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|Friday, July 18, 2003
Mr. Lawrence: 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 about The Center and our work by visiting us at www.businessofgovernment.org.
The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with David Wennergren, Chief Information Officer of the U.S. Department of the Navy.
Good morning, Dave.
Mr. Wennergren: Good morning, Paul.
Mr. Lawrence: Joining us in our conversation is Tim Connolly.
Good morning, Tim.
Mr. Connolly: Good morning.
Mr. Lawrence: Dave, let's start by talking about the military. Could you tell us what's the role of the Navy?
Mr. Wennergren: The Department of the Navy is a large organization, and of course it includes both the United States Navy and the United States Marine Corps. Its mission is to project force and protect the sea lanes around the world, which makes it a very unique organization to work in: 800,000 people deployed in virtually every time zone, tens of thousands of them literally on mobile offices, ships, deployed Marines, and to be able to be connected around the world in real-time is one of the great challenges of that organization.
Mr. Lawrence: Tell us about the activities and the programs of your office.
Mr. Wennergren: As the chief information officer, I am responsible for information management and information policies across the Navy and the Marine Corps. It's a fascinating opportunity because it's a very big organization. We have an information technology budget of over $6 billion a year, and as I mentioned, hundreds of thousands of people, and to try to bring those people together to work your way through the entire range of information technology work, networks, knowledge management, e-business, security transformation, is a wonderful opportunity.
Mr. Lawrence: What types of skills would your team have? You just described a whole range of functions, and I would have thought they would have all been computer science folks doing that sort of stuff.
Mr. Wennergren: We certainly have some excellent computer scientists in the mix, but it is really a broad range of people, because a CIO's responsibility spans the gamut from making sure that you're giving the right oversight to your systems, all of your systems, weapons systems, information systems, because of course, they all have to work together. To the other end of the spectrum, caring about your work force, making sure your work force is changed and IT proficient. So we need people with lots of different skills in the IT business.
More and more, we see folks with a strong bent towards business, towards management, towards understanding the missions of the Department and how those missions could be improved. Business process reengineering is a very important element of the work that we do in the CIO organization. We have a small cadr� of folks that actually work in the headquarters organization. CIOs have to report to the Secretary of the agency, or in our case, the Secretary of the Navy. So we have a small team there, but then we draw upon the resources of technical experts from throughout the Navy and Marine Corps teams, so there are literally hundreds of thousands of folks who are really adept at being network engineers and being software developers, and then all the other skill sets that you need to actually run a business as big as this.
Mr. Lawrence: When people ask about the budget for technology in the Navy, is there a way to describe it to give people a sense of the size?
Mr. Wennergren: Yes, it's big, and the way that we track the budget the way that OMB and Congress asks us to is kind of interesting because it covers a very broad range. So the Department of the Navy's information technology budget is $6 billion, with a B, and that's a lot of money. The biggest single initiative that we have is our Navy-Marine Corps Intranet, which is over a billion dollars a year.
It also includes a lot of very significant national security systems, the E-2C Hawkeye and other programs that are heavily IT-oriented that make up that bill. So it is not just $6 billion spent on back office functions, it's $6 billion spent on command and control systems and command support systems and all the things that go into running the business of the Navy.
Mr. Connolly: Dave, can you tell us a little bit about your roles and responsibilities as chief information officer of the Navy?
Mr. Wennergren: I work directly for the Secretary of the Navy, and my job is to provide advice and counsel on the mission of the Department. I'm part of the leadership team for the Navy and the Marine Corps, where, of course, my responsibility would be making sure that we do our information systems and our information management correctly. So I have a responsibility for policy development, for oversight, for ensuring that we have a trained work force, ensuring that our systems are operable, that we have a robust enterprise architecture structure, that we're complying with the President's management agenda, and working your way through that whole portfolio of IT initiatives that happen in the world today. We are big proponents of electronic business and the web and wireless technologies.
Again, it's about having a small team of change leaders that can work with all of the commands across the Navy and the Marine Corps to help them as they do their jobs, because one of the things that we learned early on in this adventure as we were walking through the Y2K days is that IT is everywhere. It's embedded in every plant floor, every weapons system, and almost nothing works by itself anymore. So it really is all about the difference business lines of the Navy and the Marine Corps, and we view our job as intergrators.
What we want to do is to help you understand that you can use technologies in the work force, but in the end, it's your business process, your mission area, and so the E in e-business is just get people excited that there is a need to change away from paper processes to electronic processes, but the key part of that word is business. It's not about me doing your business for you; it's about me helping you to see a way to reinvent your business to take advantage of the digital age.
Mr. Connolly: So it sounds like you have pretty broad responsibilities on both the business side as well as on the technical side. Can you tell us a little bit about your previous career and how that prepared you for your roles and responsibilities today as the CIO?
Mr. Wennergren: I've had a varied career, I guess you'd say. I've spent my entire government career with the Department of the Navy, right out of college into the Navy as a young management analyst and kind of worked my way up through the organization.
I've had a lot of different kinds of jobs. I used to do outsourcing work, the A76 program, private-public sector competitions. I was involved in the base closure rounds of the 1990s. After the base closure rounds, I had the job of working in the installation management world and restructuring all of the shore establishment that didn't close.
Then I came to the CIO world, and my first adventure was Y2K there. So sometimes people say you must wander from one program of hate and discontent to another, but I'm a hopeless optimist. So I think that the thread there is complex organizational issues, so I think both me and my predecessor, Dan Porter, the last CIO of the Department of the Navy, shared this r�sum� of having worked complex issues and having to work issues that require integration and a good understanding of the mission of the organization.
So while I have had some technology-related responsibilities in my career, clearly my selection as CIO was driven by the idea that we need people that can lead change and integrate it across complex organizations.
Mr. Connolly: Based on that, how do you see that those experiences have really brought you to today to the visionary role of CIO of the Navy?
Mr. Wennergren: The common thread, again, I think is integration. The Navy and Marine Corps is very big and very decentralized. In fact, we have a culture of over 200 years of independent ships at sea and being the captain of the ship and the captain of your destiny. That presents tremendous opportunities for innovation. Having the wherewithal to manage your own resources and go make your own choices gives smart people great opportunities to think of new ideas, and our organization is just full of smart people.
The challenge that comes in this world of being so connected is that pieces have to work together. So the premise of sending a ship out and it will come back some day and you'll have entrusted the captain to have done the right mission is a little different in a world where you're constantly in contact from sensors to shooters to logistics support and those sorts of things. So now there's a great need to take this very decentralized organization and make sure that it's integrated. Integrated doesn�t always necessarily mean centrally controlled or centralized, but that the pieces work together.
One of my responsibilities is the critical infrastructure assurance officer, of the CIAO. I always get a kick out of that acronym. The critical infrastructure assurance officer is responsible for critical infrastructure protection, so physical security, security of our key infrastructures. It's not a job that you would necessarily have associated with being a CIO, the information officer, but we're finding more and more organizations starting to get their CIO that responsibility because protecting all of our physical infrastructures has a lot to do with integrating the efforts of numerous organizations, in our case organizations like our force protection people, our antiterrorism people, our investigative service people, our computer forensics types and those sorts of organizations. So bringing all these pieces together to actually work towards a common good is the resounding theme that we see in CIO work.
Mr. Connolly: Have you seen that the role of the CIO in the Navy has evolved then over the last 10 to 15 years from being much more technically focused to being much more organizationally focused and focused on taking the Navy to the 21st century?
Mr. Wennergren: Yes, I would have said it just slightly differently, because CIOs are kind of a new concept for us. With the Clinger-Cohen Act passing in the 1990s, the first Department of the Navy CIO only arrived on the scene in the late 1990s, the 1996-1997 time frame. If we look at the last 10 or 15 years, I think your point is right-on. While they weren't called CIOs, the CIO predecessor organizations were clearly focused on technical- and acquisition-related issues, and as we stood up a CIO organization through the Clinger-Cohen Act and a lot of the other pieces of legislation, the E-Gov Act, the Federal Information Security Management Act, the Paperwork Reduction Act, and the list goes on and on, there's a recurring theme in both the intent of Congress and the intent of the administrations that CIOs are there because information, knowledge, the intellectual capital of the organization, has to be managed effectively so that it's available.
As the most classic case, a statistic from Gartner, I believe, about how over 70 percent of an organization's information lives on a C drive, and in a world where you're imagining people thousands of miles away from each other trying to get work done together, that just doesn't cut it. The intellectual capital, the wonderful knowledge and learning that we each have and can bring to the table, has to be available for people to share.
Mr. Lawrence: That's a good point, especially about the C drive.
What's NMCI and what lessons have been learned? We'll ask David Wennergren of the Navy to tell us about this when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with David Mr. Wennergren, Chief Information Officer of the Department of the Navy.
Joining us in our conversation is Tim Connolly.
Mr. Connolly: David, the Department of the Navy has been pretty much a pioneer in outsourcing. With the Navy-Marine Corps Intranet, affectionately known as NMCI, can you tell us a little bit about the background of this effort, and what is NMCI?
Mr. Wennergren: NMCI is a fundamentally important part of our transformation. It is the foundation of much of the IT transformation that's going on in the Department of the Navy.
I sometimes tell folks a story about a place called the Winchester Home, which is out in San Jose, California. If you're familiar with it, you know the story about it, but you've probably near heard it as an IT analogy. The Winchester Home was built in the late 1800s by the heir to the Winchester Rifle fortune. There's a whole story about why she built this monstrous house, but she built it for 30 years. It has hundreds of rooms and tens and thousands of square feet. It's one of the biggest houses in the entire United States. There were hundreds of builders involved in building it and no architect, no orchestra conductor, if you will. Lots of builders with lots of money to spend built lots of really cool stuff. There are patents associated with this house, innovations in the 1800s that had never before been seen in homes in America. If you translate the $5-1/2 million price tag to today's dollars, it was a $160 million job building this house.
But because they each worked independently, some odd things occurred. There are doorways that open into a wall; there are stairways that lead to nowhere; there are skylights embedded in the floor of the ceiling above; there's a chimney that starts in the basement and rises up four stories, only to stop three feet short of the roof. So without that common infrastructure, architecture, enterprise vision, big organizations tend to build lots of little things. Each little thing might be innovative on its own, but they don't work together so well, and that was the environment that we found ourselves in in the Navy and the Marine Corps team.
We found two apparent problems. We had organizations that were haves, and organizations that were have-nots. Some organizations, because of the way money flowed, had pretty robust networks, and some of our organizations had pretty pathetic networks. Unfortunately, a lot of the organizations that were not wired properly were our operational commands, which clearly needed to be.
We also found ourselves with a problem of not being able to refresh technology well enough. It takes government sometimes a long time to buy stuff, and of course you know the way technology is. I remember several years ago buying myself a 450 MHz computer and thinking that was a real hot machine there, and six months later it was who cared because technology changes so fast, and having refresh rates that take years and years and years will leave you always behind.
So we reached the point where we imagined in our minds that it was probably a couple billion dollar job to actually bring the Navy's infrastructure up to a level where you could be a really seamless enterprise network. So we have a hundred disparate networks, they didn't talk together very well, they had different security structures. We had a work force of network managers and network engineers that we were having trouble retaining. They come and they'd get trained by us, and they'd go for more lucrative salaries in the private sector. So we had to do something different.
So we landed upon the concept of the Navy-Marine Corps Intranet, which is a performance-based contract approach to buying IT as a service. This was basically a big seat management contract. There are lots of seat management contracts in industry, but this was a big deal for the government. It's the largest IT contract in federal government, it's the largest seat management effort in federal government history. So it really was a change of course as it was this basic premise that said electricity, the outlet here in this room, I plug my plug into it and if the light comes on, I get billed for the electricity of using that light. If the light doesn't come on, I don't pay a bill for it. I don't really care about what kind of transformer, what kind of stuff is on the other end of that power line out there, Virginia Power or something.
I care about service being delivered. I care about performance. So that was the path we embarked upon. It really was a novel path, because the beauty of the Navy-Marine Corps Intranet contract is that the services that it provides are the computer on your desk, the software that runs that computer, the help desk support, the long haul connectivity, to bring that enterprise network together for almost 400,000 people, 400,000 seats. It basically encompasses the entire United States and a couple of our overseas locations. Bringing that together into a performance-based contract has provided us with a world of wonderful change management experiences that we'll probably talk more about in a few minutes.
But getting that basic premise across that you could have somebody do this work for you and do it by providing a service, and the best way to take care of that would be to have a fixed price contract in terms of seat price. I'll have a menu, I'm a command and I'd like a laptop, I'd like a desktop, I'd like these kind of additional services and those sorts of things, and I understand the price and I'm willing to pay that. Then the contractor team is motivated for success by a lot of incentives. So the contract is really a wonderful novel contract vehicle because it's based on the premise of numerous service level agreements that are measured. So what I want is lots of access; I don't want latency. I want a good refresh rate, I want good security, and I'm going to measure you on that. If you exceed my expectations, then you get incentive payments.
Over half of the potential incentive payments that the contractor can get are based on customer satisfaction as measured by the individual users. What a novel concept for all of you that have relied on help desk support before, that you actually get to grade your help desk team, and that's part of how they get paid is that they've responded well to your needs.
It was an interesting adventure to go on. We're a couple of years into it now and we're making great progress now, but the early days were really a challenge because we had a fascinating dynamic. We were able to explain to people that this idea of seat management and this idea of performance-based contracting was really important and the right way to go. But you'd have this interesting dynamic when you would explain this to members of Congress, the Office of Management and Budget and the Office of the Secretary of Defense. We would almost consistently get back the answer that would say, yes, this sounds like a really great idea. You'll want to do this very quickly. You'll want to do this over a two-year period. Isn't that like awful fast for something this big and this different?
Then we would go to audiences like the Naval Postgraduate School, where we have young officers who are working on their master's degrees and are really savvy on technologies, and of course the postgraduate school is out in Monterey, not far from Silicon Valley, so they had a lot of exposure to the Internet age, if you will. So they would go, this really sounds like the right thing to do, but you're going to take two whole years to do this? Why can't you do it in months?
So it was an interesting set of dynamics, and it took us a long time to get the project actually started. We awarded the contract, and EDS is the prime contractor. Then there's a pretty august group of subcontractors: Microsoft, Dell, Raytheon, MCI. So it's a robust group of teams. But again, the important point was that we didn't say we wanted Dell computers, we didn't say we wanted Windows 2000 as the operating system. What we said to the bidders was we want good service, we want to be able to measure it, and we want service delivered well to all of these places with these service level agreements, and then you pick the teaming arrangements that you want to have to make that happen, so I don't have to be the one that goes out and buys all the servers and routers and worries about every computer and every help desk, every network operations center. I worry about getting service delivered well to me and being able to measure that service being delivered well to me.
Mr. Connolly: Tell us about the timeline. The idea began in the mid 1990s. Walk us through the big things. We're two years into it. Then what's out there?
Mr. Wennergren: We did a lot of thought work about this in the late 1990s. The contract was awarded at the end of 2000. From there, it took time. Again, it got back to this idea about seems like a good idea, but we're very nervous, it's very different. I probably shouldn't say this, but we tested this thing like it was some nuclear submarine. We were talking PCs. They only cost hundreds of dollars each now. We're talking about Microsoft Office. We're not talking about nuclear power plants. So there was a lot of initial testing and a lot of initial turmoil to get the thing up and rolling.
This year has really been the year that made a difference. You go through a two-phase process, of course, as they come in. The first thing that happens is the team comes in and assumes responsibility for your existing network. Of course then, after they assume responsibility for the network, they cut over to the new equipment and the new processes. So you assume responsibilities and then you cut over.
We've cut over about 88,000 seats at this point. We have assumed responsibility for over 200,000 seats, we, the contractor team, and our hope is by the end of the year, we're up to about 300,000 seats, assume responsibility, and a couple hundred thousand seats cut over.
So this is the year now that we're actually seeing the power of it. So had we all been having this conversation a year or so ago, I would have told you about this vision about interoperability, access, greater security, but now I can actually talk to you about the results, and there are some wonderful examples of the results.
After September 11th, in addition to the tragic loss of life at the Pentagon, the Navy also lost 70 percent of its office space there. So we had literally hundreds of people that had no place to go to work. We were able to leverage this information strike force, this EDS team, to help us reconstitute that capability literally over a weekend. By Friday after the event on Tuesday, we had found an office building in Crystal City that had been vacant. It was pretty gutted, and the EDS team had tractor-trailers full of Dell computers and Sisco routers and everything on the road. They arrived in town, and virtually over the course of the weekend, put together the network and the infrastructure inside that office building for hundreds of people. If you think about it in the old view of the world what would have had to have happened, we would have had to have people buying computers, buying software, buying telecommunications services, buying servers, and installing all those things, and integrating all those things together would have taken days, weeks, months.
The other place where we've seen dramatic improvements is because you're moving away from this idea of a hundred disparate networks with different kinds of security strategies, seeing a significant improvement in our security posture, it really is beginning to pay dividends. But it also really is the foundation of transformation, and that's the thing that oftentimes confuses people, because they think NMCI is the whole IT game for the Department of the Navy, and it's really not. I often use the description of a highway system, local story right here, just interstate 95. I've got a great superhighway now, and NMCI is that superhighway. On the interstate heading down to Richmond, I don't have to get stuck in traffic. Maybe I picked a bad example. I don't have to stop at stoplights all along the way. But all the cars and all the drivers of those cars are still fundamentally important to the success of your organization. So imagine NMCI as the big superhighway we just built, so that where you are is connected to where you need to be, and wherever you are, you have the power of reaching back to the intellectual capital of the organizational team. But you also have to then focus on all the things that have to ride on that highway system if you're going to be successful.
Mr. Lawrence: The Department of the Navy includes both the Navy and the Marine Corps. How does the CIO make decisions for the entire department when it consists of these two unique groups? We'll ask David Wennergren of the Navy to tell us about this when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with David Wennergren, the chief information officer of the Department of the Navy.
Joining us in our conversation is Tim Connolly.
Mr. Connolly: David, we spent the last segment talking a lot about NMCI. Now as we look forward, if you had a choice of starting over again, what would you change about NMCI to make the process more effective and more efficient?
Mr. Wennergren: I wouldn't change a thing about the performance-based contracting concept, and I wouldn't change a thing about the team that we have. We have a great team working with us on the project.
How we began the implementation both from our side and from the contract's team, we learned a lot, because it really was something different for us. People really enjoy personal control, and federal agencies don't always do a good enough job of public relations work. So I think we probably could have done a better job of selling the value proposition to our individual organizations so that when they went through the pain of having to give up something that they used to control, to allow somebody else to do the work for them, although I don't know how much you could ever stop some of those cultural change issues from happening. So there was a lot we learned about how you could do the implementation smoothly. But I think that's really the only place that you probably could go back and have done it better.
What I really have seen happening out of this is that it was an amazing opportunity for us because it proved to be this wonderful forcing function. If you don't build yourself an enterprise network, you have no idea how many applications you own. I remember in the Y2K days, we were keeping track of our mission-critical and mission-essential applications and systems. We were looking out for a couple thousand of them. Then when we put into place the Navy-Marine Corps Intranet, we said to these hundreds of commands that had their own local area networks and had built the stuff to run on it, just give us your applications, identify them by name, we'll check them out to make sure they're complying with security rules and they work on Windows 2000 and we'll put them on the network, and those couple thousand mission-essential applications grew to almost 100,000. A hundred thousand applications, what could you possibly do with that many? Somebody told me they were at the Gartner conference last year in Orlando, I think it was somebody from Disney was there, and they were talking about their 4,000 legacy applications that they were trying to work their way through. Somebody from the audience stood up and said, how could you have allowed that to happen? I thought I'm glad I wasn't the one up on stage there. I would have had a hard time explaining tens of thousands of them. But because you didn't have that central visibility, that ability to do configuration management, you didn't know.
So NMCI has been a wonderful forcing function to get us to do things like designate functional area managers, functional leaders for business lines in the Department of the Navy that are now responsible for looking at all the logistics applications that these different commands have built and says this is the supply chain management program we're going to use, this is the online purchasing solution we're going to use, and we're going to get rid of these other ones. It's a phenomenally complex problem. We've done a great job of working our way down from that first initial list of 100,000 to several thousand now. But you wouldn't have been able to do that, nor would you have been able to achieve the significant cost reductions that you will get by not having to build each one of these solutions over and over and over again unless you have built this enterprise network.
We used the NMCI as the fulcrum point for bringing on board infrastructure and SMART card technology. Every computer is going to show up with a SMART card reader and Middleware. You'll be able to use your PKI digital certificates. Those kinds of changes wouldn't have happened if you didn't have this forcing function of building the enterprise network to get you going.
Mr. Connolly: You talk about NMCI as a transformation, and transformations are about change. What change would you say occurred in your own roles and responsibilities as CIO, and how do you see that continuing to change going forward with the implementation of NMCI?
Mr. Wennergren: I think we've greatly benefited from a really strategic leadership team in the late 1990s as this whole vision got created that recognized that there is a road map of transformation that you had to do, and you had to start with your infrastructure. If you couldn't get your infrastructure right, you had no hope of doing things like digital marketplaces and knowledge-sharing and those sorts of things. But having the NMCI network now being implemented is allowing the Navy and Marine Corps team to turn attention away from those network tasks, to focus on the rest of that transformation agenda.
The NMCI contract is a really big contract. Like I said, it's over a billion dollars a year, but it is just that superhighway system. There is a whole bunch of other really important work that is being focused on, and that needs industry participation and working together, creating knowledge management structures, business electronic government, web enablement of our legacy applications, building of an enterprise portal, greater security, all those pieces of work are the rest of that transformational agenda that actually gets you to be that interconnected organization that's secure and a learning, knowledge-sharing community.
Mr. Lawrence: The Navy includes both the Navy and the Marine Corps. How are decisions made for the entire Department?
Mr. Wennergren: We've gone through a significant restructuring over the last year, and I think that one of the great benefits of that restructuring was a tightening of those organizational relationships. So in our new vision of the world, as the CIO, again, I report directly to the Secretary of the Navy, I have a deputy CIO for the Navy. That's Rear Admiral Tom Zelebor, who is the command and control leader for the Navy chain of command. I have a deputy CIO for the Marine Corps, who is General John Thomas, who is the director of C4 for the Marine Corps. So there's this wonderful match-up now of the person who is responsible for the command and control and computer systems for the operational chains of command now has a working relationship with me and a very close relationship in terms of dialogue and problem-solving together to make sure that the information management agenda is working in synch with those chains of command. I then have a third deputy, Rob Kiery, who works in my office, who is the deputy CIO for policy integration, who works with me to help shape and integrate those transformation efforts along those two chains of command.
We then said that each of our major commands, or what we call echelon 2 commands in the Navy and major subordinate commands in the Marine Corps, imagine business units under the Chief of Naval Operations and the Commandant of the Marine Corps, each must have a command information officer, and that command information officer must have a working relationship with Admiral Zelebor and General Thomas. We sort of leveraged some of the things that we learned from visits to GE about the way that they managed IT, this idea that if you're a business unit or a command information officer, you really need to make two people happy if you're going to be successful. You need to make that business unit leader happy, and clearly our command information officers in the past did that. They worked for the commander of the Naval Air Systems Command, and if you didn't make the Naval Air Systems Command's mission work, then you weren't getting a good CIO for that command.
The second piece of that puzzle that the folks at GE realized a while back was you also have a reporting relationship with the agency CIO, because otherwise, you'll suboptimize because you'll build great systems for -- I need an online small purchase system at NAVAIR and so I go out and build one. But I'm over here at the Naval Supply Systems Command and I say I need an online small purchase system so I go build one, and I'm out at the Pacific Fleet and you see how it goes, and each one of those cost me millions of dollars. So if you only focus on that command, you miss the important point, that we are an enterprise. Up until a couple of years ago, enterprises for us were organizations like the Atlantic Fleet, the Pacific Fleet, because that's the way the money flowed and that's where your responsibility flowed. So this new set of organizational relationships really kind of helps everybody think a step up, to say that the enterprise is the Navy and Marine Corps team, because if you don't think that way, you can't build a Navy-Marine Corps Intranet, you can't build a Navy-Marine Corps enterprise portal, you can't align yourself about interoperable single authoritative data sources, et cetera.
Mr. Lawrence: One of the things driving management is the President's management agenda, and it calls out specific items. One of them is e-government. What are you doing in the area of e-government?
Mr. Wennergren: Absolutely. E-government is so crucially important to us. There were some terminology things we had to work our way through first. I have a PowerPoint slide whose title is �a constantly changing world� that goes e-commerce, e-business, e-government, e-war fighting, because you go out and talk to an audience in the Navy and they go we're not business. What do you mean e-business? We don't do that kind of stuff. We're not selling products. And you're like absolutely, you're a business. Your business is national defense and you still have labor-intensive, cumbersome paper processes that you do and that's eating our lunch, and you need to find ways to leverage technology and get with it, and get with the web, and get with wireless technologies and develop E kinds of solutions. So we have done a lot of work to really take the President's management agenda, and even before the President's management agenda, to build ourselves organizations that will help us achieve that goal.
We established a Department of the Navy E-Business Operations Office that is a single innovation center for the Navy and Marine Corps team. There's a small cadr� of government folks with a number of private sector partners that basically helps you. If you're a command and you say I need some help trying to figure out how to do this e-business stuff, they'll bring out consultants, they'll come work with you and help you develop solutions.
They actually operate a pilot fund. We put aside $20 million and say let's go find great ideas and pilot new ideas. What classically happens in large organizations in I think government or the private sector is that you have this great idea, it's going to save us a million bucks a year, I need $100,000 to make it go. The controller says feel free to use your savings. I don't have those yet. Well, I don't know, I guess you're going to have trouble getting started. So we have found there is tremendous power in planting these small seeds of change.
I can tell you one quick story. A hospital, the Naval Medical Center in San Diego, California, a neonatologist and a CIO for that hospital came up with an idea regarding a very cumbersome process about how a patient goes from visiting a general practitioner to getting a specialist's appointment. It was bad. It was just really cumbersome. You didn't know whether the person actually made the appointment or whether they kept it, your general doctor didn't know if the person was getting treatment, whether he was well until he saw the person again in six months. They said what a great way to leverage web technologies and wireless devices to change this experience. So they developed this wonderful solution where the doctor sits in the room with the patient, he's got a little wireless device in his hand and he's saying you have a problem but Mary is really good at this and she has an opening next Wednesday at 9:00, can we lock you in for that, and he just pushes a button on his wireless device and locks the patient in for the appointment right there. Here come your lab results, and all the while maintaining that face-to-face contact as they work through this issue; $100,000 they needed to do this.
I have to tell you, $100,000 is not a lot of money for the Department of the Navy, but it's an incredibly large amount of money for a hospital. So the e-business operations officer comes and brings the $100,000, brings the private sector partner in for the solution. The neonatologist and the CIO, which I get a kick out of because when they both talk, you really can't tell who the IT person is because the neonatologist can talk babies, he can walk web. They build the solution; they love it so much. They, not us, they the hospital folks, take it to the Department of Defense Health Affairs Board, the surgeon generals for the Army, the Navy, and the Air Force, and say you can implement this solution DoDwide for $2 million. The surgeon generals say we were about to do something like this that had less functionality and was going to cost $20 million. We can take this idea and put it across DoD and avoid spending $18 million. That's a powerful example about how planting that $100,000 seed will help the Department of Defense avoid spending $18 million.
I have the benefit of being the best practices co-chair now for Federal CIO Council, so I'm able to start to take these ideas and the ideas that are going on in lots of other federal agencies and build this portfolio of best practices that are going on that tie directly to all parts of the President's management agenda.
Mr. Lawrence: That was an interesting point about the collaboration between the doctor and the CIO.
What role does IT play during a military conflict? We'll ask David Wennergren of the Department of the Navy when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with David Wennergren, the Chief Information Officer of the U.S. Department of the Navy.
Joining us in our conversation is Tim Connolly.
Mr. Connolly: David, we spent a lot of time this morning talking about change. The real question I have is, what do you see as the CIO's role in not only delivering change in programs like NMCI, but really in creating and leading change as the Navy progresses toward the future?
Mr. Wennergren: I think the measure of an effective CIO is the ability to lead change. You have to understand technology, but I believe firmly that technology is only a percentage of the answer. I may spend 20 percent of a day worrying about some technology issue and 80 percent of the day worrying about the cultural change issues that go along with actually making an organization transform. There is so much that you can learn from that. I could have spent the whole hour talking about that, but there are some important nuggets that you pick up.
Change takes on two forms. There are evolutionary types of change. When we go and do knowledge management, it's a real grassroots kind of thing. You go to a command and you say you could do this kind of stuff, you'd be a learning organization, that's great. They all get excited about it and they go off and do it. The beauty of evolutionary change is that it has great consensus and support. You can build a great little solution there. The problem is that evolutionary change on its own doesn't do sweeping enough change. So while we've embraced this theory of teaching people to fish, we've developed tools. We have tools about how you do knowledge management, how you develop a work force, how you do critical infrastructure protection/vulnerability assessments, CDs or web-based tools, and we give these tools to commands.
If you think about it, if each command takes that tool and uses it to do knowledge management, they all end up doing knowledge management in a consistent way, and I get the same kind of answer that I would have gotten if I had just mandated that they all do knowledge management, but of course, they all did it willingly.
The problem is they may not all do it, and so sometimes in order to get broad, sweeping change, you have to embark on a revolutionary change. We would not have a Navy-Marine Corps Intranet if we had not just said you will do it. We would not have 2-1/2 million access cards, SMART cards, in the hands of DoD people if we had not just said we're going to go to a single SMART card. So you have to couple these evolutionary change approaches with revolutionary change approaches.
Of course, the challenge with revolutionary change approaches is I didn't get each of your buy-in. So I have to then deal with the personal/cultural issues of change is coming to you, and there's a book about managing transitions that's out now. Or the guy makes an interesting point about we don't like change, we don't like transitions because in order to have a new beginning, you must have an end, and people tend to not like endings. So every time I do something that's sort of forceful, you have to worry about how you're going to deal with those cultural change issues. But you have to embrace them, because the world is changing at such a fast pace, if you don't think about change which means accepting some risks, you really do risk irrelevancy. So we've learned a lot.
We've learned about moving with speed. The solutions that are working best for us right now are those that we do in months. Take an e-business pilot like the one we talked about, put it in a place in three months, leverage industry best practices and go. The things that are not working well for us are the things where we try to build this perfect solution, build it to death, and two or three years later try to deliver it. Because in our world, over two or three years, technology changes, military people rotate in and out, political leadership comes and goes, and you never quite close the deal. You have to move with speed. You have to look for forcing functions. You have to say if you're going to change a little, you might as well change a lot. There is no point in just getting a few computers. At the moment that you're going through that stress of a change in a computer, I'm also delivering you new processes and those sorts of things.
You need to think about how you change the status quo. We had a culture where once you're in the budget, I'm a legacy application, I got approved, and now I get $5 million a year, and next year I want $6 million. So people go why do you need an extra million, but you're basically in the game. Of course, with those legacy applications that are the old mainframe client-server kind of solutions, they're not my web services view of the future of the world, so it's the new stuff that is going to be wireless and web-based that really is where we need to focus, but of course they're new and so they get tortured to death. Where is your testing plan? Where is your business case? Where is your this, where is your that, before you ever get to the place where you say let them go or let them try because that's where I want to spend my money.
That's why our legacy application process is so important, because that's where we're going into each of those people with the baby and saying that's not a web-based thing, that's not PKI-enabled, that's not available on the enterprise portal, you are not part of the future vision. The status quo stuff needs to go in favor of the new path.
I think finally and most importantly, it's this idea about the Indiana Jones movie, "Indiana Jones and the Last Crusade," and he's on the search for the Holy Grail. This is another IT analogy, because he's got the little book and he knows what his vision is. His dad has been shot and he has to find the Holy Grail to save his dad. He gets to that chasm and he has to get across and the book says it's a leap of faith. His reaction is don't you hate that? But of course, he eventually takes the step and there's a pathway and he gets across. That's what this is about for all of our commands. There is that moment when you do have to take that leap of faith. So you need to give people as much confidence that they should be trusting to take that leap of faith, but in the end, you have to find some way to encourage them to take it or you'll never get this change in.
Mr. Connolly: Can you tell us a little bit about web enablement means to the Department of the Navy? And can you expand on the role of the Department's new portal policy in achieving this objective?
Mr. Wennergren: We've been getting it for a while. We have a senior leadership course that we teach at our Naval Postgraduate School where we send our senior flag officers and general officers, and they go spend a couple of weeks talking to folks in the Silicon Valley and elsewhere about what's going on in the world, and they come back very energized. They get it. They understand the power of the web, the power of the web in terms of access, the flow of information, better security structures, all the things that go into being web-enabled. But then you turn around and look at your organization and you still have a lot of old legacy systems that aren't that kind. So we've embarked upon a lot of work to try to change that.
We created a task force web team whose job was to go encourage and push for web enabled solutions, and Monica Sheperd and her team of folks that have been doing that for the Department of the Navy have been doing an outstanding job.
In order to have a web strategy work though, you have to have a place for that stuff to hang. So we've just released our policy for the Navy-Marine Corps portal, our enterprise strategy that says we're going to have a constituent portal structure where you really will have a single front portal that you get to do work whether you're aboard ship, you're ashore, you're in a hotel, you're at your wireless device waiting for the bus, whatever kind of channel delivery you need, you have a common access to the intellectual capital of the Department. That will again be like the legacy application process where we have hundreds of portals. Portals became cool, so everybody wanted to build one. I don't really need the Surface Warfare Officer's School in New England to be the 505th place to build another portal. What I need them to do is to focus on content. They may have content they want to deliver to students. You find that content, we'll give you the portal to hang it on as a database, as a transaction. I don't need you to be the next person to worry about a customized look and feel.
So with this portal strategy linked with the Navy-Marine Corps Intranet, linked with this web-enabling path, what you see is this change now. In the past, you were the aircraft maintenance technician out on an aircraft carrier thousands of miles from home in the Pacific Ocean and all you had to go by was your knowledge, your tech manuals, your engineering drawings, the knowledge of your supervisor, and you had to fix the plane. Now through a distance support portal, you can reach back to the engineer in Crane, Indiana who actually designed that part that you're trying to work on and have like a voice/video/data whiteboard exchange with him. So now these young men and women that you would be so proud of deployed far from home in harm's way have the power to reach back to the literally hundreds of thousands of people that are back here in the United States. And all that expertise, all that knowledge, all that intellectual power is now available to them, and that's compelling.
Mr. Lawrence: Could you tell us about your role as the chair of the Defense SMART Card Senior Coordinating Group?
Mr. Wennergren: I have a lot of great jobs, and that's another wonderful one, being the chair of the SMART card effort across the Department of the Navy. We talked about NMCI being a big change management issue because it's going to touch 400,000 people's lives. The SMART card program is touching 4 million people's lives across all of DoD. So everybody has an opinion about that.
We're really thrilled. I think there are great kudos that go out to Mary Dixon, who runs the access card office for the Department of Defense and is my partner in crime in this adventure, and the folks at the Defense Manpower Data Center who actually do the programming and such that makes this program happen, because this is truly a testimony to the power of industry/government partnerships. We knew we needed a SMART card. We knew we needed them for millions of people. We couldn't afford to build some government-only solution, and we really did get it. We worked with industry and we came up with standards where there weren't any and we leveraged standards where they were, and we did the right things. PKI digital certificates were going to live on this card, x509 version 3, standard base certificates, Global Platform, the security structure that Visa and others use, JavaCard, using all the common approaches that would make this thing be affordable and that we wouldn't have to build all the things that make it work. The x509 version 3 certificate is recognized by Microsoft Outlook. I don't have to build special stuff into every commercial product that I want to have touch this SMART card. So I think we really got it right, and we got it right because of the work of people like Mary, Ken Shefflin, Robbie Brandaway and all the other folks who do this kind of work.
We have 2-1/2 million SMART cards out there now. It is one of the largest SMART card deployments in the world, and it really is changing the way we work and live. So if you followed me around today when I go back to the office, I'll use this SMART card to get into my office as my physical access badge. When I get up to my computer, I'll use the PKI digital certificates on the computer chip on the card to get on my computer and do a cryptographic logon, much more secure than user IDs and passwords. I'll use the digital certificates to launch myself to secure websites, again getting past the idea of about 50 websites I need to go to, so I have 50 passwords I'll keep on a yellow sticky. I use the digital certificates to do digital signatures, which of course are the key to electronic business. So I'll file a travel claim this afternoon and digitally sign it. Then when I leave to go to lunch, I'll pull the card out of the computer, the screen will lock up and nobody else can be me, and off I go. So this power of having a digital key in the hands of every sailor, every Marine, every airman, every soldier, every civilian, every contractor that works on our facilities is really a key part of this vision. It's the way that we'll get PKI in the hands of everybody, and it's the way that we really get this idea about e-business and digital signatures in place.
Mr. Lawrence: What advice would you give to someone considering a career in public service?
Mr. Wennergren: I think it's a wonderful calling, and you have to want that. As I said before, I look around the nation and I see young men and women doing phenomenal things on behalf of all of us in defending this nation, and it just makes your heart glad and you feel really proud.
There's a wonderful team spirit. I think it's particularly true of the military departments. There's a wonderful team camaraderie about being part of this together. So there are some great opportunities, great opportunities for public service, and it is that idea about service to the nation that is so important. So if that's the kind of stuff that turns you on, there's are such opportunities now. The work force is aging. People are retiring. The skill sets that are needed are different. We need people who are web-savvy. We need people who are Internetmeisters. So the skill sets that we need are the skill sets that the people coming out of high school and college have and live this kind of multitasking kind of work. So there are phenomenal opportunities for those that feel that calling to help serve the nation.
Mr. Lawrence: Dave, thank you very much for joining us today. That has to be our last question, but Tim and I want to thank you for squeezing us into your busy schedule.
Mr. Wennergren: Thank you, Tim. Thank you, Paul. It's been great being here with you. I guess I could point out that if you liked anything you heard today, www.doncio.navy.mil is our CIO website and has more information about everything we talked about today. So thank you again.
Mr. Lawrence: Thank you.
This has been The Business of Government Hour featuring a conversation with David Wennergren, chief information officer of the Department of the Navy. Be sure and visit us on the web at businessofgovernment.org. There, you can learn more about our programs and research and get a transcript of today's fascinating conversation. Again, that's businessofgovernment.org.
This is Paul Lawrence. Thank you for listening.
Tuesday, February 25, 2002
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman for the IBM 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.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 conversation is with Cam Findlay. Cam is the deputy secretary of the U.S. Department of Labor. Good morning, Cam.
Mr. Findlay: Good morning.
Mr. Lawrence: Joining us in our conversation is Fred Fagerstrom. Good morning, Fred.
Mr. Fagerstrom: Good morning.
Mr. Lawrence: Cam, let's start by talking about the mission and responsibilities of the department. Can you give us an overview?
Mr. Findlay: The Department of Labor is the principal government agency that is involved with protecting workers in the work place. We have several agencies within the department such as the Occupational Safety and Health Administration which is known as OSHA, the Mine Safety and Health Administration, the Office of Labor and Management Standards which regulates the relationship between union members and their unions, and the Office of Federal Contract Compliance Programs, or OFCCP, which prevents work place discrimination. So with the worker protection focus we have several agencies.
We also are the federal agency, which protects your employee benefits. Your health care benefits if you're in the private sector, of your pension benefits, we regulate those under a law called ERISA.
We operate about $11 billion worth of job training and employment service programs to help get dislocated people back to work. Then finally, we operate the $45 billion a year unemployment insurance system, which helps people when they are between jobs.
Mr. Lawrence: You described some dollar numbers, the size of the budget. What about the number of people in the department?
Mr. Findlay: We have about 17,000 employees at 570-plus locations around the country. Our budget varies considerably year to year because it's dependent quite a bit on the unemployment rate. The budget last year, I believe, ended up being about $70 billion because the unemployment rate was relatively high. The proposed budget for fiscal year 2004 which we've just submitted is for about $56 billion. That's not because we're cutting $14 billion out of our budget, it's just because of projections as to what the unemployment rate will be, which means that there will be fewer unemployment benefits paid.
Mr. Lawrence: You described a wide range of activities going on in the department. Could you give us a sense of the types of skills the employees have?
Mr. Findlay: We have a very highly skilled and well-educated work force. We have agencies like the Bureau of Labor Statistics, which is composed of economists and statisticians. We have what used to be called the Pension and Welfare Benefits Administration and is now called the Employee Benefits Security Administration. This is the agency that protects your pensions and health benefits. That is composed of a lot of actuaries and highly trained professionals as well.
Then, of course, our OSHA inspectors, our inspectors in the Office of Labor Management Standards, and our inspectors in the Wage and Hour Division which I didn't mention before which regulates wages, overtime, and things like that, those tend to be law-enforcement types that get out there in the field and protect workers.
Mr. Fagerstrom: What are your responsibilities and duties as the deputy secretary?
Mr. Findlay: The job of deputy secretary is always a slightly undefined one because it depends somewhat on the relationship with the secretary. I feel like I have a very good relationship with the secretary, and I spend a lot of time dealing with the boring day-to-day issues that we don't want to trouble her with.
But I think formally my role is to run the budget process. As I said, we have a budget in the tens of billions of dollars, and we begin putting that budget together in the early summer, we submit it to OMB in the fall, and then work with OMB from the fall to the introduction of the budget in February.
I am in charge of our regulatory process at our department. We have a body that we call the Policy Planning Board that is all of our agency heads. We bring them together once a week, and every regulation that comes through the department, every major new policy initiative, has to come through this Policy Planning Board. I chair that board along with our assistant secretary for policy.
Then I think broadly I guess I'm in charge of the management of the department. I am the person that is supposed to be watching over the implementation of the President's management agenda, issues like financial management, competitive sourcing, human capital, e-government, those sorts of issues.
Mr. Fagerstrom: As deputy secretary, you are also a member of the President's Management Council. Could you tell us about the council and your role within the council?
Mr. Findlay: Yes. This council was an innovation of President Bush who it's often been said is the first MBA president. It brings together all of the chief operating officers of all of the departments and smaller agencies throughout the government. It's a forum to exchange best practices amongst each other on management issues, to press for management changes on things like e-government, program evaluation, and financial management. It's really been a great catalyst for this administration to take management issues very seriously.
As to my own role on the council, I'm one of probably 20 or 30 COOs on the council, but I happen to chair the E-Government Committee of the President's Management Council. What we've tried to do with this committee is to bring some focus and coherence to all of the vast amounts of IT spending and planning that is going on throughout the federal government.
In particular, there are 24 e-gov initiatives, things like govbenefits.gov which is one site where you can go and look up all the benefits that might be applicable to you. There's recreation.gov where you can register to stay at a lodge in Yellowstone, or you can get a permit for some other federal facility some place else in the country.
We have these 24 e-government initiatives, and it frankly was kind of a hodgepodge at the beginning because they were all off doing their own thing. They were being forced to beg departments for money and to plead with departments to shut down duplicative investments. So this committee was formed in order to bring some order to this process.
Mr. Lawrence: Just to follow-up on that, how would they do that? As I understand it, they have no real authority to do the kinds of things. So how would actually some of those things get done?
Mr. Findlay: All we've got is moral suasion backed up by the President's great desire to see this work. It was tricky at the beginning because what happened was that OMBs in past years would approve budgets, and they would say to the Department of Veterans Affairs here is your X million dollars for a project to do this IT investment. Then after we set up the e-government initiative that was supposed to say put all government benefits on the same site, we were in the position of OMB having to go back to the Department of Veterans Affairs and saying, you thought that was your money. It's actually money we're going to use for this e-government initiative. So please give us the money back. And by the way, please stop the spending that you were planning to do. You can imagine that that caused a lot of friction amongst agencies and between the agencies in OMB.
So what we've tried to do is to get all the involved parties in a room together and agree that a cross-agency project is a good one, and then agree as the President's Management Council on how it's going to be funded and how we're going to shut down duplicative investments. So far it's actually worked pretty well.
It is still a work in progress, and I would be lying if I said it's been absolutely smooth sailing, but I think the formation of this E-Government Committee has made a big difference.
Mr. Lawrence: Tell us about your career prior to coming to the department.
Mr. Findlay: Well, I graduated from law school in 1987. I came to Washington to clerk for a judge at the D.C. Circuit, and then I did a second clerkship at the Supreme Court. When I came off that clerkship, all of my colleagues were going off to law firms, and I decided to enter public service. So I went to work as the special assistant to the secretary of transportation who at that time was a guy named Sam Skinner. I was in that job, or actually I became counselor to the secretary. Then in 1991, Sam Skinner was named White House chief of staff, and I went over with him to the White House as deputy assistant to the President and counselor to the chief of staff, thereby proving the rule that the longer the title, the less important your job.
I was at the White House through the very difficult year of 1992 when we were trying to get President Bush reelected. Then like everyone else that worked at the White House, had to look for a job in the private sector in 1992.
So I have been trained as a lawyer, and I went back to Chicago and went to work at the law firm of Sidley & Austin and spent almost 9 year there until I got the call to come out and be deputy secretary of labor.
Mr. Lawrence: It's time for a break. We'll stop on that point. Stick with us through the break and come back as we continue our conversation with Cam Findlay of the U.S. Department of Labor. What are the different programs at the department and how are they changing? We'll ask Cam to tell us about these programs when The Business of Government Hour continues.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Cam Findlay, the deputy secretary of the U.S. Department of Labor. Joining us in our conversation is Fred Fagerstrom.
Cam, let's find out a little bit more about the Department of Labor. We know the department is organized into major program areas. Could you tell us more about the Employment and Training Administration?
Mr. Findlay: The Employment and Training Administration, or ETA as we call it, is our largest agency. Its principal goal is to help dislocated workers. It does this by running $11 billion or so of job training and employment service programs that are operated throughout the country through one-stop employment centers. Then it also runs the unemployment insurance system.
ETA has some dog and cat roles. It also has a role in labor-based employment programs, things like that. But basically it runs our training programs and the unemployment insurance program.
Mr. Fagerstrom: Speaking of that, what about the Employee Benefits Security Administration, what does it do? And why was its named changed recently, last February, from the Pension and Welfare Benefits Administration?
Mr. Findlay: We changed the name of the Pension and Welfare Benefits Administration to better reflect what its actual duties are. When people heard the name welfare, they assumed that it was an agency that somehow dispensed government benefits. But in fact, this is an agency, as I mentioned earlier, that regulates the security of employee benefits, principally pensions, 401(k)s, plans like that, and then also all private-sector employer-provided health plans. So we thought the idea of the Employee Benefits Security Administration better guided what the role of that agency is.
This agency, EBSA as we call it now, is really a terrific agency. They do a great job of protecting Americans' pensions and health care benefits with a fairly lean staff. They routinely recover $6- or $700 million a year in pension benefits for workers, and they are going to be beefed up in the next couple of years to do an even better job. We've asked for a 10 percent increase in their budget for fiscal year 2004 so that they can have more people on the ground investigating pension plans and health plans.
Mr. Lawrence: Are there any management challenges with changing an organization's name?
Mr. Findlay: Principally, business cards and stationery, I think. It was something that we were able to do just a secretarial order, we didn't need legislation to do it, but we were happy to be able to better get the message out about what this agency does.
Mr. Lawrence: In your opening description you talked a lot about what the department does in terms with regards to occupational injury and illness. I wonder if you can take us through the different organizations and how they all work together, how you pull that together.
Mr. Findlay: Yes, there are some synergies, particularly between OSHA and the Mine Safety and Health Administration which regulates employee safety in mines, and both agencies have done very well in the last couple of years.
As for OSHA, the most recent statistics show that employee injuries and fatalities have continued to decline for several years under our stewardship. As for the Mine Safety and Health Administration, or MSHA, we had a record low number of fatalities last year in mines in the United States. And of course, we had that very dramatic rescue of nine miners at Quecreek in Pennsylvania where MSHA really lead the effort along with the Commonwealth of Pennsylvania. So we are very proud of those agencies.
Our other worker protection agencies are perhaps less well know, but we have the Office of Labor Management Standards which enforces requirements that unions file financial statements with the government, and also regulates union elections and has other functions like that. Its basic function is to ensure that union members' rights are fully protected within unions.
Then we have the Wage and Hour Division, which is responsible for ensuring that people are paid the minimum wage and that people are properly paid overtime. Then we have this Office of Federal Contract and Compliance Programs, which enforces the executive order that requires nondiscrimination in the work place of all federal contractors.
Mr. Lawrence: One can't help but think that when you describe those missions of a time in our history, say 50 years ago, when many of these were very pressing and important issues. One senses that over time the work place has gotten safer or there is less effort to bypass the law. Is that perception true, or are these things still aggressively out there?
Mr. Findlay: I think that is true, Paul, and it's one of the things we're trying to do at our department. We have to recognize that our department was established in 1913 and many of the laws that it enforces were enacted in the '30s, '40s, '50s, or '60s. The work place has changed so much since then, so our constant challenge is to update all of our laws, our regulations, our policies, and our programs to take account of the changes in the work place.
You mentioned OSHA. I think it is true that most employes want to protect their employee's safety. It's in their interests to do that. So OSHA wants to add to its enforcement activities what we're calling compliance assistance. We want to get the word out to employers to help them understand how to avoid injuries before they occur rather than fine employers for injuries after they occur. So OSHA has been very aggressive in getting its information up on the web, in holding seminars around the country, in entering into partnerships with trade groups and employers, and the proof is in the pudding: we believe that injuries and fatalities are going down.
Mr. Fagerstrom: Another whole area within the Department of Labor is the Bureau of Labor Statistics. What is that responsible for, and how do those activities fit within the department?
Mr. Findlay: The Bureau of Labor Statistics is one of the jewels of the federal government. It's an agency that is responsible for compiling a whole number of statistics about what is going on out in the work force. Most famously, on the first Friday or every month, the Bureau of Labor Statistics issues the unemployment rate. One of my duties as deputy secretary is to have the Commissioner of the Bureau of Labor Statistics come to my office every first Friday of the month at 8 o'clock and walk me through the latest employment statistics.
Sometimes it's good news as it was this past month, and sometimes it's less good news, but it's always interesting to guess at what the unemployment rate is going to be before everyone else finds out.
The Bureau of Labor Statistics has a whole number of other programs. It measures the consumer price index, the producer price index, productivity, things like that. It's a terrific agency that does excellent work.
Mr. Lawrence: One of the things we noticed when we were studying the department is you have the Center for Faith Based and Community Initiatives. I wonder if you could tell us about that?
Mr. Findlay: Yes, the Department of Labor is one of five or six federal agencies that was required by executive order to set up a Center for Faith Based and Community Initiatives. The mission of this center, which we're very excited about is essentially to remove barriers to faith based and community organizations to participate with the federal government and to participate in the federal government's programs.
At one level, this is just a matter of eliminating unnecessary and artificial restrictions, say, in grant proposals. We don't want to shut out faith based groups simply because they're faith based groups, and we've had a lot of success in that and have been able to get out some grants.
Then the second part of the job of this center is to get out there and gin up interest in the faith based community in our programs. We have a lot of pilot programs around the country. We've got one called Ready for Work in Jacksonville, Florida, that is linking returning offenders coming out of prison with our employment and training system. We've got another program with public-private ventures that teams up with our Job Corps Centers which are job training centers to do mentoring in Job Corps Centers. So we're very excited about the work of this part of our department. And we were very proud that we were the first agency to get out some grants to faith-based organizations.
Mr. Lawrence: When you think about the broad range of programs we've been talking about, how do you manage them all in terms of the scale? Let's take something like communication. How do you get a relevant message out to all of these people?
Mr. Findlay: It is a challenge in a department as big as ours with so many employees and so many locations. One of the things we always hear from our stakeholders is that we may be saying one thing in Washington, but at the district office in Pocatello, Idaho, they're not hearing the message. I'm making that up. I don't want to say anything bad about the district office in Pocatello, if we do have one there.
But we have undertaken a considerable effort to communicate with our employees. The secretary sends e-mail messages all the time to employees on issues of concern, and any major new initiative she'll make sure to announce them to that way. We do web-casts that all of our employees can pick up so that if we're holding an event in the Francis Perkins Building, our headquarters in Washington, many times all of our employees all around the country can log on and watch the event.
Several of our assistant secretaries and deputy assistant secretaries and I have made it a point to try and get out and hit every regional office so that our goal is that every regional office will have a senior department official visiting every quarter.
Mr. Lawrence: It's time for a break. Rejoin us in a few minutes as we continue talking about management with Cam Findlay of the U.S. Department of Labor. How is Labor doing with the President's management agenda? We'll ask Cam for his insights when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Cam Findlay, deputy secretary of the U.S. Department of Labor. Joining us in our conversation is Fred Fagerstrom.
Mr. Fagerstrom: Good morning. Can you tell us about the department's four strategic goals?
Mr. Findlay: Yes. When I arrived at the department we had three strategic goals, a prepared work force which reflected our mission of training dislocated workers, a secure work force which involves our mission of providing unemployment insurance principally to workers, and the third was quality work places. That meant safe work places, work places free from discrimination, work places where you were paid a fair day's wage for a day's work. Those are obviously very important goals, and we are working very hard to achieve them.
But we also decided to take a look when we were required to develop a new strategic plan at a new goal, and the new one we came up with after a lot of semantic back and forth amongst the senior staff of our department was a competitive work force. The idea there is to deal with the changes that are taking place in the global economy.
It's not enough to be trained once, you may have to be retrained to deal with the dynamic global economy. We didn't want to leave in place particular regulations, laws, or policies if they weren't really relevant to the 21st century economy. So the idea of this last goal was to force our department to ask itself on a continual basis, Is this the best way to be carrying out the mission of the department? Could we regulate in a different way? Could we protect employee safety in a different way? Could we protect employee benefits in a different way? So that was the idea behind adding this fourth goal, and we're very with how our strategic plan has worked out, and we intend to vigorously go after all four of our goals.
Mr. Lawrence: Could you tell us more about the department's Management Review Board?
Mr. Findlay: Yes. We set up something we call the Management Review Board soon after I arrived to put in place a sort of coherent and across-the-board approach to the management issues facing our department. The Management Review Board is chaired by our assistant secretary for management, Pat Pizella, and it brings together all the agency heads within our department. We deal with issues like IT, information technology, issues, common human capital issues, competitive sourcing. It's really a department tool to implement the President's management agency and to deal with all the management issues that arise in a department like ours.
Mr. Lawrence: Does it have the authority to make decisions, or is it more of this moral suasion of getting people on the same page?
Mr. Findlay: I think it has the authority to make recommendations to the secretary. Ultimately, the secretary is the final decision maker on all these things. I'll give you an example. We have a variety of e-mail systems at our department, an almost preposterous variety of different systems, different name conventions and so forth. So one of the things we decided to do early was to convert to a single e-mail system that would make it secure, it would make it easier to communicate in the department, and it would take on a name convention so that it will be easy to figure out what someone's e-mail address is.
A part of our department, the Employment Standards Administration, which has the Office of Labor Management Standards and a couple of other departments, Wage and Hour, and they have this hilarious name convention, that you use the initials plus the word fenex2 (phonetic) at dol.com or something. So you could never figure out how to e-mail somebody in that part of our department.
So we took the issue to the Management Review Board after a lot of vigorous discussion, a lot of very interesting issues, for instance, BLS, the Bureau of Labor Statistics, wanted to keep its own separate e-mail system because it used it to collect information from the field. After all that discussion, we decided to go with a common e-mail system and we made the recommendation to the secretary to essentially implement it throughout the whole department.
There were, frankly, parts of our department that did not want to implement a common e-mail system even after the discussion was over. But imprimatur of the Management Review Board really did help seal the deal.
Mr. Fagerstrom: You mentioned the President's management agency. How has the department done in achieving the goals of the President's management agenda?
Mr. Findlay: I'm proud to report that the Department of Labor has the best scores in the federal government on the President's management agency. There are five initiatives under the President's management agency, and on status we have got yellows on four and red on one. On progress we have green on four and yellow on one. The outlier in each case is competitive sourcing. It is an area where no department in the entire federal government has gotten a yellow score for status. So we're in good company on that area, but we still want to do better.
Mr. Lawrence: Any particular highlights or things of note through the scorecard?
Mr. Findlay: Yes, I think the places where we made improvements are worth mentioning. In financial management, we had had a red score when the OMB management scorecard was first developed. We asked OMB why did we have red, and they said you don't have a good plan in place for preventing erroneous payments in the unemployment insurance system and it's costing the federal government billions of dollars a year.
So I came back to our CFO, Sam Mock (phonetic) and our head of the Employment and Training Administration, Emily Deroko (phonetic), and said let's put together a plan for dealing with this erroneous payment problem. We were able to put together a plan that assisted states in ferreting our erroneous payments by getting access to various databases, and with that improvement, OMB took us from a red to a yellow.
We've had similar successes in some of the other areas. We're one of the leaders in e-gov because we have been the managing partner of perhaps the most successful e-gov initiative, govbenefits.gov. I would encourage all our listeners to log on. It's a really great site. It is a citizen-centered site in the sense that you don't have to guess at what government department to go to find out what benefits you're eligible for. What you do is you go to the site, it asks a series of questions about you, and then after you've gone through three screens, it will tell you all the government benefit programs that you might be eligible for, how to apply, and who to contact.
That was one initiative that we led, and we were very proud of it. So we've made a lot of progress in the e-gov area as well.
Mr. Lawrence: When you think about moving the scores from red to yellow, what are the management lessons learned in terms of the energy needed to effect those changes?
Mr. Findlay: I think it varies. There are some problems that are almost insoluble in the short-run. We have financial systems that were developed many years ago and really are past their prime. So if we decide today we want to upgrade those financial management systems - or a better way to put it is we decided last summer to do that when we were putting together the fiscal year 2004 budget. So we sought $20 million in the fiscal year 2004 budget to get that work done.
It will be a 3-year project, so it's something that will not be done until 2006, 3 or 4 years from now, and only then will we really have the financial system that we need to manage the department the way the private-sector enterprise might be managed. There are real obstacles in that area.
As I mentioned, the erroneous payment issue under UI was just a matter of asking the question, How can we solve this problem? They came up with some fairly simple fixes pretty quickly. I think it varies initiative to initiative.
Mr. Lawrence: One of the things we were noticing in the department is the Center for Program Planning and Results. I'm curious about that, especially as you think about performance-based management initiatives.
Mr. Findlay: In this past year we set up this new Center for Program Planning and Results in the office of the assistant secretary for management. This center is in charge essentially of two things, the GPRA process, the Government Performance and Results Act, and then also our progress on the President's management agency. This is the part of our department that goes out to the agencies and encourages them to make their GPRA goals much more outcome oriented as opposed to input oriented. It's the part of the department that tries to come up with good information and good measures for all of these metrics.
Then it's also the part of the department that puts out our annual report. Every 6 months or so I work with that center to sit down with each of our agency heads and assess their progress towards their GPRA goals and their President's management agency initiatives. I think it's been a very useful thing to do because in the day-to-day work of government, it's very easy to get fixated in what was in the "Washington Post" that morning, and you need to have the long-term focus on management issues.
Mr. Lawrence: That's a good stopping point. Some back in a few minutes as we continue our conversation about management with Cam Findlay of the U.S. Department of Labor. What does the future hold for the department? We'll ask Cam for his perspective when The Business of Government Hour continues.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Cam Findlay. Cam is the deputy secretary of the U.S. Department of Labor. Joining us in our conversation is Fred Fagerstrom.
Cam, can you tell us more about the mission of the secretary's 21st Century Work Force Initiative?
Mr. Findlay: Yes. One of President Bush's and Secretary Chou's biggest initiatives since we arrived at the Department of Labor is to focus all of our efforts on the work force of today rather than the work force of the past.
I mentioned earlier that our department is almost 100 years old, and many of the statutes that we administer are decades old. Many of the things that we do have not fully taken account of the way the work place has changed in recent decades. The work place is much more diverse than it used to be. We have a different workday, a much more 24/7 orientation. As I mentioned before, many employers have stepped up to the plate already and begun to protect their workers on their own, so we wanted to take a look at everything we do and see whether it's relevant to the 21st century.
So President Bush's executive order set up in our department an Office of the 21st Century Work Force to focus a spotlight on these kinds of trends, and it has done a great job in highlighting some of the trends out there. I mentioned before that there is diversity in the work force.
Another thing is that there's a skills gap out there. There are a lot of people out of work still, but there are a lot of jobs that are being advertised in the paper every day that there aren't enough good people to apply for, so we want to close that skills gap. So this 21st century office has held a number of events such as a 21st Century Summit that the President and Alan Greenspan and a number of leaders came to address. It sponsored the Saver Summit, which was intended to focus on the need for all employees to begin think about. And it held a Women Entrepreneurship Conference last year at which the President spoke that was intended to focus on the issues that face women small-business owners, which are an increasing segment of the economy.
More recently, the office in conjunction with the American Enterprise Institute held a conference on productivity and how we can increase productivity. This is in line with that final strategic goal that I mentioned, a competitive work force, because ultimately the way we increase our incomes and we increase jobs is to make workers more productive.
So this 21st century office has really been there to act as a catalyst for us to all examine our premises as to whether we're doing our jobs in a way that's relevant to today's workers.
Mr. Fagerstrom: Would you reflect on the recent rescue of the nine miners and any lessons learned from that?
Mr. Findlay: That was probably the most emotionally satisfying thing that's happened since I came to the Department of Labor. I got a call from the head of the Mine Safety and Health Administration late one night and was told that nine miners were trapped underground, and while he was optimistic as one should always be, he made clear that this was a very difficult situation.
Then we got about 50 people from the Mine Safety and Health Administration out there to Pennsylvania very quickly. They were able to move very unique equipment out there very quickly. But even with all that effort, I think there was always some doubt that we would get those people out alive.
When I woke up that weekend morning and saw the pictures of the miners being hauled out of their mine in that yellow capsule, I was happy as I can remember being since my marriage or the birth of my children. It was very exciting.
We've had the miners and their families to our department, we brought the yellow capsule that you saw on TV in for the event, and it was very, very special. I think what it does show is that the sort of partnerships that MSHA was able to form with the states can be very effective. MSHA provides grants to states for training, and then it has this operational role of miners. Ou people really came through, and we were as proud of them as we could possibly be.
Mr. Lawrence: When you look out to the future, what are the next challenges on the horizon for the department?
Mr. Findlay: I think out biggest legislative challenge is to obtain reauthorization of the Work Force Investment Act. This is the law that authorizes all of our training programs. It expires this year, so we've got to reauthorize it.
The President has just put forward his proposal which would eliminate some of the silos in the programs, change the governance structure that has prevented money from getting to people that need it, and try to increase the role of employers in the work force investment system. We think that latter point is very important. Employers are the people that provide jobs. That's a tautology, but we have to always remember that because if employers are not part of the system, then we're not necessarily training people for the right things, we're not aware of what jobs are out there, and we're not making the connection between employers and dislocated workers.
Regulatorily, we have a very full regulatory agenda. We are updating the white color exemption rules under the Fair Labor Standards Act. These are the rules that determine whether you're a blue collar worker that gets paid overtime or a white collar worker that doesn't. These regs were last significantly changed in the '40s and early '50s, and so they're badly in need of change. They still provide detailed guidance on jobs like Linotype operators, straw bosses, gang leaders, and leg men. I don't know what any of those things are, but we don't need rules that apply to them anymore.
Then we have several other regulations. We have proposed to update the forms that unions use to file their financial statements with us. We have put out a rule that would enhance the integrity of the unemployment insurance system by withdrawing permission that was given out a few years ago that states could use money from their unemployment trust funds to pay maternity leave, and we've got a couple of other major rules out as well.
Then I think more broadly, we want to continue the management reforms we've been pursuing at the Department of Labor. We have a lot of work to do in the financial management area, a lot of work to do in competitive sourcing, and still a lot of work to do in human resources. We we'll be pursuing those things.
Mr. Fagerstrom: You've talked about a number of things and challenges for the next few years. What's your vision for the agency over the longer term, the 5- and 10-year horizon?
Mr. Findlay: I hope that we will be very bold in terms of thinking about how our agency relates to the 21st century work force. I know I've said it a couple of times, but this is a very old agency. Unlike most of the other domestic agencies, we are not a "Great Society" agency. We're not even a "New Deal" agency. We're really a turn-of-the-century agency. Many of our laws, the Fair Labor Standards Act was passed in 1938, even recent laws like the Occupational Safety and Health Act are a generation old now. I hope we will be bold in terms of looking to see if there are any changes that need to be made to those laws, to the regulations under the laws, to opinion letters and things like that, so that we can really make our department relevant.
I've often remarked that the Department of Labor seal reflects the anachronism of some of our programs and policies. It shows as the symbols of our work force an anvil, a plow, a mill wheel, and a steamship, and those are really 19th century symbols, they're not 21st century symbols. We've got to make sure that our department is more up to date than its seal is.
Mr. Lawrence: I'm curious, as you think about your career, what advice would you give to a person interested in a career in public service?
Mr. Findlay: I think the main advice I'd give people is that it's important to be nimble and flexible, and that it's impossible to plan your career in a linear way. I think my career offers a good example of that in that I started out of law school as a law clerk, and it's the sort of job where typically would go be an appellate lawyer some place, and found myself with a great opportunity to work for a cabinet department that I didn't know much about. I went there, and then through pure chance found myself at the White House.
I couldn't have planned that progression, but I just did things that were interesting to me, and somehow things have worked out reasonably well. I guess I would just say to people don't try to look 25 years ahead and plan everything out. Be flexible, because in today's economy people don't stay in jobs for their lifetimes anymore.
Mr. Lawrence: Cam, I'm afraid we're out of time. Fred and I want to thank you for being with us. Throughout the conversation you mentioned a couple websites. Did you want to remind the audience?
Mr. Findlay: Yes, let me first give the Department of Labor's website which is www.dol.gov. That would be a good place to learn more about our department. But I also mentioned the govbenefits.gov website. It's just as it sounds, it's www dot g-o-v-b-e-n-e-f-i-t-s dot gov.
Mr. Lawrence: Thank you. This has been The Business of Government Hour featuring a conversation with Cam Findlay, the deputy secretary of the U.S. Department of Labor. 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. This is Paul Lawrence. Thank you for listening.
Friday, January 31, 2003
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman of The IBM Endowment for The Business 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.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 conversation this morning is with Samuel Bodman. Sam is the Deputy Secretary of U.S. Department of Commerce.
Mr. Bodman: Good morning, sir.
Mr. Lawrence: And joining us in our conversation is Tom Romana (phonetic). Good morning, Tom.
Mr. Romana: Good morning, sir.
Mr. Lawrence: Well, Sam perhaps you could give us some context. Let's begin by finding our more about the Department of Commerce. We know it's made up of a number of bureaus that have a wide range and functions. So, perhaps you could describe the overall mission.
Mr. Bodman: As you have already suggested, the Department's mission is broad and the responsibilities set that we is very diversed. Secretary Evans, my boss, and I really see our role as stewards for the free enterprise system. That's how we think of it. We both come from the private sector and that's how we think of this job.
Our mission is quite simple. To be an advocate for and a facilitator of business in the United States and between the United States and the World.
Our priorities include promoting free and fair trade practices. Encouraging economic development in distressed communities. Protecting intellectual property at the Patent Office which is part of our responsibility. And improving the quality of life and productivity of our economy through research. There is as we will cover later on, there are the research activity of the Department is a very important part of it. We have a varied web site, www.commerce.gov that is consistently one of the top three web presences across all of the Government.
Mr. Lawrence: Can you give us a sense in prospective in terms of the number of employees and the size of the budget in the Department of Commerce?
Mr. Bodman: We have a budget of about $5 billion dollars which in the non-Washington world is a great deal of money. Among the departments here in Washington it's on the smaller size. But we have 40,000 employees, close to 40,000 employees that many of whom are here in Washington but a significant number are scattered throughout the United States as well as around the World.
Mr. Lawrence: Is there a history of how the Department came to have so many varied functions?
Mr. Bodman: Well, I guess the best way to answer that is to go back and look a bit at the history of the Department. We began as the Department of Commerce and Labor. Both departments were together. It was formed in 1903 almost a hundred years ago. In fact, this month will be, the month of February will be our hundredth anniversary. And, we're going to be celebrating that during the next few weeks. Labor and Commerce became separate departments ten later in 1913. Commerce and labor were the seventh department formed as the Government was taking shape at that point in time.
The Patent and Trademark Office was formed outside but was transferred to the Department of Commerce from Interior in 1925. The Economic Development Administration, part of our work with the outreach to communities in the U.S. was created in 1965. NOAA which is almost now half of our budget, National Oceanic and Atmospheric Administration was formed in 1970. And, that joined the Department. And, TIA which is our activity for overseeing the telecommunications spectrum within the Government. We represent the Government in discussing the management with the FCC was created and developed also during the 1970's. International Trade Administration formed in 1980. So, all of these components which are thought of as activities of the Government which aid the development of free enterprise of business and the (inaudible) of Commerce were all added in over this century.
Mr. Lawrence: Sam, can you tell us a little bit about your roles and responsibilities as the Deputy Secretary?
Mr. Bodman: Tom, I'm the really thought of I think it's fair to say as the Chief Operating Officer. In fact, earlier in our tenure all the deputies were summoned over to the White House. The President met with us in the Roosevelt Room. And, he instructed us that you are the Chief Operating Officers of your department and your job is to keep the day to day activities of the department running effectively and smoothly thereby liberating the Secretaries of the various departments including Commerce to spend on in speaking out in working with the President on his priorities.
The Chief Operating Officer, at least as I think about it, kind of defines his job as the compliment of the things as the Secretary wants to get done. Our Secretary, for example, has concluded that he wants to spend a large part of his time the International Trade than on the economy. So, he works extensively with Secretary O'Donnis (phonetic) in the International Trade Administration. I tend to spend most of my time with the many other bureaus within the department whether its NOAA or the Patent Office, EDA, and so forth. And, so, it's a matter of splitting up the load. I also spend time working with my counterparts, the Deputies of the other departments in implementing the President's Management Agenda.
Mr. Lawrence: Could you tell us a little bit about your career before coming into this position and maybe think a little bit about what in your past best prepared you to take on the job?
Mr. Bodman: I'm a chemical engineer, Tom. My training -- I was educated first at Cornell then I got a doctorate at MIT. And, I spent the first seven years of my professional life as a teacher. I was a professor of engineering at MIT. I started doing some consulting work in the venture capital industry in those days which was a brand new field. That led me to leave teaching in about 1970 and I resigned my professorship and took a job with what was then a very small company in Boston with 15 employees.
That company became Fidelity Investments which now has tens of thousands employees and is spread around the world. I was there 17 years. Over time I became President and Chief Operating Officer of that company and oversaw the management of neutral funds, the brokerage business, pension fund management and the like.
In 1986, I left Fidelity and became Chairman and Chief Executive Officer of Cabot Corporation, a Boston based Fortune 500 company engaged in those days in oil and gas and chemical manufacturing and specialty materials. We spun off the oil and gas business and Cabot continues as a chemical and specialty material business.
As to what prepared me best for this job, I would say first being a Chief Operating Officer at Fidelity which I was for almost a decade helped me take on this assignment here because I understood the need to conform my responsibilities, to conform my activities, perhaps I should say to those of the Secretaries, in that case, the Chairman at Fidelity, so as to best provide for a unified and effective partnership.
At Cabot, I spend much of time there as a Chief Executive looking at and visiting other nations and making investments in countries around the world were Cabot had never operated. Cabot operates today some 45, 46 chemical plants in 25 countries. Five or six of those countries were new or done on my watch. So, I spent a lot of time negotiating terms of new plants and new facilities abroad and that's helped frankly in my role in the department in dealing with the ministers of trade and commerce from foreign who visit and sometimes the Secretary, if she is in town, sees those and in many instances I see them because I tend to spend more of my time here in Washington while the Secretary is on the road.
So, that one at Fidelity learning the ends and outs of being a Chief Operating Officer helped in to understanding how to deal with foreign governments was something I learned a lot about at Cabot.
Mr. Lawrence: You're working in the public sector but it's clear that you have a great deal of private sector experience. How would you contrast the two sectors in terms of culture and management styles?
Mr. Bodman: Well, there's much greater diversity in the private sector as to culture and management style. Some companies are quite formal and structured. Other much more informal. Cabot was a company that I worked hard on changing during the time that I was there. The company I inherited was a very formal high structured one. I felt we could make better decisions and run the company more effectively by decentralizing business activities causing decisions to be made locally and to make it a more informal organization.
The people operating, for example, on a first name basis. The government is a much formal place to do business and work. I account for that for two reasons. One it is a large, a very large organization. Millions of people working in the government. Therefore, it's important I believe to have a certain degree of structure to maintain an effective organization. And, a big fraction of government employees are military folks. And, obviously the military has its own very structured way of doing business, a way of functioning. The President is the is in effect the Chief Executive Officer of not just the civilian government but of the military. And, so, I think some of the formality of the military spills over in the way we do business. People are addressed by title and by position much more in the government than my experience in working the private sector.
Mr. Lawrence: This is a good stopping point. We got to go to a break. Rejoin us in a few minutes as we continue our conversation with Sam Bodman with the U.S. Department of Commerce. Do you know what the American jobs and American values initiative is? You'll find out when we ask Sam when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. This morning's conversation is with Samuel Bodman. Sam is the Deputy Secretary of the U.S. Department of Commerce. Joining us in our conversation is Tom Romana.
Mr. Romana: Sam, could you tell us more about the American jobs, American values initiative at the Department of Commerce?
Mr. Bodman: Sure, Tom. The phrase "American jobs, American values" is a theme that we developed with the intention of capturing all that the Commerce Department represents and promotes. There are five component ideas that are associated with the theme: opportunity, innovation, entrepreneurship, trade and stewardship. These are really the core principals of the Commerce Department. These are the things that we believe in as I mentioned previously we view ourselves as the home of private enterprise within the government. And, this theme "American jobs/American values" is intended to really reflect those principles.
Mr. Romana: You mentioned earlier the involvement of the Department in our economic system. What's the Department doing to promote economic development?
Mr. Bodman: We undertake economic development in a whole variety of ways. A major priority is promoting job creation in trying to grow the economy. Especially these days, both the President and Secretary realize that we've got too many people out of work. And, that jobs are really at the heart of the President's economic growth plan that he has proposed to Congress. That's exactly why the President pushed for extended unemployment benefits just a couple of weeks ago. That's why the President proposed the innovative reemployment accounts concept for helping those who are out of work find -- develop ways of both training themselves for new jobs and helping pay some of the expenses to help them get new jobs.
The economy is growing but just not fast enough to produce the jobs that the Administration would like to see. And, we believe that the President's plan will put money back in the tax payer's wallets and will encourage small business to grow to hire the people who are looking for work.
Just a week ago today, I as in Seattle and while I was there visited a center that they run in the city of Seattle. Actually in Belleview, outside the city of Seattle that's state run. And, I met with two different groups of about 35 folks who were looking for work. And, talked to them about the President's plan. Listened to them to understand what their problems were and it was quite a fascinating experience.
The Secretary spends these days reading the bulk of his time traveling our country and listening. So, this is one experience I had. I tend to spend more of my time in Washington looking after the day to day operations while he's on the road. But, when you get out of here and you get out and talk to people who are really feeling the pain of the levels economic uncertainty that we're hearing about, reading about, it's revealing and an important process.
Mr. Romana: How does the Economic Development Administration factor into this part?
Mr. Bodman: We believe that successful economic development investments attract private sector capital. EDA as we call it, the Economic Development Administration's job is to foster a positive community environment where the private sector will risk capital investment to produce goods and services and to increase productivity thereby providing high skill, high wage jobs for the citizens in that area. In other words, their job is to invest sometimes in infrastructure, sometimes in other kinds of facilities that will in turn lead to investment from the private sector. We have a very capable person running that department who has done this job on a local level in Arlington, Texas. And, he came up to look after this and he has applied many of entrepreneurial principles that he put in place down there across the country and it's had quite an effect.
Mr. Romana: Can you tell us more about the National Oceanic and Atmospheric Administration and the work that they do and how that fits into the overall mission for the department?
Mr. Bodman: Well, the National Oceanic and Atmospheric Administration are NOAA. NOAA as we call it, is dedicated to enhancing economics security in our national safety by doing a lot of research, by doing weather prediction, working on forecasting other climate related events and by monitoring and protecting our Nation's marine assets. Both coastal resources as well as marine resources out in the deeper waters.
NOAA, from a budget standpoint, and we tend to look at things from a budget standpoint often here in Washington, is something over half of the department's budget. So, it's close to $3 billion dollars that spend in these activities.
The National Weather Service is part of NOAA. The National Marine Fisheries Service is part of NOAA.
NMFS as we call it, National Marine Fisheries Service is responsible for studying and understanding the fish population, the various fisheries, setting rules and regulations that govern the way fisherman are allowed to exploit these resources. So, fishing is about a $50 billion dollar business in America. And, so, you can see that it has direct impact on a very important economic sector.
The weather affects everybody. So, the NOAA really covers a very wide range of activities. Among other things is the center the government's work on global climate change or so (inaudible) issues related to global warming. That's undertaken in many departments. But, the center of it is within NOAA.
So, this activity covers a whole range of things and all of them bear on the economy although almost all of them are also very in a varied important dose of science and research that are part of it. I might add that as a fill-up that the website that they have www.noaa.gov which is part of Commerce, is really -- that has extraordinary level of activity. Parts has the weather service on it and its measured by the number of hits per day. It's one of the business websites that exists.
Mr. Romana: Earlier when you described the various functions of the Department, I couldn't notice emphasis on technology, patents and trademarks, technology administration, the National Telecommunications and Information Administration. So, I'm curious in thinking about things like the internet and wireless technology. What's the relationship between those things and those parts of the Department of Commerce?
Mr. Bodman: Because the Department of Commerce is so heavily devoted to science, to engineer, to research, the Secretary really had sought me out to take on this job because of my background in science and technology. You'll find that research is a major part of the vast bulk of things that we do at Commerce. I have just spoken about NOAA and the research activities there.
We have responsibility also for the National Institute of Standards and Technology or NIST as we call it. Together NOAA and NIST make up about two-thirds of our budget. So, you get a sense of the importance that we place on research. Both of these are very heavily research oriented activities. NIST, scientists develop and promote measurement. NIST use to be called the Bureau of Standards back when I was in the university. And, it's a major source of physics and chemical research carried out in the public interest. NIST scientist set the standards. They set the technology to enhance productivity, to facilitate trade, to improve our quality of life. And, this is really, I would use the term this is big league science. We have had two Nobel Prize winners in physics who worked for NIST awarded in the last five years.
Mr. Romana: Sam, can you talk a little bit about some of the programs and goals of the International Trade Administration?
Mr. Bodman: International Trade Administration or ITA as we call it. The first part of ITA's activities that I would mention is the U.S. Commercial Service which is an agency within ITA that helps U.S. companies particularly small and medium size businesses make export sales. That's really their mission.
The Commercial Service is a worldwide network of some 18,000 employees. Those employees work throughout the United States in 105 different export assistance centers throughout the United States. We also maintain and operate 151 international offices in 83 countries. Each export assistance office and each Commercial Service office is operated by Commerce employees. And, they together represent in these 83 countries some 96% of the world's market for exports. So, we have people out covering all manner of business activities.
Last year the agency, that agency, the Commercial Service facilitated as we calculated over $22 billion dollars in exports.
The import administration, on the other hand, deals with the negative side of things. It deals with the times when there -- we believe, they believe there are unfair foreign pricing or government subsidies for foreign companies that are exporting to our country. And, so, the import administration makes judgments, enforces the laws that we have on the books for dealing with these issues. And, is -- has been very effective during this past year, for example, in the steel area where there have been steel tariffs put in place. It was really the input administration that did and is continuing to do the work in analyzing and work in steel markets.
And, lastly, Market Access and Compliance or MAC works on specifically opening markets for American firms and workers and accesses the degree to which foreign nations are complying with the trade laws. We find that at times, for example, in some countries there pirating going on of CDs or of other software types of products. And, our folks of MAC are there and on the spot, evaluating it and working hard. Our leader in that area, Secretary Lash, Bill Lash, is in visiting a country where he felt there were unfair practices. So, we've been -- the post government argued with him so he went out to the local shopping mall at his own expense and bought up 20 to 30 CDs. Brought them back. Made a big deal about it in the newspaper. The government got so upset that they introduced a bill in their legislature to prevent Bill from coming back in the country. So, we have to say we're proactive might be an understatement.
Mr. Lawrence: Well, that's a good stopping point. Rejoin us in a few minutes when we continue our conversation about management with Sam Bodman with the U.S. Commerce. How is Congress handling the issues of the President's Management Agenda? We'll ask Sam when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and today's conversation is with Samuel Bodman. Sam is the deputy secretary of the U.S. Department of Commerce. And joining us in our conversation is Tom Romia.
Mr. Romia: Sam, let's spend some time talking about the department's management initiatives. Could you tell us about the department's response to the President's management agenda and the department's red and yellow light scores?
Mr. Bodman: Sure, Tom, I'd be happy to. First, the President's management initiatives are five in number. First, the management or strategic management of human capital, of the human resources we have, secondly, efforts on competitive sourcing, outsourcing those parts of governmental activity that might more appropriately be done in the private sector. Improving financial performance is the third area of responsibility, expanding electronic government or e-Gov as we call it, and then lastly integrating budget and performance measures, so those five areas. There could be others that the President might have initiated but he chose to focus on those five.
OMB has developed a two-tiered scorecard to monitor how the agencies are doing in implementing the PMA. They have progress ratings. That is to say are we meeting our goals along the way that we said we would meet in terms of improving things. And then status ratings, how are we doing overall? The status ratings tend to be lower than the progress ratings because OMB I think correctly found when they came in and assessed the situation that in these five areas the government was really falling short of where it should be.
With respect to how we're doing the Commerce folks have made significant progress. I'm quite proud of what we've accomplished. In the most recent scorecard in the so-called progress ratings we've received green ratings. By the way, the evaluations are done in colors, green meaning things are going well or acceptably, yellow a mixed bag, and then red you're failing to do what you said you would do. We've gotten four greens in progress and one yellow where they've deemed that we have some problems. That happens to be in the e-Gov area but there's substantial room for improvement in that, looking at the status of where we are, we have three reds and two yellows in the most recent one.
So I'd say we're probably somewhat above average for the departments if you look at the way all the departments are being evaluated but, more importantly, it's been a useful tool inside the department to help all of us identify what the issues are and try to make progress. And it's a bit of an imprecise and imperfect measure of how we're doing that OMB is using but I think it's an effective one.
One example is in the financial area. The department received an unqualified opinion just this last week on our 2002 financial statements and we're close to completing the implementation of an integrated financial management system. That should be fully deployed by October of this year and we think we'll see a follow-on to that in terms of the way we're evaluated.
Financial management is a real problem for the government as a whole. The government as a whole does not have an unqualified financial statement and we have significant problems in squaring up the financial measures of just how well we're doing. The Commerce Department itself, as I said, I'm proud that we've continued to make good progress but the reason that the President has this as an objective is that it's a problem that permeates the whole federal government.
Mr. Lawrence: In addition to financial management another issue that gets called out often is human capital management.
Mr. Bodman: Right.
Mr. Lawrence: Could you tell us about your work force restructuring plans and the human capital issues at the department?
Mr. Bodman: I'd be happy to, Paul. We completed in the last year a so-called work force restructuring plan and that's really the cornerstone to implementing the human capital initiative that I mentioned under the President's management initiatives. The plan identified three Commerce-wide human capital challenges. First, looking at the high turnover that we have in some mission-critical occupations. Second, we like many parts of the government have an impending wave of retirements and this is particularly among the Senior Executive Service, so-called SES, our senior career employees, who are approaching retirement age and we need to have a plan to respond to that and to be ready for those retirements. And then thirdly we have the need to reshape the work force competencies as the world has changed.
For example, one of our specialists in the international trade area is retiring. His expertise happens to be the shoe industry and he's one of the world's great experts on the shoe industry. Well, the shoe industry in the United States has declined in its importance. And so when he's replaced it probably makes more sense to bring in somebody with expertise in e-business or some other activity. So that's an example of the sort of planning we're doing.
And we're taking steps to respond to these issues. We revamped the SES candidate development program. People enter into this when they wish to become part of the SES and we've established new performance measures for our senior executives. We've acquired an online training system, enhanced our web-based hiring system. We've revitalized the employee safety program throughout the department; that's been something of particular importance to me personally. And we've improved diversity recruitment efforts throughout the department.
And lastly several Commerce bureaus on their own have done their own restructuring plans. These would include EDA, the Economic Development Administration, Patent & Trademark Office, and MBDA, which is our Minority Business Development Administration, a part of Commerce focused specifically on the challenges of working with the minority business community. Each of these has restructured themselves and is working with Congress to get approval of their plans, which in general call for a decrease of the number of generals, if you will, who are in the headquarters and having more sergeants and privates out in the field working in the field offices with our clients, the American public.
Mr. Romia: How are you ensuring accountability for implementing your management agendas?
Mr. Bodman: Much of that, Tom, is personal. Accountability is really focusing on delegating the responsibility to individuals and holding them accountable. I meet periodically with the bureau managers of each of the activities within the department to review their progress. We discuss some midcourse adjustments to their plans and programs. We have regular budget and operational oversight meetings that also keep me abreast of the improvements that are being made.
Additionally the Secretary and I meet with senior managers from all of our bureaus every Monday morning at what we call the Executive Management Team, EMT, meetings. And we meet for an hour to an hour and a half and we go over issues such as the President's management agenda. We deal with also any of the priorities that the department happens to be focusing on at that particular point in time.
Our chief financial officer who I work with directly every day, our chief information officer, also oversee day to day activities and, as I mentioned before, we've revised the annual performance agreements with our senior executives so that we can ensure individual accountability. Like any other management job, in order to ensure accountability it really takes shoe leather, if you will. It takes personal time, face time, with the employees and that's really what my job is.
Mr. Lawrence: What are the management challenges or maybe what's the slice on the answer you just gave for the department that has to coordinate and manage such a wide variety of programs?
Mr. Bodman: Well, there are challenges because of the great diversity of what we do. We have a large number of employees all over the country, all over the world, as I mentioned before. We try to ensure that we don't overlap with the services of other government agencies which is very important. And we try to make sure that we coordinate with federal programs, with states, with local governments and work closely with our friends at OMB and on the Hill. Those are some of the challenges.
It's a formidable task and, as I mentioned before, the only way that I know how to do this and the way we're working at it is to try to hire quality people, try to empower them, to delegate responsibility to them to run their operations, and then to hold them accountable. Communication with them is key. So we spend a lot of time walking around talking to people and trying to understanding what they're doing.
Mr. Lawrence: How do you walk around when you have so many employees all around the world? How do you communicate to such a large group?
Mr. Bodman: Well, we do it electronically. That's certainly part of it. The Secretary travels the world a great deal. I do some of that since I tend to spend more of my time here in Washington. But it's a formidable task. As I say, each of the bureaus with people who are officed and function around the country and around the world are run by very capable people who travel an enormous amount. The woman who runs our Foreign Commercial Service, I, frankly, hardly ever see. If she attends, and is welcome always at the EMT meetings on Monday morning, if she's there a quarter of the time it's unusual. She's just gone. She's on the road working with her people. So it involves a lot of effort. It's a very management-intense organization.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue talking about management with Sam Bodman of the U.S. Department of Commerce. What really takes place at the President's Management Council, the PMC? We'll ask Sam, who's one of its members, to give us the inside scope when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and today's conversation is with Samuel Bodman, the deputy secretary of the U.S. Department of Commerce and joining us in our conversation is Tom Romia.
Mr. Romia: Sam, as deputy secretary you're a member of the President's Management Council. Could you tell us a little bit about the council and its purpose, activities, and goals?
Mr. Bodman: I'd be happy to, Tom. The council is made up of my counterparts from each of the departments as well as the head of, if you will, the service agencies that serve the various departments and serve the President. So we would have there the deputies from the 20 or so operating departments that are members of the council as well as the head of GSA, the head of the Office of Personnel Management as well as the deputies from OMB. And in particular that the council is managed by the deputy for management from the Office of Management and Budget, Mark Everson.
And the PMC meets monthly and it provides really a forum for the deputies to discuss progress being made, challenges, barriers, obstacles for the implementation of the President's management agenda. In other words the PMC is really about management and about what we're all collectively trying to do within our individual departments.
There are subgroups that worry about many individual initiatives, Kay Coles James, who runs OPM, is in charge of the subcommittee on human capital. We have a subcommittee on e-Gov that I happened to spend time on. So we work also at the subcommittee level. There's also an executive committee of the PMC, a group of five or six of us that meet also roughly once a month in order to set agendas and make sure that we're dealing with all the issues that we should be tackling.
It also, I might say, has served as a very effective social organization in the sense the deputies have gotten to know one another. And so if I have a problem in an individual agency I know my counterpart there, I've spent time with him or her, and it's easy to pick up the phone and talk to somebody that I've worked with and come to know a bit personally. So that's also been a very effective outcome of all this.
Mr. Lawrence: Well, that's interesting you bring that up because I was going to ask you about a number of the initiatives you described would seem to be broader than just the Department of Commerce. What are the management challenges working across the agencies?
Mr. Bodman: I can tell you this, that the President insists upon running a unified team and he has encouraged us to work together. As I mentioned, early in the game he got all the deputies there and gave us some marching orders. He has, I think, a very interesting way of phrasing it. In addition to that in his view, and I believe he's right, the typical American citizen does not differentiate between a political appointee and a career employee in the government. From a citizen's standpoint everybody's the same. And I think that's correct.
So we work very hard on trying to integrate and run the entire government in an effective way. The PMC plays a very active role in that regard. A good example might be thinking a bit about the climate change research carried out throughout the government. The President has a very specific results-oriented vision that he has for protecting our environment and he has a program that he wants us to carry out to meet the challenges and goals that he's set forth.
We have over 12, I think either 13 or 14, federal agencies that are working together on the science of climate change. Now think about that, 13 different agencies. It's a real challenge and they are working under the leadership of a Cabinet-level committee that is headed by Secretary Evans and Secretary Abraham from Commerce and from Energy to set priorities for where we ought to make additional investments in climate change. And then below that we have a series of other committees.
I happen to chair these days the so-called Interagency Working Group on Climate Change Science and Technology where we have representatives of all these 13 different departments, everybody from NASA to NOAA to Energy Department, Agriculture, and so forth, all of whom have research going on on the climate change and different aspects of it. And I alternate that, the chairmanship, up until the end of last year. Bob Card over at Energy was the chairman and then I took it on for him during this calendar '03.
So that's how we go about it. We try to get people together and try to be inclusive. And there again it's a little bit similar to the answer when we were talking about managing international. It just takes time and it takes face time and it takes effort.
Mr. Romia: On that same topic of interaction with other agencies one agency that's on most people's minds today is Homeland Security. What will the Department of Commerce's role be in homeland security?
Mr. Bodman: Tom, that's a very good question. Obviously it's on the minds of both our citizens as well as those of us working in government. A number of Commerce bureaus is working actively with the new department on homeland security issues and I would expect this kind of cooperation between these two departments will continue in the future.
One of our bureaus is the Bureau of Industry and Security or BIS, which is responsible for licensing exports of sensitive dual-use items and technologies. These are items that they have perfectly legitimate civilian uses but they also could be used as chemical weapons or nuclear weapons or biological weapons or advanced conventional weapons, some computer systems, for example. They have been working with Homeland Security. They in turn have a subsidiary activity involved in looking at critical infrastructure. That activity's actually been moved from Commerce over to the Homeland Security Office but we continue to work closely with our former colleagues there.
NOAA has observation systems and forecasting ability. So if we were attacked with some kind of microbe or chemical that was dispensed in the air we've got the skills and the capability of doing micrometeorological forecasting so that we would know where and when and how to deal with such an attack. NOAA also does monitoring of harbors. And we have a lot of expertise, a lot of data, on what the floor of harbors and entrances to harbors look like and so we can go in and check. Has something been changed? Do we have items, perhaps explosives or something, that have been put in a harbor that weren't there before? And so NOAA is very active in that.
And then lastly, NIST or the Institute of Standards and Technology is really expert on setting standards. And they certified, for example, the radiation dosage that was necessary to irradiate the mail following the anthrax attacks. They're conducting the investigation on the structural causes for the collapse of the two World Trade Center buildings. We've got samples out in Gaithersburg and they're doing the work on it. They also are experts on biometrics and some of the new technologies that might be used in screening people and keeping databases of individuals. So there are all manner of activities and we would expect the continuation of a good relationship with the new department.
Mr. Lawrence: Our final question, Sam, today is what advice would you give to perhaps a young person interested in a career in public service?
Mr. Bodman: That's an interesting question for someone who's spent almost all of his time in the private sector. First, bear in mind that when you work in public service you really do have an additional component, I think, of your motivation, that you're here for the good of all. I think having individuals remind themselves of that and understand that when you come into federal service that you are working in an immensely large organization and any immensely large organization is going to be imperfect in the way it manages itself. So you will find at times as a public service employee in the federal government, in any event, and I imagine it's true in the state and some local governments as well, we have gone to such lengths to make certain that we provide for checks and balances in our system that at times it makes the going very slow on getting decisions made.
I was used to in private sector a situation, especially when I was the chairman and I could make a decision, when I made a decision it didn't always get done but usually it did. When you come to the federal government even the President's not in charge of many decisions because the President can recommend but it's really up to Congress to appropriate the money. And so it's very important to bear in mind that you're in a large, complex organization that is in fact here for the greater good but it is likely to be slower going than you would like it to be and so therefore having patience is a very important component of it.
I would add that one of the things I found since I came here is an enormous number of highly skilled, highly dedicated, highly capable career employees who are really here for the right reason. They're here to serve our country. And that's been a very heartwarming and very positive part of my experience in government.
Mr. Lawrence: That's a good ending point. Thank you, Sam, for joining us today. Tom and I want to thank you for fitting us into your very busy schedule.
Mr. Bodman: I'm delighted to be here. I would remind any listener that I've given the websites, the worldwide web commerce.gov is a very active website. It covers all manner of activities, including NOAA's activity, or you can go directly to the NOAA website, which is quite a dandy place to explore and is the place that I like to go for actually a little recreation. They have a lot of interesting and scientifically challenging jobs there that they do and they're described well on that website.
Mr. Lawrence: Thank you. This has been The Business of Government Hour featuring a conversation with Samuel Bodman, the deputy secretary of the U.S. Department of Commerce. Be sure and visit us on the web at businessofgovernment.org. There you can learn more about our programs and get a transcript of today's very interesting conversation. Again, that's businessof- goverment.org. This is Paul Lawrence. Thank you for listening.
Tuesday, February 11, 2003
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman of The IBM Endowment for The Business 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.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 conversation this morning is with Linda Combs. Linda is the Chief Financial Officer at the Environmental Protection Agency.
Good morning, Linda.
Ms. Combs: Good morning.
Mr. Lawrence: In joining us in our conversation is Morgan Kinghorn. Good morning, Morgan.
Mr. King: Good morning, Paul.
Mr. Lawrence: Linda, perhaps you could start by giving an overview of the EPA, tell us about its mission and its types of programs.
Ms. Combs: The EPA's mission is to protect the environment and human health. We have just under 18,000 employees working in many locations across the country. We have ten regional offices as well as laboratories and field offices. And, of course, a large number of our talented people, about half, are located in Washington, D.C. We have many, many talented folks that work in EPA. We have scientists, engineers, attorneys and given the work that we do, science is very important to the core mission of our agency.
Our mission, of course, is to protect the environment and human health. We have generalists as well as environmental protection folks of many different scientific backgrounds, biologists, zoologists, ecologists, toxicologists, right along with the financial expertise we have in my own office. But, we have a very dedicated group of people that work at the EPA and I think that one of the statements that I have heard that capsulizes that is that I know that there are people currently working at EPA that first came in in 1970 when EPA first opened its doors. So, there are a number of dedicated and talented folks that work at EPA.
Mr. Lawrence: In terms of the Chief Financial Officer, that is quite large at EPA, very diverse programs as you mentioned. What are your responsibilities as CFO at the EPA?
Ms. Combs: We have in the CFO Office about 350 of those dedicated people that I spoke about a moment ago. We have many of our folks in the Washington, D.C. area in the CFO Office but we also have some field offices in Cincinnati, Research Triangle Park in Las Vegas. And, of course, our people are primarily accountants and financial specialists, budge and program analysts but we have environmental scientists in our CFO Office as well as writers, policy specialists, and system specialists as well as economists.
Our responsibilities are broad enough to require a very wide range of skills to get our jobs done. As the agency's senior financial manager, my job as CFO is basically to provide executive oversight for all of the aspects of the EPA's annual budget which is approximately $8 billion dollars a year. We are also responsible for the agency's strategic planning efforts in accordance with the Government Performance and Results Act. We have an integrity and accountability function as well as an auditing function in auditing tracking function in our office as well. We have financial computer systems that we're responsible for as well as accounting. Of course, we're the office that pays people. So, payroll is very important part of what we do in the OCFO Office.
We have an integrated budget in performance system. And, we have a web based financial reporting system that is our financial data warehouse. But, in addition to all of that, to keep up with our April $1 billion dollar budget, we do budget formulation, execution, analysis and reporting within EPA's integrated planning and budget and accountability system.
So, we basically have oversight for all the financial operations, all the financial statements and reporting and we have budget formulation as well as execution responsibilities.
One of the responsibilities that I feel is very important for any CFO to participate in and I take that responsibility very seriously as I work with the chief financial officers counsel. I think it is important to have EPA at the table in promoting the things that are important to EPA. But, I also think it is important for CFO's to provide a leadership role across government and we have responsibility in our own office for the President's Management Agenda as many CFO's across government do.
We actually have three of the five areas in our own responsibility. I am very, very happy and one of those reasons I bring that up is we were actually the second agency to earn all green scores in financial, excuse me, in all of the progress areas related to the President's Management Agenda.
So, the President's Management Agenda has served a number of purposes. It's brought CFO's across government together but it's brought people in our own EPA environment together as well around five specific agenda items that is important to each and every manager and that are also important in a CFO Office.
Mr. Lawrence: So, then you're obviously involved in having to write down the appropriations processes and you're involved with them before. Do you see any difference in that process so far in terms of any of the detail or the structure or the craziness?
Ms. Combs: Well, I think one of the differences is that the process seems to be stretched out. This year particularly we are still, of course, in a continuing resolution as we speak. We have a long group retracted period of time. We work on three years budgets at a time. We are currently awaiting our 03 final conference. We currently have just presented the President's 04 budget. And, we have already started some preplanning for the 05 effort.
So, I would say the biggest difference Morgan is probably our -- my impression that the process has become much more protracted. And, that just causes all of us to have a lot of input in how we do our daily jobs in thinking over a span of several years at one time. Part of that's good but a lot of that is some uncertainty that interjected there as well.
Mr. Lawrence: Morgan hinted at your different experiences. Can you tell us about your career prior to coming to the EPA?
Ms. Combs: Sure. I was the Assistant Secretary for the Treasury for Management from 1989 through 1991. I was Acting Associated Administrator for Management at the Department of Veterans Affairs before that. And, Deputy Under Secretary for Management at the Department of Education in the early and mid-eighties. Prior to my Federal career, I was Advisor to the Governor of North Carolina, and an elected Board Member for the Board of Education in Winston Salem for South County, North Carolina. I was Manager of National Direct Student Loan Programs for Wachovia Corporation. Also, in North Carolina. And, in my very, very, very early career, I was an Administrator and class room teacher in the Winston Salem for South County schools in North Carolina.
My husband and I have over the last ten years managed our own entrepreneurial business. So I have seen large, large organizations and have had responsibility for very large organizations as well as small entrepreneurial activities and have wonderful successes and wonderful memories with all of those.
Mr. Lawrence: If I counted correctly, you've had positions in education, Veteran's Affairs and Treasury. And, I'm curious if you can contrast the differences in management styles at those three places.
Ms. Combs: One of the things that I always like to think of are the similarities. The similarities which is not what you asked me about, Paul, but I'll get there.
Mr. Lawrence: It's the opposite.
Ms. Combs: The similarities reflect a lot around dedicated people. And each and every one of those responsibilities because each and every one of those encompassed management areas, I have found such dedicated and talented individuals that work in the Federal Government. I am always, always so impressed with the caliber of people that the Federal Government is able to attract. And, how committed and dedicated those individuals are.
So, the differences I would say relate to the missions of those organizations. The Veteran's Affairs had a very discrete and determined mission. The Treasury Department was broader and much more over arching and encompassing because of the number of bureaus and number of large bureaus within Treasury. Education had a very discrete mission. And, here now at EPA it's one of the regulatory agencies and it, too, has a very different mission.
So, I'm saying the differences rely more in mission. The similarities lie in people.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes when we continue our discussion with Linda Combs of the EPA. How has the EPA created a results based management. We'll ask Linda with The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. And, today's conversation is with Linda Combs. Linda is the Chief Financial Officer at the Environmental Protection Agency. And, joining us in our conversation is Morgan Kinghorn. Well, Linda, one of the things that you talked about in the last segment when you were describing your responsibilities, you mentioned that you were a member of the Federal CFO Council. Could you give us an overview of the kind of work that the Council does?
Ms. Combs: Sure, Paul. The CFO Council itself is a group of CFO's, any CFO that is in the 22 or 24 Cabinet level agencies and we work collaboratively to improve financial management across the U.S. Government. The Council was first established under the provisions of the CFO Act of 1990 in order to facilitate and coordinate the activities of agencies and its members across the U.S. Government.
Since I was one of the first CFO's in Government after the CFO Act became law in 1990 when I was at Treasury, I got a first hand experience there at what this Council could do as well as what the management council across government could and should do relative to more cross cutting issues. It's a special experience for me now to come back and years later as EPA CFO to see how that position and the Council itself has grown over time.
The CFO Council itself has a number of projects right now. One of the projects that I co-chair at this time is a project to look at financial metrics across government. There are things like cash balances, various metrics that we are identifying that would be a small number of metrics that one could look at and if bubbled up through all of the 22 Cabinet level agencies, would create a picture in and of itself what the Federal Government looks like. All the reconciling on a timely basis and various financial metrics functions that business constantly looks at. We think it's important as CFO's to step up to the plate and say we ought to be looking at those things not just in our own individual agencies and departments, we ought to have a representation that could span across government so that these could be looked at on a Government wide basis as well.
Mr. Lawrence: As you know, the CFO Act was passed nearly 13 years ago, 13 years ago this December and you're alluded to the fact there's been a lot change in the CFO community. One of the things folks have talked about since is how the CFOs' sort of partner with the rest of their agencies and colleagues to improve financial and budgetary management within the agency. How did you proceed to do that since you've come back into this kind of position?
Ms. Combs: I think the biggest issue that we face is probably how well we gather, how well we manage and integrate information about costs and pare that up with results to our programs. I think this is a cost cutting issue that many agencies and departments are dealing with a little bit differently now than when I left 11 or 12 years ago.
At EPA, we have looked very closely at budget and performance integration. And, fortunately we are looked to as a leader in this area. We've had our goals and objectives for planning, budgeting, and financial reporting for several years. And, are constantly working to improve those.
That's one of the areas of the President's Management Agenda that I spoke about earlier. And, because we had an early start on this and we are recognized as one of the leaders in Government in this area. We recently earned recognition as one of the seven finalist for the President's Quality Award in Budget Performance Integration. So, we're leaders in Budget Performance Integration, we still have a ways to go in looking at costs information, activity based costing as it's associated with results management in our programs. And, I think it's real, real important as my role as CFO to bring to the table and to bring to the managers of these program areas better business tools with which to operate. I consider that one of my prime responsibilities as CFO is to have a full deployment of business intelligence tools so that mangers can make the best use of these new capabilities that they will have on their desktop. And, whether it's a dashboard approach or different kinds of approaches that help them manage their programs better with better costing information as well as what are the results that they are getting for there programs. That's what I think one of my major roles as CFO is.
Mr. Lawrence: One of the issues that has really existed really probably after that last couple of years, is in the drive to look at performance. Some of the stakeholders, whether it's the Congress or external stakeholders have never seen that interested in looking at results. And, I know that's changed generally and I think it's probably changed in your environment. Can you give us a sense of maybe the last ten years when you moved to go up to appropriations on OMB? I'm sure people are really asking about results including the people who are investing in your programs. Has that changed?
Ms. Combs: I think that has changed. I think when we talk about at EPA our goals being cleaner air, purer water, better protected land, and how that protects the environment and human health as our major mission, it's very difficult sometimes to translate our immediate results to showing long term human health and protection for U.S. citizens. But healthy communities and eco systems is a very, very important element of what we do. And, we have to continue to strive to find better ways to display the results that we are getting for the dollars that we put into our programs. We are looking at better effectiveness measures. We're looking at the way our strategic plan and the geperal (phonetic) results all fold in hand in hand. So, we're really trying to look at this whole area in a broader more encompassing way in order to show to our stakeholders, whether it's Congress, OMB or certainly the American people that here's what you're getting for your dollars. This is important to human health and here's why.
When I talked earlier about science being an important aspect of what we do and how that's a foundation of what we do that makes science even more integral and important to us. It is helping us to show these results.
Mr. Lawrence: What kind of time frame do you use when you talk to people about results? For example, in the examples you gave, you talked about scientific goals which might take decades to achieve yet it sounds like people to you and want to know results on a much shorter interval. How do you translate those conversations into the real thing?
Ms. Combs: That is very difficult. You know, one of the things that we're -- we have previously looked in Government and this is not just true for EPA, it goes for education, some of the other departments that I have been involved in as well. We've been looking at outputs. Now, we're being -- we're hoping to move toward more outcome based knowledge in everything we do. And, you're exactly right, Paul, that that's hard when it's going to take a long time to show environmental results or health results but we happen to think that if we continue to measure some what I would call medium output measures that are leading toward our further outcome based objectives and goals. And, we put these in our strategic plan. We feel like we're much better off today than we would have been without doing that. But, it is going to take a matter of years. But, this is not anything that we're going to be able to look just tomorrow. We're going to have to think longer term and be able to show some short to medium term results that build into our longer term output.
Mr. Lawrence: That's a good stopping point for this segment. Please come with us in a few minutes as we continue talking about management with Linda Combs of the EPA. How's the EPA doing with the financial management portion of the President's Management Agenda? We'll ask Linda from her prospective when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and today's conversation is with Linda Combs. Linda is the chief financial officer at the Environmental Protection Agency. And joining us in our conversation is Morgan Kinghorn.
Well, Linda, can you tell us more about the Managing for Improved Results Steering Group at the EPA?
Ms. Combs: Sure. This group was managed from my office at the initial request of the deputy administrator and it brought together people from all of the agency's offices to think about very practical ways that we could make some real improvements in the way EPA managed its overall programs that the agency could implement right away. The group made some genuinely useful recommendations and it gave some longer-term approaches as well that we could also adopt.
One of the most important recommendations for immediate action was to take a look at our annual performance, goals and measures, and see if we could devise a more rational set of categories. Time I think the agencies can find measures of success over as we establish and maximize our priorities and measures and as priorities change. The longer-term recommendations that came from the steering group focus on enhancements to our overall strategic plan with greater emphasis on the outcomes of EPA's work, reinforcing accountability for specific performance objectives, and building the agency's capacity to indeed manage for results and how those results are costed out, how they're calculated, and how they're determined.
Mr. Kinghorn: You mentioned that you were one of a very select number of agencies that all green on progress for the President's management agenda. Could you share with us some of your activities related to the financial performance piece of that and what are the timetables for these initiatives and what do you expect to get out of them?
Ms. Combs: Sure. We have as our prime objective under the financial management arena continuing to get clean-audit opinions. I think everybody in financial management, private or public sector, would say that that is one of the bellwethers that you must have in order to say that you are fully performing in the financial arena. We have automated our financial statements. That's been a big help to us. And in terms of the financial management scorecard itself we have sat down with OMB each and every quarter over the last year and we'll continue to do so to further define and further refine which specific elements we're going to be responsible for.
And we've laid out our own timetable about moving from our legacy financial systems and making sure that our financial systems meet each and every standard, new or old, for the government financial systems. I mentioned a while ago the reporting tools and how important those are for managers but they're very important for us as well in the financial arena to be able to use this business-intelligent software and these new kinds of reporting tools for managing program results but also to support our financial goals as well.
Mr. Kinghorn: Well, if you look at your budget probably 45 percent of it's allocated in a variety of programs for grants to states, tribes, and other EPA partners, everything from construction grants to Superfund to cooperative agreements. And harking back to what we were talking about on performance, this is tough to measure the success. It's an indirect application. I mean, you give grant money, heaven knows what you get for it. What are some of the things you're looking at as an agency that devotes that much of your budget to other forms of financing in terms of performance?
Ms. Combs: This does go to our discussion on some of the difficulties involved in actually measuring environmental outcomes. The significant portion of the EPA's budget that directly supports state, tribal, and environmental programs does indeed create some important environmental results across the country but it does continue to be a challenge for us to carve out which of those results can be attributed to state efforts and tribal efforts and which can be derived from the actual grant money that EPA gives as opposed to other specific resources. And for those reasons we think partnerships are very, very important.
It's important to emphasize, I think, that we have a very special relationship with our state and tribal partners and that we maintain very close working relationships with state governments and state agencies across the country. We enjoy that close working and growing relationship with the Environmental Council of the States. ECOS is an organization of state environmental commissioners and we consult with them regularly, we've consulted with them on our strategic plans and our annual reports under GPRA, and we continue to take steps to involve those representatives and our state and tribal representatives in our agency planning discussions every year.
The states don't work for EPA but we will continue to hope that they will work with us. We're certainly aware that right now states have some very difficult situations that they're dealing with in terms of their financial situations and we think it's very important that this partnership be closer than ever because we need to know what their difficulties are, understand what their difficulties are, and make that relationship work even better in the times in which we are dealing right now.
We feel like it's important for our office where we deal with accountability as well as strategic planning to further define the regional performance contributions along with our agency goals and see what those obvious connections are that can be made between our states and our tribal partners. We think an important element here could be to develop a set of measures to look across the regions and see how we are being most helpful to our state and tribal partners as well as seeing where we feel like we could end up being more effective as well.
Mr. Kinghorn: EPA has a structure to manage the finances, I think, of your grants, your cooperative agreements, and general contracts delegated to RTP, to Cincinnati, and Las Vegas, which really seems to advance what other agencies are just thinking about doing. Has that structure served you well in terms of specialization in each of those locations, particularly at RTP, which is also closely linked to some of the core programs of EPA?
Ms. Combs: And I have a special place in my heart for RTP since I'm from North Carolina but we certainly think it has. I think, too, in terms of the way we're looking at special provisions that may need to be made as we look toward better protection of the homeland and of homeland security this diversity that we have, I think, makes itself even more important in today's environment.
And one of the things, too, I would offer in terms of not just our own internal structure related to where grants and payments are processed but we have also a very important financing operation that we feel very good about at EPA that's managed out of my own office. It's the Environmental Finance Advisory Board. It's a federally-chartered advisory committee that's composed of independent financing experts from public and private sector organizations who are interested in lowering the environmental cost and increasing investment in environmental facilities and infrastructure and services across the nation. So they produce policy and technical reports that actually leverage better public and private resources.
And as I spoke earlier about the need for better partnerships and closer alignments as we have the situation in this day and time, our environmental finance centers, which are located at various universities around the country, also provide some financial outreach to our regulated community. And these networks and these partnerships as well as information on our own website help communities and environmental programs across the nation in ways that we could not do alone with our own internal financing effort. And they're staffed with a number of volunteers basically, people who dedicate their time and energy, particularly for the Environmental Finance Advisory Board. Those are volunteers, people who spend their own time, effort, and energy in their own local communities. They're just excellent people to have access to.
Mr. Lawrence: That's a good stopping point. We've got to go to a break. Rejoin us in a few minutes as we continue talking about management with Linda Combs of the EPA. What role will EPA have in homeland security? We'll ask Linda for her thoughts when The Business of Government Hour returns.
Announcer: How can we strengthen the relationship between performance and public service? A recent endowment report makes the case for performance management by confronting conventional attitudes. For a copy of the report, "Performance Management: A Start Where You Are, Use What You Have Guide," by author Chris Wye visit our website at businessofgovernment.org or call us at 703-741-1077.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and today's conversation is with Linda Combs. Linda is the chief financial officer at the Environmental Protection Agency and joining us in our conversation is Morgan Kinghorn.
Mr. Kinghorn: Linda how do you define and measure financial management success at the EPA?
Ms. Combs: Well, Morgan, when I see that green score for progress in financial management on the executive branch management scorecard I think that'll be a splendid indicator of our success. But I must tell you we won't sit on our hands after that. I've dedicated myself to moving financial management at EPA to what I call beyond green. One of my more important personal and professional goals when I came to the CFO Office at EPA was to basically say we're going to have the most respected CFO Office in the federal government. We're well on our way to achieving that and we're not just doing that to win accolades of recognition from OMB or from the public or from any of our constituents.
But if we are the most respected CFO Office in government that means a lot of positive things for our organization. Number one, it means that we do our business efficiently. If we do our business efficiently there are actually lots of rewards that come back to us. We're able to get back for paying our bills on time, for example, some rebates that we would not have access to otherwise. And just last year EPA because we do our business efficiently we got over a million dollars in rebates. Ninety-three percent of the rebates that we could possibly collect we're collecting those because we do our business more efficiently. So part of the success for our efforts at EPA in financial management come directly through the other program offices and maintaining those positive relationships with other program offices at EPA and ensuring that we're doing the right thing to manage our programs better is a particular dimension that I am very proud of now and would like to continue to be proud of.
There are lots of challenges that continue to come our way. One of the things that we have looked at since I've been at EPA is maintaining talented people with the skills and abilities it's going to take to work in the CFO Office of EPA in the 21st century. We've done a lot of work in that arena already and in the coming year we're going to keep looking and working toward acquiring the kind of talent we need to do our job well.
Mr. Kinghorn: The issues that you suggested that you have been successful, I mean, systems help, data warehouses help, but it is people and in terms of future financial managers I know that the market seems to be getting stronger now. People are coming back into government. If you look at the information from Harvard schools and Syracuse a very high percentage relatively compared to past years of people is coming into the federal government. They used to go into state or nonprofits. Have you seen that happen and are you trying to recruit them in to continue to replenish the talent that you have that has led to the successes but to continue that in the future?
Ms. Combs: Yes, we certainly are. This pipeline for future financial managers I think has to start with a recruiting effort in the federal government the likes of which we've never seen before and in my opinion now is a perfect time to do it. The federal government couldn't be in a better position to take advantage of talented MBAs coming out of schools whether it's Harvard or many of my schools that I'm aware of in North Carolina and reaching out to those schools and saying here's who we are and here is what we do is part of what I'm about.
I continue to talk to people as much as possible about the most interesting opportunities that are available in working in a CFO office. The expanse of opportunities that people deal with in federal government positions is not to be found by MBAs going into the private sector for their first five or ten years in business. Having come from a banking background myself I know that to be true and if we are going to optimize on the skills that are necessary for financial managers in particular to come into the federal government now is our time to do it.
And I think it behooves all of us, particularly CFOs, in the federal government to take on this mantle of opportunity and work with the Office of Personnel Management in making absolutely certain that we work with every hiring authority that we currently have available to us as well as creating additional ones because young people are indeed interested in working for something that is greater than their themselves. That's what the federal government opportunities give to them. Where else in the federal government could I when I was at Education and managing then a multibillion-dollar budget at age 35, have the opportunity to do that? Certainly not in the private sector. So I see our opportunity now as a great one if we can take advantage of it and capitalize on it quickly.
Mr. Lawrence: Homeland security's on everyone's mind these days. What role will EPA play in homeland security?
Ms. Combs: Well, we certainly don't know what lies ahead for this country but we certainly can be certain of one thing at EPA, that EPA is going to step up and take part in any task that's presented for us to do. Most recently our EPA people have had some leadership roles in recovering debris from the Columbia disaster, certainly a sad task that none of us anticipated but we certainly are proud that we have the talented and right kind of people and the right kinds of places to be able to immediately mobilize and do the kinds of things that were required there.
Governor Whitman and our senior executives for emergency response are in close contact with Governor Ridge and our other colleagues at the Department of Homeland Security and I think as the Department of Homeland Security comes together over the next few months we'll continue to work closely with them to address whatever needs that the EPA is equipped to fill. I think obviously we're still under a continuing resolution for '03 but whatever resources have to be taken I think that's where our office comes in in being able to fulfill its mission of supporting other areas within EPA itself.
Most people do not readily recognize, I think, the hazards people that we have in our emergency response team and how vital and critical their role is. But it takes something, I think, like, unfortunately, the Columbia disaster for people to realize hazardous chemicals there, call the EPA, and often a disaster has taken place before EPA is recognized as needing to have a role right there. But I think as homeland security itself gets underway our role will become even clearer and more focused and more prominent.
Mr. Lawrence: We have time for one more question so I'd like to ask you to reflect on your career and perhaps give us a perspective about the kind of advice you'd give to perhaps a young person considering a career in public service.
Ms. Combs: I've had a number of opportunities, I think, over the years to talk to young people about their careers and particularly about public service. I think sometimes we don't initially recognize the fact that many people who come into public service believe that public service is a public trust and it's an honor and a privilege to serve your fellow Americans and to uphold that public trust.
As I mentioned earlier, particularly young people and people changing careers want to do something that's bigger than themselves. Yes, that sounds like a job for idealists but there are idealists in every single profession whether it's a scientific professional, whether it's a financial profession. Those people I think over the years of their career have an opportunity to realize that the job that they could do for the federal government would play a large role in making life better for Americans and for the rest of the world as well.
The broad, encompassing jobs that I mentioned earlier, whether it's a fiduciary role or whether it's a scientific role, those broad and encompassing roles can be found in federal service. And combined with the public trust and the experience that people bring to the table some of the best minds that we find anywhere are in the federal government. And with the privilege and honor of serving I think that I would and will continue to advise young people considering a career in public service certainly to consider the federal government.
Mr. Lawrence: Well, Linda, I'm afraid we're out of time this morning. Morgan and I want to thank you for fitting us into your busy schedule.
Ms. Combs: Thank you.
Mr. Lawrence: This has been The Business of Government Hour featuring a conversation with Linda Combs. Linda's the chief financial officer at the Environment Protection Agency. Be sure and visit us on the web at businessofgovernment.org where you can learn more about our programs and get a transcript of today's conversation. Once again, that's businessofgovernment.org.
This is Paul Lawrence. Thank you for listening.
Friday, March 7, 2003
Mr. Lawrence: Good morning, and welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman of The IBM 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.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 conversation this morning is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Good morning, Jenna.
Ms. Dorn: Good morning.
Mr. Lawrence: And joining us in our conversation is Dave Abel. Good morning, Dave.
Mr. Able: Good morning.
Mr. Lawrence: Jenna, let's have some context. Could you tell us about the FTA and its mission?
Ms. Dorn: Certainly, Paul. Since the earliest day of our government, the federal sector has supported transportation, because it has recognized that it is indeed the engine that drives economic growth and it is so important to connecting communities. From the Boston Post Road that connected the east coast to the Transcontinental Railroad that helped develop the West, there was a real recognition that there is an important and an appropriate role for the federal government to support.
So in 1968, Congress created what was then called the Urban Mass Transportation Administration or UMTA. Many years later it was changed to the Federal Transit Administration, recognizing that public transportation support is both urban and rural so, thus, the name Federal. What we do at the FTA is to support public transportation in communities across America. By that public transportation I mean buses, subways, light rails, vans, trolleys, and even ferries in appropriate states.
Each year the FTA gives about $7 billion of grants to every state and to about 600 transit agencies. Most of this money goes to support the purchase of capital equipment like buses or maintenance facilities, but also we create brand-new rail systems for smaller communities as well. We also provide technical assistance because as you can imagine, when you're building hundreds of millions of dollars, and in some cases, billion-dollar projects, the environmental planning, the community outreach, the construction oversight, is a very complicated matter. So technical assistance is a big part of our role as well.
Mr. Lawrence: Give us a sense of the budget, and also the number of people, and I was curious as you described the different functions, the skill sets of the employees.
Ms. Dorn: It's a very diverse group, and that's what makes it such a fun and challenging opportunity for me as its leader. We have about 500 full-time employees. In addition to that, we have about 200 private-sector experts who help us with one of the best, I'm proud to say, oversight programs in government.
We have a great team, and it's diverse, as I mentioned. Many planners and engineers who help local communities find transit solutions and ensure that the investments are really a value added. And like every government agency, we have policy makers, lawyers, marketers, budget experts as well.
Mr. Abel: So what are your duties and responsibilities as the administrator?
Ms. Dorn: Fundamentally, I need to make sure that the Federal Transit Administration's policies and practices do what the President asks, and that is that we be results-oriented, customer focused, citizen centered. Part of that job is listening to stakeholders and to help ensure that in fact the way that we provide the money and the oversight that we offer really does provide a value added to taxpayers.
Public transportation provides terribly important benefits to communities, everything from making sure that we are mobile across to the community, to relieving congestion, to providing environmental benefits and saving energy costs. So that piece is a responsibility that all of us on the FTA team take seriously. We then need to advise the secretary about the policies and the projects, and that's my job to make sure that every dollar we spend makes a difference.
Mr. Abel: Can you tell us a little bit about your previous experiences before you were the administrator, particularly your roles in government previous to this responsibility?
Ms. Dorn: I've had a rather eclectic sort of career, Dave, in terms of I've had the privilege of serving in the Executive Branch in two different cabinet agencies in three different administrations. And I've also worked in the Legislative Branch in Congress, and have been an executive in the not-for-profit world. So it really has helped me a lot do each of my jobs by having that diversity of experience.
Prior to serving in my current job, I had the privilege of serving under George W. Bush's father, 41, as they affectionately call him, as the assistant secretary for labor. Prior to that, I was the associate deputy secretary at the Department of Transportation under President Reagan. I had the opportunity to help a private-sector entity get its start at the Department of Transportation as well, where I was head of what was called the Commercial Space Transportation Agency. Under President Reagan he was eager to privatize the opportunity to get to space, so they moved that from the NASA environment to the Department of Transportation, and that was a really fun and enjoyable job.
I had the privilege to get an overview of the microcosm of policy by serving in the U.S. Senate as a staff member for Senator Mark Hatfield, both when he was chairman of the Appropriations Committee, and on his personal staff as well. In between those times, I was an executive at one of the nation's largest not-for-profits, the American Red Cross. So I feel like I've been lucky to have some really interesting and diverse experiences.
Mr. Abel: How does this diversity help you in performing your job today? It is a very eclectic background. It's very broad across the roles that you've played in government. How does that play in with what you do as the administrator on a daily basis?
Ms. Dorn: One of my professors in college used to say, "Where one stands depends upon where one sits." What I have found in my job is that one of the most important things to be able to understand and relate is the perspective of another individual, whether it would be another Executive Branch agency, member of Congress, or a stakeholder. That helps you understand how to problem solve. So a big part of any executive's responsibilities, I think, is mediating, moderating, consensus building, focusing on the big picture.
I have learned in each and all of my jobs the very important value of outreach to stakeholders is listening. And I think one of most important skills that I learned that was valuable in any of these jobs, in government or not-for-profit, was the skill of writing. My journalism background helped me develop that skill, and I didn't realize quite then how useful that would be, because if you can't write it down or talk about it, then it's very hard to be able to solve the problem and deal with the issue.
Mr. Lawrence: Let me ask a little bit more about your background. In terms of working in government and also the nonprofits, could you give us a sense of the comparison about the management approaches in both of those sectors?
Ms. Dorn: I think particularly under this secretary and under this President, there is more of a focus in government towards outcomes and results, and that is a very I think important sort of initiative through the President's Management Agenda that this President with the support of Secretary Mineta has really moved forward.
It isn't always as accepted in a not-for-profit, or, in fact, even in the Legislative Branch where process tends to be product. So I really appreciate that this administration is focused more on results and outcomes. In public transportation, what that means is more riders, getting more people out of their cars so we can have fewer congested roads and riding public transportation. So it's not about, for example, how many buses you have, how many miles of light rail, but how many people are on the buses or on the light rails. So that's a real important focus. I think it's not always as accepted in a more not-for-profit environment.
Mr. Lawrence: How about in terms of the Legislative and Executive Branches? You talked a little bit about process is the outcome, but how about some comparisons in terms of the management styles in those two sectors or those two parts of our government?
Ms. Dorn: By the very nature of our charges, the Executive and the Legislative have a different responsibility. There is such an emphasis on management, or should be, management for results, and it's a very different sort of thing than looking at the 30,000-foot level which is what you do on a congressional committee. When you really get down into the issue and figure out what are the pros and cons of doing any particular policy or whatever, you have to have depth and expertise on your staff to be able to weigh those pros and cons, and that isn't always necessary in another environment like a congressional environment. So management is the most important thing, frankly, to getting the policies accomplished in the Executive Branch, and it doesn't have to be in the Legislative Branch.
Mr. Lawrence: You've talked a lot about your experiences in your career about the importance of involving stakeholders. Could you give us a sense of who the stakeholders are for the FTA?
Ms. Dorn: That's one of the most fun things about the job, actually, Paul, because it's such a diverse set. We have mayors, city councilmen and governors, all of whom care about public transportation. We had rider groups, people who don't have the choice; they don't have a car. We have the providers. Every organization from a small not-for-profit like the United Cerebral Palsy that provides opportunities to get to work or other places, to large transit agencies like the New York's transit agency that offers 7 million rides a day. There is a very diverse set of stakeholders.
Sometimes that makes it very complicated, but it always is rewarding because the community comes together and makes that kind of decision about what kind of investments they want to make in public transportation.
Mr. Lawrence: Come back after the break as we continue talking with Jenna Dorn of the Federal Transit Administration. This is The Business of Government Hour.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. This morning's conversation is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Joining us in our conversation is Dave Able.
Mr. Abel: Jenna, let's talk a little bit more about FTA. How does FTA fit in with the mission and activities of the Department of Transportation?
Ms. Dorn: Good question. FTA is one of about 10 what we call modal administrations within the Department of Transportation, and, of course, we're focused on the public part of transportation, as a grant-making agency to transit systems.
One of the most important things that is important to note is that public transportation is really a lifeline to jobs, to community, and to friends and family for those who rely on transit. It also supports economic growth and vitality; it reduces congestion, and improves the quality of life. Certainly it conserves energy, and there is no more important time to do that.
None of these benefits, however, can really occur unless we work at the community level and at the nationwide level to make sure that we have a seamless kind of transportation system. So the other modal administrations, whether it's the airports of highways, all of them have to be user friendly and have to be connected to each other so we make a transportation system that works well together.
This year is a terribly important time to be talking about that because the surface modes of transportation will be having their programs reauthorized for the next 6 years, under Congress's direction. So the administration is in the process of finalizing its proposal to move forward, and there will be some really good discussions over the next number of months on that.
Mr. Lawrence: Let's spend a few minutes talking about the programs of the FTA. Could you tell us more about the urbanized area formula program?
Ms. Dorn: That is probably the biggest part of our grant program in the Federal Transit Administration. We give about $4-1/2 billion to cities to buy buses, to make major capital investments. Most of that is distributed by formula, and flexibility is really the watchword for the urbanized area formula program.
The kinds of things that we want to change in the administration's reauthorization bill, we want to make sure that the local community which is the appropriate place for community decisions to be made about transportation has the option about where and how they want to invest in their transportation systems. So that's a very important piece of the urbanized area program.
We also want to start, and the administration has proposed, a passenger-based performance incentive, and that's a very important and growing piece that this President wants to emphasize, what we're all about is outcomes. For public transportation, the real outcome is number of riders, and we think that while ridership has moved upward dramatically over the last 6 years, 28 percent more people ride public transportation across America now than they did 6 years ago, we think we can do even better, and we need to do better, particularly in America's cities.
Mr. Abel: So how about the New Starts Program? What is that, and how does it facilitate cost-effective transit solutions?
Ms. Dorn: The New Starts Program, under this President's '04 budget, is a $1.5 billion investment, and it's what it says: it's new investments or extensions of existing transportation infrastructure. For example, we build light rail systems, heavy rail systems, and the whole component of the New Starts Program is really very performance based, because we have a very intensive way of evaluating literally hundreds of projects that are proposed to the federal government, to the FTA, to be built in communities across America.
We have a very comprehensive kind of plan to figure out are these projects really going to provide benefits for the costs that they will cost, and what other kinds of benefits in terms of the environment will they provide. Then we rate those projects, and we tell Congress that we think this project is highly recommended, recommended, or not recommended, and then the administration and Congress work through that kind of investment.
Typically, for a capital investment sort of new start, the federal government provides about 50 percent of the capital infrastructure. Right now we have probably 30 projects across the country from light rail, to trolleys, to buses, bus rapid-transit projects, heavy rail, from the east coast to the west coast. So it's a very important part of our program, one part of our program that we're very proud of, because we spend so much time and energy making sure that the taxpayer dollar will really be a value at the end of the day.
Mr. Lawrence: Could you tell us a about the state-administered programs? I've pulled out a couple, the Rural Formula Program, the Elderly and Persons with Disabilities Program, the Job Axis and Reverse Commute Program, and the New Freedom Initiative?
Ms. Dorn: We talk about major capital infrastructure in the new starts, and at the other end of the spectrum really are the smaller but equally important services that we provide, primarily for people who don't have choices about whether or not to ride transportation. We're talking about programs that we administer at FTA like for the elderly and disabled, which are formula grants that are distributed through the states, and then the states do a suballocation to about 1,300 local transit providers.
What the role of the government is, is to make sure that in communities across the country that there can be service provisions for the elderly, for the disabled, for the low-income that get to work, etcetera, so that we believe that that's a very important part of our program. What we're trying to do is to rationalize those programs and to make sure that we never have a situation in a community where you have a van that is taking the elderly at one end of the neighborhood and at another end of the neighborhood you might have the United Cerebral Palsy providing a disabled ride, when in fact if there were more combination and more local community planning, you could have a more efficient kind of service provision and you'd have more service to more riders.
So we want to ease the restrictions that have grown up over time, in terms of government kinds of requirements. We want to make it easier to get the service to people who need it. So there are a number of proposals in our reauthorization proposal that would do just that.
Mr. Abel: How does that differ from the Metropolitan and Statewide Planning Programs?
Ms. Dorn: One of the most important things, Dave, about putting together a good public transportation system is planning for it, whether it's planning with a number of providers across the stakeholder groups, or whether it's deciding just what kind of investment should be made that makes sense.
In some growing communities that are already large, for example, a light rail makes sense. In others, it may be a lower-cost technology like bus rapid transit that would allow us to make a more cost-effective investment. Or it may make sense to have one service provider, as I mentioned earlier, to provide services for elderly and the disabled, or you might want to mix it up.
The key to that is local community planning. So in this President's budget we've increased the amount of money for planning so that we can make sure that every dollar we spend really produces something.
Mr. Lawrence: You've described a wide range of programs, and I'm curious, how are you measuring the performance of these programs?
Ms. Dorn: I think we can do a better job, Paul, in terms of measuring the performance, and that's why the proposal that this secretary has supported has a component for performance-based funding that's in addition to the formulas. What we're saying is that those transit agencies that can establish that in fact their systems have increased ridership, then we want to give an extra bonus, because that's our goal. So we're working very closely with a number of agencies, including the National Academy of Public Administration to help us figure out how can we make an effective performance-based sort of system.
We've done that for our grantees, but we've also done that inside the FTA in terms of performance-based systems that we're implementing that we may be able to have a chance to talk about in a moment.
Mr. Lawrence: Are all the outcome measures clear, or is that part of what still needs to be developed in many cases?
Ms. Dorn: In some cases, it is difficult to establish how specifically an outcome relates to a particular investment. Let me give you an example. The value of an investment in a light rail, heavy rail system, or bus rapid transit, the value to the environment or to the creation of economic development around the stations, to be able to quantify that can sometimes be difficult. So many of the benefits are indirectly as a result of the investment.
So the most significant though not the only one, the most significant measure we believe is how many riders are using the facility. So that's pretty clear. We believe there are a number of incentives that we can provide so that the investment that is made is made on the right basis, on an outcome sort of orientation.
Mr. Lawrence: How when you measure the ridership or look at ridership do you compare? I think you pointed out that some people have options outside of public transportation; other people have fewer options, maybe none.
Ms. Dorn: We don't want to only count the number of riders overall, but because we believe that the federal government has a role to play in helping to ensure that those who don't have a choice about riding or not riding, because they don't have a car, that we want to measure the ridership of those groups as well. So we want to measure ridership at a lot of different levels.
You have to take into account the community size, because ridership in New York is quite a different matter than ridership in Wagontire, Oregon, even on a percentage basis. So we're very conscious of that, and we want to carefully plan how we do this best.
Mr. Lawrence: That's a good stopping point. We have to go to a break. Join us in a few minutes as we continue talking about management with Jenna Dorn of the FTA. How does the FTA link budget to performance? We'll ask Jenna for her perspective when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Joining us in our conversation is Dave Able.
Mr. Abel: Jenna, the 2004 budget was recently announced. Can you give us some general highlights of the budget and how it compares to your budget in previous years?
Ms. Dorn: I'm really pleased by the good news for public transit in the FY 2004 budget, as proposed by the President, especially in light of the many critical and costly challenges facing this country. This budget keeps our commitment to public transit by sustaining the record level of funding that was present in the '03 budget, and I think it's really useful to give a perspective.
Over the last 6 years, the federal investment in public transportation has grown by 25 percent, and that's terribly good news in my view because these investments have provided so many benefits to the community. In terms of other increases within the Federal Transit Administration, I'm pleased that the Rural Transit Program will grow by 20 percent. I think that's really important, because there are about 40 percent of our rural counties who have no public transportation. If you were to take all of the rural communities together and determine how many are choice riders versus those who have no choice, about one-third of the people in rural communities across America are transit dependent. So that 20 percent increase for rural transit is I think a really important and responsible step.
Mr. Abel: In your budget request, you have some very clear priorities. Can you talk about the four main goals of the FTA?
Ms. Dorn: I think the goals really reflect what the taxpayers need, want, and expect. There are just a couple of fundamental principles, first of all, common-sense transit solutions. We want to give states and communities the freedom and the flexibility to solve their own transit challenges in terms of determining where and how those investments should be made. That's always been the federal philosophy, really, in terms of transportation - particularly public transportation - that federal investments are appropriate, but local decisions need to be made because of the wide diversity in geography, in culture, in preference, in economic base, etcetera. So we want to make sure that we can simplify and streamline our programs to get the most transit service for the dollar.
Over the years, a number of different requirements have grown up. They are not always valuable. So we want to streamline the programs. We know that funding categories and restrictions shouldn't get in the way of common-sense transit solutions. Ironically, and Secretary Maneta has often mentioned this to me, one of the worst things that can happen is that a community's decision about what kind of investments to make in public transportation are skewed by the pots of money. In other words, I really would like to do a bus rapid transit sort of investment, but there is only money for a light rail or fixed guide way, so, therefore, I'll modify my merit-based program and try to fit it into the confines of how we've built the funding pot. So that we think doesn't really make sense.
Another important principle is really A-plus performance. That's both within FTA, our responsibility, and also in all of our transit agencies and service providers across the country. We want to provide improvement where it matters the most, and that's in getting more riders to more locations with less overlap in service. So we have some performance-based incentives that we discussed earlier to encourage an emphasis on ridership, and we want to encourage cooperation and coordination with a number of transit-related programs that are occurring in the community. We want to make sure that all of those make sense and they perform well.
The third principle is really promoting independence and economic opportunity, and that's what public transit is all about. As I mentioned before, really transit can be a lifeline for many groups, including people with disabilities, the elderly, and low-income, and our programmatic changes are designed to make it easier to make communities serve those kinds of needs.
We also think it's pretty important that because there are so many needs out there in terms of public transportation and our investments are generally keeping up with those needs, that it's important that those funds be delivered by formula rather than, forgive me for saying it, but many of the programs delivered by earmarking. We think that the more flexibility we can provide to local communities by formula, the better that is.
In some cases, for example, we have only half the urbanized areas who get bus money, yet the whole country needs bus money because half the urbanized areas get earmarks. So we think it is really important to emphasize that piece.
The last piece is keeping our commitment which means staying on target to improve transit infrastructure and maintaining record levels of funding for public transportation, and making sure that we continue the long-held commitment that there is a significant role of the federal government in providing investments for these kinds of services.
Mr. Lawrence: How are you linking budget and performance?
Ms. Dorn: We have ways go in that in terms of our programmatic efforts, and I think we've made a significant first step in introducing people-based performance incentives for part of our formula program. I think that will have long-term, wide-ranging impacts to encourage all of our transit agencies that the number-one focus is increasing ridership. If we want to get all the benefits for public transportation, for decreasing congestion, helping the environment, reducing energy consumption, we have to get people out of their cars and onto public transportation. We recognize very fully that we need a partnership; we're not car-bashing, because we need that partnership with the highways and transit, but we need more ridership on public transportation.
I guess I would just saying linking the budget to performance, also, I'm very proud that the Federal Transit Administration has a very aggressive and value-added oversight program so that when we make a federal investment in transit, we are sure, or as sure as we can be, that that investment will pay off, that we'll be on time, on budget. We have many, many major infrastructure projects that we're building throughout the country from helping New York in terms of recovery after the terrorist attack in their $4.5 billion subway and transit reconstruction program, to helping communities in California and all in between who have light rail or bus rapid transit technology programs. So we keep a very right rein to make sure that these are value-added investments, and I believe in large very large part they are.
Mr. Abel: The President has made very clear through his management agenda the need to make management improvements across the federal government. How are you working to implement management improvements in the FTA in particular?
Ms. Dorn: The secretary and the President have taken this piece very seriously. And as you mentioned, Dave, the President's Management Agenda is very results-oriented, customer-focused, citizen-centered, and we've taken that to heart.
About a year ago, our senior management team at FTA developed a strategic business plan to guide our work. It identified a number of major goals and 16 specific action items. We've been very focused with regular meetings not about process, but about outcomes, and we want to be really focused on that, and I think that the taxpayer will be better for our focus on the outcomes.
As a management team, we've stepped up to the plate by agreeing to be held jointly accountable for four specific measurable accomplishments, and if we don't meet those, including one of them, meaning increasing ridership in areas across the country, if we don't meet them, then our performance bonus depends on that success. So I think that's a very important piece.
We have increased emphasis on cost-effectiveness in our projects. We want to do a better job of assessing the risks, whether we're tunneling in Seattle for a major light rail project, or we're building a bus rapid-transit guide way, we want to understand better going in what kind of risks there are, and then be able to hold ourselves accountable to the bottom line, the budget, the costs, and the benefits as well.
Mr. Abel: We've talked quite a bit this morning about reauthorization. Can you tell us more about the President's reauthorization proposal for FTA?
Ms. Dorn: Sure. First of all, we have an underlying foundation of what's called T-21, which was the initial or the second phase of investment in public transportation. We think that foundation is very solid and we have learned a lot. What we want to do is kind of tweak that and make some fundamental improvements.
The second piece is the predictability of those funds. What we have found is that the more that the state and local governments understand that there will be a long-term commitment at dollar-level X for investments, the more they will investment. In fact, over the past 10 years, state and local investment has grown even more, because there is that certainty, that predictability, that 3 years from now they're going to have this dollar amount. That allows communities to make longer-term investments. And I'm sure as you would know, investments in transit and public transportation and transportation generally, many of them have to be longer-term.
Another price of local flexibility, so that we don't have to follow pots of money with particular requirements, but, in fact, the locals can determine what they need. Lastly, we think it's really important the more we can streamline the programs and remove burdensome requirements from the grantees, the better our dollar will perform locally.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue talking about management with Jenna Dorn of the FTA. What's the FTA's role in the post-9/11 year? We'll ask Jenna to give us her perspective when The Business of Government Hour continues.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Joining us in our conversation is Dave Able.
Mr. Abel: Jenna, security is critical to most organizations, in fact, all organizations in the government right now, but probably none more than the modals within the Department of Transportation. Can you tell us about the Post-9/11 Security Initiative and what FTA is doing in regards to that initiative?
Ms. Dorn: Sure. It's such an important question, Dave. Really, transit systems are safer and more secure now than they have ever been. However, it's important to note that just by the very design of our transit systems, they're designed to be open and accessible. That, in effect, makes them vulnerable, as well as the history around the world where transit systems have been the targets of terrorist attack. I'm really pleased to say and proud to say, however, that with the full and aggressive cooperation of our transit partners throughout the country, as well as with the FTA and the strong emphasis, as you know, under Secretary Maneta's leadership, we've made some really important progress.
Let me just give the highlight of what we've learned in terms of the most important investments that can be made at the federal government and at the state and local governments. What you've learned is that you get the most bang for the buck in the transit environment in terms of security by investing in three things: training of personnel; emergency response; and public awareness. In all of those things, we have been very active, and I'll get to that in just a moment, but I want to tell you about some of the things we did initially after 9/11.
We put together a team of experts, transit experts, terrorism experts, intelligence experts, that went out to 37 of our top transit agencies, the subway systems, the light rail systems, and those that had high consequence, high assets in the community. And we did a very thorough - not a cookie cutter - but a very thorough assessment about vulnerabilities and threats. We learned a great deal about that that we were able to transmit to transit agencies across the country, and each of those agencies learned a lot as well. We are now sending them in follow-up teams to perfect some of the plans and the emergency response things that need to be done in each of those areas.
In addition to the training piece that I mentioned, where we have increased the kind of training that is offered for first-level supervisors, what we want to make sure is that not only is the public aware that there is heightened sensitivity on the part of the operators and the bus drivers, but that they are trained well to know what to look for, what to do, and it's those first-line supervisors that really can play an important role, whether it's a bus system, a subway, or a light rail.
The emergency response plan, there is nothing more important than that, and as I noted very dutifully just a few short weeks after the terrorist attack, when I went to New York and had a briefing from the transit, the police, and the fire officials, they said literally tens of thousands of lives were saved as a result of that collaboration, collaboration across not just the transit folks, not just the emergency, the fire and the police, all working together. They had an emergency operations center, they talked to each other, they were aware of what was important to do. They trusted each other, and all of that is very important.
We have established, through 17 regional forums throughout the country, that kind of learning experience with 2-day seminars bringing all of these folks together to try to more finely tune those emergency response plans, and that's been a very important effort as well.
Mr. Abel: As the Transportation Security Administration increases their focus on surface transport where they've mainly focused in the past year or so on air transport, what will be the nature of the relationship between FTA and TSA?
Ms. Dorn: I am very committed and encouraged by the fact that we already have a very good and strong working relationship with our colleagues at TSA, and I am confident that that will continue. We have in effect an agreement, a memorandum of understanding, both in sprit and in kind, about who does what and how we do it together. The real benefit of TSA being a part of Homeland Security is not only the intelligence sharing, but also being able to prioritize resources not only across transportation sectors, but across all sectors.
For me in the FTA, I may say we need capital equipment to make sure that we protect against this or that, but I don't have the 30- or 50-000-foot level about what are the threats in this environment versus the port security or versus the banking industry, so that piece will just be very important. But I remain very confident that that working relationship will continue and be better, in fact, because of the affiliation of a TSA in a broader Homeland Security department.
Mr. Lawrence: How is technology changing the way FTA does business?
Ms. Dorn: In terms of FTA, Paul, I think that a very substantive kind of contribution that technology has made is in the arena of electronic government, or e-gov, I guess as it's called. Our grantees use a web-based grant application and approval system that's really one of the best in government. In fact, in the last two weeks we've gotten an award from outside not-for-profits who say we have a very good system.
That lets us transfer the funds as quickly as possible once a completed grant application has been received. As you can imagine, with more than $7 billion every year in grant funds going out to communities, that kind of more responsive timeframe in grant application review allows us to make sure that the money goes to the right place in a timely fashion.
In terms of technology being used by real people, in terms of the riders, that technology has been so important in terms of encouraging ridership. Many of you may seen the next bus technology or the next train coming technology that allows you, as someone who is riding or me as someone who's riding, to note when that bus actually will be there. It makes you feel better, it makes you feel more confident, it allows you to schedule things, and that encourages ridership. So there are many areas of technology that over the past even 5 or 6 years have made a big difference in our ability to provide public transportation in a seamless way and in a way that really matters to local communities.
Mr. Abel: What are some of the next challenges on the horizon for your agency?
Ms. Dorn: Certainly, reauthorization of the Surface Transportation Bill is absolutely top on our list. That's a very important sort of effort we want to continue, the very good foundation that has been established through T-21.
Mr. Abel: What about transit issues in general? What are the next big things that are going to arise as far as issues in transit?
Ms. Dorn: I think the whole competition for funds. Transit has become trendy in a very good way, I think. People are recognizing, in many places: we can't build more roads; we can't extend more; we have to maintain the system. And in some places where the roads are - expansions are obviously very important.
But because of that, there is more and more demand on public transportation infrastructure. Fortunately, the investments that the federal government has provided to date have virtually been keeping up with the maintenance and the demand, but we see down the road that there are more and more communities that want to make major capital investments. So that's a very important piece of what we see in the future.
In addition, I think the whole issue of focusing attention directly on our customers, the riding public, that's a terribly important issue not yet talked enough about, but we're trying to remedy that.
Mr. Abel: Can you give us your highlights of your vision for the agency over the next 5 to 10 years, taking into account some of the factors that we've talked about during the conversation this morning?
Ms. Dorn: Perhaps to summarize it, I would hope that public transportation in America's future would be the mode of choice. I don't mean by that that every person would choose transit, but every person would have an opportunity to choose transit, in their community, if that's what worked for them. So that would be one piece of it.
I guess from a more parochial perspective as the administrator of FTA, I would hope that FTA would be recognized as the best resource and the source of expertise to help ensure that America continues to make very sound investments in public transportation.
Mr. Lawrence: You've had a long career in public service so I'm curious, what advice would you give to a person interested in starting a career in the public sector?
Ms. Dorn: First, I would tell them that there's no better career than in public service. It's just a wonderful opportunity. I feel privileged to serve in this department, under this secretary and this President, and it's a career you can't beat. So I would tell people, young people that, or even mid-career people I would tell that.
I also think it's important to be open to opportunities and to learn as much as you can by every experience because every experience will be valuable to the next one. I guess the third thing I would say is that the more you can hone your skills in listening, writing, communication, analysis, it will stand you in good stead no matter what sector, or no matter what agency, you serve in.
Mr. Lawrence: Jenna, we're out of time. Dave and I want to thank you for joining us this morning.
Ms. Dorn: Thank you. I've really enjoyed it, Dave and Paul. And I would call attention to your listeners that we have a website, www.fta.dot.gov. Thanks so much.
Mr. Lawrence: Thank you. This has been The Business of Government Hour, featuring a conversation with Jenna Dorn, administrator for the Federal Transit Administration in the U.S. Department of Transportation. Be sure and visit us on the web at businessofgovernment.org. There you can learn more about our programs and research and get a transcript of today's very interesting conversation. Again, that's businessofgovernment.org. This is Paul Lawrence. Thank you for listening.
Mr. Lawrence: Good morning, and welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chair of The IBM 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.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 conversation this morning is with Dan Gregory Blair. Dan is the deputy director of the Office of Personnel Management. Good morning, Dan.
Mr. Blair: Good morning, Paul. How are you?
Mr. Lawrence: Great. Thanks for joining us.
Mr. Blair: Thank you for the invitation.
Mr. Lawrence: Also this morning is Nicole Gardner. Good morning, Nicole.
Ms. Gardner: Good morning, Paul. Good morning, Dan.
Mr. Blair: Hello, Nicole.
Mr. Lawrence: Dan, perhaps you could start by talking to us about OPM. Give us a sense of its mission and the activities.
Mr. Blair: The Office of Personnel Management or OPM serves as the principal adviser to the President on federal personnel issues. We're an agency of approximately 3,600 employees strong. Our work force includes employees who possess a broad swath of specialties including people with expertise in budget, finance, security administration, personnel management, computer security, telecommunications.
Our mission is to build a high-quality and diverse federal work force based on merit system principles, that America needs to guarantee its freedom, prosperity, and ensure the security of our nation. Our goals are threefold: first, we want federal agencies to adopt human resources management systems that improve their ability to build successful, high-performing organizations. We work to see that federal agencies use effective merit-based human capital strategies to create a rewarding work environment that accomplishes those missions.
And we meet the needs of the federal agencies' employees and delivery of efficient and effective products and services such as our retirement system, our life and health insurance systems, and long-term care programs as well.
Mr. Lawrence: I'm surprised when you told us about the number of employees and the wide range of skills. I would have thought intuitively these are all HR-focused folks.
Mr. Blair: In operating an agency, you need to have a wide variety of skills. We have a CFO, we need people with top financial management skills, we need people with top tech skills. I think we'll go into this later in the discussion, but OPM is the lead agency on five of the e-government initiatives that span across government. So we need people with top IT skills. So we need people with the breadth and depth in a wide variety of skills, knowledge, and abilities.
Ms. Gardner: Dan, you've give us the broad context. Can you tell us a little bit about what you do specifically as the deputy director?
Mr. Blair: If you look at Title V, which is the basis for our authority at the Office of Personnel Management, it says that the deputy director's functions are those that the director may from time to time assign him or her. That's pretty broad, and I will say that this director, Kay Coles James, has given me quite a full plate. I serve on the President's Council on Integrity and Efficiency which is the Inspectors General Council ferreting out waste, fraud, and abuse across government. I assist the director on any projects that she may deem necessary.
For instance, I was the lead on implementing our recent restructuring. Effective March 3rd, we have a restructured OPM, which is intended to better deliver our goods and services and serve our customers better. One of the first tasks that the director assigned me when I came to OPM was to fix the hiring process, and we've been working hard on that.
I am the chief point of contact to the veteran's community, because, as you know, the federal government serves as the largest employer of veterans in the country. I help oversee the Combined Federal Campaign. Also I will from time to time testify on Capitol Hill on various issues. For instance, last year I testified before the House Postal Appropriations Subcommittee. In addition, I testified before one of the government reform subcommittees last December on our federal employee health benefits program. So as you can see, I have a broad plate of responsibilities.
Ms. Gardner: Kay Coles James is a very dynamic personality. She has a very broad and very aggressive vision for the federal work force. I'm sure that it's an exciting position, and it's got obviously a lot of diversity to it.
You've had a very interesting career with lots of different positions and turns. Can you tell people a little bit about how you got to where you are?
Mr. Blair: It's been a long, interesting story. I started in Washington out of law school. I'm a graduate of the University of Missouri, School of Law, in Columbia, Missouri, and I came to work for my local congressman from Missouri. I was a staffer on the former House Post Office and Civil Service Committee. That was the House of Representatives' committee charged with oversight jurisdiction of the Civil Service and the Postal Service. What I thought was a short-term assignment turned into about a 10-year assignment, and I served there as the chief Republican counsel.
After the 1994 elections, that committee and several other committees were combined to form the House Government Reform and Oversight, and I worked there for three years as a subcommittee staff director on the subcommittee charged with oversight of the Postal Service.
Beginning in January 1998, I moved over to the other body as they call it on Capitol Hill, from the House side anyway, I moved over to the Senate working for former Senator Fred Thompson as senior counsel on the Senate Governmental Affairs Committee. My portfolio included oversight of the Civil Service, government ethics, federal budget process reform, and the Postal Service.
So I've seen it from one angle for almost 17 years, and then I was tapped by the President to be the deputy director and work for Kay Coles James at the Office of Personnel Management. It's a phenomenal opportunity.
Mr. Lawrence: When you think about your career, is there any one experience or set of experiences that best prepared you for this position?
Mr. Blair: I don't think there would be one thing to best prepare you. I came to OPM having seen it for years in operation, but never internally. I saw it strengths, and I also saw its weaknesses. So I was prepared for the agency when I came down there. That said, I've been very impressed with the caliber of employees that we have, their dedication to hard work, and their ability to really turn on a dime in carrying out a wide variety of tasks at a moment's notice.
We have a tough job right now. We're engaged in a war against terrorism, and our public servants are asked to operate in a stressful environment, and people recognize that. That said, I think that we have a tremendous federal work force, and I'm very honored to be part of it and to be serving in this administration.
Mr. Lawrence: What drew you to HR? You were a lawyer, you come to Washington, and you end up in HR.
Mr. Blair: HR is people oriented. The emphasis is funny here now - funny in the sense that for most of the past couple of decades, the emphasis of congressional oversight has not been on Civil Service reform so much as it has been on the budgetary aspects. I was part of the staff effort that drew up the new Federal Employee Retirement System in the mid-1980s. We looked at the Federal Employee Health Benefit System and saw how that needed reform, and the Long-Term Care system.
But beginning in the mid- to late-1990s, we saw that a huge number of program failure across government that were occurring could always be traced back to not having the right people in the right place with the right skills. When David Walker was confirmed as the comptroller general of GAO, he brought a new level of enthusiasm and commitment to this issue area. I worked on a number of reports that Senate Governmental Affairs put out under Senator Thompson's name in which we highlighted program failures, but we also highlighted the fact that the downsizing that occurred in the 1990s while reducing the size of government, often ended up with agencies being anorexic in terms that they lost people with needed skills, knowledge, and abilities, and weren't able to really carry out their functions.
So we have a new shift in emphasis right now, and the shift is on viewing people not has a burden or not as just a cost, but viewing them as a resource. Then with the confirmation of Kay James as OPM director, she's breathed new life into the concept of HR or human capital, and it's been a tremendous change in the way of thinking, that people are indeed our best asset in the federal government, and she's been leading that charge and at the forefront of that fight of getting people to recognize throughout government and outside the government that, indeed, federal employees are up to the challenge.
Mr. Lawrence: I'd be curious in your perspective. You grew up in the House and the Senate on the Legislative side, and now you're in the Executive Branch working on the same issues. Could you compare or contrast, the differences, similarities, management styles, approaches to issues?
Mr. Blair: I think in the House and Senate you have a great amount of autonomy for each individual office. Now I'm working in to me what is a large organization, 3,500 people, but if you compare it to the new Department of Homeland Security of 170,000, we're still small. So that was a cultural change for me.
That said, the two bodies of government operate with distinct missions and with distinct styles and differences. Congress's duties are to pass laws. The Executive Branch carries those out. It was interesting, I helped secure the passage of the Long-Term Care legislation, and then I was on the other end helping to carry it out. So you can see you get an interesting perspective of being able to see from the inside what those on the outside don't see, and you sit back and go if I'd only known that when I sat in this other position.
That said, I think it gives you a well-roundedness that not everyone has that opportunity to have, and it's been a phenomenal experience this last year and a half.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue our conversation with Dan Gregory Blair of OPM. What are the management challenges of standing up a new department? We'll ask Dan to tell us how OPM is working with the Department of Homeland Security when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Dan Gregory Blair. Dan is the deputy director of the Office of Personnel Management. Joining us in our conversation is Nicole Gardner.
Ms. Gardner: Thank you, Paul. Dan, we've had some conversation about some of the broad mandates of OPM. One of the things that's on everybody's minds these days if the standing up of the Department of Homeland Security. No matter what part of government or the public you're in, it's a big question.
I know that OPM is engaged in this activity. Can you tell us a little bit about the role of OPM in setting up the new department, and what some of the time lines are for those activities?
Mr. Blair: When you said it's on your mind, believe me, it's on our minds as well. That is probably the number-one priority right now, is assisting the department in standing up.
OPM has played a pivotal role since the development of the DHS proposal. We played a key role in the legislative debate, and we were successful in obtaining the critical authority to develop the new HR system in six essential areas for the new department: hiring, compensation, performance management, firing appeals, and labor/management relations.
We played a very active role in the transition in making sure the department hit the ground running when it official on January 24th, and we're now gearing up to work closely with the department's officials, union leadership, rank-and-file employees, and other interested stakeholders, in the actual development of the new HR systems.
Following this extensive outreach, which will take place over the spring and summer, the outreach is designed to be as collaborative and inclusive as possible, and I can't emphasize that enough. We hope to see the actual implementation of the new HR systems shortly after the new calendar year.
Ms. Gardner: That's aggressive.
Mr. Blair: It is very aggressive. It certainly is taxing us, but we're up to the challenge. We have to be, given the environment in which we're operating right now.
Ms. Gardner: That's reassuring to hear as a citizen. I know there are a lot of people involved, a lot of departments, a lot of different parties and perspectives. Can you give us a little peak in terms of the challenges you're facing coordinating all these different players?
Mr. Blair: This challenge cannot be overestimated. There are 22 major entities that are being brought within the confines of this new department, I've been told over 108 subcomponents, thereof, with 170,000 employees. It is essential that this coordination and integration be done well and in a timely manner. So we're going to be working closely with the department to address the multitude of disparities in HR programs that currently exist among and between all those entities, and that we want to continue to provide the department whatever advice and assistance we can in any area associated with the communication and management of its work force.
We're going to be playing a role with this department for a long time to come.
Ms. Gardner: Yes, and I'm sure they appreciate the help, and it's going to be very complex as they get rolling. The Act actually exempted the civil servants in the new department from a lot of the laws that apply to hiring, to promotions, to job descriptions, to bargaining, appraisals, firing, disciplining, and so on. I think there's a lot of misunderstanding about what the impact of all of those changes is. Can you help us understand a little bit more about how these changes will affect civil servants not only in Homeland Security, but what else it might mean for other civil servants?
Mr. Blair: As I said earlier, the Act gave flexibility in six different areas, hiring, compensation, performance management, firing appeals, and labor/management relations. Until official changes are made and implemented, the employees of the department will continue to be covered by the procedures that currently exist. So the flexibilities are there only if they're exercised.
In the legislation creating the department - it's a nuance, but it's a nuance that needs to be understood - did not exempt the 170,000 employees from the Civil Service laws. Rather, it gave the flexibility to implement changes in these limited areas. That said, the changes that will ultimately come as a result of the authorities granted will have no direct or immediate impact on the rest of the Civil Service.
However, it will be a starting point for managerial flexibility, and if best practices are identified, if good practices that are working well in this department appear to transfer well to others, I think that you will see legislation accordingly. But it will be up to the administration and Congress to determine if they are going to be made applicable to the other parts of the federal government. Right now we're focusing on the Department of Homeland Security, and we want to make sure that we get these systems up and running, and running well in order to defend our homeland.
Ms. Gardner: Pursuing the Act for just another minute here, there were a lot of interesting things in that bill, and one of the things that was very interesting was the creation of a new job, if you will, in the federal government called the chief human capital officer. Tell us a little bit about what that means and what OPM expects from that new team of people.
Mr. Blair: As I said earlier, at OPM and under this director, Kay James, we see people as an asset, an asset to be managed well. In recognition of the director's vision, we obtained through this legislation, particularly with the support of Senators Thompson and Voinovich, mandate to create what's called a Chief Human Capital Officer's Council. Each of the 24 major agencies and departments will be asked to name a chief human capital officer.
We have a CFO Council, which is devoted to good financial practices, and we have a chief financial officer at each of these agencies. We have a chief information officer, and a CIO Council that will oversee IT issues at each of these agencies. This is a recognition of the elevation of human resource, or if you want to call it human capital, we use them almost interchangeably, issues, in the world around us today, that in order to effectively manage your organization, you not only need to effectively manage your money and your information technology, but you need to be able to manage your people well, too, and naming a chief human capital officer is recognition of that.
Mr. Lawrence: President Bush also added the management of a $500 million fund called the Human Capital Fund. Could you tell us about the plans for this fund?
Mr. Blair: Sure. I'm happy to. This is exciting because this is an opportunity to use pay as a strategic tool in better managing our work force for more effective results. In the FY 2004 budget, President Bush proposed to allocate $500 million for the Human Capital Performance Fund. This is a fund that would be administered by OPM. Agencies will be required to submit to OPM a plan to distribute the money from the fund to employees based strictly on employee or organizational performance, and/or to address other critical agency human capital needs that affect an agency's performance.
So what we have here is a proposal to actually use pay, which is not a strategic tool yet for performance management. It's exciting, and it's the first step that we've taken towards reforming how we reward our employees.
Mr. Lawrence: OPM is also in charge of helping federal agencies meet the challenges of the President's Management Agenda in the area of strategic management of human capital. Could you talk to us about how OPM is measuring the success of these efforts?
Mr. Blair: Our role in this area is both evaluative and consultative, evaluative in that we we're working with OMB in learning about each agency and its human capital challenges and helping agencies develop plans and make commitments to move towards a more strategic management of their human resources.
We're also consultative in that same role, too, in helping them identify ways of improving their human capital management. As agencies move beyond making these plans and implementing these specific initiatives, our OPM team is working to develop relationships with senior agency leaders and engage them in efforts to better align their human capital with agency missions and guide them towards commitments that will actually produce results and help them better accomplish their goals.
During 2002, OPM, the Office of Management and Budget, and GAO, worked together to revise the human capital standards for success to provide a clearer set of outcomes for agencies to use in gauging their efforts. As the need for more guidance became evident, OPM developed what we call a human capital assessment and accountability framework to guide agencies toward achieving these standards.
So we have the human capital standards for success, and how to reach success on these standards, we have the framework. So we have good guidance and practices in place.
Ms. Gardner: So you're helping other agencies to figure out what they need to do to be successful, and as you pointed out in the beginning, OPM is also a very multidimensional agency in and of itself. So what's OPM doing to improve its management of its human capital?
Mr. Blair: If you look at the most recent scorecard that was issued by the President, OPM was one of eight agencies with all green progress scores, and we're in the top six for our status scores as well. So we're definitely among the top scoring agencies in government on the scorecard.
In that effort, we've also realigned and restructured ourselves to better serve our customers. What we've done is we've taken our organization and reworked it so we have four primary divisions devoted to the strategic HR policies. Our human capital scorecard component is our accountability in leadership division. Then we have HR products and services, and our management component. Along with the three offices of communication, congressional relations, and general counsel, we're there to help agencies and help ourselves internally carry out the President's agenda on human capital.
Mr. Lawrence: That's a good stopping point. It's time for a break. Come back in a few minutes as we continue talking about management with Dan Gregory Blair of OPM. This is The Business of Government Hour.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Dan Gregory Blair. Dan is the deputy director of the Office of Personnel Management. Joining us in our conversation is Nicole Gardner.
Ms. Gardner: Thanks, Paul. Now Dan, we've just talked about all the things that OPM is involved with, and we all know how important homeland security is. So in case anybody over there thought they were going to have a normal workday, we wanted to make sure we talked about some of the other things that are on your plate that Mr. Forman has had the confidence to send over to OPM.
There are five, actually six, you just corrected me earlier, government, e-government-wide initiatives, and we want to talk about each one of them. The first one, can we just start with the Recruitment One Stop? Tell us a little bit about that one.
Mr. Blair: Certainly. The way that I look at these e-government initiatives is that they cover the entire employee's life cycle while they're in the federal government. To start off with, we would look at Recruitment One Stop. What this will do is allow for job seekers to have access to a web-based application system. We will have a federal government-branded web presence that delivers a fast and responsive experience. It is intended to be clear and easy to use, and it will help job seekers identify jobs that match both their skills and interests. We intend for it to be an efficient process for building online job applications.
Early feedback regarding the eligibility screening on factors such as citizenship or age will be built in. The online application will have a status tracking component, all working towards a seamless integration with agency automated assessment systems.
As we've announced recently, we did award a major contract with monster.com in January 2003, and we hope to have some new enhancements on our website beginning in April 2003, such as a new search function, and it will have a new design look to it as well.
Mr. Lawrence: Another of the initiatives is the Enterprise Human Resource Integration. Could you tell us about its goals and status?
Mr. Blair: Enterprise Human Resource Integration, or EHRI for short, will eliminate the need for paper records on employees. This will enable the management of reporting of benefits generated by our e-payroll initiative, and the electronic transfer of employee information throughout the federal employee's life cycle. So instead of keeping paper records, on employees, we'll be able to do this electronically, and this will reduce redundancies, improve time, and definitely improve efficiencies.
At the end of the employee's life cycle when he or she goes into retirement, they will transfer the data to our retirement systems, and we're attempting to modernize that as well through another major initiative.
Ms. Gardner: So there is some logic here. You hire employees, you get all their data. Now comes the next one, which is the whole training side, the e-training side. Tell us a little bit about that one.
Mr. Blair: I don't know if you've had a chance to go look at our Go Learn website, but I'm fascinated with it. If you click onto it you'll see that it appears to be an office, and you can drill down into the offices or go above or below and looking at what classes might be best for you.
This supports the career development of the federal work force. A number of benefits accrue to online training. It reduces repetition, you have economies of scale. It's an easy one-stop, web-based access for employees to access. It also encourages additional training and investments in learning as appropriate to the continuous development of your human resources.
The e-training initiatives connects federal agencies to a competency-based library of courses throughout the creation of what we call a portal. Once you enter the portal, then you can access the different courses. The Go Learn website went operational in July 2002, and in January 2003, both the Federal Law Enforcement Training Center and the Federal Executive Institute have operational sites as well on that website.
The site is one of the most active sites of its type in the world, and we've had over 40,000 users to register on the site since July when we opened. So we've had great success with that, and we look forward to more.
Mr. Lawrence: What e-payroll and e-clearance?
Mr. Blair: E-payroll is an effort to consolidate the 22 disparate payroll systems that you have in the federal government. We've gone through an extensive process, and we've narrowed that down to two processing centers. What we're doing here is an attempt to improve economies of sale, gain efficiencies, and save the taxpayers more than $1 billion by consolidating it down to two centers.
Right now, there will be an improved financial management, we'll have an improved link between performance and budget and, again, greater efficiencies in federal payroll processing. This has been a tremendous effort, and we're looking forward to saving the taxpayers over $1 billion.
Mr. Lawrence: So you've got the employees, you've trained them up, you've gotten them cleared, and now they're going to retire. Tell us about the modernization program of the retirement system.
Mr. Blair: This has been an ongoing effort, but we want to make sure that there's a seamless and paperless trail, which can follow an employee into retirement. Once in retirement, if a retiree needs to retrieve these records, that he or she will be able to do so. So this is all part of an effort to keep the entire employee's life cycle in electronic format, rather than going into a cave in Boyers, Pennsylvania, and having to retrieve records that may date back 20, 30, or even 40 years, that you'll be able to access them almost instantaneously.
Another part of this whole e-government initiative, also a very important one, is the e-clearance initiative in which we'll be able to do security clearances on line as well. This is one area that is often time consuming, and our intention is to improve the speed and the processing of individual security clearances.
Mr. Lawrence: All these e-government initiatives would seem to involve coordination and collaboration of the HR functions in the different agencies. How is OPM working with the other agencies to facilitate these accomplishments?
Mr. Blair: We are the managing partner on these initiatives, so we've been charged with taking the lead on this. That said, other agencies are our working partners, and we've been looking at them for support and guidance as well. These have been going very well, and we look forward to continuing them.
Ms. Gardner: Dan, it seems like a focal point of many of these initiatives, obviously in the e-government world, there is a focus on technology and what technology does to enable the ability for OPM to streamline all these processes. How is technology going to increase the effectiveness of OPM as the provider of these services to both other agencies and to the civil servants?
Mr. Blair: Let's go through an employee's life cycle, and I think we can hit it along those lines. Recruitment One Stop will benefit agencies form a faster recruitment, selection, and hiring process of getting the right people with the right jobs with the right skills. The e-training initiative will deliver effective and cost-effective training when needed in a format that's most appropriate for the agency's missions. Improved access to background investigations and clearance information will be facilitated by our e-clearance committee, and it will put key personnel in these security sensitive positions faster than ever before possible.
The EHRI process will facilitate the management of agency personnel and permit a more efficient exchange of personnel and payroll data among agencies. Now we won't have to wait to transfer paper if an employee moves between different agencies; that can be done electronically.
Then the e-payroll initiative will provide guidance on structuring payroll for agencies. So you have almost a seamless process here for an employee's life cycle from the time that they're hired, to the time that they enter into retirement.
Mr. Lawrence: I'm curious in terms of your experiences what the lessons learned would be. You talked about the success of each one these and the fact that as a managing partner you know that things are going quite well. As you reflect on this and perhaps give advice to others working these cross-agency collaborations, what are the lessons learned?
Mr. Blair: I think the lessons learned are that you always have to look at these issues from the other person's perspective in order to know where they're coming from in order that you can effectively lead them. It's a collaborative process. It's not one to be dictated by one agency to another. That said, you certainly have to take up the mantle of leadership and go where the President expects you go to, and carry it out as effectively as possible.
This is evidence of OPM's new role, and evidence of the director's commitment at raising the visibility of OPM to really a position of which it was envisioned to be in the 1978 Civil Service Reform Act of being the chief personnel adviser to the President on federal personnel issues.
Over the past decade, as you know, OPM saw itself downsized significantly. We've seen a number of agencies seeking additional flexibilities outside the scope of Title V of the United States Code, which we administer. That said, we have a new role at OPM. We're more about tools than we are about rules. That said, we are holding agencies accountable for the strategic management of their most important capital, their people.
We have a director who is committed to building and establishing a world-class organization that not only employs within OPM, but federal employees outside the federal government will look to as the cutting edge for best practices in human resources management.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue discussing management with Dan Gregory Blair of OPM. What are the largest human resource challenges facing the federal government? We'll ask Dan for his perspective when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Dan Gregory Blair. Dan is the deputy director of the Office of Personnel Management. Joining us in our conversation is Nicole Gardner.
Ms. Gardner: Thanks, Paul. Dan, we've had a very interesting conversation, and we've talked about a lot of the initiatives. Let's turn our attention just a little bit now and talk about some of the challenges that are facing the government today in the world of human capital and HR. What are they, and how are they being addressed?
Mr. Blair: As you know, and it's been highlighted quite a bit, we face a retirement wave, that a significant number of federal employees will be eligible for retirement over the course of the next 5 years. If you give early-outs as regular retirement, over half the work force or up to half the work force. In our executive ranks, it goes up to 70 percent.
That said, I think the most significant challenge we're facing is making sure the agency and department heads know that human resources issues, human capital issues, are no longer just HR, the human resource department's, purview. Rather, it's a management and leadership issue.
To emphasize that and to drill that down, of the five strategic cross-cutting initiatives on the President's Management Agenda, the strategic management of human capital is the first one. It's the first one because you can't achieve success on the other four without effectively having the right people with the right skills and right knowledge in place getting the right jobs done. It's that important.
Since it's that important, agency leadership has taken notice, we're holding agencies and departments accountable, that's why you have a scorecard, and we will continue to hold them accountable for the ways that they manage their work force.
Mr. Lawrence: You mentioned the retirement wave and the impact on federal agencies. Let me make this personal, what kind of challenges does this present OPM?
Mr. Blair: At OPM we're engaged in work force planning, and we know where our people may or may not be leaving. That said, it's also an opportunity, and one of the things that Director James has stressed is that when we talk about a human capital crisis, the flip side of that is a human capital opportunity about bringing new people in government, and bringing fresh faces and new ideas. That said, you're going to have to have systems in place that can rapidly replace those people who might be leaving.
We've heard about a retirement wave, and our information shows that not quite as many people retired the past year as had been predicted. I think that's primarily because of the economy. But in the next hot economy, we may be having more people retire than we had anticipated. So that's why we really need to have systems in place, effective hiring systems in place, that can bring people on board quickly with the right skills in order to accomplish agency missions and goals.
Ms. Gardner: Dan, under the banner of challenges, continuing along this theme, you mentioned in the very beginning segment about the fact that you've been asked to help fix the hiring process, and we talked about the Recruitment One Stop. But there's a whole lot that happens once a candidate I want to be considered for a job. Tell us about what's happening there. Also, what can people expect if you apply for a job? Who's responsible? How is this going?
Mr. Blair: At a bare minimum, we expect agencies to get back with potential applicants. If you file an application for a federal job, we would hope that the agency receiving that application would get back with you either with a letter or with an e-mail acknowledging the application, and at some point letting you know where you may stand in that process.
We've emphasized that agencies shouldn't rely on online technologies alone, that there is a digital divide out there, and that there are people who don't have access to computers for one reason or another, and that agencies should provide the same access to those that we provide to those who do have access to the Internet.
That said, hiring is no longer just within the realm of the HR department. Today's job applicant is not going to wait around 2 months, 3 months, 6 months, or 9 months, to hear back from a potential employer about a job. You have to get back more quickly. We have to make sure that agencies have systems in place that can not only process the applicants that they have, but the back end as well as rating and ranking.
One of the key aspects of the homeland security legislation was it gave agencies some flexibility in how they hire, and the processes that they use in hiring people. There was limited direct hire authority for hard-to-fill jobs in critical occupations. There was the ability to use alternative forms of ranking.
Right now in the federal government, or up until the passage of that legislation, we hired job applicants under what we called the rule of three. The rule of three dates back to 1871. Why we were hiring under a 130-year-old rule is beyond me, and that was one of the key aspects, I think one of the key victories, in that legislation is that we were able to employ more contemporary methods of rating and ranking folks.
But more needs to be done, and the agencies are the ones that have to employ these methods. It is no longer an HR thing. Hiring is no longer an HR thing. Hiring is an issue for agency leadership and management as well because if you're going to have people leaving either to go to the private sector or to other agencies or for other opportunities or retiring, you're going to need to have a process in place that can fill those jobs quickly because if you can't fill the job, you can't do the work that the President and the American people expect you to carry out. So it's very critical that we pay attention this.
One area in which I've been visiting a number of agencies and talking about is we've developed a 30 working day model for hiring a Senior Executive Service member. Before, it had taken 6 to 9 months to hire an SESer, and we know that this can be complicated. That said, if an agency wants to hire someone quickly, we've developed a process, and I have talked to a number of agencies so far about how they can employ this process to bring them on within 30 working days. I think that's an example of what OPM is about now, that we can operate within the current system of flexibilities. While we may need more, we certainly do need to do more of using what we have on hand, and that's what we're about, helping the agencies meet their goals and missions.
Ms. Gardner: You gave us a little bit of historical context, and we've been talking in the present, all the challenges and the strategic initiatives that OPM is involved with. Let's push the button and fast-forward maybe 3, 5, or 10 years.
You've been in government a long time, and you're very familiar with all of the issues you're dealing with. What do you think OPM is going to be doing in 5 to 10 years?
Mr. Blair: That's a good question. There is a definite trend towards decentralization in agency personnel management, and that trend is going to continue. I think, however, we've developed a good template with the Department of Homeland Security in that the core values of the Civil Service were maintained. And I think that that's imperative that the core values of the Civil Service be maintained while giving agencies a maximum amount of flexibility to operate and manage their work forces as best they see fit. We're going to continue to hold agencies accountable, and that trend towards accountability, I think, will only be strengthened over the years, especially as more and more flexibility is accorded to agencies in managing their work forces.
You will always see a need for an Office of Personnel Management, especially when it comes to administering our retirement systems, our health insurance systems, our life insurance systems, and now our new long-term care system. The new long-term care system is up and running now. We had a comprehensive open season ending at the end of the year, and already we predict this to be the largest sponsored long-term care program in the country.
That said, as our population ages, the need for long-term care is not going to decrease, but increase, and so this is going to be an added role for the Office of Personnel Management, and it's going to be part of a competitive benefits package that we want to maintain and make sure that it is competitive and contemporary in order to attract and retain our best employees.
Mr. Lawrence: You've had a chance to take us through the gamut, so I'm curious, what advice would you give to a young person considering a career in public service?
Mr. Blair: I would say the sky is the limit. I think that you can begin at an entry-level job and progress as far as you want to in the federal government. Director James recently addressed a number of visiting students from some historically black colleges and universities, and she told them that the skills and abilities that you have are the skills and abilities you can give to your country.
So, in fact, any job that exists in the private sector probably has a public-sector counterpart in one way, shape, or form. We've seen, since September 11th, a resurgence of interest in public service, and I think that's very important. The functions of government are today more important than ever in securing our homeland and protecting the country and making sure that the country continues to be a beacon of liberty and freedom, and that public service is something to hold your head high up about, and that the sky is the limit when it comes to public service.
Ms. Gardner: I have one more question for you, Dan. What's the highlight, if you could tell us, of your civil service career?
Mr. Blair: I think that's obvious. I think working for the President and this director as the deputy for the Office of Personnel Management. If for some reason it ended tomorrow, it's been a phenomenal, phenomenal opportunity. It's the highest honor that I ever been accorded, and I want to continue working hard for both.
It's an incredible organization. It's a dynamic organization. I have the privilege of working with a director who has vision and boundless energy and wants to create a world-class organization, and I want to be part of that. So keep it coming.
Mr. Lawrence: Dan, I'm afraid we're out of time. Nicole and I want to thank you for being here. You mentioned websites a couple times during our conversation. I can't help but think that someone might be interested and want to learn more. How could they get more information?
Mr. Blair: Let me put my recruiting hat on and say that we have thousands upon thousands of jobs available now, and if you're graduating from college, if you're an executive out there looking for a change, or you're in mid-career and you want to do something different, log on to our website, and it's www.usajobs.opm.gov. And we have thousands of jobs listed, an ability to apply for them. There's an online resume builder, and the government needs you, the government wants you. Be a little patient. We still are reengineering our systems, but we really need you, and the time is critical for people with good skills.
Mr. Lawrence: Thank you, Dan. This has been The Business of Government Hour featuring a conversation with Dan Gregory Blair, deputy director of 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 and get a transcript of today's fascinating conversation. Again, that's businessofgovernment.org. This is Paul Lawrence. Thank you for listening.
Monday, February 10, 2003
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman of The IBM Endowment for The Business 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.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 with Cari Dominguez. Cari is the chair of the U.S. Equal Employment Opportunity Commission.
Good morning, Cari.
Ms. Dominguez: Good morning, Paul. It's a pleasure to be with you.
Mr. Lawrence: Thank you for joining us. Could you tell us a little bit more about the EEOC and its mission?
Ms. Dominguez: The EEOC has a very unique mission. It's a keeper of the laws that enforce non-discrimination in the work place. The Age Discrimination and Employment Act, The Americans Disability Act, The Equal Pay Act, Title Seven of the Civil Rights Acts, all of these are statutes that are enforced by the Commission.
Mr. Lawrence: Now, it is a Commission as opposed to just a government agency, Why is that?
Ms. Dominguez: The EEOC was created as part of the Civil Rights Act of 1964. We actually became operational in 1965. Back then we had no experience whatsoever with issues relating to employment discrimination. And so, it was determined that we needed a body of regulators, individuals, primarily attorneys that would look at class issues, patterns and practices and discriminatory behavior and then we take these issues what we call Commissioners Charges . That how the whole development of EEO case law came about. Primary took Commissioners Charges, the identification of discriminatory practices and then the Commissioners, it's a five member Commission, the Commissioners would then direct the investigations as well as the selection of these employers to pursue non-discrimination issues. And so, that's how it evolved. And that's how the Commission has played a very critical role in the development of EEOC case law in our history.
Mr. Lawrence. Now, you're the chair. What are your duties and responsibilities as chair of the Commission?
Ms Dominguez: Essentially the chair sets the direction for the Commission. I'm nominated by the President, confirmed by the Senate. It's a five year term. Five Commissioners. Each has a five year term. And the chair serves as a CEO of the Commission. I'm in charge of all of the management day-to-day direction and guidance, setting up the strategic framework, the operational management practices, etc. that I would expect all of our employees to operate under. And then issues that relate to lawsuits and policy development are handled by the Commissioners. They bubble up to the Commissioners. I present them to the Commissioners for vote. And so, that's pretty much that. So, I'm a voting Commissioner but at the same time I have the added responsibilities of running the agency.
Mr. Lawrence: Tell us about your previous experiences before joining the Commission.
Ms. Dominguez: Prior to joining the Commission, I was a small business entrepreneur. I ran my own management consulting business that involved a variety of things. I did executive recruitment, executive search. I also did served as expert witness on class ceiling issues. I did a lot of workforce preparedness assessments for employers looking at the competencies of their employees and then making some recommendations. So, this as an entrepreneur.
And, then prior to that, I was a partner with the two major international search firms. I've also believe in the power of one and I chose to go into the search business because I felt that people do influence the direction of an organization by the individuals that you appoint to positions of leadership.
Prior to that, I was a political appointee in the Bush 41, the 41st President Administration. I was the Assistant Secretary of Labor as well as Director of the Office of Federal Contra-Compliance Programs.
And, prior to that, I was at Bank of America in charge of Director of Executive Programs in charge of what we call the Caring and Defeating of the Top Appointed Executives. At the bank, I did all the executive staffing, executive compensation, benefits, succession planning, all of those things.
And, I think the theme that ran through my career regardless of whether it was weaving in and out of the public and private sectors and independent sectors has to do with human resources and the value of our human capital in driving, change and improving performance in an organization. You know, you can have the best laid out technology and business processes but if the people aren't included, aren't part of it, aren't the ones driving it, you are going to still continue to have mediocre results. So, whatever position I've held has always been with a focus of the importance of human resources of our people in being in the driver's seat.
Mr. Lawrence: Do you think that's a widely understood theme now?
Ms. Dominguez: I think it's getting to be much more widely understood. I recall the about seven or eight years ago when we started the delayering organizations and we became so beefed up talent that all of a sudden Corporate America had to hurry up and once again look at the critical competencies and the talent that they had lost. So, I do think it's important and it's much more important now when we are always playing catch up in the marketplace and looking for ways to be more competitive and drive improvements and be more profitable.
Mr. Lawrence: Do you think this is appreciated in Government as well?
Ms. Dominguez: The Government has never had a competitor per se. We've been somewhat insulated from the pressures of the marketplace, from the demands of our customers, but that's no loner so. We're now as concerned about being competitive particularly under the President's management agenda and his commitment to make sure that if we're going to outsource that we can at least be as competitive as the entities that to which we may end up outsourcing. So, we're beginning to realize the value of having prepared, skilled, knowledgeable individuals driving these changes. And the importance and the efficiency of our operations even though we don't generate a revenue per se, we are entrusted. So, yes, I do think that the Government in general is looking at ways to drive improvement and attract the best talent and development the talent that we have. For so long we've had silos in government and even though the people are so dedicated and so hard working and so committed. The Commission, for example, we have some of the longest tenured employees. We have individuals that have been there since the doors opened back in 1965. So, it's important that we keep people with broadening their skills of development. Yes, people do matter.
Mr. Lawrence: You've had a variety of different experiences when you were describing your career. I wonder if there's any one or any one particular challenge that best prepared you for your present position?
Ms. Dominguez: Well, one of the challenges when I look back on which is a transformational experience is that when I was Director of the Office of Federal Contra-Compliance Programs. When I arrived, there it was an entity that was not really -- did not have a good image of itself. I felt that they were just kind of going through the motions without really a sense of focus of purpose. And, we identified an opportunity that we could really establish the relevance of that program and that came out through the glass ceiling initiative. Glass ceiling by the way is a definition that talks about the syndrome that you seem to be rising and rising but you somehow can't get to the top of a corporate ladder because there's an invisible barrier that's getting in the way and you just kind of bump against the ceiling but you don't know what it is. So, we decided we needed to be at the table and we needed to participate along with the shareholders and with the customers and with the employees and since the Federal Government has a role to play. And, just by having that initiative it caused almost a miraculous turnaround in the sense of value and self-esteem and interest that our employees generated because for once they felt themselves part of an important societal issue and they saw themselves as catalysts in improving changes in the society. So, that was a very, very positive experience and I should say that it has been an initiative that's been carried throughout both administrations for republicans and democrats.
Mr. Lawrence: You moved from the private sector to the Federal Government and back again both ways. I'm curious, how would you contrast the two sectors in terms of their approach to management?
Ms. Dominguez: Well, quite different. In fact, I arrive in the private sector I think in the best and the worst of times. I was there, I worked for banking at the time when we went from 1,200 branches down to 800 when we were downsizing and restructuring. And, I recall the first two years reporting to six different managers. I'd go to lunch, come back, I'd have a different manager. It caused me to be adaptable and flexible and nimble. It caused me to be sensitive to the business changes that were going on. And, the recognition that our employers, the employer and all the other peer companies had to follow the market requirements, what the customers wanted, what the marketability, you know, the alliances and the kinds of things that make an organization not only profitable but responsive to the needs of the society.
So, one of the things that I noticed was how quickly we changed in the private sector. It was just a survival. And, it was a need, you know, just a viable. Unfortunately, in the Government we haven't had that sense of emergency, that sense of, we need to be responsive to the customer because we haven't had any competitors. It's been a self-contained entity. We're beginning to see that sense of competition and that sense of okay, so we've made great progress and yes, we're lucky and fortunate to have had the pleasure of all this time to think about ways of improving it without the external pressures. But the time has come now when we have to keep asking more of ourselves when our own tax payers and customers are asking more of us. So, I do think that the culture that we've had one that is bureaucratic, many, many layers of checks and more checks and counter checks. When you've had individuals you even, even with their desires to move and broaden find themselves sort of stymied in the same career path without ability to broaden their base of knowledge and skills and career building experiences. We find that that is a detriment now to our dedicated employees. And, we need to break up all those barriers and give them an opportunity to broaden their base.
Mr. Lawrence: That's a good stopping point. We got to go to a break. Please join us in a few minutes as we continue our discussion with Cari Dominguez of the EEOC. Do you know what the Commission's five point plan is? We ask Cari to tell us more about it when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and this morning's conversation is with Cari Dominguez. Cari's the chair of the U.S. Equal Employment Opportunity Commission. Cari, at the last break we were just talking about the management styles and I'm curious, what's it like to lead an management organization that has a lot of public scrutiny?
Ms. Dominguez: Obviously, we're adjudicatory agency. We have a person that comes and files a complaint against an employer. And, so, our responsibility is to go out and investigate those allegations and because of the nature of our business we have stakeholders who are a constituency groups if you will that constantly monitor every decision, every case that we take to litigation. So, we have stakeholders. For example, the NAACP, Mexican/American Legal Defense Fund on the one hand representing the interest of groups of citizens and working men and women. On the other hand, we also have the employer community and we have the practitioners within the employer community. We also have Congress. If they don't like what we're doing at any particular point or if they get too many letters from any of these groups, I will get invited over there for a little visit. And, so we do have just about every segment of our society from the workers all the way up to the legislators that keep the close tabs on what we do and how we do it. And, it's a very visible agency. We're constantly being studied and lots of press articles and all kinds of things. So, we have to make sure that we're constantly communicating and explaining. Communications is the key. Explaining to all of our constituencies why we're doing what we do and why we think it makes sense and inviting them to come and help us in the development of public policy.
Mr. Lawrence: Over the years, what type of complaints have the EEOC dealt with?
Ms. Dominguez: We have had a fairly consistent pattern of charge activity. About 35% of most of charge -- we get about 82, ;83, 84,000 charges a year. It's hovers around that number. And the majority of the charges, about 35% are race related charges. About 30% are gender discrimination. 20% age. 20% disability, which are two of the fastest growing segments of our workload. 10% national origin which also took a spike after September 11th along with religious discrimination which we get about 1 to 2 % of charges a year. And, that's been a consistent trend since the inception of the Commission. We're getting a lot of charges of individuals over 50 who are alleging that they're being restructured out of their positions. And, again, that with the more religious diversity we've had more religious discrimination charges. So, it's a interesting blend of issues and a interesting trend that we're seeing but by far race and gender lead the way.
Mr. Lawrence: How many people work for the Commission and what type skills do they have?
Ms. Dominguez: We have a lot of serve. We have about 2,800 employees in -- at the moment we have 51 district area and local offices including Porto Rico. About one-third of our employee base is made up of attorneys. Lots of -- we have a very, very vibrant general counsel's office. We have regional attorneys and they're the ones that take the cases forth. We file about -- over -- anywhere between three to four hundred lawsuits a year. And, again, I said we get 82,000 or so charges. So, that's not a whole lot of cases that we actually take to court to litigate. Most of our cases end up being settled prior to going to court. So, there's a lot of conciliation and mediation efforts that take place.
So, about a third are attorneys and then we have mediators. We have investigators. We have analysts. We have a couple of physiologists to look at trends and make sure the validation of tests, those kinds of things. Of ten times the employers will administer tests and then they have to be validated to make sure that they don't have an adverse impact that effect one group of workers differently than others discriminatorily.
Mr. Lawrence: I initially thought the EEOC dealt primarily with large businesses but in doing research for our conversation I learned that a lot of activities going on with small businesses and under represented -- underserved communities. Can you tell us about that outreach activity?
Ms. Dominguez: Certainly. I think that if you look back at the trends, a lot of the major employers that were the recipient of Commissioners' charges and lawsuits. And, for the most part the Fortune 500 side employers have developed pretty good sophisticated HR programs and practices and policies that keep them and their workforce pretty well informed of what their responsibilities are. We are finding that the greatest number of charge activity coming from our, as you mentioned, Paul, mid-size and small size employers and particularly in some of the areas with little sophistication. For example, we had major law suit last year, $47 million dollar settlement. This company had no HR, no Human Resources operations. They had no outside counsel. And, this particular employer decided he did not want women working in his company. So, all of a sudden all of these women cued up to our offices and we're seeing that a lot of it has to do with the lack of understanding and application of sound HR policies and programs. So, our biggest outreach efforts right now are with mid and small size employers and with underserved communities like agriculture, farming. We've had a number of issues with documented workers and the migrant communities. So, we're still seeing some of our more venerable segments of the work force being prayed upon. And, so, that's where we think the -- a lot of our work needs to continue to focus on. These are individuals that have limited education, limited skills. Often times, English is a second language. But they're very critical components for a work force because they take on the jobs that very few others want to take on, service workers and laborers and unskilled workers.
So, that is a huge segment of our work force, work load and we need to continue to have extensive and aggressive outreach efforts directed at that community.
The particular profile of a charging party, a person that comes to file a complaint is someone that is kind of a wage/hour -- hourly wage earner. Someone who has limited education. Someone who just can't pick up and go -- get hired by the competitor because they have very limited opportunities.
And, now we find that there are three industries that take up the bulk of our attention. Retail because of the labor intensive nature of the work; foot service, fast food service and that type of thing; and, hospitality, housekeeping and those types of jobs. A lot of those types of industries and industries related to the three that I mentioned really make up the bulk of our work.
Mr. Lawrence: Can you tell us about the five point plan?
Ms. Dominguez: I got together with our senior managers. And, for a period of several weeks, decided that they needed to have five anchor points. We needed to develop a strategic frame work upon which all of the things that the Commission would do in the context of the 21st century workplace would have to be addressed.
The first point is proactive prevention. We must attempt to prevent discrimination from occurring in the first instance. It's almost like medicine. You know, you want to know, you want to screen out any potential illnesses before they become fatal, before they really truly effect and get to the -- get to your core organs. It's the same thing with us. The act of prevention is where we're spending a lot more resources than we have in the past. I added another five percent of our resources to making sure that we do outreach. We're doing web chats. We're doing technical assistance program seminars. Last year I spent quite a bit personal time meeting with senior executives all over the nation. It was an interesting -- I'll just share a quick addict with you. When I call on -- these were individuals that typically would not meet with the chair EEOC, like Chief Marketing Officers, Chief Information Officers, Financial Officers, small business CEO's. When they got the call that the chair of EEOC wanted to meet with them -- when I met with them, what did you think when you got that call and they would say they were panic stricken. We didn't know why you wanted to meet with us. I wanted to change that --that sense into one of curiosity. Well, maybe there's something there that we need to partner up with not just to delegate it to the attorney or to the Human Resources Executive. So, proactive prevention and all the related outreach efforts are key. If we can't prevent discrimination from taking place, and we do get a charge, an allegation, then it's called point number two proficient resolution. Let's try to address it as quickly as possible, as quickly and cheaply as we can so it isn't languish infester.
And, the third point is what I call the center piece of the five point plan. And, that's mediation. We have had tremendous success in mediation. The days that it takes -- it takes on average about 171 days to resolve a charge. That is a dramatic drop from your prior lasts 182 days. But I think the winner has been mediation. It takes us about 86 days to mediate a charge compared to 171 days. And last year we settled more cases, more charges through mediation than ever before in the history. And, this year we positioned to do even more. We're promoting universal agreements to mediate. We're encouraging employers to sign national agreements with us that says that's it's not required, but it says if a charge comes up let's commit to take a look at it under the concept of mediation before we go into the investigative mode. And, so, it's been a real success story, Commission as well as for the employers.
The fourth point in the five point plan is the strategic enforcement and litigation. We want to make sure that our attorneys in the general counsel's office as well as our investigators in the day to day operations work along side of each other early on so that we don't delay processing of charges because once you refer it to the attorney, he or she will go well, no, you need to go back and investigate this, that and the other. So, if they work along side it early on in the development of the case, then the case can -- you can either issue a right to sue letter if you thinks its not going to be pursued by the Commission or you can take it on a litigate it yourself. That's a very important component. It's also a component under which we'll be looking at trends, we're looking at patterns. For example, we're seeing that most of the charges we're getting relate to retaliation, relate to harassment. There's a tremendous epidemic of harassment charges across the nation. And, also, to -- what constitutes a reasonable accommodation under the American Disabilities Act. It's a lot of confusion as to what am I required to do in terms of providing that accommodation. I think that if we can collect that information, develop guidelines like we have been, and then feed it back to the employers, that's an important contribution.
And, then the fifth point this is what I say practicing what we preach. It's the EEOC as a model work place. Let us have the best mediation program that we can have. Let's us make sure that whatever we have before us is equally responsive to the expectations that we've placed on the employer.
Mr. Lawrence: That's a good point. We've got to go to a break. Come back after break as we continue our discussion on management with Cari Dominguez of EEOC. This is The Business of Government Hour.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and this morning's conversation is with Cari Dominguez. Cari is the chair of the U.S. Equal Employment Opportunity Commission.
Well, Cari, so far our conversation has focused on complaints in the private sector. I'm curious about the complaints in the federal sector and how that process goes.
Ms. Dominguez: Yes, Paul. EEOC has a dual responsibility not only to the private sector charges but also we write the regulations and review the appeals process for the federal sector. We've made some improvements but we're not doing as well. We still get about 23,000 complaints by federal employees annually, individuals who believe that they've been discriminated against, and if you conservatively cost those out, and the cost ranges depending on how long it takes, but it could be anywhere from $5,000 to $35,000 to process an EEO charge in the federal government, we're looking at hundreds of millions of dollars of taxpayers' money. And I recently held a commission meeting to look into that and find out what were some of the issues and to a person everyone was concerned about the delays. It takes over 420 days to settle a complaint compared to 86 days if we mediate one in the private sector or 171 days if we investigate it. Sometimes the appeals process and the review of that could take years. It's not uncommon to have complaints last four or five years.
So we need to take a look at the layering and making sure that we can simplify the process. And one way to do that is to introduce mediation early on in the process. We've had such great success in the private sector that we believe that if we have a mediation process early on and once an employee comes in to talk about concerns or whatever they're experiencing in their offices that may be a good opportunity not only to have EEO counseling but also introduce mediation.
So we're looking and that's one of my major priorities this year is to look for ways to streamline the federal sector complaint process so it's not as lengthy, so it's not as mixed. Oftentimes a lot of the issues that are in that pool of complaints have nothing to do with EEO. It may have to do with maybe more of a union-related grievance. It may be more to do with communications or bad blood between an employee and an employer. So we're trying to come up with some standards that really drive out the nonmeritorious allegations and really concentrate on those that have substance.
Mr. Lawrence: The five-point plan you described in the last segment laid out some broad management themes. What type of performance measures are you using to measure the success of the five-point plan?
Ms. Dominguez: We're using a variety of performance metrics. Of course, one of which we are constantly being measured against is how long it takes to process a charge so looking for ways through technology and by building the expertise of our investigators to cut down the time that it takes is always an important metric.
We're also looking at the satisfaction rate. We've gone out, particularly as it relates to mediation, to find out whether both the respondents and the charging parties are pleased with the quality of the services they're getting from the commission and the quality of the process and we've been pleased to see that we've had over a 90 percent satisfaction rate when we used mediation.
Another benchmark that we're trying, again, if we look at the fact that it takes on average 420 days to process a federal sector complaint let's see if we can do it in 300 days and how can we work more closely with the agencies. The most important measure we now have is the President's management agenda metrics of getting to green, getting to green in human capital, getting to green in the use of technology, and so we're working on our own getting to green standards. For example, one of the things we're working on this year is filing complaints online so that you don't have to come into a brick and mortar building, EEOC office, but you can actually do it out of the comfort of your home with commands and so on and you can file that and then having a hotline or some sort of a technical assistance desk to help with that.
Another aspect of measurements that I think is important has to do with our own infrastructure. Our infrastructure, I mentioned we have 51 offices, but our infrastructure has not had a fresh look since the late 1970s. At a time when we're much more mobile, much more technologically oriented, I think about my banking background. It used to be you had to go walk into a branch to deposit and people are a little leery about ATMs. And now they go online banking. I said there's no reason why we have to have people come into EEOC to file a charge. They should be able to do it in a variety of ways. They can come in if they want to or they can use technology. So that's an important piece of it.
And that would allow us to then distribute our investigators and mediators in a much more different way than they currently are. They currently are concentrated in pockets within major cities and other areas where there's a large activity of charges but that doesn't necessarily have to be that way. We can have a much broader presence throughout all 50 states if we in fact took full advantage of our technology. So that's an important one for us, getting to green and working closely with the Office of Management and Budget and the Office of Personnel Management and all of those components.
Mr. Lawrence: In terms of getting the complaint process online was it just as straightforward as actually putting the forms and such on the Internet or are there other things about security and privacy that were only envisioned as being done on paper that now require changes?
Ms. Dominguez: All of those things. You also have to remember a large bulk of our population of complainants are skills limited, oftentimes don't even speak English, so we have to be sensitive to that and we have to make it easier for those that are proficient with technology and have access to it. But it has to do with confidentiality issues. It has to do with if in fact they want to mediate. It has to do with making sure that there's a firewall between our mediators and our investigators and how that information once filed how we're going to keep it and how we're going to use it from one function to the other is critical.
So yes, we've had a number of attorneys looking at all kinds of issues relating to what's the best way and how to best instruct individuals if they're going to self-direct their own information processing, if they're going to writing the allegations and so on, how can we best instruct them so they can be clear in what we need in order to do our work?
Mr. Lawrence: Earlier in our conversation you talked about directing more resources to certain functions. I think you said 5 percent more. I'm curious. How are you linking resource allocation to performance as you look across the organization?
Ms. Dominguez: We're doing some of that. I'm not satisfied with where we are at the moment. Last year we had a banner year. We just had a phenomenal year in terms of reduced time to process charges, the increased number of charges that we processed, as well as the benefits that were collected for victims of discrimination. So it looks like on all points we really did a phenomenal job.
But we're still apportioning our resources on an even basis, not so much on a needs-driven or where is the majority of the charges coming from or what are some of the issues that may be precedent-setting. One of the critical roles of the commission is to identify issues that are novel or precedent-setting or that help evolve case law and take those cases to litigation so that we can get some court rulings on it.
We have not yet gotten our resource allocations to the point where we can be that flexible. It's still somewhat centralized. Over 90 percent of our resources are fixed expenses. They deal with salaries and rental leases, brick and mortar type things, so we have very, very little funding for discretionary allowances, a little more this year for technology but not as much as I would like, for example, if we can get mobile units and do this online application and take the funding from rental leases and use that for more investigative work or more outreach work.
Similarly, I think our ratio of employee to manager may be a little off-kilter and we need to take a look at that. We still have a somewhat hierarchical structure even as we rely on technology. I can now send an e-mail to all my employees. I don't have to rely on my direct reports talking to their direct reports talking to their direct reports and all the way down the line. So we have enabling technologies that help us reach but unfortunately we're working on it but I don't think our processes are where they should be to be able to redeploy those resources as quickly as we should.
Mr. Lawrence: Well, speaking of messaging, could you tell us about the "Freedom to Compete" public service announcements?
Ms. Dominguez: "Freedom to Compete" is an initiative that I launched shortly after I arrived at the commission and the message was very simple. It's when you peel all the layers of the laws that we administer, be it Americans with disabilities, age discrimination, what is it that it's all about? It's about the freedom to compete in the work place on a level playing field without regard to race or color or religion. So we decided to go out and aggressively heighten awareness and identify opportunities, to talk to individuals who see the commission as an enforcement, as a cop, and educate the public as to this is about everyone's rights.
I think the reason we have these laws is because as a nation we value fairness in the work place as well, as much as we value fairness in everything we do. And it's about that freedom to compete, giving people a chance to prove themselves and not to be saddled with prejudice or biases. And the "Freedom to Compete" is a way of capturing that, providing information to the public on the trends we're seeing, the ongoing biases and prejudices that we're still seeing, so that they can do some self-correction on their own.
We can't be boiling the ocean and covering all fronts. We have to engage in strategic alliances and partnerships which we have done. The Executive Leadership Council, for example, is the first group that we've partnered with and through them we launched those public service announcements. We had individuals that helped identify spokespersons and that was a very important partnership for us. Similarly, working with the Society for Human Resources Management, with the American Bar Association, their employment section, the EEO subsection, we have a number of partners and alliances that we need to tap into to promote the concept of freedom to compete.
Mr. Lawrence: That's a good stopping point. Come back after the break with us as we continue our discussion on management Cari Dominguez of the EEOC. What role will the EEOC have in homeland security? We'll ask Cari for her perspective when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and this morning's conversation is with Cari Dominguez. Cari is the chair of the U.S. Equal Employment Opportunity Commission.
Well, Cari, can you tell us about some of the partnerships the commission has with the state and local organizations?
Ms. Dominguez: Yes. We've had a long-standing relationship with what we call FEPAs, fair employment practices agencies. Essentially they're state human rights commissions and we have working arrangements with them so that when an individual files a charge at the state level they can serve as our agents. Sometimes they file both at the federal level with EEOC as well as at the local level. They're a very, very important component of our work practices because they serve as agents. They keep us informed of what's going on at the various states. And now we are actually piloting an effort to involve some of those FEPAs in mediation on behalf of the commission.
Similarly with the TEROs, the tribal employment rights offices, they serve as representatives of the commission within the various tribes to make sure that if there are individual Native Americans who believe they're being discriminated against that they represent the commission and take those charges and process them on our behalf.
Mr. Lawrence: What role will the commission play in homeland security?
Ms. Dominguez: We will continue to play a very important role. We went out quite aggressively talking to national leaders of Muslims and Arab Americans and Sikhs. In fact the first commission meeting that I held related to backlash discrimination after 9/11. We want to make sure that innocent victims do not suffer and that anger is not misdirected at them because they happen to be Muslims or Sikhs. So from our perspective our challenge is to make sure that this valuable group of workers in America is not singled out, not profiled, in the workplace any differently than any other individual would be, so making sure that everyone gets treated fairly and equally under the law. And so we'll be coordinating very closely with the Homeland Security Department to make sure that that message gets out.
Mr. Lawrence: What are the next challenges on the horizon for the EEOC?
Ms. Dominguez: We have a number of challenges. Legislatively there are three laws working their way through Congress, one of which has to do with genetics discrimination. It's the new frontier. With the Human Genome Project and the decoding of the DNA we now have very sophisticated medical tests that can identify genetic markers, that can tell an individual whether they're predisposed to developing certain illnesses like multiple sclerosis, diabetes, carpal tunnel, et cetera, and there's some concern that if this information gets in the hand of an employer that it may be used for employment selection. Because you're genetically predisposed does not mean that the illness is going to be developed. But that's one of the new frontiers that Congress is looking at and considering passing a law prohibiting discrimination on the basis of genetics.
Similarly, there are a couple of other laws working their way through Congress, one of which is the Employment Nondiscrimination Act on the Basis of Sexual Orientation, which is not covered. It's covered in a number of states but not at the federal level. As well as a strengthened law relating to workplace religious discrimination and, again, a lot of it had to do with the backlash from 9/11. We received over 700 charges, by the way, after September 11th from Muslims and Sikhs and Arab Americans. The Sikhs have the long beard or the turbans or the dresses. A lot of them were being singled out. At least the allegations were that they were being singled out. So this Workplace Discrimination Act heightens awareness to some of these things along with many others.
So I think legislatively we'll have the new frontier of employment discrimination issues to address. Structurally we're going to continue to refine our processes. As I said earlier, at our infrastructure we commissioned the National Academy for Public Administration to come in and they are the only congressionally-chartered group that does a lot of work with federal agencies. We invited them to come in and interview hundreds of our employees and stakeholders to talk about what's working, what's not working, how can we refine our processes and make our organization flatter and return many more of our resources to the trenches, if you will, down to the investigative resources where we have such an important need.
Mr. Lawrence: What's your vision for the EEOC over the next five to ten years?
Ms. Dominguez: My vision is to continue to build on the excellence that we've gained so far. EEOC is the premier civil rights employment law enforcement agency in the nation. We've been charged by statute, by the President, to serve as the lead coordinator of all of these. We work closely with Justice and the Department of Labor and the Office of Personnel Management. We want to build on that and I wanted to take it to a higher level. I think we need to be the global premier enforcement agency and we want to do it by modeling the best, the excellence that we can model in terms of outreach, in terms of professionalism, in terms of our enforcement activities.
We've been working very closely with Canada and European countries. Especially when you have so many multinational companies like IBM, for example, all over the globe we want to make sure that we facilitate developing consistent standards across countries and the way to do that is by sharing our expertise with other countries. So I have personally committed to working very closely with my counterparts in other nations, participating in global summits and sharing information, because it's a lofty vision, but the world is getting smaller and we need to make sure that we speak with one voice.
Mr. Lawrence: Could you ever envision the day when the commission goes out of business because there are no more complaints?
Ms. Dominguez: That I think is a dream for all of us who work in these types of programs. Wouldn't it be an ideal world when we no longer have to endure discrimination or bias or prejudice? So yes, I hope it will happen in my lifetime but the issues keep evolving. It used to be hiring. Now it's on the termination side. So it means that a lot of people are getting hired so that's the good news. It used to be that the doors were locked for many.
So yes, I think the issues are evolving, becoming more sophisticated, and I hope that in my lifetime we can see a reduced amount of focus on this and a much more aggressive effort at the harmony in the workplace.
Mr. Lawrence: Throughout our conversation this morning you've talked about the EEOC working with different organizations at the state level, at the government level, at the private sector. What are the management challenges and how do you make that collaboration work?
Ms. Dominguez: A lot of it, again, it gets back to the people. Even in our own agency it's coordination and how people make it work. And that's what I have found to be the success, by reaching out to my counterparts at the state level. Every state that I visit I make it a point of visiting with my director of the state Human Rights Commission, my counterpart, and that's what's going to make the difference. I said earlier I believe in the power of one. I do believe that a person can make a lasting difference and we certainly have plenty of experiences along those lines.
So the coordination of that outreach requires leadership. It requires extensive communications. It requires modeling the behaviors that we want others to emulate. And if we do that and we do it consistently and credibly it'll happen. It'll happen throughout.
Mr. Lawrence: What advice would you give to perhaps a young person interested in a career in public service?
Ms. Dominguez: My advice would be to go for it. It's a novel calling. I have been enriched tremendously personally by my experiences in government. It may not be the most financially rewarding but it's certainly the most intrinsically rewarding because you do make a very positive difference and you see the results day in and day out. It's just a wonderful career and I think with all the exciting changes about to hit in the federal government that we'll see the kinds of opportunities we're used to seeing in the private sector take hold in the public sector. So I would encourage everyone who's listening to give it a serious thought, not to be intimidated by those long forms, to fill the applications but to really go for it and see beyond that because they can make a big, positive difference.
Mr. Lawrence: I'm afraid we're out of time this morning, Cari. Thank you for joining us.
Ms. Dominguez: Thank you, Paul. It's a pleasure to be here. And remember www.eeoc.gov is where you can get more information about what we're doing.
Mr. Lawrence: Great, thank you. This has been The Business of Government Hour featuring a conversation with Cari Dominguez. Cari's the chair of the U.S. Equal Employment Opportunity Commission. 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. You can also get a transcript of today's very interesting conversation. Again, that's businessof- government.org.
This is Paul Lawrence. Thank you for listening.
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Tuesday, October 22, 2002
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman of The IBM Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improve government effectiveness. Find out about The Endowment by visiting us on the web at businessofgovernment.org
The Business of Government Hour features a conversation about management with a government executive who's changing the way government does business. Our conversation this morning is with Dennis Dollar. Dennis is the chairman of the National Credit Union Administration.
Good morning, Dennis.
Mr. Dollar: Good morning, Paul.
Mr. Lawrence: And joining us in our conversation is Debra Cammer.
Good morning, Debra.
Ms. Cammer: Good morning, Paul.
Mr. Lawrence: Dennis, could you give us an overview of the mission and the activities of the National Credit Union Administration?
Mr. Dollar: The National Credit Union Administration is the federal agency established by Congress, an independent federal regulatory agency who is charged with the responsibility for chartering, supervising, and regulating all federally chartered credit unions in the United States and administering the National Credit Union Share Insurance Fund, which is the equivalent, I guess you could say, of the FDIC. What the FDIC fund is to the banks, the National Credit Union Share Insurance Fund is to credit unions.
We insure the accounts of all depositors up to $100,000, and administer that Share Insurance Fund. So we are the regulator of federal credit unions and the insurer of all federally insured credit unions, whether they are federally chartered or state chartered.
Mr. Lawrence: How big is your organization, and what type of skills do the employees have?
Mr. Dollar: Our agency has a little bit less than a 1,000 employees. About three years ago, we were about at 1,050. We are now at around the 945 range. We have been engaged in some efforts to try to streamline the agency and improve our efficiency some, but we're right in that range of 1,000 employees.
We're a wide-flung organization, as an examination and supervision agency that actually hires examiners that go into credit unions, and conduct supervisory visits, that do examinations and assign rating codes to the safety and soundness of America's credit unions.
We have about 600 of our employees that are field-based. In fact, we have one of the highest percentages of employees that telecommute of any agency, because they do not all operate out of a regional office somewhere. We do have 6 regional offices throughout the country, but they are supervisory in nature. Our examiners, about 600 of them, operate out of their homes. They go to the credit unions, they conduct their examinations. They come back and report to that regional office.
Then we have here in Washington, actually in Alexandria, Virginia, which is where our headquarters is located, we have about another 400 employees that are the supervisory employees that are dealing with the regulatory issues as well as the oversight issues of those 6 regional offices and those 600 scattered employees. Most of our examiners come from an accounting or auditing background. They are examiners by nature, so therefore, they are very meticulous, detail-oriented compliance officers, but also have to be very good in the ratio evaluating mode and asset liability evaluating mode.
We have a very extensive training program that prepares them, and I think we have had tremendous success. America's credit unions have the highest asset level that they have ever had in their history. They have the highest capital position, which is a net worth position, of any time in their history. We have never had one penny of taxpayers' dollars that has been required to bail out a federally insured credit union. It is been one of I think the true success stories of the financial services industry of our country, even though it's a small segment. It's a growing and emerging segment, and we want to make sure they are safe and sound as they continue to grow and emerge.
Mr. Lawrence: Can you give us a sense of how many credit unions there are in the country?
Mr. Dollar: Right about 10,000 now, Paul. Probably 10 years ago, there were about 20,000 credit unions. Credit unions have seen what a number of industries have, and that is a consolidation over the course of years. So there are about 10,000 credit unions today. About 6,500 of those are federally chartered; about 3,500 of those are state chartered. But 97 percent of them are federally insured. And they range in size from a couple of hundred thousand dollars in assets that might just be the credit union for a very small business or a small church or a small association, to the largest credit union in the world, which is maybe Federal Credit Union, which is closing in on I think in the vicinity of 13 to 14 billion dollars in assets.
The overwhelming majority of credit unions are small; over 65 percent of them are 20 million or less in assets. But they meet a real need, I think, and the market continues to grow. And as it does, we want to make sure that these credit unions are not just here for this generation of credit union members, but for generations to come. And that's where our role come in, as regulators, examiners, supervision program.
Ms. Cammer: Dennis, how would you describe the relationship between NCUA and the federally regulated credit unions?
Mr. Dollar: Well, of course, we are their chartering entity, Debra. But, we also -- once they are chartered and are in place, we have an ongoing safety and soundness evaluation program and examination program which, every 12 to 18 months, we will go into every federally chartered credit union with actually a site visit. We will look at their policies; we'll pull loans from their loan portfolio; we'll look at their investment portfolio; we'll ensure that they are complying with all rules, regulations. We will examine their numbers and ratios as it relates to the safety and soundness standards that we monitor. And, I would say that the relationship is the standard regulator-regulated relationship. And that is, they always dread seeing us to come, but they realize how important it is for the integrity of the credit union system that there be in place an effective system of regulation and oversight. And that's what we provide.
We also work hand-in-hand with the state regulators in the 50 states for those state chartered credit unions. And because we are the federal insurer and most of the state chartered credit unions are federally insured, we oftentimes work hand-in-hand in a joint examination with the states when the states go in. So we oversee all the federally chartered credit unions and we work hand-in-hand with the states on state chartered credit unions in our roles as insurer.
Ms. Cammer: Now, you mentioned the National Credit Union Share Insurance Fund. How would it be used in the event of financial crisis?
Mr. Dollar: Well, a financial crisis that resulted in the forced conservatorship or liquidation of a credit union would bring the Share Insurance Fund into play to make sure that after all the assets of the credit union are liquidated and all of the liabilities are paid, that if there is any shortfall in what a member had in their depository account, up to a maximum of $100,000, the same as the FDIC fund, then the National Credit Union Share Insurance Fund would make up that difference.
And it is a very, very strong fund. As I said a moment ago, the Fund has never been unable to, not only meet any losses in credit union, but to be able to meet losses and still continue to grow its equity level. In seven of the last eight years, we have been able to actually pay a dividend back to the credit union that invested in the Fund.
This Fund is not funded by taxpayers' dollars. It is backed by the full faith and credit of the United States government. And if the Fund ever exhausted itself, the full faith and credit of the United States government is there to back it up. But that has never happened. And in fact, we have never seen our equity level go below one percent.
And so we have a very strong Fund -- we've been able, as I said, in seven of the last eight years, to be able to pay a dividend back to those credit unions who funded the Share Insurance Fund. They fund with one percent of their assets and we adjust that on annual basis, based upon either asset growth or asset shrinkage. And they then keep one percent on deposit on us; we invest that.
The earnings on that investment, we use to be able to pay any losses that may come, and also to build that equity level up to be able to cover against tough times or hard times. And we are very proud of the fact that unlike some of the other insurance funds, if you recall the savings and loan crisis of the '80s that cost the American taxpayers some $40 billion to be able to satisfy all of those claims, we've never had the first penny of taxpayers' dollars been called upon to bail out a credit union. We think that's a sign of the conservative nature of credit unions and how they do their business well. But I think it's also -- if I pat our agency at the back a little bit, a sign of good oversight, good management, good integrity in our supervision process to make sure we get a hold of problems early and don't ever let them get to a crisis stage, if we can help it.
Ms. Cammer: Dennis, can we switch gears a little bit. I'd like to have you explain to the listeners what your role is as chairman and how the three members of the Board interact with you.
Mr. Dollar: Well, Debra, the NCUA Board is a three-member board appointed by the President, confirmed by the Senate, that is the policymaking board for the National Credit Union Administration.
We make and adopt and promulgate all rules and regulations that federal credit unions operate under and that help to administer the Share Insurance Fund.
As chairman, I'm designated by the President to be the presiding officer of the Board, to set the agenda for the Board, to be the primary spokesperson for the agency and all matters of dealing with other agencies, other regulatory agencies, the Congress, the Administration, and the like. We have an excellent board. We have a three-member board at present that works together very, very well. We are required, as most regulatory boards are, to come from a bipartisan background; in other words, all three members of the Board cannot be from the same political party. And we have presently myself serving as chairman, Debra Matz from New York, who is serving as one of our Board members, and JoAnn Johnson from Iowa, former state senator from Iowa who's serving as the other Board member.
We think we have a good board in place and we think that some good things are happening in America's credit unions.
Mr. Lawrence: That's a good stopping point. Stick with us through the break as we continue our conversation with Dennis Dollar of the National Credit Union Administration.
Have you heard of the initiative called "Access Across America"? We'll ask Dennis more about it when The Business of Government Hour returns. (Intermission)
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Dennis Dollar, chairman of the National Credit Union Administration.
Joining us in our conversation is Debra Cammer.
Well, Dennis, I wanted to ask you about your career prior to serving on the NCUA Board.
Mr. Dollar: Well, Paul, I've had a career that is both a private sector career and public sector career. Shortly after my graduation from the University of Mississippi in 1975, I ran for a seat in the Mississippi House of Representatives. Mississippi is my home state. I'm from Gulfport, down on the Mississippi Gulf Coast.
And I ran for and was elected to the state legislature in 1975 at the age of 22. I was one of the youngest members to ever serve in the state legislature in Mississippi. And so I began my public career in elected office. And I served eight years there. In addition to my years in the legislature, at the same time, I was in the real estate business and affiliated with the local junior college.
Upon my leaving the legislature, after eight years, I went into administration in the college that I was teaching at. And I served in that position until 1991. In late 1991, I was contacted by the Gulfport VA Federal Credit Union, a relatively small credit union, there in the Mississippi Gulf Coast area. They needed a CEO. They needed somebody with proven leadership skills. And they said that my leadership record at the junior college that I have been affiliated with, as well as my public career, having been a member of the legislature and the involvement in the community that that brings, was exactly what they were looking for. Interestingly, I had never been in the financial services arena, but I felt like that good management abilities, good leadership training, willingness to put the principles you have learned in your career in place works in any field.
You can learn the details. It is those innate abilities to lead and to bring to the leadership table the attribute that can be successful -- that have proven themselves, and I'm certainly not the only one. There have been thousands and hundreds of thousands of leaders who have moved their leadership abilities from one field to another and been able to be very successful.
So I went to the credit union in '91, knowing that it was a change in direction, but believing that those attributes would be successful there as they had been in other fields. I took a fairly struggling credit union that was having some problems; interestingly, problems with the very agency that I am today the chairman of, and we were able to turn that organization around, take it from being a relatively borderline credit union as far as its long-term financial stability to an award-winning credit union, winning local and national awards in every area, from financial performance to the social responsibility programs that we had in place.
And so after serving in that capacity for about six years, I was contacted by the Senator from my home state, Senator Trent Lott -- who happened to be serving as the Senate majority leader at that time -- about the Republican seat on the NCUA board. It was coming up for appointment, and that was during the Clinton Administration.
The traditional protocol is that the President will many times defer to the ranking senator from the other party for appointments to the other party's seat on these various boards and commissions. And he said, you've got a background in the political arena. You would function well in Washington. You have a background in the credit union arena. We need someone who understands and knows the issues, would you be interested in coming up and serving on the NCUA Board.
I did my homework and came to the conclusion that would be a good career move for me and my family. And so I told the Senator, if you could make it happen, we'd love to come and serve. And so he was able to bring that about, and I was appointed in 1997 and was confirmed in October -- took my seat in October; served as a board member from '97 until 2001.
When President Bush was elected and there's now Republican in the White House, he looked on all of these boards to try to find either the Republican that was serving or someone from his side of the aisle to elevate to the chairmanship. He was, I'm very honored to say, impressed by what we had done as a member of the Board, and elevated me to the chairmanship in September of 2001.
Mr. Lawrence: Give me a little perspective on having seen both sides of it. You have been an elected official and an appointed official. How does it feel to have seen both sides?
Mr. Dollar: You know, as Judy Collins sang back in the '60s: "I've seen life from both sides now." It is really an interesting perspective to have seen life from both sides now. I'm the only chairman of the NCUA Board to ever have been subject to an NCUA examination. I'm the only chairman of the NCUA board ever to have paid an NCUA operating fee that supports the budget of the agency. I think that does give a very unique perspective.
It has enabled me at so many staff meetings with our outstanding leadership team there at NCUA, when an issue might come up and they might say, "When we pass this regulation, here's how it's going to work in America's credit unions," to be able to say "no, wait, you don't understand; in the real world, here what's going to be the cause and effect of this action." And I think bringing that to the table has not only enabled me to be more effective regulator of credit unions, having understood the issues, but it has helped us as an agency to be a more effective agency. And I believe it is in some ways helped credit unions to have some higher confidence level that although they may not always agree, and they certainly do not, with every decision that we make from a regulatory or supervisory perspective, they know that the guy that's heading the agency at least has been where they are, has been in the trenches of the credit union movement. And I think that credibility does help you be a much more effective regulator.
Ms. Cammer: Now as the chairman of the NCUA, you're spearheading an initiative called "Access Across America." Can you tell us about the program and what the goals are?
Mr. Dollar: "Access Across America" is a name we have given to an umbrella of efforts that we are making at the National Credit Union Administration to try to encourage credit unions to extend their field of membership; that is, the people that they are legally or regulartorily authorized to serve, into some of the underserved areas of America.
There are over 90 million Americans living today in census tracts that are designated by the U.S. Treasury Department as underserved or unbanked. Many of these are underserved or unbanked because the traditional for-profit financial institutions have fled these areas. Unfortunately, what they have left many of these communities to is to pawnshops and check cashers and the rent-to-own companies who at 400 or 500 percent return can make a profit there, but unfortunately, the impact on those communities has been very unfortunate. And I don't believe anyone's ever going to achieve the American dream if their primary financial institution is a check casher or pawnshop.
So we have tried to encourage credit unions, which, by their nature and by their definition are not-for-profit financial cooperatives. As not-for-profits, they don't require as high of a return to be able to go in some of these areas and offer these financial services. So the "Access Across America," it has been our goal to try to see credit unions move in to every one of those census tracts to provide lower cost financial services to every one of those 90-plus million Americans living in those underserved areas.
The result is twofold; not only is it consistent with the credit union heartbeat -- and credit unions were formed for the purpose of providing access to credit to people of largely modest means that may not be able to gain credit from traditional financial institutions. They were formed as an alternative. And they still to this day, although credit unions have grown and they offer a wide range of services to people from all economic levels and all works of life, they still have a heartbeat for making sure that the little guys are not forgotten. So in many of these communities, they need access to some lower cost financial institutions.
So it's a win as far as helping credit unions continue to meet their mission. But it's also a win for us as a regulator, because one of the concerns with credit unions has been the fact that they have had a limited field of membership. They were restricted to the employees of a certain company or a certain association; some to a community, but a limited community and a very localized community.
We as regulators realize the importance of diversification. We don't ever want to see a credit union go under because their sponsor group goes out of business or gets bought out by another company. We want to see these credit unions continue to survive. And as a regulator, that's important from a safety and soundness and financial stability perspective.
So "Access Across America" is designed to be not only an opportunity to extend financial services to some people who really need it in these underserved communities, but also as a source of some diversification opportunities for these credit unions; to enable them to be able to diversify their risks.
Yes, there's increased risk in some of these areas. But it's a manageable risk, and there's some good business in these areas. And with a good business plan, with a well-thought approach to going in these areas, we have found credit unions with tremendous, tremendous successes. And we see them making a tremendous difference in these communities.
If I might, let me just share you a couple of statistics and show you how successful "Access Across America" has been just in the two years it's been in place. In 1999, the first year that credit unions were able to do it; before we began really emphasizing it, we had seven credit unions that adopted underserved areas. About 235,000 Americans lived in those areas. Last year, 2001, only two years later, with our "Access Across America" initiative in place, with the streamlining of process to remove regulatory impediments and make it easier for credit unions to adopt these areas, we had 165 credit unions that adopted underserved areas.
They actually adopted 282 underserved areas. Some adopted more than one. 16.1 million Americans who at the beginning of the year 2001 were not eligible to join a credit union were eligible by the end of year. That's an increase from 235,000 just two years ago to 16.1 million. Obviously, this is done without any regulatory mandate to force credit unions to do it, and we did through a regulatory empowerment approach without lowing standards but streamlining process, we made that possible. This year, in 2002, we have already got 184 credit unions through the end of September.
We already exceeded last year's number; 303 underserved areas, also exceeding last year's number. 17 million Americans living in underserved areas that are eligible already this year. We have already exceeded in nine months the successes of last year. We're very proud of the results and we think that it's going to make a real impact in a number of those communities. Mr. Lawrence: That's a good stopping point. Come back with us after the break as we continue our talking about management with Dennis Dollar of the National Credit Union Administration. This is The Business of Government Hour. (Intermission)
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Dennis Dollar. Dennis is the chairman of the National Credit Union Administration.
Joining us in our conversation is Debra Cammer.
Well, Dennis, let's switch gears a little and talk about management within NCUA. We know that last year, you commissioned a working group on Accountability In Management, or AIM. What are the results of the AIM group study?
Mr. Dollar: One of our goals was to try to bring about efficiencies within the organization. As I mentioned a moment ago, Paul, we had 20,000 credit unions that we were regulating or insuring in 1985, and today, it's down below 10,000. Naturally, you cannot continue to grow an agency or keep an agency staffed to oversee 20,000 institutions when you're now only overseeing 10,000.
So we wanted to make sure that we had the most efficient operation possible. We felt like we owed it to our stakeholders to make sure that we were as efficient as possible with their dollars. As I said, the agency is funded entirely by either operating fees that we charged to our federal credit unions, or a transfer for overhead that we bring from the Share Insurance Fund. That again is funded by federal and state chartered credit unions. So the credit unions pay our bills entirely. And we have an obligation to them to be as good a steward as possible.
So AIM was put together with some of our best and brightest minds to just do a very serious internal self-study. We try not to be personnel-driven but try to be efficiency-driven. And one of my goals was try to see if we could not result over a two-year period and at least a minimum of four percent cutback in the staffing of the agency without any layoffs, without any forced retirements, to be able to see if we could find a way to do it through attrition, to disrupt our agency as little as possible even as we achieve these efficiencies.
We began to look at how we're allocating out resources, which is absolutely necessary if you're going to bring about a four percent reduction without any layoffs, without any RIFs, without any forced retirements. You've got to really look at your limited resources and see how we're applying them. Particularly when you're an agency with only 1,000 employees. It is harder to get a four percent cutback in an agency of 1,000 than it is in agency of 10,000. And so, what we did, we really went to the foundation of what we do, which is safety and soundness related, our safety and soundness oversight program, and said how can we allocate our resources more effectively, to be more consistent with the President's Management Agenda, to be results-oriented, to be citizen-centered and not bureaucracy-oriented, to try to be market-based in our approach, to realize that the credit union community is changing; realize the risk factors are changing from where they were two years ago, let alone five years ago or ten years ago, as credit unions offer more and more services.
And so we began to retool our program more towards a risk-focused examination program, in which we said every credit union doesn't need to be examined every year. Some of them perhaps could go out to 18 months based upon on their lower risk portfolio; whereas there are others based upon either their higher risk or perhaps problems that they may having in the credit unions that may need us to go in there more often than once a year.
And so as we began to look at risk-based scheduling and risk-focused examination, we found that we could reallocate our resources and be much more effective in focusing on risk majoring on majors, if you will, instead of majoring on minors, and actually save tens of thousands of examiner hours in the process. Those examiner hours, we were able to free up to be able to help struggling credit unions, credit unions that may have problems or concerns, higher risk portfolios; and others, we would be able to actually reduce through attrition of some of our staff. And we're well on the way to doing that. 3.6 percent of our reduction, we have already achieved, and as we go to our 2003 budget year, we will exceed the four percent goal that we put forward in AIM.
Ms. Cammer: What kind of training are you offering your employees so that they can more effectively analyze the risks?
Mr. Dollar: Debra, that's the key in any implementation of a management program or management shift in direction; the training of your people. And particularly when you're doing a cultural change, where you're saying no longer are we going in on the same time frame every year to every credit union with the same checklist in every credit union. We're now going to go in based upon the risk portfolio of that credit union.
That requires a real change in our examination core, and we've done extensive training not only through our training programs that we have on an ongoing basis, whether it be CD-ROM training or the like. We this summer brought together every examiner in our agency for four weeks of intensive training, in which they did nothing but receive training on the new risk-focused examination. It's a part of changing not just our examination approach, but changing more importantly their examination approach, and when you have examiners doing things a certain way for 15-20 years, it is a cultural change.
Same thing happens to the private sector. When I came in to that credit union, we had loan officers that have been administering the loan policy the same way for the last eight years. To come in and change from a culture of trying to find a way to disapprove the loans so that you don't have to that extra paperwork, to trying to find a way to approve the loan if you can within proper risk management parameters is a complete cultural change. Some made the change; some didn't. It was a management challenge. We had the same thing in NCUA, but I've got to say that our staff has responded very well, very positively, and I think the key is how you sell it and the training you give to where you don't just go forward and say "We're changing our approach. Jump on board. Hope it works for you."
But to actually go through this extensive four-week training. We even brought in the state regulators who are our partners in overseeing state chartered credit unions, and gave them this same training. So if they choose to do the same type of risk-focused program that we do, that we will be able to work in coordination with each other.
The results of that are already paying off as I travel through the country and meet with credit union groups and trade associations and the like. The feedback that I'm getting, although we're only a matter of months into this, is that it is a much more streamlined process, much more efficient. They're focusing on where the risk is. They're not rummaging through $50 travel vouchers. They're in there looking at the asset liability management of the credit union; they're looking at the risk portfolio of either investments or lending. They're looking at our policies to make sure they're in place, and you, as an agency, are getting in my credit union and getting out more quickly, more efficiently, and the results are very powerful.
Ms. Cammer: You mentioned earlier the President's Management Agenda. I'm wondering if you can talk a little bit more about how AIM and the PMA relate and how you're leveraging that to improve the organization.
Mr. Dollar: One of the publications I that keep at the edge of my desk all the time is the President's Management Agenda. Not only am I an appointee of his Administration and therefore am committed to following his directives, I believe that they are tailor-made for our agency. What his whole focus is as it relates to the principles of reform that are in the President's Management Agenda is to get away from doing things the way that you've always done them and to get away from a bureaucracy-driven approach to administering an agency and to get to a results approach that impacts positively the person who is regulated without lower standards in the process.
And so AIM was an offshoot, if you will, from the President's Management Agenda, but it is I think the reason for the President's Management Agenda, to say just as GIPRA was designed to say, and other strategic planning initiatives, that you can't do things the way you've always done them in a changing and dynamic marketplace. And the financial industry is probably the most fast-changing and most dynamic marketplace out there today. And for credit unions who only have three percent of the deposit base in this country, if you add all the deposits of America credit union together, they don't come up to the asset level of Citibank.
So we're a relatively small player, but an emerging player and an important player, and a player that you want to know that those $500 billion of insured deposits that are out there are safe and sound. But the changes that are being required of these credit unions require them to be able to adjust quickly and us to able to do so as well. And that's why when the President says in his management agenda that he wants agencies to be market-based in their approach, he wants us to realize that that marketplace out there changes faster than we as government do at times.
And if we are not willing to allow those that we regulate to adjust to that changing marketplace, we may create the very problems we're trying to avoid, and that is safety and soundness problems by virtue of the fact that the marketplace moves more rapidly than the ability to credit unions to adjust to it. So we have to change our approach to be empowering within the bounds of safety and soundness, to be willing to help someone meet a standard rather than lowering that standard. And I think that's where AIM and the President's Management Agenda mesh very effectively.
Mr. Lawrence: People are an important part of change, and I note that in the strategic plan for the next five years, human capital's called out rather boldly. What are the challenges you're facing in this area?
Mr. Dollar: Well, the challenges that we are facing are the same challenges that other agencies are facing, and frankly, the private sectors are facing as well. And that is that there is greater accountability for the bottom line of our budget from our stakeholders, but yet there is also at the same time a greater demand from them for a more effective organization, a more professional organization. So we had to have the challenge of walking that very difficult and fine line between efficiency but still providing the level of service that our stakeholders deserve. It's the biggest challenge we've had, but it's not unique to us, and I'm very pleased with the results we've shown this far.
Mr. Lawrence: That's a good stopping point. Come back with us in a few minutes as we continue talking about management with Dennis Dollar of the National Credit Union Administration. What does the future hold for NCUA? We'll ask Dennis for his thoughts when The Business of Government Hour returns. (Intermission)
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Dennis Dollar. Dennis is the chairman of the National Credit Union Administration.
Joining us in our conversation is Debra Cammer.
Ms. Cammer: Dennis, what are some of the new technologies you're seeing credit unions use to better serve their customers?
Mr. Dollar: You know, Debra, we've spent a lot of this discussion this morning talking about change and the fact that the environment is changing and the dynamic nature of the financial services industry is changing, and I would have never dreamed of some of the technological advances of the last five years in financial services. When I left my credit union to come to the NCUA Board, less than one percent of the credit unions even had a website, let alone interactive home banking.
Today, I just got our most recent statistics, that show over 10.7 million credit union members are now using online internet banking at their credit union's website. And when you realize that there are a little over 80 million credit union members nationwide, that's a remarkably high percentage in a very short period of time.
We've gone from a period where perhaps seven years ago, there were very few credit unions who had anything more than an informational website, to now where over half the credit unions have an interactive website actually able to do transactions, and very likely five years from now, a credit union would not be able to compete in the marketplace without that. I mean, that is a required change and adjustment for credit unions, but it is also for us, because all of a sudden now, we have to have our oversight program much more flexible and adaptable to looking at online transactions, online security -- when I said a moment ago that we're going to be a more risk-focused examination program, and if you're going to be risk-focused today, there's one thing you have to look at is the security of the internet transactions.
So I think that we have seen change, we will continue to see change. I'm not a very good crystal ball type of guy to know exactly what the changes are going to be five years from now or ten years from now. One thing I know for sure, there will be changes and they will be more expensive to deliver, and that more and more credit unions, 80-plus million and growing members will be demanding those changes to be provided and those services to be provided; more of them will be technologically based. And credit unions will have to walk that line from being high tech to also being high touch. And they don't want to become the large impersonal financial institutions that many traditional banks have become. That's a part of the credit union difference, a part of the credit union uniqueness.
But yet their members are demanding more and more of those services. They got to be able to find a way to provide those services, technologically advanced and costly that they may be, and while still maintaining that high touch that has been the nature of what a credit union is. So, it's going to be a challenge for credit unions. Its going to challenge for us, but it is one that I believe that credit unions are up to, and I know that we as an agency are adapting to and our strategic plan is very much focused towards being that type of an agent of change without lowering standards in the process.
Mr. Lawrence: But, I will ask you to pull your crystal ball out and talk about your vision for NCUA in the next five to ten years.
Mr. Dollar: Oh, we do have a vision statement for NCUA and a strategic plan that we just this month updated for 2003-2008 period. And one of the primary focuses of it if you can capsulize it is, yes, there are certainly human resources aspects, there are efficiency aspects. But one of the true foundations of this strategic plan is that we want to be much more outwardly oriented. So many times when you do a strategic plan, you focus inwardly. How can we restructure a department? How can we cut down on some of our procurement costs?
All of those internal type of things, and they are certainly important to study. But when you're in the regulatory arena, particularly regulating an industry in which the marketplace is changing as dramatically as it is in the financial services delivery arena, you've got to be outward-looking in your strategic plan. And so we have tried to draw a plan that is designed toward a maximum of earned flexibility. I emphasized the word "earned flexibility." We've put in place a regulation we call "reg flex" and an entire approach we call "reg flex," which is based upon earned regulatory flexibility. Not granting it to everyone, not deregulation, which removes the regulatory requirement for everyone regardless of their performance, but to realize that based upon a risk-based analysis, some credit unions don't have the same regulatory requirements applied in the same way as others. And we need to allow them to earn greater empowerment. And I think that is putting in place a regulatory regime, if you will, that is adaptable to these changes that we know are going to come, even though we don't what all of them are.
Mr. Lawrence: How will you measure the success of an initiative like that?
Mr. Dollar: I think you measure the success of any initiative in the foreseeable future by the overall results of the industry. And if you regulate an industry, although we regulate individual credit unions, our responsibility is to them but also to the overall credit union industry. And through that, through the members, those 80 million members who put their hard-earned dollars in those credit unions, I think that if five years from now, ten years from now, we see stronger credit unions, we see more credit union members, we see credit unions who have a more diversified field of membership and therefore are safer and sounder and stronger, if we see credit unions that are offering more products and service to more members from all walks of life, then I think we will have been successful. One of the challenges when you're in an appointed position such as I and my colleagues on the Board are in is that we have a fixed term, six years as our term.
Many times, if you are really going to try to be visionary, you're going to put in place programs that you will not be able to measure the ultimate success of while you are there. But rather than just dealing with the problems of today and the challenges of today, and the opportunities of today, I think it is incumbent upon us to look at tomorrow and try to put in place things like "reg flex," "Access Across America," "AIM," that may not necessarily pay dividends today. "Access Across America," for example, those 33 million Americans that two years ago were not eligible to join a credit union that are now eligible, it will be ten years from now, 20 years from now before we know how many of them actually joined, whether or not they get a loan, will they start a small business, whether or not they break themselves away from the pawnshops and the check cashers and are able to bring about financial self-sufficiency, maybe homeownership because they have access to a credit union.
But I believe it is worthwhile in doing, even though the ultimate evaluation period will be down the line. That's what visionary leadership is all about. And this is one thing that contrasts a little bit to my days in elective office. The tendency in an elective office many times is to try to come up with some project that you can have your picture taken in front of for the brochure of your next re-election campaign. Immediate results are what pay political dividends.
But I think as fast as the marketplace is changing, as important it is for government to be responsive to those changes and that dynamic nature of that marketplace, we've got to be willing to say, you know, some of our projects may not show the payday over the next six months or even the next six years. But that does not mean that they are not worthwhile projects for us to get ourselves involved in.
Mr. Lawrence: Well, given your unique perspective and your service and your career in public service, I'm curious, what advice would you give to a young person considering a career in public service?
Mr. Dollar: Well, first is just not to discount it. So many times in today's society, the lure of the paycheck of the private sector, to be the next dot com millionaire, many times makes certain of our young people as they come out of college or go into their careers to discount public service.
The ability to impact lives, the ability to be able to make a difference in their community is a reward within itself. And I think the pay of public service has greatly improved in recent years. I think that is a trend that will continue. I think that trend must continue so that we can compete for the best and the brightest in the public sector. But I think there is an addition to that; the reward from making a difference, in making a positive difference. Well, I would hope that any young man or young woman coming out of college, beginning their career today, particularly in this area, when there are so many public service opportunities available to them, would at least not discount public service as a possible source of career. And then secondly, I think, to involve themselves in the community, to involve themselves in the decision making process, because it is important that those of us in the public sector be aware of public issues and community issues and the like.
And sometimes, young men and young women say, "How do I get started?" It may be as simple as getting involved in a community organization. It may as simple as getting involved in a chamber of commerce on a local basis. It may be as simple as participating in the combined federal campaign. But some way to be able to interact with those in the public sector that are always looking for talent; that are always looking for the next generation of the best and the brightest. And I think that you have to get that exposure before you able to have those opportunities.
Mr. Lawrence: That's a good stopping point, because Dennis, I'm afraid we're out of time. Debra and I want to thank you for being with us this morning.
Mr. Dollar: It's been a pleasure. And let me just close by saying that if any of your listeners would like additional information about credit unions or about the "Access Across America" initiative, they can contact our website, which is www.ncua.gov. And we also have a special website for "Access Across America," which is www.accessacrossamerica.gov.
Mr. Lawrence: Great. Thank you very much. This has been The Business of Government Hour, featuring a conversation with Dennis Dollar, chairman of the National Credit Union Administration.
Be sure to visit us on the web at businessofgovernment.org. There, you can learn more about out programs and get a transcript of today's very interesting conversation. Once again, that's businessofgovernment.org.
This is Paul Lawrence. Thanks for listening.
Friday, October 4, 2002
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, 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.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 conversation this morning is with Dr. David Chu, Undersecretary of Defense for Personnel and Readiness for the Department of Defense.
Good morning, David.
Mr. Chu: Good morning, Paul.
Mr. Lawrence: And joining us in our conversation is Bill Phillips.
Good morning, Bill.
Mr. Phillips: Good morning, gentlemen.
Mr. Chu: Bill, how are you?
Mr. Lawrence: David, what's the mission of the Office of the Undersecretary for Personnel and Readiness?
Mr. Chu: We're the 'people' people of the Department. That is to say, we manage everything ranging from what the pay table is going to look like for military personnel, through the health care system that provides for them and their families, all the way through to questions of overseeing the readiness of our units, in terms of the training that they get, and where they get that training and how it's going to be conducted.
Mr. Lawrence: And how does it fit in the overall mission of the Department?
Mr. Chu: People, as you all I think appreciate, are the heart of the Department. And of course, there are a lot of people. We have about 3-1/2 million people when you count the active reserve and the civil force of the Department, in terms of the direct employee workforce of the Department.
And without those people, who are quality people, who are well-trained, well-motivated to do the kind of job that the nation needs, there really isn't a military. So this is the heart of the Department's capacity to fulfill the nation's needs.
Mr. Lawrence: David, as the Undersecretary for Personnel and Readiness, what are your specific duties?
Mr. Chu: My job is really to set policy within the framework that the Congress provides by its statutes and consistent with the administration's aims and agenda. Now, in some cases, we'll go back to the Congress and ask for a change of policy.
But to give an example, we supervise the health care system for the military. We buy somewhat over half of the health care services that our people need from the private sector. We have contracts through which this is managed. In fact, at this very moment, we're re-bidding those contracts.
And so my job is to set the parameters that are going to describe those contracts. How many regions are we going to have, how many contracts are we going to pursue, what degree of competition should we aim for, what's going to be the nature of those contracts, what are going to be the incentives that those contracts contain.
I don't actually run the programs myself. The office doesn't run the programs directly. But it may administer the programs, or it may administer the agency that actually carries out the task at hand. That's an example, again, from the health care sector. We have the so-called Tricare Management Activity that actually runs the contracts for us.
Mr. Lawrence: Tell us about your career prior to this appointment.
Mr. Chu: I spent most of my life in and around the Defense Department in some fashion. I came in as a young Army officer during the Vietnam War. I got my chance to visit Southeast Asia, as every Army person I think in that era got to do. And coming out of that experience, I looked around and was fortunate enough to be hired by RAND, which is a research corporation, headquartered in Santa Monica, California.
And quite by accident, I started working on military manpower questions. I was originally trained as an international trade and development economist. But this was the focus of great deal of attention, this question of military manpower, in the early 1970s. Because as you remember, the country had made a decision to go to a volunteer force. Big experiment. No one had ever attempted to put together this big a military composed completely of volunteers before. The British had a volunteer force. Much smaller scale.
And so the Department of Defense engaged RAND, among others, to help it think through how are we going to make this successful? How are we going to make this work? And it was a big challenge. And you may remember some of those years in the '70s. The volunteer force didn't do so well at first, in fact, almost failed. Partly because they set the pay numbers wrong in the mid-1970s. And the quality levels of the force fell, and in fact fell further than people managing the Department of Defense understood to be the case, because they'd made a technical mistake. They had misnormed the so-called Vocational Aptitude Battery tests, the Armed Services Vocational Aptitude Battery tests, the ASVAB.
And the managers thought they were getting reasonably qualified people, maybe not quite the level they'd like to have. The sergeants kept saying, you know, these people aren't like the ones we used to get. They just aren't very good. It turned out the sergeants were right. It turned out they were taking in large numbers of people only marginally qualified for military service, by mistake in the mid-'70s.
Congress reacted to all this by setting standards for the military, in terms of the quality of recruits enlisted in the military. And part of RAND's job was to help the military and say, okay, if these are the standards, how are we going to get from here to there? How are we going to make this successful?
I came to work in Washington in 1978, at the Congressional Budget Office, where I ran the section responsible for national securities issues broadly. And I was invited by the Reagan administration to become what's called the Director of Program Analysis Evaluation, which is the sort of inside think-tank in the Pentagon. It's there to advise the Secretary on choices, on alternatives.
In some ways, it's the black hat of the Department. Your job is to be the Secretary's set of intellectual shock troops, to advance new ideas, ideas that may not be popular, in fact, generally aren't popular, but later come to be received wisdom.
I'll take an example. One of the issues we took on in that period of time is who should conduct the air defense mission of the United States? In that era, it was the air sovereignty mission. In other words, the airliner comes to the United States, you know, appropriately, who goes up and checks it out kind of thing. And it was being done by active Air Force units, even though it was a mission that we thought could be done equally well, and at somewhat less expense, by Reserve companies, Air Guard, Air Reserve units.
And you would have thought that we were heretics for raising this possibility that the Reserve components could do this. Well, after a long battle, the Air Force grudgingly agreed to try out using more Reserve component crews for this purpose. And of course, quite ironically, I came back to the Department, having been there from '81 to '93, came back in 2001 to discover we now had, at that time, all the air defense being conducted by Reserve component units.
So part of your job in that post is to get new ideas tried, to get them advanced, get people to look at them. I served in that post for almost 12 years, left as the administration left office in January of '93, Bush 41, as people call it. And I returned to RAND, as it turned out. I worked in RAND's Washington office, which I was the head of for a while, and then later ran one of RAND's major units, the ROIA (?) Center, which is the unit that advises the Army. And then I was invited by the present administration to come back in the post I now hold in June of 2001.
Mr. Lawrence: Given that career, what made you decide that you wanted to come back this time?
Mr. Chu: I have always found public service extremely rewarding. I recognize financially, often people take a significant step down in income to take these positions. But the psychic rewards, the sense of contribution that one gets, and the opportunity to help the nation do its business, is tremendous compensation. It gives you a tremendously good feeling about what you're doing with your life. And so it's that more than anything else that I think makes public service attractive.
Of course, the Defense Department, as I think you know, is a great place to work. It's a terrific set of people, highly motivated, very mission-oriented. Polite (?) did a survey of federal employees recently. You may have seen this piece of research. And while we have our faults -- and he pointed some of those out -- nonetheless, he was really struck by the degree to which morale in the Defense Department was not only good but getting better over time after the events of September 11th, because it's so mission-focused.
And it's just a great set of people to work with. It's a real sense of community, a real sense of pulling together, common purpose. And of course, in some sense, defending the country and its interest is the ultimate public service, the ultimate reason one had a central government.
Mr. Lawrence: It's interesting that you mention that it's such a great place to work, because the Department of Defense is the largest of the federal government agencies. And I'm just wondering with things of that scale, how do you communicate? How do you do the traditional management functions on that size?
Mr. Chu: Well, you use every instrument at your disposal, including programs like this, obviously. Part of it is just very straightforward. It's a bit like Woody Hayes and 3 yards straight up the middle. You write the memos; you make the announcements.
More important I think is getting out and talking to people, if not face to face, at least in some way that they can ask you questions, they can express their concerns. I am struck that many of the problems of the Defense Department -- and I think it's true of any large bureaucracy -- arise from miscommunication. As the military would like to say, what's the commander's intent? What are we trying to do here? What are we trying to accomplish? And why did we pick this way of getting to that goal?
And I am impressed at the power of just sitting down and talking with people. And of course, in an organization that large, a lot of what you need to do is talk to the leaders of subordinate units, to convey to them what are we trying to accomplish here? Why did we choose this method?
And of course, even better to have talked to them before you've made a choice, to engage them in thinking through how might we solve this problem? How might we address this issue? And I have always found that if you can get the leaders together like this, that you may come in the room with no idea of what to do about the problem at hand. And I am impressed at the number of times you leave the room with the outline of an answer, with the framework with which you can proceed. Because each person has contributed his or her particular insight.
And so I find the meeting -- I know people laugh a bit about meetings as being the bane of their existence. Actually, I find the meeting extremely productive. And with the tasks I have to be responsible for, a terrific way to get them to explain what we have to do, and to get them help tell us what a solution might look like.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue our conversation with David Chu of the Department of Defense.
Human capital transformation is a key part of the President's management agenda. What's the Department's plan to address the human resource issues? We'll ask David when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Dr. David Chu, Undersecretary of Defense for Personnel and Readiness for the Department of Defense.
And joining us in our conversation is Bill Phillips.
Mr. Phillips: David, can you talk to us a little bit about the efforts at the Department's human capital transformation process? How do the different pieces fit together, and how is that going to impact the overall mission of the Department?
Mr. Chu: I'm delighted to do so. Let me start with why we are trying to change things. We recognize this is a different world than the one that characterized the Cold War. The Cold War is over. The United States, as we all know, faces different military problems. We have to have the right kind of people, the right set of skills that are appropriate to that new set of problems.
The other thing of course that has changed is American society. It's a society a lot more educated than it was true before. It's a society where families have different aspirations than might have been true in earlier years. One of the most important changes is that most young Americans now want to go on to college reasonably soon after they finish high school.
In the old days, so to speak -- I'm almost old enough to be able to say that -- most high school graduates went out and got a job. And so the competition, so to speak, was not college. It was the job market.
Given all these changes, we have to change both what we're aiming at, and how we're going to get there. And that's what the human capital transformation is all about. To do that, what we've tried to do is to borrow from the business playbook, develop a set of strategic plans that look forward. In other words, instead of back to what our past practices were, let's look forward to what our future practices ought to be.
And separately for the military and civil forces of the Department, we have a set of efforts that are intended to give us those strategic guidelines. And I can say more about that in just a few minutes.
At the same time, for both the civilians and military, we recognize that a key part of why someone would want to join and stay with our organization, and really work hard and contribute with our organization, is the set of understandings between us and them of what this position, what this commitment is going to be like, what the social compact is, so to speak, emphasizing that we're all in this together. This is not us versus them, not employees versus management. We have a combined interest here.
And so, yes, we're going to ask you to do some difficult things, and to take on some fairly significant burdens, in particular in the military case, to risk your life or your health in the process. But at the same time, we're prepared to do various things to make sure that you're well taken care of. And part of what we want to do for both the civilian and military forces in the Department, is to make sure that that social compact is in good shape, that we are appropriately taking care of you.
That doesn't mean coddling people. It means being sure that their circumstances are what they find attractive that makes them want to come to work in the morning, want to contribute.
The terrific spirit we saw on September 12th, when the Secretary of Defense made a decision that if at all possible, the Pentagon would reopen after that attack. And I was really struck at the awe in the tone of media reporting, that my God, all of these thousands of civilian and military personnel are trooping back into the building while the building was literally still burning. And no one had any hesitation about coming back to work.
That kind of dedication is why you want to be sure that people are well taken care of.
Mr. Phillips: You mentioned the strategic plan and linking the human capital. Could you tell us a little bit about that strategic plan?
Mr. Chu: Yes. We start by asking ourselves, both military and civilians, what kind of skills are we going to need in this future world that we face? And then of course -- and that's a large debate. Obviously, there are going to be different opinions about that debate. I think the common element for both military and civil personnel is this is going to be a more educated force in the future. And so the old view that a high school diploma was enough, and that on the military side, let's say, and that we didn't really care very much if you got any further formal education or not, that's out.
We recognize that both for our good and for your -- to meet your desires, most young people enlisting in the military want to continue their education, since we have a whole set of programs designed to respond to that. And part of the strategic plan issue is how do we position these programs correctly. So, how much do we do on tuition assistance, for example.
The Army has a wonderful program called Army College Online, in which, if you meet various criteria, they will give you a "free computer" that allows you to do courses from various universities on an online basis.
Impressive results. I happened to be at Fort Lewis the day they were giving out the computers. Even though they had emphasized there were plenty of computers for everybody, that you didn't have to wait, people were there in line at 4:00 a.m. in the morning to make sure that they were going to get their computers. And these were not just privates. There were people wearing quite a lot of stripes on their arms who were there, making sure that they got the computer, and saw them signing up for their courses, and so on and so forth.
So there's a terrific thirst for continuing education on the part of our people. We want to slake that thirst, because we recognize it's also in our own interest. So defining what we need, thinking through what we're going to have to do to attract, retain, and motivate those people is the essence of what these plans are all about.
And so what they consist of is a series of, as we were phrasing it, lines of operation. In other words, areas we have to pay attention to. And then within each, the specific steps we'll need to take in order to achieve the results that we want.
Mr. Phillips: Let me just extend that thought a little bit. You've talked about some of the challenges you face with respect to college as an alternative to the military. You've talked about some of the programs that the Army has in place. What are the key things that the Department needs to do to continue to attract young people to the military?
Mr. Chu: Well, one of the first things that you have to do always, is to make sure that your compensation package is fair, competitive. No one's going to get rich serving in the military. But they shouldn't have to absorb undue financial burden either. And so you have to constantly pay attention to what are we competing against? And that's one of the big changes taking place that we have to react to.
Twenty years ago, the standard for thinking about enlisted compensation in the military was what could a high school diploma make in the American economy? That's no longer relevant. If most young Americans, particularly the ones that we want, seek to go on to college, the standard is what could someone with some college education, let's say a year or two, make in the American economy. That's a very different set of numbers. It's a higher set of numbers.
The President has responded to that by saying that a part of our pay raise in the last 2 years should be targeted to the mid-range in terms of experience of our both enlisted and officer communities, because in both those areas, we're kind of weak, when you, on the enlisted side, vet it against some college earnings line. We were not competitive, and we still aren't as competitive in that regard as we wanted to be. So we're slowly trying to bring our compensation level up.
But it also means, back to what you mentioned earlier, that we have to convince young people regarding college, it's not either/or. The military is not an alternative to college. We have to give you the chance to continue your education while you're in the military. Or the military could be the vehicle by which you accumulate the savings -- the Montgomery G.I. bill being the example -- so that you can, post-military service, resume a college education.
So we're trying to position ourselves so that it's not either/or, that you can do both, you can have your cake and eat it, too, and that's what we're trying to tell young people.
Mr. Phillips: You mentioned earlier the strategy for civilian members of the Department of Defense. Could you contrast that with the military strategy for H.R.?
Mr. Chu: We are starting from a much lower base with civilians. I think it's true of the federal government at large, and certainly the Department of Defense that we have not thought about our civilians as the kind of strategic resource they truly are. And one of the things I think that's giving everybody a wake-up call on this front is the coming wave of federal retirements. Everyone understands that because the civil workforce has been on a decentralized basis, what we have is a workforce with a lot of people nearing retirement age. Standard numbers are in 5 years, half the federal workforce could retire. That number applies to DoD as well.
Now, not all the people are going to retire when they become eligible. So it's not upon us quite as rapidly as some of the doomsayers may assert. But certainly in the next 10 to 15 years, the way we see it strategically as a problem within Defense, we have to recruit a number of people equal to approximately half our current workforce. That's a huge challenge.
It's also a different mindset. The last 10 to 15 years of DoD workforce management, true I think in most federal agencies as well, has been how to move off the payroll. How to downsize. How to shrink. We are not in the recruiting business. I'll take a very simple kind of issue. Do we have a booth ready to go to job fairs? Well, a few weeks ago, we didn't have a booth ready to go to job fairs. So, if I would call up and say "You know, XYZ is having a job fair. Where is our booth?" I would sort of get blank looks, because until recently, that hasn't been our problem.
Now, it is our problem. And we want to approach it strategically. We don't just want to wait for the retirements to swamp us and to drain all the talent at once. What happened, in fact -- you may recall this episode in New York City, when Mayor Lindsay let the senior workforce of New York City subway system maintenance unit all retire at once.
Well, a funny thing happened. For the next several years, the trains didn't work. Because not everything was written down in the manual. And it was those senior guys, mostly guys -- some gals, I suspect, though not many in that era -- who knew how to -- who knew those tricks, who knew how to make the trains actually run. And we don't want to let that problem happen to us. So we're trying to get ahead of that problem.
On the civil side, we're just beginning this journey. We're just starting to put the tools in place necessary to achieve these objectives. And one of them, a very simple one, is simply being candid with ourselves. How many people do we need to hire each year? Up to now, we'd never set a goal. We decentralized it, told, you know, component managers well, it's your problem Bill or Paul. You know, here are the civil service rules, here are the lists. You go hire someone.
We think we have to take a more strategic approach than that, in order to be successful.
Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue our conversation about management with David Chu of the Department of Defense.
This is The Business of Government Hour.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Dr. David Chu. David is the Undersecretary of Defense for Personnel and Readiness for the Department of Defense.
And joining us in our conversation is Bill Phillips.
Mr. Phillips: David, in our last segment, you were talking about strategic planning with regard to human capital transformation and a number of those things. Your current planning talks about a capabilities-based workforce, and that model. Talk to us about that, and how is it changing the way the Department does its business?
Mr. Chu: Of course, in the Cold War, we faced a single -- or often thought we faced a single major opponent. And we had a well-defined idea about how that opponent might act and threaten our interests. And so, if I may use sort of an economist's jargon, we had a point solution to every problem. We could optimize. We could pick what we thought was the best answer, because we thought we knew what the problem was we had to solve.
Now we face different problems, where the threats are not as clearly defined, where we may face over time a very different kind of problem, and one that we can't fully now foresee as I think the events of September 11th illustrated. So we're much more into a portfolio management problem, if I may continue the analogy, where we have to hedge against a variety of possible outcomes.
I'll give you an example, a practical example that I'm struggling with right now. Language training. What kind of language capacity do we want our military and civil workforce to have? Indeed, what kind of language resources will the Department of Defense need over time?
Now, 15-18 months ago, no one would have forecast that finding the Pashtun speakers in the military ranks would be a high priority task for the personnel system. Now of course we'll take every Pashtun speaker we can discover. And yet, you can't keep every possible language on hand. So, how do you get the capability here to interact with a variety of societies, some of them very different from the United States, certainly very different from Western European notions of what's the state, what's the role of government, so on and so forth. How would you function in this society?
And we need to be able to solve that problem to have the capability to operate wherever on the globe the President might send the military forces of the United States. So, it is a matter of being able to act effectively in a wide range of circumstances, whose specific parameters we cannot foresee that now constitutes the problem that we've got to solve. And what we're really coming to is I think a conclusion that to do so, you've got to have a range of capacities within your institution, not just something optimized for one particular problem.
If you're optimizing one problem, you know, it's like the watch that is stopped. It will be accurate twice a day, but it will be useless the rest of the time. Much better to have a timepiece that's perhaps not quite so precise, but that's more or less on the mark across the entire 24 hours. And that's where we want to try to take the Department.
Mr. Phillips: You have a number of initiatives in place to improve quality of life. Could you talk to us about those, and describe how they're impacting readiness and recruiting and those elements?
Mr. Chu: That's a critical issue for both the military and civil personnel in the Department. On the military side, I think it's something that's long been recognized. The military has a saying that goes something like retention decisions are made at the kitchen table, that it really isn't the retention officer that's doing the job. It's what the family decides is right for them. And that means it's not simply a matter of what is the work responsibility of the military member. It's also what happens to the family.
And that affects all aspects of their lives. Several are of course more salient than others. One is housing. The state of military housing is not good. The President spoke to that during his campaign and has emphasized it since. It's one of his personal interests. Our problem is that we have an old housing stock for those who use military houses. It was built, much of it, to the standards of the 1950s.
And to think back on what those standards were, I think we usefully recall what was a Levittown house. Levittown, as you know, was the late-'40s, Long Island, first suburbia kind of development. And it had just under 1,000 square feet. And it had one bathroom. There was no such thing as a family room, breakfast nook, or any of that sort of thing. There was only a one-car garage. That's not the standard that American families aspire to today.
What have we done? Starting in the last administration -- and I have to give a lot of credit both to Congress and our predecessors in this -- they realized that we couldn't do that all ourselves. And it was time to turn to the resources of the private sector, and to offer them essentially a long-term lease kind of proposition on government land, in which they would build the houses, and we would give them a preferential opportunity to rent those houses to our people. So we have a vast set of housing privatization efforts out there right now.
What does that do for us? First of all, it brings the capital of the private sector to bear so the government doesn't have to raise the capital outright. Second, it brings the skill of the private sector in figuring out what the housing -- what do people really want in a house? We're not necessarily all that good at it, and we shouldn't probably be writing those specifications. We want a result, which is we want a happy set of families. You tell me what they're going to like. Here's how much money they can spend, because everyone knows what the housing allowance is going to look like.
What's in it for the developer? Well, we have a good set of customers. Our people pay on time. Because in fact what we'll do is just send the housing allowance directly from the Treasury to developer if you want to buy the house. The developer still has to compete, typically, in these arrangements. He has to build a house, or a condo type unit that's attractive enough that the military members want to say, yes, I'd like to live in this. And so he's got a strong incentive to build a good community. And typically in these arrangements, he has a 25-year lease maybe with an option to roll over for another 25 years and certain refreshment stands. They're fairly complex vehicles.
But they're very imaginative. And the results, at least so far, are extremely promising. You can go to these various bases. An excellent set at Fort Carson, as one example. They're great houses. Military families are delighted to live in them. They're nice communities. The developer has a strong interest in making a successful community, because he wants to fill it with these high-end families that come on with their housing allowances, which means there's no vacancy rate, there's no cash flow problem, there's no delinquent payment issue for him. It's a win-win situation for everyone.
So that's just one example of how we have to respond to what our people aspire to. We can't just stick them in a 1950s Levittown, even if it's "free," and assume they're going to be happy.
Mr. Lawrence: Health care costs are rising throughout the country, and I'm assuming the Department of Defense is no exception. What are the major concerns about health care in the Department?
Mr. Chu: Well, the big transition in health care in defense was the move to a managed care like paradigm in the late '80s, early '90s, which we call Tricare. The early years, to be candid, were not a happy situation. We had a lot of performance issues. We're proud of how far we've come over these last 10 years. We treat this just as a private sector health care operation, where we do survey of our patients after their last visit. We send them a questionnaire and say what about this last visit? How did you feel about it?
We're very proud of our scores. We're right up there just about where the better private plans are in terms of patient satisfaction with the encounter that they've had. We do face the same challenge the civil sector faces, and that is the rapid rise of health care costs, although we're very proud of the fact that this past fiscal year, for the first time in 4 or 5 years, we finished the year within our budget.
And that relates to a major management effort we've made as the Congress likes for us to optimize the mix of resources we bring to delivery of health care, to improve how well we use both the contracts we have, as well as the set of military treatment facilities, hospitals and clinics that are government-owned and government-operated and staffed by government personnel.
Often we had a bad match in a particular local market. And increasingly, the way we're going to try to deal with the cost issues over time is to view the health care system as a set of important local markets. Each one has different conditions. For defense, there are 15 or 20 really big ones around the country. Washington, D.C., is an example; Norfolk, Virginia, is another example. San Diego is an example. Fort Hood is an example. San Antonio is an example.
In other words, a place where we've got a lot of people, and we have a significant number of assets, both government and purchase character. And the issue for us is how to put those together in the best possible fashion. We'll be appointing a set of market leaders, market managers, really, who will be the guru for that area, and with certain powers to reallocate resources, and reapply resources within that small region to get the best outcome for our people, and the best deal for the government.
Mr. Phillips: Does the changing nature of the population, its age and its size, pose different complexities for managing health care?
Mr. Chu: Absolutely. We have an older patient population now than was true 20 years ago because a lot higher fraction is composed of retirees and their families. And of course as you know, Congress made a decision 2 or 3 years ago to extend the Tricare benefit to those who are otherwise Medicare-eligible. Prior law had said once you became Medicare-eligible, you dropped out of our system, except insofar as we had space available in a military hospital.
That led to an outcry on the part of the retirees as they reached 65. Congress reacted by saying, okay, they're eligible, too. So, within the last 18 months, we've rolled out what's called Tricare for Life, starting October 1st a year ago. The pharmacy part actually started a little bit before that.
It is I think a great tribute to the people working with our health care system. They made this all work. This is a huge -- this is hundreds of thousands of additional households, for which we suddenly became responsible and the whole issue of paying their bills as second payer to Medicare. So it was a significant financial transaction operation to manage here. And then it's gone, I think, at least we believe, quite well. In terms of the transition, people are generally satisfied with the outcome.
But yes, it is a population that's much older on average than was true before. And we suddenly added all these much older families, so we've got a whole new set of issues to deal with in terms of how we manage the system, including -- you know, some of these things you don't think of in advance, in terms of what public administration requires -- including the whole question of eligibility.
And the way the military medical system works, to be eligible, you have to have a military ID card. Well, many older retiree families, especially surviving widows, haven't had an ID card in years. In fact, had no idea they were supposed to apply for an ID card, because there was no benefit to them doing so. So we had a big effort to get the word out, and to help people who haven't had an ID card to get one so they can be in the system. And it's not so much the card per se that's critical. They have to be in our automated register, so to speak, so that when you come to a treatment facility, they say oh yes, here's Bill. He's on my list. We'll pay his bills. We'll cover his care.
Mr. Lawrence: That's a good stopping point. It's time for a break. Rejoin us in a few minutes as we continue our conversation about management with David Chu of the Department of Defense.
This is The Business of Government Hour.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and today's conversation is with Dr. David Chu. David is the Undersecretary of Defense for Personnel and Readiness for the Department of Defense.
And joining us in our conversation is Bill Phillips.
Mr. Phillips: David, in the last segment, you clearly demonstrated a passion for the quality of life and the social compact with the military. Talk to us about education of children of military dependents.
Mr. Chu: I think this is one of the sleeper issues out there. And it illustrates the fact that what people worry about in terms of our quality of life shifts over time as the aspirations of Americans change.
And one of the things people aspire for now, as we all appreciate, is good quality education for their kids. We've done a terrific job overseas with Department of Defense educational system. Our schools overseas, if we were a state, and you gave us a standardized test -- and we do actually do take these tests like everybody else we'd be between 1 and 5 in the nation, in terms of test score outcomes, which is I think a terrific record.
But as I go around the country and I ask people stationed at Base X or Camp Y, how is the school system, too frequently, I get poor answers. I get answers where you recognize from their behavior that they are not satisfied. We have, in many locations, people either living a fair way away from the base in order to find a school system that they find adequate for their kids, or actually sending their kids to private schools. And it's not just officers. We now have some senior enlisted personnel, who, while we pay them decently, I don't think we're really paying the level where they can typically afford a private school, who are saying I'm going to somehow find this money, because the situation is unacceptable.
This is a big issue for the Department. The Department, of course, should not be running the schools in the United States. We do, for historical reasons, run a small set on the few bases around the country. But we shouldn't be in the school business because that's a local responsibility. And one of our big challenges in the Department of Defense is to find a way to work with local communities so they can improve the school system for everyone, but importantly including the children of our military personnel.
Now, one of the improvements which we seek all around the country, both from strong school systems as well as others, is being sure that they're sensitive to the needs of kids of families who move around a lot. One of the difficulties that occurs is, you know, tryouts for the sports are let's say the last week in August. Well, if you don't show up till September, you may not be considered by the school system.
Likewise, each school system has its prerequisites in order to take the calculus course, let's say. Well, if you didn't quite meet those, you know, you might not get that chance. And so we've got an organized program, importantly advanced by Mrs. Reimer (?), the wife of a former Underchief of staff, to try to sensitize school systems and school system leaders to the need to think about how your rules will affect an important part of your student body in those communities where you've got a lot of military children.
And I'm delighted many school systems are responsive to that overture when we make it, and start to think about how they could do things a little bit differently so that our kids have an equal chance as someone who has lived for 20 years in the same place.
Some of it's hilarious, and the local school superintendent can't do anything about it. One of the problems, as you know, in many school systems, is you have to take a course on the history of the state in which you live. And some of our children have taken the history course for several states, which is more I think than anyone really anticipated.
Mr. Lawrence: Many have wondered I think about the relationship between the Department of Defense and the Department of Veterans Affairs. Now, as I understand it, you're part of an Executive Council that's looking into the coordination between the two. I wonder if you could tell us about the goals of that Council?
Mr. Chu: This is something that Leo Mackay, the Veterans Affairs Department Undersecretary and I put into place within the last year to respond to the President's interest in seeing better coordination between the two departments. But obviously share, in some sense, the same population. The veterans are all graduates, alumni, so to speak of the Department of Defense.
VA runs a big medical system, as we all know, of course, to deal with veterans' problems, which are somewhat different from the active force. In some locations, we have facilities in the same place. And so one obvious issue is shouldn't we collaborate more? Shouldn't we find a way to work together? We also have issues of how we organize the benefit program so it's easier for them to deal with those programs. For example, could we not make the exit physical from the military the same physical that VA uses for assessment of disabilities?
Well, in the past, the physical didn't do all the tests the VA needs to have. So it's a matter of making sure that we have the same form, that the record can be read by both institutions since all records are now increasingly electronic, and that we make sure we cover all the testing VA has.
Some of it is quite straightforward. Some of it is quite complex, in terms of how we do things. And I'll give you an example. We already do a fair amount of business where they take care of our patient, we take care of their patient. An example in Honolulu is Tripler (?) Army Hospital has a VA outpatient clinic on its grounds. And if you need inpatient care, you go to the Tripler Hospital.
But each of these has to be crafted one by one as a separate agreement between the two institutions. A lot of argument of what the costs are, who's supposed to pay for each element of cost. And what Dr. McKay and I agreed was let's find a way to cut through these arguments so that the two institutions can work together more easily. And so what we did was simply say if you take care of my patient, there is an externally established schedule of prices. Essentially it's an extension of the Medicare schedule.
And we'll both agree to accept that, because we want to be able to meet -- actually, accept it minus 10 percent because there ought to be some savings here for the government and the taxpayer -- and let's not argue over exactly whether I used one more bandage on your patient than would be normal, and therefore I've got to charge you a little extra. It will all come out in the wash in the end.
And the idea behind this is to release the energies of the local leaders so they can come to the agreements, which they typically seek and want, because they want to do the best thing for their patient population.
Mr. Lawrence: David, let's shift and talk about the future. You talked earlier about the challenge of the pending retirement over the next number of years, significant people leaving. As you look out, what are the most significant personnel and readiness issues and challenges that you face and the Department faces?
Mr. Chu: It's how you sustain the contemporary success of the volunteer force. As American society changes, and the aspirations of young people change, and as we're conducting a probably long-term global war on terrorism -- this is not a short conflict, this is a long haul event, much like the Cold War in some respects, I think is the way we ought to think about it. That ought to be our mindset.
And how do you keep this force as it is today the best military in the world? Important because it's got the best people in it, and they are motivated and properly trained to do their job. And that's the other big challenge. How units will operate in the future, as I think operations in Afghanistan demonstrated, is going to be very different from the past. It's a much more, as the military like to say, joint operation.
So you had Army Special Forces operatives on the ground calling in air strikes from Air Force and Navy aircraft. And we don't practice enough for real, so to speak, in peacetime, in the peacetime settings with those kinds of joint operations. Not that services don't work together well, not that they can't work together - not that they can't improvise well. But our standard is and should be not to improvise.
In other words, this should be second nature. It shouldn't be okay, I've got to solve this problem on the aircraft on the way to the theater because I'm now facing the enemy. I should have done this over and over, so it's automatic, so I know what I'm doing, and I know how to work with someone from a different service, a different kind of weapons system than my own service provides.
And providing that joint national training capability is one of the Secretary's premier objectives. My orders are, stand this up by 1 October 2004.
Mr. Lawrence: Given all the conflicts you alluded to, what's going to happen to the size of the Department if that's --
Mr. Chu: Our expectation is the number of people in active service will probably be relatively constant over the foreseeable future. We need to realize the challenge the secretary has issued to the Department. Don't just solve the problems, react to the pressures of the present day by adding without thinking about what you're going to subtract. In other words, if I have a new, high priority mission, what older mission that maybe isn't quite so important, can I take off the table? What can I stop doing?
And why does the secretary want to do that? The obvious reason is we do not have an unlimited budget. Although we have a big budget, there is a constraint out there. And the secretary has to do two things with the budget. He has to win the current conflict, and he has to invest in those transformational articles that will change the face of the Department for the future.
If he allows new missions simply to be added on top of everything else we're doing, he'll never have any money with which to transform. And so my clear instructions are figure out what we can drop off, what's low priority, what doesn't have a real payoff in this environment, which might include civilianizing the function, which might include going to a contract to provide that function.
The constant question that I'm charged with examining is does this need to be uniformed personnel, which is our most expensive resource in the Department.
Mr. Lawrence: What advice would you give to a young person who is now considering an opportunity for career service?
Mr. Chu: Well, first of all, I'd congratulate him or her, because I think it's a terrific choice. Second, I'd emphasize pick something that interests you. Because if you don't have a passion for it, if you don't enjoy it, if you don't like it - there are a lot of vicissitudes that come with public service. There are a certain number of burdens. I don't want to be unclear about this.
And so you've got to love what you're doing. I think it's less important to chart a career in some kind of managed sense. If you do well, my take on the federal government is if you do well, you'll get a great chance, a great set of chances. So start with something interesting. Start with a set of issues that turns you on. Start with a set of people that you like to work with, especially pick a boss that you respect and that you think you can learn from, and it will take care of itself from there.
Mr. Lawrence: David, we're out of time. Bill and I want to thank you for being with us this morning.
Mr. Chu: It's my pleasure. Thank you.
Mr. Phillips: Thank you very much.
Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Dr. David Chu of the Department of Defense.
Be sure and visit us on the web at businessofgovernment.org. There, you can learn more about our programs, and get a transcript of today's very interesting conversation. Again, that's businessofgovernment.org.
This is Paul Lawrence. See you next week.
Wednesday, August 21, 2002
Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and the co-chair of The Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about The Endowment by visiting us on the web at endowment.pwcglobal.com.
The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with Mark Catlett, principal deputy assistant for management at the U.S. Department of Veterans Affairs.
Good morning, Mark.
Mr. Catlett: Good morning, Paul.
Mr. Lawrence: And joining us in our conversation is another PwC partner, Greg Greben.
Good morning, Greg.
Mr. Greben: Good morning, Paul.
Mr. Lawrence: Mark, let's start by talking about the VA. Could you describe its mission and activities for our listeners?
Mr. Catlett: The Department of Veterans Affairs is responsible for providing benefits to 20 to 25 million veterans and their dependents for the country. We do eight things for veterans, from health care through providing compensation payments for those who are injured or ill from their service; pensions for those who are of low income; education benefits, very important, from when they transfer out of the military; housing benefits, insurance benefits and vocational rehabilitation. Those are the primary ones. And a burial benefit at the end of their life, where we memorialize their service. So we do a lot of very important things for the people that defend our freedom.
Mr. Lawrence: It's a large mission, it's a large organization. How many people are in the VA, and what type skills do they have?
Mr. Catlett: That's one thing I've always liked about being at the VA. I've been there my whole career. It is a very multifaceted organization. We have, in government terms, a little less than 200,000 FT average employment, but it's probably about 230,000 employees to provide this mission. And it spans the realm from all the professions in health care, through specialists in business, such as the housing program. We provide a guarantee there, which gets into credit reform and specialized accounting with that; vocational rehabilitation; psychiatrists, psychologists. So it is a very, very interesting place, and something even after 26 years, there's things for me to learn, in terms of the things, many things that we do for veterans, and how well we do them.
Mr. Greben: Mark, as principal deputy assistant secretary for management, what are your specific responsibilities?
Mr. Catlett: Greg, my office is responsible -- we're a staff function, obviously, at the corporate level for the Department. And we are specifically responsible for policy and the oversight of the budget activities, the financial activities, and the procurement activities, and the fourth one, relatively new, the capital asset function. It's been available in the Department. We've consolidated that and brought that into our office within this administration.
In addition to that policy and oversight, those responsibilities, as well, we are the office that has the direct liaison to the Office of Management and Budget, and to the committees on the Hill for the budget of the Department. That's where I began; that's still sort of my first love in terms of my role in the VA, and an important part of the value I bring to the Department. Those are very important relationships and responsibilities we have in terms of the budget. And that's the direct role that we have. And as I said, that, as well as then what we do as far as normal types of policysetting and oversight for the basic business functions.
Mr. Greben: Mark, in your 26 years, you have a rather unique background in that you've served as both a political appointee and a career civil servant. Can you tell us about that?
Mr. Catlett: Well, that is interesting, Greg. I came to Washington 26 years ago intending on being a federal bureaucrat, proud of that. I enjoy very much what I do. And in the first Clinton administration, Jesse Brown, the Secretary who just passed away, asked me to be his political appointee as the assistant secretary for management, which is basically the chief financial officer. I said no, you've got to be nuts. Why would I change? I'm a careerist. I want to be a careerist. And I was assured by folks that I could return to become a careerist. I had the impression that once you left career service and a political appointment, that was it. You know, you were on your own.
I was about 40 at the time, and said, no, I think I'll stay. But through his very persuasive capabilities, and most importantly, the assurance that I could return to a career slot, I took that political appointment for -- well, I was there -- the day Jesse left is when I returned to career service, but continued to serve in that job another 16 months, as it normally goes in the government, trying to select somebody to follow me.
So I did the job for more than 5 years, technically, just a little more than 4 of it as the political appointee, as I am doing now. I'm the acting CFO, if you will, because we're still trying to fill in this administration. The last political appointment to be filled in the VA is the chief financial officer.
And what are we, 18 months in, and we're still waiting for that to happen. So for this whole administration as well, I have been basically the acting CFO or assistant secretary, even though my title is, as Paul read, I'm the deputy for that function. But I'm the guy in the spot right now.
And the other point I'd make, sort of that distinction, is that I think I'm very lucky, as many of us are. The VA is a very, very flat organization. There's not much hierarchy there. And while I was in the political position, I didn't see my job a whole lot different than it is now, as a careerist trying to do the same thing. You know, the business opportunity is there. Fortunately, from my view, I wasn't required to do a lot of political activities. I did a very few of them, but wasn't required to and wasn't expected to. So I wasn't the normal political appointee who came off the campaign trail, you know, and came in, and still obviously was interested not only in doing a job there for my department, but also having an interest in serving that president, and the re-election of that president.
I was never expected to do that. I didn't come from that. And fortunately, I walked into it not sort of getting the guarantee about that. But fortunately, I found that it wasn't expected of me, and I didn't want that. I'm very interested in politics and follow it. But I'm a careerist at heart, and like I said, was very much glad and pleased with the fact that I could try to do the job one step above from my former job as the budget officer, trying to do the job of bringing about better business practices and better management in the Department as the political appointee, even though, as I said, most of my time, almost all of my time, was spent on the business of the VA, and not on anything overtly political.
Mr. Lawrence: Tell us about your career prior to that. Sort of how long have you been at VA, and what --
Mr. Catlett: Well, as we were saying, and kidding as we started here, I'm sort of a landmark there. I've been at the VA now over 26 years, came there in '76. And I was through the Budget Office. The corporate budget office for the VA is where I was until 1989, when I moved up to, if you will, to the front office for the first time of the Office of Management. And then, with '93, with the political appointment.
So I basically looked at all the budget oversight for all the programs of the VA over my first 13, 14 years there. So I've got a good background. Again, I'm a Washington type, been in Washington my whole career. But I did have a good overview. And that's one thing I find in government; as some people complain about, particularly the folks on the Hill, budget seems to drive everything, particularly in this era. And the reason I see that is that that's the one time of year when the Executive Branch has to put down on a piece of paper and commit to what they're going to accomplish in the next year.
We've made some steps with the Results Act and better planning documents. But until that time, the planning documents meant very, very little. The budget was where you really committed. So as the budget officer, and as a budget analyst before that, that's where the crunch came in terms of a department and an administration making a commitment to what they intended to accomplish. We've gotten a whole lot better with identifying results that we intend to achieve, and the metrics that go with that. But like I said, over this era, I think budget has become what focuses.
And like I said, I was lucky. I fell into it. I came to town in '76. It was the Bicentennial Year, so every convention was in town. I was a graduate student, came to walk the streets. It was 95 degrees that week in April. I walked the streets with a couple of buddies, interviewing, and fell into the job at the VA.
I was literally on the bus going back to Connecticut Avenue, to my hotel, had to make a change on the bus, had time. There was a guy sitting beside me at rush hour, a young guy. I said, where do I change buses? And fortunately, we had 5 minutes until we got there. And he worked at the VA. We started talking, and the next day, he had an interview for me. He said, I know a guy that needs somebody. He said, give me a number, I'll call you tomorrow. So I fell into the VA, and great for me. I've been very, very fortunate, I think, to be at the VA.
Mr. Lawrence: That's very interesting. Now, you spent your whole career one place, and in the public sector. Have you ever thought about changing?
Mr. Catlett: No. When I was 15 years old, I knew I wanted to come to Washington. I lived 90 miles away. I wanted to come to Washington and be part of the federal government. It was a fascination with me, an interest. And I just wanted to be a part of it. I had no idea if I wanted to be involved politically or bureaucratically. But it's something I've wanted to do. I feel strongly about. I think public service is a great thing, and I'm very pleased, and feel very fortunate to be the part I am of it, at the VA.
Mr. Lawrence: And you've been around a lot of different leaders in your career, and I'm curious. What are the good characteristics of effective leaders?
Mr. Catlett: Well, really, in a nutshell, there's two things: passion and persistence. I think you have to have passion for your mission, for what you want to -- and I say mission, or what you want to accomplish. Jesse Brown, again, not just because of his passing, but was one that, you know, as the leader that I worked directly for, exemplified that the best, in terms of not just his advocacy for veterans, the broad theme of his life, basically, but as well, the things that he wanted to accomplish, that he had a passion for.
And then persistence. I mean, like any bureaucracy, I think either public or private, there's a lot of competing interests. And you have to stick to it, to see through the things that you want to bring about. And so, to me, like I say in a nutshell, I would say those are the two characteristics that are most important for good leadership.
Mr. Lawrence: That's interesting. But it's a good stopping point. Rejoin us in a few minutes as we continue our conversation with Mark Catlett of the VA.
The VA and the Department of Defense serve many of the same people. What's the relationship between the two? We'll ask Mark when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs. And joining us in our conversation is another PwC partner, Greg Greben.
Mr. Greben: Mark, you were part of a task force at VA which was commissioned to look at the procurement process. Can you tell us more about the goals of the task force and your role in it?
Mr. Catlett: When the Secretary, Secretary Principi, came, obviously, he had a lot of things he wanted to accomplish. He knew the VA, and a lot of things he knew needed to be done through his previous role as deputy secretary, his commission work under the other administration, commissioned by the Hill in looking at veterans benefits.
And in our area, the one thing that he was most interested in was procurement reform. I mean, we have a good track record. Many people know about what we do with our formulary and competing prices for the pharmaceuticals that we provide veterans, and getting excellent prices in that. And he wanted to see that emulated across the rest of our activities.
We spend close to $6 billion for all types of medical supplies, including the pharmaceuticals and all other types of supplies and requirements to serve veterans. And he wanted to see changes there that would bring about the efficiencies and the competitiveness in the pricing that we were getting in pharmaceuticals. So that's it in a nutshell.
I served as the deputy chair, if you will. Dr. Bob Weeb from California, one of the network directors in our health system, was named as the chair. Obviously, as with most things, you have these competing interests. Obviously, trying to strive for efficiency in the pricing process, in the procurement, you have to be careful that you don't shortchange the quality of the material.
And so it was important to have a health leader lead the team, and we had strong representation from other field folks, and some clinical folks on the team as well, so that we maintain that balance. While we are striving from guys like me for, you know, better pricing, we have to make sure that we do that correctly.
The focus of the task force that we've reported and that we're now implementing were some basic things: standardization, which I've implied, as we have done in pharmaceuticals in the creation of a formulary. Bringing that to what we call the med, the medical and surgical supplies as well.
We've been attempting that over the last 5 years, but not very successfully. And again, it's sort of a physician's desire to use the product lines that they like. And so that's the competition we have. And they'll always discuss quality of care if you try to direct it too much. So we have to bring about standardization, and find a way that the physicians standardize. We can't, as procurement officials and budget types, say okay, you have to standardize and choose this product line. They know best, in terms of the care. So we have to have it physician-led, and that's what we're trying to get done.
The other broad area that we knew we have a concern about and what we have to address is basically the role of data, both for our customer and then for us as providers.
First for the customers. It's one thing to standardize, if we can, all these product lines. But they don't know where to buy it. They don't know where to go to buy it. Cataloguing that, we're trying to use GSA's Advantage System, trying to get where it's in real-time on screen, at their touch, where they can go to find in a good catalogue, find the product lines they need. If we standardized and said you've got to buy this, they have to know how to get to it. And we've made some progress there, but there's a lot of room to improve.
Secondly, for data as well, as the providers, we need a National Item File. We need to standardize the way, the nomenclature that we use for all of these tens of thousands of things that we buy. We need to standardize that, so that we -- I mean, we need to have a standard language for that nomenclature, so that we know how to bid that in the market competitively. We have to roll up and decide where is our best opportunities to get competitive pricing? So we have to know what we're buying.
So those are the primary focuses of the task force.
Mr. Greben: Clearly the procurement reform will promote better management. What are the direct benefits to the veteran?
Mr. Catlett: Well, the direct benefits to the veteran are in this way a little indirect, I guess is the way I approach it. We hope, as we are faced now, we have more in the broad scheme for health care -- and this is focused on health care, which is where our big bucks are. We have more patients than funds we have, resources we have to treat them.
So we have to stretch our resources that get the bang for the buck, basically. So the better we buy, as long as we don't compromise quality, the more efficiently we buy, means there's more resources for staffing, which is still our primary resource in providing health care. You know, 60 percent of our costs is payroll. We have to squeeze as much as we can out of the supply side, the non-payroll side, so that we can hire more physicians and nurses to provide care.
We are swamped with patients, and we are in a tough -- like I said, we're a victim of our own success if you look at the way VA has changed in the last 5 years. We've made access; we've made ourselves accessible with hundreds more clinics, and we have improved the quality of the service. We've made it the way it should be in terms of health focus, and not a hospital focus, so that means the care is out there, as it's being provided.
So we have more than doubled the number of veterans getting care from us, and probably by 2-1/2 times the number seeking care from us in the last 6 or 7 years. So we have to be as efficient as we can in order to provide as much service as we can within the dollars we have.
Health care is, for us, a discretionary expense. It's subject to availability of funds. A lot of the other things we do for veterans are mandatory, which means that whatever the demand is, the money is to be provided to them. There's transfer payments for compensation and pension, provide the guarantees for housing, find vocational rehabilitation. These are all mandatory. If the demand doubles, the money has to follow.
On health care, it's not that simple. We get an annual appropriation, and we have to live within the resources. And we are pressed to the point now of thinking about having to restrict the number of veterans who come to us for care, which we haven't had to do in the past, because the demand is so great.
Mr. Lawrence: The Department of Defense and Veterans Affairs have operated separately, even though the departments serve many of the same people. And I'm curious what the state of cooperation is between the two departments.
Mr. Catlett: With this administration, I think I have seen -- again, being around for a long time -- we've had efforts. And we always have efforts at core collaboration, and cooperation. As one example, we have probably 140 of our medical centers are or have a contract to be a TriCare provider. But literally, less than $10 million of care is purchased by DoD from us. So it's very, very minimal in that regard.
The thing that's improved with this administration is obviously, the President first established a task force to look at it. And there was an interim report just released within the last couple of weeks. But there will be another year before they report. And clearly, Secretary Principi was not satisfied with waiting more than 2 years to try to improve that.
The deputy secretary, Dr. Leo Mackay, and Dr. David Chu from DoD have formed a Joint Executive Council. Dr. Kaiser, in the last administration, formed a Health Council with DoD. And there was a lot of work on specific projects and activities. That's been incorporated now under this broader council at the top, with the deputy secretary, the number two guy at the VA leading it for the VA and bringing in a benefits council.
And now we're talking about creating a Facilities Council that would be something that I would be probably co-chairing, looking at how we better coordinate the expansion and the improvement of our facilities. I mean, that's where we can make the biggest bang. As we know, there's a lot of people that we overlap. But many, many more don't need DoD and VA.
There's about 600,000 military retirees who are those who could get care who are duly eligible. They can get care from the VA or from the military, as a retiree. But most veterans who leave the military don't have a career at the VA, aren't at the military, aren't retirees. So they don't have an option with DoD. They're at the VAs.
And then, with the military as well, you have many, many dependents, hundreds of thousands of dependents of current service members. So actually, the group that is the smallest piece of their population and ours, if you split it in two, are the ones where we have commonality, or where they have dual eligibility.
But still, 600,000 is significant. And to put it in proportion, that's out of about 6 million that are now enrolled with us. We have better, much more forceful leadership from the top to bring about -- and we are meeting quarterly in that group, and we have an agenda set. In effect, the next step is to create what we're calling our strategic plan for this group. We'll be meeting next week to try to lay out what we want to accomplish over the next 5 years.
I mean, they've laid out an agenda for this next year. We want to make it a little broader so we can reach agreement on that.
Mr. Lawrence: What's taken so long for this to come together? Are there historical issues?
Mr. Catlett: I would say the broad issue, as I tried to indicate, is the numbers of people that really have dual eligibility aren't all of them. It's the minority of the folks that get health care through DoD, and at the VA.
But most importantly probably I think is the military's concern with maintaining a military presence for preparedness when there is a conflict in which there would be a huge number of casualties. I mean, we have a backup role there. But, you know, practicing battlefield medicine and all of that intensity that goes with that, and the
follow-through with that, is something that we don't do.
And I feel that DoD military and DoD medicine wants to protect that. I mean, there's been some that say, ah, you ought to make it one system. Merge it. It's all veterans. What the heck? But I think it's DoD interested in making sure that they have a system of sufficient size so that you can have, keep the skill level up for the people who are needed when they're needed. So that, in effect, you have to have docs, you know, practicing their skills here -- and you can't practice, obviously, battlefield medicine. But still, surgery and some of the basics of health care, you have to have them doing something for when the time comes, and it's needed.
So, to me, that's it in a nutshell.
Mr. Lawrence: That's a good stopping point. It's time for a break. Come back with us in a few minutes as we continue our conversation about management with Mark Catlett of the VA.
What steps is the VA taking to get the green on OMB's management scorecard? We'll ask Mark when The Business of Government Hour continues.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs.
And joining us in our conversation is Greg Greben, another PwC partner.
Mr. Greben: We've read a lot about the Capital Asset Realignment for Enhanced Services, the CARES program. Can you tell us about CARES?
Mr. Catlett: Sure can, Greg. It's of special interest for me, in terms of the changes that the VA needs to undertake. CARES focuses on our health care element. Obviously, that's our large infrastructure with our medical system. We have over 170 medical centers. We've opened, as I noted earlier, hundreds of new clinics in the last 5 or 6 years.
But as GAO has noted over the years, and the Congressional committees, and we ourselves, we need to change. We have an infrastructure that's from really almost 50 years ago. And medicine is not practiced the way technology has advanced that. And to put in context for me, again, I have referred to Dr. Kaiser and his excellent leadership in the health administration in the Clinton administration.
He brought about that change with some help. We got an eligibility act out of the Congress that allowed us to treat the patient and not -- I mean, we literally had rules before whereby you would have to be an in-patient to get certain services. So we were inefficient. In order to give care, docs who wanted to give the care would have to admit patients so that they'd give them some services, because the law over time, although well-intentioned, had been segmented. And they were basically trying to dictate medical practice in law.
And as anything happens in that over time, it accumulates. And things change. Particularly, technology changed medicine. It was outdated. We got that change. Kaiser was the forceful leader to bring about a focus, as he said, on health care and not on hospitals or not on the infrastructure. And we opened these clinics, and created these access points.
So we gained huge efficiencies out of that so that we could give more care. As I noted earlier, we've doubled the number of people getting care. But we've nowhere doubled our budget is because we squeezed out the inefficiencies that went with practicing medicine in a hospital setting.
We've moved the staff out. Now, the second thing awaits us, and that's what CARES is about. We've got to right-size, and I'm not trying to be cute about the word -- this infrastructure. We don't need it. We have tens of thousands of acres, and we have millions of square feet of space that we don't need. And in some cases, we don't need the entire facilities, because it's not the way medicine is practiced.
We have completed the one study we've completed in Chicago, or Chicago and the Wisconsin areas north of that in one of the 21 regions in the VA. I'm very pleased that the Secretary, in approving that last spring, we will be hopefully releasing that press release this third week of August, in which we are going to the implementation plan for that. We have $125 million appropriated now that we're going to release to Chicago.
We have, through one of our innovations that we're overseeing, called Enhanced Use Leasing, whereby the private sector financing is used to build that, we have underway nearly $100 million of improvements at our Chicago facilities right now. We're in the middle of them in Chicago twice in the last couple of months, signing the deals with the energy companies for cogeneration plants.
We have another enhanced use lease to be signed in September. And as well, then, we are going to seek, and we're going to close one of the four Chicago hospitals, lease that as invaluable property, downtown Chicago. And we intend to use those resources from that lease to help build out the hospital 6 miles west, still in Chicago, that we want to be our tertiary care facility in Chicago.
So, I'm very excited. We will be devoting, in the next 15 months, over $300 million in resources from all our means of financing to the Chicago and the broader network in that area, in that region, to bring about this infrastructure change. We'll be eliminating one facility; we have a second one of four in Chicago that basically we're ready to outlease, hopefully we'll be outleasing that to the military. The Navy's there in North Chicago. We're looking to that.
So CARES is about, as I said, we have dispersed the staff. Now, we have to manage this infrastructure. And if we can pull this off -- and we are underway with the studies now for the rest of the country. And in the next 2 years -- in the next year, basically, by next spring or summer, we want the plans proposed and approved by the Secretary that says this is how we need to change this infrastructure, where we need to get rid of it.
And I would be very careful of it, because it's very sensitive in veterans issues and politics here. Getting rid of buildings is not about eliminating care. It's about, again, as we talked about in procurement reform. We have to have more of our resources devoted to hiring physicians and nurses. And we are spending too much money on the infrastructure and the staff, the indirect care staff, the wage grade staff, to maintain that infrastructure.
We need to have more money for doctors and nurses. And that's what this is about. So we're excited that we've got to -- it took us a while. Chicago was our test. We've learned. It took us 2 years to get through it. But we've approved it. And we're going to devote hundreds of millions of dollars now to that. And our big challenge now for CARES is everyone � the Congress and OMB, everyone has been hyped and hopped, saying let's go. But I'm, as the budget officer, saying, where's the money?
We've got to finance. We're going to spend 300 million in Chicago in that region. I doubt if we'll spend anywhere near that in many other regions. But we need hundreds of millions of dollars for a system of our size to right-size, and to bring about the change. Everyone has said, yes, conceptually, buy it. But where do we get the money in financing that? Our budgets have to be supplemented to do that. And we will use not just appropriations, as I said, but this Enhanced Use Leasing Authority, which is a very interesting concept.
Again, we sort of led the way. We've had it for 12 years; we were slow starting it. But we are expanding that significantly, where we use private sector funding to improve the buildings that we need, or if we don't need them, where we generate a revenue stream for us, to help support our health care system.
Mr. Lawrence: It seems pretty clear the reasons why you don't want to have the ability to shift money to provide more direct health care from infrastructure.
Mr. Catlett: Right.
Mr. Lawrence: What have been some of the management challenges to get to that point?
Mr. Catlett: I would think it's the normal challenge. It's just the fear of change and the inertia that goes with it. The expectation, again, is sort of the thing I love about government is, you've got a lot of competing interests, and it takes a while to come to a conclusion and move. That's why I would envy the private sector. Say, when a business and a corporation decide to take a direction, obviously they're at risk to stakeholders, stockholders, and everyone else. But they move out as a unified team.
Here, we've got a board of directors that's unbelievable, from not just the Congress, but with the many different perspectives on the Congress, from appropriations to authorizers. Within the administration, you've got several points of use. So, with us, with a strong advocacy group, a lot of people are saying is this just the way to cut back on the health care, instead of improving the health care by redirecting the resources?
So overcoming that suspicion on some people's parts and I think just the general fear and inertia. As I said, another piece of it is, this will be dislocating a lot of our employees. We have tens of thousands of people that are wage grade employees, blue-collar employees that take care of our facilities, that do the food service, the engineering staff. If we get rid of facilities, we're not going to need those folks. And the transition for those folks, you know, and how we best do that to care for our employees, at the same time to bring about the change, you're talking about a very interesting and a very tough set of issues, because there's a lot of different interests here.
Mr. Lawrence: How did you overcome all those issues?
Mr. Catlett: Well, we haven't yet. But in Chicago -- and again, I think part of it is, again, it's tough as people look at it. But again, the basic dynamic that's underway now is that we have so much demand for care that everyone understands intellectually, we have got to get on.
We don't have the luxury of waiting and working through this issue. We have to speed this up. I mean, our appropriation is not unlimited. We will do as much as we can with this special authority we have to access private financing. But that will be a supplement only. It can't replace the idea of coming up with more money.
And so we have to, with a base of now 25 billion we have for health care, that we'll spend this upcoming year on health care, we have got to get it concentrated as much as we can in direct care, and physicians and nurses who are providing that care.
So, like I said, these issues have been with us for 2 years. They're going to be with us through this CARES study that's now being completed for the rest of the country. And like I said, all those dynamics and all those influences will play out as we try to get to a set of plans that we need to start financing in the 2004 budget, and the couple of years following.
Mr. Lawrence: With regard to your role in financial management, what steps is VA taking to improve its financial management scorecard grade, to get to green?
Mr. Catlett: The biggest change for us -- the scorecard has a lot of components. The financial management is one of the five common denominators for all of government agencies. For us, it's a big change, a huge change, as we're replacing our financial system and our procurement data system, our procurement system, in the field and centrally.
Like I said, I've been around a long time. This financial system, we brought up in '95, when I was the assistant secretary, the political appointment previously. It took us a while to do that. And we're now at the point where it needs to be replaced. That was the big change. And now what we hope to do is replace the two front ends out there in the field for the financial system and the procurement system for tracking our inventory with a new, integrated system, with our core financial system.
So we've been underway with that 2 years to study and develop. We have begun the pilots for that. And over the next 18 months now, we'll need to roll that out. So that is absolutely the largest challenge we have as the Office of Management within this department to bring about a new financial system -- well, I should say a new financial and procurement system for tracking this $60 billion a year that we're responsible for.
If we pull that off, then we deserve a green. I mean, that's our goal, to get that done. And this is bigger than anything that we've tried before, in terms of trying to get to basically one system.
Mr. Lawrence: That's a good stopping point. Rejoin us after the break as we continue our discussion about management with Mark Catlett of the VA. This is The Business of Government Hour.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs.
Joining us in our conversation is Greg Greben, another PwC partner.
Mr. Greben: Mark, we spoke earlier about VA's challenge in updating its core financial and logistics system. Can you speak to us about some of the challenges faced and lessons learned?
Mr. Catlett: Yeah, Greg. Like you said, it's sort of a work in progress here, what we're doing. We're 2 years into the planning and design of that, with a lot of help and support, after choosing a system, from a lot of contract help. I guess there's two things I would say. One is, frankly, I guess it's not a surprise. But we get overpromised a little bit in terms of what these systems can do. I mean, obviously, we want to try to avoid -- over my career, you know, the lessons learned, or a big one is, you know, don't try to retrofit this new technology, this new software to the way you've done things in the past. You need a change your business practice to match the software.
But what they promise a lot isn't there. I mean, in particular, we've stopped a new payroll system, basically because they couldn't meet the load test. And again, VA's a big place, and maybe that's it. I mean, we have within that case, with 230-240,000 employees, the ability to process in real-time that much of a payroll. The system couldn't handle it that we were trying to bring up.
So, that and other reasons. But that was the primary reason we had to leave there. I think we're looking at, we're edging up on some of those same issues now, as we bring up the core financial and logistics system. It is, can they handle the capacity that we have to put through here? The tens of thousands of people that we'll have online at any time, trying to input into that system, is something new for a lot of the software and the companies trying to pitch us here.
So that's a big concern for us. That's not necessarily a lesson learned for everybody. But that is one thing. The biggest thing I think within the government setting when you try to bring about a change like this is communication. I mean, you just cannot have enough communication. And in particular, in our case with the field. I mean, you can get folks involved. You set up teams, you set up committees, you get people in full-time. We have folks in Washington brought in full-time to work with us to manage, from the field perspective, how to bring about this change, and hear them out in terms of the things that they need and how we do it.
But even with that, you can never plan. So you should, not just in terms of the time it takes to complete it, but your ability to identify -- I would call it the communication/training it takes to get to a system. In fact, with this system, with all these sites of care and of other benefits, hundreds of sites we have, the thing that we have learned in the middle of this, what we're trying to bring about now is a consolidation and a centralization of our financial and procurement activities in the field.
We don't want to bring this thing, this system up at 170 medical centers. We want to bring it up at 21 regional centers. And obviously, you're going to still have folks at each medical center doing some financial things. But the basic management of finance, we want to regionalize.
Some of our health networks have done that already. And we're pushing to standardize that for a lot of reasons. And one of them is, when we roll out this new financial system, we don't want to have to be dealing with the tens of thousands of people that we would have to if we were trying to put this system up at every one of our medical centers, our regional offices, and our clinics, as I said.
So the lesson there is communication, and making sure that you oversubscribe what you need to do in terms of as you look forward in trying to bring about a change like this.
Mr. Greben: Part of improving budget and performance integration is being able to provide the necessary financial information to managers in a timely manner. What plans are in place to improve in this area?
Mr. Catlett: This sort of touches on something near and dear to me. I've often described myself to VA audiences as sort of a Results Act nut. I think it is one of the better things that happened to government. I mean, Congress did it. In '93, they gave ourselves 5 or 6 years to pull it off. That was as required.
People could look at that and think government must be terrible, that it takes 5 or 6 years to bring about a change. But the change affects everybody. It's just not the way we manage, it's the way Congress oversees what we do, and the questions they ask.
So performance and budgeting and linkages has been a special interest of mine. And in fact, we are going to change our appropriation accounts structure with our next budget that we submit. I think we're the first HCR department to do it in total. We're totally going to change -- we have about 45 accounts. We want to get down to less than 20, and we want one for each -- I've described earlier in this conversation about the eight things that we do for veterans. We want an appropriation for each of those that would include all the costs, whether it's the entitlements, the mandatory payments or services to veterans, the administrative costs, the capital costs. All that together.
So in an oversight role, where even from the public perspective, they can look at us and say, hey, here's the things you do for veterans. Where do you spend your money? If you look at our account structure now, you cannot figure it out. You have to be a bean counter like me and 25 other people at the VA, or 50 other people who write these six books every year and submit a budget. And we're the experts, and somebody's got to ask us to figure what's going on there. We wanted to make it plainer and simpler to folks that this is where we spend the money.
But now, after my advertising, to get to your question. Actually, the interesting part of it is the financial data is not the problem. We have financial data, even with our current system, pretty much available as we need it to look at, particularly in the execution and tracking of this. And again, a nice thing that's happened at the VA, again, with strong leadership from our deputy secretary, we have monthly performance meetings, where the under secretaries, and the leaders of every organization are there to present. You can't delegate this to someone else to submit a nice little report. You have to be there, present, and explain the operation and the performance.
The problem we have right now is not the financial data, but it's the performance data, to getting that in terms of any real-time; getting, you know, the metrics that we're setting in place to determine the quality of the service that we're providing, the amount of service even. All those things which we call the performance data, they have come out of systems that are informal even, and end up folks calling to the field, tell us what you're doing, sort of collecting this by hand, if you will, or by e-mail, instead of having it standardized in the system.
So performance data is our bigger problem than financial data, towards having the data we need for real-time execution, tracking and adjustments as you look to try to implement your programs.
Mr. Lawrence: When you think out over the VA as a whole, what do you consider to be the biggest challenges over the next 5 years?
Mr. Catlett: There would be two things, Paul, that I would speak to there. I'll give you the first one, which is the coordination of health benefits. I think that, again, I want to get beyond just the health in terms of VA because there's another challenge there for us.
But health benefits, as we talked about, there's a lot of focus on our linkage with DoD. The bigger nexus is with Medicare. I mean, the 10 million-plus veterans over 65 who are non-service-connected, who are eligible to get care from us -- and a million and a half of them do, or are enrolled to get care from us -- they're all eligible. Or 95 percent of them are eligible for Medicare.
And we proposed in the last administration to try to get a coordination of payments on that. And again, the huge sort of small paid political opposition, inertia, you know, fear of the change or the inertia of sticking with what we've got, the fear that we'd be raiding the trust fund, the Medicare Trust Fund with all the pressures on it to manage and manage its costs. But that's the bigger coordination that has to happen. That's much more important than what happens between us and DoD, in my opinion. But from all three elements, that has to come about.
But the second thing over 5 years alludes back to the discussion we've had about CARES and our infrastructure shift. But it isn't limited to our health system. Technology has changed the way. I mean, we need to get to the Information Age in the way we provide service to veterans. We have 57 regional offices where you come and apply. We are doing that on the web now, obviously. But you still can walk up to the counter. And most veterans still interact with us by phone.
But we need to get that infrastructure, much less significant and much smaller than our health. We don't need it in the future, if we get to an Information Age service delivery mechanism. And so I think the infrastructure shift across the VA, both for all benefits as well as their health care system, is the thing we have to do.
We can pull CARES off for the health care system. I think the regional office, and, you know, the shift to infrastructure can follow as well in the next year, over the next 5 years. If we can pull that off, then our money will be much better utilized for providing service for veterans across the board, from benefits to health care.
Mr. Lawrence: What advice would you give a young person interested in career and public service at perhaps the VA?
Mr. Catlett: The advice I'd give is, despite sort of the allure of the previous up cycle in the economy, and the dot com frenzy that happened there, and everything and all the opportunity they have there, that it's interesting. And what I've seen, what I've alluded to, I've been very lucky to have, in a government career, I've been very pleased, almost beyond expectations at times, at the opportunity I had to move up in the organization, and to do new things and different things, and to be more responsible for what goes on.
But I think government gives a lot of opportunity. You're not going to get rich there, obviously. But you can make a nice living. And like I said, you have to come with the idea that you're there for the public service. Not to play a clich� here, but I think public service is something that has to appeal to you, in terms of being part of something bigger than you and a broader good for the public and for our society in general.
But with that, like I said, I think it's surprising folks will find how many opportunities there are to do things. At least, I find it in Washington. I know a lot of folks in the VA who work in the field can't wait to get back to the field when they come to Washington.
But if you're in Washington, you know, in the bureaucracy, and you can handle the ambiguity and all the competing interests, that's to me the fun of it, is to see something through when you've got to manage it through a structure that, at this time, is very unstructured in terms of who's in charge at this moment? Who's got the power to make things happen? Because there's nothing that ever can be completed when you have the Congress and the administration, particularly in this era of a split government, basically, as we've had.
So to me, being a bureaucrat can be exciting. I've found that more so than I expected.
Mr. Lawrence: Mark, I'm afraid we're out of time. Greg and I want to thank you for joining us this morning.
Mr. Catlett: Thank you very much. I enjoyed it.
Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs.
Be sure and visit us on the web at endowment.pwcglobal.com. There, you can learn more about our programs, and you can also get a transcript of today's conversation. Again, that's endowment.pwcglobal.com.
This is Paul Lawrence. See you next week.