're about to receive a package or that the package you sent was delivered.

Finally, the e-commerce initiatives that we've got to offer more products and services. So it really is changing the whole landscape of what we do. It's how we look at the future and how we're tackling the present and moving toward the future.

Mr. Lawrence: How is all this technology changing the way the Postal Service is managed?

Mr. Nolan: Well, we need to have technical savvy, first of all. That's sort of the ante to be in the game. So you need to understand the technology, either through people you have in house or consulting partners or vendors that you deal with so that's critical.

But the big thing is that still the fundamentals apply in managing an organization and it's a matter of understanding customers, and the big challenge here is that not only do you try and understand what the technologies can do for you and what you have to do internally but also how is it affecting your customers and be able to anticipate that impact and be able to be there as the customers change. Because when you've got a customer who very often doesn't know for sure how it's going to impact him, it's pretty hard for them to tell you.

So what you just got to be is more of a futurist I think to examine what's really going on here and to be there at the pass to cut them off and make sure they stick with you.

Ms. Staisey: John, if we could all be time travelers and travel ahead 10 years into the future, what would USPS look like in 2010?

Mr. Nolan: The U.S. Postal Service is the gateway to the household. Nobody in their right mind will go to their household directly. They drop at the Postal Service and let us do that, walk that last mile. No one is more efficient, no one is more effective at doing it. No one is trusted more. So whether it's packages, whether it's videos, you name it, people are going to use the Postal Service to move that last mile.

On the origin end, we've got all the tools necessary for our carriers to make it very easy to hand things to us so you won't necessarily have to go to a post office. You're going to see some post offices changing location. We need to move where the population is. With technology today, with kiosks and all sorts of things, there's a whole easier ways; the Internet. You don't have to come to the Postal Service to buy a stamp. You may not even need the stamp. You can do PC postage now and pay for your postage.

So I think what you're going to see is a Postal Service that has moved with technology and understood clearly what customers were trying to accomplish. You're going to see a lot of different models setting up in different areas. The post office today, there's a lot of sameness to it. It's the same everywhere. Well, in the future I don't see that always being the case. I think that there are certain areas where the post office ought to have a whole lot of services that it doesn't have today, and in other areas that just wouldn't be appropriate. So you won't see some of those services offered.

If you're in a town with no greeting card stores, why not be able to buy a greeting card at the post office. In other places that has greeting card stores, we can't add extra value there so don't do it.

So I think what you're going to see is a Postal Service that's much more tailored to the customer where the customer is, and a greater flexibility and range of service offerings.

Mr. Lawrence: What type of leaders will be in this organization in 10 years?

Mr. Nolan: Probably ones that don't include me, but I think to be effective in the Postal Service 10 years from now you're going to have to be someone that has a vision, and stick with that vision and move aggressively toward it. You're going to have to have sound business knowledge because you're going to be up against the biggest and the best and the littlest and the fastest.

So you're going to have to have a business acumen that's going to be critical for the future. Hopefully there will be a greater movement of executives from outside to inside and inside to outside, but it's going to be a lot of challenges and they're going to have to be innovative.

Mr. Lawrence: I'm afraid we're out of time, John. Nancy and I want to thank you very much for spending time with us. We've had an interesting conversation.

This has been the Business of Government Hour featuring a conversation with John Nolan, Deputy Postmaster General, and Chief Marketing Officer of the U.S. Postal Service. To learn more about the endowment's programs and research into new approaches to improving government effectiveness, visit us on the web at www.endowment.pwcglobal.com. See you next week.